As filed with the Securities and Exchange Commission on February
12, 2021.
Registration No. 333-
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-1
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
CHARGE ENTERPRISES, INC.
(Exact name of registrant as specified in its charter)
Delaware
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7373
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90-0471969
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State or other jurisdiction
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(Primary Standard Industrial
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(I.R.S. Employer
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incorporation or organization
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Classification Code Number)
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Identification Number)
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125 Park Avenue, 25th Floor
New York, NY 10017
(212) 921-2100
(Address, including zip code, and telephone number, including area
code, of registrant’s principal executive
offices)
Andrew Fox
Chief Executive Officer
125 Park Avenue, 25th Floor
New York, NY 10017
(212) 921-2100
(Name, address, including zip code, and telephone number, including
area code, of agent for service)
Copies of Communications to:
Richard A. Friedman
Stephen A. Cohen
Sheppard, Mullin, Richter & Hampton LLP
30 Rockefeller Plaza
New York, New York 10112
(212) 653-8700
Approximate date of commencement of proposed sale to the
public: From time to time after
the effective date of this registration statement.
If any securities being registered on this Form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under
the Securities Act of 1933,
check the following box. ☒
If this Form is filed to register additional securities for an
offering pursuant to Rule 462(b) under the Securities Act, please check the following box and
list the Securities Act
registration statement number of the earlier effective registration
statement for the same offering. ☐
If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities
Act, check the following box and list the Securities Act registration statement number of
the earlier effective registration statement for the same
offering. ☐
If this Form is a post-effective amendment filed pursuant to Rule
462(d) under the Securities
Act, check the following box and list the Securities Act registration statement number of
the earlier effective registration statement for the same
offering. ☐
Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, a non-accelerated filer,
smaller reporting company, or
an emerging growth company. See
the definitions of “large accelerated filer,”
“accelerated filer,” “smaller reporting
company,” and “emerging growth company” in Rule 12b-2 of the
Exchange Act.
Large accelerated filer ☐
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Accelerated filer ☐
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Non-accelerated filer ☒
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Smaller reporting company ☒
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Emerging growth company ☒
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If an emerging growth company,
indicate by check mark if the registrant has elected not to use the
extended transition period for complying with any new or revised
financial accounting standards provided pursuant to Section
7(a)(2)(B) of the Securities
Act. ☐
_______________________
CALCULATION OF REGISTRATION FEE
Title of Each Class of
Securities To Be Registered
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Amount to be Registered(1)
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Proposed Maximum Offering Price Per Share(2)
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Proposed Maximum Aggregate Offering Price(2)
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Amount of Registration Fee
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Common
stock, par value $0.0001 per share
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42,357,784
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$2.76
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$116,907,483.84
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$12,754.61
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(1)
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Pursuant
to Rule 416 promulgated under the Securities Act of 1933, as
amended (the “Securities Act”), this registration
statement shall also cover any additional shares of the
registrant’s common stock
as may be issued to the Selling Stockholders because of any future
stock dividends, stock distributions, stock splits, similar capital
readjustments or other anti-dilution
adjustments.
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(2)
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Estimated
solely for the purpose of calculating the registration fee pursuant
to Rule 457(c) promulgated under the Securities Act on the basis of
the average of the high and low sale prices of the
Registrant’s common stock on
February 9, 2021, as quoted on the OTC Pink
Marketplace.
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The registrant hereby amends this registration statement on such
date or dates as may be necessary to delay its effective date until
the registrant shall file a further amendment which specifically
states that this registration statement shall thereafter become
effective in accordance with section 8(a) of the Securities Act of
1933 or until the registration statement shall become effective on
such date as the Securities and Exchange Commission acting pursuant
to said section 8(a), may determine.
The information in this prospectus is
not complete and may be changed. The selling stockholders may not sell these securities
until the registration statement filed with the Securities and
Exchange Commission is effective. This prospectus is not an offer
to sell these securities and it is not soliciting an offer to buy
these securities in any state or jurisdiction where the offer or
sale is not permitted.
SUBJECT TO COMPLETION, DATED FEBRUARY 12, 2021
PROSPECTUS
Charge Enterprises, Inc.
42,357,784 Shares of Common Stock
This prospectus relates to the disposition from time to time of up
to 42,357,784 shares of our common stock, par value $0.0001 per
share (the “Shares”), which includes 27,555,556 shares
of our common stock issuable upon the conversion of convertible
promissory notes (the “Notes”), 7,600,000 shares of our
common stock issuable upon the exercise of warrants (the
“Warrants”) and 7,202,228 shares of common stock which
are held by the selling stockholders (the “Selling
Stockholders”) identified in the prospectus, including their
transferees, pledgees or donees or their respective
successors. The Shares issued or
issuable by us to the Selling Stockholders were sold in two
separate private placement transactions that were completed on May
8, 2020 and November 3, 2020. The Notes and Warrants are subject to
a blocker provision (the "Blocker"), which restricts the conversion
of the Notes and exercise of a Warrant if, as a result of such
exercise, the holder, together with its affiliates and any other
person whose beneficial ownership of Common Stock would be
aggregated with the holder's for purposes of Section 13(d) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"),
would beneficially own in excess of 9.99% of our then issued and
outstanding shares of Common Stock (including the shares of Common
Stock issuable upon such conversion and/or
exercise).
We are not selling any common stock under this prospectus and will
not receive any of the proceeds from the sale of shares by the
Selling Stockholders. We will, however, receive the net proceeds of
any Warrants exercised for cash. For a description of the
transaction pursuant to which this resale registration statement
relates, please see “Prospectus Summary – The
Offering.”
The Selling Stockholders will sell their shares of common stock at
$2.75 per share until our shares are quoted on the OTCQX, OTCQB or
listed on a national securities exchange, and
thereafter, at
fixed prices, at prevailing market
prices at the time of the sale, at varying prices determined at the
time of sale, or at negotiated prices, including, without
limitation, in one or more transactions that may take place by
ordinary brokerage transactions, privately-negotiated transactions
or through sales to one or more underwriters or broker-dealers for
resale. We provide more information about how a Selling Stockholder
may sell its shares of common stock in the section titled
“Plan of Distribution” on page 48.
We will bear all costs relating to the registration of the Shares,
other than any legal or accounting costs or commissions of the
Selling Stockholders.
Our common stock is presently quoted on the OTC Pink tier of
the OTC Markets Group, Inc.
under the symbol “CRGE.” The closing price for
our common stock on February 9,
2021, as reported by the OTC Pink, was $2.88 per
share.
We are
an “emerging growth company” as that term is used in
the Jumpstart Our Business Startups Act of 2012 and, as such, have
elected to comply with certain reduced public company reporting
requirements.
Prior
to the acquisition of PTGi
International Carrier Services Inc. and GetCharged, Inc. in October
2020, we were a “shell company” as defined in Rule 405
of the Securities Act.
Investing in our common stock involves a high degree of risk. See
the section entitled “Risk Factors” beginning on page
10 of this prospectus and elsewhere in this prospectus for a
discussion of information that should be considered in connection
with an investment in our common stock.
We may amend or supplement this prospectus from time to time by
filing amendments or supplements as required. You should read the
entire prospectus and any amendments or supplements carefully
before you make your investment decision.
The date of this prospectus is , 2021
TABLE OF CONTENTS
SPECIAL
NOTE REGARDING FORWARD-LOOKING STATEMENTS
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4
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PROSPECTUS
SUMMARY
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5
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RISK
FACTORS
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10
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USE OF
PROCEEDS
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25
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MARKET
FOR REGISTRANT’S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
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26
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SELECTED
HISTORICAL FINANCIAL DATA
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27
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UNAUDITED
PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
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28
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MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
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33
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BUSINESS
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38
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DIRECTORS,
EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
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44
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EXECUTIVE
COMPENSATION
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46
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SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
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50
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SELLING
STOCKHOLDERS
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51
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PLAN OF
DISTRIBUTION
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52
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DESCRIPTION
OF SECURITIES
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54
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CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS
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56
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LEGAL
MATTERS
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56
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EXPERTS
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56
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WHERE
YOU CAN FIND MORE INFORMATION
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57
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INDEX
TO FINANCIAL STATEMENTS
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F-1
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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This
prospectus contains forward-looking statements. These
forward-looking statements contain information about our
expectations, beliefs or intentions regarding our product
development and commercialization efforts, business, financial
condition, results of operations, strategies or prospects, and
other similar matters. These forward-looking statements are based
on management’s current expectations and assumptions about
future events, which are inherently subject to uncertainties, risks
and changes in circumstances that are difficult to predict. These
statements may be identified by words such as
“expects,” “plans,” “projects,”
“will,” “may,” “anticipates,”
“believes,” “should,”
“intends,” “estimates,” and other words of
similar meaning.
These
statements relate to future events or our future operational or
financial performance, and involve known and unknown risks,
uncertainties and other factors that may cause our actual results,
performance or achievements to be materially different from any
future results, performance or achievements expressed or implied by
these forward-looking statements. Factors that may cause actual
results to differ materially from current expectations include,
among other things, those listed under the section titled
“Risk Factors” and elsewhere in this prospectus, in any
related prospectus supplement and in any related free writing
prospectus.
Any
forward-looking statement in this prospectus, in any related
prospectus supplement and in any related free writing prospectus
reflects our current view with respect to future events and is
subject to these and other risks, uncertainties and assumptions
relating to our business, results of operations, industry and
future growth. Given these uncertainties, you should not place
undue reliance on these forward-looking statements. No
forward-looking statement is a guarantee of future performance. You
should read this prospectus, any related prospectus supplement and
any related free writing prospectus and the documents that we
reference herein and therein and have filed as exhibits hereto and
thereto completely and with the understanding that our actual
future results may be materially different from any future results
expressed or implied by these forward-looking statements. Except as
required by law, we assume no obligation to update or revise these
forward-looking statements for any reason, even if new information
becomes available in the future.
This
prospectus, any related prospectus supplement and any related free
writing prospectus also contain or may contain estimates,
projections and other information concerning our industry, our
business and the markets for our products, including data regarding
the estimated size of those markets and their projected growth
rates. We obtained the industry and market data in this prospectus
from our own research as well as from industry and general
publications, surveys and studies conducted by third parties. This
data involves a number of assumptions and limitations and contains
projections and estimates of the future performance of the
industries in which we operate that are subject to a high degree of
uncertainty, including those discussed in “Risk
Factors.” We caution you not to give undue weight to such
projections, assumptions and estimates. Further, industry and
general publications, studies and surveys generally state that they
have been obtained from sources believed to be reliable, although
they do not guarantee the accuracy or completeness of such
information. While we believe that these publications, studies and
surveys are reliable, we have not independently verified the data
contained in them. In addition, while we believe that the results
and estimates from our internal research are reliable, such results
and estimates have not been verified by any independent
source.
PROSPECTUS SUMMARY
The following summary highlights information contained elsewhere in
this prospectus. This summary may not contain all of the
information that may be important to you. You should read this
entire prospectus carefully, including the sections entitled
“Risk Factors” and “Management’s Discussion
and Analysis of Financial Condition and Results of
Operations” and the Company’s historical financial
statements and related notes included elsewhere in this prospectus.
In this prospectus, unless otherwise noted, the terms “the
Company,” “Charge,” “we,”
“us,” and “our” refer to Charge
Enterprises, Inc. and its subsidiaries.
Overview
Charge
Enterprises, Inc. is a portfolio of global businesses with the
vision of connecting people everywhere with communications,
infrastructure and transportation.
We’re
a company that shares our success with all stakeholders with three
distinct divisions.
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Charge
Communications, with a strategy offering Unified Communication as a
Service (UCaaS) and
Communication as a Platform Service (CPaaS), providing termination of both
voice and data to Carriers and Mobile Network Operators
(MNO’s) globally for over 2 decades.
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Charge
Infrastructure, addresses last mile micro-mobility by offering
patented, unique and problem-solving infrastructure solutions to
cities globally.
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Charge Transport,
with a strategy of building out new delivery routes globally,
adding electrification and autonomous capability to deliver
10’s of millions of parcels a day whilst constantly
innovating and utilizing our shared resources.
Charge
Enterprises, where communications and transportation are changing
faster than ever before. Our strategy is to do the unglamorous part
of connecting your phone calls, delivering your packages, and
powering micro-mobility.
COVID-19’s
impact has been unprecedented with many people either working from
home or furloughed, the demand on physical and digital networks has
been enormous with traffic up in some countries by 40% in a matter
of weeks. Last mile delivery, infrastructure and telecoms perceived
as one of the least impacted sectors by the global
pandemic.
The
crisis has caused companies and individuals to think about what
exactly this new normal will look like with increased
communications, infrastructure / micro-mobility and transport
options.
We see
a huge opportunity to capitalize on this sector, when you work with
us expect to be treated like a PEER: Prompt Ethical Empathetic
Reliable.
We
operate our current business through a number of subsidiaries which
we have recently acquired and/or formed.
Communications Division
Our
Communications Division is based upon the services offered by our
wholly-owned subsidiary, PTGi
International Carrier Services Inc. (“PTGi”), which was
acquired in October 2020. Specifically, on October 2, 2020, we
entered into a stock purchase agreement with the shareholders of
PTGi pursuant to which we agreed to acquire 100% of the outstanding
voting securities of PTGi in consideration for $1,000,000 (the
“PTGi Acquisition”). The closing of the PTGi
Acquisition occurred on October 31, 2020.
Infrastructure Division
Our Infrastructure Division is based upon the services offered by
our wholly-owned subsidiary, GetCharged Inc.
(“GetCharged”), which was acquired in September 2020.
Specifically, on September 25,
2020, we entered into a stock acquisition agreement with the
shareholders of GetCharged, pursuant to which we agreed to acquire
100% of the outstanding voting securities of GetCharged in exchange for 60,000,000 shares of our common
stock. The closing of the GetCharged acquisition occurred on October 12,
2020.
Transportation Division
Our
Transportation Division is intended to be based upon the services
offered by companies that we are seeking to acquire.
On
August 10, 2020, Transworld Enterprises, Inc, our wholly owned
subsidiary (“Transworld Enterprises”) entered into an
asset purchase agreement with Romolos Corp (“Romolos”)
pursuant to which Transworld Enterprises agreed to acquire
substantially all of the assets of Romolos for an aggregate
purchase price of $900,000 (the “Romolos Acquisition”).
Romolos is a privately-held transportation company that operates
Federal Express (“FedEx”) home and ground routes in the
NYC area. The obligation of Transworld Enterprises to consummate
the Romolos Acquisition will be subject to the satisfaction or
waiver of a number of closing conditions, including, but not
limited to, approval by FedEx. As of
the date of this prospectus, the Romolos Acquisition did not close
by the date set forth in the agreement and Transworld
Enterprises has decided to no longer
pursue this transaction.
On
August 27, 2020, the Company entered into an asset purchase
agreement with APS Transportation, Inc. (“APS”)
pursuant to which the Company agreed to acquire substantially all
of the assets of APS for an aggregate purchase price of $525,000
(the “APS Acquisition”). APS is a privately-held
transportation company that operates FedEx home and ground routes
in the NYC area. The obligation of the Company to consummate the
APS Acquisition will be subject to the satisfaction or waiver of a
number of closing conditions, including, but not limited to,
approval by FedEx. As of the date of
this prospectus, the APS Acquisition did not close by the date set
forth in the agreement and Transworld Enterprises
has decided to no longer pursue this
transaction.
We will continue to seek out other opportunities that provide
instant delivery or last mile services in the transportation
sector.
Recent Developments
On May 8, 2020, the Company acquired 100% of the outstanding equity
interests in Transworld Enterprises, Inc.
(“Transworld”) in exchange for 1,000,000 shares of its
Series D convertible preferred stock and 1,000,000 shares of its
Series F convertible preferred stock. The Series D convertible
preferred stock converts into 80% of the Company’s issued and
outstanding shares of common stock upon the consummation of the
Reverse Stock Split. The Series F convertible preferred stock
converts at any time into 80% of the Company’s issued and
outstanding shares of common stock and shall vote on an as
converted basis. In connection with the transaction all prior
officers and directors of the Company resigned and new officers and
directors from Transworld were appointed as officers and directors
of the Company.
On May 8, 2020, the Company entered into a securities purchase
agreement with funds affiliated with Arena Investors LP (the
“May 2020 Investors”) pursuant to which it issued
convertible notes in an aggregate principal amount of $3 million
for an aggregate purchase price of $2.7 million (collectively, the
“May 2020 Notes”). In connection with the issuance of
the May 2020 Notes, we issued to the May 2020 Investors warrants to
purchase an aggregate of 7,600,000 shares of Common Stock
(collectively, the “Warrants”) and 7.5 shares of series
G convertible preferred stock (the “Series G Preferred
Stock”). The Series G Preferred Stock automatically converted
into shares of our common stock upon consummation of a reverse
stock split that was effected on October 6, 2020.
In May and June 2020, the Company entered into a purchase agreement
with KORR Value LP, an entity controlled by Kenneth Orr, the
Company’s Executive Chairman, pursuant to which the Company
issued convertible notes in an aggregate principal amount of
$550,000 for an aggregate purchase price of $500,000 (collectively,
the “KORR Notes”). In connection with the issuance of
the KORR Notes, we issued to KORR Value warrants to purchase an
aggregate of 1,266,667 shares of Common Stock (collectively, the
“KORR Warrants”). The KORR Notes and KORR Warrants are
on substantially the same terms as the Notes and Warrants issued to
the May 2020 Investors except that the KORR Notes are subordinated
to the Notes. In June 2020, KORR Value LP transferred 50% of the
KORR Notes to PDG Venture Group LLC.
Between May 8, 2020 and September 30, 2020, the Company entered
into securities purchase agreements with other accredited investors
(the “Subordinated Creditors”) pursuant to which the
Company issued convertible notes in an aggregate principal amount
of $546,444 for an aggregate purchase price of $495,000
(collectively, the “Subordinated Creditor Notes”). In
connection with the issuance of the Subordinated Creditor Notes, we
issued to the Subordinated Creditors warrants to purchase an
aggregate of 2,359,555 shares of Common Stock (collectively, the
“Subordinated Creditor Warrants”). The Subordinated
Creditor Notes and Subordinated Creditor Warrants are on
substantially the same terms as the Notes and Warrants issued to
the May 2020 Investors except that the Subordinated Creditor Notes
are subordinated to the Notes.
On August 12, 2020, Transworld Enterprises entered into an asset purchase agreement with
Romolos Corp (“Romolos”) pursuant to which
Transworld Enterprises agreed to
acquire substantially all of the assets of Romolos for an aggregate
purchase price of $900,000 (the “Romolos Acquisition”).
Romolos is a privately-held transportation company that operates
Federal Express (“FedEx”) home and ground routes in the
NYC area. The obligation of Transworld Enterprises
to consummate the Romolos Acquisition
will be subject to the satisfaction or waiver of a number of
closing conditions, including, but not limited to, approval by
FedEx. As of the date of this prospectus, the Romolos Acquisition
did not close by the date set forth in the agreement and
Transworld Enterprises has decided to
no longer pursue this transaction.
On August 12, 2020, the Company entered into an asset purchase
agreement with APS Transportation, Inc. (“APS”)
pursuant to which the Company agreed to acquire substantially all
of the assets of APS for an aggregate purchase price of $525,000
(the “APS Acquisition”). APS is a privately-held
transportation company that operates FedEx home and ground routes
in the NYC area. The obligation of Transworld Enterprises
to consummate the APS Acquisition will
be subject to the satisfaction or waiver of a number of closing
conditions, including, but not limited to, approval by FedEx. As of
the date of this prospectus, the APS Acquisition did not close by
the date set forth in the agreement and the Company has decided to
no longer pursue this transaction.
On September 25, 2020, the Company entered into a stock acquisition
agreement with the shareholders of GetCharged, Inc.
(“GetCharged”) pursuant to which the Company agreed to
acquire 100% of the outstanding voting securities of GetCharged in
exchange for 60,000,000 shares of the Company’s common stock
(the “GetCharged Acquisition”). The closing of the
GetCharged Acquisition occurred on October 12, 2020.
On October 2, 2020, the Company entered into a stock purchase
agreement with the shareholders of PTGi International Carrier
Services Inc. (“PTGi”) pursuant to which the Company
agreed to acquire 100% of the outstanding voting securities of PTGi
in consideration for $1,000,000 (the “PTGi
Acquisition”). The closing of the PTGi Acquisition occurred
on October 31, 2020.
On October 1, 2020, the Company filed a Certificate of Amendment
with the Colorado Secretary of State reflecting the 500:1 reverse
stock split which was previously announced as well as the
conversion of the Company from a Colorado corporation to a Delaware
corporation. In connection with the corporate conversion, (i) the
Company changed its name from “GoIP Global, Inc.” to
“Transworld Holdings, Inc.” (ii) all issued and
outstanding preferred stock in the Colorado corporation other than
the Series F Preferred Stock was converted into shares of the
Company’s common stock and (iii) the Company’s Series F
Preferred Stock became the Series A Preferred Stock of the Delaware
corporation. The transactions described above were approved by
FINRA on October 2, 2020 and became effective on the OTC Pink
trading market at the open of trading on October 6,
2020.
On
November 3, 2020, the Company entered
into a securities purchase
agreement with funds affiliated with Arena Investors LP (the
“November 2020 Investors”) pursuant to which it issued
convertible notes in an
aggregate principal amount of $3.8 million for an aggregate
purchase price of $3.5 million (collectively, the “November
2020 Notes” and together with the May 2020 Notes, the
“Notes”). In connection with the issuance of the
November 2020 Notes, we issued to the November 2020 Investors
903,226 shares of common stock.
On
December 8, 2020, the Company entered
into a securities purchase
agreement with accredited investors pursuant to which the Company
sold an aggregate of 8,700,002 shares of common stock for an
aggregate purchase price of $2,175,000.
On January 26, 2021, following its acquisitions of PTGi and
GetCharged, we changed our name from Transworld
Holdings, Inc. to Charge Enterprises, Inc.
Implications of Being an Emerging Growth Company
As a company with less than $1.07 billion in revenues during our
last fiscal year, we qualify as an emerging growth company as
defined in the Jumpstart Our Business Startups Act, or the JOBS
Act, enacted in 2012. As an emerging growth company, we expect to
take advantage of reduced reporting requirements that are otherwise
applicable to public companies. These provisions include, but are
not limited to:
●
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being permitted to present only two years of audited financial
statements, in addition to any required unaudited interim financial
statements, with correspondingly reduced "Management's Discussion
and Analysis of Financial Condition and Results of Operations"
disclosure in this prospectus;
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●
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not being required to comply with the auditor attestation
requirements of Section 404 of the Sarbanes-Oxley Act of 2002, as
amended;
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●
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reduced disclosure obligations regarding executive compensation in
our periodic reports, proxy statements and registration statements;
and
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●
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exemptions from the requirements of holding a nonbinding advisory
vote on executive compensation and shareholder approval of any
golden parachute payments not previously approved.
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We may use these provisions until the last day of our fiscal year
following the fifth anniversary of the completion of this offering.
However, if certain events occur prior to the end of such five-year
period, including if we become a "large accelerated filer," our
annual gross revenues exceed $1.07 billion or we issue more than
$1.0 billion of non-convertible debt in any three-year period, we
will cease to be an emerging growth company prior to the end of
such five-year period.
The JOBS Act provides that an emerging growth company can take
advantage of an extended transition period for complying with new
or revised accounting standards. To the extent that we continue to
qualify as a "smaller reporting company," as such term is defined
in Rule 12b-2 under the Securities Exchange Act of 1934, after we
cease to qualify as an emerging growth company, certain of the
exemptions available to us as an emerging growth company may
continue to be available to us as a smaller reporting company,
including: (i) not being required to comply with the auditor
attestation requirements of Section 404(b) of the Sarbanes Oxley
Act; (ii) scaled executive compensation disclosures; and (iii) the
requirement to provide only two years of audited financial
statements, instead of three years.
Corporate Information
Our principal executive offices are located at 125 Park Avenue,
25th Floor, New York, NY 10017 and our telephone number is (212)
921-2100. We maintain a website at www.charge.enterprises.
Information contained on or accessible through our website is not,
and should not be considered, part of, or incorporated by reference
into, this prospectus.
The Offering
This prospectus relates to the disposition from time to time of up
to 42,357,784 shares of our common stock, par value $0.0001 per
share (the “Shares”), which includes 27,555,556 shares
of our common stock issuable upon the conversion of senior secured
convertible promissory notes (the “Notes”), 7,600,000
shares of our common stock issuable upon the exercise of warrants
(the “Warrants”) and 7,202,228 shares of common stock
which are held by the Selling Shareholders. The Shares issued or
issuable by us to the Selling Stockholders were sold in two
separate private placement transactions that were completed on May
8, 2020 and November 3, 2020.
Common stock offered by the Selling Stockholders
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Up to 42,357,784 shares of our common stock that may be
issued to certain of the Selling Stockholders, which includes 27,555,556 shares of our common
stock issuable upon the conversion of Notes, 7,600,000 shares of
our common stock issuable upon the exercise of Warrants and
7,202,228 shares of common stock.
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Common stock outstanding before Offering:
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148,718,385 (1)
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Common stock outstanding after Offering (assuming all shares of
Common Stock are issued upon conversion and exercise):
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191,076,169
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Use of Proceeds
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All of the Shares sold pursuant to this prospectus will be offered
and sold by the Selling Stockholders. We will not receive any
proceeds from such sales. We would, however, receive
proceeds upon the exercise of the Warrants held by the Selling
Stockholders which, if such warrants are exercised in full, would
be approximately $3,800,000. Proceeds, if any, received from the
exercise of such Warrants will be used for working capital and
general corporate purposes. No assurances can be given that any of
such Warrants will be exercised. See
“Use
of Proceeds.”
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Offering Price
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The Selling Stockholders may sell the Shares at a fixed price of $2.75
per share until our Common Stock is listed or quoted on an
established public trading market (including the OTCQB), and
thereafter, at fixed prices, at
prevailing market prices at the time of the sale, at varying prices
determined at the time of sale, or at negotiated prices, including,
without limitation, in one or more transactions that may take place
by ordinary brokerage transactions, privately-negotiated
transactions or through sales to one or more underwriters or
broker-dealers for resale. See “Plan of
Distribution.”
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Risk Factors
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An investment in our securities involves a high degree of risk and
could result in a loss of your entire investment. Prior to making
an investment decision, you should carefully consider all of the
information in this prospectus and, in particular, you should
evaluate the risk factors set forth under the caption “Risk
Factors” beginning on page 10.
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Trading Symbol
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“CRGE.”
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(1) The number of shares of common stock outstanding is based on
148,718,385 shares of common stock issued and outstanding as
of February 8, 2021 and excludes the
following:
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2,500,000
shares of common stock issuable upon the exercise of outstanding
stock options having a weighted average exercise price of $0.29 per
share;
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9,959,555
shares of common stock issuable upon the exercise of outstanding
warrants having an exercise price of $0.50 per share;
and
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30,685,332
shares of the Company’s common stock issuable upon conversion
of outstanding convertible notes.
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May 2020 Financing
On May 8, 2020, we entered into a securities purchase agreement with the May 2020 Investors
pursuant to which we issued the May 2020 Notes. In connection
with the issuance of the Notes, we issued to the Selling
Stockholders warrants to purchase an aggregate of 7,600,000 shares
of Common Stock (collectively, the “Warrants”) and 7.5
shares of series G convertible preferred stock (the “Series G
Preferred Stock”).
The May 2020 Notes each have a term of twenty-four months and
mature on May 8, 2022, unless earlier converted. The May 2020 Notes
accrue interest at a rate of 8% per annum, subject to increase to
20% per annum upon and during the occurrence of an event of
default. Interest is payable in cash on a quarterly basis beginning
on June 30, 2020. The May 2020 Notes are convertible at any time,
at the holder’s option, into shares of our
common stock at an initial
conversion price of $0.25 per
share, subject to certain
beneficial ownership limitations (with a maximum ownership limit of
9.99%). The
conversion
price is also subject to adjustment due to certain events,
including stock dividends, stock splits and in connection with the
issuance by the Company of common stock or
common
stock equivalents at an effective price per share lower than the
conversion price then in effect. The Notes may be redeemed by the Company, in its
sole discretion, in an amount equal to 110% of the principal
amount, interest and any other amounts owed under the Notes,
subject to certain limitations.
Each Warrant is exercisable for a period of two years from the date
of issuance at an initial exercise price of $0.50 per
share, subject to certain
beneficial ownership limitations (with a maximum ownership limit of
9.99%). The
exercise
price is also subject to adjustment due to certain events,
including stock dividends, stock splits and in connection with the
issuance by the Company of common stock or
common
stock equivalents at an effective price per share lower than the
exercise price then in effect.
The investors may exercise the Warrants on a cashless basis if the
shares of common stock underlying the Warrants are not then
registered pursuant to an effective registration statement. In the
event the Selling Shareholders exercise the Warrants on a cashless
basis, then we will not receive any proceeds.
The Series G Preferred Stock issued to the May 2020 Investors had
no voting rights and converted into shares of our common stock upon
consummation of the reverse stock split that was consummated on
October 6, 2020.
The May
2020 Notes rank pari passu with the November 2020 Notes and senior
to all current and future indebtedness of the Company and are
secured by substantially all of the assets of the
Company.
A Registration Rights Agreement was executed in connection with the
issuance of the May 2020 Notes, the Warrants and the Series G
Preferred Stock and the registration statement of which this
prospectus is a part is being filed to fulfill our obligations
under such agreement.
If we fail
to have it declared effective by the SEC within 150 days following
the date of the financing, or if the Company fails to maintain the
effectiveness of the registration statement until all of such
shares of common stock have been sold or are otherwise able to be
sold pursuant to Rule 144 under the Securities Act of 1933, as
amended, without any volume or manner of sale restrictions, then
the Company will be obligated to pay to the May 2020 Investors
liquidated damages equal to then, in addition to any other rights
the Holders may have hereunder or under applicable law, upon the
occurrence of any such event and on each monthly anniversary of
thereafter until the event is cured, the Company shall pay to the
Selling Stockholders an amount in cash equal to their pro rata
portion of $50,000, provided such amount shall increase by $25,000
on every thirty (30) day anniversary, until such events are
satisfied.
November 2020 Financing
On November 3, 2020, we entered into a securities purchase
agreement with the November 2020 Investor pursuant to which we
issued the November 2020 Notes. In connection with the issuance of
the November 2020 Notes, we issued to the November 2020 Investors
903,226 shares of common stock.
The November 2020 Notes each have a term of thirty-six months and
mature on November 23, 2023, unless earlier converted. The November
2020 Notes accrue interest at a rate of 8% per annum, subject to
increase to 20% per annum upon and during the occurrence of an
event of default. Interest is payable in cash on a quarterly basis
beginning on December 31, 2020. The November 2020 Notes are
convertible at any time, at the holder’s option, into shares
of our common stock at an
initial conversion price of
$0.25 per share, subject to certain
beneficial ownership limitations (with a maximum ownership limit of
9.99%). The conversion price
is also subject to adjustment due to certain events, including
stock dividends, stock splits and in connection with the issuance
by the Company of common stock or common
stock equivalents at an effective price per share lower than the
conversion price then in effect.
The Notes may be redeemed by the Company, in its sole discretion,
in an amount equal to 110% of the principal amount, interest and
any other amounts owed under the Notes, subject to certain
limitations.
The
November 2020 Notes rank pari passu with the May 2020 Notes and
senior to all current and future indebtedness of the Company and
are secured by substantially all of the assets of the Company. In
addition, some of the Company’s subsidiaries entered into a
subsidiary guaranty agreement and guaranteed the obligations owned
to the November 2020 Investor under the November 2020
Notes.
A Registration Rights Agreement was executed in connection with the
issuance of the November 2020 Notes and the registration statement
of which this prospectus is a part is being filed to fulfill our
obligations under such agreement. If we fail to maintain
the effectiveness of the registration statement until all of such
shares of common stock have been sold or are otherwise able to be
sold pursuant to Rule 144 under the Securities Act of 1933, as
amended, without any volume or manner of sale restrictions, then
the Company will be obligated to pay to the November 2020 Investors
liquidated damages equal to then, in addition to any other rights
the Holders may have hereunder or under applicable law, upon the
occurrence of any such event and on each monthly anniversary of
thereafter until the event is cured, the Company shall pay to the
Selling Stockholders an amount in cash equal to their pro rata
portion of $60,000, provided such amount shall increase by $30,000
on every thirty (30) day anniversary, until such events are
satisfied.
The Selling Stockholders have no voting rights other than for the
shares of common stock which they may hold in the
Company.
RISK FACTORS
An investment in our securities involves a high degree of risk.
This prospectus contains the risks applicable to an investment in
our securities. Prior to making a decision about investing in our
securities, you should carefully consider the specific factors
discussed under the heading “Risk Factors” in this
prospectus. The risks and uncertainties we have described are not
the only ones we face. Additional risks and uncertainties not
presently known to us or that we currently deem immaterial may also
affect our operations. The occurrence of any of these known or
unknown risks might cause you to lose all or part of your
investment in the offered securities.
Risks Related to Our Business
Widespread health developments, including the recent global
COVID-19 pandemic, could materially and adversely affect our
business, financial condition and results of
operations.
Our business has been, and may continue to be, impacted by the fear
of exposure to or actual effects of the COVID-19 pandemic in
countries where we operate or our customers are located, such as
recommendations or mandates from governmental authorities to close
businesses, limit travel, avoid large gatherings or to
self-quarantine, as well as temporary closures or decreased
operations of the facilities of our customers, distributors or
suppliers. These impacts include, but are not limited
to:
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Significant
reductions in demand or significant volatility in demand for one or
more of our products, which may be caused by, among other things:
the temporary inability of consumers to purchase our products due
to illness, quarantine or other restrictions, store or restaurant
closures, or financial hardship, shifts in demand away from one or
more of our higher priced products to lower priced products, or
stockpiling or similar activity, reduced options for marketing and
promotion of products or other restrictions in connection with the
COVID-19 pandemic; if prolonged, such impacts can further increase
the difficulty of operating our business, including accurately
planning and forecasting;
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Inability
to meet our consumers' and customers' needs and achieve costs
targets due to disruptions in our manufacturing and supply
arrangements caused by the loss or disruption of essential
manufacturing and supply elements such as raw materials or
purchased finished goods, logistics, reduction or loss of workforce
due to the insufficiency or failure of our safety protocols, or
other manufacturing and supply capability;
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Failure
of third parties on which we rely, including our suppliers,
distributors, contract manufacturers, contractors, commercial banks
and external business partners, to meet their obligations to us or
to timely meet those obligations, or significant disruptions in
their ability to do so, which may be caused by their own financial
or operational difficulties; or
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Significant
changes in the conditions in markets in which we manufacture, sell
or distribute our products, including quarantines, governmental or
regulatory actions, closures or other restrictions that limit or
close our operating and manufacturing facilities, restrict our
employees' ability to perform necessary business functions,
restrict or prevent consumers from having access to our products,
or otherwise prevent our distributors, partners, suppliers, or
customers from sufficiently staffing operations, including
operations necessary for the production, distribution, sale, and
support of our products.
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All of these impacts could place limitations on our ability to
execute on our business plan and materially and adversely affect
our business, financial condition and results of
operations.
We are a holding company and our only material assets are its cash
in hand, equity interests in its operating subsidiaries and our
other investments. As a result, our principal source of revenue and
cash flow is distributions from its subsidiaries.
As a holding company, our assets are its cash and cash equivalents,
the equity interests in its subsidiaries and other investments. As
of September 30, 2020, we had approximately $2.4 million in cash
and cash equivalents. Our principal source of revenue and cash flow
is distributions from our subsidiaries. Thus, our ability to manage
our operations and finance future acquisitions, is dependent on the
ability of its subsidiaries to generate sufficient net income and
cash flows to make upstream cash distributions to us. Our
subsidiaries are separate legal entities, and although they may be
wholly-owned or controlled by us, they have no obligation to make
any funds available to us, whether in the form of loans, dividends,
distributions or otherwise. The ability of our subsidiaries to
distribute cash to it are and will remain subject to, among other
things, availability of sufficient funds and applicable state laws
and regulatory restrictions. Claims of creditors of our
subsidiaries generally will have priority as to the assets of such
subsidiaries over our claims and claims of our creditors and
stockholders. To the extent the ability of our subsidiaries to
distribute dividends or other payments to us could be limited in
any way, our ability to grow, pursue business opportunities or make
acquisitions that could be beneficial to our businesses, or
otherwise fund and conduct our business could be materially
limited.
To service our indebtedness and other obligations, we will require
a significant amount of cash.
Our ability to generate cash depends on many factors beyond our
control and any failure to service our outstanding indebtedness
could harm our business, financial condition and results of
operations. Our ability to make payments on and to refinance our
indebtedness and to fund working capital needs and planned capital
expenditures will depend on our ability to generate cash in the
future. This, to a certain extent, is subject to general economic,
financial, competitive, business, legislative, regulatory and other
factors that are beyond our control. If our business does not
generate sufficient cash flow from operations or if future
borrowings are not available to us in an amount sufficient to
enable us and our subsidiaries to pay our indebtedness or to fund
our other liquidity needs, we may need to refinance all or a
portion of our indebtedness on or before the maturity thereof, sell
assets, reduce or delay capital investments or seek to raise
additional capital, any of which could have a material adverse
effect on us.
In addition, we may not be able to effect any of these actions, if
necessary, on commercially reasonable terms or at all. Our ability
to restructure or refinance our indebtedness will depend on the
condition of the capital markets and our financial condition at
such time. Any refinancing of our debt could be at higher interest
rates and may require us to comply with more onerous covenants,
which could further restrict our business operations. The terms of
existing or future debt instruments or preferred stock may limit or
prevent us from taking any of these actions. In addition, any
failure to make scheduled payments of interest and principal on our
outstanding indebtedness or dividend payments on our outstanding
shares of preferred stock would likely result in a reduction of our
credit rating, which could harm our ability to incur additional
indebtedness or otherwise raise capital on commercially reasonable
terms or at all. Our inability to generate sufficient cash flow to
satisfy our debt service and other obligations, or to refinance or
restructure our obligations on commercially reasonable terms or at
all, would have an adverse effect, which could be material, on our
business, financial condition and results of
operations.
We have experienced significant historical, and may experience
significant future, operating losses and net losses, which may
hinder our ability to meet working capital requirements or service
our indebtedness, and we cannot assure you that we will generate
sufficient cash flow from operations to meet such requirements or
service our indebtedness.
We cannot assure you that we will recognize net income in future
periods. If we cannot generate net income or sufficient operating
profitability, we may not be able to meet our working capital
requirements or service our indebtedness. Our ability to generate
sufficient cash for our operations will depend upon, among other
things, the future financial and operating performance of our
operating business, which will be affected by prevailing economic
and related industry conditions and financial, business, regulatory
and other factors, many of which are beyond our
control.
We cannot assure you that our business will generate cash flow from
operations in an amount sufficient to fund our liquidity needs. If
our cash flows and capital resources are insufficient, we may be
forced to reduce or delay capital expenditures, sell assets and/or
seek additional capital or financings. Our ability to obtain future
financings will depend on the condition of the capital markets and
our financial condition at such time. Any financings could be at
high interest rates and may require us to comply with covenants in
addition to, or more restrictive than, covenants in our current
financing documents, which could further restrict our business
operations. In the absence of such operating results and resources,
we could face substantial liquidity problems and might be required
to dispose of material assets or operations to meet our
obligations. We may not be able to consummate those dispositions
for fair market value or at all. Furthermore, any proceeds that we
could realize from any such disposition may not be adequate to meet
our obligations.
If we are not able to deploy capital effectively and on acceptable
terms, we may not be able to execute our business
strategy.
Our strategy includes effectively deploying capital by acquiring
interests in new companies. We may not be able to identify
attractive acquisition candidates that fit our strategy. Even if we
are able to identify acquisition candidates, we may not be able to
acquire interests in those companies due to an inability to reach
mutually acceptable financial or other terms with those companies
or due to competition from other potential acquirers that may have
greater resources, brand name recognition, industry contacts or
flexibility of structure than we do. The recent turmoil in the
global economy has caused significant declines and fluctuations in
the valuations of publicly-traded companies and privately-held
companies. Uncertainty regarding the extent to which valuations of
companies that fit our acquisition criteria will continue to
fluctuate may affect our ability to accurately value potential
acquisition candidates. Additionally, ongoing weak economic
conditions may make it more difficult for us to obtain capital
needed to deploy to new and existing partner companies. If we are
unable to effectively deploy capital to partner companies on
acceptable terms, we may not be able to execute on our strategy,
and our business may be adversely impacted.
We will need additional funding in the near future to continue our
current level of operations and growth.
As of
December 31, 2019, we had an accumulated deficit of $17,502,305. In
addition, for the year ended December 31, 2019, we had a loss of
$292,416. Revenues generated from our current operations are not
sufficient to pay our on-going operating expenses. Prior to the
acquisition of PTGi and GetCharged, our working capital needs since
our acquisition of Transworld Enterprises, Inc., our wholly owned
subsidiary, have been primarily funded by securities sold to the
Selling Shareholders. We may continue to obtain additional funding
from the sale of our securities or from strategic transactions in
order to fund our current level of operations. Aside from
continuing these loan transactions, we have not identified the
sources for additional financing that we may require, and we do not
have commitments from third parties to continue to provide this
financing. Being a micro-cap stock, certain investors may be
unwilling to invest in our securities. There is no assurance that
sufficient funding through a financing will be available to us at
acceptable terms or at all. Historically, we have raised capital
through the issuance of convertible debt securities or straight
equity securities. However, given the risks associated with our
business, the risks associated with our common stock, the worldwide
financial uncertainty that has affected the capital markets, and
our status as a small, unknown public company, we expect in the
near future, we will have a great deal of difficulty raising
capital through traditional financing sources. Therefore, we cannot
guarantee that we will be able to raise capital, or if we are able
to raise capital, that such capital will be in the amounts needed.
Our failure to raise capital, when needed, and in sufficient
amounts, will severely impact our ability to continue to develop
our business as planned. In addition, if we are unable to obtain
funding as, and when needed, we may have to further reduce and/or
cease our future operations. Any additional funding that we obtain
in an equity or convertible debt financing is likely to reduce the
percentage ownership of the company held by our existing security
holders.
There is substantial doubt about the entity’s ability to
continue as a going concern.
The
consolidated financial statements of the Company as of December 31,
2019 were prepared on a going concern basis which assumes the
Company will be able to realize its assets and discharge its
liabilities in the normal course of business for the foreseeable
future. The Company has incurred net losses of $292,416 and
$646,190 for the years ended December 31, 2019 and 2018,
respectively, and has incurred losses since inception resulting in
an accumulated deficit of $17,502,305 as of December 31,
2019.
The
ability to continue as a going concern is dependent upon the
Company generating profitable operations in the future and/or
obtaining the necessary financing to meet its obligations and repay
its liabilities arising from normal business operations when they
come due. The Company’s ability to raise additional capital
through the future issuances of debt or equity is unknown. The
obtainment of additional financing, the successful development of
the Company’s contemplated plan of operations, or its
attainment of profitable operations are necessary for the Company
to continue operations. The ability to successfully resolve these
factors raise substantial doubt about the Company’s ability
to continue as a going concern. The consolidated financial
statements of the Company do not include any adjustments that may
result from the outcome of these aforementioned uncertainties. The
Company believes that the acquisition of PTGi and GetCharged may
alleviate the going concern when the audit for the fiscal year
ended December 31, 2020 is completed however there can be no
assurance that any such determination will be made.
We have had operating losses since formation and expect to continue
to incur net losses for the near term.
Prior
to the acquisition of PTGi and GetCharged, we had a working capital
deficit and our revenues were not sufficient to fund our
anticipated operating needs. We have reported net losses of
$292,416 and $646,190 for the years ended December 31, 2019 and
2018, respectively. In order to achieve profitable operations, we
need to significantly increase our revenues from the sales of
products. We cannot be certain that our business will ever be
successful or that we will generate significant revenues and become
profitable. As a result, an investment in our company is highly
speculative and no assurance can be given that our business model
will be successful and, therefore, that our stockholders will
realize any return on their investment or that they will not lose
their entire investment.
Our current sources of funding are limited, and any additional
funding that we may obtain may be on unfavorable terms and may
significantly dilute our existing shareholders.
Prior
to the acquisition of PTGi and GetCharged, the amount of revenues
that we generated was not sufficient to fund our operating
expenses. We believe that has changed since these acquisitions were
consummated in the fourth quarter of 2020. As a result, if
operations are not sufficient to fund our operations going forward,
we will have to obtain additional public or private equity
financings or debt financings in order to continue our operations.
Any additional funding that we obtain in a financing is likely to
reduce the percentage ownership of the Company held by our existing
security-holders. The amount of this dilution may be substantial
based on our current stock price, and could increase if the trading
price of our common stock declines at the time of any financing
from its current levels. To the extent we raise additional capital
by issuing equity securities, our stockholders will experience
further dilution. If we raise funds through debt financings, we may
become subject to restrictive covenants. We may also attempt to
raise funds through corporate collaboration andlicensing
arrangements. To the extent that we raise additional funds through
such means, we may be required to relinquish some rights to our
technologies or products, or grant licenses on terms that are not
favorable to us. There can be no assurance that financing will be
available in amounts or on terms acceptable to us, if at all. If we
are unable to obtain the needed additional funding, we will have to
reduce or even totally discontinue our operations, which would have
a significant negative impact on our stockholders and could result
in a total loss of their investment in our stock.
Funding,
especially on terms acceptable to us, may not be available to meet
our future capital needs because of the state of the credit and
capital markets. Global market and economic conditions have been,
and continue to be, disruptive and volatile. The cost of raising
money in the debt and equity capital markets for smaller companies
like ours has increased substantially while the availability of
funds from those markets has diminished significantly. Also, low
valuations and decreased appetite for equity investments, among
other factors, may make the equity markets difficult to access on
acceptable terms or unavailable altogether.
If
adequate funds are not available, we may be required to delay,
scale-back or eliminate our product enhancement and new product
development programs. There can be no assurance that additional
financing will be available on acceptable terms or at all, if and
when required.
We and our subsidiaries may not be able to attract and/or retain
additional skilled personnel.
We may not be able to attract new personnel, including management
and technical and sales personnel, necessary for future growth, or
replace lost personnel. In particular, the activities of some of
our operating subsidiaries require personnel with highly
specialized skills. Competition for the best personnel in our
businesses can be intense. Our financial condition and results of
operations could be materially adversely affected if we are unable
to attract and/or retain qualified personnel.
The nature of our business is speculative and dependent on a number
of variables beyond our control that cannot be reliably ascertained
in advance.
The
revenues and profits of an enterprise like ours are generally
dependent upon many variables. Our customer appeal depends upon
factors which cannot be reliably ascertained in advance and over
which we have no control, such as unpredictable customer and media
reviews, industry analyst commentaries, and comparisons to
competitive products. As with any relatively new business
enterprise operating in a specialized and intensely competitive
market, we are subject to many business risks which include, but
are not limited to, unforeseen marketing difficulties, excessive
research and development expenses, unforeseen negative publicity,
competition, product liability issues, manufacturing and logistical
difficulties, and lack of operating experience. Many of the risks
may be unforeseeable or beyond our control. There can be no
assurance that we will successfully implement our business plan in
a timely or effective manner, that we will be able to generate
sufficient interest in our products, or that we will be able to
market and sell enough products and services to generate sufficient
revenues to continue as a going concern.
Our markets are highly competitive, and our failure to compete
successfully would limit our ability to sell our products, attract
and retain customers and grow our business.
Our
markets are highly competitive, and we expect that both direct and
indirect competition will increase in the future. Within each of
our markets, we encounter direct competition from various larger
U.S. and non-U.S. competitors. The adoption of new technology
likely will intensify the competition for our products. Due to the
rapidly evolving markets in which we compete, additional
competitors with significant market presence and financial
resources may enter those markets, thereby further intensifying
competition, adversely affecting our sales, and adversely affecting
our business and prospects.
We may not be successful in developing our new products and
services.
The
market for our products and services is characterized by rapid
technological change, changing customer needs, frequent new product
introductions and evolving industry standards. These market
characteristics are exacerbated by the emerging nature of this
market and the fact that many companies are expected to continually
introduce new and innovative products and services. Our success
will depend partially on our ability to introduce new products,
services and technologies continually and on a timely basis and to
continue to improve the performance, features and reliability of
our products and services in response to both evolving demands of
prospective customers and competitive products. There can be no
assurance that any of our new or proposed products or services will
maintain the limited market acceptance that we have to date
established. Our failure to design, develop, test, market and
introduce new and enhanced products, technologies and services
successfully so as to achieve market acceptance could have a
material adverse effect upon our business, operating results and
financial condition.
There
can be no assurance that we will not experience difficulties that
could delay or prevent the successful development, introduction or
marketing of new or enhanced products and services, or that our new
products and services will adequately satisfy the requirements of
prospective customers and achieve significant acceptance by those
customers. Because of certain market characteristics, including
technological change, changing customer needs, frequent new product
and service introductions and evolving industry standards, the
continued introduction of new products and services is critical.
Delays in the introduction of new products and services may result
in customer dissatisfaction and may delay or cause a loss of
revenue. There can be no assurance that we will be successful in
developing new products or services or improving existing products
and services that respond to technological changes or evolving
industry standards.
In
addition, new or enhanced products and services introduced by us
may contain undetected errors that require significant design
modifications. This could result in a loss of customer confidence
which could adversely affect the use of our products, which in
turn, could have a material adverse effect upon our business,
results of operations or financial condition.
We cannot accurately predict our future revenues and
expenses.
We are
currently developing various sources of revenues based on market
conditions and the type of products that we are marketing. As such,
the amount of revenues we receive from the sale and use of our
products will fluctuate and depend upon our customer’s
willingness to buy our products. As with any developing enterprise
operating in a specialized and intensely competitive market, we are
subject to many business risks which include, but are not limited
to, unforeseen negative publicity, competition, product liability
and lack of operating experience. Many of the risks may be
unforeseeable or beyond our control. There can be no assurance that
we will successfully implement our business plan in a timely
manner, or generate sufficient interest in our products or
services, or that we will be able to market and sell enough
products and services to generate sufficient revenues to continue
as a going concern.
Our
expense levels in the future will be based, in large part, on our
expectations regarding future revenue, and as a result net
income/loss for any quarterly period in which material orders are
delayed could vary significantly. In addition, our costs and
expenses may vary from period to period because of a variety of
factors, including our research and development costs, our
introduction of new products and services, cost increases from
third-party service providers or product manufacturers, production
interruptions, changes in marketing and sales expenditures, and
competitive pricing pressures.
There are risks of international sales and operations.
We
anticipate that a growing, and potentially substantial portion of
our future revenue from the sale of our products and services may
be derived from customers located outside the United States. As
such, a portion of our sales and operations could be subject to
tariffs and other import-export barriers, currency exchange risks
and exchange controls, foreign product standards, potentially
adverse tax consequences, longer payment cycles, problems in
collecting accounts receivable, political instability, and
difficulties in staffing and managing foreign operations. Although
we intend to monitor our exposure to currency fluctuations and
currently the U.S. dollar is very strong giving us a significant
buying advantage, there can be no assurance that exchange rate
fluctuations will not have an adverse effect on our results of
operations or financial condition. In the future, we could be
required to sell our products and services in other currencies,
which would make the management of currency fluctuations more
difficult and expose our business to greater risks in this
regard.
Our
products may be subject to numerous foreign government standards
and regulations that are continually being amended. Although we
will endeavor to satisfy foreign technical and regulatory
standards, there can be no assurance that we will be able to comply
with foreign government standards and regulations, or changes
thereto, or that it will be cost effective for us to redesign our
products to comply with such standards or regulations. Our
inability to design or redesign products to comply with foreign
standards could have a material adverse effect on our business,
financial condition and results of operations.
Any of
the foregoing factors could have a material adverse effect on our
business, results of operations, and financial
condition.
Because we face significant competition for acquisition and
business opportunities, including from numerous companies with a
business plan similar to ours, it may be difficult for us to fully
execute our business strategy. Additionally, our subsidiaries also
operate in highly competitive industries, limiting their ability to
gain or maintain their positions in their respective
industries.
We expect to encounter intense competition for acquisition and
business opportunities from both strategic investors and other
entities having a business objective similar to ours, such as
private investors (which may be individuals or investment
partnerships), blank check companies, and other entities, domestic
and international, competing for the type of businesses that we may
acquire. Many of these competitors possess greater technical, human
and other resources, or more local industry knowledge, or greater
access to capital, than we do, and our financial resources may be
relatively limited when contrasted with those of many of these
competitors. These factors may place us at a competitive
disadvantage in successfully completing future acquisitions and
investments.
In addition, while we believe that there are numerous target
businesses that we could potentially acquire or invest in, our
ability to compete with respect to the acquisition of certain
target businesses that are sizable will be limited by our available
financial resources. We may need to obtain additional financing in
order to consummate future acquisitions and investment
opportunities and cannot assure you that any additional financing
will be available to us on acceptable terms, or at all, or that the
terms of our existing financing arrangements will not limit our
ability to do so. This inherent competitive limitation gives others
an advantage in pursuing acquisition and investment
opportunities.
Future acquisitions or business opportunities could involve unknown
risks that could harm our business and adversely affect our
financial condition and results of operations.
We are a diversified holding company that owns interests in a
number of different businesses. We have in the past, and intend in
the future, to acquire businesses or make investments, directly or
indirectly through our subsidiaries, that involve unknown risks,
some of which will be particular to the industry in which the
investment or acquisition targets operate, including risks in
industries with which we are not familiar or experienced. There can
be no assurance our due diligence investigations will identify
every matter that could have a material adverse effect on us or the
entities that we may acquire. We may be unable to adequately
address the financial, legal and operational risks raised by such
investments or acquisitions, especially if we are unfamiliar with
the relevant industry, which can lead to significant losses on
material investments. The realization of any unknown risks could
expose us to unanticipated costs and liabilities and prevent or
limit us from realizing the projected benefits of the investments
or acquisitions, which could adversely affect our financial
condition and liquidity. In addition, our financial condition,
results of operations and the ability to service our debt may be
adversely impacted depending on the specific risks applicable to
any business we invest in or acquire and our ability to address
those risks.
If we fail to develop and maintain an effective system of internal
controls, we may not be able to accurately report our financial
results or prevent fraud. As a result, our current and potential
stockholders could lose confidence in our financial reports, which
could harm our business and the trading price of our common
stock.
Effective
internal controls are necessary for us to provide reliable
financial reports and effectively prevent fraud. Section 404 of the
Sarbanes-Oxley Act of 2002 requires us to evaluate and report on
our internal controls over financial reporting and, depending on
our future growth, may require our independent registered public
accounting firm to annually attest to our evaluation, as well as
issue their own opinion on our internal controls over financial
reporting. The process of implementing and maintaining proper
internal controls and complying with Section 404 is expensive and
time consuming. We cannot be certain that the measures we will
undertake will ensure that we will maintain adequate controls over
our financial processes and reporting in the future. Furthermore,
if we are able to rapidly grow our business, the internal controls
that we will need will become more complex, and significantly more
resources will be required to ensure our internal controls remain
effective. Failure to implement required controls, or difficulties
encountered in their implementation, could harm our operating
results or cause us to fail to meet our reporting obligations. If
we or our auditors discover a material weakness in our internal
controls, the disclosure of that fact, even if the weakness is
quickly remedied, could diminish investors’ confidence in our
financial statements and harm our stock price. In addition,
non-compliance with Section 404 could subject us to a variety of
administrative sanctions, including the suspension of trading,
ineligibility for future listing on one of the Nasdaq Stock Markets
or national securities exchanges, and the inability of registered
broker-dealers to make a market in our common stock, which may
reduce our stock price.
Our ability to compete could be jeopardized and our business
seriously compromised if we are unable to protect ourselves from
third-party challenges or infringement of the proprietary aspects
of the wireless location products and technology we
develop.
Our
products utilize a variety of proprietary rights that are critical
to our competitive position. Because the technology and
intellectual property associated with our products are evolving and
rapidly changing, our current intellectual property rights may not
adequately protect us in the future. We rely on a combination of
patent, copyright, trademark and trade secret laws and contractual
restrictions to protect the intellectual property utilized in our
products. Despite our efforts to protect our proprietary rights,
unauthorized parties may attempt to copy or otherwise obtain and
use our products or technology. In addition, monitoring
unauthorized use of our products is difficult and we cannot be
certain the steps we have taken will prevent unauthorized use of
our technology. Also, it is possible that no additional patents or
trademarks will be issued from our currently pending or future
patent or trademark applications. Because legal standards relating
to the validity, enforceability and scope of protection of patent
and intellectual property rights are uncertain and still evolving,
the future viability or value of our intellectual property rights
is uncertain. Moreover, effective patent, trademark, copyright and
trade secret protection may not be available in some countries in
which we distribute or anticipate distributing our products.
Furthermore, our competitors may independently develop similar
technologies that limit the value of our intellectual property,
design or patents. In addition, third parties may at some point
claim certain aspects of our business infringe their intellectual
property rights. While we are not currently subject to nor aware of
any such claim, any future claim (with or without merit) could
result in one or more of the following:
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Significant
litigation costs;
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Diversion
of resources, including the attention of management;
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Our
agreement to pay certain royalty and/or licensing
fees;
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Cause
us to redesign those products that use such technology;
or
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Cessation
of our rights to use, market, or distribute such
technology.
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Any of
these developments could materially and adversely affect our
business, results of operations and financial condition. In the
future, we may also need to file lawsuits to enforce our
intellectual property rights, to protect our trade secrets, or to
determine the validity and scope of the proprietary rights of
others. Whether successful or unsuccessful, such litigation could
result in substantial costs and diversion of resources. Such costs
and diversion could materially and adversely affect our business,
results of operations and financial condition.
We depend on our key personnel to manage our business effectively
in a rapidly changing market. If we are unable to retain our key
employees, our business, financial condition and results of
operations could be harmed.
Our
future success depends to a significant degree on the skills,
efforts and continued services of our executive officers and other
key engineering, manufacturing, operations, sales, marketing and
support personnel. If we were to lose the services of one or more
of our key executive officers or other key engineering,
manufacturing, operations, sales, marketing and support personnel,
we may not be able to grow our business as we expect, and our
ability to compete could be harmed, adversely affecting our
business and prospects.
Rapid technological change in our market and/or changes in customer
requirements could cause our products to become obsolete or require
us to redesign our products, which would have a material adverse
effect on our business, operating results and financial
condition.
The
market for our products is characterized by rapid technological
change, frequent new product introductions and enhancements,
uncertain product life cycles, changing customer demands and
evolving industry standards, any of which can render existing
products obsolete. We believe that our future success will depend
in large part on our ability to develop new and effective products
in a timely manner and on a cost-effective basis. As a result of
the complexities inherent in our products, major new products and
product enhancements can require long development and testing
periods, which may result in significant delays in the general
availability of new releases or significant problems in the
implementation of new releases. In addition, if we or our
competitors announce or introduce new products our current or
future customers may defer or cancel purchases of our products,
which could materially adversely affect our business, operating
results and financial condition. Our failure to develop
successfully, on a timely and cost effective basis, new products or
new product enhancements that respond to technological change,
evolving industry standards or customer requirements would have a
material adverse effect on our business, operating results and
financial condition.
We may suffer adverse consequences if we are deemed an investment
company and we may incur significant costs to avoid investment
company status.
We believe we are not an investment company as defined by the
Investment Company Act of 1940, and have operated our business in
accordance with such view. If the SEC or a court were to disagree
with us, we could be required to register as an investment company.
This would subject us to disclosure and accounting rules geared
toward investment, rather than operating, companies; limit our
ability to borrow money, issue options, issue multiple classes of
stock and debt, and engage in transactions with affiliates; and
require us to undertake significant costs and expenses to meet the
disclosure and other regulatory requirements to which we would be
subject as a registered investment company.
Future acquisitions or strategic investments may not be successful
and may harm our operating results.
Future
acquisitions or strategic investments could have a material adverse
effect on our business and operating results because
of:
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The
assumption of unknown liabilities, including employee obligations.
Although we normally conduct extensive legal and accounting due
diligence in connection with our acquisitions, there are many
liabilities that cannot be discovered, and which liabilities could
be material.
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We may
become subject to significant expenses related to bringing the
financial, accounting and internal control procedures of the
acquired business into compliance with U.S. GAAP financial
accounting standards and the Sarbanes Oxley Act of
2002.
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Our
operating results could be impaired as a result of restructuring or
impairment charges related to amortization expenses associated with
intangible assets.
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We
could experience significant difficulties in successfully
integrating any acquired operations, technologies, customers’
products and businesses with our existing operations.
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Future
acquisitions could divert substantial capital and our
management’s attention.
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We may
not be able to hire the key employees necessary to manage or staff
the acquired enterprise operations.
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Our executive officers and directors have the ability to
significantly influence matters submitted to our stockholders for
approval.
As of
February 9, 2021, our executive officers and directors, in the
aggregate, beneficially own shares representing approximately 50%
of our common stock. Beneficial ownership includes shares over
which an individual or entity has investment or voting power and
includes shares that could be issued upon the exercise of options
and warrants within 60 days after the date of determination. On
matters submitted toour stockholders for approval, holders of our
common stock are entitled to one vote per share. If our executive
officers and directors choose to act together, they would have
significant influence over all matters submitted to our
stockholders for approval, as well as our management and affairs.
For example, these individuals, if they chose to act together,
would have significant influence on the election of directors and
approval of any merger, consolidation or sale of all or
substantially all of our assets. This concentration of voting power
could delay or prevent an acquisition of our company on terms that
other stockholders may desire.
Failure to manage growth effectively could adversely affect our
business, results of operations and financial
condition.
The
success of our future operating activities will depend upon our
ability to expand our support system to meet the demands of our
growing business. Any failure by our management to effectively
anticipate, implement, and manage changes required to sustain our
growth would have a material adverse effect on our business,
financial condition, and results of operations. We cannot assure
you that we will be able to successfully operate acquired
businesses, become profitable in the future, or effectively manage
any other change.
Subsequent to consummation of any acquisition, we may be required
to take write-downs or write-offs, restructuring and impairment or
other charges that could have a significant negative effect on our
financial condition, results of operations and our stock price,
which could cause you to lose some or all of your
investment.
Even if we conduct extensive due diligence on a target business
with which we acquire, we cannot assure you that this examination
will uncover all material risks that may be presented by a
particular target business, or that factors outside of the target
business and outside of our control will not later arise. Even if
our due diligence successfully identifies the principal risks,
unexpected risks may arise and previously known risks may
materialize in a manner not consistent with our preliminary risk
analysis. As a result, from time to time we may be forced to
write-down or write-off assets, restructure our operations, or
incur impairment or other charges that could result in our
reporting losses. Even though these charges may be non-cash items
and not have an immediate impact on our liquidity, the fact that we
report charges of this nature could contribute to negative market
perceptions about us or our securities. In addition, charges of
this nature may cause us to violate net worth or other covenants to
which we may be subject as a result of assuming pre-existing debt
held by a target business or by virtue of our obtaining
post-combination debt financing.
Changes in laws or regulations, or a failure to comply with any
laws and regulations, may adversely affect our business,
investments and results of operations.
We are subject to laws and regulations enacted by national,
regional and local governments, including in particular, reporting
and other requirements under the Exchange Act. Compliance with, and
monitoring of, applicable laws and regulations may be difficult,
time consuming and costly. Those laws and regulations and their
interpretation and application may also change from time to time
and those changes could have a material adverse effect on our
business, investments and results of operations. In addition, a
failure to comply with applicable laws or regulations, as
interpreted and applied, could result in fines, injunctive relief
or similar remedies which could be costly to us or limit our
ability to complete an initial business combination or operate the
post-combination company successfully.
Risks Related to our Communications Division
Our Communications business is substantially smaller than some of
our major competitors, whose marketing and pricing decisions, and
relative size advantage could adversely affect our ability to
attract and to retain customers. These major competitors are likely
to continue to cause significant pricing pressures that could
adversely affect PTGi’s net revenues, results of operations
and financial condition.
The carrier services telecommunications industry is significantly
influenced by the marketing and pricing decisions of the larger
business participants. The rapid development of new technologies,
services and products has eliminated many of the traditional
distinctions among wireless, cable, Internet, local and long
distance communication services. We face many competitors in this
market, including telephone companies, cable companies, wireless
service providers, satellite providers, application and device
providers. PTGi faces competition for its voice trading services
from telecommunication services providers’ traditional
processes and new companies. Once telecommunication services
providers have established business relationships with competitors
to PTGi, it could be extremely difficult to convince them to
utilize our services. These competitors may be able to develop
services or processes that are superior to PTGi’s services or
processes, or that achieve greater industry
acceptance.
Many of our competitors are significantly larger than us and have
substantially greater financial, technical and marketing resources,
larger networks, a broader portfolio of service offerings, greater
control over network and transmission lines, stronger name
recognition and customer loyalty and long-standing relationships
with our target customers. As a result, our ability to attract and
retain customers may be adversely affected. Many of our competitors
enjoy economies of scale that result in low cost structures for
transmission and related costs that could cause significant pricing
pressures within the industry.
Our ability to compete effectively will depend on, among other
things, our network quality, capacity and coverage, the pricing of
our products and services, the quality of our customer service, our
development of new and enhanced products and services, the reach
and quality of our sales and distribution channels and our capital
resources. It will also depend on how successfully we anticipate
and respond to various factors affecting our industry, including
new technologies and business models, changes in consumer
preferences and demand for existing services, demographic trends
and economic conditions. While growth through acquisitions is a
possible strategy for PTGi, there are no guarantees that any
acquisitions will occur, nor are there any assurances that any
acquisitions by PTGi would improve the financial results of its
business. If we are not able to respond successfully to these
competitive challenges, we could experience reduced
revenues.
PTGi suppliers may not be able to obtain credit insurance on PTGi,
which could have a material adverse effect on PTGi’s
business.
PTGi makes purchases from its suppliers, who may rely on the
ability to obtain credit insurance on PTGi in determining whether
or not to extend short-term credit to PTGi in the form of accounts
receivables. To the extent that these suppliers are unable to
obtain such insurance they may be unwilling to extend
credit.
Any failure of PTGi’s physical infrastructure, including
undetected defects in technology, could lead to significant costs
and disruptions that could reduce its revenue and harm its business
reputation and financial results.
PTGi depends on providing customers with highly reliable service.
PTGi must protect its infrastructure and any collocated equipment
from numerous factors, including:
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physical
or electronic security breaches;
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fire,
earthquake, flood and other natural disasters;
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terrorism,
sabotage and vandalism.
Problems at one or more of PTGi’s exchange delivery points,
whether or not within PTGi’s control, could result in service
interruptions or significant equipment damage. Any loss of
services, equipment damage or inability to terminate voice calls or
supply Internet capacity could reduce the confidence of the members
and customers and could consequently impair ICS’s ability to
obtain and retain customers, which would adversely affect both
PTGi’s ability to generate revenues and its operating
results.
PTGi’s positioning in the marketplace and intense domestic
and international competition in these services places a
significant strain on our resources, which if not managed
effectively could result in operational inefficiencies and other
difficulties.
To manage PTGi’s market positioning effectively, we must
continue to implement and improve its operational and financial
systems and controls, invest in critical network infrastructure to
expand its coverage and capacity, maintain or improve its service
quality levels, purchase and utilize other transmission facilities,
evolve its support and billing systems and train and manage its
employee base. If we inaccurately forecast the movement of traffic
onto PTGi’s network, we could have insufficient or excessive
transmission facilities and disproportionate fixed expenses. As we
proceed with the development of our PTGi business, operational
difficulties could arise from additional demand placed on customer
provisioning and support, billing and management information
systems, product delivery and fulfillment, support, sales and
marketing, administrative resources, network infrastructure,
maintenance and upgrading. For instance, we may encounter delays or
cost-overruns or suffer other adverse consequences in implementing
new systems when required.
If PTGi is not able to operate a cost-effective network, we may not
be able to operate our PTGi business successfully.
Our business’s success depends on our ability to design,
implement, operate, manage, maintain and upgrade a reliable and
cost-effective network infrastructure. In addition, we rely on
third-party equipment and service vendors manage PTGi’s
global network through which it provides its services. If we fail
to generate traffic on PTGi’s network, if we experience
technical or logistical impediments to the development of necessary
aspects of PTGi’s network or the migration of traffic and
customers onto PTGi’s network, or if we experience
difficulties with third-party providers, we may not achieve desired
economies of scale or otherwise be successful in our
business.
Our telecommunications network infrastructure has several
vulnerabilities and limitations.
Our telecommunications network is the source of most of
PTGi’s revenues and any damages to or loss of our equipment
or any problem with or limitation of PTGi’s network whether
accidental or otherwise, including network, hardware and software
failures may result in a reduction in the number of our customers
or usage level by our customers, our inability to attract new
customers or increased maintenance costs, all of which would have a
negative impact on our results of operations. The development and
operation of our network is subject to problems and technological
risks, including:
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power
surges or outages;
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software
defects as well as hardware and software obsolescence;
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breaches
of security, whether by computer virus, break-in or
otherwise;
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denial
of access to our sites for failure to obtain required municipal or
other regulatory approvals; and
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other
factors which may cause interruptions in service or reduced
capacity for our customers.
Our operations also rely on a stable supply of utilities service.
We cannot assure you that future supply instability will not impair
our ability to procure required utility services in the future,
which could adversely impact our business, financial condition and
results of operations.
Changes in the regulatory framework under which PTGi operates could
adversely affect our business prospects or results of
operations.
PTGi’s domestic operations are subject to regulation by
federal and state agencies, and our international operations are
regulated by various foreign governments and international bodies.
These regulatory regimes may restrict or impose conditions on our
ability to operate in designated areas and to provide specified
products or services. We are frequently required to maintain
licenses for our operations and conduct our operations in
accordance with prescribed standards. We are from time to time
involved in regulatory and other governmental proceedings or
inquiries related to the application of these requirements. It is
impossible to predict with any certainty the outcome of pending
federal and state regulatory proceedings relating to our
operations, or the reviews by federal or state courts of regulatory
rulings. Moreover, new laws or regulations or changes to the
existing regulatory framework could affect how we manage our
wireline and wireless networks, impose additional costs, impair
revenue opportunities, and potentially impede our ability to
provide services in a manner that would be attractive to us and our
customers.
Service interruptions due to natural disasters or unanticipated
problems with our network infrastructure could result in customer
loss.
Natural disasters or unanticipated problems with our network
infrastructure could cause interruptions in the services we
provide. The failure of a switch and our back-up system would
result in the interruption of service to the customers served by
that switch until necessary repairs are completed or replacement
equipment is installed. The successful operation of our network and
its components is highly dependent upon our ability to maintain the
network and its components in reliable enough working order to
provide sufficient quality of service to attract and maintain
customers. Any damage or failure that causes interruptions in our
operations or lack of adequate maintenance of our network could
result in the loss of customers and increased maintenance costs
that would adversely impact our results of operations and financial
condition.
We have backup data for our key information and data processing
systems that could be used in the event of a catastrophe or a
failure of our primary systems,and have established alternative
communication networks where available. However, we cannot assure
you that our business activities would not be materially disrupted
if there were a partial or complete failure of any of these primary
information technology systems or communication networks. Such
failures could be caused by, among other things, software bugs,
computer virus attacks or conversion errors due to system
upgrading. In addition, any security breach caused by unauthorized
access to information or systems, or intentional malfunctions or
loss or corruption of data, software, hardware or other computer
equipment, could have a material adverse effect on our business,
results of operations and financial condition.
Our insurance coverage may not adequately cover losses resulting
from the risks for which we are insured.
We maintain insurance policies for our network facilities and all
of our corporate assets. This insurance coverage protects us in the
event we suffer losses resulting from theft, fraud, natural
disasters or other similar events or from business interruptions
caused by such events. In addition, we maintain insurance policies
for our directors and officers. We cannot assure you however, that
such insurance will be sufficient or will adequately cover
potential losses.
We could be adversely affected if major suppliers fail to provide
needed equipment and services on a timely or cost-efficient basis
or are unwilling to provide us credit on favorable terms or at
all.
We rely on a few strategic suppliers and vendors to provide us with
equipment, materials and services that we need in order to expand
and to operate our business. There are a limited number of
suppliers with the capability of providing the network equipment
and platforms that our operations and expansion plans require or
the services that we require to maintain our extensive and
geographically widespread networks. In addition, because the supply
of network equipment and platforms requires detailed supply
planning and this equipment is technologically complex, it would be
difficult for us to replace the suppliers of this equipment.
Suppliers of cables that we need to extend and maintain our
networks may suffer capacity constraints or difficulties in
obtaining the raw materials required to manufacture these
cables.
We also depend on network installation and maintenance services
providers, equipment suppliers, call centers, collection agencies
and sales agents, for network infrastructure, and services to
satisfy our operating needs. Many suppliers rely heavily on labor;
therefore, any work stoppage or labor relations problems affecting
our suppliers could adversely affect our operations. Suppliers may,
among other things, extend delivery times, raise prices and limit
supply due to their own shortages and business requirements.
Similarly, interruptions in the supply of telecommunications
equipment for networks could impede network development and
expansion. If these suppliers fail to deliver products and services
on a timely and cost-efficient basis that satisfies our demands or
are unwilling to sell to us on favorable credit terms or at all, we
could experience disruptions, which could have an adverse effect on
our business, financial condition and results of
operations.
Risks related to Our Infrastructure Division
Our success depends upon the continued strength of our brand. If we
are not able to maintain and enhance our brand, our business and
operating results may be adversely affected.
We
believe that our brand has significantly contributed to the success
of our business and that maintaining and enhancing the brand is
critical to retaining and expanding our customer base. Our
marketing, design, research and products are aimed at reinforcing
consumer perceptions of our “Charge” brand as a premium
EV solution for the micro-mobility market. Therefore, failure to
protect our brand or to grow the value of the “Charge”
brand may have a material adverse effect on our business and
results of operations, including losing our customers.
We
focus on promoting awareness of our “Charge” brand
generally and in particular as a premium EV solution for the
micro-mobility market globally. We seek to maintain and strengthen
our brand image through marketing initiatives, including
advertising, consumer promotions and trade promotions. Maintaining
and strengthening our brand image depends on our ability to adapt
to a rapidly changing media environment and preferences of
customers to receiving information, including our increasing
reliance on social media and online dissemination of advertising
campaigns. If we do not continue to improve, maintain and
strengthen our brand, we may lose the opportunity to build a
critical mass of customers. Additionally, promoting and positioning
our brand will likely depend significantly on our ability to
provide high-quality products and services and engage with our
customers as intended. If we are unsuccessful in doing so, our
business, financial condition, results of operations and prospects
could be materially and adversely affected.
Our success is dependent on the continued popularity of our
existing products and services and our continued innovation and
successful launches of new products and services, and we may not be
able to anticipate or make timely responses to changes in the
preferences of consumers.
The
success of our operations depends on our ability to introduce new
or enhanced electric vehicles (“EV”) charging, storage,
and service stations for electric mopeds and e-scooters, and other
new products. Consumer preferences differ across and within each of
the regions in which we operate or plan to operate and may shift
over time in response to changes in demographic and social trends,
economic circumstances and the marketing efforts of our
competitors. There can be no assurance that our existing EV
charging, storage, and service stations will continue to be favored
by consumers or that we will be able to anticipate or respond to
changes in consumer preferences in a timely manner. Our failure to
anticipate, identify or react to these particular preferences could
adversely affect our sales performance and our
profitability.
We rely substantially on external suppliers for the manufacture of
our EV charging, storage, and service stations.
We
purchase our EV charging, storage, and service stations from
external suppliers for use in our operations, and a continuous and
stable supply of these EV charging, storage, and service stations
that meet our standards is crucial to our operations and
production. We have entered into an exclusive manufacturing
agreement with Quebec-based Poitras Industries to produce and
manufacture its micro-mobility charging and docking stations. We
expect to continue to rely on external suppliers for a substantial
percentage of our requirements in the future. We had one supplier
accounting for greater than 10% of our total purchases in both 2018
and 2019. We cannot assure you that we will be able to maintain our
existing relationships with this supplier and continue to be able
to source EV charging, storage, and service stations we use in our
operations on a stable basis and at a reasonable price or at all.
For example, our supplier may increase the prices for the EV
charging, storage, and service stations we purchase and/or
experience disruptions in their production of the components
or materials.
Our Revenue Growth Depends on Consumers’ Willingness to Adopt
Electric Mopeds and E-Scooters.
Our
growth is highly dependent upon the adoption and use by consumers
of electric vehicles (“EV”) charging, storage, and
service stations for electric mopeds and e-scooters, and we are
subject to a risk of any reduced demand for our docks and charging
stations. If the market for our docks and charging stations does
not gain broad market acceptance or develops more slowly than we
expect, our business, prospects, financial condition and operating
results will be harmed. The market for charging, storage, and
service stations is relatively new, rapidly evolving, characterized
by rapidly changing technologies, price competition, additional
competitors, evolving government regulation and industry standards,
frequent new announcements, long development cycles for EV original
equipment manufacturers, and changing consumer demands and
behaviors. Factors that may influence the purchase and use of
charging, storage, and service stations, and specifically charging,
storage, and service stations for electric mopeds and e-scooters,
include:
●
perceptions about
quality and safety of charging, storage, and service
stations;
●
the limited range
over which electric mopeds and e-scooters may be driven on a single
battery charge and concerns about running out of power while in
use;
●
the environmental
consciousness of consumers;
●
access to docking
and charging stations, standardization of docking and charging
systems and consumers’ perceptions about convenience and cost
to dock and charge an electric mopeds and e-scooter;
and
●
the availability of
tax and other governmental incentives to purchase and operate
electric mopeds and e-scooters or future regulation requiring
increased use of nonpolluting modes of transportation.
The
influence of any of the factors described above may negatively
impact the widespread consumer adoption of electric mopeds and
e-scooters, which would materially adversely affect our business,
operating results, financial condition and prospects.
Our ability to deploy our EV docking and charging stations is
dependent on outside government regulation which can be subject to
change at any time
Our
ability to deploy our EV docking and charging stations is dependent
on the outside government regulation such as transportation
ordinances by municipalities, FTC (Federal Trade Commission) and
other relevant government laws and regulations. The laws and
regulations concerning the deployment of our EV docking and
charging stations may be subject
to change and if they do then the deployment of our EV docking and
charging stations may no longer
be in the best interest of the Company. At such point the Company
may no longer want to sell product and therefore your investment in
the Company may be affected.
Computer Malware, Viruses, Hacking, Phishing Attacks and Spamming
Could Harm Our Business and Results of Operations.
Computer
malware, viruses, physical or electronic break-ins and similar
disruptions could lead to interruption and delays in our services
and operations and loss, misuse or theft of data. Computer malware,
viruses, computer hacking and phishing attacks against online
networking platforms have become more prevalent and may occur on
our systems in the future.
Any
attempts by hackers to disrupt our website service or our internal
systems, if successful, could harm our business, be expensive to
remedy and damage our reputation or brand. Our network security
business disruption insurance may not be sufficient to cover
significant expenses and losses related to direct attacks on our
website or internal systems. Efforts to prevent hackers from
entering our computer systems are expensive to implement and may
limit the functionality of our services. Though it is difficult to
determine what, if any, harm may directly result from any specific
interruption or attack, any failure to maintain performance,
reliability, security and availability of our products and services
and technical infrastructure may harm our reputation, brand and our
ability to attract customers. Any significant disruption to our
website or internal computer systems could result in a loss of
customers and could adversely affect our business and results of
operations.
We have
previously experienced, and may in the future experience, service
disruptions, outages and other performance problems due to a
variety of factors, including infrastructure changes, third-party
service providers, human or software errors and capacity
constraints. If our mobile application is unavailable when
customers attempt to access it or it does not load as quickly as
they expect, customers may seek other services.
Our
platform functions on software that is highly technical and complex
and may now or in the future contain undetected errors, bugs, or
vulnerabilities. Some errors in our software code may only be
discovered after the code has been deployed. Any errors, bugs, or
vulnerabilities discovered in our code after deployment, inability
to identify the cause or causes of performance problems within an
acceptable period of time or difficultly maintaining and improving
the performance of our platform, particularly during peak usage
times, could result in damage to our reputation or brand, loss of
revenues, or liability for damages, any of which could adversely
affect our business and financial results.
We
expect to continue to make significant investments to maintain and
improve the availability of our platform and to enable rapid
releases of new features and products. To the extent that we do not
effectively address capacity constraints, upgrade our systems as
needed and continually develop our technology and network
architecture to accommodate actual and anticipated changes in
technology, our business and operating results may be
harmed.
We have
a disaster recovery program to transition our operating platform
and data to a failover location in the event of a catastrophe and
have tested this capability under controlled circumstances,
however, there are several factors ranging from human error to data
corruption that could materially lengthen the time our platform is
partially or fully unavailable to our user base as a result of the
transition. If our platform is unavailable for a significant period
of time as a result of such a transition, especially during peak
periods, we could suffer damage to our reputation or brand, or loss
of revenues any of which could adversely affect our business and
financial results.
Growing Our Customer Base Depends Upon the Effective Operation of
Our Mobile Applications with Mobile Operating Systems, Networks and
Standards That We Do Not Control.
We are
dependent on the interoperability of our mobile applications with
popular mobile operating systems that we do not control, such as
Google’s Android and iOS, and any changes in such systems
that degrade our products’ functionality or give preferential
treatment to competitive products could adversely affect the usage
of our applications on mobile devices. Additionally, in order to
deliver high quality mobile products, it is important that our
products work well with a range of mobile technologies, systems,
networks and standards that we do not control. We may not be
successful in developing relationships with key participants in the
mobile industry or in developing products that operate effectively
with these technologies, systems, networks or
standards.
If We Are Unable to Keep Up With Advances in EV Technology, We May
Suffer a Decline in Our Competitive Position.
The EV
industry is characterized by rapid technological change. If we are
unable to keep up with changes in EV technology, our competitive
position may deteriorate which would materially and adversely
affect our business, prospects, operating results and financial
condition. As technologies change, we plan to upgrade or adapt our
EV docking and charging stations and software in order to continue
to provide EV docking and charging services with the latest
technology. However, due to our limited cash resources, our efforts
to do so may be limited. As a result, we may be unable to grow,
maintain and enhance the network of docking and charging stations.
Any failure of our docking and charging stations to compete
effectively with other manufacturers’ charging stations will
harm our business, operating results and prospects.
We Are in an Intensely Competitive Industry and There Can Be No
Assurance That We Will Be Able to Compete with Our Competitors Who
May Have Greater Resources.
We face
strong competition from competitors in the EV charging services
industry, including competitors who could duplicate our model. Many
of these competitors may have substantially greater financial,
marketing and development resources and other capabilities than us.
In addition, there are very few barriers to entry into the market
for our services. There can be no assurance, therefore, that any of
our current and future competitors, many of whom may have far
greater resources, will not independently develop services that are
substantially equivalent or superior to our services. Therefore, an
investment in our Company is very risky and speculative due to the
competitive environment in which we may operate.
Our
competitors may be able to provide customers with different or
greater capabilities or benefits than we can provide in areas such
as technical qualifications, past contract performance, geographic
presence and price. Furthermore, many of our competitors may be
able to utilize substantially greater resources and economies of
scale to develop competing products and technologies, divert sales
away from us by winning broader contracts or hire away our
employees by offering more lucrative compensation packages. In the
event that the market for EV docking and charging stations expands,
we expect that competition will intensify as additional competitors
enter the market and current competitors expand their product
lines. In order to secure contracts successfully when competing
with larger, well-financed companies, we may be forced to agree to
contractual terms that provide for lower aggregate payments to us
over the life of the contract, which could adversely affect our
margins. Our failure to compete effectively with respect to any of
these or other factors could have a material adverse effect on our
business, prospects, financial condition or operating
results.
Changes to Federal, State or International Laws or Regulations
Applicable To Our Company Could Adversely Affect Our
Business.
Our
business is subject to a variety of federal, state and
international laws and regulations, including those with respect
government incentives promoting fuel efficiency and alternate forms
of energy, electric vehicles and others. These laws and
regulations, and the interpretation or application of these laws
and regulations, could change. Any reduction, elimination or
discriminatory application of government subsidies and economic
incentives because of policy changes, fiscal tightening or other
reasons may result in diminished revenues from government sources
and diminished demand for our products. In addition, new laws or
regulations affecting our business could be enacted. These laws and
regulations are frequently costly to comply with and may divert a
significant portion of management’s attention. If we fail to
comply with these applicable laws or regulations, we could be
subject to significant liabilities which could adversely affect our
business.
There
are many federal, state and international laws that may affect our
business, including measures to regulate charging systems, electric
vehicles, and others. If we fail to comply with these applicable
laws or regulations we could be subject to significant liabilities
which could adversely affect our business.
There
are a number of significant matters under review and discussion
with respect to government regulations which may affect the
business we intend to enter and/or harm our customers, and thereby
adversely affect our business, financial condition and results of
operations.
Risks Related to this Offering and Our Common Stock
There has been a limited public market
for our common stock, and we do
not know whether one will develop to provide you adequate
liquidity. Furthermore, the trading price for our common stock,
should an active trading market develop, may be volatile and could
be subject to wide fluctuations in per-share
price.
Our common stock is quoted on
the OTC Pink under the trading symbol “CRGE”;
historically, however, there has been a limited public market for
our common stock. We cannot
assure you that an active trading market for our common stock will
develop or be sustained. The liquidity of any market for the shares
of our common stock will depend on a number of factors,
including:
●
|
the
number of stockholders;
|
●
|
our
operating performance and financial condition;
|
●
|
the
market for similar securities;
|
●
|
the
extent of coverage of us by securities or industry analysts;
and
|
●
|
the
interest of securities dealers in making a market in the shares of
our common stock.
|
Even if an active trading market develops, the market price for
our common stock may be highly
volatile and could be subject to wide fluctuations. In addition,
the price of shares of our common stock could decline significantly if our
future operating results fail to meet or exceed the expectations of
market analysts and investors and actual or anticipated variations
in our quarterly operating results could negatively affect our
share price.
The volatility of the price of our common stock may also be impacted by the risks
discussed under this “Risk Factors” section, in
addition to other factors, including:
●
|
developments
in the financial markets and worldwide or regional
economies;
|
●
|
announcements
of innovations or new products or services by us or our
competitors;
|
●
|
announcements
by the government relating to regulations that govern our
industry;
|
●
|
significant
sales of our common stock or other securities in the open
market;
|
●
|
variations
in interest rates;
|
●
|
changes
in the market valuations of other comparable companies;
and
|
●
|
changes
in accounting principles.
|
Our outstanding warrants and preferred stock may affect the market
price and liquidity of the common stock.
As of the date of this prospectus, we had approximately 148,718,385
shares of common stock
outstanding and had outstanding warrants for the purchase of up to approximately
10.0 million additional shares of common stock at an exercise price of $0.50 per
share, all of which are
exercisable as of the date of this prospectus (subject to certain
beneficial ownership limitations). We also had outstanding
1,000,000 shares of Series A
preferred stock (the “Series A Preferred
Stock”). The Series A Preferred Stock is convertible
into 80% of our fully-diluted shares of common stock. In addition, as described more fully below,
holders of our Notes and Warrants may elect to receive a substantial number
of shares of common stock upon
conversion of the notes and/or
exercise of the Warrants. The amount of common stock reserved for issuance may have an
adverse impact on our ability to raise capital and may affect the
price and liquidity of our common stock in the public market. In addition,
the issuance of these shares of common stock will have a dilutive effect on
current stockholders’ ownership.
The conversion of outstanding
convertible notes into shares of common stock could materially dilute our current
stockholders.
As of the date of this prospectus, we had approximately $8.0
million aggregate principal amount of convertible
notes outstanding. The convertible
notes are convertible into shares of our common stock at a fixed price of $0.25 per share,
which may be less than the market price of our common stock at the time of conversion, and which
may be subject to future adjustment due to certain events,
including the issuance by the Company of common stock or common
stock equivalents at an effective price per share lower than the
conversion rate then in effect.
If the entire principal amount of all the outstanding convertible
notes is converted into shares of common stock, we would be
required to issue an aggregate of no less than 32 million shares of
common stock. If we issue all of these shares, the ownership of our
current stockholders will be diluted.
Because our common stock may be deemed a low-priced
“penny” stock, an investment in our common stock should be considered high-risk and
subject to marketability restrictions.
Historically, the trading price of our common stock has been $5.00 per share or lower,
and deemed a penny stock, as defined in Rule 3a51-1 under the
Exchange Act, and subject to the penny stock rules of the Exchange
Act specified in rules 15g-1 through 15g-100. Those rules require
broker–dealers, before effecting transactions in any penny
stock, to:
●
|
deliver
to the customer, and obtain a written receipt for, a disclosure
document;
|
●
|
disclose
certain price information about the stock;
|
●
|
disclose
the amount of compensation received by the broker-dealer or any
associated person of the broker-dealer;
|
●
|
send
monthly statements to customers with market and price information
about the penny stock; and
|
●
|
in some
circumstances, approve the purchaser’s account under certain
standards and deliver written statements to the customer with
information specified in the rules.
|
Consequently, the penny stock rules may restrict the ability or
willingness of broker-dealers to sell the common stock and may affect the ability of holders
to sell their common stock in
the secondary market and the price at which such holders can sell
any such securities. These additional procedures could also limit
our ability to raise additional capital in the
future.
Financial Industry Regulatory
Authority (“FINRA”) sales practice requirements may
also limit a stockholder’s ability to buy and sell our common
stock, which could depress the price of our common stock.
In addition to the “penny stock” rules described above,
FINRA has adopted rules that require a broker-dealer to have
reasonable grounds for believing that the investment is suitable
for that customer before recommending an investment to a customer.
Prior to recommending speculative low-priced securities to their
non-institutional customers, broker-dealers must make reasonable
efforts to obtain information about the customer’s financial
status, tax status, investment objectives and other information.
Under interpretations of these rules, FINRA believes that there is
a high probability that speculative low-priced securities will not
be suitable for at least some customers. Thus, the FINRA
requirements make it more difficult for broker-dealers to recommend
that their customers buy our common stock, which may limit your ability to buy
and sell our shares of common
stock, have an adverse effect on the market for our shares
of common stock, and thereby
depress our price per share of common stock.
If securities or industry analysts do not publish research or
reports about our business, or if they issue an adverse or
misleading opinion regarding our stock, our stock price and trading
volume could decline.
The trading market for our common stock may be influenced by the research and
reports that industry or securities analysts publish about us or
our business. We do not currently have, and may never obtain,
research coverage by securities and industry analysts. If no or few
securities or industry analysts commence coverage of us, the
trading price for our common
stock may be negatively affected. In the event that we receive
securities or industry analyst coverage, if any of the analysts who
cover us issue an adverse or misleading opinion regarding us, our
business model, our intellectual property or our stock performance,
or if our operating results fail to meet the expectations of
analysts, our stock price would likely decline. If one or more of
these analysts cease coverage of us or fail to publish reports on
us regularly, we could lose visibility in the financial markets,
which in turn could cause our stock price or trading volume to
decline.
Certain provisions of our certificate of incorporation and Delaware
law make it more difficult for a third party to acquire us and make
a takeover more difficult to complete, even if such a transaction
were in stockholders’ interest.
Our certificate of incorporation and the Delaware General
Corporation Law contain certain provisions that may have the effect
of making it more difficult or delaying attempts by others to
obtain control of our Company, even when these attempts may be in
the best interests of our stockholders. We also are subject to the
anti-takeover provisions of the Delaware General Corporation Law,
which prohibits us from engaging in a “business
combination” with an “interested stockholder”
unless the business combination is approved in a prescribed manner
and prohibits the voting of shares held by persons acquiring
certain numbers of shares without obtaining requisite approval. The
statutes and our certificate of incorporation have the effect of
making it more difficult to effect a change in control of our
Company.
We do not currently or for the foreseeable future intend to pay
dividends on our common stock.
We have never declared or paid any cash dividends on our common
stock. We currently anticipate that we will retain future earnings
for the development, operation and expansion of our business and do
not anticipate declaring or paying any cash dividends for the
foreseeable future. As a result, any return on your investment in
our common stock will be
limited to the appreciation in the price of our common stock, if any.
Financial reporting obligations of being a public company in the
United States are expensive and time-consuming, and our management
will be required to devote substantial time to compliance
matters.
Upon
effectiveness of the registration statement of which this
prospectus forms a part, we will incur significant additional
legal, accounting and other expenses that we did not incur as a
private company. The obligations of being a public company in the
United States require significant expenditures and will place
significant demands on our management and other personnel,
including costs resulting from public company reporting obligations
under the Securities Exchange Act of 1934, as amended, or the
Exchange Act, and the rules and regulations regarding corporate
governance practices, including those under the Sarbanes-Oxley Act
of 2002, or the Sarbanes-Oxley Act, the Dodd-Frank Wall Street
Reform and Consumer Protection Act, or the Dodd-Frank Act, and the
listing requirements of the stock exchange on which our securities
are listed or quoted, if any. These rules require the establishment
and maintenance of effective disclosure and financial controls and
procedures, internal control over financial reporting and changes
in corporate governance practices, among many other complex rules
that are often difficult to implement, monitor and maintain
compliance with. Moreover, despite recent reforms made possible by
the JOBS Act, the reporting requirements, rules, and regulations
will make some activities more time-consuming and costly,
particularly after we are no longer an "emerging growth company."
In addition, we expect these rules and regulations to make it more
difficult and more expensive for us to obtain director and officer
liability insurance and we may be required to incur substantial
costs to maintain the same or similar coverage that we had through
Synergy. Our management and other personnel will need to devote a
substantial amount of time to ensure that we comply with all of
these requirements and to keep pace with new regulations, otherwise
we may fall out of compliance and risk becoming subject to
litigation or being delisted, among other potential
problems.
We are an "emerging growth company" and as a result of our reduced
disclosure requirements applicable to emerging growth companies,
our common stock may be less attractive to investors.
We are
an "emerging growth company," as defined in the Jumpstart Our
Business Startups Act of 2012, or the JOBS Act, and we intend to
take advantage of certain exemptions from various reporting
requirements that are applicable to other public companies that are
not "emerging growth companies" including, but not limited to, not
being required to comply with the auditor attestation requirements
of Section 404 of the Sarbanes-Oxley Act, reduced disclosure
obligations regarding executive compensation in our periodic
reports and proxy statements, and exemptions from the requirements
of holding a nonbinding advisory vote on executive compensation and
shareholder approval of any golden parachute payments not
previously approved. We could remain an "emerging growth company"
until the earliest to occur of earliest of (i) the last day of the
fiscal year in which we have total annual gross revenues of $1.07
billion or more; (ii) the last day of our fiscal year following the
fifth anniversary of the date of this prospectus; (iii) the date on
which we have issued more than $1 billion in nonconvertible debt
during the previous three years; or (iv) the date on which we are
deemed to be a large accelerated filer under the rules of the
Securities and Exchange Commission. We cannot predict whether
investors will find our common stock less attractive because we
will rely on these exemptions. If some investors find our common
stock less attractive as a result, there may be a less active
trading market for our common stock and our stock price may be more
volatile.
The Company is not subject to any reporting requirements with the
Securities and Exchange Commission. Until such time as the Company
is subject to such reporting requirements, there may not be
liquidity in the Company’s common stock.
The Company is not subject to any reporting obligations with the
SEC and the Company was previously a “shell company” as
defined in Rule 12b-2 under the Exchange Act. Pursuant to Rule
144(i), securities issued by a current or former shell company that
otherwise meet the holding period and other requirements of Rule
144 nevertheless cannot be sold in reliance on Rule 144 until one
year after the Company (a) is no longer a shell company; and (b)
has filed current “Form 10 information“ (as defined in
Rule 144(i)) with the SEC reflecting that it is no longer a shell
company, and provided that at the time of a proposed sale pursuant
to Rule 144, the Company is subject to the reporting requirements
of Section 13 or 15(d) of the Exchange Act and has filed all
reports and other materials required to be filed by Section 13 or
15(d) of the Exchange Act, as applicable, during the preceding 12
months (or for such shorter period that the issuer was required to
file such reports and materials), other than Form 8-K reports. As a
result, Rule 144 is not currently available to the
Company.
USE OF PROCEEDS
The Selling Stockholders will receive all of the proceeds from the
sale of the shares offered by them pursuant to this prospectus. We
will not receive any proceeds from the sale of the shares by the
Selling Stockholders covered by this prospectus. We would,
however, receive proceeds upon the exercise of the Warrants held by
the selling stockholders which, if such Warrants are exercised in
full, would be approximately $3,800,000. Proceeds, if any, received from the
exercise of such Warrants will be used for working capital and
general corporate purposes. No assurances can be given that any of
such Warrants will be exercised.
MARKET FOR REGISTRANT’S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
Our common stock is quoted on
the OTC Pink of the marketplace maintained by OTC Markets Group,
Inc. under the symbol “CRGE.” Our common stock trades
on a limited or sporadic basis and should not be deemed to
constitute an established public trading market. There is no
assurance that there will be liquidity in the common
stock.
Stockholders
As of February 10, 2021, there were 1,052 stockholders of record,
which total does not include stockholders who hold their shares in
“street name.” The transfer agent for our common stock
is Manhattan Transfer Registrar Company, whose address is
38B Sheep Pasture Road, Port Jefferson, New York
11777.
Dividends
We have not paid any dividends on our common stock to date and do not anticipate that we
will pay dividends in the foreseeable future. Any payment of cash
dividends on our common stock
in the future will be dependent upon the amount of funds legally
available, our earnings, if any, our financial condition, our
anticipated capital requirements and other factors that the Board
may think are relevant. However, we currently intend for the
foreseeable future to follow a policy of retaining all of our
earnings, if any, to finance the development and expansion of our
business and, therefore, do not expect to pay any dividends on our
common stock during such time.
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA
The following tables set forth our selected historical consolidated
financial data as of the dates and for the periods indicated. The
selected historical consolidated financial data as of and for the
years ended December 31, 2019 and 2018 were derived from our
audited consolidated financial statements and related notes thereto
included elsewhere in this prospectus. We have derived the selected
historical consolidated financial data as of September 30, 2020 and
for the nine months ended September 30, 2020 and 2019 from the
unaudited consolidated financial statements included elsewhere in
this prospectus. In the opinion of our management, the unaudited
consolidated financial statements have been prepared on the same
basis as our audited consolidated financial statements and include
all adjustments, consisting of normal recurring adjustments,
necessary for a fair presentation of our financial information set
forth in those statements. Results for the interim period are not
necessarily indicative of the results to be expected for the full
year or any other period. Our historical results are not
necessarily indicative of the results that should be expected for
any future period. You should read the following selected
historical consolidated financial data together with the
consolidated financial statements and related notes and
Management’s Discussion and Analysis of Financial Condition
and Results of Operations included elsewhere in this
prospectus.
|
Nine Months
Ended
September
30,
|
|
|
|
|
|
|
|
|
|
Consolidated
statements of operations data:
|
|
|
|
|
Revenue
|
$-
|
$-
|
$-
|
$-
|
|
|
|
|
|
Operating
Expenses
|
|
|
|
|
Professional
expenses
|
592,146
|
146,469
|
131,970
|
159,500
|
General and
administrative
|
39,990
|
30,442
|
50,028
|
41,057
|
Total operating
expenses
|
632,136
|
176,911
|
181,998
|
200,557
|
|
|
|
|
|
Net Operating
loss
|
(632,136)
|
(176,911)
|
(181,998)
|
(200,557)
|
|
|
|
|
|
Other income
(expenses):
|
|
|
|
|
Interest
expense
|
(118,831)
|
(22,422)
|
(28,124)
|
(5,489)
|
Interest expense,
related party
|
(15,086)
|
-
|
-
|
-
|
Interest
income
|
20,061
|
-
|
-
|
-
|
Amortization of
debt discount
|
(157,028)
|
(52,450)
|
(138,922)
|
(27,578)
|
Amortization of
debt discount, related party
|
(4,385)
|
-
|
-
|
-
|
Amortization of
debt issue costs
|
(11,999)
|
-
|
-
|
-
|
Change in fair
value of derivative liabilities
|
(537)
|
(294,690)
|
56,628
|
(412,566)
|
Loss on
modification of debt
|
(98,825)
|
-
|
-
|
-
|
Gain on settlement
of accounts payable
|
10,590
|
-
|
-
|
-
|
Total other
expenses
|
(376,040)
|
(369,562)
|
(110,418)
|
(445,633)
|
|
|
|
|
|
Net Income
(loss)
|
$(1,008,176)
|
$(546,473)
|
$(292,416)
|
$(646,190)
|
Basic and Diluted
loss per share
|
$(0.08)
|
$(0.06)
|
$(0.00)
|
$(0.00)
|
Weighted average
number of shares outstanding, basic and diluted
|
12,491,278
|
9,169,808
|
8,879,041
|
8,277,945
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated
statements of financial position data:
|
|
|
|
Cash and cash
equivalents
|
$2,415,102
|
$31
|
$-
|
Working capital
(2)
|
(845,956)
|
(335,952)
|
(943,761)
|
Total
assets
|
6,371,945
|
31
|
-
|
Total
liabilities
|
4,403,297
|
335,983
|
943,761
|
Total stockholders'
equity (deficit)
|
1,968,648
|
(335,952)
|
(943,761)
|
|
|
(2)
|
Working
capital is defined as total current assets minus total current
liabilities.
|
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL
INFORMATION
The
unaudited pro forma condensed combined balance sheet presents the
historical balance sheets of Charge Enterprises, Inc.
(“Charge Enterprises”), PTGI International Carrier
Services Inc. (“PTGI”), and GetCharged, Inc.
(“GetCharged”) as of September 30, 2020 and accounts
for the merger of Charge Enterprises, PTGI and GetCharged with
Charge Enterprises, Inc. as the accounting acquirer giving effect
to the transaction as if it had occurred as of September 30, 2020.
On October 12, 2020, Charge Enterprises purchased 100% of the
outstanding shares of GetCharged in exchange for $17,500,000 in
common stock consideration. As a result of the Exchange Agreement,
GetCharged became a wholly owned subsidiary of the Charge
Enterprises. On October 31, 2020, Charge Enterprises acquired 100%
of the outstanding voting securities of PTGI in consideration for
$892,000 cash consideration.
The
Charge Enterprises, PTGI and GetCharged balance sheet information
was derived from its unaudited balance sheets as of September 30,
2020. The unaudited pro forma condensed combined statements of
operations are based on the historical statements of Charge
Enterprises, GetCharged, and PTGI and combine the results of
operations giving effect to the transaction as if it occurred on
January 1, 2020, and reflecting the pro forma adjustments expected
to have a continuing impact on the combined results.
The
unaudited pro forma condensed combined financial statements are for
informational purposes only. They do not purport to indicate the
results that would have actually been obtained had the acquisitions
been completed on the assumed dates or for the periods presented,
or that may be realized in the future. Furthermore, while the pro
forma financial information reflects transaction costs incurred
with the merger on September 30, 2020, the pro forma financial
information does not reflect the impact of any reorganization or
restructuring expenses or operating efficiencies resulting from the
transaction. The unaudited pro forma condensed combined financial
statements, including the notes thereto, are qualified in their
entirety by reference to, and should be read in conjunction with,
the historical financial statements referred to above.
CHARGE ENTERPRISES, INC. (F/NA/ TRANSWORLD HOLDINGS, INC.) AND
SUBSIDIARIES
|
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEETS
|
AS OF SEPTEMBER 30, 2020
|
|
|
PTGI
International
Carrier Services
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
Current assets
|
|
|
|
|
|
|
Cash and cash
equivalents
|
$2,415,102
|
$11,288,565
|
$32,374
|
$(892,000)
|
(h)
|
$12,844,041
|
Accounts
receivable, net
|
-
|
50,741,380
|
-
|
-
|
|
50,741,380
|
Deposits and
prepaids
|
143,875
|
-
|
-
|
-
|
|
143,875
|
Notes
receivable and accrued interest
|
755,061
|
-
|
-
|
-
|
|
755,061
|
Other current
assets net
|
-
|
12,981,526
|
-
|
-
|
|
12,981,526
|
Derivative
assets
|
-
|
-
|
-
|
-
|
|
-
|
Total current
assets
|
3,314,038
|
75,011,471
|
32,374
|
(892,000)
|
|
77,465,883
|
|
|
|
|
|
|
|
Investment in
subsidiary
|
-
|
-
|
-
|
-
|
(a)
|
-
|
Property,
plant and equipment, net
|
-
|
508,372
|
1,098,362
|
-
|
|
1,606,734
|
Non-current
assets
|
-
|
3,452
|
224,826
|
-
|
|
228,278
|
Goodwill
|
3,057,907
|
-
|
-
|
20,345,805
|
(d)
|
23,403,712
|
Total
assets
|
$6,371,945
|
$75,523,295
|
$1,355,562
|
$19,453,805
|
|
$102,704,607
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS' DEFICIT
|
|
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
|
|
Accounts
payable
|
$331,592
|
$19,231,745
|
$-
|
$-
|
|
$19,563,337
|
Accrued
liabilities
|
75,397
|
54,433,965
|
312,867
|
-
|
|
54,822,229
|
Accrued
liabilities, related party
|
1,946
|
-
|
-
|
-
|
|
1,946
|
Convertible
notes payable, net of discount
|
3,673,529
|
-
|
-
|
-
|
|
3,673,529
|
Notes
payable
|
-
|
109,164
|
-
|
-
|
|
109,164
|
Related
party payable
|
75,000
|
-
|
13,500
|
-
|
|
88,500
|
Derivative
liabilities
|
2,530
|
-
|
-
|
-
|
|
2,530
|
Lease
liability, current
|
-
|
-
|
-
|
-
|
|
-
|
Total
current liabilities
|
4,159,994
|
73,774,874
|
326,367
|
-
|
|
78,261,235
|
|
|
|
|
|
|
|
Long-term
notes payable
|
|
|
3,875,000
|
|
|
3,875,000
|
Convertible
notes payable, related party, net of discount
|
243,303
|
-
|
-
|
-
|
|
243,303
|
Total
liabilities
|
4,403,297
|
73,774,874
|
4,201,367
|
-
|
|
82,379,538
|
Commitments
and contingencies
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholder's Equity
|
|
|
|
|
|
|
Preferred
stock, $0.001 par value, 10,000,000
shares authorized;
|
|
|
|
|
|
|
Series
A: 100,000 authorized; 0 shares issued and outstanding at September
30, 2020
|
-
|
-
|
-
|
-
|
|
-
|
Series
B: 1,000,000 shares authorized; 0 shares issued and outstanding at
September 30, 2020
|
-
|
-
|
-
|
-
|
|
-
|
Series
C: 5,000,000 authorized; 0 shares issued and outstanding at
September 30, 2020
|
-
|
-
|
-
|
-
|
|
-
|
Series
D: 1,000,000 authorized; 1,000,000 shares issued and outstanding at
September 30, 2020
|
1,000
|
-
|
-
|
-
|
|
1,000
|
Series
E: 1,000,000 authorized; 543,251 shares issued and outstanding at
September 30, 2020
|
543
|
-
|
-
|
-
|
|
543
|
Series
F: 1,000,000 authorized; 1,000,000 shares issued and outstanding at
September 30, 2020
|
1,000
|
-
|
-
|
-
|
|
1,000
|
Series
G: 100,000 authorized; 8 shares issued and outstanding at September
30, 2020
|
-
|
-
|
-
|
-
|
|
-
|
Common stock,
$0.001 par value; 6,800,000,000 shares authorized 72,741,278 issued
and outstanding at September 30, 2020
|
12,741
|
100
|
100
|
59,800
|
(b)
|
72,741
|
Additional
paid in capital
|
20,463,845
|
191,227,944
|
-
|
(173,787,944)
|
(c)
|
37,903,845
|
Common stock
to be issued
|
-
|
-
|
-
|
-
|
|
-
|
Accumulated
other comprehensive income (loss) - currency translation
adjustments
|
-
|
(8,013,161)
|
-
|
8,013,161
|
(e)
|
-
|
Accumulated
deficit
|
(18,510,481)
|
(181,466,462)
|
(2,845,905)
|
185,168,788
|
(f)
|
(17,654,060)
|
Total
stockholders' equity
|
1,968,648
|
1,748,421
|
(2,845,805)
|
19,453,805
|
|
20,325,069
|
Total
liabilities and stockholders' equity
|
6,371,945
|
75,523,295
|
1,355,562
|
19,453,805
|
|
102,704,607
|
See
notes to the unaudited pro forma condensed combined financial
statements
CHARGE ENTERPRISES, INC. (F/NA/ TRANSWORLD HOLDINGS, INC.) AND
SUBSIDIARIES
|
UNAUDITED CONDENSED COMBINED STATEMENTS OF OPERATIONS
|
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2020
|
|
|
PTGI International Carrier Services
|
|
|
|
|
|
|
|
|
|
Revenues
|
$-
|
$430,101,704
|
$60,483
|
$-
|
$430,162,187
|
Cost of Goods Sold
|
-
|
424,434,212
|
-
|
-
|
424,434,212
|
Gross Margin
|
$-
|
$5,667,492
|
$60,483
|
$-
|
$5,727,975
|
|
|
|
|
|
|
Operating expenses
|
|
|
|
|
|
General and
administrative
|
$39,990
|
$4,527,315
|
$-
|
$-
|
$4,567,305
|
Salaries and
related benefits
|
-
|
-
|
51,058
|
-
|
51,058
|
Selling,
office and administration
|
-
|
-
|
685,901
|
-
|
685,901
|
Professional
fees
|
592,146
|
327,552
|
-
|
-
|
919,698
|
Depreciation
expense
|
-
|
251,212
|
-
|
-
|
251,212
|
Total
operating expenses
|
632,136
|
5,106,079
|
736,959
|
-
|
6,475,174
|
|
|
|
|
|
|
Net operating
income (loss)
|
(632,136)
|
561,413
|
(676,476)
|
-
|
(747,199)
|
|
|
|
|
|
|
Other income (expenses)
|
|
|
|
|
|
Amortization
of debt discount
|
(157,028)
|
-
|
-
|
-
|
(157,028)
|
Amortization
of debt discount, related party
|
(4,385)
|
-
|
-
|
-
|
(4,385)
|
Amortization
of debt issue costs
|
(11,999)
|
-
|
-
|
-
|
(11,999)
|
Change in fair
value of derivative liabilities
|
(537)
|
331,271
|
-
|
-
|
330,734
|
Contingent
consideration (gain) loss
|
-
|
(30,514)
|
-
|
-
|
(30,514)
|
Gain on
settlement of accounts payable
|
10,590
|
-
|
-
|
-
|
10,590
|
Interest
expense
|
(118,831)
|
-
|
(192,054)
|
-
|
(310,885)
|
Interest
expense, related party
|
(15,086)
|
-
|
-
|
-
|
(15,086)
|
Interest
income
|
20,061
|
69
|
-
|
-
|
20,130
|
Loss on
modification of debt
|
(98,825)
|
-
|
-
|
-
|
(98,825)
|
Other
expense
|
-
|
2,072,220
|
-
|
-
|
2,072,220
|
Gain on
bargain purchase
|
-
|
-
|
-
|
856,421(g)
|
856,421
|
Total other
income (expense)
|
(376,040)
|
2,373,046
|
(192,054)
|
856,421
|
2,661,373
|
|
|
|
|
|
|
Income(loss)
before provision for income taxes
|
(1,008,176)
|
2,934,459
|
(868,530)
|
856,421
|
1,914,174
|
|
|
|
|
|
|
Income tax
expense (benefit)
|
-
|
-
|
-
|
-
|
-
|
|
|
|
|
|
|
Net income
(loss)
|
$(1,008,176)
|
$2,934,459
|
$(868,530)
|
$856,421
|
$1,914,174
|
|
|
|
|
|
|
|
$(0.08)
|
|
|
|
$0.16
|
|
|
|
|
|
|
|
12,491,278
|
|
|
|
12,491,278
|
See notes to the unaudited pro forma condensed combined financial
statements
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL
STATEMENTS
On
October 12, 2020, Charge Enterprises purchased 100% of the
outstanding shares of GetCharged in exchange for $17,500,000 in
common stock consideration. As a result of the Exchange Agreement,
GetCharged became a wholly owned subsidiary of the Charge
Enterprises.
On
October 31, 2020, Charge Enterprises acquired 100% of the
outstanding voting securities of PTGI in consideration for $892,000
cash consideration.
The pro
forma adjustments to the September 30, 2020 combined unaudited
financial statements include the following:
a)
To record the
Investment in PTGI (See Entry #1) and Investment in GetCharged (See
Entry #2) accounts and to then eliminate the Investment in PTGI
(See Entry #3) and Investment in GetCharged (See Entry #4)
accounts.
b)
To record
Investment in GetCharged (See Entry #2) and then to eliminate the
common stock of PTGI (See Entry #3) and common stock of GetCharged
(See Entry #4).
c)
To record
Investment in GetCharged (See Entry #2) and then to eliminate the
additional paid-in capital account of PTGI (See Entry
#3)
d)
To record the
goodwill associated with the GetCharged acquisition (See Entry
#4)
e)
To eliminate the
accumulated other comprehensive income (loss) - currency
translation adjustments account of PTGI (See Entry #3)
f)
To eliminate the
accumulated deficit of PTGI (See Entry #3) and accumulated deficit
of GetCharged (See Entry #4).
g)
To record the gain
on bargain purchase associated with the PTGI acquisition (See Entry
#3)
h)
To record cash
consideration for Investment in PTGI (See Entry #1)
The
fair value of the assets and liabilities of PTGI and GetCharged
were equal to their book values. As such there was no purchased
differential. The following is the calculation of goodwill (gain on
bargain purchase)
|
|
|
Purchase
price
|
$892,000
|
$17,500,000
|
Less: net book
value of assets
|
1,748,421
|
(2,845,805)
|
Excess purchase
price
|
(856,421)
|
20,345,805
|
Fair value
adjustments
|
-
|
-
|
Excess purchase
price after adjustments
|
(856,421)
|
20,345,805
|
Goodwill (gain on
bargain purchase)
|
(856,421)
|
20,345,805
|
Entry
#1 as follows:
|
|
|
Investment in
PTGI
|
892,000
|
(a)
|
Cash
|
|
892,000(h)
|
Entry #2 as follows:
|
|
|
Investment in Get
Charged
|
17,500,000
|
(a)
|
Additional paid in
capital
|
|
17,440,000(c)
|
Common
stock
|
|
60,000(b)
|
Entry
#3 as follows:
|
|
|
Accumulated other
comprehensive income (loss) - currency translation
adjustments
|
|
8,013,161(e)
|
Accumulated
deficit
|
|
181,466,462(f)
|
Investment in
PTGI
|
|
892,000(a)
|
Additional paid in
capital
|
191,227,944
|
(c)
|
Common
stock
|
100
|
(b)
|
Gain on bargain
purchase
|
|
856,421(g)
|
Entry
#4 as follows:
|
|
|
Investment in Get
Charged
|
|
17,500,000(a)
|
Accumulated
deficit
|
|
2,845,905(f)
|
Common
stock
|
100
|
(b)
|
Goodwill
|
20,345,805
|
(d)
|
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
You should read the following discussion and analysis of our
financial condition and results of operations together with our
financial statements and the related notes and other financial
information included elsewhere in this prospectus. Some of the
information contained in this discussion and analysis or set forth
elsewhere in this prospectus, including information with respect to
our plans and strategy for our business, includes forward-looking
statements that involve risks and uncertainties. See “Special
Note Regarding Forward-Looking Statements.” You should review
the “Risk Factors” section of this prospectus for a
discussion of important factors that could cause our actual results
to differ materially from the results described in or implied by
the forward-looking statements contained in the following
discussion and analysis.
Overview
Charge
Enterprises, Inc. is a portfolio of global businesses with the
vision of connecting people everywhere with communications,
infrastructure and transportation.
We’re
a company that shares our success with all stakeholders with three
distinct divisions.
●
Charge
Communications, with a strategy offering Unified Communication as a
Service (UCaaS) and
Communication as a Platform Service (CPaaS), providing termination of both
voice and data to Carriers and Mobile Network Operators
(MNO’s) globally for over 2 decades.
●
Charge
Infrastructure, addresses last mile micro-mobility by offering
patented, unique and problem-solving infrastructure solutions to
cities globally.
●
Charge Transport,
with a strategy of building out new delivery routes globally,
adding electrification and autonomous capability to deliver
10’s of millions of parcels a day whilst constantly
innovating and utilizing our shared resources.
Charge
Enterprises, where communications and transportation are changing
faster than ever before. Our strategy is to do the unglamorous part
of connecting your phone calls, delivering your packages, and
powering micro-mobility.
COVID-19’s
impact has been unprecedented with many people either working from
home or furloughed, the demand on physical and digital networks has
been enormous with traffic up in some countries by 40% in a matter
of weeks. Last mile delivery, infrastructure and telecoms perceived
as one of the least impacted sectors by the global
pandemic.
The
crisis has caused companies and individuals to think about what
exactly this new normal will look like with increased
communications, infrastructure / micro-mobility and transport
options.
We see
a huge opportunity to capitalize on this sector, when you work with
us expect to be treated like a PEER: Prompt Ethical Empathetic
Reliable.
We
operate our current business through a number of subsidiaries which
we have recently acquired and/or formed.
Communications Division
Our
Communications Division is based upon the services offered by our
wholly-owned subsidiary, PTGi
International Carrier Services Inc. (“PTGi”), which was
acquired in October 2020. Specifically, on October 2, 2020, we
entered into a stock purchase agreement with the shareholders of
PTGi pursuant to which we agreed to acquire 100% of the outstanding
voting securities of PTGi in consideration for $1,000,000 (the
“PTGi Acquisition”). The closing of the PTGi
Acquisition occurred on October 31, 2020.
Infrastructure Division
Our Infrastructure Division is based upon the services offered by
our wholly-owned subsidiary, GetCharged Inc.
(“GetCharged”), which was acquired in September 2020.
Specifically, on September 25,
2020, we entered into a stock acquisition agreement with the
shareholders of GetCharged, pursuant to which we agreed to acquire
100% of the outstanding voting securities of GetCharged in exchange for 60,000,000 shares of our common
stock. The closing of the GetCharged acquisition occurred on October 12,
2020.
Transportation Division
Our
Transportation Division is intended to be based upon the services
offered by companies that we are seeking to acquire.
On
August 10, 2020,Transworld Enterprises entered into an asset
purchase agreement with Romolos Corp (“Romolos”)
pursuant to which Transworld Enterprises agreed to acquire
substantially all of the assets of Romolos for an aggregate
purchase price of $900,000 (the “Romolos Acquisition”).
Romolos is a privately-held transportation company that operates
Federal Express (“FedEx”) home and ground routes in the
NYC area. The obligation of Transworld Enterprises to consummate
the Romolos Acquisition will be subject to the satisfaction or
waiver of a number of closing conditions, including, but not
limited to, approval by FedEx. On August 27, 2020, Transworld
Enterprises entered into an asset purchase agreement with APS
Transportation, Inc. (“APS”) pursuant to which
Transworld Enterprises agreed to acquire substantially all of the
assets of APS for an aggregate purchase price of $525,000 (the
“APS Acquisition”). APS is a privately-held
transportation company that operates FedEx home and ground routes
in the NYC area. The obligation of Transworld Enterprises to
consummate the APS Acquisition will be subject to the satisfaction
or waiver of a number of closing conditions, including, but not
limited to, approval by FedEx. As of
the date of this prospectus, the Romolos and APS Acquisition did
not close by the date set forth in the respective agreement and the
Company has decided to no longer pursue these
transactions.
Recent Developments
On May 8, 2020, the Company acquired 100% of the outstanding equity
interests in Transworld Enterprises, Inc.
(“Transworld”) in exchange for 1,000,000 shares of its
Series D convertible preferred stock and 1,000,000 shares of its
Series F convertible preferred stock. The Series D convertible
preferred stock converts into 80% of the Company’s issued and
outstanding shares of common stock upon the consummation of the
Reverse Stock Split. The Series F convertible preferred stock
converts at any time into 80% of the Company’s issued and
outstanding shares of common stock and shall vote on an as
converted basis. In connection with the transaction all prior
officers and directors of the Company resigned and new officers and
directors from Transworld were appointed as officers and directors
of the Company.
On May 8, 2020, the Company entered into a securities purchase
agreement with funds affiliated with Arena Investors LP (the
“May 2020 Investors”) pursuant to which it issued
convertible notes in an aggregate principal amount of $3 million
for an aggregate purchase price of $2.7 million (collectively, the
“May 2020 Notes”). In connection with the issuance of
the May 2020 Notes, we issued to the May 2020 Investors warrants to
purchase an aggregate of 7,600,000 shares of Common Stock
(collectively, the “Warrants”) and 7.5 shares of series
G convertible preferred stock (the “Series G Preferred
Stock”). The Series G Preferred Stock automatically converted
into shares of our common stock upon consummation of a reverse
stock split that was effected on October 6, 2020.
In May and June 2020, the Company entered into a purchase agreement
with KORR Value LP, an entity controlled by Kenneth Orr, the
Company’s Executive Chairman, pursuant to which the Company
issued convertible notes in an aggregate principal amount of
$550,000 for an aggregate purchase price of $500,000 (collectively,
the “KORR Notes”). In connection with the issuance of
the KORR Notes, we issued to KORR Value warrants to purchase an
aggregate of 1,266,667 shares of Common Stock (collectively, the
“KORR Warrants”). The KORR Notes and KORR Warrants are
on substantially the same terms as the Notes and Warrants issued to
the May 2020 Investors except that the KORR Notes are subordinated
to the Notes. In June 2020, KORR Value LP transferred 50% of the
KORR Notes to PDG Venture Group LLC.
Between May 8, 2020 and September 30, 2020, the Company entered
into securities purchase agreements with other accredited investors
(the “Subordinated Creditors”) pursuant to which the
Company issued convertible notes in an aggregate principal amount
of $546,444 for an aggregate purchase price of $495,000
(collectively, the “Subordinated Creditor Notes”). In
connection with the issuance of the Subordinated Creditor Notes, we
issued to the Subordinated Creditors warrants to purchase an
aggregate of 2,359,555 shares of Common Stock (collectively, the
“Subordinated Creditor Warrants”). The Subordinated
Creditor Notes and Subordinated Creditor Warrants are on
substantially the same terms as the Notes and Warrants issued to
the May 2020 Investors except that the Subordinated Creditor Notes
are subordinated to the Notes.
On August 12, 2020, the Company entered into an asset purchase
agreement with Romolos Corp (“Romolos”) pursuant to
which the Company agreed to acquire substantially all of the assets
of Romolos for an aggregate purchase price of $900,000 (the
“Romolos Acquisition”). Romolos is a privately-held
transportation company that operates Federal Express
(“FedEx”) home and ground routes in the NYC area. The
obligation of the Company to consummate the Romolos Acquisition
will be subject to the satisfaction or waiver of a number of
closing conditions, including, but not limited to, approval by
FedEx. As of the date of this prospectus, the Romolos Acquisition
did not close by the date set forth in the agreement and the
Company has decided to no longer pursue this
transaction.
On August 27, 2020, the Company entered into an asset purchase
agreement with APS Transportation, Inc. (“APS”)
pursuant to which the Company agreed to acquire substantially all
of the assets of APS for an aggregate purchase price of $525,000
(the “APS Acquisition”). APS is a privately-held
transportation company that operates FedEx home and ground routes
in the NYC area. The obligation of the Company to consummate the
APS Acquisition will be subject to the satisfaction or waiver of a
number of closing conditions, including, but not limited to,
approval by FedEx. As of the date of this prospectus, the APS
Acquisition did not close by the date set forth in the agreement
and the Company has decided to no longer pursue this
transaction.
On September 25, 2020, the Company entered into a stock acquisition
agreement with the shareholders of GetCharged, Inc.
(“GetCharged”) pursuant to which the Company agreed to
acquire 100% of the outstanding voting securities of GetCharged in
exchange for 60,000,000 shares of the Company’s common stock
(the “Charge Acquisition”). The closing of the
GetCharged Acquisition occurred on October 12, 2020.
On October 2, 2020, the Company entered into a stock purchase
agreement with the shareholders of PTGi International Carrier
Services Inc. (“PTGi”) pursuant to which the Company
agreed to acquire 100% of the outstanding voting securities of PTGi
in consideration for $1,000,000 (the “PTGi
Acquisition”). PTGi is a global wholesale telecommunications
provider offering both international and U.S. domestic voice
termination. The obligation of the Company to consummate the PTGi
Acquisition will be subject to the satisfaction or waiver of a
number of closing conditions, including, but not limited to, FCC
approval. The closing of the PTGi Acquisition occurred on October
31, 2020.
On October 1, 2020, the Company filed a Certificate of Amendment
with the Colorado Secretary of State reflecting the 500:1 reverse
stock split which was previously announced as well as the
conversion of the Company from a Colorado corporation to a Delaware
corporation. In connection with the corporate conversion, (i) the
Company changed its name from “GoIP Global, Inc.” to
“Transworld Holdings, Inc.” (ii) all issued and
outstanding preferred stock other than the Series F Preferred Stock
was converted into shares of the Company’s common stock and
(iii) the Company’s Series F Preferred Stock became the
Series A Preferred Stock of the Delaware corporation. The
transactions described above were approved by FINRA on October 2,
2020 and became effective on the OTC Pink trading market at the
open of trading on October 6, 2020.
On
November 3, 2020, the Company entered
into a securities purchase
agreement with funds affiliated with Arena Investors LP (the
“November 2020 Investors”) pursuant to which it issued
convertible notes in an
aggregate principal amount of $3.8 million for an aggregate
purchase price of $3.5 million (collectively, the “November
2020 Notes” and together with the May 2020 Notes, the
“Notes”). In connection with the issuance of the
November 2020 Notes, we issued to the November 2020 Investors
903,226 shares of Common Stock. The Notes are secured by all the
assets of the Company and its subsidiaries (other than PTGi) and
the Company’s subsidiaries, other than PTGi, have guaranteed
the Notes.
On
December 8, 2020, the Company entered
into a securities purchase
agreement with accredited investors pursuant to which the Company
sold 8,700,002 shares of common stock for an aggregate purchase
price of $2,175,000.
On January 26, 2021, following its acquisitions of of PTGi and
GetCharged,, we changed our name from Transworld
Holdings, Inc. to Charge Enterprises, Inc.
Impact of COVID-19
On
January 30, 2020, the World Health Organization (“WHO”)
announced a global health emergency because of a new strain of
coronavirus originating in Wuhan, China (the “COVID-19
outbreak”) and the risks to the international community as
the virus spreads globally beyond its point of origin. In March
2020, the WHO classified the COVID-19 outbreak as a pandemic, based
on the rapid increase in exposure globally.
The
full impact of the COVID-19 outbreak continues to evolve as of the
date of this prospectus. As such, it is uncertain as to the full
magnitude that the pandemic will have on our financial condition,
liquidity, and future results of operations. Management is actively
monitoring the global situation and its impact on our financial
condition, liquidity, operations, suppliers, industry, and
workforce.
The
ultimate impact of the COVID-19 pandemic is highly uncertain and
subject to change and we do not yet know the full extent of
potential delays or impacts on our business, financing or clinical
trial activities or on healthcare systems or the global economy as
a whole. Although we cannot estimate the length or gravity of the
impact of the COVID-19 outbreak nor estimate the potential impact
to our fiscal year 2020 financial statements at this time, if the
pandemic continues, it could have a material adverse effect on our
results of future operations, financial position, liquidity, and
capital resources, and those of the third parties on which we rely
in fiscal year 2020.
Results of Operations for Charge Enterprises, Inc.
Comparison of the nine months ended September 30, 2020 and
2019
Revenues
We had
no revenue during the nine months ended September 30, 2020 and
2019.
Professional Fees
Professional
Fees were $592,146 for nine months ended September 30, 2020 and
$146,469 for nine months ended September 30, 2019, an increase of
$445,677. Professional Fees consist primarily of fees paid to
Legal, accounting and other professional firms. The increase was
primarily due to structural set up, M&A and financing fees as
we grew the company.
General and Administrative Expenses
General
and administrative expenses were $39,990 for nine months ended
September 30, 2020 and $30,442 for nine months ended September 30,
2019, an increase of $9,548. General and administrative expenses
consist primarily of professional fees, office expenses, travel and
entertainment, and fees paid for investor relations. The increase
was primarily a result of expenses related the move forward
business initiatives.
Total Operating Expenses
Total
operating expenses were $632,136 for nine months ended September
30, 2020 and $176,911 for nine months ended September 30, 2019, an
increase of $455,255. Total operating expenses consists of
personnel expenses and general and administrative expenses. The
increase of $455,255 was primarily due to expenses related the move
forward business initiatives.
Net Operating Loss
The
Company had a net operating loss of $(632,136) for nine months
ended September 30, 2020 and $(176,911) for nine months ended
September 30, 2019, an increase of $(96,409). The increase of
$(96,409) was primarily due to expenses related the move forward
business initiatives.
Interest Expense
Interest
expense was $(118,831) for nine months ended September 30, 2020 and
$(22,422) for nine months ended September 30, 2019, an increase of
$(96,409). Interest expense consists primarily of interest related
to convertible debt. The increase was a result of additional debt
being issued during nine months ended September 30,
2020.
Interest Expense, related party
Interest
expense, related party was $(15,086) for nine months ended
September 30, 2020 and $0 for nine months ended September 30, 2019,
an increase of $(15,086). Interest expense consists primarily of
interest related to convertible debt. The increase was a result of
additional debt being issued during nine months ended September 30,
2020 to funds affiliated with Kenneth Orr, or Executive
Chairman.
Interest Income
Interest
income was $20,061 for nine months ended September 30, 2020 and $0
for nine months ended September 30, 2019, an increase of $20,061.
Interest income consists of interest earned on a note receivable in
the amount of $405,000.
Amortization of Debt Discount
Amortization
of debt discount was $(157,028) for nine months ended September 30,
2020 and $(52,450) for nine months ended September 30, 2019, an
increase of $(104,578). The increase was a result of additional
debt being issued during nine months ended September 30,
2020.
Amortization of Debt Discount, related party
Amortization
of debt discount, related party, was $(4,385) for nine months ended
September 30, 2020 and $0 for nine months ended September 30, 2019,
an increase of $(4,385). The increase was a result of additional
debt being issued during nine months ended September 30, 2020 to
funds affiliated with Kenneth Orr, or Executive
Chairman.
Amortization of Debt Issue Costs
Amortization
of debt issue costs was $(11,999) for nine months ended September
30, 2020 and $0 for nine months ended September 30, 2019, an
increase of $(11,999). The increase was a result of debt financing
to support the move forward initiatives.
Change in Fair Value of Derivative Liabilities
Change
in fair value of derivative liabilities resulted in income of
$(537) for nine months ended September 30, 2020 and expense of
$(294,690) for nine months ended September 30, 2019, a decrease of
$294,153. The decrease was a result of a decline in fair value of
the derivative instruments from the nine months ended September 30,
2020 to the nine months ended September 30, 2019.
Loss on modification of debt
Loss on
modification of debt was $(98,825) for nine months ended September
30, 2020 and $0 for nine months ended September 30, 2019, an
increase of $(98,825). The increase was a result of a notes payable
in the amount of $300,000 being amended to add a conversion option
which resulted in the recording of a loss on debt modification in
the amount of $98,825.
Gain on settlement of accounts payable
Gain on
settlement of accounts payable was $10,590 for nine months ended
September 30, 2020 and $0 for nine months ended September 30, 2019,
an increase of $10,590. The increase was a result of the Company
settling an accounts payabel balance with its transfer
agent.
Total Other Expenses
Total
other expenses were $(376,040) for nine months ended September 30,
2020 and $(369,562) for nine months ended September 30, 2019, an
increase of $(6,478). The increase was primarily a result of
expenses related the move forward business initiatives
Net Loss
Net
loss $(1,008,176) for nine months ended September 30, 2020 and
$(546,473) for nine months ended September 30, 2019, an increase of
$(461,703). The increase was primarily a result of expenses related
the move forward business initiatives, including cost of financing,
legal, accounting, etc.
Comparison of the Fiscal Years Ended December 31, 2019 and
2018
Revenues
We had
no revenue during the fiscal years ended December 31, 2019 and
2018.
Personnel Expenses
Personnel
expenses were $131,970 for the fiscal year ended December 31, 2019
and $159,500 for the fiscal year ended December 31, 2018, a
decrease of $27,530. Personnel expenses consist primarily of fees
paid to consultants. The decrease of $27,530 was primarily due
$24,000 paid in stock issued for services during fiscal year
December 31, 2018 versus $0 in fiscal year December 31,
2019.
General and Administrative Expenses
General
and administrative expenses were $50,028 for the fiscal year ended
December 31, 2019 and $41,057 for the fiscal year ended December
31, 2018, an increase of $8,971. General and administrative
expenses consist primarily of professional fees, office expenses,
travel and entertainment, and fees paid for investor relations. The
increase was primarily a result of increased office expenses and
legal fees.
Total Operating Expenses
Total
operating expenses were $181,998 for the fiscal year ended December
31, 2019 and $200,557 for the fiscal year ended December 31, 2018,
a decrease of $18,559. Total operating expenses consists of
personnel expenses and general and administrative expenses. The
decrease of $18,559 was primarily due $24,000 paid in stock issued
for services in fiscal year December 31, 2018 versus $0 in fiscal
year December 31, 2019.
Net Operating Loss
The
Company had a net operating loss of $(181,998) for the fiscal year
ended December 31, 2019 and $(200,557) for the fiscal year ended
December 31, 2018, a decrease of $(18,559). The decrease of $18,559
was primarily due $24,000 paid in stock issued for services in
fiscal year December 31, 2018 versus $0 in fiscal year December 31,
2019.
Interest Expense
Interest
expense was $(28,124) for the fiscal year ended December 31, 2019
and $(5,489) for the fiscal year ended December 31, 2018, an
increase of $(22,635). Interest expense consists primarily of
interest related to convertible debt. The increase was a result of
additional debt being issued during the fiscal year ended December
31, 2019.
Amortization of Debt Discount
Amortization
of debt discount was $(138,922) for the fiscal year ended December
31, 2019 and $(27,578) for the fiscal year ended December 31, 2018,
an increase of $(111,344). The increase was a result of additional
debt being issued during the fiscal year ended December 31,
2019.
Change in Fair Value of Derivative Liabilities
Change
in fair value of derivative liabilities resulted in income of
$56,628 for the fiscal year ended December 31, 2019 and expense of
$(412,566) for the fiscal year ended December 31, 2018, a decrease
of $469,914. The decrease was a result of a decline in fair value
of the derivative instruments from December 31, 2018 to December
31, 2019.
Total Other Expenses
Total
other expenses were $(110,418) for the fiscal year ended December
31, 2019 and $(445,633) for the fiscal year ended December 31,
2018, a decrease of $(335,215). Total other expenses consist of
interest expense, amortization of debt discount and change in fair
value of derivative liabilities. The decrease was primarily a
result of a decline in fair value of the derivative instruments
from December 31, 2018 to December 31, 2019.
Net Loss
Net
loss was $(292,416) for the fiscal year ended December 31, 2019 and
$(646,190) for the fiscal year ended December 31, 2018, a decrease
of $(353,774). The decrease was primarily a result of a decline in
fair value of the derivative instruments from December 31, 2018 to
December 31, 2019.
Liquidity and Capital Resources
The Company’s current operations have focused on business
planning and raising capital. The Company sustained operating
losses since inception through the acquisition of PTGi and
GetCharged. In the second and third quarter of 2020, the Company
issued an approximately $8.0 million aggregate principal amount of
the convertible promissory notes. Management believes that as a
result of the acquisitions of PTGi and GetCharged, it has
sufficient capital to fund its operations however is currently
evaluating different strategies to obtain the funding for future
acquisitions. These strategies may include but are not limited to:
public offerings of equity and/or debt securities, payments from
potential strategic research and development, licensing and/or
marketing arrangements.
The financial statements of the Company for the fiscal year ended
December 31, 2019 were been prepared on a going-concern basis,
which contemplates the realization of assets and the satisfaction
of liabilities in the normal course of business. Accordingly, the
financial statements do not include any adjustments that might be
necessary should the Company be unable to continue in existence.
The Company has incurred substantial losses and negative cash flows
from operations since its inception and has an accumulated deficit
of approximately $17.5 million. The Company believes its financial
position is more secure as a result of the acquisitions of PTGi and
GetCharged which occurred in the fourth quarter of
2020.
Critical Accounting Policies
We consider the following accounting policies to be critical given
they involve estimates and judgments made by management and are
important for our investors’ understanding of our operating
results and financial condition. For more information see Note 2 to
our audited financial statements beginning on page F-1 of this
prospectus.
Use of Estimates
The
preparation of financial statements in conformity with GAAP
requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during
the reporting period. The most significant assumptions and
estimates relate to the valuation of equity issued for services,
valuation of equity associated with convertible debt, the valuation
of derivative liabilities, and the valuation of deferred tax
assets. Actual results could differ from these
estimates.
Derivative Liability
The
Company evaluates convertible instruments, options, warrants or
other contracts to determine if those contracts or embedded
components of those contracts qualify as derivatives to be
separately accounted for under ASC Topic 815, "Derivatives and
Hedging”. The result of this accounting treatment is that the
fair value of the derivative is marked-to-market each balance sheet
date and recorded as a liability. In the event that the fair value
is recorded as a liability, the change in fair value is recorded in
the statement of operations as other income (expense). Upon
conversion or exercise of a derivative instrument, the instrument
is marked to fair value at the conversion date and then that fair
value is reclassified to equity. Equity instruments that are
initially classified as equity that become subject to
reclassification under ASC Topic 815 are reclassified to
liabilities at the fair value of the instrument on the
reclassification date.
Stock Based Compensation Expense
The
Company records stock-based compensation in accordance with the
provisions of FASB ASC Topic 718, “Accounting for Stock
Compensation,” which establishes accounting standards for
transactions in which an entity exchanges its equity instruments
for goods or services. In accordance with guidance provided under
ASC Topic 718, the Company recognizes an expense for the fair value
of its stock awards at the time of grant and the fair value of its
outstanding stock options as they vest, whether held by employees
or others. As of December 31, 2019 and 2018, there were no options
outstanding, respectively. For the year ended December 31, 2018,
the Company issued 60,000 shares to non-employees for services and
recorded $24,000 in expense related to the shares.
Convertible Debentures
If the
conversion features of conventional convertible debt provide for a
rate of conversion that is below market value at issuance, this
feature is characterized as a beneficial conversion feature
("BCF"). A BCF is recorded by the Company as a debt discount
pursuant to ASC Topic 470-20 "Debt with Conversion and Other
Options". In those circumstances, the convertible debt is recorded
net of the discount related to the BCF, and the Company amortizes
the discount to interest expense, over the life of the
debt.
Net Income (Loss) Per Common Share
The
Company computes loss per common share, in accordance with
Financial Accounting Standards Board (“FASB”) ASC Topic
260, Earnings Per Share, which requires dual presentation of basic
and diluted earnings per share. Basic income or loss per common
share is computed by dividing net income or loss by the weighted
average number of common shares outstanding during the period.
Diluted income or loss per common share is computed by dividing net
income or loss by the weighted average number of common shares
outstanding, plus the issuance of common shares, if dilutive, that
could result from the exercise of outstanding stock options and
warrants.
Recent Accounting Pronouncements
In
February 2016, the FASB issued ASU 2016-02, Leases (Topic 842),
which will require lessees to recognize almost all leases on their
balance sheet as a right-of-use asset and a lease liability. For
income statement purposes, the FASB retained a dual model,
requiring leases to be classified as either operating or finance.
Classification will be based on criteria that are largely similar
to those applied in current lease accounting, but without explicit
bright lines. Lessor accounting is similar to the current model,
but updated to align with certain changes to the lessee model and
the new revenue recognition standard. This ASU is effective for
fiscal years beginning after December 15, 2018, including interim
periods within those fiscal years. The Company has adopted this
guidance effective January 1, 2019. The Company currently has no
leases.
In May
2014, the FASB issued ASU 2014-09, Revenue from Contracts with
Customers, issued as a new Topic, ASC Topic 606. The new revenue
recognition standard supersedes all existing revenue recognition
guidance. Under this ASU, an entity should recognize revenue when
it transfers promised goods or services to customers in an amount
that reflects the consideration to which the entity expects to be
entitled in exchange for those goods or services. ASU 2015-14,
issued in August 2015, deferred the effective date of ASU 2014-09
to the first quarter of 2018, with early adoption permitted in the
first quarter of 2017. The Company has adopted this guidance
effective January 1, 2018. The adoption of this standard did not
have a material impact on the financial statements.
In
August 2016, the Financial Accounting Standards Board
(“FASB”) issued Accounting Standards Update
(“ASU”) No. 2016-15, Statement of Cash Flows (Topic
230): Classification of Certain Cash Receipts and Cash Payments.
This update addresses a diversity in practice in how certain cash
receipts and cash payments are presented and classified in the
statement of cash flows under Topic 230, Statement of Cash Flows,
and other Topics. The amendments in this Update are effective for
public business entities for fiscal years beginning after December
15, 2017, and interim periods within those fiscal years. Early
adoption is permitted, including adoption in an interim period. The
Company has adopted this guidance effective January 1, 2018. The
adoption of this standard did not have a material impact on the
financial statements.
On June
20, 2018, the FASB issued ASU 2018-07, Compensation—Stock
Compensation (Topic 718): Improvements to Nonemployee Share-Based
Payment Accounting. ASU 2018-07 is intended to reduce cost and
complexity and to improve financial reporting for share-based
payments to nonemployees (for example, service providers, external
legal counsel, suppliers, etc.). Under the new standard, companies
will no longer be required to value non-employee awards differently
from employee awards. Meaning that companies will value all equity
classified awards at their grant-date under ASC 718 and forgo
revaluing the award after this date. The Company adopted ASU
2018-07 on January 1, 2018. The adoption of this standard did not
have a material impact on the financial statements.
The
Company has implemented all new accounting pronouncements that are
in effect. These pronouncements did not have any material impact on
the consolidated financial statements unless otherwise disclosed,
and the Company does not believe that there are any other new
accounting pronouncements that have been issued that might have a
material impact on its financial position or results of
operations.
Inflation
We believe that inflation has not had a material adverse impact on
our business or operating results during the periods
presented.
Off-balance Sheet Arrangements
We have no off-balance sheet arrangements as of the date of this
prospectus.
BUSINESS
Overview
Charge
Enterprises, Inc. is a portfolio of global businesses with the
vision of connecting people everywhere with communications,
infrastructure and transportation.
We’re
a public company that shares our success with all stakeholders with
three distinct divisions.
●
Charge
Communications, with a strategy offering Unified Communication as a
Service (UCaaS) and
Communication as a Platform Service (CPaaS), providing termination of both
voice and data to Carriers and Mobile Network Operators
(MNO’s) globally for over 2 decades.
●
Charge
Infrastructure, addresses last mile micro-mobility by offering
patented, unique and problem-solving infrastructure solutions to
cities globally.
●
Charge Transport,
with a strategy of building out new delivery routes globally,
adding electrification and autonomous capability to deliver
10’s of millions of parcels a day whilst constantly
innovating and utilizing our shared resources.
Charge
Enterprises, where communications and transportation are changing
faster than ever before. Our strategy is to do the unglamorous part
of connecting your phone calls, delivering your packages, and
powering micro-mobility.
COVID-19’s
impact has been unprecedented with many people either working from
home or furloughed, the demand on physical and digital networks has
been enormous with traffic up in some countries by 40% in a matter
of weeks. Last mile delivery, infrastructure and telecoms perceived
as one of the least impacted sectors by the global
pandemic.
The
crisis has caused companies and individuals to think about what
exactly this new normal will look like with increased
communications, infrastructure / micro-mobility and transport
options.
We see
a huge opportunity to capitalize on this sector, when you work with
us expect to be treated like a PEER: Prompt Ethical Empathetic
Reliable.
We
operate our current business through a number of subsidiaries which
we have recently acquired and/or formed.
Communications Division
Our
Communications Division is based upon the services offered by our
wholly-owned subsidiary, PTGi International Carrier Services, Inc.
(“PTGi”), which was acquired in October 2020.
Specifically, on October 2, 2020, we entered into an stock purchase
agreement with the shareholders of PTGi pursuant to which we agreed
to acquire 100% of the outstanding voting securities of PTGi in
consideration for $1,000,000 (the “PTGi Acquisition”).
The closing of the PTGi Acquisition occurred on October 31,
2020.
Business of PTGi
PTGi is
a global wholesale telecommunications provider offering both
international and U.S. domestic voice termination. PTGi provides
customers with internet-protocol-based and time-division
multiplexing ("TDM") access for the transport of long-distance
voice and data minutes.
Network
PTGi
operates a global telecommunications network consisting of domestic
switching and related peripheral equipment, and carrier-grade
routers and switches for Internet and circuit-based services. To
ensure high-quality communications services, our network employs
digital switching and fiber optic technologies, incorporates the
use of Voice-over-Internet Protocol protocols and SS7/C7 signaling,
and is supported by comprehensive network monitoring and technical
support services.
Foreign Carrier Agreements
In
selected countries where competition with the traditional Post
Telegraph and Telecommunications companies ("PTTs") is limited, we
have entered into foreign carrier agreements with PTTs or other
service providers that permit PTGi to provide traffic into, and
receive return traffic from, these countries.
Network Management and Control
PTGi
owns and operates network management systems in Ashburn, Virginia
which are used to monitor and control our switching systems, global
data network, and other digital transmission equipment used in
PTGi’s network. Additional network monitoring, network
management, and traffic management services are supported from our
Network Management Centers located in Guatemala City, Guatemala and
Bucharest, Romania. The network management control centers are
constantly online.
Sales and Marketing
PTGi
markets its services through a variety of sales channels, as
summarized below:
●
Trade Shows: We attends industry trade
shows around the globe throughout the year. At each trade show,
PTGi markets to both existing and potential new customers
through prearranged meetings, social gatherings and networking;
and
●
Business Development: PTGi’s world class
sales team focuses on developing our business potential around the
globe through ongoing communication and face-to-face
meetings.
Management Information and Billing Systems
PTGi
operates management information, network and customer billing
systems supporting the functions of network and traffic management,
customer service and customer billing. For financial reporting, we
consolidate information from each of PTGi’s markets into a
single database.
We
believe that PTGi’s financial reporting and billing systems
are generally adequate to meet its business needs. However, in the
future, PTGi may determine that it needs to invest additional
capital to purchase hardware and software, license more specialized
software and increase its capacity.
Competition
Long
Distance: PTGi faces significant competition as it attempts to win
the business of other telecommunications carriers and resellers. We
compete on the basis of price, service quality, financial strength,
relationship and presence. Sales of wholesale long-distance voice
minutes are generated by connecting one telecommunications operator
to another and charging a fee to do so.
Over-the-top
("OTT"): OTT applications, such as WhatsApp, Skype, and FaceTime,
continue to impact PTGi’s long distance business model. There
can be no assurance that: (1) the current declines in the
long-distance business globally driven by OTT application will not
increase; or (2) our business will not be impacted by the increased
consumer adoption of OTT applications globally.
Government Regulation
PTGi is
subject to varying degrees of regulation in each of the
jurisdictions in which it operates. Local laws and regulations, and
the interpretation of such laws and regulations, differ among those
jurisdictions. There can be no assurance that: (1) future
regulatory, judicial and legislative changes will not have a
material adverse effect on us; (2) domestic or international
regulators or third parties will not raise material issues with
regard to its compliance with applicable regulations; or (3)
regulatory activities will not have a material adverse effect on
it.
Regulation
impacting the telecommunications industry continues to change
rapidly in many jurisdictions. Privacy-related laws and
regulations, such as the EU’s GDPR, as well as privatization,
deregulation, changes in regulation, consolidation, and
technological change have had, and will continue to have,
significant effects on the industry. Although we believe that
continuing deregulation with respect to portions of the
telecommunications industry will create opportunities for firms
such as us, there can be no assurance that deregulation and changes
in regulation will be implemented in a manner that would benefit
us.
The
regulatory frameworks in certain jurisdictions in which we provide
services as of December 31, 2020 are described below:
United States
In the
United States, PTGi’s services are subject to the provisions
of the Communications Act of 1934, as amended (the "Communications
Act"), and other federal laws, rules, and orders of the Federal
Communications Commission ("FCC") regulations, and the applicable
laws and regulations of the various states.
International Service Regulation
The FCC
has jurisdiction over common carrier services linking points in the
U.S. to points in other countries, and PTGi provides such services.
Providers of such international common carrier services must obtain
authority from the FCC under Section 214 of the Communications Act.
We have obtained the authorizations required to use, on a
facilities-based and resale basis, various transmission media for
the provision of international switched services and international
private line services on a non-dominant carrier basis. The FCC is
considering a number of possible changes to its rules governing
international common carriers. We cannot predict how the FCC will
resolve those issues or how its decisions will affect our
international business. FCC rules permit non-dominant carriers such
as PTGi to offer some services on a detariffed basis, where
competition can provide consumers with lower rates and choices
among carriers and services.
Domestic Service Regulation
With
respect to PTGi's domestic U.S. telecommunications services, PTGi
is considered a non-dominant interstate carrier subject to
regulation by the FCC. FCC rules provide us significant authority
to initiate or expand its domestic interstate operations, but we
are required to obtain FCC approval to assume control of another
telecommunications carrier or its assets, to transfer control of
PTGi’s operations to another entity, or to discontinue
service. PTGi is also required to file various reports and pay
various fees and assessments to the FCC and various state
commissions. Among other things, interstate common carriers must
offer service on a nondiscriminatory basis at just and reasonable
rates. The FCC has jurisdiction to hear complaints regarding
PTGi’s compliance or non-compliance with these and other
requirements of the Communications Act and the FCC’s rules.
Among other regulations, PTGi is subject to the Communications
Assistance for Law Enforcement Act ("CALEA") and associated FCC
regulations which require telecommunications carriers to configure
their networks to facilitate law enforcement authorities to perform
electronic surveillance.
In
April 2019, FCC rules relating to the completion of calls to rural
areas became effective. These rules require certain providers of
retail long distance voice service to generate and retain various
records regarding completion of calls to rural areas. Specifically,
the rules require those providers to collect and retain information
on long-distance call attempts such as, but not limited to, the
called number, the date and time of the call, and the use of an
intermediate provider. The rules also prohibit false audible
ringing (the premature triggering of audible ring tones to the
caller before the call setup request has reached the terminating
service provider). While PTGi is not directly subject to these
rules, PTGi may function as an intermediate provider within the
meaning of these rules, which may require PTGi to provide
information to its customers regarding calls that it carries on
their behalf. In addition, under Section 262 to the Communications
Act of 1934, intermediate providers (such as PTGi) must register
with the FCC and meet certain quality standards (now embodied in
the FCC’s rules).
Interstate
and international telecommunications carriers are required to
contribute to the federal Universal Service Fund ("USF"). Carriers
providing wholesale telecommunications services are not required to
contribute with respect to services sold to customers that provide
a written certification that the customers themselves will make the
required contributions. If the FCC or the USF Administrator were to
determine that the USF reporting for the Company, including PTGi,
is not accurate or in compliance with FCC rules, PTGi could be
subject to additional contributions, as well as to monetary fines
and penalties. In addition, the FCC may revise its USF contribution
mechanisms and the services considered when calculating the
contribution. PTGi cannot predict the outcome of any such revisions
or their potential effect on PTGi's contribution obligations. Some
changes to the USF under consideration by the FCC may affect
certain entities more than others, and PTGi may be disadvantaged as
compared to its competitors as a result of FCC decisions regarding
USF. In addition, the FCC may extend the obligation to contribute
to the USF to certain services that PTGi offers but that are not
currently assessed USF contributions.
FCC
rules require providers that originate interstate or intrastate
traffic on or destined for the public switched telephone network
("PSTN") to transmit the telephone number associated with the
calling party to the next provider in the call path. Intermediate
providers, such as PTGi, must pass calling party number ("CPN") or
charge number ("CN") signaling information they receive from other
providers unaltered, to subsequent providers in the call path.
While PTGi believes that it is in compliance with this rule, to the
extent that it passes traffic that does not have appropriate CPN or
CN information, PTGi could be subject to fines, cease and desist
orders, or other penalties.
Infrastructure Division
Our
Infrastructure Division is based upon the services offered by our
wholly-owned subsidiary, GetCharged, Inc.
(“GetCharged”), which was acquired in October 2020.
Specifically, on September 25, 2020, we entered into a stock
acquisition agreement with the shareholders of GetCharged, pursuant
to which we agreed to acquire 100% of the outstanding voting
securities of GetCharged in exchange for 60,000,000 shares of our
common stock. The closing of the GetCharged acquisition occurred on
October 12, 2020.
Business of Charge Infrastructure
Charge
Infrastructure is focused on building the largest global network of
EV charging, storage, and service stations for electric mopeds and
e-scooter. Charge Infrastructure is a software-enabled
"e-micro-mobility infrastructure as a service" play to provide a
universal parking, charging and safety diagnostic solution for
electric vehicles (scooters, bikes, drones, mopeds, etc). Its
physical and digital product suite is designed to solve key issues
cities have with the current situations created by scooter share
operators. We have secured some of the most sought after real
estate locations world-wide. Our vision is to become the de facto
clean electric fueling network of the future, whether it is
stations, containers, batteries or other.
At
Charge Infrastructure, we are focused on building the largest
global network of electric charging, storage and service stations
for micro-mobility devices. We provide vital infrastructure for
riders and micro mobility operators by offering a convenient place
to charge and store e-vehicles, helping to protect the integrity of
city streets while keeping pedestrians and residents
safe.
Charge
Infrastructure began deploying docks and charging stations in Paris
in June 2020 and intends to expand that presence, with the goal of
deploying GetCharged's unique docking and charging stations in more
than 100 locations over the next 18 months. Charge plans to roll
out its newly evolved stations, which are powered from the existing
electrical grid and require no battery swapping.
Charge
Infrastructure has entered into a manufacturing and supply
agreement with Quebec-based Poitras Industries to produce and
manufacture its micro-mobility charging and docking
stations.
GetCharged
has a partnership with Reef Technologies and several smaller
operators.
Our
charging stations and Smart Hub containers keep e-scooters
organized, charged, and city sidewalks clear. As the world
struggles to harness the potential of micro-mobility while
addressing issues of accessibility, safety, and battery life,
Charge is dedicated to empowering cities to welcome a more
responsible model of micro-mobility.
●
Charging Stations -
Our charging stations keep e-scooters organized and charged,
safeguarding pedestrians and other road users.
●
Smart Hub
containers - Strategically located near city centers, juicers
utilize smart hub containers to create a quick e-scooter
turnover.
●
Digital-parking
stations - Our digital parking stations are well-suited for dense
areas in major cities that need rides to end in one specific
location, and not scattered all over the streets.
●
Charge Services,
LLC - Our own network of juicers are dedicated to creating
efficient turnover for operators. They quickly pump out fully
charged e-scooters, all the while making sure to send damaged
e-scooters back to the respective warehouse for repairs. It is
authorized to do business in California, and is now operating in
Los Angeles.
Charge
Infrastructure has a very simple business model – every time
an e-scooter is plugged into one of our charging and docking
stations we get paid. We run at a global of 50% gross profit margin
and can recoup the full investment cost including installation
after twelve months at 80% utilization. Recurring revenue streams
will include charging, parking, sponsorship, diagnostics and
data.
GetCharged
made an investment into Naki Power for a minority equity
stake and has further executed a term sheet for the exclusive
rights to North America.
Naki
Power is the largest power-sharing system in Europe operating in
five countries with 1,500 active power stations where consumers can
rent portable chargers. The company is changing the way people
charge their electronic devices, offering powerbank rentals in
bars, restaurants, airports, public transport hubs, etc., that
offer freedom and convenience for people in cities, just like other
sharing economy services such as electric bike and scooter rental.
Naki Power has solidified itself in the European market as a viable
means to charge the many different electronics used in today's
world, including cell phones, wearables, or other products such as
portable speakers. Users are not required to supply their own
charging cable and, with multiple outputs, the portable chargers
are compatible with almost every electronic device available
today.
GetCharged’s
vision is to bring more power-sharing options to its customers by
launching Naki Power stations across North America with service
beginning in the third quarter 2021. After solidifying our presence
in North America, Naki Power and Charge plans include expanding the
service to other countries.
Sales and Marketing
Charge
Infrastructure markets its services through a variety of sales
channels, as summarized below:
●
Trade Shows: We
attend industry trade shows around the globe throughout the year.
At each trade show, Charge Infrastructure markets to both
existing and potential new customers through meetings, social
gatherings and networking.
●
Business Development:
Charge Infrastructure sales team focuses on developing our business
potential around the globe through ongoing communication and
digital meetings.
●
Inbound: Charge
Infrastructure receives a large amount of inbound inquiries from
cities around the world with requests to deploy charging and
docking stations in cities and private property.
●
Press: Due to the
nature of the business and the interest in micro-mobility in the
press we market our charging stations and services through press
releases and opportunistic interviews in the media.
●
Physical stations:
The charging and docking stations are positioned in prominent
locations in cities around the world and therefore receive a large
amount of attention as this new street furniture is solving a
serious problem of scooter clutter in cities.
Competition
Charge
Infrastructure faces competition from other charging and docking
suppliers as it attempts to win the business of cities, private
landlords and resellers. We compete on the basis of price, service
quality, relationship, presence and the quality of our charging and
docking stations.
Government Regulation
Charge
Infrastructure is subject to varying degrees of regulation in each
of the jurisdictions in which it operates. Local laws and
regulations, and the interpretation of such laws and regulations,
differ among those jurisdictions. There can be no assurance that:
(1) future regulatory, judicial and legislative changes will not
have a material adverse effect on us; (2) domestic or international
regulators or third parties will not raise material issues with
regard to its compliance with applicable regulations; or (3)
regulatory activities will not have a material adverse effect on
it.
Regulation
impacting the micro mobility industry continues to change rapidly
in many jurisdictions which may affect the businesses
advantageously or adversely depending on the decisions
made.
Transportation Division
Our
Transportation Division is intended to be based upon the services
offered by companies that we are seeking to acquire.
On
August 10, 2020, Transworld Enterprises entered into an asset
purchase agreement with Romolos Corp (“Romolos”)
pursuant to which Transworld Enterprises agreed to acquire
substantially all of the assets of Romolos for an aggregate
purchase price of $900,000 (the “Romolos Acquisition”).
Romolos is a privately-held transportation company that operates
Federal Express (“FedEx”) home and ground routes in the
NYC area. The obligation of Transworld Enterprises to consummate
the Romolos Acquisition will be subject to the satisfaction or
waiver of a number of closing conditions, including, but not
limited to, approval by FedEx..
On
August 27, 2020, Transworld Enterprises entered into an asset
purchase agreement with APS Transportation, Inc.
(“APS”) pursuant to which Transworld Enterprises agreed
to acquire substantially all of the assets of APS for an aggregate
purchase price of $525,000 (the “APS Acquisition”). APS
is a privately-held transportation company that operates FedEx home
and ground routes in the NYC area. The obligation of Transworld
Enterprises to consummate the APS Acquisition will be subject to
the satisfaction or waiver of a number of closing conditions,
including, but not limited to, approval by FedEx.
As of the date of this prospectus, the Romolos and APS Acquisition
did not close by the date set forth in the respective agreement and
the Company has decided to no longer pursue these
transactions. We
will continue to seek out other opportunities that provide instant
delivery or last mile services in the transportation
sector.
Investments Division
In
addition to investing in marketable securities, under the advisory
of KORR Acquisition Group, Inc. (a related party and shareholder),
Charge Investments invests in limited private investments in
certain businesses that it finds to be oportunistic. In the fourth
quarter, Charge invested in Oblong, Inc., a provider of patented
multi-stream collaboration technologies and managed services for
video collaboration and network applications, through a
private placement.
Employees
As of February 1, 2021, we had 1 employee. Many of our activities
are outsourced to consultants who provide services to us on a
project basis. As business activities require and capital resources
permit, we will hire additional employees to fulfill our
company’s needs.
Properties
Our principal executive offices are located at 125 Park Avenue,
25th Floor, New York, NY 10017. We lease our virtual office for
approximately $140.00 per month pursuant to a lease which
terminates on February 29, 2022, provided if either party does not
terminate the agreement within (30) days prior to the end of the
initial term, the lease shall automatically renew for successive
one (1) month periods on the same terms. We believe that our
existing facilities are suitable and adequate to meet our current
needs. We intend to add new facilities or expand existing
facilities as we add employees, and we believe that suitable
additional or substitute space will be available as needed to
accommodate any such expansion of our operations.
Legal Proceedings
There are no pending legal proceedings to which we are a party or
in which any of our directors, officers or affiliates, any owner of
record or beneficially of more than 5% of any class of voting
securities of our company, or security holder is a party adverse to
us or has a material interest adverse to us. Our property is not
the subject of any pending legal proceedings.
Corporate History and Information
We were incorporated in the State of Colorado on December 27, 2017.
In early 2018 we had sought to engage in ventures related to the Internet of
Value, or IoV, and then in late 2018 had abandoned the IoV
business model and decided to pursue a business opportunity in the
CBD market. Thereafter, in early 2019 management determined that the CBD
opportunity postpone the CBD opportunity and turned its attention
to an opportunity in the emerging cannabis sector. Since the
completion of the acquisitions of TransWorld, PTGi and GetCharged,
described below, we have determined not to pursue any of these
proposed earlier opportunities or businesses.
On
April 30, 2020, the Company entered into an agreement to acquire
100% of the outstanding equity interests of Transworld Enterprises
pursuant to a Share Exchange Agreement, dated April 30, 2020, by
and among the Company, Transworld Enterprises and the shareholders
of Transworld Enterprises. The transactions contemplated by the
Share Exchange Agreement closed on May 8, 2020. In accordance with
the Share Exchange Agreement, the Company acquired all of the
outstanding shares of Transworld Enterprises in exchange for
1,000,000 shares of each of the Company’s Series D and Series
F preferred stock. The series D preferred stock was convertible
into 80% of the Company’s issued and outstanding shares of
common stock upon consummation of a reverse stock split and voted
on an as-converted basis. The series F preferred stock is
convertible into 80% of the Company’s issued and outstanding
shares of common stock at any time at the option of the holder and
votes on an as-converted basis.
On July 13, 2020, the Board of Directors of the Company approved,
subject to shareholder approval, (i) a Plan of Conversion, pursuant
to which the Company will convert from a corporation incorporated
under the laws of the State of Colorado to a corporation
incorporated under the laws of the State of Delaware, and such
approval includes the adoption of the Certificate of Incorporation
and the Bylaws for the Company under the laws of the State of
Delaware, and a change in the name of the Company from “GoIP
Global, Inc.” to “Transworld Holdings, Inc.”,
each of which became effective concurrently with the effectiveness
of the Reincorporation and (ii) a reverse stock split of our
outstanding common stock in a ratio of one-for-five hundred
(1:500), which became effective immediately prior to the
effectiveness of the Reincorporation. On October 1, 2020, we filed
articles of amendment with the Colorado Secretary of State to
effectuate the Reverse Stock Split. Immediately thereafter, we
completed the Reincorporation by filing our new Certificate of
Incorporation with the State of Delaware.
On September 25, 2020, we entered into a stock acquisition
agreement with the shareholders of GetCharged pursuant to which we
agreed to acquire 100% of the outstanding voting securities of
GetCharged in exchange for 60,000,000 shares of our common stock.
The closing of the GetCharged acquisition occurred on October 12,
2020.
On October 2, 2020, we entered into a stock purchase agreement with
the shareholders of PTGi pursuant to which we agreed to acquire
100% of the outstanding voting securities of PTGi in consideration
for $1,000,000. The closing of the PTGi acquisition occurred on
October 31, 2020.
On January 26, 2021, following its acquisitions of of PTGi and
GetCharged,, we changed our name from Transworld Holdings, Inc. to
Charge Enterprises, Inc.
DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
The following table sets forth the names, ages, and biographical
information of each of our current directors and executive
officers, and the positions with the Company held by each person.
Our directors serve a one-year term until their successors are
elected and qualified, or until such director’s earlier
death, resignation or removal. Our executive officers are elected
annually by our board of directors and serve a one year term until
their successors are elected and qualified, or until such
officer’s earlier death, resignation or removal.
Name
|
Age
|
Position
|
Andrew Fox
|
48
|
Chief
Executive Officer and Director
|
Craig Denson
|
59
|
Interim
Chief Financial Officer, Chief Operating Officer and
Director
|
Kenneth Orr
|
54
|
Executive
Chairman
|
Phil Scala
|
70
|
Secretary and
Director
|
Justin Deutsch
|
44
|
Director
|
Jim Murphy
|
77
|
Director
|
Andrew
Fox has been the Chief Executive Officer and a Director since
October 2020. Mr. Fox has been the founder and Chief Executive
Officer of GetCharged, Inc. since its formation in 2018 Mr. Fox is
a serial entrepreneur with over two decades of experience in
executing disruptive approaches to a wide range of industries
including media, transportation, real estate, insurance, and
consumer staples.
Craig
Denson has been the Chief Operating Officer and a Director since
October 2020, and the Interim Chief Financial Officer and Chief
Financial Officer since January 2021. Mr. Denson has been the
Presient & CEO of PTGi since May 2012. Mr. Denson joined PTGi
in 2009 as Vice President, responsible for the Wholesale and
Pre-Paid Telecom divisions in North America. In May 2012 Mr. Denson
was promoted to President and CEO of PTGi. Prior to joining the
company, Mr. Denson was President and COO of Sigma Software
Solutions, an OSS and BSS software company providing billing and
CRM software to the telecom industry globally. Prior to Sigma
Software, Mr. Denson was Vice President and General Manager of ACS
Canada, whereby he led the Telecom ASP software services division.
Mr. Denson started his career with PepsiCo in 1986, progressing
through the organization and ending as National Sales Manager of
two operating divisions before entering the telecom industry in
1999. Mr. Denson holds a business degree from Humber College, is a
strategic planner and conceptual thinker, excels at bringing
clarity to complex issues by creating practical solutions to
organizational challenges.
Kenneth
Orr has been Executive Chairman since May 2020. He is the founder
and CEO of KORR Acquisitions Group, Inc. a registered investment
adviser since 2017, where he has initiated numerous activist
investments and have provided Ken with specific skills and
knowledge that can only be gained through experience. Mr. Orr
acquired Herold Securities in 1994 and renamed the firm First
Cambridge Securities. FCS established offices in New York City and
Los Angeles. Mr. Orr is a graduate of Tufts University (‘88
– Bachelor of Science), Columbia Business School (Value
Investing) and Harvard Business School (Leading with
Finance).
Philip
P. Scala was our interim chief executive officer from May 2020
until October 2020 and has been our secretary and director since
May 2020. Prior to forming Pathfinder Consultants International,
Philip Scala served the United States both as a Commissioned
Officer in the US Army for five years (from 1974 through 1979)
followed by his 29 years of service with the Federal Bureau of
Investigations (FBI). He graduated from the Airborne, Ranger, and
Pathfinder Schools (Honor Graduate) at the Fort Benning Infantry
School, and served with the First of the Sixth Infantry, First
Armored Division, in the Federal Republic of Germany (1974-1977).
During his service, he was promoted to the rank of Captain. Upon
acceptance in to the FBI academy, Captain Scala resigned his
commission, and entered the FBI Academy located on the United
States Marine Corps Base at Quantico, Virginia; graduating and
being appointed as a Special Agent of the FBI, in April of 1979.
Mr. Scala served 15 years in the New York SWAT team, including the
leadership of the Brooklyn-Queens team and Senior team leader for
the New York Division from 1990-1995. His training included
certifications as Rappel-Master, Tactical Instructor, Sniper, and
Firearms instructor. He has participated in numerous SWAT
operations, arrests, skyjackings and raids, including the
Hell’s Angels HQ, the Atlanta Prison uprising, and the rescue
of a mutinied oil tanker (Liberian-flagged,
“Ypapanti”), in the Atlantic Ocean. In 1993, he led the
raid on the Al-Qaeda bomb factory, where five terror operatives
were arrested, and seized five explosive drums intended to destroy
the United Nations, Federal Plaza, and the city’s tunnels. On
May 10, 1998, Mr. Scala was selected as a Supervisory Special Agent
for the Gambino La Cosa Nostra Squad (C-16). During his tenure, the
squad successfully investigated and prosecuted the Mob infiltration
of Wall Street, the New York Waterfront investigation,
“Murder Incorporated,” labor racketeering, the NY
Construction Industry, dismantlement of the Gambino family in NY
and Sicily, the NBA referee case, and the largest consumers’
fraud ($1 billion) in US history, which involved the mob’s
infiltration of the internet, telecommunications, and banking
industries. From 2003-2008, Mr. Scala developed and implemented the
NY Office’s Leadership Development Program, which assisted
relief supervisors develop excellence in leadership through
mentoring, journalizing, “Best Practice” experiences,
and accountability tools. The program was designed to be
continuous, progressive, and measurable in assisting the FBI
leaders maximize their leadership potential throughout their
careers. Mr. Scala received his bachelor’s degree and Master
of Business Administration in accounting from St. John’s
University; he also earned a Master of Arts degree in Psychology
from New York University.
Justin
Deutsch has been a director of the Company since May 2020. Mr.
Deutsch joined Weybosset Research & Management, LLC in October
2014 as a portfolio manager. Prior to joining the firm, he was an
equity analyst and trader at Bay Crest Partners for five years,
specializing in large cap companies. Justin has been instrumental
in helping build portfolios at Weybosset – think, trains,
truck engines, beer, industrial gasses, and retailing. Before Bay
Crest, Justin worked as head trader and portfolio manager for Horn
Capital Management, a hedge fund based in New York City. Justin
received his BA from New York University and most recently attended
the Harvard Kennedy Schools program, Investment Decisions and
Behavioral Finance. He currently splits his time between New York
and Providence.
James Murphy has been a director of the Company since June 2020.
Mr. Murphy brings more than 40 years of investigative and
consulting experience as the Founder and President of Sutton
Associates. From 1980 to 1984, Mr. Murphy was an Assistant Special
Agent in Charge with the Federal Bureau of Investigation,
responsible for a territory encompassing more than seven million
people. His investigative specialties included organized crime,
white-collar crime, labor racketeering and political corruption.
From 1976 to 1980, Mr. Murphy was assigned to the Office of
Planning and Evaluation at FBI headquarters, Washington, D.C. In
this capacity, he evaluated and recommended changes in the FBI's
administrative and investigative programs. Since entering the
private sector in 1984, Mr. Murphy has advanced the industry by
developing systematic and professional protocols for performing due
diligence, as well as other investigative services.
Board Committees, Compensation Committee Interlocks and Insider
Participation
Due to the small number of directors, at the present time the
duties of an Audit
Committee, Nominating and
Governance Committee and Compensation Committee (including with
respect to setting executive officer compensation) are performed by
the Board as a whole. At such time as we have more directors on our
Board, these committees will be formed. We do not currently have an
“audit committee financial expert” since we currently
do not have an audit committee.
Family Relationships
None
Arrangements between Officers and Directors
Except as set forth herein, to our knowledge, there is no
arrangement or understanding between any of our officers or
directors and any other person pursuant to which the officer or
director was selected to serve as an officer or
director.
Involvement in Certain Legal Proceedings
Except as set forth herein, we are not aware of any of our
directors or officers being involved in any legal proceedings in
the past ten years relating to any matters in bankruptcy,
insolvency, criminal proceedings (other than traffic and other
minor offenses), or being subject to any of the items set forth
under Item 401(f) of Regulation S-K.
While
the events underlying the actions and/or settlements described
below were over 20 years ago, and the final settlements of such
matters were over 15 years ago, investors may wish to consider the
above information prior to making an investment in the Company. For
further details on the above, go to www.sec.gov, or contact the
Company.
Kenneth
Orr, our Executive Chairman, was a registered principal and
president of First Cambridge Securities Corporation (“First
Cambridge”) from March 1994 until May 23, 1997. First
Cambridge was registered with the Securities and Exchange
Commission (the “Commission”) as a broker dealer
pursuant to Section 15(b) of the Securities Exchange Act of 1934,
as amended, during the period of Mr. Orr’s employment. On May
9, 1997, the Alabama Securities Commission (the “ASC”)
issued an order of suspension against Mr. Orr and First Cambridge
for failure to respond to a visitation letter from the commission
directing the production of documents relevant to an investigation
being conducted by the ASC. On December 10, 1999, the Securities
and Exchange Commission (the “Commission”) filed a
civil action in federal district court against Mr. Orr and sixteen
other defendants. In connection therewith, a Final Judgment of
Permanent Injunction and Other Relief was entered by the Court, on
September 13, 2002, as to Mr. Orr, with respect to which Mr. Orr
consented without admitting or denying the allegations in the
Commission's Complaint, permanently enjoining him from future
violations of Section 17(a) of the Securities Act, and Section
10(b) of the Exchange Act and Rule 10b-5 thereunder, ordering him
to disgorge $55,000 in ill-gotten gains, approximately $44,000 in
prejudgment interest, and post-judgment interest, and ordering Orr
to pay a civil penalty of $55,000. Mr. Orr consented to the entry
of the final judgment without admitting or denying the allegations
in the Commission's Complaint. Regarding the same allegations in
the SEC complaint, on January 3, 2002, in a settlement with the US
Attorney, Mr. Orr pleaded guilty to one count of indirect
conspiracy, and, on May 21, 2002, a judgment was entered against
Mr. Orr by the Court pursuant to which Mr. Orr ordered to pay a
$3,000 fine. In addition and as part of the above, in December
2004, Mr. Orr consented to the entry of an Order Making Findings
and Imposing Remedial Sanctions pursuant to Section 15(b) of the
Securities Exchange Act of 1934. In connection therewith, Mr. Orr
was barred from association with any broker or dealer. Any
reapplication for association by Mr. Orr will be subject to the
applicable laws and regulations governing the reentry process. Mr.
Orr has determined not to reapply or seek reentry.
Code of Ethics and Code of Conduct
Prior to the effectiveness of the registration statement of which
this prospectus forms a part, we will adopt a written code of
business conduct and ethics that applies to our directors, officers
and employees, including our principal executive officer, principal
financial officer, principal accounting officer or controller, or
persons performing similar functions. A copy of the code will be
posted on our website. In addition, we intend to post on our
website all disclosures that are required by law concerning any
amendments to, or waivers from, any provision of the code. The
information on our website is deemed not to be incorporated in this
prospectus or to be part of this prospectus.
EXECUTIVE COMPENSATION
As a “smaller reporting company” under SEC rules, our named
executive officers for the fiscal year ended December 31, 2020
(collectively, the “Named Executive Officers”) were as
follows:
●
|
Isaac
H. Sutton, our former Chief Executive Officer who resigned from the
Company on April 30, 2020.
|
●
|
Phil
Scala, our former Interim Chief Executive Officer who was appointed
on May 8, 2020 and resigned on October 12, 2020.
|
●
|
Andrew
Fox, our Chief Executive Officer who was appointed on October 12,
2020.
|
No other executive officers received total annual compensation
during the fiscal year ended December 31, 2020 in excess of
$100,000.
As of December 31, 2020, we did not pay any compensation to our
Named Executive Officers.
We currently do not have any employment agreements or agreements
with any of our executive officers.
Outstanding Equity Awards at Fiscal Year End
Except as described below, as of December 31, 2020, there were no
unexercised options, unvested stock awards or outstanding equity
incentive plan awards held by our Named Executive
Officers.
Andrew
Fox was granted an option to purchase 9,400,000 shares of common
stock at an exercise price of $0.29 per share. The option shall
vest in 4 equal installments beginning on the date of grant and on
each of the 1st, 2nd and 3rd anniversary of the
date of grant.
Long-Term Incentive Plans, Retirement or Similar Benefit
Plans
As of December 31, 2020, there were no arrangements or plans in
which we provide pension, retirement or similar benefits for
directors or executive officers.
Resignation, Retirement, Other Termination, or Change in Control
Arrangements
We do not have arrangements in respect of remuneration received or
that may be received by our Named Executive Officers set forth
above to compensate such officers in the event of termination of
employment (as a result of resignation, retirement, change of
control) or a change of responsibilities following a change of
control.
Director Compensation
As of December 31, 2020, we did not pay any compensation to our
directors.
2020 Omnibus Equity Incentive Plan
Summary
On
January 11, 2021, our Board of Directors and a majority of our
stockholders adopted the 2020 Omnibus Equity Incentive Plan (the
“2020 Plan”).
Our
administrator may grant incentive stock options, non-statutory
stock options, stock appreciation rights, restricted stock,
restricted stock units and other stock-based awards to participants
to acquire shares of our common stock under the 2020 Plan. It is
anticipated that the 2020 Plan will be administered by our Board of
Directors, or if our Board of Directors does not administer the
2020 Plan, a committee or subcommittee of our Board of Directors
that complies with the applicable requirements of Section 16 of the
Exchange Act and any other applicable legal or stock exchange
listing requirements. The following table sets forth, as of
February 5, 2021, the approximate number of each class of
participants eligible to participate in the 2020 Plan and the basis
of such participation.
Class and Basis
of Participation
|
Approximate
Number of Class
|
Employees
|
1
|
Directors
|
6(1)
|
Independent
Contractors
|
|
|
(1)
|
Two of
the six directors is an employee of the Company.
|
Description of 2020 Plan
Types of
Awards. The 2020 Plan provides
for the issuance of incentive stock options, non-statutory stock
options, stock appreciation rights (“SARs”), restricted
stock, restricted stock units (“RSUs”), and other
stock-based awards. Items described above in the Section called
“Shares Available; Certain Limitations” are
incorporated herein by reference.
Administration.
The 2020 Plan will be administered by our Board of Directors, or if
our Board of Directors does not administer the 2020 Plan, a
committee or subcommittee of our Board of Directors that complies
with the applicable requirements of Section 16 of the Exchange Act
and any other applicable legal or stock exchange listing
requirements (each of our Board of Directors or such committee or
subcommittee, the “plan administrator”). The plan
administrator may interpret the 2020 Plan and may prescribe, amend
and rescind rules and make all other determinations necessary or
desirable for the administration of the 2020 Plan, provided that,
subject to the equitable adjustment provisions described below, the
plan administrator will not have the authority to reprice or cancel
and re-grant any award at a lower exercise, base or purchase price
or cancel any award with an exercise, base or purchase price in
exchange for cash, property or other awards without first obtaining
the approval of our stockholders.
The
2020 Plan permits the plan administrator to select the eligible
recipients who will receive awards, to determine the terms and
conditions of those awards, including, but not limited to, the
exercise price or other purchase price of an award, the number of
shares of common stock or cash or other property subject to an
award, the term of an award and the vesting schedule applicable to
an award, and to amend the terms and conditions of outstanding
awards.
Restricted Stock and
Restricted Stock Units.
Restricted stock and RSUs may be granted under the 2020 Plan. The
plan administrator will determine the purchase price, vesting
schedule and performance goals, if any, and any other conditions
that apply to a grant of restricted stock and RSUs. If the
restrictions, performance goals or other conditions determined by
the plan administrator are not satisfied, the restricted stock and
RSUs will be forfeited. Subject to the provisions of the 2020 Plan
and the applicable award agreement, the plan administrator has the
sole discretion to provide for the lapse of restrictions in
installments.
Unless
the applicable award agreement provides otherwise, participants
with restricted stock will generally have all of the rights of a
stockholder; provided that dividends will only be paid if and when
the underlying restricted stock vests. RSUs will not be entitled to
dividends prior to vesting, but may be entitled to receive dividend
equivalents if the award agreement provides for them. The rights of
participants granted restricted stock or RSUs upon the termination
of employment or service to us will be set forth in the award
agreement.
Options. Incentive
stock options and non-statutory stock options may be granted under
the 2020 Plan. An “incentive stock option” means an
option intended to qualify for tax treatment applicable to
incentive stock options under Section 422 of the Code. A
“non-statutory stock option” is an option that is not
subject to statutory requirements and limitations required for
certain tax advantages that are allowed under specific provisions
of the Code. A non-statutory stock option under the 2020 Plan is
referred to for federal income tax purposes as a
“non-qualified” stock option. Each option granted under
the 2020 Plan will be designated as a non-qualified stock option or
an incentive stock option. At the discretion of the administrator,
incentive stock options may be granted only to our employees,
employees of our “parent corporation” (as such term is
defined in Section 424(e) of the Code) or employees of our
subsidiaries.
The
exercise period of an option may not exceed ten years from the date
of grant and the exercise price may not be less than 100% of the
fair market value of a share of common stock on the date the option
is granted (110% of fair market value in the case of incentive
stock options granted to ten percent stockholders). The exercise
price for shares of common stock subject to an option may be paid
in cash, or as determined by the plan administrator in its sole
discretion, (i) through any cashless exercise procedure approved by
the plan administrator (including the withholding of shares of
common stock otherwise issuable upon exercise), (ii) by tendering
unrestricted shares of common stock owned by the participant, (iii)
with any other form of consideration approved by the plan
administrator and permitted by applicable law or (iv) by any
combination of these methods. The option holder will have no rights
to dividends or distributions or other rights of a stockholder with
respect to the shares of common stock subject to an option until
the option holder has given written notice of exercise and paid the
exercise price and applicable withholding taxes.
In
the event of an participant’s termination of employment or
service, the participant may exercise his or her option (to the
extent vested as of such date of termination) for such period of
time as specified in his or her option agreement.
Stock Appreciation
Rights. SARs may be granted
either alone (a “free-standing SAR”) or in conjunction
with all or part of any option granted under the 2020 Plan (a
“tandem SAR”). A free-standing SAR will entitle its
holder to receive, at the time of exercise, an amount per share up
to the excess of the fair market value (at the date of exercise) of
a share of common stock over the base price of the free-standing
SAR (which shall be no less than 100% of the fair market value of
the related shares of common stock on the date of grant) multiplied
by the number of shares in respect of which the SAR is being
exercised. A tandem SAR will entitle its holder to receive, at the
time of exercise of the SAR and surrender of the applicable portion
of the related option, an amount per share up to the excess of the
fair market value (at the date of exercise) of a share of common
stock over the exercise price of the related option multiplied by
the number of shares in respect of which the SAR is being
exercised. The exercise period of a free-standing SAR may not
exceed ten years from the date of grant. The exercise period of a
tandem SAR will also expire upon the expiration of its related
option.
The
holder of a SAR will have no rights to dividends or any other
rights of a stockholder with respect to the shares of common stock
subject to the SAR until the holder has given written notice of
exercise and paid the exercise price and applicable withholding
taxes.
In
the event of an participant’s termination of employment or
service, the holder of a SAR may exercise his or her SAR (to the
extent vested as of such date of termination) for such period of
time as specified in his or her SAR agreement.
Other Stock-Based
Awards. The plan administrator
may grant other stock-based awards under the 2020 Plan, valued in
whole or in part by reference to, or otherwise based on, shares of
common stock. The plan administrator will determine the terms and
conditions of these awards, including the number of shares of
common stock to be granted pursuant to each award, the manner in
which the award will be settled, and the conditions to the vesting
and payment of the award (including the achievement of performance
goals). The rights of participants granted other stock-based awards
upon the termination of employment or service to us will be set
forth in the applicable award agreement. In the event that a bonus
is granted in the form of shares of common stock, the shares of
common stock constituting such bonus shall, as determined by the
administrator, be evidenced in uncertificated form or by a book
entry record or a certificate issued in the name of the participant
to whom such grant was made and delivered to such participant as
soon as practicable after the date on which such bonus is payable.
Any dividend or dividend equivalent award issued hereunder shall be
subject to the same restrictions, conditions and risks of
forfeiture as apply to the underlying
award.
Equitable Adjustment and Treatment of Outstanding Awards Upon a
Change in Control
Equitable
Adjustments. In the event of a
merger, consolidation, reclassification, recapitalization,
spin-off, spin-out, repurchase, reorganization, special or
extraordinary dividend or other extraordinary distribution (whether
in the form of common stock, cash or other property), combination,
exchange of shares, or other change in corporate structure
affecting our common stock, an equitable substitution or
proportionate adjustment shall be made in (i) the aggregate number
and kind of securities reserved for issuance under the 2020 Plan,
(ii) the kind and number of securities subject to, and the exercise
price of, any outstanding options and SARs granted under the 2020
Plan, (iii) the kind, number and purchase price of shares of common
stock, or the amount of cash or amount or type of property, subject
to outstanding restricted stock, RSUs and other stock-based awards
granted under the 2020 Plan and (iv) the terms and conditions of
any outstanding awards (including any applicable performance
targets). Equitable substitutions or adjustments other than those
listed above may also be made as determined by the plan
administrator. In addition, the plan administrator may terminate
all outstanding awards for the payment of cash or in-kind
consideration having an aggregate fair market value equal to the
excess of the fair market value of the shares of common stock, cash
or other property covered by such awards over the aggregate
exercise price, if any, of such awards, but if the exercise price
of any outstanding award is equal to or greater than the fair
market value of the shares of common stock, cash or other property
covered by such award, the plan administrator may cancel the award
without the payment of any consideration to the participant. With
respect to awards subject to foreign laws, adjustments will be made
in compliance with applicable requirements. Except to the extent
determined by the plan administrator, adjustments to incentive
stock options will be made only to the extent not constituting a
“modification” within the meaning of Section 424(h)(3)
of the Code.
Change in
Control. The 2020 Plan provides
that, unless otherwise determined by the plan administrator and
evidenced in an award agreement, if a “change in
control” (as defined below) occurs and a participant is
employed by us or any of our affiliates immediately prior to the
consummation of the change in control, then the plan administrator,
in its sole and absolute discretion, may (i) provide that any
unvested or unexercisable portion of an award carrying a right to
exercise will become fully vested and exercisable; and (ii) cause
the restrictions, deferral limitations, payment conditions and
forfeiture conditions applicable to any award granted under the
2020 Plan to lapse, and the awards will be deemed fully vested and
any performance conditions imposed with respect to such awards will
be deemed to be fully achieved at target performance levels. The
plan administrator shall have discretion in connection with such
change in control to provide that all outstanding and unexercised
options and SARs shall expire upon the consummation of such change
in control.
For
purposes of the 2020 Plan, a “change in control” means,
in summary, the first to occur of the following events: (i) a
person or entity becomes the beneficial owner of more than 50% of
our voting power; (ii) an unapproved change in the majority
membership of our Board of Directors; (iii) a merger or
consolidation of us or any of our subsidiaries, other than (A) a
merger or consolidation that results in our voting securities
continuing to represent 50% or more of the combined voting power of
the surviving entity or its parent and our Board of Directors
immediately prior to the merger or consolidation continuing to
represent at least a majority of the Board of Directors of the
surviving entity or its parent or (B) a merger or consolidation
effected to implement a recapitalization in which no person is or
becomes the beneficial owner of our voting securities representing
more than 50% of our combined voting power; or (iv) stockholder
approval of a plan of our complete liquidation or dissolution or
the consummation of an agreement for the sale or disposition of
substantially all of our assets, other than (A) a sale or
disposition to an entity, more than 50% of the combined voting
power of which is owned by our stockholders in substantially the
same proportions as their ownership of us immediately prior to such
sale or (B) a sale or disposition to an entity controlled by our
Board of Directors. However, a change in control will not be deemed
to have occurred as a result of any transaction or series of
integrated transactions following which our stockholders,
immediately prior thereto, hold immediately afterward the same
proportionate equity interests in the entity that owns all or
substantially all of our assets.
Tax Withholding
Each
participant will be required to make arrangements satisfactory to
the plan administrator regarding payment of up to the maximum
statutory tax rates in the participant’s applicable
jurisdiction with respect to any award granted under the 2020 Plan,
as determined by us. We have the right, to the extent permitted by
applicable law, to deduct any such taxes from any payment of any
kind otherwise due to the participant. With the approval of the
plan administrator, the participant may satisfy the foregoing
requirement by either electing to have us withhold from delivery of
shares of common stock, cash or other property, as applicable, or
by delivering already owned unrestricted shares of common stock, in
each case, having a value not exceeding the applicable taxes to be
withheld and applied to the tax obligations. We may also use any
other method of obtaining the necessary payment or proceeds, as
permitted by applicable law, to satisfy our withholding obligation
with respect to any award.
Amendment and Termination of the 2020 Plan
The
2020 Plan provides our Board of Directors with authority to amend,
alter or terminate the 2020 Plan, but no such action impair the
rights of any participant with respect to outstanding awards
without the participant’s consent. The plan administrator may
amend an award, prospectively or retroactively, but no such
amendment may materially impair the rights of any participant
without the participant’s consent. Stockholder approval of
any such action will be obtained if required to comply with
applicable law. The 2020 Plan will terminate on the tenth
anniversary of the Effective Date (although awards granted before
that time will remain outstanding in accordance with their
terms).
Clawback. If we are required to prepare a financial
restatement due to the material non-compliance with any financial
reporting requirement, then the plan administrator may require any
Section 16 officer to repay or forfeit to us that part of the cash
or equity incentive compensation received by that Section 16
officer during the preceding three years that the plan
administrator determines was in excess of the amount that such
Section 16 officer would have received had such cash or equity
incentive compensation been calculated based on the financial
results reported in the restated financial statement. The plan
administrator may take into account any factors it deems reasonable
in determining whether to seek recoupment of previously paid cash
or equity incentive compensation and how much of such compensation
to recoup from each Section 16 officer (which need not be the same
amount or proportion for each Section 16 officer). The amount and
form of the incentive compensation to be recouped shall be
determined by the administrator in its sole and absolute
discretion.
New Plan Benefits
Future grants under the 2020 Plan will be made at the discretion of
the plan administrator and, accordingly, are not yet determinable.
In addition, benefits under the 2020 Plan will depend on a number
of factors, including the fair market value of our common stock on
future dates and the exercise decisions made by participants.
Consequently, at this time, it is not possible to determine the
future benefits that might be received by participants receiving
discretionary grants under the 2020 Plan.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The following table sets forth information as of February 1, 2021,
as to each person or group who is known to us to be the beneficial
owner of more than 5% of our outstanding voting securities and as
to the security and percentage ownership of each of our executive
officers and directors and of all of our officers and directors as
a group.
Beneficial ownership is determined under the rules of the SEC and
generally includes voting or investment power over securities.
Except in cases where community property laws apply or as indicated
in the footnotes to this table, we believe that each stockholder
identified in the table possesses sole voting and investment power
over all shares of common stock shown as beneficially owned by the
stockholder. Shares of common stock that are currently exercisable
or convertible within 60 days of February 1, 2021 are deemed to be
beneficially owned by the person holding such securities for the
purpose of computing the percentage beneficial ownership of that
person, but are not treated as outstanding for the purpose of
computing the percentage ownership of any other person. Except as
otherwise indicated, the address of each stockholder is c/o Charge
Enterprises, Inc. at 125 Park Avenue, 25th Floor, New York, NY
10017.
Name and Address of Beneficial Owner
|
Shares of Common Stock Beneficially Owned
|
Percentage of Class Outstanding (1)
|
Shares of Series A Preferred Stock Beneficially Owned
|
Percentage of Class Outstanding (2)
|
Security Ownership of Certain Beneficial Owners:
|
|
|
|
|
Korr
Acquisitions Group, Inc. (3)
|
42,474,540
|
28.56%
|
1,000,000
|
100%
|
KORR
Value, LP (4)
|
12,184,683
|
8.11%
|
--
|
--
|
Mt.
Whitney Securities LLC (5)
|
15,560,298
|
9.69%
|
--
|
--
|
Arena
Structured Private Investments LLC (6)
|
16,422,782
|
9.99%
|
--
|
--
|
Andrew
Fox (7)
|
15,751,855
|
10.38%
|
--
|
--
|
P&G
Gershon LLC (8)
|
13,279,307
|
8.93%
|
--
|
--
|
Security Ownership of Management and Directors:
|
|
|
|
|
Kenneth
Orr (9)
|
56,782,934
|
37.78%
|
1,000,000
|
100%
|
Andrew
Fox (7)
|
15,751,855
|
10.38%
|
--
|
--
|
Craig
Denson
|
--
|
-
|
--
|
--
|
Phil
Scala(10)
|
1,111,887
|
*
|
--
|
--
|
Justin
Deutsch(10)
|
474,768
|
*
|
--
|
--
|
James
Murphy(10)
|
50,000
|
-
|
--
|
--
|
Executive
officers and directors as a group — 6 persons
|
74,171,444
|
|
1,000,000
|
100%
|
* less
than 1%
(1)
|
The
number and percentage of shares beneficially owned are determined
in accordance with Rule 13d-3 of the Securities Exchange Act of
1934, as amended (the “Exchange Act”), and the
information is not necessarily indicative of beneficial ownership
for any other purpose. Under such rule, beneficial ownership
includes any shares over which the individual or entity has voting
power or investment power and any shares of common stock that the
individual has the right to acquire within 60 days of February 1,
2021, through the exercise of any stock option or other
right.
|
|
(2)
|
Our
series A Preferred Stock shall vote together with the common stock
on an as converted basis. The series A preferred stock is
convertible into 80% of our fully-diluted shares of common stock at
any time at the option of the Holder.
|
|
(3)
|
Mr. Orr
is the principal operating officer of KORR Acquisitions Group,
Inc., which is the general partner of KORR Value LP. Mr. Orr has
sole voting and dispositive power over the shares held by KORR
Acquisitions Group, Inc. and KORR Value LP. The address of KORR
Acquisition Group, Inc. is 1400 Old
Country Road, Westbury, NY 11590.
|
|
(4)
|
Includes
(i) 1,044,000 shares of common stock issuable upon conversion of
outstanding promissory notes and (ii) warrants to purchase 522,000
shares of common stock. Mr. Orr is the principal operating officer
of KORR Acquisitions Group, Inc., which is the general partner of
KORR Value LP. Mr. Orr has sole voting and dispositive power over
the shares held by KORR Acquisitions Group, Inc. and KORR Value LP.
The address of KORR Value, LP is 1400
Old Country Road, Westbury, NY 11590.
|
|
(5)
|
Includes
(i) 7,231,488 shares of common stock issuable upon conversion of
outstanding promissory notes and (ii) warrants to
purchase
4,579,943
shares of common stock. Arena Investors, LP is the investment
adviser of, and may be deemed to beneficially own securities owned
by this entity (the “Investment Advisor”). Arena
Investors GP, LLC is the general partner of, and may be deemed to
beneficially own securities owned by the Investment Advisor. Each
of the Investment Advisor and either the managing member share
voting and disposal power over the shares held by the entity
described above. Each of the persons set forth above other than
applicable entity holding such shares disclaims beneficial
ownership of the shares beneficially owned by such entity and this
disclosure shall not be construed as an admission that any such
person or entity is the beneficial owner of any such securities.
The address for the entities set forth above is 405 Lexington
Avenue, 59th Floor, New York, New York 10174.
|
|
(6)
|
Includes
15,555,556 shares of common stock issuable upon conversion of
outstanding promissory notes. Arena Investors, LP is the investment
adviser of, and may be deemed to beneficially own securities owned
by this entity (the “Investment Advisor”). Arena
Investors GP, LLC is the general partner of, and may be deemed to
beneficially own securities owned by the Investment Advisor. Each
of the Investment Advisor and either the managing member share
voting and disposal power over the shares held by the entity
described above. Each of the persons set forth above other than
applicable entity holding such shares disclaims beneficial
ownership of the shares beneficially owned by such entity and this
disclosure shall not be construed as an admission that any such
person or entity is the beneficial owner of any such securities.
The address for the entities set forth above is 405 Lexington
Avenue, 59th Floor, New York, New York 10174.
|
|
(7)
|
Includes
(i) 2,350,000 shares of common stock issuable upon outstanding
options, (ii) 440,000 shares of common stock issuable upon
conversion of outstanding promissory notes and (iii) warrants to
purchase 220,000 shares of common stock. Does not include 1,159,588
shares of common stock purchased by Mr. Fox from an unaffiliated
third party which has not be transferred into his
name.
|
|
(8)
|
Dan
Waldman has sole voting and dispositive power over the shares held
by this entity. The address for this entity is 100 Riverside Drive,
New York, NY 10024.
|
|
(9)
|
Includes
(i) 2,123,711 shares of common stock held by Cori Orr, his wife,
(ii) 42,474,540 shares of common stock held by KORR Acquisition
Group, Inc. (iii) 10,618,683 shares of common stock held by KORR
Value, LP, (iv) 1,044,000 shares of common stock issuable upon
conversion of outstanding promissory notes held by KORR Value, LP
and (v) warrants to purchase 522,000 shares of common stock held by
KORR Value, LP. Does not include 80,000 shares of common stock
purchased by Mr. Orr from an unaffiliated third party which has not
be transferred into his name. Mr. Orr has sole voting and
dispositive power over the shares held by KORR Acquisitions Group,
Inc. and KORR Value LP.
|
|
(10
|
Includes
50,000 shares of common stock issuable upon exercise of
options
|
|
SELLING STOCKHOLDERS
The
common stock being offered by the selling shareholders are those
previously issued to the selling shareholders, and those issuable
to the selling shareholders, upon conversion of the Notes and/or
exercise of the Warrants.
We are
registering the shares of common stock in order to permit the
selling shareholders to offer the shares for resale from time to
time. Except for the ownership of the securities by the selling
shareholders that were issued in the May 2020 private placement and
the November 2020 private placement, the selling shareholders have
not had any material relationship with us within the past three
years.
The
table below lists the selling shareholders and other information
regarding the beneficial ownership of the shares of common stock by
each of the selling shareholders. The second column lists the
number of shares of common stock beneficially owned by each selling
shareholder, based on its ownership of our common stock, the Notes
and Warrants, as of February 1, 2021, assuming conversion of the
Notes and/or exercise of Warrants held by the selling shareholders
on that date, without regard to any limitations on
exercises.
The
third column lists the shares of common stock being offered by this
prospectus by the selling shareholders.
In
accordance with the terms of the registration rights agreement with
the selling shareholders, this prospectus generally covers the
resale of the sum of (i) the number of shares of common stock
issued to the selling shareholders upon conversion of the series G
preferred stock, (ii) the maximum number of shares of common stock
issuable upon conversion of the notes, determined as if the
outstanding notes were exercised in full as of the trading day
immediately preceding the date this registration statement was
initially filed with the SEC and (iii) the maximum number of shares
of common stock issuable upon exercise of the warrants, determined
as if the outstanding warrants were exercised in full as of the
trading day immediately preceding the date this registration
statement was initially filed with the SEC, each as of the trading
day immediately preceding the applicable date of determination and
all subject to adjustment as provided in the registration right
agreement, without regard to any limitations on the exercise of the
warrants or conversion of the notes. The fourth column assumes the
sale of all of the shares offered by the selling shareholders
pursuant to this prospectus.
Under
the terms of the Notes and Warrants, a selling shareholder may not
exercise the notes and/or exercise the warrants to the extent such
exercise would cause such selling shareholder, together with its
affiliates and attribution parties, to beneficially own a number of
shares of common stock which would exceed 9.99% of our then
outstanding common stock following such conversion and/or exercise.
The number of shares in the second column does not reflect this
limitation.
The
selling shareholders may sell all, some or none of their shares in
this offering. See "Plan of Distribution."
|
|
|
Shares of Common Stock Beneficially Owned after the
Offering
|
Name of Selling
Shareholder
|
Number of Shares of Common Stock Beneficially Owned Prior to
Offering
|
Maximum Number of Shares of Common Stock to be Sold Pursuant to
this Prospectus
|
Number of Shares Owned After the Offering
|
|
Mt.
Whitney Securities, LLC (1)(2)
|
15,560,298
|
15,560,298
|
--
|
--
|
Arena
Originating Co., LLC (1)(3)
|
1,437,878
|
1,437,878
|
--
|
--
|
Arena
Special Opportunities Fund, LP (1)(4)
|
5,482,450
|
5,482,450
|
--
|
--
|
Arena
Special Opportunities Partners I, LP (1)(5)
|
3,418,776
|
3,418,776
|
--
|
--
|
Arena
Structured Private Investments LLC (1)(6)
|
16,422,472
|
16,458,472
|
36,000
|
*
|
* Less
than 1%
(1)
Consists of shares of common stock, Notes and Warrants held by
Arena Origination Co., LLC (“Originating Fund”), Arena
Special Opportunities Fund, LP (“Opportunities Fund”),
Arena Structured Private Investments
LLC (“Investments Fund”) and Arena Special
Opportunities Partners I, LP (“Partners Fund” and
together with the Originating Fund, Opportunities Fund and
Investments Fund, the “Arena Funds”), respectively. In
addition, includes common stock, Notes and Warrants held by Mt.
Whitney Securities LLC (“Managed Account,” and together
with the Arena Funds, the “Arena Entities”). Arena
Investors, LP is the investment adviser of, and may be deemed to
beneficially own securities owned by the Arena Entities (the
“Investment Advisor”). Westaim Origination Holdings,
Inc is the managing member of, and may be deemed to beneficially
own securities owned by, Originating Fund. Arena Special
Opportunities Fund (Onshore) GP, LLC is the general partner of, and
may be deemed to beneficially own securities owned by,
Opportunities Fund. Arena Special Opportunities Partners (Onshore)
GP, LLC is the general partner of, and may be deemed to
beneficially own securities owned by, Partners Fund. The Managed
Account is an account separately managed by the Investment Advisor.
Arena Investors GP, LLC is the general partner of, and may be
deemed to beneficially own securities owned by the Investment
Advisor. Each of the Investment Advisor and either the managing
member or the general partner of the respective Arena Fund share
voting and disposal power over the shares held by each Arena Fund
described above. Each of the persons set forth above other than
applicable entity holding such shares disclaims beneficial
ownership of the shares beneficially owned by such entity and this
disclosure shall not be construed as an admission that any such
person or entity is the beneficial owner of any such securities.
The address for the entities set forth above is 405 Lexington
Avenue, 59th Floor, New York, New York 10174.
(2)
Includes (a) 7,231,488 shares of common stock issuable upon
conversion of the May 2020 Notes, (b) 4,579,943 shares of common
stock issuable upon exercise of the Warrants.
(3)
Includes (a) 664,368 shares of common stock issuable upon
conversion of the May 2020 Notes and (b) 420,766 shares of common
stock issuable upon exercise of the Warrants.
(4)
Includes (a) 2,543,752 shares of common stock issuable upon
conversion of the May 2020 Notes, (b) 1,611,043 shares of common
stock issuable upon exercise of the Warrants.
(5)
Includes (a) 1,560,392 shares of common stock issuable upon
conversion of the May 2020 Notes and (b) 988,248 shares of common
stock issuable upon exercise of the Warrants.
(6)
Includes 15,555,556 shares of common stock issuable upon conversion
of the November 2020 Notes.
PLAN OF DISTRIBUTION
Each
Selling Stockholder (the “Selling Stockholders”) of the
securities and any of their pledgees, assignees and
successors-in-interest may, from time to time, sell any or all of
their securities covered hereby on the principal trading market or
any other stock exchange, market or trading facility on which the
securities are traded or in private transactions. These sales may
be at $2.75 per share until our shares are quoted on the OTCQX,
OTCQB or listed on a national securities exchange, and thereafter,
at fixed or negotiated prices. A Selling Stockholder may use any
one or more of the following methods when selling
securities:
●
|
ordinary
brokerage transactions and transactions in which the broker-dealer
solicits purchasers;
|
●
|
block
trades in which the broker-dealer will attempt to sell the
securities as agent but may position and resell a portion of the
block as principal to facilitate the transaction;
|
●
|
purchases
by a broker-dealer as principal and resale by the broker-dealer for
its account;
|
●
|
an
exchange distribution in accordance with the rules of the
applicable exchange;
|
●
|
privately
negotiated transactions;
|
●
|
settlement
of short sales;
|
●
|
in
transactions through broker-dealers that agree with the Selling
Stockholders to sell a specified number of such securities at a
stipulated price per security;
|
●
|
through
the writing or settlement of options or other hedging transactions,
whether through an options exchange or otherwise;
|
●
|
a
combination of any such methods of sale; or
|
●
|
any
other method permitted pursuant to applicable law.
|
The
Selling Stockholders may also sell securities under Rule 144 or any
other exemption from registration under the Securities Act of 1933,
as amended (the “Securities Act”), if available, rather
than under this prospectus.
Broker-dealers
engaged by the Selling Stockholders may arrange for other
brokers-dealers to participate in sales. Broker-dealers may receive
commissions or discounts from the Selling Stockholders (or, if any
broker-dealer acts as agent for the purchaser of securities, from
the purchaser) in amounts to be negotiated, but, except as set
forth in a supplement to this Prospectus, in the case of an agency
transaction not in excess of a customary brokerage commission in
compliance with FINRA Rule 2440; and in the case of a principal
transaction a markup or markdown in compliance with FINRA
IM-2440.
In
connection with the sale of the securities or interests therein,
the Selling Stockholders may enter into hedging transactions with
broker-dealers or other financial institutions, which may in turn
engage in short sales of the securities in the course of hedging
the positions they assume. The Selling Stockholders may also sell
securities short and deliver these securities to close out their
short positions, or loan or pledge the securities to broker-dealers
that in turn may sell these securities. The Selling Stockholders
may also enter into option or other transactions with
broker-dealers or other financial institutions or create one or
more derivative securities which require the delivery to such
broker-dealer or other financial institution of securities offered
by this prospectus, which securities such broker-dealer or other
financial institution may resell pursuant to this prospectus (as
supplemented or amended to reflect such transaction).
The
Selling Stockholders and any broker-dealers or agents that are
involved in selling the securities may be deemed to be
“underwriters” within the meaning of the Securities Act
in connection with such sales. In such event, any commissions
received by such broker-dealers or agents and any profit on the
resale of the securities purchased by them may be deemed to be
underwriting commissions or discounts under the Securities Act.
Each Selling Stockholder has informed the Company that it does not
have any written or oral agreement or understanding, directly or
indirectly, with any person to distribute the
securities.
The
Company is required to pay certain fees and expenses incurred by
the Company incident to the registration of the securities. The
Company has agreed to indemnify the Selling Stockholders against
certain losses, claims, damages and liabilities, including
liabilities under the Securities Act.
We
agreed to keep this prospectus effective until the earlier of (i)
the date on which the securities may be resold by the Selling
Stockholders without registration and without regard to any volume
or manner-of-sale limitations by reason of Rule 144, without the
requirement for the Company to be in compliance with the current
public information under Rule 144 under the Securities Act or any
other rule of similar effect or (ii) all of the securities have
been sold pursuant to this prospectus or Rule 144 under the
Securities Act or any other rule of similar effect. The resale
securities will be sold only through registered or licensed brokers
or dealers if required under applicable state securities laws. In
addition, in certain states, the resale securities covered hereby
may not be sold unless they have been registered or qualified for
sale in the applicable state or an exemption from the registration
or qualification requirement is available and is complied
with.
Under
applicable rules and regulations under the Exchange Act, any person
engaged in the distribution of the resale securities may not
simultaneously engage in market making activities with respect to
the common stock for the applicable restricted period, as defined
in Regulation M, prior to the commencement of the distribution. In
addition, the Selling Stockholders will be subject to applicable
provisions of the Exchange Act and the rules and regulations
thereunder, including Regulation M, which may limit the timing of
purchases and sales of the common stock by the Selling Stockholders
or any other person. We will make copies of this prospectus
available to the Selling Stockholders and have informed them of the
need to deliver a copy of this prospectus to each purchaser at or
prior to the time of the sale (including by compliance with Rule
172 under the Securities Act).
There can be no assurance that any Selling Stockholder will sell
any or all of the shares
of common stock registered
pursuant to the registration statement, of which this prospectus
forms a part.
The Selling Stockholders and any other person participating in such
distribution will be subject to applicable provisions of the
Exchange Act and the rules and regulations thereunder, including,
without limitation, Regulation M of the Exchange Act, which may
limit the timing of purchases and sales of any of the shares
of common stock by the Selling
Stockholders and any other participating person. Regulation M may
also restrict the ability of any person engaged in the distribution
of the shares of common stock
to engage in market-making activities with respect to the shares
of common stock. All of the
foregoing may affect the marketability of the shares of
common stock and the ability of any
person or entity to engage in market-making activities with respect
to the shares of common
stock.
We will indemnify the Selling Stockholders against liabilities,
including some liabilities under the Securities Act, in accordance
with the Registration Rights Agreement, or the Selling Stockholders
will be entitled to contribution. We may be indemnified by the
Selling Stockholders against civil liabilities, including
liabilities under the Securities Act, that may arise from any
written information furnished to us by the Selling Stockholder
specifically for use in this prospectus, in accordance with the
Registration Rights Agreement, or we may be entitled to
contribution.
DESCRIPTION OF SECURITIES
The following description of our capital stock, together with any
additional information we include in any applicable prospectus
supplement or any related free writing prospectus, summarizes the
material terms and provisions of our capital stock. For the
complete terms of our capital stock, please refer to our
certificate of incorporation bylaws that are incorporated by
reference into the registration statement of which this prospectus
is a part or may be incorporated by reference in this prospectus or
any applicable prospectus supplement. The terms of these securities
may also be affected by the Delaware General Corporation Law (the
“DGCL”). The summary below and that contained in any
applicable prospectus supplement or any related free writing
prospectus are qualified in their entirety by reference to our
certificate of incorporation and bylaws.
General
As of the date of this prospectus, our authorized capital stock
consists of 500,000,000 shares of common stock, par value $0.0001 per share, and
10,000,000 shares of preferred stock, par value $0.0001 per share.
As of February 10, 2021, there were 148,718,385 shares of our common stock and 1,000,000 shares of Series A
Preferred Stock issued and outstanding.
Common Stock
Holders of our common stock are
entitled to one vote for each share of common stock held of record for the election of
directors and on all matters
submitted to a vote of stockholders. Holders of our common stock
are entitled to receive dividends ratably, if any, as may be
declared by the Board out of legally available funds, subject to
any preferential dividend rights of any preferred stock then
outstanding. In the event of our dissolution, liquidation or
winding up, holders of our common stock are entitled to share
ratably in our net assets legally available after the payment
of all of our debts and other
liabilities, subject to the liquidation preferences of any
preferred stock then outstanding. Holders of our common stock have
no preemptive, subscription, redemption or conversion rights. The
rights, preferences and privileges of holders of
common stock are subject to, and may
be adversely affected by, the rights of the holders of shares of
any series of preferred stock currently outstanding or that we may
designate and issue in the future.
Preferred Stock
Our Board is authorized, without action by the stockholders, to
designate and issue up to 10.0 million shares of preferred stock in
one or more series. Our Board can fix or alter the rights,
preferences and privileges of the shares of each series and any of
its qualifications, limitations or restrictions, including dividend
rights, conversion rights, voting rights, terms of redemption,
liquidation preferences and the number of shares constituting a
class or series. The issuance of preferred stock could, under
certain circumstances, result in one or more of the following
adverse effects:
●
|
decreasing
the market price of our common stock;
|
●
|
restricting
dividends on our common stock;
|
●
|
diluting
the voting power of our common stock;
|
●
|
impairing
the liquidation rights of our common stock; or
|
●
|
delaying
or preventing a change in control of us without further action by
our stockholders.
|
Our Board will make any determination to issue such shares based on
its judgment as to our best interests and the best interests of our
stockholders.
Series A Preferred Stock
Each
share of the Series A Preferred Stock shall convert, on one
occasion, at the sole option of the Holder into 80% of our
fully-diluted shares of common stock on the date of conversion.
Each Holder shall be entitled to the whole number of votes equal to
the number of shares of Common Stock into which such holder’s
Series A Preferred Stock would be convertible on the record date
for the vote or consent of stockholders, and shall otherwise have
voting rights and powers equal to the voting rights and powers of
the Common Stock. The Series A Preferred Stock shall rank senior
with respect to the preferences as to dividends, distributions and
payments upon the liquidation, dissolution and winding up of the
Company and all other shares of capital stock of the Company shall
be junior in rank to all Series A Preferred Stock with respect to
the preferences as to dividends, distributions and payments upon
the liquidation, dissolution and winding up of the
Company.
Anti-Takeover Effects of Certain Provisions of our Certificate of
Incorporation, Bylaws and the DGCL
Certain
provisions of our Certificate of Incorporation and Bylaws, which
are summarized in the following paragraphs, may have the effect of
discouraging potential acquisition proposals or making a tender
offer or delaying or preventing a change in control, including
changes a stockholder might consider favorable. Such provisions may
also prevent or frustrate attempts by our stockholders to replace
or remove our management. In particular, the Certificate of
Incorporation and Bylaws and Delaware law, as applicable, among
other things:
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●
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|
provide
the board of directors with the ability to alter the bylaws without
stockholder approval;
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|
●
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|
place
limitations on the removal of directors; and
|
|
●
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|
provide
that vacancies on the board of directors may be filled by a
majority of directors in office, although less than a
quorum.
|
These
provisions are expected to discourage certain types of coercive
takeover practices and inadequate takeover bids and to encourage
persons seeking to acquire control of our company to first
negotiate with its board. These provisions may delay or prevent
someone from acquiring or merging with us, which may cause the
market price of our common stock to decline.
Blank Check
Preferred. The Board is
authorized to create and issue from time to time, without
stockholder approval, up to an aggregate of 10,000,000 shares of
preferred stock in one or more series and to establish the number
of shares of any series of preferred stock and to fix the
designations, powers, preferences and rights of the shares of each
series and any qualifications, limitations or restrictions of the
shares of each series.
The authority to designate preferred stock may be
used to issue series of preferred stock, or rights to acquire
preferred stock, that could dilute the interest of, or impair the
voting power of, holders of the common stock or could also be used
as a method of determining, delaying or preventing a change of
control.
Advance Notice
Bylaws. The Bylaws contain an
advance notice procedure for stockholder proposals to be brought
before any meeting of stockholders, including proposed nominations
of persons for election to the Board. Stockholders at any meeting
will only be able to consider proposals or nominations specified in
the notice of meeting or brought before the meeting by or at the
direction of the Board or by a stockholder who was a stockholder of
record on the record date for the meeting, who is entitled to vote
at the meeting and who has given the Company’s corporate
secretary timely written notice, in proper form, of the
stockholder’s intention to bring that business before the
meeting. Although the Bylaws do not give the Board the power to
approve or disapprove stockholder nominations of candidates or
proposals regarding other business to be conducted at a special or
annual meeting, the Bylaws may have the effect of precluding the
conduct of certain business at a meeting if the proper procedures
are not followed or may discourage or deter a potential acquiror
from conducting a solicitation of proxies to elect its own slate of
directors or otherwise attempting to obtain control of the
Company.
Interested Stockholder
Transactions. We are subject to
Section 203 of the Delaware General Corporation Law which,
subject to certain exceptions, prohibits “business
combinations” between a publicly-held Delaware corporation
and an “interested stockholder,” which is generally
defined as a stockholder who becomes a beneficial owner of 15% or
more of a Delaware corporation’s voting stock for a
three-year period following the date that such stockholder became
an interested stockholder.
Transfer Agent and Registrar
Our transfer agent and registrar for our capital stock is
Manhattan Transfer Registrar Company, whose address is 38B Sheep
Pasture Road, Port Jefferson, New York 11777.
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
Other than as disclosed below, during the last two fiscal years,
there have been no transactions, or proposed transactions, in which
our company was or is to be a participant where the amount involved
exceeds the lesser of $120,000 or one percent of the average of our
company’s total assets at year-end and in which any director,
executive officer or beneficial holder of more than 5% of the
outstanding common, or any of their respective relatives, spouses,
associates or affiliates, has had or will have any direct or
material indirect interest. We have no policy regarding entering
into transactions with affiliated parties.
The
balance in related party payables amounted to $302,031 and $401,517
for the years ended December 31, 2019 and 2018, respectively. The
Company had an oral agreement with the Company’s former CEO
(Isaac H. Sutton), who provided management services through a
private entity that he owns. On April 30, 2020 Isaac H. Sutton
stepped down as CEO of the Company and is no longer a related
party. The related party payable was converted to a convertible
note payable in the amount of $300,000. The balance of that
convertible note payable as of September 30, 2020 was
$228,751.
During
the year ended December 31, 2019, the Company’s former CEO
converted $100,000 of accrued management services into 375,000,000
shares of common stock.
In May and June 2020, the Company entered into a purchase agreement
with KORR Value LP, an entity controlled by Kenneth Orr, the
Company’s Executive Chairman, pursuant to which the Company
issued convertible notes in an aggregate principal amount of
$550,000 for an aggregate purchase price of $500,000 (collectively,
the “KORR Notes”). In connection with the issuance of
the KORR Notes, we issued to KORR Value warrants to purchase an
aggregate of 1,266,667 shares of Common Stock (collectively, the
“KORR Warrants”). The KORR Notes and KORR Warrants are
on substantially the same terms as the Notes and Warrants issued to
the May 2020 Investors except that the KORR Notes are subordinated
to the Notes. In June 2020, KORR Value LP transferred 50% of the
KORR Notes to PDG Venture Group LLC.
Between May 8, 2020 and September 30, 2020, the Company entered
into securities purchase agreements with other accredited investors
(the “Subordinated Creditors”) pursuant to which the
Company issued convertible notes in an aggregate principal amount
of $546,444 for an aggregate purchase price of $495,000
(collectively, the “Subordinated Creditor Notes”). In
connection with the issuance of the Subordinated Creditor Notes, we
issued to the Subordinated Creditors warrants to purchase an
aggregate of 2,359,555 shares of Common Stock (collectively, the
“Subordinated Creditor Warrants”). The Subordinated
Creditor Notes and Subordinated Creditor Warrants are on
substantially the same terms as the Notes and Warrants issued to
the May 2020 Investors except that the Subordinated Creditor Notes
are subordinated to the Notes. On September 2, 2020, Andrew Fox,
our CEO, purchased a Subordinated Creditor Note with an aggregate
principal amount of $110,000 and a Subordinated Creditor Warrant to
purchase 220,000 shares of common stock for an aggregate purchase
price of $100,000.
On September 30, 2020, KORR Value LP, an entity controlled by
Kenneth Orr, the Company’s Executive Chairman advanced the
Company $75,000. There is no advance due on this advance and it is
payable on demand.
LEGAL MATTERS
The validity of the shares of common stock offered by this prospectus will be
passed upon for us by Sheppard, Mullin, Richter & Hampton LLP,
New York, New York.
EXPERTS
The financial statements of Charge Enterprises, Inc. at December
31, 2019 and 2018, and for each of the two years in the period
ending December 31, 2019, appearing in this prospectus have been
audited by Accell Audit & Compliance, P.A., an independent registered public accounting
firm, as set forth in their report thereon appearing elsewhere
herein, and are included in reliance upon such report given on the
authority of such firm as experts in accounting and
auditing.
The financial statements of PTGi International Carrier
Services, Inc. at December 31,
2019 and 2018, and for each of the two years in the period ending
December 31, 2019, appearing in this prospectus have been audited
by Seligson &
Giannattasio, LLP, an
independent registered public accounting firm, as set forth in
their report thereon appearing elsewhere herein, and are included
in reliance upon such report given on the authority of such firm as
experts in accounting and auditing.
The financial statements of GetCharged, Inc. at December 31, 2019 and 2018, and for each
of the two years in the period ending December 31, 2019, appearing
in this prospectus have been audited by K.K. Mehta CPA Associates, PLLC, an independent registered public
accounting firm, as set forth in their report thereon appearing
elsewhere herein, and are included in reliance upon such report
given on the authority of such firm as experts in accounting and
auditing.
WHERE YOU CAN FIND MORE INFORMATION
We have filed with the Securities and Exchange Commission a
registration statement on Form S-1 under the Securities Act with
respect to the common stock offered by this prospectus. This
prospectus, which is part of the registration statement, omits
certain information, exhibits, schedules and undertakings set forth
in the registration statement. For further information pertaining
to us and our common stock, reference is made to the registration
statement and the exhibits and schedules to the registration
statement. Statements contained in this prospectus as to the
contents or provisions of any documents referred to in this
prospectus are not necessarily complete, and in each instance where
a copy of the document has been filed as an exhibit to the
registration statement, reference is made to the exhibit for a more
complete description of the matters involved.
You may read and copy all or any portion of the registration
statement without charge at the public reference room of the
Securities and Exchange Commission at 100 F Street, N.E.,
Washington, D.C. 20549. Copies of the registration statement may be
obtained from the Securities and Exchange Commission at prescribed
rates from the public reference room of the Securities and Exchange
Commission at such address. You may obtain information regarding
the operation of the public reference room by calling
1-800-SEC-0330. In addition, registration statements and certain
other filings made with the Securities and Exchange Commission
electronically are publicly available through the Securities and
Exchange Commission's website at http://www.sec.gov.
The registration statement, including all exhibits and amendments
to the registration statement, has been filed electronically with
the Securities and Exchange Commission.
Upon completion of this offering, we will become subject to the
information and periodic reporting requirements of the Securities
Exchange Act of 1934, as amended, and, accordingly, will be
required to file annual reports containing financial statements
audited by an independent public accounting firm, quarterly reports
containing unaudited financial data, current reports, proxy
statements and other information with the Securities and Exchange
Commission. You will be able to inspect and copy such periodic
reports, proxy statements and other information at the Securities
and Exchange Commission's public reference room, and the website of
the Securities and Exchange Commission referred to
above.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Charge Enterprises, Inc.
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|
Page
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Unaudited
Financial Statements as of September 30, 2020
|
|
|
Report
of Independent Registered Public Accounting Firm
|
|
F-3
|
Consolidated
Balance Sheets at September 30, 2020 (Unaudited) and December 31,
2019
|
|
F-4
|
Consolidated
Statements of Operations for the nine months ended September 30,
2020 and 2019 (Unaudited)
|
|
F-5
|
Consolidated
Statements of Stockholders’ Equity for the nine months ended
September 30, 2020 (Unaudited)
|
|
F-6
|
Consolidated
Statements of Stockholders’ Deficit for the nine months ended
September 30, 2019 (Unaudited)
|
|
F-7
|
Consolidated
Statements of Cash Flows for the nine months ended September 30,
2020 and 2019 (Unaudited)
|
|
F-9
|
Notes
to Unaudited Consolidated Financial Statements
|
|
F-9
|
Audited
Financial Statements for the fiscal years ended December 31, 2019
and 2018
|
|
|
Report
of Independent Registered Public Accounting Firm
|
|
F-23
|
Balance
Sheets at December 31, 2019 and 2018
|
|
F-24
|
Statements
of Operations for the years ended December 31, 2019 and
2018
|
|
F-25
|
Statements
of Stockholders’ Deficit for the years ended December 31,
2019 and 2018
|
|
F-26
|
Statements
of Cash Flows for the years ended December 31, 2019 and
2018
|
|
F-27
|
Notes
to Financial Statements
|
|
F-28
|
PTGi International Carrier Services Inc.
|
|
|
Unaudited
Consolidated Financial Statements as of September 30,
2020
|
|
|
Consolidated Balance Sheets
|
|
F-41
|
Consolidated Statements of Operations
|
|
F-42
|
Consolidated
Statement of Comprehensive Income
|
|
F-43
|
Consolidated Statements of Changes in Stockholder’s Equity
(Deficit)
|
|
F-44
|
Consolidated Statements of Cash Flows
|
|
F-45
|
Notes to the Financial Statements
|
|
F-46
|
|
|
|
Audited
Consolidated Financial Statements for the fiscal years ended
December 31, 2019 and 2018
|
|
|
Report of Independent Registered Public Accountancy
Firm
|
|
F-54
|
Consolidated Balance Sheets at December 31,
2019 and December 31,
2018
|
|
F-55
|
Consolidated Statements of Operations for the
years ended December 31,
2019 and
2018
|
|
F-56
|
Consolidated
Statements of Comprehensive Income (Loss)
|
|
F-57
|
Consolidated Statement of Changes in Stockholder’s Equity
(Deficit) for the years ended
December 31, 2019 and
2018
|
|
F-58
|
Consolidated Statements of Cash Flows for the years December
31, 2019 and 2018
|
|
F-59
|
Notes to Consolidated Financial
Statements
|
|
F-60
|
GetCharged, Inc.
|
|
|
Unaudited
Condensed Financial Statements as of September 30,
2020
|
|
|
Balance
Sheet
|
|
F-70
|
Statement
of Income
|
|
F-71
|
Statement
of Changes in Stockholders’ Equity
|
|
F-72
|
Statement
of Cash Flows
|
|
F-73
|
Notes to Financial Statements
|
|
F-74
|
Audited
Consolidated Financial Statements for the year ended December 31,
2019
|
|
|
Independent
Auditor's Report
|
|
F-82
|
Balance
Sheet For the Years Ended December 31, 2019
|
|
F-83
|
Statement
of Income For the Years Ended December 31, 2019
|
|
F-84
|
Statement
of Changes in Stockholders’ Equity For the Years Ended
December 31, 2019
|
|
F-85
|
Statement
of Cash Flows For the Years Ended December 31, 2019
|
|
F-86
|
Notes to Financial Statements
|
|
F-87
|
|
|
|
Audited
Consolidated Financial Statements for the year ended December 31,
2018
|
|
|
Independent
Auditor's Report
|
|
F-98
|
Balance
Sheet For the Years Ended December 31, 2018
|
|
F-99
|
Statement
of Income For the Years Ended December 31, 2018
|
|
F-100
|
Statement
of Changes in Stockholders’ Equity For the Years Ended
December 31, 2018
|
|
F-101
|
Statement
of Cash Flows For the Years Ended December 31, 2018
|
|
F-102
|
Notes to Financial Statements
|
|
F-103
|
Charge Enterprises, Inc.
(Formerly TransWorld Holdings, Inc.
And GoIP Global, Inc.)
and Subsidiary
CONSOLIDATED
FINANCIAL STATEMENTS
For the
Nine Months Ended
September
30, 2020
CHARGE ENTERPRISES, INC.
(FORMERLY TRANSWORLD HOLDINGS, INC. AND GOIP GLOBAL,
INC.)
AND SUBSIDIARY
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2020
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Consolidated Financial Statements
|
|
Report of Independent Registered Public Accounting
Firm
|
F-3
|
Consolidated Balance Sheets at September 30, 2020 (Unaudited) and
December 31, 2019
|
F-4
|
Consolidated Statements of Operations for the nine months ended
September 30, 2020 and 2019 (Unaudited)
|
F-5
|
Consolidated Statements of Stockholders’ Equity for the nine
months ended September 30, 2020 (Unaudited)
|
F-6
|
Consolidated Statements of Stockholders’ Deficit for the nine
months ended September 30, 2019 (Unaudited)
|
F-7
|
Consolidated Statements of Cash Flows for the nine months
ended September 30, 2020 and 2019 (Unaudited)
|
F-8
|
Notes to Unaudited Consolidated Financial Statements
|
F-9
|
REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the
Board of Directors and
Stockholders
of Charge Enterprises, Inc.
Results of Review of Interim Financial Information
We have
reviewed the consolidated balance sheets of Charge Enterprises,
Inc. and subsidiary (the Company) as of September 30, 2020 and
December 21, 2019, and the related consolidated statements of
operations for the three-month and nine-month periods ended
September 30, 2020 and 2019, and the consolidated statements of
stockholders equity (deficit) for the nine-month periods ended
September 30, 2020 and 2019 and the consolidated statements of cash
flows for the nine month periods then ended, and the related notes
(collectively referred to as the interim consolidated financial
statements). Based on our reviews, we are not aware of any material
modifications that should be made to the accompanying interim
consolidated financial statements for them to be in conformity with
accounting principles generally accepted in the United States of
America.
Basis for Review Results
These
interim consolidated financial statements are the responsibility of
the Company’s management. We conducted our review in
accordance with the standards of the PCAOB. A review of interim
financial information consists principally of applying analytical
procedures and making inquiries of persons responsible for
financial and accounting matters. It is substantially less in scope
than an audit conducted in accordance with standards of the PCAOB,
the objective of which is the expression of an opinion regarding
the financial statements taken as a whole. Accordingly, we do not
express such an opinion. We are a public accounting firm registered
with the Public Company Accounting Oversight Board (United States)
(PCAOB) and are required to be independent with respect to the
Company in accordance with the U.S. federal securities laws and the
applicable rules and regulations of the Securities and Exchange
Commission and the PCAOB.
\s\
Seligson & Giannattasio, LLP
Seligson &
Giannattasio, LLP
White
Plains, New York
February 9,
2021
CHARGE ENTERPRISES, INC. (FORMERLY TRANSWORLD HODLINGS,
INC.
AND GOIP GLOBAL, INC.) AND SUBSIDIARY
|
CONSOLIDATED BALANCE SHEETS
|
|
|
|
|
|
|
|
|
|
|
|
ASSETS
|
|
|
Current assets
|
|
|
Cash
and cash equivalents
|
$2,415,102
|
$31
|
Deposits
and prepaids
|
143,875
|
-
|
Notes
receivable and accrued interest
|
755,061
|
-
|
Total
current assets
|
3,314,038
|
31
|
|
|
|
Goodwill
|
3,057,907
|
-
|
Total
assets
|
$6,371,945
|
$31
|
|
|
|
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
|
|
|
Current
liabilities:
|
|
|
Accounts
payable
|
$331,592
|
$33,952
|
Accrued
liabilities
|
75,397
|
-
|
Accrued
liabilities, related party
|
1,946
|
-
|
Convertible
notes payable, net of discount
|
3,673,529
|
-
|
Related
party payable
|
75,000
|
302,031
|
Derivative
liabilities
|
2,530
|
-
|
Total
current liabilities
|
4,159,994
|
335,983
|
|
|
|
Convertible
notes payable, related party, net of discount
|
243,303
|
-
|
Total
liabilities
|
4,403,297
|
335,983
|
|
|
|
Commitments
and contingencies
|
|
|
|
|
|
Stockholder's equity (deficit)
|
|
|
Preferred
stock, $0.001 par value, 10,000,000
shares authorized;
|
|
|
Series
A: 100,000 authorized; 0 shares issued and outstanding
|
-
|
-
|
Series
B: 1,000,000 shares authorized; 0 and 200,000 shares issued and
outstanding at September 30, 2020 and December 31, 2019,
respectively
|
-
|
200
|
Series
C: 5,000,000 authorized; 0 and 2,000,000 shares issued and
outstanding at September 30, 2020 and December 31, 2019,
respectively
|
-
|
2,000
|
Series
D: 1,000,000 authorized; 1,000,000 and 0 shares issued and
outstanding at September 30, 2020 and December 31, 2019,
respectively
|
1,000
|
-
|
Series
E: 1,000,000 authorized; 543,251 and 418,251 shares issued and
outstanding at September 30, 2020 and December 31, 2019,
respectively
|
543
|
418
|
Series
F: 1,000,000 authorized; 1,000,000 and 0 shares issued and
outstanding at September 30, 2020 and December 31, 2019,
respectively
|
1,000
|
-
|
Series
G: 8 authorized; 8 and 0 shares issued and outstanding at September
30, 2020 and December 31, 2019, respectively
|
-
|
-
|
Common
stock, $0.001 par value; 6,800,000,000 shares authorized 12,741,278
issued and outstanding at September 30, 2020 and December 31,
2019
|
12,741
|
9,516
|
Additional
paid in capital
|
20,463,845
|
17,150,994
|
Common
stock to be issued
|
-
|
3,225
|
Accumulated
deficit
|
(18,510,481)
|
(17,502,305)
|
Total
stockholders' equity (deficit)
|
1,968,648
|
(335,952)
|
Total
liabilities and stockholders' equity (deficit)
|
$6,371,945
|
$31
|
The accompanying notes are an integral part of these unaudited
consolidated financial statements.
CHARGE ENTERPRISES, INC.
(FORMERLY TRANSWORLD HODLINGS, INC.
AND GOIP GLOBAL, INC.) AND SUBSIDIARY
|
CONSOLIDATED STATEMENTS OF OPERATIONS
|
|
|
|
|
|
|
|
For the three
months ended
September
30,
|
For the nine
months ended
September
30,
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
$-
|
$-
|
$-
|
$-
|
|
|
|
|
|
Operating
expenses
|
|
|
|
|
Professional
fees
|
400,286
|
33,925
|
592,146
|
146,469
|
General and
administrative
|
34,266
|
3,114
|
39,990
|
30,442
|
Total operating
expenses
|
434,552
|
37,039
|
632,136
|
176,911
|
|
|
|
|
|
Net operating
loss
|
(434,552)
|
(37,039)
|
(632,136)
|
(176,911)
|
|
|
|
|
|
Other
income (expenses):
|
|
|
|
|
Interest
expense
|
(73,836)
|
(14,146)
|
(118,831)
|
(22,422)
|
Interest expense,
related party
|
(15,086)
|
-
|
(15,086)
|
-
|
Interest
income
|
16,333
|
-
|
20,061
|
-
|
Amortization of
debt discount
|
(118,271)
|
-
|
(157,028)
|
(52,450)
|
Amortization of
debt discount, related party
|
(4,385)
|
-
|
(4,385)
|
-
|
Amortization of
debt issue costs
|
(7,562)
|
-
|
(11,999)
|
-
|
Change in fair
value of derivative liabilities
|
291
|
(370,935)
|
(537)
|
(294,690)
|
Loss on
modification of debt
|
-
|
-
|
(98,825)
|
-
|
Gain on settlement
of accounts payable
|
-
|
-
|
10,590
|
-
|
Total other
expenses
|
(202,516)
|
(385,081)
|
(376,040)
|
(369,562)
|
|
|
|
|
|
Net income
(loss)
|
$(637,068)
|
$(422,120)
|
$(1,008,176)
|
$(546,473)
|
|
|
|
|
|
Basic and diluted loss per share
|
$(0.05)
|
$(0.05)
|
$(0.08)
|
$(0.06)
|
|
|
|
|
|
Weighted average number of shares outstanding, basic and
diluted
|
12,491,278
|
8,695,413
|
12,491,278
|
9,169,808
|
The accompanying notes are an integral part of these unaudited
consolidated financial statements.
CHARGE ENTERPRISES, INC.
(FORMERLY TRANSWORLD HODLINGS, INC. AND GOIP GLOBAL, INC.) AND
SUBSIDIARY
|
STATEMENTS OF STOCKHOLDERS' EQUITY
|
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2020
(UNAUDITED)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, January
1, 2020
|
2,618,251
|
$2,618
|
12,741,278
|
$9,516
|
$3,225
|
$17,150,994
|
$(17,502,305)
|
$(335,952)
|
|
|
|
|
|
|
|
|
|
Sale of common
stock
|
-
|
-
|
-
|
3,225
|
(3,225)
|
-
|
-
|
-
|
|
|
|
|
|
|
|
|
|
Sale of Series E Preferred
Stock
|
125,000
|
125
|
-
|
-
|
-
|
12,375
|
-
|
12,500
|
|
|
|
|
|
|
|
|
|
Series D Preferred stock issued in
merger with Transworld Enterprises, Inc.
|
1,000,000
|
1,000
|
-
|
-
|
-
|
1,527,159
|
-
|
1,528,159
|
|
|
|
|
|
|
|
|
|
Series F Preferred stock issued in
merger with Transworld Enterprises, Inc.
|
1,000,000
|
1,000
|
-
|
-
|
-
|
1,528,953
|
-
|
1,529,953
|
|
|
|
|
|
|
|
|
|
Series G Preferred stock issued in
connection with Convertible Notes
|
8
|
-
|
-
|
-
|
-
|
143,339
|
-
|
143,339
|
|
|
|
|
|
|
|
|
|
Series B Preferred stock
cancelled
|
(200,000)
|
(200)
|
-
|
-
|
-
|
200
|
-
|
-
|
|
|
|
|
|
|
|
|
|
Series C Preferred stock
cancelled
|
(2,000,000)
|
(2,000)
|
-
|
-
|
-
|
2,000
|
-
|
-
|
|
|
|
|
|
|
|
|
|
Loss on modification of
debt
|
-
|
-
|
-
|
-
|
-
|
98,825
|
-
|
98,825
|
|
|
|
|
|
|
|
|
|
Net loss
|
-
|
-
|
-
|
-
|
-
|
-
|
(1,008,176)
|
(1,008,176)
|
|
|
|
|
|
|
|
|
|
Balance,
September 30, 2020
|
2,543,259
|
$2,543
|
12,741,278
|
$12,741
|
$-
|
$20,463,845
|
$(18,510,481)
|
$1,968,648
|
|
|
|
|
|
Series
D Preferred Stock
|
1,000,000
|
$1,000
|
Series
E Preferred Stock
|
543,251
|
543
|
Series
F Preferred Stock
|
1,000,000
|
1,000
|
Series
G Preferred Stock
|
8
|
-
|
Balance, September 30, 2020
|
2,543,259
|
$2,543
|
The accompanying notes are an integral part of these unaudited
consolidated financial statements
CHARGE ENTERPRISES, INC.
(FORMERLY TRANSWORLD HODLINGS, INC. AND GOIP GLOBAL, INC.) AND
SUBSIDIARY
|
STATEMENTS OF STOCKHOLDERS' DEFICIT
|
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2019
(UNAUDITED)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, January
1, 2019
|
2,300,000
|
$2,300
|
8,286,329
|
$8,286
|
$20
|
$12,110,640
|
$(17,209,889)
|
$(5,088,643)
|
|
|
|
|
|
|
|
|
|
Sale of common
stock
|
-
|
-
|
880,000
|
880
|
(20)
|
(350,000)
|
-
|
(349,140)
|
|
|
|
|
|
|
|
|
|
Net loss
|
-
|
-
|
-
|
-
|
-
|
-
|
(546,473)
|
(546,473)
|
|
|
|
|
|
|
|
|
|
Balance,
September 30, 2019
|
2,300,000
|
$2,300
|
9,166,329
|
$9,166
|
$-
|
$11,760,640
|
$(17,756,362)
|
$(5,984,256)
|
*Detail of Preferred Stock as of September 30, 2019
|
|
|
|
|
Series
B Preferred Stock
|
200,000
|
$200
|
Series
A Preferred Stock
|
100,000
|
100
|
Series
C Preferred Stock
|
2,000,000
|
2,000
|
Series
D Preferred Stock
|
-
|
-
|
Series
E Preferred Stock
|
-
|
-
|
Series
F Preferred Stock
|
-
|
-
|
Series
G Preferred Stock
|
-
|
-
|
Balance, September 30, 2019
|
2,300,000
|
$2,300
|
The accompanying notes are an integral part of these unaudited
consolidated financial statements
CHARGE ENTERPRISES, INC.
(FORMERLY TRANSWORLD HODLINGS, INC.
AND GOIP GLOBAL, INC.) AND SUBSIDIARY
|
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
(UNAUDITED)
|
|
For the nine
months ended
September
30,
|
|
|
|
CASH
FLOWS FROM OPERATING ACTIVITIES:
|
|
|
Net
loss
|
$(1,008,176)
|
$(546,473)
|
Adjustments to
reconcile net loss to net cash used in operating
activities:
|
|
|
Change
in fair value of derivative liabilities
|
537
|
294,690
|
Amortization
of debt discount
|
157,028
|
52,450
|
Amortization
of debt discount, related party
|
4,385
|
-
|
Amortization
of debt issue costs
|
11,999
|
-
|
Loss
on modification of debt
|
98,825
|
-
|
Gain
on settlement on accounts payable
|
(10,590)
|
-
|
Changes in working
capital requirements:
|
|
|
Deposits
|
(142,500)
|
-
|
Prepaid
expenses
|
(1,375)
|
-
|
Accounts
payable
|
308,230
|
(1,075)
|
Accrued
interest
|
75,397
|
(8,465)
|
Accrued
interest, related party
|
1,946
|
-
|
Interest
receivable
|
(20,061)
|
-
|
Related
party advances
|
(28,074)
|
(17,496)
|
Net
cash used in operating activities
|
(552,429)
|
(226,369)
|
|
|
|
CASH
FLOWS FROM INVESTING ACTIVITIES:
|
|
|
Cash issuance for
notes receivable
|
(735,000)
|
-
|
Net
cash (used in) provided by investing activities
|
(735,000)
|
-
|
|
|
|
CASH
FLOWS FROM FINANCING ACTIVITIES:
|
|
|
Proceeds from sale
of common stock
|
-
|
89,990
|
Cash receipts from
sale of Series E Preferred Stock
|
12,500
|
-
|
Cash receipts from
issuance of notes payable
|
-
|
27,500
|
Cash receipts from
issuance of convertible notes payable
|
3,195,000
|
108,500
|
Cash receipts from
issuance of convertible notes payable, related party
|
495,000
|
-
|
Net
cash provided by financing activities
|
3,702,500
|
225,990
|
|
|
|
NET
INCREASE IN CASH
|
2,415,071
|
(379)
|
CASH,
BEGINNING OF PERIOD
|
31
|
379
|
CASH,
END OF PERIOD
|
$2,415,102
|
$-
|
|
|
|
Supplemental
disclosure of cash flow information
|
|
|
Cash paid for
interest expense
|
$49,183
|
$-
|
Cash paid for
income taxes
|
$-
|
$-
|
|
|
|
Non-cash operating
and financing activities:
|
|
|
Goodwill
acquired in a business combination through the issuance of
stock
|
$3,057,907
|
$-
|
Debt
discount associated with convertible notes
|
$499,669
|
$-
|
Series
G Preferred Stock issued in connection with convertible notes
financing
|
$143,339
|
$-
|
The accompanying notes are an integral part of these unaudited
consolidated financial statements.
CHARGE ENTERPRISES, INC.
(FORMERLY TRANSWORLD HODLINGS, INC.
AND GOIP GLOBAL, INC.) AND SUBSIDIARY
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
Charge
Enterprises, Inc. (“Charge Enterprises” (formerly known
as “Transworld Holdings, Inc.” “GoIP Global,
Inc.”, “GoIP”) was incorporated on May 8, 2003 as
E Education Network, Inc. (“EEN”) under the laws of the
State of Nevada. On August 10, 2005, the Company’s name was
changed to GoIP Global, Inc. On December 28, 2017, the Company was
redomiciled in Colorado. On October 1, 2020, the Company was
redomiciled to Delaware and the name was changed to TransWorld
Holdings, Inc. On
January 26, 2021, following its acquisitions of PTGI and
GetCharged, we changed our name
from Transworld Holdings, Inc. to Charge Enterprises,
Inc.
On April 30, 2020, the Company entered into a Share Exchange
Agreement with TransWorld Enterprises Inc. (“TW”), a
Delaware Corporation. As part of the exchange the Company has
agreed to issue 1,000,000 share of Series D Preferred Stock and
1,000,000 shares of Series F Preferred Stock in exchange for all
the equity interest of TW. TW, as a holding company, will focus on
acquiring controlling interests in profitable basic
businesses. Initially, TW will focus on acquiring
transportation companies and simple manufacturing and or consumer
products businesses.
On July
13, 2020, the Board of Directors of the Company approved, subject
to shareholder approval, (i) a Plan of Conversion, pursuant to
which the Company will convert from a corporation incorporated
under the laws of the State of Colorado to a corporation
incorporated under the laws of the State of Delaware (the
“Reincorporation”), and such approval includes the
adoption of the Certificate of Incorporation (the “Delaware
Certificate”) and the Bylaws (the “Delaware
Bylaws”) for the Company under the laws of the State of
Delaware, and a change in the name of the Company from “GoIP
Global, Inc.” to “Transworld Holdings, Inc.”,
each to become effective concurrently with the effectiveness of the
Reincorporation and (ii) a reverse stock split of our outstanding
common stock in a ratio of one-for-five hundred (1:500), provided
that all fractional shares as a result of the split shall be
automatically rounded up to the next whole share (the
“Reverse Split”), to become effective immediately prior
to the effectiveness of the Reincorporation. On August 7, 2020,
shareholder approval for these actions was obtained. The
Reincorporation was effective October 1, 2020 and the reverse split
was effective on October 6, 2020.
2.
|
Summary of significant accounting policies
|
Basis of Presentation
The consolidated financial statements have been prepared in
conformity with accounting principles generally accepted in the
United States of America (“GAAP”).
Principles of Consolidation
The
consolidated unaudited financial statements include the accounts of
Transworld Holdings, Inc. (formerly known as GoIP Global, Inc.) and
its wholly owned subsidiary TransWorld Enterprises, Inc.,
collectively referred to as the Company. All material intercompany
accounts, transactions and profits were eliminated in
consolidation. These consolidated financial statements should be
read in conjunction with the company’s latest annual
financial statements.
Use of Estimates
The preparation of financial statements in conformity with GAAP
requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during
the reporting period. The most significant assumptions and
estimates relate to the valuation of equity issued for services,
valuation of equity associated with convertible debt, the valuation
of derivative liabilities, and the valuation of deferred tax
assets. Actual results could differ from these
estimates.
Revenue Recognition
The
Company recognizes revenue in accordance with Accounting Standards
Update (“ASU”) 2014-09, “Revenue from contracts with
customers,” (Topic 606). Revenue is recognized when a
customer obtains control of promised goods or services. In
addition, the standard requires disclosure of the nature, amount,
timing, and uncertainty of revenue and cash flows arising from
contracts with customers. The amount of revenue that is recorded
reflects the consideration that the Company expects to receive in
exchange for those goods. The Company applies the following
five-step model in order to determine this amount: (i)
identification of the promised goods in the contract; (ii)
determination of whether the promised goods are performance
obligations, including whether they are distinct in the context of
the contract; (iii) measurement of the transaction price, including
the constraint on variable consideration; (iv) allocation of the
transaction price to the performance obligations; and (v)
recognition of revenue when (or as) the Company satisfies each
performance obligation. The Company’s main revenue stream is
from services. The Company recognizes as revenues the amount of the
transaction price that is allocated to the respective performance
obligation when the performance obligation is satisfied or as it is
satisfied. Generally, the Company's performance obligations are
transferred to customers at a point in time, typically upon
delivery.
Fair Value Measurements and Fair Value of Financial
Instruments
Accounting Standard Codification (“ASC”) Topic
820, Fair
Value Measurements, clarifies
the definition of fair value, prescribes methods for measuring fair
value, and establishes a fair value hierarchy to classify the
inputs used in measuring fair value as follows:
Level
1: Inputs are unadjusted quoted prices in active markets for
identical assets or liabilities available at the measurement
date.
Level
2: Inputs are unadjusted quoted prices for similar assets and
liabilities in active markets, quoted prices for identical or
similar assets and liabilities in markets that are not active,
inputs other than quoted prices that are observable, and inputs
derived from or corroborated by observable market
data.
Level
3: Inputs are unobservable inputs which reflect the reporting
entity's own assumptions on what assumptions the market
participants would use in pricing the asset or liability based on
the best available information.
The estimated fair value of certain financial instruments,
including all current liabilities are carried at historical cost
basis, which approximates their fair values because of the
short-term nature of these instruments.
Fair Value of Financial Instruments
ASC subtopic 825-10, Financial Instruments
("ASC 825-10") requires disclosure of
the fair value of certain financial instruments. The carrying value
of cash and cash equivalents, accounts payable and accrued
liabilities as reflected in the balance sheets, approximate fair
value because of the short-term maturity of these instruments. All
other significant financial assets, financial liabilities and
equity instruments of the Company are either recognized or
disclosed in the financial statements together with other
information relevant for making a reasonable assessment of future
cash flows, interest rate risk and credit risk. Where practicable
the fair values of financial assets and financial liabilities have
been determined and disclosed; otherwise only available information
pertinent to fair value has been disclosed.
The Company follows ASC subtopic 820-10, Fair Value Measurements and
Disclosures ("ASC 820-10") and
ASC 825-10, which permits entities to choose to measure many
financial instruments and certain other items at fair
value.
Derivative Liability
The Company evaluates convertible instruments, options, warrants or
other contracts to determine if those contracts or embedded
components of those contracts qualify as derivatives to be
separately accounted for under ASC Topic 815, "Derivatives and
Hedging”. The result of
this accounting treatment is that the fair value of the derivative
is marked-to-market each balance sheet date and recorded as a
liability. In the event that the fair value is recorded as a
liability, the change in fair value is recorded in the statement of
operations as other income (expense). Upon conversion or exercise
of a derivative instrument, the instrument is marked to fair value
at the conversion date and then that fair value is reclassified to
equity. Equity instruments that are initially classified as equity
that become subject to reclassification under ASC Topic 815 are
reclassified to liabilities at the fair value of the instrument on
the reclassification date.
Cash and Cash Equivalents
The Company considers all highly liquid investments with an
original maturity of three months or less to be cash
equivalents.
Stock Based Compensation
The
Company records stock-based compensation in accordance with the
provisions of FASB ASC Topic 718, “Accounting for Stock
Compensation,” which establishes accounting standards
for transactions in which an entity exchanges its equity
instruments for goods or services. In accordance with guidance
provided under ASC Topic 718, the Company recognizes an expense for
the fair value of its stock awards at the time of grant and the
fair value of its outstanding stock options as they vest, whether
held by employees or others. As of September 30, 2020 and December
31, 2019, there were no options outstanding.
Convertible Debentures
If the conversion features of conventional convertible debt provide
for a rate of conversion that is below market value at issuance,
this feature is characterized as a beneficial conversion feature
("BCF"). A BCF is recorded by the Company as a debt discount
pursuant to ASC Topic 470-20 "Debt with Conversion and Other
Options". In those
circumstances, the convertible debt is recorded net of the discount
related to the BCF, and the Company amortizes the discount to
interest expense, over the life of the debt. The Company does not
have any BCFs.
Advertising, Marketing and Public Relations
The Company follows the policy of charging the costs of
advertising, marketing, and public relations to expense as
incurred. There were no advertising expenses for the nine months
ended September 30, 2020 and 2019, respectively.
Income Taxes
Income taxes are accounted for under the asset and liability
method. Deferred tax assets and liabilities are recognized for the
future tax consequences attributable to differences between the
financial statement carrying amounts of existing assets and
liabilities and their respective tax bases and operating loss,
capital loss and tax credit carryforwards. Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply
to taxable income in the years in which those temporary differences
are expected to be recovered or settled. The effect on deferred tax
assets and liabilities of a change in tax rates is recognized in
income in the period that includes the enactment date.
The Company recognizes the effect of income tax positions only if
those positions are more likely than not of being sustained.
Recognized income tax positions are measured at the largest amount
that is greater than 50% likely of being realized. Changes in
recognition or measurement are reflected in the period in which the
change in judgment occurs. The Company records interest and
penalties related to unrecognized tax benefits as a component of
general and administrative expenses. Our federal tax return and any
state tax returns are not currently under examination.
The Company has adopted FASB ASC 740-10, Accounting for Income
Taxes, which requires an asset
and liability approach to financial accounting and reporting for
income taxes. Deferred income tax assets and liabilities are
computed annually from differences between the financial statement
and tax basis of assets and liabilities that will result in taxable
or deductible amounts in the future based on enacted tax laws and
rates applicable to the periods in which the differences are
expected to affect taxable income. Valuation allowances are
established when necessary to reduce deferred tax assets to the
amount expected to be realized.
Net Income (Loss) Per Common Share
The Company computes loss per common share, in accordance with FASB
ASC Topic 260, Earnings Per
Share, which requires dual
presentation of basic and diluted earnings per share. Basic income
or loss per common share is computed by dividing net income or loss
by the weighted average number of common shares outstanding during
the period. Diluted income or loss per common share is computed by
dividing net income or loss by the weighted average number of
common shares outstanding, plus the issuance of common shares, if
dilutive, that could result from the exercise of outstanding stock
options and warrants. No potential dilutive common shares are
included in the computation of any diluted per share amount when a
loss is reported. Accordingly, we did not include 99,205,163 and
1,915,590 of potentially dilutive warrants, convertible notes and
convertible preferred stock at September 30, 2020 and 2019
respectively.
|
For The Nine Months Ended
|
|
|
|
|
|
Potentially
dilutive warrants
|
9,844,402
|
0
|
Potentially
dilutive convertible notes
|
17,360,063
|
1,915,590
|
Potentially
dilutive convertible preferred stock
|
72,000,698
|
0
|
|
99,205,163
|
1,915,590
|
Recent Accounting Pronouncements
In February 2016, the FASB issued ASU 2016-02, Leases
(Topic 842), which will require
lessees to recognize almost all leases on their balance sheet as a
right-of-use asset and a lease liability. For income statement
purposes, the FASB retained a dual model, requiring leases to be
classified as either operating or finance. Classification will be
based on criteria that are largely similar to those applied in
current lease accounting, but without explicit bright lines. Lessor
accounting is similar to the current model, but updated to align
with certain changes to the lessee model and the new revenue
recognition standard. This ASU is effective for fiscal years
beginning after December 15, 2018, including interim periods within
those fiscal years. The Company has adopted this guidance effective
January 1, 2019. The Company currently has no
leases.
The
Company has implemented all new accounting pronouncements that are
in effect. These pronouncements did not have any material impact on
the consolidated financial statements unless otherwise disclosed,
and the Company does not believe that there are any other new
accounting pronouncements that have been issued that might have a
material impact on its financial position or results of
operations.
3.
|
Concentration of credit risks
|
The Company maintains accounts with financial institutions. All
cash in checking accounts is non-interest bearing and is fully
insured by the Federal Deposit Insurance Corporation (FDIC). At
times, cash balances may exceed the maximum coverage provided by
the FDIC on insured depositor accounts. The Company believes it
mitigates its risk by depositing its cash and cash equivalents with
major financial institutions. At September 30, 2020, the Company
had $2,090,102 in excess of FDIC insurance.
The Company's consolidated financial statements are prepared using
the GAAP applicable to a going concern, which contemplates the
realization of assets and liquidation of liabilities in the normal
course of business. At September 30,
2020 and December 31, 2019, the Company had $2,415,102 and
$31 in cash and $845,956 and $335,952
in negative working capital, respectively. For the nine
months ended September 30, 2020 and 2019, the Company had a net
loss of $1,008,176 and $546,473, respectively. Continued losses may adversely affect the
liquidity of the Company in the future.
In view of the matters described in the preceding paragraph,
recoverability of a major portion of the recorded asset amounts
shown in the accompanying consolidated balance sheets is dependent
upon continued operations of the Company, which in turn is
dependent upon the Company's ability to raise additional capital,
obtain financing and to succeed in its future operations. The
consolidated financial statements do not include any adjustments
relating to the recoverability and classification of recorded asset
amounts or amounts and classification of liabilities that might be
necessary should the Company be unable to continue as a going
concern.
The Company has operating costs and expenses at the present time
for development of its business activities. The Company, however,
will be required to raise additional capital over the next twelve
months to meet its current administrative expenses, and it may do
so in connection with or in anticipation of possible acquisition
transactions. This financing may take the form of additional sales
of its equity securities loans from its directors and or
convertible notes. There is no assurance that additional financing
will be available, if required, or on terms favorable to the
Company.
TransWorld Enterprises, Inc.
Effective
April 30, 2020, the Company entered into an agreement to acquire
100% of the outstanding equity interests of TransWorld, pursuant to
that certain Share Exchange Agreement (referred to as the
“Exchange Agreement”), by and among the Company,
TransWorld and the shareholders of TransWorld. The transactions
contemplated by the Exchange Agreement closed on May 8, 2020. In
accordance with the Exchange Agreement, the Company acquired all of
the outstanding shares of TransWorld in exchange for 1,000,000
shares of each of the Company’s series D and series F
preferred stock. The series D preferred stock is currently
convertible into 12.5% of the Company’s issued and
outstanding shares of common stock upon consummation of a reverse
stock split and votes on an as converted basis. The series F
preferred stock is currently convertible into 12.5% of the
Company’s issued and outstanding shares of common stock at
any time at the option of the holder and votes on an as converted
basis.
TransWorld
did not meet the definition of a business under ASC 805, Business
Combinations. As such the
transaction was treated as an asset purchase. According to ASC
805-50-30-2 if the consideration given is not in the form of cash,
measurement is based on either the cost which shall be measured
based on the fair value of the consideration given or the fair
value of the asset (or net assets) acquired, whichever is more
clearly evident and, thus, more reliably measurable. In this case,
TransWorld did not have any assets. As such the value of the
consideration was valued at $3,057,907, which was the value of the
Series D and Series F Preferred stock. The entire value was recoded
as goodwill.
Romolos Corp.
On
August 10, 2020, the Company entered into an Asset Purchase
Agreement with Romolos Corp. The agreement provides for the
purchase of the rights and assets related to the operation of a
FedEx Route for a purchase price of $900,000. The route is
currently serving no less than an average of 3,000 weekly stops
based upon annual 2020 deliveries made to date. The purchase will
be all cash. The acquisition is subject to approval by FedEx, an
overlap of an additional acquisition, which is expected to sign in
the near term, and customary due diligence. During the nine months
ended September 30, 2020, the Company paid a $90,000 deposit
towards the purchase.
APS Transportation Inc.
On
August 27, 2020, the Company entered into an Asset Purchase
Agreement with APS Transportation, Inc. The agreement provides for
the purchase of the rights and assets related to the operation of a
FedEx Route for a purchase price of $525,000. The route is
currently serving no less than an average of 3,000 weekly stops
based upon annual 2020 deliveries made to date. The purchase will
be all cash. The acquisition is subject to approval by FedEx, an
overlap of an additional acquisition, which is expected to sign in
the near term, and customary due diligence. During the nine months
ended September 30, 2020, the Company paid a $52,500 deposit
towards the purchase.
GetCharged, Inc.
On
August 27, 2020, the Company entered into a stock purchase
agreement with GetCharged, Inc. (“GetCharged”). In
connection with the agreement, the Company will purchase the
outstanding shares of GetCharged in exchange for $17,500,000 in
consideration. The consideration will be paid in common stock. The
Closing on the acquisition is scheduled for October 12, 2020. In
connection with the closing, the Company will owe a success fee of
3%, or $525,000, to TransWorld’s CEO.
On June
9, 2020, the Company issued $405,000 for a promissory note to Root
Protocols Corp. The note has an interest rate of 16% and a maturity
date of 120 days. As of the maturity date and as of September 30,
2020, this note remained unpaid and is still outstanding. During
the nine months ended September 30, 2020, the Company recorded
$20,016 in interest receivable.
In
connection with the GetCharged acquisition, the Company gave
$330,000 as a loan with no interest. After the date of the closing,
this loan will be an intercompany loan.
7.
|
Related party payables
|
As
of December 31, 2019, the balance in related party payables
amounted to $302,031. The Company had an oral agreement with the
Company’s former CEO (Isaac H. Sutton), who provided
management services through a private entity that he owns. On April
30, 2020 Isaac H. Sutton stepped down as CEO of the Company and is
no longer a related party. The related party payable was converted
to a convertible note payable in the amount of $300,000. The
balance of that convertible note payable as of September 30, 2020
was $228,751. See Note 8.
On
September 30, 2020, KORR Value LP, an entity controlled by Kenneth
Orr, the Company’s Executive Chairman advanced the Company
$75,000. There is no advance due on this advance and it is payable
on demand.
8.
|
Convertible notes payable
|
The
carrying value of convertible notes payable, net of discount, as of
September 30, 2020 was $3,673,529 as summarized below:
|
|
Convertible
Notes Payable
|
|
Convertible notes
payable issued April 30, 2020 (8% interest)
|
$228,751
|
Convertible notes
payable issued May 8, 2020 (8% interest)
|
3,000,000
|
Convertible
notes payable issued August 25, 2020 (8% interest)
|
386,667
|
Convertible
notes payable issued August 27, 2020 (8% interest)
|
288,889
|
Convertible notes
payable issued September 2, 2020 (8% interest)
|
110,000
|
Convertible
notes payable issued September 14, 2020 (8% interest)
|
49,777
|
Total face
value
|
4,064,084
|
Less:
unamortized discount
|
(390,555)
|
Carrying
value
|
$3,673,529
|
Sutton Global Note
On
April 30, 2020, the former CEO converted his payable into a
convertible note with a face value of $300,000. The note has a
coupon rate of 6% and a maturity date of December 31, 2021. The
note is convertible at a rate of $.0005 per share. Since the note
added a conversion option, it resulted in a debt modification
requiring the Company to record a loss on modification of debt in
the amount of $98,825. The Company recorded interest expense
related to this note in the amount of $4,751 for the nine months
ended September 30, 2020. As of September 30, 2020 the balance of
the note was $228,751 and is recorded on the balance sheet as a
non-current liability.
May 2020 Financing
On May
8, 2020, the Company entered into a securities purchase agreement
with certain institutional investors (collectively, the “May
2020 Investors”) pursuant to which the Company issued
convertible notes in an aggregate principal amount of $3 million
for an aggregate purchase price of $2.7 million (collectively, the
“Notes”). In connection with the issuance of the Notes,
the Company issued to the May 2020 Investors warrants to purchase
an aggregate of 7,600,000 shares of Common Stock (collectively, the
“Warrants) and 7.5 shares of series G convertible preferred
stock (the“Series G Preferred Stock). The Notes each have a
term of twelve months and mature on May 8, 2021, unless earlier
converted. The Notes accrue interest at a rate of 8% per annum,
subject to increase to 20% per annum upon and during the occurrence
of an event of default. Interest is payable in cash on a quarterly
basis beginning on September 30, 2020. The May 2020 Notes are
convertible at any time, at the holder’s option, into shares
of our common stock at an initial conversion price of $0.25 per
share, subject to certain beneficial ownership limitations (with a
maximum ownership limit of 9.99%) and subject to a decrease in the
conversion price to the greater of (i) $0.01 or (ii) 75% of the
average VWAP of the Common Stock for the immediately preceding five
(5) Trading Days on the date of conversion. The conversion price is
also subject to adjustment due to certain events, including stock
dividends, stock splits and in connection with the issuance by the
Company of common stock or common stock equivalents at an effective
price per share lower than the conversion price then in effect. The
Notes may be redeemed by the Company, in its sole discretion, in an
amount equal to 110% of the principal amount, interest and any
other amounts owed under the Notes, subject to certain
limitations.
Each
Warrant is exercisable for a period of two years from the date of
issuance at an initial exercise price of $0.50 per share, subject
to certain beneficial ownership limitations (with a maximum
ownership limit of 9.99%). The exercise price is also subject to
adjustment due to certain events, including stock dividends, stock
splits and in connection with the issuance by the Company of common
stock or common stock equivalents at an effective price per share
lower than the exercise price then in effect. The May 2020
Investors may exercise the Warrants on a cashless basis if the
shares of common stock underlying the Warrants are not then
registered pursuant to an effective registration statement. In the
event the May 2020 Investors exercise the Warrants on a cashless
basis, then we will not receive any proceeds.
The
Series G Preferred Stock have no voting rights and shall convert
into 7.5% of our issued and outstanding shares of common stock upon
consummation of a reverse stock split of our Common
Stock.
The
Notes rank senior to all current and future indebtedness of the
Company and are secured by substantially all of the assets of the
Company.
A
Registration Rights Agreement was executed in connection with the
issuance of the Notes, the Warrants and the Preferred Stock. If we
fail to have it declared effective by the SEC within 150 days
following the date of the financing, or if the Company fails to
maintain the effectiveness of the registration statement until all
of such shares of common stock have been sold or are otherwise able
to be sold pursuant to Rue 144 under the Securities Act of 1933, as
amended, without any volume or manner of sale restrictions, then
the Company will be obligated to pay to the May 2020 Investors
liquidated damages equal to then, in addition to any other rights
the May 2020 Investors may under applicable law, upon the
occurrence of any such event and on each monthly anniversary of
thereafter until the event is cured, the Company shall pay to the
May 2020 Investors an amount in cash equal to their pro rata
portion of $50,000, provided such amount shall increase by $25,000
on every thirty (30) day anniversary, until such events are
satisfied.
Based
on the previous conclusions, the Company allocated the face value
as follows:
|
|
Compound embedded
derivative
|
$66
|
Derivative
warrants
|
975
|
Series
G convertible preferred stock
|
143,339
|
Original
issue discount
|
300,000
|
Convertible
promissory note
|
2,555,620
|
|
$3,000,000
|
Notes issued between August 25, 2020 and September 14,
2020
Between
August 25, 2020 and September 14, 2020, the Company issued
convertible notes in an aggregate principal amount of $546,444 for
an aggregate purchase price of $495,000. In connection with the
issuance of the Notes, the Company issued warrants to purchase an
aggregate of 1,092,887 shares of Common Stock.
The
Company has accounted for these Notes as a financing transaction,
wherein the net proceeds that were received were allocated to the
financial instrument issued. Prior to making the accounting
allocation, the Company evaluated the notes under ASC 815
Derivatives and Hedging
(“ASC 815”). ASC 815 generally requires the analysis of
embedded terms and features that have characteristics of
derivatives to be evaluated for bifurcation and separate accounting
in instances where their economic risks and characteristics are not
clearly and closely related to the risks of the host contract. The
material embedded derivative features consisted of the embedded
conversion option and a buy-in put. The conversion option bears
risks of equity which were not clearly and closely related to the
host debt agreement and required bifurcation. Current accounting
principles that are also provided in ASC 815 do not permit an
issuer to account separately for individual derivative terms and
features that require bifurcation and liability classification.
Rather, such terms and features must be and were bundled together
and fair valued as a single, compound embedded
derivative.
Based
on the previous conclusions, the Company allocated the face value
as follows:
|
|
Compound embedded
derivative
|
$279
|
Derivative
warrants
|
384
|
Original
issue discount
|
51,444
|
Convertible
promissory note
|
494,337
|
|
$546,444
|
Amortization of debt discount and accrued interest
For the
nine months ended September 30, 2020, the Company recorded $118,271
in amortization of debt discount. The amount of unamortized
discount as of September 30, 2020 was $390,555. As of September 30,
2020, the Company recorded $71,002 in accrued interest related to
the notes, which is included within accounts payable and accrued
interest on the consolidated balance sheets. In connection with the
financing, the Company paid $30,000 in debt issue costs. These
costs were recorded as a contra-liability and will be amortized
over the life of the loan. For the nine months ended September 30,
2020 the Company recorded $11,999 in amortization of debt issue
costs. On July 23, 2020, the Company paid $36,000 in interest on
certain notes.
9.
|
Convertible notes payable, related parties
|
The
carrying value of convertible notes payable related party, net of
discount, as of September 30, 2020 was $243,303 as summarized
below:
|
|
Convertible
Notes Payable
|
|
Convertible notes
payable issued April 30, 2020 (8% interest)
|
$261,111
|
Total face
value
|
261,111
|
Less:
unamortized discount
|
(17,808)
|
Carrying
value
|
$243,303
|
KORR Value Financing
In May
and June 2020, the Company entered into a securities purchase
agreement with KORR Value LP, an entity controlled by Kenneth Orr,
the Company’s Executive Chairman, pursuant to which the
Company issued convertible notes in an aggregate principal amount
of $550,000 for an aggregate purchase price of $495,000
(collectively, the “KORR Notes”). In connection with
the issuance of the KORR Notes, the Company issued to KORR Value
warrants to purchase an aggregate of 1,266,667 shares of Common
Stock (collectively, the “KORR Warrants”). The KORR
Notes and KORR Warrants are on substantially the same terms as the
Notes and Warrants issued to the Selling Shareholders except that
the KORR Notes are subordinated to the Notes.
The
Company has accounted for this Note as a financing transaction,
wherein the net proceeds that were received were allocated to the
financial instrument issued. Prior to making the accounting
allocation, the Company evaluated the notes under ASC 815
Derivatives and Hedging
(“ASC 815”). ASC 815 generally requires the analysis of
embedded terms and features that have characteristics of
derivatives to be evaluated for bifurcation and separate accounting
in instances where their economic risks and characteristics are not
clearly and closely related to the risks of the host contract. The
material embedded derivative features consisted of the embedded
conversion option and a buy-in put. The conversion option bears
risks of equity which were not clearly and closely related to the
host debt agreement and required bifurcation. Current accounting
principles that are also provided in ASC 815 do not permit an
issuer to account separately for individual derivative terms and
features that require bifurcation and liability classification.
Rather, such terms and features must be and were bundled together
and fair valued as a single, compound embedded
derivative.
Based
on the previous conclusions, the Company allocated the face value
as follows:
|
|
Compound embedded
derivative
|
$17
|
Derivative
warrants
|
272
|
Original
issue discount
|
55,000
|
Convertible
promissory note
|
494,711
|
|
$550,000
|
On
August 27, 2020, the Company repaid $13,183 in interest to the
holder.
On
August 27, 2020, the holder reassigned $288,889 in principal to an
unrelated party. The assigned amount has been recategorized to
Convertible notes payable.
For the
nine months ended September 30, 2020, the Company recorded $4,385
in amortization of debt discount. The amount of unamortized
discount as of September 30, 2020 was $17,808. As of September 30,
2020, the Company recorded $15,086 in accrued interest related to
the note.
10.
|
Derivative financial instruments
|
The
following tables summarizes the effects on the Company’s gain
(loss) associated with changes in the fair values of the derivative
financial instruments by type of financing for the nine months
ended September 30, 2020 and 2019:
The financings giving rise to derivative financial instruments and
the income effects:
|
|
|
|
|
Compound
embedded derivative
|
$44
|
$294,690
|
Derivative
warrants
|
(581)
|
-
|
Total
gain (loss)
|
$(537)
|
$294,690
|
The
Company’s Convertible Notes issued between January 16, 2018
and September 14, 2020 gave rise to derivative financial
instruments. The Notes embodied certain terms and conditions that
were not clearly and closely related to the host debt agreement in
terms of economic risks and characteristics. These terms and
features consist of the embedded conversion option.
Current
accounting principles that are provided in ASC 815 - Derivatives and Hedging require
derivative financial instruments to be classified in liabilities
and carried at fair value with changes recorded in income. In
addition, the standards do not permit an issuer to account
separately for individual derivative terms and features embedded in
hybrid financial instruments that require bifurcation and liability
classification as derivative financial instruments. Rather, such
terms and features must be bundled together and fair valued as a
single, compound embedded derivative. The Company has selected the
Monte Carlo Simulations valuation technique to fair value the
compound embedded derivative because it believes that this
technique is reflective of all significant assumption types, and
ranges of assumption inputs, that market participants would likely
consider in transactions involving compound embedded derivatives.
Such assumptions include, among other inputs, interest risk
assumptions, credit risk assumptions and redemption behaviors in
addition to traditional inputs for option models such as market
trading volatility and risk-free rates. The Monte Carlo Simulations
technique is a level three valuation technique because it requires
the development of significant internal assumptions in addition to
observable market indicators.
Significant
inputs and results arising from the Monte Carlo Simulations process
are as follows for the compound embedded derivative that has been
bifurcated from the Convertible Notes and classified in
liabilities:
|
Inception
|
|
September
30,
2020
|
Quoted
market price on valuation date
|
$0.00035
- $0.00080
|
|
$0.00070
|
Contractual
conversion rate
|
$0.25
|
|
$0.25
|
Range
of effective contractual conversion rates
|
--
|
|
--
|
Contractual
term to maturity
|
1.00
Year
|
|
0.85
– 0.93 Years
|
Market
volatility:
|
|
|
|
Volatility
|
81.08%
- 265.47%
|
|
76.48%
- 292.12%
|
Contractual
interest rate
|
8.0%
|
|
8.0%
|
The
following table reflects the issuances of compound embedded
derivatives and changes in fair value inputs and assumptions
related to the compound embedded derivatives during the nine months
ended September 30, 2020.
|
|
Balances at January
1
|
$-
|
Issuances:
|
|
Convertible
Note Financing
|
362
|
Derivative
Warrants
|
1,631
|
Changes
in fair value inputs and assumptions reflected in
income
|
537
|
Balances at
September 30
|
$2,530
|
The
fair value of the compound embedded derivative is significantly
influenced by the Company’s trading market price, the price
volatility in trading and the interest components of the Monte
Carlo Simulation technique.
Preferred Stock
The Company has 10,000,000 Shares of Preferred Stock authorized
with a par value of $.001. The Company has allocated 100,000 Shares
for Series A Preferred, 1,000,000 Shares for Series B Preferred,
5,000,000 Shares for Series C Preferred, 1,000,000 for Series D
Preferred, 1,000,000 for Series E Preferred, 1,000,000 for Series F
Preferred and 7.5 for Series G Preferred.
Series A —The Series A
Preferred has the following designations:
●
Convertible
at option of holder.
●
The
holders are entitled to receive dividends.
●
1
Preferred share is convertible to 100 common shares.
●
In
the event of reorganization this Class of Preferred will not be
affected by any such capital reorganization.
●
Voting:
The holder of this Series of Preferred shall be entitled to elect
the majority of the members of the Board of Directors.
Series B —As of September
30, 2020 and December 31, 2019 there were 0 and 200,000 shares
issued and outstanding to the Company’s officer and CEO. The
Series B Preferred has the following
designations:
●
Convertible
at option of holder.
●
The
holders are entitled to receive dividends.
●
100,000
preferred shares are convertible to 9.9% common
shares.
●
The
Series B holders are entitled to receive liquidation in preference
to the common holders or any other class or series of preferred
stock.
●
Voting:
The Series B holders are entitled to vote together with the common
holders as a single class.
In 2017, 200,000 shares of Series B Preferred Stock were issued to
the Company’s CEO in exchange for a conversion of $200,000 of
related party advances. On May 8, 2020, the 200,000 shares were
cancelled.
Series C — As of
September 30, 2020 and December 31, 2019 there were 0 and 2,000,000
shares issued and outstanding to the Company’s officer and
CEO. The Series C Preferred has the following
designations:
●
Convertible
at option of holder.
●
The
holders are entitled to receive dividends.
●
1
Preferred share is convertible to 10 common shares.
●
In
the event of reorganization this Class of Preferred will not be
affected by any such capital reorganization.
●
Voting:
The holder of this Series of Preferred shall be entitled to vote 1
Preferred Shares for 5,000 votes.
On May 8, 2020, the 2,000,000 shares were cancelled.
Series D — As of
September 30, 2020 and December 31, 2019 there were 1,000,000 and 0
shares issued and outstanding. The Series D Preferred has the
following designations:
●
Convertible
into common upon the Company completing a 500 to 1 reverse stock
split upon which the amount converted will equal 80% of the issued
and outstanding common per the reverse split.
●
In
the event of reorganization this Class of Preferred will not be
affected by any such capital reorganization.
●
Voting:
The holder of this Series of Preferred shall be entitled to vote
and shall in aggregate represent 80% of the votes.
On May 8, 2020, in connection with the Share Exchange (See Note 5),
the Company issued 1,000,000 shares of Series D Preferred
Stock.
Series E — As of
September 30, 2020 and December 31, 2019 there were 543,251 and
418,251 shares issued and outstanding, respectively. On January 15,
2020, the Company sold 125,000 shares of Series E Preferred for
$12,500. On December 31, 2019, the holder of the Series of
Preferred converted $38,100 face value plus $3,725 in accrued
interest into 418,251 shares of Series E preferred stock.
The Series E Preferred has the
following designations:
●
Convertible
at option of holder any time after March 30, 2020; 1 preferred
share is convertible into 1,000 common shares
●
Automatically
convertible into common upon the Company completing a 500 to 1
reverse stock split.
●
In
the event of reorganization this Class of Preferred will not be
affected by any such capital reorganization.
●
Voting:
The holder of this Series of Preferred shall not be entitled to
vote.
Series F — As of
September 30, 2020 and December 31, 2019 there were 1,000,000 and 0
shares issued and outstanding, respectively. On May 8, 2020, in
connection with the Share Exchange (See Footnote 5), the Company
issued 1,000,000 shares of Series F Preferred
Stock.
The Series F Preferred has the following designations:
●
Convertible into
80% of the Company’s issued and outstanding shares of common
stock upon consummation of a reverse stock split and votes on an as
converted basis.
●
In
the event of reorganization this Class of Preferred will not be
affected by any such capital reorganization.
●
Voting:
The holder of this Series of Preferred are entitled to whole number
of votes equal to the number of shares of common
stock.
Series G — As of
September 30, 2020 and December 31, 2019 there were 8 and 0 shares
issued and outstanding, respectively. In connection with the
May 8, 2020 financing, the Company issued 8 of Series G Preferred
Stock. The Series G Preferred has the following
designations:
●
Convertible into 1%
of the Company’s issued and outstanding shares of common
stock at any time at the option of the holder and votes on an as
converted basis.
●
The shares will
automatically convert to common shares once the 500 to 1 reverse
split is effective.
●
In
the event of reorganization this Class of Preferred will not be
affected by any such capital reorganization.
●
Voting:
The holder of this Series of Preferred shall not be entitled to
vote.
The Company has evaluated each series of the Preferred Stock for
proper classification under ASC 480 - Distinguishing Liabilities
from Equity and ASC 815
- Derivatives and
Hedging.
ASC 480 generally requires liability classification for financial
instruments that are certain to be redeemed, represent obligations
to purchase shares of stock or represent obligations to issue a
variable number of common shares. The Company concluded that each
series of Preferred Stock was not within the scope of ASC 480
because none of the three conditions for liability classification
was present.
ASC 815 generally requires an analysis embedded terms and features
that have characteristics of derivatives to be evaluated for
bifurcation and separate accounting in instances where their
economic risks and characteristics are not clearly and closely
related to the risks of the host contract. However, in order to
perform this analysis, the Company was first required to evaluate
the economic risks and characteristics of each series of the
Preferred Stock in its entirety as being either akin to equity or
akin to debt. The Company’s evaluation concluded that each
series of Preferred Stock was more akin to an equity-like contract
largely due to the fact the financial instrument is not mandatorily
redeemable for cash and the holders are not entitled to any
dividends. Other features of the Preferred Stock that operate like
equity, such as the conversion option and voting feature, afforded
more evidence, in the Company’s view, that the instrument is
more akin to equity. As a result, the embedded conversion features
are clearly and closely related to their equity host instruments.
Therefore, the embedded conversion features do not require
bifurcation and classification as derivative
liabilities.
12.
|
Commitments and contingencies
|
During
the normal course of business, the Company may be exposed to
litigation. When the Company becomes aware of potential litigation,
it evaluates the merits of the case in accordance with FASB ASC
450-20-50, Contingencies.
The Company evaluates its exposure to the matter, possible legal or
settlement strategies and the likelihood of an unfavorable outcome.
If the Company determines that an unfavorable outcome is probable
and can be reasonably estimated, it establishes the necessary
accruals. As of September 30, 2020 and December 31, 2019, the
Company is not aware of any contingent liabilities that should be
reflected in the consolidated financial statements.
Reverse stock split
The
Company effected a 500:1 reverse stock split on October 6, 2020.
Share amounts are reflected giving effect to the reverse stock
split on a retroactive basis.
PTGI stock purchase agreement
On
October 2, 2020, the Company entered into an stock purchase
agreement with the shareholders of PTGI International Carrier
Services Inc. (“PTGI”) pursuant to which the Company
agreed to acquire 100% of the outstanding voting securities of PTGI
in consideration for $1,000,000 (the “PTGI
Acquisition”). The closing of the PTGI Acquisition occurred
on October 31, 2020. PTGI is a global wholesale telecommunications
provider offering both international and U.S. domestic voice
termination.
Get Charged acquisition agreement
The Get
Charged acquisition agreement detailed on Note 5 closed on October
12, 2020. On December 21, 2020, the
Company issued 55,274,252 shares in connection with the
acquisition.
Redomiciliation and name change
On October 1, 2020, the Company filed a Certificate of Amendment
with the Colorado Secretary of State reflecting the 500:1 reverse
stock split which was previously announced as well as the
conversion of the Company from a Colorado corporation to a Delaware
corporation. In connection with the corporate conversion, (i) the
Company changed its name from “GoIP Global, Inc.” to
“Transworld Holdings, Inc.” (ii) all issued and
outstanding preferred stock in the Colorado corporation other than
the Series F Preferred Stock was converted into shares of the
Company’s common stock and (iii) the Company’s Series F
Preferred Stock became the Series A Preferred Stock of the Delaware
corporation. The transactions described above were approved by
FINRA on October 2, 2020 and became effective on the OTC Pink
trading market at the open of trading on October 6,
2020.
Private Placement
On December 8, 2020, the Company entered into a Private Placement
Agreement for the purchase of up to an aggregate $2,500,000 at
$0.25 per share. In connection with the Private Placement, the
Company sold 8,700,00 shares for an aggregate $2,175,000. The
shares were issued on January 15, 2021.
Securities purchase agreement
On
November 3, 2020, the Company entered
into a securities purchase
agreement with funds affiliated with Arena Investors LP (the
“November 2020 Investors”) pursuant to which it issued
convertible notes in an aggregate principal amount of $3.8 million
for an aggregate purchase price of $3.5 million (collectively, the
“November 2020 Notes” and together with the May 2020
Notes, the “Notes”) The notes have a coupon rate of 8%
and a maturity date of November 3, 2023. The notes have a
conversion price of $0.25. In connection with the issuance of the
November 2020 Notes, we issued to the November 2020 Investors
903,226 shares of common stock.
Romolus Corp Acquisition
The Romolus Acquisition did not close by the date set forth in the
agreement and the Company has decided to no longer pursue this
transaction.
APS Transportation Inc.
The APS Acquisition did not close by the date set forth in the
agreement and the Company has decided to no longer pursue this
transaction.
2020 Omnibus Equity Incentive Plan
On January 11, 2021, our Board of Directors and a majority of our
stockholders adopted the 2020 Omnibus Equity Incentive Plan (the
“2020 Plan”). The 2020 Plan provides for the issuance
of incentive stock options, non-statutory stock options, stock
appreciation rights (“SARs”), restricted stock,
restricted stock units (“RSUs”), and other stock-based
awards.
REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the
Board of Directors and Stockholders of GoIP Global,
Inc.
Opinion on the Financial Statements
We have
audited the accompanying balance sheets of GoIP Global, Inc. (the
“Company”) as of December 31, 2019 and 2018, and the
related statements of operations, changes in stockholders’
deficit, and cash flows for the years then ended, and the related
notes (collectively referred to as the financial statements). In
our opinion, the financial statements present fairly, in all
material respects, the financial position of the Company as of
December 31, 2019 and 2018, and the results of its operations and
its cash flows for the years ended December 31, 2019 and 2018, in
conformity with accounting principles generally accepted in the
United States of America.
Basis for Opinion
These
financial statements are the responsibility of the Company’s
management. Our responsibility is to express an opinion on the
Company’s financial statements based on our audits. We are a
public accounting firm registered with the Public Company
Accounting Oversight Board (United States) (PCAOB) and are required
to be independent with respect to the Company in accordance with
the U.S. federal securities laws and the applicable rules and
regulations of the Securities and Exchange Commission and the
PCAOB.
We
conducted our audits in accordance with the standards of the PCAOB.
Those standards require that we plan and perform the audits to
obtain reasonable assurance about whether the financial statements
are free of material misstatement, whether due to error or fraud.
The Company is not required to have, nor were we engaged to
perform, an audit of its internal control over financial reporting.
As part of our audits, we are required to obtain an understanding
of internal control over financial reporting, but not for the
purpose of expressing an opinion on the effectiveness of the
Company’s internal control over financial reporting.
Accordingly, we express no such opinion.
Our
audits included performing procedures to assess the risks of
material misstatement of the financial statements, whether due to
error or fraud, and performing procedures that respond to those
risks. Such procedures included examining, on a test basis,
evidence regarding the amounts and disclosures in the financial
statements. Our audits also included evaluating the accounting
principles used and significant estimates made by management, as
well as evaluating the overall presentation of the financial
statements. We believe that our audits provide a reasonable basis
for our opinion.
Substantial Doubt about the Company’s Ability to Continue as
a Going Concern
The
accompanying financial statements have been prepared assuming that
the Company will continue as a going concern. As discussed in Note
4, the Company has incurred net losses and negative cash flow from
operations since inception. These factors, and the need for
additional financing in order for the Company to meet its business
plans raises substantial doubt about the Company’s ability to
continue as a going concern. Our opinion is not modified with
respect to that matter.
We have
served as the Company’s auditor since 2019.
Tampa,
Florida
June 4,
2020
4806
West Gandy Boulevard ● Tampa, Florida 33611 ●
813.440.6380
GOIP GLOBAL, INC.
BALANCE SHEETS
|
|
|
|
|
|
ASSETS
|
|
|
Current
assets
|
|
|
Cash
|
$31
|
$-
|
Total
assets
|
$31
|
$-
|
|
|
|
LIABILITIES
AND STOCKHOLDERS' DEFICIT
|
|
|
Current
liabilities:
|
|
|
Accounts payable
and accrued liabilities
|
33,952
|
38,100
|
Related party
payable
|
302,031
|
401,517
|
Convertible notes
payable, net of unamortized discount
|
|
27,578
|
Derivative
liabilities
|
-
|
476,566
|
Total current
liabilities
|
335,983
|
943,761
|
|
|
|
Commitments and
contingencies (Note 9)
|
|
|
|
|
|
Stockholder's
deficit
|
|
|
Preferred stock,
$0.001 par value, 10,000,000 shares authorized;
|
|
|
Series B: 1,000,000
shares authorized; 200,000 shares issued and outstanding at
December 31, 2019 and 2018, respectively
|
200
|
200
|
Series A: 10,000
authorized; 0 and 100,000 shares issued and outstanding at December
31, 2019 and 2018, respectively
|
|
100
|
Series C: 5,000,000
authorized; 2,000,000 shares issued and outstanding at December 31,
2019 and 2018 respectively
|
2,000
|
2,000
|
Series E: 1,000,000
authorized; 418,251 and 0 shares issued and outstanding at December
31, 2019 and 2018, respectively
|
418
|
-
|
Common stock,
$0.001 par value; 6,800,000,000 shares authorized 4,758,164,306 and
4,143,164,306 issued and outstanding at December 31, 2019 and 2018,
respectively
|
4,758,168
|
4,143,168
|
Additional paid in
capital
|
10,793,092
|
12,110,660
|
Shares to be
issued
|
1,612,475
|
10,000
|
Accumulated
deficit
|
(17,502,305)
|
(17,209,889)
|
Total stockholders'
deficit
|
(335,952)
|
(943,761)
|
|
|
|
Total liabilities
and stockholders' deficit
|
$31
|
$0
|
The
accompanying notes are an integral part of these financial
statements
GOIP GLOBAL, INC.
STATEMENTS OF OPERATIONS
For the years ended December 31,
|
|
|
Revenues
|
$-
|
$-
|
|
|
|
Operating
expenses
|
|
|
Personnel
expenses
|
131,970
|
159,500
|
General and
administrative
|
50,028
|
41,057
|
Total operating
expenses
|
181,998
|
200,557
|
|
|
|
Net operating
loss
|
(181,998)
|
(200,557)
|
|
|
|
Other
income (expenses):
|
|
|
Interest
expense
|
(28,124)
|
(5,489)
|
Amortization of
debt discount
|
(138,922)
|
(27,578)
|
Change in fair
value of derivative liabilities
|
56,628
|
(412,566)
|
Total other
expenses
|
(110,418)
|
(445,633)
|
|
|
|
Net income
(loss)
|
$(292,416)
|
$(646,190)
|
|
|
|
Basic
and diluted loss per share
|
$(0.00)
|
$(0.00)
|
|
|
|
Weighted
average number of shares outstanding, basic and
diluted
|
4,439,520,470
|
4,138,972,525
|
The
accompanying notes are an integral part of these financial
statements
GOIP GLOBAL, INC.
STATEMENTS OF STOCKHOLDERS' DEFICIT
FOR THE YEARS ENDED DECEMBER 31, 2019 AND 2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance,
December 31, 2017
|
200,000
|
$200
|
100,000
|
$100
|
2,000,000
|
$2,000
|
-
|
$1
|
4,113,164,306
|
$4,113,168
|
$-
|
$12,116,660
|
$(16,563,699)
|
$(331,571)
|
Subscribed shares
to be issued
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
10,000
|
-
|
-
|
10,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares issued for
services
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
30,000,000
|
30,000
|
-
|
(6,000)
|
-
|
24,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
(646,190)
|
(646,190)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance,
December 31, 2018
|
200,000
|
200
|
100,000
|
100
|
2,000,000
|
2,000
|
-
|
-
|
4,143,164,306
|
4,143,168
|
10,000
|
12,110,660
|
(17,209,889)
|
(943,761)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sale of common
stock
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
465,000,000
|
465,000
|
(10,000)
|
(370,000)
|
-
|
85,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Conversion of debt
to common stock
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
1,227,474,719
|
-
|
1,227,475
|
(735,943)
|
-
|
491,532
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Conversion of
liabilities to common stock
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
150,000,000
|
150,000
|
-
|
(121,788)
|
-
|
28,212
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Conversion of debt
into Series E
|
-
|
-
|
-
|
-
|
-
|
-
|
418,25
|
418
|
|
-
|
-
|
167,563
|
-
|
167,981
|
Preferred
stock
|
|
|
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Conversion of
accrued payroll to common stock
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
375,000,000
|
-
|
375,000
|
(275,000)
|
-
|
100,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Conversion of
Series A Preferred stock to common stock
|
-
|
-
|
(100,000)
|
(100)
|
-
|
-
|
-
|
-
|
10,000,000
|
-
|
10,000
|
(9,900)
|
-
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beneficial
conversion feature
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
27,500
|
-
|
27,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
(292,416)
|
(292,416)
|
Balance,
December 31, 2019
|
200,000
|
$200
|
-
|
$-
|
2,000,00
|
$2,000
|
418,251
|
$418
|
6,370,639,025
|
4,758,168
|
1,612,475
|
$10,793,092
|
$(17,502,305)
|
$(335,952)
|
The
accompanying notes are an integral part of these financial
statements
GOIP GLOBAL, INC.
STATEMENTS OF CASH FLOWS
|
For the years ended December 31,
|
|
|
|
CASH
FLOWS FROM OPERATING ACTIVITIES:
|
|
|
Net
loss
|
$(292,416)
|
$(646,190)
|
Adjustments to
reconcile net loss to net cash used in operating
activities:
|
|
|
Stock-based
compensation
|
-
|
24,000
|
Change in fair
value of derivative liabilities
|
(56,628)
|
412,566
|
Amortization of
debt discount
|
138,922
|
27,578
|
Changes in working
capital requirements:
|
|
|
Accounts payable
and accrued liabilities
|
(4,148)
|
14,051
|
Related party
advances
|
5,811
|
93,995
|
Net cash used in
operating activities
|
(208,459)
|
(74,000)
|
|
|
|
CASH
FLOWS FROM FINANCING ACTIVITIES:
|
|
|
Cash receipts from
subscribed common stock (to be issued)
|
-
|
10,000
|
Cash receipts from
sale of common stock
|
94,990
|
-
|
Cash receipts from
issuance of convertible notes payable
|
113,500
|
64,000
|
Net cash provided
by financing activities
|
208,490
|
74,000
|
|
|
|
NET
INCREASE IN CASH
|
31
|
-
|
CASH,
BEGINNING OF PERIOD
|
-
|
-
|
CASH,
END OF PERIOD
|
$31
|
$-
|
|
|
|
Supplemental
disclosure of cash flow information
|
|
|
Cash paid for
interest expense
|
$-
|
$-
|
Cash paid for
income taxes
|
$-
|
$-
|
|
|
|
Non-cash operating
and financing activities:
|
|
|
Conversion of
liabilities to common stock
|
$787,725
|
$-
|
The
accompanying notes are an integral part of these financial
statements
GOIP GLOBAL, INC.
NOTES TO FINANCIAL STATEMENTS
1.Nature of operations
GoIP
Global. Inc. ("GoIP or the "Company”) was incorporated on May
8, 2003 as E Education Network, Inc. (“EEN”) under the
laws of the State of Nevada. On August 10, 2005, the
Company’s name was changed to GoIP Global, Inc. On December
28, 2017 the company was redomiciled in Colorado and is now a
Colorado corporation.
GoIP
business operations deals with The Internet of Value (IoV) which enables
the instant exchange of value transactions like currencies, stocks,
votes, securities, intellectual property, music, scientific
discoveries, and more without intermediaries. Similar to how
information is exchanged across the internet today. This is
powerful because it enables a future for everyone to share in the
transfer of value. The Internet of
Value is poised to reshape and transform e-Commerce and the
global economy. But for it to become reality and adopted, it must
ensure trust.
2.Summary of significant accounting policies
Basis of Presentation
The
financial statements have been prepared in conformity with
accounting principles generally accepted in the United States of
America (“GAAP”).
Use of Estimates
The
preparation of financial statements in conformity with GAAP
requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during
the reporting period. The most significant assumptions and
estimates relate to the valuation of equity issued for services,
valuation of equity associated with convertible debt, the valuation
of derivative liabilities, and the valuation of deferred tax
assets. Actual results could differ from these
estimates.
Revenue Recognition
The
Company recognizes revenue in accordance with Accounting Standards
Update (“ASU”) 2014-09, “Revenue from contracts with
customers,” (Topic 606). Revenue is recognized when a
customer obtains control of promised goods or services. In
addition, the standard requires disclosure of the nature, amount,
timing, and uncertainty of revenue and cash flows arising from
contracts with customers. The amount of revenue that is recorded
reflects the consideration that the Company expects to receive in
exchange for those goods. The Company applies the following
five-step model in order to determine this amount: (i)
identification of the promised goods in the contract; (ii)
determination of whether the promised goods are performance
obligations, including whether they are distinct in the context of
the contract; (iii) measurement of the transaction price, including
the constraint on variable consideration; (iv) allocation of the
transaction price to the performance obligations; and (v)
recognition of revenue when (or as) the Company satisfies each
performance obligation. The Company’s main revenue stream is
from services. The Company recognizes as revenues the amount of the
transaction price that is allocated to the respective performance
obligation when the performance obligation is satisfied or as it is
satisfied. Generally, the Company's performance obligations are
transferred to customers at a point in time, typically upon
delivery.
The
Company only applies the five-step model to contracts when it is
probable that the entity will collect the consideration it is
entitled to in exchange for the goods or services it transfers to
the customer. Once a contract is determined to be within the scope
of Financial Accounting Standards Board (“ FASB”)
Accounting Standards Codification (“ASC”) 606 at
contract inception, the Company reviews the contract to determine
which performance obligations the Company must deliver and which of
these performance obligations are distinct. The Company recognizes
as revenues the amount of the transaction price that is allocated
to the respective performance obligation when the performance
obligation is satisfied or as it is satisfied. Generally, the
Company's performance obligations are transferred to customers at a
point in time, typically upon delivery.
Fair Value Measurements and Fair Value of Financial
Instruments
The
Company adopted Accounting Standard Codification
(“ASC”) Topic 820, Fair Value Measurements. ASC Topic 820
clarifies the definition of fair value, prescribes methods for
measuring fair value, and establishes a fair value hierarchy to
classify the inputs used in measuring fair value as
follows:
Level
1: Inputs are unadjusted quoted prices in active markets for
identical assets or liabilities available at the measurement
date.
Level
2: Inputs are unadjusted quoted prices for similar assets and
liabilities in active markets, quoted prices for identical or
similar assets and liabilities in markets that are not active,
inputs other than quoted prices that are observable, and inputs
derived from or corroborated by observable market
data.
Level
3: Inputs are unobservable inputs which reflect the reporting
entity's own assumptions on what assumptions the market
participants would use in pricing the asset or liability based on
the best available information.
The
estimated fair value of certain financial instruments, including
all current liabilities are carried at historical cost basis, which
approximates their fair values because of the short-term nature of
these instruments.
Fair Value of Financial Instruments
ASC
subtopic 825-10, Financial
Instruments ("ASC 825-10") requires disclosure of the fair
value of certain financial instruments. The carrying value of cash
and cash equivalents, accounts payable and accrued liabilities as
reflected in the balance sheets, approximate fair value because of
the short-term maturity of these instruments. All other significant
financial assets, financial liabilities and equity instruments of
the Company are either recognized or disclosed in the financial
statements together with other information relevant for making a
reasonable assessment of future cash flows, interest rate risk and
credit risk. Where practicable the fair values of financial assets
and financial liabilities have been determined and disclosed;
otherwise only available information pertinent to fair value has
been disclosed.
The
Company follows ASC subtopic 820-10, Fair Value Measurements and Disclosures
("ASC 820-10") and ASC 825-10, which permits entities to choose to
measure many financial instruments and certain other items at fair
value.
Derivative Liability
The
Company evaluates convertible instruments, options, warrants or
other contracts to determine if those contracts or embedded
components of those contracts qualify as derivatives to be
separately accounted for under ASC Topic 815, "Derivatives and Hedging”. The
result of this accounting treatment is that the fair value of the
derivative is marked-to-market each balance sheet date and recorded
as a liability. In the event that the fair value is recorded as a
liability, the change in fair value is recorded in the statement of
operations as other income (expense). Upon conversion or exercise
of a derivative instrument, the instrument is marked to fair value
at the conversion date and then that fair value is reclassified to
equity. Equity instruments that are initially classified as equity
that become subject to reclassification under ASC Topic 815 are
reclassified to liabilities at the fair value of the instrument on
the reclassification date.
Cash and Cash Equivalents
For
purposes of the Statements of Cash Flows, the Company considers
highly liquid investments with an original maturity of three months
or less to be cash equivalents.
Stock Based Compensation Expense
The
Company records stock-based compensation in accordance with the
provisions of FASB ASC Topic 718, “Accounting for Stock
Compensation,” which establishes accounting standards
for transactions in which an entity exchanges its equity
instruments for goods or services. In accordance with guidance
provided under ASC Topic 718, the Company recognizes an expense for
the fair value of its stock awards at the time of grant and the
fair value of its outstanding stock options as they vest, whether
held by employees or others. As of December 31, 2019 and 2018,
there were no options outstanding, respectively. For the year ended
December 31, 2018, the Company issued 30,000,000 shares to
non-employees for services and recorded $24,000 in expense related
to the shares.
Convertible Debentures
If the
conversion features of conventional convertible debt provide for a
rate of conversion that is below market value at issuance, this
feature is characterized as a beneficial conversion feature
("BCF"). A BCF is recorded by the Company as a debt discount
pursuant to ASC Topic 470-20 "Debt
with Conversion and Other Options". In those circumstances,
the convertible debt is recorded net of the discount related to the
BCF, and the Company amortizes the discount to interest expense,
over the life of the debt.
Advertising, Marketing and Public Relations
The
Company follows the policy of charging the costs of advertising,
marketing, and public relations to expense as incurred. The Company
recorded advertising expenses in the amount of $3,000 and $0 for
the years ended December 31, 2019 and 2018,
respectively.
Income Taxes
Income
taxes are accounted for under the asset and liability method.
Deferred tax assets and liabilities are recognized for the future
tax consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities and
their respective tax bases and operating loss, capital loss and tax
credit carryforwards. Deferred tax assets and liabilities are
measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are
expected to be recovered or settled. The effect on deferred tax
assets and liabilities of a change in tax rates is recognized in
income in the period that includes the enactment date.
The
Company recognizes the effect of income tax positions only if those
positions are more likely than not of being sustained. Recognized
income tax positions are measured at the largest amount that is
greater than 50% likely of being realized. Changes in recognition
or measurement are reflected in the period in which the change in
judgment occurs. The Company records interest and penalties related
to unrecognized tax benefits as a component of general and
administrative expenses. Our federal tax return and any state tax
returns are not currently under examination.
The
Company has adopted FASB ASC 740-10, Accounting for Income Taxes, which
requires an asset and liability approach to financial accounting
and reporting for income taxes. Deferred income tax assets and
liabilities are computed annually from differences between the
financial statement and tax basis of assets and liabilities that
will result in taxable or deductible amounts in the future based on
enacted tax laws and rates applicable to the periods in which the
differences are expected to affect taxable income. Valuation
allowances are established when necessary to reduce deferred tax
assets to the amount expected to be realized.
Net Income (Loss) Per Common Share
The
Company computes loss per common share, in accordance with
Financial Accounting Standards Board (“FASB”) ASC Topic
260, Earnings Per Share,
which requires dual presentation of basic and diluted earnings per
share. Basic income or loss per common share is computed by
dividing net income or loss by the weighted average number of
common shares outstanding during the period. Diluted income or loss
per common share is computed by dividing net income or loss by the
weighted average number of common shares outstanding, plus the
issuance of common shares, if dilutive, that could result from the
exercise of outstanding stock options and warrants.
Recent Accounting Pronouncements
In
February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), which will require
lessees to recognize almost all leases on their balance sheet as a
right-of-use asset and a lease liability. For income statement
purposes, the FASB retained a dual model, requiring leases to be
classified as either operating or finance. Classification will be
based on criteria that are largely similar to those applied in
current lease accounting, but without explicit bright lines. Lessor
accounting is similar to the current model, but updated to align
with certain changes to the lessee model and the new revenue
recognition standard. This ASU is effective for fiscal years
beginning after December 15, 2018, including interim periods within
those fiscal years. The Company has adopted this guidance effective
January 1, 2019. The Company currently has no leases.
In May
2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers,
issued as a new Topic, ASC Topic 606. The new revenue recognition
standard supersedes all existing revenue recognition guidance.
Under this ASU, an entity should recognize revenue when it
transfers promised goods or services to customers in an amount that
reflects the consideration to which the entity expects to be
entitled in exchange for those goods or services. ASU 2015-14,
issued in August 2015, deferred the effective date of ASU 2014-09
to the first quarter of 2018, with early adoption permitted in the
first quarter of 2017. The Company has adopted this guidance
effective January 1, 2018. The adoption of this standard did not
have a material impact on the financial statements.
In
August 2016, the Financial Accounting Standards Board
(“FASB”) issued Accounting Standards Update
(“ASU”) No. 2016-15, Statement of Cash Flows (Topic 230):
Classification of Certain Cash
Receipts and Cash Payments. This update addresses a
diversity in practice in how certain cash receipts and cash
payments are presented and classified in the statement of cash
flows under Topic 230, Statement of Cash Flows, and other Topics.
The amendments in this Update are effective for public business
entities for fiscal years beginning after December 15, 2017, and
interim periods within those fiscal years. Early adoption is
permitted, including adoption in an interim period. The Company has
adopted this guidance effective January 1, 2018. The adoption of
this standard did not have a material impact on the financial
statements.
On June
20, 2018, the FASB issued ASU 2018-07, Compensation—Stock Compensation
(Topic 718): Improvements to Nonemployee Share-Based Payment
Accounting. ASU 2018-07 is intended to reduce cost and complexity
and to improve financial reporting for share-based payments to
nonemployees (for example, service providers, external legal
counsel, suppliers, etc.). Under the new standard, companies will
no longer be required to value non-employee awards differently from
employee awards. Meaning that companies will value all equity
classified awards at their grant-date under ASC 718 and forgo
revaluing the award after this date. The Company adopted ASU
2018-07 on January 1, 2018. The adoption of this standard did not
have a material impact on the financial statements.
The
Company has implemented all new accounting pronouncements that are
in effect. These pronouncements did not have any material impact on
the consolidated financial statements unless otherwise disclosed,
and the Company does not believe that there are any other new
accounting pronouncements that have been issued that might have a
material impact on its financial position or results of
operations.
3.Concentration of credit risks
The
Company maintains accounts with financial institutions. All cash in
checking accounts is non-interest bearing and is fully insured by
the Federal Deposit Insurance Corporation (FDIC). At times, cash
balances may exceed the maximum coverage provided by the FDIC on
insured depositor accounts. The Company believes it mitigates its
risk by depositing its cash and cash equivalents with major
financial institutions. There were no cash deposits in excess of
FDIC insurance at December 31, 2019 and 2018.
4.Going Concern
The
Company's financial statements are prepared using the GAAP
applicable to a going concern, which contemplates the realization
of assets and liquidation of liabilities in the normal course of
business. At December 31, 2019 and 2018, the Company had $31 and $0
in cash and $335,952 and $943,761 in negative working capital,
respectively. For the years ended December 31, 2019 and 2018, the
Company had a net loss of $292,416 and $646,190, respectively.
Continued losses may adversely affect the liquidity of the Company
in the future. In view of the matters described in the preceding
paragraph, recoverability of a major portion of the recorded asset
amounts shown in the accompanying balance sheets is dependent upon
continued operations of the Company, which in turn is dependent
upon the Company's ability to raise additional capital, obtain
financing and to succeed in its future operations. The financial
statements do not include any adjustments relating to the
recoverability and classification of recorded asset amounts or
amounts and classification of liabilities that might be necessary
should the Company be unable to continue as a going
concern.
The
Company has operating costs and expenses at the present time for
development of its business activities. The Company, however, will
be required to raise additional capital over the next twelve months
to meet its current administrative expenses, and it may do so in
connection with or in anticipation of possible acquisition
transactions. This financing may take the form of additional sales
of its equity securities loans
from its directors and or convertible notes. There is no
assurance that additional financing will be available, if required,
or on terms favorable to the Company.
5.Related party transactions
The
balance in related party payables amounted to $302,031 and $401,517
for the years ended December 31, 2019 and 2018, respectively. The
Company has an oral agreement with the CEO, who provides management
services through a private entity that he owns. The expenses are
classified in the statements of operations as general and
administrative expenses. For the years ended December 31, 2019 and
2018, the Company accrued $90,000 and $120,000 in management
service fees to the Company’s CEO, respectively.
During
the year ended December 31, 2019, the Company’s CEO converted
$100,000 of accrued management services into 375,000,000 shares of
common stock.
6.Convertible promissory notes
The
Company issued multiple convertible notes. The Company has
accounted for these Notes as financing transactions, wherein the
net proceeds that were received were allocated to the financial
instrument issued. Prior to making the accounting allocation, the
Company evaluated the notes under ASC 815 Derivatives and Hedging (“ASC
815”). ASC 815 generally requires the analysis embedded terms
and features that have characteristics of derivatives to be
evaluated for bifurcation and separate accounting in instances
where their economic risks and characteristics are not clearly and
closely related to the risks of the host contract. The material
embedded derivative features consisted of the embedded conversion
option and a buy-in put. The conversion option bears risks of
equity which were not clearly and closely related to the host debt
agreement and required bifurcation. Current accounting principles
that are also provided in ASC 815 do not permit an issuer to
account separately for individual derivative terms and features
that require bifurcation and liability classification. Rather, such
terms and features must be and were bundled together and fair
valued as a single, compound embedded derivative.
Seacor Note
On
January 30, 2018, the Company entered into a convertible promissory
note agreement (the “Seacor Note”) with a lender for a
face value of $12,500. The coupon rate is 12% per annum and the
maturity date is January 31, 2019. The note is convertible into
common stock at the lender’s option at $.0001 per share. The
proceeds were received in three tranches: (i) $5,000 on January 30,
2018, (ii) $5,000 on February 23, 2018 and (iii) $2,500 on March
23, 2018.
Based
on the previous conclusions, the Company allocated the cash
proceeds first to the derivative component at its fair value with
the residual allocated to the host debt contract, as
follows:
|
|
Compound embedded
derivative
|
$78,082
|
Day-one derivative
loss
|
(65,582)
|
|
$12,500
|
The
proceeds were allocated to the compound embedded derivative. This
resulted in a day-one derivative loss and therefore, there was no
value allocated to the note on the inception date. The Note will be
accreted up to its face value of $12,500 over the life of the Note
based on an effective interest rate. Amortization expense for the
years ended December 31, 2019 and 2018 amounted to $3,697
and
$8,803,
respectively. On December 31, 2019, the holder converted the
$12,500 face value plus $2,795 in accrued interest into 152,945,205
shares of common stock. The carrying value of the Note as of
December 31, 2019 and 2018 amounted to $0 and $8,803,
respectively.
Oscaleta Notes
On
February 12, 2018, the Company entered into a convertible
promissory note agreement (the “Oscaleta Note 1”) with
a lender for a face value of $5,000. The coupon rate is 12% per
annum and the maturity date is February 12, 2019. The note is
convertible into common stock at the lender’s option at
$.0001 per share. On March 9, 2018, the Company entered into a
convertible promissory note agreement (the “Oscaleta Note
2”) with a lender for a face value of $10,000. The coupon
rate is 12% per annum and the maturity date is March 9, 2019. The
note is convertible into common stock at the lender’s option
at $.0001 per share.
Based
on the previous conclusions, the Company allocated the cash
proceeds first to the derivative component at its fair value with
the residual allocated to the host debt contract, as
follows:
|
|
Compound embedded
derivative
|
$62,649
|
Day-one derivative
loss
|
(47,649)
|
|
$15,000
|
The
proceeds were allocated to the compound embedded derivative. This
resulted in a day-one derivative loss and therefore, there was no
value allocated to the note on the inception date. The Note will be
accreted up to its face value of $15,000 over the life of Note
based on an effective interest rate. Amortization expense for the
years ended December 31, 2019 and 2018 amounted to $8,634 and
$6,366, respectively. On December 31, 2019, the holder converted
$15,000 face value plus $3,309 in accrued interest into 183,090,500
shares of common stock. The carrying value of the Note as of
December 31, 2019 and 2018 amounted to $0 and $6,366,
respectively.
Sky Direct Note 1
On
January 16, 2018, the Company entered into a convertible promissory
note agreement (the “Sky Direct Note 1”) with a lender
for a face value of $49,400. The coupon rate is 12% per annum and
the maturity date is January 17, 2019. The note is convertible into
common stock at the lender’s option at $.0001 per share. The
proceeds were received in thirteen tranches: (1) $5,000 on January
16, 2018, (2)
$1,000
on July 17, 2018, (3) $2,500 on October 22, 2018, (4) $5,000 on
October 29, 2018, (5) $7,500 on November 7, 2018, (6)
$2,500
on
November 9, 2018, (7) $5,000 on November 13, 2018, (8) $3,000 on
November 20, 2018, (9) $3,000 on November 28, 2018
(10),
$2,000
on November 30, 2018, (11) $6,000 on January 9, 2019, (12) $1,400
on January 17, 2019 and (13) $5,500 on February 8,
2019.
Based
on the previous conclusions, the Company allocated the cash
proceeds first to the derivative component at its fair value with
the residual allocated to the host debt contract, as
follows:
|
|
Compound embedded
derivative
|
$388,631
|
Day-one derivative
loss
|
(339,231)
|
|
$49,400
|
The
proceeds were allocated to the compound embedded derivative. This
resulted in a day-one derivative loss and therefore, there was no
value allocated to the note on the inception date. The Note will be
accreted up to its face value of $49,400 over the life of Note
based on an effective interest rate. Amortization expense for the
years ended December 31, 2019 and 2018 amounted to $36,992 and
$12,408, respectively. On December 31, 2019, the holder converted
$49,400 face value plus $6,381 in accrued interest into 557,806,137
shares of common stock. The carrying value of the Note as of
December 31, 2019 and 2018 amounted to $0 and $12,408,
respectively.
Sky Direct Note 2
On
February 15, 2019, the Company entered into a convertible
promissory note agreement (the “Sky Direct Note 2”)
with a lender for a face value of $38,100. The coupon rate is 12%
per annum and the maturity date is February 16, 2020. The note is
convertible into common stock at the lender’s option at
$.0001 per share. The proceeds were received in seven tranches: (1)
$4,000 on February 15, 2019, (2) $7,000 on February 27, 2019, (3)
$13,000 on March 1, 2019, (4) $6,600 on March 6, 2019, (5) $2,500
on March 27, 2019, (6) $2,000 on April 11, 2019 and (7) $3,000 on
April 30, 2019.
Based
on the previous conclusions, the Company allocated the cash
proceeds first to the derivative component at its fair value with
the residual allocated to the host debt contract, as
follows:
|
|
Compound embedded
derivative
|
$263,418
|
Day-one derivative
loss
|
(225,318)
|
|
$38,100
|
The
proceeds were allocated to the compound embedded derivative. This
resulted in a day-one derivative loss and therefore, there was no
value allocated to the note on the inception date. The Note will be
accreted up to its face value of $38,100 over the life of Note
based on an effective interest rate. Amortization expense for the
year ended December 31, 2019 amounted to $38,100. On December 31,
2019, the holder converted $38,100 face value plus $3,725 in
accrued interest into 4,182,510 shares of Series D preferred stock.
The carrying value of the Note as of December 31, 2019 amounted to
$0.
Schaeffer Note
On
January 24, 2019, the Company entered into a convertible promissory
note agreement (the “Schaeffer Note”) with a lender for
a face value of $30,000. The coupon rate is 12% per annum and the
maturity date is July 15, 2019. The note is convertible into common
stock at the lender’s option at $.0001 per
share.
Based
on the previous conclusions, the Company allocated the cash
proceeds first to the derivative component at its fair value with
the residual allocated to the host debt contract, as
follows:
|
|
Compound embedded
derivative
|
$179,548
|
Day-one derivative
loss
|
(149,548)
|
|
$30,000
|
The
proceeds were allocated to the compound embedded derivative. This
resulted in a day-one derivative loss and therefore, there was no
value allocated to the note on the inception date. The Note will be
accreted up to its face value of $30,000 over the life of Note
based on an effective interest rate. Amortization expense for the
year ended December 31, 2019 amounted to $30,000. On December 31,
2019, the holder converted $30,000 face value plus $3,363 in
accrued interest into 333,632,877 shares of common stock. The
carrying value of the Note as of December 31, 2019 amounted to
$0.
7.Derivative financial instruments
As of
December 31, 2019, the convertible notes were converted in full and
as a result the derivative liabilities at December 31, 2019
amounted to $0. The following tables summarize the components of
the Company’s derivative liabilities and linked common shares
as of December 31, 2018 and the amounts that were reflected in
income related to derivatives for the year then ended:
|
|
The financings
giving rise to derivative financial instruments
|
|
|
Compound embedded
derivative
|
679,414,247
|
$(476,566)
|
The
following tables summarizes the effects on the Company’s gain
(loss) associated with changes in the fair values of the derivative
financial instruments by type of financing for the years ended
December 31, 2019 and 2018:
|
|
The financings
giving rise to derivative financial instruments and the income
effects:
|
|
Compound embedded
derivative
|
$498,225
|
Day-one derivative
loss
|
(441,597)
|
Total gain
(loss)
|
$56,628
|
|
|
The financings
giving rise to derivative financial instruments and the income
effects:
|
|
Compound embedded
derivative
|
$(20,835)
|
Day-one derivative
loss
|
(391,731)
|
Total gain
(loss)
|
$(412,566)
|
The
Company’s face value $172,500 Convertible Promissory Notes
issued between January 16, 2018 and November 30, 2018 gave rise to
derivative financial instruments. The Notes embodied certain terms
and conditions that were not clearly and closely related to the
host debt agreement in terms of economic risks and characteristics.
These terms and features consist of the embedded conversion
option.
Current
accounting principles that are provided in ASC 815 - Derivatives and Hedging require
derivative financial instruments to be classified in liabilities
and carried at fair value with changes recorded in income. In
addition, the standards do not permit an issuer to account
separately for individual derivative terms and features embedded in
hybrid financial instruments that require bifurcation and liability
classification as derivative financial instruments. Rather, such
terms and features must be bundled together and fair valued as a
single, compound embedded derivative. The Company has selected the
Monte Carlo Simulations valuation technique to fair value the
compound embedded derivative because it believes that this
technique is reflective of all significant assumption types, and
ranges of assumption inputs, that market participants would likely
consider in transactions involving compound embedded derivatives.
Such assumptions include, among other inputs, interest risk
assumptions, credit risk assumptions and redemption behaviors in
addition to traditional inputs for option models such as market
trading volatility and risk-free rates. The Monte Carlo Simulations
technique is a level three valuation technique because it requires
the development of significant internal assumptions in addition to
observable market indicators.
Significant inputs
and results arising from the Monte Carlo Simulations process are as
follows for the compound embedded derivative that has been
bifurcated from the Convertible Notes and classified in
liabilities:
|
|
|
|
Quoted market price
on valuation date
|
$0.0003 - 0.0014
|
$0.0008
|
$0.0004
|
Contractual
conversion rate
|
$0.0001
|
$0.0001
|
$0.0001
|
Range of effective
contractual conversion rates
|
--
|
--
|
--
|
Contractual term to
maturity
|
|
|
|
Market
volatility:
|
|
|
|
Volatility
|
170.00%
|
170.00%
|
170.00%
|
Contractual
interest rate
|
12.0%
|
12.0%
|
12.0%
|
The
following table reflects the issuances of compound embedded
derivatives and changes in fair value inputs and assumptions
related to the compound embedded derivatives during the years ended
December 31, 2019 and 2018.
|
|
|
Balances at January
1
|
$476,566
|
$-
|
Issuances:
|
|
|
Convertible Note
Financing
|
516,597
|
455,731
|
Changes in fair
value inputs and assumptions reflected in income
|
(498,225)
|
20,835
|
Conversions
|
(494,938)
|
-
|
Balances at
December 31
|
$-
|
$476,566
|
The
fair value of the compound embedded derivative is significantly
influenced by the Company’s trading market price, the price
volatility in trading and the interest components of the Monte
Carlo Simulation technique.
8.Equity
Preferred Stock
The
Company has 10,000,000 Shares of Preferred Stock authorized with a
par value of $.001. The Company has allocated 100,000 Shares for
Series A Preferred, 1,000,000 Shares for Series B Preferred,
5,000,000 Shares for Series C Preferred, 1,000,000 Series D
Preferred and 1,000,000 Series E Preferred.
Series A —As of December
31, 2019 and 2018 there were 0 and 100,000 shares issued and
outstanding, respectively. The 100,000 was originally issued to the
Company 's officer and CEO. These Series A Shares were converted
into 10,000,000 shares of common stock during the year ended
December 31, 2019. The Series A Preferred has the following
designations:
●
|
Convertible
at option of holder.
|
●
|
The
holders are entitled to receive dividends.
|
●
|
1
Preferred share is convertible to 100 common shares.
|
●
|
In the
event of reorganization this Class of Preferred will not be
affected by any such capital reorganization.
|
●
|
Voting:
The holder of this Series of Preferred shall be entitled to elect
the majority of the members of the Board of Directors.
|
Series B —As of December
31, 2019 and 2018 there were 200,000 shares issued and outstanding
to the Company’s officer and CEO. The Series B Preferred has
the following designations:
●
|
Convertible
at option of holder.
|
●
|
The
holders are entitled to receive dividends.
|
●
|
100,000
preferred shares are convertible to 9.9% common
shares.
|
●
|
The
Series B holders are entitled to receive liquidation in preference
to the common holders or any other class or series of preferred
stock.
|
●
|
Voting:
The Series B holders are entitled to vote together with the common
holders as a single class.
|
In
2017, 200,000 shares of Series B Preferred Stock were issued to the
Company’s CEO in exchange for a conversion of $200,000 of
related party advances.
Series C — As of December
31, 2019 and 2018 there were 2,000,000 shares issued and
outstanding to the Company’s officer and CEO. The Series C
Preferred has the following designations:
●
|
Convertible
at option of holder.
|
●
|
The
holders are entitled to receive dividends.
|
●
|
1
Preferred share is convertible to 10 common shares.
|
●
|
In the
event of reorganization this Class of Preferred will not be
affected by any such capital reorganization.
|
●
|
Voting:
The holder of this Series of Preferred shall be entitled to vote 1
Preferred Shares for 5,000 votes.
|
Series D — As of December
31, 2019 and 2018 there were 0 and 0 shares issued and outstanding,
respectively. The Series D Preferred has the following
designations:
●
|
Convertible
into common upon the Company completing a 500 to 1 reverse stock
split upon which the amount converted will equal 80% of the issued
and outstanding common per the reverse split.
|
●
|
In the
event of reorganization this Class of Preferred will not be
affected by any such capital reorganization.
|
●
|
Voting:
The holder of this Series of Preferred shall be entitled to vote
and shall in aggregate represent 80% of the votes.
|
Series E — As of December
31, 2019 and 2018 there were 418,251 and 0 shares issued and
outstanding. On December 31, 2019, the holder of the Series of
Preferred converted $38,100 face value plus $3,725 in accrued
interest into 418,251 shares of Series E preferred stock. The
Series E Preferred has the following designations:
●
|
Convertible
at option of holder any time after March 30, 2020; 1 preferred
share is convertible into 1,000 common shares
|
●
|
Automatically
convertible into common upon the Company completing a 500 to 1
reverse stock split.
|
●
|
In the
event of reorganization this Class of Preferred will not be
affected by any such capital reorganization.
|
●
|
Voting:
The holder of this Series of Preferred shall not be entitled to
vote.
|
The
Company has evaluated each series of the Preferred Stock for proper
classification under ASC 480 - Distinguishing Liabilities from Equity
and ASC 815 - Derivatives and
Hedging.
ASC 480
generally requires liability classification for financial
instruments that are certain to be redeemed, represent obligations
to purchase shares of stock or represent obligations to issue a
variable number of common shares. The Company concluded that each
series of Preferred Stock was not within the scope of ASC 480
because none of the three conditions for liability classification
was present.
ASC 815
generally requires an analysis embedded terms and features that
have characteristics of derivatives to be evaluated for bifurcation
and separate accounting in instances where their economic risks and
characteristics are not clearly and closely related to the risks of
the host contract. However, in order to perform this analysis, the
Company was first required to evaluate the economic risks and
characteristics of each series of the Preferred Stock in its
entirety as being either akin to equity or akin to debt. The
Company’s evaluation concluded that each series of Preferred
Stock was more akin to an equity-like contract largely due to the
fact the financial instrument is not mandatorily redeemable for
cash and the holders are not entitled to any dividends. Other
features of the Preferred Stock that operate like equity, such as
the conversion option and voting feature, afforded more evidence,
in the Company’s view, that the instrument is more akin to
equity. As a result, the embedded conversion features are clearly
and closely related to their equity host instruments. Therefore,
the embedded conversion features do not require bifurcation and
classification as derivative liabilities.
9. Commitments and contingencies
During
the normal course of business, the Company may be exposed to
litigation. When the Company becomes aware of potential litigation,
it evaluates the merits of the case in accordance with FASB ASC
450-20-50, Contingencies.
The Company evaluates its exposure to the matter, possible legal or
settlement strategies and the likelihood of an unfavorable outcome.
If the Company determines that an unfavorable outcome is probable
and can be reasonably estimated, it establishes the necessary
accruals. As of December 31, 2019 and 2018, the Company is not
aware of any contingent liabilities that should be reflected in the
financial statements.
10. Income taxes
The
Company adopted the provisions of uncertain tax positions as
addressed in ASC 740-10-65-1. As a result of the implementation of
ASC 740-10-65-1, the Company recognized no increase in the
liability for unrecognized tax benefits. As of December 31, 2019
the Company had net operating loss carry forwards of approximately
$17,502,305 that may be available to reduce future years’
taxable income in varying amounts through 2031. Future tax benefits
which may arise as a result of these losses have not been
recognized in these financial statements, as their realization is
determined not likely to occur and accordingly, the Company has
recorded a valuation allowance for the deferred tax asset relating
to these tax loss carry-forwards.
The
valuation allowance at December 31, 2019 was $3,675,484. The net
changes in valuation allowance during the years ended December 31,
2019 and 2018 was $61,407 and $135,700, respectively. In assessing
the realizability of deferred tax assets, management considers
whether it is more likely than not that some portion or all of the
deferred income tax assets will not be realized.
The
components of the net deferred tax asset (liability) at December
31, 2019 and, 2018 and the statutory tax rate, the effective tax
rate and the elected amount of the valuation allowance are
indicated below:
|
|
|
|
|
|
Net operating loss
carry-forward
|
$(17,502,305)
|
$(17,209,889)
|
Effective tax
rate
|
21%
|
21%
|
|
3,675,484
|
3,614,077
|
Valuation
allowance
|
(3,675,484)
|
(3,614,077)
|
Deferred tax
asset
|
$-
|
$-
|
Income
tax benefit resulting from applying statutory rates in
jurisdictions in which we are taxed (Federal and State of New York)
differs from the income tax provision (benefit) in our financial
statements. The following table reflects the reconciliation for the
years ended December 31, 2019 and 2018:
|
|
|
|
|
Benefit at federal
and statutory rate
|
(21)%
|
(21)%
|
Change in valuation
allowance
|
21%
|
21%
|
Effective tax
rate
|
0%
|
0%
|
11. Subsequent events
Share exchange
On
April 30, 2020, the Company entered into a Share Exchange Agreement
with TransWorld Enterprises Inc. (“TW”), a Delaware
Corporation. As part of the exchange the Company has agreed to
issue 1,000,000 share of Series D Preferred Stock and 1,000,000
shares of Series F Preferred Stock in exchange for all the equity
interest of TW. TW, as a holding company, will focus on acquiring
controlling interests in profitable basic businesses. Initially, TW
will focus on acquiring transportation companies and simple
manufacturing and or consumer products businesses.
Sale of Series E Preferred Stock
On
January 15, 2020, the Company sold 125,000 shares of Series E
Preferred Stock for $12,500, or $10 per share.
Convertible notes payable
On May
8, 2020, the Company issued an aggregate $3,000,000 in convertible
notes payable to an investment group with an original issue
discount of $300,000. The notes have a coupon rate of 8% and a
maturity date of May 8, 2021. The notes have a conversion price of
the lower of (i) $0.25 or (ii) the average VWAP of the Common Stock
for the immediately preceding twenty (20) Trading Days on the
Trading Market on the date of completion. In connection with the
notes, the Company issued warrants to purchase 7,600,000 shares of
common stock with an exercise price of $0.50 and expiration date of
2 years. The Holders will also receive 7.5 shares of the
Company’s Series G Preferred Stock to be issued to the
Purchaser at Closing, which shall be convertible into 7.5% of the
Company’s issued and outstanding common stock upon
consummation of the Reverse Stock Split.
On May
8, 2020, the Company issued $500,000 in convertible notes payable
to an investor with an original issue discount of $45,000. The
notes have a coupon rate of 8% and a maturity date of May 8, 2021.
The notes have a conversion price of the lower of (i) $0.25
or
(ii)
the average VWAP of the Common Stock for the immediately preceding
twenty (20) Trading Days on the Trading Market on the date of
completion. In connection with the notes, the Company issued
warrants to purchase 1,151,515 shares of common stock with an
exercise price of $0.50 and expiration date of 2
years.
PTGI
International Carrier Services, Inc and Subsidiaries
REVIEW OF FINANCIAL
STATEMENTS
Periods Ended
September 30, 2020 and September 30, 2019
PTGI
INTERNATIONAL CARRIER SERVICES INC
AND SUBSIDIARIES
PERIODS
ENDED SEPTEMBER 30, 2020 and 2019
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Consolidated Financial Statements
|
|
Report
of the Independent Accountant
|
F-41
|
Consolidated
Balance Sheets
|
F-42
|
Consolidated
Statements of Operations
|
F-43
|
Consolidated
Statement of Comprehensive Income
|
F-44
|
Consolidated
Statements of Changes in Stockholder’s Equity
(Deficit)
|
F-45
|
Consolidated
Statements of Cash Flows
|
F-46
|
Notes
to the Financial Statements
|
F-47
|
INDEPENDENT
ACCOUNTANT’S REVIEW REPORT
To
Management
PTGI International
Carrier Services, Inc.
New York,
NY
We have reviewed
the accompanying financial statements of PTGI International Carrier
Services, Inc. and subsidiaries, which comprise the consolidated
balance sheets as of September 30, 2020 and 2019, and the related
consolidated statements of operations, comprehensive income,
changes in stockholder’s equity, and cash flows for the nine
months ended September 30, 2020 and 2019, and the related notes to
the consolidated financial statements (the “financial
statements”). A review includes primarily applying analytical
procedures to management’s financial data and making
inquiries of company management. A review is substantially less in
scope than an audit, the objective of which is the expression of an
opinion regarding the financial statements as a whole. Accordingly,
we do not express such an opinion.
Management’s
Responsibility for the Financial Statements
Management is
responsible for the preparation and fair presentation of these
financial statements in accordance with accounting principles
generally accepted in the United States of America; this includes
the design, implementation, and maintenance of internal control
relevant to the preparation and fair presentation of financial
statements that are free from material misstatement, whether due to
fraud or error.
Accountant’s
Responsibility
Our responsibility
is to conduct the review engagement in accordance with Statements
on Standards for Accounting and Review Services promulgated by the
Accounting and Review Services Committee of the AICPA. Those
standards require us to perform procedures to obtain limited
assurance as a basis for reporting whether we are aware of any
material modifications that should be made to the financial
statements for them to be in accordance with accounting principles
generally accepted in the United States of America. We believe that
the results of our procedures provide a reasonable basis for our
conclusion.
Accountant’s
Conclusion
Based on our
review, we are not aware of any material modifications that should
be made to the accompanying financial statements in order for them
to be in accordance with accounting principles generally accepted
in the United States of America.
Substantial
Doubt about the Company’s Ability to Continue as a Going
Concern
The accompanying
financial statements have been prepared assuming that the Company
will continue as a going concern. As discussed in Note 4 to the
financial statements, the Company had significant net losses for
the period ended December 31, 2019 and received subsequent funding
from its parent. Management’s evaluation of the events and
conditions and management’s plans regarding the matter also
are described in Note 4. The realization of a major portion of its
assets is dependent upon the success of its future operations. The
financial statements do not include any adjustments that might
result from the outcome of this uncertainty.
Seligson &
Giannattasio, LLP
White Plains, New
York
February 8,
2021
PTGI
INTERNATIONAL CARRIER SERVICES INC
AND SUBSIDIARIES
CONSOLIDATED
BALANCE SHEETS
|
|
|
Assets
|
|
|
Current
assets
|
|
|
Cash and cash
equivalents
|
$11,288,565
|
$41,112,864
|
Accounts
receivable, net
|
50,741,380
|
61,076,381
|
Investments in
futures contracts
|
10,958,540
|
-
|
Other current
assets net
|
2,022,986
|
1,851,229
|
Total
current assets
|
75,011,471
|
104,040,474
|
|
|
|
Property, plant and
equipment, net
|
508,372
|
839,522
|
Non-current
assets
|
3,452
|
22,717
|
Goodwill
|
-
|
2,998,752
|
Total
Assets
|
$75,523,295
|
$107,901,465
|
|
|
|
Liabilities
& Stockholder’s Equity (Deficit)
|
|
|
Current
liabilities
|
|
|
Accounts
payable
|
$19,231,745
|
$47,383,680
|
Accrued
liabilities
|
43,476,625
|
51,278,860
|
Futures contract
liabilities
|
10,957,340
|
-
|
Notes
payable-current maturities
|
109,164
|
242,486
|
Related party
payable
|
-
|
20,549
|
Total
current liabilities
|
73,774,874
|
98,925,575
|
Other
liabilities
|
|
|
Notes
payable less current maturities
|
-
|
109,164
|
|
|
|
Total
Liabilities
|
73,774,874
|
99,034,739
|
|
|
|
Stockholders'
Equity (Deficit)
|
|
|
Common stock, $1
par value; 100 shares authorized; 100 shares issued and
outstanding
|
100
|
100
|
Additional paid in
capital
|
191,227,944
|
199,121,632
|
Accumulated Other
Comprehensive Income(loss)
Currency
Translation Adjustment
|
(8,013,161)
|
(8,084,044)
|
Accumulated
deficit
|
(181,466,462)
|
(182,170,962)
|
Total Stockholders'
Equity
|
1,748,421
|
8,866,726
|
Total
Liabilities and Stockholders' Equity (Deficit)
|
$75,523,295
|
$107,901,465
|
The
accompanying notes are an integral part of these consolidated
financial statements.
PTGI INTERNATIONAL CARRIER SERVICES, INC. AND
SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
Revenues
|
$430,101,704
|
$506,972,842
|
Cost of goods
sold
|
424,434,212
|
498,461,018
|
Gross
margin
|
5,667,492
|
8,511,824
|
|
|
|
Operating
expenses
|
|
|
Professional
fees
|
327,552
|
744,781
|
General and
administrative
|
4,527,315
|
5,683,005
|
Depreciation
expense
|
251,212
|
259,643
|
Total
operating expenses
|
5,106,079
|
6,687,429
|
|
|
|
Net operating
income
|
561,413
|
1,824,395
|
|
|
|
Other
income (expense)
|
|
|
Loss
on goodwill impairment
|
-
|
(1,376,718)
|
Other
income (expense)
|
2,072,220
|
(13,079)
|
Interest
income
|
69
|
-
|
Contingent
consideration (gain) loss
|
(30,514)
|
332,586
|
Derivative
FX gain (loss)
|
331,271
|
(59,753)
|
Total
other income (expense)
|
2,373,046
|
(1,116,964)
|
|
|
|
Income before
provision for income taxes
|
2,934,459
|
707,431
|
|
|
|
Provision for
income taxes (Benefit)
|
-
|
-
|
|
|
|
Net
income
|
$2,934,459
|
$707,431
|
The
accompanying notes are an integral part of these consolidated
financial statements.
PTGI INTERNATIONAL CARRIER SERVICES, INC. AND
SUBSIDIARIES
|
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
|
|
|
|
|
|
Net
Income
|
$2,934,459
|
$707,431
|
Other
comprehensive income
|
|
|
Foreign
currency translation adjustment, Net of tax
|
(25,321)
|
(45,986)
|
Comprehensive
income
|
$2,909,138
|
$661,445
|
The
accompanying notes are an integral part of these consolidated
financial statements.
PTGI
INTERNATIONAL CARRIER SERVICES, INC. AND SUBSIDIARIES
|
CONSOLIDATED
STATEMENTS OF CHANGES IN STOCKHOLDER’S EQUITY
(DEFICIT)
|
FOR
THE PERIODS ENDED SEPTEMBER 30, 2020 AND SEPTEMBER 30,
2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance January
1, 2020
|
100
|
$100
|
$187,121,632
|
$(184,400,921)
|
$(7,987,840)
|
$(5,267,029)
|
|
|
|
|
|
|
|
Payment of
dividends
|
-
|
-
|
(6.410,713)
|
-
|
-
|
(6,410,713)
|
|
|
|
|
|
|
|
Equity adjustment-Intercompany
payable forgiven
|
-
|
-
|
17,025
|
-
|
-
|
17,025
|
Net income
|
-
|
-
|
-
|
2,934,459
|
-
|
2,934,459
|
Contribution by parent
(HC2)
|
-
|
-
|
10,500,000
|
-
|
-
|
10,500,000
|
Other comprehensive
income
|
|
|
|
|
(25,321)
|
(25,321)
|
Balance September
30, 2020
|
100
|
100
|
191,227,944
|
(181,466,462)
|
(8,013,161)
|
1,748,421
|
Balance January
1, 2019
|
100
|
$100
|
$203,421,632
|
$(182,878,393)
|
$(8,038,058)
|
$12,505,281
|
Payment of
dividends
|
-
|
-
|
(4,300,000)
|
-
|
-
|
(4,300,000)
|
|
|
|
|
|
|
|
Other comprehensive
income
|
-
|
-
|
-
|
-
|
(45,986)
|
(45,986)
|
|
|
|
|
|
|
|
Net income
|
-
|
-
|
-
|
707,431
|
-
|
707,431
|
|
|
|
|
|
|
|
Balance September
30, 2019
|
100
|
$100
|
$199,121,632
|
$(182,170,962)
|
$(8,084,044)
|
$8,866,726
|
The
accompanying notes are an integral part of these consolidated
financial statements.
PTGI
INTERNATIONAL CARRIER SERVICES, INC. AND SUBSIDIARIES
|
CONSOLIDATED
STATEMENTS OF CASH FLOWS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
Flows from Operating Activities
|
|
|
Net
income
|
$2,934,459
|
$707,431
|
Adjustments to
reconcile net income to net
|
|
|
cash used by
operating activities:
|
|
|
Depreciation and
amortization
|
251,212
|
259,643
|
Loss on impairment
of goodwill
|
-
|
1,376,718
|
Provision for
doubtful accounts receivable
|
(15,666)
|
24,893
|
(Gain) loss on
contingent consideration
|
30,514
|
(332,586)
|
(Gain) loss on
foreign currency exchange
|
(331,271)
|
59,753
|
Changes in
operating assets & liabilities
|
|
|
Accounts
receivable
|
1,675,164
|
56,451,670
|
Intercompany
receivable, net
|
20,008
|
(22,164)
|
Other
assets
|
44,574
|
(70,857)
|
Accounts payable
and other current liabilities
|
(32,238,339)
|
(27,910,183)
|
Other
liabilities
|
(107,624)
|
6,541
|
Net cash provided
by (used by) operating activities
|
(27,736,969)
|
30,550,859
|
|
|
|
Cash
Flows from Investing Activities
|
|
|
Purchase of
property, plant and equipment
|
(4,091)
|
(7,566)
|
Net investments in
Futures Contracts
|
(1,200)
|
-
|
Net cash used by
investing activities
|
(5,291)
|
(7,566)
|
|
|
|
Cash
Flows from Financing Activities
Contribution
from HC2 Holdings, Inc
|
10,500,000
|
-
|
Payment of
dividends to HC2 Holdings, Inc
|
(6,410,713)
|
(4,300,000)
|
Cash paid for
contingent liability
|
(74,952)
|
(119,886)
|
Net cash (used by)
provided by financing activities
|
4,014,335
|
(4,419,886)
|
|
|
|
Effects of exchange
rate changes on cash and cash equivalents
|
455,371
|
(34,574)
|
|
|
|
Increase (decrease)
in cash and cash equivalents
|
(23,272,554)
|
26,088,833
|
|
|
|
Cash and cash
equivalents at beginning of period
|
34,561,119
|
15,024,031
|
|
|
|
Cash and cash
equivalents at end of period
|
$11,288,565
|
$41,112,864
|
|
|
|
Supplemental Cash
Flow Information
|
|
|
Cash paid for
interest
|
$-
|
$-
|
Cash paid for
income taxes
|
$-
|
$-
|
The
accompanying notes are an integral part of these consolidated
financial statements.
PTGI
INTERNATIONAL CARRIER SERVICES INC AND
SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE
1 – NATURE OF OPERATIONS
PTGI INTERNATIONAL CARRIER
SERVICES INC (PTGI) was incorporated on December 13, 2007 as
Arbinet Carrier Services, Inc. under the laws of the State of
Delaware. On February 25, 2013, the Company’s name was
changed to PTGI International Carrier Services, Inc. PTGI is a
global wholesale telecommunications provider offering a network of
direct routes and provides premium voice communication services for
national telecommunications operators, mobile operators, wholesale
carriers, prepaid operators, voice over internet protocol service
operators and internet service providers. PTGI provides a quality
service via direct routes and by forming strong relationships with
carefully selected partners.
NOTE
2 – SUMMARY OF SIGNIFCANT ACCOUNTING POLICIES
Basis of Presentation
The
consolidated financial statements have been prepared in conformity
with accounting principles generally accepted in the United States
of America (“GAAP”).
Principles of Consolidation
The consolidated
financial statements include the accounts of PTGI International
Carrier Services, Inc. and its wholly owned subsidiaries
Go2Tel.com, Inc., a company organized under the laws of the State
of Florida, GU2TEL Spain, SLU, a Spanish entity, PTGI International
Carrier Services, Ltd, a United Kingdom entity and PTGI-ICS OPSRO
S.R.L, a Romanian entity, collectively referred to as the Company.
All material intercompany accounts, transactions and profits were
eliminated in consolidation. PTGI-ICS OPSRO S.R.L, a company
organized under the laws of Romania was deregistered effective
September 30, 2020.
Use of Estimates
The
preparation of financial statements in conformity with GAAP
requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from these
estimates.
Revenue Recognition
The Company
recognizes revenue in accordance with Accounting Standards Update
(“ASU”) 2014-09, “Revenue from contracts with
customers,” (Topic 606). Revenue is recognized when a
customer obtains control of promised goods or services. In
addition, the standard requires disclosure of the nature, amount,
timing, and uncertainty of revenue and cash flows arising from
contracts with customers. The amount of revenue that is recorded
reflects the consideration that the Company expects to receive in
exchange for those services. The Company applies the following
five-step model in order to determine this amount: (i)
identification of the promised services in the contract; (ii)
determination of whether the promised services are performance
obligations, including whether they are distinct in the context of
the contract; (iii) measurement of the transaction price, including
the constraint on variable consideration; (iv) allocation of the
transaction price to the performance obligations; and (v)
recognition of revenue when (or as) the Company satisfies each
performance obligation. The Company’s main revenue stream is
from the provision of telecommunications services. The Company
recognizes as revenues the amount of the transaction price that is
allocated to the respective performance obligation when the
performance obligation is satisfied or as it is satisfied.
Generally, the Company's performance obligations are transferred to
customers at a point in time, typically upon delivery.
PTGI operates an
extensive network of direct routes and offers premium voice
communication services for carrying a mix of business, residential
and carrier long-distance traffic, data and transit traffic.
Customers may have a bilateral relationship with PTGI, meaning they
have both a customer and vendor relationship with PTGI. In these
cases, PTGI sells the customer access to the PTGI supplier routes
but also purchases access to the customer’s supplier routes.
Net revenue is derived from the long-distance data and transit
traffic. Net revenue is earned based on the number of minutes
during a call multiplied by the price per minute, and is recorded
upon completion of a call. Completed calls are billable activity
while incomplete calls are non-billable. Incomplete calls may occur
as a result of technical issues or because the customer’s
credit limit was exceeded and thus the customer routing of traffic
was prevented. Revenue for a period is calculated from information
received through PTGI’s billing software, such as minutes and
market rates. Customized billing software has been implemented to
track the information from the switch and analyze the call detail
records against stored detailed information about revenue rates.
This software provides PTGI with the ability to perform a timely
and accurate analysis of revenue earned in a period. PTGI evaluates
gross versus net revenue recognition for each of its contractual
arrangements by assessing indicators of control and significant
influence to determine whether the PTGI acts as a principal (i.e.
gross recognition) or an agent (i.e. net recognition). PTGI has
determined that it acts as a principal for all of its performance
obligations in connection with all revenue earned. Net revenue
represents gross revenue, net of allowance for doubtful accounts
receivable, service credits and service adjustments. Cost of
revenue includes network costs that consist of access, transport
and termination costs. The majority of PTGI’s cost of revenue
is variable, primarily based upon minutes of use, with transmission
and termination costs being the most significant
expense.
Accounts Receivable
Trade
accounts receivable are recorded at the net invoice value and are
not interest bearing. The Company considers receivables past due
based on the payment terms. The Company reviews its exposure to
accounts receivable and reserves specific amounts if collectability
is no longer reasonably assured. The Company also reserves a
percentage of its trade receivable balance based on collection
history and current economic trends that might impact the level of
future credit losses. The Company re-evaluates such reserves on a
regular basis and adjusts its reserves as needed. The Company also
has credit insurance on certain of its receivables to lessen the
risk of uncollectible accounts. Based on the Company’s
operating history and customer base, bad debts to date have not
been material.
Forward contracts
PTGI enters into
forward contracts for the purchase and sale of currency
futures. Open positions are recorded at market value, with
related unrealized gains and losses, included in income.
Market value has been determined based on published prices.
Unrealized gains and losses are included in investments in futures
contracts and futures contract liabilities , respectively, on the
accompanying balance sheet. The contractual amounts of these
purchases and sales, amounting to approximately $10,958,540 and
$10,957,340 at September 30, 2020.
Fair Value Measurements and Fair Value of Financial
Instruments
Accounting Standard Codification
(“ASC”) Topic 820, Fair Value
Measurements, clarifies the
definition of fair value, prescribes methods for measuring fair
value, and establishes a fair value hierarchy to classify the
inputs used in measuring fair value as follows:
Level
1: Inputs are unadjusted quoted prices in active markets for
identical assets or liabilities available at the measurement
date.
Level
2: Inputs are unadjusted quoted prices for similar assets and
liabilities in active markets, quoted prices for identical or
similar assets and liabilities in markets that are not active,
inputs other than quoted prices that are observable, and inputs
derived from or corroborated by observable market
data.
Level
3: Inputs are unobservable inputs which reflect the reporting
entity's own assumptions on what assumptions the market
participants would use in pricing the asset or liability based on
the best available information.
The
estimated fair value of certain financial instruments, including
all current liabilities are carried at historical cost basis, which
approximates their fair values because of the short-term nature of
these instruments.
Fair Value of Financial Instruments
ASC subtopic 825-10, Financial Instruments
("ASC 825-10") requires disclosure of
the fair value of certain financial instruments. The carrying value
of cash and cash equivalents, accounts receivable, accounts payable
and accrued liabilities as reflected in the balance sheets,
approximate fair value because of the short-term maturity of these
instruments. All other significant financial assets, financial
liabilities and equity instruments of the Company are either
recognized or disclosed in the financial statements together with
other information relevant for making a reasonable assessment of
future cash flows, interest rate risk and credit risk. Where
practicable the fair values of financial assets and financial
liabilities have been determined and disclosed; otherwise only
available information pertinent to fair value has been
disclosed.
The Company follows ASC subtopic 820-10,
Fair Value
Measurements and Disclosures ("ASC 820-10") and ASC 825-10, which permits
entities to choose to measure many financial instruments and
certain other items at fair value.
Cash and Cash Equivalents
The
Company considers all highly liquid investments with an original
maturity of three months or less to be cash
equivalents.
Long-Lived Assets
Our
long-lived assets include property, plant and equipment and other
indefinite lived intangible assets. We evaluate our long-lived
assets for impairment, other than indefinite lived intangible
assets, in accordance with ASC 360, whenever events or changes in
circumstances indicate that the carrying amount of such assets may
not be recoverable. Estimates of future cash flows and timing of
events for evaluating long-lived assets for impairment are based
upon management’s judgment. If any of our intangible or
long-lived assets are considered to be impaired, the amount of
impairment to be recognized is the excess of the carrying amount of
the assets over its fair value.
Applicable
long-lived assets are amortized or depreciated over the shorter of
their estimated useful lives, the estimated period that the assets
will generate revenue, or the statutory or contractual term in the
case of patents. Estimates of useful lives and periods of expected
revenue generation are reviewed periodically for appropriateness
and are based upon management’s judgment.
Impairment of Goodwill
The
Company evaluates indefinite lived intangible assets for impairment
at least annually and whenever impairment indicators are present in
accordance with ASC 350. When necessary, the Company records an
impairment loss for the amount by which the fair value is less than
the carrying value of these assets. The fair value of intangible
assets other than goodwill is typically determined using the
“relief from royalty method”, specifically the
discounted cash flow method utilizing Level 3 fair value inputs.
Some of the more significant estimates and assumptions inherent in
this approach include: the amount and timing of the projected net
cash flows, which includes the expected impact of competitive,
legal and/or regulatory forces on the projections, as well as the
selection of a long-term growth rate; the discount rate, which
seeks to reflect the various risks inherent in the projected cash
flows; and the tax rate, which seeks to incorporate the geographic
diversity of the projected cash flows.
The
Company performs impairment testing for all other long-lived assets
whenever impairment indicators are present. When necessary, the
Company calculates the undiscounted value of the projected cash
flows associated with the asset, or asset group, and compares this
estimated amount to the carrying amount. If the carrying amount is
found to be greater, we record an impairment loss for the excess of
book value over fair value. During the period ended September 30,
2019, the Company determined that the existing goodwill should be
impaired and reported an impairment charge totaling
$1,376,718.
Depreciation and Amortization
Fixed
assets are recorded at cost. Depreciation is generally calculated
on a straight-line method and amortization of leasehold
improvements is provided for on the straight-line method over the
estimated useful lives of the various assets as
follows:
Telco
equipment
|
7
years
|
Computer
hardware
|
3
years
|
Computer
software
|
3
years
|
Furniture
and fixtures
|
5
years
|
|
|
Maintenance
and repairs are expensed as incurred while renewals and betterments
are capitalized.
Advertising, Marketing and Public Relations
The Company follows the policy of charging the
costs of advertising, marketing, and public relations to expense as
incurred. There were no advertising expenses for the
reporting periods.
Income Taxes
Income
taxes are accounted for under the asset and liability method.
Deferred tax assets and liabilities are recognized for the future
tax consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities and
their respective tax bases and operating loss, capital loss and tax
credit carryforwards. Deferred tax assets and liabilities are
measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are
expected to be recovered or settled. The effect on deferred tax
assets and liabilities of a change in tax rates is recognized in
income in the period that includes the enactment date.
For
all periods presented, PTGI was included in the consolidated income
tax returns of its Parent, HC2 Holdings, Inc. (“HC2”).
All losses incurred by PTGI were utilized by PTGI or by HC2 in the
consolidated tax filings.
The
Company recognizes the effect of income tax positions only if those
positions are more likely than not of being sustained. Recognized
income tax positions are measured at the largest amount that is
greater than 50% likely of being realized. Changes in recognition
or measurement are reflected in the period in which the change in
judgment occurs. The Company records interest and penalties related
to unrecognized tax benefits as a component of general and
administrative expenses. Our federal tax return and any state tax
returns are not currently under examination.
The Company has adopted FASB ASC 740-10,
Accounting for
Income Taxes, which requires an
asset and liability approach to financial accounting and reporting
for income taxes. Deferred income tax assets and liabilities are
computed annually from differences between the financial statement
and tax basis of assets and liabilities that will result in taxable
or deductible amounts in the future based on enacted tax laws and
rates applicable to the periods in which the differences are
expected to affect taxable income. Valuation allowances are
established when necessary to reduce deferred tax assets to the
amount expected to be realized.
Leases
In February 2016, the
FASB issued Accounting Standards Update No.
2016-02, Leases
(Topic 842) (“Topic
842”). Topic 842 requires the entity to recognize the assets
and liabilities for the rights and obligations created by leased
assets. Leases will be classified as either finance or operating,
with classification affecting expense recognition in the income
statement.
On
January 1, 2019, the Company adopted Topic 842 applying the
optional transition method, which allows an entity to apply the new
standard at the adoption date with a cumulative effect adjustment
to the opening balance of retained earnings in the period of
adoption. As a result of adopting Topic 842, the Company recognized
assets and liabilities for the rights and obligations created by
operating leases totaling approximately $3,926.
The
Company determines if a contract contains a lease at inception
based on whether it conveys the right to control the use of an
identified asset. Substantially all of the Company’s leases
are classified as operating leases. The Company records operating
lease right-of-use assets within “Other assets” and
lease liabilities are recorded within “current and noncurrent
liabilities” in the consolidated balance sheets. Lease
expenses are recorded within “General and administrative
expenses” in the consolidated statements of operations.
Operating lease payments are presented within “Operating cash
flows” in the consolidated statements of cash
flows.
Operating
lease right-of-use assets and lease liabilities are recognized
based on the net present value of future minimum lease payments
over the lease term starting on the commencement date. The Company
generally is not able to determine the rate implicit in its leases
and, as such, applies an incremental borrowing rate based on the
Company’s cost of borrowing for the relevant terms of each
lease. Lease expense for minimum lease payments is recognized on a
straight-line basis over the lease term. Lease terms may include an
option to extend or terminate a lease if it is reasonably certain
that the Company will exercise such options. The Company has
elected the practical expedient to not separate lease components
from non-lease components, and also has elected not to record a
right-of-use asset or lease liability for leases which, at
inception, have a term of twelve months or less. Variable lease
payments are recognized in the period in which the obligation for
those payments is incurred.
NOTE
3 – CONCENTRATION OF CREDIT RISKS
The
Company's cash and cash equivalents, marketable securities and
accounts receivable are monitored for exposure to concentrations of
credit risk. The Company maintains substantially all of its cash
balances in a limited number of financial institutions. The
balances are each insured by the Federal Deposit Insurance
Corporation up to $250,000. The Company had balances in excess of
this limit at September 30, 2020 and 2019 totaling $10,788,565 and
$40,612,864, respectively.
NOTE
4 – GOING CONCERN
PTGI's consolidated financial statements are
prepared using the GAAP applicable to a going concern, which
contemplates the realization of assets and liquidation of
liabilities in the normal course of business. At
September
30,
2020, PTGI had
$11,288,565 in cash and $1,236,597 in working
capital, respectively. Losses may adversely affect the liquidity of PTGI
in the future. During 2020, PTGI received a total of $10,500,000 in
capital contributions from HC2. Had these contributions not been
received, PTGI would have had negative working capital and
stockholder’s equity at September 30,2020. The consolidated
financial statements do not include any adjustments relating to the
recoverability and classification of recorded asset amounts or
amounts and classification of liabilities that might be necessary
should PTGI be unable to continue as a going
concern.
NOTE
5 – PROPERTY, PLANT AND EQUIPMENT
Property, plant and
equipment consisted of the following at September 30, 2020 and
2019:
|
|
|
|
|
|
|
|
|
Telco
equipment
|
$2,271,955
|
$2,270,449
|
Computer
hardware
|
137,604
|
132,991
|
Computer
software
|
27,751
|
27,751
|
Furniture
& fixtures
|
824
|
824
|
|
2,438,134
|
2,432,015
|
Less:
Accumulated depreciation
|
(1,929,762)
|
(1,592,493)
|
Property
Plant and Equipment
|
$508,372
|
$839,522
|
Depreciation
expense was $251,212 and $259,643 for the nine months ended
September 30, 2020 and 2019, respectively.
NOTE
6 – ACCRUED LIABILITIES
In the normal
course of business PTGI incurs costs that can be billed by the
suppler in a subsequent period. To ensure proper presentation the
unbilled costs are accrued at each month end. As invoices are
received the accrued payable is relieved and the correct payable
reflected in the accounts payable account. During 2020, PTGI
renegotiated several contracts with vendors. As a result, the
Company entered settlements that resulted in a $2 million reduction
in the amounts due. This is included in the income statement in
other income.
NOTE
7 – ACQUISITION OF G02TEL.COM
In November 2018,
PTGI entered into a purchase agreement to acquire the stock of
GO2Tel.com and its subsidiary. Pursuant to the agreement, PTGI paid
$200,000 and is required to pay 20% of the gross margin for the
following 24 months (Earnout Provision) in exchange for all the
outstanding shares of GO2Tel.com common stock. Payment of the
earnout provision is made quarterly but no less than $30,000. The
company reported the original purchase price based on 20% of the
estimated gross margin for the following 24 months plus the initial
cash payment. Remeasurement of the expected payout at period end
resulted in a gain adjustment to the Contingent Consideration due
of $30,514. The original amount of these earnout provision was
$797,580. As of September 30, 2020, $109,164 remains on the earnout
provision.
NOTE
8 – RELATED PARTY PAYABLE
PTGI
uses shares facilities and corporate services provided by HC2. The
facilities include shared IT platforms. Corporate services include
IT and tax-related support. For use of the HC2 provided services,
cost allocations are transferred and paid monthly.
NOTE
9 – COMMITMENTS AND CONTINGENCIES
During the normal course of business, the Company
may be exposed to litigation. When the Company becomes aware of
potential litigation, it evaluates the merits of the case in
accordance with FASB ASC 450-20-50, Contingencies.
The Company evaluates its exposure to the matter, possible legal or
settlement strategies and the likelihood of an unfavorable outcome.
If the Company determines that an unfavorable outcome is probable
and can be reasonably estimated, it establishes the necessary
accruals. As of December 31,
2019, and
2018, the Company is not aware
of any contingent liabilities that should be reflected in the
consolidated financial statements.
NOTE
10 – SUBSEQUENT EVENTS
PTGI Stock Purchase Agreement
On October 2, 2020, the Shareholder
of the Company, ICS Group Holdings, Inc., entered into
a Stock Purchase Agreement with TransWorld Holdings, Inc (TRW).
pursuant to which TRW agreed to
acquire 100% of the outstanding voting securities of PTGI in
consideration for $1,000,000 (the “PTGI Acquisition”).
The closing of the PTGI Acquisition occurred on October 31,
2020.
PTGI
International Services, Ltd transfer
On October 10,
2020, the Shares of PTGI International Services, Ltd (PTGI Ltd)
were transferred to the Company’s Shareholder, ICS Group
Holdings, Inc for nominal consideration. Under the terms of the
PTGI Stock Purchase Agreement with TRW, PTGI Ltd would continue to
provide sales support services to PTGI through February 28,
2021.
PTGI
International Carrier Services, Inc and Subsidiaries
CONSOLIDATED
FINANCIAL STATEMENTS
For the Years
Ended
December 31, 2019
and December 31, 2018
PTGI
INTERNATIONAL CARRIER SERVICES INC
AND SUBSIDIARIES
FOR
THE YEARS ENDED DECEMBER 31, 2019 and 2018
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Consolidated Financial Statements
|
|
Report
of Independent Registered Public Accountancy Firm
|
F-54
|
Consolidated Balance Sheets at December
31, 2019 and
December 31, 2018
|
F-55
|
Consolidated Statements of Operations for the
years ended December
31, 2019 and 2018
|
F-56
|
Consolidated
Statements of Comprehensive Income (Loss)
|
F-57
|
Consolidated Statement of Changes in
Stockholder’s Equity (Deficit) for the years
ended December 31, 2019 and 2018
|
F-58
|
Consolidated Statements of Cash Flows for the
years December
31, 2019 and 2018
|
F-59
|
Notes to Consolidated Financial Statements
|
F-60
|
REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To
the Board of Directors and Stockholder’s of
PTGI
International Carrier Services, Inc.
Opinion on the Financial Statements
We
have audited the accompanying consolidated balance sheets of PTGI
International Carrier Services, Inc. and subsidiaries (the
"Company") as of December 31, 2019 and 2018, and the related
consolidated statements of operations, stockholder’s deficit,
comprehensive income (loss) and cash flows for each of the years in
the two-year period ended December 31, 2019, and the related notes
(collectively referred to as the “financial
statements”). In our opinion, the consolidated financial
statements present fairly, in all material respects, the
consolidated financial position of the Company as of December 31,
2019 and 2018 and the results of their operations and their cash
flows for each of the years in the two-year period ended December
31, 2019, in conformity with accounting principles generally
accepted in the United States of America.
Basis of Opinion
These
financial statements are the responsibility of the Company’s
management. Our responsibility is to express an opinion on the
Company’s consolidated financial statements based on our
audits. We are a public accounting firm registered with the Public
Company Accounting Oversight Board (United States)
(“PCAOB”) and are required to be independent with
respect to the Company in accordance with the U.S. federal
securities laws and the applicable rules and regulations of the
Securities and Exchange Commission and the PCAOB.
We
conducted our audits in accordance with the standards of the PCAOB.
Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the consolidated
financial statements are free of material misstatement, whether due
to error or fraud. The Company is not required to have, nor were we
engaged to perform, an audit of its internal control over financial
reporting. As part of our audits we are required to obtain an
understanding of internal control over financial reporting, but not
for the purpose of expressing an opinion on the effectiveness of
the Company’s internal control over financial reporting.
Accordingly, we express no such opinion.
Our
audits included performing procedures to assess the risks of
material misstatement of the financial statements, whether due to
error or fraud, and performing procedures that respond to those
risks. Such procedures included examining, on a test basis,
evidence regarding the amounts and disclosures in the financial
statements. Our audits also included evaluating the accounting
principles used and significant estimates made by management, as
well as evaluating the overall presentation of the financial
statements. We believe that our audits provide a reasonable basis
for our opinion.
Going Concern
The
accompanying consolidated financial statements have been prepared
assuming the Company will continue as a going concern. As discussed
in Note 4 to the financial statements, the Company has incurred
significant recurring losses. The realization of a major portion of
its assets is dependent upon its ability to meet its future
financing needs and the success of its future operations. These
factors raise substantial doubt about the Company’s ability
to continue as a going concern. The financial statements do not
include any adjustments that might result from this
uncertainty.
Seligson
& Giannattasio, LLP
We
have served as the Company’s auditor since 2020.
White
Plains, New York
February
3, 2021
PTGI
INTERNATIONAL CARRIER SERVICES INC
AND SUBSIDIARIES
CONSOLIDATED
BALANCE SHEETS
|
|
|
Assets
|
|
|
Current
assets
|
|
|
Cash and cash
equivalents
|
$34,561,119
|
$15,024,031
|
Accounts
receivable, net
|
51,849,911
|
117,561,914
|
Other current
assets net
|
2,143,501
|
1,829,886
|
Total
current assets
|
88,554,531
|
134,415,831
|
|
|
|
Property, plant and
equipment, net
|
755,516
|
1,091,623
|
Non-current
assets
|
15,494
|
19,440
|
Goodwill
|
-
|
4,375,470
|
Total
Assets
|
$89,325,541
|
$139,902,364
|
|
|
|
Liabilities
& Stockholder’s Equity (Deficit)
|
|
|
Current
liabilities
|
|
|
Accounts
payable
|
$49,467,157
|
$21,538,208
|
Accrued
liabilities
|
44,846,707
|
105,018,582
|
Notes
payable-current maturities
|
261,226
|
398,790
|
Related party
payable
|
17,480
|
42,713
|
Total
current liabilities
|
94,592,570
|
126,998,293
|
Other
liabilities
|
|
|
Notes payable less
current maturities
|
-
|
398,790
|
|
|
|
Total
Liabilities
|
94,592,570
|
127,397,083
|
|
|
|
Stockholders'
Equity (Deficit)
|
|
|
Common stock, $1
par value; 100 shares authorized; 100 shares issued and
outstanding
|
100
|
100
|
Additional paid in
capital
|
187,121,632
|
203,421,632
|
Accumulated Other
Comprehensive Income(loss)
Currency
Translation Adjustment
|
(7,987,840)
|
(8,038,058)
|
Accumulated
deficit
|
(184,400,921)
|
(182,878,393)
|
Total Stockholders'
Equity (Deficit)
|
(5,267,029)
|
12,505,281
|
Total
Liabilities and Stockholders' Equity (Deficit)
|
$89,325,541
|
$139,902,364
|
The
accompanying notes are an integral part of these consolidated
financial statements.
PTGI INTERNATIONAL CARRIER SERVICES, INC. AND
SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
Revenues
|
$696,119,986
|
$793,466,665
|
Cost of goods
sold
|
684,877,653
|
778,988,522
|
Gross
margin
|
11,242,333
|
14,478,143
|
|
|
|
Operating
expenses
|
|
|
Professional
fees
|
1,017,247
|
941,124
|
General and
administrative
|
7,277,222
|
8,520,763
|
Depreciation
expense
|
345,215
|
347,608
|
Total
operating expenses
|
8,639,684
|
9,809,495
|
|
|
|
Net operating
income
|
2,602,649
|
4,668,648
|
|
|
|
Other
income (expense)
|
|
|
Loss
on goodwill impairment
|
(4,463,720)
|
-
|
Other
income (expense)
|
(25,356)
|
(34,573)
|
Interest
expense
|
-
|
(372)
|
Interest
income
|
1,233
|
-
|
Contingent
consideration (gain) loss
|
377,446
|
-
|
Derivative
FX gain (loss)
|
(20,193)
|
(24,434)
|
Total
other income (expense)
|
(4,130,590)
|
(59,379)
|
|
|
|
Income (loss)
before provision for income taxes
|
(1,527,941)
|
4,609,269
|
|
|
|
Provision for
income taxes (Benefit)
|
(5,413)
|
22,745
|
|
|
|
Net
income (loss)
|
$(1,522,528)
|
$4,586,524
|
The
accompanying notes are an integral part of these consolidated
financial statements.
PTGI INTERNATIONAL CARRIER SERVICES, INC. AND
SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
|
|
|
|
|
Net
Income (loss)
|
$(1,522,528)
|
$4,586,524
|
Other
comprehensive income
|
|
|
Foreign
currency translation adjustment, net of tax
|
50,218
|
(2,371,397)
|
Comprehensive
income (loss)
|
$(1,472,310)
|
$2,215,127
|
The
accompanying notes are an integral part of these consolidated
financial statements.
PTGI
INTERNATIONAL CARRIER SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED
STATEMENT OF CHANGES IN STOCKHOLDER’S EQUITY
(DEFICIT)
FOR
THE YEARS ENDED DECEMBER 31, 2019 AND 2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance January
1, 2018
|
100
|
$100
|
$15,528,220
|
$(187,464,917)
|
$(5,666,661)
|
$(177,603,258)
|
|
|
|
|
|
|
|
Payment of
dividends
|
-
|
-
|
(2,500,000)
|
-
|
-
|
(2,500,000)
|
|
|
|
|
|
|
|
Equity adjustment in
reorganization
|
-
|
-
|
190,393,412
|
-
|
-
|
190,393,412
|
Net income
|
-
|
-
|
-
|
4,586,524
|
-
|
4,586,524
|
Other comprehensive
income
|
-
|
-
|
-
|
-
|
(2,371,397)
|
(2,371,397)
|
|
|
|
|
|
|
|
Balance December
31, 2018
|
100
|
100
|
203,421,632
|
(182,878,393)
|
(8,038,058)
|
12,505,281
|
|
|
|
|
|
|
|
Payment of
dividends
|
-
|
-
|
(16,300,000)
|
-
|
-
|
(16,300,000)
|
|
|
|
|
|
|
|
Other comprehensive
income
|
-
|
-
|
-
|
-
|
50,218
|
50,218
|
|
|
|
|
|
|
|
Net loss
|
-
|
-
|
-
|
(1,522,528)
|
-
|
(1,522,528)
|
|
|
|
|
|
|
|
Balance December
31, 2019
|
100
|
$100
|
$187,121,632
|
$(184,400,921)
|
$(7,987,840)
|
$(5,267,029)
|
The
accompanying notes are an integral part of these consolidated
financial statements.
PTGI
INTERNATIONAL CARRIER SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED
STATEMENTS OF CASH FLOWS
|
|
|
|
|
|
|
|
|
|
|
Cash
Flows from Operating Activities
|
|
|
Net income
(loss)
|
$(1,522,528)
|
$4,586,524
|
Adjustments to
reconcile net income(loss) to net
|
|
|
cash used by
operating activities:
|
|
|
Depreciation and
amortization
|
345,215
|
347,608
|
Loss on impairment
of goodwill
|
4,463,720
|
-
|
Provision for
doubtful accounts receivable
|
119,264
|
313,396
|
(Gain) loss on
contingent consideration
|
(377,446)
|
-
|
(Gain) loss on
foreign currency exchange
|
20,193
|
24,434
|
Changes in
operating assets & liabilities
|
|
|
Accounts
receivable
|
65,589,041
|
(24,143,797)
|
Intercompany
receivable, net
|
(25,231)
|
(165,644)
|
Other
assets
|
(346,092)
|
698,993
|
Accounts payable
and other current liabilities
|
(32,259,846)
|
19,575,614
|
Other
liabilities
|
14,093
|
-
|
Net cash provided
by operating activities
|
36,020,383
|
1,237,128
|
|
|
|
Cash
Flows from Investing Activities
|
|
|
Purchase of
property, plant and equipment
|
(9,073)
|
(120,192)
|
Acquisition of
subsidiary
|
-
|
158,722
|
Net cash (used by)
provided by investing activities
|
(9,073)
|
38,530
|
|
|
|
Cash
Flows from Financing Activities
|
|
|
Payment of
dividends to HC2 Holdings, Inc
|
(16,300,000)
|
(2,500,000)
|
Cash paid for
contingent liability
|
(173,002)
|
-
|
Net cash used by
financing activities
|
(16,473,002)
|
(2,500,000)
|
|
|
|
Effects of exchange
rate changes on cash and cash equivalents
|
(1,220)
|
(27,561)
|
|
|
|
Increase in cash
and cash equivalents
|
19,537,088
|
(1,251,903)
|
|
|
|
Cash and cash
equivalents at beginning of period
|
15,024,031
|
16,275,934
|
|
|
|
Cash and cash
equivalents at end of period
|
$34,561,119
|
$15,024,031
|
|
|
|
Supplemental Cash
Flow Information
|
|
|
Cash paid for
interest
|
$-
|
$-
|
Cash paid for
income taxes
|
$-
|
$-
|
|
|
|
The
accompanying notes are an integral part of these consolidated
financial statements.
PTGI
INTERNATIONAL CARRIER SERVICES INC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE
1 – NATURE OF OPERATIONS
PTGI INTERNATIONAL CARRIER
SERVICES INC (PTGI) was incorporated on December 13, 2007 as
Arbinet Carrier Services, Inc. under the laws of the State of
Delaware. On February 25, 2013, the Company’s name was
changed to PTGI International Carrier Services, Inc. PTGI is a
global wholesale telecommunications provider offering a network of
direct routes and provides premium voice communication services for
national telecommunications operators, mobile operators, wholesale
carriers, prepaid operators, voice over internet protocol service
operators and internet service providers. PTGI provides a quality
service via direct routes and by forming strong relationships with
carefully selected partners.
NOTE
2 – SUMMARY OF SIGNIFCANT ACCOUNTING POLICIES
Basis of Presentation
The
consolidated financial statements have been prepared in conformity
with accounting principles generally accepted in the United States
of America (“GAAP”).
Principles of Consolidation
The consolidated
financial statements include the accounts of PTGI International
Carrier Services, Inc. and its wholly owned subsidiaries
Go2Tel.com, Inc., a company organized under the laws of the State
of Florida, GU2TEL Spain, SLU, a Spanish entity, PTGI International
Carrier Services, Ltd, a United Kingdom entity and PTGI-ICS OPSRO
S.R.L, a Romanian entity, collectively referred to as the Company.
All material intercompany accounts, transactions and profits were
eliminated in consolidation.
Use of Estimates
The
preparation of financial statements in conformity with GAAP
requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from these
estimates.
Revenue Recognition
The Company
recognizes revenue in accordance with Accounting Standards Update
(“ASU”) 2014-09, “Revenue from contracts with
customers,” (Topic 606). Revenue is recognized when a
customer obtains control of promised goods or services. In
addition, the standard requires disclosure of the nature, amount,
timing, and uncertainty of revenue and cash flows arising from
contracts with customers. The amount of revenue that is recorded
reflects the consideration that the Company expects to receive in
exchange for those services. The Company applies the following
five-step model in order to determine this amount: (i)
identification of the promised services in the contract; (ii)
determination of whether the promised services are performance
obligations, including whether they are distinct in the context of
the contract; (iii) measurement of the transaction price, including
the constraint on variable consideration; (iv) allocation of the
transaction price to the performance obligations; and (v)
recognition of revenue when (or as) the Company satisfies each
performance obligation. The Company’s main revenue stream is
from the provision of telecommunications services. The Company
recognizes as revenues the amount of the transaction price that is
allocated to the respective performance obligation when the
performance obligation is satisfied or as it is satisfied.
Generally, the Company's performance obligations are transferred to
customers at a point in time, typically upon delivery.
PTGI operates an
extensive network of direct routes and offers premium voice
communication services for carrying a mix of business, residential
and carrier long-distance traffic, data and transit traffic.
Customers may have a bilateral relationship with PTGI, meaning they
have both a customer and vendor relationship with PTGI. In these
cases, PTGI sells the customer access to the PTGI supplier routes
but also purchases access to the customer’s supplier routes.
Net revenue is derived from the long-distance data and transit
traffic. Net revenue is earned based on the number of minutes
during a call multiplied by the price per minute, and is recorded
upon completion of a call. Completed calls are billable activity
while incomplete calls are non-billable. Incomplete calls may occur
as a result of technical issues or because the customer’s
credit limit was exceeded and thus the customer routing of traffic
was prevented. Revenue for a period is calculated from information
received through PTGI’s billing software, such as minutes and
market rates. Customized billing software has been implemented to
track the information from the switch and analyze the call detail
records against stored detailed information about revenue rates.
This software provides PTGI with the ability to perform a timely
and accurate analysis of revenue earned in a period. PTGI evaluates
gross versus net revenue recognition for each of its contractual
arrangements by assessing indicators of control and significant
influence to determine whether the PTGI acts as a principal (i.e.
gross recognition) or an agent (i.e. net recognition). PTGI has
determined that it acts as a principal for all of its performance
obligations in connection with all revenue earned. Net revenue
represents gross revenue, net of allowance for doubtful accounts
receivable, service credits and service adjustments. Cost of
revenue includes network costs that consist of access, transport
and termination costs. The majority of PTGI’s cost of revenue
is variable, primarily based upon minutes of use, with transmission
and termination costs being the most significant
expense.
Accounts Receivable
Trade
accounts receivable are recorded at the net invoice value and are
not interest bearing. The Company considers receivables past due
based on the payment terms. The Company reviews its exposure to
accounts receivable and reserves specific amounts if collectability
is no longer reasonably assured. The Company also reserves a
percentage of its trade receivable balance based on collection
history and current economic trends that might impact the level of
future credit losses. The Company re-evaluates such reserves on a
regular basis and adjusts its reserves as needed. The Company also
has credit insurance on certain of its receivables to lessen the
risk of uncollectible accounts. Based on the Company’s
operating history and customer base, bad debts to date have not
been material.
Fair Value Measurements and Fair Value of Financial
Instruments
Accounting Standard Codification
(“ASC”) Topic 820, Fair Value
Measurements, clarifies the
definition of fair value, prescribes methods for measuring fair
value, and establishes a fair value hierarchy to classify the
inputs used in measuring fair value as follows:
Level
1: Inputs are unadjusted quoted prices in active markets for
identical assets or liabilities available at the measurement
date.
Level
2: Inputs are unadjusted quoted prices for similar assets and
liabilities in active markets, quoted prices for identical or
similar assets and liabilities in markets that are not active,
inputs other than quoted prices that are observable, and inputs
derived from or corroborated by observable market
data.
Level
3: Inputs are unobservable inputs which reflect the reporting
entity's own assumptions on what assumptions the market
participants would use in pricing the asset or liability based on
the best available information.
The
estimated fair value of certain financial instruments, including
all current liabilities are carried at historical cost basis, which
approximates their fair values because of the short-term nature of
these instruments.
Fair Value of Financial Instruments
ASC subtopic 825-10, Financial Instruments
("ASC 825-10") requires disclosure of
the fair value of certain financial instruments. The carrying value
of cash and cash equivalents, accounts receivable, accounts payable
and accrued liabilities as reflected in the balance sheets,
approximate fair value because of the short-term maturity of these
instruments. All other significant financial assets, financial
liabilities and equity instruments of the Company are either
recognized or disclosed in the financial statements together with
other information relevant for making a reasonable assessment of
future cash flows, interest rate risk and credit risk. Where
practicable the fair values of financial assets and financial
liabilities have been determined and disclosed; otherwise only
available information pertinent to fair value has been
disclosed.
The Company follows ASC subtopic 820-10,
Fair Value
Measurements and Disclosures ("ASC 820-10") and ASC 825-10, which permits
entities to choose to measure many financial instruments and
certain other items at fair value.
Cash and Cash Equivalents
The
Company considers all highly liquid investments with an original
maturity of three months or less to be cash
equivalents.
Long-Lived Assets
Our
long-lived assets include property, plant and equipment and other
indefinite lived intangible assets. We evaluate our long-lived
assets for impairment, other than indefinite lived intangible
assets, in accordance with ASC 360, whenever events or changes in
circumstances indicate that the carrying amount of such assets may
not be recoverable. Estimates of future cash flows and timing of
events for evaluating long-lived assets for impairment are based
upon management’s judgment. If any of our intangible or
long-lived assets are considered to be impaired, the amount of
impairment to be recognized is the excess of the carrying amount of
the assets over its fair value.
Applicable
long-lived assets are amortized or depreciated over the shorter of
their estimated useful lives, the estimated period that the assets
will generate revenue, or the statutory or contractual term in the
case of patents. Estimates of useful lives and periods of expected
revenue generation are reviewed periodically for appropriateness
and are based upon management’s judgment.
Impairment of Goodwill
The
Company evaluates indefinite lived intangible assets for impairment
at least annually and whenever impairment indicators are present in
accordance with ASC 350. When necessary, the Company records an
impairment loss for the amount by which the fair value is less than
the carrying value of these assets. The fair value of intangible
assets other than goodwill is typically determined using the
“relief from royalty method”, specifically the
discounted cash flow method utilizing Level 3 fair value inputs.
Some of the more significant estimates and assumptions inherent in
this approach include: the amount and timing of the projected net
cash flows, which includes the expected impact of competitive,
legal and/or regulatory forces on the projections, as well as the
selection of a long-term growth rate; the discount rate, which
seeks to reflect the various risks inherent in the projected cash
flows; and the tax rate, which seeks to incorporate the geographic
diversity of the projected cash flows.
The
Company performs impairment testing for all other long-lived assets
whenever impairment indicators are present. When necessary, the
Company calculates the undiscounted value of the projected cash
flows associated with the asset, or asset group, and compares this
estimated amount to the carrying amount. If the carrying amount is
found to be greater, we record an impairment loss for the excess of
book value over fair value. During the year ended December 31,
2019, the Company determined that the existing goodwill should be
entirely impaired and reported an impairment charge totaling
$4,463,720.
Depreciation and Amortization
Fixed
assets are recorded at cost. Depreciation is generally calculated
on a straight-line method and amortization of leasehold
improvements is provided for on the straight-line method over the
estimated useful lives of the various assets as
follows:
Telco
equipment
|
7
years
|
Computer
hardware
|
3
years
|
Computer
software
|
3
years
|
Furniture
and fixtures
|
5
years
|
Maintenance
and repairs are expensed as incurred while renewals and betterments
are capitalized.
Advertising, Marketing and Public Relations
The Company follows the policy of charging the
costs of advertising, marketing, and public relations to expense as
incurred. There were no advertising expenses for the years
ended December 31, 2019 and
2018,
respectively.
Income Taxes
Income
taxes are accounted for under the asset and liability method.
Deferred tax assets and liabilities are recognized for the future
tax consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities and
their respective tax bases and operating loss, capital loss and tax
credit carryforwards. Deferred tax assets and liabilities are
measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are
expected to be recovered or settled. The effect on deferred tax
assets and liabilities of a change in tax rates is recognized in
income in the period that includes the enactment date.
For
all periods presented, PTGI was included in the consolidated income
tax returns of its Parent, HC2 Holdings, Inc. (“HC2”).
All losses incurred by PTGI were utilized by PTGI or by HC2 in the
consolidated tax filings. As of December 31, 2019, PTGI does not
have any unused net operating losses or other credits available for
use against future earnings.
The
Company recognizes the effect of income tax positions only if those
positions are more likely than not of being sustained. Recognized
income tax positions are measured at the largest amount that is
greater than 50% likely of being realized. Changes in recognition
or measurement are reflected in the period in which the change in
judgment occurs. The Company records interest and penalties related
to unrecognized tax benefits as a component of general and
administrative expenses. Our federal tax return and any state tax
returns are not currently under examination.
The Company has adopted FASB ASC 740-10,
Accounting for
Income Taxes, which requires an
asset and liability approach to financial accounting and reporting
for income taxes. Deferred income tax assets and liabilities are
computed annually from differences between the financial statement
and tax basis of assets and liabilities that will result in taxable
or deductible amounts in the future based on enacted tax laws and
rates applicable to the periods in which the differences are
expected to affect taxable income. Valuation allowances are
established when necessary to reduce deferred tax assets to the
amount expected to be realized.
Leases
In February 2016, the
FASB issued Accounting Standards Update No.
2016-02, Leases
(Topic 842) (“Topic
842”). Topic 842 requires the entity to recognize the assets
and liabilities for the rights and obligations created by leased
assets. Leases will be classified as either finance or operating,
with classification affecting expense recognition in the income
statement.
On
January 1, 2019, the Company adopted Topic 842 applying the
optional transition method, which allows an entity to apply the new
standard at the adoption date with a cumulative effect adjustment
to the opening balance of retained earnings in the period of
adoption. As a result of adopting Topic 842, the Company recognized
assets and liabilities for the rights and obligations created by
operating leases totaling approximately $3,926.
The
Company determines if a contract contains a lease at inception
based on whether it conveys the right to control the use of an
identified asset. Substantially all of the Company’s leases
are classified as operating leases. The Company records operating
lease right-of-use assets within “Other assets” and
lease liabilities are recorded within “current and noncurrent
liabilities” in the consolidated balance sheets. Lease
expenses are recorded within “General and administrative
expenses” in the consolidated statements of operations.
Operating lease payments are presented within “Operating cash
flows” in the consolidated statements of cash
flows.
Operating
lease right-of-use assets and lease liabilities are recognized
based on the net present value of future minimum lease payments
over the lease term starting on the commencement date. The Company
generally is not able to determine the rate implicit in its leases
and, as such, applies an incremental borrowing rate based on the
Company’s cost of borrowing for the relevant terms of each
lease. Lease expense for minimum lease payments is recognized on a
straight-line basis over the lease term. Lease terms may include an
option to extend or terminate a lease if it is reasonably certain
that the Company will exercise such options. The Company has
elected the practical expedient to not separate lease components
from non-lease components, and also has elected not to record a
right-of-use asset or lease liability for leases which, at
inception, have a term of twelve months or less. Variable lease
payments are recognized in the period in which the obligation for
those payments is incurred.
NOTE
3 – CONCENTRATION OF CREDIT RISKS
The
Company's cash and cash equivalents, marketable securities and
accounts receivable are monitored for exposure to concentrations of
credit risk. The Company maintains substantially all of its cash
balances in a limited number of financial institutions. The
balances are each insured by the Federal Deposit Insurance
Corporation up to $250,000. The Company had balances in excess of
this limit at December 31, 2019 and 2018 totaling $34,061,119 and
$14,620,689, respectively.
NOTE
4 – GOING CONCERN
PTGI's consolidated financial statements are
prepared using the GAAP applicable to a going concern, which
contemplates the realization of assets and liquidation of
liabilities in the normal course of business. At
December
31,
2019
and
December 31, 2018,
PTGI had
$34,561,119 and $15,024,031 in cash and ($6,038,039) and
($7,417,538) in working capital,
respectively. Losses may
adversely affect the liquidity of PTGI in the future. In view of
the matters described, recoverability of a major portion of the
recorded asset amounts shown in the accompanying consolidated
balance sheets is dependent upon continued operations, which in
turn is dependent upon PTGI's ability to obtain financing from its
parent, HC2 and to succeed in its future operations and to execute
on planned expansion acquisitions. The consolidated financial
statements do not include any adjustments relating to the
recoverability and classification of recorded asset amounts or
amounts and classification of liabilities that might be necessary
should PTGI be unable to continue as a going
concern.
NOTE
5 – PROPERTY, PLANT AND EQUIPMENT
Property, plant and
equipment consisted of the following at December 31, 2019 and
2018:
|
|
|
|
|
|
|
|
|
Telco
equipment
|
$2,271,955
|
$2,269,945
|
Computer
hardware
|
122,150
|
117,429
|
Computer
software
|
27,751
|
27,751
|
Furniture
& fixtures
|
824
|
824
|
|
2,422,680
|
2,415,949
|
Less:
Accumulated depreciation
|
(1,667,164)
|
(1,324,326)
|
Property
Plant and Equipment
|
$755,516
|
$1,091,623
|
Depreciation
expense was $342,215 and $347,608 for the twelve months ended
December 31, 2019 and 2018, respectively.
NOTE
6 – ACCRUED LIABILITIES
In the normal
course of business PTGI incurs costs that can be billed by the
suppler in a subsequent period. To ensure proper presentation the
unbilled costs are accrued at each month end. As invoices are
received the accrued payable is relieved and the correct payable
reflected in the accounts payable account.
NOTE
7 – ACQUISITION OF G02TEL.COM
In November 2018,
PTGI entered into a purchase agreement to acquire the stock of
GO2Tel.com and its subsidiary. Pursuant to the agreement, PTGI paid
$200,000 and is required to pay 20% of the gross margin for the
following 24 months (Earnout Provision) in exchange for all the
outstanding shares of GO2Tel.com common stock. Payment of the
earnout provision is made quarterly but no less than $30,000. The
company reported the original purchase price based on 20% of the
estimated gross margin for the following 24 months plus the initial
cash payment. Remeasurement of the expected payout at year end
resulted in a gain adjustment to the Contingent Consideration due
of $377,446. The original amount of these earnout provision was
$797,580. As of December 31, 2019, $261,226 remains on the earnout
provision.
NOTE
8 – RELATED PARTY PAYABLE
PTGI
uses shares facilities and corporate services provided by HC2. The
facilities include shared IT platforms. Corporate services include
IT and tax-related support. For use of the HC2 provided services,
cost allocations are transferred and paid monthly.
NOTE
9 – COMMITMENTS AND CONTINGENCIES
During the normal course of business, the Company
may be exposed to litigation. When the Company becomes aware of
potential litigation, it evaluates the merits of the case in
accordance with FASB ASC 450-20-50, Contingencies.
The Company evaluates its exposure to the matter, possible legal or
settlement strategies and the likelihood of an unfavorable outcome.
If the Company determines that an unfavorable outcome is probable
and can be reasonably estimated, it establishes the necessary
accruals. As of December 31,
2019, and
2018, the Company is not aware
of any contingent liabilities that should be reflected in the
consolidated financial statements.
NOTE
10 – SUBSEQUENT EVENTS
PTGI Stock Purchase Agreement
On October 2, 2020, the Shareholder
of the Company, ICS Group Holdings, Inc., entered into
a Stock Purchase Agreement with TransWorld Holdings, Inc (TRW).
pursuant to which TRW agreed to
acquire 100% of the outstanding voting securities of PTGI in
consideration for $1,000,000 (the “PTGI Acquisition”).
The closing of the PTGI Acquisition occurred on October 31,
2020.
PTGI
International Services, Ltd transfer
On October 10,
2020, the Shares of PTGI International Services, Ltd (PTGI Ltd)
were transferred to the Company’s Shareholder, ICS Group
Holdings, Inc for nominal consideration. Under the terms of the
PTGI Stock Purchase Agreement with TRW, PTGI Ltd would continue to
provide sales support services to PTGI through February 28,
2021.
Liquidation
of PTGI-ICS OPSRO S.R.L
PTGI-ICS OPSRO
S.R.L, a company organized under the laws of Romania was
deregistered effective September 30, 2020.
GETCHARGED, INC.
________________________________________________________
REVIEW
OF FINANCIAL STATEMENTS
Period Ended September 30, 2020
Reviewed Financial Statements
TABLE OF CONTENTS
GetCharged, Inc.
|
|
|
Unaudited
Condensed Financial Statements as of September 30,
2020
|
|
|
Balance
Sheet
|
|
F-70
|
Statement
of Income
|
|
F-71
|
Statement
of Changes in Stockholders’ Equity
|
|
F-72
|
Statement
of Cash Flows
|
|
F-73
|
Notes to Financial Statements
|
|
F-74
|
INDEPENDENT ACCOUNTANT’S REVIEW REPORT
To the
Board of Director(s) of
GetCharged,
Inc.
New
York, New York
We have
reviewed the accompanying financial statements of Get Charged Inc.,
which comprise the balance sheets as of September 30, 2020, and the
related statements of operations, changes in stockholders’
equity, and cash flows for the year then ended, and the related
notes to the financial statements. A review includes primarily
applying analytical procedures to management’s financial data
and making inquiries of company management. A review is
substantially less in scope than an audit, the objective of which
is the expression of an opinion regarding the financial statements
as a whole. Accordingly, we do not express such an
opinion.
Management’s Responsibility for the Financial
Statements
Management
is responsible for the preparation and fair presentation of these
financial statements in accordance with accounting principles
generally accepted in the United States of America; this includes
the design, implementation, and maintenance of internal control
relevant to the preparation and fair presentation of financial
statements that are free from material misstatement, whether due to
fraud or error.
Accountant’s Responsibility
Our
responsibility is to conduct the review engagement in accordance
with Statements on Standards for Accounting and Review Services
promulgated by the Accounting and Review Services Committee of the
AICPA. Those standards require us to perform procedures to obtain
limited assurance as a basis for reporting whether we are aware of
any material modifications that should be made to the financial
statements for them to be in accordance with accounting principles
generally accepted in the United States of America. We believe that
the results of our procedures provide a reasonable basis for our
conclusion.
Accountant’s Conclusion
Based
on our review, we are not aware of any material modifications that
should be made to the accompanying financial statements in order
for them to be in accordance with accounting principles generally
accepted in the United States of America.
K. K.
Mehta CPA Associates PLLC
Garden
City, New York
January
11, 2021
GETCHARGED, INC.
REVIEW
OF FINANCIAL STATEMENTS
Period
Ended September 30, 2020
BALANCE SHEET
|
|
|
ASSETS
|
|
|
Current Assets:
|
|
|
Cash
|
32,374
|
730,244
|
Total
Current Assets
|
32,374
|
730,244
|
Property,
Equipment and Leasehold Improvements, Net
|
1,098,361
|
300,739
|
Other
Assets
|
224,826
|
5,000
|
TOTAL ASSETS
|
$1,355,562
|
$1,035,983
|
LIABILITIES
AND STOCKHOLDERS' EQUITY
|
|
|
Current
Liabilities:
|
|
|
Accounts
Payable and Accrued Expenses
|
312,967
|
70,060
|
Total
Current Liabilities
|
312,967
|
70,060
|
Long-
Term Notes Payable
|
3,875,000
|
2,050,000
|
Total
Liabilities
|
4,187,967
|
2,120,060
|
Stockholders'
Equity:
|
|
|
Common
Stock , $0.00001 par value:
|
|
|
Authorized
shares- 10,000,000
|
|
|
Issued
and Outstanding shares- 200
|
-
|
-
|
Accumulated
Surplus (Deficit)
|
(2,832,405)
|
(1,084,077)
|
Total
Equity
|
(2,832,405)
|
(1,084,077)
|
|
|
|
TOTAL
LIABILITIES AND MEMBERS' EQUITY
|
$1,355,562
|
$1,035,983
|
GETCHARGED, INC.
REVIEW
OF FINANCIAL STATEMENTS
Period Ended
September 30, 2019
|
|
|
REVENUE
|
60,483
|
35
|
COST
OF GOODS SOLD
|
-
|
-
|
GROSS
PROFIT
|
$60,483
|
$35
|
OPERATING
EXPENSES
|
|
|
Advertising
|
-
|
5,000
|
Salaries
and related benefits
|
51,058
|
-
|
Selling,
Office and Administration
|
685,901
|
1,009,051
|
TOTAL
OPERATING EXPENSES
|
736,958
|
1,014,051
|
INCOME
(LOSS) FROM OPERATIONS
|
|
|
INCOME
(LOSS) FROM OPERATIONS
|
$(676,476)
|
$(1,014,017)
|
OTHER
INCOME (EXPENSES)
|
|
|
Interest
Income
|
-
|
-
|
Interest
Expense
|
(192,054)
|
(56,560)
|
TOTAL
OTHER INCOME
|
(192,054)
|
(56,560)
|
NET
INCOME BEFORE
|
|
|
PROVISION
FOR INCOME TAXES
|
(868,530)
|
(1,070,577)
|
Provision
for Income Taxes
|
-
|
-
|
NET INCOME
ATTRIBUTABLE TO SHAREHOLDER
|
$(868,530)
|
$(1,070,577)
|
GETCHARGED, INC.
REVIEW
OF FINANCIAL STATEMENTS
Period Ended
September 30, 2019
STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY
Nine
Months ended Sept 30, 2020
|
|
|
|
|
|
|
|
|
|
|
Balance, January 1,
2020
|
200
|
-
|
-
|
(1,963,876)
|
(1,963,876)
|
|
|
|
|
|
|
Issuance of Common
Stock
|
|
-
|
-
|
-
|
-
|
|
|
|
|
|
|
Net
Income
|
|
-
|
-
|
(868,530)
|
(868,530)
|
|
|
|
|
|
|
Balance September
30, 2020
|
200
|
-
|
-
|
(2,832,406)
|
(2,832,405)
|
Nine
Months Ended Sept 30, 2019
|
|
|
|
|
|
|
|
|
|
|
Balance, January 1,
2019
|
|
200
|
-
|
-
|
-
|
Issuance of Common
Stock
|
|
-
|
-
|
-
|
-
|
Prior Period
Adjustment
|
|
|
|
|
(13,500)
|
Net
Income
|
-
|
-
|
-
|
-
|
(1,070,577)
|
Balance Sept 30,
2019
|
200
|
-
|
-
|
-
|
(1,084,077)
|
GETCHARGED, INC.
REVIEW
OF FINANCIAL STATEMENTS
Period Ended
September 30, 2019
STATEMENT
OF CASH FLOW
|
|
|
Cash
flows from Operating Activities
|
|
|
Net
Profit/(Loss)
|
(868,530)
|
(1,070,577)
|
Adjustments
to reconcile net loss to net cash provided by (used in)
Operations:
|
|
|
Change in Operating
Assets and Liabilities:
|
|
|
Accounts payable
and accrued expenses
|
184,361
|
70,060
|
Net
cash provided from (used in) Operating activities
|
(684,169)
|
(1,000,517)
|
|
|
|
Cash
flows from Investing activities
|
|
|
Acquisition of
PP&E
|
(173,007)
|
(301,452)
|
Investment in
Subsidiary
|
(211,517)
|
(17,788)
|
Net
cash provided from (used in) Investing activities
|
(384,525)
|
(319,240)
|
|
|
|
Cash
flows from Financing activities
|
|
|
Issuance of Common
Stock
|
-
|
-
|
Issuance of Notes
Payable
|
770,000
|
2,050,000
|
Net
cash provided from (used in) Financing activities
|
770,000
|
2,050,000
|
Net
Change in cash
|
(298,694)
|
730,243
|
Net
Change in cash classified within current assets held for
sale
|
|
|
Cash at beginning
of period
|
331,066
|
-
|
Cash
at end of period
|
32,374
|
730,244
|
GETCHARGED, INC.
NOTES TO FINANCIAL STATEMENTS
PERIOD ENDED SEPTEMBER 30, 2020
NOTE 1: DESCRIPTION OF BUSINESS ACTIVITIES
GetCharged
Inc., a Delaware corporation established in November, 2018, is
engaged to build a worldwide network of electric charging, storage,
and service stations for e-scooters and e-bikes, while protecting
the integrity, access, and safety of sidewalks for all pedestrians.
The company are creating the electric fueling stations of the
future. The company started its operation since January of
2019.
NOTE 2: BASIS OF PRESENTATION
The
accompanying financial statements have been prepared in accordance
with accounting principles generally accepted in the United States
(“GAAP”), and include the accounts of GetCharged, Inc.
The basis used for the preparation and presentation of the
financial statements is based on the needs of the financial
statement users. Financial presentation under the accrual method
(basis of presentation under accounting principle generally
accepted in the United States) provides the best approach to
present the financial statements with the appropriate revenues
since accounts receivable, net of allowance for doubtful debts, can
be recorded against appropriate expenses which are incurred in the
same period to generate those revenues.
NOTE 3: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Use of Estimates
The
preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America
requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those
estimates.
Revenue Recognition
It is
the Company’s policy that revenues from sale of service are
recognized in accordance with ASC 605, “Revenue
Recognition.” Four basic criteria must be met before revenue
can be recognized: (1) persuasive evidence of an arrangement
exists; (2) services have been rendered; (3) the selling price is
fixed and determinable; and (4) collectability is reasonably
assured. Determination of criteria (3) and (4) is based on
management’s judgments regarding fixed nature in selling
prices of the services rendered and the collectability of those
amounts.
Cash and Cash Equivalents
Cash
and cash equivalents consist of cash in hand/bank and highly liquid
investments that are readily convertible into cash. The Company
considers securities when purchased with maturities of three months
or less to be cash equivalents. The carrying amount of these
securities approximate fair market value because of the short-term
maturity of these instruments.
Fair Values Measurements
The
Company’s financial assets and liabilities that are measured
at fair value on a recurring basis have been categorized based upon
a fair value hierarchy. Level 1 inputs utilize quoted prices in
active markets for identical assets or liabilities. Level 2 inputs
are based on other observable market data, such as quoted prices
for similar assets and liabilities, and inputs other than quoted
prices that are observable, such as interest rates and yield
curves. Level 3 inputs are developed from unobservable data
reflecting our own assumptions, and include situations where there
is little or no market activity for the asset or
liability.
Certain
non-financial assets and liabilities are measured at fair value on
a nonrecurring basis, including property, plant, and equipment,
goodwill and intangible assets. These assets are not measured at
fair value on a recurring basis; however, they are subject to fair
value adjustments in certain circumstances, such as when there is
evidence of an impairment. A general description of the valuation
methodologies used for assets and liabilities measured at fair
value, including the general classification of such assets and
liabilities pursuant to the valuation hierarchy, is included in
each footnote with fair value measurements presented.
The
Company’s financial instruments consist principally of cash
and cash equivalents, short-term marketable securities, accounts
receivable, notes receivable, accounts payable, notes payable and
long-term debt. The recorded values of cash and cash equivalents,
accounts receivable, notes receivable, accounts payable approximate
their fair values based upon their short-term nature. The recorded
values of notes payable and long-term debt approximate their fair
values, as interest approximates market rates.
The
fair value of a financial instrument is the amount that would be
received in an asset sale or paid to transfer a liability in an
orderly transaction between unaffiliated market participants.
Assets and liabilities measured at fair value are categorized based
on whether the inputs are observable in the market and the degree
that the inputs are observable. The categorization of financial
instruments within the valuation hierarchy is based on the lowest
level of input that is significant to the fair value measurement.
The hierarchy is prioritized into three levels (with Level 3 being
the lowest) defined as follows:
Level
1: Quoted prices in active markets for identical assets or
liabilities that the entity has the ability to access.
Level
2: Observable inputs other than prices included in Level 1, such as
quoted prices for similar assets and liabilities in active markets;
quoted prices for identical or similar assets and liabilities in
markets that are not active; or other inputs that are observable or
can be corroborated with observable market data.
Level
3: Unobservable inputs that are supported by little or no market
activity and that are significant to the fair value of the assets
and liabilities. This includes certain pricing models, discounted
cash flow methodologies, and similar techniques that use
significant unobservable inputs.
The
fair value of the Company’s, short-term marketable
securities, were determined based on “Level 1” inputs.
The Company does not have any financial instruments in the
“Level 2” and “Level 3” category. The
Company believes that the recorded values of all the other
financial instruments approximate their current fair values because
of their nature and relatively short maturity dates or
durations.
There
have been no changes in Level 1, Level 2, and Level 3 and no
changes in valuation techniques for these assets or liabilities for
the periods ended December 31, 2019.
FASB
ASC 825-10 requires disclosure of fair value information about
financial instruments, whether or not recognized in the statement
of financial condition. In cases where quoted market prices are not
available, fair values are based on estimates using present value
or other valuation techniques. Those techniques are significantly
affected by the assumptions used, including the discount rate and
estimates of future cash flows. In that regard, the derived fair
value estimates cannot be substantiated by comparison to
independent markets and, in many cases, could not be realized in
immediate settlement of the instruments. FASB ASC 825-10 excludes
certain financial instruments and all nonfinancial instruments from
its disclosure requirements. Accordingly, the aggregate fair value
amounts presented do not represent the underlying value of the
Company.
The
following methods and assumptions were used by the Company in
estimating its fair value disclosures for financial
instruments:
Cash
and cash equivalents - The carrying amounts reported in the
statements of financial condition for cash and cash equivalents
approximate those assets’ fair values. Investment securities
which consist of marketable securities - Fair values for investment
securities are based on quoted market prices, where
available.
Property, Equipment and Depreciation
Property
and equipment are stated at cost. Depreciation is calculated using
the straight-line method over the estimated useful lives of the
related assets. The Company has a policy of capitalizing purchases
over $5,000. Expenditures for routine maintenance and repairs on
property and equipment are charged to expense.
The
Company reviews long lived assets for impairment when circumstances
indicate the carrying value of an asset may not be recoverable
based upon the undiscounted future cash flows of the asset. If the
carrying value of the asset is determined not to be recoverable, a
write down to fair value is recorded. Fair values are determined
based on quoted market values, discounted cash flows or external
appraisals as appropriate. We review long lived assets for
impairment at the individual asset or asset group level for which
the lowest level of independent cash flows can be
identified.
Depreciation
is provided for financial reporting purposes utilizing both the
accelerated and straight-line methods over the estimated useful
lives of the assets, which are as follows;
Machinery
and Equipment
|
3-5
years
|
Furniture
and Fixtures
|
5-7
years
|
Software
|
3
years
|
Other Assets
Other
assets comprises of overpayment to the financial institutions and
security deposits for rental properties.
Income Taxes
Income
Taxes Income taxes are accounted for on an asset and liability
approach that requires the recognition of deferred tax assets and
liabilities for the expected future tax consequence of events that
have been recognized in the consolidated financial statements or
tax returns. In estimating future tax consequences, the Company
generally considers all expected future events other than proposed
changes in the tax law or rates. Valuation allowances are provided
if it is more likely than not that a deferred tax asset will not be
realized.
The
Company recognizes liabilities for uncertain tax positions based on
a two-step process. The first step is to evaluate the tax position
for recognition by determining if the weight of available evidence
indicates that it is more likely than not that the position will be
sustained on audit, including resolution of related appeals or
litigation processes, if any. Once it is determined that the
position meets the recognition threshold, the second step requires
an estimate and measure the largest amount of tax benefit that is
more likely than not to be realized upon ultimate settlement. The
difference between the amount of recognizable tax benefit and the
total amount of tax benefit from positions filed or to be filed
with the tax authorities is recorded as a liability for uncertain
tax benefits. It is inherently difficult and subjective to estimate
such amounts due to the probability of various possible outcomes.
The Company reevaluates uncertain tax positions on a quarterly
basis. This evaluation is based on factors including, but not
limited to, changes in facts or circumstances, changes in tax law,
effectively settled issues under audit and new audit activity. Such
a change in recognition or measurement could result in the
recognition of a tax benefit or an additional charge to the tax
provision.
A
valuation allowance was taken by the Company as it believes there
is no sufficient positive evidence to support its conclusion not to
record a valuation allowance. Management believes that there can be
no assurance that the Company will generate taxable income or that
all of its timing differences between tax and financial reporting
will be utilized.
Tax
Cuts and Job Act. The Tax Cuts and Jobs Act was enacted in December
2018. Among other things, the new law (I) establishes a new, flat
corporate federal statutory income tax rate of 21%, (ii) eliminates
the corporate alternative minimum tax and allows the use of such
carryforwards to offset regular tax liability for any taxable year,
(iii) limits the deduction for net interest expense incurred by
U.S. corporations, (iv) allows businesses to immediately expense,
for tax purposes, the cost of new investments in certain qualified
depreciable assets, (v) eliminates or reduces certain deductions
related to meals and entertainment expenses, (vi) modifies the
limitation on excessive employee remuneration to eliminate the
exception for performance-based compensation and clarifies the
definition of a covered employee and (vii) limits the deductibility
of deposit insurance premiums. The Tax Cuts and Jobs Act also
significantly changes the US tax law related to foreign operations,
however, such changes do not currently impact the
Company.
Advertising
The
Company expenses all advertising costs as incurred. Advertising
expense for the years ended September 30, 2020 was
$5,000.
NOTE 4: SUBSEQUENT EVENTS
In
accordance with ASC 855, the Company evaluated subsequent events
through January 11, 2021, the date these financial statements were
issued.
GETCHARGED,
INC.
REPORT
ON AUDITS OF FINANCIAL STATEMENTS
Years Ended December 31, 2019
Audited
Financial Statements
TABLE OF CONTENTS
Audited
Consolidated Financial Statements for the year ended December 31,
2019
|
|
|
Independent
Auditor's Report
|
|
F-82
|
Balance
Sheet For the Years Ended December 31, 2019
|
|
F-83
|
Statement
of Income For the Years Ended December 31, 2019
|
|
F-84
|
Statement
of Changes in Stockholders’ Equity For the Years Ended
December 31, 2019
|
|
F-85
|
Statement
of Cash Flows For the Years Ended December 31, 2019
|
|
F-86
|
Notes to Financial Statements
|
|
F-87
|
INDEPENDENT AUDITOR’S REPORT
To the
Board of Director(s) of
GetCharged,
Inc.
New
York, New York
Report on Financial Statements
We have
audited the accompanying financial statements of GetCharged, Inc.,
which comprise the balance sheet as of December 31, 2019 and the
related statement of income, change in stockholders’ equity,
and cash flow for the year then ended, and the related notes to the
financial statements.
Management’s Responsibility for the Financial
Statements
Management
is responsible for the preparation and fair presentation of these
financial statements in accordance with accounting principles
generally accepted in the United State of America; this includes
the design, implementation, and maintenance of internal control
relevant to the preparation and fair presentation of financial
statements that are free from material misstatement, whether due to
fraud or error.
Auditors’ Responsibility
Our
responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits in
accordance with auditing standards generally accepted in the United
States of America. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the
financial statements are free of material
misstatement.
An
audit involves performing procedures to obtain audit evidence about
the amounts and disclosures in the financial statements. The
procedures selected depend on the auditor’s judgment,
including the assessment of the risks of material misstatement of
the financial statements, whether due to fraud or error. In making
those risk assessments, the auditor considers internal control
relevant to the entity's preparation and fair presentation of the
financial statements in order to design audit procedures that are
appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of the entity's internal
control. Accordingly, we express no such opinion. An audit also
includes evaluating the appropriateness of accounting policies used
and the reasonableness of significant accounting estimates made by
management, as well as evaluating the overall presentation of the
financial statements.
We
believe that the audit evidence we have obtained is sufficient and
appropriate to provide a basis for our audit opinion.
Opinion
In our
opinion, the 2018 financial statements referred to above present
fairly, in all material respects, the financial position of
GetCharged, Inc. as of December 31, 2019, and the results of its
operations and cash flow for the year then ended, in conformity
with accounting principles generally accepted in the United States
of America.
Substantial Doubt about the Company’s Ability to Continue as
a Going Concern
The
accompanying financial statements have been prepared assuming that
the Company will continue as a going concern. As discussed in Note
11 to the financial statements, the Company has sustained
significant net loss for the year ended December 31, 2019.
Management’s evaluation of the events and conditions and
management’s plans regarding the matter also are described in
Note 11. The financial statements do not include any adjustments
that might result from the outcome of this uncertainty. Our opinion
is not modified with respect to that matter.
Garden
City, New York
July
27, 2020
GETCHARGED, INC.
AUDITED
FINANCIAL STATEMENTS
YEARS ENDED
DECEMBER 31, 2019
BALANCE SHEET
As
of December 31,
|
|
ASSETS
|
|
Current
Assets:
|
|
Cash
|
331,066
|
Total Current
Assets
|
331,066
|
|
|
Property, Equipment
and Leasehold Improvements, NetOther Assets
|
926,06712,596
|
TOTAL
ASSETS
|
$1,269,729
|
|
|
LIABILITIES AND
STOCKHOLDERS’ EQUITY
|
|
Current
Liabilities:
|
|
Accounts Payable
and Accrued Expenses
|
128,506
|
Total Current
Liabilities
|
128,506
|
|
|
Long-Term Notes
Payable
|
3,105,000
|
Total
Liabilities
|
3,233,506
|
|
|
Stockholders’
Equity:
|
|
Common Stock,
$0.0001 par value:
|
|
Authorized shares
– 18,000,000
|
|
Issue and
Outstanding shares – 10,000,000
|
100
|
Accumulated Surplus
(Deficit)
|
(1,963,876)
|
Total
Equity
|
(1,963,776)
|
|
|
TOTAL
LIABILITIES AND MEMBERS’ EQUITY
|
$1,269,729
|
GETCHARGED, INC.
AUDITED
FINANCIAL STATEMENTS
YEARS ENDED
DECEMBER 31, 2019
STATEMENT OF INCOME
Year
Ended December 31,
|
|
|
|
REVENUE
|
6,819
|
|
|
COSTS OF GOODS
SOLD
|
-
|
|
|
GROSS
PROFIT
|
$6,819
|
|
|
OPERATING
EXPENSES
|
|
Advertising
|
5,000
|
Selling, Office and
Administration
|
1,848,453
|
TOTAL OPERATING
EXPENSES
|
1,853,453
|
|
|
INCOME (LOSS) FROM
OPERATIONS
|
$(1,846,634)
|
|
|
OTHER INCOME
(EXPENSES)
|
|
Interest
Income
|
14
|
Interest
Expense
|
(117,257)
|
TOTAL OTHER
INCOME
|
(117,243)
|
|
|
NET INCOME
BEFORE
|
|
PROVISION FOR
INCOME TAXES
|
(1,963,876)
|
|
|
Provision for
Income Taxes
|
-
|
|
|
NET
INCOME ATTRIBUTABLE TO SHAREHOLDER
|
$(1,963,876)
|
GETCHARGED, INC.
AUDITED
FINANCIAL STATEMENTS
YEARS ENDED
DECEMBER 31, 2019
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
Year Ended December 31, 2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, January 2,
2019
|
-
|
-
|
-
|
-
|
-
|
Purchase of Treasury
Stock
|
|
|
|
|
|
Issuance of Common
Stock
|
10,000
|
100
|
-
|
-
|
100
|
Net Income
|
-
|
-
|
-
|
(1,963,876)
|
(1,963,876)
|
Balance, December
31, 2019
|
10,000,000
|
100
|
-
|
(1,963,876)
|
(1,963,776)
|
GETCHARGED, INC.
AUDITED
FINANCIAL STATEMENTS
YEARS ENDED
DECEMBER 31, 2019
STATEMENTS OF CASH FLOWS
Year Ended December 31,
|
|
|
|
Cash
flows from Operating Activities
|
|
Net
Profit/(Loss)
|
(1,963,876)
|
Adjustments to
reconcile net loss to net cash
|
|
provided by (used
in) Operations:
|
|
Change in Operating
Assets and Liabilities:
|
|
Other
Receivable
|
(12,596)
|
Accounts payable
and accrued expenses
|
128,506
|
Net
cash provided from (used in) Operating activities
|
(1,847,967)
|
|
|
Cash
flows from Investing activities
|
|
Acquisition of
PP&E
|
(926,067)
|
Net
cash provided from (used in) Investing activities
|
(926,067)
|
|
|
Cash
flows from Financing activities
|
|
Loan received from
related Party
|
100
|
Issuance of Notes
Payable
|
3,105,000
|
Net
cash provided from (used in) Financing activities
|
3,105,100
|
|
|
Net
Change in cash
|
331,066
|
Net
Change in cash classified within current assets held for
sale
|
|
Cash
at beginning of period
|
-
|
Cash
at end of period
|
$331,066
|
GETCHARGED, INC.
AUDITED
FINANCIAL STATEMENTS
YEARS ENDED
DECEMBER 31, 2019
NOTE 1: DESCRIPTION OF BUSINESS ACTIVITIES
GetCharged
Inc., a Delaware corporation established in November, 2018, is
engaged to build a worldwide network of electric charging, storage,
and service stations for e-scooters and e-bikes, while protecting
the integrity, access, and safety of sidewalks for all pedestrians.
The company are creating the electric fueling stations of the
future. The company started its operation since January of
2019.
NOTE 2: BASIS OF PRESENTATION
The
accompanying financial statements have been prepared in accordance
with accounting principles generally accepted in the United States
(“GAAP”), and include the accounts of GetCharged, Inc.
The basis used for the preparation and presentation of the
financial statements is based on the needs of the financial
statement users. Financial presentation under the accrual method
(basis of presentation under accounting principle generally
accepted in the United States) provides the best approach to
present the financial statements with the appropriate revenues
since accounts receivable, net of allowance for doubtful debts, can
be recorded against appropriate expenses which are incurred in the
same period to generate those revenues.
NOTE 3: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Use of Estimates
The
preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America
requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those
estimates.
Cash and Cash Equivalents
Cash
and cash equivalents consist of cash in hand/bank and highly liquid
investments that are readily convertible into cash. The Company
considers securities when purchased with maturities of three months
or less to be cash equivalents. The carrying amount of these
securities approximate fair market value because of the short-term
maturity of these instruments.
Fair Values Measurements
The
Company’s financial assets and liabilities that are measured
at fair value on a recurring basis have been categorized based upon
a fair value hierarchy. Level 1 inputs utilize quoted prices in
active markets for identical assets or liabilities.
GETCHARGED, INC.
NOTES
TO FINANCIAL STATEMENTS
YEARS ENDED
DECEMBER 31, 2019
Level 2
inputs are based on other observable market data, such as quoted
prices for similar assets and liabilities, and inputs other than
quoted prices that are observable, such as interest rates and yield
curves. Level 3 inputs are developed from unobservable data
reflecting our own assumptions, and include situations where there
is little or no market activity for the asset or
liability.
Certain
non-financial assets and liabilities are measured at fair value on
a nonrecurring basis, including property, plant, and equipment,
goodwill and intangible assets. These assets are not measured at
fair value on a recurring basis; however, they are subject to fair
value adjustments in certain circumstances, such as when there is
evidence of an impairment. A general description of the valuation
methodologies used for assets and liabilities measured at fair
value, including the general classification of such assets and
liabilities pursuant to the valuation hierarchy, is included in
each footnote with fair value measurements presented.
The
Company’s financial instruments consist principally of cash
and cash equivalents, short-term marketable securities, accounts
receivable, notes receivable, accounts payable, notes payable and
long-term debt. The recorded values of cash and cash equivalents,
accounts receivable, notes receivable, accounts payable approximate
their fair values based upon their short-term nature. The recorded
values of notes payable and long-term debt approximate their fair
values, as interest approximates market rates.
The
fair value of a financial instrument is the amount that would be
received in an asset sale or paid to transfer a liability in an
orderly transaction between unaffiliated market participants.
Assets and liabilities measured at fair value are categorized based
on whether the inputs are observable in the market and the degree
that the inputs are observable. The categorization of financial
instruments within the valuation hierarchy is based on the lowest
level of input that is significant to the fair value measurement.
The hierarchy is prioritized into three levels (with Level 3 being
the lowest) defined as follows:
Level
1: Quoted prices in active markets for identical assets or
liabilities that the entity has the ability to access.
Level
2: Observable inputs other than prices included in Level 1, such as
quoted prices for similar assets and liabilities in active markets;
quoted prices for identical or similar assets and liabilities in
markets that are not active; or other inputs that are observable or
can be corroborated with observable market data.
Level
3: Unobservable inputs that are supported by little or no market
activity and that are significant to the fair value of the assets
and liabilities. This includes certain pricing models, discounted
cash flow methodologies, and similar techniques that use
significant unobservable inputs.
The
fair value of the Company’s, short-term marketable
securities, were determined based on “Level 1” inputs.
The Company does not have any financial instruments in the
“Level 2” and “Level 3” category. The
Company believes that the recorded values of all the other
financial instruments approximate their current fair values because
of their nature and relatively short maturity dates or
durations.
There
have been no changes in Level 1, Level 2, and Level 3 and no
changes in valuation techniques for these assets or liabilities for
the periods ended December 31, 2019.
FASB
ASC 825-10 requires disclosure of fair value information about
financial instruments, whether or not recognized in the statement
of financial condition. In cases where quoted market prices are not
available, fair values are based on estimates using present value
or other valuation techniques. Those techniques are significantly
affected by the assumptions used, including the discount rate and
estimates of future cash flows. In that regard, the derived fair
value estimates cannot be substantiated by comparison to
independent markets and, in many cases, could not be realized in
immediate settlement of the instruments. FASB ASC 825-10 excludes
certain financial instruments and all nonfinancial instruments from
its disclosure requirements. Accordingly, the aggregate fair value
amounts presented do not represent the underlying value of the
Company.
The
following methods and assumptions were used by the Company in
estimating its fair value disclosures for financial
instruments:
Cash
and cash equivalents - The carrying amounts reported in the
statements of financial condition for cash and cash equivalents
approximate those assets’ fair values. Investment securities
which consist of marketable securities – Fair values for
investment securities are based on quoted market prices, where
available.
Property, Equipment and Depreciation
Property
and equipment are stated at cost. Depreciation is calculated using
the straight-line method over the estimated useful lives of the
related assets. The Company has a policy of capitalizing purchases
over $5,000. Expenditures for routine maintenance and repairs on
property and equipment are charged to expense.
The
Company reviews long lived assets for impairment when circumstances
indicate the carrying value of an asset may not be recoverable
based upon the undiscounted future cash flows of the asset. If the
carrying value of the asset is determined not to be recoverable, a
write down to fair value is recorded. Fair values are determined
based on quoted market values, discounted cash flows or external
appraisals as appropriate. We review long lived assets for
impairment at the individual asset or asset group level for which
the lowest level of independent cash flows can be
identified.
Depreciation
is provided for financial reporting purposes utilizing both the
accelerated and straight-line methods over the estimated useful
lives of the assets, which are as follows;
Machinery
and Equipment
|
3-5
years
|
Furniture
and Fixtures
|
5-7
years
|
Software
|
3
years
|
Other Assets
Other
assets comprises of overpayment to the financial institutions and
security deposits for rental properties.
Income Taxes
Income
Taxes Income taxes are accounted for on an asset and liability
approach that requires the recognition of deferred tax assets and
liabilities for the expected future tax consequence of events that
have been recognized in the consolidated financial statements or
tax returns. In estimating future tax consequences, the Company
generally considers all expected future events other than proposed
changes in the tax law or rates. Valuation allowances are provided
if it is more likely than not that a deferred tax asset will not be
realized.
The
Company recognizes liabilities for uncertain tax positions based on
a two-step process. The first step is to evaluate the tax position
for recognition by determining if the weight of available evidence
indicates that it is more likely than not that the position will be
sustained on audit, including resolution of related appeals or
litigation processes, if any. Once it is determined that the
position meets the recognition threshold, the second step requires
an estimate and measure the largest amount of tax benefit that is
more likely than not to be realized upon ultimate settlement. The
difference between the amount of recognizable tax benefit and the
total amount of tax benefit from positions filed or to be filed
with the tax authorities is recorded as a liability for uncertain
tax benefits. It is inherently difficult and subjective to estimate
such amounts due to the probability of various possible outcomes.
The Company reevaluates uncertain tax positions on a quarterly
basis. This evaluation is based on factors including, but not
limited to, changes in facts or circumstances, changes in tax law,
effectively settled issues under audit and new audit activity. Such
a change in recognition or measurement could result in the
recognition of a tax benefit or an additional charge to the tax
provision.
A
valuation allowance was taken by the Company as it believes there
is no sufficient positive evidence to support its conclusion not to
record a valuation allowance. Management believes that there can be
no assurance that the Company will generate taxable income or that
all of its timing differences between tax and financial reporting
will be utilized.
Tax
Cuts and Job Act. The Tax Cuts and Jobs Act was enacted in December
2018. Among other things, the new law (I) establishes a new, flat
corporate federal statutory income tax rate of 21%, (ii) eliminates
the corporate alternative minimum tax and allows the use of such
carryforwards to offset regular tax liability for any taxable year,
(iii) limits the deduction for net interest expense incurred by
U.S. corporations, (iv) allows businesses to immediately expense,
for tax purposes, the cost of new investments in certain qualified
depreciable assets, (v) eliminates or reduces certain deductions
related to meals and entertainment expenses, (vi) modifies the
limitation on excessive employee remuneration to eliminate the
exception for performance-based compensation and clarifies the
definition of a covered employee and (vii) limits the deductibility
of deposit insurance premiums. The Tax Cuts and Jobs Act also
significantly changes the US tax law related to foreign operations,
however, such changes do not currently impact the
Company.
Advertising
The
Company expenses all advertising costs as incurred. Advertising
expense for the years ended December 31, 2019 was
$5,000.
NOTE 4: STOCK OPTION
Performance Incentive Plan
On May
2019, the shareholders approved the Company's 2019 Performance
Stock Option, (the "Stock Option"). Under the terms of the
Incentive Plan, up to 1,000,000 shares of common stock may be
granted. The Stock Option is administered by the Compensation
Committee which is appointed by the Board of Directors. The
Committee determines which key employee, officer or director on the
regular payroll of the Company, or outside consultants shall
receive stock options. Granted options are exercisable after the
date of grant in accordance with the terms of the grant up to five
years after the date of the grant. The exercise price of any
incentive stock option or nonqualified option granted under the
Incentive Plan may not be less than 100% of the fair market value
of the shares of common stock of the Company at the time of the
grant.
Options:
The
following options were issued to employees and non-employee Board
of Directors and consultants in accordance with the Company's
Performance Incentive Plan. However, they may not be outstanding at
each year end.
Grant
Date
|
|
|
Expiration
Term
|
1-May-19
|
697,500
|
$0.00
|
5
years
|
At
December 31, 2019, the Company has shares of common stock reserved
for issuance of these options and for options granted
previously.
Activity
in stock options, including those outside the Performance Incentive
Plan, for year-end December 31, 2019, is summarized as
follows:
|
|
|
Balance,
December 31, 2018
|
-
|
-
|
Options
Granted
|
697,500
|
$-
|
Options
Exercised
|
-
|
-
|
Options
Cancelled/Expired
|
-
|
-
|
Balance,
December 31, 2019
|
697,500
|
$-
|
All of
the options listed in the above table have no intrinsic value, as
their exercise prices are all in excess of the market value of the
Company's common stock as of December 31, 2019.
NOTE 5: ACCOUNT PAYABLE AND ACCRUED EXPENSES
Accounts
payable and accrued expenses consist of the following:
December
31,
|
|
Accounts Payable
and Accrued Expenses
|
11,249
|
Interest
Payable
|
117,257
|
|
$128,506
|
The
accounts payable and accrued expenses consists of trade payables
arising from company’s normal course of
business.
NOTE 6: PROPERTY AND EQUIPMENT
Property
and equipment consists of the following as of December
31:
December
31,
|
|
Furniture and
Equipment
|
956,667
|
Subtotal
|
956,667
|
|
|
Accumulated
Depreciation
|
-
|
Net
Total
|
$956,667
|
The
above fixed assets have not been placed in service at the end of
December 31, 2019, thus no depreciation expenses have been booked.
Accordingly, depreciation expense for the year ended December 31,
2019 was $0.
NOTE 7: CREDIT RISK
Financial
instruments that potentially subject the Company to concentrations
of credit risk consist of temporary cash investments, which from
time to time exceed the federal depository insurance coverage and
commercial accounts receivable. The Company has cash investment
policies that restrict placement of these investments to financial
institutions evaluated as highly creditworthy. Cash and cash
equivalents held in a bank exceed federally insured limits at year
end and at various points during the year.
NOTE 8: BUSINESS RISK
The
Company's primary business deals with building electric charging
service station. While the Company is unable to predict what
regulatory changes may occur or the impact on the Company of any
particular change, the Company’s operations and financial
results could be negatively affected if the federal or state
regulator relax the laws on the use of fossils fuel.
NOTE 9: CONVERTIBLE NOTE
The
carrying value of the convertible notes, as of December 31, 2019 is
$3,105,000. The company accrued interest of $117,257 for year 2019
at the rate of 8% per annum on the outstanding convertible
notes.
The
convertible notes are issued as series notes. As of December 2019,
Series 1, 2 and 3A notes has been issued. At December 31, 2019, a
total of $ 450,000, $ 1,550,000 and $ 1,105,000 has been used under
series note1, 2 and 3 respectively.
The
series 1 note will be converted to common shares at a discount of
20% whenever the company’s capitalization will reach $ 10 M.
Similarly, notes 2 & 3 will be converted to common shares at a
discount of 20% whenever the company’s capitalization value
reaches $ 17.5M.
NOTE 10: COMMITMENTS AND CONTINGENCIES
Uncertain Tax Position
The
Company follows the FASB Accounting Standards Codification, which
provides guidance on accounting for uncertainty in income taxes
recognized in an enterprise’s financial statements. The
guidance prescribes a recognition threshold and measurement
attribute for the financial statement recognition and measurement
of a tax position taken or expected to be taken in a tax return,
and also provides guidance on de-recognition, classification,
interest and penalties, accounting in interim periods, disclosure
and transition. As of December 31, 2019, the Company had no
uncertain tax positions that qualify for either recognition or
disclosure in the Company’s financial statements. The
Company’s policy is to recognize interest and penalties on
unrecognized tax benefits in income tax expense in the financial
statements. No interest and penalties were recorded during the
years ended December 31, 2019.
Litigation
The
Company is involved, from time to time, in disputes and claims
incidental to the conduct of its business. The company reviews any
such legal proceedings and claims on an ongoing basis and follows
appropriate accounting guidance when making accrual and disclosure
decisions. Based upon present information, the company determined
that there was no matters that required an accrual as of December
31, 2019 nor were there any asserted or unasserted material claims
for which material losses are reasonably possible.
NOTE 11: GOING CONCERN
The
Company sustained net operating losses of $(1,963,876) for the
years ended December 31, 2019, indicating an adverse effect in the
Company’s ability to continue as a going
concern.
Managements
plans to address the going concern is to seek out additional
investors, provide additional loans and capital contributions to
the Company from current stockholders, and open service charge
stations to increase gross profit margins. Management launched
service charge stations subsequent to balance sheet date,
please see note
14.
The
ability to continue as a going concern is dependent upon the
success of these actions as well as continued favorable treatment
as it relates to federal laws and regulations. There can be no
assurance the Company will be successful in accomplishing its
objectives. The financial statements do not include any adjustments
that might be necessary should the Company be unable to continue as
a going concern.
NOTE 12: RELATED PARTY TRANSACTION
During
the year 2019 there has been the following issuance of convertible
notes payables to the related parties.
Related
Parties
|
|
Daniel
Waldman
|
$245,000.00
|
Andrew
Fox
|
$350,000.00
|
Total
|
$595,000.00
|
Further
during the year 2019, the company paid $ 129,945.70 as a
reimbursement of contracting fees to 9 Madison Inc. owned by
related parties. The amount has been charged as an expense to
statement of income under consulting fees. Also during 2019 per the
consulting agreement reached between company and Daniel Waldman in
2018 the company awarded an stock option which will grant him
420,000 shares of company’s common stock with a vesting
period of five years from the date of issuance.
NOTE 13: RECENT ACCOUNTING GUIDANCE
In
December 2019, the FASB issued an accounting standard updates that
eliminates certain exceptions related to the approach for
intra-period tax allocation, the methodology for calculating income
taxes in an interim period and the recognition of deferred tax
liabilities for outside basis differences. It also clarifies and
simplifies other aspects of the accounting for income taxes. ASU
2019-12 is effective for fiscal years beginning after December 15,
2020, and interim periods within those fiscal years. The Company is
currently evaluating the adoption date and impact, if any, adoption
will have on its financial position and results of
operations.
In June
2016, the FASB issued Accounting Standard Update No. 2016-13,
Financial Instruments-Credit Losses (Topic 326): Measurement of
Credit Losses on Financial Instruments (ASU 2016-13), which
requires the measurement and recognition of expected credit losses
for financial assets held at amortized cost. ASU 2016-13 replaces
the existing incurred loss impairment model with a forward-looking
expected credit loss model which will result in earlier recognition
of credit losses. The standard will be effective for us in the last
quarter of 2020, but early adoption is permitted. The Company is
currently evaluating this update on its financial position and
results of operations.
NOTE 14: SUBSEQUENT EVENTS
In
accordance with ASC 855, the Company evaluated subsequent events
through July 27, 2020, the date these financial statements were
issued.
Subsequent
to the year-end, in February 2020 the company launched service
charge station in Los Angles, California and the second one in
Paris, France in July of 2020.
GETCHARGED,
INC.
REPORT
ON AUDITS OF FINANCIAL STATEMENTS
Years Ended December 31, 2018
Audited
Financial Statements
TABLE OF CONTENTS
Audited
Consolidated Financial Statements for the year ended December 31,
2018
|
|
|
Independent
Auditor's Report
|
|
F-98
|
Balance
Sheet For the Years Ended December 31, 2018
|
|
F-99
|
Statement
of Income For the Years Ended December 31, 2018
|
|
F-100
|
Statement
of Changes in Stockholders’ Equity For the Years Ended
December 31, 2018
|
|
F-101
|
Statement
of Cash Flows For the Years Ended December 31, 2018
|
|
F-102
|
Notes to Financial Statements
|
|
F-103
|
INDEPENDENT AUDITOR’S REPORT
To the
Board of Director(s) of
GetCharged,
Inc.
New
York, New York
Report on Financial Statements
We have
audited the accompanying financial statements of GetCharged, Inc.,
which comprise the balance sheet as of December 31, 2018 and the
related statement of income, change in stockholders’ equity,
and cash flow for the year then ended, and the related notes to the
financial statements.
Management’s Responsibility for the Financial
Statements
Management
is responsible for the preparation and fair presentation of these
financial statements in accordance with accounting principles
generally accepted in the United State of America; this includes
the design, implementation, and maintenance of internal control
relevant to the preparation and fair presentation of financial
statements that are free from material misstatement, whether due to
fraud or error.
Auditors’ Responsibility
Our
responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits in
accordance with auditing standards generally accepted in the United
States of America. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the
financial statements are free of material
misstatement.
An
audit involves performing procedures to obtain audit evidence about
the amounts and disclosures in the financial statements. The
procedures selected depend on the auditor’s judgment,
including the assessment of the risks of material misstatement of
the financial statements, whether due to fraud or error. In making
those risk assessments, the auditor considers internal control
relevant to the entity's preparation and fair presentation of the
financial statements in order to design audit procedures that are
appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of the entity's internal
control. Accordingly, we express no such opinion. An audit also
includes evaluating the appropriateness of accounting policies used
and the reasonableness of significant accounting estimates made by
management, as well as evaluating the overall presentation of the
financial statements.
We
believe that the audit evidence we have obtained is sufficient and
appropriate to provide a basis for our audit opinion.
Opinion
In our
opinion, the 2018 financial statements referred to above present
fairly, in all material respects, the financial position of
GetCharged, Inc. as of December 31, 2018, and the results of its
operations and cash flow for the year then ended, in conformity
with accounting principles generally accepted in the United States
of America.
Garden
City, New York
January
11, 2021
GETCHARGED, INC.
AUDITED
FINANCIAL STATEMENTS
YEARS ENDED
DECEMBER 31, 2018
BALANCE SHEET
As
of December 31,
|
|
ASSETS
|
|
Current
Assets:
|
|
Cash
|
|
Total Current
Assets
|
|
|
|
Property, Equipment
and Leasehold Improvements, NetOther Assets
|
|
TOTAL
ASSETS
|
$
|
|
|
LIABILITIES AND
STOCKHOLDERS’ EQUITY
|
|
Current
Liabilities:
|
|
Due to related
parties, net
|
13,500
|
Total Current
Liabilities
|
13,500
|
|
|
Long-Term Notes
Payable
|
-
|
Total
Liabilities
|
13,500
|
|
|
Stockholders’
Equity:
|
|
Common Stock,
$0.0001 par value:
|
|
Authorized shares
– 10,000,000
|
|
Issue and
Outstanding shares – 200
|
0
|
Accumulated Surplus
(Deficit)
|
(13,500)
|
Total
Equity
|
(13,500)
|
|
|
TOTAL
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
|
GETCHARGED, INC.
AUDITED
FINANCIAL STATEMENTS
YEARS ENDED
DECEMBER 31, 2018
STATEMENT OF INCOME
Year
Ended December 31,
|
|
|
|
REVENUE
|
|
|
|
COSTS OF GOODS
SOLD
|
|
|
|
GROSS
PROFIT
|
$
|
|
|
OPERATING
EXPENSES
|
|
Advertising
|
-
|
Selling, Office and
Administration
|
13,500
|
TOTAL OPERATING
EXPENSES
|
13,500
|
|
|
INCOME (LOSS) FROM
OPERATIONS
|
$(13,500)
|
|
|
OTHER INCOME
(EXPENSES)
|
|
Interest
Income
|
-
|
Interest
Expense
|
|
TOTAL OTHER
INCOME
|
|
|
|
NET INCOME
BEFORE
|
|
PROVISION FOR
INCOME TAXES
|
(13,500)
|
|
|
Provision for
Income Taxes
|
-
|
|
|
NET
INCOME ATTRIBUTABLE TO SHAREHOLDERS
|
$(13,500)
|
GETCHARGED, INC.
AUDITED
FINANCIAL STATEMENTS
YEARS ENDED
DECEMBER 31, 2018
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
|
|
|
|
|
|
|
|
|
|
|
Balance, January 2,
2018
|
-
|
-
|
-
|
-
|
-
|
Issuance of Common
Stock
|
200
|
0
|
-
|
-
|
-
|
Net Income
|
-
|
-
|
-
|
(13,500
|
(13,500)
|
Balance,
December 31, 2018
|
200
|
0
|
-
|
(13,500
|
(13,500)
|
STATEMENTS OF CASH FLOWS
Year Ended December 31,
|
|
|
|
Cash
flows from Operating Activities
|
|
Net
Profit/(Loss)
|
(13,500)
|
Adjustments to
reconcile net loss to net cash
|
|
provided by (used
in) Operations:
|
|
Change in Operating
Assets and Liabilities:
|
|
Other
Receivable
|
-
|
Accounts payable
and accrued expenses
|
-
|
Net
cash provided from (used in) Operating activities
|
(13,500)
|
|
|
Cash
flows from Investing activities
|
|
Acquisition of
PP&E
|
-
|
Net cash provided
from (used in) Investing activities
|
-
|
|
|
Cash
flows from Financing activities
|
|
Loan received from
related Party
|
13,500
|
Issuance of Notes
Payable
|
-
|
Net
cash provided from (used in) Financing activities
|
13,500
|
|
|
Net
Change in cash
|
-
|
Net
Change in cash classified within current assets held for
sale
|
|
Cash
at beginning of period
|
-
|
Cash
at end of period
|
$-
|
GETCHARGED, INC.
AUDITED
FINANCIAL STATEMENTS
YEARS ENDED
DECEMBER 31, 2018
NOTE 1: DESCRIPTION OF BUSINESS ACTIVITIES
GetCharged
Inc., a Delaware corporation established in November, 2018, is
engaged to build a worldwide network of electric charging, storage,
and service stations for e-scooters and e-bikes, while protecting
the integrity, access, and safety of sidewalks for all pedestrians.
The company are creating the electric fueling stations of the
future. The company started its operation since January of
2019.
NOTE 2: BASIS OF PRESENTATION
The
accompanying financial statements have been prepared in accordance
with accounting principles generally accepted in the United States
(“GAAP”), and include the accounts of GetCharged, Inc.
The basis used for the preparation and presentation of the
financial statements is based on the needs of the financial
statement users. Financial presentation under the accrual method
(basis of presentation under accounting principle generally
accepted in the United States) provides the best approach to
present the financial statements with the appropriate revenues
since accounts receivable, net of allowance for doubtful debts, can
be recorded against appropriate expenses which are incurred in the
same period to generate those revenues.
NOTE 3: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Use of Estimates
The
preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America
requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those
estimates.
Cash and Cash Equivalents
Cash
and cash equivalents consist of cash in hand/bank and highly liquid
investments that are readily convertible into cash. The Company
considers securities when purchased with maturities of three months
or less to be cash equivalents. The carrying amount of these
securities approximate fair market value because of the short-term
maturity of these instruments.
NOTE 3:
SUBSEQUENT EVENTS
In
accordance with ASC 855, the Company evaluated subsequent events
through January 11, 2021, the date these financial statements were
issued.
Since
December 31, 2019, the spread of COVID-19 has severely impacted
many local economies around the globe. In many countries,
businesses are being forced to cease or limit operations for long
or indefinite periods of time. Measures taken to contain the spread
of the virus, including travel bans, quarantines, social
distancing, and closures of non-essential services have triggered
significant disruptions to businesses worldwide, resulting in an
economic slowdown. Global stock markets have also experienced great
volatility and a significant weakening. Governments and central
banks have responded with monetary and fiscal interventions to
stabilize economic conditions.
Subsequent
to the year-end, in February 2020 the company launched service
charge station in Los Angles, California and the second one in
Paris, France in July of 2020.
On
September 25, 2020, GetCharged Inc. (the “Company”)
each of the transferor and Andrew Fox, in his capacity as the
Transferor’s Representative entered into stock acquisition
agreement with Transworld Enterprises Inc.
(“Acquiror”), a wholly owned subsidiary of GoIP Global
, Inc. whereby the transferors shall exchange, transfer and deliver
the shares to Acquiror at the purchase price of $17,500,000, and
the company transfers the shares to the acquirer free and clear of
encumbrances. The shareholder record of GetCharged Inc. shall
receive prorate shares of parents payable in respect of the
purchase price. For avoidance of doubt, the Purchase price shall be
paid in Parent Shares (and not in cash).
On
October 9, 2020 the above mentioned agreement was amendment to
reflect the change in manner of payment to the company. As per
agreement, parent shall issue to each Transferor a stock
certificate evidencing such Transferor’s Pro Rata Share of
the number of Parent Shares equal to the Purchase Price minus the
Holdback Shares (each, a closing Parent Share Certificate”)
and deliver a closing Parent Share Certificate to each Transferor
at or as soon as practicable following the Closing. Further, the
parties agreed that the aggregate number of Parent Shares equal to
the Purchase Price shall be 60,000,000 Parent Shares.
As of
December 31, 2020, the company issued total convertible Notes
Payable worth $5,965,000 with an interest rate of 8% per annum. The
Note shall automatically and without any action on the part of
Holder convey into that number of Class A Voting Common Stock of
the Company.
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the expenses expected to be incurred
in connection with the issuance and distribution of common stock
registered hereby, all of which, except for the SEC registration
fee, are estimated.
SEC registration fee
|
$*
|
Miscellaneous expenses
|
*
|
Legal
|
*
|
Accounting fees and expenses
|
*
|
Total
|
*
|
* To be
filed by amendment.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
We are incorporated under the laws of the State of Delaware.
Section 145 of the Delaware General Corporation Law
(“DGCL”) provides that a Delaware corporation may
indemnify any persons who were, are, or are threatened to be made,
parties to any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of such
corporation), by reason of the fact that such person is or was an
officer, director, employee or agent of such corporation, or is or
was serving at the request of such corporation as an officer,
director, employee or agent of another corporation or enterprise.
The indemnity may include expenses (including attorneys’
fees), judgments, fines and amounts paid in settlement actually and
reasonably incurred by such person in connection with such action,
suit or proceeding, provided that such person acted in good faith
and in a manner he or she reasonably believed to be in or not
opposed to the corporation’s best interests and, with respect
to any criminal action or proceeding, had no reasonable cause to
believe that his or her conduct was illegal. A Delaware corporation
may indemnify any persons who were, are, or are threatened to be
made, a party to any threatened, pending or completed action or
suit by or in the right of the corporation by reason of the fact
that such person is or was a director, officer, employee or agent
of such corporation, or is or was serving at the request of such
corporation as a director, officer, employee or agent of another
corporation or enterprise. The indemnity may include expenses
(including attorneys’ fees) actually and reasonably incurred
by such person in connection with the defense or settlement of such
action or suit provided such person acted in good faith and in a
manner he or she reasonably believed to be in or not opposed to the
corporation’s best interests except that no indemnification
is permitted without judicial approval if the officer or director
is adjudged to be liable to the corporation. Where an officer or
director is successful on the merits or otherwise in the defense of
any action referred to above, the corporation must indemnify him or
her against the expenses (including attorneys’ fees) actually
and reasonably incurred.
Our certificate of incorporation provides that to the fullest
extent permitted by the General Corporation Law, a director shall
not be personally liable to us or our stockholders for monetary
damages for breach of fiduciary duty as a director. Our bylaws
provide that we shall indemnify and hold harmless our directors and
officers to the fullest extent permitted by applicable law, except
that we will not be required to indemnify or hold harmless any
director or officer in connection with any proceeding initiated by
such person unless the proceeding was authorized by our board of
directors. Under our bylaws, such rights shall not be exclusive of
any other rights acquired by directors and officers, including by
agreement.
Our bylaws provide that we will pay expenses to any director or
officer prior to the final disposition of the proceeding, provided,
however, that such advancements shall be made only upon receipt of
an undertaking by such director or officer to repay all amounts
advanced if it should be ultimately determined that such director
or officer is not entitled to indemnification under the bylaws of
or otherwise.
Section 174 of the DGCL provides, among other things, that a
director who willfully or negligently approves of an unlawful
payment of dividends or an unlawful stock purchase or redemption
may be held liable for such actions. A director who was either
absent when the unlawful actions were approved, or dissented at the
time, may avoid liability by causing his or her dissent to such
actions to be entered in the books containing minutes of the
meetings of the board of directors at the time such action occurred
or immediately after such absent director receives notice of the
unlawful acts.
We expect to obtain general liability insurance that covers certain
liabilities of our directors and officers arising out of claims
based on acts or omissions in their capacities as directors or
officers, including liabilities under the Securities Act. Insofar
as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers or persons controlling the
registrant pursuant to the foregoing provisions, we have been
informed that in the opinion of the SEC such indemnification is
against public policy as expressed in the Securities Act and is
therefore unenforceable.
The above provisions may discourage stockholders from bringing a
lawsuit against our directors for breach of their fiduciary duty.
The provisions may also have the effect of reducing the likelihood
of derivative litigation against directors and officers, even
though such an action, if successful, might otherwise benefit us
and our stockholders. Furthermore, a stockholder’s investment
may be adversely affected to the extent we pay the costs of
settlement and damage awards against directors and officers
pursuant to these indemnification provisions. We believe that these
certificate of incorporation provisions, bylaw provisions,
indemnification agreements and the insurance are necessary to
attract and retain qualified persons as directors and
officers.
At present, there is no pending litigation or proceeding involving
any of our directors or officers where indemnification will be
required or permitted. We are not aware of any threatened
litigation or proceedings that might result in a claim for such
indemnification.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
The Company made the following issuances of its unregistered
securities pursuant exemptions contained in Section 4(a)(2) or
3(a)(9) of the Securities Act and/or Rule 506 of Regulation D
promulgated thereunder:
●
|
In
February 2018, the Company issued an aggregate of 30,000,000 shares
of common stock to 3 consultants for services
rendered.
|
●
|
In
April 2019, the Company issued 40,000,000 shares of common stock to
an accredited investor for aggregate gross proceeds of
$10,000.
|
●
|
In May
2019, the Company issued an aggregate of 275,000,000 shares of
common stock to 3 accredited investors for aggregate gross proceeds
of $55,000.
|
●
|
In June
2019, the Company issued 125,000,000 shares of common stock to an
accredited investor for aggregate gross proceeds of
$25,000.
|
●
|
In
September 2019, the Company issued an aggregate of 50,000,000
shares of common stock to 2 accredited investors for aggregate
gross proceeds of $7,500.
|
●
|
In
November 2019, the Company issued an aggregate of 125,000,000
shares of common stock to an accredited investor upon conversion of
an outstanding promissory note.
|
●
|
In
December 2019, the Company issued an aggregate of 41,825 shares of
series E preferred stock to an accredited investor upon conversion
of an outstanding promissory note.
|
●
|
In
January 2020, the Company issued an aggregate of 1,602,474,719
shares of common stock to 3 accredited investors upon conversion of
an outstanding promissory notes.
|
●
|
In
January 2020, the Company issued an aggregate of 10,000,000 shares
of common stock to an accredited investor upon conversion of
outstanding convertible preferred stock.
|
●
|
In
January 2020, the Company issued an aggregate of 125,000 shares of
shares of series E preferred stock to an accredited investor for
aggregate gross proceeds of $12,500.
|
●
|
In
April 2020, the Company issued a convertible note with an aggregate
principal amount of $300,000 to Issac Sutton, the Company’s
former chief executive officer and director, for aggregate gross
proceeds of $300,000
|
●
|
In May
2020, the Company issued to the shareholders of Transworld
Enterprises, Inc. an aggregate of 1,000,000 shares of series D
preferred stock and 1,000,000 shares of Series F preferred stock in
exchange for all outstanding shares of Transworld Enterprises,
Inc.
|
●
|
In May
2020, the Company issued convertible notes with an aggregate
principal amount of $3,000,000, warrants to purchase an aggregate
of 7,600,000 shares of common stock and 7.5 series G preferred
stock for aggregate gross proceeds of $2,700,000.
|
●
|
In May and June 2020, the Company entered into a purchase agreement
with KORR Value LP, an entity controlled by Kenneth Orr, the
Company’s Executive Chairman, pursuant to which the Company
issued convertible notes in an aggregate principal amount of
$550,000 for an aggregate purchase price of $500,000 (collectively,
the “KORR Notes”). In connection with the issuance of
the KORR Notes, we issued to KORR Value warrants to purchase an
aggregate of 1,266,667 shares of Common Stock (collectively, the
“KORR Warrants”). The KORR Notes and KORR Warrants are
on substantially the same terms as the Notes and Warrants issued to
the May 2020 Investors except that the KORR Notes are subordinated
to the Notes. In June 2020, KORR Value LP transferred 50% of the
KORR Notes to PDG Venture Group LLC..
|
|
|
●
|
Between May 8, 2020 and September 30, 2020, the Company entered
into securities purchase agreements with other accredited investors
(the “Subordinated Creditors”) pursuant to which the
Company issued convertible notes in an aggregate principal amount
of $546,444 for an aggregate purchase price of $495,000
(collectively, the “Subordinated Creditor Notes”). In
connection with the issuance of the Subordinated Creditor Notes, we
issued to the Subordinated Creditors warrants to purchase an
aggregate of 2,359,555 shares of Common Stock (collectively, the
“Subordinated Creditor Warrants”). The Subordinated
Creditor Notes and Subordinated Creditor Warrants are on
substantially the same terms as the Notes and Warrants issued to
the May 2020 Investors except that the Subordinated Creditor Notes
are subordinated to the Notes.
|
|
|
●
|
On September 25, 2020, the Company entered into a stock acquisition
agreement with the shareholders of GetCharged, Inc.
(“GetCharged”) pursuant to which the Company agreed to
acquire 100% of the outstanding voting securities of GetCharged in
exchange for 60,000,000 shares of the Company’s common stock
(the “Charge Acquisition”). The closing of the Charge
Acquisition occurred on October 12, 2020.
|
|
|
●
|
On
November 3, 2020, the Company entered
into a securities purchase
agreement with funds affiliated with Arena Investors LP (the
“November 2020 Investors”) pursuant to which it issued
convertible notes in an
aggregate principal amount of $3.8 million for an aggregate
purchase price of $3.5 million (collectively, the “November
2020 Notes” and together with the May 2020 Notes, the
“Notes”). In connection with the issuance of the
November 2020 Notes, we issued to the November 2020 Investors
903,226 shares of Common Stock.
|
|
|
●
|
On
December 8, 2020, the Company entered
into a securities purchase
agreement with accredited investors pursuant to which the Company
sold 8,700,002 shares of common stock for an aggregate purchase
price of $2,175,000.
|
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT
SCHEDULES
(a)
Exhibits
The
following exhibits are filed with this registration
statement:
Exhibit Number
|
|
Exhibit Description
|
|
|
Share
Exchange Agreement, dated May 8, 2020, by and among the Company,
Transworld Enterprises, Inc. and the shareholders of
Transworld
|
|
|
Stock Acquisition Agreement, dated September 25,
2020 by and among the Company, Transworld Enterprises, Inc., a
Delaware corporation and wholly owned subsidiary of Company,
GetCharged, Inc., a Delaware corporation, each of the parties set
forth on Exhibit A
thereto and Andrew Fox, in his
capacity as the Transferors’
Representative
|
|
|
First Amendment to the Stock Acquisition
Agreement, effective October 9, 2020, by and among the Company,
Transworld Enterprises, Inc., a Delaware corporation and wholly
owned subsidiary of Company, GetCharged, Inc., a Delaware
corporation, each of the parties set forth on Exhibit A and
Andrew Fox, in his capacity as the Transferors’
Representative
|
|
|
Stock Purchase
Agreement, dated October 2, 2020, by and between the Company, ICS
Group Holdings Inc., a Delaware corporation (the
“Shareholder”), solely for the purpose of Article 8 and
Article 10, HC2 Holdings
Inc., a Delaware corporation, and PTGI International Carrier
Services Inc., a Delaware corporation.
|
|
|
Certificate
of Incorporation of GoIP Global, Inc., dated October 1,
2020
|
|
|
Certificate
of Designations of the Series A Preferred Stock, dated October 6,
2020
|
|
|
Certificate
of Amendment to the Certificate of Incorporation, dated December
11, 2020
|
|
|
Certificate
of Amendment to the Certificate of Incorporation, dated January 26,
2021
|
|
|
Bylaws
|
|
|
Form
of Senior Secured Note, dated May 8, 2020
|
|
|
Form
of Subordinated Note issued to KORR Value
|
|
|
Form
of Warrant, dated May 8, 2020
|
|
|
Form
of Warrant issued to Subordinated Note Holders
|
|
|
Form
of Senior Secured Note issued to the November 2020
Investors
|
5.1
|
|
Opinion
of Sheppard, Mullin, Richter & Hampton LLP*
|
|
|
Securities
Purchase Agreement, dated May 8, 2020, by and between the Company
and the investors signatory thereto
|
|
|
Registration
Rights Agreement, dated May 8, 2020, by and between the Company and
the investors signatory thereto
|
|
|
Security
Agreement, dated May 8, 2020, by and between the Company and the
investors signatory thereto
|
|
|
Subordination
Agreement, dated May 8, 2020 by and between the Company, KORR Value
LP and the investors signatory thereto
|
|
|
Securities
Purchase Agreement, dated May 8, 2020, by and between the Company
and KORR Value LP
|
|
|
Form
of Securities Purchase Agreement entered into with the Subordinated
Note Holders
|
|
|
Subordination
Agreement entered into between the May 2020 Investors and
Subordinated Note Holders
|
|
|
Securities
Purchase Agreement, dated November 3, 2020, by and between the
Company and the investors signatory thereto
|
|
|
Registration
Rights Agreement, dated November 3, 2020, by and between the
Company and the investors signatory thereto
|
|
|
Amended
and Restated Security Agreement, dated November 3, 2020, by and
between the Company and the investors signatory
thereto
|
|
|
Amended
and Restated Subordination Agreement, dated November 3, 2020 by and
between the Company, KORR Value LP and the investors signatory
thereto
|
|
|
Form
of Subsidiary Guaranty Agreement, dated November 3,
2020
|
|
|
First
Amendment and Waiver to May 2020 Financing, dated December 8,
2020
|
|
|
Second
Amendment and Waiver to May 2020 Financing, dated December 8,
2020
|
|
|
First
Amendment and Waiver to November 2020 Financing, dated December 8,
2020
|
|
|
Securities
Purchase Agreement, dated December 3, 2020 related to the December
2020 private placement
|
10.17*
|
|
2020
Omnibus Incentive Equity Plan
|
|
|
Consent of Accell Audit & Compliance,
P.A
|
|
|
Consent of Seligson &
Giannattasio, LLP
|
|
|
Consent of K.K. Mehta CPA
Associates,
PLLC
|
23.4
|
|
Consent
of Sheppard, Mullin, Richter & Hampton LLP (including in
Exhibit 5.1)*
|
24.1
|
|
Power
of Attorney (included on signature page to this registration
statement)
|
__________
*
|
To be filed by
amendment.
|
(b)
Financial Statement Schedules
See
the Index to Financial Statements included on page F-1 for a list
of the financial statements included in this
prospectus.
ITEM 17. UNDERTAKINGS
The undersigned registrant hereby undertakes:
1. To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration
statement:
(i)
|
To
include any prospectus required by Section 10(a)(3) of the
Securities Act;
|
(ii)
|
To
reflect in the prospectus any facts or events arising after the
effective date of this registration statement ( or most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set
forth in the registration statement. Notwithstanding the foregoing,
any increase or decrease in volume of securities offered (if the
total dollar value of securities offered would not exceed that
which was registered) and any deviation from the low or high end of
the estimated maximum offering range may be reflected in the form
of prospectus filed with the Commission pursuant to Rule 424(b)
(Section 230.424(b) of this chapter) if, in the aggregate, the
changes in volume and price represent no more than 20% change in
the maximum aggregate offering price set forth in the
“Calculation of Registration
Fee ” table in the effective registration statement;
and
|
(iii)
|
To
include any material information with respect to the plan of
distribution not previously disclosed in the registration statement
or any material change to such information in the registration
statement.
|
Provided, however, that:
2. That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering
thereof.
3. To remove from registration by means of a post-effective
amendment any of the securities being registered which remain
unsold at the termination of the offering.
Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to our directors, officers and
controlling persons pursuant to the provisions above, or otherwise,
we have been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy
as expressed in the Securities Act, and is, therefore,
unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant
of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in
the Act and will be governed by
the final adjudication of such issue.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant has duly caused this registration statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in New
York, New York, on February 12, 2021.
|
|
|
|
|
|
|
|
By:
|
/s/ Andrew Fox
|
|
|
|
Andrew
Fox
|
|
|
|
Chief Executive Officer
(Principal Executive
Officer)
|
|
POWER OF ATTORNEY
Each of the undersigned officers and directors of Charge
Enterprises Inc. hereby constitutes and appoints Kenneth Orr and
Andrew Fox, and each of them any of whom may act without joinder of
the other, the individual's true and lawful attorneys-in-fact and
agents, each with full power of substitution and resubstitution,
for the person and in his or her name, place and stead, in any and
all capacities, to sign this registration statement of Charge
Enterprises, Inc. on Form S-1, and any other registration statement
relating to the same offering (including any registration
statement, or amendment thereto, that is to become effective upon
filing pursuant to Rule 462(b) under the Securities Act of 1933, as
amended), and any and all amendments thereto (including
post-effective amendments to the registration statement), and to
file the same, with all exhibits thereto, and all other documents
in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents, and
each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in
connection therewith, as fully to all intents and purposes as he or
she might or could do in person, hereby ratifying and confirming
all that said attorneys-in-fact and agents or any of them, or their
substitute or substitutes, may lawfully do or cause to be done by
virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as
amended, this Registration Statement on Form S-1 has been signed by
the following persons in the capacities and on the dates indicated
below.
Signature
|
|
Title
|
|
Date
|
|
|
|
|
|
/s/ Andrew
Fox
|
|
Chief
Executive Officer and Director
|
|
February 12, 2021
|
Andrew
Fox
|
|
(Principal Executive Officer)
|
|
|
|
|
|
|
|
/s/ Craig
Denson
|
|
Interim
Chief Financial Officer,
|
|
February 12, 2021
|
Craig
Denson
|
|
Chief
Operating Officer and Director
|
|
|
|
|
(Principal Financial Officer and Principal Accounting
Officer)
|
|
|
|
|
|
|
|
/s/ Kenneth
Orr
|
|
Executive
Chairman
|
|
February 12,
2021
|
Kenneth
Orr
|
|
|
|
|
|
|
|
|
|
/s/ Phil
Scala
|
|
Secretary
and Director
|
|
February 12, 2021
|
Phil
Scala
|
|
|
|
|
|
|
|
|
|
/s/ Justin
Deutsch
|
|
Director
|
|
February 12, 2021
|
Justin
Deutsch
|
|
|
|
|
|
|
|
|
|
/s/ James
Murphy
|
|
Director
|
|
February 12, 2021
|
James
Murphy
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exhibit 2.1
SHARE EXCHANGE AGREEMENT
THIS
SHARE EXCHANGE AGREEMENT (the “Agreement”) is made this 30th day
of April , 2020 (the “Effective Date”), by and among
GoIP Global, Inc., a Colorado corporation (“GoIP”), TransWorld Enterprises
Inc., a Delaware Corporation (“TransWorld or TW”) and
the shareholders of TW listed on Exhibit A hereto (the
“Shareholders”). GoIP, TransWorld, and the Shareholders
are sometimes referred to herein individually as a
“Party” and
collectively as the “Parties.”
BACKGROUND
A. WHEREAS, the Shareholders are the
holders of all of the issued and outstanding shares of common
stock, par value $0.001 per share, of the TW (the " Interests");
B. WHEREAS, the Shareholders have agreed to
transfer to GoIP, and GoIP has agreed to acquire from the
Shareholders, all of the Interests, in exchange for the issuance of
(i) 1,000,000 shares of Series D Preferred Stock, with such rights
and privileges as detailed in the Certificate of Designation
included herewith as Exhibit B (the “Series D Preferred Stock”) to the
Shareholders holding shares of common stock of TW, which Shares
shall represent 80% of the issued and outstanding shares of common
stock of GoIP, par value $0.001 per share (the “Common Stock”) immediately after
the closing of the transactions contemplated herein (including the
Reverse Split (as defined in Article V.7 below)) and (ii) 1,000,000
shares of Series F Preferred Stock, with such rights and privileges
as detailed in the Certificate of Designation included herewith as
Exhibit C (the “Series F
Preferred Stock” and collectively with the Series D
Preferred Stock, the “Shares”) to the Shareholders of TW
who hold shares of preferred stock, in each case, on the terms and
conditions as set forth herein;
C. NOW, THEREFORE, in consideration of the
foregoing premises, and the covenants, representations and
warranties set forth herein, and for other good and valuable
consideration, the receipt and sufficiency of which is hereby
acknowledged and accepted, the Parties, intending to be legally
bound, hereby agree as follows:
Article I
definitions
1.1 Definitions.
For purposes of this Agreement, and in addition to other terms
defined elsewhere in this Agreement, the following terms have the
meaning assigned to them below:
(a) an
“affiliate” of
any person means another person that directly or indirectly,
through one or more intermediaries, controls, is controlled by, or
is under common control with, such first person.
(b) “material
adverse change” or “material adverse
effect” means, when used in connection with TW or GoIP, any
change or effect that either individually or in the aggregate with
all other such changes or effects is materially adverse to the
business, assets, properties, condition (financial or otherwise) or
results of operations of such Party and its subsidiaries taken as a
whole (after giving effect to the consummation of the Share
Exchange);
(c) “ordinary course of business” means
the ordinary course of business consistent with past custom and
practice (including with respect to quantity and
frequency).
(d) “person” means an individual,
corporation, partnership, joint venture, association, trust,
unincorporated organization or other entity.
(e) “subsidiary” of any person means
another person, an amount of the voting securities, other voting
ownership or voting partnership interests of which is sufficient to
elect at least a majority of its board of directors or other
governing body (or, if there are no such voting interests, fifty
percent (50%) or more of the equity interests of which) that is
owned directly or indirectly by such first person; and
(f) “security interest” means any
mortgage, pledge, lien, encumbrance, deed of trust, lease, charge,
right of first refusal, easement, servitude, proxy, voting trust or
agreement, transfer restriction under any Member or similar
agreement or any other security interest, other than (i)
mechanic’s, materialmen’s, and similar liens, (ii)
statutory liens for taxes not yet due and payable, (c) purchase
money liens and liens securing rental payments under capital lease
arrangements, (iii) pledges or deposits made in the ordinary course
of business in connection with workers’ compensation,
unemployment insurance or other similar social security
legislation; and (iv) encumbrances, security deposits or reserves
required by law or by any Governmental Entity.
(g) “TW
Conditions” means the
satisfaction of the following conditions after the execution of
this Agreement by TW: (i) completion of one or a series of
financing transaction by TW which result in aggregate gross
proceeds of at least $1,000,000 on or prior to July 31, 2020; or
(ii) the acquisition of at least 51% of the assets or equity
securities by GoIP of an operating business.
Article II
Purchase
and Sale
2.1 Share
Exchange. At
the Closing, the Shareholders shall sell, transfer, convey, assign
and deliver the Interests, representing 100% of the Interests to
GoIP, and in consideration thereof, GoIP shall issue the
consideration set forth in II.2 below (the "Share Exchange"). To
the extent the TW Conditions are not satisfied on or prior to July
31, 2020, the parties agree to act in good faith to take all
necessary and appropriate steps to unwind the Share Exchange such
that the transactions contemplated by this Agreement shall be
unwound, be null and void and have no further force or
effect.
2.2 Consideration.
Upon the terms and subject to the satisfaction of the conditions
contained in this Agreement, in consideration of the sale,
conveyance, assignment and transfer of the Interests, GoIP agrees
to ratably issue to the Shareholders the Shares.
2.3 Closing.
Unless earlier terminated, the closing of the Share Exchange (the
“Closing”) will
take place at the location mutually selected by GoIP and TW no
later than at 5:00pm. U.S. Eastern Standard Time on the business
day three (3) days following the date of satisfaction of the
conditions set forth in Article VI (the “Closing Date”), unless another
date, time or place is agreed to in writing by TW and GoIP. The
Parties agree that they intend to close the transactions
contemplated hereby on or before May 8, 2020 and further agree to
use best efforts to meet such date for Closing.
2.4 Closing
Deliveries.
On or prior to the Closing Date, GoIP shall
deliver or cause to be delivered to the Shareholders and TW, as
applicable, the following: (i) book entry confirmation of the
issuance of the Shares, registered in the name of the Shareholders
in such percentages as listed on Exhibit A, (ii) executed copies of
all written agreements required by this Agreement, and (iii) such
other closing documents as may be reasonably requested by TW or the
Shareholders. On or prior to the Closing Date, TW and Shareholders,
as applicable, shall deliver or cause to be delivered to GoIP all
the following: (i) book entry delivery of the Interests, (ii)
executed copies of all written agreements required by this
Agreement, and (iii) such other closing documents as may be
reasonably requested by GoIP.
2.5 Section
368 Reorganization. For U.S. federal income Tax purposes,
the Share Exchange is intended to constitute a "reorganization"
within the meaning of Section 368(a)(1)(B) of the Code. The Parties
hereby adopt this Agreement as a "plan of reorganization" within
the meaning of Sections 1.368-2(g) and 1.368-3(a) of the Treasury
Regulations. Notwithstanding the foregoing or anything else to the
contrary contained in this Agreement, the Parties acknowledge and
agree that no Party is making any representation or warranty as to
the qualification of the transactions contemplated by this
Agreement as a reorganization under Section 368 of the Code or as
to the effect, if any, that any transaction consummated prior to or
after the Closing Date has or may have on any such reorganization
status. The Parties acknowledge and agree that each (i) has had the
opportunity to obtain independent legal and tax advice with respect
to the transaction contemplated by this Agreement, and (ii) is
responsible for paying its own Taxes, including without limitation,
any adverse tax consequences that may result if the transaction
contemplated by this Agreement is not determined to qualify as a
reorganization under Section 368 of the Code.
Article III
REPRESENTATIONS
AND WARRANTIES
3.1 Representations
and Warranties of TW. TW represents and warrants to GoIP as
follows:
(a) Organization, Standing and
Power. TW is a duly organized, validly existing and in good
standing under the laws of its state of organization or
incorporation and has the requisite power and authority and all
government licenses, authorizations, permits, consents and
approvals required to own, lease and operate its properties and
carry on its business as now being conducted. TW is duly qualified
or licensed to do business and is in good standing in each
jurisdiction in which the nature of its business or the ownership
or leasing of its properties makes such qualification or licensing
necessary, other than in such jurisdictions where the failure to be
so qualified or licensed (individually or in the aggregate) would
not have a material adverse effect.
(b) Corporate Authority;
Noncontravention. TW has all requisite power and authority
to enter into this Agreement and to consummate the transactions
contemplated by this Agreement. The execution and delivery of this
Agreement by TW and the consummation by TW of the transactions
contemplated hereby have been duly authorized by all necessary
action on the part of TW. This Agreement has been duly executed and
when delivered by TW shall constitute a valid and binding
obligation of TW, enforceable against TW in accordance with its
terms, except as such enforcement may be limited by bankruptcy,
insolvency or other similar laws affecting the enforcement of
creditors’ rights generally or by general principles of
equity. The execution and delivery of this Agreement do not, and
the consummation of the transactions contemplated by this Agreement
and compliance with the provisions hereof will not, conflict with,
or result in any breach or violation of, or default (with or
without notice or lapse of time, or both) under, or give rise to a
right of termination, cancellation or acceleration of or
“put” right with respect to any obligation or to a loss
of a material benefit under, or result in the creation of any
security interest upon any of the properties or assets of TW under,
(i) TW’s certificates or articles of organization, operating
agreements or other organizational or charter documents of TW, (ii)
any loan or credit agreement, note, bond, mortgage, indenture,
lease or other material agreement, instrument, permit, concession,
franchise or license applicable to TW, its properties or assets, or
(iii) subject to the governmental filings and other matters
referred to in the following sentence, any judgment, order, decree,
statute, law, ordinance, rule, regulation or arbitration award
applicable to TW, its properties or assets, other than, in the case
of clauses (ii) and (iii), any such conflicts, breaches,
violations, defaults, rights, losses or security interests that
individually or in the aggregate could not have a material adverse
effect with respect to TW or could not prevent, hinder or
materially delay the ability of TW to consummate the transactions
contemplated by this Agreement.
(c) Governmental Authorization. No
consent, approval, order or authorization of, or registration,
declaration or filing with, or notice to, any United States or
Delaware court, administrative agency or commission, or other
federal, state or local government or other governmental authority,
agency, domestic or foreign (a “Governmental Entity”), is required
by or with respect to TW in connection with the execution and
delivery of this Agreement by TW or the consummation by TW of the
transactions contemplated hereby.
(d) Certain Fees. No brokerage or
finder’s fees or commissions are or will be payable by TW or
Shareholders to any broker, financial advisor or consultant,
finder, placement agent, investment banker, bank or other person
with respect to the transactions contemplated by this
Agreement.
(e) Litigation. There is no suit,
action or proceeding or investigation pending or, to the knowledge
of TW, threatened against or affecting TW or any basis for any such
suit, action, proceeding or investigation that, individually or in
the aggregate, could reasonably be expected to have a material
adverse effect with respect to TW or prevent, hinder or materially
delay the ability of TW to consummate the transactions contemplated
by this Agreement, nor is there any judgment, decree, injunction,
rule or order of any Governmental Entity or arbitrator outstanding
against TW having, or which, insofar as reasonably could be
foreseen by TW, in the future could have, any such
effect.
(f) Liabilities. TW has no
liabilities or obligations of any nature (whether fixed or unfixed,
secured or unsecured, known or unknown and whether absolute,
accrued, contingent, or otherwise) except for liabilities or
obligations disclosed to GoIP in writing prior to Closing. Further,
there shall be no debt or liability owed by TW as of
Closing.
(g) Board Recommendation. The Board
of Directors of TW have unanimously determined that the terms of
this Agreement and transactions contemplated hereby are fair to and
in the best interests of the Shareholders of TW.
(h) Ownership of Interests. The
Shareholders own all of the issued and outstanding Interests, free
and clear of all liens and other encumbrances.
(i) Material
Agreements.
(i) Schedule III.1(i)
contains a complete and accurate list of each contract, agreement,
instrument, lease, and commitment (including license agreements) to
which TW is a party (the “TW
Contracts”). TW has delivered, or will deliver prior
to Closing, a copy of each TW Contract to GoIP. Except as otherwise
set forth on Schedule III.1(i):
(ii) TW
is not in default under any TW Contract, nor, to TW’s best
knowledge, does there exist any event that, with notice or the
passage of time or both, would constitute a default or event of
default by TW under any TW Contract.
(iii) No
power of attorney or similar authorization given by TW is currently
in effect or outstanding. No TW Contract limits the freedom of TW
to compete in any line of business or with any person.
(iv) Each
of the TW Contracts is valid, binding, and enforceable by TW in
accordance with its terms, except as such enforcement may be
limited by bankruptcy, insolvency or other similar laws affecting
the enforcement of creditors’ rights generally or by general
principles of equity and is in full force and effect.
(v) TW is not aware of
any default by any other party to any TW Contract or of any event
that (whether with or without notice, lapse of time, or both) would
constitute a default by any other party with respect to obligations
of that party under any TW Contract, and, to the knowledge of TW,
there are no facts that exist indicating that any of the TW
Contracts may be totally or partially terminated or suspended by
the other parties.
(vi) [Intentionally
Omitted].
(vii) TW
is not a party to any credit facility or loan TW Contracts whereby
TW is obligated to any third-party to either fund or make payments
on any loan or amounts due and owing.
(j) Compliance with Anti-Corruption
Laws. Neither TW nor to the knowledge of TW, any director,
officer, member, agent, employee or other person acting on behalf
of TW has, in the course of its actions for, or on behalf of, TW
(i) used any corporate funds for any unlawful contribution, gift,
entertainment or other unlawful expenses relating to political
activity; (ii) made any direct or indirect unlawful payment to any
foreign or domestic government official or employee from corporate
funds; or (iii) made any unlawful bribe, rebate, payoff, influence
payment, kickback or other unlawful payment to any foreign or
domestic government official or employee.
(k) OFAC. Neither TW, nor to the
knowledge of TW, any director, officer, agent, member, employee,
affiliate or person acting on behalf of TW, is currently subject to
any U.S. sanctions administered by the Office of Foreign Assets
Control of the U.S. Treasury Department.
(l) Financial Information. All
financial information of TW provided to GoIP (the
“Financials”),
fairly presents the financial position of TW as of the date
provided. Except as contemplated by or permitted under this
Agreement, there are no adjustments to the Financials that would,
individually or in the aggregate, have a material adverse effect on
TW’s financial condition or results of operations as reported
in the Financials.
(m) Full Disclosure. All of the
representations and warranties made by TW and the Shareholders in
this Agreement, and all statements set forth in the certificates
delivered by TW at the Closing pursuant to this Agreement, are
true, correct and complete in all material respects and do not
contain any untrue statement of a material fact or omit to state
any material fact necessary in order to make such representations,
warranties or statements, in light of the circumstances under which
they were made, misleading. The copies of all documents furnished
by TW pursuant to the terms of this Agreement are complete and
accurate copies of the original documents. The schedules,
certificates, and any and all other statements and information,
whether furnished in written or electronic form, to GoIP or its
representatives by or on behalf of any of TW or its affiliates in
connection with the negotiation of this Agreement and the
transactions contemplated hereby do not contain any material
misstatement of fact or omit to state a material fact or any fact
necessary to make the statements contained therein not
misleading.
3.2 Representations
and Warranties of GoIP. GoIP represents and warrants to TW
as follows, which shall be true and correct as of
Closing:
(a) Organization, Standing and Corporate
Power. GoIP is duly organized, validly existing and in good
standing under the laws of the State of Colorado and has the
requisite corporate power and authority and all government
licenses, authorizations, permits, consents and approvals required
to own, lease and operate its properties and carry on its business
as now being conducted. GoIP is duly qualified or licensed to do
business and is in good standing in each jurisdiction in which the
nature of its business or the ownership or leasing of its
properties makes such qualification or licensing necessary, other
than in such jurisdictions where the failure to be so qualified or
licensed (individually or in the aggregate) would not have a
material adverse effect with respect to GoIP.
(b) Corporate Authority;
Noncontravention. GoIP has all requisite corporate and other
power and authority to enter into this Agreement and to consummate
the transactions contemplated by this Agreement. The execution and
delivery of this Agreement by GoIP and the consummation by GoIP of
the transactions contemplated hereby have been (or at Closing will
have been) duly authorized by all necessary corporate action on the
part of GoIP. This Agreement has been duly executed and when
delivered by GoIP shall constitute a valid and binding obligation
of GoIP, enforceable against GoIP in accordance with its terms,
except as such enforcement may be limited by bankruptcy, insolvency
or other similar laws affecting the enforcement of creditors’
rights generally or by general principles of equity. The execution
and delivery of this Agreement do not, and the consummation of the
transactions contemplated by this Agreement and compliance with the
provisions hereof will not, conflict with, or result in any breach
or violation of, or default (with or without notice or lapse of
time, or both) under, or give rise to a right of termination,
cancellation or acceleration of or “put” right with
respect to any obligation or to loss of a material benefit under,
or result in the creation of any security interest upon any of the
properties or assets of GoIP under, (i) its articles of
incorporation, bylaws, or other charter documents of GoIP (ii) any
loan or credit agreement, note, bond, mortgage, indenture, lease or
other agreement, instrument, permit, concession, franchise or
license applicable to GoIP, its properties or assets, or (iii)
subject to the governmental filings and other matters referred to
in the following sentence, any judgment, order, decree, statute,
law, ordinance, rule, regulation or arbitration award applicable to
GoIP, its properties or assets, other than, in the case of clauses
(ii) and (iii), any such conflicts, breaches, violations, defaults,
rights, losses or security interests that individually or in the
aggregate could not have a material adverse effect with respect to
GoIP or could not prevent, hinder or materially delay the ability
of GoIP to consummate the transactions contemplated by this
Agreement.
(c) Government Authorization. No
consent, approval, order or authorization of, or registration,
declaration or filing with, or notice to, any Governmental Entity,
is required by or with respect to GoIP in connection with the
execution and delivery of this Agreement by GoIP, or the
consummation by GoIP of the transactions contemplated
hereby.
(d) Litigation; Labor Matters; Compliance
with Laws. There is no suit, action or proceeding or
investigation pending or, to the knowledge of GoIP, threatened
against or affecting GoIP or any basis for any such suit, action,
proceeding or investigation that, individually or in the aggregate,
could reasonably be expected to have a material adverse effect with
respect to GoIP or prevent, hinder or materially delay the ability
of GoIP to consummate the transactions contemplated by this
Agreement, nor is there any judgment, decree, injunction, rule or
order of any Governmental Entity or arbitrator outstanding against
GoIP having, or which, insofar as reasonably could be foreseen by
GoIP, in the future could have, any such effect.
(f) Subsidiaries. GoIP does not own
directly or indirectly, any equity or other ownership interest in
any company, corporation, partnership, joint venture or
otherwise.
(g) Capital Structure of GoIP. The
authorized capital stock of GoIP consists of 6,800,000,000 shares
of common stock, par value $0.0001 per share and 10,000,000 shares
of preferred stock, par value $0.0001 per share. There are
6,370,638,755 shares of common stock issued and outstanding as of
the Closing Date. As of the Closing Date, GoIP will have the
following classes of preferred stock authorized: Series A, Series
B, Series C, Series D, Series E and Series F of which 100,000,
5,000,000, 1,000,000, 1,000,000, 1,000,000 and 1,000,000 are
authorized, respectively. GoIP has taken steps to have all issued
and outstanding shares of Series A, Series B and Series C preferred
stock converted into shares of common stock on or prior to the
Closing Date such that no shares of each of such Series is
outstanding as of the date of this Agreement. There will be
1,000,000 Series D Preferred Stock, 543,250 shares of Series E
Preferred Stock and 1,000,000 shares of Series F Preferred Stock
issued and outstanding as of the Closing Date. All issued and
outstanding shares of common stock are duly authorized, validly
issued, fully paid, non-assessable and free of preemptive rights
and other similar rights. GoIP is not a party to or bound by any
written or oral contract or agreement which grants to any person an
option, warrant or right of first refusal or other right of any
character to acquire at any time, or upon the happening of any
stated events, any shares of or interest in GoIP, whether or not
presently authorized, issued or outstanding. Except as set forth in
Schedule III.2(g), there are outstanding (i) no shares of capital
stock or other voting securities of GoIP, (ii) no securities of
GoIP or any of its subsidiaries convertible into or exchangeable
for shares of capital stock or voting securities of GoIP, (iii) no
options or other rights to acquire from GoIP or any of its
subsidiaries, and no obligations of GoIP or any of its subsidiaries
to issue, any capital stock, voting securities or securities
convertible into or exchangeable for capital stock or voting
securities of GoIP, and (iv) no equity equivalents, interest in the
ownership or earnings of GoIP or any of its subsidiaries or other
similar rights. There are no outstanding obligations of GoIP or any
of its subsidiaries to repurchase, redeem or otherwise acquire any
securities of GoIP, except as set forth in Schedule III.2(g). The
Shares to be issued pursuant to this Agreement (including any
shares of Common Stock issuable upon conversion thereunder) will
be, when issued, duly authorized, validly issued, fully paid and
nonassessable, not subject to preemptive rights, and issued in
compliance with all applicable state and federal laws concerning
the issuance of securities. Shares of common stock of GoIP are
quoted on the OTC Pink Marketplace under the symbol
“GOIG.”
(h) Financial Statements. The
financial statements of GoIP included in the reports, schedules,
forms, statements and other documents filed by GoIP with
OTCMarkets.com (“OTC”) (collectively, and in each
case including all exhibits and schedules thereto and documents
incorporated by reference therein, the “GoIP OTC Documents”), comply as to
form in all material respects with applicable accounting
requirements, have been prepared in accordance with U.S. generally
accepted accounting principles applied on a consistent basis during
the periods involved (except as may be indicated in the notes
thereto) and fairly present the financial position of GoIP as of
the dates thereof and the results of operations and changes in cash
flows for the periods then ended (subject, in the case of unaudited
quarterly statements, to normal year-end audit adjustments as
determined by GoIP’s independent accountants). Except as set
forth in the GoIP OTC Documents, at the date of the most recent
unaudited financial statements of GoIP included in the GoIP OTC
Documents, GoIP has not incurred any liabilities or obligations of
any nature (whether accrued, absolute, contingent or otherwise)
which, individually or in the aggregate, could reasonably be
expected to have a material adverse effect with respect to GoIP.
GoIP has delivered to GoIP on or prior to the Closing Date such
financial statements as would be required to make GoIP current in
its obligations with OTC. GoIP hereby represents and warrants that
the GoIP OTC Documents are able to be audited by a certified public
accountant in order to satisfy any requirements which may be
necessary for GoIP to include financial statements in any filing to
be made with the Securities and Exchange Commission on or after the
Closing Date. The balance sheet of GoIP as of the Closing Date is
set forth on Schedule III.2(h).
(i) Absence of Certain Changes or
Events. Except as disclosed in Schedule III.2(i), since the
date of the most recent financial statements included in the GoIP
OTC Documents, GoIP has conducted its business only in the ordinary
course consistent with past practice in light of its current
business circumstances, and there is not and has not been
any:
(i) material adverse
change with respect to GoIP.
(ii) event
which, if it had taken place following the execution of this
Agreement, would not have been permitted by Section 4.1 without
prior consent of the TW.
(iii) condition,
event or occurrence which could reasonably be expected to prevent,
hinder or materially delay the ability of GoIP to consummate the
transactions contemplated by this Agreement.
(iv) incurrence,
assumption or guarantee by GoIP of any indebtedness for borrowed
money other than in the ordinary course and in amounts and on terms
consistent with past practices or as disclosed to TW in
writing.
(v) creation or other
incurrence by GoIP of any security interest on any asset other than
in the ordinary course consistent with past practices.
(vi) transaction
or commitment made, or any contract or agreement entered into, by
GoIP relating to its assets or business (including the acquisition
or disposition of any assets) or any relinquishment by GoIP of any
contract or other right, in either case, material to GoIP, other
than transactions and commitments in the ordinary course consistent
with past practices and those contemplated by this
Agreement;
(vii) labor
dispute, other than routine, individual grievances, or, to the
knowledge of GoIP, any activity or proceeding by a labor union or
representative thereof to organize any employees of GoIP or any
lockouts, strikes, slowdowns, work stoppages or threats by or with
respect to such employees;
(viii) change
in any compensation to officer, director or other affiliate of GoIP
or the grant of any equity compensation to any such
person;
(ix) payment,
prepayment or discharge of liability other than in the ordinary
course of business or any failure to pay any liability when
due.
(x) write-offs or
write-downs of any assets of GoIP.
(xi) creation,
termination or amendment of, or waiver of any right under, any
material contract of GoIP.
(xii) damage,
destruction or loss having, or reasonably expected to have, a
material adverse effect on GoIP.
(xiii) other
condition, event or occurrence which individually or in the
aggregate could reasonably be expected to have a material adverse
effect or give rise to a material adverse change with respect to
GoIP; or
(xiv) agreement
or commitment to do any of the foregoing.
(j) Certain Fees. No brokerage or
finder’s fees or commissions are or will be payable by GoIP
to any broker, financial advisor or consultant, finder, placement
agent, investment banker, bank or other person with respect to the
transactions contemplated by this Agreement.
(k) Litigation; Labor Matters; Compliance
with Laws.
(i) There is no suit,
action or proceeding or investigation pending or, to the knowledge
of GoIP, threatened against or affecting GoIP or any basis for any
such suit, action, proceeding or investigation that, individually
or in the aggregate, could reasonably be expected to have a
material adverse effect with respect to GoIP or prevent, hinder or
materially delay the ability of GoIP to consummate the transactions
contemplated by this Agreement, nor is there any judgment, decree,
injunction, rule or order of any Governmental Entity or arbitrator
outstanding against GoIP having, or which, insofar as reasonably
could be foreseen by GoIP, in the future could have, any such
effect.
(ii) GoIP
is not a party to, or bound by, any collective bargaining
agreement, contract or other agreement or understanding with a
labor union or labor organization, nor is it the subject of any
proceeding asserting that it has committed an unfair labor practice
or seeking to compel it to bargain with any labor organization as
to wages or conditions of employment nor is there any strike, work
stoppage or other labor dispute involving it pending or, to its
knowledge, threatened, any of which could have a material adverse
effect with respect to GoIP.
(iii) The
conduct of the business of GoIP complies with all statutes, laws,
regulations, ordinances, rules, judgments, orders, decrees or
arbitration awards applicable thereto.
(l) Benefit Plans. GoIP is not a
party to any benefit plan under which GoIP currently has an
obligation to provide benefits to any current or former employee,
officer or director of GoIP.
(m) Certain Employee Payments. GoIP
is not a party to any employment agreement which could result in
the payment to any current, former or future director or employee
of GoIP of any money or other property or rights or accelerate or
provide any other rights or benefits to any such employee or
director as a result of the transactions contemplated by this
Agreement, whether or not (i) such payment, acceleration or
provision would constitute a “parachute payment”
(within the meaning of Section 280G of the Internal Revenue Code,
as amended), or (ii) some other subsequent action or event would be
required to cause such payment, acceleration or provision to be
triggered.
(n) Material Contract Defaults.
GoIP is not, or has not, received any notice or has any knowledge
that any other party is, in default in any respect under any GoIP
Material Contract; and there has not occurred any event that with
the lapse of time or the giving of notice or both would constitute
such a material default. For purposes of this Agreement, a
“GoIP Material
Contract” means any contract, agreement or commitment
that is effective as of the Closing Date to which GoIP is a party
(i) with expected receipts or expenditures in excess of $5,000,
(ii) requiring GoIP to indemnify any person, (iii) granting
exclusive rights to any party, (iv) evidencing indebtedness for
borrowed or loaned money in excess of $5,000 or more, including
guarantees of such indebtedness, or (v) which, if breached by GoIP
in such a manner would (A) permit any other party to cancel or
terminate the same (with or without notice of passage of time) or
(B) provide a basis for any other party to claim money damages
(either individually or in the aggregate with all other such claims
under that contract) from GoIP or (C) give rise to a right of
acceleration of any material obligation or loss of any material
benefit under any such contract, agreement or
commitment.
(o) Properties. GoIP has valid land
use rights for all real property that is material to its business
and good, clear and marketable title to all the tangible properties
and tangible assets reflected in the latest balance sheet as being
owned by GoIP or acquired after the date thereof which are,
individually or in the aggregate, material to GoIP’s business
(except properties sold or otherwise disposed of since the date
thereof in the ordinary course of business), free and clear of all
material Security interests, encumbrances, claims, security
interest, options and restrictions of any nature whatsoever. Any
real property and facilities held under lease by GoIP are held by
them under valid, subsisting and enforceable leases of which GoIP
is in compliance, except as could not, individually or in the
aggregate, have or reasonably be expected to result in a material
adverse effect.
(p) Intellectual Property. GoIP
owns or has valid rights to use the Trademarks, trade names, domain
names, copyrights, patents, logos, licenses and computer software
programs (including, without limitation, the source codes thereto)
that are necessary for the conduct of its business as now being
conducted, all as set forth on Schedule III.2(p). All of
GoIP’s licenses to use Software programs are current and have
been paid for the appropriate number of users. To the knowledge of
GoIP, none of GoIP’s Intellectual Property or GoIP License
Agreements infringe upon the rights of any third party that may
give rise to a cause of action or claim against GoIP or its
successors. The term “GoIP
License Agreements” means any license agreements
granting any right to use or practice any rights under any
Intellectual Property (except for such agreements for off-the-shelf
products that are generally available for less than $10,000), and
any written settlements relating to any Intellectual Property, to
which GoIP is a party or otherwise bound.
(q) Board Determination. The Board
of Directors of GoIP has unanimously determined that the terms of
the Share Exchange are fair to and in the best interests of GoIP
and its shareholders.
(r) Compliance with Anti-Corruption
Laws. Neither GoIP nor to the knowledge of GoIP, any
director, officer, agent, employee or other person acting on behalf
of GoIP has, in the course of its actions for, or on behalf of,
GoIP (i) used any corporate funds for any unlawful contribution,
gift, entertainment or other unlawful expenses relating to
political activity; (ii) made any direct or indirect unlawful
payment to any foreign or domestic government official or employee
from corporate funds; (iii) violated or is in violation of any
applicable U.S. laws; or (iv) made any unlawful bribe, rebate,
payoff, influence payment, kickback or other unlawful payment to
any foreign or domestic government official or
employee.
(s) OFAC. Neither GoIP, nor to the
knowledge of GoIP, any director, officer, agent, employee,
affiliate or person acting on behalf of GoIP, is currently subject
to any U.S. sanctions administered by the Office of Foreign Assets
Control of the U.S. Treasury Department.
(t) Money Laundering Laws. The
operations of GoIP are and have been conducted at all times in
compliance with all money laundering laws, and no action, suit or
proceeding by or before any court or governmental agency, authority
or body or any arbitrator involving GoIP with respect to money
laundering laws is pending or, to the best knowledge of GoIP,
threatened.
(u) Liabilities. GoIP has no
liabilities or obligations of any nature (whether fixed or unfixed,
secured or unsecured, known or unknown and whether absolute,
accrued, contingent, or otherwise) except for liabilities or
obligations disclosed to TW in writing and set forth on Schedule
III.2(u).
(v) Material
Agreements.
(i) Schedule III.2(v)
contains a complete and accurate list of each contract, agreement,
instrument, lease, and commitment (including license agreements) to
which GoIP is a party (the “GoIP Contracts”). GoIP has
delivered a copy of each GoIP Contract to TW. Except as otherwise
set forth on Schedule III.2(v):
(ii) GoIP
is not in default under any GoIP Contract, nor, to GoIP’s
best knowledge, does there exist any event that, with notice or the
passage of time or both, would constitute a default or event of
default by GoIP under any GoIP Contract.
(iii) No
power of attorney or similar authorization given by GoIP is
currently in effect or outstanding. No GoIP Contract limits the
freedom of GoIP to compete in any line of business or with any
person.
(iv) Each
of the GoIP Contracts is valid, binding, and enforceable by GoIP in
accordance with its terms and is in full force and effect. There is
no pending or threatened proceeding that would interfere with the
quiet enjoyment of any leasehold of which GoIP is the lessee or
sublessee. All other parties to the GoIP Contracts have consented
or, before the Closing, will have consented (when such consent is
necessary) to the consummation of the transaction contemplated by
this Agreement without requiring modification of GoIP’s
rights or obligations under any GoIP Contract.
(v) GoIP is not aware
of any default by any other party to any GoIP Contract or of any
event that (whether with or without notice, lapse of time, or both)
would constitute a default by any other party with respect to
obligations of that party under any GoIP Contract, and, to the
knowledge of GoIP, there are no facts that exist indicating that
any of the GoIP Contracts may be totally or partially terminated or
suspended by the other parties.
(vi) To
GoIP’s knowledge, no GoIP Contract will result in any loss to
GoIP on the performance thereof (including any liability for
penalties or damages, whether liquidated, direct, indirect,
incidental, or consequential).
(w) GoIP is not a party
to any credit facility or loan Contracts whereby GoIP is obligated
to any third-party to either fund or make payments on any loan or
amounts due and owing.
(x) Organizational Documents. GoIP
has delivered or made available to TW a true and correct copy of
the Certificate of Incorporation, as amended and Bylaws, as amended
of GoIP and any other organizational documents of GoIP, each as
amended, and each such instrument is in full force and effect as of
the Closing Date (the " Organizational Documents"). GoIP is not in
violation of any of the provisions of its Organizational Documents.
GoIP has also delivered or made available to TW a true and correct
copy of the minute book of GoIP as is in full force and effect as
of the Closing Date (the “Minute Book”). All
information contained in the Minute Book has not been revoked as of
the Closing Date.
(y) Tax Matters. Tax Returns. GoIP
has not filed any tax returns required to be filed (if any) by or
on behalf of GoIP, as applicable, and has not been required to pay
any taxes (whether or not reflected on any tax return). No
governmental authority in any jurisdiction has made a claim,
assertion or threat to GoIP that GoIP is or may be subject to
taxation by such jurisdiction; there are no liens with respect to
taxes on the GoIP’s property or assets; and there are no tax
rulings, requests for rulings, or closing agreements relating to
GoIP for any period (or portion of a period) that would affect any
period after the date hereof.
(z) Transactions With
Affiliates and Employees. No
officer, director, employee or stockholder of the GoIP or any
Affiliate of any such Person, has or has had, either directly or
indirectly, an interest in any transaction with GoIP (other than
for services as employees, officers and directors), including any
contract or other arrangement providing for the furnishing of
services to or by, providing for rental of real or personal
property to or from, or otherwise requiring payments to or from any
such Person or, to the knowledge of GoIP, any entity in which any
such Person has an interest or is an officer, director, trustee or
partner.
(aa) Bank
Accounts and Safe Deposit Boxes. GoIP has such bank accounts at such banks and with
such account numbers as set forth on Schedule
III.2(aa).
(bb) Investment
Company. Neither GoIP nor its
affiliate, immediately following the Closing, will become, an
"investment company" within the meaning of the Investment Company
Act of 1940, as amended.
(cc) Foreign
Corrupt Practices. GoIP, nor,
to the Knowledge of GoIP, any director, officer, agent, employee or
other Person acting on behalf of GoIP has, in the course of its
actions for, or on behalf of, GoIP (a) used any corporate funds for
any unlawful contribution, gift, entertainment or other unlawful
expenses relating to political activity; (b) made any direct or
indirect unlawful payment to any foreign or domestic government
official or employee from corporate funds; (c) violated or is in
violation of any provision of the U.S. Foreign Corrupt Practices
Act of 1977, as amended; or (d) made any unlawful bribe, rebate,
payoff, influence payment, kickback or other unlawful payment to
any foreign or domestic government official or
employee.
(dd) Bankruptcy
and Indebtedness. GoIP has not
taken any steps to seek protection pursuant to any Law or statute
relating to bankruptcy, insolvency, reorganization, receivership,
liquidation or winding up, nor does GoIP have any Knowledge or
reason to believe that any of its respective creditors intend to
initiate involuntary bankruptcy proceedings or any actual knowledge
of any fact which would reasonably lead a creditor to do so.
Except as set forth in Section V. 12,
there is no outstanding secured and unsecured indebtedness of GoIP,
or for which the Company has commitments.
(ee) Listing
and Maintenance Requirements. GoIP’s
Common Stock is currently quoted on FINRA's Over-the-Counter
Markets ("OTC") under the symbol ("GOIG") and GoIP has not, in the
24 months preceding the date hereof, received any notice from the
OTC or FINRA or any trading market on which the Common Stock is or
has been listed or quoted to the effect that Acquiror is not in
compliance with the quoting, listing or maintenance requirements of
the OTC or such other trading market. GoIP is, and has no reason to
believe that it will not, in the foreseeable future, continue to be
in compliance with all such quoting, listing and maintenance
requirements.
(ff) No
SEC or FINRA Inquiries. Neither
GoIP nor any of its present officers or directors is, or has ever
been, the subject of any formal or informal inquiry or
investigation by the SEC or FINRA.
(gg) DTC
Eligible. The Common Stock is DTC eligible and DTC has not
placed a “freeze” or a “chill” on the
Common Stock and the Company has no reason to believe that DTC has
any intention to make the Common Stock not DTC eligible, or place a
“freeze” or “chill” on the Common
Stock.
(hh) Promotional
Stock Activities. Neither the GoIP, its officers, or any
affiliates or agents of GoIP have engaged in any stock promotional
activity that could give rise to a complaint or inquired by the
Securities and Exchange Commission alleging (i) a violation of the
anti-fraud provisions of the federal securities laws, (ii)
violations of the anti-touting provisions, (iii) improper
“gun-jumping; or (iv) promotion without proper disclosure of
compensation.
(ii) Full
Disclosure. All of the representations and warranties made
by GoIP in this Agreement, and all statements set forth in the
certificates delivered by GoIP at the Closing pursuant to this
Agreement, are true, correct and complete in all material respects
and do not contain any untrue statement of a material fact or omit
to state any material fact necessary in order to make such
representations, warranties or statements, in light of the
circumstances under which they were made, misleading. The copies of
all documents furnished by GoIP pursuant to the terms of this
Agreement are complete and accurate copies of the original
documents. The schedules, certificates, and any and all other
statements and information, whether furnished in written or
electronic form, to TW or its representatives by or on behalf of
GoIP and its stockholders in connection with the negotiation of
this Agreement and the transactions contemplated hereby do not
contain any material misstatement of fact or omit to state a
material fact or any fact necessary to make the statements
contained therein not misleading.
III.3 Representations
and Warranties of the Shareholders. Each Shareholder
represents and warrants to GoIP as follows:
(a) Ownership of the Interests, The
Shareholder owns all of his/her/its Interests, free and clear of
all liens and encumbrances, and has the absolute right and
authority to transfer such Interests to GoIP.
(b) Power of Shareholder to Execute
Agreement. The Shareholder has the full right, power, and
authority to execute, deliver, and perform this Agreement, and this
Agreement is the legal binding obligation of the Shareholder and is
enforceable against the Shareholder in accordance with its terms,
except that (i) such enforcement may be subject to bankruptcy,
insolvency, reorganization, moratorium, or other similar laws now
or hereafter in effect relating to creditors’ rights, and
(ii) the remedy of specific performance and injunctive and other
forms of equitable relief may be subject to equitable defenses and
to the discretion of the court before which any proceeding
therefore may be brought.
(c) Agreement Not in Breach of Other
Instruments Affecting Shareholder. The execution and
delivery of this Agreement, the consummation of the transactions
hereby contemplated, and the fulfillment of the terms hereof will
not result in the breach of any term or provisions of, or
constitute a default under, or conflict with, or cause the
acceleration of any obligation under any agreement or other
instrument of any description to which the Shareholder is a party
or by which the Shareholder is bound, or any judgment, decree,
order, or award of any court, governmental body, or arbitrator or
any applicable law, rule, or regulation.
Article IV
COVENANTS RELATING TO CONDUCT OF BUSINESS PRIOR TO
EXCHANGE
IV.1 Negative
Covenants. From the
date of this Agreement and until the Closing Date, or until the
prior termination of this Agreement, TW and GoIP shall not, unless
mutually agreed to in writing:
(a) engage in any
transaction, except in the normal and ordinary course of business,
or create or suffer to exist any security interest upon any of its
assets or which will not be discharged in full prior to the
closing.
(b) sell, assign or
otherwise transfer any of its assets, or cancel or compromise any
debts or claims relating to their assets, other than for fair
value, in the ordinary course of business, and consistent with past
practice.
(c) issue any ownership
interests or make other changes to its capital
structure.
(d) permit any material
adverse change to occur with respect to its business or assets;
or
(e) make any material
change with respect to its business in accounting or bookkeeping
methods, principles or practices.
IV.2 Affirmative
Covenants. From
the date of this Agreement and until the Closing Date, or until the
prior termination of this Agreement, TW and GoIP shall, unless
mutually agreed to in writing:
(a) obtain all consents
and approvals necessary to effectuate the Share
Exchange.
(b) use best efforts to
preserve intact its present business organizations, keep available
the services of its employees and preserve its material
relationships with customers, suppliers, licensors, licensees,
distributors and others, to the end that its good will and ongoing
business not be impaired prior to the Closing; and
(c) pay all expenses
and debt that becomes due and payable.
Article V
ADDITIONAL
AGREEMENTS
5.1 Access
to Information
(a) Access to Information. TW and
GoIP shall, and shall cause their respective officers, employees,
counsel, financial advisors and other representatives to, afford to
GoIP and TW and their respective representatives reasonable access
during normal business hours during the period prior to the Closing
to its properties, books, contracts, commitments, personnel and
records and, during such period, shall furnish, promptly upon
request, all information concerning its business, properties,
financial condition, operations and personnel as such other Party
may from time to time reasonably request.
(b) Confidentiality. All
information furnished by either Party hereto will be treated as the
sole property of the Party furnishing the information (the
“Disclosing
Party”) until consummation of the transactions
contemplated herein, and if such transactions do not occur, each
Party shall return to the Disclosing Party all documents or other
material containing or reflecting or referring to such information
and all copies thereof. Other than as required by law the Parties
will keep confidential all information contained herein or produced
by the Parties in connection with the transactions referenced
herein and will not directly or indirectly use such information for
any competitive or other commercial purpose.
(c) Effect on Representations. No
investigation pursuant to this Section 5.1 shall affect any
representations or warranties of the Parties herein or the
conditions to the obligations of the Parties hereto.
5.2 Best
Efforts. Upon the terms and subject to the conditions set
forth in this Agreement, each of the Parties agrees to use its best
efforts to take, or cause to be taken, all actions, and to do, or
cause to be done, and to assist and cooperate with the other
Parties in doing, all things necessary, proper or advisable to
consummate and make effective, in the most expeditious manner
practicable, the Share Exchange and the other transactions
contemplated by this Agreement. GoIP and TW shall mutually
cooperate in order to facilitate the achievement of the benefits
reasonably anticipated from the Share Exchange.
5.3 Public
Announcements. The Parties will not issue any press release
or other public statements with respect to the transactions
contemplated by this Agreement, except as may be required by
applicable law or court process or approved by the other
Parties.
5.4 Expenses.
All costs and expenses incurred in connection with this Agreement
and the transactions contemplated hereby shall be paid by the Party
incurring such expenses.
5.5 No
Solicitation. Prior to Closing, each officer, director, and
key employee of GOIP (collectively, “Key Persons”)
shall enter into a non-solicitation agreement (“NCND”)
with TW, in the form satisfactory to TW, whereby the Key Persons
agree not to disclose any of TW’s confidential information,
and, for a period of two (2) years following Closing, in any
capacity, directly or indirectly, (i) use TW’s proprietary
information or trade secrets; or (ii) hire or attempt to hire or
otherwise solicit any employees or TW in employment in or services
to any undertaking with which it is associated.
5.6 Preferred
Shares. Prior to
Closing, GoIP will take all steps necessary to approve, including
obtaining board and shareholder approval, and file with the state
of Colorado the Certificate of Designations for the
Shares.
5.7 Reverse
Split. Following execution of this Agreement, GoIP shall (i)
cause a majority of its voting shares and its board of directors to
approve a 500-to-1 reverse stock split of its common stock (the
“Reverse
Split”), (ii) notify and obtain approval from FINRA of
the Reverse Split, and (iii) file such documents as necessary with
the state of Colorado to effectuate the Reverse Split.
5.8 Officers
and Directors. GoIP shall take all actions and do all things
reasonably necessary to have the proposed officers and directors
selected by the Shareholders (the “Proposed Management”) approved by
the stockholders and/or board of directors, as necessary, at
Closing. All current directors of GoIP shall resign and submit a
notice of resignation to the Board of Directors of GoIP, effective
as of the Closing Date.
5.9 Adjustments. The
operation of TW business and related income and expenses up to the
close of business on the day before the Closing will be for the
account of the Shareholders and thereafter for the account of the
GoIP.
5.10 Promotional
Activities. GoIP
shall not, following the Closing Date, directly or indirectly,
conduct any stock promotion activities, in writing, orally or
otherwise, without the prior written consent of TW.
5.11 Existing
Preferred Shares. GoIP shall take all steps necessary to
have all preferred shares held by Sutton Global Associates Inc
converted to shares of common stock and all such preferred stock
shall be cancelled and terminated.
5.12 GoIP
Debt. Except for debt relating to the Note of $300,000 owed
to Sutton Global Associates Inc (the “Sutton Debt”), a Note in the
amount of $12,500 payable to Sky Direct LLC and the liabilities set
forth on Schedule V.12 hereto, GoIP shall have no debt or
liabilities on its books as of the Closing Date. In addition, on or prior to the Closing Date, GoIP
shall take all necessary steps and provide written evidence to TW
that the Sutton Debt is modified as follows: (i) the Sutton Debt
shall only be convertible at a fixed price of $0.25 per share upon
consummation of the Reverse Split and (ii) there shall be a
requirement that at any time after the Closing Date, upon receipt
of net proceeds in excess of $100,000 by GoIP or TW, GoIP shall pay
down the Sutton Note equal to two percent (2%) of the cash not
subject to restriction that is received in connection with such
financing.
5.13 Bank
Accounts. Following execution of this Agreement, GoIP shall
take all necessary steps, as soon as practicable, but in no event
no later than seven (7) days after the Closing Date, to add Kenneth
Orr as a signatory to GoIP’s bank accounts identified on
Schedule III.2(aa). In addition, following the execution of this
Agreement, any check, withdrawal, wire or other deduction from any
GoIP bank account in excess of $5,000 shall require the approval
and signature of Kenneth Orr, or such other representative of TW as
may be identified on or after the date of this
Agreement.
5.14 Audit
Requirement. GoIP shall undertake an audit of its financial
statements and GoIP OTC Documents as soon as practicable after the
Closing Date. To the extent GoIP cannot complete an audit of its
financial statements and GoIP OTC Documents in accordance with the
requirements of the Securities and Exchange Commission on or prior
to the ninety (90) day anniversary of the Closing Date (the
“Audit Deadline”), If such audit cannot be completed on
or prior to the Audit Deadline, TW shall have the right to unwind
the transactions contemplated by this Agreement. GoIP and TW shall
act in good faith and take such further assurances as are necessary
to comply with the requirements set forth in this Section to the
extent the audit requirement is not completed by the Audit
Deadline.
Article VI
CONDITIONS PRECEDENT
6.1 Conditions
to Each Party’s Obligation to Effect the Share
Exchange. The obligation of each Party to effect the Share
Exchange and otherwise consummate the transactions contemplated by
this Agreement is subject to the satisfaction, at or prior to the
Closing, of each of the following conditions:
(a) No Restraints. No temporary
restraining order, preliminary or permanent injunction or other
order preventing the consummation of the Share Exchange shall have
been issued by any court of competent jurisdiction or any other
Governmental Entity having jurisdiction and shall remain in effect,
and there shall not be any applicable legal requirement enacted,
adopted or deemed applicable to the Share Exchange that makes
consummation of the Share Exchange illegal.
(b) Governmental Approvals. All
authorizations, consents, orders, declarations or approvals of, or
filings with, or terminations or expirations of waiting periods
imposed by, any Governmental Entity having jurisdiction which the
failure to obtain, make or occur would have a material adverse
effect on GoIP or TW shall have been obtained, made or
occurred.
(c) No Litigation. There shall not
be pending or threatened any suit, action or proceeding before any
court, Governmental Entity or authority (i) pertaining to the
transactions contemplated by this Agreement or (ii) seeking to
prohibit or limit the ownership or operation by TW, GoIP or any of
its subsidiaries, or to dispose of or hold separate any material
portion of the business or assets of TW or GoIP.
(d) Member Approval. The
Shareholders shall have adopted and approved this Agreement and the
Share Exchange in accordance with applicable law.
6.2 Conditions
Precedent to Obligations of GoIP. The obligation of GoIP to
effect the Share Exchange and otherwise consummate the transactions
contemplated by this Agreement are subject to the satisfaction, at
or prior to the Closing, of each of the following
conditions:
(a) Representations, Warranties and
Covenants. The representations and warranties of TW and the
Shareholders in this Agreement shall be true and correct in all
material respects (except for such representations and warranties
that are qualified by their terms by a reference to materiality or
material adverse effect, which representations and warranties as so
qualified shall be true and correct in all respects) both when made
and on and as of the Closing, and (ii) TW and the Shareholders
shall each have performed and complied in all material respects
with all covenants, obligations and conditions of this Agreement
required to be performed and complied with by each of them prior to
the Closing.
(b) Consents. GoIP shall have
received evidence, in form and substance reasonably satisfactory to
it, that such licenses, permits, consents, approvals,
authorizations, qualifications and orders of governmental
authorities and other third parties as necessary in connection with
the transactions contemplated hereby have been obtained.
(c) Officer’s Certificate of
TW. GoIP shall have received a certificate executed on
behalf of TW by an executive officer of TW confirming that the
conditions set forth in Sections VI.1 and VI.2(a) have been
satisfied.
(d) No Material Adverse Change.
There shall not have occurred any change in the business, condition
(financial or otherwise), results of operations or assets
(including intangible assets) and properties of TW that,
individually or in the aggregate, could reasonably be expected to
have a material adverse effect on TW.
(e) Secretary’s Certificate of
TW. GoIP shall have received a certificate, dated as of the
Closing Date, from the Secretary of TW, certifying (i) as to the
incumbency and signatures of the officers of TW, who shall execute
this Agreement and documents at the Closing and (ii) that attached
thereto is a true and complete copy of (A) the articles or
certificate of incorporation of TW and all amendments thereto, (B)
the bylaws of TW and all amendments thereto, and (C) resolutions of
the Board of Directors of TW and its Shareholders authorizing the
execution, delivery and performance of this Agreement by
TW.
(f) Liabilities. There shall be no
liabilities on the books of TW.
(g) Schedules and Agreement. TW and
the Shareholders, as applicable, shall have provided GoIP with all
schedules and agreements, duly executed, required by this
Agreement.
6.3 Conditions
Precedent to Obligation of TW and Shareholders. The
obligations of TW to and the Shareholders to effect the Share
Exchange and otherwise consummate the transactions contemplated by
this Agreement are subject to the satisfaction, at or prior to the
Closing, of each of the following conditions:
(a) Representations, Warranties and
Covenants. The representations and warranties of GoIP in
this Agreement shall be true and correct in all material respects
(except for such representations and warranties that are qualified
by their terms by a reference to materiality or material adverse
effect, which representations and warranties as so qualified shall
be true and correct in all respects) both when made and on and as
of the Closing, and GoIP shall have performed and complied in all
material respects with all covenants, obligations and conditions of
this Agreement required to be performed and complied with by it
prior to the Closing.
(b) Consents. TW shall have
received evidence, in form and substance reasonably satisfactory to
it, that such licenses, permits, consents, approvals,
authorizations, qualifications and orders of governmental
authorities and other third parties as necessary in connection with
the transactions contemplated hereby have been obtained.
(c) Officer’s Certificate of
GoIP. TW shall have received a certificate executed on
behalf of GoIP by an executive officer of GoIP, confirming that the
conditions set forth in Sections VI.1 and VI.3(a) have been
satisfied.
(d) Secretary’s Certificate of
GoIP. TW shall have received a certificate, dated as of the
Closing Date, from the Secretary of GoIP, certifying (i) as to the
incumbency and signatures of the officers of GoIP, who shall
execute this Agreement and documents at the Closing and (ii) that
attached thereto is a true and complete copy of (A) the articles or
certificate of incorporation of GoIP and all amendments thereto,
(B) the bylaws of GoIP and all amendments thereto, and (C)
resolutions of the Board of Directors of GoIP and its Shareholders
authorizing the execution, delivery and performance of this
Agreement by GoIP.
(e) Resignations. The current directors of
GoIP shall submit written resignations from their respective
positions with GoIP and GoIP shall provide copies of such
resignations to TW.
(f) Liabilities. There shall be no
liabilities on the books of GoIP other than those created per the
terms and limitations of the Sutton Debt. The promissory note
representing the Sutton Debt shall have been amended in accordance
with Section V.12 hereof.
(g) Due Diligence. TW shall be
satisfied with its due diligence investigations.
(h) Reverse Split. The Reverse
Split shall have been approved by the board of directors and
shareholders of GoIP and submitted to FINRA.
(i) Filings
with Secretary of State of Colorado. The Series D Preferred Stock and
Series E Preferred Stock shall have been duly approved and
designated by GoIP and the Certificate of Designations for such
shall have been filed with the state of Colorado.
(j) Preferred
Share Cancellation.
All preferred shares of GoIP held by Sutton Global Associates Inc
shall have been cancelled pursuant to the terms of that certain
Return to Treasury Agreement to be entered into on or prior to the
Closing Date.
(k) Schedules and Agreement. GoIP
shall have provided TW and the Shareholders, as applicable, with
all schedules and agreements, duly executed, required by this
Agreement.
Article VII
TERMINATION,
AMENDMENT AND WAIVER
7.1 Termination.
This Agreement may be terminated and abandoned at any time prior to
the Closing Date:
(a) by mutual written
consent of GoIP and TW.
(b) by either GoIP or
TW if any Governmental Entity shall have issued an order, decree or
ruling or taken any other action permanently enjoining, restraining
or otherwise prohibiting the Share Exchange and such order, decree,
ruling or other action shall have become final and
nonappealable;
(c) by TW for any
reason during the period from full execution of this Agreement
until the date thirty (30) days therefrom (the “Due Diligence Period”).
(d) by GoIP or TW if a
material breach of this Agreement or material adverse change shall
have occurred relative to the other Party before Closing and is not
cured within five (5) days after GoIP or TW tenders notice of the
breach to the other Party.
(e) by GoIP or TW if
the Closing has not occurred by April 30, 2020, unless TW has
provided GoIP with written notice of its intent to extend
Closing.
7.2 Effect
of Termination. In the event of termination of this
Agreement by either TW or GoIP as provided in Section 7.1, this
Agreement shall forthwith become void and have no effect, without
any liability or obligation on the part of GoIP, the Shareholders
or TW except those provisions that specifically survive
termination. Nothing contained in this Section shall relieve any
Party for any breach of the representations, warranties, covenants
or agreements set forth in this Agreement.
7.3 Amendment.
This Agreement may not be amended except by an instrument in
writing signed on behalf of each of the Parties.
7.4 Extension;
Waiver. Any agreement on the part of a Party to an extension
or waiver of another Party’s obligations hereunder shall be
valid only if set forth in an instrument in writing signed on
behalf of such Party. The failure of any Party to this Agreement to
assert any of its rights under this Agreement or otherwise shall
not constitute a waiver of such rights.
7.5 Return
of Documents. In the event of termination of this Agreement
for any reason, GoIP and TW will return to the other Party all of
the other Party’s documents, work papers, and other materials
(including copies) relating to the transactions contemplated in
this Agreement, whether obtained before or after execution of this
Agreement. GoIP, the Shareholders and TW will not use any
information so obtained from the other Party for any purpose and
will take all reasonable steps to have such other Party’s
information kept confidential.
Article VIII
INDEMNIFICATION
AND RELATED MATTERS
8.1 Survival
of Representations and Warranties. The representations and
warranties in this Agreement or in any instrument delivered
pursuant to this Agreement and the indemnification requirements
contained in this Article VIII shall survive the Closing or earlier
termination of this Agreement to the fullest extent permitted by
law and for a period of twelve (12) months thereafter (the
“Survival
Date”).
8.2 Indemnification
by Transworld. Except as
otherwise limited by this ARTICLE VIII, Transworld shall indemnify,
defend and hold harmless GoIP and any successor or assign thereof
(collectively, the “GoIP
Indemnitees”) from and
against, and pay or reimburse GoIP Indemnitees for, any and all
losses, actions, orders, liabilities, damages (including
consequential damages), diminution in value, taxes, interest,
penalties, liens, amounts paid in settlement and reasonable costs
and expenses (including reasonable expenses of investigation and
court costs and reasonable attorneys’ fees and expenses),
(any of the foregoing, a “Loss”) suffered or incurred by, or imposed upon,
any GoIP Indemnitee arising in whole or in part out of or resulting
directly or indirectly from: (a) any inaccuracy in or breach of any
representation or warranty made by Transworld in this Agreement
(including all schedules, exhibits and annexes hereto and all
certificates, documents, instruments and undertakings furnished
pursuant to this Agreement to which Transworld is a party or made
in connection herewith); (b) any nonfulfillment or breach of any
covenant, obligation or agreement made by or on behalf of
Transworld in this Agreement (including all schedules, exhibits and
annexes hereto and all certificates, documents, instruments and
undertakings furnished pursuant to this Agreement to which
Transworld is a party or made in connection herewith and
therewith); or (c) enforcing GoIP Indemnitees’
indemnification rights provided for hereunder.
8.3 Indemnification
by GoIP. Except as otherwise
limited by this ARTICLE VIII, GoIP shall indemnify, defend and hold
harmless Transworld and its Representatives and any successor or
permitted assign thereof (collectively, the
“Transworld
Indemnitees”) from and
against, and pay or reimburse Transworld Indemnitees for, any and
all Losses, suffered or incurred by, or imposed upon, any
Transworld Indemnitee arising in whole or in part out of or
resulting directly or indirectly from: (a) any inaccuracy in or
breach of any representation or warranty made by GoIP in this
Agreement (including all schedules, exhibits and annexes hereto and
all certificates, documents, instruments and undertakings furnished
pursuant to this Agreement to which GoIP is a party or made in
connection herewith); (b) any nonfulfillment or breach of any
covenant, obligation or agreement made by or on behalf of GoIP in
this Agreement (including all schedules, exhibits and annexes
hereto and all certificates, documents, instruments and
undertakings furnished pursuant to this Agreement to which GoIP is
a party or made in connection herewith and therewith); or (c)
enforcing Transworld Indemnitees’ indemnification rights
provided for hereunder.
8.4 Indemnification
Procedures.
(a) For the purposes of this Agreement, (i) the term
“Indemnitee” shall refer to the Person or Persons
indemnified, or entitled, or claiming to be entitled, to be
indemnified, pursuant to the provisions of Section VIII. 2 or VIII.
3 as the case may be, and (ii) the term “Indemnitor” shall refer to the Person or Persons
having the actual or alleged obligation to indemnify pursuant to
such provisions.
(b) In
order to make a claim for indemnification hereunder, the Indemnitee
must provide written notice (a “Claim Notice”) of such claim to the Indemnitor (and with
respect to any claim against GoIP prior to the Expiration Date, the
Escrow Agent), which Claim Notice shall include (i) a reasonable
description of the facts and circumstances which relate to the
subject matter of such indemnification claim to the extent then
known and (ii) the amount of Losses suffered by the Indemnitee in
connection with the claim to the extent known or reasonably
estimable (provided, that the Indemnitee may thereafter in good
faith adjust the amount of Losses with respect to the claim by
providing a revised Claim Notice to the Indemnitor and, if
applicable, the Escrow Agent); provided, that the copy of any Claim
Notice provided to the Escrow Agent shall be redacted for any
confidential or proprietary information of the Indemnitor or the
Indemnitees described in clause (i) above.
(c) In
the case of any claim for indemnification under this Agreement
arising from a claim of a third party (including any Governmental
Authority), an Indemnitee must give a Claim Notice the Indemnitor
of such third party claim promptly (and in any event within thirty
(30) days) after the Indemnitee’s receipt of notice of such
claim; provided, that the failure to timely provide such notice
will not relieve an Indemnitor of its indemnification obligations
except to the extent that the Indemnitor is actually harmed
thereby. The Indemnitor will have the right to defend and to direct
the defense against any such claim in its name and at its expense,
and with counsel selected by the Indemnitor unless: (i) the
Indemnitor fails to acknowledge fully its obligations to the
Indemnitee within fifteen (15) days after receiving notice of such
third party claim or contests, in whole or in part, its
indemnification obligations therefor; (ii) if the Indemnitor is
Transworld, (A) the applicable third party claimant is a
Governmental Authority or a then-current customer of GoIP or any of
its Affiliates or (B) an adverse judgment with respect to the claim
will establish a precedent materially adverse to the continuing
business interests of GoIP or its Affiliates; (iii) there is a
conflict of interest between the Indemnitor and the Indemnitee in
the conduct of such defense such that representation of both
Indemnitor and Indemnitee by the same counsel would violate
professional standards of conduct for attorneys in the jurisdiction
where the Indemnitor’s counsel is practicing on behalf of the
Indemnitor; (iv) the applicable third party alleges claims of
fraud, willful misconduct or intentional misrepresentation; (v)
such claim is criminal in nature, could reasonably be expected to
lead to criminal proceedings, or seeks an injunction or other
equitable relief against the Indemnitee; or (vi) the claim seeks or
is reasonably expected to seek damages or other amounts that would
result in all or any portion of the Indemnitee’s right to
indemnification for such claim (when combined in the aggregate with
the amount of all other pending and finally determined claims
against the Indemnitor) being either (A) if the Indemnitor is GoIP,
in excess of the then remaining Escrow Shares unless GoIP provides
evidence reasonably acceptable to TW of GoIP’s ability to pay
all potential amounts with respect to such claim and all other
pending and finally determined claims against GoIP, along with
security or an escrow arrangement reasonably acceptable to TW for
such amounts, or (B) limited by the Indemnification Cap. If the
Indemnitor elects, and is entitled, to compromise or defend such
claim, it will within fifteen (15) days (or sooner, if the nature
of the claim so requires) notify the Indemnitee of its intent to do
so, and the Indemnitee will, at the request and expense of the
Indemnitor, cooperate in the defense of such claim. If the
Indemnitor elects not to, or is not entitled under this Section to,
compromise or defend such claim, fails to notify the Indemnitee of
its election as herein provided or refuses to acknowledge or
contests its obligation to indemnify under this Agreement, the
Indemnitee may pay, compromise or defend such claim.
Notwithstanding anything to the contrary contained herein, the
Indemnitor will have no indemnification obligations with respect to
any such claim which has been or will be settled by the Indemnitee
without the prior written consent of the Indemnitor (which consent
will not be unreasonably withheld, delayed or conditioned);
provided, however, that notwithstanding the foregoing, the
Indemnitee will not be required to refrain from paying any claim
which has matured by a court judgment or decree, unless an appeal
is duly taken therefrom and exercise thereof has been stayed, nor
will it be required to refrain from paying any claim where the
delay in paying such claim would result in the foreclosure of a
lien upon any of the property or assets then held by the Indemnitee
or where any delay in payment would cause the Indemnitee material
economic loss. The Indemnitor’s right to direct the defense
will include the right to compromise or enter into an agreement
settling any claim by a third party; provided, further, that no
such compromise or settlement will obligate the Indemnitee to agree
to any settlement that requires the taking or restriction of any
action (including the payment of money and competition
restrictions) by the Indemnitee (other than the delivery of a
release for such claim and customary confidentiality obligations),
except with the prior written consent of the Indemnitee (such
consent not to be unreasonably withheld, conditioned or delayed).
Notwithstanding the Indemnitor’s right to compromise or
settle in accordance with the immediately preceding sentence, the
Indemnitor may not settle or compromise any claim over the
objection of the Indemnitee; provided, however, that consent by the
Indemnitee to settlement or compromise will not be unreasonably
withheld, delayed or conditioned. The Indemnitee will have the
right to participate in the defense of any claim with counsel
selected by it subject to the Indemnitor’s right to direct
the defense. The fees and disbursements of such counsel will be at
the expense of the Indemnitee; provided, however, that, in the case
of any claim which seeks injunctive or other equitable relief
against the Indemnitee, the fees and disbursements of such counsel
will be at the expense of the Indemnitor.
(d) With respect to any direct
indemnification claim under this Agreement that does not arise from
a third-party claim, the Indemnitor will have a period of thirty
(30) days after receipt of the Claim Notice within which to respond
thereto. If the Indemnitor does not respond within such thirty (30)
days, the Indemnitor will be deemed to have accepted responsibility
for the Losses set forth in the Claim Notice and will have no
further right to contest the validity of the Claim Notice. If the
Indemnitor responds within such thirty (30) days after the receipt
of the Claim Notice and rejects such claim in whole or in part, the
Indemnitee will be free to pursue such remedies as may be available
to it under this Agreement, any other documents entered into in
connection with the transactions set forth herein or applicable
law.
8.5 Limitations on
Indemnification. No Indemnitor
shall be liable for an indemnification claim made under clause (a)
of Section VIII.2 or Section VIII.3, as the case may be: (a) for
which a claim for indemnification is not asserted hereunder on or
before the Survival Date; (b) unless and until the aggregate amount
of Losses incurred by GoIP Indemnitees in the aggregate under
clause (a) of Section VIII.2 or by Transworld Indemnitees in the
aggregate under clause (a) of Section VIII.3, as applicable,
exceeds Twenty-Five Thousand U.S. Dollars ($25,000) (the
“Basket”) in which case the applicable Indemnitor
shall be obligated to the applicable Indemnitee for the amount of
all Losses of such Indemnitees from the first dollar of Losses of
the Indemnitees required to reach the Basket; or (c) to the extent
Losses incurred by GoIP Indemnitees in the aggregate under clause
(a) of Section 7.2 or by Transworld Indemnitees in the aggregate
under clause (a) of Section 7.3, as applicable, exceed an amount
equal to the value of the Escrow Shares (the
“Indemnification
Cap”). Notwithstanding
the foregoing: (i) the Indemnification Cap shall not apply to
indemnification claims to the extent amounts are actually paid
under insurance maintained by the Indemnitor (or any of its
Affiliates); and (ii) the Basket and the Indemnification Cap shall
not apply to indemnification claims that are based in whole or in
part upon fraud, willful misconduct or intentional
misrepresentation. The Indemnification Cap and Basket shall apply
only to indemnification claims made under clause (a) of Section
VIII.2 or Section VIII.3 and shall not affect or apply to any other
indemnification claim made pursuant to this Agreement, including
those asserted under any other clause of Section VIII.2 or Section
VIII.3.
8.6 General
Indemnification Provisions. The
amount of any Losses suffered or incurred by any Indemnitee shall
be reduced by the amount of any insurance proceeds or other cash
receipts paid to the Indemnitee or any Affiliate thereof as a
reimbursement with respect to such Losses (and no right of
subrogation shall accrue to any insurer hereunder, except to the
extent that such waiver of subrogation would prejudice any
applicable insurance coverage), including any indemnification
received by the Indemnitee or such Affiliate from an unrelated
party with respect to such Losses, net of the costs of collection
and any related anticipated future increases in insurance premiums
resulting from such Loss or insurance payment. No investigation or
knowledge by a party of a breach of a representation or warranty of
another party hereto shall affect the representations and
warranties of the breaching party or the recourse available to such
first party under any provision of this Agreement (including this
ARTICLE VIII) with respect thereto. For all purposes of this
ARTICLE VIII including for purposes determining whether there has
been a breach giving rise to the indemnification claim and the
amount of Losses, all of the representations, warranties and
covenants set forth in this Agreement (including the schedules,
exhibits and annexes hereto) that are qualified by materiality,
Material Adverse Effect or words of similar import or effect will
be deemed to have been made without any such qualification. In any
claim for indemnification under this Agreement, no Person shall be
required to indemnify any Person for punitive damages or special
damages, unless such punitive damages, or special damages are
actually awarded to a third party.
8.7 Escrow;
Timing of Payment; Right to Set-Off. All claims for indemnification by a TW
Indemnitee pursuant to this ARTICLE VII shall first be asserted
against the Sutton Debt (the “Escrow
Amount”) in accordance
with this Agreement. Any indemnification obligation of an
Indemnitor under this ARTICLE VIII will be paid within five (5)
Business Days after the determination of such obligation in
accordance with Section 7.4 and GoIP and Transworld will provide or
cause to be provided any written instructions or other information
or documents required to do so). The provisions of this ARTICLE
VIII notwithstanding, at the sole discretion of TW and without
limiting any other rights of TW Indemnitees under this Agreement or
any other documents executed hereunder or at law or equity, to the
extent that a TW Indemnitee is determined in accordance with this
Agreement to be entitled to indemnification hereunder, if GoIP
fails or refuses to promptly indemnify such TW Indemnitee as
provided herein then Transworld (or any other TW Indemnitee) may
offset the full amount to which such TW Indemnitee is entitled, in
whole or in part, by reducing the amount of any payment or other
obligation due to GoIP pursuant to this Agreement or any document
executed in connection herewith, and any amounts owed by GoIP
pursuant to any outstanding indemnification claim by a Transworld
Indemnitee.
8.8 Exclusive
Remedies. Except as otherwise
set forth herein, the parties acknowledge and agree that their sole
and exclusive remedy with respect to any and all claims (other than
claims arising from fraud on the part of a party hereto in
connection with the transactions contemplated by this Agreement)]
for any breach of any representation, warranty, covenant, agreement
or obligation set forth herein or otherwise relating to the subject
matter of this Agreement, shall be pursuant to the indemnification
provisions set forth in this ARTICLE VIII. In furtherance of the
foregoing, each party hereby waives, to the fullest extent
permitted under law, any and all rights, claims and causes of
action for any breach of any representation, warranty, covenant,
agreement or obligation set forth herein or otherwise relating to
the subject matter of this Agreement it may have against the other
parties hereto and their Affiliates and each of their respective
Representatives arising under or based upon any Law, except
pursuant to the indemnification provisions set forth in this
ARTICLE VIII. Nothing in this Section shall limit any
Person’s right to seek and obtain any equitable relief to
which any Person shall be entitled pursuant to this
Agreement.
Article IX
GENERAL
PROVISIONS
9.1 Notices.
All notices or other communications required or permitted hereunder
shall be in writing shall be deemed duly given (i) if by personal
delivery, when so delivered, (ii) if mailed, three (3) business
days after having been sent by registered or certified mail, return
receipt requested, postage prepaid and addressed to the intended
recipient, (iii) if sent through an overnight delivery service in
circumstances to which such service guarantees next day delivery,
the following day, or (iv) when sent by facsimile with telephonic
confirmation or electronic mail with confirmation of transmission
by the transmitting equipment, the same day, in each case to the
addresses, facsimile numbers, or electronic mail addresses
designated in writing by each Party hereto to the other Party. Any
Party may change the address, facsimile number, or electronic mail
address to which notices and other communications hereunder are to
be delivered by giving the other Party no less than ten (10)
days’ prior notice in the manner herein set forth. All
notices to the Shareholders shall be sent “care of”
TW.
9.2 Interpretation.
When a reference is made in this Agreement to a Section, Exhibit or
Schedule, such reference shall be to a Section of, or an Exhibit or
Schedule to, this Agreement unless otherwise indicated. The
headings contained in this Agreement are for reference purposes
only and shall not affect in any way the meaning or interpretation
of this Agreement. All Exhibits and Schedules to this Agreement are
hereby incorporated into and made a part of this Agreement. In this
Agreement, words importing the singular number include the plural
and vice versa and words importing gender include all genders.
Whenever the words “include,” “includes” or
“including” are used in this Agreement, they shall be
deemed to be followed by the words “without
limitation.”
9.3 Entire
Agreement; No Third-Party Beneficiaries. This Agreement and
the other agreements and documents referred to herein constitute
the entire agreement, and supersede all prior agreements and
understandings, both written and oral, among the Parties with
respect to the subject matter of this Agreement. This Agreement is
not intended to confer upon any person other than the Parties any
rights or remedies.
9.4 Governing
Law; Federal Waiver. This Agreement shall be governed
by, and construed in accordance with, the laws of the State of New
York, USA, regardless of the laws that might otherwise govern under
applicable principles of conflicts of laws thereof. The Parties expressly acknowledge
and agree that (i) the use, possession, cultivation, manufacture,
transportation, purchase and sale of cannabis is federally illegal,
(ii) the federal laws and certain states’ laws regarding the
use, possession, cultivation, transportation, manufacture and
furnishing of cannabis (the “Industry”) are in conflict; (iii)
engaging in the lawful conduct of business operations in the
Industry under state law may risk criminal or civil forfeiture,
violation of federal law, and heightened risk of criminal or civil
prosecution, crime and violence.
9.5 Assignment.
Neither this Agreement nor any of the rights, interests or
obligations under this Agreement shall be assigned, in whole or in
part, by operation of law or otherwise by any of the Parties
without the prior written consent of the other Parties. Any
assignment in contradiction of the above shall be null and void.
Subject to the preceding sentence, this Agreement will be binding
upon, inure to the benefit of, and be enforceable by, the Parties
and their respective successors and assigns.
9.6 Severability.
Whenever possible, each provision or portion of any provision of
this Agreement will be interpreted in such manner as to be
effective and valid under applicable law but if any provision or
portion of any provision of this Agreement is held to be invalid,
illegal or unenforceable in any respect under any applicable law or
rule in any jurisdiction, such invalidity, illegality or
unenforceability will not affect any other provision or portion of
any provision in such jurisdiction, and this Agreement will be
reformed, construed and enforced in such jurisdiction as if such
invalid, illegal or unenforceable provision or portion of any
provision had never been contained herein.
9.7 Counterparts.
This Agreement may be executed simultaneously in two or more
counterparts, any one of which need not contain the signatures of
more than one Party, but all such counterparts taken together will
constitute one and the same Agreement. This Agreement, to the
extent delivered by means of a facsimile machine or electronic mail
(any such delivery, an “Electronic Delivery”), shall be
treated in all manner and respects as an original agreement or
instrument and shall be considered to have the same binding legal
effect as if it were the original signed version thereof delivered
in person. At the request of any Party hereto, each other Party
hereto shall re-execute original forms hereof and deliver them in
person to all other Parties. No Party hereto shall raise the use of
Electronic Delivery to deliver a signature or the fact that any
signature or agreement or instrument was transmitted or
communicated through the use of Electronic Delivery as a defense to
the formation of a contract, and each such Party forever waives any
such defense, except to the extent such defense related to lack of
authenticity.
9.8 Attorneys’
Fees. In the event any suit or other legal proceeding is
brought for the enforcement of any of the provisions of this
Agreement, the Parties hereto agree that the prevailing Party or
Parties shall be entitled to recover from the other Party or
Parties upon final judgment on the merits reasonable
attorneys’ fees, including attorneys’ fees for any
appeal, and costs incurred in bringing such suit or
proceeding.
9.9 Section
Headings. The headings of Articles and Sections in this
Agreement are provided for convenience only and will not affect its
construction or interpretation. All references to "Article" or
"Articles" or "Section" or "Sections" refer to the corresponding
Article or Articles or Section or Sections of this Agreement,
unless the context indicates otherwise.
9.10 Construction.
The Parties have participated jointly in the negotiation and
construction of this Agreement. Each Party has retained independent
legal counsel to advise on this Agreement. In the event an
ambiguity or question of intent or interpretation arises, this
Agreement shall be construed as if drafted jointly by the Parties
and no presumption or burden of proof shall arise favoring or
disfavoring any Party by virtue of the authorship of any of the
provisions of this Agreement. Any reference to any federal, state,
local, or foreign statute or Law shall be deemed also to refer to
all rules and regulations promulgated thereunder, unless the
context requires otherwise. Unless otherwise expressly provided,
the word "including" shall mean including without limitation. The
Parties intend that each representation, warranty, and covenant
contained herein shall have independent significance. If any Party
has breached any representation, warranty, or covenant contained
herein in any respect, the fact that there exists another
representation, warranty, or covenant relating to the same subject
matter (regardless of the relative levels of specificity) which the
Party has not breached shall not detract from or mitigate the fact
that the Party is in breach of such representation, warranty, or
covenant. All words used in this Agreement will be construed to be
of such gender or number as the circumstances require.
9.11 Counterparts.
This Agreement may be executed in one or more counterparts, each of
which will be deemed to be an original copy of this Agreement and
all of which, when taken together, will be deemed to constitute one
and the same agreement. 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.
9.12 Specific
Performance. Each of the Parties acknowledges and agrees
that the other Parties would be damaged irreparably in the event
any of the provisions of this Agreement are not performed in
accordance with their specific terms or otherwise are breached.
Accordingly, each of the Parties agrees that the other Parties
shall be entitled to an injunction or injunctions to prevent
breaches of the provisions of this Agreement and to enforce
specifically this Agreement and the terms and provisions hereof in
any action instituted in any court of the U.S. or any state thereof
having jurisdiction over the Parties and the matter, in addition to
any other remedy to which they may be entitled, at law or in
equity, except that in no way may a Party terminating prior to the
Closing Date in accordance with this Agreement be required to close
the Share Exchange.
[Signature
Page Follows, Remainder of Page Intentionally Blank]
IN
WITNESS WHEREOF, the undersigned have caused their duly authorized
officers to execute this Share Exchange Agreement as of the date
first above written.
GoIP:
GoIP
Global, Inc.
By:
Isaac H. Sutton, CEO
|
TransWorld Enterprises Inc:
By:
Phil Scala, Interim CEO
|
Signatures of the Shareholders are contained on the following
member Counterpart Signature Page:
KORR ACQUISITIONS GROUP, INC.
_______________________________
Name:
Kenneth Orr
Title:
|
KORR VALUE, LP
By:
KORR Acquisitions Group, Inc, its general partner
_______________________________
Name:
Kenneth Orr
Title:
|
_______________________________
Greg
Goldberg
|
_______________________________
Cori
Orr
|
_______________________________
Lauren
Orr
|
_______________________________
Benjamin
Orr
|
_______________________________
Jonathan
Orr
|
_______________________________
David
Orr
|
_______________________________
Fred
Giovanelli
|
_______________________________
Phil
Scala
|
_______________________________
Justin
Deutsch
|
VIVACE MAXVICTOR LLC
_______________________________
Name:
Title:
|
SCHEDULE I
STOCK ACQUISITION AGREEMENT
by and among
GOIP GLOBAL, INC.
TRANSWORLD ENTERPRISES, INC.,
GETCHARGED, INC.,
THE TRANSFERORS
and
ANDREW FOX, as the Transferors’ Representative
DATED AS OF SEPTEMBER 25, 2020
TABLE OF CONTENTS
Page
ARTICLE 1
Acquisition
|
1
|
1.1
|
Acquisition
of the Shares
|
1
|
1.2
|
Purchase
Price
|
1
|
ARTICLE 2
Closing
|
2
|
2.1
|
Closing
|
2
|
2.2
|
Transferor
Closing Deliverables
|
2
|
2.3
|
Company
Closing Deliverables
|
2
|
2.4
|
Acquiror
and Parent Closing Deliverables
|
4
|
2.5
|
Manner
of Payment
|
4
|
2.6
|
Withholding
|
5
|
2.7
|
Holdback
|
5
|
ARTICLE
3 Closing Statement
|
5
|
3.1
|
Definitions
|
5
|
3.2
|
Closing
Statement
|
7
|
ARTICLE
4 Representations and warranties of the Transferors
|
7
|
4.1
|
Organization
|
7
|
4.2
|
Authority
and Enforceability
|
7
|
4.3
|
Title
to Shares
|
7
|
4.4
|
No
Conflict
|
8
|
4.5
|
Legal
Proceedings
|
8
|
4.6
|
Investment
Representations
|
8
|
ARTICLE
5 Representations and warranties of the company
|
9
|
5.1
|
Organization
and Qualification of the Company
|
9
|
5.2
|
Authority;
Board Approval
|
9
|
5.3
|
No
Conflicts; Consents
|
10
|
5.4
|
Capitalization
|
10
|
5.5
|
Subsidiaries;
Joint Ventures
|
11
|
5.6
|
Financial
Statements
|
12
|
5.7
|
No
Undisclosed Liabilities; Indebtedness
|
13
|
5.8
|
Absence
of Certain Changes, Events and Conditions
|
13
|
5.9
|
Material
Contracts
|
16
|
5.1
|
Real
Property
|
18
|
5.11
|
Personal
Property; Sufficiency of Assets
|
19
|
5.12
|
[Reserved]
|
19
|
5.13
|
Intellectual
Property
|
19
|
5.14
|
[Reserved]
|
22
|
5.15
|
Accounts
Receivable; Accounts Payable
|
22
|
5.16
|
Customers,
Suppliers and Distributors
|
23
|
5.17
|
Insurance
|
24
|
5.18
|
Legal
Proceedings; Governmental Orders
|
24
|
5.19
|
Compliance
With Laws; Permits
|
25
|
5.2
|
Environmental
Matters
|
25
|
5.21
|
Employee
Benefit Matters
|
27
|
5.22
|
Employment
Matters
|
30
|
5.23
|
Taxes
|
31
|
5.24
|
Export
Control Matters
|
34
|
5.25
|
Import
Compliance
|
35
|
5.26
|
Certain
Payments
|
35
|
5.27
|
Warranty
Obligations
|
36
|
5.28
|
Data
Privacy and Security
|
36
|
5.29
|
Transactions
with Related Persons
|
37
|
5.3
|
Brokers
|
37
|
5.31
|
Projections
|
38
|
ARTICLE
6 Representations and warranties of Acquiror and
Parent
|
38
|
6.1
|
Representations
and Warranties of Acquiror
|
38
|
6.2
|
Representations
and Warranties of Parent
|
39
|
ARTICLE
7 Covenants
|
40
|
7.1
|
Conduct
of Business Prior to the Closing
|
40
|
7.2
|
Access
to Information
|
41
|
7.3
|
No
Solicitation of Other Bids
|
41
|
7.4
|
Notice
of Certain Events
|
42
|
7.5
|
Confidentiality
|
42
|
7.6
|
Non-competition;
Non-solicitation
|
43
|
7.7
|
Approvals
and Consents
|
44
|
7.8
|
Release
|
46
|
7.9
|
Closing
Conditions
|
46
|
7.1
|
Publicity;
Transaction Disclosure
|
46
|
7.11
|
Reserved
|
47
|
7.12
|
Litigation
Support
|
47
|
7.13
|
280G
|
48
|
7.14
|
Company
Covenants
|
48
|
7.15
|
Customer
and other Business Relationships
|
48
|
7.16
|
Insurance;
Risk of Loss
|
48
|
7.17
|
Internal
Control over Financial Reporting
|
49
|
7.18
|
Financial
Reporting Cooperation
|
49
|
7.19
|
Further
Assurances
|
49
|
7.2
|
Transferors’
Representative
|
49
|
ARTICLE
8 Tax matters
|
50
|
8.1
|
Tax
Covenants
|
50
|
8.2
|
Termination
of Existing Tax Sharing Agreements
|
52
|
8.3
|
Tax
Indemnification
|
52
|
8.4
|
Straddle
Period
|
52
|
8.5
|
Contests
|
52
|
8.6
|
Cooperation
and Exchange of Information
|
53
|
8.7
|
Tax
Treatment of Indemnification Payments
|
53
|
8.8
|
Survival
|
53
|
8.9
|
Overlap
|
53
|
ARTICLE
9 Conditions to closing
|
53
|
9.1
|
Conditions
to Obligations of All Parties
|
53
|
9.2
|
Conditions
to Obligations of Parent and Acquiror
|
54
|
9.3
|
Conditions
to Obligations of the Company and the Transferors
|
55
|
ARTICLE
10 Indemnification
|
56
|
10.1
|
Survival
|
56
|
10.2
|
Indemnification
By The Transferors
|
56
|
10.3
|
Indemnification
By Acquiror
|
57
|
10.4
|
Certain
Limitations
|
58
|
10.5
|
Indemnification
Procedures
|
58
|
10.6
|
Manner
of Payments
|
61
|
10.7
|
No
Circular Recovery
|
62
|
10.8
|
Materiality
|
62
|
10.9
|
Tax
Treatment of Indemnification Payments
|
62
|
10.1
|
Effect
of Investigation and Waiver
|
63
|
10.11
|
Exclusive
Remedies
|
63
|
10.12
|
No
Contribution
|
63
|
10.13
|
Separate
Bases for Claim
|
63
|
ARTICLE
11 Termination
|
63
|
11.1
|
Termination
|
63
|
11.2
|
Effect
of Termination
|
64
|
ARTICLE
12 Miscellaneous
|
65
|
12.1
|
Expenses
|
65
|
12.2
|
Notices
|
65
|
12.3
|
Construction
|
66
|
12.4
|
Severability
|
67
|
12.5
|
Entire
Agreement
|
67
|
12.6
|
Reserved
|
68
|
12.7
|
Successors
and Assigns
|
68
|
12.8
|
No
Third-Party Beneficiaries
|
68
|
12.9
|
Amendment
and Modification; Waiver
|
68
|
12.1
|
Governing
Law
|
68
|
12.11
|
Forum
Selection; Consent to Jurisdiction; Waiver of Jury
Trial
|
68
|
12.12
|
Specific
Performance
|
69
|
12.13
|
Counterparts;
Effectiveness
|
70
|
STOCK ACQUISITION AGREEMENT
This
STOCK ACQUISITION AGREEMENT (this “Agreement”), dated as of
September 25, 2020, is entered into by and among GoIP Global, Inc.
(“Parent”), Transworld
Enterprises, Inc., a Delaware corporation and wholly owned
subsidiary of Parent (“Acquiror”), GetCharged,
Inc., a Delaware corporation (the “Company”), each of the
parties set forth on Exhibit A hereto (each, a
“Transferor” and
collectively, the “Transferors”) and Andrew
Fox, in his capacity as the Transferors’ Representative.
Annex A hereto
contains definitions of certain initially capitalized terms used in
this Agreement.
RECITALS
WHEREAS, as of the
date hereof the Transferors collectively own, and as of immediately
prior to the Closing will collectively own, all of the issued and
outstanding shares of capital stock of the Company (collectively,
the “Shares”); and
WHEREAS, the
Transferors wish to exchange, transfer and deliver to Acquiror, and
Acquiror wishes to acquire from the Transferors, the Shares, on the
terms and subject to the conditions set forth herein.
NOW,
THEREFORE, in consideration of the mutual covenants and agreements
hereinafter set forth and for other good and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties agree as follows:
AGREEMENT
ARTICLE
1
1.1 Acquisition of the
Shares. On the terms and subject to the
conditions of this Agreement, at the Closing, the Transferors shall
exchange, transfer and deliver the Shares to Acquiror, and Acquiror
shall acquire the Shares from the Transferors, free and clear of
all Encumbrances.
1.2 Purchase
Price. The purchase
price for the Shares shall be $17,500,000 (the “Purchase Price”). For the
avoidance of doubt, the Purchase Price shall be paid in Parent
Shares (and not in cash) pursuant to Section 2.5. Each Transferor
shall receive its Pro Rata Share of the Parent Shares payable
hereunder in respect of the Purchase Price.
1.3
Plan of
Reorganization. The parties hereto
intend that, for U.S. federal and applicable state and local income
tax purposes, the transaction contemplated by this Agreement shall
qualify as a tax-free reorganization within the meaning of Section
368 of the Code and that this Agreement constitutes a plan of
reorganization within the meaning of Section 368 of the
Code.
Closing
2.1 Closing. The consummation
of the acquisition of the Shares pursuant to Article 1 (the
“Closing”) shall be held
virtually (via the exchange of executed documents and other
deliverables by PDF or other means of electronic delivery) rather
than in-person, as promptly as practicable following, but in no
event later than, three (3) Business Days after the date on which
the last of the conditions set forth in Article 9 (other than those
conditions that by their terms are to be satisfied at the Closing,
but subject to the satisfaction or waiver of such conditions at the
Closing) to be satisfied or waived is so satisfied or waived, or by
such other means and/or at such other place, time and date as
Acquiror and the Transferors’ Representative may agree. All
documents delivered and actions taken at the Closing shall be
deemed to have been delivered or taken simultaneously, and no such
delivery or action shall be considered effective or complete unless
or until all other such deliveries or actions are completed or
waived in writing by the party against whom such waiver is sought
to be enforced. The date on which the Closing is actually held is
referred to herein as the “Closing Date.” Subject to
the provisions of Article 11, the failure to consummate the Closing
on the date and time determined pursuant to this Section 2.1 shall
not result in the termination of this Agreement and shall not
relieve any party to this Agreement of any obligation under this
Agreement. The Closing shall be deemed to be effective at 11:59
p.m. Eastern Standard Time on the Closing Date (the
“Effective
Time”) for all purposes, except as may otherwise be
expressly provided herein.
2.2 Transferor Closing
Deliverables. At or prior to
the Closing, each Transferor shall deliver to Acquiror such
documents or instruments as Acquiror reasonably requests and are
reasonably necessary to consummate the Transactions.
2.3 Company Closing
Deliverables. At or prior to
the Closing (or by such other date, if any, as indicated in the
applicable subsection below), the Company shall deliver to Acquiror
the following:
(a) resignations of the
directors and officers of the Company, except as Acquiror may
otherwise specify;
(b) a certificate,
dated the Closing Date and signed by a duly authorized officer of
Company, that each of the conditions set forth in Section 9.2(a) and
Section 9.2(b)
and Section 9.2(d)
have been satisfied;
(c) a certificate of
the Secretary or an Assistant Secretary (or equivalent officer) of
the Company certifying (i) that attached thereto are true and
complete copies of all resolutions adopted by the board of
directors of the Company authorizing the execution, delivery and
performance of this Agreement and the Transaction Documents and the
consummation of the Transactions, (ii) that all such
resolutions are in full force and effect and are all the
resolutions adopted in connection with the Transactions, and
(iii) the names and signatures of the officers of the Company
authorized to sign this Agreement and the Transaction
Documents;
(d) the certificate of
incorporation (or other equivalent Governing Document) and all
amendments thereto of each Group Company, duly certified as of a
recent date by the secretary of state or similar Governmental
Authority of the jurisdiction under the Laws in which such Group
Company is organized;
(e) a good standing
certificate (or its equivalent) of each Group Company as of a
recent date from the secretary of state or similar Governmental
Authority of the jurisdiction under the Laws in which such Group
Company is organized;
(f) a certificate,
dated the Closing Date and signed by the Transferor Representative
and the Company, stating that the Related Party Transactions and
Relationships have been terminated and no Group Company has any
residual Liability with respect thereto;
(g) to the extent there
exist any Encumbrances (1) on the equity securities of any Group
Company (including the Shares) or (2) on the properties and assets
of any Group Company (other than Permitted Encumbrances) as of the
Closing (the “Group
Company Encumbrances”), fully executed documentation
required in connection with the release of any such Group Company
Encumbrances, in form and substance reasonably satisfactory to
Acquiror providing for the discharge in full of all such Group
Company Encumbrances;
(h) at least five (5)
Business Days prior to the Closing, (i) a final invoice from each
Person to whom Company Transaction Expenses are owed along with
instructions from such Person for paying such amounts and (ii) an
agreement by such Person that the Contract pursuant to which the
Company Transaction Expenses are owed as set forth in the final
invoice shall be deemed terminated upon payment of such Company
Transaction Expenses at Closing and that such Person thereupon
releases the Company from any and all claims under such Contract;
all in a form reasonably satisfactory to Acquiror;
(i) an employment
agreement with the Company, in form and substance reasonably
acceptable to Acquiror, duly executed by Andrew Fox (the
“Employment
Agreement”);
(j) such certificates
and documents as may be necessary or appropriate to change the
authorized signatories on all bank accounts and safe deposit boxes
maintained by or in the name of the Company;
(k) the original minute
and stock books of each Group Company;
(l) a Note Conversion
Agreement, in form and substance satisfactory to Acquiror, to be
executed by the Company and each holder of convertible notes set
forth on Schedule
2.2(c) (“Convertible Notes”)
pursuant to which Note Conversion Agreement each holder of
Convertible Notes shall agree that, as of immediately prior to the
Closing, all Convertible Notes held by such holder shall be
converted into shares of Class B Non-Voting Common Stock of the
Company in full satisfaction of the Company’s obligations
under the Convertible Notes and the Convertible Notes shall
terminate and be of no further force or effect;
(m) evidence reasonably
satisfactory to Acquiror that all outstanding options that have
vested (or will be vested as of the Closing) were exercised or
terminated in full, or will be exercised or terminated in full
prior to the Closing;
(n) an executed
certificate pursuant to Treasury Regulations Section 1.1445-2(c)
certifying that the Company is not and has not been a “United
States real property holding corporation as defined in Section
897(c)(2) of the Code during the period described in Section 897(c)
of the Code and no interest in the Company constitutes a
“United States real property interest” as defined in
Section 897(c)(1) within the meaning of Section 1445 of the
Code;
(o) an executed
counterpart signature page or joinder to this Agreement, in each
case in form and substance reasonably acceptable to Acquiror, duly
executed by any Person who, following the date hereof and prior to
the Closing, (x) acquires or is issued any shares of the
Company’s capital stock or any other equity interest, or the
right to any shares or equity interest, in the Company (including
pursuant to the exercise of options or convertible notes or other
securities) or (y) is discovered to own shares of the
Company’s capital stock or any other equity interest in the
Company (or have the right to any shares or equity interest in the
Company), including, without limitation, the individuals set forth
on Schedule 2.3(o); provided, in each case, that Exhibit A shall be updated
accordingly and delivered to Acquiror prior to the Closing;
and
(p) such other
documents or instruments as Acquiror reasonably requests and are
reasonably necessary to consummate the Transactions.
2.4 Acquiror and Parent Closing
Deliverables. At the Closing,
Acquiror (or Parent, in the case of clause (c) below) shall deliver
the following:
(a) to the
Transferors’ Representative, the Employment Agreement duly
executed by the Company;
(b) to the
Transferors’ Representative a duly filed and stamped copy of
the Articles of Incorporation of Parent;
(c) to the
Transferors’ Representative, that number of Parent Shares
equal to the Purchase Price minus the Holdback Shares, by issuance
of Parent Shares in the manner provided in Section 2.5; and
(d) such other
documents or instruments as the Transferors’ Representative
reasonably requests and are reasonably necessary to consummate the
Transactions.
2.5 Manner of
Payment. The Purchase
Price shall be paid to the Transferors as follows: Parent shall
issue to each Transferor a stock certificate evidencing such
Transferor’s Pro Rata Share of the number of Parent Shares
equal to the Purchase Price minus the Holdback Shares (each, a
“Closing Parent
Share Certificate”) and deliver a Closing Parent Share
Certificate to each Transferor at the Closing. The Closing Parent
Share Certificates shall be returned by the Transferors to Parent
from time to time to reflect any cancellation and/or re-issue of
Parent Shares pursuant to Section 10.6. The Parties agree
that the aggregate number of Parent Shares equal to the Purchase
Price shall be that number of Parent Shares as is convertible into
60,000,000 shares of common stock of Parent as of the Closing,
after giving effect to the approved 500:1 reverse stock split (but
without taking into account the conversion of any outstanding
warrants or options issued by Parent).
2.6 Withholding. Acquiror or
Parent, as applicable, shall be entitled to deduct and withhold
from the consideration or other amounts otherwise payable pursuant
to this Agreement to any Person such amounts as they are required
to deduct and withhold with respect to such payment under the Code,
or any provision of state, local or foreign law. To the extent that
amounts are so withheld by Acquiror or Parent, such withheld
amounts shall be (a) paid to the appropriate Tax authority and (b)
treated for all purposes of this Agreement as having been paid to
the appropriate recipient in respect of which such deduction and
withholding was made by Acquiror or Parent, as
applicable
2.7 Holdback.
(a)
During the period
commencing on the Closing Date and ending on the first anniversary
thereof (the “Expiration Date”), Parent
shall hold in escrow such number of Parent Shares as shall equal
five percent (5%) of the Purchase Price (the “Holdback Shares”). The
Holdback Shares shall serve as a source of security for the
Transferors’ obligations after the Closing under this
Agreement, including its indemnification obligations under Article
10.
(b)
The Holdback Shares
shall no longer be subject to any claim that is first made after
the Expiration Date; provided, however, with respect to any claims
made in accordance with this Agreement on or prior to the
Expiration Date (including those that are revised or adjusted in
accordance with Article 10 after the Expiration Date) that remain
unresolved as of the end of the Expiration Date
(“Pending
Claims”), all or a portion of the Holdback Shares
reasonably necessary to satisfy such Pending Claims (as determined
with respect to any indemnification claims based on the amount of
the indemnification claim included in the notice provided by an
Acquiror Indemnitee under Article 10, as it may be revised or
adjusted in accordance with Article 10) shall continue to be held
in escrow by Parent until such time as such Pending Claim shall
have been finally resolved pursuant to the provisions of this
Agreement. After the Expiration Date, any Holdback Shares still
held in escrow by Parent that are not subject to (i) Pending Claims
or (ii) resolved but unpaid claims in favor of Acquiror or other
Acquiror Indemnitees, shall be disbursed by Parent to the
Transferors’ Representative for distribution to the
Transferors. Promptly after the final resolution of all Pending
Claims and the payment of all obligations in connection therewith,
Parent shall disburse any Holdback Shares remaining in escrow to
the Transferors’ Representative for distribution to the
Transferors.
Closing
Statement
3.1 Definitions. As used
herein:
(a) “Accounting Principles”
means GAAP and, to the extent not inconsistent with GAAP, using the
same accounting methods, practices, principles, policies and
procedures, with consistent classifications, judgments and
valuation and estimation methodologies that were used in the
preparation of the Financial Statements for the most recent fiscal
year end as if such accounts were being prepared and audited as of
a fiscal year end.
(b) “Cash on Hand,” as of any
time means the amount equal to the bank balance of all unrestricted
cash, cash equivalents and marketable securities held by the Group
Companies at such time minus, without duplication, the following:
(i) any issued but uncleared checks and wires issued by the Group
Companies as of the Effective Time; (ii) cash overdrafts and other
negative balances of unrestricted cash and cash equivalents in any
bank account of the Group Companies as of such time; and (iii) cash
that is collected from customers in advance, is being held on
behalf of customers and represents a Liability to such customers as
of such time. Cash may be a positive or negative number. Cash, cash
equivalents and marketable securities shall be deemed unrestricted
as of the relevant time only if at such time it is (a) not subject
to restrictions or limitations on use either by obligations or
commitment to third parties (including security deposits made by
any Group Company and cash securing letters of credit or other
payment obligations) or for regulatory or legal purposes and (b)
held in the United States.
(c) “Closing Company Net Cash”
means the Company Net Cash as of the Effective Time.
(d) “Closing Company Transaction
Expenses” means Company Transaction Expenses that
remain unpaid as of immediately prior to the Closing (but inclusive
of all amounts that will or may become due at or following the
Closing wholly or partially by reason of the
Transactions).
(e) “Company Net Cash” means,
as of any date of determination, (i) the Cash on Hand as of such
date plus (ii) all
accounts receivable of the Group Companies (net of appropriate
reserves in accordance with GAAP), minus (iii) all accounts
payable of the Group Companies, in each case, excluding all
intercompany receivables and intercompany payables, and as set
forth on the consolidated balance sheet of the Group Companies
prepared pursuant to the Accounting Principles.
(f) “Company Transaction
Expenses” means the aggregate amount of (a) all fees
and expenses incurred by any Group Company in connection with the
negotiation, preparation, execution and performance of this
Agreement and the Transaction Documents, and the Transactions,
including all legal, financial advisory, accounting, consulting and
other fees and expenses and any broker’s or finder’s
fees, (b) all amounts (plus any associated withholding Taxes or any
Taxes required to be paid by any Group Company with respect
thereto) payable by any Group Company, whether immediately or in
the future, under any “change of control,” retention,
termination, compensation, severance or other similar arrangements
by reason of (either alone or in conjunction with any other event,
such as termination or continuation of employment) the consummation
of the Transactions or any Transaction Document (including such
amounts payable to any employee of any Group Company at the
election of such employee pursuant to any such arrangements) and
(c) any other fees, costs, expenses or payments resulting from the
change of control of the Group Companies or otherwise payable in
connection with receipt of any consent or approval in connection
with the Transactions.
(a) At least five (5)
Business Days prior to the Closing Date, the Company shall prepare
and deliver to Acquiror a written statement (the form and substance
of which shall be subject to Acquiror’s approval, which
approval shall not to be unreasonably withheld) (the
“Closing
Statement”) that includes (i) a good-faith estimated
consolidated balance sheet of the Group Companies as of the
Effective Time prepared in accordance with the Accounting
Principles, (ii) a good-faith estimate of the Closing Company
Transaction Expenses and the Closing Company Net Cash, and (iii) a
schedule setting forth the number of Parent Shares allocable to
each Transferor.
Representations
and warranties of the Transferors
Each
Transferor hereby represents and warrants to Parent and Acquiror
that, with respect to such Transferor, the statements contained in
this Article 4 are
true and correct on the date hereof and shall be true and correct
on the Closing Date as if made thereon:
4.1 Organization.
If such Transferor is not a natural person, the Transferor
(i) is duly organized, validly existing and in good standing
under the laws of the state of its formation and (ii) has all
necessary power and corporate authority to carry on its business,
and to own or use the properties and assets that it purports to own
or use.
4.2 Authority and
Enforceability. The Transferor
has all requisite power and authority, and has taken all action
necessary, to execute and deliver this Agreement and each
Transaction Document and to perform its obligations hereunder and
thereunder. This Agreement has been, and each Transaction Document
will be prior to the Closing, duly authorized, executed and
delivered by the Transferor, and this Agreement constitutes, and
each Transaction Document when so executed and delivered will
constitute, the legal, valid and binding obligations of the
Transferor, enforceable against the Transferor in accordance with
their terms.
(a) The Transferor is
the record and beneficial owner of, and has good and valid title
to, the Shares set forth next to such Transferor’s name on
Exhibit A, free and
clear of all Encumbrances. The Transferor is not a party to any
option, warrant, right, contract, call, put or other agreement or
commitment providing for the disposition or acquisition of any of
the Shares (other than this Agreement). The Transferor does not
have any other debt or ownership interest in any Group
Company.
(b) Other than this
Agreement, the Shares are not subject to any voting trust agreement
or other Contract restricting or otherwise relating to the voting,
dividend rights or other disposition of the Shares.
4.4 No Conflict. The execution and
delivery by the Transferor of this Agreement and each Transaction
Document, and the performance by it of any actions contemplated
hereunder or thereunder, does not and will not, directly or
indirectly (with or without notice or lapse of time):
(a) Conflict with or
violate any provision of the Governing Documents of the Transferor
(if Transferor is not a natural person);
(b) Require notice,
consent or approval under, conflict with, violate, result in a
breach of, result in the acceleration of obligations, loss of a
benefit or increase in Liabilities or fees under, create in any
Person the right to terminate, cancel or modify, or cause a default
under or give rise to any rights or penalties under (i) any
provision of Law relating to the Transferor, (ii) any
provision of any Governmental Order to which the Transferor or any
of its properties are subject, (iii) any provision of any
Contract to which the Transferor or its properties are bound, or
(iv) any other restriction of any kind or character to which
the Transferor or its properties are subject; or
(c) Require a
registration, filing, application, notice, consent, approval,
order, qualification or waiver with, to or from any Governmental
Authority.
4.5 Legal
Proceedings. There are no
Actions pending or, to the Transferor’s knowledge, threatened
against or by the Transferor or any of his Affiliates or Related
Persons that challenge or seek to prevent, enjoin or otherwise
delay the Transactions.
4.6 Investment
Representations.
(a) The Parent
Shares that the Transferor will acquire pursuant hereto will be
acquired for investment only and not with a view of any
distribution thereof that would violate the Securities Act of 1933,
as amended (the “Securities Act”) or any
applicable state securities laws.
(b) The Transferor
understands that the Parent Shares have not been registered under
the Securities Act or the securities laws of any state and must be
held indefinitely unless subsequently registered under the
Securities Act and any applicable state securities laws or unless
an exemption from registration becomes or is available. The
Transferor will not distribute any of the Parent Shares in
violation of the Securities Act or any applicable state securities
laws.
(c) The Transferor
understands that there is no established market for the Parent
Shares, and it is not anticipated that there will be any public
market for the Parent Shares in the foreseeable future and,
accordingly, that it may not be possible for the Transferor to
liquidate its investment readily and it may be necessary to hold
the investment for an indefinite period.
(d) (i) The
Transferor is financially able to hold the Parent Shares for
long-term investment, (ii) the Transferor recognizes that
there are substantial risks involved in the acquisition of the
Parent Shares, including risk of loss of the entire amount of such
investment, and (iii) the Transferor can bear the economic
risk of the acquisition of the Parent Shares and the loss of the
entire amount of the investment.
(e) The Transferor
confirms that it (i) is familiar with Parent, Acquiror and
their respective Affiliates (collectively, the “Parent Companies”),
(ii) has been given the opportunity to ask questions of the
officers and directors of the Parent Companies and to obtain (and
has received to the Transferor’s satisfaction) such
information about the business and financial condition of the
Parent Companies as the Transferor has reasonably requested and
(iii) has such knowledge and experience in financial and
business matters that the Transferor is capable of evaluating the
merits and risks of acquiring the Parent Shares.
(f) In formulating a
decision to acquire the Parent Shares, the Transferor (i) has
relied solely upon an independent investigation of the Parent
Companies and upon consultations with the Transferor’s legal
and financial advisors with respect to this Agreement and the
nature of this investment and (ii) has not relied on any oral
or written representations or warranties of the Parent
Companies.
(g) The Transferor is
an accredited investor within the meaning of Regulation D under the
Securities Act.
(h) The Transferor is
not subject to any “bad actor” disqualifying event
described in Rule 506(d)(1)(i)-(viii) of the Securities Act (each
event so described, a “Disqualification
Event”).
ARTICLE
5
Representations and warranties
of the company
The
Company hereby represents and warrants to Acquiror and Parent that
the statements contained in this Article 5 are true and correct
on the date hereof and shall be true and correct on the Closing
Date as if made thereon:
5.1 Organization and Qualification of the
Company. 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, operate or lease the properties and
assets now owned, operated or leased by it and to carry on its
business as it has been and is currently conducted. Section 5.1 of the Disclosure
Schedule sets forth each jurisdiction in which each Group Company
is licensed or qualified to do business, and each Group Company is
duly licensed or qualified to do business and is in good standing
in each jurisdiction in which the properties owned or leased by it
or the operation of its business as currently conducted makes such
licensing or qualification necessary.
5.2 Authority; Board
Approval. The Company has
full corporate power and authority to enter into and perform its
obligations under this Agreement and the Transaction Documents to
which it is a party and to consummate the Transactions. The
execution, delivery and performance by the Company of this
Agreement and the Transaction Documents and the consummation by the
Company of the Transactions have been duly authorized by all
requisite corporate action on the part of the Company and no other
corporate proceedings on the part of the Company are necessary to
authorize the execution, delivery and performance of this Agreement
or to consummate the Transactions. This Agreement has been duly
executed and delivered by the Company, and (assuming due
authorization, execution and delivery by each other party) this
Agreement constitutes a legal, valid and binding obligation of the
Company enforceable against the Company in accordance with its
terms. When each Transaction Document to which the Company is or
will be a party has been duly executed and delivered by the Company
(assuming due authorization, execution and delivery by each other
party thereto), such Transaction Document will constitute a legal
and binding obligation of the Company enforceable against it in
accordance with its terms.
5.3 No Conflicts;
Consents. The execution and
delivery by the Company of this Agreement and each Transaction
Document, and the performance by it of any actions contemplated
hereunder or thereunder, does not and will not, directly or
indirectly (with or without notice or lapse of time):
(a) Conflict with or
violate any provision of the Governing Documents of any Group
Company;
(b) Require notice,
consent or approval under, conflict with, violate, result in a
breach of, result in the acceleration of obligations, loss of a
benefit or increase in Liabilities or fees under, create in any
Person the right to terminate, cancel or modify, or cause a default
under or give rise to any rights or penalties under (i) any
provision of Law relating to any Group Company, (ii) any
provision of any Governmental Order to which any Group Company or
any of its properties are subject, or (iii) any provision of
any Material Contract;
(c) Cause (i) any
Group Company to become subject to, or to become liable for the
payment of, any Tax, or (ii) any of the assets of any Group
Company to be reassessed or revalued by any Governmental Authority
or subject to an Encumbrance; or
(d) Require a
registration, filing, application, notice, consent, approval,
order, qualification or waiver with, to or from any Governmental
Authority.
The
Company has waived any and all rights of first refusal and similar
rights to which it may be entitled under the Company’s
Governing Documents in connection with the transactions
contemplated by this Agreement, and no rights of first refusal or
similar rights are granted by the Company’s Governing
Documents to any Person other than the Company.
(a) The authorized
capital stock of the Company consists of 18,000,000 shares of
Common Stock (14,000,000 of which are designated Class A Voting
Common Stock and 4,000,000 of which are designated Class B
Non-Voting Common Stock), of which 9,777,037 shares of Class A
Voting Common Stock and 61,795 shares of Class B Non-Voting Common
Stock are issued and outstanding. The Company has reserved an
aggregate of 1,000,000 shares of Class B Common Stock for issuance
to employees, consultants, officers, or directors pursuant to the
Company’s Equity Incentive Plan (the “Plan”), of which 697,500
shares are subject to outstanding options and no options have been
exercised, and 302,500 shares remain available for issuance in
connection with future granted options under the Plan.
(b) Section 5.4(b) of the
Disclosure Schedule sets forth the capitalization of the Company.
All of the Shares are owned beneficially and of record by the
Transferors, free, and clear of all Encumbrances. The Shares
represent 100% of the outstanding ownership interests in the
Company. All of the Shares have been duly authorized, are validly
issued, fully paid, and non-assessable and have been offered,
issued and transferred without violation of any preemptive right or
other right to purchase and were issued and/or transferred in
compliance with all applicable Laws, the Governing Documents of the
Company and the Contracts to which the Company is a party or
otherwise bound. Other than the equity securities set forth on
Schedule 5.4(b),
there are no other equity or other ownership interests in the
Company or outstanding securities convertible or exchangeable into
ownership interests of the Company, including any other options,
warrants, purchase rights, preemptive rights, subscription rights,
conversion rights, exchange rights, calls, puts, rights of first
refusal, right of first offer, anti-dilution protections,
obligations, commitments, plans or other Contracts or similar
rights that could require the Company to issue, sell or otherwise
cause to become outstanding or to acquire, repurchase or redeem (or
establish a sinking fund with respect to redemption) ownership
interests in the Company or require the Company to make any
payments based on the price or value of the Shares or dividends
paid thereon. Other than the Convertible Notes, no holder of
Indebtedness of the Company has any right to vote or to convert or
exchange such Indebtedness for ownership interests of the Company.
There are no outstanding or authorized equity appreciation,
contingent value, phantom equity, profit participation, or similar
rights with respect to the Company. There are no voting trusts,
proxies, or other Contracts with respect to the voting of the
ownership interests of the Company. Upon consummation of the
Transactions, Acquiror will be the sole owner, beneficially and of
record, of 100% of the issued and outstanding equity interests of
the Company, free and clear of any Encumbrances.
(c) The Company has
delivered to Acquiror (via the Dataroom) copies of the Governing
Documents of the Company. The minute books of the Company, which
have been delivered to Acquiror, accurately reflect in all material
respects all actions taken at all meetings and consents in lieu of
meetings of stockholders, and all actions taken at all meetings and
consents in lieu of meetings of its board of directors and all
committees, and no material meetings of any such stockholders,
board of directors, or committees have been held for which minutes
have not been prepared and are not contained in such minute
books.
5.5 Subsidiaries; Joint
Ventures.
(a) Section 5.5(a) of the
Disclosure Schedule sets forth for each Subsidiary of the Company,
(i) the authorized capital stock or other ownership interests of
such Subsidiary, and (ii) the number of issued, allotted and
outstanding shares of capital stock or other ownership interests of
each class of its capital, the names of the record and beneficial
holders thereof and the number of shares or other ownership
interests held by each such holder. All of the issued, allotted and
outstanding shares of capital stock or other ownership interests of
each Subsidiary of the Company have been duly authorized, are
validly issued and allotted, fully paid, and non-assessable and
have been offered, issued, allotted and transferred without
violation of any preemptive rights or other right to purchase and
were issued and/or transferred in compliance with all applicable
Laws, the Governing Documents of the Subsidiary and the Contracts
to which the Subsidiary is a party or otherwise bound. There are no
other capital stock or other ownership interests in any of the
Company’s Subsidiaries or outstanding securities convertible
or exchangeable into capital stock or other ownership interests of
such Subsidiaries, including any options, warrants, purchase
rights, preemptive rights, subscription rights, conversion rights,
exchange rights, calls, puts, rights of first refusal, rights of
first offer, anti-dilution protections, obligations, commitments,
plans or other Contracts or similar rights that could require the
Company or any of its Subsidiaries to issue, sell or otherwise
cause to become outstanding or to acquire, repurchase or redeem (or
establish a sinking fund with respect to redemption) capital stock
or any other ownership interests in any such Subsidiary or require
the Company or any of its Subsidiaries to make any payments based
on the price or value of any securities or instruments set forth on
Section 5.5(a) of
the Disclosure Schedule or dividends paid thereon. No holder of
Indebtedness of the Company or any of its Subsidiaries has any
right to vote or to convert or exchange such Indebtedness for
capital stock or other ownership interests of any of the
Company’s Subsidiaries. There are no outstanding or
authorized equity appreciation, contingent value, phantom equity,
profit participation, or similar rights with respect to any of the
Company’s Subsidiaries. There are no voting trusts, proxies,
or other Contracts with respect to the voting of the capital stock
or other ownership interests of the Company’s Subsidiaries.
Upon consummation of the transactions contemplated hereby, Acquiror
will be the sole owner, beneficially and of record, directly or
indirectly, of 100% of the issued and outstanding capital stock or
other ownership interests of the Company’s Subsidiaries, free
and clear of any Encumbrances. Except as set forth on Section 5.5(a) of the
Disclosure Schedule, the Company does not have any direct or
indirect Subsidiaries and does not own directly or indirectly any
capital stock or other equity interest in any other
Person.
(b) Except as set forth
on Section 5.5(b)
of the Disclosure Schedule no Transferor nor any Affiliates of any
Transferor (other than a Group Company) has made a loan to, or
borrowed money from, any Group Company, for which such Group
Company has outstanding Liabilities to the other in respect of any
loan or borrowing.
5.6 Financial
Statements.
(a) Complete copies
of the Group Companies’ audited consolidated financial
statements consisting of the consolidated balance sheet of the
Group Companies dated as of December 31, 2019 and the related
consolidated statements of income and retained earnings,
stockholders’ equity and cash flow for the year then ended
(the “Year-End
Financial Statements”), and unaudited financial
statements consisting of the consolidated balance sheet of the
Group Companies as of May 31, 2020 and the related statements of
income and retained earnings, stockholders’ equity and cash
flow for the six-month period then ended (the
“Interim Financial
Statements” and together with the Year-End Financial
Statements, the “Financial Statements”)
have been delivered to Acquiror. The Financial Statements have been
prepared in accordance with GAAP applied on a consistent basis
throughout the period involved, subject, in the case of the Interim
Financial Statements, to normal and recurring year-end adjustments
(the effect of which will not be materially adverse) and the
absence of notes (that, if presented, would not differ materially
from those presented in the Year-End Financial Statements). The
Financial Statements fairly and accurately present in all material
respects the consolidated financial condition of the Group
Companies as of the respective dates they were prepared and the
results of the operations of the Group Companies for the periods
indicated. The consolidated audited balance sheet of the Group
Companies as of December 31, 2019 is referred to herein as the
“Year-End Balance
Sheet” and the date thereof as the “Year-End Balance Sheet
Date” and the consolidated balance sheet of the Group
Companies as of May 31, 2020 is referred to herein as the
“Interim Balance
Sheet” and the date thereof as the “Interim Balance Sheet
Date”.
(b) The books of
account and financial records of the Group Companies are true and
correct in all material respects and have been prepared and are
maintained in accordance with GAAP applied on a consistent basis
throughout the period involved. No Group Company has made any
changes in its accounting practice since the Year-End Balance Sheet
Date. The Group Companies maintain a standard system of accounting
established and administered in accordance with GAAP.
(c) No Group Company
maintains any “off balance sheet arrangement” within
the meaning of Item 303 of Regulation S-K promulgated under the
Securities Act of 1933, as amended.
(d) Each Group Company
maintains accurate books and records reflecting its assets and
liabilities and maintains proper and adequate internal accounting
and record-keeping controls that provide reasonable assurance that
(i) it maintains no off-the-book accounts and its assets and
properties are used only in accordance with management’s
directives, (ii) transactions are executed in accordance with
management’s authorizations, (iii) transactions are
recorded as necessary to permit preparation of financial statements
and to maintain asset accountability, (iv) access to assets is
permitted only in accordance with management’s authorization,
(v) the recorded accounting for assets is compared with the
existing assets at regular intervals and appropriate action is
taken with respect to any differences, (vi) accounts, notes and
other receivables are recorded accurately and do not include any
amounts for which there is no written contractual commitment to
pay, and proper and adequate procedures are implemented to effect
the collection of accounts, notes and other receivables on a
current and timely basis, and (vii) it maintains records in
accordance with statutory records retention
requirements.
(e) No Group Company
has received any grants, subsidies or other financial assistance
from a Governmental Authority.
5.7 No Undisclosed Liabilities;
Indebtedness. No Group Company
has any material Liabilities, except (a) those which are
adequately reflected or reserved against in the Year-End Balance
Sheet, and (b) those which have been incurred in the Ordinary
Course of Business since the Year-End Balance Sheet Date and which
are not, individually or in the aggregate, material in amount.
Section 5.7 of the
Disclosure Schedule sets forth all of the Indebtedness of the
Group Companies as of the date hereof, all of which shall be paid
off prior to the Closing such that there shall not be any
Indebtedness of the Group Companies as of the Closing.
5.8 Absence of Certain Changes, Events and
Conditions. Except as set
forth in Section
5.8 of the Disclosure Schedule, since the Year-End Balance
Sheet Date, there has not been with respect to any Group Company
any:
(a) event, occurrence
or development that has had, or could reasonably be expected to
have, individually or in the aggregate, a Material Adverse
Effect;
(b) amendment of the
Governing Documents of any Group Company;
(c) split, combination
or reclassification of any shares of its capital
stock;
(d) issuance, sale or
other disposition of any of its capital stock, or grant of any
options, warrants or other rights to purchase or obtain (including
upon conversion, exchange or exercise) any of its capital
stock;
(e) declaration or
payment of any dividends or distributions on or in respect of any
of its capital stock or redemption, purchase or acquisition of its
capital stock;
(f) change in any
method of accounting or accounting practice of any Group Company,
except as required by GAAP or as disclosed in the notes to the
Financial Statements;
(g) change in any Group
Company’s cash management practices or policies, practices
and procedures with respect to collection of accounts receivable,
establishment of reserves for uncollectible accounts, accrual of
accounts receivable, inventory control, prepayment of expenses,
payment of trade accounts payable, accrual of other expenses,
deferral of revenue and acceptance of customer
deposits;
(h) entry into or
modification or amendment of any Material Contract;
(i) termination of a
Contract that, if in existence on the date hereof, would have been
a Material Contract;
(j) incurrence,
assumption or guarantee of any indebtedness for borrowed money
except unsecured current obligations and Liabilities incurred in
the Ordinary Course of Business;
(k) transfer,
assignment, sale or other disposition of any of the assets shown or
reflected in the Year-End Balance Sheet or cancellation of any
debts or entitlements;
(l) transfer,
assignment or grant of any license or sublicense of any material
rights under or with respect to any Company Intellectual Property
or Company IP Agreements;
(m) material damage,
destruction or loss (whether or not covered by insurance) to its
property;
(n) any capital
investment in, or any loan to, any other Person;
(o) acceleration,
termination, material modification to or cancellation of any
material Contract to which any Group Company is a party or by which
it is bound;
(p) any material
capital expenditures;
(q) imposition of any
Encumbrance upon any Group Company’s properties, capital
stock or assets, tangible or intangible;
(r) (i) grant of
any bonuses, whether monetary or otherwise, or increase in any
wages, salary, severance, pension or other compensation or benefits
in respect of its employees, officers, directors, independent
contractors or consultants, other than as provided for in any
written agreements or required by applicable Law, (ii) change
in the terms of employment for any employee or any termination of
any employees, or (iii) action to accelerate the vesting or
payment of any compensation or benefit for any current or former
employee, officer, director, independent contractor or
consultant;
(s) hiring or promoting
any person except to fill a vacancy in the Ordinary Course of
Business;
(t) adoption,
modification or termination of any: (i) employment, severance,
retention or other agreement with any current or former employee,
officer, director, independent contractor or consultant,
(ii) Benefit Plan or (iii) collective bargaining or other
agreement with a Union, in each case whether written or
oral;
(u) any loan to (or
forgiveness of any loan to), or entry into any other transaction
with, any of its stockholders, directors, officers and
employees;
(v) entry into the
settlement or compromise of any Action or any default or consent to
entry of any judgment or admission of any liability with respect
thereto;
(w) entry into a new
line of business or abandonment or discontinuance of existing lines
of business;
(x) adoption of any
plan of merger, consolidation, reorganization, liquidation or
dissolution or filing of a petition in bankruptcy under any
provisions of federal or state bankruptcy Law or consent to the
filing of any bankruptcy petition against it under any similar
Law;
(y) promotional, sales,
discount or other activity outside of the Ordinary Course of
Business that has had, or would reasonably be expected to have, the
effect of accelerating sales prior to the Closing that would
otherwise be expected to occur subsequent to the
Closing;
(z) purchase, lease or
other acquisition of the right to own, use or lease any property or
assets for an amount in excess of $25,000 individually (in the case
of a lease, per annum) or in the aggregate (in the case of a lease,
for the entire term of the lease, not including any option
term);
(aa) acquisition by
merger or consolidation with, or by purchase of a substantial
portion of the assets or stock of, or by any other manner, any
business or any Person or any division thereof;
(bb) action by any Group
Company to make, change or rescind any Tax election, amend any Tax
Return or take any position on any Tax Return, take any action,
omit to take any action or enter into any other transaction that
would have the effect of increasing the Tax liability or reducing
any Tax asset of Acquiror in respect of any Post-Closing Tax
Period; or
(cc) any Contract to do
any of the foregoing, or any action or omission that would result
in any of the foregoing.
(a) Section 5.9(a) of the
Disclosure Schedule lists each of the following Contracts of
the Group Companies or by which any Group Company is otherwise
bound (each Contract set forth or required to be set forth on
Section 5.9(a) of
the Disclosure Schedule, each Company IP Agreements set forth or
required to be set forth in Section 5.13(b) of the
Disclosure Schedule, a “Material
Contract”), identified in such Section of the
Disclosure Schedule by reference to the applicable subsection
below:
(i) all Contracts
involving aggregate payments to or from the Company in excess of
$25,000 and which, in each case, cannot be cancelled by the
applicable Group Company without penalty or without more than
thirty (30) days’ notice;
(ii) all Contracts with
suppliers pursuant to which any Group Company has paid more than
$25,000 in the last 12 months;
(iii) all Contracts with
customers pursuant to which any Group Company has received more
than $25,000 in the last 12 months;
(iv) all Contracts that
require any Group Company to purchase its total requirements of any
product or service from
a third party;
(v) all Contracts
providing for a Group Company to be the exclusive provider of any
product or service to any Person, or that otherwise involve the
granting by any Person to a Group Company or a Group Company to any
Person of exclusive rights of any kind;
(vi) all Contracts that
provide for the assumption of any Tax, environmental or other
Liability of any Person;
(vii) all Contracts that
relate to the acquisition or disposition of any business, a
material amount of stock or assets of any other Person or any real
property (whether by merger, sale of stock, sale of assets or
otherwise);
(viii) all Contracts with
distributors and sales representatives;
(ix) all broker, dealer,
manufacturer’s representative, franchise, agency, sales
promotion, market research, marketing consulting and advertising
Contracts;
(x) all Contracts with
employees and independent contractors and consultants;
(xi) except for
Contracts relating to trade receivables, all Contracts relating to
Indebtedness;
(xii) all franchise,
construction, fidelity, performance and other bonds, guaranties in
lieu of bonds and letters of credit posted by or on behalf of the
Company;
(xiii) all Contracts with
any Governmental Authority;
(xiv) all Contracts that
limit or purport to limit the ability of any Group Company to
compete in any line of business or with any Person or in any
geographic area or during any period of time, that restriction the
ability of any Group Company to do business with any Person or hire
or solicit any Person, or that restricts the right of any Group
Company to sell to or purchase from any Person, or that grants the
other party or any third person “most favored nation”
status or any type of special discount rights, or grants any rights
of first refusal, rights of first negotiation or similar rights to
any Person;
(xv) all Contracts
pursuant to which a Group Company is the lessee or lessor of, or
holds, uses, or makes available for use to any Person, (A) any
real property or (B) any tangible personal property and, in
the case of clause (B), that involves an aggregate future or
potential liability or receivable, as the case may be, in excess of
$25,000;
(xvi) all Contracts for
the sale or purchase of any real property, or for the sale or
purchase of any tangible personal property in an amount in excess
of $25,000;
(xvii) all Contracts
providing for indemnification to or from any Person and that was
not entered into the Ordinary Course of Business;
(xviii) all Contracts for
any joint venture, partnership or similar arrangement by any Group
Company;
(xix) all collective
bargaining agreements or Contracts with any Union;
(xx) all Contracts
concerning the occupancy, management or operation of any Leased
Real Property (including brokerage contracts);
(xxi) all Contracts that
provide any other Person with “most favored nation” or
similar pricing or contain any special warranty, rebate
arrangement, “take or pay” arrangement, mark-down or
discount arrangement, agreement to take back or exchange goods,
consignment arrangement or similar understanding with a customer or
supplier of any Group Company;
(xxii) all powers of
attorney granted by a Group Company to any Person for any purpose
whatsoever;
(xxiii) all Contracts
purporting to be binding on any Affiliate of any Group
Company;
(xxiv) all Contracts
granting any rights of first refusal, rights of first negotiation
or similar rights to any Person;
(xxv) all Contracts that
involve payments based, in whole or in part, on profits, revenues,
fee income or other financial performance measures of any Group
Company;
(xxvi) any other Contract
that is material to the Group Companies and not otherwise disclosed
pursuant to this Section
5.9; and
(xxvii) any bids, proposals
or quotations, which if accepted would constitute a Material
Contract.
(b) Each Material
Contract is valid and binding on the applicable Group Company in
accordance with its terms and is in full force and effect. None of
the Group Companies or, to the Company’s Knowledge, any other
party thereto is in breach of or default under (or is alleged to be
in breach of or default under) in any material respect, or has
provided or received any notice of any intention to terminate, any
Material Contract. No party to a Material Contract has exercised
any termination rights with respect thereto or has given notice of
any significant dispute with respect thereto. No event or
circumstance has occurred that, with notice or lapse of time or
both, would constitute an event of default under any Material
Contract or result in a termination thereof or would cause or
permit the acceleration or other changes of any right or obligation
or the loss of any benefit thereunder. Complete and correct copies
of each Material Contract (including all modifications, amendments
and supplements thereto and waivers thereunder) have been made
available to Acquiror.
(c) No Group Company is
a party to any Contract that will bind Acquiror or any of its
Affiliates (other than the Company) with respect to
Acquiror’s or Acquiror’s Affiliates’ own
customers, products or services or otherwise.
(a) No Group Company
owns, directly or indirectly, or has ever owned, any real property,
nor does any Group Company hold title to any real
property.
(b) Section 5.10(b) of the
Disclosure Schedule lists (i) the street address of each
parcel of real property leased or subleased by any Group Company,
together with all buildings, structures and facilities located
thereon (“Leased
Real Property”); (ii) the landlord under the
lease, the rental amount currently being paid, and the expiration
of the term of such lease or sublease for each leased or subleased
property; and (iii) the current use of such property. The
Company has delivered or made available to Acquiror true, complete
and correct copies of any leases, subleases, or other occupancy
agreements, and any amendments, guaranties or addendums thereto,
including all notices exercising renewal, expansion or termination
rights thereunder affecting the Leased Real Property. No Group
Company is a sublessor or grantor under any sublease or other
instrument granting to any other Person any right to the
possession, lease, occupancy or enjoyment of any Leased Real
Property. The use and operation of the Leased Real Property in the
conduct of the Group Companies’ business do not violate in
any material respect any Law, covenant, condition, restriction,
easement, license, permit or agreement. No material improvements
constituting a part of the Leased Real Property encroach on real
property owned or leased by a Person other than the Group
Companies. There are no Actions pending nor, to the Company’s
Knowledge, threatened against or affecting the Leased Real Property
or any portion thereof or interest therein in the nature or in lieu
of condemnation or eminent domain proceedings.
(c) The Company has
made available to Acquiror all title reports, surveys, title
policies, environmental audits or reports, maintenance reports,
permits and appraisals with respect to the Leased Real Property to
the extent any of the foregoing are in the possession of the
Company or the agents under its control.
(d) No Group Company
has leased or sublet, as lessor, sub lessor, licensor or the like,
any of the Leased Real Property to any Person. The Leased Real
Property has access, in all material respects, sufficient for the
conduct of Ordinary Course of Business, including to public roads
and to all utilities, (including electricity, internet, sanitary
and storm sewer, potable water, natural gas and other utilities,
used in the operation of the business at that
location).
(e) The Leased Real
Property constitutes all of the real property utilized by the Group
Companies.
(f) The Leased Real
Property is sufficient for the conduct of the Group
Companies’ business. All buildings, structures and
appurtenances comprising part of the Leased Real Property that are
currently being used by the Group Companies are structurally sound
and in satisfactory condition and have been reasonably maintained,
normal wear and tear excepted. No Group Company has an obligation
to restore the premises subject to the Leased Real Property to
their condition at the start of the applicable lease or otherwise,
whether on the date hereof or at the termination or expiration of
the lease.
5.11 Personal Property; Sufficiency of
Assets.
(a) Each Group Company
has good and marketable title to, or a valid and binding leasehold
or license interest in, all of the tangible personal property and
assets used by such Group Company (the “Personal Property”), free
and clear of all Encumbrances other than Permitted Encumbrances.
The Personal Property, together with all other properties and
assets of the Group Companies, are sufficient for the continued
conduct of the Group Companies’ business after the Closing in
substantially the same manner as conducted prior to the Closing and
constitute all of the rights, property and assets necessary to
conduct the Group Companies’ business in such
manner.
(b) The Personal
Property is structurally sound, in good operating condition and
repair, and adequate for the uses to which they are being put, and
none of the Personal Property is in need of maintenance or repairs
except for ordinary, routine maintenance and repairs that are not
material in nature or cost.
5.13 Intellectual
Property.
(a) As used
herein:
(i)
“Company Intellectual
Property” means all Intellectual Property that is
owned or held for use by any Group Company.
(ii)
“Company IP Agreements”
means all licenses, sublicenses, consent to use agreements,
settlements, coexistence agreements, covenants not to sue,
permissions and other Contracts (including any right to receive or
obligation to pay royalties or any other consideration), whether
written or oral, relating to Intellectual Property to which any
Group Company is a party, beneficiary or otherwise
bound.
(iii)
“Company IP Registrations”
means all Company Intellectual Property that is subject to any
issuance registration, application or other filing by, to or with
any Governmental Authority or authorized private registrar in any
jurisdiction, including registered trademarks, domain names and
copyrights, issued and reissued patents and pending applications
for any of the foregoing.
(iv)
“Intellectual Property”
means all intellectual property and industrial property rights and
assets, and all rights, interests and protections that are
associated with, similar to, or required for the exercise of, any
of the foregoing, however arising, pursuant to the Laws of any
jurisdiction throughout the world, whether registered or
unregistered, including any and all: (a) trademarks, service marks,
trade names, brand names, logos, trade dress, design rights and
other similar designations of source, sponsorship, association or
origin, together with the goodwill connected with the use of and
symbolized by, and all registrations, applications and renewals
for, any of the foregoing; (b) internet domain names, whether or
not trademarks, registered in any top-level domain by any
authorized private registrar or Governmental Authority, web
addresses, web pages, websites and related content, accounts with
Twitter, Facebook and other social media companies and the content
found thereon and related thereto, and URLs; (c) works of
authorship, expressions, designs and design registrations, whether
or not copyrightable, including copyrights, author, performer,
moral and neighboring rights, and all registrations, applications
for registration and renewals of such copyrights; (d) inventions,
discoveries, trade secrets, business and technical information and
know-how, databases, data collections and other confidential and
proprietary information and all rights therein; (e) patents
(including all reissues, divisionals, provisionals, continuations
and continuations-in-part, re-examinations, renewals, substitutions
and extensions thereof), patent applications, and other patent
rights and any other Governmental Authority-issued indicia of
invention ownership (including inventor’s certificates, petty
patents and patent utility models); (f) Software; and (g)
semiconductor chips and mask works.
(v) “Software” means any and
all (a) computer programs, including any and all software
implementations of algorithms, heuristics, models and
methodologies, whether in source code or object code, (b) testing,
validation, verification and quality assurance materials, (c)
databases, conversions, interpreters and compilations, including
any and all data and collections of data, whether machine readable
or otherwise, (d) descriptions, schematics, flow-charts and other
work product used to design, plan, organize and develop any of the
foregoing, (e) all documentation, including user manuals, web
materials and architectural and design specifications and training
materials, relating to any of the foregoing, (f) software
development processes, practices, methods and policies recorded in
permanent form, relating to any of the foregoing, and (g)
performance metrics, sightings, bug and feature lists, build,
release and change control manifests recorded in permanent form,
relating to any of the foregoing.
(b) Section 5.13(b) of the
Disclosure Schedule lists all (i) Company IP Registrations and
(ii) Company Intellectual Property, including Software, that
are not registered but that are material to the Group
Companies’ business or operations. All required filings and
fees related to the Company IP Registrations have been timely filed
with and paid to the relevant Governmental Authorities and
authorized registrars, and all Company IP Registrations are
otherwise in good standing. The Company has provided Acquiror with
true and complete copies of file histories, documents,
certificates, office actions, correspondence and other materials
related to all Company IP Registrations.
(c) Section 5.13(d) of the
Disclosure Schedule lists all Company IP Agreements. The Company
has provided Acquiror with true and complete copies of all such
Company IP Agreements, including all modifications, amendments and
supplements thereto and waivers thereunder. Each Company IP
Agreement is valid and binding on the applicable Group Company in
accordance with its terms and is in full force and effect. Neither
any Group Company nor any other party thereto is in breach of or
default under (or is alleged to be in breach of or default under),
or has provided or received any notice of breach or default of or
any intention to terminate, any Company IP Agreement.
(d) A Group Company is
the sole and exclusive legal and beneficial, and with respect to
the Company IP Registrations, record, owner of all right, title and
interest in and to the Company Intellectual Property, and has the
valid right to use all other Intellectual Property used in or
necessary for the conduct of the Group Companies’ current
business or operations, in each case, free and clear of
Encumbrances other than Permitted Encumbrances. Without limiting
the generality of the foregoing, each Group Company has entered
into binding, written agreements with every current and former
employee of such Group Company, and with every current and former
independent contractor, whereby such employees and independent
contractors (i) assign to such Group Company any ownership
interest and right they may have in the Company Intellectual
Property; and (ii) acknowledge the Group Company’s
exclusive ownership of all Company Intellectual Property. The
Company has provided Acquiror with true and complete copies of all
such agreements.
(e) The consummation of
the transactions contemplated hereunder will not result in the loss
or impairment of or payment of any additional amounts with respect
to, nor require the consent of any other Person in respect of, any
Group Company’s right to own, use or hold for use any
Intellectual Property as owned, used or held for use in the conduct
of the Company’s business or operations as currently
conducted.
(f) The Group
Companies’ rights in the Company Intellectual Property are
valid, subsisting and enforceable. Each Group Company has taken all
reasonable steps to maintain the Company Intellectual Property and
to protect and preserve the confidentiality of all trade secrets
included in the Company Intellectual Property, including requiring
all Persons having access thereto to execute written non-disclosure
agreements.
(g) The conduct of the
Group Companies’ business as currently and formerly
conducted, and the products, processes and services of the Group
Companies, have not infringed, misappropriated, diluted or
otherwise violated, and do not and will not infringe, dilute,
misappropriate or otherwise violate the Intellectual Property or
other rights of any Person. No Person has infringed,
misappropriated, diluted or otherwise violated, or is currently
infringing, misappropriating, diluting or otherwise violating, any
Company Intellectual Property.
(h) There are no
Actions (including any oppositions, interferences or
re-examinations) settled, pending or threatened (including in the
form of offers to obtain a license): (i) alleging any
infringement, misappropriation, dilution or violation of the
Intellectual Property of any Person by any Group Company;
(ii) challenging the validity, enforceability, registrability
or ownership of any Company Intellectual Property or any Group
Company’s rights with respect to any Company Intellectual
Property; or (iii) by any Group Company or any other Person
alleging any infringement, misappropriation, dilution or violation
by any Person of the Company Intellectual Property. No Group
Company is subject to any outstanding or prospective Governmental
Order (including any motion or petition therefor) that does or
would restrict or impair the use of any Company Intellectual
Property.
(i) The computer,
information technology and data processing systems, facilities and
services used by any Group Company, including all software,
hardware, networks, communications facilities, platforms and
related systems and services in the custody or control of a Group
Company (collectively, “Systems”), are reasonably
sufficient for the existing needs of the applicable Group Company,
including as to capacity, scalability and ability to process
current peak volumes in a timely manner; the Systems are in good
working condition to effectively perform all computing, information
technology and data processing operations necessary for the
operation of the Group Companies; all Systems (to the extent
dedicated to a Group Company), other than software that is duly and
validly licensed to such Group Company pursuant to a valid and
enforceable Contract, are owned and operated by, and or are under
the control of, the applicable Group Company. To the
Company’s Knowledge, no Person has gained unauthorized access
to any of the Systems that would compromise to any material degree
the value or confidentiality of such Systems or that would
necessitate that the Company notify a third person of such
unauthorized access. The Group Companies have implemented all
critical security patches provided by third party licensors for the
Systems. The Group Companies have disaster recovery plans and
procedures for its business. The Group Companies maintain policies
and procedures regarding data security and privacy that are
commercially reasonable and in material compliance with Law. To the
Company’s Knowledge, there has been no material security
breach relating to, violation of any security policy regarding, or
unauthorized access or unauthorized use of, the
Systems.
5.15 Accounts
Receivable; Accounts Payable.
(a) The accounts
receivable reflected on the Interim Balance Sheet and the accounts
receivable arising after the date thereof (a) have arisen from
bona fide transactions entered into by the applicable Group Company
involving the sale of goods or the rendering of services in the
Ordinary Course of Business; (b) constitute only valid,
undisputed claims of the applicable Group Company not subject to
claims of set-off or other defenses or counterclaims other than
normal cash discounts accrued in the Ordinary Course of Business;
and (c) subject to a reserve for bad debts shown on the
Interim Balance Sheet or, with respect to accounts receivable
arising after the Interim Balance Sheet Date, on the accounting
records of the applicable Group Company, are collectible in full
within sixty (60) days after billing. The reserve for bad debts
shown on the Interim Balance Sheet or, with respect to accounts
receivable arising after the Interim Balance Sheet Date, on the
accounting records of the applicable Group Company have been
determined in accordance with GAAP, consistently applied, subject
to normal year-end adjustments and the absence of disclosures
normally made in footnotes. To the Knowledge of the Company, no
account debtor has refused or threatened to refuse to pay its
obligations for any reason, no account debtor is insolvent or
bankrupt, and no account receivable is pledged to any third
party.
(b) The accounts
payable reflected on the Interim Balance Sheet and arising after
the date thereof have arisen from bona fide transactions entered
into by the applicable Group Company in the Ordinary Course of
Business. No Group Company has written-off or reversed any accounts
payable or liability reserves in a manner inconsistent with prior
practice. The accrued expenses reflected on the Interim Balance
Sheet or accrued after the date thereof have arisen from bona fide
transactions entered into by the applicable Group Company in the
Ordinary Course of Business
5.16 Customers, Suppliers and
Distributors.
(a) Section 5.16(a) of the
Disclosure Schedule sets forth a list of the ten (10) largest
customers (“Material
Customers”) of the Group Companies, as measured by the
dollar amount of revenues recognized by the Company, during the
twelve (12) month period ended December 31, 2019 and the five (5)
month period ended May 31, 2020, showing the amount of revenues
recognized by the Group Companies from such customer during each
such period. To the Knowledge of the Company, there are no
bankruptcies filed by, on behalf of, or against any Material
Customer. None of the Material Customers have been in arrears to
the Company more than ninety (90) days in the twelve (12) month
period prior to the date of this Agreement.
(b) Section 5.16(b) of the
Disclosure Schedule sets forth a list of all Contracts with
Material Customers which are the subject of an ongoing competitive
bidding process, or for which the Company has been notified or
informed in writing or, to the Knowledge of the Company, orally,
that it will be the subject of a competitive bidding process within
twelve (12) months after the date of this Agreement.
(c) Section 5.16(c) of the
Disclosure Schedule sets forth a list of the ten (10) largest
suppliers (“Material
Suppliers”) of the Group Companies, as measured by the
dollar volume of purchases from such suppliers, during the twelve
(12) month period ended December 31, 2019 and the five (5) month
period ended May 31, 2020, showing the amount of payments made by
the Group Companies to each such supplier during each such period.
To the Knowledge of the Company, there are no bankruptcies filed
by, on behalf of, or against any Material Supplier. There are no
suppliers of products or services to the Company that are material
to the Group Companies’ business with respect to which
practical alternative sources of supply are not generally available
on comparable terms and conditions in the marketplace.
(d) No Group Company
has received notice from any Material Customer or Material Supplier
that such Material Customer or Material Supplier, and to the
Company’s Knowledge, no Material Customer or Material
Supplier, will, intends to, or is considering terminating,
cancelling, discontinuing, reducing, changing the terms (whether
related to payment, price, quantity of business or otherwise) of,
or otherwise adversely modifying, in each case in any material
respect, its business with the Group Companies, whether as a result
of any of the transaction described in this Agreement or otherwise
(and the Company does not have any reasonable basis to believe that
any reasons exist or as a result of the transactions contemplated
by this Agreement or any potential change in management or
ownership of the Company would exist for any Material Customer or
Material Supplier to take any such action). No Group Company is, or
has during the past twelve (12) months been, involved in any
material claim, dispute or controversy with any Material Customer
or any Material Supplier.
5.17 Insurance. Section 5.17 of the Disclosure
Schedule sets forth a true and complete list of all current
policies or binders of fire, liability, product liability, umbrella
liability, real and personal property, workers’ compensation,
vehicular, directors’ and officers’ liability,
fiduciary liability and other casualty and property insurance
maintained by the Company or any Transferor or any of their
respective Affiliates (including the Group Companies) and relating
to the assets, business, operations, employees, officers and
directors of the Group Companies (collectively, the
“Insurance
Policies”) and true and complete copies of the
Insurance Policies have been made available to Acquiror. The
Insurance Policies are in full force and effect and shall remain in
full force and effect following the consummation of the
Transactions, and none of the Insurance Policies are written on a
claims- made basis or will otherwise go into run-off at or
following the Closing. No Group Company has received any notice of
cancellation of, premium increase with respect to, or alteration of
coverage under, any of the Insurance Policies. All premiums due on
the Insurance Policies have either been paid or, if due and payable
prior to Closing, will be paid prior to Closing in accordance with
the payment terms of each Insurance Policy. No Group Company has
any liability due for any retrospective premium adjustment, audit
premium adjustment, experience based liability or loss sharing cost
adjustment under any of the Insurance Policies. All the Insurance
Policies (a) are valid and binding in accordance with their
terms; (b) are provided by carriers who are financially
solvent; and (c) have not been subject to any lapse in
coverage. There are no claims related to the business of the Group
Companies pending under any the Insurance Policies as to which
coverage has been questioned, denied or disputed or in respect of
which there is an outstanding reservation of rights. No Group
Company is in default under, and has not otherwise failed to comply
with, in any material respect, any provision contained in any the
Insurance Policy. The Insurance Policies are of the type and in the
amounts customarily carried by Persons conducting a business
similar to the Group Companies and are sufficient for compliance
with all applicable Laws and Contracts to which any Group Company
is a party or by which it is bound.
5.18 Legal
Proceedings; Governmental Orders.
(a) Section 5.18(a) of the
Disclosure Schedule identifies and provides a summary of the status
and material claims involved in each Action that is currently or
the past five years was pending, or, to the Company’s
Knowledge, threatened against or by any Group Company (or any of
its Representatives with respect to their business activities on
behalf of any Group Company) affecting any of its properties or
assets. Except as set forth in such Section 5.18(a) of the
Disclosure Schedule, the Group Companies have insurance that will
cover all Losses that may be incurred by any Group Company in
connection with each such pending Action.
(b) There are no
Actions pending or, to the Company’s Knowledge, threatened
against or by any Group Company that challenges or seeks to
prevent, enjoin or otherwise delay the Transactions. No event has
occurred or circumstances exist that may give rise to, or serve as
a basis for, any such Action.
(c) There are no, nor
in the past five (5) years have there been any, outstanding
Governmental Orders and no unsatisfied judgments, penalties or
awards against or affecting any Group Company (or any of its
Representatives with respect to their business activities on behalf
of the Group Companies) or any of its properties or assets. No
event has occurred or circumstances exist that may constitute or
result in (with or without notice or lapse of time) a violation of
any such Governmental Order.
5.19 Compliance With Laws;
Permits.
(a) Each Group Company
has been in compliance in all material respects with all Laws. No
Group Company has been charged with and is not now under
investigation with respect to, a violation of any Law. No Group
Company has received any communication during the past five
(5) years from a
Governmental Authority that alleges that any Group Company is not
in compliance with any Law.
(b) The Group Companies
(i) hold, and are in compliance in all material respects with
the terms of, all Permits that are necessary to enable the Group
Companies to conduct their business, all of which are listed on
Section 5.19(b) of
the Disclosure Schedule, (ii) have not received any notice of
the institution of any Action to revoke any such Permits or
alleging that any Group Company fails to hold such Permits,
(iii) have not received any notice that any loss or expiration
of any Permit is pending, other than expiration in accordance with
the terms thereof, and (iv) have no Knowledge of any
threatened or reasonably foreseeable loss or expiration of any
Permit, other than expiration in accordance with the terms thereof.
The Permits are valid and in full force and effect and none of the
Permits will be terminated or impaired or become terminable as a
result of the Transactions
(c) With respect to any
securities of the Company to be transferred hereunder in reliance
on Rule 506 under the Securities Act, none of the Company, any of
its predecessors, any affiliated issuer, any director, executive
officer, other officer of the Company participating in the
Transactions, any beneficial owner of 20% or more of the
Company’s outstanding voting equity securities, calculated on
the basis of voting power, nor any promoter (as that term is
defined in Rule 405 under the Securities Act) connected with the
Company in any capacity at the time of transfer (each, an
“Issuer Covered
Person” and, together, “Issuer Covered Persons”)
is subject to any Disqualification Event, except for a
Disqualification Event covered by Rule 506(d)(2) or (d)(3). The
Company has exercised reasonable care to determine whether any
Issuer Covered Person is subject to a Disqualification Event. The
Company has complied, to the extent applicable, with its disclosure
obligations under Rule 506(e), and has furnished to the Acquiror a
copy of any disclosures provided thereunder.
5.20 Environmental
Matters.
(a) As used
herein:
(i)
“Environmental Claim”
means any Action, Governmental Order, lien, fine, penalty, or, as
to each, any settlement or judgment arising therefrom, by or from
any Person alleging liability of whatever kind or nature (including
liability or responsibility for the costs of enforcement
proceedings, investigations, cleanup, governmental response,
removal or remediation, natural resources damages, property
damages, personal injuries, medical monitoring, penalties,
contribution, indemnification and injunctive relief) arising out
of, based on or resulting from: (a) the presence, Release of, or
exposure to, any Hazardous Materials; or (b) any actual or alleged
non-compliance with any Environmental Law or term or condition of
any Environmental Permit.
(ii)
“Environmental Law” means
any applicable Law, and any Governmental Order or binding agreement
with any Governmental Authority: (a) relating to pollution (or the
cleanup thereof) or the protection of natural resources, endangered
or threatened species, human health or safety, or the environment
(including ambient air, soil, surface water or groundwater, or
subsurface strata); or (b) concerning the presence of, exposure to,
or the management, manufacture, use, containment, storage,
recycling, reclamation, reuse, treatment, generation, discharge,
transportation, processing, production, disposal or remediation of
any Hazardous Materials. The term “Environmental Law”
includes, without limitation, the following (including their
implementing regulations and any state analogs): the Comprehensive
Environmental Response, Compensation, and Liability Act of 1980, as
amended by the Superfund Amendments and Reauthorization Act of
1986, 42 U.S.C. §§ 9601 et seq.; the Solid Waste
Disposal Act, as amended by the Resource Conservation and Recovery
Act of 1976, as amended by the Hazardous and Solid Waste Amendments
of 1984, 42 U.S.C. §§ 6901 et seq.; the Federal
Water Pollution Control Act of 1972, as amended by the Clean Water
Act of 1977, 33 U.S.C. §§ 1251 et seq.; the Toxic
Substances Control Act of 1976, as amended, 15 U.S.C.
§§ 2601 et seq.; the Emergency Planning and
Community Right-to-Know Act of 1986, 42 U.S.C.
§§ 11001 et seq.; the Clean Air Act of 1966, as
amended by the Clean Air Act Amendments of 1990, 42 U.S.C.
§§ 7401 et seq.; and the Occupational Safety and
Health Act of 1970, as amended, 29 U.S.C. §§ 651 et
seq.
(iii)
“Environmental Notice”
means any written directive, notice of violation or infraction, or
notice respecting any Environmental Claim relating to actual or
alleged non-compliance with any Environmental Law or any term or
condition of any Environmental Permit.
(iv)
“Environmental Permit”
means any Permit, letter, clearance, consent, waiver, closure,
exemption, decision or other action required under or issued,
granted, given, authorized by or made pursuant to Environmental
Law.
(v) “Hazardous Materials”
means all pollutants, contaminants, wastes, hazardous or toxic
substances or materials, including all substances defined as
Hazardous Substances, Oils, Pollutants or Contaminants in the
National Oil and Hazardous Substances Pollution Contingency Plan,
40 C.F.R. § 300.5, toxic mold, asbestos and
asbestos-containing materials, ignitable, reactive or corrosive
substances, by-products, process intermediate products or wastes,
petroleum or petroleum fractions and products, lead-containing
paint, urea-formaldehyde insulation, polychlorinated biphenyls,
radon, chemical liquids or solids, liquid or gaseous products, or
any constituent of any such substance or waste, the use, handling
or disposal of which by any Group Company could reasonably be
expected to result in liability under any applicable Environmental
Law or that is or is defined as hazardous, toxic or injurious by,
or regulated as such under, any Law or is in any way governed by or
subject to any applicable Environmental Laws.
(vi)
“Release” means any actual
or threatened release, spilling, leaking, pumping, pouring,
emitting, emptying, discharging, injecting, escaping, leaching,
dumping, abandonment, disposing or allowing to escape or migrate
into or through the environment (including, without limitation,
ambient air (indoor or outdoor), surface water, groundwater, land
surface or subsurface strata or within any building, structure,
facility or fixture).
(b) Each Group Company
is currently and has been in compliance with all Environmental Laws
and has not, and no Group Company has received from any Person any:
(i) Environmental Notice or Environmental Claim; or
(ii) written request for information pursuant to Environmental
Law, which, in each case, either remains pending or unresolved, or
is the source of ongoing obligations or requirements as of the
Closing Date. Each Group Company has all Environmental Permits
required for the conduct of the Group Companies’ business as
presently conducted under applicable Environmental Laws and is in
compliance in all material respects with all terms and conditions
of such Environmental Permits and all applicable Environmental
Laws.
(c) There has been no
Release of Hazardous Materials in contravention of Environmental
Law with respect to the business or assets of any Group Company or
any real property currently or formerly owned, operated or leased
by any Group Company, and no Group Company has received an
Environmental Notice that any real property currently or formerly
owned, operated or leased in connection with the business of a
Group Company (including soils, groundwater, surface water,
buildings and other structure located on any such real property)
has been contaminated with any Hazardous Material which could
reasonably be expected to result in an Environmental Claim against,
or a violation of Environmental Law or term of any Environmental
Permit by any Group Company.
(d) No Group Company
has retained or assumed, by contract or operation of Law, any
liabilities or obligations of third parties under Environmental
Law.
(e) The Company has
provided or otherwise made available to Acquiror: (i) any and
all environmental reports, studies, audits, records, sampling data,
site assessments, risk assessments, economic models and other
similar documents with respect to the business or assets of any
Group Company or any currently or formerly owned, operated or
leased real property which are in the possession or control of any
Group Company related to compliance with Environmental Laws,
Environmental Claims or an Environmental Notice or the Release of
Hazardous Materials; and (ii) any and all material documents
concerning planned or anticipated capital expenditures required to
reduce, offset, limit or otherwise control pollution and/or
emissions, manage waste or otherwise ensure compliance with current
or future Environmental Laws (including, without limitation, costs
of remediation, pollution control equipment and operational
changes).
5.21 Employee Benefit
Matters.
(a) Section
5.21(a) of the Disclosure Schedule contains a true and
complete list of each pension, benefit, retirement, compensation,
profit-sharing, deferred compensation, incentive, performance
award, phantom equity, stock or stock-based, change in control,
retention, severance, vacation, paid time off, fringe-benefit and
other similar agreement, plan, policy, program or arrangement (and
any amendments thereto), in each case whether or not reduced to
writing and whether funded or unfunded, including each
“employee benefit plan” within the meaning of
Section 3(3) of the Employee Retirement Income Security Act of
1974, as amended, and the regulations promulgated thereunder
(“ERISA”), whether or not tax-qualified and whether or
not subject to ERISA, which is or has been maintained, sponsored,
contributed to, or required to be contributed to by any
Group Company or any other Person that, together with any
Group Company, would be treated as a single employer within the
meaning of Section 414(b), (c), (m) or (o) of the Code (an
“ERISA Affiliate”) for the benefit of any current
or former employee, officer, director, retiree, independent
contractor or consultant of any Group Company or its ERISA
Affiliates or any spouse or dependent of such individual, or under
which any Group Company or any of its ERISA Affiliates has or
may have any Liability, or with respect to which Acquiror or
any of its Affiliates would reasonably be expected to have any
Liability, contingent or otherwise (each, a “Benefit Plan”).
(b) With respect to
each Benefit Plan, the Company has made available to
Acquiror accurate, current and complete copies of each of the
following: (i) where the Benefit Plan has been reduced to
writing, the plan document together with all amendments;
(ii) where the Benefit Plan has not been reduced to writing, a
written summary of all material plan terms; (iii) where
applicable, copies of any trust agreements or other funding
arrangements, custodial agreements, insurance policies and
contracts, administration agreements and similar agreements, and
investment management or investment advisory agreements, now in
effect or required in the future as a result of the Transactions or
otherwise; (iv) copies of any summary plan descriptions,
summaries of material modifications, employee handbooks and any
other written communications (or a description of any oral
communications) relating to any Benefit Plan; (v) in the case
of any Benefit Plan that is intended to be qualified under
Section 401(a) of the Code, a copy of the most recent
favorable determination, opinion or advisory letter from the
Internal Revenue Service; (vi) in the case of any Benefit Plan
for which a Form 5500 is required to be filed, copies of the three
most recently filed Forms 5500, with schedules attached;
(vii) the financial statements and/or actuarial valuations and
reports related to any Benefit Plans with respect to the two most
recently completed plan years, and a current estimate of accrued
and anticipated liabilities thereunder; (viii) copies of
material notices, letters or other correspondence with respect to
the registration, maintenance or qualification requirements
applicable to a Benefit Plan from any Governmental Authority,
including, without limitation, the Internal Revenue Service,
Department of Labor or Pension Benefit Guaranty Corporation
relating to the Benefit Plan; and (ix) the three most recent,
annual nondiscrimination tests for each Benefit Plan for which such
nondiscrimination tests are required by applicable
Law.
(c) Each Benefit Plan
has been established, administered and maintained in accordance
with its terms and in compliance with all applicable Laws
(including ERISA and the Code). Each Benefit Plan that is
intended to be qualified under Section 401(a) of the Code
(a “Qualified Benefit
Plan”) is so qualified and has received a favorable
and current determination letter from the Internal Revenue Service,
or with respect to a prototype plan, can rely on an opinion letter
from the Internal Revenue Service to the prototype plan sponsor, to
the effect that such Qualified Benefit Plan is so qualified and
that the plan and the trust related thereto are exempt from federal
income taxes under Sections 401(a) and 501(a), respectively,
of the Code, and nothing has occurred that could reasonably be
expected to cause the revocation of such determination letter from
the Internal Revenue Service or the unavailability of reliance on
such opinion letter from the Internal Revenue Service, as
applicable, nor has such revocation or unavailability been
threatened. Nothing has occurred with respect to any Benefit
Plan that has subjected or could reasonably be expected to subject
any Group Company or, with respect to any period on or after the
Closing Date, Acquiror or any of its Affiliates, to a penalty
under Section 502 of ERISA or to tax or penalty under
Section 4975 of the Code. All benefits, contributions
and premiums relating to each Benefit Plan have been timely paid in
accordance with the terms of such Benefit Plan and all applicable
Laws and accounting principles, and all benefits accrued under any
unfunded Benefit Plan have been paid, accrued or otherwise
adequately reserved to the extent required by, and in accordance
with, GAAP. Each Group Company has timely filed all requisite
governmental reports (which were true, correct and complete as of
the date filed), including any required audit reports, and has
properly and timely filed and distributed or posted all notices and
reports to employees required to be filed, distributed or posted
with respect to the Benefit Plans.
(d) Neither any Group
Company nor any of its ERISA Affiliates has ever sponsored,
maintained, or contributed to any (i) Benefit Plan that is or
was subject to Title IV of ERISA or Section 302 of ERISA or
Section 412 of the Code; (ii) “multiemployer
plan” within the meaning of Section 3(37) of ERISA;
(iii) “multiple employer plan” within the
meaning of Section 413(c) of the Code; or
(iv) “funded welfare plan” within the meaning
of Section 419 of the Code.
(e) No provision of
any Benefit Plan or collective bargaining agreement could
reasonably be expected to result in any limitation on
Acquiror or any of its Affiliates from amending or terminating
any Benefit Plan prior to or after the Closing and without
incurring any expenses (including, but not limited to, loads,
surrender fees, termination or deferred sales charges imposed with
respect to insurance products or other financial products used to
fund such Benefit Plans), other than reasonable administrative
expenses in connection with such termination. No
Group Company has any commitment or obligation and
has not made any representations to any employee, officer,
director, independent contractor or consultant, whether or not
legally binding, to adopt, amend or modify any Benefit Plan or any
collective bargaining agreement, in connection with the
consummation of the Transactions or otherwise.
(f) No Benefit Plan
provides health benefits (whether or not insured) with respect to
employees or former employees (or any of their beneficiaries) of
any Group Company or any of its ERISA Affiliates after retirement
or other termination of service (other than coverage or benefits
(i) required to be provided under Part 6 of Subtitle B of
Title I of ERISA or any similar state continuation coverage Laws or
(ii) the full cost of which is borne by the employee or former
employee (or any of their beneficiaries)).
(g) There is no
pending or, to Company’s Knowledge, threatened Action
relating to a Benefit Plan (other than routine claims for
benefits), and no Benefit Plan has within the three years prior to
the date hereof been the subject of an examination or audit by a
Governmental Authority or the subject of an application or filing
under or is a participant in, an amnesty, voluntary compliance,
self-correction or similar program sponsored by any Governmental
Authority.
(h) Each Benefit Plan
that is subject to Section 409A of the Code has been
maintained and operated in compliance with such section and all
applicable regulatory guidance (including notices, rulings and
proposed and final regulations), and no amounts deferred under any
such plan is, or upon vesting will be, subject to the interest and
additional Tax set forth under Section 409A(a)(1)(B) of the
Code. Neither any Group Company nor any of its ERISA
Affiliates has any indemnity or gross-up obligation to any service
provider for any Taxes or penalties imposed under
Sections 4999 or 409A of the Code.
(i) Each individual
who is classified by a Group Company as an independent contractor
has been properly classified for purposes of participation and
benefit accrual under each Benefit Plan.
(j) Neither the
execution of this Agreement nor any of the Transactions will
(either alone or upon the occurrence of any additional or
subsequent events): (i) entitle any current or former
director, officer, employee, independent contractor or consultant
of any Group Company or any of its ERISA Affiliates to severance
pay or any other payment; (ii) accelerate the time of payment,
funding or vesting, or increase the amount of compensation due to
any such individual; (iii) limit or restrict the right of any
Group Company to merge, amend or terminate any Benefit Plan;
(iv) increase the amount payable under or result in any other
material obligation pursuant to any Benefit Plan; or (v)
result in any amount paid or payable by any Group Company (or
by any of its Affiliates or by any Person who acquires ownership or
effective control of a Group Company or ownership of a substantial
portion of the Group Companies’ assets (within the
meaning of section 280G of the Code)): (A) constituting an
“excess parachute payment” within the meaning of
Code Section 280G or Code Section 4999, or (B) being not deductible
by any Group Company by reason of Code Section
280G.
(a) Section 5.22(a) of the
Disclosure Schedule contains a list of all persons who are
employees, independent contractors or consultants of any Group
Company as of the date hereof, including any employee who is on a
leave of absence of any nature, paid or unpaid, authorized or
unauthorized, and sets forth for each such individual the
following: (i) name; (ii) title or position (including
whether full or part time); (iii) hire date; (iv) current
annual base compensation rate; (v) commission, bonus or other
incentive-based compensation; and (vi) a description of the
fringe benefits provided to each such individual as of the date
hereof. Except as set forth in Section 5.22(a) of the
Disclosure Schedule, as of the date hereof, all compensation,
including wages, commissions and bonuses, payable to employees,
independent contractors or consultants of any Group Company for
services performed on or prior to the date hereof have been paid in
full and there are no outstanding agreements, understandings or
commitments of any Group Company with respect to any compensation,
commissions or bonuses.
(b) No Group Company
is, or has been, a party to, bound by, or negotiating any
collective bargaining agreement or other Contract with a union,
works council or labor organization (collectively,
“Union”), and there is
not, and has not been, any Union representing or purporting to
represent any employee of any Group Company, and, to the
Company’s Knowledge, no Union or group of employees is
seeking or has sought to organize employees for the purpose of
collective bargaining. There has never been, nor has there been any
threat of, any strike, slowdown, work stoppage, lockout, concerted
refusal to work overtime or other similar labor disruption or
dispute affecting any Group Company or any of its employees. No
Group Company has any duty to bargain with any Union.
(c) Each Group Company
is and has been in compliance in all material respects with all
applicable Laws pertaining to employment and employment practices,
including all Laws relating to labor relations, equal employment
opportunities, fair employment practices, employment
discrimination, harassment, retaliation, reasonable accommodation,
disability rights or benefits, immigration, wages, hours, overtime
compensation, child labor, hiring, promotion and termination of
employees, working conditions, meal and break periods, privacy,
health and safety, workers’ compensation, leaves of absence
and unemployment insurance. All individuals characterized and
treated by a Group Company as independent contractors or
consultants are properly treated as independent contractors under
all applicable Laws. All employees classified as exempt under the
Fair Labor Standards Act and state and local wage and hour laws are
properly classified. There are no Actions against any Group Company
pending, or to the Company’s Knowledge, threatened to be
brought or filed, by or with any Governmental Authority or
arbitrator in connection with the employment of any current or
former applicant, employee, consultant, or independent contractor
of any Group Company, including, without limitation, any claim
relating to unfair labor practices, employment discrimination,
harassment, retaliation, equal pay, wage and hours or any other
employment related matter arising under applicable
Laws.
(d) Each Group
Company has complied with the federal Worker Adjustment and
Retraining Notification Act of 1988, and similar state, local and
foreign laws related to plant closings, relocations, mass layoffs
and employment losses (the “WARN Act”) and it has no
plans to undertake any action in the future that would trigger the
WARN Act.
(e) To the Knowledge of
the Company, no key employee intends to terminate his or her
employment.
(a) All Tax Returns
required to be filed on or before the Closing Date by any Group
Company have been, or will be, timely filed. Such Tax Returns are,
or when filed will be, true, complete and correct in all respects.
All Taxes due and owing by any Group Company (whether or not shown
on any Tax Return) have been, or will be, timely paid. All
estimated Taxes required to be paid by or with respect to any Group
Company have been paid.
(b) Each Group Company
has (i) properly deducted or withheld and timely paid to the
appropriate Governmental Authorities all Taxes required by Law to
be deducted, withheld or paid by it, including in connection with
amounts paid or owing to any employee, independent contractor,
creditor, customer, stockholder or other party, and (ii) complied
with all information reporting and backup withholding provisions of
applicable Law.
(c) No claim has been
made by any taxing authority in any jurisdiction where any Group
Company does not file Tax Returns that it is, or may be, subject to
Tax by that jurisdiction. Section 5.23(c) of the
Disclosure Schedule sets forth each state, county, local
municipal, domestic or foreign jurisdiction or Governmental
Authority in or with which any Company (i) files a Tax Return,
(ii) is registered for any Tax purpose, (iii) treats
itself as liable for any Tax on a “nexus” basis,
(iv) is qualified to do business, (v) owns or regularly
uses property on anything other than a transient basis,
(vi) has any employee or in which any employee is regularly
present, or (vii) has any agent, representative or
distributor.
(d) No extensions or
waivers of statutes of limitations have been given or requested
with respect to any Taxes of any Group Company.
(e) The amount of the
Group Companies’ Liability for unpaid Taxes for all periods
ending on or before May 31, 2020 does not, in the aggregate, exceed
the amount of accruals for Taxes (excluding reserves for deferred
Taxes) reflected on the Financial Statements. The amount of the
Group Companies’ Liability for unpaid Taxes for all periods
following the end of the recent period covered by the Financial
Statements shall not, in the aggregate, exceed the amount of
accruals for Taxes (excluding reserves for deferred Taxes) as
adjusted for the passage of time in accordance with the past custom
and practice of the Group Companies (and which accruals shall not
exceed comparable amounts incurred in similar periods in prior
years).
(f) Section 5.23(f) of the
Disclosure Schedule sets forth:
(i) the taxable years
of each Group Company as to which the applicable statutes of
limitations on the assessment and collection of Taxes have not
expired;
(ii) those years for
which examinations by the taxing authorities have been completed;
and
(iii) those taxable years
for which examinations by taxing authorities are presently being
conducted.
(g) All deficiencies
asserted, or assessments made, against any Group Company as a
result of any examinations by any taxing authority have been fully
paid.
(h) No Group Company is
a party to any Action by any taxing authority. There are no pending
or threatened Actions by any taxing authority.
(i) The Company has
delivered to Acquiror copies of all federal, state, local and
foreign income, franchise and similar Tax Returns, examination
reports, and statements of deficiencies assessed against, or agreed
to by, any Group Company for all Tax periods ending after December
31, 2015.
(j) There are no
Encumbrances for Taxes (other than for current Taxes not yet due
and payable) upon the assets of any Group Company.
(k) No Group Company is
a party to, or bound by, any Tax indemnity, Tax-sharing or Tax
allocation agreement that shall survive the Closing.
(l) No Group Company is
a party to, or bound by, any closing agreement or offer in
compromise with any taxing authority.
(m) No private letter
rulings, technical advice memoranda or similar agreement or rulings
have been requested, entered into or issued by any taxing authority
with respect to any Group Company.
(n) No Group Company
has been a member of an affiliated, combined, consolidated or
unitary Tax group for Tax purposes other than a tax group of which
the Company is the parent. No Group Company has any Liability for
Taxes of any Person (other than the Company) under Treasury
Regulations Section 1.1502-6 (or any corresponding provision
of state, local or foreign Law), as transferee or successor, by
contract or otherwise.
(o) No Group Company
has agreed to make, nor is it required to make, any adjustment
under Sections 481(a) or 263A of the Code or any
comparable provision of state, local or foreign Tax Laws by reason
of a change in accounting method or otherwise. No Group Company has
taken any action that could defer a Liability for Taxes of any
Group Company from any Pre-Closing Tax Period to any Post-Closing
Tax Period.
(p) No Group Company
has been, nor will it be required hereunder to include any
adjustment in taxable income for any Tax period (or portion
thereof) pursuant to Section 481 of the Code or any comparable
provision under state or foreign Tax laws as a result of accounting
methods employed prior to the Closing, nor is any application
pending with a Governmental Authority requesting permission for any
changes in accounting methods that relate to the Companies. No
Group Company will be required hereunder to include in income, or
exclude any item of deduction from, taxable income for any taxable
period (or portion thereof) ending after the Closing Date as a
result of any (i) “closing agreement” as described
in Code section 7121 (or any corresponding or similar provision of
state, local or foreign income Tax law), (ii) open transaction
or installment disposition made on or prior to the Closing Date,
(iii) intercompany transactions occurring at or prior to the
Closing or any excess loss account in existence at Closing
described in Treasury Regulations under Code section 1502 (or any
corresponding or similar provision of state, local or foreign
income Tax law), (iv) income from the discharge of
indebtedness that was deferred pursuant to the provisions of Code
section 108(i), or (v) prepaid amount received on or prior to
the Closing Date.
(q) No Group Company
is, nor has it been, a United States real property holding
corporation (as defined in Section 897(c)(2) of the Code)
during the applicable period specified in
Section 897(c)(1)(a) of the Code.
(r) No Group Company
has been a “distributing corporation” or a
“controlled corporation” in connection with a
distribution described in Section 355 of the
Code.
(s) No Group Company
has consummated or participated in, nor is it currently
participating in, any transaction which was or is a “Tax
shelter” transaction as defined in Sections 6662 or 6111
of the Code or the Treasury Regulations promulgated thereunder. No
Group Company has participated in, and is not currently
participating in, a “Listed Transaction” or a
“Reportable Transaction” within the meaning of
Section 6707A(c) of the Code or Treasury Regulations
Section 1.6011-4(b), or any transaction requiring disclosure
under a corresponding or similar provision of state, local, or
foreign law.
(t) There is currently
no limitation on the utilization of net operating losses, capital
losses, built-in losses, tax credits or similar items of any Group
Company under Sections 269, 382, 383, 384 or 1502 of the Code
and the Treasury Regulations thereunder (and comparable provisions
of state, local or foreign Law).
(u) Section 5.23(u) of the
Disclosure Schedule sets forth all foreign jurisdictions in
which any Group Company is subject to Tax, is engaged in business
or has a permanent establishment. No Group Company has entered into
a gain recognition agreement pursuant to Treasury Regulations
Section 1.367(a)-8. No Group Company has transferred an
intangible the transfer of which would be subject to the rules of
Section 367(d) of the Code.
(v) All transactions or
arrangements made by the Company and/or any of its Subsidiaries
with related parties have been made on arm’s length terms, in
accordance with applicable transfer pricing principles and the
processes by which prices, amounts and terms have been arrived at
have, in each case, been fully documented.
(w) No Group Company
owns, directly or indirectly, any interests in an entity that has
been or would be treated as a “passive foreign investment
company” within the meaning of Code Section
1297.
(x) No Group Company
will be required to include any amount in income pursuant to Code
Section 965 (including Section 965(h) for any Post Closing Tax
Period.
(y) None of the assets
of a Group Company is property that a Group Company is required to
treat as being owned by any other person pursuant to the so-called
“safe harbor lease” provisions of former
Section 168(f)(8) of the Internal Revenue Code of 1954, as
amended.
5.24 Export Control
Matters.
(a) Each Group
Company has been in compliance in all material respects with all
Export Control Laws applicable to it. “Export Control Laws”
means all Laws relating to U.S. export control and trade embargo
statutes, regulations, Governmental Orders, guidelines and policies
of the United States Government and each applicable Governmental
Authority of any country in which any Group Company conducts
business, including, but not limited to EU Export Control and EU
Sanctions Laws, the International Traffic In Arms Regulations (22
C.F.R. Parts 120-130 (2011)) of the U.S. Department of State; the
Export Administration Regulations (“EAR”) (15 C.F.R. Parts
730-774 (2011)) of the U.S. Department of Commerce; the U.S.
antiboycott regulations and guidelines, including those under EAR
and U.S. Department of the Treasury regulations; the various
economic sanctions regulations and guidelines of the U.S.
Department of the Treasury, Office of Foreign Assets Control, and
the USA Patriot Act (Title III of Pub. L. 107-56, signed into law
October 26, 2001), as amended; and restrictions against dealings
with certain prohibited, debarred, denied or specially designated
entities or individuals under statutes, regulations, and
Governmental Orders of various agencies of the federal government
of the United States.
(b) No Group Company
has received from any Governmental Authority a request for
information relating to the sale or delivery of any product or
services or any disclosure of technical data based on a potential
violation of any Export Control Law. There are no Actions or, to
the Knowledge of the Company, investigations pending and there are
no Actions or investigations contemplated by any Governmental
Authority against or involving any Group Company based on an
alleged violation of any Export Control Law.
(c) Without limiting
the foregoing paragraphs (a) and (b) of this Section 5.24, each Group
Company:
(i) has not exported
any items or services directly or indirectly to any country subject
to economic sanctions, including Cuba, Iran, North Korea, Sudan or
Syria, or permitted access to technical data of any persons of
these nationalities except such persons who have lawful U.S.
permanent residence status;
(ii) has not exported
any items or services directly or indirectly to, or permitted
access to technical data of, any individuals or entities listed on
any U.S. or EU government list of parties subject to sanctions or
export prohibitions, including without limitation the list of
Specially Designated Nationals, the Denied Parties List, the
Unverified List, the Entity List, the Nonproliferation Sanctions
list, or the UK Treasury Consolidated List of Sanctions Targets;
and
(iii) has not exported
any items directly or indirectly to, or permitted access to
technical data of, any individuals or entities of the
People’s Republic of China, Russia or Venezuela except for
solely civilian end use by civilian end users.
(d) The Company is
aware of U.S. Commerce Department Bureau of Industry and Security
recordkeeping requirements, and of the recordkeeping requirements
of any other Governmental Authority regulating the items that it
exports, and each Group Company is in full compliance with the
same.
(a) All imports into
the United States made by or on behalf of each Group Company were
made in full compliance with the Laws enforced by U.S. Customs and
Border Protection, and the Laws of any other U.S. Governmental
Authority that is responsible for regulating the goods being
imported by such Group Company.
(b) The Company is
aware of U.S. Customs and Border Protection reasonable care
requirements, and each Group Company is in full compliance with the
same.
(c) The Company is
aware of U.S. Customs and Border Protection recordkeeping
requirements, and of the recordkeeping requirements of any other
Governmental Authority regulating the products that it imports, and
each Group Company is in full compliance with the
same.
(d) No Group Company is
subject to any fines or penalties, and to the Knowledge of the
Company, it is not aware of any fines or penalties that a Group
Company may become subject to, under the provisions of 19 USC
§§ 1592 and 1595a, or under any other U.S. Law regulating
the importation of goods into the United States.
(e) The imported
products for which a Group Company is, or has been, the importer of
record or otherwise legally responsible, are not subject to, nor,
to the Company’s Knowledge may become subject to:
(i) any detention, seizure or forfeiture; (ii) any notice
of redelivery or claim for liquidated damages; (iii) any
country of origin marking notice; or (iv) any other fine or
penalty.
5.26 Certain
Payments. Each Group
Company in material compliance with all applicable foreign,
federal, state and local anti-bribery, anticorruption and
anti-money laundering Laws, including the U.S. Foreign Corrupt
Practices Act, as amended. None of the Group Companies nor any
Representative thereof or any other Person authorized to act for or
on behalf of any Group Company, has directly or indirectly, (a)
made any contribution, gift, bribe, rebate, payoff, influence
payment, kickback or other payment to any Person, public or
private, regardless of form, whether in money, property or services
(i) to obtain favorable treatment in securing business; (ii) to pay
for favorable treatment of business secured; (iii) to obtain
special concessions or for special concessions already obtained; or
(iv) in violation of any Law, or (b) established or maintained any
fund or asset that has not been recorded in the books and records
of the Group Companies.
5.27 Warranty
Obligations. The Company has
delivered to Acquiror true and correct copies of all written
warranties currently in effect covering the products and services
of the Group Companies. No Group Company has, in any of past three
(3) years, had Liabilities under express and implied warranties in
excess of the reserve for warranty liability set forth in the
balance sheet for included in the Financial Statements for such
year, and no Group Company will have Liabilities under express and
implied warranties with respect to any products (including any part
or component and regardless of the date of manufacture) designed,
manufactured, assembled, sold or distributed by any Group Company
or any services performed by any Group Company prior to the Closing
Date in excess of the reserve for warranty liability set forth on
the Interim Balance Sheet.
5.28 Data Privacy and
Security.
(a) The Group
Companies’ Data Handling practices, including with respect to
Sensitive Data, comply in all material respects with all Laws and
contractual obligations, are, in any event, to the Knowledge of the
Company reasonable, and are regularly and consistently followed in
the conduct of its business and on which the Group Companies
regularly conduct training. “Data Handling” means the
collection, storage, processing, use, transmission, disclosure and
securing of data. “Sensitive Data” means any
data of a sensitive nature, including: (a) confidential information
regarding the Group Companies’ products, services operations
and clients; (b) nonpublic Personal Information, as defined under
the Gramm-Leach-Bliley Act; (c) information required by any
applicable law or industry standard or requirement to be encrypted,
masked or otherwise protected from disclosure; (d) government
identifiers, such as Social Security or other tax identification
numbers, driver’s license numbers and other government-issued
identification numbers; (e) account, credit or debit card numbers,
with or without any required security code, access code, personal
identification number or password that would permit access to an
individual’s financial account, and account information,
including balances and transaction data; (f) user names, email
addresses, passwords, or other credentials for accessing accounts;
and (g) any other sensitive information regarding individuals or
their employment, family, health or financial status, such as
medical records, salary, benefits, marital status and geo location
data.
(b) Sensitive Data are
stored and transmitted in an encrypted manner, and Sensitive Data
are not maintained by any Group Company for longer than is needed
to conduct the Business, or as required by Laws or Contractual
obligations. Sensitive Data is not transmitted or otherwise
provided to a third party except by a secure, encrypted means and
subject to a requirement that the recipient treat any such
Sensitive Data securely and as required by Law.
(c) To the Knowledge of
the Company, no Sensitive Data handled by any Group Company has
been exposed, lost, inappropriately accessed, misappropriated or
misused. To the Knowledge of the Company, (i) there have been
no breaches of or lapses in the security of any IT systems or
facilities of the Group Companies or of any communications means or
interface with the Group Companies’ IT systems, and
(ii) the Group Companies’ IT systems have not
experienced any unpermitted intrusions or been adversely affected
by any denial of service attacks.
(d) The consummation of
the Transactions will not violate any Laws, contractual obligations
or industry requirement relating to Sensitive Data or Data
Handling, and all data, including Sensitive Data, of the Group
Companies will be available for Data Handling by the Group
Companies following the Closing on substantially the same terms and
conditions as existed immediately before the Closing.
5.29 Transactions with Related
Persons. Except as set
forth in Section
5.29 of the Disclosure Schedule (the items so disclosed, the
“Related Party
Transactions and Relationships”), no Transferor nor
any Affiliate of any Transferor, nor any of their respective
Representatives:
(a) owns any direct or
indirect interest of any kind in, or controls or has controlled, or
is a manager, officer, director, stockholder, member or partner of,
or consultant to, or lender to or borrower from or has the right to
participate in the profits of, any Person which is a competitor,
supplier, vendor, customer, landlord, tenant, creditor or debtor of
a Group Company;
(b) owns or has an
interest in, directly or indirectly, any property, asset or right
used by any Group Company;
(c) owes any money to
or is owed any money by any Group Company (other than accrued
compensation in the case of employees of the Group
Companies);
(d) provides goods or
services to any Group Company (other than the employees of the
Group Companies);
(e) is a party to a
Contract, or is involved in any business arrangement or other
relationship, with any Group Company (whether written or
oral);
(f) has pledged any
assets, posted any letters of credit or guaranteed any obligations
on behalf of any Group Company (nor has any Group Company pledged
any assets, posted any letters of credit or guaranteed any
obligations on behalf of any such Person); or
(g) has any claim or
cause of action against any Group Company.
5.30 Brokers. Except as set
forth in Section
5.30 of the Disclosure Schedule, no broker, finder or
investment banker is entitled to any brokerage, finder’s or
other fee or commission in connection with the Transactions or any
other transactions, whether past, present or future, based upon
arrangements made by or on behalf of any Group Company or any
Transferor.
5.31 Projections.
All cost estimates, forecasts, projections and other forward
looking information regarding the Group Companies that have been
provided to Acquiror or its representatives, were prepared in good
faith based upon assumptions believed to be reasonable at the time,
it being recognized by Acquiror that such information as it relates
to future events is not to be viewed as fact and that actual
results during the period or periods covered by such financial
information may differ from the projected results set forth therein
by a material amount.
Representations
and warranties of Acquiror and Parent
6.1 Representations and Warranties of
Acquiror. Acquiror hereby
represents and warrants to the Company and the Transferors that the
statements contained in this Section 6.1 are true and
correct on the date hereof and shall be true and correct on the
Closing Date as if made thereon:
(a) Organization
and Authority of Acquiror
.
Acquiror is a corporation duly organized, validly existing and in
good standing under the Laws of the State of Delaware. Acquiror has
full corporate power and authority to enter into this Agreement and
the other Transaction Documents to which Acquiror is a party, to
carry out its obligations hereunder and thereunder and to
consummate the Transactions. The execution and delivery by Acquiror
of this Agreement and any other Transaction Document to which
Acquiror is a party, the performance by Acquiror of its obligations
hereunder and thereunder and the consummation by Acquiror of the
Transactions have been duly authorized by all requisite corporate
action on the part of Acquiror. This Agreement has been duly
executed and delivered by Acquiror, and (assuming due
authorization, execution and delivery by each other party hereto)
this Agreement constitutes a legal, valid and binding obligation of
Acquiror enforceable against Acquiror in accordance with its terms.
When each other Transaction Document to which Acquiror is or will
be a party has been duly executed and delivered by Acquiror
(assuming due authorization, execution and delivery by each other
party thereto), such Transaction Document will constitute a legal
and binding obligation of Acquiror enforceable against it in
accordance with its terms.
(b) No
Conflicts; Consents. The execution and
delivery by Acquiror of this Agreement and each Transaction
Document, and the performance by it of any actions contemplated
hereunder or thereunder, does not and will not, directly or
indirectly (with or without notice or lapse of time)
(i) conflict with or violate any provision of the
Governing Documents of Acquiror or (ii) conflict with,
violate, result in a breach of, result in the acceleration of
material obligations, loss of a benefit or increase in Liabilities
or fees under, create in any Person the right to terminate, cancel
or modify, or cause a default under or give rise to any rights or
penalties under any provision of any Governmental Order to which
Acquiror is subject or any provision of any Contract to which
Acquiror is a party or by which Acquiror is subject, except for
such filings as may be required under the Securities Act (or
applicable blue sky laws).
(c) Investment
Purpose
.
Acquiror will acquire the Shares solely for its own account for
investment purposes and not with a view to, or for offer or sale in
connection with, any distribution thereof.
(d) Legal
Proceedings. There are no
Actions pending or, to Acquiror’s knowledge, threatened
against or by Acquiror or any Affiliate of Acquiror that challenge
or seek to prevent, enjoin or otherwise delay the
Transactions.
(e) Brokers.
Except for such amounts as Acquiror shall pay, no broker, finder or
investment banker is entitled to any brokerage, finder’s or
other fee or commission in connection with the Transactions or any
other Transaction Document based upon arrangements made by or on
behalf of Acquiror.
6.2 Representations and Warranties of
Parent. Parent hereby
represents and warrants to the Company and the Transferors that the
statements contained in this Section 6.2 are true and
correct on the date hereof and shall be true and correct on the
Closing Date as if made thereon:
(a) Organization
and Authority of Parent. Parent is a
corporation duly organized, validly existing and in good standing
under the Laws of the State of Colorado. Parent has full corporate
power and authority to enter into this Agreement and the other
Transaction Documents to which Parent is a party, to carry out its
obligations hereunder and thereunder and to consummate the
Transactions. The execution and delivery by Parent of this
Agreement and any other Transaction Document to which Parent is a
party, the performance by Parent of its obligations hereunder and
thereunder and the consummation by Parent of the Transactions have
been duly authorized by all requisite corporate action on the part
of Parent. This Agreement has been duly executed and delivered by
Parent, and (assuming due authorization, execution and delivery by
each other party hereto) this Agreement constitutes a legal, valid
and binding obligation of Parent enforceable against Parent in
accordance with its terms. When each other Transaction Document to
which Parent is or will be a party has been duly executed and
delivered by Parent (assuming due authorization, execution and
delivery by each other party thereto), such Transaction Document
will constitute a legal and binding obligation of Parent
enforceable against it in accordance with its terms.
(b) No
Conflicts; Consents. The execution and
delivery by Parent of this Agreement and each Transaction Document,
and the performance by it of any actions contemplated hereunder or
thereunder, does not and will not, directly or indirectly (with or
without notice or lapse of time) (i) conflict with or
violate any provision of the Governing Documents of Parent or
(ii) conflict with, violate, result in a breach of, result in
the acceleration of material obligations, loss of a benefit or
increase in Liabilities or fees under, create in any Person the
right to terminate, cancel or modify, or cause a default under or
give rise to any rights or penalties under any provision of any
Governmental Order to which Parent is subject or any provision of
any Contract to which Parent is a party or by which Parent is
subject, except for such filings as may be required under the
Securities Act (or applicable blue sky laws).
(c) Legal
Proceedings. There are no
Actions pending or, to Parent’s knowledge, threatened against
or by Parent or any Affiliate of Parent that challenge or seek to
prevent, enjoin or otherwise delay the Transactions.
(d) Valid
Issuance of the Parent Shares. The Parent
Shares, when issued and delivered in accordance with the terms of
this Agreement, will be validly issued, fully paid and
nonassessable and free of restrictions on transfer other than
restrictions on transfer under applicable state and federal
securities Laws. Subject to the accuracy and completeness of the
representations in Article
4 and Article
5, the Parent Shares will be issued in compliance with all
applicable federal and state securities Laws.
(e) Brokers.
Except for such amounts as Parent shall pay, no broker, finder or
investment banker is entitled to any brokerage, finder’s or
other fee or commission in connection with the Transactions or any
other Transaction Document based upon arrangements made by or on
behalf of Parent.
(f)
No Disqualification
Events. With respect to any securities of Parent to be
transferred hereunder in reliance on Rule 506 under the Securities
Act, none of Parent, Acquiror, any of their respective
predecessors, any affiliated issuer, any director, executive
officer, other officer of Parent or Acquiror participating in the
Transactions, any beneficial owner of 20% or more of Parent’s
or Acquiror’s outstanding voting equity securities,
calculated on the basis of voting power, nor any promoter (as that
term is defined in Rule 405 under the Securities Act) connected
with Parent or Acquiror in any capacity at the time of transfer
(each, a “Parent
Covered Person” and, together, “Parent Covered Persons”)
is subject to any Disqualification Event, except for (i) a
Disqualification Event covered by Rule 506(d)(2) or (d)(3) or (ii)
as disclosed in Parent’s filings made with the OTC Markets,
Inc. as set forth in https://www.otcmarkets.com/stock/GOIG/disclosure.
Each of Parent and Acquiror has exercised reasonable care to
determine whether any Parent Covered Person is subject to a
Disqualification Event. Each of Parent and Acquiror has complied,
to the extent applicable, with its disclosure obligations under
Rule 506(e), and has furnished to the Transferors a copy of any
disclosures provided thereunder.
Covenants
7.1 Conduct of Business Prior to the
Closing. From the date
hereof until the Closing, except as otherwise provided in this
Agreement or consented to in writing by Acquiror (which consent
shall not be unreasonably withheld or delayed), each Group Company
shall (a) conduct the business of the Group Companies in the
Ordinary Course of Business; and (b) use its reasonable best
efforts to maintain and preserve intact the current organization,
business and franchise of the Group Companies and to preserve the
rights, franchises, goodwill and relationships of its employees,
customers, lenders, suppliers, regulators and others having
business relationships with the Group Companies. Without limiting
the foregoing, from the date hereof until the Closing Date, each
Group Company shall:
(a) preserve and
maintain all of its Permits;
(b) pay its debts,
Taxes and other obligations when due;
(c) not accelerate any
receivables or delay paying any payables;
(d) not cancel or waive
rights of substantial value;
(e) maintain the
properties and assets owned, operated or used by it in the same
condition as they were on the date of this Agreement, subject to
reasonable wear and tear;
(f) continue in full
force and effect without modification all Insurance Policies,
except as required by applicable Law;
(g) defend and protect
its properties and assets from infringement or
usurpation;
(h) perform all of its
obligations under all Contracts relating to or affecting its
properties, assets or business;
(i) maintain its books
and records in accordance with past practice;
(j) comply in all
material respects with all applicable Laws;
(k) not (i) make,
change or revoke any Tax election, (ii) consent to any extension or
waiver of the limitations period applicable to any claim or
assessment with respect to Taxes (iii) file any amended income tax
or any other material Return, (iii) settle or compromise any Tax
claim or assessment by any Governmental Authority, (iv) enter
into a closing agreement with a taxing authority or (v) surrender
any right to claim a refund of a material amount of Taxes;
and
(l) not take or permit
any action that would cause any of the changes, events or
conditions described in Section 5.8 to
occur.
Without
in any way limiting any party’s rights or obligations under
this Agreement, the parties understand and agree that (i) nothing
contained in this Agreement shall give Acquiror, directly or
indirectly, the right to control or direct the business operations
of the Group Companies prior to the Closing and (ii) prior to the
Closing, the Company shall exercise, consistent with the terms and
conditions of this Agreement, complete control and supervision over
the operations of the business.
7.2 Access to
Information. From the date
hereof until the Closing, each Group Company shall (a) afford
Acquiror and its Representatives full and free access to and the
right to inspect all of the properties, assets, premises, books and
records, Contracts and other documents and data related to any
Group Company; (b) furnish Acquiror and its Representatives with
such financial, operating and other data and information related to
any Group Company as Acquiror or any of its Representatives may
reasonably request (including for Acquiror to make a determination
as to whether the conditions to Closing have been satisfied); and
(c) instruct the Representatives of the Group Companies to
cooperate with Acquiror in its investigation of the Company. Any
investigation pursuant to this Section 7.2 shall be conducted
in such manner as not to interfere unreasonably with the conduct of
the Group Companies’ business. No investigation by Acquiror
or other information received by Acquiror shall operate as a waiver
or otherwise affect any representation, warranty or agreement given
or made by the Company or any Transferor in this
Agreement.
7.3 No Solicitation of Other
Bids.
(a) Each Group
Company and each Transferor shall not, and shall not authorize or
permit any of its Affiliates or any of its or their Representatives
to, directly or indirectly, (i) encourage, solicit, initiate,
facilitate or continue inquiries regarding an Acquisition Proposal;
(ii) enter into discussions or negotiations with, or provide
any information to, any Person concerning a possible Acquisition
Proposal; or (iii) enter into any agreements or other
instruments (whether or not binding) regarding an Acquisition
Proposal. Each Group Company and each Transferor shall immediately
cease and cause to be terminated, and shall cause its Affiliates
and all of its and their Representatives to immediately cease and
cause to be terminated, all existing discussions or negotiations
with any Persons conducted heretofore with respect to, or that
could lead to, an Acquisition Proposal. For purposes hereof,
“Acquisition
Proposal” shall mean any inquiry, proposal or offer
from any Person (other than Acquiror or any of its Affiliates)
concerning (A) a merger, consolidation, liquidation,
recapitalization, share exchange or other business combination
transaction involving any Group Company; (B) the issuance or
acquisition of shares of capital stock or other equity securities
of any Group Company; or (C) the sale, lease, exchange or
other disposition of any significant portion of any Group
Company’s properties or assets.
(b) In addition to the
other obligations under this Section 7.3, each Group Company
and Transferor shall promptly (and in any event within three (3)
Business Days after receipt thereof by a Group Company, its
Affiliates, any Transferor or their Representatives) advise
Acquiror orally and in writing of any Acquisition Proposal, any
request for information with respect to any Acquisition Proposal,
or any inquiry with respect to or which could reasonably be
expected to result in an Acquisition Proposal, the material terms
and conditions of such request, Acquisition Proposal or inquiry,
and the identity of the Person making the same.
(c) Each Group Company
and each Transferor agrees that the rights and remedies for
noncompliance with this Section 7.3 shall include
having such provision specifically enforced by any court having
equity jurisdiction, it being acknowledged and agreed that any such
breach or threatened breach shall cause irreparable injury to
Acquiror and that money damages would not provide an adequate
remedy to Acquiror.
7.4 Notice of Certain
Events.
(a) From the date
hereof until the Closing, the Company shall promptly notify
Acquiror in writing of:
(i) any fact,
circumstance, event or action the existence, occurrence or taking
of which (A) has had, or could reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect,
(B) has resulted in, or could reasonably be expected to result
in, any representation or warranty made by the Company or any
Transferor hereunder not being true and correct or (C) has
resulted in, or could reasonably be expected to result in, the
failure of any of the conditions set forth in Section 9.2 to be
satisfied;
(ii) any notice or other
communication from any Person alleging that the consent of such
Person is or may be required in connection with the
Transactions;
(iii) any notice or other
communication from any Governmental Authority in connection with
the Transactions; and
(iv) any Actions
commenced or, to Company’s Knowledge, threatened against,
relating to or involving or otherwise affecting the Company that,
if pending on the date of this Agreement, would have been required
to have been disclosed pursuant to Section 5.18 or that relates to
the consummation of the Transactions.
(b) Acquiror’s
receipt of information pursuant to this Section 7.4 shall not operate
as a waiver or otherwise affect any representation, warranty or
agreement given or made by the Company or any Transferor in this
Agreement (including Section 10.2 and Section 11.1(b)) and shall not
be deemed to amend or supplement the Disclosure
Schedule.
7.5 Confidentiality.
From and after the Closing, each Transferor shall, and shall cause
its Affiliates to, hold, and shall use its reasonable best efforts
to cause its or their respective Representatives to hold, in
confidence any and all information, whether written or oral,
concerning the Group Companies (“Confidential
Information”), except to the extent that the
Transferor can show that such information (a) is generally
available to and known by the public through no fault of the
Transferor, any of its Affiliates or their respective
Representatives; or (b) is lawfully acquired by the
Transferor, any of its Affiliates or their respective
Representatives from and after the Closing from sources which are
not prohibited from disclosing such information by a legal,
contractual or fiduciary obligation. If any Transferor or any of
its Affiliates or their respective Representatives are compelled to
disclose any information by judicial or administrative process or
by other requirements of Law, such Transferor shall promptly notify
Acquiror in writing and shall disclose only that portion of such
information which the Transferor is advised by its counsel in
writing is legally required to be disclosed, provided that the Transferor shall use
reasonable best efforts to obtain an appropriate protective order
or other reasonable assurance that confidential treatment will be
accorded such information.
7.6 Non-competition;
Non-solicitation.
(a) For a period of
five (5) years following the Closing (and in the case of
Section 7.6(a)(v)
indefinitely), each Transferor agrees that it shall not, directly
or indirectly through any Person or any Affiliate thereof, entity
or contractual arrangement:
(i) engage in the
Business or any segment thereof anywhere in the world (the
“Restricted
Territory”), it being acknowledged by the Transferors
that the Group Companies engage in the Business throughout the
Restricted Territory;
(ii) acquire, own,
manage, operate, join, control, or participate in the ownership,
management, operation or control of, consult with or perform
services for, lend money or capital to, invest capital in, or be
connected in any manner with, including, without limitation, as a
partner or through stock ownership in, any business or Person that
engages in the Business or any segment thereof anywhere in the
Restricted Territory;
(iii) solicit, offer
employment to or hire any individual that is an employee or
consultant of a Group Company or otherwise induce or attempt to
induce (whether for their own account or for the account of any
other Person) any individual that is an employee or consultant of a
Group Company to leave the employ of such Group Company;
provided,
however, that
nothing in this Section
7.6(a)(ii) shall prohibit any such party from: (i) using
general solicitations (including through search firms) not targeted
at employees of the Group Companies, or employing any person who
responds to such solicitation; (ii) hiring, employing or discussing
employment with any person who contacts such party independently
without any solicitations by such party or (iii) soliciting any
person who has left the employment of the Group Companies at least
six (6) months prior to such party soliciting such
person;
(iv) induce or attempt to induce any
customer, supplier, licensee or other business relation of
a Group Company to cease doing business
with such Group Company or in any way interfere with
the relationship between any such customer, supplier,
licensee or
business
relation and the Group Companies; or
(v) disparage Acquiror
or any of its Affiliates (including, after the Closing, the Group
Companies) in any way that could adversely affect the goodwill,
reputation or business relationships of Acquiror or any of its
Affiliates with the public generally, or with any of their
customers, suppliers or employees.
Notwithstanding
the foregoing, (x) the foregoing restrictions shall not apply to
Andrew Fox for so long as he is employed by the Company, Acquiror
or Parent following the Closing (provided, for the avoidance of
doubt, that he shall be bound by the covenants and other
obligations set forth in the Employment Agreement) and (y) nothing
in this Section 7.6(a) shall prevent a Transferor that is a
natural person from owning up to five percent (5%) of any of the
debt or equity securities of any business organization that is
required to file reports with the Securities and Exchange
Commission pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended.
(b) Each Transferor
acknowledges that if it breaches any obligation under this
Section 7.6,
Acquiror will suffer immediate and irreparable harm and damage for
which money alone cannot fully compensate, and the Transferor
therefore agrees that upon such breach or threatened breach,
Acquiror shall be entitled to seek a temporary restraining order,
preliminary injunction, permanent injunction or other injunctive
relief, without posting any bond or other security, barring the
other party from violating any such provision. This Section 7.6(b) shall not be
construed as an election of any remedy, or as a waiver of any right
available to Acquiror under this Agreement or the Law, including
the right to seek damages for a breach.
(c) If a court of
competent jurisdiction determines that the character, duration or
geographical scope of the provisions of this Section 7.6 are unreasonable,
it is the intention and the agreement of the parties that these
provisions shall be construed by the court in such a manner as to
impose only those restrictions on each Transferor’s conduct
that are reasonable in light of the circumstances and as are
necessary to assure to Acquiror the benefits of this Agreement. If,
in any judicial proceeding, a court shall refuse to enforce all of
the separate covenants of this Section 7.6 because taken
together they are more extensive than necessary to assure to
Acquiror the intended benefits of this Agreement, it is expressly
understood and agreed by the parties that the provisions hereof
that, if eliminated, would permit the remaining separate provisions
to be enforced in such proceeding, shall be deemed eliminated, for
the purposes of such proceeding, from this Agreement.
7.7 Approvals and
Consents.
(a) From the date
hereof until the Closings, the Company and the Transferors shall
(i) use reasonable best efforts to file, make or obtain, as
applicable, all registrations, filings, applications, notices,
consents, approvals, orders, qualifications and waivers, if any,
listed on Section
9.2(c) of the Disclosure Schedule and (ii) shall make any
payments required to accomplish the foregoing (and to the extent
such payments are not made prior to the Closing, they shall be
Company Transaction Expenses).
(b) Each of the parties
shall use all reasonable best efforts to:
(i) respond to any
inquiries by any Governmental Authority regarding antitrust or
other matters with respect to the Transactions or any agreement or
document contemplated hereby;
(ii) avoid the
imposition of any order or the taking of any action that would
restrain, alter or enjoin the Transactions or any agreement or
document contemplated hereby; and
(iii) in the event any
Governmental Order adversely affecting the ability of the parties
to consummate the Transactions or any agreement or document
contemplated hereby has been issued, to have such Governmental
Order vacated or lifted.
(c) If any consent,
approval or authorization necessary to preserve any right or
benefit under any Contract to which the Company is a party is not
obtained prior to the Closing, the Transferors’
Representative shall, at its sole expense, subsequent to the
Closing, cooperate with Acquiror and the Company in attempting to
obtain such consent, approval or authorization as promptly
thereafter as practicable. If such consent, approval or
authorization cannot be obtained, the Transferors’
Representative shall use its reasonable best efforts to provide the
Company with the rights and benefits of the affected Contract for
the term thereof, and, if the Transferors’ Representative
provides such rights and benefits, the Company shall assume all
obligations and burdens thereunder.
(d) All analyses,
appearances, meetings, discussions, presentations, memoranda,
briefs, filings, arguments, and proposals made by or on behalf of a
party before any Governmental Authority or the staff or regulators
of any Governmental Authority, in connection with the transactions
contemplated hereunder (but, for the avoidance of doubt, not
including any interactions between or the Company with Governmental
Authorities in the ordinary course of business, any disclosure
which is not permitted by Law or any disclosure containing
confidential information) shall be disclosed to the other party in
advance of any filing, submission or attendance, it being the
intent that the parties will consult and cooperate with one
another, and consider in good faith the views of one another, in
connection with any such analyses, appearances, meetings,
discussions, presentations, memoranda, briefs, filings, arguments,
and proposals. Each party shall give notice to the other party with
respect to any meeting, discussion, appearance or contact with any
Governmental Authority or the staff or regulators of any
Governmental Authority, with such notice being sufficient to
provide the other party with the opportunity to attend and
participate in such meeting, discussion, appearance or
contact.
(e) Notwithstanding the
foregoing, nothing in this Section 7.7 shall require, or
be construed to require, Parent, Acquiror or any of their
respective Affiliates to agree to (i) sell, hold, divest,
discontinue or limit, before or after the Closing Date, any assets,
businesses or interests of Parent, Acquiror, the Company or any of
their respective Affiliates, (ii) any conditions relating to,
or changes or restrictions in, the operations of any such assets,
businesses or interests which, in either case, could reasonably be
expected to result in a Material Adverse Effect or materially and
adversely impact the economic or business benefits to Acquiror of
the Transactions, (iii) any material modification or waiver of
the terms and conditions of this Agreement, or (iv) threaten
to, commence, prosecute or defend any Action.
(f) The Company and
each Transferor hereby waives all rights of first refusal, co-sale
rights, drag-along rights, consent rights and other similar rights
that the Company or the Transferor (as applicable) may have, as
well as any restrictions on the transfer of the Shares, in each
case under the Company’s organizational documents or
otherwise with respect to the transactions contemplated
hereby.
(a) Each Transferor, on
behalf of itself and its Affiliates, and their respective
successors and assigns and Representatives (collectively, the
“Releasors”), hereby
knowingly and voluntarily releases and forever discharges,
effective as of the Closing Date, Parent, Acquiror, each Group
Company, and each of their respective past, present and/or future
Affiliates and Representatives (collectively, the
“Released
Parties”), from any and all Actions, claims, suits,
controversies, causes of action, cross-claims, counter claims,
demands, debts, compensatory damages, liquidated damages, punitive
or exemplary damages, other damages, claims for costs and
attorneys’ fees, or liabilities of any nature whatsoever in
law and in equity, whether known or unknown, liquidated or
contingent, which the Transferor or any other Releasor ever had,
now have or may have relating to, arising out of or in any way
connected with the dealings of the Group Companies and the other
Released Parties, on the one hand, and the Transferor and the other
Releasors, on the other hand, or any circumstance, agreement,
action, omission, event or matter occurring or existing between
them, in each case, prior to the Closing Date (collectively, the
“Released
Claims”); provided, however, that the Released
Claims shall not include any of the terms, conditions or other
provisions or obligations under this Agreement or the Transaction
Documents.
(b) Each Transferor
acknowledges that the Laws of many states provide substantially the
following:
“A GENERAL
RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW
OR SUSPECT TO EXIST IN HIS OR HER FAVOR AT THE TIME OF EXECUTING
THE RELEASE, WHICH IF KNOWN BY HIM OR HER MUST HAVE MATERIALLY
AFFECTED HIS OR HER SETTLEMENT WITH THE DEBTOR.”
Each
Transferor acknowledges that such provisions are designed to
protect a party from waiving claims which he does not know exist or
may exist. Nonetheless, each Transferor agrees that, effective as
of the Closing Date, each Transferor and the other Releasors shall
be deemed to waive any such provision.
(c) Each Transferor
further agrees that no party shall, nor permit any Affiliate
thereof to: (i) institute a lawsuit or other legal proceeding based
upon, arising out of, or relating to any of the Released Claims,
(ii) participate, assist, or cooperate in any such proceeding or
(iii) encourage, assist and/or solicit any third party to institute
any such proceeding.
7.9 Closing
Conditions. From the date
hereof until the Closing, each Transferor shall, and shall cause
the Company to, use reasonable best efforts to take such actions as
are necessary to expeditiously satisfy the closing conditions set
forth in Article
9.
7.10 Publicity; Transaction
Disclosure.
(a) Any public
announcement, press release or similar publicity with respect to
this Agreement or the Transactions will be issued, if at all, at
such time and in such manner as approved in writing by the other
party (such approval not to be unreasonably withheld, conditioned
or delayed); provided, that if such
announcement is required by Law, a party may make any such
announcement, release or similar publicity without the consent of
the other party, provided that the disclosing party shall use
commercially reasonable efforts to provide, to the extent
practicable and legally permitted, the other party a reasonable
opportunity to review and comment on the content of such
announcements in advance (it being understood that the other party
shall not have any right to prevent the disclosing party from
making such announcements).
(b) None of (i) the
Group Companies, any Transferor or any of their respective
Affiliates or any of their respective Representatives shall (except
with the prior written consent of Acquiror or as permitted by this
Agreement) and (ii) Acquiror or any of its Affiliates or
Representative shall (except with the prior written consent of the
Transferors’ Representative or as permitted by this
Agreement) disclose to any Person: (A) the fact that any
confidential information of the Group Companies has been disclosed
to Acquiror or its Representatives, or that any confidential
information of Parent or Acquiror has been disclosed to the Group
Companies or the Transferors or (B) any information about the
transactions contemplated hereby, including the status of such
discussions or negotiations, the execution of any documents
(including this Agreement) or any of the terms of the transactions
contemplated hereby or the related documents (including this
Agreement); provided that the foregoing
obligation of the Group Companies, the Transferors or Acquiror (or
any of their respective Affiliates or Representatives) shall not
prohibit disclosure of any such information (1) if required by
applicable Law; (2) as required in order to fulfill such
party’s obligations under this Agreement; (3) to a financial,
legal or accounting advisor for the purpose of advising in
connection with the transactions contemplated by this Agreement and
the other Transaction Documents (provided, that such advisor is
made aware of and directed to comply with the provisions of this
Section 7.10), (4)
to the extent that the information has been made public by, or with
the prior consent of, Acquiror (with respect to disclosures by the
Group Companies, a Transferor or their respective Affiliates or
Representatives) or the Transferors’ Representative (with
respect to disclosures by Acquiror or its Affiliates or
Representatives) or (5) in connection with any Action with respect
to this Agreement or any other Transaction Documents; and
provided,
further, that in
the event any of the Group Companies, a Transferor or Acquiror is
required by Law to disclose any such information, such Person shall
promptly notify Acquiror (with respect to disclosures by the Group
Companies or a Transferor) or the Transferors’ Representative
(with respect to disclosures by Acquiror) in writing to the extent
permitted by Law, which notification shall include the nature of
the legal requirement and the extent of the required disclosure,
and such Person shall reasonably cooperate with Acquiror or the
Transferors’ Representative, as applicable (at such
Person’s expense) to preserve the confidentiality of such
information consistent with applicable Law.
7.11 Reserved.
7.12 Litigation
Support. Following the
Closing, in the event and for so long as Parent, Acquiror or the
Group Companies are actively contesting or defending against any
Action in connection with any fact, situation, circumstance,
action, failure to act, or transaction on or prior to the Closing
Date involving any Group Company, each Transferor will cooperate
with it and its counsel in the contest or defense and provide such
testimony and access to the Transferor’s books and records as
shall be necessary in connection with the contest or defense, all
at the sole cost and expense of Parent, Acquiror and the Group
Companies (unless Acquiror is entitled to indemnification therefor
hereunder).
7.13 280G. Promptly
following the execution of this Agreement, the Company shall submit
to the Transferors for approval (in a manner reasonably
satisfactory to Acquiror), in accordance with Section 280G(b)(5)(B)
of the Code, any payments and/or benefits that may separately or in
the aggregate, constitute “parachute payments” pursuant
to Section 280G of the Code (“Section 280G Payments”)
(which determination shall be made by the Company and shall be
subject to review and approval by Acquiror, such approval not to be
unreasonably withheld, conditioned or delayed), such that such
payments and benefits shall not be deemed to be Section 280G
Payments, and prior to the Closing, the Company shall deliver to
Acquiror notification and documentation reasonably satisfactory to
Acquiror that (a) a vote of the holders of the capital stock of the
Company was solicited in conformance with Section 280G and the
regulations promulgated thereunder and the requisite stockholder
approval was obtained with respect to any payments and/or benefits
that were subject to the stockholder vote (the “280G
Stockholder Approval”), or (b) that the 280G Stockholder
Approval was not obtained and as a consequence, that such payments
and/or benefits shall not be made or provided to the extent they
would cause any amounts to constitute Section 280G Payments,
pursuant to the waivers of those payments and/or benefits which
were executed by the affected individuals prior to the vote of the
holders of Company’s capital stock pursuant to this
Section
7.13.
7.14 Company
Covenants. Each Transferor
shall cause each Group Company to comply with each of its covenants
and agreements set forth herein.
7.15 Customer and other Business
Relationships. After the
Closing, each Transferor shall cooperate with Acquiror in its
efforts to continue and maintain for the benefit of Acquiror those
business relationships of the Group Companies existing prior to the
Closing, including relationships with customers, suppliers,
employees, regulatory authorities, licensors. After the Closing,
each Transferor will, and will cause its Affiliates to, refer to
Acquiror all inquiries relating to the Group
Companies.
7.16 Insurance; Risk of
Loss. The Company and
each Transferor will, and will cause each of its Affiliates to,
keep insurance policies currently maintained in respect of the
Business and current or former employees of the Group Companies, as
the case may be, or suitable replacements therefor, in full force
and effect through the close of business on the Closing Date. For
any claim that may be asserted against any Group Company after the
Closing Date arising out of events, incidents, conduct or
circumstances that occurred and/or existed prior to the Closing
Date (such claims, “Post-Closing Claims”):
(i) each Transferor shall ensure that the Group Companies have
access to coverage under each of the insurance policies set forth
in Section 5.17 of
the Disclosure Schedule (the “Specified Policies”) in
each case subject to the terms and conditions thereof; and (ii)
with respect to Specified Policies designated as
“Claims-Made” and “Occurrence-Reported,”
each Transferor shall secure tail coverage and/or ensure that the
Group Companies have access, either directly or through the
Transferor or its Affiliates to coverage under renewals of such
Specified Policies or equivalent coverage. After the Closing Date,
the Group Companies may seek coverage for any Post-Closing Claim
from the applicable insurer under any Specified Policy or, where
applicable, any tail or renewal policy or equivalent of such
Specified Policy, and each Transferor shall cooperate with the
Group Companies in connection with the tendering of such claims
(including by providing access to employees and third party claims
adjustors); provided, however, that (i) the Group
Companies shall reimburse each Transferor for all of its
out-of-pocket costs and expenses in connection with such
cooperation; and (ii) the Group Companies shall notify the
applicable Transferor(s) of all such coverage claims made. No
Transferor shall release, commute, buy-back, or otherwise eliminate
the coverage available under any Specified Policy without first
providing written notice to the Group Companies.
7.17 Internal
Control over Financial Reporting. Without limiting
any other provisions of this Agreement, prior to the Closing, the
Company shall use its commercially reasonable efforts to coordinate
with Acquiror and to provide the internal resources required to
establish: (a) a system of “internal controls over financial
reporting” (as defined in Rules 13a-15(f) and 15d-15(f) under
the Exchange Act) sufficient to provide reasonable assurances: (i)
that transactions are recorded as necessary to permit preparation
of financial statements in conformity with GAAP; (ii) that
transactions are executed only in accordance with the authorization
of management; and (iii) regarding prevention or timely detection
of the unauthorized acquisition, use or disposition of the
properties or assets of the Group Company, and (b) a system of
“disclosure controls and procedures” (as defined in
Rules 13a-15(e) and 15d-15(e) under the Exchange Act) sufficient to
ensure that all material information concerning the Group Companies
is made known on a timely basis to the individuals responsible for
the preparation of the Company’s financial statements;
provided that the
Company shall not be required to incur any out of pocket expenses
(other than nominal expenses) in connection with such efforts.
Prior to the Closing, the Company shall reasonably cooperate with
Acquiror with respect to integration planning in respect of
accounting and financial reporting functions.
7.18 Financial Reporting
Cooperation. During the period
between the signing of this Agreement and the earlier of the
Closing or termination of this Agreement, the Company shall provide
(and cause its Subsidiaries to provide) such reasonable and
customary cooperation (and to use commercially reasonable efforts
to cause its and their respective managers, officers, directors,
employees, accountants, legal counsel, agents, other advisors and
authorized representatives to provide such reasonable and customary
cooperation) in connection with Acquiror’s and its
Affiliates’ reporting obligations under the Securities Act
and the Exchange Act.
7.19 Further
Assurances. Each of the
parties shall, and shall cause their respective Affiliates to,
execute and deliver such additional documents, instruments,
conveyances and assurances and take such further actions as may be
reasonably required to carry out the provisions hereof and give
effect to the Transactions.
7.20 Transferors’
Representative. Andrew Fox shall
serve as the exclusive agent of the Transferors (the
“Transferors’
Representative”) for all purposes of this Agreement
and the Transactions contemplated hereby. Without limiting the
generality of the foregoing, the Transferors’ Representative
shall be authorized (a) in connection with the Closing, to execute
all certificates, documents and agreements on behalf of and in the
name of any of the Transferors necessary to effectuate the Closing
and the Transactions, and (b) to negotiate, execute and deliver all
amendments, modifications and waivers to this Agreement or any
other agreement, document or instrument contemplated by this
Agreement. The Transferors’ Representative also shall be
exclusively authorized to take all actions on behalf of the
Transferors in connection with any claims or disputes in respect of
this Agreement, any other agreement, document or instrument
contemplated by this Agreement or the Transactions, to bring,
prosecute, defend or settle such claims and disputes, and to make
and receive payments in respect of such claims and disputes on
behalf of the Transferors, and no Transferor shall take any such
action without the Transferors’ Representative’s prior
written approval. The Transferors’ Representative shall not
be liable to any of the Transferors for any action taken by the
Transferors’ Representative pursuant to this Agreement unless
the Transferors’ Representative has acted in bad faith or
with gross negligence or willful misconduct, and the Transferors
shall jointly and severally indemnify him from any Losses arising
out of or relating to the Transferors’ Representative serving
as agent hereunder. The Transferors’ Representative is
serving in the capacity as exclusive agent of the Transferors
hereunder solely for purposes of administrative convenience.
Parent, Acquiror and any Acquiror Indemnitee shall be entitled to
rely conclusively on the instructions, decisions, actions and
inactions of the Transferors’ Representative as to (i) the
settlement of any claims for indemnification by Parent, Acquiror or
any such Acquiror Indemnitee or (ii) any other action required or
permitted to be taken by the Transferors’ Representative
hereunder. No party hereunder shall have any cause of action
against Parent, Acquiror or any Acquiror Indemnitee for any action
taken by Parent, Acquiror or such Acquiror Indemnitee in reliance
upon the instructions or decisions of the Transferors’
Representative. Upon delivery of the any payments, whether in cash
or equity securities, by Parent or Acquiror to Transferors’
Representative as contemplated by this Agreement, each Transferor
should look only to the Transferors’ Representative for such
payments and shall have not claims against Acquiror or Parent.
Transferors’ Representative shall have the right to name and
appoint a successor in advance in the event that the
Transferors’ Representative resigns, dies or becomes
incapacitated. If the Transferors’ Representative resigns,
dies or becomes incapacitated and no such successor has been
appointed, his successor will be appointed within fifteen (15) days
of such event by mutual written consent of Transferors. The
decisions and actions of any successor Transferors’
Representative will be, for all purposes, those of the
Transferors’ Representative as if originally named herein.
The death or incapacity of any Transferor will not terminate the
authority and agency of the Transferors’ Representative. Any
successor Transferors’ Representative will provide Acquiror
with prompt written notice of his or her appointment.
ARTICLE
8
(a) Without the
prior written consent of Acquiror, no Transferor (and, prior to the
Closing, the Group Companies, their respective Affiliates and their
respective Representatives) shall, to the extent it may affect, or
relate to, any Group Company, make, change or rescind any Tax
election, amend any Tax Return or take any position on any Tax
Return, take any action, omit to take any action or enter into any
other transaction that would have the effect of increasing the Tax
liability or reducing any Tax asset of Acquiror or any Group
Company in respect of any taxable period ending after the Closing
Date and, with respect to any taxable period beginning before and
ending after the Closing Date, the portion of such taxable period
beginning on and including the Closing Date (“Post-Closing Tax
Period”). Each Transferor agrees that Acquiror is to
have no liability for any Tax resulting from any action of such
Transferor, any Group Company (on or prior to the Closing Date),
its Affiliates or any of their respective Representatives, and
agrees to indemnify and hold harmless Acquiror (and, after the
Closing Date, the Group Companies) against any such Tax or
reduction of any Tax asset.
(b) All transfer,
documentary, sales, use, stamp, registration, value added and other
such Taxes and fees (including any penalties and interest) incurred
in connection with this Agreement and the other Transaction
Documents (including any real property transfer Tax and any other
similar Tax) shall be borne and paid by the Transferors when
due. Each Transferor shall, at its own expense, timely file any Tax
Return or other document with respect to such Taxes or fees (and
Acquiror shall cooperate with respect thereto as
necessary).
(c) The
Transferors’ Representative shall prepare, or cause to be
prepared, all income Tax Returns required to be filed by the Group
Companies on a consolidated basis after the Closing Date with
respect to a “taxable period” ending on or before the
Closing Date, and Acquiror shall prepare all other Tax returns
required to be filed by the Group Companies after the Closing
Date.
(d) Any Tax Return
required to be filed by the Group Companies after the Closing Date
with respect to a “taxable period” ending on or before
the Closing Date and with respect to any taxable period beginning
before and ending after the Closing Date the portion of such
taxable period ending on and including the Closing Date
(“Pre-Closing Tax
Period”) shall be prepared in a manner consistent with
past practice (unless otherwise required by Law) and without a
change of any election or any accounting method. All Tax Returns
prepared by Acquiror for Pre-Closing Tax Periods and shall be
submitted by Acquiror to the Transferors’ Representative
(together with schedules, statements and, to the extent requested
by the Acquiror, supporting documentation) at least forty-five (45)
days prior to the due date (including extensions) of such Tax
Return. If the Transferors’ Representative objects to any
item on any such Tax Return, it shall, within ten (10) days after
delivery of such Tax Return, notify Acquiror in writing that it so
objects, specifying with particularity any such item and stating
the specific factual or legal basis for any such objection. If a
notice of objection shall be duly delivered, Acquiror and the
Transferors’ Representative shall negotiate in good faith and
use their reasonable best efforts to resolve such items. If
Acquiror and the Transferors’ Representative are unable to
reach such agreement within ten (10) days after receipt by Acquiror
of such notice, the disputed items shall be resolved by a
nationally recognized accounting firm selected by Acquiror and
reasonably acceptable to the Transferors’ Representative (the
“Accounting
Referee”) and any determination by the Accounting
Referee shall be final. The Accounting Referee shall resolve any
disputed items within twenty (20) days of having the item referred
to it pursuant to such procedures as it may require. If the
Accounting Referee is unable to resolve any disputed items before
the due date for such Tax Return, the Tax Return shall be filed as
prepared by Acquiror and then amended to reflect the Accounting
Referee’s resolution. The costs, fees and expenses of the
Accounting Referee shall be by Acquiror, on the one hand, and
the Transferors’ Representative, on the other hand, in such
amount(s) as shall be determined by the Accounting Referee based on
the proportion that the aggregate amount of disputed items
submitted to the Accounting Referee that is unsuccessfully disputed
by Acquiror, on the one hand, or the Transferors’
Representative, on the other hand, as determined by the Accounting
Referee, bears to the total amount of such disputed items so
referred to the Accounting Referee for resolution. The preparation
and filing of any Tax Return of the Group Companies that does not
relate to a Pre-Closing Tax Period shall be exclusively within the
control of Acquiror.
8.2 Termination
of Existing Tax Sharing Agreements. Any and all
existing Tax sharing agreements (whether written or not) binding
upon any Group Company shall be terminated as of the Closing Date.
After such date no Group Company, Transferor nor any of the
Transferors’ Affiliates and their respective Representatives
shall have any further rights or liabilities
thereunder.
8.3 Tax
Indemnification. The Transferors
shall, on a joint and several basis, indemnify the Group Companies,
Acquiror, and each Acquiror Indemnitee and hold them harmless from
and against (a) any Loss attributable to any breach of or
inaccuracy in any representation or warranty made in Section 5.23; (b) any Loss
attributable to any breach or violation of, or failure to fully
perform, any covenant, agreement, undertaking or obligation in this
Article 8;
(c) all Taxes of the Group Companies or relating to the
business of the Group Companies for all Pre-Closing Tax Periods;
(d) all Taxes of any member of an affiliated, consolidated,
combined or unitary group of which any Group Company (or any
predecessor of any Group Company) is or was a member on or prior to
the Closing Date by reason of a liability under Treasury Regulation
Section 1.1502-6 or any comparable provisions of foreign,
state or local Law; and (e) any and all Taxes of any person
imposed on any Group Company arising under the principles of
transferee or successor liability or by contract, relating to an
event or transaction occurring before the Closing Date. In each of
the above cases, together with any out-of-pocket fees and expenses
(including attorneys’ and accountants’ fees) incurred
in connection therewith. The Transferors shall, on a joint and
several basis, reimburse Acquiror for any Taxes of any Group
Company that are the responsibility of the Transferors pursuant to
this Section 8.3
within ten (10) Business Days after payment of such Taxes by
Acquiror or any Group Company.
8.4 Straddle
Period. In the case of
Taxes that are payable with respect to a taxable period that begins
before and ends after the Closing Date (each such period, a
“Straddle
Period”), the portion of any such Taxes that are
treated as Taxes of the Group Companies for any Pre-Closing Tax
Period shall be:
(a) in the case of
Taxes based upon, or related to, income or receipts, deemed equal
to the amount which would be payable if the taxable year ended with
the Closing Date; and
(b) in the case of
other Taxes, deemed to be the amount of such Taxes for the entire
period multiplied by a fraction the numerator of which is the
number of days in the period ending on the Closing Date and the
denominator of which is the number of days in the entire
period.
8.5 Contests. Acquiror agrees
to give written notice to the Transferors’ Representative of
the receipt of any written notice by any Group Company, Acquiror or
any of Acquiror’s Affiliates which involves the assertion of
any claim, or the commencement of any Action, in respect of which
an indemnity may be sought by Acquiror pursuant to this
Article 8 (a
“Tax
Claim”); provided, that failure to
comply with this provision shall not affect Acquiror’s right
to indemnification hereunder. Acquiror shall control the contest or
resolution of any Tax Claim; provided, however, that Acquiror shall
obtain the prior written consent of the Transferors’
Representative (which consent shall not be unreasonably withheld or
delayed) before entering into any settlement of a claim or ceasing
to defend such claim; and, provided further, that the
Transferors’ Representative shall be entitled to participate
in the defense of such claim and to employ counsel of its choice
for such purpose, the fees and expenses of which separate counsel
shall be borne solely by the Transferors’
Representative.
8.6 Cooperation
and Exchange of Information. The Transferors
and Acquiror shall provide each other with such cooperation and
information as either of them reasonably may request of the other
in filing any Tax Return pursuant to this Article 8 or in connection with
any audit or other proceeding in respect of Taxes of the Group
Companies. Such cooperation and information shall include providing
copies of relevant Tax Returns or portions thereof, together with
accompanying schedules, related work papers and documents relating
to rulings or other determinations by tax authorities. Each
Transferor and Acquiror shall retain all Tax Returns, schedules and
work papers, records and other documents in its possession relating
to Tax matters of the Group Companies for any taxable period
beginning before the Closing Date until the expiration of the
statute of limitations of the taxable periods to which such Tax
Returns and other documents relate, without regard to extensions
except to the extent notified by the other party in writing of such
extensions for the respective Tax periods. Prior to transferring,
destroying or discarding any Tax Returns, schedules and work
papers, records and other documents in its possession relating to
Tax matters of the Group Companies for any taxable period beginning
before the Closing Date, the Transferor or Acquiror (as the case
may be) shall provide the other party with reasonable written
notice and offer the other party the opportunity to take custody of
such materials.
8.7 Tax Treatment of Indemnification
Payments. Any
indemnification payments pursuant to this Article 8 shall be treated as
an adjustment to the Purchase Price by the parties for Tax
purposes, unless otherwise required by Law.
8.8 Survival. Notwithstanding
anything in this Agreement to the contrary, the provisions of
Section 5.22 and
this Article 8
shall survive for the full period of all applicable statutes of
limitations (giving effect to any waiver, mitigation or extension
thereof) plus 60 days.
8.9 Overlap. To the extent
that any obligation or responsibility pursuant to Article 10 may overlap with an
obligation or responsibility pursuant to this Article 8, the provisions of
this Article 8
shall govern.
Conditions
to closing
9.1 Conditions to Obligations of All
Parties. The obligations
of each party to consummate the Transactions shall be subject to
the fulfillment, at or prior to the Closing, of each of the
following conditions
(a) No Governmental
Authority shall have enacted, issued, promulgated, enforced or
entered any Governmental Order which is in effect and has the
effect of making the Transactions illegal, otherwise restraining or
prohibiting consummation of such transactions or causing any of the
transactions contemplated hereunder to be rescinded following
completion thereof.
(b) No Action shall
have been commenced against Parent, Acquiror, any Transferor or any
Group Company, which would prevent the Closing. No injunction or
restraining order shall have been issued by any Governmental
Authority, and be in effect, which restrains or prohibits any
transaction contemplated hereby.
9.2 Conditions
to Obligations of Parent and Acquiror. The obligations
of Parent and Acquiror to consummate the Transactions shall be
subject to the fulfillment or such party’s waiver, at or
prior to the Closing, of each of the following
conditions:
(a) Other than the
representations and warranties contained in Article 4, Section 5.1, Section 5.2, Section 5.3(a), Section 5.4, Section 5.5, Section 5.23 and Section 5.30, the
representations and warranties of the Transferors and the Company
contained in this Agreement, the other Transaction Documents and
any certificate or other writing delivered pursuant hereto shall be
true and correct in all respects (in the case of any representation
or warranty qualified by materiality or Material Adverse Effect) or
in all material respects (in the case of any representation or
warranty not qualified by materiality or Material Adverse Effect)
on and as of the date hereof and on and as of the Closing Date with
the same effect as though made at and as of such date (except those
representations and warranties that address matters only as of a
specified date, the accuracy of which shall be determined as of
that specified date in all respects). The representations and
warranties of contained in Article 4, Section 5.1, Section 5.2, Section 5.3(a), Section 5.4, Section 5.5, Section 5.23 and Section 5.30 shall be true and
correct in all respects on and as of the date hereof and on and as
of the Closing Date with the same effect as though made at and as
of such date (except those representations and warranties that
address matters only as of a specified date, the accuracy of which
shall be determined as of that specified date in all
respects).
(b) The Company and
each Transferor (including the Transferors’ Representative)
shall have duly performed and complied in all material respects
with all agreements, covenants and conditions required by this
Agreement and each of the other Transaction Documents to be
performed or complied with by it prior to or on the Closing Date;
provided,
that, with respect
to agreements, covenants and conditions that are qualified by
materiality, the Company and each Transferor (including the
Transferors’ Representative) shall have performed such
agreements, covenants and conditions, as so qualified, in all
respects.
(c) All registrations,
filings, applications, notices, consents, approvals, orders,
qualifications and waivers listed on Section 9.2(c) of the
Disclosure Schedule, if any, shall have been filed, made or
obtained, as applicable.
(d) From the date of
this Agreement, there shall not have occurred any Material Adverse
Effect, nor shall any event or events have occurred that,
individually or in the aggregate, with or without the lapse of
time, could reasonably be expected to result in a Material Adverse
Effect.
(e) Acquiror shall have
received estoppel certificates and non-disturbance agreements from
the lessor of, and lender with respect to, each Leased Real
Property addressed to the Company in customary form.
(f) The Company shall
have delivered a Closing Statement pursuant to Section 3.2(a) in form
reasonably approved by Acquiror, and the amount obtained by
subtracting the Closing Company Transaction Expenses from the
Closing Company Net Cash (each as reflected in the Closing
Statement) shall be no less than $0.
(g) The Company and the
Transferors (including the Transferors’ Representative) shall
have delivered each of the closing deliverables set forth in
Sections 2.2 and
2.3.
(h) All Convertible
Notes shall have been converted into shares of Class B Non-Voting
Common Stock of the Company prior to the Closing and, upon such
conversion, each Convertible Note shall have been terminated and of
no further force or effect.
(i) Upon conversion of
the Convertible Notes, the Company shall have no other
Indebtedness.
(j) All outstanding
options issued pursuant to the Plan that have vested (or will be
vested as of the Closing) shall have been exercised in full or
terminated prior to the Closing.
(k) Each of
Exhibit A and the
capitalization table attached to Section 5.4(b) of the
Disclosure Schedule shall be true and correct in all respects as of
immediately prior to the Closing; provided, that following the date
of this Agreement, no amendments or other modifications of either
Exhibit A or such
capitalization table shall be made without the prior written
consent of Acquiror in its sole discretion.
(l) The form and
substance of all certificates, instruments, opinions and other
documents delivered to Acquiror or Parent under this Agreement
shall be satisfactory in all reasonable respects to Acquiror and
its counsel.
9.3 Conditions to Obligations of the
Company and the Transferors. The obligations
of the Company and the Transferors to consummate the Transactions
shall be subject to the fulfillment or the Transferors’
Representative’s waiver, at or prior to the Closing, of each
of the following conditions:
(a) Other than the
representations and warranties of the Acquiror contained in
Section 6.1(a),
Section 6.1(b)(i)
and Section 6.1(e),
and the representations and warranties of Parent contained in
Section 6.2(a),
Section 6.2(b)(i),
Section 6.2(d) and
Section 6.2(e), the
representations and warranties of Acquiror and Parent contained in
this Agreement, the other Transaction Documents and any certificate
or other writing delivered pursuant hereto shall be true and
correct in all respects (in the case of any representation or
warranty qualified by materiality or Material Adverse Effect) or in
all material respects (in the case of any representation or
warranty not qualified by materiality or Material Adverse Effect)
on and as of the date hereof and on and as of the Closing Date with
the same effect as though made at and as of such date (except those
representations and warranties that address matters only as of a
specified date, the accuracy of which shall be determined as of
that specified date in all respects). The representations and
warranties of Acquiror contained in Section 6.1(a), Section 6.1(b)(i) and
Section 6.1(e) and
the representations and warranties of Parent contained in
Section 6.2(a),
Section 6.2(b)(i),
Section 6.2(d) and
Section 6.2(e)
shall be true and correct in all respects on and as of the date
hereof and on and as of the Closing Date with the same effect as
though made at and as of such date.
(b) Each of Parent and
Acquiror shall have duly performed and complied in all material
respects with all agreements, covenants and conditions required by
this Agreement and each of the other Transaction Documents to be
performed or complied with by it prior to or on the Closing
Date.
Indemnification
10.1 Survival. Subject to the
limitations and other provisions of this Agreement, the
representations and warranties contained herein (other than any
representations or warranties contained in Section 5.23 which are subject
to Article 8) shall
survive the Closing and shall remain in full force and effect until
the second anniversary of the Closing Date (the “General Survival
Period”); provided, that the
representations and warranties in Article 4, Section 5.1, Section 5.2, Section 5.3(a), Section 5.4, Section 5.5, Section 5.11(a), Section 5.29 and Section 5.30 shall remain in
full force and effect until the seventh anniversary of the Closing
Date, the representations and warranties in Section 5.20, Section 5.21 and Section 5.23 shall survive for
the full period of all applicable statutes of limitations (giving
effect to any waiver, mitigation or extension thereof) plus 60 days, and any
representation in the case of fraud, intentional misrepresentation
or intentional breach, shall survive indefinitely (the
representations and warranties identified in the foregoing proviso,
the “Fundamental
Representations”). All covenants and agreements of the
parties contained herein (other than any covenants or agreements
contained in Article
8 which are subject to Article 8) and any statement
contained in any certificate delivered pursuant hereto shall
survive the Closing indefinitely or for the period explicitly
specified therein. Notwithstanding the foregoing, any claims
asserted in good faith with reasonable specificity (to the extent
known at such time) and in writing by notice from the non-breaching
party to the breaching party prior to the expiration date of the
applicable survival period shall not thereafter be barred by the
expiration of the relevant representation or warranty and such
claims shall survive until finally resolved. For the avoidance of
doubt, the references in this Section 10.1 to the “statutes
of limitations” shall refer to the statute of limitations
applicable to the particular matter that gave rise to a breach of
the representation or warranty in question, and not to the statute
of limitations applicable to a breach of this
Agreement.
10.2 Indemnification By The
Transferors. Subject to the
other terms and conditions of this Article 10, the Transferors
shall indemnify and defend each of Parent, Acquiror and their
respective Affiliates (including after the Closing, the Group
Companies) and their respective Representatives (collectively, the
“Acquiror
Indemnitees”) against, and shall hold each of them
harmless from and against, and shall pay and reimburse each of them
for, any and all Losses that is or may be incurred or sustained by,
or imposed upon, the Acquiror Indemnitees based upon, arising out
of, with respect to, relating to or by reason of:
(a) an inaccuracy in or
breach of any representation or warranty of any Transferor or the
Company contained in this Agreement or in any certificate or
instrument delivered by or on behalf of any Transferor or the
Company pursuant to this Agreement (other than in respect of
Section 5.23, it
being understood that the sole remedy for any such inaccuracy in or
breach thereof shall be pursuant to Article 8), as of the date such
representation or warranty was made or as if such representation or
warranty was made on and as of the Closing Date (except for
representations and warranties that expressly relate to a specified
date, the inaccuracy in or breach of which will be determined with
reference to such specified date);
(b) a breach or
non-fulfillment of any covenant, agreement or obligation to be
performed by any Transferor (including the Transferors’
Representative) or any Group Company pursuant to this Agreement
(other than any breach or violation of, or failure to fully
perform, any covenant, agreement, undertaking or obligation in
Article 8, it being
understood that the sole remedy for any such breach, violation or
failure shall be pursuant to Article 8);
(c) Company Transaction
Expenses or any Indebtedness outstanding as of Closing (including,
without limitation, any amounts set forth on Section 5.7 of the Disclosure
Schedule);
(d) a claim or right
asserted or held by any person who is or at any time was an
officer, director, employee or agent of any Group Company (against
any Group Company or Acquiror, against any Affiliate of the Company
or Acquiror or against any other Person) involving a right or
entitlement or an alleged right or entitlement to indemnification,
reimbursement of expenses or any other relief or remedy (under the
Governing Documents, under any indemnification agreement or similar
Contract, under any applicable Laws or otherwise) with respect to
any act or omission on the part of such person or any event or
other circumstance that arose, occurred or existed at or prior to
the Closing; and
(e) the matter set
forth on Section
5.18(a) of the Disclosure Schedule.
10.3 Indemnification By
Acquiror. Subject to the
other terms and conditions of this Article 10, Acquiror shall
indemnify and defend the Transferors and their respective
Representatives (collectively, the “Transferor Indemnitees”)
against, and shall hold each of them harmless from and against, and
shall pay and reimburse each of them for, any and all Losses
incurred or sustained by, or imposed upon, the Transferor
Indemnitees based upon, arising out of, with respect to, relating
to or by reason of:
(a) an inaccuracy in or
breach of any of the representations or warranties of Acquiror or
Parent contained in this Agreement or in any certificate or
instrument delivered by or on behalf of Acquiror or Parent pursuant
to this Agreement, as of the date such representation or warranty
was made or as if such representation or warranty was made on and
as of the Closing Date (except for representations and warranties
that expressly relate to a specified date, the inaccuracy in or
breach of which will be determined with reference to such specified
date); or
(b) a breach or
non-fulfillment of any covenant, agreement or obligation to be
performed by Acquiror or Parent pursuant to this Agreement (other
than Article 8, it
being understood that the sole remedy for any such breach thereof
shall be pursuant to Article 8).
10.4 Certain
Limitations. The
indemnification provided for in Section 10.2 and Section 10.3 shall be subject
to the following limitations:
(a) The Transferors
shall not be liable to the Acquiror Indemnitees for indemnification
under Section
10.2(a) until the aggregate amount of all Losses in respect
of indemnification under Section 10.2(a) exceeds $25,000
(the “Basket”), in which event
the Transferors shall be liable for all Losses in respect of
indemnification under Section 10.2(a) in excess of
the Basket. The aggregate amount of all Losses for which the
Transferors shall be liable pursuant to Section 10.2(a) shall not
exceed $875,000 (the “Cap”). Except for claims
based on fraud, intentional misrepresentation or intentional
breach, the Transferors shall not have liability pursuant to
Section 10.2 in an
aggregate amount greater than the Purchase Price as finally
determined pursuant to this Agreement.
(b) Acquiror shall not
be liable to the Transferor Indemnitees for indemnification under
Section
10.3(a) until
the aggregate amount of all Losses in respect of indemnification
under Section
10.3(a) exceeds
the Basket, in which event Acquiror shall be liable for all Losses
in respect of indemnification under Section 10.3(a) in excess of
the Basket. The aggregate amount of all Losses for which Acquiror
shall be liable pursuant to Section 10.3(a) shall not
exceed the Cap. Except for claims based on fraud, intentional
misrepresentation or intentional breach, Acquiror shall not have
liability pursuant to Section 10.3 in an aggregate
amount greater than the Purchase Price as finally determined
pursuant to this Agreement.
(c) The Transferors
shall not be liable to the Acquiror Indemnitees for indemnification
under Section
10.2(e) until
the aggregate amount of all Losses in respect of indemnification
under Section
10.2(e) exceeds
$150,000, in which event the Transferors shall be liable for all
Losses in respect of indemnification under Section 10.2(e) in excess of
$150,000.
(d) Notwithstanding the
foregoing, neither the Basket nor the Cap shall apply to any
indemnification claims based upon, arising out of, with respect to,
relating to or by reason of any breach of a Fundamental
Representation or claims based on fraud, intentional
misrepresentation or intentional breach or any claim with respect
to Taxes.
10.5 Indemnification
Procedures. The party making
a claim under this Article
10 is referred to as the “Indemnified Person”, and
the party against whom such claims are asserted under this
Article 10 is
referred to as the “Indemnifying
Person”.
(i) Notice. If any Indemnified
Person receives notice of the assertion or commencement of any
Action made or brought by any Person who is not a party or an
Affiliate of a party or a Representative of the foregoing (a
“Third Party
Claim”) against such Indemnified Person with respect
to which the Indemnifying Person is obligated to provide
indemnification under this Agreement, the Indemnified Person shall
give the Indemnifying Person reasonably prompt written notice
thereof, but in any event not later than thirty (30) days after
receipt of such notice of such Third Party Claim. The failure to
give such prompt written notice shall not, however, relieve the
Indemnifying Person of its indemnification obligations, except and
only to the extent that the Indemnifying Person forfeits rights or
defenses by reason of such failure. Such notice by the Indemnified
Person shall describe the Third Party Claim in reasonable detail,
shall include copies of all material written evidence thereof and
shall indicate the estimated amount, if reasonably practicable, of
the Loss that has been or may be sustained by the Indemnified
Person.
(ii) Right to Defend. Upon receipt
of the notice, the Indemnifying Person will have the right to
defend the Indemnified Person against the Third Party Claim with
counsel reasonably satisfactory to the Indemnified Person,
provided, that
(i) within thirty (30) days after the Indemnified Person has
given notice of the Third Party Claim the Indemnifying Person
acknowledges in writing to the Indemnified Person its unqualified
obligation to indemnify the Indemnified Person as provided
hereunder; provided, further, that, if after the Indemnifying
Person acknowledges its unqualified obligation to indemnify the
Indemnified Person and assumed the defense of such Third Party
Claim, (A) new allegations or claims are asserted as part of such
Third Party Claim, or (B) the original Third Party Claim is
otherwise amended in a manner that materially increases the
indemnification obligations of the Indemnifying Person under such
Third Party Claim (including by reason of new facts having been
discovered or being alleged), then, in each such case, the
Indemnifying Person shall either (I) notify the Indemnified
Person of such changes to the original Third Party Claim, within
fifteen (15) days of such changes, and turn over the defense of the
Third Party Claim to the Indemnified Person, in which case the
Indemnifying Person shall be deemed not to have acknowledged its
obligation to indemnify the Indemnified Person (except to the
extent all or any portion of the original Third Party Claim has
already been determined, compromised or settled), or
(I) continue to defend such Third Party Claim, in which case
the Indemnifying Person shall be deemed to have acknowledged its
obligation to indemnify the Indemnified Person with respect to such
Third Party Claim as so changed, (ii) the Indemnifying Person
provides the Indemnified Person with evidence reasonably acceptable
to the Indemnified Person that the Indemnifying Person will have
the financial resources to defend against the Third Party Claim and
fulfill its indemnification obligations hereunder, (iii) the
Third Party Claim involves only money damages, and does not seek
statutory, enhanced or treble damages or an injunction or other
equitable relief, (iv) the Third Party Claim has a reasonable
likelihood of resulting in indemnifiable Losses that would result
in the Cap being exceeded or does not have a reasonable likelihood
of resulting in indemnifiable Losses that would result in the
Basket being exceeded; or (v) settlement of, or an adverse
judgment with respect to, the Third Party Claim is not, in the good
faith judgment of the Indemnified Person, likely to establish a
precedential custom or practice adverse to the continuing business
interests or the reputation of the Indemnified Person or have a
material adverse effect on the Indemnified Person, (vi) the
Third Party Claim does not involve a supplier, customer,
distributor, licensor, licensee, lessor or insurer of the Company
or any Affiliate thereof or a Governmental Authority, (vii) the
Third Party Claim does not involve a class action lawsuit and
(viii) the Indemnifying Person conducts the defense of the
Third Party Claim actively and diligently. The Indemnifying Person
will keep the Indemnified Person apprised of all material
developments, including settlement offers, with respect to the
Third Party Claim and permit the Indemnified Person to participate
in the defense of the Third Party Claim with counsel selected by it
subject to the Indemnifying Person’s right to control the
defense thereof. The fees and disbursements of such counsel shall
be at the expense of the Indemnified Person, provided, that if in the
reasonable opinion of counsel to the Indemnified Person,
(A) there are legal defenses available to an Indemnified
Person that are different from or additional to those available to
the Indemnifying Person; or (B) there exists a conflict of
interest between the Indemnifying Person and the Indemnified Person
that cannot be waived, the Indemnifying Person shall be liable for
the reasonable fees and expenses of counsel to the Indemnified
Person in each jurisdiction for which the Indemnified Person
determines counsel is required. If the Indemnifying Person elects
not to or is not entitled to defend such Third Party Claim, fails
to promptly notify the Indemnified Person in writing of its
election to defend as provided in this Agreement, or fails to
diligently prosecute the defense of such Third Party Claim, the
Indemnified Person may, subject to Section 10.5(c), pay,
compromise, defend such Third Party Claim and seek indemnification
for any and all Losses based upon, arising from or relating to such
Third Party Claim. The Transferors and Acquiror shall cooperate
with each other in all reasonable respects in connection with the
defense of any Third Party Claim.
(iii) Cooperation. With respect to
any Third Party Claim, both the Indemnified Person and the
Indemnifying Person, as the case may be, shall keep the other
Person fully informed of the status of such Third Party Claim and
any related Actions at all stages thereof where such Person is not
represented by its own counsel. The parties agree to provide
reasonable access to the other parties to such documents and
information as may be reasonably requested in connection with the
defense, negotiation or settlement of any such Third Party Claim;
provided, however, that the parties shall cooperate in such a
manner as to preserve in full (to the extent possible) the
confidentiality of all Confidential Information and the
attorney-client and work-product privileges of the other party. In
connection therewith, each party agrees that: (i) it will use
commercially reasonable efforts, in respect of any Third Party
Claim in which it has assumed or participated in the defense, to
avoid production of Confidential Information (consistent with
applicable Law and rules of procedure); and (ii) all
communications between any party and counsel responsible for or
participating in the defense of any Third Party Claim shall, to the
extent possible, be made so as to preserve any applicable
attorney-client or work-product privilege.
(iv) Settlement. The Indemnifying
Person shall not enter into settlement or compromise of any Third
Party Claim or permit a default or consent to entry of any judgment
or admit any liability with respect thereto, if it is not defending
such Third Party Claim. If the Indemnifying Person is defending
such Third Party Claim, it shall not enter into settlement or
compromise of any Third Party Claim or permit a default or consent
to entry of any judgment or admit any liability with respect
thereto without the prior written consent of the Indemnified Person
unless such settlement, compromise or judgment (A) does not involve
liability or the creation of a financial or other obligation on the
part of the Indemnified Person, does not involve any finding or
admission of any violation of Law or any violation of the rights of
any Person or the admission of wrongdoing and would not have any
adverse effect on other claims that may have been made against the
Indemnified Person, (B) does not involve any relief other than
monetary damages that are paid in full by the Indemnifying Person,
and (C) provides, for the complete, final and unconditional release
of each Indemnified Person and its Affiliates from all liabilities
and obligations in connection with such Third Party Claim and would
not otherwise adversely affect the Indemnified Person.
(b) Direct Claims. Any Action by an
Indemnified Person on account of a Loss which does not result from
a Third Party Claim (a “Direct Claim”) shall be
asserted by the Indemnified Person giving the Indemnifying Person
reasonably prompt written notice thereof, but in any event not
later than thirty (30) days after the Indemnified Person becomes
aware of such Direct Claim. The failure to give such prompt written
notice shall not, however, relieve the Indemnifying Person of its
indemnification obligations, except and only to the extent that the
Indemnifying Person forfeits rights or defenses by reason of such
failure. Such notice by the Indemnified Person shall describe the
Direct Claim in reasonable detail, shall include copies of all
material written evidence thereof and shall indicate the estimated
amount, if reasonably practicable, of the Loss that has been or may
be sustained by the Indemnified Person. The Indemnifying Person
shall have thirty (30) days after its receipt of such notice to
respond in writing to such Direct Claim. The Indemnified Person
shall allow the Indemnifying Person and its professional advisors
to investigate the matter or circumstance alleged to give rise to
the Direct Claim, and whether and to what extent any amount is
payable in respect of the Direct Claim and the Indemnified Person
shall assist the Indemnifying Person’s investigation by
giving such information and assistance (including access to the
Company’s premises and personnel and the right to examine and
copy any accounts, documents or records) as the Indemnifying Person
or any of its professional advisors may reasonably request. If the
Indemnifying Person does not so respond within such thirty (30) day
period, the Indemnifying Person shall be deemed to have rejected
such claim, in which case the Indemnified Person shall be free to
pursue such remedies as may be available to the Indemnified Person
on the terms and subject to the provisions of this
Agreement.
(c) Tax Claims. Notwithstanding any
other provision of this Agreement, the control of any claim,
assertion, event or proceeding in respect of Taxes of the Company
(including, but not limited to, any such claim in respect of a
breach of the representations and warranties in Section 5.22 hereof
or any breach or violation of or failure to fully perform any
covenant, agreement, undertaking or obligation in Article 8) shall be
governed exclusively by Article 8 hereof.
(a) All indemnification
owing by Acquiror to any Transferor Indemnitee hereunder, as
finally determined pursuant to this Article 10, shall be effected,
no later than five (5) Business Days after the final determination
thereof, (i) first, by the re-issuance by Parent of the Parent
Shares cancelled pursuant to Section 10.6(b) on or prior to
such payment having an aggregate value up to the amount of the
indemnification obligation and (ii) thereafter, by the transfer of
additional Parent Shares having an aggregate value equal to the
amount of the unsatisfied portion of such indemnification
obligation, in each case within five (5) Business Days after the
final determination thereof.
(b) All indemnification
owing by the Transferors to any Acquiror Indemnitee hereunder, as
finally determined pursuant to this Article 10, shall be effected,
no later than five (5) Business Days after the final determination
thereof, (i) first by Parent’s cancellation of that number of
Holdback Shares having an aggregate value up to the amount of the
indemnification obligation(s) in accordance with this Agreement and
(ii) thereafter, by Parent’s cancellation of up to that
number of Parent Shares having an aggregate value equal to the
amount of the unsatisfied portion of such indemnification
obligation, it being agreed and understood that upon such
determination, such Parent Shares shall be automatically cancelled,
without the need for any further action by Parent, Acquiror, the
Transferors or any other person. For the avoidance of doubt,
Acquiror may exercise its rights pursuant to this Section 10.6(b) on more than
one occasion to the extent applicable Losses are incurred, which
are not paid by the Transferors and which are determined to be
owing as provided above.
(c) For U.S. federal
and applicable state and local income Tax purposes, to the extent
permitted by applicable Law, Parent, Acquiror and the Transferors
agree (A) to treat the cancellation and/or re-issuance of Parent
Shares pursuant to Section
10.6(a) and Section
10.6(b) as an adjustment to the number of shares of Series F
Preferred Stock of Parent comprising the Parent Shares issued
hereunder and that, for the avoidance of doubt, the cancellation of
such Parent Shares relate back to the time of the issuance of such
Parent Shares, and (B) to report the transactions contemplated by
this Agreement consistently with the foregoing, including, without
limitation, the filing of any Tax returns.
(d) The Board of
Directors of Parent shall update the stock register of Parent to
reflect any such cancellation and/or re-issuance. To the extent any
Parent Shares must be cancelled pursuant to Section 10.6(b), each
Transferor shall promptly deliver the Closing Parent Share
Certificate (or any replacement stock certificate) to Parent, and
Parent shall cancel such stock certificate and deliver to such
Transferor a replacement stock certificate evidencing the Parent
Shares which remain after giving effect to such cancellation. To
the extent any previously cancelled Parent Shares must be re-issued
pursuant to Section
10.6(a), each Transferor shall promptly deliver the Closing
Parent Share Certificate (or any replacement stock certificate) to
Parent, and Parent shall cancel such stock certificate and deliver
to such Transferor a replacement stock certificate evidencing the
Parent Shares after giving effect to such re-issuance.
(e) For purposes of
this Section 10.6,
the value of the Parent Shares at the time of cancellation shall be
calculated as of the Closing.
(f) For purposes of
giving effect to the foregoing agreements regarding
indemnification, each Transferor agrees that, during the period
commencing on the Closing Date and ending on the first anniversary
thereof, such Transferor shall not, directly or indirectly,
transfer, assign, convey, sell, pledge, encumber or otherwise
dispose of any Parent Shares (other than as a result of the
cancellation thereof by Parent pursuant to Section
10.6(b)).
10.7 No Circular
Recovery
(a) . No Transferor may
seek indemnification under the Governing Documents from any Group
Company for any matter for which it has an indemnification
obligation hereunder.
10.8 Materiality. For purposes of
calculating the amount of Losses incurred by a party seeking
indemnification hereunder arising out of or resulting from any
breach of a representation, warranty covenant or agreement
contained herein, and for purposes of determining whether such a
breach has occurred, the representations, warranties, covenants and
agreements contained herein shall be deemed to have been made
without any qualifications as to “materiality”,
“Material Adverse Effect” or other similar
qualifications.
10.9 Tax Treatment of Indemnification
Payments. All
indemnification payments made under this Agreement shall be treated
for Tax purposes by the parties as an adjustment to the Purchase
Price, unless otherwise required by Law.
10.10 Effect of Investigation and
Waiver. Each party hereby
agrees that its representations, warranties and covenants (and any
related conditions to Closing) shall not be affected or deemed
waived by reason of the fact that any other party knew or should
have known that such representations, warranties and covenants is
or may be inaccurate or may have been breached, unless the other
party expressly agreed in a writing delivered prior to Closing to
waive such inaccuracy or breach.
10.11 Exclusive
Remedies. Subject to
Section 12.11, the
parties acknowledge and agree that their sole and exclusive remedy
with respect to any and all claims (other than claims arising from
fraud, intentional misrepresentation, criminal activity or willful
misconduct on the part of a party in connection with the
Transactions) for any breach of any representation, warranty,
covenant, agreement or obligation set forth herein shall be
pursuant to the indemnification provisions set forth in
Article 8 and this
Article 10. Nothing
in this Section
10.11 shall limit any Person’s right to seek and
obtain any equitable relief to which any Person shall be entitled
or to seek any remedy on account of any party’s fraud,
intentional misrepresentation, criminal activity or willful
misconduct.
10.12 No
Contribution. Anything to the
contrary herein notwithstanding, no Transferor shall have any right
to seek any indemnification or contribution from or remedy against
any Group Company whether arising prior to or after the Closing
Date in respect of any breach of any representation or warranty by
a Group Company or the failure of a Group Company to comply with
any covenant or agreement to be performed by such Group Company on
or prior to the Closing Date and each Transferor hereby waives any
such claim they may have against each Group Company with respect
thereto whether at law, in equity or otherwise.
10.13 Separate
Bases for Claim. If any party
hereto has breached any representation, warranty or covenant or
agreement contained herein in any respect, the fact that there
exists another representation, warranty or covenant relating to the
same subject matter (regardless of the relative levels of
specificity) which such party has not breached shall not detract
from or mitigate the fact that such party is in breach of the first
representation, warranty, covenant or agreement.
Termination
11.1 Termination. This Agreement
may be terminated at any time prior to the Closing:
(a) by the mutual
written consent of the Transferors’ Representative and
Acquiror;
(b) by Acquiror by
written notice to the Transferors’ Representative
if:
(i) neither Acquiror
nor Parent is then in material breach of any provision of this
Agreement and there has been a breach, inaccuracy in or failure to
perform any representation, warranty, covenant or agreement made by
a Transferor (including the Transferors’ Representative) or
the Company in this Agreement that would give rise to the failure
of any of the conditions specified in Article 9 and such breach,
inaccuracy or failure has not been cured within ten (10) days of
the Transferors’ Representative’s receipt of written
notice of such breach from Acquiror;
(ii) any of the
conditions set forth in Section 9.1 or Section 9.2 shall not have
been, or if it becomes apparent that any of such conditions will
not be, fulfilled by October 9, 2020 (the “Outside Date”) unless
such failure shall be due to the failure of Acquiror or Parent to
perform or comply with any of the covenants or agreements hereof to
be performed or complied with by it prior to the Closing;
or
(iii) as a result of
Acquiror’s due diligence examination of the Group Companies
or other matters which have come to the attention of Acquiror
(including, without limitation, any information disclosed in the
Disclosure Schedule or pursuant to Section 7.4), Acquiror has
concluded that material matters, facts or circumstances involving
the Group Companies or the Business exist which make it inadvisable
for the Acquiror to proceed with the Closing.
(c) by the
Transferors’ Representative by written notice to Acquiror
if:
(i) no Transferor
(including the Transferors’ Representative) nor any Group
Company is then in material breach of any provision of this
Agreement and there has been a breach, inaccuracy in or failure to
perform any representation, warranty, covenant or agreement made by
Acquiror or Parent in this Agreement that would give rise to the
failure of any of the conditions specified in Article 9 and such breach,
inaccuracy or failure has not been cured within ten (10) days of
Acquiror’s receipt of written notice of such breach from the
Transferors’ Representative; or
(d) by Acquiror or the
Transferors’ Representative in the event that (i) there
shall be any Law that makes consummation of the Transactions
illegal or otherwise prohibited or (ii) any Governmental
Authority shall have issued a Governmental Order restraining or
enjoining the Transactions, and such Governmental Order shall have
become final and non-appealable.
11.2 Effect of
Termination. In the event of
the termination of this Agreement in accordance with this
Article 11,
this Agreement shall forthwith become void and there shall be no
liability on the part of any party except:
(a) for this
Article 11 and
Section 7.10 and
Article 12, which
provisions shall survive the termination of this Agreement;
and
(b) that nothing herein
shall relieve any party from liability for any breach of any
provision hereof.
Miscellaneous
12.1 Expenses. Except as
otherwise expressly provided herein, all costs and expenses,
including, without limitation, fees and disbursements of counsel,
financial advisors and accountants, incurred in connection with
this Agreement and the Transactions shall be paid by the party
incurring such costs and expenses, whether or not the Closing shall
have occurred.
12.2 Notices. All notices,
requests, consents, claims, demands, waivers and other
communications hereunder shall be in writing and shall be deemed to
have been given (a) when delivered by hand (with written
confirmation of receipt); (b) when received by the addressee
if sent by a nationally recognized overnight courier (receipt
requested); (c) on the date sent by facsimile or e-mail of a
PDF document (with confirmation of transmission) if sent during
normal business hours of the recipient, and on the next Business
Day if sent after normal business hours of the recipient or
(d) on the third (3rd) day after the date
mailed, by certified or registered mail, return receipt requested,
postage prepaid. Such communications must be sent to the respective
parties at the following addresses (or at such other address for a
party as shall be specified in a notice given in accordance with
this Section
12.2):
If to
the Transferors, the Transferors’ Representative or the
Company (prior to the Closing):
|
289
East 89th
Street, 45th FloorNew York,
NYAttention: Andrew FoxEmail: a@charge.us
|
with a
copy (which shall not constitute notice) to:
|
The
Michael Barnas Law Firm, PLLC
10
Linden Road
Albany,
NY 12208
Attention:
Michael C. Barnas, Esq.
Email:
mbarnas@barnaslaw.com
|
If to
the Transferors or the Transferors’ Representative (after the
Closing):
|
289
East 89th
Street, 45th Floor
New
York, NY
Attention:
Andrew Fox
Email:
a@charge.us
|
with a
copy (which shall not constitute notice) to:
|
The
Michael Barnas Law Firm, PLLC
10
Linden Road
Albany,
NY 12208
Attention:
Michael C. Barnas, Esq.
Email:
mbarnas@barnaslaw.com
|
If to
Acquiror:
|
c/o
GoIP Global, Inc.
3419
West Gray Court
Tampa,
FL 33609
Attention:
Kenneth Orr
Email:
ko@korrag.com
|
with a
copy (which shall not constitute notice) to:
|
Sheppard
Mullin Richter & Hampton, LLP
30
Rockefeller Plaza, 38th Floor
New
York, New York 10112
Attention:
Richard Friedman, Esq. Stephen A. Cohen, Esq.
Facsimile:
(212) 653-8701
Email:
rafriedman@sheppardmullin.com scohen@sheppardmullin.com
|
If to
Parent:
|
c/o
GoIP Global, Inc.
3419
West Gray Court
Tampa,
FL 33609
Attention:
Kenneth Orr
Email:
ko@korrag.com
|
with a
copy (which shall not constitute notice) to:
|
Sheppard
Mullin Richter & Hampton, LLP
30
Rockefeller Plaza, 38th Floor
New
York, New York 10112
Attention:
Richard Friedman, Esq. Stephen A. Cohen, Esq.
Facsimile:
(212) 653-8701
Email:
rafriedman@sheppardmullin.com scohen@sheppardmullin.com
|
12.3 Construction. Unless the
express context otherwise requires: (a) the words
“hereof”, “herein”, and
“hereunder” and words of similar import, when used in
this Agreement, shall refer to this Agreement as a whole and not to
any particular provision of this Agreement; (b) the terms defined
in the singular have a comparable meaning when used in the plural,
and vice versa; (c) the terms “Dollars” and
“$” mean United States Dollars; (d) references herein
to a specific Article, Section, clause, Schedule or Exhibit shall
refer, respectively, to the Articles, Sections and clauses of, and
Schedules and Exhibits to, this Agreement; (e) wherever the word
“include,” “includes,” or
“including” is used in this Agreement, it shall be
deemed to be followed by the words “without
limitation”; (f) any reference to the masculine, feminine or
neuter gender shall include each other gender; (g) when reference
is made herein to “the business of” a Person, such
reference shall be deemed to include the business of all direct and
indirect Subsidiaries of such Person, (h) all accounting and
financial terms shall be deemed to have the meanings assigned
thereto under GAAP unless expressly stated otherwise, (i) when this
Agreement states that the Company has “made available,”
“delivered” or “provided” (or terms of
similar import) a particular document or other item, it shall mean
that the Company has made a true, correct and complete copy of such
document or item (together with all amendments, supplements or
other modifications thereto or waivers thereof) available for
viewing by Acquiror and its representatives (and properly labeled,
including both as to its location within the index to the
electronic dataroom for “Charge” run by Google Drive
(the “Dataroom”) and the
description of the file containing such document or information) in
the Dataroom, as such materials were posted to the Dataroom at
least three (3) Business Days prior to the date hereof and not
removed on or prior to the date hereof, and, if any such document
or information has not been continuously available to each of
Acquiror’s representatives who have access to the Dataroom
since the initial date such representatives were granted access, a
notification that such document or information was added to the
Dataroom has been sent to each representative of Acquiror who has
access to the Dataroom prior to the fifth (5th) Business Day
preceding the Closing Date, (j) any reference to any applicable Law
in this Agreement refers to such applicable Law as in effect at the
date of this Agreement and the Closing Date, (k) in the computation
of periods of time from a specified date to a later specified date,
the word “from” means “from and including”
and the words “to” and “until” each mean
“to but excluding” and if the last day of any such
period is not a Business Day, such period will end on the next
Business Day, (l) when calculating the period of time
“within” which or “following” which any act
or event is required or permitted to be done, notice given or steps
taken, the date which is the reference date in calculating such
period is to be excluded from the calculation and if the last day
of any such period is not a Business Day, such period will end on
the next Business Day, (m) the provision of a table of contents and
the insertion of headings are for convenience of reference only and
shall not affect or be utilized in construing or interpreting this
Agreement, (n) references to “day” means calendar days
unless Business Days are expressly specified, (o) references to any
Person includes such Person’s predecessors, successors and
assigns to the extent, in the case of successors and assigns, such
successors and assigns are permitted by the terms of any applicable
agreement, and reference to a Person in a particular capacity
excludes such Person in any other capacity or individually, (p)
references to a party means a party to this Agreement, (q)
references to a document, instrument, or agreement also refers to
all addenda, exhibits, or schedules thereto, (r) a reference to a
“copy” or “copies” of any document,
instrument, or agreement means a copy or copies that are complete
and correct; and (s) a reference to a list, or any like compilation
(whether in the Schedules to this Agreement or elsewhere), means
that the item referred to is complete and correct. All Exhibits and
Schedules annexed hereto or referred to herein are incorporated in
and made a part of this Agreement as if set forth in full herein.
The parties agree that they have been represented by counsel during
the negotiation and execution of this Agreement and, therefore,
waive the application of any applicable Law or rule of construction
providing that ambiguities in an agreement or other document will
be construed against the party or parties drafting such agreement
or document. Unless expressly provided otherwise, any approval or
consent required to be given by a party in this Agreement shall be
given or withheld by such party in its sole discretion. The fact
that any representation and warranty may be more specific than any
other representation and warranty shall not be construed so as to
limit or restrict the scope, applicability or meaning of any other
representation and warranty contained herein.
12.4 Severability.
If any term or provision of this Agreement is invalid, illegal or
unenforceable in any jurisdiction, such invalidity, illegality or
unenforceability shall not affect any other term or provision of
this Agreement or invalidate or render unenforceable such term or
provision in any other jurisdiction. Upon such determination that
any term or other provision is invalid, illegal or unenforceable,
the parties shall negotiate in good faith to modify this Agreement
so as to effect the original intent of the parties as closely as
possible in a mutually acceptable manner in order that the
Transactions be consummated as originally contemplated to the
greatest extent possible.
12.5 Entire
Agreement. This Agreement
and the Transaction Documents contain the entire understanding of
the parties with respect to the subject matter hereof and thereof
and supersede all prior and contemporaneous oral or written
agreements, negotiations, understandings, statements or proposals
with respect to the subject matter hereof and thereof. In the event
of any inconsistency between the statements in the body of this
Agreement and those in the other Transaction Documents and
Disclosure Schedule (other than an exception expressly set forth as
such in the Disclosure Schedule), the statements in the body of
this Agreement will control.
12.7 Successors and
Assigns. This Agreement
shall be binding upon and shall inure to the benefit of the parties
and their respective successors and permitted assigns. No party may
assign its rights or delegate any of its obligations hereunder
without the prior written consent of the other parties, which
consent shall not be unreasonably withheld or delayed; provided, that Acquiror shall
be entitled to assign or delegate this Agreement or all or any part
of its rights or obligations hereunder (a) to any one or more
Affiliates of Acquiror, provided further that such assignment shall
not relieve Acquiror of any of its obligations hereunder,
(b) in connection with the sale of all or any substantial
portion of the assets of Acquiror or one or more Affiliates of
Acquiror or (c) for collateral security purposes to any lender
providing financing to Acquiror. No assignment or delegation shall
relieve the assigning party of any of its obligations
hereunder.
12.8 No Third-Party
Beneficiaries. Except as
provided in Section
8.3 and Article
10, this Agreement is for the sole benefit of the parties
and their respective successors and permitted assigns and nothing
herein, express or implied, is intended to or shall confer upon any
other Person or entity any legal or equitable right, benefit or
remedy of any nature whatsoever under or by reason of this
Agreement.
12.9 Amendment and Modification;
Waiver. This Agreement
may only be amended, modified or supplemented by an agreement in
writing signed by the Acquiror and Transferors’
Representative. No waiver by any party of any of the provisions
hereof shall be effective unless explicitly set forth in writing
and signed by the party so waiving (provided that any right of the
Transferors may be waived by the Transferors’ Representative
on behalf of the Transferors). No waiver by any party shall operate
or be construed as a waiver in respect of any failure, breach or
default not expressly identified by such written waiver, whether of
a similar or different character, and whether occurring before or
after that waiver. No failure to exercise, or delay in exercising,
any right, remedy, power or privilege arising from this Agreement
shall operate or be construed as a waiver thereof; nor shall any
single or partial exercise of any right, remedy, power or privilege
hereunder preclude any other or further exercise thereof or the
exercise of any other right, remedy, power or
privilege.
12.10 Governing
Law. This Agreement
and the Transaction Documents shall be governed by and construed in
accordance with the internal Laws of the State of New York without
reference to such state’s or any other jurisdiction’s
principles of conflicts of law.
12.11 Forum Selection; Consent to
Jurisdiction; Waiver of Jury Trial.
(a) Any Action against
Parent, Acquiror, the Group Companies, or any Transferor (including
the Transferors’ Representative) arising out of, or with
respect to, this Agreement or any Governmental Order entered by any
court in respect thereof shall be brought exclusively in the state
or federal courts located in the State of New York (the
“Designated
Courts”), and such parties accept the exclusive
jurisdiction of the Designated Courts for the purpose of any such
Action. Each of Parent, Acquiror, the Company and the Transferors
(including the Transferors’ Representative) agrees that
service of any process, summons, notice or document by U.S.
registered mail addressed to such party in accordance with the
addresses set forth in Section 12.2 shall be
effective service of process for any Action brought against such
party in any such court. Each of Parent and Acquiror hereby
designates the individual listed in Section 12.2 to whom
notice may be given on behalf of Acquiror or Parent, as applicable,
as its true and lawful agent upon whom may be served any lawful
process in any Action instituted by or on behalf of the Company
(before the Closing) or the Transferors. The Transferors and the
Company (before the Closing) hereby designate the
Transferors’ Representative as their true and lawful agent
upon whom may be served any lawful process in any Action instituted
by or on behalf of Acquiror or Parent.
(b) In addition, each
of Parent, Acquiror, the Company and the Transferors (including the
Transferors’ Representative) hereby irrevocably waives, to
the fullest extent permitted by Law, any objection which it may now
or hereafter have to the laying of venue of any Action arising out
of or relating to this Agreement in any Designated Court or any
Governmental Order entered by any of the Designated Courts and
hereby further irrevocably waives any claim that any Action brought
in the Designated Courts has been brought in an inconvenient
forum.
(c) EACH OF PARENT,
ACQUIROR, THE COMPANY AND THE TRANSFERORS (INCLUDING THE
TRANSFERORS’ REPRESENTATIVE) ACKNOWLEDGES AND AGREES THAT ANY
CONTROVERSY THAT MAY ARISE OUT OF, OR WITH RESPECT TO, THIS
AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES,
AND THEREFORE EACH SUCH PARTY HEREBY IRREVOCABLY AND
UNCONDITIONALLY WAIVES TO THE FULLEST EXTENT PERMITTED BY LAW ANY
RIGHT SUCH PARTY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY
ACTION DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS
AGREEMENT OR THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT. EACH
PARTY CERTIFIES AND ACKNOWLEDGES THAT (I) NO REPRESENTATIVE, AGENT
OR ATTORNEY OR ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR
OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF
LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER, (II) EACH PARTY
UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF THIS WAIVER,
(III) EACH PARTY MAKES THIS WAIVER VOLUNTARILY AND (IV) EACH PARTY
HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER
THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS OF THIS SECTION 12.11. ANY PARTY
MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS AGREEMENT WITH
ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE PARTIES TO THE
WAIVER OF THEIR RIGHT TO TRIAL BY JURY.
12.12 Specific
Performance. The parties agree
that irreparable damage would occur if any provision of this
Agreement were not performed in accordance with the terms hereof
and that the parties shall be entitled to specific performance of
the terms hereof, in addition to any other remedy to which they are
entitled at law or in equity.
12.13 Counterparts;
Effectiveness. This Agreement
may be executed in several counterparts (including counterparts by
email, facsimile, portable document format (pdf) or any electronic
signature complying with the U.S. federal ESIGN Act of 2000
(including DocuSign)), each of which shall be deemed an original
and all of which shall together constitute one and the same
instrument. This Agreement shall become effective when each party
shall have received a counterpart hereof signed by all of the other
parties. Until and unless each party has received a counterpart
hereof signed by the other Parties, this Agreement shall have no
effect and no party shall have any right or obligation hereunder
(whether by virtue of any other oral or written agreement or other
communication).
[SIGNATURE
PAGE FOLLOWS]
IN
WITNESS WHEREOF, each party has duly executed and delivered this
Agreement as of the date first above written.
|
“PARENT”
GOIP
GLOBAL, INC.
By: __________________________
Name:
Title:
|
|
“ACQUIROR”
TRANSWORLD
ENTERPRISES, INC.
By:
Name:
Title:
|
IN
WITNESS WHEREOF, each party has duly executed and delivered this
Agreement as of the date first above written.
|
“COMPANY”
GETCHARGED,
INC.
By: ________________________
Name:
Title:
|
|
“TRANSFERORS’
REPRESENTATIVE”
_____________________________
ANDREW FOX
|
IN
WITNESS WHEREOF, each party has duly executed and delivered this
Agreement as of the date first above written.
|
“TRANSFERORS”
[_______________________]
By:__________________________
Name:
Title:
|
ANNEX A
DEFINITIONS
In this
Annex, and in the Agreement and the other Appendices and Schedules
thereto, unless the context otherwise requires, the following terms
shall have the meanings assigned below and the terms listed in the
chart below shall have the meanings assigned to them in the Section
set forth opposite to such term (unless otherwise specified,
section references in this Annex are to Sections of this
Agreement):
Term:
|
Section:
|
Accounting
Referee
|
8.1(d)
|
Acquiror
|
Preamble
|
Acquiror
Indemnitees
|
10.2
|
Acquisition
Proposal
|
7.3(a)
|
Agreement
|
Preamble
|
Basket
|
10.4(a)
|
Benefit
Plan
|
5.21(a)
|
Cap
|
10.4(a)
|
Closing
|
2.1
|
Closing
Date
|
2.1
|
Closing
Statement
|
3.3(a)
|
Company
|
Preamble
|
Company
Intellectual
Property
|
5.13(a)(i)
|
Company
IP
Agreements
|
5.13(a)(ii)
|
Company
IP
Registrations
|
5.13(a)(iii)
|
Data
Handling
|
5.28(a)
|
Direct
Claim
|
10.5(b)
|
Environmental
Claim
|
5.20(a)(i)
|
Environmental
Law
|
5.20(a)(ii)
|
Environmental
Notice
|
5.20(a)(iii)
|
Environmental
Permit
|
5.20(a)(iv)
|
ERISA
|
5.21(a)
|
ERISA
Affiliate
|
5.21(a)
|
Export
Control
Laws
|
5.24(a)
|
Financial
Statements
|
5.6(a)
|
General
Survival
Period
|
10.1
|
Hazardous
Materials
|
5.20(a)(v)
|
Indemnified
Person
|
10.5
|
Indemnifying
Person
|
10.5
|
Insurance
Policies
|
5.17
|
Intellectual
Property
|
5.13(a)(iv)
|
Interim
Balance
Sheet
|
5.6(a)
|
Interim
Balance Sheet
Date
|
5.6(a)
|
Interim
Financial
Statements
|
5.6(a)
|
Term:
|
Section:
|
Leased
Real
Property
|
5.10(b)
|
Material
Contracts
|
5.9(a)
|
Material
Customers
|
5.16(a)
|
Material
Suppliers
|
5.16(c)
|
Non-Disclosure
Agreement
|
12.6
|
Personal
Property
|
5.11
|
Post-Closing
Tax
Period
|
8.1(a)
|
Purchase
Price
|
1.2
|
Qualified
Benefit
Plan
|
5.21(c)
|
Real
Property
|
7.2
|
Release
|
5.20(a)(vi)
|
Restricted
Territory
|
7.6(a)(i)
|
Securities
Act
|
4.7(a)
|
Sensitive
Data
|
5.28(a)
|
Shares
|
Recitals
|
Software
|
5.13(a)(v)
|
Solvent
|
5.6(f)
|
Straddle
Period
|
8.4
|
Tax
Claim
|
8.5
|
Third
Party
Claim
|
10.5(a)
|
Transferor
Indemnitees
|
10.3
|
Transferors
|
Preamble
|
Union
|
5.22(b)
|
WARN
Act
|
5.22(d)
|
Year-End
Balance
Sheet
|
5.6(a)
|
Year-End
Balance Sheet
Date
|
5.6(a)
|
Year-End
Financial
Statements
|
5.6(a)
|
“Action” means any
governmental, judicial, administrative or adversarial proceeding
(public or private), any action, complaint, claim, lawsuit, legal
proceeding, whistleblower complaint, litigation, arbitration or
mediation, any hearing, investigation (internal or otherwise),
audit, probe or inquiry by any Governmental Authority or any other
dispute, including any adversarial proceeding arising out of this
Agreement.
“Affiliate” means, with
respect to any Person, any other Person who, directly or
indirectly, through one or more intermediaries, controls, is
controlled by, or is under common control with, such Person. The
term “control” (including, with correlative meanings,
the terms “under common control with” and
“controlled by”), as used in the preceding sentence,
means the possession, directly or indirectly, of the power to
direct or cause the direction of the management and policies of a
Person, whether through the ownership of voting securities, by
contract or otherwise.
“Business” means the
business presently conducted by the Group Companies, including
charging of electric vehicles and devices.
“Business Day” means
any day except Saturday, Sunday or any other day on which
commercial banks located in the State of New York are authorized or
required by Law to be closed for business.
“Parent Shares” shall mean
shares of Series F Preferred Stock of Parent, par value $0.001 per
share.
“Code” means the
Internal Revenue Code of 1986, as amended.
“Contracts” means
all contracts, purchase orders, leases, deeds, mortgages, licenses,
instruments, notes, undertakings, indentures, joint ventures and
all other agreements, commitments and arrangements, whether written
or oral.
“Disclosure Schedule”
means that certain document identified as the Disclosure Schedule,
dated as of the date hereof (as the same may be modified from time
to time in accordance with the terms hereof), delivered by the
Company and the Transferors to Acquiror in connection with this
Agreement. Each Section in the Disclosure Schedule shall be deemed
to qualify only (i) the corresponding Section of this Agreement,
(ii) any other Section of this Agreement to which such disclosure
makes express reference or (iii) any other Section of this
Agreement to the extent the relevance of the information disclosed
in such Section in the Disclosure Schedule to such other Section is
readily apparent on its face. Notwithstanding anything to the
contrary contained herein, no disclosure in the Disclosure Schedule
shall be deemed adequate to disclose an exception to a
representation or warranty made by any party unless the disclosure
identifies the exception with reasonable particularity and
describes the relevant facts in reasonable detail. Without limiting
the generality of the foregoing, the mere listing (or inclusion of
a copy) of a document or other item in the Disclosure Schedule
shall not be deemed adequate to disclose an exception to a
representation or warranty made herein (unless the representation
or warranty has to do with the existence of the document or other
item itself).
“Encumbrance” means
any charge, claim, community property interest, pledge, condition,
equitable interest, lien (statutory or other), option, security
interest, mortgage, easement, encroachment, right of way, right of
first refusal, or restriction of any kind, including any
restriction on use, voting, transfer, receipt of income or exercise
of any other attribute of ownership. For purposes of this
Agreement, a Person will be deemed to own a property or asset
subject to an Encumbrance if it holds such property or asset
subject to the interest of a vendor or a lessor under any
conditional sale agreement, capital lease, or other title retention
agreement (or any financing lease having substantially the same
economic effect as any of the foregoing) relating to such property
or asset.
“Family” means, with
respect to a particular individual, (a) the individual, (b) the
individual’s spouse and former spouse(s), (c) any other
natural person who is related to the individual or the
individual’s spouse within the second degree, and (d) any
other natural person who resides with such individual.
“GAAP” means United
States generally accepted accounting principles in effect from time
to time.
“Governing Documents”
means with respect to any Person: (a) if a corporation, the
articles or certificate of incorporation and the bylaws; (b) if a
general partnership, the partnership agreement and any statement of
partnership; (c) if a limited partnership, the limited partnership
agreement and the certificate of limited partnership; (d) if a
limited liability company, the articles of organization and
operating agreement; (e) if a trust, the instrument governing the
trust, (f) if another type of Person, any other charter or similar
document adopted or filed in connection with the creation,
formation or organization of the Person; (g) all
equityholders’ agreements, voting agreements, voting trust
agreements, joint venture agreements, registration rights
agreements or other agreements or documents relating to the
organization, management or operation of any Person or relating to
the rights, duties and obligations of the equityholders of any
Person; and (h) any amendment or supplement to any of the
foregoing.
“Governmental
Authority” means any federal, state, local or
foreign government or political subdivision thereof, or any agency
or instrumentality of such government or political subdivision, or
any self-regulated organization or other non-governmental
regulatory authority or quasi-governmental authority (to the extent
that the rules, regulations or orders of such organization or
authority have the force of Law), or any arbitrator, court or
tribunal of competent jurisdiction.
“Governmental
Order” means any order, writ, judgment,
injunction, decree, stipulation, determination or award entered by
or with any Governmental Authority.
“Group Companies” means,
collectively, the Company and each of its
Subsidiaries.
“Indebtedness” means the
following obligations: (a) all indebtedness or other obligations of
the Group Companies for borrowed money, whether current, short-term
or long-term, secured or unsecured, including all notes
(convertible or otherwise) or similar instruments, overdrafts and
negative cash balances; (b) all indebtedness of the Group Companies
for the deferred purchase price for purchases of property or
services with respect to which any Group Company is liable,
contingently or otherwise, as obligor or otherwise (whether
earn-outs, indemnity payments, non-compete payments, consulting
payments, retention bonuses, severance payments or other similar
payments, or otherwise; in each case whether contingent or not and
valued at the maximum amount thereof) except any trade payable
incurred in the Ordinary Course of Business that is treated (in its
entirety) as a current account payable under GAAP; (c) all lease
obligations of the Group Companies under leases that have been or
should be capitalized in accordance with GAAP; (d) the aggregate
face amount of all outstanding letters of credit issued on behalf
of the Group Companies; (e) all obligations of the Group Companies
arising under acceptance facilities; (f) all guaranties,
endorsements and other contingent obligations of the Group
Companies to purchase, to provide funds for payment, to supply
funds to invest in any other Person, or otherwise to assure a
creditor against loss; (g) all obligations of the Group Companies
under any interest rate protection, foreign currency exchange, or
other interest or exchange rate swap or hedging agreement or
arrangement, or other derivative product; (h) all obligations
secured by an Encumbrance upon any assets or properties of the
Group Companies; (i) all outstanding or held checks, money orders
or similar instruments of the Group Companies as of the Closing;
(j) all Liabilities of the Group Companies pursuant to any phantom
equity plan or Liabilities with respect stock appreciation or
similar rights or arising from non-qualified deferred compensation
arrangements, plans or policies or other forms of deferred
compensation arrangements; (k) any other Liabilities, contingent or
otherwise, that, in accordance with GAAP, should be classified upon
the balance sheet of the Group Companies as indebtedness; (l) all
“withdrawal liability” of any Group Company to a
“multiemployer plan” as such terms are defined under
ERISA, (m) all indebtedness referred to in clauses (a) through (l)
above of any Person other than a Group Company that is guaranteed
by any Group Company; (n) declared but unpaid distributions; and
(o) accrued and unpaid interest on, and prepayment premiums,
penalties or similar contractual charges arising as a result of the
discharge of, any such foregoing obligation.
“Knowledge of the
Company” or “Company’s
Knowledge” or any other similar knowledge
qualification, means the knowledge of any of the following persons:
Andrew Fox and Daniel Waldman. Any such person shall be deemed to
have “knowledge” of a particular fact or other matter
if such person (a) is actually aware of such fact or other matter
or (b) would reasonably be expected to discover or otherwise become
aware of such fact or other matter in the course of conducting a
comprehensive investigation concerning the existence of such fact
or other matter, including by making due inquiry of the applicable
personnel who report directly to that listed
individual.
“Law” means (a) any
federal, state, local, municipal, foreign, international,
multinational or other administrative law, constitution, common law
principle, ordinance, code, statute, judgment, injunction, decree,
order, rule, statute or governmental regulation, or “fair
price,” “moratorium,” “control share
acquisition” or other similar anti-takeover statute or
regulation, (b) any binding judicial or administrative
interpretation of any of the foregoing, (c) the terms and
conditions of any agreement relating to any Group Company with a
Governmental Authority, (d) the terms and conditions of any
certification relating to any Group Company to any Governmental
Authority, (e) any governmental requirements or restrictions
of any kind, or any rule, regulation or order promulgated
thereunder, (f) any rules, regulations, orders, decrees,
consents, or judgments of any regulatory agency, stock exchange or
similar self-regulatory organization, court or other Person, or
(g) any applicable requirements associated with any
Permits.
“Liability” means, with
respect to any Person, any liability or obligation of such Person
of any kind, character or description, whether known or unknown,
absolute or contingent, secured or unsecured, joint or several, due
or to become due, vested or unvested, executory, determined,
determinable or otherwise and whether or not the same is required
to be accrued on the financial statements of such
Person.
“Losses” mean any
and all claims, damages, decline in value, judgements, Liabilities,
losses (including, without limitation, punitive, exemplary,
consequential or indirect damages and liabilities of any kind),
lost profits, penalties, settlement payments, arbitration awards,
taxes and costs and expenses (including, without limitation,
reasonable attorneys’, consultants’ and experts’
fees and expenses and other costs of defending, investigating or
settling claims or enforcing rights to indemnification hereunder)
and the cost of pursuing any insurance providers in each case
whether or not arising out of Third Party Claims; provided, however, that
“Losses” shall not include punitive or exemplary
damages, except in the case of fraud or to the extent actually
awarded to a Governmental Authority or other third
party.
“Material Adverse
Effect” means any development, event, occurrence,
fact, condition or change that is, or could reasonably be expected
to become, individually or in the aggregate, materially adverse to
(a) the business, results of operations, condition (financial
or otherwise), assets or prospects of the Group Companies, taken as
a whole, or (b) the ability of any Transferor or the Company
to consummate the Transactions on a timely basis; provided, however, that “Material Adverse
Effect” shall not include any event, occurrence, fact,
condition or change, directly or indirectly, arising out of or
attributable to: (i) general economic or political conditions;
(ii) conditions generally affecting the industries in which
the Group Companies operate; (iii) any changes in financial or
securities markets in general; or (iv) acts of war (whether or
not declared), armed hostilities or terrorism, or the escalation or
worsening thereof; provided further, however, that any event,
occurrence, fact, condition or change referred to in clauses
(i) through (iv) immediately above shall be taken into
account in determining whether a Material Adverse Effect has
occurred or could reasonably be expected to occur to the extent
that such event, occurrence, fact, condition or change has a
disproportionate effect on the Group Companies compared to other
participants in the industries in which the Group Companies
operate.
“Ordinary Course of
Business” of a Person means an action taken by such
Person if that action (a) is consistent in nature, scope and
magnitude with the past practices of such Person and is taken in
the ordinary course of the normal, day-to-day operations of such
Person; (b) does not require authorization by the board of
directors or stockholders of such Person (or by any Person or group
of Persons exercising similar authority) and does not require any
other separate or special authorization of any nature; and (c) is
similar in nature, scope and magnitude to actions customarily
taken, without any separate or special authorization, in the
ordinary course of the normal, day-to-day operations of other
Persons that are in the same line of business as such Person. No
violation of Law or Contracts shall be deemed in the Ordinary
Course of Business.
“Permits” means all
permits, certificates, licenses, approvals, governmental
notifications, franchises, certificates, approvals, exemptions,
classifications, registrations and other similar authorizations
(and applications therefor) from Governmental
Authorities.
“Permitted Encumbrances”
means (a) liens for Taxes not yet due and payable or being
contested in good faith by appropriate procedures and for which
there are adequate accruals or reserves on the Interim Balance
Sheet; (b) mechanics, carriers’, workmen’s,
repairmen’s or other like liens arising or incurred in the
Ordinary Course of Business and that are not delinquent and which
are not, individually or in the aggregate, material to the business
of the Group Companies; and (c) easements, rights of way,
zoning ordinances and other similar encumbrances affecting Real
Property which are not, individually or in the aggregate, material
to the business of the Group Companies.
“Person” means an
individual, corporation, partnership, joint venture, limited
liability company, Governmental Authority, unincorporated
organization, trust, association or other entity.
“Pro Rata Share” means,
with respect to a Transferor, the percentage set forth on
Exhibit A next to
such Transferor’s name under the heading “Pro Rata
Share”.
“Related Person” means (a)
with respect to an entity, (i) any Affiliate of such entity, (ii)
each Person that serves as a director, officer, partner, member,
manager, executor, or trustee (or in a similar capacity) of such
entity, (iii) any Person with respect to which such entity serves
as a general partner or a trustee (or in a similar capacity), and
(iv) any Person that would be a Related Person of any individual
described in clause (i) or (ii) pursuant to clause (b) of this
definition or (b) with respect to an individual, (i) each other
member of such individual’s Family, and (ii) any entity with
respect to which such individual or one or more members of such
individual’s Family serves as a director, officer, partner,
member, manager, executor, or trustee (or in a similar
capacity).
“Representative” means,
with respect to any Person, any and all directors, officers,
employees, consultants, financial advisors, counsel, accountants
and other agents of such Person.
“Subsidiary” means, with
respect to any Person, any other Person of which (a) the
accounts of which would be consolidated with and into those of the
applicable Person in such Person’s consolidated financial
statements if such statements were prepared in accordance with GAAP
as of such date, (b) if a corporation, a majority of the total
voting power of shares of capital stock entitled (without regard to
the occurrence of any contingency) to vote in the election of
directors, managers or trustees thereof is at the time owned or
controlled, directly or indirectly, by that Person or one or more
of the other Subsidiaries of that Person or a combination thereof,
or (c) if a limited liability company, partnership,
association or other business entity (other than a corporation), a
majority of membership, partnership or other similar ownership
interest thereof is at the time owned or controlled, directly or
indirectly, by that Person or one or more other Subsidiaries of
that Person or a combination thereof and, for this purpose, a
Person or Persons owns a majority ownership interest in such a
business entity (other than a corporation) if such Person or
Persons shall be allocated a majority of such business
entity’s gains or losses or shall be or control any managing
director or general partner of such business entity (other than a
corporation).
“Tax Return” means
any return, declaration, report, claim for refund, information
return or statement or other document relating to Taxes, including
any schedule or attachment thereto, and including any amendment
thereof.
“Taxes” means all
federal, state, local, foreign and other income, gross receipts,
sales, use, production, ad valorem, transfer, franchise,
registration, profits, license, lease, service, service use,
withholding, payroll, employment, unemployment, estimated, excise,
severance, environmental, stamp, occupation, premium, property
(real or personal), real property gains, windfall profits, customs,
duties or other taxes, fees, assessments or charges of any kind
whatsoever, together with any interest, additions or penalties with
respect thereto and any interest in respect of such additions or
penalties.
“Transaction Documents”
means, with respect to a party, all agreements, certificates and
other instruments to be delivered by such party in connection with
this Agreement.
“Transactions” means the
transactions contemplated by this Agreement and the Transaction
Documents.
FIRST AMENDMENT
TO
STOCK ACQUISITION AGREEMENT
_____________________
This
FIRST AMENDMENT TO STOCK ACQUISITION AGREEMENT (this
“Amendment”), effective as
of October 9, 2020, is by and between TRANSWORLD ENTERPRISES, INC.,
a Delaware corporation (“Acquiror”) and Andrew
Fox, in his capacity as the Transferors’ Representative (the
“Transferors’
Representative”) under that certain Stock Acquisition
Agreement dated as of September 25, 2020, by and among GoIP Global,
Inc., Transworld Enterprises, Inc., GetCharged, Inc., the
Transferors signatory thereto, and Andrew Fox, as the
Transferors’ Representative (the “Acquisition Agreement”).
Acquiror and Transferors’ Representative are sometimes
referred to herein as a “Party” or, collectively,
as the “Parties”. Capitalized
terms used but not otherwise defined herein have the meanings
ascribed to them in the Acquisition Agreement.
WHEREAS, the
Parties are party to the Acquisition Agreement;
WHEREAS, the
Parties desire to amend the Acquisition Agreement as set forth
below; and
WHEREAS, Section
12.9 of the Acquisition Agreement provides that the Acquisition
Agreement may not be amended, supplemented or otherwise modified
except by an agreement in writing signed by the Acquiror and
Transferors’ Representative.
NOW,
THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements set forth herein and for good and valuable
consideration, the receipt and sufficiency of which is hereby
acknowledged, and intending to be legally bound hereby, the Parties
do hereby agree as follows:
ARTICLE I
AMENDMENT TO ACQUISITION AGREEMENT
Section
1.1
The first sentence of Section 2.4 of the Acquisition Agreement is
hereby amended and restated in its entirety to read as
follows:
“Acquiror and Parent Closing
Deliverables. At the Closing or
as soon as practicable thereafter, Acquiror (or Parent, in the case
of clause (c) below) shall deliver the
following:”
Section
1.2
Section 2.5 of the Acquisition Agreement is hereby amended and
restated in its entirety to read as follows:
“2.5
Manner of Payment.
The Purchase Price shall be paid to the Transferors as follows:
Parent shall issue to each Transferor a stock certificate
evidencing such Transferor’s Pro Rata Share of the number of
Parent Shares equal to the Purchase Price minus the Holdback Shares
(each, a “Closing
Parent Share Certificate”) and deliver a Closing
Parent Share Certificate to each Transferor at or as soon as
practicable following the Closing. The Closing Parent Share
Certificates shall be returned by the Transferors to Parent from
time to time to reflect any cancellation and/or re-issue of Parent
Shares pursuant to Section
10.6. The Parties agree that the aggregate number of Parent
Shares equal to the Purchase Price shall be 60,000,000 Parent
Shares.”
Section
1.3
Section 10.6(c) of the Acquisition Agreement is hereby amended and
restated in its entirety to read as follows:
“(c)
For U.S. federal
and applicable state and local income Tax purposes, to the extent
permitted by applicable Law, Parent, Acquiror and the Transferors
agree (A) to treat the cancellation and/or re-issuance of Parent
Shares pursuant to Section
10.6(a) and Section
10.6(b) as an adjustment to the number of shares of common
stock of Parent comprising the Parent Shares issued hereunder and
that, for the avoidance of doubt, the cancellation of such Parent
Shares relate back to the time of the issuance of such Parent
Shares, and (B) to report the transactions contemplated by this
Agreement consistently with the foregoing, including, without
limitation, the filing of any Tax returns.”
Section
1.4 The definition of “Parent Shares” in Annex A
of the Acquisition Agreement is hereby amended and restated in its
entirety to read as follows:
““Parent
Shares” shall mean shares of common stock of Parent,
par value $0.0001 per share.”
Section
1.5 Exhibit A to the Acquisition Agreement is hereby amended
and restated in its entirety to read as set forth in Exhibit A hereto.
Section
1.6 The Parties further acknowledge and agree that the
Parties are entering into that certain letter agreement attached
hereto as Exhibit
B, which letter agreement shall supplement, and in no way
limit, the indemnification obligations set forth in the Acquisition
Agreement.
ARTICLE II
MISCELLANEOUS
Section
2.1 No Further Amendment. Except as
expressly amended hereby, the Acquisition Agreement is in all
respects ratified and confirmed and all the terms, conditions, and
provisions thereof shall remain in full force and effect. This
Amendment is limited precisely as written and shall not be deemed
to be an amendment to any other term or condition of the
Acquisition Agreement or any of the documents referred to therein.
The provisions of Article 12 of the Acquisition Agreement shall
apply to this Amendment mutatis mutandis.
Section
2.2 Effect of Amendment. This
Amendment shall form a part of the Acquisition Agreement for all
purposes, and each party thereto and hereto shall be bound hereby.
From and after the execution of this Amendment by the Parties, any
reference to the Acquisition Agreement shall be deemed a reference
to the Acquisition Agreement as amended hereby.
[Signature
Page Follows]
IN
WITNESS WHEREOF, this Amendment has been duly executed and
delivered by each Party hereto as of the date first above
written.
ACQUIROR:
TRANSWORLD ENTERPRISES, INC.
By:
Name:
Title:
Date:
October 12, 2020
|
TRANSFERORS’ REPRESENTATIVE:
ANDREW
FOX
Date:
October 12, 2020
|
[Signature
Page to First Amendment to Stock Acquisition
Agreement]
Exhibit A
See
attached.
Exhibit B
See
attached.
STOCK PURCHASE AGREEMENT
by and between
GOIP GLOBAL, INC.,
ICS GROUP HOLDINGS INC.,
SOLELY FOR THE PURPOSE OF ARTICLE 8 AND ARTICLE 10,
HC2
HOLDINGS INC.
and
PTGI INTERNATIONAL CARRIER SERVICES INC.
DATED AS OF OCTOBER 2, 2020
.
TABLE OF CONTENTS
Page
ARTICLE
1 Purchase and sale
|
1
|
1.1
|
Purchase
and Sale
|
1
|
1.2
|
Purchase
Price
|
1
|
ARTICLE
2 Closing
|
1
|
2.1
|
Closing
|
1
|
2.2
|
Shareholder
Closing Deliverables
|
2
|
2.3
|
Company
Closing Deliverables
|
2
|
2.4
|
Buyer
Closing Deliverables
|
3
|
2.5
|
Manner
of Payment
|
4
|
2.6
|
Withholding
|
4
|
ARTICLE
3 Payment Adjustments
|
4
|
3.1
|
Definitions
|
4
|
3.2
|
Net
Estimated Adjustment Amount
|
6
|
3.3
|
Post-Closing
Adjustment
|
6
|
ARTICLE
4 Representations and warranties of the shareholder
|
9
|
4.1
|
Organization
|
10
|
4.2
|
Authority
and Enforceability
|
10
|
4.3
|
Title
to Shares
|
10
|
4.4
|
No
Conflict
|
10
|
4.5
|
Legal
Proceedings
|
11
|
4.6
|
United
States Person
|
11
|
4.7
|
Pre-Closing
Reorganization
|
11
|
ARTICLE
5 Representations and warranties of the company
|
11
|
5.1
|
Organization
and Qualification of the Company
|
11
|
5.2
|
Authority;
Board Approval
|
11
|
5.3
|
No
Conflicts; Consents
|
12
|
5.4
|
Capitalization
|
12
|
5.5
|
Subsidiaries;
Joint Ventures
|
12
|
5.6
|
Legal
Proceedings; Governmental Orders
|
13
|
5.7
|
Permits
|
14
|
5.8
|
Transactions
with Related Persons
|
15
|
5.9
|
Brokers
|
15
|
ARTICLE
6 Representations and warranties of buyer
|
15
|
6.1
|
Organization
and Authority of Buyer
|
15
|
6.2
|
No
Conflicts; Consents
|
16
|
6.3
|
Investment
Purpose
|
16
|
6.4
|
Legal
Proceedings
|
16
|
6.5
|
Brokers
|
16
|
ARTICLE
7 Covenants
|
16
|
7.1
|
Conduct
of Business Prior to the Closing
|
16
|
7.2
|
Access
to Information
|
17
|
7.3
|
No
Solicitation of Other Bids
|
19
|
7.4
|
Notice
of Certain Events
|
20
|
7.5
|
Confidentiality
|
20
|
7.6
|
Non-competition;
Non-solicitation
|
21
|
7.7
|
Approvals
and Consents
|
22
|
7.8
|
Release
|
23
|
7.9
|
Closing
Conditions
|
24
|
7.1
|
Publicity;
Transaction Disclosure
|
24
|
7.11
|
Benefit
Plans
|
25
|
7.12
|
Litigation
Support
|
25
|
7.13
|
280G
|
25
|
7.14
|
Company
Covenants
|
26
|
7.15
|
Customer
and other Business Relationships
|
26
|
7.16
|
Insurance;
Risk of Loss
|
26
|
7.17
|
Internal
Control over Financial Reporting
|
26
|
7.18
|
Financial
Reporting Cooperation
|
27
|
7.19
|
Further
Assurances
|
27
|
ARTICLE
8 Tax matters
|
27
|
8.1
|
Tax
Covenants
|
27
|
8.2
|
Termination
of Existing Tax Sharing Agreements
|
29
|
8.3
|
Tax
Indemnification
|
29
|
8.4
|
Straddle
Period
|
29
|
8.5
|
Contests
|
30
|
8.6
|
Cooperation
and Exchange of Information
|
30
|
8.7
|
Tax
Treatment of Indemnification Payments
|
30
|
8.8
|
Survival
|
30
|
8.9
|
Overlap
|
30
|
ARTICLE
9 Conditions to closing
|
31
|
9.1
|
Conditions
to Obligations of All Parties
|
31
|
9.2
|
Conditions
to Obligations of Buyer
|
31
|
9.3
|
Conditions
to Obligations of the Company and the Shareholder
|
32
|
ARTICLE
10 Indemnification
|
33
|
10.1
|
Survival
|
33
|
10.2
|
Indemnification
By The Shareholder
|
33
|
10.3
|
Indemnification
By Buyer
|
34
|
10.4
|
Certain
Limitations
|
35
|
10.5
|
Indemnification
Procedures
|
35
|
10.6
|
Manner
of Payments
|
38
|
10.7
|
No
Circular Recovery
|
38
|
10.8
|
Materiality
|
38
|
10.9
|
Tax
Treatment of Indemnification Payments
|
39
|
10.1
|
Exclusive
Remedies
|
39
|
10.11
|
No
Contribution
|
39
|
10.12
|
Separate
Bases for Claim
|
39
|
ARTICLE
11 Termination
|
39
|
11.1
|
Termination
|
39
|
11.2
|
Effect
of Termination
|
40
|
ARTICLE
12 Miscellaneous
|
40
|
12.1
|
Expenses
|
40
|
12.2
|
Notices
|
41
|
12.3
|
Construction
|
41
|
12.4
|
Severability
|
43
|
12.5
|
Entire
Agreement
|
43
|
12.6
|
[Reserved]
|
43
|
12.7
|
Successors
and Assigns
|
43
|
12.8
|
No
Third-Party Beneficiaries
|
43
|
12.9
|
Amendment
and Modification; Waiver
|
43
|
12.1
|
Governing
Law
|
44
|
12.11
|
Forum
Selection; Consent to Jurisdiction; Waiver of Jury
Trial
|
44
|
12.12
|
Specific
Performance
|
45
|
12.13
|
Counterparts;
Effectiveness
|
45
|
STOCK PURCHASE AGREEMENT
This
STOCK PURCHASE AGREEMENT (this “Agreement”), dated as of
October 2, 2020 entered into by and between GoIP Global, Inc., a
Colorado corporation (“Buyer”), ICS Group
Holdings Inc., a Delaware corporation (the “Shareholder”), solely for
the purpose of Article
8 and Article
10, HC2
Holdings Inc., a Delaware corporation (“Parent”), and PTGI
International Carrier Services Inc., a Delaware corporation (the
“Company”). Annex A hereto contains
definitions of certain initially capitalized terms used in this
Agreement.
RECITALS
WHEREAS, the
Shareholder owns all of the issued and outstanding shares of
capital stock of the Company, consisting of 100 shares of common
stock (the “Shares”); and
WHEREAS, the
Shareholder wishes to sell to Buyer, and Buyer wishes to purchase
from the Shareholder, the Shares, on the terms and subject to the
conditions set forth herein;
NOW,
THEREFORE, in consideration of the mutual covenants and agreements
hereinafter set forth and for other good and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties agree as follows:
AGREEMENT
ARTICLE
1
1.1 Purchase and
Sale. On the terms and subject to the
conditions of this Agreement, at the Closing, the Shareholder shall
sell, transfer and deliver the Shares to Buyer, and Buyer shall
purchase the Shares from the Shareholder, free and clear of all
Encumbrances.
1.2 Purchase
Price. The purchase
price for the Shares and for the covenants and agreements of the
Shareholder hereunder shall be one million dollars
($1,000,000) (the “Base Purchase Price”),
subject to the adjustments as hereinafter provided (as so adjusted,
the “Purchase
Price”).
Closing
2.1 Closing. The consummation
of the sale of the Shares pursuant to Article 1 (the
“Closing”) shall be held
virtually (via the exchange of executed documents and other
deliverables by PDF or other means of electronic delivery) rather
than in-person, as promptly as practicable following, but in no
event later than, three (3) Business Days after the date on which
the last of the conditions set forth in Article 9 (other than those
conditions that by their terms are to be satisfied at the Closing,
but subject to the satisfaction or waiver of such conditions at the
Closing) to be satisfied or waived is so satisfied or waived, or by
such other means and/or at such other place, time and date as Buyer
and the Shareholder may agree. All documents delivered and actions
taken at the Closing shall be deemed to have been delivered or
taken simultaneously, and no such delivery or action shall be
considered effective or complete unless or until all other such
deliveries or actions are completed or waived in writing by the
party against whom such waiver is sought to be enforced. The date
on which the Closing is actually held is referred to herein as the
“Closing
Date.” Subject to the provisions of Article 11, the
failure to consummate the Closing on the date and time determined
pursuant to this Section 2.1 shall not result in the termination of
this Agreement and shall not relieve any party to this Agreement of
any obligation under this Agreement. The Closing shall be deemed to
be effective at 11:59 p.m. Eastern Standard Time on the Closing
Date (the “Effective
Time”) for all purposes, except as may otherwise be
expressly provided herein.
2.2 Shareholder
Closing Deliverables. At or prior to
the Closing, the Shareholder shall deliver to Buyer:
(a) the stock
certificate(s) evidencing all of the Shares, free and clear of all
Encumbrances, duly endorsed in blank or accompanied by stock powers
or other instruments of transfer duly executed in blank and with
all required stock transfer tax stamps affixed;
(b) a certificate
pursuant to Treasury Regulations Section 1.1445-2(b) certifying
that the Shareholder is not a foreign person within the meaning of
Section 1445 of the Code; and
(c) such other
documents or instruments as Buyer reasonably requests and are
reasonably necessary to consummate the Transactions.
2.3 Company Closing
Deliverables. At or prior to
the Closing (or by such other date, if any, as indicated in the
applicable subsection below), the Company shall deliver to Buyer
the following:
(a) resignations of the
directors and officers of the Company, except as Buyer may
otherwise specify;
(b) a certificate,
dated the Closing Date and signed by a duly authorized officer of
Company, that each of the conditions set forth in Section 9.2(a) and
Section 9.2(b)
and Section 9.2(d)
have been satisfied;
(c) a certificate of
the Secretary or an Assistant Secretary (or equivalent officer) of
the Company certifying (i) that attached thereto are true and
complete copies of all resolutions adopted by the board of
directors of the Company authorizing the execution, delivery and
performance of this Agreement and the Transaction Documents and the
consummation of the Transactions, (ii) that all such
resolutions are in full force and effect and are all the
resolutions adopted in connection with the Transactions, and
(iii) the names and signatures of the officers of the Company
authorized to sign this Agreement and the Transaction
Documents;
(d) the certificate of
incorporation (or other equivalent Governing Document) and all
amendments thereto of each Group Company, duly certified as of a
recent date by the secretary of state or similar Governmental
Authority of the jurisdiction under the Laws in which such Group
Company is organized;
(e) a good standing
certificate (or its equivalent) of each Group Company as of a
recent date from the secretary of state or similar Governmental
Authority of the jurisdiction under the Laws in which such Group
Company is organized;
(f) a certificate,
dated the Closing Date and signed by a duly authorized officer of
the Shareholder and the Group Companies, stating that the Related
Party Transactions and Relationships have been terminated and no
Group Company has any residual Liability with respect
thereto;
(g) to the extent there
exist any Encumbrances (1) on the equity securities of any Group
Company (including the Shares) or (2) on the properties and assets
of any Group Company (other than Permitted Encumbrances) as of the
Closing (the “Group
Company Encumbrances”), fully executed documentation
required in connection with the release of any such Group Company
Encumbrances, in form and substance reasonably satisfactory to
Buyer providing for the discharge in full of all such Group Company
Encumbrances;
(h) a transition
services agreement, in form reasonably acceptable to Buyer and the
Shareholder and covering the services set forth on Exhibit A, duly executed by the
Shareholder, Parent, Buyer and the Company (the “Transition Services
Agreement”);
(i) such certificates
and documents as may be necessary or appropriate to change the
authorized signatories on all bank accounts and safe deposit boxes
maintained by or in the name of the Company;
(j) the original minute
and stock books of each Group Company to the extent such books
exist;
(k) evidence reasonably
satisfactory to Buyer that all of the Company’s interest
(whether by ownership of equity securities, by Contract or
otherwise) in any Excluded Entity has been transferred to the
Shareholder or an Affiliate thereof or otherwise terminated in full
as a result of the dissolution of such Excluded Entity (i) in a
manner that does not result in any Tax Liabilities or any other
adverse Tax consequences for a Post-Closing Tax Period of any Group
Company and (ii) which terminates in full all of the Group
Companies’ Liabilities arising out of or relating to any
Excluded Entity, in each case, as determined by Buyer in good faith
(the “Pre-Closing
Reorganization”); and
(l) such other
documents or instruments as Buyer reasonably requests and are
reasonably necessary to consummate the Transactions.
2.4 Buyer Closing
Deliverables. At the Closing,
Buyer shall deliver to the Shareholder the following:
(a) the Transition
Services Agreement duly executed by Buyer;
(b) a certificate,
dated the Closing Date and signed by a duly authorized officer of
Buyer, that each of the conditions set forth in Section 9.3(a) and
Section 9.3(b)
have been satisfied;
(c) a certificate of
the Secretary or an Assistant Secretary (or equivalent officer) of
Buyer certifying (i) that attached thereto are true and
complete copies of all resolutions adopted by the board of
directors of Buyer authorizing the execution, delivery and
performance of this Agreement and the Transaction Documents and the
consummation of the Transactions, (ii) that all such
resolutions are in full force and effect and are all the
resolutions adopted in connection with the Transactions, and
(iii) the names and signatures of the officers of Buyer
authorized to sign this Agreement and the Transaction
Documents;
(d) the certificate of
incorporation (or other equivalent Governing Document) and all
amendments thereto of Buyer, duly certified as of a recent date by
the secretary of state or similar Governmental Authority of the
jurisdiction under the Laws in which Buyer is
organized;
(e) the Closing
Purchase Price in the manner provided in Section 2.5; and
(f) such other
documents or instruments as the Shareholder reasonably requests and
are reasonably necessary to consummate the
Transactions.
2.5 Manner of
Payment. The Closing
Purchase Price shall be paid to the Shareholder at Closing by wire
transfer of immediately available funds to an account designated by
the Shareholder at least three (3) Business Days prior to the
Closing.
2.6 Withholding. Buyer shall be
entitled to deduct and withhold from the consideration or other
amounts otherwise payable pursuant to this Agreement to any Person
such amounts as they are required to deduct and withhold with
respect to such payment under the Code, or any provision of state,
local or foreign law. To the extent that amounts are so withheld by
Buyer, such withheld amounts shall be (a) paid to the appropriate
Tax authority and (b) treated for all purposes of this Agreement as
having been paid to the appropriate recipient in respect of which
such deduction and withholding was made by Buyer.
Payment
Adjustments
3.1 Definitions. As used
herein:
(a) “Accounting Principles”
means GAAP and, to the extent not inconsistent with GAAP, using the
same accounting methods, practices, principles, policies and
procedures, with consistent classifications, judgments and
valuation and estimation methodologies that were used in the
preparation of the Company’s financial statements for the
most recent fiscal year end.
(b) “Closing Company Net
Equity” means the Company Net Equity as of the
Effective Time as determined in accordance with Section 3.3
hereof.
(c) “Closing Company Transaction
Expenses” means Company Transaction Expenses that
remain unpaid as of immediately prior to the Closing (but inclusive
of all amounts that will or may become due at or following the
Closing wholly or partially by reason of the
Transactions).
(d) “Company Net Equity”
means, as of any date of determination, (i) the sum of the Group
Companies’ cash, accounts receivable, net, and all other
assets (other than PPE), less (ii) the sum of the Group
Companies’ accounts payable and other accrued expenses, net,
and liabilities, as would be shown on a consolidated balance sheet
of the Group Companies prepared in accordance with the Accounting
Principles; provided that such calculation
shall (w) exclude all intercompany receivables owed by one Group
Company to another and all payables owed by one Group Company to
another, (x) exclude equipment, (y) include accrued employee
bonuses as a liability (provided further that, if the calculation
of Company Net Equity would otherwise be less than negative Three
Hundred Seventy-Five Thousand Dollars (-$375,000), the accrued
bonuses payable to employees, shall be reduced on a
dollar-for-dollar basis to the extent necessary and available to
cause Company Net Equity to equal negative Three Hundred
Seventy-Five Thousand Dollars (-$375,000)), it being understood
that neither Buyer nor any Group Company shall be liable for (and
to the extent there is any Action in connection therewith, the
Shareholder shall indemnify Buyer for) such accrued bonuses that
are reduced pursuant to this clause (y) and therefore not paid to
the applicable employee(s), and (z) shall otherwise be performed in
accordance with the terms of Exhibit B attached
hereto.
(e) “Company Net Equity Collar
Range” means any amount that is both (i) greater than
or equal to the Lower Target Company Net Equity and (ii) less than
or equal to the Upper Target Company Net Equity.
(f) “Company Transaction
Expenses” means the aggregate amount of (a) all fees
and expenses incurred by any Group Company prior to Closing, or
arising out of any contract or commitment entered into by a Group
Company prior to the Closing (other than this Agreement or any
other Transaction Document), in connection with the negotiation,
preparation, execution and performance of this Agreement and the
Transaction Documents, and the Transactions, including all legal,
financial advisory, accounting, consulting and other fees and
expenses and any broker’s or finder’s fees, (b) all
amounts (plus any associated withholding Taxes or any Taxes
required to be paid by any Group Company with respect thereto)
payable by the Company, whether immediately or in the future, under
any “change of control,” retention, termination,
compensation, severance or other similar arrangements by reason of
(either alone or in conjunction with any other event, such as
termination or continuation of employment) the consummation of the
Transactions or any Transaction Document (including such amounts
payable to any employee of any Group Company at the election of
such employee pursuant to any such arrangements but excluding any
amounts payable with respect to the termination of employee by a
Group Company following the Closing); provided that any such amounts
shall not be deemed to be a Company Transaction Expense to the
extent included as a liability in the calculation of the Company
Net Equity.
(g) “Excess Transaction Expense Reduction
Amount” means (i) the Closing Company Transaction
Expenses, if the Closing Company Net Equity is lower than negative
five hundred thousand dollars (-$500,000) or (ii) $0, if the
Closing Company Net Equity is equal to or greater than negative
five hundred thousand dollars (-$500,000).
(h) “Lower Target Company Net
Equity” means negative Two Hundred Fifty Thousand
Dollars (-$250,000).
(i) “Upper Target Company Net
Equity” means Zero Dollars ($0).
3.2 Net Estimated Adjustment
Amount.
(a) At least five (5)
Business Days prior to the Closing Date, the Company shall prepare
and deliver to Buyer a written statement (the form and substance of
which shall be subject to Buyer’s approval, which approval
shall not to be unreasonably withheld) (the “Estimated Closing
Statement”) that includes a good-faith estimate of the
Company Net Equity as of the Closing Date (the “Estimated Closing Net
Equity”) and a good faith estimate of the Closing
Company Transaction Expenses (the “Estimated Closing Company Transaction
Expenses”), and the calculation of the Closing
Purchase Price, in each case, with reasonable supporting
detail.
(b) The
“Net Estimated
Adjustment Amount” shall be equal to
zero:
(i) (x) if the
Estimated Closing Net Equity is less than the Lower Target Company
Net Equity, then minus the amount, if any, by
which the Estimated Closing Net Equity is less than the Lower
Target Company Net Equity (the “Estimated Closing Net Equity
Deficit”) or (y) if the Estimated Closing Net Equity
exceeds the Upper Target Company Net Equity, then plus the amount, if any, by
which the Estimated Closing Net Equity exceeds the Upper Target
Company Net Equity (any such amount, the “Estimated Closing Net Equity
Surplus”) (it being understood that if the Estimated
Closing Net Equity falls within the Company Net Equity Collar
Range, then the adjustment pursuant to this clause (i) shall be
$0);
(ii) minus (x) the Estimated Closing
Company Transaction Expenses, if the Estimated Closing Net Equity
is lower than negative five hundred thousand dollars (-$500,000) or
(y) $0, if the Estimated Closing Net Equity is equal to or greater
than negative five hundred thousand dollars (-$500,000) (the
“Estimated Excess
Transaction Expense Reduction Amount”).
3.3 Post-Closing
Adjustment.
(a) On the
120th day
following the Closing Date, Buyer shall prepare, or cause to be
prepared, and deliver to the Shareholder within 10 days thereafter
a written statement (the “Closing Statement”) that
shall include a calculation of (i) the Company Net Equity as of the
Closing Date (which calculation shall (A) exclude the amount of any
account receivable outstanding as of the Effective Time but which
has not been paid as of the 120th day following the
Closing Date (the “Ineligible Accounts
Receivable”) and (B) include the amount of any
accounts receivable to the extent payments are actually received by
the Group Companies after the Effective Time with respect to such
accounts receivable, even if any such payment would not be properly
included, in accordance with the Accounting Principles, as part of
the Group Companies’ cash or accounts receivable in existence
at the Effective Time), (ii) Closing Company Transaction Expenses
and (iii) the Net Adjustment Amount, each with reasonable
supporting detail.
(b) During the 30
day period following
Buyer’s delivery of the Closing Statement to the Shareholder
(the “Review
Period”), Buyer shall provide the Shareholder and its
Representatives reasonable access to the relevant books and records
of the Group Companies for the purpose of facilitating the
Shareholder’s review of the Closing Statement. The Closing
Statement shall become final and binding on the last day of the
Review Period, unless on or before the last day of the Review
Period, the Shareholder delivers to Buyer a written notice of
disagreement (a “Notice of Disagreement”),
which shall set forth in reasonable detail (i) the items or amounts
with which the Shareholder disagrees and the basis for such
disagreement (which disagreement shall be limited to mathematical
errors, the asserted failure of such calculation of the Closing
Statement to be made in accordance with the terms of this
Article 3 or a
determination as to whether any other relevant requirements have
been satisfied) and (ii) the Shareholder’s proposed
adjustments to the Closing Statement. The Shareholder shall be
deemed to have agreed with all items and amounts in the Closing
Statement not specifically referenced in a Notice of Disagreement
provided to Buyer on or before the last day of the Review
Period.
(c) During the 30
day period following delivery of a Notice of Disagreement by the
Shareholder to Buyer (the “Resolution Period”), such
parties in good faith shall seek to resolve in writing any
differences that they may have with respect to the computation of
the amounts as specified therein. Any disputed items resolved in
writing between the Shareholder and Buyer within the Resolution
Period shall be final and binding on the parties for all purposes
hereunder. If the Shareholder and Buyer have not resolved all such
differences by the end of the Resolution Period, the Shareholder
and Buyer shall submit, in writing, such differences to the New
York City office of the Accounting Expert. The “Accounting Expert” shall
be PricewaterhouseCoopers LLP, or, in the event that it is not
available or is not a Neutral Accounting Firm, a Neutral Accounting
Firm selected by mutual agreement of Buyer and the Shareholder;
provided, however, that (i)
if, within fifteen (15) days after the end of the Resolution
Period, such parties are unable to agree on a Neutral Accounting
Firm to act as the Accounting Expert, then each party shall select
a Neutral Accounting Firm and such firms together shall select the
Neutral Accounting Firm to act as the Accounting Expert, and (ii)
if any party does not select a Neutral Accounting Firm within ten
(10) days of written demand therefor by the other party, then the
Neutral Accounting Firm selected by the other party shall act as
the Accounting Expert. A “Neutral Accounting Firm”
means an independent accounting firm of nationally recognized
standing that is not at the time it is to be engaged hereunder
rendering services to any party hereto, or any Affiliate of any
party hereto, and has not done so within the two year period prior
thereto.
(d) The parties shall
arrange for the Accounting Expert to agree in its engagement letter
to act in accordance with this Section 3.3(d). The parties
shall make readily available to the Accounting Expert all relevant
books and records within such party’s control reasonably
requested by the Accounting Expert. Each party shall present a
brief to the Accounting Expert (which brief shall also be
concurrently provided to the other party) within 20 days of the
appointment of the Accounting Expert detailing such party’s
views as to the correct nature and amount of each item remaining in
dispute from the Notice of Disagreement (and for the avoidance of
doubt, no party may introduce a dispute to the Accounting Expert
that was not originally set forth on the Notice of Disagreement).
Within 10 days of receipt of the brief, the receiving party may
present a responsive brief to the Accounting Expert (which
responsive brief shall also be concurrently provided to the other
party). Each party may make an oral presentation to the Accounting
Expert (in which case, such presenting party shall notify the other
party of such presentation, and the other party shall have the
right to be present (and speak) at such presentation), within 45
days of the appointment of the Accounting Expert. The Accounting
Expert shall have the opportunity to present written questions to
either party, a copy of which shall be provided to the other party.
There shall be no ex parte communications between any party (or its
Representatives), on the one hand, and the Accounting Expert, on
the other hand, relating to any disputed matter and unless
requested by the Accounting Expert in writing, no party may present
any additional information or arguments to the Accounting Expert,
either orally or in writing. The Accounting Expert shall consider
only those items and amounts in the Shareholder’s and
Buyer’s respective calculations that are identified as being
items and amounts to which the Shareholder and Buyer have been
unable to agree, and shall act as an expert only (and thus not as
an arbitrator). In resolving any disputed item, the Accounting
Expert may not assign a value to any item greater than the greatest
value for such item claimed by either Buyer or the Shareholder, or
less than the smallest value for such item claimed by either Buyer
or the Shareholder. The Accounting Expert shall make a written
determination within 60 days of its appointment as to each such
disputed item, which determination shall be final and binding on
the parties for all purposes hereunder absent manifest mathematical
error or manifest disregard for the provisions of this Article 3 (and, in the event of
such manifest error or disregard, the written determination shall
be referred back to the Accounting Expert to correct the same).
Notwithstanding the foregoing, the Accounting Expert shall have no
authority to resolve any dispute regarding the interpretation of
any provision of this Agreement or whether Buyer, Company or
Shareholder has breached any covenant contained herein, it being
understood and agreed that any such dispute shall be resolved
solely as provided in Section 10.10. All fees and
expenses of the Accounting Expert in resolving the dispute shall be
allocated between the Shareholder, on the one hand, and Buyer, on
the other hand, such that the amount paid by the Shareholder bears
the same proportion that the aggregate dollar amount unsuccessfully
disputed by the Shareholder bears to the total dollar amount of the
disputed items that were submitted for resolution to the Accounting
Expert, and Buyer shall pay the balance. For purposes of
illustration only, if the Closing Company Net Equity is disputed to
be $1,000 by the Shareholder and $900 by Buyer, and the Closing
Company Net Equity is determined by the Accounting Expert to be
$940, then the Shareholder would bear 60% of the fees and expenses
of the Accounting Expert because the amount disputed was $100 and
the amount unsuccessfully disputed by the Shareholder was
$60.
(e) The
“Net Adjustment
Amount” shall equal zero:
(i) (x) if the Closing
Net Equity is less than the Lower Target Company Net Equity, then
minus the amount,
if any, by which the Closing Net Equity is less than the Lower
Target Company Net Equity or (y) if the Closing Net Equity exceeds
the Upper Target Company Net Equity, then plus the amount, if any, by
which the Closing Net Equity exceeds the Upper Target Company Net
Equity (it being understood that if the Closing Net Equity falls
within the Company Net Equity Collar Range, then the adjustment
pursuant to this clause (i) shall be $0);
(ii) minus the Estimated Closing Net
Equity Surplus or plus the absolute value of the Estimated Closing
Net Equity Deficit, as applicable;
(iii) minus the amount, if any, by
which the Excess Transaction Expense Reduction Amount exceeds the
Estimated Excess Transaction Expense Reduction Amount or
plus the amount, if
any, by which the Estimated Excess Transaction Expense Reduction
Amount exceeds the Excess Transaction Expense Reduction
Amount.
(f) If the Net
Adjustment Amount is positive, Buyer shall promptly (and in no
event later than five (5) Business Days following the final
determination of the Net Adjustment Amount) pay such Net Adjustment
Amount to the Shareholder, by wire transfer of immediately
available funds to an account designated in writing by the
Shareholder.
(g) If the Net
Adjustment Amount is negative (in which case the
“Net Adjustment
Amount” shall be deemed to be equal to the absolute
value of such amount), the Shareholder shall promptly (and in no
event later than five (5) Business Days following the final
determination of the Net Adjustment Amount) pay the lesser of (i)
such Net Adjustment Amount, and (ii) the Base Purchase Price, to
Buyer, by wire transfer of immediately available funds to an
account designated in writing by Buyer.
(h) The Purchase Price
shall automatically be deemed increased by any Net Adjustment
Amount payment made by Buyer to Shareholder and shall automatically
be deemed reduced by any Net Adjustment Amount payment made by
Shareholder to Buyer.
(i) Notwithstanding
anything to the contrary set forth herein, and for the avoidance of
doubt, the parties hereby acknowledge and agree that no adjustments
otherwise required to be made to the Base Purchase Price or the
Purchase Price pursuant to this Article 3 shall reduce the
Purchase Price to an amount which is less than $500,000.00, except
in the event of fraud or intentional misrepresentation in
connection with the preparation of the Estimated Closing
Statement.
(j) Any payment
received by the Group Companies or the Buyer with respect to an
Ineligible Accounts Receivable during the one year period following
the Closing Date shall be immediately remitted by the Buyer or the
applicable Group Company to the Shareholder.
(k) Following the
Effective Time, the Buyer shall, or shall cause the Group Companies
to, use commercially reasonable means consistent with the credit
and collection practices used by the Group Companies prior to the
Effective Time, to promptly collect all of the Group Companies
accounts receivable outstanding as of the Effective Time and the
Buyer shall not agree, or permit any Group Company to agree, to
compromise or adjust in any manner any such account receivable
without the prior written consent of the Shareholder.
(l) Following the
Effective Time, all payments received by a Group Company from any
customer shall be applied to the oldest outstanding account
receivable of such customer (but only to the extent that such
account receivable is not then subject to an unresolved
dispute).
ARTICLE
4
Representations and warranties
of the shareholder
The
Shareholder hereby represents and warrants to Buyer that the
statements contained in this Article 4 are true and correct
on the date hereof and shall be true and correct on the Closing
Date as if made thereon:
4.1 Organization. The Shareholder
(i) is a corporation duly organized, validly existing and in
good standing under the laws of the state of Delaware and
(ii) has all necessary corporate power and corporate authority
to carry on its business, and to own or use the properties and
assets that it purports to own or use.
4.2 Authority and
Enforceability. The Shareholder
has all requisite power and authority, and has taken all action
necessary, to execute and deliver this Agreement and each
Transaction Document and to perform its obligations hereunder and
thereunder. This Agreement has been, and each Transaction Document
will be prior to the Closing, duly authorized, executed and
delivered by the Shareholder, and this Agreement constitutes, and
each Transaction Document when so executed and delivered will
constitute, the legal, valid and binding obligations of the
Shareholder, enforceable against the Shareholder in accordance with
their terms, except as enforceability may be limited by bankruptcy,
insolvency or similar laws affecting the enforcement of
creditors’ rights generally.
(a) The Shareholder is
the record and beneficial owner of, and has good and valid title
to, the Shares, free and clear of all Encumbrances. The Shareholder
is not a party to any option, warrant, right, contract, call, put
or other agreement or commitment providing for the disposition or
acquisition of any of the Shares (other than this Agreement). The
Shareholder does not have any other debt or ownership interest in
any Group Company.
(b) Other than this
Agreement, the Shares are not subject to any voting trust agreement
or other Contract restricting or otherwise relating to the voting,
dividend rights or other disposition of the Shares.
4.4 No Conflict. The execution and
delivery by the Shareholder of this Agreement and each Transaction
Document, and the performance by it of any actions contemplated
hereunder or thereunder, does not and will not, directly or
indirectly (with or without notice or lapse of time):
(a) Conflict with or
violate any provision of the Governing Documents of the
Shareholder;
(b) Require notice,
consent or approval under, conflict with, violate, result in a
breach of, result in the acceleration of obligations, loss of a
benefit or increase in Liabilities or fees under, create in any
Person the right to terminate, cancel or modify, or cause a default
under or give rise to any rights or penalties under (i) any
provision of Law relating to the Shareholder, (ii) any
provision of any Governmental Order to which the Shareholder or any
of its properties are subject, (iii) any provision of any
Contract to which the Shareholder or its properties are bound, or
(iv) any other restriction of any kind or character to which
the Shareholder or its properties are subject; or
(c) Require a
registration, filing, application, notice, consent, approval,
order, qualification or waiver with, to or from any Governmental
Authority except (i) the filing of the FCC Applications and the
receipt of the FCC Consent, and (ii) the filing of the PUC
Applications and the receipt of the PUC Consents.
4.5 Legal
Proceedings. There are no
Actions pending or, to the Shareholder’s knowledge,
threatened against or by the Shareholder or any of its Affiliates
or Related Persons that challenge or seek to prevent, enjoin or
otherwise delay the Transactions.
4.6 United States
Person. The Shareholder
is a United States Person (as defined in Section 7701(a)(3) of
the Code).
4.7 Pre-Closing
Reorganization. The Pre-Closing
Reorganization will not qualify as a tax-free reorganization under
Code Section 368 or a tax-free spin off under Code Section 355 for
U.S. federal income tax purpose and Shareholder agrees to treat it
and to cause the Group Companies to treat it as a taxable
transaction for U.S. federal, state and local income tax
purposes.
Representations
and warranties of the company
The
Company hereby represents and warrants to Buyer that the statements
contained in this Article
5 are true and correct on the date hereof and shall be true
and correct on the Closing Date as if made thereon:
5.1 Organization and Qualification of the
Company. 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, operate or lease the properties and
assets now owned, operated or leased by it and to carry on its
business as it has been and is currently conducted. Go2Tel is a
corporation duly organized, validly existing and in good standing
under the Laws of the State of Florida and has full corporate power
and authority to own, operate or lease the properties and assets
now owned, operated or leased by it and to carry on its business as
it has been and is currently conducted. Section 5.1 of the Disclosure
Schedule sets forth each jurisdiction in which each Group Company
is licensed or qualified to do business, and each Group Company is
duly licensed or qualified to do business and is in good standing
in each jurisdiction in which the properties owned or leased by it
or the operation of its business as currently conducted makes such
licensing or qualification necessary, except where the failure to
be so qualified would not have a Material Adverse
Effect.
5.2 Authority;
Board Approval. The Company has
full corporate power and authority to enter into and perform its
obligations under this Agreement and the Transaction Documents to
which it is a party and to consummate the Transactions. The
execution, delivery and performance by the Company of this
Agreement and the Transaction Documents and the consummation by the
Company of the Transactions have been duly authorized by all
requisite corporate action on the part of the Company and no other
corporate proceedings on the part of the Company are necessary to
authorize the execution, delivery and performance of this Agreement
or to consummate the Transactions. This Agreement has been duly
executed and delivered by the Company, and (assuming due
authorization, execution and delivery by each other party) this
Agreement constitutes a legal, valid and binding obligation of the
Company enforceable against the Company in accordance with its
terms, except as enforceability may be limited by bankruptcy,
insolvency or similar laws affecting the enforcement of
creditors’ rights generally. When each Transaction Document
to which the Company is or will be a party has been duly executed
and delivered by the Company (assuming due authorization, execution
and delivery by each other party thereto), such Transaction
Document will constitute a legal and binding obligation of the
Company enforceable against it in accordance with its terms, except
as enforceability may be limited by bankruptcy, insolvency or
similar laws affecting the enforcement of creditors’ rights
generally.
5.3 No Conflicts;
Consents. The execution and
delivery by the Company of this Agreement and each Transaction
Document, and the performance by it of any actions contemplated
hereunder or thereunder, does not and will not, directly or
indirectly (with or without notice or lapse of time), conflict with
or violate any provision of the Governing Documents of any
Group Company.
(a) The authorized
capital stock of the Company consists of 10,000 Shares, of which
100 Shares are issued and outstanding as of the close of business
on the date of this Agreement.
(b) All of the Shares
are owned beneficially and of record by the Shareholder, free, and
clear of all Encumbrances. The Shares represent 100% of the
outstanding ownership interests in the Company. All of the Shares
have been duly authorized, are validly issued, fully paid, and
non-assessable and have been offered, issued and transferred
without violation of any preemptive right or other right to
purchase and were issued and/or transferred in compliance with all
applicable Laws, the Governing Documents of the Company and the
Contracts to which the Company is a party or otherwise bound. Other
than the Shares, there are no other equity or other ownership
interests in the Company or outstanding securities convertible or
exchangeable into ownership interests of the Company, including any
other options, warrants, purchase rights, preemptive rights,
subscription rights, conversion rights, exchange rights, calls,
puts, rights of first refusal, right of first offer, anti-dilution
protections, obligations, commitments, plans or other Contracts or
similar rights that could require the Company to issue, sell or
otherwise cause to become outstanding or to acquire, repurchase or
redeem (or establish a sinking fund with respect to redemption)
ownership interests in the Company or require the Company to make
any payments based on the price or value of the Shares or dividends
paid thereon. No holder of Indebtedness of the Company has any
right to vote or to convert or exchange such Indebtedness for
ownership interests of the Company. There are no outstanding or
authorized equity appreciation, contingent value, phantom equity,
profit participation, or similar rights with respect to the
Company. There are no voting trusts, proxies, or other Contracts
with respect to the voting of the ownership interests of the
Company. Upon consummation of the Transactions, Buyer will be the
sole owner, beneficially and of record, of 100% of the issued and
outstanding equity interests of the Company, free and clear of any
Encumbrances.
(c) The Company has
delivered to Buyer copies of the Governing Documents of the Company
and all minute books of the Company.
5.5 Subsidiaries; Joint
Ventures. Section 5.5(a) of the
Disclosure Schedule sets forth for each Subsidiary of the Company,
(i) the authorized capital stock or other ownership interests of
such Subsidiary, and (ii) the number of issued, allotted and
outstanding shares of capital stock or other ownership interests of
each class of its capital, the names of the record and beneficial
holders thereof and the number of shares or other ownership
interests held by each such holder. All of the issued, allotted and
outstanding shares of capital stock or other ownership interests of
each Subsidiary of the Company have been duly authorized, are
validly issued and allotted, fully paid, and non-assessable and
have been offered, issued, allotted and transferred without
violation of any preemptive rights or other right to purchase and
were issued and/or transferred in compliance with all applicable
Laws, the Governing Documents of the Subsidiary and the Contracts
to which the Subsidiary is a party or otherwise bound. There are no
other capital stock or other ownership interests in any of the
Company’s Subsidiaries or outstanding securities convertible
or exchangeable into capital stock or other ownership interests of
such Subsidiaries, including any options, warrants, purchase
rights, preemptive rights, subscription rights, conversion rights,
exchange rights, calls, puts, rights of first refusal, rights of
first offer, anti-dilution protections, obligations, commitments,
plans or other Contracts or similar rights that could require the
Company or any of its Subsidiaries to issue, sell or otherwise
cause to become outstanding or to acquire, repurchase or redeem (or
establish a sinking fund with respect to redemption) capital stock
or any other ownership interests in any such Subsidiary or require
the Company or any of its Subsidiaries to make any payments based
on the price or value of any securities or instruments set forth on
Section 5.5(a) of
the Disclosure Schedule or dividends paid thereon. No holder of
Indebtedness of the Company or any of its Subsidiaries has any
right to vote or to convert or exchange such Indebtedness for
capital stock or other ownership interests of any of the
Company’s Subsidiaries. There are no outstanding or
authorized equity appreciation, contingent value, phantom equity,
profit participation, or similar rights with respect to any of the
Company’s Subsidiaries. There are no voting trusts, proxies,
or other Contracts with respect to the voting of the capital stock
or other ownership interests of the Company’s Subsidiaries.
Upon consummation of the transactions contemplated hereby, Company
will be the sole owner, beneficially and of record, directly or
indirectly, of 100% of the issued and outstanding capital stock or
other ownership interests of the Company’s Subsidiaries, free
and clear of any Encumbrances. Except as set forth on Section 5.5(a) of the
Disclosure Schedule, the Company does not have any direct or
indirect Subsidiaries and does not own directly or indirectly any
capital stock or other equity interest in any other
Person.
5.6 Legal Proceedings; Governmental
Orders.
(a) Section 5.6(a) of the
Disclosure Schedule identifies and provides a summary of the status
and material claims involved in each Action that is currently or in
the past five years was pending, or, to the Company’s
Knowledge, is currently threatened, against or by any Group Company
(or any of its Representatives with respect to their business
activities on behalf of any Group Company) affecting any of its
properties or assets. Except as set forth in such Section 5.6(a) of the
Disclosure Schedule, the Group Companies have insurance that will
cover all Losses that may be incurred by any Group Company in
connection with each such pending Action.
(b) There are no
Actions pending or, to the Company’s Knowledge, threatened
against or by any Group Company that challenges or seeks to
prevent, enjoin or otherwise delay the Transactions. No event has
occurred or circumstances exist that may give rise to, or serve as
a basis for, any such Action.
(c) There are no, nor
in the past five (5) years have there been any, outstanding
Governmental Orders and no unsatisfied judgments, penalties or
awards against or affecting any Group Company (or any of its
Representatives with respect to their business activities on behalf
of the Group Companies) or any of its properties or assets. No
event has occurred or circumstances exist that may constitute or
result in (with or without notice or lapse of time) a violation of
any such Governmental Order.
(a) The Group Companies
(i) hold, and are in compliance in all material respects with
the terms of, all Permits that are necessary to enable the Group
Companies to conduct their business, including all licenses or
authorizations issued by the FCC and all certificates of public
convenience and necessity or similar instruments issued by any
State PUC and all material franchises, ordinances and other
agreements granting access to public rights of way
(“Communications
Authorizations”), all of which are listed on
Section 5.7(a) of
the Disclosure Schedule, (ii) have not received any notice of
the institution of any Action to revoke any such Permits or
alleging that any Group Company fails to hold such Permits,
(iii) have not received any notice that any loss or expiration
of any Permit is pending, other than expiration in accordance with
the terms thereof, and (iv) have no Knowledge of any
threatened or reasonably foreseeable loss or expiration of any
Permit, other than expiration in accordance with the terms thereof.
The Permits are valid and in full force and effect and the
Communications Authorizations are not subject to any conditions or
requirements that are not generally imposed by the FCC or
applicable State PUC upon holders of such Communications
Authorizations. None of the Permits will be terminated or impaired
or become terminable as a result of the Transactions. Subject to
obtaining the required consents set forth in Section 7.7(d), all
Communications Authorizations will not be adversely affected by,
and will remain valid and in full force and effect immediately
following, the consummation of the Transactions. Each
Communications Authorization and all proceeds thereof are free and
clear of all Encumbrances and no other Person has any right, title
or interest in or with respect to any Communications
Authorization.
(b) Without limiting
the foregoing clause (a), and except as set forth in Schedule 5.7(b), during the
last five years, each Group Company has timely submitted, as
applicable, all required regulatory reports, forms, notices, and
certifications required by applicable Communications Laws,
including, without limitation (i) FCC Forms 499-A and 499-Q, the
annual telecommunications reporting worksheets, (ii) the annual
customer proprietary network information compliance certification,
(iii) FCC Form 477 for local telephone competition and broadband
reporting and (iv) annual report filings required by any relevant
State PUC. No Group Company has incurred, or if incurred has fully
discharged, any fine, charge, forfeiture, penalty, or other
liability, nor have they made a voluntary contribution to the U.S.
treasury resulting from the violation of any Communications Laws.
Each Group Company has paid in full all required contributions,
Taxes and fees (including, without limitation, universal service
contributions to any applicable Governmental Authorities), required
by any Communications Law to have been paid prior to the date
hereof applicable to the business of the Group
Companies.
5.8 Transactions
with Related Persons. Except as set
forth in Section
5.8 of the Disclosure Schedule (the items so disclosed, the
“Related Party
Transactions and Relationships”), neither the
Shareholder nor any Affiliate thereof, nor, to the Knowledge of the
Shareholder, any of their respective Representatives:
(a) owns or has an
interest in, directly or indirectly, any property, asset or right
used by any Group Company;
(b) owes any money to
or is owed any money by any Group Company (other than accrued
compensation in the case of employees of the Group
Companies);
(c) provides goods or
services to any Group Company (other than the employees of the
Group Companies);
(d) is a party to a
Contract, or is involved in any business arrangement or other
relationship, with any Group Company (whether written or
oral);
(e) has pledged any
assets, posted any letters of credit or guaranteed any obligations
on behalf of any Group Company (nor has any Group Company pledged
any assets, posted any letters of credit or guaranteed any
obligations on behalf of any such Person); or
(f) has any claim or
cause of action against any Group Company.
5.9 Brokers. Except as set
forth in Section
5.9 of the Disclosure Schedule, no broker, finder or
investment banker is entitled to any brokerage, finder’s or
other fee or commission in connection with the Transactions or any
other transactions, whether past, present or future, based upon
arrangements made by or on behalf of any Group Company or the
Shareholder.
Representations
and warranties of buyer
Buyer
hereby represents and warrants to the Company and the Shareholder
that the statements contained in this Article 6 are true and correct
on the date hereof and shall be true and correct on the Closing
Date as if made thereon.
6.1 Organization and Authority of
Buyer. At the time of
the execution of this Agreement by Buyer, Buyer is a corporation
duly organized, validly existing and in good standing under the
Laws of the State of Colorado, and, as of immediately prior to the
Effective Time, Buyer will be a corporation duly organized, validly
existing and in good standing under the Laws of the State of
Delaware. Buyer has full corporate power and authority to enter
into this Agreement and the other Transaction Documents to which
Buyer is a party, to carry out its obligations hereunder and
thereunder and to consummate the Transactions. The execution and
delivery by Buyer of this Agreement and any other Transaction
Document to which Buyer is a party, the performance by Buyer of its
obligations hereunder and thereunder and the consummation by Buyer
of the Transactions have been duly authorized by all requisite
corporate action on the part of Buyer. This Agreement has been duly
executed and delivered by Buyer, and (assuming due authorization,
execution and delivery by the Shareholder and the Company) this
Agreement constitutes a legal, valid and binding obligation of
Buyer enforceable against Buyer in accordance with its terms,
except as enforceability may be limited by bankruptcy, insolvency
or similar laws affecting the enforcement of creditors’
rights generally. When each other Transaction Document to which
Buyer is or will be a party has been duly executed and delivered by
Buyer (assuming due authorization, execution and delivery by each
other party thereto), such Transaction Document will constitute a
legal and binding obligation of Buyer enforceable against it in
accordance with its terms, except as enforceability may be limited
by bankruptcy, insolvency or similar laws affecting the enforcement
of creditors’ rights generally.
6.2 No
Conflicts; Consents. The execution and
delivery by Buyer of this Agreement and each Transaction Document,
and the performance by it of any actions contemplated hereunder or
thereunder, does not and will not, directly or indirectly (with or
without notice or lapse of time) conflict with or violate any
provision of the Governing Documents of Buyer.
6.3 Investment
Purpose. Buyer will
acquire the Shares solely for its own account for investment
purposes and not with a view to, or for offer or sale in connection
with, any distribution thereof.
6.4 Legal
Proceedings. There are no
Actions pending or, to Buyer’s knowledge, threatened against
or by Buyer or any Affiliate of Buyer that challenge or seek to
prevent, enjoin or otherwise delay the Transactions.
6.5 Brokers. Except for such
amounts as Buyer shall pay, no broker, finder or investment banker
is entitled to any brokerage, finder’s or other fee or
commission in connection with the Transactions or any other
Transaction Document based upon arrangements made by or on behalf
of Buyer.
Covenants
7.1 Conduct of Business Prior to the
Closing. From the date
hereof until the Closing, except as otherwise provided in this
Agreement, required to complete the Pre-Closing Reorganization or
consented to in writing by Buyer (which consent shall not be
unreasonably withheld or delayed), each Group Company shall
(a) conduct the business of the Group Companies in the
Ordinary Course of Business; and (b) use its reasonable best
efforts to maintain and preserve intact the current organization,
business and franchise of the Group Companies and to preserve the
rights, franchises, goodwill and relationships of its employees,
customers, lenders, suppliers, regulators and others having
business relationships with the Group Companies. Without limiting
the foregoing, from the date hereof until the Closing Date, each
Group Company shall:
(a) preserve and
maintain all of its Permits;
(b) pay its debts,
Taxes and other obligations when due;
(c) not accelerate any
receivables or delay paying any payables;
(d) not cancel or waive
rights of substantial value;
(e) maintain the
properties and assets owned, operated or used by it in the same
condition as they were on the date of this Agreement, subject to
reasonable wear and tear;
(f) continue in full
force and effect without modification all insurance policies,
except as required by applicable Law;
(g) defend and protect
its properties and assets from infringement or
usurpation;
(h) perform all of its
obligations under all Contracts relating to or affecting its
properties, assets or business;
(i) maintain its books
and records in accordance with past practice;
(j) comply in all
material respects with all applicable Laws; and
(k) not (i) make,
change or revoke any Tax election, (ii) consent to any extension or
waiver of the limitations period applicable to any claim or
assessment with respect to Taxes (iii) file any amended income tax
or any other material Tax Return, (iv) settle or compromise any
material Tax claim or assessment by any Governmental Authority,
(v) enter into a closing agreement with a taxing authority or
(vi) surrender any right to claim a refund of a material amount of
Taxes.
Without
in any way limiting any party’s rights or obligations under
this Agreement, the parties understand and agree that (i) nothing
contained in this Agreement shall give Buyer, directly or
indirectly, the right to control or direct the business operations
of the Group Companies prior to the Closing and (ii) prior to the
Closing, the Company shall exercise, consistent with the terms and
conditions of this Agreement, complete control and supervision over
the operations of the Business.
7.2 Access to
Information.
(a) From the date
hereof until the Closing, each Group Company shall (a) afford Buyer
and its Representatives full and free access to and the right to
inspect all of the properties, assets, premises, books and records,
Contracts and other documents and data related to any Group
Company; (b) furnish Buyer and its Representatives with such
financial, operating and other data and information related to any
Group Company as Buyer or any of its Representatives may reasonably
request (including for Buyer to make a determination as to whether
the conditions to Closing have been satisfied); and (c) instruct
the Representatives of the Group Companies to cooperate with Buyer
in its investigation of the Company. Any investigation pursuant to
this Section 7.2
shall be conducted during normal business hours and in such manner
as not to interfere unreasonably with the conduct of the Group
Companies’ business.
(b) For a period of 7
years after the Closing Date, the Shareholder and its
Representatives shall have reasonable access to all of the books
and records of each Group Company with respect to the pre-Closing
period, to the extent that such access may reasonably be required
in connection with the preparation of the Shareholder’s
financial reports or Tax Returns or any Tax audits or for any other
legitimate and reasonable purpose (it being understood that any
Action by or on behalf of Shareholder Indemnitees against Buyer or
any of its Affiliates or any of their respective Affiliates with
respect to this Agreement or any Transaction Document, does not
constitute legitimate or reasonable purpose). Such access shall be
afforded by Buyer upon receipt of reasonable advance notice and
during normal business hours. Notwithstanding the
foregoing, neither Buyer nor Group Company shall be required to
provide access or to disclose any information to the Shareholder or
any of its Representatives if doing so would reasonably be expected
to (x) waive any legal privilege or (y) be in violation of
applicable Contract or law to which Buyer or a Group Company is a
party or to which it is subject; provided that, in each case,
Buyer and the applicable Group Companies shall use their
commercially reasonable efforts to make any such disclosure in a
manner that does not waive any legal privilege or violate
applicable Contract or law, including entering into a joint-defense
agreement.
(c) The Shareholder
shall provide, or cause to be provided, to Buyer and its
Representatives, copies of historical financial statements and
other financial information regarding the Group Companies (and if
required, the Excluded Entities), in each case, to the extent
required in connection with Buyer’s compliance with the rules
and requirement of the Securities Exchange Commission or otherwise
in connection with Buyer’s financial reporting and disclosure
obligations under federal and state securities laws or the rules or
regulations promulgated thereunder. All such financial statements
and information shall be provided within the timeframe required
under applicable securities laws and the rules and regulations
promulgated thereunder.
(d) Following the
Closing, Buyer shall provide Shareholder and its Representatives,
within the timeframe required under applicable securities laws and
the rules and regulations promulgated thereunder, with financial
statements and other financial information regarding the Group
Companies, in each case, to the extent required in connection with
compliance by the Shareholder and its Affiliates with the rules and
requirement of the Securities Exchange Commission or otherwise in
connection with their respective financial reporting and disclosure
obligations under federal and state securities laws or the rules or
regulations promulgated thereunder, including without limitation
the following:
(i) Not later than 9
Business Days following the end of each calendar month which occurs
during the period from the Closing Date through the last day of the
first fiscal quarter of the Shareholder ending after the Closing
Date, Buyer shall provide Shareholder with the consolidated trial
balances for the Group Companies and certify
OneStream;
(ii) Not later than 9
Business Days following the end of the first fiscal quarter of the
Shareholder ending after the Closing Date, Buyer shall provide
Shareholder with a year-to-date statement of cash flows for the
Group Companies and all roll-forward support for such statement of
cash flows;
(iii) Not later than 9
Business Days following the end of the first fiscal quarter of the
Shareholder ending after the Closing Date, Buyer shall provide
Shareholder with a balance sheet of the Group Companies as of the
Closing Date and an income statement for the Group Companies
covering the period from the last day of the fiscal quarter of the
Group Companies preceding the Closing Date to the Closing
Date;
(iv) Not later than 12
Business Days following the end of the first fiscal quarter of the
Shareholder ending after the Closing Date, Buyer shall provide
Shareholder with all required information or other items listed on
the quarter-end checklist provided by the Parent’s accounting
team to the Group Companies’ accounting team;
(v) Not later than 14
Business Days following the end of the first fiscal quarter of the
Shareholder ending after the Closing Date, Buyer shall provide
Shareholder with all quarterly analytics regarding the Group
Companies as may be requested by the Parent’s accounting
team; and
(vi) Not later than 15
Business Days following the end of the first fiscal quarter of the
Shareholder ending after the Closing Date, Buyer shall provide
Shareholder with the M3 Executive Summary File providing support
for results of operations, Adjusted EBITDA, and all requested KPIs
necessary to support the Parent’s SEC filing & management
reporting needs with respect to the Group Companies.
7.3 No
Solicitation of Other Bids.
(a) Each Group
Company and each Shareholder shall not, and shall not authorize or
permit any of its Affiliates or any of its or their Representatives
to, directly or indirectly, (i) encourage, solicit, initiate,
facilitate or continue inquiries regarding an Acquisition Proposal;
(ii) enter into discussions or negotiations with, or provide
any information to, any Person concerning a possible Acquisition
Proposal; or (iii) enter into any agreements or other
instruments (whether or not binding) regarding an Acquisition
Proposal. Each Group Company and each Shareholder shall immediately
cease and cause to be terminated, and shall cause its Affiliates
and all of its and their Representatives to immediately cease and
cause to be terminated, all existing discussions or negotiations
with any Persons conducted heretofore with respect to, or that
could lead to, an Acquisition Proposal. For purposes hereof,
“Acquisition
Proposal” shall mean any inquiry, proposal or offer
from any Person (other than Buyer or any of its Affiliates)
concerning (A) a merger, consolidation, liquidation,
recapitalization, share exchange or other business combination
transaction involving any Group Company; (B) the issuance or
acquisition of shares of capital stock or other equity securities
of any Group Company; or (C) the sale, lease, exchange or
other disposition of any significant portion of any Group
Company’s properties or assets.
(b) In addition to the
other obligations under this Section 7.3, each Group Company
and Shareholder shall promptly (and in any event within three (3)
Business Days after receipt thereof by a Group Company, its
Affiliates, any Shareholder or their Representatives) advise Buyer
orally and in writing of any Acquisition Proposal, any request for
information with respect to any Acquisition Proposal, or any
inquiry with respect to or which could reasonably be expected to
result in an Acquisition Proposal, and the material terms and
conditions of such request, Acquisition Proposal or
inquiry.
(c) Each Group Company
and each Shareholder agrees that the rights and remedies for
noncompliance with this Section 7.3 shall include
having such provision specifically enforced by any court having
equity jurisdiction, it being acknowledged and agreed that any such
breach or threatened breach shall cause irreparable injury to Buyer
and that money damages would not provide an adequate remedy to
Buyer.
7.4 Notice of Certain
Events.
(a) From the date
hereof until the Closing, the Company shall promptly notify Buyer
in writing of:
(i) any fact,
circumstance, event or action the existence, occurrence or taking
of which (A) has had, or could reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect,
(B) has resulted in, or could reasonably be expected to result
in, any representation or warranty made by the Company or the
Shareholder hereunder not being true and correct or (C) has
resulted in, or could reasonably be expected to result in, the
failure of any of the conditions set forth in Section 9.2 to be
satisfied;
(ii) any notice or other
communication from any Person alleging that the consent of such
Person is or may be required in connection with the
Transactions;
(iii) any notice or other
communication from any Governmental Authority in connection with
the Transactions; and
(iv) any Actions
commenced or, to Company’s Knowledge, threatened against,
relating to or involving or otherwise affecting the Company that,
if pending on the date of this Agreement, would have been required
to have been disclosed pursuant to Section 5.6 or that relates to
the consummation of the Transactions.
(b) Buyer’s
receipt of information pursuant to this Section 7.4 shall not operate
as a waiver or otherwise affect any representation, warranty or
agreement given or made by the Company or the Shareholder in this
Agreement (including Section 10.2 and Section 11.1(b)) and shall not
be deemed to amend or supplement the Disclosure
Schedule.
7.5 Confidentiality.
From and after the Closing, the Shareholder shall, and shall cause
its Affiliates to, hold, and shall use its reasonable best efforts
to cause its or their respective Representatives to hold, in
confidence any and all information, whether written or oral,
concerning the Group Companies (“Confidential
Information”), except to the extent that the
Shareholder can show that such information (a) is generally
available to and known by the public through no fault of the
Shareholder, any of its Affiliates or their respective
Representatives; or (b) is lawfully acquired by the
Shareholder, any of its Affiliates or their respective
Representatives from and after the Closing from sources which are
not prohibited from disclosing such information by a legal,
contractual or fiduciary obligation. If Shareholder or any of its
Affiliates or their respective Representatives are compelled to
disclose any information by judicial or administrative process or
by other requirements of Law, Shareholder shall promptly notify
Buyer in writing and shall disclose only that portion of such
information which the Shareholder is advised by its counsel in
writing is legally required to be disclosed, provided that the Shareholder shall use
reasonable best efforts to obtain an appropriate protective order
or other reasonable assurance that confidential treatment will be
accorded such information.
7.6 Non-competition;
Non-solicitation.
(a) For a period of two
(2) years following the Closing, the Shareholder agrees that it
shall not, directly or indirectly through any Person, entity or
contractual arrangement:
(i) engage in the
Business anywhere in the world (the “Restricted Territory”),
it being acknowledged by the Shareholder that the Group Companies
engage in the Business throughout the Restricted Territory;
or
(ii) solicit, offer
employment to or hire any individual that is an employee or
consultant of a Group Company as of the Closing Date or otherwise
induce or attempt to induce (whether for their own account or for
the account of any other Person) any individual that is an employee
or consultant of a Group Company as of the Closing Date to leave
the employ of such Group Company; provided, however, that nothing in this
Section 7.6(a)(ii)
shall prohibit any such party from: (i) using general solicitations
(including through search firms) not targeted at employees of the
Group Companies, or employing any person who responds to such
solicitation; (ii) hiring, employing or discussing employment with
any person who contacts such party independently without any
solicitations by such party or (iii) soliciting any person who has
left the employment of the Group Companies at least six (6) months
prior to such party soliciting such person; or
(iii) knowingly induce
or attempt to induce any
customer, supplier, licensee or other business relation of
a Group Company to cease participating in
the Business as conducted by such Group Company.
(b) The Shareholder
acknowledges that if it breaches any obligation under this
Section 7.6, Buyer
will suffer immediate and irreparable harm and damage for which
money alone cannot fully compensate, and the Shareholder therefore
agrees that upon such breach or threatened breach, Buyer shall be
entitled to seek a temporary restraining order, preliminary
injunction, permanent injunction or other injunctive relief,
without posting any bond or other security, barring the other party
from violating any such provision. This Section 7.6(b) shall not be
construed as an election of any remedy, or as a waiver of any right
available to Buyer under this Agreement or the Law, including the
right to seek damages for a breach.
(c) If a court of
competent jurisdiction determines that the character, duration or
geographical scope of the provisions of this Section 7.6 are unreasonable,
it is the intention and the agreement of the parties that these
provisions shall be construed by the court in such a manner as to
impose only those restrictions on the Shareholder’s conduct
that are reasonable in light of the circumstances and as are
necessary to assure to Buyer the benefits of this Agreement. If, in
any judicial proceeding, a court shall refuse to enforce all of the
separate covenants of this Section 7.6 because taken
together they are more extensive than necessary to assure to Buyer
the intended benefits of this Agreement, it is expressly understood
and agreed by the parties that the provisions hereof that, if
eliminated, would permit the remaining separate provisions to be
enforced in such proceeding, shall be deemed eliminated, for the
purposes of such proceeding, from this Agreement.
7.7 Approvals and
Consents.
(a) From the date
hereof until the Closings, Buyer, the Company and the Shareholder
shall (i) use their respective reasonable best efforts to file,
make or obtain, as applicable, all registrations, filings,
applications, notices, consents, approvals, orders, qualifications
and waivers listed on Section 7.7 of the Disclosure
Schedule and (ii) shall make any payments required to accomplish
the foregoing. For the avoidance of doubt, the cost of such filings
and obtaining such consents shall be borne 100% by
Buyer.
(b) Each of the Parties
shall use their respective reasonable best efforts to:
(i) respond to any
inquiries by any Governmental Authority regarding antitrust or
other matters with respect to the Transactions or any agreement or
document contemplated hereby;
(ii) avoid the
imposition of any order or the taking of any action that would
restrain, alter or enjoin the Transactions or any agreement or
document contemplated hereby; and
(iii) in the event any
Governmental Order adversely affecting the ability of the parties
to consummate the Transactions or any agreement or document
contemplated hereby has been issued, to have such Governmental
Order vacated or lifted.
(c) If any consent,
approval or authorization necessary to preserve any right or
benefit under any Contract to which the Company is a party is not
obtained prior to the Closing, the Shareholder shall, at
Buyer’s sole expense, subsequent to the Closing, cooperate
with Buyer and the Company in attempting to obtain such consent,
approval or authorization as promptly thereafter as practicable. If
such consent, approval or authorization cannot be obtained, the
Shareholder shall use its commercially reasonable efforts to
provide the Company with the rights and benefits of the affected
Contract for the term thereof, and, if the Shareholder provides
such rights and benefits, the Company shall assume all obligations
and burdens thereunder.
(d) Each of the Parties
shall use all reasonable best efforts to (i) file or cause to be
filed with the FCC all required applications seeking consent to the
transfer of control of all applicable Communications Authorizations
from Seller to Buyer (the “FCC Applications”) not
later than ten (10) Business Days following the date hereof; (ii)
file or cause to be filed with the State PUCs all appropriate
applications seeking consent to the transfer of control of the
applicable Communications Authorizations from Seller to Buyer (the
“State PUC
Applications”) not later ten (10) Business Days
following the date hereof; and (iii) make such filings with any
applicable Governmental Authorities as are necessary to obtain any
required consents to the transfer of control of other
Communications Authorizations. Each Party shall furnish to the
other Party all necessary information concerning such Party and its
Affiliates as may be reasonably required for inclusion in the (i)
FCC Applications, (ii) State PUC Applications, (iii) any other
filings to be made in connection with the Transactions or (iv) to
determine compliance with Law. The Parties shall supply promptly
any additional information and documentary material that may be
requested by the FCC, the State PUCs, and any other applicable
Governmental Authority. Each Party shall work together in good
faith and use its reasonable best efforts to expeditiously
prosecute all such applications and filings to a favorable
conclusion.
(e) All analyses,
appearances, meetings, discussions, presentations, memoranda,
briefs, filings, arguments, and proposals made by or on behalf of a
party before any Governmental Authority or the staff or regulators
of any Governmental Authority, in connection with the transactions
contemplated hereunder (but, for the avoidance of doubt, not
including any interactions between or the Company with Governmental
Authorities in the ordinary course of business, any disclosure
which is not permitted by Law or any disclosure containing
confidential information) shall be disclosed to the other party in
advance of any filing, submission or attendance, it being the
intent that the parties will consult and cooperate with one
another, and consider in good faith the views of one another, in
connection with any such analyses, appearances, meetings,
discussions, presentations, memoranda, briefs, filings, arguments,
and proposals. Each party shall give notice to the other party with
respect to any meeting, discussion, appearance or contact with any
Governmental Authority or the staff or regulators of any
Governmental Authority, with such notice being sufficient to
provide the other party with the opportunity to attend and
participate in such meeting, discussion, appearance or
contact.
(f) Notwithstanding the
foregoing, nothing in this Section 7.7 shall require, or
be construed to require, Buyer or any of its Affiliates to agree to
(i) sell, hold, divest, discontinue or limit, before or after
the Closing Date, any assets, businesses or interests of Buyer, the
Company or any of their respective Affiliates, (ii) any
conditions relating to, or changes or restrictions in, the
operations of any such assets, businesses or interests which, in
either case, could reasonably be expected to result in a Material
Adverse Effect or materially and adversely impact the economic or
business benefits to Buyer of the Transactions, (iii) any
material modification or waiver of the terms and conditions of this
Agreement, or (iv) threaten to, commence, prosecute or defend
any Action.
(g) As of the Closing,
the Shareholder hereby waives all rights of first refusal, co-sale
rights, drag-along rights, consent rights and other similar rights
that the Shareholder may have, as well as any restrictions on the
transfer of the Shares, in each case under the Company’s
organizational documents or otherwise with respect to the
transactions contemplated hereby.
(a) The Shareholder, on
behalf of itself and its Affiliates which it controls, and their
respective successors and assigns (collectively, the
“Releasors”), hereby
knowingly and voluntarily releases and forever discharges,
effective as of the Closing Date, Buyer and each Group Company, and
each of their respective past, present and/or future Affiliates and
Representatives (collectively, the “Released Parties”), from
any and all Actions, claims, suits, controversies, causes of
action, cross-claims, counter claims, demands, debts, compensatory
damages, liquidated damages, punitive or exemplary damages, other
damages, claims for costs and attorneys’ fees, or liabilities
of any nature whatsoever in law and in equity, whether known or
unknown, liquidated or contingent, which the Shareholder or any
other Releasor ever had, now have or may have relating to, arising
out of or in any way connected with the dealings of the Group
Companies, on the one hand, and the Shareholder and the other
Releasors, on the other hand, or any circumstance, agreement,
action, omission, event or matter occurring or existing between the
Group Companies on the one hand and the Shareholder and the other
Releasors on the other hand, in each case, prior to the Closing
Date (collectively, the “Released Claims”);
provided,
however, that the
Released Claims shall not include any of the terms, conditions or
other provisions or obligations under this Agreement or the
Transaction Documents.
(b) The Shareholder
acknowledges that the Laws of many states provide substantially the
following:
“A GENERAL
RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW
OR SUSPECT TO EXIST IN HIS OR HER FAVOR AT THE TIME OF EXECUTING
THE RELEASE, WHICH IF KNOWN BY HIM OR HER MUST HAVE MATERIALLY
AFFECTED HIS OR HER SETTLEMENT WITH THE DEBTOR.”
The
Shareholder acknowledges that such provisions are designed to
protect a party from waiving claims which he does not know exist or
may exist. Nonetheless, the Shareholder agrees that, effective as
of the Closing Date, the Shareholder and the other Releasors shall
be deemed to waive any such provision.
(c) The Shareholder
further agrees that it shall not, and shall not permit any
Affiliates which it controls to, (i) institute a lawsuit or other
legal proceeding based upon, arising out of, or relating to any of
the Released Claims, (ii) participate, assist, or cooperate in any
such proceeding, or (iii) encourage, assist and/or solicit any
third party to institute any such proceeding.
7.9 Closing
Conditions. From the date
hereof until the Closing, each of Buyer and the Shareholder shall,
and Shareholder shall cause the Company to, use reasonable best
efforts to take such actions as are necessary to expeditiously
satisfy the closing conditions set forth in Article 9.
7.10 Publicity;
Transaction Disclosure.
(a) Any public
announcement, press release or similar publicity with respect to
this Agreement or the Transactions will be issued, if at all, at
such time and in such manner as approved in writing by the other
party (such approval not to be unreasonably withheld, conditioned
or delayed); provided, that if such
announcement is required by Law, a party may make any such
announcement, release or similar publicity without the consent of
the other party, provided that the disclosing party shall use
commercially reasonable efforts to provide, to the extent
practicable and legally permitted, the other party a reasonable
opportunity to review and comment on the content of such
announcements in advance (it being understood that the other party
shall not have any right to prevent the disclosing party from
making such announcements).
(b) None of (i) the
Group Companies, the Shareholder or any of their respective
Affiliates or any of their respective Representatives shall (except
with the prior written consent of Buyer or as permitted by this
Agreement) and (ii) Buyer or any of its Affiliates or
Representative shall (except with the prior written consent of the
Shareholder or as permitted by this Agreement) disclose to any
Person: (A) the fact that any confidential information of the
Group Companies has been disclosed to Buyer or its Representatives,
or that any confidential information of Buyer has been disclosed to
the Group Companies or the Shareholder or (B) any information
about the transactions contemplated hereby, including the status of
such discussions or negotiations, the execution of any documents
(including this Agreement) or any of the terms of the transactions
contemplated hereby or the related documents (including this
Agreement); provided that the foregoing
obligation of the Group Companies, the Shareholder or Buyer (or any
of their respective Affiliates or Representatives) shall not
prohibit disclosure of any such information (1) if required by
applicable Law; (2) as required in order to fulfill such
party’s obligations under this Agreement; (3) to a financial,
legal or accounting advisor for the purpose of advising in
connection with the transactions contemplated by this Agreement and
the other Transaction Documents (provided, that such advisor is
made aware of and directed to comply with the provisions of this
Section 7.10); (4)
to the extent that the information has been made public by, or with
the prior consent of, Buyer (with respect to disclosures by the
Group Companies, the Shareholder or their respective Affiliates or
Representatives) or the Shareholder (with respect to disclosures by
Buyer or its Affiliates or Representatives); or (5) in connection
with any Action with respect to this Agreement or any other
Transaction Documents; and provided, further, that in the event any
of the Group Companies, the Shareholder or Buyer is required by Law
to disclose any such information, such Person shall promptly notify
Buyer (with respect to disclosures by the Group Companies or the
Shareholder) or the Shareholder (with respect to disclosures by
Buyer) in writing to the extent permitted by Law, which
notification shall include the nature of the legal requirement and
the extent of the required disclosure, and such Person shall
reasonably cooperate with Buyer or the Shareholder, as applicable
(at such Person’s expense) to preserve the confidentiality of
such information consistent with applicable Law.
7.11 Benefit
Plans.
Effective as of the Effective Time or before, the Company shall
terminate or cause to be terminated each employee benefit plan of
the Company designated on Section 7.11 of the Disclosure
Schedule, unless Buyer provides written notice to the Company that
such employee benefit plan shall not be terminated.
7.12 Litigation
Support. Following the
Closing, in the event and for so long as Buyer or the Group
Companies are actively contesting or defending against any Action
in connection with any fact, situation, circumstance, action,
failure to act, or transaction on or prior to the Closing Date
involving any Group Company, the Shareholder will cooperate with it
and its counsel in the contest or defense and provide such
testimony and access to the Shareholder’s books and records
as shall be necessary in connection with the contest or defense,
all at the sole cost and expense of Buyer and the Group Companies
(unless Buyer is entitled to indemnification therefor
hereunder).
7.13 280G. Promptly
following the execution of this Agreement, the Company shall submit
to the Shareholder for approval (in a manner reasonably
satisfactory to Buyer), by such number of holders of the
Shareholder as is required by the terms of Section 280G(b)(5)(B) of
the Code, any payments and/or benefits that may separately or in
the aggregate, constitute “parachute payments” pursuant
to Section 280G of the Code (“Section 280G Payments”)
(which determination shall be made by the Company and shall be
subject to review and approval by Buyer, such approval not to be
unreasonably withheld, conditioned or delayed), such that such
payments and benefits shall not be deemed to be Section 280G
Payments, and prior to the Closing, the Company shall deliver to
Buyer notification and documentation reasonably satisfactory to
Buyer that (a) a vote of the holders of the capital stock of the
Company was solicited in conformance with Section 280G and the
regulations promulgated thereunder and the requisite Shareholder
approval was obtained with respect to any payments and/or benefits
that were subject to the Shareholder vote (the “280G Shareholder
Approval”), or (b) that the 280G Shareholder Approval
was not obtained and as a consequence, that such payments and/or
benefits shall not be made or provided to the extent they would
cause any amounts to constitute Section 280G Payments, pursuant to
the waivers of those payments and/or benefits which were executed
by the affected individuals prior to the vote of the holders of
Company’s capital stock pursuant to this Section 7.13.
7.14 Company
Covenants. The Shareholder
shall cause each Group Company to comply with each of its covenants
and agreements set forth herein.
7.15 Customer and other Business
Relationships. After the
Closing, the Shareholder will, and will cause its Affiliates to,
refer to Buyer all inquiries relating to the Group
Companies.
7.16 Insurance; Risk of
Loss. The Shareholder
will, and will cause each of its Affiliates to, keep insurance
policies currently maintained in respect of the Business and
current or former employees of the Group Companies, as the case may
be, or suitable replacements therefor, in full force and effect
through the close of business on the Closing Date. For any claim
that may be asserted against any Group Company after the Closing
Date arising out of events, incidents, conduct or circumstances
that occurred and/or existed prior to the Closing Date (such
claims, “Post-Closing Claims”):
(i) the Shareholder shall ensure that the Group Companies have
access to coverage under each of the insurance policies set forth
in Section 7.16 of
the Disclosure Schedule (the “Specified Policies”) in
each case subject to the terms and conditions thereof; and (ii)
with respect to Specified Policies designated as
“Claims-Made” and “Occurrence-Reported,”
the Shareholder shall secure tail coverage and/or ensure that the
Group Companies have access, either directly or through the
Shareholder or its Affiliates to coverage under renewals of such
Specified Policies or equivalent coverage. After the Closing Date,
the Group Companies may seek coverage for any Post-Closing Claim
from the applicable insurer under any Specified Policy or, where
applicable, any tail or renewal policy or equivalent of such
Specified Policy, and the Shareholder shall cooperate with the
Group Companies in connection with the tendering of such claims
(including by providing access to employees and third party claims
adjustors); provided, however, that (i) the Group
Companies shall reimburse the Shareholder for all of its
out-of-pocket costs and expenses in connection with such
cooperation; and (ii) the Group Companies shall notify the
Shareholder of all such coverage claims made. Shareholder shall not
release, commute, buy-back, or otherwise eliminate the coverage
available under any Specified Policy without first providing
written notice to the Group Companies.
7.17 Internal
Control over Financial Reporting. Without limiting
any other provisions of this Agreement, prior to the Closing, the
Company shall use its commercially reasonable efforts to coordinate
with Buyer and to provide the internal resources required to
establish: (a) a system of “internal controls over financial
reporting” (as defined in Rules 13a-15(f) and 15d-15(f) under
the Exchange Act) sufficient to provide reasonable assurances: (i)
that transactions are recorded as necessary to permit preparation
of financial statements in conformity with GAAP; (ii) that
transactions are executed only in accordance with the authorization
of management; and (iii) regarding prevention or timely detection
of the unauthorized acquisition, use or disposition of the
properties or assets of the Group Company, and (b) a system of
“disclosure controls and procedures” (as defined in
Rules 13a-15(e) and 15d-15(e) under the Exchange Act) sufficient to
ensure that all material information concerning the Group Companies
is made known on a timely basis to the individuals responsible for
the preparation of the Company’s financial statements;
provided that the
Company shall not be required to incur any out of pocket expenses
(other than nominal expenses) in connection with such efforts.
Prior to the Closing, the Company shall reasonably cooperate with
Buyer with respect to integration planning in respect of accounting
and financial reporting functions.
7.18 Financial Reporting
Cooperation. During the period
between the signing of this Agreement and the earlier of the
Closing or termination of this Agreement, the Company shall provide
(and cause its Subsidiaries to provide) such reasonable and
customary cooperation (and to use commercially reasonable efforts
to cause its and their respective managers, officers, directors,
employees, accountants, legal counsel, agents, other advisors and
authorized representatives to provide such reasonable and customary
cooperation) in connection with Buyer’s and its
Affiliates’ reporting obligations under the Securities Act
and the Exchange Act.
7.19 Further
Assurances. Each of the
parties shall, and shall cause their respective Affiliates to,
execute and deliver such additional documents, instruments,
conveyances and assurances and take such further actions as may be
reasonably required to carry out the provisions hereof and give
effect to the Transactions.
Tax
matters
(a) Without the
prior written consent of Buyer (which consent shall not be
unreasonably withheld, conditioned or delayed), the Shareholder
(and, prior to the Closing, the Group Companies, their respective
Affiliates and their respective Representatives) shall not, to the
extent it may adversely affect any Group Company following the
Effective Time, make, change or rescind any Tax election, amend any
Tax Return or take any position on any Tax Return, take any action,
omit to take any action or enter into any other transaction that
would have the effect of increasing the Tax liability or reducing
any Tax asset of Buyer or any Group Company in respect of any
taxable period ending after the Closing Date and, with respect to
any taxable period beginning before and ending after the Closing
Date, the portion of such taxable period beginning on and including
the Closing Date (“Post-Closing Tax
Period”). Parent and Shareholder each agree that Buyer
is to have no liability for any Tax resulting from any action of
Parent, Shareholder, any Group Company (on or prior to the Closing
Date), its Affiliates or any of their respective Representatives
(excluding any liability with respect to any Virginia BPOL taxes
owed by a Group Company for which neither Parent nor Shareholder
shall have any indemnification obligation hereunder), and agrees to
indemnify and hold harmless Buyer (and, after the Closing Date, the
Group Companies) against any such Tax liability. Following the
Effective Time, except for the indemnification provided in the
immediately preceding sentence, neither Parent nor Shareholder, nor
any of their respective Affiliates (other than the Group Companies)
or Representatives, shall have any liability or obligation with
respect to any Tax liability of a Group Company.
(b) All transfer,
documentary, sales, use, stamp, registration, value added and other
such Taxes and fees (including any penalties and interest) incurred
in connection with this Agreement and the other Transaction
Documents (including any real property transfer Tax and any other
similar Tax) shall be borne 100% by Buyer. The Buyer shall, at
its own expense, timely file any Tax Return or other document with
respect to such Taxes or fees (and Shareholder shall cooperate with
respect thereto as necessary).
(c) Shareholder shall
prepare, or cause to be prepared, all income Tax Returns required
to be filed by the Group Companies on a consolidated basis after
the Closing Date with respect to a “taxable period”
ending on or before the Closing Date and, Buyer shall prepare all
other Tax returns required to be filed by the Group Companies after
the Closing Date.
(d) Any Tax Return
required to be filed by the Group Companies after the Closing Date
with respect to a “taxable period” ending on or before
the Closing Date and with respect to any taxable period beginning
before and ending after the Closing Date the portion of such
taxable period ending on and including the Closing Date
(“Pre-Closing Tax Period”), shall be prepared in a
manner consistent with past practice (unless otherwise required by
Law) and without a change of any election or any accounting method
(unless otherwise required by Law). All Tax Returns prepared by
Buyer for Pre-Closing Tax Periods shall be submitted by Buyer to
the Shareholder (together with schedules, statements and, to the
extent requested by the Shareholder, supporting documentation) at
least forty-five (45) days prior to the due date (including
extensions) of such Tax Return. If the Shareholder objects to any
item on any such Tax Return, it shall, within ten (10) days after
delivery of such Tax Return, notify Buyer in writing that it so
objects, specifying with particularity any such item and stating
the specific factual or legal basis for any such objection. If a
notice of objection shall be duly delivered, Buyer and the
Shareholder shall negotiate in good faith and use their reasonable
best efforts to resolve such items. If Buyer and the Shareholder
are unable to reach such agreement within ten (10) days after
receipt by Buyer of such notice, the disputed items shall be
resolved by a nationally recognized accounting firm selected by
Buyer and reasonably acceptable to the Shareholder (the
“Accounting
Referee”) and any determination by the Accounting
Referee shall be final. The Accounting Referee shall resolve any
disputed items within twenty (20) days of having the item referred
to it pursuant to such procedures as it may require. If the
Accounting Referee is unable to resolve any disputed items before
the due date for such Tax Return, the Tax Return shall be filed as
prepared by Buyer and then amended to reflect the Accounting
Referee’s resolution. The costs, fees and expenses of the
Accounting Referee shall be by Buyer, on the one hand, and the
Shareholder, on the other hand, in such amount(s) as shall be
determined by the Accounting Referee based on the proportion that
the aggregate amount of disputed items submitted to the Accounting
Referee that is unsuccessfully disputed by Buyer, on the one hand,
or the Shareholder, on the other hand, as determined by the
Accounting Referee, bears to the total amount of such disputed
items so referred to the Accounting Referee for resolution. The
preparation and filing of any Tax Return of the Group Companies
that does not relate to a Pre-Closing Tax Period shall be
exclusively within the control of Buyer.
8.2 Termination of Existing Tax Sharing
Agreements. Any and all
existing Tax sharing agreements (whether written or not) binding
upon any Group Company shall be terminated as of the Closing Date.
After such date neither any Group Company, Parent, the Shareholder
nor any of the Shareholder’s Affiliates and their respective
Representatives shall have any further rights or liabilities
thereunder.
8.3 Tax
Indemnification. Except to the
extent treated as a liability in the calculation of the Closing
Company Net Cash, the Shareholder and Parent shall jointly and
severally indemnify the Group Companies, Buyer, and each Buyer
Indemnitee and hold them harmless from and against (a) any
Loss attributable to any breach or violation of, or failure to
fully perform, any covenant, agreement, undertaking or obligation
in this Article 8;
(b) all Taxes of the Group Companies or relating to the
business of the Group Companies for all Pre-Closing Tax Periods
(excluding any liability with respect to any Virginia BPOL taxes
owed by a Group Company for which neither Parent nor Shareholder
shall have any indemnification obligation hereunder); (d) all
Taxes of any member of an affiliated, consolidated, combined or
unitary group of which any Group Company (or any predecessor of any
Group Company) is or was a member on or prior to the Closing Date
by reason of a liability under Treasury Regulation
Section 1.1502-6 or any comparable provisions of foreign,
state or local Law (excluding any liability with respect to any
Virginia BPOL taxes owed by a Group Company for which neither
Parent nor Shareholder shall have any indemnification obligation
hereunder); and (e) any and all Taxes of any person imposed on
any Group Company arising under the principles of transferee or
successor liability or by contract, relating to an event or
transaction occurring before the Closing Date (excluding any
liability with respect to any Virginia BPOL taxes owed by a Group
Company for which neither Parent nor Shareholder shall have any
indemnification obligation hereunder). In each of the above cases,
together with any out-of-pocket fees and expenses (including
reasonable attorneys’ and accountants’ fees) incurred
in connection therewith. The Shareholder shall reimburse Buyer for
any Taxes of any Group Company that are the undisputed
responsibility of the Shareholder pursuant to this Section 8.3 within ten (10)
Business Days after payment of such Taxes by Buyer or any Group
Company.
8.4 Straddle
Period. In the case of
Taxes that are payable with respect to a taxable period that begins
before and ends after the Closing Date (each such period, a
“Straddle
Period”), the portion of any such Taxes that are
treated as Taxes of the Group Companies for any Pre-Closing Tax
Period shall be:
(a) In the case of
Taxes based upon, or related to, income or receipts, deemed equal
to the amount which would be payable if the taxable year ended with
the Closing Date;
(b) In the case of
other Taxes, deemed to be the amount of such Taxes for the entire
period multiplied by a fraction the numerator of which is the
number of days in the period ending on the Closing Date and the
denominator of which is the number of days in the entire period;
and
(c) Any Taxes of any of
the Group Companies arising from the Pre-Closing
Reorganization.
8.5 Contests. Buyer agrees to
give written notice to the Shareholder of the receipt of any
written notice by any Group Company, Buyer or any of Buyer’s
Affiliates which involves the assertion of any claim, or the
commencement of any Action, in respect of which an indemnity may be
sought by Buyer pursuant to this Article 8 (a
“Tax
Claim”); provided, that failure to
comply with this provision shall not affect Buyer’s right to
indemnification hereunder. Shareholder shall control the contest or
resolution of any Tax Claim; provided, however, that Shareholder shall
obtain the prior written consent of the Buyer (which consent shall
not be unreasonably withheld or delayed) before entering into any
settlement of a claim which may adversely affect the Buyer or any
Group Company or ceasing to defend such claim; and, provided further, that the Buyer shall
be entitled to participate in the defense of such claim and to
employ counsel of its choice for such purpose, the fees and
expenses of which separate counsel shall be borne solely by the
Buyer.
8.6 Cooperation
and Exchange of Information. The Shareholder
and Buyer shall provide each other with such cooperation and
information as either of them reasonably may request of the other
in filing any Tax Return pursuant to this Article 8 or in connection with
any audit or other proceeding in respect of Taxes of the Group
Companies. Such cooperation and information shall include providing
copies of relevant Tax Returns or portions thereof, together with
accompanying schedules, related work papers and documents relating
to rulings or other determinations by tax authorities. Each
Shareholder and Buyer shall retain all Tax Returns, schedules and
work papers, records and other documents in its possession relating
to Tax matters of the Group Companies for any taxable period
beginning before the Closing Date until the expiration of the
statute of limitations of the taxable periods to which such Tax
Returns and other documents relate, without regard to extensions
except to the extent notified by the other party in writing of such
extensions for the respective Tax periods. Prior to transferring,
destroying or discarding any Tax Returns, schedules and work
papers, records and other documents in its possession relating to
Tax matters of the Group Companies for any taxable period beginning
before the Closing Date, the Shareholder or Buyer (as the case may
be) shall provide the other party with reasonable written notice
and offer the other party the opportunity to take custody of such
materials.
8.7 Tax Treatment of Indemnification
Payments. Any
indemnification payments pursuant to this Article 8 shall be treated as
an adjustment to the Purchase Price by the parties for Tax
purposes, unless otherwise required by Law.
8.8 Survival. Notwithstanding
anything in this Agreement to the contrary, the provisions of this
Article 8 shall
survive for the full period of all applicable statutes of
limitations (giving effect to any waiver, mitigation or extension
thereof) plus 60 days.
8.9 Overlap. To the extent
that any obligation or responsibility pursuant to Article 10 may overlap with an
obligation or responsibility pursuant to this Article 8, the provisions of
this Article 8
shall govern.
Conditions
to closing
9.1 Conditions to Obligations of All
Parties. The obligations
of each party to consummate the Transactions shall be subject to
the fulfillment or mutual waiver of the Parties, at or prior to the
Closing, of each of the following conditions:
(a) The FCC Consent and
State PUC Consents shall have been obtained, and with respect to
the FCC Consent, such consent shall have become a Final
Order.
(b) No Governmental
Authority shall have enacted, issued, promulgated, enforced or
entered any Governmental Order which is in effect and has the
effect of making the Transactions illegal, otherwise restraining or
prohibiting consummation of such Transactions or causing any of the
Transactions to be rescinded following completion
thereof.
(c) No Action shall
have been commenced against Buyer, the Shareholder or any Group
Company, which would prevent the Closing. No injunction or
restraining order shall have been issued by any Governmental
Authority, and be in effect, which restrains or prohibits the
Transactions.
9.2 Conditions
to Obligations of Buyer. The obligations
of Buyer to consummate the Transactions shall be subject to the
fulfillment or Buyer’s waiver, at or prior to the Closing, of
each of the following conditions:
(a) Other than the
representations and warranties contained in Article 4, Section 5.1, Section 5.2, Section 5.3, Section 5.4, Section 5.5 and Section 5.9, the
representations and warranties of the Shareholder and the Company
contained in this Agreement, the other Transaction Documents and
any certificate or other writing delivered pursuant hereto shall be
true and correct in all respects on and as of the date hereof and
on and as of the Closing Date with the same effect as though made
at and as of such date (except those representations and warranties
that address matters only as of a specified date, the accuracy of
which shall be determined as of that specified date in all
respects), except to the extent that the facts, events and
circumstances that cause such representations and warranties to not
be true and correct as of such date(s) have not had and would not
reasonably be expected to have a Material Adverse Effect (provided
that qualifications as to materiality, Material Adverse Effect or
other similar qualifications contained in such representations and
warranties shall not be given effect). The representations and
warranties of contained in Article 4, Section 5.1, Section 5.2, Section 5.3, Section 5.4, Section 5.5 and Section 5.9 shall be true and
correct in all material respects on and as of the date hereof and
on and as of the Closing Date with the same effect as though made
at and as of such date (except those representations and warranties
that address matters only as of a specified date, the accuracy of
which shall be determined as of that specified date in all
respects) (provided that qualifications as to materiality, Material
Adverse Effect or other similar qualifications contained in such
representations and warranties shall not be given
effect).
(b) The Company and the
Shareholder shall have duly performed and complied in all material
respects with all agreements, covenants and conditions required by
this Agreement and each of the other Transaction Documents to be
performed or complied with by it prior to or on the Closing
Date.
(c) [Reserved].
(d) From the date of
this Agreement, there shall not have occurred any Material Adverse
Effect, nor shall any event or events have occurred that,
individually or in the aggregate, with or without the lapse of
time, could reasonably be expected to result in a Material Adverse
Effect.
(e) [Reserved].
(f) The Company shall
have delivered an Estimated Closing Statement pursuant to
Section 3.1(a) in
form reasonably approved by Buyer.
(g) The Company and the
Shareholder shall have delivered each of the closing deliverables
set forth in Sections
2.2 and 2.3.
(h) The form and
substance of all certificates, instruments, opinions and other
documents delivered to Buyer under this Agreement shall be
satisfactory in all reasonable respects to Buyer and its
counsel.
(i) The Pre-Closing
Reorganization shall have been completed.
(j) Saudi Telecom shall
not have terminated, canceled, discontinued, materially reduced, or
materially changed the terms (whether related to payment, price,
quantity of business or otherwise) of, or otherwise adversely
modified in any material respect, its business with the Group
Companies, or notified the Group Companies or the Shareholder of
its intent to do any of the foregoing.
(k) The sum of (i) the
Estimated Closing Company Transaction Expenses and (ii) the amount,
if any, by which the Target Company Net Equity exceeds the
Estimated Closing Net Equity, shall not exceed five hundred
thousand dollars ($500,000).
9.3 Conditions to Obligations of the
Company and the Shareholder. The obligations
of the Company and the Shareholder to consummate the Transactions
shall be subject to the fulfillment or the Shareholder’s
waiver, at or prior to the Closing, of each of the following
conditions:
(a) Other than the
representations and warranties of Buyer contained in Section 6.1, Section 6.2 and Section 6.5, the
representations and warranties of Buyer contained in this
Agreement, the other Transaction Documents and any certificate or
other writing delivered pursuant hereto shall be true and correct
in all respects on and as of the date hereof and on and as of the
Closing Date with the same effect as though made at and as of such
date (except those representations and warranties that address
matters only as of a specified date, the accuracy of which shall be
determined as of that specified date in all respects), except to
the extent that the facts, events and circumstances that cause such
representations and warranties to not be true and correct as of
such date(s) have not had and would not reasonably be expected to
have a material adverse effect on the ability of Buyer to
consummate the Transactions on a timely basis (provided that
qualifications as to materiality, Material Adverse Effect or other
similar qualifications contained in such representations and
warranties shall not be given effect). The representations and
warranties of Buyer contained in Section 6.1, Section 6.2 and Section 6.5 shall be true and
correct in all material respects on and as of the date hereof and
on and as of the Closing Date with the same effect as though made
at and as of such date, except those representations and warranties
that address matters only as of a specified date, the accuracy of
which shall be determined as of that specified date in all respects
(provided that qualifications as to materiality, Material Adverse
Effect or other similar qualifications contained in such
representations and warranties shall not be given
effect).
(b) Buyer shall have
duly performed and complied in all material respects with all
agreements, covenants and conditions required by this Agreement and
each of the other Transaction Documents to be performed or complied
with by it prior to or on the Closing Date.
ARTICLE
10
10.1 Survival. Subject to the
limitations and other provisions of this Agreement, the
representations and warranties contained herein shall survive the
Closing and shall remain in full force and effect until the first
anniversary of the Closing Date (the “General Survival
Period”); provided, that (a) the
representations and warranties in Article 4 (other than
Section 4.3),
Section 5.1,
Section 5.2,
Section 5.3,
Section 5.4,
Section 5.5,
Section 5.9,
Section 6.1,
Section 6.2 and
Section 6.5 shall
survive for the full period of all applicable statutes of
limitations (giving effect to any waiver, mitigation or extension
thereof) plus 60 days,
(b) the representations and warranties in Section 4.3 shall survive
indefinitely (the representations and warranties identified in the
foregoing clauses (a) and (b), the “Fundamental
Representations”) and (c) and any representation in
the case of fraud, intentional misrepresentation or intentional
breach shall survive indefinitely. Each covenant and agreement of
the parties contained herein which is to be performed prior to the
Closing Date (other than any covenants or agreements contained in
Article 8 which are
subject to Article
8) and any statement contained in the certificates and
instruments delivered pursuant to Section 2.2(a), 2.2(b), 2.3(b), 2.3(c), 2.3(f), 2.4(b) or 2.4(c) shall survive the
Closing for a period of six (6) months following the Closing Date.
Each covenant and agreement of the parties contained herein which
is to be performed on or after the Closing Date (other than any
covenants or agreements contained in Article 8 which are subject to
Article 8) shall
survive the Closing indefinitely or for the period explicitly
specified therein. Notwithstanding the foregoing, any claims
asserted in good faith with reasonable specificity (to the extent
known at such time) and in writing by notice from the non-breaching
party to the breaching party prior to the expiration date of the
applicable survival period shall not thereafter be barred by the
expiration of the relevant representation or warranty and such
claims shall survive until finally resolved. For the avoidance of
doubt, the references in this Section 10.1 to the “statutes
of limitations” shall refer to the statute of limitations
applicable to the particular matter that gave rise to a breach of
the representation or warranty in question, and not to the statute
of limitations applicable to a breach of this
Agreement.
10.2 Indemnification By The
Shareholder. Subject to the
other terms and conditions of this Article 10, the Shareholder and
Parent shall jointly and severally indemnify and defend each of
Buyer and its Affiliates (including after the Closing, the Group
Companies) and their respective Representatives (collectively, the
“Buyer
Indemnitees”) against, and shall hold each of them
harmless from and against, and shall pay and reimburse each of them
for, any and all Losses that is or may be incurred or sustained by,
or imposed upon, the Buyer Indemnitees based upon, arising out of,
with respect to, relating to or by reason of:
(a) A material
inaccuracy in or material breach of any representation or warranty
of the Shareholder or the Company contained in this Agreement or in
any certificate or instrument delivered by or on behalf of the
Shareholder or the Company pursuant to Section 2.2(a), 2.2(b), 2.3(b), 2.3(c) or 2.3(f), as of the date such
representation or warranty was made or as if such representation or
warranty was made on and as of the Closing Date (except for
representations and warranties that expressly relate to a specified
date, the inaccuracy in or breach of which will be determined with
reference to such specified date);
(b) a breach or
non-fulfillment of any covenant, agreement or obligation to be
performed by the Shareholder or any Group Company pursuant to this
Agreement (other than any breach or violation of, or failure to
fully perform, any covenant, agreement, undertaking or obligation
in Article 8, it
being understood that the sole remedy for any such breach,
violation or failure shall be pursuant to Article 8);
(c) a claim or right
asserted or held by any person who is or at any time was an
officer, director, employee or agent of any Group Company (against
any Group Company, Buyer, or any Affiliate of a Group Company or
Buyer) involving a right or entitlement or an alleged right or
entitlement to indemnification, reimbursement of expenses or any
other relief or remedy (under the Governing Documents, under any
indemnification agreement or similar Contract, under any applicable
Laws or otherwise) with respect to any act or omission on the part
of such person or any event or other circumstance that arose,
occurred or existed at or prior to the Closing;
(d) the Pre-Closing
Reorganization; or
(e) any Excluded
Entity.
10.3 Indemnification By
Buyer. Subject to the
other terms and conditions of this Article 10, Buyer shall
indemnify and defend the Shareholder, its Affiliates and their
respective Representatives (collectively, the “Shareholder
Indemnitees”) against, and shall hold each of them
harmless from and against, and shall pay and reimburse each of them
for, any and all Losses incurred or sustained by, or imposed upon,
the Shareholder Indemnitees based upon, arising out of, with
respect to, relating to or by reason of:
(a) a material
inaccuracy in or material breach of any of the representations or
warranties of Buyer contained in this Agreement or in any
certificate or instrument delivered by or on behalf of Buyer
pursuant to Section
2.4(b) and Section
2.4(c), as of the date such representation or warranty was
made or as if such representation or warranty was made on and as of
the Closing Date (except for representations and warranties that
expressly relate to a specified date, the inaccuracy in or breach
of which will be determined with reference to such specified date);
or
(b) a breach or
non-fulfillment of any covenant, agreement or obligation to be
performed by Buyer pursuant to this Agreement (other than
Article 8, it being
understood that the sole remedy for any such breach thereof shall
be pursuant to Article
8).
10.4 Certain
Limitations. The
indemnification provided for in Section 10.2 and Section 10.3 shall be subject
to the following limitations:
(a) The Shareholder
and Parent shall not be liable to the Buyer Indemnitees for
indemnification under Section 10.2(a) until the
aggregate amount of all Losses in respect of indemnification under
Section 10.2(a)
exceeds $25,000 (the “Basket”), in which event
the Shareholder and Parent shall be liable for all Losses in
respect of indemnification under Section 10.2(a) in excess of
the Basket. Notwithstanding anything to the contrary set forth
herein, in no event shall the Shareholder or Parent have liability pursuant to
Article 8 and/or
Article 10 in an
aggregate amount greater than the Purchase Price as finally
determined pursuant to this Agreement (the “Cap”), except in the case
of fraud.
(b) Buyer shall not be
liable to the Shareholder Indemnitees for indemnification under
Section
10.3(a) until
the aggregate amount of all Losses in respect of indemnification
under Section
10.3(a) exceeds
the Basket, in which event Buyer shall be liable for all Losses in
respect of indemnification under Section 10.3(a) in excess of
the Basket but not exceeding the Cap. Buyer shall not have
liability pursuant to Article 10 in an aggregate
amount greater than the Purchase Price as finally determined
pursuant to this Agreement, except in the case of
fraud.
(c) Notwithstanding the
foregoing, the Basket shall not apply to any indemnification claims
based upon, arising out of, with respect to, relating to or by
reason of any claims based on fraud, intentional misrepresentation
or intentional breach or any claim with respect to
Taxes.
10.5 Indemnification
Procedures. The party making
a claim under this Article
10 is referred to as the “Indemnified Person”, and
the party against whom such claims are asserted under this
Article 10 is
referred to as the “Indemnifying
Person”.
(a) Third Party
Claims.
(i) Notice. If any Indemnified
Person receives notice of the assertion or commencement of any
Action made or brought by any Person who is not a party or an
Affiliate of a party or a Representative of the foregoing (a
“Third Party
Claim”) against such Indemnified Person with respect
to which the Indemnifying Person is obligated to provide
indemnification under this Agreement, the Indemnified Person shall
give the Indemnifying Person reasonably prompt written notice
thereof, but in any event not later than thirty (30) days after
receipt of such notice of such Third Party Claim. The failure to
give such prompt written notice shall not, however, relieve the
Indemnifying Person of its indemnification obligations, except and
only to the extent that the Indemnifying Person forfeits rights or
defenses by reason of such failure. Such notice by the Indemnified
Person shall describe the Third Party Claim in reasonable detail,
shall include copies of all material written evidence thereof and
shall indicate the estimated amount, if reasonably practicable, of
the Loss that has been or may be sustained by the Indemnified
Person.
(ii) Right to Defend. Upon receipt
of the notice, the Indemnifying Person will have the right to
defend the Indemnified Person against the Third Party Claim with
counsel reasonably satisfactory to the Indemnified Person,
provided, that
(i) within thirty (30) days after the Indemnified Person has
given notice of the Third Party Claim the Indemnifying Person
acknowledges in writing to the Indemnified Person its unqualified
obligation to indemnify the Indemnified Person as provided
hereunder; provided, further, that, if after the Indemnifying
Person acknowledges its unqualified obligation to indemnify the
Indemnified Person and assumed the defense of such Third Party
Claim, (A) new allegations or claims are asserted as part of such
Third Party Claim, or (B) the original Third Party Claim is
otherwise amended in a manner that materially increases the
indemnification obligations of the Indemnifying Person under such
Third Party Claim (including by reason of new facts having been
discovered or being alleged), then, in each such case, the
Indemnifying Person shall either (I) notify the Indemnified
Person of such changes to the original Third Party Claim, within
fifteen (15) days of such changes, and turn over the defense of the
Third Party Claim to the Indemnified Person, in which case the
Indemnifying Person shall be deemed not to have acknowledged its
obligation to indemnify the Indemnified Person (except to the
extent all or any portion of the original Third Party Claim has
already been determined, compromised or settled), or
(I) continue to defend such Third Party Claim, in which case
the Indemnifying Person shall be deemed to have acknowledged its
obligation to indemnify the Indemnified Person with respect to such
Third Party Claim as so changed, (ii) the Indemnifying Person
provides the Indemnified Person with evidence reasonably acceptable
to the Indemnified Person that the Indemnifying Person will have
the financial resources to defend against the Third Party Claim and
fulfill its indemnification obligations hereunder, (iii) the
Third Party Claim involves only money damages, and does not seek
statutory, enhanced or treble damages or an injunction or other
equitable relief, (iv) the Third Party Claim has a reasonable
likelihood of resulting in indemnifiable Losses that would result
in the Cap being exceeded or does not have a reasonable likelihood
of resulting in indemnifiable Losses that would result in the
Basket being exceeded; or (v) settlement of, or an adverse
judgment with respect to, the Third Party Claim is not, in the good
faith judgment of the Indemnified Person, likely to establish a
precedential custom or practice adverse to the continuing business
interests or the reputation of the Indemnified Person or have a
material adverse effect on the Indemnified Person, (vi) the
Third Party Claim does not involve a supplier, customer,
distributor, licensor, licensee, lessor or insurer of the Company
or any Affiliate thereof or a Governmental Authority, (vii) the
Third Party Claim does not involve a class action lawsuit and
(viii) the Indemnifying Person conducts the defense of the
Third Party Claim actively and diligently. The Indemnifying Person
will keep the Indemnified Person apprised of all material
developments, including settlement offers, with respect to the
Third Party Claim and permit the Indemnified Person to participate
in the defense of the Third Party Claim with counsel selected by it
subject to the Indemnifying Person’s right to control the
defense thereof. The fees and disbursements of such counsel shall
be at the expense of the Indemnified Person, provided, that if in the
reasonable opinion of counsel to the Indemnified Person,
(A) there are legal defenses available to an Indemnified
Person that are different from or additional to those available to
the Indemnifying Person; or (B) there exists a conflict of
interest between the Indemnifying Person and the Indemnified Person
that cannot be waived, the Indemnifying Person shall be liable for
the reasonable fees and expenses of counsel to the Indemnified
Person in each jurisdiction for which the Indemnified Person
determines counsel is required. If the Indemnifying Person elects
not to or is not entitled to defend such Third Party Claim, fails
to promptly notify the Indemnified Person in writing of its
election to defend as provided in this Agreement, or fails to
diligently prosecute the defense of such Third Party Claim, the
Indemnified Person may, subject to Section 10.5(c), pay,
compromise, defend such Third Party Claim and seek indemnification
for any and all Losses based upon, arising from or relating to such
Third Party Claim. The Shareholder, Parent and Buyer shall cooperate with
each other in all reasonable respects in connection with the
defense of any Third Party Claim.
(iii) Cooperation. With respect to
any Third Party Claim, both the Indemnified Person and the
Indemnifying Person, as the case may be, shall keep the other
Person fully informed of the status of such Third Party Claim and
any related Actions at all stages thereof where such Person is not
represented by its own counsel. The parties agree to provide
reasonable access to the other parties to such documents and
information as may be reasonably requested in connection with the
defense, negotiation or settlement of any such Third Party Claim;
provided, however, that the parties shall cooperate in such a
manner as to preserve in full (to the extent possible) the
confidentiality of all Confidential Information and the
attorney-client and work-product privileges of the other party. In
connection therewith, each party agrees that: (i) it will use
commercially reasonable efforts, in respect of any Third Party
Claim in which it has assumed or participated in the defense, to
avoid production of Confidential Information (consistent with
applicable Law and rules of procedure); and (ii) all
communications between any party and counsel responsible for or
participating in the defense of any Third Party Claim shall, to the
extent possible, be made so as to preserve any applicable
attorney-client or work-product privilege.
(iv) Settlement. The Indemnifying
Person shall not enter into settlement or compromise of any Third
Party Claim or permit a default or consent to entry of any judgment
or admit any liability with respect thereto, if it is not defending
such Third Party Claim. If the Indemnifying Person is defending
such Third Party Claim, it shall not enter into settlement or
compromise of any Third Party Claim or permit a default or consent
to entry of any judgment or admit any liability with respect
thereto without the prior written consent of the Indemnified Person
unless such settlement, compromise or judgment (A) does not involve
liability or the creation of a financial or other obligation on the
part of the Indemnified Person, does not involve any finding or
admission of any violation of Law or any violation of the rights of
any Person or the admission of wrongdoing and would not have any
adverse effect on other claims that may have been made against the
Indemnified Person, (B) does not involve any relief other than
monetary damages that are paid in full by the Indemnifying Person,
and (C) provides, for the complete, final and unconditional release
of each Indemnified Person and its Affiliates from all liabilities
and obligations in connection with such Third Party Claim and would
not otherwise adversely affect the Indemnified Person.
(b) Direct Claims. Any Action by an
Indemnified Person on account of a Loss which does not result from
a Third Party Claim (a “Direct Claim”) shall be
asserted by the Indemnified Person giving the Indemnifying Person
reasonably prompt written notice thereof, but in any event not
later than thirty (30) days after the Indemnified Person becomes
aware of such Direct Claim. The failure to give such prompt written
notice shall not, however, relieve the Indemnifying Person of its
indemnification obligations, except and only to the extent that the
Indemnifying Person forfeits rights or defenses by reason of such
failure. Such notice by the Indemnified Person shall describe the
Direct Claim in reasonable detail, shall include copies of all
material written evidence thereof and shall indicate the estimated
amount, if reasonably practicable, of the Loss that has been or may
be sustained by the Indemnified Person. The Indemnifying Person
shall have thirty (30) days after its receipt of such notice to
respond in writing to such Direct Claim. The Indemnified Person
shall allow the Indemnifying Person and its professional advisors
to investigate the matter or circumstance alleged to give rise to
the Direct Claim, and whether and to what extent any amount is
payable in respect of the Direct Claim and the Indemnified Person
shall assist the Indemnifying Person’s investigation by
giving such information and assistance (including access to the
Company’s premises and personnel and the right to examine and
copy any accounts, documents or records) as the Indemnifying Person
or any of its professional advisors may reasonably request. If the
Indemnifying Person does not so respond within such thirty (30) day
period, the Indemnifying Person shall be deemed to have rejected
such claim, in which case the Indemnified Person shall be free to
pursue such remedies as may be available to the Indemnified Person
on the terms and subject to the provisions of this
Agreement.
(c) Tax Claims. Notwithstanding any
other provision of this Agreement, the control of any claim,
assertion, event or proceeding in respect of Taxes of the Company
(including, but not limited to, any such claim in respect of any
breach or violation of or failure to fully perform any covenant,
agreement, undertaking or obligation in Article 8) shall be
governed exclusively by Article 8 hereof.
(a) All indemnification
owing by Buyer to any Shareholder Indemnitee hereunder, as finally
determined pursuant to this Article 10, shall be effected,
no later than five (5) Business Days after the final determination
thereof, by wire transfer of immediately available funds from Buyer
(or its designee) to an account designated in writing by such
Shareholder Indemnitee within five (5) Business Days after the
final determination thereof.
(b) All indemnification
owing by the Shareholder and/or Parent to any Buyer Indemnitee
hereunder, as finally determined pursuant to this Article 10, shall be effected,
no later than five (5) Business Days after the final determination
thereof, by wire transfer of immediately available funds from the
Shareholder, Parent (or their respective designee) to an account
designated in writing by such Buyer Indemnitee within five (5)
Business Days after the final determination thereof.
10.7 No Circular
Recovery
(a) . The Shareholder
may not seek indemnification under the Governing Documents for any
Group Company for any matter for which it has an indemnification
obligation hereunder.
10.8 Materiality. For purposes of
calculating the amount of Losses incurred by a party seeking
indemnification hereunder arising out of or resulting from any
breach of a representation, warranty covenant or agreement
contained herein, and for purposes of determining whether such a
breach has occurred, the representations, warranties, covenants and
agreements contained herein shall be deemed to have been made
without any qualifications as to “materiality”,
“Material Adverse Effect” or other similar
qualifications.
10.9 Tax Treatment of Indemnification
Payments. All cash
indemnification payments made under this Agreement shall be treated
for Tax purposes by the parties as an adjustment to the Purchase
Price, unless otherwise required by Law.
10.10 Exclusive
Remedies. Subject to
Section 12.12, the
parties acknowledge and agree that their sole and exclusive remedy
with respect to any and all claims (other than claims arising from
fraud, intentional misrepresentation, criminal activity or willful
misconduct on the part of a party in connection with the
Transactions) for any breach of any representation, warranty,
covenant, agreement or obligation set forth herein shall be
pursuant to the indemnification provisions set forth in
Article 8 and this
Article 10. Nothing
in this Section
10.10 shall limit any Person’s right to seek and
obtain any equitable relief to which any Person shall be entitled
or to seek any remedy on account of any party’s fraud,
intentional misrepresentation, criminal activity or willful
misconduct.
10.11 No
Contribution. Anything to the
contrary herein notwithstanding, the Shareholder shall not have any
right to seek any indemnification or contribution from or remedy
against any Group Company whether arising prior to or after the
Closing Date in respect of any breach of any representation or
warranty by a Group Company or the failure of a Group Company to
comply with any covenant or agreement to be performed by such Group
Company on or prior to the Closing Date and the Shareholder hereby
waive any such claim they may have against each Group Company with
respect thereto whether at law, in equity or
otherwise.
10.12 Separate
Bases for Claim. If any party
hereto has breached any representation, warranty or covenant or
agreement contained herein in any respect, the fact that there
exists another representation, warranty or covenant relating to the
same subject matter (regardless of the relative levels of
specificity) which such party has not breached shall not detract
from or mitigate the fact that such party is in breach of the first
representation, warranty, covenant or agreement.
Termination
11.1 Termination. This Agreement
may be terminated at any time prior to the Closing:
(a) by the mutual
written consent of the Shareholder and Buyer;
(b) by Buyer by written
notice to the Shareholder if:
(i) Buyer is not then
in material breach of any provision of this Agreement and there has
been a breach, inaccuracy in or failure to perform any
representation, warranty, covenant or agreement made by a
Shareholder or the Company in this Agreement that would give rise
to the failure of any of the conditions specified in Article 9 and such breach,
inaccuracy or failure has not been cured within ten (10) days of
the Shareholder’s receipt of written notice of such breach
from Buyer; or
(ii) any of the
conditions set forth in Section 9.1 or Section 9.2 shall not have
been, or if it becomes apparent that any of such conditions will
not be, fulfilled by February 28, 2021 (the “Outside Date”) unless
such failure shall be due to the failure of Buyer to perform or
comply with any of the covenants or agreements hereof to be
performed or complied with by it prior to the Closing;
(c) by the Shareholder
by written notice to Buyer if:
(i) neither the
Shareholder nor any Group Company is then in material breach of any
provision of this Agreement and there has been a breach, inaccuracy
in or failure to perform any representation, warranty, covenant or
agreement made by Buyer in this Agreement that would give rise to
the failure of any of the conditions specified in Article 9 and such breach,
inaccuracy or failure has not been cured within ten (10) days of
Buyer’s receipt of written notice of such breach from the
Shareholder; or
(ii) any of the
conditions set forth in Section 9.1 or Section 9.3 shall not have
been, or if it becomes apparent that any of such conditions will
not be, fulfilled by the Outside Date, unless such failure shall be
due to the failure of the Shareholder or any Group Company to
perform or comply with any of the covenants or agreements hereof to
be performed or complied with by it prior to the Closing;
or
(d) by Buyer or the
Shareholder in the event that (i) there shall be any Law that
makes consummation of the Transactions illegal or otherwise
prohibited or (ii) any Governmental Authority shall have
issued a Governmental Order restraining or enjoining the
Transactions, and such Governmental Order shall have become final
and non-appealable.
11.2 Effect
of Termination. In the event of
the termination of this Agreement in accordance with this
Article 11,
this Agreement shall forthwith become void and there shall be no
liability on the part of any party except:
(a) for this
Article 11 and
Section 7.10 and
Article 12, which
provisions shall survive the termination of this Agreement;
and
(b) that nothing herein
shall relieve any party from liability for any breach of any
provision hereof.
Miscellaneous
12.1 Expenses. Except as
otherwise expressly provided herein, all costs and expenses,
including, without limitation, fees and disbursements of counsel,
financial advisors and accountants, incurred in connection with
this Agreement and the Transactions shall be paid by the party
incurring such costs and expenses, whether or not the Closing shall
have occurred; provided that all filing and
other similar fees payable in connection with any filings or
submissions in connection with the FCC Applications and State PUC
Applications shall be borne 100% by Buyer.
12.2 Notices. All notices,
requests, consents, claims, demands, waivers and other
communications hereunder shall be in writing and shall be deemed to
have been given (a) when delivered by hand (with written
confirmation of receipt); (b) when received by the addressee
if sent by a nationally recognized overnight courier (receipt
requested); (c) on the date sent by facsimile or e-mail of a
PDF document (with confirmation of transmission) if sent during
normal business hours of the recipient, and on the next Business
Day if sent after normal business hours of the recipient or
(d) on the third (3rd) day after the date
mailed, by certified or registered mail, return receipt requested,
postage prepaid. Such communications must be sent to the respective
parties at the following addresses (or at such other address for a
party as shall be specified in a notice given in accordance with
this Section
12.2):
If to
the Shareholder or the Company (prior to the Closing):
|
HC2
Holdings, Inc.
450
Park Avenue, 29th Floor
New
York, NY 10022
Attention:
Michael Sena, Chief Financial Officer
Facsimile:
None
Email:
msena@hc2.com
|
with a
copy (which shall not constitute notice) to:
|
Archer
& Greiner, PC
One
Centennial Square
Haddonfield,
NJ 08033
Attention:
Deborah A. Hays, Esquire
Facsimile:
(856) 795-0574
Email:
dhays@archerlaw.com
|
If to
Buyer:
|
c/o
Korr Acquisitions Group, Inc.
1400
Old Country Road, Suite 305
Westbury,
New York 11590
Attention:
Kenneth OrrFacsimile: None
Email:
ko@korrag.com
|
with a
copy (which shall not constitute notice) to:
|
Sheppard
Mullin Richter & Hampton, LLP
30
Rockefeller Plaza, 38th Floor
New
York, New York 10112
Attention:
Richard Friedman, Esq. Stephen A. Cohen, Esq.
Facsimile:
(212) 653-8701
Email:
rafriedman@sheppardmullin.com scohen@sheppardmullin.com
|
12.3 Construction. Unless the
express context otherwise requires: (a) the words
“hereof”, “herein”, and
“hereunder” and words of similar import, when used in
this Agreement, shall refer to this Agreement as a whole and not to
any particular provision of this Agreement; (b) the terms defined
in the singular have a comparable meaning when used in the plural,
and vice versa; (c) the terms “Dollars” and
“$” mean United States Dollars; (d) references herein
to a specific Article, Section, clause, Schedule or Exhibit shall
refer, respectively, to the Articles, Sections and clauses of, and
Schedules and Exhibits to, this Agreement; (e) wherever the word
“include,” “includes,” or
“including” is used in this Agreement, it shall be
deemed to be followed by the words “without
limitation”; (f) any reference to the masculine, feminine or
neuter gender shall include each other gender; (g) when reference
is made herein to “the business of” a Person, such
reference shall be deemed to include the business of all direct and
indirect Subsidiaries of such Person, (h) all accounting and
financial terms shall be deemed to have the meanings assigned
thereto under GAAP unless expressly stated otherwise, (i) when this
Agreement states that the Company has “made available,”
“delivered” or “provided” (or terms of
similar import) a particular document or other item, it shall mean
that the Company has made a true, correct and complete copy of such
document or item (together with all amendments, supplements or
other modifications thereto or waivers thereof) available for
viewing by Buyer and its representatives (and properly labeled,
including both as to its location within the index to the
electronic dataroom for “Project Relay” run by Dropbox
(the “Dataroom”) and the
description of the file containing such document or information) in
the Dataroom, as such materials were posted to the Dataroom at
least three (3) Business Days prior to the date hereof and not
removed on or prior to the date hereof, and, if any such document
or information has not been continuously available to each of
Buyer’s representatives who have access to the Dataroom since
the initial date such representatives were granted access, a
notification that such document or information was added to the
Dataroom has been sent to each representative of Buyer who has
access to the Dataroom prior to the fifth (5th) Business Day
preceding the Closing Date, (j) any reference to any applicable Law
in this Agreement refers to such applicable Law as in effect at the
date of this Agreement and the Closing Date, (k) in the computation
of periods of time from a specified date to a later specified date,
the word “from” means “from and including”
and the words “to” and “until” each mean
“to but excluding” and if the last day of any such
period is not a Business Day, such period will end on the next
Business Day, (l) when calculating the period of time
“within” which or “following” which any act
or event is required or permitted to be done, notice given or steps
taken, the date which is the reference date in calculating such
period is to be excluded from the calculation and if the last day
of any such period is not a Business Day, such period will end on
the next Business Day, (m) the provision of a table of contents and
the insertion of headings are for convenience of reference only and
shall not affect or be utilized in construing or interpreting this
Agreement, (n) references to “day” means calendar days
unless Business Days are expressly specified, (o) references to any
Person includes such Person’s predecessors, successors and
assigns to the extent, in the case of successors and assigns, such
successors and assigns are permitted by the terms of any applicable
agreement, and reference to a Person in a particular capacity
excludes such Person in any other capacity or individually, (p)
references to a party means a party to this Agreement, (q)
references to a document, instrument, or agreement also refers to
all addenda, exhibits, or schedules thereto, (r) a reference to a
“copy” or “copies” of any document,
instrument, or agreement means a copy or copies that are complete
and correct; and (s) a reference to a list, or any like compilation
(whether in the Schedules to this Agreement or elsewhere), means
that the item referred to is complete and correct. All Exhibits and
Schedules annexed hereto or referred to herein are incorporated in
and made a part of this Agreement as if set forth in full herein.
The parties agree that they have been represented by counsel during
the negotiation and execution of this Agreement and, therefore,
waive the application of any applicable Law or rule of construction
providing that ambiguities in an agreement or other document will
be construed against the party or parties drafting such agreement
or document. Unless expressly provided otherwise, any approval or
consent required to be given by a party in this Agreement shall be
given or withheld by such party in its sole discretion. The fact
that any representation and warranty may be more specific than any
other representation and warranty shall not be construed so as to
limit or restrict the scope, applicability or meaning of any other
representation and warranty contained herein.
12.4 Severability.
If any term or provision of this Agreement is invalid, illegal or
unenforceable in any jurisdiction, such invalidity, illegality or
unenforceability shall not affect any other term or provision of
this Agreement or invalidate or render unenforceable such term or
provision in any other jurisdiction. Upon such determination that
any term or other provision is invalid, illegal or unenforceable,
the parties shall negotiate in good faith to modify this Agreement
so as to effect the original intent of the parties as closely as
possible in a mutually acceptable manner in order that the
Transactions be consummated as originally contemplated to the
greatest extent possible.
12.5 Entire
Agreement. This Agreement
and the Transaction Documents contain the entire understanding of
the parties with respect to the subject matter hereof and thereof
and supersede all prior and contemporaneous oral or written
agreements, negotiations, understandings, statements or proposals
with respect to the subject matter hereof and thereof. In the event
of any inconsistency between the statements in the body of this
Agreement and those in the other Transaction Documents and
Disclosure Schedule (other than an exception expressly set forth as
such in the Disclosure Schedule), the statements in the body of
this Agreement will control.
12.7 Successors and
Assigns. This Agreement
shall be binding upon and shall inure to the benefit of the parties
and their respective successors and permitted assigns. No party may
assign its rights or delegate any of its obligations hereunder
without the prior written consent of the other parties, which
consent shall not be unreasonably withheld or delayed; provided, that Buyer shall be
entitled to assign or delegate this Agreement or all or any part of
its rights or obligations hereunder (a) to any one or more
Affiliates of Buyer, provided further that such assignment shall
not relieve Buyer of any of its obligations hereunder, (b) in
connection with the sale of all or any substantial portion of the
assets of Buyer or (c) for collateral security purposes to any
lender providing financing to Buyer. No assignment or delegation
shall relieve the assigning party of any of its obligations
hereunder.
12.8 No Third-Party
Beneficiaries. Except as
provided in Section
8.3 and Article
10, this Agreement is for the sole benefit of the parties
and their respective successors and permitted assigns and nothing
herein, express or implied, is intended to or shall confer upon any
other Person or entity any legal or equitable right, benefit or
remedy of any nature whatsoever under or by reason of this
Agreement.
12.9 Amendment and Modification;
Waiver. This Agreement
may only be amended, modified or supplemented by an agreement in
writing signed by each party. No waiver by any party of any of the
provisions hereof shall be effective unless explicitly set forth in
writing and signed by the party so waiving. No waiver by any party
shall operate or be construed as a waiver in respect of any
failure, breach or default not expressly identified by such written
waiver, whether of a similar or different character, and whether
occurring before or after that waiver. No failure to exercise, or
delay in exercising, any right, remedy, power or privilege arising
from this Agreement shall operate or be construed as a waiver
thereof; nor shall any single or partial exercise of any right,
remedy, power or privilege hereunder preclude any other or further
exercise thereof or the exercise of any other right, remedy, power
or privilege.
12.10 Governing
Law. This Agreement
and the Transaction Documents shall be governed by and construed in
accordance with the internal Laws of the State of New York without
reference to such state’s or any other jurisdiction’s
principles of conflicts of law.
12.11 Forum Selection; Consent to
Jurisdiction; Waiver of Jury Trial.
(a) Any Action against
Buyer, the Group Companies, or the Shareholder arising out of, or
with respect to, this Agreement or any Governmental Order entered
by any court in respect thereof shall be brought exclusively in the
state or federal courts located in the State of New York (the
“Designated
Courts”), and such parties accept the exclusive
jurisdiction of the Designated Courts for the purpose of any such
Action. Each of Buyer, the Company, the Shareholder agrees that
service of any process, summons, notice or document by U.S.
registered mail addressed to such party in accordance with the
addresses set forth in Section 12.2 shall be
effective service of process for any Action brought against such
party in any such court. Buyer hereby designates the individual
listed in Section 12.2 to whom
notice may be given on behalf of Buyer as its true and lawful agent
upon whom may be served any lawful process in any Action instituted
by or on behalf of the Company (before the Closing) or the
Shareholder. The Shareholder and the Company (before the Closing)
hereby designate the Person listed in Section 12.2 to whom
notice may be given on behalf of Buyer as their true and lawful
agent upon whom may be served any lawful process in any Action
instituted by or on behalf of Buyer.
(b) In addition, each
of Buyer, the Company and the Shareholder hereby irrevocably
waives, to the fullest extent permitted by Law, any objection which
it may now or hereafter have to the laying of venue of any Action
arising out of or relating to this Agreement in any Designated
Court or any Governmental Order entered by any of the Designated
Courts and hereby further irrevocably waives any claim that any
Action brought in the Designated Courts has been brought in an
inconvenient forum.
(c) EACH OF BUYER, THE
COMPANY AND THE SHAREHOLDER ACKNOWLEDGES AND AGREES THAT ANY
CONTROVERSY THAT MAY ARISE OUT OF, OR WITH RESPECT TO, THIS
AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES,
AND THEREFORE EACH SUCH PARTY HEREBY IRREVOCABLY AND
UNCONDITIONALLY WAIVES TO THE FULLEST EXTENT PERMITTED BY LAW ANY
RIGHT SUCH PARTY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY
ACTION DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS
AGREEMENT OR THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT. EACH
PARTY CERTIFIES AND ACKNOWLEDGES THAT (I) NO REPRESENTATIVE, AGENT
OR ATTORNEY OR ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR
OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF
LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER, (II) EACH PARTY
UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF THIS WAIVER,
(III) EACH PARTY MAKES THIS WAIVER VOLUNTARILY AND (IV) EACH PARTY
HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER
THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS OF THIS SECTION 12.11. ANY PARTY
MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS AGREEMENT WITH
ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE PARTIES TO THE
WAIVER OF THEIR RIGHT TO TRIAL BY JURY.
12.12 Specific
Performance. The parties agree
that irreparable damage would occur if any provision of this
Agreement were not performed in accordance with the terms hereof
and that the parties shall be entitled to specific performance of
the terms hereof, in addition to any other remedy to which they are
entitled at law or in equity.
12.13 Counterparts;
Effectiveness. This Agreement
may be executed in several counterparts (including counterparts by
email, facsimile, portable document format (pdf) or any electronic
signature complying with the U.S. federal ESIGN Act of 2000
(including DocuSign)), each of which shall be deemed an original
and all of which shall together constitute one and the same
instrument. This Agreement shall become effective when each party
shall have received a counterpart hereof signed by all of the other
parties. Until and unless each party has received a counterpart
hereof signed by the other Parties, this Agreement shall have no
effect and no party shall have any right or obligation hereunder
(whether by virtue of any other oral or written agreement or other
communication).
[SIGNATURE
PAGE FOLLOWS]
IN
WITNESS WHEREOF, each party has duly executed and delivered this
Agreement as of the date first above written.
|
“BUYER”
By:
Name:
Title:
|
|
“COMPANY”
By:
Name:
Title:
|
|
“SHAREHOLDER”
By:
Name:
Title:
|
|
Solely
for the purpose of Article 8 and Article 10
“PARENT”
By:
Name:
Title:
|
ANNEX A
DEFINITIONS
In this
Annex, and in the Agreement and the other Appendices and Schedules
thereto, unless the context otherwise requires, the following terms
shall have the meanings assigned below and the terms listed in the
chart below shall have the meanings assigned to them in the Section
set forth opposite to such term (unless otherwise specified,
section references in this Annex are to Sections of this
Agreement):
Term:
|
Section:
|
Accounting
Expert
|
3.3(c)
|
Accounting
Referee
|
8.1(d)
|
Acquisition
Proposal
|
7.3(a)
|
Agreement
|
Preamble
|
Base
Purchase
Price
|
1.2
|
Basket
|
10.4(a)
|
Buyer
|
Preamble
|
Buyer
Indemnitees
|
10.2
|
Cap
|
10.4(a)
|
Closing
|
2.1
|
Closing
Date
|
2.1
|
Closing
Statement
|
3.3(a)
|
Company
|
Preamble
|
Direct
Claim
|
10.5(b)
|
Estimated
Closing Company Transaction Expenses
|
3.2(a)
|
General
Survival
Period
|
10.1
|
Indemnified
Person
|
10.5
|
Indemnifying
Person
|
10.5
|
Net
Adjustment
Amount
|
3.3(e),
3.3(g)
|
Net
Estimated Adjustment
Amount
|
3.2(b)
|
Neutral
Accounting
Firm
|
3.3(c)
|
Notice
of
Disagreement
|
3.3(b)
|
Post-Closing
Tax
Period
|
8.1(a)
|
Purchase
Price
|
1.2
|
Real
Property
|
7.2
|
Resolution
Period
|
3.3(c)
|
Restricted
Territory
|
7.6(a)(i)
|
Review
Period
|
3.3(b)
|
Shareholder
Indemnitees
|
10.3
|
Shareholder
|
Preamble
|
Shares
|
Recitals
|
Tax
Claim
|
8.5
|
Third
Party
Claim
|
10.5(a)(i)
|
“Action” means any
governmental, judicial, administrative or adversarial proceeding
(public or private), any action, complaint, claim, lawsuit, legal
proceeding, whistleblower complaint, litigation, arbitration or
mediation, any hearing, investigation (internal or otherwise),
audit, probe or inquiry by any Governmental Authority or any other
dispute, including any adversarial proceeding arising out of this
Agreement.
“Affiliate” means, with
respect to any Person, any other Person who, directly or
indirectly, through one or more intermediaries, controls, is
controlled by, or is under common control with, such Person. The
term “control” (including, with correlative meanings,
the terms “under common control with” and
“controlled by”), as used in the preceding sentence,
means the possession, directly or indirectly, of the power to
direct or cause the direction of the management and policies of a
Person, whether through the ownership of voting securities, by
contract or otherwise.
“Business” means the
wholesaling long-distance voice business conducted by the Group
Companies as of the date of this Agreement.
“Business Day” means
any day except Saturday, Sunday or any other day on which
commercial banks located in the State of New York are authorized or
required by Law to be closed for business.
“Closing Purchase Price”
shall mean (i) the Base Purchase Price plus (ii) the Net Estimated
Adjustment Amount.
“Code” means the
Internal Revenue Code of 1986, as amended.
“Communications
Authorizations” has the meaning set forth in
Section
5.7(a).
“Communications Laws”
means (i) the Communications Act, (ii) the rules, regulations,
published orders, policies and decisions promulgated by, and other
applicable requirements of, the FCC and interpretations thereof by
federal courts of competent jurisdiction, (iii) the state statutes
governing the communications industry, the rules, orders,
regulations and other applicable requirements of any State PUCs and
(iv) any other rules, regulations, published orders, policies and
decisions promulgated by the telecommunications regulatory agencies
of the U.S., states and territories and interpretations thereof by
courts of competent jurisdiction, in each case, with jurisdiction
over any of the services offered by any Group Company.
“Contracts” means
all contracts, purchase orders, leases, deeds, mortgages, licenses,
instruments, notes, undertakings, indentures, joint ventures and
all other agreements, commitments and arrangements, whether written
or oral.
“Disclosure Schedule”
means that certain document identified as the Disclosure Schedule,
dated as of the date hereof (as the same may be modified from time
to time in accordance with the terms hereof), delivered by the
Company and the Shareholder to Buyer in connection with this
Agreement. Each Section in the Disclosure Schedule shall be deemed
to qualify only (i) the corresponding Section of this Agreement,
(ii) any other Section of this Agreement to which such disclosure
makes express reference or (iii) any other Section of this
Agreement to the extent the relevance of the information disclosed
in such Section in the Disclosure Schedule to such other Section is
readily apparent on its face. Notwithstanding anything to the
contrary contained herein, no disclosure in the Disclosure Schedule
shall be deemed adequate to disclose an exception to a
representation or warranty made by any party unless the disclosure
identifies the exception with reasonable particularity and
describes the relevant facts in reasonable detail. Without limiting
the generality of the foregoing, the mere listing (or inclusion of
a copy) of a document or other item in the Disclosure Schedule
shall not be deemed adequate to disclose an exception to a
representation or warranty made herein (unless the representation
or warranty has to do with the existence of the document or other
item itself).
“Encumbrance” means
any charge, claim, community property interest, pledge, condition,
equitable interest, lien (statutory or other), option, security
interest, mortgage, easement, encroachment, right of way, right of
first refusal, or restriction of any kind, including any
restriction on use, voting, transfer, receipt of income or exercise
of any other attribute of ownership. For purposes of this
Agreement, a Person will be deemed to own a property or asset
subject to an Encumbrance if it holds such property or asset
subject to the interest of a vendor or a lessor under any
conditional sale agreement, capital lease, or other title retention
agreement (or any financing lease having substantially the same
economic effect as any of the foregoing) relating to such property
or asset.
“Excluded Entities” means,
collectively, PTGI International Carrier Services Ltd., a private
limited company organized in the United Kingdom, PTGI-ICS OPSRO
S.R.L., a limited liability company organized in Romania, and any
other Subsidiaries of the Company other than Go2Tel.
“FCC” means the Federal
Communications Commission.
“FCC Applications” has the
meaning set forth in Section 7.7(d).
“FCC Consent” shall mean
the consent of the FCC to the FCC Applications contemplated in
Section
7.7(d).
“Final Order” shall mean
thirty-one (31) days have elapsed from the date of public notice of
the FCC Consent and (1) no request for stay has been filed, and no
action with respect thereto is pending, no such stay is in effect,
and, if any deadline for filing any such request is designated by
statute or regulation, it has passed, (2) no appeal, petition for
rehearing or reconsideration or application for review of the
action is pending before the FCC and the time for filing any such
action has passed, (3) no reconsideration on the FCC’s own
motion is pending or in effect and the time for such
reconsideration has passed and (4) no appeal or petition for review
to a court, or request for stay by a court, of the FCC’s
action is pending or in effect, and, if any deadline for filing any
such appeal or request is designated by statute or rule, such
deadline has passed.
“GAAP” means United
States generally accepted accounting principles in effect from time
to time.
“Go2Tel” means Go2Tel.com,
Inc., a Florida corporation and a wholly owned Subsidiary of the
Company.
“Governing Documents”
means with respect to any Person: (a) if a corporation, the
articles or certificate of incorporation and the bylaws; (b) if a
general partnership, the partnership agreement and any statement of
partnership; (c) if a limited partnership, the limited partnership
agreement and the certificate of limited partnership; (d) if a
limited liability company, the articles of organization and
operating agreement; (e) if a trust, the instrument governing the
trust, (f) if another type of Person, any other charter or similar
document adopted or filed in connection with the creation,
formation or organization of the Person; (g) all
equityholders’ agreements, voting agreements, voting trust
agreements, joint venture agreements, registration rights
agreements or other agreements or documents relating to the
organization, management or operation of any Person or relating to
the rights, duties and obligations of the equityholders of any
Person; and (h) any amendment or supplement to any of the
foregoing.
“Governmental
Authority” means any federal, state, local or
foreign government or political subdivision thereof, or any agency
or instrumentality of such government or political subdivision, or
any self-regulated organization or other non-governmental
regulatory authority or quasi-governmental authority (to the extent
that the rules, regulations or orders of such organization or
authority have the force of Law), or any arbitrator, court or
tribunal of competent jurisdiction.
“Governmental
Order” means any order, writ, judgment,
injunction, decree, stipulation, determination or award entered by
or with any Governmental Authority.
“Group Companies” means,
collectively, the Company and each of its Subsidiaries (other than
the Excluded Entities).
“Indebtedness” means the
following obligations: (a) all indebtedness or other obligations of
the Group Companies for borrowed money, whether current, short-term
or long-term, secured or unsecured, including all overdrafts and
negative cash balances; (b) all indebtedness of the Group Companies
for the deferred purchase price for purchases of property or
services with respect to which any Group Company is liable,
contingently or otherwise, as obligor or otherwise (whether
earn-outs, indemnity payments, non-compete payments, consulting
payments, retention bonuses, severance payments or other similar
payments, or otherwise; in each case whether contingent or not and
valued at the maximum amount thereof) except any trade payable
incurred in the Ordinary Course of Business that is treated (in its
entirety) as a current account payable under GAAP; (c) all lease
obligations of the Group Companies under leases that have been or
should be capitalized in accordance with GAAP; (d) the aggregate
face amount of all outstanding letters of credit issued on behalf
of the Group Companies; (e) all obligations of the Group Companies
arising under acceptance facilities; (f) all guaranties,
endorsements and other contingent obligations of the Group
Companies to purchase, to provide funds for payment, to supply
funds to invest in any other Person, or otherwise to assure a
creditor against loss; (g) all obligations of the Group Companies
under any interest rate protection, foreign currency exchange, or
other interest or exchange rate swap or hedging agreement or
arrangement, or other derivative product; (h) all obligations
secured by an Encumbrance upon any assets or properties of the
Group Companies; (i) all outstanding or held checks, money orders
or similar instruments of the Group Companies as of the Closing;
(j) all Liabilities of the Group Companies pursuant to any phantom
equity plan or Liabilities with respect stock appreciation or
similar rights or arising from non-qualified deferred compensation
arrangements, plans or policies or other forms of deferred
compensation arrangements; (k) any other Liabilities, contingent or
otherwise, that, in accordance with GAAP, should be classified upon
the balance sheet of the Group Companies as indebtedness; (l) all
“withdrawal liability” of any Group Company to a
“multiemployer plan” as such terms are defined under
ERISA, (m) all indebtedness referred to in clauses (a) through (l)
above of any Person other than a Group Company that is guaranteed
by any Group Company; (n) declared but unpaid distributions; and
(o) accrued and unpaid interest on, and prepayment premiums,
penalties or similar contractual charges arising as a result of the
discharge of, any such foregoing obligation.
“Knowledge of the
Company,” “Knowledge of the
Shareholder,” “Company’s
Knowledge” or “Shareholder’s
Knowledge” or any other similar knowledge
qualification, means the knowledge of Craig Denson. Any such person
shall be deemed to have “knowledge” of a particular
fact or other matter if such person is actually aware of such fact
or other matter.
“Law” means (a) any
federal, state, local, municipal, foreign, international,
multinational or other administrative law, constitution, common law
principle, ordinance, code, statute, judgment, injunction, decree,
order, rule, statute or governmental regulation, or “fair
price,” “moratorium,” “control share
acquisition” or other similar anti-takeover statute or
regulation, (b) any binding judicial or administrative
interpretation of any of the foregoing, (c) the terms and
conditions of any agreement relating to any Group Company with a
Governmental Authority, (d) the terms and conditions of any
certification relating to any Group Company to any Governmental
Authority, (e) any governmental requirements or restrictions
of any kind, or any rule, regulation or order promulgated
thereunder, (f) any rules, regulations, orders, decrees,
consents, or judgments of any regulatory agency, stock exchange or
similar self-regulatory organization, court or other Person, or
(g) any applicable requirements associated with any
Permits.
“Liability” means, with
respect to any Person, any liability or obligation of such Person
of any kind, character or description, whether known or unknown,
absolute or contingent, secured or unsecured, joint or several, due
or to become due, vested or unvested, executory, determined,
determinable or otherwise and whether or not the same is required
to be accrued on the financial statements of such
Person.
“Losses” mean any
and all claims, damages, decline in value, judgements, Liabilities,
losses (including, without limitation, punitive, exemplary,
consequential or indirect damages and liabilities of any kind),
lost profits, penalties, settlement payments, arbitration awards,
taxes and costs and expenses (including, without limitation,
reasonable attorneys’, consultants’ and experts’
fees and expenses and other costs of defending, investigating or
settling claims or enforcing rights to indemnification hereunder)
and the cost of pursuing any insurance providers in each case
whether or not arising out of Third Party Claims; provided, however, that
“Losses” shall not include punitive or exemplary
damages, except in the case of fraud or to the extent actually
awarded to a Governmental Authority or other third
party.
“Material Adverse
Effect” means any development, event, occurrence,
fact, condition or change that is, or could reasonably be expected
to become, individually or in the aggregate, materially adverse to
(a) the business, results of operations, condition (financial
or otherwise), assets or prospects of the Group Companies, taken as
a whole, or (b) the ability of the Shareholder or the Company
to consummate the Transactions on a timely basis; provided, however, that “Material Adverse
Effect” shall not include any event, occurrence, fact,
condition or change, directly or indirectly, arising out of or
attributable to: (i) general economic or political conditions;
(ii) conditions generally affecting the industries in which
the Group Companies operate; (iii) any changes in financial or
securities markets in general; (iv) acts of war (whether or
not declared), armed hostilities or terrorism, or the escalation or
worsening thereof; (v) earthquakes, hurricanes, pandemic, other
natural disasters; (vi) public announcement of this Agreement
(including the loss of suppliers or customers to the extent
resulting therefrom), (vii) actions of the Group Companies or the
Shareholder taken as expressly required by this Agreement, or that
are taken at the written request of Buyer, (viii) changes in
applicable Laws, GAAP or in the interpretation or enforcement
thereof, or (ix) any failure (in and of itself) by the Group
Companies to meet any projections or forecasts of earnings, claims
paid or loss reserves (provided that this clause (ix) shall not
prevent a determination that any change, condition, event,
occurrence, state of facts, effect or development underlying such
failure to meet projections or forecasts has resulted in a Material
Adverse Effect, to the extent such change or effect is not
otherwise excluded from this definition of Material Adverse
Effect); provided
further,
however, that any
event, occurrence, fact, condition or change referred to in clauses
(i), (ii), (iii), (iv), (v) or (viii) immediately above shall
be taken into account in determining whether a Material Adverse
Effect has occurred or could reasonably be expected to occur to the
extent that such event, occurrence, fact, condition or change has a
disproportionate effect on the Group Companies compared to other
participants in the industries in which the Group Companies
operate.
“Ordinary Course of
Business” of a Person means an action taken by such
Person if that action (a) is consistent in nature, scope and
magnitude with the past practices of such Person and is taken in
the ordinary course of the normal, day-to-day operations of such
Person; (b) does not require authorization by the board of
directors or shareholders of such Person (or by any Person or group
of Persons exercising similar authority) and does not require any
other separate or special authorization of any nature; and (c) is
similar in nature, scope and magnitude to actions customarily
taken, without any separate or special authorization, in the
ordinary course of the normal, day-to-day operations of other
Persons that are in the same line of business as such Person. No
violation of Law or Contracts shall be deemed in the Ordinary
Course of Business.
“Permits” means all
permits, certificates, licenses, approvals, governmental
notifications, franchises, certificates, approvals, exemptions,
classifications, registrations and other similar authorizations
(and applications therefor) from Governmental
Authorities.
“Permitted Encumbrances”
means (a) liens for Taxes not yet due and payable or being
contested in good faith by appropriate procedures and for which
there are adequate accruals or reserves on the Group
Companies’ balance sheet as of August 31, 2020;
(b) mechanics, carriers’, workmen’s,
repairmen’s or other like liens arising or incurred in the
Ordinary Course of Business and that are not delinquent and which
are not, individually or in the aggregate, material to the business
of the Group Companies; and (c) easements, rights of way,
zoning ordinances and other similar encumbrances affecting real
property which are not, individually or in the aggregate, material
to the business of the Group Companies.
“Person” means an
individual, corporation, partnership, joint venture, limited
liability company, Governmental Authority, unincorporated
organization, trust, association or other entity.
“Related Person” means
with respect to an entity, (i) any Affiliate of such entity, (ii)
each Person that serves as a director, officer, partner, member,
manager, executor, or trustee (or in a similar capacity) of such
entity, and (iii) any Person with respect to which such entity
serves as a general partner or a trustee (or in a similar
capacity).
“Representative” means,
with respect to any Person, any and all directors, officers,
employees, consultants, financial advisors, counsel, accountants
and other agents of such Person.
“State PUCs” means any
state public service commission, public utilities commission or
similar state agency responsible for regulating the communications
industry within a particular state and with jurisdiction over any
of the services offered by any Group Company .
“State PUC Applications”
has the meaning set forth in Section 7.7(d).
“State PUC Consents” shall
mean the consent of any State PUCs to the State PUC Applications
contemplated in Section
7.7(d).
“Subsidiary” means, with
respect to any Person, any other Person of which (a) the
accounts of which would be consolidated with and into those of the
applicable Person in such Person’s consolidated financial
statements if such statements were prepared in accordance with GAAP
as of such date, (b) if a corporation, a majority of the total
voting power of shares of capital stock entitled (without regard to
the occurrence of any contingency) to vote in the election of
directors, managers or trustees thereof is at the time owned or
controlled, directly or indirectly, by that Person or one or more
of the other Subsidiaries of that Person or a combination thereof,
or (c) if a limited liability company, partnership,
association or other business entity (other than a corporation), a
majority of membership, partnership or other similar ownership
interest thereof is at the time owned or controlled, directly or
indirectly, by that Person or one or more other Subsidiaries of
that Person or a combination thereof and, for this purpose, a
Person or Persons owns a majority ownership interest in such a
business entity (other than a corporation) if such Person or
Persons shall be allocated a majority of such business
entity’s gains or losses or shall be or control any managing
director or general partner of such business entity (other than a
corporation).
“Tax Return” means
any return, declaration, report, claim for refund, information
return or statement or other document relating to Taxes, including
any schedule or attachment thereto, and including any amendment
thereof.
“Taxes” means all
federal, state, local, foreign and other income, gross receipts,
sales, use, production, ad valorem, transfer, franchise,
registration, profits, license, lease, service, service use,
withholding, payroll, employment, unemployment, estimated, excise,
severance, environmental, stamp, occupation, premium, property
(real or personal), real property gains, windfall profits, customs,
duties or other taxes, fees, assessments or charges of any kind
whatsoever, together with any interest, additions or penalties with
respect thereto and any interest in respect of such additions or
penalties.
“Transaction Documents”
means, with respect to a party, all agreements, certificates and
other instruments to be delivered by such party in connection with
this Agreement.
“Transactions” means the
transactions contemplated by this Agreement and the Transaction
Documents.
TRANSWORLD HOLDINGS, INC.
BYLAWS
ARTICLE I—STOCKHOLDERS
Section 1. Annual
Meeting.
(1) An
annual meeting of the stockholders, for the election of directors
to succeed those whose terms expire and for the transaction of such
other business as may properly come before the meeting, shall be
held at such place, on such date, and at such time as the Board of
Directors shall each year fix, which date shall be within 13 months
of the last annual meeting of stockholders.
(2)
Nominations of persons for election to the Board of Directors and
the proposal of business to be transacted by the stockholders may
be made at an annual meeting of stockholders (a) pursuant to the
Corporation’s proxy materials with respect to such meeting,
(b) by or at the direction of the Board of Directors, or (c) by any
stockholder of record of the Corporation (the “Record
Stockholder”) at the time of the giving of the notice
provided for in Section 1(3) of this Article I who is entitled to
vote at the meeting and who has complied with the notice procedures
set forth in this Section 1. For the avoidance of doubt, clause (c)
shall be the exclusive means for a stockholder to bring nominations
of persons for election to the Board of Directors and the foregoing
business (other than business included in the Corporation’s
proxy materials pursuant to Rule 14a-8 under the Securities
Exchange Act of 1934, as amended (such act, and the rules and
regulations promulgated thereunder, the “Exchange Act”)
before an annual meeting of stockholders.
(3) For
nominations or business to be properly brought before an annual
meeting by a Record Stockholder pursuant to clause (c) of Section
1(2) of this Article I, (a) the Record Stockholder must have given
timely notice thereof in writing to the Secretary of the
Corporation, (b) any such business must be a proper matter for
stockholder action under Delaware law, and (c) the Record
Stockholder and the beneficial owner, if any, on whose behalf any
such proposal or nomination is made, must have acted in accordance
with the representations set forth in the Solicitation Statement
required by these Bylaws. To be timely, a Record
Stockholder’s notice shall be received by the Secretary at
the principal executive offices of the Corporation not less than 45
or more than 75 days prior to the one-year anniversary (the
“Anniversary”) of the date on which the Corporation
first mailed its proxy materials for the immediately preceding
year’s annual meeting of stockholders; provided, however,
that if the annual meeting is convened more than 30 days before, or
delayed by more than 30 days after, the one-year anniversary of the
immediately preceding year’s annual meeting of stockholders,
notice by the Record Stockholder to be timely must be so received
by the Secretary at the principal executive offices not later than
the close of business on the later of (i) the 90th day before such
annual meeting or (ii) the 10th day following the day on which
Public Announcement (as defined in Section 1(6) of this Article I)
of the date of such meeting is first made. Notwithstanding anything
in the preceding sentence to the contrary, in the event that the
number of directors to be elected to the Board of Directors is
increased and there is no Public Announcement naming all of the
nominees for director or specifying the size of the increased Board
of Directors made by the Corporation at least 10 days before the
last day a Record Stockholder may deliver a notice of nomination in
accordance with the preceding sentence, a Record
Stockholder’s notice required by this bylaw shall also be
considered timely, but only with respect to nominees for director
for any new positions created by such increase, if it shall be
received by the Secretary at the principal executive offices of the
Corporation not later than the close of business on the 10th day
following the day on which such Public Announcement is first made
by the Corporation. In no event shall an adjournment or
postponement of an annual meeting commence a new time period for
the giving of a Record Stockholder’s notice.
(4)
Such Record Stockholder’s notice shall set
forth:
(a)
if
such notice pertains to the nomination of directors, as to each
person whom the Record Stockholder proposes to nominate for
election or reelection as a director, all information relating to
such person as would be required to be disclosed in solicitations
of proxies for the election of such nominees as directors pursuant
to Regulation 14A under the Exchange Act, and such person’s
written consent to serve as a director if elected;
(b)
as
to any business that the Record Stockholder proposes to bring
before the meeting, a brief description of such business, the
reasons for conducting such business at the meeting and any
material interest in such business of such Record Stockholder and
the beneficial owner, if any, on whose behalf the proposal is made;
and
(c)
as
to (1) the Record Stockholder giving the notice and (2) the
beneficial owner, if any, on whose behalf the nomination or
proposal is made (each, a “party”):
(i)
the
name and address of each such party as they appear on the
Corporation’s books (if such name and address appear on the
Corporation’s books);
(ii)
(A)
the class, series and number of shares of the Corporation that are
owned beneficially and of record by each such party, (B) any
option, warrant, convertible security, stock appreciation right, or
similar right with an exercise or conversion privilege or a
settlement payment or mechanism at a price related to any class or
series of shares of the Corporation or with a value derived in
whole or in part from the value of any class or series of shares of
the Corporation, whether or not such instrument or right shall be
subject to settlement in the underlying class or series of capital
stock of the Corporation or otherwise (a “Derivative
Instrument”) directly or indirectly owned beneficially by
each such party, and any other direct or indirect opportunity to
profit or share in any profit derived from any increase or decrease
in the value of shares of the Corporation, (C) any proxy, contract,
arrangement, understanding, or relationship pursuant to which
either party has a right to vote any shares of any security of the
Company, (D) any short interest in any security of the Company held
by each such party (for purposes of this Section 1(4) a person
shall be deemed to have a short interest in a security if such
person directly or indirectly, through any contract, arrangement,
understanding, relationship or otherwise, has the opportunity to
profit or share in any profit derived from any decrease in the
value of the subject security), (E) any rights to dividends on the
shares of the Corporation owned beneficially by each such party
that are separated or separable from the underlying shares of the
Corporation, (F) any proportionate interest in shares of the
Corporation or Derivative Instruments held, directly or indirectly,
by a general or limited partnership in which either party is a
general partner or, directly or indirectly, beneficially owns an
interest in a general partner and (G) any performance-related fees
(other than an asset-based fee) that each such party is entitled to
based on any increase or decrease in the value of shares of the
Corporation or Derivative Instruments, if any, in each case with
respect to clauses (A) through (G) herein as of the close of
business on the date of such notice, including without limitation
any such interests held by members of each such party’s
immediate family sharing the same household (which information set
forth in this paragraph shall be supplemented by such stockholder
or such beneficial owner, as the case may be, not later than ten
(10) days after the record date for the meeting to disclose such
ownership as of the close of business on the record
date);
(iii)
any
other information relating to each such party that would be
required to be disclosed in a proxy statement or other filings
required to be made in connection with solicitations of proxies
for, as applicable, the proposal and/or for the election of
directors in a contested election pursuant to Section 14 of the
Exchange Act; and
(iv)
a
statement whether or not each such party will deliver a proxy
statement and form of proxy to holders of, in the case of a
proposal, at least the percentage of voting power of all of the
shares of capital stock of the Corporation required under
applicable law to carry the proposal or, in the case of a
nomination or nominations, at least the percentage of voting power
of all of the shares of capital stock of the Corporation reasonably
believed by the Record Stockholder or beneficial holder, as the
case may be, to be sufficient to elect the nominee or nominees
proposed to be nominated by the Record Stockholder (such statement,
a “Solicitation Statement”).
(5)
Subject to Section 2 of Article II of these Bylaws, a person shall
not be eligible for election or re-election as a director at an
annual meeting unless (i) the person is nominated by a Record
Stockholder in accordance with Section 1(2)(c) of this Article I or
(ii) the person is nominated by or at the direction of the Board of
Directors. Only such business shall be conducted at an annual
meeting of stockholders as shall have been brought before the
meeting in accordance with the procedures set forth in Section 1 of
this Article I. The chairman of the meeting shall have the power
and the duty to determine whether a nomination or any business
proposed to be brought before the meeting has been made in
accordance with the procedures set forth in these Bylaws and, if
any proposed nomination or business is not in compliance with these
Bylaws, to declare that such defectively proposed business or
nomination shall not be presented for stockholder action at the
meeting and shall be disregarded.
(6) For
purposes of these Bylaws, “Public Announcement” shall
mean disclosure in a press release reported by the Dow Jones News
Service, Associated Press or a comparable national news service or
in a document publicly filed by the Corporation with the Securities
and Exchange Commission pursuant to Section 13, 14 or 15(d) of the
Exchange Act.
(7)
Notwithstanding the foregoing provisions of this Section 1, a
stockholder shall also comply with all applicable requirements of
the Exchange Act and the rules and regulations thereunder with
respect to matters set forth in this Section 1. Nothing in this
Section 1 shall be deemed to affect any rights of stockholders to
request inclusion of proposals in the Corporation’s proxy
statement pursuant to Rule 14a-8 under the Exchange
Act.
Section 2. Special
Meetings.
(1)
Special meetings of the stockholders, other than those required by
statute, may be called at any time by the Board of Directors acting
pursuant to a resolution adopted by a majority of the Whole Board.
For purposes of these Bylaws, the term “Whole Board”
shall mean the total number of authorized directors whether or not
there exist any vacancies in previously authorized directorships.
The Board of Directors may postpone or reschedule any previously
scheduled special meeting.
(2)
Only such business shall be conducted at a special meeting of
stockholders as shall have been brought before the meeting by or at
the direction of the Board of Directors. The notice of such special
meeting shall include the purpose for which the meeting is called.
Nominations of persons for election to the Board of Directors may
be made at a special meeting of stockholders at which directors are
to be elected (a) by or at the direction of the Board of Directors
or (b) by any stockholder of record at the time of giving of notice
provided for in this paragraph, who shall be entitled to vote at
the meeting and who delivers a written notice to the Secretary
setting forth the information set forth in Section 1(4)(a) and
1(4)(c) of this Article I. Nominations by stockholders of persons
for election to the Board of Directors may be made at such a
special meeting of stockholders only if such record
stockholder’s notice required by the preceding sentence is
received by the Secretary at the principal executive offices of the
Corporation not later than the close of business on the later of
the 90th day prior to such special meeting or the 10th day
following the day on which Public Announcement is first made of the
date of the special meeting and of the nominees proposed by the
Board of Directors to be elected at such meeting. In no event shall
an adjournment or postponement of a special meeting commence a new
time period for the giving of a record stockholder’s notice.
A person shall not be eligible for election or reelection as a
director at a special meeting unless the person is nominated (i) by
or at the direction of the Board of Directors or (ii) by a record
stockholder in accordance with the notice procedures set forth in
this Article I.
(3)
Notwithstanding the foregoing provisions of this Section 2, a
stockholder shall also comply with all applicable requirements of
the Exchange Act and the rules and regulations thereunder with
respect to matters set forth in this Section 2. Nothing in this
Section 2 shall be deemed to affect any rights of stockholders to
request inclusion of proposals in the Corporation’s proxy
statement pursuant to Rule 14a-8 under the Exchange
Act.
Section 3. Notice
of Meetings.
Notice
of the place, if any, date, and time of all meetings of the
stockholders, and the means of remote communications, if any, by
which stockholders and proxyholders may be deemed to be present in
person and vote at such meeting, shall be given, not less than 10
nor more than 60 days before the date on which the meeting is to be
held, to each stockholder entitled to vote at such meeting, except
as otherwise provided herein or required by law (meaning, here and
hereinafter, as required from time to time by the Delaware General
Corporation Law or the Certificate of Incorporation of the
Corporation).
When a
meeting is adjourned to another time or place, notice need not be
given of the adjourned meeting if the time and place, if any,
thereof, and the means of remote communications, if any, by which
stockholders and proxyholders may be deemed to be present in person
and vote at such adjourned meeting are announced at the meeting at
which the adjournment is taken; provided, however, that if the date of
any adjourned meeting is more than 30 days after the date for which
the meeting was originally noticed, or if a new record date is
fixed for the adjourned meeting, notice of the place, if any, date,
and time of the adjourned meeting and the means of remote
communications, if any, by which stockholders and proxyholders may
be deemed to be present in person and vote at such adjourned
meeting, shall be given in conformity herewith. At any adjourned
meeting, any business may be transacted which might have been
transacted at the original meeting.
Section 4. Quorum.
At any
meeting of the stockholders, the holders of a majority of the
voting power of all of the shares of the stock entitled to vote at
the meeting, present in person or by proxy, shall constitute a
quorum for all purposes, unless or except to the extent that the
presence of a larger number may be required by law. Where a
separate vote by a class or classes or series is required, a
majority of the voting power of the shares of such class or classes
or series present in person or represented by proxy shall
constitute a quorum entitled to take action with respect to that
vote on that matter.
If a
quorum shall fail to attend any meeting, the chairman of the
meeting may adjourn the meeting to another place, if any, date, or
time.
Section 5. Organization.
Such
person as the Board of Directors may have designated or, in the
absence of such a person, the Chairman of the Board or, in his or
her absence, the Chief Executive Officer of the Corporation or, in
his or her absence, such person as may be chosen by the holders of
a majority of the voting power of the shares entitled to vote who
are present, in person or by proxy, shall call to order any meeting
of the stockholders and act as chairman of the meeting. In the
absence of the Secretary of the Corporation, the secretary of the
meeting shall be such person as the chairman of the meeting
appoints.
Section 6. Conduct
of Business.
The
chairman of any meeting of stockholders shall determine the order
of business and the procedure at the meeting, including such
regulation of the manner of voting and the conduct of discussion as
seem to him or her in order. The chairman of the meeting shall have
the power to adjourn the meeting to another place, if any, date and
time. The date and time of the opening and closing of the polls for
each matter upon which the stockholders will vote at the meeting
shall be announced at the meeting.
Section 7. Proxies
and Voting.
At any
meeting of the stockholders, every stockholder entitled to vote may
vote in person or by proxy authorized by an instrument in writing
or by a transmission permitted by law filed in accordance with the
procedure established for the meeting. Any copy, facsimile
telecommunication or other reliable reproduction of the writing or
transmission created pursuant to this paragraph may be substituted
or used in lieu of the original writing or transmission for any and
all purposes for which the original writing or transmission could
be used, provided that such copy, facsimile telecommunication or
other reproduction shall be a complete reproduction of the entire
original writing or transmission.
If
shares or other securities having voting power stand of record in
the names of 2 or more persons, whether fiduciaries, members of a
partnership, joint tenants, tenants in common, tenants by the
entirety, or otherwise, or if 2 or more persons have the same
fiduciary relationship respecting the same shares, unless the
Secretary is given written notice to the contrary and is furnished
with a copy of the instrument or order appointing them or creating
the relationship wherein it is so provided, their acts with respect
to voting shall have the following effect: (a) if only 1 votes, his
or her act binds all; (b) if more than 1 votes, the act of the
majority so voting binds all; (c) if more than 1 votes, but the
vote is evenly split on any particular matter, each faction may
vote the securities in question proportionally, or any person
voting the shares, or a beneficiary, if any, may apply to the
Delaware Court of Chancery or such other court as may have
jurisdiction for relief as provided in Section 217(b) of the
Delaware General Corporation Law. If the instrument filed with the
Secretary shows that any such tenancy is held in unequal interests,
a majority or even-split for the purpose of clause (c) of this
paragraph shall be a majority or even-split in
interest.
The
Corporation may, and to the extent required by law, shall, in
advance of any meeting of stockholders, appoint one or more
inspectors to act at the meeting and make a written report thereof.
The Corporation may designate one or more alternate inspectors to
replace any inspector who fails to act. If no inspector or
alternate is able to act at a meeting of stockholders, the person
presiding at the meeting may, and to the extent required by law,
shall, appoint one or more inspectors to act at the meeting. Each
inspector, before entering upon the discharge of his or her duties,
shall take and sign an oath faithfully to execute the duties of
inspector with strict impartiality and according to the best of his
or her ability. Every vote taken by ballots shall be counted by a
duly appointed inspector or inspectors.
All
elections shall be determined by a plurality of the votes cast, and
except as otherwise required by law, all other matters shall be
determined by a majority of the votes cast affirmatively or
negatively.
Section 8. Stock
List.
A
complete list of stockholders entitled to vote at any meeting of
stockholders, arranged in alphabetical order for each class of
stock and showing the address of each such stockholder and the
number of shares registered in his or her name, shall be open to
the examination of any such stockholder for a period of at least 10
days prior to the meeting in the manner provided by
law.
The
stock list shall also be open to the examination of any stockholder
during the whole time of the meeting of stockholders as provided by
law. This list shall presumptively determine the identity of the
stockholders entitled to vote at the meeting and the number of
shares held by each of them.
Section
9. Written Consent of
Stockholders Without a Meeting. Any action to be taken at any annual
or special meeting of stockholders may be taken without a meeting,
without prior notice and without a vote, if a consent or consents
in writing, setting forth the action to be so taken, shall be
signed by the holders of outstanding stock having not less than the
minimum number of votes that would be necessary to authorize or
take such action at a meeting at which all shares entitled to vote
thereon were present and voted and shall be delivered (by hand or
by certified or registered mail, return receipt requested) to the
Corporation by delivery to its registered office in the State of
Delaware, its principal place of business, or an officer or agent
of the Corporation having custody of the book in which proceedings
of meetings of stockholders are recorded. Every written consent
shall bear the date of signature of each stockholder who signs the
consent, and no written consent shall be effective to take the
corporate action referred to therein unless, within 60 days of the
earliest dated consent delivered in the manner required by this
Section, written consents signed by a sufficient number of holders
to take action are delivered to the Corporation as aforesaid.
Prompt notice of the taking of the corporate action without a
meeting by less than unanimous written consent shall, to the extent
required by applicable law, be given to those stockholders who have
not consented in writing, and who, if the action had been taken at
a meeting, would have been entitled to notice of the meeting if the
record date for notice of such meeting had been the date that
written consents signed by a sufficient number of holders to take
the action were delivered to the Corporation
ARTICLE II—BOARD OF DIRECTORS
Section 1. Number,
Election and Term of Directors.
Subject
to the rights of the holders of any series of preferred stock to
elect directors under specified circumstances, the authorized
number of directors shall be fixed from time to time exclusively by
the Board of Directors pursuant to a resolution adopted by a
majority of the Whole Board. The directors, other than those who
may be elected by the holders of any series of preferred stock
under specified circumstances, shall be elected at each annual
meeting of stockholders. Each director shall hold office until the
next annual meeting of stockholders and until his or her successor
shall have been duly elected and qualified or until his or her
earlier death, resignation, disqualification or removal from
office. At each annual meeting of stockholders, if authorized by a
resolution of the Board of Directors, directors may be elected to
fill any vacancy on the Board of Directors, regardless of how such
vacancy shall have been created.
Section 2. Newly
Created Directorships and Vacancies.
Subject
to the rights of the holders of any series of preferred stock then
outstanding, newly created directorships resulting from any
increase in the authorized number of directors or any vacancies in
the Board of Directors resulting from death, resignation,
retirement, disqualification, removal from office or other cause
shall, unless otherwise required by law or by resolution of the
Board of Directors, be filled only by a majority vote of the
directors then in office, though less than a quorum (and not by
stockholders), and directors so chosen shall serve for the
remainder of the full term of the director for which the vacancy
was created or occurred or until such director’s successor
shall have been duly elected and qualified. No decrease in the
number of authorized directors shall shorten the term of any
incumbent director.
Section 3. Resignation.
Any
director may resign at any time by delivering his or her notice in
writing or by electronic transmission to the Secretary, such
resignation to specify whether it will be effective at a particular
time, upon receipt by the Secretary or at the pleasure of the Board
of Directors. If no such specification is made, it shall be deemed
effective at the pleasure of the Board of Directors. When one or
more directors shall resign from the Board of Directors, effective
at a future date, a majority of the directors then in office,
including those who have so resigned, shall have power to fill such
vacancy or vacancies, the vote thereon to take effect when such
resignation or resignations shall become effective, and each
director so chosen shall hold office for the unexpired portion of
the term of the director whose place shall be vacated and until his
or her successor shall have been duly elected and
qualified.
Section 4. Regular
Meetings.
Regular
meetings of the Board of Directors shall be held at such place or
places, on such date or dates, and at such time or times as shall
have been established by the Board of Directors and publicized
among all directors. A notice of each regular meeting shall not be
required.
Section 5. Special
Meetings.
Special
meetings of the Board of Directors may be called by the Chairman of
the Board, the Chief Executive Officer or by a majority of the
Whole Board and shall be held at such place, on such date, and at
such time as they or he or she shall fix. Notice of the place,
date, and time of each such special meeting shall be given to each
director by whom it is not waived by mailing written notice not
less than two (2) days before the meeting or by telephone or by
telegraphing or telexing or by facsimile or electronic transmission
of the same not less than 24 hours before the meeting. Unless
otherwise indicated in the notice thereof, any and all business may
be transacted at a special meeting.
Section 6. Quorum.
At any
meeting of the Board of Directors, a majority of the total number
of the Whole Board shall constitute a quorum for all purposes. If a
quorum shall fail to attend any meeting, a majority of those
present may adjourn the meeting to another place, date, or time,
without further notice or waiver thereof.
Section 7. Participation in Meetings By
Conference Telephone.
Members
of the Board of Directors, or of any committee thereof, may
participate in a meeting of such Board of Directors or committee by
means of conference telephone or other communications equipment by
means of which all persons participating in the meeting can hear
each other and such participation shall constitute presence in
person at such meeting.
Section 8. Conduct
of Business.
At any
meeting of the Board of Directors, business shall be transacted in
such order and manner as the Board of Directors may from time to
time determine, and all matters shall be determined by the vote of
a majority of the directors present, except as otherwise provided
herein or required by law. Action may be taken by the Board of
Directors without a meeting if all members thereof consent thereto
in writing or by electronic transmission, and the writing or
writings or electronic transmission or transmissions are filed with
the minutes of proceedings of the Board of Directors. Such filing
shall be in paper form if the minutes are maintained in paper form
and shall be in electronic form if the minutes are maintained in
electronic form.
Section 9. Compensation of
Directors.
Unless
otherwise restricted by the Corporation’s Certificate of
Incorporation, the Board of Directors shall have the authority to
fix the compensation of the directors. The directors may be paid
their expenses, if any, of attendance at each meeting of the Board
of Directors and may be paid a fixed sum for attendance at each
meeting of the Board of Directors or paid a stated salary or paid
other compensation as director. No such payment shall preclude any
director from serving the Corporation in any other capacity and
receiving compensation therefor. Members of special or standing
committees may be allowed compensation for attending committee
meetings.
ARTICLE III—COMMITTEES
Section 1. Committees of the Board of
Directors.
The
Board of Directors may from time to time designate committees of
the Board of Directors, with such lawfully delegable powers and
duties as it thereby confers, to serve at the pleasure of the Board
of Directors and shall, for those committees and any others
provided for herein, elect a director or directors to serve as the
member or members, designating, if it desires, other directors as
alternate members who may replace any absent or disqualified member
at any meeting of the committee. In the absence or disqualification
of any member of any committee and any alternate member in his or
her place, the member or members of the committee present at the
meeting and not disqualified from voting, whether or not he or she
or they constitute a quorum, may by unanimous vote appoint another
member of the Board of Directors to act at the meeting in the place
of the absent or disqualified member.
Section 2. Conduct
of Business.
Each
committee of the Board of Directors may determine the procedural
rules for meeting and conducting its business and shall act in
accordance therewith, except as otherwise provided herein or
required by law. Adequate provision shall be made for notice to
members of all meetings; one-third (1/3) of the members shall
constitute a quorum unless the committee shall consist of 1 or 2
members, in which event 1 member shall constitute a quorum; and all
matters shall be determined by a majority vote of the members
present. Action may be taken by any committee without a meeting if
all members thereof consent thereto in writing or by electronic
transmission, and the writing or writings or electronic
transmission or transmissions are filed with the minutes of the
proceedings of such committee. Such filing shall be in paper form
if the minutes are maintained in paper form and shall be in
electronic form if the minutes are maintained in electronic
form.
ARTICLE IV—OFFICERS
Section 1. Generally.
The
officers of the Corporation shall consist of, if and when
designated by the Board of Directors, a Chief Executive Officer, a
President, one or more Vice Presidents, a Secretary, a Treasurer
and such other officers as may from time to time be appointed by
the Board of Directors. Officers shall be elected by the Board of
Directors, which shall consider such appointment at its first
meeting after every annual meeting of stockholders. Each officer
shall hold office until his or her successor is elected and
qualified or until his or her earlier death, resignation or
removal. Any number of offices may be held by the same person
unless specifically prohibited therefrom by law. The salaries of
officers elected by the Board of Directors shall be fixed from time
to time by the Board of Directors, a committee thereof or by such
officers as may be designated by resolution of the Board of
Directors.
Section 2. Chief
Executive Officer.
The
Chief Executive Officer shall have the responsibility for the
general management and control of the business and affairs of the
Corporation and shall perform all duties and have all powers that
are commonly incident to the office of chief executive or which are
delegated to him or her by the Board of Directors. The Chief
Executive Officer shall preside at all meetings of the
stockholders. He or she shall have power to sign all stock
certificates, contracts and other instruments of the Corporation
that are authorized and shall have general supervision and
direction of all of the other officers, employees and agents of the
Corporation.
Section 3. President.
The
President shall be the chief operating officer of the Corporation.
He or she shall have general responsibility for the management and
control of the operations of the Corporation and shall perform all
duties and have all powers that are commonly incident to the office
of chief operating officer or that are delegated to him or her by
the Board of Directors. Subject to the direction of the Board of
Directors and the Chief Executive Officer, the President shall have
power to sign all stock certificates, contracts and other
instruments of the Corporation that are authorized and shall have
general supervision of all of the other officers (other than the
Chief Executive Officer), employees and agents of the Corporation.
Unless another officer has been appointed the Corporation’s
Chief Executive Officer, the President shall also have the powers
and responsibilities set forth under Section 2 of this Article
IV.
Section 4. Vice
President.
Each
Vice President shall have such powers and duties as may be
delegated to him or her by the Board of Directors and that are
commonly incident to their office. One Vice President shall be
designated by the Board of Directors to perform the duties and
exercise the powers of the President in the event of the
President’s absence or disability.
Section 5. Chief
Financial Officer.
The
Chief Financial Officer shall keep or cause to be kept the books of
account of the Corporation in a thorough and proper manner and
shall render statements of the financial affairs of the Corporation
in such form and as often as required by the Board of Directors,
the Chief Executive Officer or the President. The Chief Financial
Officer, subject to the order of the Board of Directors, shall have
the custody of all funds and securities of the Corporation. The
Chief Financial Officer shall perform other duties commonly
incident to the office of the chief financial officer and shall
also perform such other duties and have such other powers as the
Board of Directors, the Chief Executive Officer or the President
shall designate from time to time. The Chief Executive Officer or
the President may direct the Treasurer or any Assistant Treasurer,
or the Controller or any Assistant Controller to assume and perform
the duties of the Chief Financial Officer in the absence or
disability of the Chief Financial Officer.
Section 6. Secretary.
The
Secretary shall issue all authorized notices for, and shall
maintain minutes of, all meetings of the stockholders and the Board
of Directors and any committee thereof. He or she shall have charge
of the corporate books and shall perform such other duties that are
commonly incident to the office of secretary and as the Board of
Directors may from time to time prescribe. The Chief Executive
Officer or the President may direct any Assistant Secretary or
other officer to assume and perform the duties of the Secretary in
the absence or disability of the Secretary.
Section 7. Treasurer.
The
Treasurer shall make such disbursements of the funds of the
Corporation as are authorized and shall render from time to time an
account of all such transactions and of the financial condition of
the Corporation. The Treasurer shall also perform such other duties
that are commonly incident to the office of treasurer and as the
Board of Directors may from time to time prescribe.
Section 8. Delegation of
Authority.
The
Board of Directors may from time to time delegate the powers or
duties of any officer to any other officers or agents,
notwithstanding any provision hereof.
Section 9. Removal.
Any
officer of the Corporation may be removed at any time, with or
without cause, by the affirmative vote of a majority of the members
of the Board of Directors or by the Chief Executive Officer or by
other superior officers upon whom such power of removal may have
been conferred by the Board of Directors.
Section 10. Resignations.
Any
officer may resign at any time by giving notice in writing or by
electronic transmission to the Board of Directors or to the Chief
Executive Officer, the President or the Secretary. Any such
resignation shall be effective when received by the person or
persons to whom such notice is given, unless a later time is
specified therein, in which event the resignation shall become
effective at such later time. Unless otherwise specified in such
notice, the acceptance of any such resignation shall not be
necessary to make it effective. Any resignation shall be without
prejudice to the rights, if any, of the Corporation under any
contract with the resigning officer.
Section 11. Action
with Respect to Securities of Other
Corporations.
Unless
otherwise directed by the Board of Directors, the Chief Executive
Officer, the President and the Chief Financial Officer shall each
have power to vote and otherwise act on behalf of the Corporation,
in person or by proxy, at any meeting of stockholders of or with
respect to any action of stockholders of any other corporation or
entity in which this Corporation may hold securities and otherwise
to exercise any and all rights and powers which this Corporation
may possess by reason of its ownership of securities in such other
corporation or entity.
ARTICLE V—STOCK
Section 1. Certificates of Stock; Uncertificated
Shares.
The
shares of the Corporation shall be evidenced by certificates;
provided, however, that the
Board may provide by resolution or resolutions that some or all of
any or all classes or series of stock of the Corporation shall be
uncertificated shares. Any such resolution shall not apply to
shares evidenced by a certificate until such certificate is
surrendered to the Corporation. Notwithstanding the adoption of
such a resolution by the Board, every holder of stock evidenced by
certificates, and upon request every holder of uncertificated
shares, shall be entitled to have a certificate signed by, or in
the name of the Corporation by, the Chairman or a Vice-Chairman of
the Board of Directors or the President or a Vice President, and by
the Secretary or an Assistant Secretary, or the Treasurer or an
Assistant Treasurer, certifying the number of shares owned by him
or her. Any or all of the signatures on the certificate may be by
facsimile.
Section 2. Transfers of
Stock.
Transfers
of stock shall be made only upon the transfer books of the
Corporation kept at an office of the Corporation or by transfer
agents designated to transfer shares of the stock of the
Corporation. Except where a certificate is issued in accordance
with Section 5 of this Article V of these Bylaws, an outstanding
certificate for the number of shares involved shall be surrendered
for cancellation before a new certificate is issued
therefor.
Section 3. Record
Date.
In
order that the Corporation may determine the stockholders entitled
to notice of or to vote at any meeting of stockholders, or to
receive payment of any dividend or other distribution or allotment
of any rights or to exercise any rights in respect of any change,
conversion or exchange of stock or for the purpose of any other
lawful action, the Board of Directors may, except as otherwise
required by law, fix a record date, which record date shall not
precede the date on which the resolution fixing the record date is
adopted and which record date shall not be more than 60 nor less
than 10 days before the date of any meeting of stockholders, nor
more than 60 days prior to the time for such other action as
hereinbefore described; provided,
however, that if no record date is fixed by the Board of
Directors, the record date for determining stockholders entitled to
notice of or to vote at a meeting of stockholders shall be at the
close of business on the day next preceding the day on which notice
is given or, if notice is waived, at the close of business on the
day next preceding the day on which the meeting is held, and, for
determining stockholders entitled to receive payment of any
dividend or other distribution or allotment of rights or to
exercise any rights of change, conversion or exchange of stock or
for any other purpose, the record date shall be at the close of
business on the day on which the Board of Directors adopts a
resolution relating thereto.
A
determination of stockholders of record entitled to notice of or to
vote at a meeting of stockholders shall apply to any adjournment of
the meeting; provided,
however, that the Board of Directors may fix a new record
date for the adjourned meeting.
Section 4. Registered
Stockholders.
The
Corporation shall be entitled to recognize the exclusive right of a
person registered on its books as the owner of shares to receive
dividends, and to vote as such owner, and shall not be bound to
recognize any equitable or other claim to or interest in such share
or shares on the part of any other person whether or not it shall
have express or other notice thereof, except as otherwise provided
by the laws of the State of Delaware.
Section 5. Lost,
Stolen or Destroyed Certificates.
In the
event of the loss, theft or destruction of any certificate of
stock, another may be issued in its place pursuant to such
regulations as the Corporation may establish concerning proof of
such loss, theft or destruction and concerning the giving of a
satisfactory bond or bonds of indemnity.
Section 6. Regulations.
The
issue, transfer, conversion and registration of certificates of
stock shall be governed by such other regulations as the Board of
Directors may establish.
ARTICLE VI—OTHER SECURITIES OF THE CORPORATION
All
bonds, debentures and other corporate securities of the
Corporation, other than stock certificates (covered in Article V of
these Bylaws), may be signed by the Chairman of the Board of
Directors, the Chief Executive Officer, the President or any Vice
President, or such other person as may be authorized by the Board
of Directors, and the corporate seal impressed thereon or a
facsimile of such seal imprinted thereon and attested by the
signature of the Secretary or an Assistant Secretary, or the Chief
Financial Officer or Treasurer or an Assistant Treasurer;
provided, however, that
where any such bond, debenture or other corporate security shall be
authenticated by the manual signature, or where permissible
facsimile signature, of a trustee under an indenture pursuant to
which such bond, debenture or other corporate security shall be
issued, the signatures of the persons signing and attesting the
corporate seal on such bond, debenture or other corporate security
may be the imprinted facsimile of the signatures of such persons.
Interest coupons appertaining to any such bond, debenture or other
corporate security, authenticated by a trustee as aforesaid, shall
be signed by the Treasurer or an Assistant Treasurer of the
Corporation or such other person as may be authorized by the Board
of Directors, or bear imprinted thereon the facsimile signature of
such person.
ARTICLE VII—NOTICES
Section 1. Notices.
If
mailed, notice to stockholders shall be deemed given when deposited
in the mail, postage prepaid, directed to the stockholder at such
stockholder’s address as it appears on the records of the
Corporation. Without limiting the manner by which notice otherwise
may be given effectively to stockholders, any notice to
stockholders may be given by facsimile, telegraph, telex or by
electronic transmission in the manner provided in Section 232 of
the Delaware General Corporation Law.
Without
limiting the manner by which notice otherwise may be given
effectively to stockholders, any notice to stockholders given by
the Corporation under the provisions of the Delaware General
Corporation Law, the Corporation’s Certificate of
Incorporation or these Bylaws shall be effective if given by a
single written notice to stockholders who share an address if
consented to by the stockholders at that address to whom such
notice is given. Any stockholder who fails to object in writing to
the Corporation, within 60 days of having been given written notice
by the Corporation of its intention to send such single notice,
shall be deemed to have consented to receiving such single written
notice. Any such consent shall be revocable by the stockholder by
written notice to the Corporation.
Section 2. Waivers.
A
written waiver of any notice, signed by a stockholder or director,
or waiver by electronic transmission by such person, whether given
before or after the time of the event for which notice is to be
given, shall be deemed equivalent to the notice required to be
given to such person. Neither the business nor the purpose of any
meeting need be specified in such a waiver. Attendance at any
meeting shall constitute waiver of notice except attendance for the
sole purpose of objecting to the timeliness of notice.
ARTICLE VIII—MISCELLANEOUS
Section 1. Facsimile and Electronic
Signatures.
In
addition to the provisions for use of facsimile or electronic
signatures elsewhere specifically authorized in these Bylaws,
facsimile or electronic signatures of any officer or officers of
the Corporation may be used whenever and as authorized by the Board
of Directors or a committee thereof.
Section 2. Corporate Seal.
The
Board of Directors may provide a suitable seal, containing the name
of the Corporation, which seal shall be in the charge of the
Secretary. If and when so directed by the Board of Directors or a
committee thereof, duplicates of the seal may be kept and used by
the Treasurer or by an Assistant Secretary or Assistant
Treasurer.
Section 3. Reliance
upon Books, Reports and Records.
Each
director, each member of any committee designated by the Board of
Directors, and each officer of the Corporation shall, in the
performance of his or her duties, be fully protected in relying in
good faith upon the books of account or other records of the
Corporation and upon such information, opinions, reports or
statements presented to the Corporation by any of its officers or
employees, or committees of the Board of Directors so designated,
or by any other person as to matters which such director or
committee member reasonably believes are within such other
person’s professional or expert competence and who has been
selected with reasonable care by or on behalf of the
Corporation.
Section 4. Fiscal
Year.
The
fiscal year of the Corporation shall be as fixed by the Board of
Directors.
Section 5. Time
Periods.
In
applying any provision of these Bylaws that requires that an act be
done or not be done a specified number of days prior to an event or
that an act be done during a period of a specified number of days
prior to an event, calendar days shall be used, the day of the
doing of the act shall be excluded, and the day of the event shall
be included.
Section 6. Other
Offices.
The
Corporation shall also have and maintain an office or principal
place of business at such place as may be fixed by the Board of
Directors, and may also have offices at such other places, both
within and without the State of Delaware as the Board of Directors
may from time to time determine or the business of the Corporation
may require.
Section 7. Execution of Corporate
Instruments.
The
Board of Directors may, in its discretion, determine the method and
designate the signatory officer or officers, or other person or
persons, to execute on behalf of the Corporation any corporate
instrument or document, or to sign on behalf of the Corporation the
corporate name without limitation, or to enter into contracts on
behalf of the Corporation, except where otherwise provided by law
or these Bylaws, and such execution or signature shall be binding
upon the Corporation.
All
checks and drafts drawn on banks or other depositaries on funds to
the credit of the Corporation or in special accounts of the
Corporation shall be signed by such person or persons as provided
in these Bylaws or as the Board of Directors shall authorize so to
do.
Unless
authorized or ratified by the Board of Directors or within the
agency power of an officer, no officer, agent or employee shall
have any power or authority to bind the Corporation by any contract
or engagement or to pledge its credit or to render it liable for
any purpose or for any amount.
ARTICLE IX—INDEMNIFICATION OF DIRECTORS AND
OFFICERS
Section 1. Right to
Indemnification.
Each
person who was or is made a party or is threatened to be made a
party to or is otherwise involved in any action, suit or
proceeding, whether civil, criminal, administrative or
investigative (hereinafter a “Proceeding”), by reason
of the fact that he or she is or was a director or an officer of
the Corporation or is or was serving at the request of the
Corporation as a director, officer or trustee of another
corporation or of a partnership, joint venture, trust or other
enterprise, including service with respect to an employee benefit
plan (hereinafter an “Indemnitee”), whether the basis
of such proceeding is alleged action in an official capacity as a
director, officer or trustee or in any other capacity while serving
as a director, officer or trustee, shall be indemnified and held
harmless by the Corporation to the fullest extent permitted by
Delaware law, as the same exists or may hereafter be amended (but,
in the case of any such amendment, only to the extent that such
amendment permits the Corporation to provide broader
indemnification rights than such law permitted the Corporation to
provide prior to such amendment), against all expense, liability
and loss (including attorneys’ fees, judgments, fines, ERISA
excise taxes or penalties and amounts paid in settlement)
reasonably incurred or suffered by such Indemnitee in connection
therewith; provided,
however, that, except as provided in Section 3 of this
Article IX with respect to proceedings to enforce rights to
indemnification, the Corporation shall indemnify any such
Indemnitee in connection with a Proceeding (or part thereof)
initiated by such Indemnitee only if such Proceeding (or part
thereof) was authorized by the Board of Directors of the
Corporation or is expressly required by law.
Section 2. Right to
Advancement of Expenses.
In
addition to the right to indemnification conferred in Section 1 of
this Article IX, an Indemnitee shall also have the right to be paid
by the Corporation the expenses (including attorney’s fees)
incurred in defending any such Proceeding in advance of its final
disposition (hereinafter an “Advancement of Expenses”);
provided, however, that, if
required by the Delaware General Corporation Law, an Advancement of
Expenses incurred by an Indemnitee in his or her capacity as a
director or officer (and not in any other capacity in which service
was or is rendered by such Indemnitee, including, without
limitation, service to an employee benefit plan) shall be made only
upon delivery to the Corporation of an undertaking (hereinafter an
“Undertaking”), by or on behalf of such Indemnitee, to
repay all amounts so advanced if it shall ultimately be determined
by final judicial decision from which there is no further right to
appeal (hereinafter a “Final Adjudication”) that such
Indemnitee is not entitled to be indemnified for such expenses
under Section 1 of this Article IX or otherwise.
Section 3. Right of
Indemnitee to Bring Suit.
If a
claim under Section 1 or 2 of this Article IX is not paid in full
by the Corporation within 60 days after a written claim has been
received by the Corporation, except in the case of a claim for an
advancement of expenses, in which case the applicable period shall
be 20 days, the Indemnitee may at any time thereafter bring suit
against the Corporation to recover the unpaid amount of the claim.
If successful in whole or in part in any such suit, or in a suit
brought by the Corporation to recover an Advancement of Expenses
pursuant to the terms of an Undertaking, the Indemnitee shall be
entitled to be paid also the expense of prosecuting or defending
such suit. In (i) any suit brought by the Indemnitee to enforce a
right to indemnification hereunder (but not in a suit brought by
the Indemnitee to enforce a right to an Advancement of Expenses),
it shall be a defense that, and (ii) any suit brought by the
Corporation to recover an Advancement of Expenses pursuant to the
terms of an Undertaking, the Corporation shall be entitled to
recover such expenses upon a Final Adjudication that, in either
case the Indemnitee has not met any applicable standard for
indemnification set forth in the Delaware General Corporation Law.
Neither the failure of the Corporation (including its directors who
are not parties to such action, a committee of such directors,
independent legal counsel, or its stockholders) to have made a
determination prior to the commencement of such suit that
indemnification of the Indemnitee is proper in the circumstances
because the Indemnitee has met the applicable standard of conduct
set forth in the Delaware General Corporation Law, nor an actual
determination by the Corporation (including its directors who are
not parties to such action, a committee of such directors,
independent legal counsel, or its stockholders) that the Indemnitee
has not met such applicable standard of conduct, shall create a
presumption that the Indemnitee has not met the applicable standard
of conduct or, in the case of such a suit brought by the
Indemnitee, be a defense to such suit. In any suit brought by the
Indemnitee to enforce a right to indemnification or to an
Advancement of Expenses hereunder, or brought by the Corporation to
recover an Advancement of Expenses pursuant to the terms of an
Undertaking, the burden of proving that the Indemnitee is not
entitled to be indemnified, or to such Advancement of Expenses,
under this Article IX or otherwise shall be on the
Corporation.
Section 4. Non-Exclusivity of
Rights.
The
rights to indemnification and to the Advancement of Expenses
conferred in this Article IX shall not be exclusive of any other
right that any person may have or hereafter acquire under any
statute, the Corporation’s Certificate of Incorporation,
these Bylaws, agreement, vote of stockholders or directors or
otherwise.
Section 5. Insurance.
The
Corporation may maintain insurance, at its expense, to protect
itself and any director, officer, employee or agent of the
Corporation or another corporation, partnership, joint venture,
trust or other enterprise against any expense, liability or loss,
whether or not the Corporation would have the power to indemnify
such person against such expense, liability or loss under the
Delaware General Corporation Law.
Section 6. Indemnification of Employees and
Agents of the Corporation.
The
Corporation may, to the extent authorized from time to time by the
Board of Directors, grant rights to indemnification and to the
advancement of expenses to any employee or agent of the Corporation
to the fullest extent of the provisions of this Article IX with
respect to the indemnification and advancement of expenses of
directors and officers of the Corporation.
Section 7. Nature
of Rights.
The
rights conferred upon indemnitees in this Article IX shall be
contract rights and such rights shall continue as to an Indemnitee
who has ceased to be a director, officer or trustee and shall inure
to the benefit of the Indemnitee’s heirs, executors and
administrators. Any amendment, alteration or repeal of this Article
IX that adversely affects any right of an Indemnitee or its
successors shall be prospective only and shall not limit or
eliminate any such right with respect to any Proceeding involving
any occurrence or alleged occurrence of any action or omission to
act that took place prior to such amendment or repeal.
Section 8. Saving
Clause.
If this
Article IX or any portion hereof shall be invalidated on any ground
by any court of competent jurisdiction, then the Corporation shall
nevertheless indemnify and advance expenses to each director and
officer to the fullest extent not prohibited by any applicable
portion of this Article IX that shall not have been invalidated, or
by any other applicable law. If this Article IX shall be invalid
due to the application of the indemnification provisions of another
jurisdiction, then the Corporation shall indemnify and advance
expenses to each director and officer to the fullest extent
permitted under any other applicable law.
ARTICLE X—AMENDMENTS
Subject
to the limitations set forth in Section 7 of Article IX of these
Bylaws, in furtherance and not in limitation of the powers
conferred by law, the Board of Directors is expressly authorized to
adopt, amend and repeal these Bylaws subject to the power of the
holders of capital stock of the Corporation to adopt, amend or
repeal Bylaws of the Corporation; provided, however, that, with respect
to the power of holders of capital stock to adopt, amend and repeal
bylaws of the Corporation, notwithstanding any other provision of
these Bylaws or any provision of law that might otherwise permit a
lesser vote or no vote, but in addition to any affirmative vote of
the holders of any particular class or series of the capital stock
of the Corporation required by law, these Bylaws or any preferred
stock, the affirmative vote of the holders of at least sixty-seven
(67%) of the voting power of all of the then-outstanding shares
entitled to vote generally in the election of directors, voting
together as a single class, shall be required to adopt, amend or
repeal any provision of these Bylaws.
ARTICLE XI – FORUM FOR ADJUDICATION OF
DISPUTES
Unless
the Corporation consents in writing to the selection of an
alternative forum, the Court of Chancery of the State of Delaware
shall be the sole and exclusive forum for any stockholder
(including a beneficial owner) to bring (i) any derivative action
or proceeding brought on behalf of the Corporation, (ii) any action
asserting a claim of breach of a fiduciary duty owed by any
director, officer or other employee of the Corporation to the
Corporation or the Corporation’s stockholders, (iii) any
action asserting a claim against the Corporation, its directors,
officers or employees arising pursuant to any provision of the DGCL
or these Bylaws, or (iv) any action asserting a claim against the
Corporation, its directors, officers, employees or agents governed
by the internal affairs doctrine, except for, as to each of (i)
through (iv) above, any claim as to which the Court of Chancery
determines that there is an indispensable party not subject to the
jurisdiction of the Court of Chancery (and the indispensable party
does not consent to the personal jurisdiction of the Court of
Chancery within ten days following such determination), which is
vested in the exclusive jurisdiction of a court or forum other than
the Court of Chancery, or for which the Court of Chancery does not
have subject matter jurisdiction.
Unless
the Corporation consents in writing to the selection of an
alternative forum, the federal district courts of the United States
of America shall be the exclusive forum for the resolution of any
complaint asserting a cause of action arising under the Securities
Act of 1933, as amended. Any person or entity purchasing or
otherwise acquiring any interest in shares of capital stock of the
Corporation shall be deemed to have notice of and consented to the
provisions of this Article XI.
Exhibit 4.1
NEITHER
THIS SECURITY NOR THE SECURITIES INTO WHICH THIS SECURITY IS
CONVERTIBLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE
COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE
UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE “SECURITIES ACT”), AND,
ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR
PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT
SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND
IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY
A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, THE
SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY.
THIS SECURITY AND THE SECURITIES ISSUABLE UPON CONVERSION OF THIS
SECURITY MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN
ACCOUNT OR OTHER LOAN SECURED BY SUCH SECURITIES.
Original
Issue Date: May 8, 2020
Original Principal Amount: $________
Purchase
Price: $_________
ORIGINAL ISSUE DISCOUNT SENIOR SECURED
CONVERTIBLE PROMISSORY NOTE
DUE MAY 8, 2021
THIS
ORIGINAL ISSUE DISCOUNT SENIOR SECURED CONVERTIBLE PROMISSORY NOTE
is a duly authorized and validly issued debt obligation of GoIP
Global, Inc., a Colorado corporation (the “Company” or the
“Borrower”), having its
principal place of business at 1400 Old Country Road, Westbury New
York 11590, designated as its Original Issue Discount Senior
Secured Convertible Promissory Note due May 8, 2021 (the
“Note”).
FOR
VALUE RECEIVED, the Company promises to pay to ____________ or its registered assigns
(the “Holder”), or shall have
paid pursuant to the terms hereunder, the principal sum of $_______
and any other sums due hereunder on May 8, 2021 (the
“Maturity
Date”), or such earlier date as this Note is required
or permitted to be repaid as provided hereunder, and to pay
interest to the Holder on the aggregate unconverted and then
outstanding principal amount of this Note in accordance with the
provisions hereof. This Note is subject to the following additional
provisions:
Section
1. Definitions. For the purposes
hereof, in addition to the terms defined elsewhere in this Note,
(a) capitalized terms not otherwise defined herein shall have the
meanings set forth in the Purchase Agreement and (b) the following
terms shall have the following meanings:
“Alternate Conversion
Price” means the greater of (i) $0.01 or (ii) 75% of
the average VWAP of the Common Stock for the immediately preceding
five (5) Trading Days on the Trading Market on the date of
conversion.
“Beneficial Ownership
Limitation” shall have the meaning set forth in
Section 4(d).
“Business Day” means any
day except any Saturday, any Sunday, any day which is a federal
legal holiday in the United States or any day on which the New York
Federal Reserve Bank is closed.
“Buy-In” shall have the
meaning set forth in Section 4(c)(v).
“Change of Control
Transaction” means the occurrence after the date
hereof of any of (a) an acquisition after the date hereof by an
individual or legal entity or “group” (as described in
Rule 13d-5(b)(1) promulgated under the Exchange Act) of effective
control (whether through legal or beneficial ownership of capital
stock of the Company, by contract or otherwise) of in excess of
fifty percent (50%) of the voting securities of the Company (other
than by means of conversion or exercise of the Note and the
Securities issued together with the Note), (b) the Company merges
into or consolidates with any other Person, or any Person merges
into or consolidates with the Company and, after giving effect to
such transaction, the stockholders of the Company immediately prior
to such transaction own less than fifty-one percent (51%) of the
aggregate voting power of the Company or the successor entity of
such transaction, (c) the Company sells or transfers all or
substantially all of its assets to another Person and the
stockholders of the Company immediately prior to such transaction
own less than fifty-one percent (51%) of the aggregate voting power
of the acquiring entity immediately after the transaction, (d) a
replacement at one time or within a three year period of more than
one-half of the members of the Board of Directors which is not
approved by a majority of those individuals who are members of the
Board of Directors on the Original Issue Date (or by those
individuals who are serving as members of the Board of Directors on
any date whose nomination to the Board of Directors was approved by
a majority of the members of the Board of Directors who are members
on the date hereof), or (e) the execution by the Company of an
agreement to which the Company is a party or by which it is bound,
providing for any of the events set forth in clauses (a) through
(d) above.
“Conversion” shall have
the meaning ascribed to such term in Section 4.
“Conversion Date” shall
have the meaning set forth in Section 4(a)(i).
“Conversion Price” shall
have the meaning set forth in Section 4(b).
“Conversion Shares” means,
collectively, the shares of Common Stock issuable upon conversion
of this Note in accordance with the terms hereof.
“Distribution”
shall have the meaning set forth in Section 5(c).
“Event of
Default” shall have the
meaning set forth in Section 6(a).
“Equity Conditions” means,
during the period in question, (a) the
Company shall have duly honored all conversions and redemptions
scheduled to occur or occurring by virtue of one or more Notices of
Conversion of the Holder, if any, (b) the Company shall have paid
all liquidated damages and other amounts owing to the Holder in
respect of this Note, (c) the Common Stock is trading on a
Trading Market and all of the shares issuable pursuant to the
Transaction Documents are listed or quoted for trading on such
Trading Market (and the Company believes, in good faith, that
trading of the Common Stock on a Trading Market will continue
uninterrupted for the foreseeable future), (d) there is a
sufficient number of authorized but unissued and otherwise
unreserved shares of Common Stock for the issuance of all of the
shares issuable pursuant to the Transaction Documents, (e) there is
no existing Event of Default or no existing event which, with the
passage of time or the giving of notice, would constitute an Event
of Default, (f) the issuance of the shares in question to the
Holder would not violate the limitations set forth in Section 4(d)
herein, and (g) there has been no
public announcement of a pending or proposed Fundamental
Transaction or Change of Control Transaction that has not been
consummated, and (h) the Holder is not in possession of any
information provided by the Company that constitutes, or may
constitute, material non-public information.
“Late Fees” shall have the
meaning set forth in Section 2(d).
“Mandatory Default Amount”
means either, at the Holder’s discretion (i) the conversion
of the outstanding principal amount of this Note, plus all accrued
and unpaid interest hereon, converted at the Conversion Price or
(ii) the payment of 120% of the outstanding principal amount of
this Note and accrued and unpaid interest hereon, in addition to,
for both (i) and (ii) above, the payment of all other amounts,
costs, expenses and liquidated damages due in respect of this
Note.
“New York Courts” shall
have the meaning set forth in Section 8(d).
“Note Register” shall have
the meaning set forth in Section 2(c).
“Notice of Conversion”
shall have the meaning set forth in Section 4(a)(i).
“Optional Redemption”
shall have the meaning set forth in Section 6(a).
“Optional Redemption
Amount” means the sum of (a) 110% of the then
outstanding principal amount of the Note, (b) accrued but unpaid
interest and (c) all liquidated damages and other amounts due in
respect of the Note.
“Optional Redemption Date”
shall have the meaning set forth in Section 2(e).
“Optional Redemption
Notice” shall have the meaning set forth in Section
2(e).
“Optional Redemption Notice
Date” shall have the meaning set forth in Section
2(e).
“Optional Redemption
Period” shall
have the meaning set forth in Section 2(e).
“Original Issue Date”
means the date of the first issuance of the Note, regardless of any
transfers of any Note and regardless of the number of instruments
which may be issued to evidence such Note.
“Purchase Agreement” means
the Securities Purchase Agreement, dated as of May 8, 2020, among
the Company and the original Holder, as amended, modified or
supplemented from time to time in accordance with its
terms.
“Purchase
Rights” shall have the
meaning set forth in Section 5(b).
“Required Minimum” means,
as of any date after the consummation of the Reverse Stock Split,
the number of shares of Common Stock that is two times the number
of shares of Common Stock may be converted into at such time by all
Notes then outstanding. The initial reserve shall be 24,000,000
shares of Common Stock.
“Share Delivery Date”
shall have the meaning set forth in Section 4(c)(ii).
Section
2.
Interest, Prepayment and
Conversion.
a) Payment of Interest in Cash.
The Company shall pay interest to the Holder on the aggregate
unconverted and then outstanding principal amount of this Note at
the rate of eight percent (8%) per annum, payable quarterly on
January 1, April 1, July 1 and October 1, beginning on the first
such date after the Original Issue Date, on each Conversion Date
(as to that principal amount then being converted), on each
Optional Redemption Date (as to that principal amount then being
redeemed) and on the Maturity Date (each such date, an
“Interest Payment
Date”) (if any Interest Payment Date is not a Business
Day, then the applicable payment shall be due on the next
succeeding Business Day), in cash.
b) Intentionally
Omitted.
c) Interest Calculations. Interest
shall be calculated on the basis of a 360-day year, consisting of
twelve 30 calendar day periods, and shall accrue daily commencing
on the Original Issue Date until payment in full of the outstanding
principal, together with all accrued and unpaid interest,
liquidated damages and other amounts which may become due
hereunder, has been made. Payment of interest in shares of Common
Stock shall otherwise occur pursuant to Section 4(c)(ii) herein
and, solely for purposes of the payment of interest in shares, the
Interest Payment Date shall be deemed the Conversion Date. Interest
shall cease to accrue with respect to any principal amount
converted, provided that, the Company actually delivers the
Conversion Shares within the time period required by Section
4(c)(ii) herein. Interest hereunder will be paid to the Person in
whose name this Note is registered on the records of the Company
regarding registration and transfers of this Note (the
“Note
Register”).
d) All
overdue accrued and unpaid interest to be paid hereunder shall
entail a late fee at an interest rate equal to the lesser of 20%
per annum or the maximum rate permitted by applicable law (the
“Late
Fees”) which shall accrue daily from the date such
interest is due hereunder through and including the date of actual
payment in full. Interest hereunder will be paid to the Person in
whose name this Note is registered on the records of the Company
regarding registration and transfers of this Note (the
“Note
Register”).
e) Optional
Redemption. At any time after the Original Issue Date and
before the Maturity Date, the Company may, deliver a written
notice to the Holder (an
“Optional Redemption
Notice” and the date such
notice is deemed delivered hereunder, the
“Optional
Redemption Notice Date”)
of its irrevocable election to redeem all of the then outstanding
principal amount of this Note for cash in an amount equal to the
Optional Redemption Amount on the 20th
calendar day following the Optional
Redemption Notice Date (such date, the “Optional Redemption
Date”, such 20 day period, the “Optional Redemption
Period” and such
redemption, the “Optional
Redemption”). The
Optional Redemption Amount is payable in full on the Optional
Redemption Date. The Company may only effect an Optional Redemption
if each of the Equity Conditions shall have been met (unless waived
in writing by the Holder) on each Trading Day during the period
commencing on the Optional Redemption Notice Date through to the
Optional Redemption Date and through and including the date
payment of the Optional Redemption Amount is actually made in
full. If any of the Equity Conditions
shall cease to be satisfied at any time during the Optional
Redemption Period, then the Holder may elect to nullify the
Optional Redemption Notice by notice to the Company within 3
Trading Days after the first day on which any such Equity Condition
has not been met (provided that if, by a provision of the
Transaction Documents, the Company is obligated to notify the
Holder of the non-existence of an Equity Condition, such notice
period shall be extended to the third Trading Day after proper
notice from the Company) in which case the Optional Redemption
Notice shall be null and void, ab initio.
f) SBA
Loan Redemption. From
the date hereof until the date that the Notes are no longer
outstanding, upon any issuance by the Company or any of its
Subsidiaries of Indebtedness evidenced by a Small Business
Administration loan (a “SBA
Financing”), the Holder
shall have the right, upon one (1) day written notice (the
“SBA Financing
Redemption Date”), to
require the Company to use 50% of the gross proceeds received in
such SBA Financing, to the extent not prohibited under the terms of
the SBA Financing (the “SBA Financing
Redemption Amount”), to
redeem the Note at the Optional Redemption Amount (the
“SBA Financing
Redemption”). The SBA
Financing Redemption Amount payable on the SBA Financing Redemption
Date shall be paid in cash.
g) Redemption
Procedure. The Company
covenants and agrees that it will honor all Notices of Conversion
tendered from the time of delivery of the Optional Redemption
Notice or SBA Financing Notice through the date all amounts owing
thereon are due and paid in full. If any portion of the
payment pursuant to an Optional Redemption or SBA Redemption shall
not be paid by the Company by the applicable due date, Late Fees
shall accrue until such amount is paid in full. The Company’s
determination to pay an Optional Redemption or SBA Financing
Redemption in cash shall be applied ratably to all of the holders
of the then outstanding Notes based on their (or their
predecessor’s) initial purchases of Notes pursuant to the
Purchase Agreement. Notwithstanding anything herein contained to
the contrary, if any portion of the Optional Redemption Amount
remains unpaid after such date, the Holder may elect, by written
notice to the Company given at any time thereafter,
to invalidate such Optional Redemption, ab initio, and, the
Company shall have no further right to exercise such Optional
Redemption.
h) True-Up.
1. In
the event that the proceeds received by the Purchaser from the sale
of all the Conversion Shares and up to 50% of the Commitment Shares
(“Hurdle
Shares”) does not equal
at least $750,000 (the “Hurdle
Return”) on June 1, 2021
(the “True-Up Payment
Date”), the Company shall
pay the Purchasers their pro rata portion of an amount in cash (the
“True-Up
Payment”) equal to the
Hurdle Return less the proceeds previously realized by the
Purchaser from the sale of the Hurdle Shares, net of brokerage
commissions and any other fees incurred by Purchaser in connection
with the sale of any Hurdle Shares (“Net
Proceeds”).
2. The
True-Up Payment will be paid by the Company on first Business Day
after the True-Up Payment Date to such account(s) as the Purchasers
shall provide to the Company in writing. If any portion of the
True-Up Payment has not been paid by the Company on the date set
forth in this Section, interest shall accrue on such unpaid amount
until such amount is paid in full equal to Late Fees.
Section
3.
Registration of Transfers
and Exchanges.
a) Different Denominations. This
Note is exchangeable for an equal aggregate principal amount of
Notes of different authorized denominations, as requested by the
Holder surrendering the same. No service charge will be payable for
such registration of transfer or exchange.
b) Investment Representations.
This Note has been issued subject to certain investment
representations of the original Holder set forth in the Purchase
Agreement and may be transferred or exchanged only in compliance
with the Purchase Agreement and applicable federal and state
securities laws and regulations.
c) Reliance on Note Register.
Prior to due presentment for transfer to the Company of this Note,
the Company and any agent of the Company may treat the Person in
whose name this Note is duly registered on the Note Register as the
owner hereof for the purpose of receiving payment as herein
provided and for all other purposes, whether or not this Note is
overdue, and neither the Company nor any such agent shall be
affected by notice to the contrary.
Section
4.
Conversion.
a) At any time after
the Original Issue Date until this Note is no longer outstanding,
this Note shall be convertible, in whole or in part, into shares of
Common Stock at the option of the Holder, at any time and from time
to time (subject to the conversion limitations set forth in
Section 4(d) hereof). The Holder shall effect conversions by
delivering to the Company a Notice of Conversion, the form of which
is attached hereto as Annex A (each, a
“Notice of
Conversion”), specifying therein the principal amount
of this Note to be converted and the date on which such conversion
shall be effected (such date, the “Conversion Date”). If no
Conversion Date is specified in a Notice of Conversion, the
Conversion Date shall be the date that such Notice of Conversion is
deemed delivered hereunder. To effect conversions hereunder, the
Holder shall not be required to physically surrender this Note to
the Company unless the entire principal amount of this Note, plus
all accrued and unpaid interest thereon, has been so converted.
Conversions hereunder shall have the effect of lowering the
outstanding principal amount of this Note in an amount equal to the
applicable conversion. The Holder and the Company shall maintain
records showing the principal amount(s) converted and the date of
such conversion(s). The Company may deliver an objection to any
Notice of Conversion within two Business Days of delivery of such
Notice of Conversion. In the event of any dispute or discrepancy,
the records of the Company shall be controlling and determinative
in the absence of manifest error. The Holder, and any assignee by acceptance of
this Note, acknowledge and agree that, by reason of the provisions
of this paragraph, following conversion of a portion of this Note,
the unpaid and unconverted principal amount of this Note may be
less than the amount stated on the face hereof.
b) Conversion Price. The
conversion price in effect on any Conversion Date shall be equal to
$0.25 after the Reverse Stock Split, subject to adjustment herein
(the “Conversion
Price”). Notwithstanding the foregoing, at any time
during the continuance of any Event of Default, the Conversion
Price in effect shall be equal to the Alternate Conversion Price.
If at any time the Conversion Price as determined hereunder for any
conversion would be less than the par value of the Common Stock,
then at the sole discretion of the Holder, the Conversion Price
hereunder may equal such par value for such conversion and the
Conversion Amount for such conversion may be increased to include
Additional Principal, where “Additional Principal”
means such additional amount to be added to the Principal Amount to
the extent necessary to cause the number of conversion shares
issuable upon such conversion to equal the same number of
conversion shares as would have been issued had the Conversion
Price not been adjusted by the Holder to the par value price. In
the event the Borrower has a DTC “Chill” on its shares,
the Holder may convert the Note at the Alternate Conversion Price
while that “Chill” is in effect. All such
determinations to be appropriately adjusted for any stock dividend,
stock split, stock combination, reclassification or similar
transaction that proportionately decreases or increases the Common
Stock during such measuring period.
c) Mechanics of
Conversion.
i. Conversion Shares Issuable Upon
Conversion of Principal Amount. The number of Conversion
Shares issuable upon a conversion hereunder shall be determined by
the quotient obtained by dividing (x) the outstanding principal
amount of this Note to be converted by (y) the Conversion
Price.
ii. Delivery of Certificate Upon
Conversion. Not later than three Trading Days after each
Conversion Date (the “Share Delivery Date”),
the Company shall deliver, or cause to be delivered, to the Holder
(A) a certificate or certificates representing the Conversion
Shares representing the number of Conversion Shares being acquired
upon the conversion of this Note and (B) a bank check in the amount
of accrued and unpaid interest (if the Purchaser has elected or is
required to pay accrued interest in cash).
iii. Failure
to Deliver Certificates. If, in the case of any Notice of
Conversion, such certificate or certificates are not delivered to
or as directed by the applicable Holder by the Share Delivery Date,
the Holder shall be entitled to elect by written notice to the
Company at any time on or before its receipt of such certificate or
certificates, to rescind such Conversion, in which event the
Company shall promptly return to the Holder any original Note
delivered to the Company and the Holder shall promptly return to
the Company the Common Stock certificates issued to such Holder
pursuant to the rescinded Conversion Notice.
iv. Obligation Absolute; Partial
Liquidated Damages. The Company’s obligations to issue
and deliver the Conversion Shares upon conversion of this Note in
accordance with the terms hereof are absolute and unconditional,
irrespective of any action or inaction by the Holder to enforce the
same, any waiver or consent with respect to any provision hereof,
the recovery of any judgment against any Person or any action to
enforce the same, or any setoff, counterclaim, recoupment,
limitation or termination, or any breach or alleged breach by the
Holder or any other Person of any obligation to the Company or any
violation or alleged violation of law by the Holder or any other
Person, and irrespective of any other circumstance which might
otherwise limit such obligation of the Company to the Holder in
connection with the issuance of such Conversion Shares;
provided,
however, that such
delivery shall not operate as a waiver by the Company of any such
action the Company may have against the Holder. If the Company
fails for any reason to deliver to the Holder such certificate or
certificates pursuant to Section 4(c)(ii) by the Share Delivery
Date, the Company shall pay to the Holder, in cash, as liquidated
damages and not as a penalty, for each $1,000 of principal amount
being converted $5 per Trading Day (increasing to $10 per Trading
Day on the fifth (5th)
Trading Day after such liquidated damages begin to accrue) for each
Trading Day after such Share Delivery Date until such certificates
are delivered or Holder rescinds such conversion. Nothing herein
shall limit a Holder’s right to pursue actual damages or
declare an Event of Default pursuant to Section 6 hereof for
the Company’s failure to deliver Conversion Shares within the
period specified herein and the Holder shall have the right to
pursue all remedies available to it hereunder, at law or in equity
including, without limitation, a decree of specific performance
and/or injunctive relief. The exercise of any such rights shall not
prohibit the Holder from seeking to enforce damages pursuant to any
other Section hereof or under applicable law.
v. Compensation for Buy-In on Failure to
Timely Deliver Certificates Upon Conversion. In addition to
any other rights available to the Holder, if the Company fails for
any reason to deliver to the Holder such certificate or
certificates by the Share Delivery Date pursuant to Section
4(c)(ii), and if after such Share Delivery Date the Holder is
required by its brokerage firm to purchase (in an open market
transaction or otherwise), or the Holder’s brokerage firm
otherwise purchases, shares of Common Stock to deliver in
satisfaction of a sale by the Holder of the Conversion Shares which
the Holder was entitled to receive upon the conversion relating to
such Share Delivery Date (a “Buy-In”), then the
Company shall (A) pay in cash to the Holder (in addition to any
other remedies available to or elected by the Holder) the amount,
if any, by which (x) the Holder’s total purchase price
(including any brokerage commissions) for the Common Stock so
purchased exceeds (y) the product of (1) the aggregate number of
shares of Common Stock that the Holder was entitled to receive from
the conversion at issue multiplied by (2) the actual sale price at
which the sell order giving rise to such purchase obligation was
executed (including any brokerage commissions) and (B) at the
option of the Holder, either reissue (if surrendered) this Note in
a principal amount equal to the principal amount of the attempted
conversion (in which case such conversion shall be deemed
rescinded) or deliver to the Holder the number of shares of Common
Stock that would have been issued if the Company had timely
complied with its delivery requirements under Section 4(c)(ii). For
example, if the Holder
purchases Common Stock having a total purchase price of $11,000 to
cover a Buy-In with respect to an attempted conversion of this Note
with respect to which the actual sale price of the Conversion
Shares (including any brokerage commissions) giving rise to such
purchase obligation was a total of $10,000 under clause (A) of the
immediately preceding sentence, the Company shall be required to
pay the Holder $1,000. The Holder shall provide the Company written
notice indicating the amounts payable to the Holder in respect of
the Buy-In and, upon request of the Company, evidence of the amount
of such loss. Nothing herein shall limit a Holder’s right to
pursue any other remedies available to it hereunder, at law or in
equity including, without limitation, a decree of specific
performance and/or injunctive relief with respect to the
Company’s failure to timely deliver certificates representing
shares of Common Stock upon conversion of this Note as required
pursuant to the terms hereof.
vi. Reservation of Shares Issuable Upon
Conversion. The Company covenants that it will at all times
after the consummation of the Reverse Stock Split reserve and keep
available out of its authorized and unissued shares of Common Stock
a number of shares of Common Stock at least equal to 100% of the
Required Minimum (to be adjusted monthly) for the sole purpose of
issuance upon conversion of this Note and payment of interest on
this Note, each as herein provided, free from preemptive rights or any other actual
contingent purchase rights of Persons other than the Holder (and
the other holders of the Note), not less than such aggregate number
of shares of the Common Stock as shall (subject to the terms and
conditions set forth in the Purchase Agreement) be issuable (taking
into account the adjustments and restrictions of Section 5) upon the
conversion of the then outstanding principal amount of this Note
and payment of interest hereunder. The Company covenants that all
shares of Common Stock that shall be so issuable shall, upon issue,
be duly authorized, validly issued, fully paid and
nonassessable.
vii. Fractional
Shares. No fractional shares or scrip representing
fractional shares shall be issued upon the conversion of this Note.
As to any fraction of a share which the Holder would otherwise be
entitled to purchase upon such conversion, the Company shall at its
election, either pay a cash adjustment in respect of such final
fraction in an amount equal to such fraction multiplied by the
Conversion Price or round up to the next whole share.
viii. Transfer
Taxes and Expenses. The issuance of certificates for shares
of the Common Stock on conversion of this Note shall be made
without charge to the Holder hereof for any documentary stamp or
similar taxes that may be payable in respect of the issue or
delivery of such certificates, provided that, the Company shall not
be required to pay any tax that may be payable in respect of any
transfer involved in the issuance and delivery of any such
certificate upon conversion in a name other than that of the Holder
of this Note so converted and the Company shall not be required to
issue or deliver such certificates unless or until the Person or
Persons requesting the issuance thereof shall have paid to the
Company the amount of such tax or shall have established to the
satisfaction of the Company that such tax has been paid. The
Company shall pay all Transfer Agent fees required for same-day
processing of any Notice of Conversion.
d) Holder’s
Conversion Limitations. The Company shall not effect any
conversion of this Note, and a Holder shall not have the right to
convert any portion of this Note, to the extent that after giving
effect to the conversion set forth on the applicable Notice of
Conversion, the Holder (together with the Holder’s
Affiliates, and any Persons acting as a group together with the
Holder or any of the Holder’s Affiliates) (such Persons,
“Attribution
Parties”)) would beneficially own in excess of the
Beneficial Ownership Limitation (as defined below). For
purposes of the foregoing sentence, the number of shares of Common
Stock beneficially owned by the Holder and its Affiliates and
Attribution Parties shall include the number of shares of Common
Stock issuable upon conversion of this Note with respect to which
such determination is being made, but shall exclude the number of
shares of Common Stock which are issuable upon (i) conversion of
the remaining, unconverted principal amount of this Note
beneficially owned by the Holder or any of its Affiliates or
Attribution Parties and (ii) exercise or conversion of the
unexercised or unconverted portion of any other securities of the
Company subject to a limitation on conversion or exercise analogous
to the limitation contained herein beneficially owned by the Holder
or any of its Affiliates. Except as set forth in the
preceding sentence, for purposes of this Section 4(d), beneficial
ownership shall be calculated in accordance with Section 13(d)
of the Exchange Act and the rules and regulations promulgated
thereunder. To the extent that the limitation contained in this
Section 4(d)
applies, the determination of whether this Note is convertible (in
relation to other securities owned by the Holder together with any
Affiliates and Attribution Parties) and of which principal amount
of this Note is convertible shall be in the sole discretion of the
Holder, and the submission of a Notice of Conversion shall be
deemed to be the Holder’s determination of whether this Note
may be converted (in relation to other securities owned by the
Holder together with any Affiliates) and which principal amount of
this Note is convertible, in each case subject to the Beneficial
Ownership Limitation. To ensure compliance with this restriction,
the Holder will be deemed to represent to the Company each time it
delivers a Notice of Conversion that such Notice of Conversion has
not violated the restrictions set forth in this paragraph and the
Company shall have no obligation to
verify or confirm the accuracy of such determination.
In addition, a determination as to any group
status as contemplated above shall be determined in accordance with
Section 13(d) of the Exchange Act and the rules and
regulations promulgated thereunder. For purposes of this
Section 4(d),
in determining the number of outstanding shares of Common Stock,
the Holder may rely on the number of outstanding shares of Common
Stock as stated in the most recent of the following: (i) the
Company’s most recent periodic or annual report filed with
the Commission, as the case may be, (ii) a more recent public
announcement by the Company, or (iii) a more recent written notice
by the Company or the Company’s transfer agent setting forth
the number of shares of Common Stock outstanding. Upon the
written or oral request of a Holder, the Company shall within one
Trading Day confirm orally and in writing to the Holder the number
of shares of Common Stock then outstanding. In any case, the
number of outstanding shares of Common Stock shall be determined
after giving effect to the conversion or exercise of securities of
the Company, including this Note, by the Holder or its Affiliates
or Attribution Parties since the date as of which such number of
outstanding shares of Common Stock was reported. The
“Beneficial
Ownership Limitation” shall be 9.99% of the number of
shares of the Common Stock outstanding immediately after giving
effect to the issuance of shares of Common Stock issuable upon
conversion of this Note held by the Holder. The Holder may increase
or decrease the Beneficial Ownership Limitation provisions of this
Section 4(d), provided that the Beneficial Ownership Limitation in
no event exceeds 9.99% of the number of shares of the Common Stock
outstanding immediately after giving effect to the issuance of
shares of Common Stock upon conversion of this Note held by the
Holder and the Beneficial Ownership Limitation provisions of this
Section 4(d) shall continue to apply. Any increase in the
Beneficial Ownership Limitation will not be effective until the
61st day
after such notice is delivered to the Company. The Beneficial
Ownership Limitation provisions of this paragraph shall be
construed and implemented in a manner otherwise than in strict
conformity with the terms of this Section 4(d) to correct
this paragraph (or any portion hereof) which may be defective or
inconsistent with the intended Beneficial Ownership Limitation
contained herein or to make changes or
supplements necessary or desirable to properly give effect to such
limitation. The limitations
contained in this paragraph shall apply to a successor holder of
this Note.
Section
5.
Certain
Adjustments.
a) Stock Dividends and Stock
Splits. If the Company, at any time while this Note is
outstanding: (i) pays a stock dividend or otherwise makes a
distribution or distributions payable in shares of Common Stock on
shares of Common Stock or any Common Stock Equivalents (which, for
avoidance of doubt, shall not include any shares of Common Stock
issued by the Company upon conversion of, or payment of interest
on, the Note), (ii) subdivides outstanding shares of Common Stock
into a larger number of shares, (iii) combines (including by way of
a reverse stock split) outstanding shares of Common Stock into a
smaller number of shares or (iv) issues, in the event of a
reclassification of shares of the Common Stock, any shares of
capital stock of the Company, then the Conversion Price shall be
multiplied by a fraction of which the numerator shall be the number
of shares of Common Stock (excluding any treasury shares of the
Company) outstanding immediately before such event, and of which
the denominator shall be the number of shares of Common Stock
outstanding immediately after such event. Any adjustment made
pursuant to this Section shall become effective immediately after
the record date for the determination of stockholders entitled to
receive such dividend or distribution and shall become effective
immediately after the effective date in the case of a subdivision,
combination or re-classification. The provisions of this Section
shall not apply upon the consummation of the Reverse Stock
Split.
b) Subsequent Equity Sales. If, at
any time while this Note is outstanding, the Company or any
Subsidiary, as applicable, sells or grants any option to purchase
or sells or grants any right to reprice, or otherwise disposes of
or issues (or announces any sale, grant or any option to purchase
or other disposition), any Common Stock or Common Stock Equivalents
entitling any Person to acquire shares of Common Stock at an
effective price per share that is lower than the then Conversion
Price (such lower price, the “Base Conversion Price”
and such issuances, collectively, a “Dilutive Issuance”) (if
the holder of the Common Stock or Common Stock Equivalents so
issued shall at any time, whether by operation of purchase price
adjustments, reset provisions, floating conversion, exercise or
exchange prices or otherwise, or due to warrants, options or rights
per share which are issued in connection with such issuance, be
entitled to receive shares of Common Stock at an effective price
per share that is lower than the Conversion Price, such issuance
shall be deemed to have occurred for less than the Conversion Price
on such date of the Dilutive Issuance), then the Conversion Price
shall be reduced to equal the Base Conversion Price. Such
adjustment shall be made whenever such Common Stock or Common Stock
Equivalents are issued. Notwithstanding the foregoing, no adjustment will
be made under this Section 5(b) in respect of an Exempt
Issuance. If the Company enters into a Variable Rate
Transaction, despite the prohibition set forth in the Purchase
Agreement, the Company shall be deemed to have issued Common Stock
or Common Stock Equivalents at the lowest possible conversion price
at which such securities may be converted or exercised. The Company
shall notify the Holder in writing, no later than 1 Business Day
following the issuance of any Common Stock or Common Stock
Equivalents subject to this Section 5(b), indicating therein the
applicable issuance price, or applicable reset price, exchange
price, conversion price and other pricing terms (such notice, the
“Dilutive Issuance
Notice”). For purposes of clarification, whether or
not the Company provides a Dilutive Issuance Notice pursuant to
this Section 5(b), upon the occurrence of any Dilutive Issuance,
the Holder is entitled to receive a number of Conversion Shares
based upon the Base Conversion Price on or after the date of such
Dilutive Issuance, regardless of whether the Holder accurately
refers to the Base Conversion Price in the Notice of
Conversion.
c) Subsequent Rights Offerings.
In addition to any adjustments
pursuant to Section 5(a)
above, if at any time the Company
grants, issues or sells any Common Stock Equivalents or rights to
purchase stock, warrants, securities or other property pro rata to
the record holders of any class of shares of Common Stock (the
“Purchase
Rights”), then the Holder
will be entitled to acquire, upon the terms applicable to such
Purchase Rights, the aggregate Purchase Rights which the Holder
could have acquired if the Holder had held the number of shares of
Common Stock acquirable upon complete conversion of this Note
(without regard to any limitations on exercise hereof, including
without limitation, the Beneficial Ownership Limitation)
immediately before the date on which a record is taken for the
grant, issuance or sale of such Purchase Rights, or, if no such
record is taken, the date as of which the record holders of shares
of Common Stock are to be determined for the grant, issue or sale
of such Purchase Rights (provided, however, to the extent that the
Holder’s right to participate in any such Purchase Right
would result in the Holder exceeding the Beneficial Ownership
Limitation, then the Holder shall not be entitled to participate in
such Purchase Right to such extent (or beneficial ownership of such
shares of Common Stock as a result of such Purchase Right to such
extent) and such Purchase Right to such extent shall be held in
abeyance for the Holder until such time, if ever, as its right
thereto would not result in the Holder exceeding the Beneficial
Ownership Limitation).
d) Pro Rata Distributions. During
such time as this Note is outstanding, if the Company shall declare
or make any dividend or other distribution of its assets (or rights
to acquire its assets) to holders of shares of Common Stock, by way
of return of capital or otherwise (including, without limitation,
any distribution of cash, stock or other securities, property or
options by way of a dividend, spin off, reclassification, corporate
rearrangement, scheme of arrangement or other similar transaction)
(a "Distribution"),
at any time after the issuance of this Note, then, in each such
case, the Holder shall be entitled to participate in such
Distribution to the same extent that the Holder would have
participated therein if the Holder had held the number of shares of
Common Stock acquirable upon complete exercise of this Note
(without regard to any limitations on exercise hereof, including
without limitation, the Beneficial Ownership Limitation)
immediately before the date of which a record is taken for such
Distribution, or, if no such record is taken, the date as of which
the record holders of shares of Common Stock are to be determined
for the participation in such Distribution (provided, however, to the extent that the
Holder's right to participate in any such Distribution would result
in the Holder exceeding the Beneficial Ownership Limitation, then
the Holder shall not be entitled to participate in such
Distribution to such extent (or in the beneficial ownership of any
shares of Common Stock as a result of such Distribution to such
extent) and the portion of such Distribution shall be held in
abeyance for the benefit of the Holder until such time, if ever, as
its right thereto would not result in the Holder exceeding the
Beneficial Ownership Limitation).
e) Fundamental Transaction. If, at
any time while this Note is outstanding, (i) the Company effects
any merger or consolidation of the Company with or into another
Person, (ii) the Company effects any sale of all or substantially
all of its assets in one transaction or a series of related
transactions, (iii) any tender offer or exchange offer (whether by
the Company or another Person) is completed pursuant to which
holders of Common Stock are permitted to tender or exchange their
shares for other securities, cash or property, or (iv) the Company
effects any reclassification of the Common Stock or any compulsory
share exchange pursuant to which the Common Stock is effectively
converted into or exchanged for other securities, cash or property
(in any such case, a “Fundamental
Transaction”), then, upon any subsequent conversion of
this Note, the Holder shall have the right to receive, for each
Conversion Share that would have been issuable upon such conversion
immediately prior to the occurrence of such Fundamental
Transaction, the same kind and amount of securities, cash or
property as it would have been entitled to receive upon the
occurrence of such Fundamental Transaction if it had been,
immediately prior to such Fundamental Transaction, the holder of 1
share of Common Stock (the “Alternate
Consideration”). For purposes of any such conversion,
the determination of the Conversion Price shall be appropriately
adjusted to apply to such Alternate Consideration based on the
amount of Alternate Consideration issuable in respect of 1 share of
Common Stock in such Fundamental Transaction, and the Company shall
apportion the Conversion Price among the Alternate Consideration in
a reasonable manner reflecting the relative value of any different
components of the Alternate Consideration. If holders of Common
Stock are given any choice as to the securities, cash or property
to be received in a Fundamental Transaction, then the Holder shall
be given the same choice as to the Alternate Consideration it
receives upon any conversion of this Note following such
Fundamental Transaction. To the extent necessary to effectuate the
foregoing provisions, any successor to the Company or surviving
entity in such Fundamental Transaction shall issue to the Holder a
new Note consistent with the foregoing provisions and evidencing
the Holder’s right to convert such Note into Alternate
Consideration. The terms of any agreement pursuant to which a
Fundamental Transaction is effected shall include terms requiring
any such successor or surviving entity to comply with the
provisions of this Section 5(e) and insuring that this Note (or any
such replacement security) will be similarly adjusted upon any
subsequent transaction analogous to a Fundamental
Transaction
f) Calculations. All calculations
under this Section 5 shall be made to
the nearest cent or the nearest 1/100th of a share, as the case may
be. For purposes of this Section 5, the number of
shares of Common Stock deemed to be issued and outstanding as of a
given date shall be the sum of the number of shares of Common Stock
(excluding any treasury shares of the Company) issued and
outstanding.
g) Notice to the
Holder.
i. Adjustment to Conversion Price.
Whenever the Conversion Price is adjusted pursuant to any provision
of this Section 5, the Company
shall promptly deliver to each Holder a notice setting forth the
Conversion Price after such adjustment and setting forth a brief
statement of the facts requiring such adjustment.
ii. Notice to Allow Conversion by
Holder. If (A) the Company shall declare a dividend (or any
other distribution in whatever form) on the Common Stock, (B) the
Company shall declare a special nonrecurring cash dividend on or a
redemption of the Common Stock, (C) the Company shall authorize the
granting to all holders of the Common Stock of rights or warrants
to subscribe for or purchase any shares of capital stock of any
class or of any rights, (D) the approval of any stockholders of the
Company shall be required in connection with any reclassification
of the Common Stock, any consolidation or merger to which the
Company is a party, any sale or transfer of all or substantially
all of the assets of the Company, or any compulsory share exchange
whereby the Common Stock is converted into other securities, cash
or property or (E) the Company shall
authorize the voluntary or involuntary dissolution, liquidation or
winding up of the affairs of the Company, then, in each case, the
Company shall cause to be filed at each office or agency maintained
for the purpose of conversion of this Note, and shall cause to
be delivered to the Holder at
its last address as it shall appear upon the Note Register, at
least twenty (20) calendar days prior to the applicable record or
effective date hereinafter specified (or such shorter period as is
reasonably possible, but not less than ten (10) calendar days, if
twenty (20) calendar days is not reasonably possible), a notice
stating (x) the date on which a record is to be taken for
the purpose of such dividend, distribution, redemption, rights or
warrants, or if a record is not to be taken, the date as of which
the holders of the Common Stock of record to be entitled to such
dividend, distributions, redemption, rights or warrants are to be
determined or (y) the date on which such reclassification,
consolidation, merger, sale, transfer or share exchange is expected
to become effective or close, and the date as of which it is
expected that holders of the Common Stock of record shall be
entitled to exchange their shares of the Common Stock for
securities, cash or other property deliverable upon such
reclassification, consolidation, merger, sale, transfer or share
exchange, provided that the failure to deliver such notice or any
defect therein or in the delivery thereof shall not affect the
validity of the corporate action required to be specified in such
notice. To the extent that any notice provided hereunder
constitutes, or contains, material, non-public information
regarding the Company or any of the Subsidiaries, the Company shall
simultaneously file such notice with the Commission pursuant to a
Current Report on Form 8-K or if it is not subject to the reporting
requirements of the Commission, a press release. The Holder shall
remain entitled to convert this Note during the 20-day period
commencing on the date of such notice through the effective date of
the event triggering such notice except as may otherwise be
expressly set forth herein.
Section
6.
Events of
Default.
a) “Event of Default” means,
wherever used herein, any of the following events (whatever the
reason for such event and whether such event shall be voluntary or
involuntary or effected by operation of law or pursuant to any
judgment, decree or order of any court, or any order, rule or
regulation of any administrative or governmental
body):
i. any
default in the payment of (A) the principal amount of any Note or
(B) interest, liquidated damages and other amounts owing to a
Holder on any Note, as and when the same shall become due and
payable (whether on a Conversion Date or the Maturity Date or by
acceleration or otherwise) which default, solely in the case of an
interest payment or other default under clause (B) above, is not
cured within five (5) Trading days;
ii. the
Company shall fail to observe or perform any other covenant or
agreement contained in the Note (other than a breach by the Company
of its obligations to deliver shares of Common Stock to the Holder
upon conversion, which breach is addressed in clause (ix) below)
which failure is not cured, if possible to cure, within the earlier
to occur of (A) five (5) Trading Days after notice of such
failure sent by the Holder or by any other Holder to the Company and (B) ten (10) Trading Days
after the Company has become or should have become aware of such
failure;
iii. a
default or event of default (subject to any grace or cure period
provided in the applicable agreement, document or instrument) shall
occur under (A) any of the Transaction Documents or (B) any other
material agreement, lease, document or instrument to which the
Company or any Subsidiary is obligated (and not covered by clause
(v) below);
iv. the
Company experiences a Material Adverse Effect;
v. any
Person shall breach any agreement delivered to the initial Holders
pursuant to Section 2.2 of the Purchase Agreement;
vi. any representation or warranty made in this Note, any other
Transaction Documents, any written statement pursuant hereto or
thereto or any other report, financial statement or certificate
made or delivered to the Holder or any other Holder shall be untrue
or incorrect in any material respect as of the date when made or
deemed made;
vii. the
Company or any Subsidiary shall default on any of its obligations
under any mortgage, credit agreement or other facility, indenture
agreement, factoring agreement or other instrument under which
there may be issued, or by which there may be secured or evidenced,
any indebtedness for borrowed money or money due under any long
term leasing or factoring arrangement that (a) involves an
obligation greater than $100,000, whether such indebtedness now
exists or shall hereafter be created, and (b) results in such
indebtedness becoming or being declared due and payable prior to
the date on which it would otherwise become due and
payable;
viii. the
Company or any Significant Subsidiary (as such term is defined in
Rule 1-02(w) of Regulation S-X) shall be subject to a Bankruptcy
Event;
ix. the Common Stock
shall not be eligible for listing or quotation for trading on a
Trading Market and shall not become eligible to resume listing or
quotation for trading thereon or on any other Trading Market within
five (5) Trading Days, or the transfer of shares of Common Stock
through the Depository Trust Company System is no longer available
or “chilled”;
x. the Company shall
be a party to any Change of Control Transaction or shall agree to
sell or dispose of all or in excess of fifty percent (50%) of its
assets in one transaction or a series of related transactions
(whether or not such sale would constitute a Change of Control
Transaction and, in either case, the Note is not repaid in
connection with such transaction in accordance with Section 2(d)(i)
hereof;
xi. the Company shall
fail for any reason to deliver certificates to a Holder prior to
the fifth Trading Day after a Conversion Date or the Company shall
provide at any time notice to the Holder, including by way of
public announcement, of the Company’s intention to not honor
requests for conversions of the Note in accordance with the terms
hereof;
xii. the
Company fails to be in compliance with Rule 144(c)(1) (or
Rule 144(i)(2), if applicable);
xiii. the
occurrence of any levy upon or seizure or attachment of, or any
uninsured loss of or damage to, any property of the Borrower or any
Subsidiary having an aggregate fair value or repair cost (as the
case may be) in excess of $100,000 individually or in the
aggregate, and any such levy, seizure or attachment shall not be
set aside, bonded or discharged within forty-five (45) days after
the date thereof;
xiv. any
monetary judgment, writ or similar final process shall be entered
or filed against the Company, any Subsidiary or any of their
respective property or other assets for more than $100,000, and
such judgment, writ or similar final process shall remain
unvacated, unbonded or unstayed for a period of forty-five (45)
calendar days;
xv. prior to the
payment in full and satisfaction of the owed under this Note, any
security interest and Lien purported to be created by any
Transaction Document shall cease to be in full force and effect, or
shall cease to give the Holders, the Liens, rights, powers and
privileges purported to be created and granted under such
Transaction Documents (including a perfected first priority
security interest in and Lien on all of the Collateral thereunder
(except as otherwise expressly provided in such Transaction
Document)) in favor of the Holders, or shall be asserted by the
Company or any Affiliate(s) not to be a valid, perfected, first
priority (except as otherwise expressly provided in this Agreement
or any such Transaction Document) security interest in or Lien on
the Collateral covered thereby;
xvi. enter
into any transaction or arrangement structured in accordance with,
based upon, or related or pursuant to, in whole or in part, Section
3(a)(l0) of the Securities Act;
xvii. enter
into a Variable Rate Transaction;
xviii. any
attempt by the Borrower or its officers, directors, and/or
affiliates to transmit, convey, disclose, or any actual
transmittal, conveyance, or disclosure by the Borrower or its
officers, directors, and/or affiliates of, material non-public
information concerning the Borrower, to the Holder or its
successors and assigns, which is not immediately cured by
Borrower’s public disclosure of such information on that same
date;
xix. the
Initial Registration Statement (as defined in the Registration
Rights Agreement) shall not have been filed by the Filing Date (as
defined in the Registration Rights Agreement) or declared effective
by the Commission on or prior to the Effectiveness Date (as defined
in the Registration Rights Agreement);
xx. if, during the
Effectiveness Period (as defined in the Registration Rights
Agreement), either (a) the effectiveness of the Registration
Statement lapses for any reason or (b) the Holder shall not be
permitted to resell Registrable Securities (as defined in the
Registration Rights Agreement) under the Registration Statement for
a period of more than 20 consecutive Trading Days or 30
non-consecutive Trading Days during any 12 month period;
provided,
however, that if
the Company is negotiating a merger, consolidation, acquisition or
sale of all or substantially all of its assets or a similar
transaction and, in the written opinion of counsel to the Company,
the Registration Statement would be required to be amended to
include information concerning such pending transaction(s) or the
parties thereto which information is not available or may not be
publicly disclosed at the time, the Company shall be permitted an
additional 10 consecutive Trading Days during any 12 month period
pursuant to this Section; or
xxi. the
KORR Financing Subsequent Closing does not occur on or prior to the
KORR Financing Deadline Date.
b) Remedies Upon Event of Default.
If any Event of Default occurs, the outstanding principal amount of
this Note, plus accrued but unpaid interest, liquidated damages and
other amounts owing in respect thereof through the date of
acceleration, shall become, at the Holder’s election,
immediately due and payable in cash pursuant to clause (ii) of the
Mandatory Default Amount. Commencing on the occurrence of any Event
of Default and for as long an Event of Default is not cured, the
interest rate on this Note as set forth in Section 2 above shall
accrue at an interest rate equal to 20% per annum or the maximum
rate permitted under applicable law. Upon the payment in full of
the Mandatory Default Amount, the Holder shall promptly surrender
this Note to or as directed by the Company. In connection with such
acceleration described herein, the Holder need not provide, and the
Company hereby waives, any presentment, demand, protest or other
notice of any kind, and the Holder may immediately and without
expiration of any grace period enforce any and all of its rights
and remedies hereunder and all other remedies available to it under
applicable law. Such acceleration may be rescinded and annulled by
Holder at any time prior to payment hereunder and the Holder shall
have all rights as a holder of the Note until such time, if any, as
the Holder receives full payment pursuant to this Section 6(b). No such
rescission or annulment shall affect any subsequent Event of
Default or impair any right consequent thereon. No such rescission
or annulment shall affect any subsequent Event of Default or impair
any right consequent thereon; and in addition to any other rights
and remedies available to the Holder in an Event of Default, the
Conversion Price in effect on any Conversion Date shall be equal to
the Alternate Conversion Price, subject to adjustment herein,
without any notice or any action taken by the Holder. The Borrower
shall pay the Holder hereof costs of collection, including
reasonable attorneys’ fees.
Section
7 Negative Covenants. As long as
any portion of this Note remains outstanding, unless the Holder
shall have otherwise given prior written consent, the Company shall
not, and shall not permit any of its subsidiaries (whether or not a
Subsidiary on the Original Issue Date) to, directly or
indirectly:
a) except for
Permitted Indebtedness, enter into, create, incur, assume,
guarantee or suffer to exist any indebtedness for borrowed money of
any kind, including, but not limited to, a guarantee, on or with
respect to any of its property or assets now owned or hereafter
acquired or any interest therein or any income or profits
therefrom;
b) except for
Permitted Liens, enter into, create, incur, assume or suffer to
exist any Liens of any kind, on or with respect to any of its
property or assets now owned or hereafter acquired or any interest
therein or any income or profits therefrom;
c) amend its charter
documents, including, without limitation, its certificate of
incorporation and bylaws, in any manner that materially and
adversely affects any rights of the Holder; provided the Company
may file any documents necessary to implement the Reverse Stock
Split which has been approved by the Company’s stockholders
prior to the Original Issue Date;
d) except for
Permitted Indebtedness, repay, repurchase or offer to repay,
repurchase or otherwise acquire more than a de minimis number of
shares of its Common Stock or Common Stock Equivalents other than
as to (i) the Conversion Shares as permitted or required under the
Transaction Documents and (ii) repurchases of Common Stock or
Common Stock Equivalents of departing officers and directors of the
Company, provided that such repurchases shall not exceed an
aggregate of $100,000 for all officers and directors during the
term of this Note;
e) repay, repurchase
or offer to repay, repurchase or otherwise acquire any
Indebtedness, other than the Note if on a pro-rata basis, other
than regularly scheduled principal and interest payments as such
terms are in effect as of the Original Issue Date, provided that
such payments shall not be permitted if, at such time, or after
giving effect to such payment, any Event of Default exist or
occur;
f) pay cash dividends
or distributions on any equity securities of the
Company;
g) enter into any
transaction with any Affiliate of the Company which would be
required to be disclosed in any public filing with the Commission,
unless such transaction is made on an arm’s-length basis and
expressly approved by a majority of the disinterested directors of
the Company (even if less than a quorum otherwise required for
board approval);
h) sell, lease or
otherwise dispose of any significant portion of its assets or
acquire any assets or business on or after the Original Issue
Date;
i) pay any
compensation that may be due and payable and/or accrued, whether in
cash, in kind or any combination thereof, to its executive
officers;
and
j) enter into any
agreement with respect to any of the foregoing.
Section
8.
Miscellaneous.
a) Notices. Any and all notices or
other communications or deliveries to be provided by the Holder
hereunder, including, without limitation, any Notice of Conversion,
shall be in writing and delivered personally, by facsimile, or sent
by a nationally recognized overnight courier service, addressed to
the Company, at the address set forth above, or such other
facsimile number or address as the Company may specify for such
purposes by notice to the Holder delivered in accordance with this
Section 7(a).
Any and all notices or other communications or deliveries to be
provided by the Company hereunder shall be in writing and delivered
personally, by facsimile, or sent by a nationally recognized
overnight courier service addressed to each Holder at the facsimile
number or address of the Holder appearing on the books of the
Company, or if no such facsimile number or address appears on the
books of the Company, at the principal place of business of such
Holder, as set forth in the Purchase Agreement. Any notice or other
communication or deliveries hereunder shall be deemed given and
effective on the earliest of (i) the date of transmission, if such
notice or communication is delivered via facsimile at the facsimile
number set forth on the signature pages attached hereto prior to
5:30 p.m. (New York City time) on any date, (ii) the next Trading
Day after the date of transmission, if such notice or communication
is delivered via facsimile at the facsimile number set forth on the
signature pages attached hereto on a day that is not a Trading Day
or later than 5:30 p.m. (New York City time) on any Trading Day,
(iii) the second Trading Day following the date of mailing, if sent
by U.S. nationally recognized overnight courier service or (iv)
upon actual receipt by the party to whom such notice is required to
be given.
b) Absolute Obligation. Except as
expressly provided herein, no provision of this Note shall alter or
impair the obligation of the Company, which is absolute and
unconditional, to pay the principal of, liquidated damages and
accrued interest, as applicable, on this Note at the time, place,
and rate, and in the coin or currency, herein prescribed. This Note
is a direct debt obligation of the Company. This Note ranks
pari passu with all other Notes now
or hereafter issued under the terms set forth herein.
c) Lost or Mutilated Note. If this
Note shall be mutilated, lost, stolen or destroyed, the Company
shall execute and deliver, in exchange and substitution for and
upon cancellation of a mutilated Note, or in lieu of or in
substitution for a lost, stolen or destroyed Note, a new Note for
the principal amount of this Note so mutilated, lost, stolen or
destroyed, but only upon receipt of evidence of such loss, theft or
destruction of such Note, and of the ownership hereof, reasonably
satisfactory to the Company.
d) Governing Law. All questions
concerning the construction, validity, enforcement and
interpretation of this Note shall be governed by and construed and
enforced in accordance with the internal laws of the State of New
York, without regard to the principles of conflict of laws thereof.
Each party agrees that all legal proceedings concerning the
interpretation, enforcement and defense of the transactions
contemplated by any of the Transaction Documents (whether brought
against a party hereto or its respective Affiliates, directors,
officers, shareholders, employees or agents) shall be commenced in
the state and federal courts sitting in the City of New York,
Borough of Manhattan (the “New York Courts”). Each
party hereto hereby irrevocably submits to the exclusive
jurisdiction of the New York Courts for the adjudication of any
dispute hereunder or in connection herewith or with any transaction
contemplated hereby or discussed herein (including with respect to
the enforcement of any of the Transaction Documents), and hereby
irrevocably waives, and agrees not to assert in any suit, action or
proceeding, any claim that it is not personally subject to the
jurisdiction of such New York Courts, or such New York Courts are
improper or inconvenient venue for such proceeding. Each party
hereby irrevocably waives personal service of process and consents
to process being served in any such suit, action or proceeding by
mailing a copy thereof via registered or certified mail or
overnight delivery (with evidence of delivery) to such party at the
address in effect for notices to it under this Note and agrees that
such service shall constitute good and sufficient service of
process and notice thereof. Nothing contained herein shall be
deemed to limit in any way any right to serve process in any other
manner permitted by applicable law. Each party hereto hereby
irrevocably waives, to the fullest extent permitted by applicable
law, any and all right to trial by jury in any legal proceeding
arising out of or relating to this Note or the transactions
contemplated hereby. If any party shall commence an action or
proceeding to enforce any provisions of this Note, then the
prevailing party in such action or proceeding shall be reimbursed
by the other party for its attorneys' fees and other costs and
expenses incurred in the investigation, preparation and prosecution
of such action or proceeding.
e) Waiver. Any waiver by the
Company or the Holder of a breach of any provision of this Note
shall not operate as or be construed to be a waiver of any other
breach of such provision or of any breach of any other provision of
this Note. The failure of the Company or the Holder to insist upon
strict adherence to any term of this Note on one or more occasions
shall not be considered a waiver or deprive that party of the right
thereafter to insist upon strict adherence to that term or any
other term of this Note on any other occasion. Any waiver by the
Company or the Holder must be in writing.
f) Severability. If any provision
of this Note is invalid, illegal or unenforceable, the balance of
this Note shall remain in effect, and if any provision is
inapplicable to any Person or circumstance, it shall nevertheless
remain applicable to all other Persons and circumstances. If it
shall be found that any interest or other amount deemed interest
due hereunder violates the applicable law governing usury, the
applicable rate of interest due hereunder shall automatically be
lowered to equal the maximum rate of interest permitted under
applicable law. The Company covenants (to the extent that it may
lawfully do so) that it shall not at any time insist upon, plead,
or in any manner whatsoever claim or take the benefit or advantage
of, any stay, extension or usury law or other law which would
prohibit or forgive the Company from paying all or any portion of
the principal of or interest on this Note as contemplated herein,
wherever enacted, now or at any time hereafter in force, or which
may affect the covenants or the performance of this Note, and the
Company (to the extent it may lawfully do so) hereby expressly
waives all benefits or advantage of any such law, and covenants
that it will not, by resort to any such law, hinder, delay or
impede the execution of any power herein granted to the Holder, but
will suffer and permit the execution of every such as though no
such law has been enacted.
g) Remedies, Characterizations, Other
Obligations, Breaches and Injunctive Relief. The
remedies provided in this Note shall be cumulative and in addition
to all other remedies available under this Note and any of the
other Transaction Documents at law or in equity (including a decree
of specific performance and/or other injunctive relief), and
nothing herein shall limit the Holder’s right to pursue
actual and consequential damages for any failure by the Company to
comply with the terms of this Note. The Company covenants to
the Holder that there shall be no characterization concerning this
instrument other than as expressly provided herein. Amounts set
forth or provided for herein with respect to payments, conversion
and the like (and the computation thereof) shall be the amounts to
be received by the Holder and shall not, except as expressly
provided herein, be subject to any other obligation of the Company
(or the performance thereof). The Company acknowledges that a
breach by it of its obligations hereunder will cause irreparable
harm to the Holder and that the remedy at law for any such breach
may be inadequate. The Company therefore agrees that, in the event
of any such breach or threatened breach, the Holder shall be
entitled, in addition to all other available remedies, to an
injunction restraining any such breach or any such threatened
breach, without the necessity of showing economic loss and without
any bond or other security being required. The Company shall
provide all information and documentation to the Holder that is
requested by the Holder to enable the Holder to confirm the
Company’s compliance with the terms and conditions of this
Note.
h) Next Business Day. Whenever any
payment or other obligation hereunder shall be due on a day other
than a Business Day, such payment shall be made on the next
succeeding Business Day.
i) Headings. The headings
contained herein are for convenience only, do not constitute a part
of this Note and shall not be deemed to limit or affect any of the
provisions hereof.
j) Secured Obligation. The
obligations of the Company under this Note are secured by all
assets of the Company and each Subsidiary pursuant to the Security
Agreement, dated as of May 8, 2020 between the Company, the
Subsidiaries of the Company and the Secured Parties (as defined
therein).
*********************
(Signature Pages Follow)
IN
WITNESS WHEREOF, the Company has caused this Note to be duly
executed by a duly authorized officer as of the date first above
indicated.
|
GOIP
GLOBAL, INC.
|
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By:__________________________________________
Name:
Title:
Facsimile No. for delivery of Notices: ______________
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ANNEX A - NOTICE OF CONVERSION
The
undersigned hereby elects to convert principal under the Original
Issue Discount Senior Secured Convertible Promissory Note due May
8, 2021 of GoIP Global, Inc., a Colorado corporation (the
“Company”), into shares of
common stock (the “Common Stock”), of the
Company according to the conditions hereof, as of the date written
below. If shares of Common Stock are to be issued in the name of a
person other than the undersigned, the undersigned will pay all
transfer taxes payable with respect thereto and is delivering
herewith such certificates and opinions as reasonably requested by
the Company in accordance therewith. No fee will be charged to the
holder for any conversion, except for such transfer taxes, if
any.
By the
delivery of this Notice of Conversion the undersigned represents
and warrants to the Company that its ownership of the Common Stock
does not exceed the amounts specified under Section 4 of this Note, as
determined in accordance with Section 13(d) of the Exchange
Act.
The
undersigned agrees to comply with the prospectus delivery
requirements under the applicable securities laws in connection
with any transfer of the aforesaid shares of Common
Stock.
Conversion Information
Date to Effect
Conversion:
_____________________________________
Outstanding
Principal:
_____________________________________
Outstanding
Interest:
_____________________________________
Principal Amount of
Note to be Converted:
_____________________________________
Interest Amount of
Note to be Converted:
_____________________________________
Conversion
Price Calculations:
Total Shares of Common Stock to be Issued:
Outstanding
Principal After Conversion:
_____________________________________
Outstanding
Interest After Conversion:
_____________________________________
DWAC
Instructions
Broker:
DTC#:
Account:
Account
Name:
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Physical
Delivery
Issue
to:
Address:
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Entity Name:
_____________________________________
Signatory Name:
_____________________________________
Title:
_____________________________________
Signature:
_____________________________________
Schedule 1
CONVERSION SCHEDULE
This
Original Issue Discount Senior Secured Convertible Promissory Note
due on May 8, 2021 in the original principal amount of $______ is
issued by GoIP Global, Inc., a Colorado corporation. This
Conversion Schedule reflects conversions made under Section 4 of the above
referenced Note.
Dated:
Date of
Conversion
(or for
first entry, Original Issue Date)
|
Amount
of Conversion
|
Aggregate
Principal Amount Remaining Subsequent to Conversion
(or
original Principal Amount)
|
Company
Attest
|
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Exhibit 4.2
NEITHER
THIS SECURITY NOR THE SECURITIES INTO WHICH THIS SECURITY IS
CONVERTIBLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE
COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE
UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE “SECURITIES ACT”), AND,
ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR
PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT
SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND
IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY
A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, THE
SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY.
THIS SECURITY AND THE SECURITIES ISSUABLE UPON CONVERSION OF THIS
SECURITY MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN
ACCOUNT OR OTHER LOAN SECURED BY SUCH SECURITIES.
Original Issue
Date: June __, 2020
Original Principal
Amount: $___,000
Purchase Price:
$___,000
ORIGINAL
ISSUE DISCOUNT CONVERTIBLE
PROMISSORY NOTE
DUE
____, 2021
THIS ORIGINAL ISSUE
DISCOUNT CONVERTIBLE PROMISSORY NOTE is a duly authorized and
validly issued debt obligation of GoIP Global, Inc., a Colorado
corporation (the “Company” or the
“Borrower”), having its
principal place of business at 1400 Old Country Road, Westbury New
York 11590, designated as its Original Issue Discount Senior
Secured Convertible Promissory Note due ______, 2021 (the
“Note”).
FOR
VALUE RECEIVED, the Company promises to pay to _______________ or its registered
assigns (the “Holder”), or shall have
paid pursuant to the terms hereunder, the principal sum of
$_______.00 and any other sums due hereunder on _____, 2021 (the
“Maturity
Date”), or such earlier date as this Note is required
or permitted to be repaid as provided hereunder, and to pay
interest to the Holder on the aggregate unconverted and then
outstanding principal amount of this Note in accordance with the
provisions hereof. This Note is subject to the following additional
provisions:
Section 1.
Definitions. For
the purposes hereof, in addition to the terms defined elsewhere in
this Note, (a) capitalized terms not otherwise defined herein shall
have the meanings set forth in the Purchase Agreement and (b) the
following terms shall have the following meanings:
“Alternate Conversion
Price” means the greater of (i) $0.01 or (ii) 75% of
the average VWAP of the Common Stock for the immediately preceding
five (5) Trading Days on the Trading Market on the date of
conversion.
“Beneficial Ownership
Limitation” shall have the meaning set forth in
Section
4(d).
“Business Day” means any
day except any Saturday, any Sunday, any day which is a federal
legal holiday in the United States or any day on which the New York
Federal Reserve Bank is closed.
“Buy-In” shall have the
meaning set forth in Section 4(c)(v).
“Change of Control
Transaction” means the occurrence after the date
hereof of any of (a) an acquisition after the date hereof by an
individual or legal entity or “group” (as described in
Rule 13d-5(b)(1) promulgated under the Exchange Act) of effective
control (whether through legal or beneficial ownership of capital
stock of the Company, by contract or otherwise) of in excess of
fifty percent (50%) of the voting securities of the Company (other
than by means of conversion or exercise of the Note and the
Securities issued together with the Note), (b) the Company merges
into or consolidates with any other Person, or any Person merges
into or consolidates with the Company and, after giving effect to
such transaction, the stockholders of the Company immediately prior
to such transaction own less than fifty-one percent (51%) of the
aggregate voting power of the Company or the successor entity of
such transaction, (c) the Company sells or transfers all or
substantially all of its assets to another Person and the
stockholders of the Company immediately prior to such transaction
own less than fifty-one percent (51%) of the aggregate voting power
of the acquiring entity immediately after the transaction, (d) a
replacement at one time or within a three year period of more than
one-half of the members of the Board of Directors which is not
approved by a majority of those individuals who are members of the
Board of Directors on the Original Issue Date (or by those
individuals who are serving as members of the Board of Directors on
any date whose nomination to the Board of Directors was approved by
a majority of the members of the Board of Directors who are members
on the date hereof), or (e) the execution by the Company of an
agreement to which the Company is a party or by which it is bound,
providing for any of the events set forth in clauses (a) through
(d) above.
“Conversion” shall have
the meaning ascribed to such term in Section 4. “Conversion Date” shall
have the meaning set forth in Section 4(a)(i).
“Conversion
Price” shall have the meaning set forth in
Section
4(b).
“Conversion Shares” means,
collectively, the shares of Common Stock issuable upon conversion
of this Note in accordance with the terms hereof.
“Distribution” shall have
the meaning set forth in Section 5(c).
“Event of
Default” shall have the meaning set forth in
Section
6(a).
“Equity Conditions” means,
during the period in question, (a) the Company shall have duly
honored all conversions and redemptions scheduled to occur or
occurring by virtue of one or more Notices of Conversion of the
Holder, if any, (b) the Company shall have paid all liquidated
damages and other amounts owing to the Holder in respect of
this
Note,
(c) the Common Stock is trading on a Trading Market and all of the
shares issuable pursuant to the Transaction Documents are listed or
quoted for trading on such Trading Market (and the Company
believes, in good faith, that trading of the Common Stock on a
Trading Market will continue uninterrupted for the foreseeable
future), (d) there is a sufficient number of authorized but
unissued and otherwise unreserved shares of Common Stock for the
issuance of all of the shares issuable pursuant to the Transaction
Documents,
(e) there
is no existing Event of Default or no existing event which, with
the passage of time or the giving of notice, would constitute an
Event of Default, (f) the issuance of the shares in question to the
Holder would not violate the limitations set forth in Section 4(d)
herein, and (g) there has been no public announcement of a pending
or proposed Fundamental Transaction or Change of Control
Transaction that has not been consummated, and (h) the Holder is
not in possession of any information provided by the Company that
constitutes, or may constitute, material non-public
information.
“Late Fees” shall have the
meaning set forth in Section 2(d).
“Mandatory Default Amount”
means either, at the Holder’s discretion (i) the conversion
of the outstanding principal amount of this Note, plus all accrued
and unpaid interest hereon, converted at the Conversion Price or
(ii) the payment of 120% of the outstanding principal amount of
this Note and accrued and unpaid interest hereon, in addition to,
for both (i) and (ii) above, the payment of all other amounts,
costs, expenses and liquidated damages due in respect of this
Note.
“New York Courts” shall
have the meaning set forth in Section 8(d).
“Note
Register” shall have the meaning set forth in
Section
2(c).
“Notice of Conversion”
shall have the meaning set forth in Section 4(a)(i).
“Optional
Redemption” shall have the meaning set forth in
Section 6(a).
“Optional Redemption
Amount” means the sum of (a) 110% of the then
outstanding principal amount of the Note, (b) accrued but unpaid
interest and (c) all liquidated damages and other amounts due in
respect of the Note.
“Optional Redemption Date”
shall have the meaning set forth in Section 2(e).
“Optional Redemption
Notice” shall have the meaning set forth in Section
2(e).
“Optional Redemption Notice
Date” shall have the meaning set forth in
Section 2(e).
“Optional Redemption
Period” shall have the meaning set forth in Section
2(e).
“Original Issue Date”
means the date of the first issuance of the Note, regardless of any
transfers of any Note and regardless of the number of instruments
which may be issued to evidence such Note.
“Purchase Agreement” means
the Securities Purchase Agreement, dated as of _______, 2020, among
the Company and the original Holder, as amended, modified or
supplemented from time to time in accordance with its
terms.
“Purchase Rights” shall
have the meaning set forth in Section 5(b).
“Required Minimum” means,
as of any date after the consummation of the Reverse Stock Split,
the number of shares of Common Stock that is two times the number
of shares of Common Stock may be converted into at such time by all
Notes then outstanding. The initial reserve shall be ___________
shares of Common Stock.
“Share Delivery Date”
shall have the meaning set forth in Section 4(c)(ii).
Section 2.
Interest, Prepayment and
Conversion.
a) Payment
of Interest in Cash. The Company shall pay interest to the
Holder on the aggregate unconverted and then outstanding principal
amount of this Note at the rate of eight percent (8%) per annum,
payable quarterly on January 1, April 1, July 1 and October 1,
beginning on the first such date after the Original Issue Date, on
each Conversion Date (as to that principal amount then being
converted), on each Optional Redemption Date (as to that principal
amount then being redeemed) and on the Maturity Date (each such
date, an “Interest
Payment Date”) (if any Interest Payment Date is not a
Business Day, then the applicable payment shall be due on the next
succeeding Business Day), in cash.
b)
Intentionally
Omitted.
c) Interest
Calculations. Interest shall be calculated on the basis of a
360-day year, consisting of twelve 30 calendar day periods, and
shall accrue daily commencing on the Original Issue Date until
payment in full of the outstanding principal, together with all
accrued and unpaid interest, liquidated damages and other amounts
which may become due hereunder, has been made. Payment of interest
in shares of Common Stock shall otherwise occur pursuant to Section
4(c)(ii) herein and, solely for purposes of the payment of interest
in shares, the Interest Payment Date shall be deemed the Conversion
Date. Interest shall cease to accrue with respect to any principal
amount converted, provided that, the Company actually delivers the
Conversion Shares within the time period required by Section
4(c)(ii) herein. Interest hereunder will be paid to the Person in
whose name this Note is registered on the records of the Company
regarding registration and transfers of this Note (the
“Note
Register”).
d) All
overdue accrued and unpaid interest to be paid hereunder shall
entail a late fee at an interest rate equal to the lesser of 20%
per annum or the maximum rate permitted by applicable law (the
“Late
Fees”) which shall accrue daily from the date such
interest is due hereunder through and including the date of actual
payment in full. Interest hereunder will be paid to the Person in
whose name this Note is registered on the records of the Company
regarding registration and transfers of this Note (the
“Note
Register”).
e) Optional Redemption. At any
time after the Original Issue Date and before the Maturity Date,
the Company may, deliver a written notice to the Holder (an
“Optional Redemption
Notice” and the date such notice is deemed delivered
hereunder, the “Optional Redemption Notice
Date”) of its irrevocable election to redeem all of
the then outstanding principal amount of this Note for cash in an
amount equal to the Optional Redemption Amount on the
20th calendar day following
the Optional Redemption Notice Date (such date, the “Optional
Redemption Date”, such 20 day period, the “Optional Redemption
Period” and such redemption, the “Optional Redemption”).
The Optional Redemption Amount is payable in full on the Optional
Redemption Date. The Company may only effect an Optional Redemption
if each of the Equity Conditions shall have been met (unless waived
in writing by the Holder) on each Trading Day during the period
commencing on the Optional Redemption Notice Date through to the
Optional Redemption Date and through and including the date payment
of the Optional Redemption Amount is actually made in full. If any
of the Equity Conditions shall cease to be satisfied at any time
during the Optional Redemption Period, then the Holder may elect to
nullify the Optional Redemption Notice by notice to the Company
within 3 Trading Days after the first day on which any such Equity
Condition has not been met (provided that if, by a provision of the
Transaction Documents, the Company is obligated to notify the
Holder of the non- existence of an Equity Condition, such notice
period shall be extended to the third Trading Day after proper
notice from the Company) in which case the Optional Redemption
Notice shall be null and void, ab initio.
f) SBA
Loan Redemption. From the date hereof until the date that
the Notes are no longer outstanding, upon any issuance by the
Company or any of its Subsidiaries of Indebtedness evidenced by a
Small Business Administration loan (a “SBA Financing”), the
Holder shall have the right, upon one (1) day written notice (the
“SBA Financing
Redemption Date”), to require the Company to use 50%
of the gross proceeds received in such SBA Financing, to the extent
not prohibited under the terms of the SBA Financing (the
“SBA Financing
Redemption Amount”), to redeem the Note at the
Optional Redemption Amount (the “SBA Financing
Redemption”). The SBA Financing Redemption Amount
payable on the SBA Financing Redemption Date shall be paid in
cash.
g) Redemption
Procedure. The Company covenants and agrees that it will
honor all Notices of Conversion tendered from the time of delivery
of the Optional Redemption Notice or SBA Financing Notice through
the date all amounts owing thereon are due and paid in full. If any
portion of the payment pursuant to an Optional Redemption or SBA
Redemption shall not be paid by the Company by the applicable due
date, Late Fees shall accrue until such amount is paid in full. The
Company’s determination to pay an Optional Redemption or SBA
Financing Redemption in cash shall be applied ratably to all of the
holders of the then outstanding Notes based on their (or their
predecessor’s) initial purchases of Notes pursuant to the
Purchase Agreement. Notwithstanding anything herein contained to
the contrary, if any portion of the Optional Redemption Amount
remains unpaid after such date, the Holder may elect, by written
notice to the Company given at any time thereafter, to invalidate
such Optional Redemption, ab initio, and, the Company shall have no
further right to exercise such Optional Redemption.
Section 3.
Registration of Transfers and
Exchanges.
a) Different
Denominations. This Note is exchangeable for an equal
aggregate principal amount of Notes of different authorized
denominations, as requested by the Holder surrendering the same. No
service charge will be payable for such registration of transfer or
exchange.
b) Investment
Representations. This Note has been issued subject to
certain investment representations of the original Holder set forth
in the Purchase Agreement and may be transferred or exchanged only
in compliance with the Purchase Agreement and applicable federal
and state securities laws and regulations.
c) Reliance
on Note Register. Prior to due presentment for transfer to
the Company of this Note, the Company and any agent of the Company
may treat the Person in whose name this Note is duly registered on
the Note Register as the owner hereof for the purpose of receiving
payment as herein provided and for all other purposes, whether or
not this Note is overdue, and neither the Company nor any such
agent shall be affected by notice to the contrary.
Section 4. Conversion. At any
time after the Original Issue Date until this Note is no longer
outstanding, this Note shall be convertible, in whole or in part,
into shares of Common Stock at the option of the Holder, at any
time and from time to time (subject to the conversion limitations
set forth in Section 4(d) hereof). The Holder shall effect
conversions by delivering to the Company a Notice of Conversion,
the form of which is attached hereto as Annex A (each, a
“Notice of
Conversion”), specifying therein the principal amount
of this Note to be converted and the date on which such conversion
shall be effected (such date, the “Conversion Date”). If no
Conversion Date is specified in a Notice of Conversion, the
Conversion Date shall be the date that such Notice of Conversion is
deemed delivered hereunder. To effect conversions hereunder, the
Holder shall not be required to physically surrender this Note to
the Company unless the entire principal amount of this Note, plus
all accrued and unpaid interest thereon, has been so converted.
Conversions hereunder shall have the effect of lowering the
outstanding principal amount of this Note in an amount equal to the
applicable conversion. The Holder and the Company shall maintain
records showing the principal amount(s) converted and the date of
such conversion(s). The Company may deliver an objection to any
Notice of Conversion within two Business Days of delivery of such
Notice of Conversion. In the event of any dispute or discrepancy,
the records of the Company shall be controlling and determinative
in the absence of manifest error. The Holder, and any assignee by acceptance of
this Note, acknowledge and agree that, by reason of the provisions
of this paragraph, following conversion of a portion of this Note,
the unpaid and unconverted principal amount of this Note may be
less than the amount stated on the face hereof.
a) Conversion
Price. The conversion price in effect on any Conversion Date
shall be equal to $0.25 after the Reverse Stock Split, subject to
adjustment herein (the “Conversion Price”).
Notwithstanding the foregoing, at any time during the continuance
of any Event of Default, the Conversion Price in effect shall be
equal to the Alternate Conversion Price. If at any time the
Conversion Price as determined hereunder for any conversion would
be less than the par value of the Common Stock, then at the sole
discretion of the Holder, the Conversion Price hereunder may equal
such par value for such conversion and the Conversion Amount for
such conversion may be increased to include Additional Principal,
where “Additional Principal” means such additional
amount to be added to the Principal Amount to the extent necessary
to cause the number of conversion shares issuable upon such
conversion to equal the same number of conversion shares as would
have been issued had the Conversion Price not been adjusted by the
Holder to the par value price. In the event the Borrower has a DTC
“Chill” on its shares, the Holder may convert the Note
at the Alternate Conversion Price while that “Chill” is
in effect. All such determinations to be appropriately adjusted for
any stock dividend, stock split, stock combination,
reclassification or similar transaction that proportionately
decreases or increases the Common Stock during such measuring
period.
b)
Mechanics of
Conversion.
i.
Conversion Shares Issuable Upon
Conversion of Principal Amount. The number of Conversion
Shares issuable upon a conversion hereunder shall be determined by
the quotient obtained by dividing (x) the outstanding principal
amount of this Note to be converted by (y) the Conversion
Price.
ii.
Delivery of Certificate Upon
Conversion. Not later than three Trading Days after each
Conversion Date (the “Share Delivery Date”),
the Company shall deliver, or cause to be delivered, to the Holder
(A) a certificate or certificates representing the Conversion
Shares representing the number of Conversion Shares being acquired
upon the conversion of this Note and (B) a bank check in the amount
of accrued and unpaid interest (if the Purchaser has elected or is
required to pay accrued interest in cash).
iii.
Failure to Deliver
Certificates. If, in the case of any Notice of Conversion,
such certificate or certificates are not delivered to or as
directed by the applicable Holder by the Share Delivery Date, the
Holder shall be entitled to elect by written notice to the Company
at any time on or before its receipt of such certificate or
certificates, to rescind such Conversion, in which event the
Company shall promptly return to the Holder any original Note
delivered to the Company and the Holder shall promptly return to
the Company the Common Stock certificates issued to such Holder
pursuant to the rescinded Conversion Notice.
iv.
Obligation Absolute;
Partial Liquidated Damages.
The Company’s obligations to issue and deliver the Conversion
Shares upon conversion of this Note in accordance with the terms
hereof are absolute and unconditional, irrespective of any action
or inaction by the Holder to enforce the same, any waiver or
consent with respect to any provision hereof, the recovery of any
judgment against any Person or any action to enforce the same, or
any setoff, counterclaim, recoupment, limitation or termination, or
any breach or alleged breach by the Holder or any other Person of
any obligation to the Company or any violation or alleged violation
of law by the Holder or any other Person, and irrespective of any
other circumstance which might otherwise limit such obligation of
the Company to the Holder in connection with the issuance of such
Conversion Shares; provided,
however,
that such delivery shall not operate as a waiver by the Company of
any such action the Company may have against the Holder. If the
Company fails for any reason to deliver to the Holder such
certificate or certificates pursuant to Section 4(c)(ii) by the
Share Delivery Date, the Company shall pay to the Holder, in cash,
as liquidated damages and not as a penalty, for each $1,000 of
principal amount being converted, $5 per Trading Day (increasing to
$10 per Trading Day on the fifth (5th) Trading Day after such
liquidated damages begin to accrue) for each Trading Day after such
Share Delivery Date until such certificates are delivered or Holder
rescinds such conversion. Nothing herein shall limit a
Holder’s right to pursue actual damages or declare an Event
of Default pursuant to Section 6 hereof for the Company’s
failure to deliver Conversion Shares within the period specified
herein and the Holder shall have the right to pursue all remedies
available to it hereunder, at law or in equity including, without
limitation, a decree of specific performance and/or injunctive
relief. The exercise of any such rights shall not prohibit the
Holder from seeking to enforce damages pursuant to any other
Section hereof or under applicable law.
v. Compensation
for Buy-In on Failure to Timely Deliver Certificates Upon
Conversion. In addition to any other rights available to the
Holder, if the Company fails for any reason to deliver to the
Holder such certificate or certificates by the Share Delivery Date
pursuant to Section 4(c)(ii), and if after such Share Delivery Date
the Holder is required by its brokerage firm to purchase (in an
open market transaction or otherwise), or the Holder’s
brokerage firm otherwise purchases, shares of Common Stock to
deliver in satisfaction of a sale by the Holder of the Conversion
Shares which the Holder was entitled to receive upon the conversion
relating to such Share Delivery Date (a “Buy-In”), then the
Company shall (A) pay in cash to the Holder (in addition to any
other remedies available to or elected by the Holder) the amount,
if any, by which (x) the Holder’s total purchase price
(including any brokerage commissions) for the Common Stock so
purchased exceeds (y) the product of (1) the aggregate number of
shares of Common Stock that the Holder was entitled to receive from
the conversion at issue multiplied by (2) the actual sale price at
which the sell order giving rise to such purchase obligation was
executed (including any brokerage commissions) and (B) at the
option of the Holder, either reissue (if surrendered) this Note in
a principal amount equal to the principal amount of the attempted
conversion (in which case such conversion shall be deemed
rescinded) or deliver to the Holder the number of shares of Common
Stock that would have been issued if the Company had timely
complied with its delivery requirements under Section 4(c)(ii). For
example, if the Holder purchases Common Stock having a total
purchase price of $11,000 to cover a Buy-In with respect to an
attempted conversion of this Note with respect to which the actual
sale price of the Conversion Shares (including any brokerage
commissions) giving rise to such purchase obligation was a total of
$10,000 under clause (A) of the immediately preceding sentence, the
Company shall be required to pay the Holder $1,000. The Holder
shall provide the Company written notice indicating the amounts
payable to the Holder in respect of the Buy-In and, upon request of
the Company, evidence of the amount of such loss. Nothing herein
shall limit a Holder’s right to pursue any other remedies
available to it hereunder, at law or in equity including, without
limitation, a decree of specific performance and/or injunctive
relief with respect to the Company’s failure to timely
deliver certificates representing shares of Common Stock upon
conversion of this Note as required pursuant to the terms
hereof.
vi. Reservation
of Shares Issuable Upon Conversion. The Company covenants
that it will at all times after the consummation of the Reverse
Stock Split reserve and keep available out of its authorized and
unissued shares of Common Stock a number of shares of Common Stock
at least equal to 100% of the Required Minimum (to be adjusted
monthly) for the sole purpose of issuance upon conversion of this
Note and payment of interest on this Note, each as herein provided,
free from preemptive rights or any other actual contingent purchase
rights of Persons other than the Holder (and the other holders of
the Note), not less than such aggregate number of shares of the
Common Stock as shall (subject to the terms and conditions set
forth in the Purchase Agreement) be issuable (taking into account
the adjustments and restrictions of Section 5) upon the conversion
of the then outstanding principal amount of this Note and payment
of interest hereunder. The Company covenants that all shares of
Common Stock that shall be so issuable shall, upon issue, be duly
authorized, validly issued, fully paid and
nonassessable.
vii.
Fractional Shares. No
fractional shares or scrip representing fractional shares shall be
issued upon the conversion of this Note. As to any fraction of a
share which the Holder would otherwise be entitled to purchase upon
such conversion, the Company shall at its election, either pay a
cash adjustment in respect of such final fraction in an amount
equal to such fraction multiplied by the Conversion Price or round
up to the next whole share.
viii.
Transfer Taxes and Expenses.
The issuance of certificates for shares of the Common Stock on
conversion of this Note shall be made without charge to the Holder
hereof for any documentary stamp or similar taxes that may be
payable in respect of the issue or delivery of such certificates,
provided that, the Company shall not be required to pay any tax
that may be payable in respect of any transfer involved in the
issuance and delivery of any such certificate upon conversion in a
name other than that of the Holder of this Note so converted and
the Company shall not be required to issue or deliver such
certificates unless or until the Person or Persons requesting the
issuance thereof shall have paid to the Company the amount of such
tax or shall have established to the satisfaction of the Company
that such tax has been paid. The Company shall pay all Transfer
Agent fees required for same-day processing of any Notice of
Conversion.
c) Holder’s
Conversion Limitations. The Company shall not effect any
conversion of this Note, and a Holder shall not have the right to
convert any portion of this Note, to the extent that after giving
effect to the conversion set forth on the applicable Notice of
Conversion, the Holder (together with the Holder’s
Affiliates, and any Persons acting as a group together with the
Holder or any of the Holder’s Affiliates) (such Persons,
“Attribution
Parties”)) would beneficially own in excess of the
Beneficial Ownership Limitation (as defined below). For purposes of
the foregoing sentence, the number of shares of Common Stock
beneficially owned by the Holder and its Affiliates and Attribution
Parties shall include the number of shares of Common Stock issuable
upon conversion of this Note with respect to which such
determination is being made, but shall exclude the number of shares
of Common Stock which are issuable upon (i) conversion of the
remaining, unconverted principal amount of this Note beneficially
owned by the Holder or any of its Affiliates or Attribution Parties
and (ii) exercise or conversion of the unexercised or unconverted
portion of any other securities of the Company subject to a
limitation on conversion or exercise analogous to the limitation
contained herein beneficially owned by the Holder or any of its
Affiliates. Except as set forth in the preceding sentence, for
purposes of this Section
4(d), beneficial ownership shall be calculated in accordance
with Section 13(d) of the Exchange Act and the rules and
regulations promulgated thereunder. To the extent that the
limitation contained in this Section 4(d) applies, the
determination of whether this Note is convertible (in relation to
other securities owned by the Holder together with any Affiliates
and Attribution Parties) and of which principal amount of this Note
is convertible shall be in the sole discretion of the Holder, and
the submission of a Notice of Conversion shall be deemed to be the
Holder’s determination of whether this Note may be converted
(in relation to other securities owned by the Holder together with
any Affiliates) and which principal amount of this Note is
convertible, in each case subject to the Beneficial Ownership
Limitation. To ensure compliance with this restriction, the Holder
will be deemed to represent to the Company each time it delivers a
Notice of Conversion that such Notice of Conversion has not
violated the restrictions set forth in this paragraph and the
Company shall have no obligation to verify or confirm the accuracy
of such determination. In addition, a determination as to any group
status as contemplated above shall be determined in accordance with
Section 13(d) of the Exchange Act and the rules and regulations
promulgated thereunder. For purposes of this Section 4(d), in determining
the number of outstanding shares of Common Stock, the Holder may
rely on the number of outstanding shares of Common Stock as stated
in the most recent of the following: (i) the Company’s most
recent periodic or annual report filed with the Commission, as the
case may be, (ii) a more recent public announcement by the Company,
or (iii) a more recent written notice by the Company or the
Company’s transfer agent setting forth the number of shares
of Common Stock outstanding. Upon the written or oral request of a
Holder, the Company shall within one Trading Day confirm orally and
in writing to the Holder the number of shares of Common Stock then
outstanding. In any case, the number of outstanding shares of
Common Stock shall be determined after giving effect to the
conversion or exercise of securities of the Company, including this
Note, by the Holder or its Affiliates or Attribution Parties since
the date as of which such number of outstanding shares of Common
Stock was reported. The “Beneficial Ownership
Limitation” shall be 9.99% of the number of shares of
the Common Stock outstanding immediately after giving effect to the
issuance of shares of Common Stock issuable upon conversion of this
Note held by the Holder. The Holder may increase or decrease the
Beneficial Ownership Limitation provisions of this Section 4(d),
provided that the Beneficial Ownership Limitation in no event
exceeds 9.99% of the number of shares of the Common Stock
outstanding immediately after giving effect to the issuance of
shares of Common Stock upon conversion of this Note held by the
Holder and the Beneficial Ownership Limitation provisions of this
Section 4(d) shall continue to apply. Any increase in the
Beneficial Ownership Limitation will not be effective until the
61st day after such notice is delivered to the Company. The
Beneficial Ownership Limitation provisions of this paragraph shall
be construed and implemented in a manner otherwise than in strict
conformity with the terms of this Section 4(d) to correct this
paragraph (or any portion hereof) which may be defective or
inconsistent with the intended Beneficial Ownership Limitation
contained herein or to make changes or supplements necessary or
desirable to properly give effect to such limitation. The
limitations contained in this paragraph shall apply to a successor
holder of this Note.
Section 5. Certain
Adjustments.
a) Stock
Dividends and Stock Splits. If the Company, at any time
while this Note is outstanding: (i) pays a stock dividend or
otherwise makes a distribution or distributions payable in shares
of Common Stock on shares of Common Stock or any Common Stock
Equivalents (which, for avoidance of doubt, shall not include any
shares of Common Stock issued by the Company upon conversion of, or
payment of interest on, the Note), (ii) subdivides outstanding
shares of Common Stock into a larger number of shares, (iii)
combines (including by way of a reverse stock split) outstanding
shares of Common Stock into a smaller number of shares or (iv)
issues, in the event of a reclassification of shares of the Common
Stock, any shares of capital stock of the Company, then the
Conversion Price shall be multiplied by a fraction of which the
numerator shall be the number of shares of Common Stock (excluding
any treasury shares of the Company) outstanding immediately before
such event, and of which the denominator shall be the number of
shares of Common Stock outstanding immediately after such event.
Any adjustment made pursuant to this Section shall become effective
immediately after the record date for the determination of
stockholders entitled to receive such dividend or distribution and
shall become effective immediately after the effective date in the
case of a subdivision, combination or re-classification. The
provisions of this Section shall not apply upon the consummation of
the Reverse Stock Split.
b) Subsequent
Equity Sales. If, at any time while this Note is
outstanding, the Company or any Subsidiary, as applicable, sells or
grants any option to purchase or sells or grants any right to
reprice, or otherwise disposes of or issues (or announces any sale,
grant or any option to purchase or other disposition), any Common
Stock or Common Stock Equivalents entitling any Person to acquire
shares of Common Stock at an effective price per share that is
lower than the then Conversion Price (such lower price, the
“Base Conversion
Price” and such issuances, collectively, a
“Dilutive
Issuance”) (if the holder of the Common Stock or
Common Stock Equivalents so issued shall at any time, whether by
operation of purchase price adjustments, reset provisions, floating
conversion, exercise or exchange prices or otherwise, or due to
warrants, options or rights per share which are issued in
connection with such issuance, be entitled to receive shares of
Common Stock at an effective price per share that is lower than the
Conversion Price, such issuance shall be deemed to have occurred
for less than the Conversion Price on such date of the Dilutive
Issuance), then the Conversion Price shall be reduced to equal the
Base Conversion Price. Such adjustment shall be made whenever such
Common Stock or Common Stock Equivalents are issued.
Notwithstanding the foregoing, no adjustment will be made under
this Section 5(b) in respect of an Exempt Issuance. If the Company
enters into a Variable Rate Transaction, despite the prohibition
set forth in the Purchase Agreement, the Company shall be deemed to
have issued Common Stock or Common Stock Equivalents at the lowest
possible conversion price at which such securities may be converted
or exercised. The Company shall notify the Holder in writing, no
later than 1 Business Day following the issuance of any Common
Stock or Common Stock Equivalents subject to this Section 5(b),
indicating therein the applicable issuance price, or applicable
reset price, exchange price, conversion price and other pricing
terms (such notice, the “Dilutive Issuance
Notice”). For purposes of clarification, whether or
not the Company provides a Dilutive Issuance Notice pursuant to
this Section 5(b), upon the occurrence of any Dilutive Issuance,
the Holder is entitled to receive a number of Conversion Shares
based upon the Base Conversion Price on or after the date of such
Dilutive Issuance, regardless of whether the Holder accurately
refers to the Base Conversion Price in the Notice of
Conversion.
c) Subsequent
Rights Offerings. In addition to any adjustments pursuant to
Section 5(a) above,
if at any time the Company grants, issues or sells any Common Stock
Equivalents or rights to purchase stock, warrants, securities or
other property pro rata to the record holders of any class of
shares of Common Stock (the “Purchase Rights”), then
the Holder will be entitled to acquire, upon the terms applicable
to such Purchase Rights, the aggregate Purchase Rights which the
Holder could have acquired if the Holder had held the number of
shares of Common Stock acquirable upon complete conversion of this
Note (without regard to any limitations on exercise hereof,
including without limitation, the Beneficial Ownership Limitation)
immediately before the date on which a record is taken for the
grant, issuance or sale of such Purchase Rights, or, if no such
record is taken, the date as of which the record holders of shares
of Common Stock are to be determined for the grant, issue or sale
of such Purchase Rights (provided, however, to the extent that the
Holder’s right to participate in any such Purchase Right
would result in the Holder exceeding the Beneficial Ownership
Limitation, then the Holder shall not be entitled to participate in
such Purchase Right to such extent (or beneficial ownership of such
shares of Common Stock as a result of such Purchase Right to such
extent) and such Purchase Right to such extent shall be held in
abeyance for the Holder until such time, if ever, as its right
thereto would not result in the Holder exceeding the Beneficial
Ownership Limitation).
d) Pro
Rata Distributions. During such time as this Note is
outstanding, if the Company shall declare or make any dividend or
other distribution of its assets (or rights to acquire its assets)
to holders of shares of Common Stock, by way of return of capital
or otherwise (including, without limitation, any distribution of
cash, stock or other securities, property or options by way of a
dividend, spin off, reclassification, corporate rearrangement,
scheme of arrangement or other similar transaction) (a
"Distribution"), at
any time after the issuance of this Note, then, in each such case,
the Holder shall be entitled to participate in such Distribution to
the same extent that the Holder would have participated therein if
the Holder had held the number of shares of Common Stock acquirable
upon complete exercise of this Note (without regard to any
limitations on exercise hereof, including without limitation, the
Beneficial Ownership Limitation) immediately before the date of
which a record is taken for such Distribution, or, if no such
record is taken, the date as of which the record holders of shares
of Common Stock are to be determined for the participation in such
Distribution (provided, however, to the extent that the
Holder's right to participate in any such Distribution would result
in the Holder exceeding the Beneficial Ownership Limitation, then
the Holder shall not be entitled to participate in such
Distribution to such extent (or in the beneficial ownership of any
shares of Common Stock as a result of such Distribution to such
extent) and the portion of such Distribution shall be held in
abeyance for the benefit of the Holder until such time, if ever, as
its right thereto would not result in the Holder exceeding the
Beneficial Ownership Limitation).
e) Fundamental
Transaction. If, at any time while this Note is outstanding,
(i) the Company effects any merger or consolidation of the Company
with or into another Person, (ii) the Company effects any sale of
all or substantially all of its assets in one transaction or a
series of related transactions, (iii) any tender offer or exchange
offer (whether by the Company or another Person) is completed
pursuant to which holders of Common Stock are permitted to tender
or exchange their shares for other securities, cash or property, or
(iv) the Company effects any reclassification of the Common Stock
or any compulsory share exchange pursuant to which the Common Stock
is effectively converted into or exchanged for other securities,
cash or property (in any such case, a “Fundamental
Transaction”), then, upon any subsequent conversion of
this Note, the Holder shall have the right to receive, for each
Conversion Share that would have been issuable upon such conversion
immediately prior to the occurrence of such Fundamental
Transaction, the same kind and amount of securities, cash or
property as it would have been entitled to receive upon the
occurrence of such Fundamental Transaction if it had been,
immediately prior to such Fundamental Transaction, the holder of 1
share of Common Stock (the “Alternate
Consideration”). For purposes of any such conversion,
the determination of the Conversion Price shall be appropriately
adjusted to apply to such Alternate Consideration based on the
amount of Alternate Consideration issuable in respect of 1 share of
Common Stock in such Fundamental Transaction, and the Company shall
apportion the Conversion Price among the Alternate Consideration in
a reasonable manner reflecting the relative value of any different
components of the Alternate Consideration. If holders of Common
Stock are given any choice as to the securities, cash or property
to be received in a Fundamental
Transaction, then the Holder shall be given the same choice as to
the Alternate Consideration it receives upon any conversion
of this Note following such Fundamental Transaction. To the extent
necessary to effectuate the foregoing provisions, any successor to
the Company or surviving entity in such Fundamental Transaction
shall issue to the Holder a new Note consistent with the foregoing
provisions and evidencing the Holder’s right to convert such
Note into Alternate Consideration. The terms of any agreement
pursuant to which a Fundamental Transaction is effected shall
include terms requiring any such successor or surviving entity to
comply with the provisions of this Section 5(e) and insuring that
this Note (or any such replacement security) will be similarly
adjusted upon any subsequent transaction analogous to a Fundamental
Transaction.
f) Calculations.
All calculations under this Section 5 shall be made to the
nearest cent or the nearest 1/100th of a share, as the case may be.
For purposes of this Section 5, the number of shares
of Common Stock deemed to be issued and outstanding as of a given
date shall be the sum of the number of shares of Common Stock
(excluding any treasury shares of the Company) issued and
outstanding.
g)
Notice to the
Holder.
i. Adjustment
to Conversion Price. Whenever the Conversion Price is
adjusted pursuant to any provision of this Section 5, the Company shall
promptly deliver to each Holder a notice setting forth the
Conversion Price after such adjustment and setting forth a brief
statement of the facts requiring such adjustment.
ii.
Notice to Allow Conversion by
Holder. If (A) the Company shall declare a dividend (or any
other distribution in whatever form) on the Common Stock, (B) the
Company shall declare a special nonrecurring cash dividend on or a
redemption of the Common Stock, (C) the Company shall authorize the
granting to all holders of the Common Stock of rights or warrants
to subscribe for or purchase any shares of capital stock of any
class or of any rights, (D) the approval of any stockholders of the
Company shall be required in connection with any reclassification
of the Common Stock, any consolidation or merger to which the
Company is a party, any sale or transfer of all or substantially
all of the assets of the Company, or any compulsory share exchange
whereby the Common Stock is converted into other securities, cash
or property or (E) the Company shall authorize the voluntary or
involuntary dissolution, liquidation or winding up of the affairs
of the Company, then, in each case, the Company shall cause to be
filed at each office or agency maintained for the purpose of
conversion of this Note, and shall cause to be delivered to the
Holder at its last address as it shall appear upon the Note
Register, at least twenty (20) calendar days prior to the
applicable record or effective date hereinafter specified (or such
shorter period as is reasonably possible, but not less than ten
(10) calendar days, if twenty (20) calendar days is not reasonably
possible), a notice stating (x) the date on which a record is to be
taken for the purpose of such dividend, distribution, redemption,
rights or warrants, or if a record is not to be taken, the date as
of which the holders of the Common Stock of record to be entitled
to such dividend, distributions, redemption, rights or warrants are
to be determined or (y) the date on which such reclassification,
consolidation, merger, sale, transfer or share exchange is expected
to become effective or close, and the date as of which it is
expected that holders of the Common Stock of record shall be
entitled to exchange their shares of the Common Stock for
securities, cash or other property deliverable upon such
reclassification, consolidation, merger, sale, transfer or share
exchange, provided that the failure to deliver such notice or any
defect therein or in the delivery thereof shall not affect the
validity of the corporate action required to be specified in such
notice. To the extent that any notice provided hereunder
constitutes, or contains, material, non- public information
regarding the Company or any of the Subsidiaries, the Company shall
simultaneously file such notice with the Commission pursuant to a
Current Report on Form 8-K or if it is not subject to the reporting
requirements of the Commission, a press release. The Holder shall
remain entitled to convert this Note during the 20-day period
commencing on the date of such notice through the effective date of
the event triggering such notice except as may otherwise be
expressly set forth herein.
Section 6.
Events of Default.
a) “Event
of Default” means, wherever used herein, any of the
following events (whatever the reason for such event and whether
such event shall be voluntary or involuntary or effected by
operation of law or pursuant to any judgment, decree or order of
any court, or any order, rule or regulation of any administrative
or governmental body):
i.
any default in the
payment of (A) the principal amount of any Note or (B) interest,
liquidated damages and other amounts owing to a Holder on any Note,
as and when the same shall become due and payable (whether on a
Conversion Date or the Maturity Date or by acceleration or
otherwise) which default, solely in the case of an interest payment
or other default under clause (B) above, is not cured within five
(5) Trading days;
ii.
the Company shall
fail to observe or perform any other covenant or agreement
contained in the Note (other than a breach by the Company of its
obligations to deliver shares of Common Stock to the Holder upon
conversion, which breach is addressed in clause (ix) below) which
failure is not cured, if possible to cure, within the earlier to
occur of (A) five (5) Trading Days after notice of such failure
sent by the Holder or by any other Holder to the Company and (B)
ten (10) Trading Days after the Company has become or should have
become aware of such failure;
iii. a
default or event of default (subject to any grace or cure period
provided in the applicable agreement, document or instrument) shall
occur under
(A) any
of the Transaction Documents or (B) any other material agreement,
lease, document or instrument to which the Company or any
Subsidiary is obligated (and not covered by clause (v)
below);
iv.
the Company experiences a Material
Adverse Effect;
v.
any Person shall
breach any agreement delivered to the initial Holders pursuant to
Section 2.2 of the Purchase Agreement;
vi.
any representation
or warranty made in this Note, any other Transaction Documents, any
written statement pursuant hereto or thereto or any other report,
financial statement or certificate made or delivered to the Holder
or any other Holder shall be untrue or incorrect in any material
respect as of the date when made or deemed made;
vii.
the Company or any
Subsidiary shall default on any of its obligations under any
mortgage, credit agreement or other facility, indenture agreement,
factoring agreement or other instrument under which there may be
issued, or by which there may be secured or evidenced, any
indebtedness for borrowed money or money due under any long term
leasing or factoring arrangement that (a) involves an obligation
greater than $100,000, whether such indebtedness now exists or
shall hereafter be created, and (b) results in such indebtedness
becoming or being declared due and payable prior to the date on
which it would otherwise become due and payable;
viii.
the Company or any
Significant Subsidiary (as such term is defined in Rule 1-02(w) of
Regulation S-X) shall be subject to a Bankruptcy
Event;
ix.
the Common Stock
shall not be eligible for listing or quotation for trading on a
Trading Market and shall not become eligible to resume listing or
quotation for trading thereon or on any other Trading Market within
five (5) Trading Days, or the transfer of shares of Common Stock
through the Depository Trust Company System is no longer available
or “chilled”;
x.
the Company shall
be a party to any Change of Control Transaction or shall agree to
sell or dispose of all or in excess of fifty percent (50%) of its
assets in one transaction or a series of related transactions
(whether or not such sale would constitute a Change of Control
Transaction and, in either case, the Note is not repaid in
connection with such transaction in accordance with Section 2(d)(i)
hereof;
xi.
the Company shall
fail for any reason to deliver certificates to a Holder prior to
the fifth Trading Day after a Conversion Date or the Company shall
provide at any time notice to the Holder, including by way of
public announcement, of the Company’s intention to not honor
requests for conversions of the Note in accordance with the terms
hereof;
xii.
the Company fails
to be in compliance with Rule 144(c)(1) (or Rule 144(i)(2), if
applicable);
xiii.
any monetary
judgment, writ or similar final process shall be entered or filed
against the Company, any Subsidiary or any of their respective
property or other assets for more than $100,000, and such judgment,
writ or similar final process shall remain unvacated, unbonded or
unstayed for a period of forty-five (45) calendar
days;
xiv. enter
into any transaction or arrangement structured in accordance with,
based upon, or related or pursuant to, in whole or in part, Section
3(a)(l0) of the Securities Act;
(ii) Remedies
Upon Event of Default. If any Event of Default occurs, the
outstanding principal amount of this Note, plus accrued but unpaid
interest, liquidated damages and other amounts owing in respect
thereof through the date of acceleration, shall become, at the
Holder’s election, immediately due and payable in cash
pursuant to clause of the Mandatory Default Amount. Commencing on
the occurrence of any Event of Default and for as long an Event of
Default is not cured, the interest rate on this Note as set forth
in Section 2 above shall accrue at an interest rate equal to 20%
per annum or the maximum rate permitted under applicable law. Upon
the payment in full of the Mandatory Default Amount, the Holder
shall promptly surrender this Note to or as directed by the
Company. In connection with such acceleration described herein, the
Holder need not provide, and the Company hereby waives, any
presentment, demand, protest or other notice of any kind, and the
Holder may immediately and without expiration of any grace period
enforce any and all of its rights and remedies hereunder and all
other remedies available to it under applicable law. Such
acceleration may be rescinded and annulled by Holder at any time
prior to payment hereunder and the Holder shall have all rights as
a holder of the Note until such time, if any, as the Holder
receives full payment pursuant to this Section 6(b). No such
rescission or annulment shall affect any subsequent Event of
Default or impair any right consequent thereon. No such rescission
or annulment shall affect any subsequent Event of Default or impair
any right consequent thereon; and in addition to any other rights
and remedies available to the Holder in an Event of Default, the
Conversion Price in effect on any Conversion Date shall be equal to
the Alternate Conversion Price, subject to adjustment herein,
without any notice or any action taken by the Holder. The Borrower
shall pay the Holder hereof costs of collection, including
reasonable attorneys’ fees.
Section 7.
Intentional
Omitted.
a) Notices.
Any and all notices or other communications or deliveries to be
provided by the Holder hereunder, including, without limitation,
any Notice of Conversion, shall be in writing and delivered
personally, by facsimile, or sent by a nationally recognized
overnight courier service, addressed to the Company, at the address
set forth above, or such other facsimile number or address as the
Company may specify for such purposes by notice to the Holder
delivered in accordance with this Section 8(a). Any and all
notices or other communications or deliveries to be provided by the
Company hereunder shall be in writing and delivered personally, by
facsimile, or sent by a nationally recognized overnight courier
service addressed to each Holder at the facsimile number or address
of the Holder appearing on the books of the Company, or if no such
facsimile number or address appears on the books of the Company, at
the principal place of business of such Holder, as set forth in the
Purchase Agreement. Any notice or other communication or deliveries
hereunder shall be deemed given and effective on the earliest of
(i) the date of transmission, if such notice or communication is
delivered via facsimile at the facsimile number set forth on the
signature pages attached hereto prior to 5:30 p.m. (New York City
time) on any date, (ii) the next Trading Day after the date of
transmission, if such notice or communication is delivered via
facsimile at the facsimile number set forth on the signature pages
attached hereto on a day that is not a Trading Day or later than
5:30 p.m. (New York City time) on any Trading Day, (iii) the second
Trading Day following the date of mailing, if sent by U.S.
nationally recognized overnight courier service or (iv) upon actual
receipt by the party to whom such notice is required to be
given.
b) Absolute
Obligation. Except as expressly provided herein, no
provision of this Note shall alter or impair the obligation of the
Company, which is absolute and unconditional, to pay the principal
of, liquidated damages and accrued interest, as applicable, on this
Note at the time, place, and rate, and in the coin or currency,
herein prescribed. This Note is a direct debt obligation of the
Company. This Note ranks pari passu with all other Notes
now or hereafter issued under the terms set forth herein except
such Notes shall be subordinated to any Notes issued to funds
managed by Arena Investors LP.
c) Lost
or Mutilated Note. If this Note shall be mutilated, lost,
stolen or destroyed, the Company shall execute and deliver, in
exchange and substitution for and upon cancellation of a mutilated
Note, or in lieu of or in substitution for a lost, stolen or
destroyed Note, a new Note for the principal amount of this Note so
mutilated, lost, stolen or destroyed, but only upon receipt of
evidence of such loss, theft or destruction of such Note, and of
the ownership hereof, reasonably satisfactory to the
Company.
d) Governing
Law. All questions concerning the construction, validity,
enforcement and interpretation of this Note shall be governed by
and construed and enforced in accordance with the internal laws of
the State of New York, without regard to the principles of conflict
of laws thereof. Each party agrees that all legal proceedings
concerning the interpretation, enforcement and defense of the
transactions contemplated by any of the Transaction Documents
(whether brought against a party hereto or its respective
Affiliates, directors, officers, shareholders, employees or agents)
shall be commenced in the state and federal courts sitting in the
City of New York, Borough of Manhattan (the “New York Courts”). Each
party hereto hereby irrevocably submits to the exclusive
jurisdiction of the New York Courts for the adjudication of any
dispute hereunder or in connection herewith or with any transaction
contemplated hereby or discussed herein (including with respect to
the enforcement of any of the Transaction Documents), and hereby
irrevocably waives, and agrees not to assert in any suit, action or
proceeding, any claim that it is not personally subject to the
jurisdiction of such New York Courts, or such New York Courts are
improper or inconvenient venue for such proceeding. Each party
hereby irrevocably waives personal service of process and consents
to process being served in any such suit, action or proceeding by
mailing a copy thereof via registered or certified mail or
overnight delivery (with evidence of delivery) to such party at the
address in effect for notices to it under this Note and agrees that
such service shall constitute good and sufficient service of
process and notice thereof. Nothing contained herein shall be
deemed to limit in any way any right to serve process in any other
manner permitted by applicable law. Each party hereto hereby
irrevocably waives, to the fullest extent permitted by applicable
law, any and all right to trial by jury in any legal proceeding
arising out of or relating to this Note or the transactions
contemplated hereby. If any party shall commence an action or
proceeding to enforce any provisions of this Note, then the
prevailing party in such action or proceeding shall be reimbursed
by the other party for its attorneys' fees and other costs and
expenses incurred in the investigation, preparation and prosecution
of such action or proceeding.
e) Waiver.
Any waiver by the Company or the Holder of a breach of any
provision of this Note shall not operate as or be construed to be a
waiver of any other breach of such provision or of any breach of
any other provision of this Note. The failure of the Company or the
Holder to insist upon strict adherence to any term of this Note on
one or more occasions shall not be considered a waiver or deprive
that party of the right thereafter to insist upon strict adherence
to that term or any other term of this Note on any other occasion.
Any waiver by the Company or the Holder must be in
writing.
f) Certain
Transactions and Confidentiality. The restrictions on the
sale of any Securities issued to the Holder pursuant to the
Transaction Documents, including any prohibition on Short Sales,
shall be subject to the provisions of Section 4.11 of the Purchase
Agreement, the provisions of which are incorporated herein by
reference.
g) Severability.
If any provision of this Note is invalid, illegal or unenforceable,
the balance of this Note shall remain in effect, and if any
provision is inapplicable to any Person or circumstance, it shall
nevertheless remain applicable to all other Persons and
circumstances. If it shall be found that any interest or other
amount deemed interest due hereunder violates the applicable law
governing usury, the applicable rate of interest due hereunder
shall automatically be lowered to equal the maximum rate of
interest permitted under applicable law. The Company covenants (to
the extent that it may lawfully do so) that it shall not at any
time insist upon, plead, or in any manner whatsoever claim or take
the benefit or advantage of, any stay, extension or usury law or
other law which would prohibit or forgive the Company from paying
all or any portion of the principal of or interest on this Note as
contemplated herein, wherever enacted, now or at any time hereafter
in force, or which may affect the covenants or the performance of
this Note, and the Company (to the extent it may lawfully do so)
hereby expressly waives all benefits or advantage of any such law,
and covenants that it will not, by resort to any such law, hinder,
delay or impede the execution of any power herein granted to the
Holder, but will suffer and permit the execution of every such as
though no such law has been enacted.
h) Remedies,
Characterizations, Other Obligations, Breaches and Injunctive
Relief. The remedies provided in this Note shall be
cumulative and in addition to all other remedies available under
this Note and any of the other Transaction Documents at law or in
equity (including a decree of specific performance and/or other
injunctive relief), and nothing herein shall limit the
Holder’s right to pursue actual and consequential damages for
any failure by the Company to comply with the terms of this Note.
The Company covenants to the Holder that there shall be no
characterization concerning this instrument other than as expressly
provided herein. Amounts set forth or provided for herein with
respect to payments, conversion and the like (and the computation
thereof) shall be the amounts to be received by the Holder and
shall not, except as expressly provided herein, be subject to any
other obligation of the Company (or the performance thereof). The
Company acknowledges that a breach by it of its obligations
hereunder will cause irreparable harm to the Holder and that the
remedy at law for any such breach may be inadequate. The Company
therefore agrees that, in the event of any such breach or
threatened breach, the Holder shall be entitled, in addition to all
other available remedies, to an injunction restraining any such
breach or any such threatened breach, without the necessity of
showing economic loss and without any bond or other security being
required. The Company shall provide all information and
documentation to the Holder that is requested by the Holder to
enable the Holder to confirm the Company’s compliance with
the terms and conditions of this Note.
i) Next
Business Day. Whenever any payment or other obligation
hereunder shall be due on a day other than a Business Day, such
payment shall be made on the next succeeding Business
Day.
j) Headings.
The headings contained herein are for convenience only, do not
constitute a part of this Note and shall not be deemed to limit or
affect any of the provisions hereof.
*********************
(Signature Pages Follow)
IN WITNESS WHEREOF,
the Company has caused this Note to be duly executed by a duly
authorized officer as of the date first above
indicated.
|
GOIP GLOBAL, INC.
|
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By:__________________________________________
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ANNEX
A - NOTICE OF CONVERSION
The
undersigned hereby elects to convert principal under the Original
Issue Discount Convertible Promissory Note due ______, 2021 of GoIP
Global, Inc., a Colorado corporation (the “Company”), into shares of
common stock (the “Common Stock”), of the
Company according to the conditions hereof, as of the date written
below. If shares of Common Stock are to be issued in the name of a
person other than the undersigned, the undersigned will pay all
transfer taxes payable with respect thereto and is delivering
herewith such certificates and opinions as reasonably requested by
the Company in accordance therewith. No fee will be charged to the
holder for any conversion, except for such transfer taxes, if
any.
By the
delivery of this Notice of Conversion the undersigned represents
and warrants to the Company that its ownership of the Common Stock
does not exceed the amounts specified under Section 4 of this Note, as
determined in accordance with Section 13(d) of the Exchange
Act.
The
undersigned agrees to comply with the prospectus delivery
requirements under the applicable securities laws in connection
with any transfer of the aforesaid shares of Common
Stock.
Conversion Information
Date to Effect
Conversion:
_____________________________________
Outstanding
Principal:
_____________________________________
Outstanding
Interest:
_____________________________________
Principal Amount of
Note to be Converted:
_____________________________________
Interest Amount of
Note to be Converted:
_____________________________________
Conversion
Price Calculations:
Total
Shares of Common Stock to be Issued:
Outstanding
Principal After Conversion:
_____________________________________
Outstanding
Interest After Conversion:
_____________________________________
DWAC
Instructions
Broker:
DTC#:
Account:
Account
Name:
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Physical
Delivery
Issue
to:
Address:
|
Entity
Name:
_____________________________________
Signatory Name:
_____________________________________
Title:
_____________________________________
Signature:
_____________________________________
Schedule
1
CONVERSION
SCHEDULE
This
Original Issue Discount Senior Secured Convertible Promissory Note
due on May 9, 2021 in the original principal amount of $275,000.00
is issued by GoIP Global, Inc., a Colorado corporation. This
Conversion Schedule reflects conversions made under Section 4 of the above
referenced Note.
Dated:
Date of
Conversion
(or for
first entry, Original Issue Date)
|
Amount
of Conversion
|
Aggregate Principal
Amount Remaining Subsequent to Conversion
(or
original Principal Amount)
|
Company
Attest
|
|
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Exhibit 4.3
NEITHER
THIS SECURITY NOR THE SECURITIES FOR WHICH THIS SECURITY IS
EXERCISABLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE
COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE
UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE “SECURITIES ACT”), AND,
ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR
PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT
SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND
IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS. THIS SECURITY
AND THE SECURITIES ISSUABLE UPON EXERCISE OF THIS SECURITY MAY BE
PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN
SECURED BY SUCH SECURITIES.
COMMON STOCK PURCHASE WARRANT
GOIP GLOBAL, INC.
Warrant Shares:
__________
Initial Exercise
Date: May 8, 2020
THIS
COMMON STOCK PURCHASE WARRANT (the “Warrant”) certifies that,
for value received, ______________ or its assigns (the
“Holder”) is entitled,
upon the terms and subject to the limitations on exercise and the
conditions hereinafter set forth, at any time on or after May 8,
2020 (the “Initial
Exercise Date”) and on or prior to the close of
business at 5:00 p.m. (New York City time) on May 8, 2022 (the
“Termination
Date) but not thereafter, to subscribe for and purchase from
GoIP Global, Inc., a Colorado corporation (the “Company”), up to
___________ shares (as subject to adjustment hereunder, the
“Warrant
Shares”) of Common Stock. The purchase price of one
share of Common Stock under this Warrant shall be equal to the
Exercise Price, as defined in Section 2(b).
Section
1. Definitions.
Capitalized terms used and not otherwise defined herein shall have
the meanings set forth in that certain Securities Purchase
Agreement (the “Purchase Agreement”),
dated May 8, 2020, among the Company and the purchasers signatory
thereto.
Section
2. Exercise.
a) Exercise
of Warrant. Exercise of the purchase rights represented by
this Warrant may be made, in whole or in part, at any time or times
on or after the Initial Exercise Date and on or before the
Termination Date by delivery to the Company of a duly executed
facsimile copy or PDF copy submitted by electronic (or e-mail
attachment) of the Notice of Exercise in the form annexed hereto
(“Notice of
Exercise”). Within the earlier of (i) two (2) Trading
Days and (ii) the number of Trading Days comprising the Standard
Settlement Period (as defined in Section 2(d)(i) herein) following
the date of exercise as aforesaid, the Holder shall deliver the
aggregate Exercise Price for the shares specified in the applicable
Notice of Exercise by wire transfer or cashier’s check drawn
on a United States bank unless the cashless exercise procedure
specified in Section 2(c) below is specified in the applicable
Notice of Exercise. No
ink-original Notice of Exercise shall be required, nor shall any
medallion guarantee (or other type of guarantee or notarization) of
any Notice of Exercise form be required. Notwithstanding anything
herein to the contrary, the Holder shall not be required to
physically surrender this Warrant to the Company until the Holder
has purchased all of the Warrant Shares available hereunder and the
Warrant has been exercised in full, in which case, the Holder shall
surrender this Warrant to the Company for cancellation within two
(2) Trading Days of the date the final Notice of Exercise is
delivered to the Company. Partial exercises of this Warrant
resulting in purchases of a portion of the total number of Warrant
Shares available hereunder shall have the effect of lowering the
outstanding number of Warrant Shares purchasable hereunder in an
amount equal to the applicable number of Warrant Shares purchased.
The Holder and the Company shall maintain records showing the
number of Warrant Shares purchased and the date of such purchases.
The Company shall deliver any objection to any Notice of Exercise
within one (1) Business Days of receipt of such notice.
The Holder and any assignee, by
acceptance of this Warrant, acknowledge and agree that, by reason
of the provisions of this paragraph, following the purchase of a
portion of the Warrant Shares hereunder, the number of Warrant
Shares available for purchase hereunder at any given time may be
less than the amount stated on the face hereof.
b) Exercise Price. The exercise
price per share of the Common Stock under this Warrant shall be
$0.50, subject to adjustment hereunder (the “Exercise
Price”).
c) Intentionally
Omitted.
d)
Mechanics of
Exercise.
i. Delivery of Warrant Shares Upon
Exercise. Subject to the requirements of applicable law, the
Company shall cause the Warrant Shares purchased hereunder to be
transmitted by the Transfer Agent to the Holder by crediting the
account of the Holder’s or its designee’s balance
account with The Depository Trust Company through its Deposit or
Withdrawal at Custodian system (“DWAC”) if the Company is
then a participant in such system and either (A) there is an
effective registration statement permitting the issuance of the
Warrant Shares to or resale of the Warrant Shares by the Holder or
(B) the Warrant Shares are eligible for resale by the Holder
pursuant to Rule 144 (assuming cashless exercise of the Warrants),
and otherwise by physical delivery of a certificate, registered in
the Company’s share register in the name of the Holder or its
designee, for the number of Warrant Shares to which the Holder is
entitled pursuant to such exercise to the address specified by the
Holder in the Notice of Exercise by the date that is the earlier of
(i) the earlier of (A) three (3) Trading Days after the delivery to
the Company of the Notice of Exercise and (B) one (1) Trading Day
after delivery of the aggregate Exercise Price to the Company and
(ii) the number of Trading Days comprising the Standard Settlement
Period after the delivery to the Company of the Notice of Exercise
(such date, the “Warrant Share Delivery
Date”). Upon delivery of the Notice of Exercise, the
Holder shall be deemed for all corporate purposes to have become
the holder of record of the Warrant Shares with respect to which
this Warrant has been exercised, irrespective of the date of
delivery of the Warrant Shares, provided that payment of the
aggregate Exercise Price (other than in the case of a cashless
exercise) is received within the earlier of (i) three (3) Trading
Days and (ii) the number of Trading Days comprising the Standard
Settlement Period following delivery of the Notice of Exercise. If
the Company fails for any reason to deliver to the Holder the
Warrant Shares subject to a Notice of Exercise by the Warrant Share
Delivery Date, the Company shall pay to the Holder, in cash, as
liquidated damages and not as a penalty, for each $1,000 of Warrant
Shares subject to such exercise (based on the VWAP of the Common
Stock on the date of the applicable Notice of Exercise), $10 per
Trading Day (increasing to $20 per Trading Day on the fifth Trading
Day after such liquidated damages begin to accrue) for each Trading
Day after the first Business Day after the Warrant Share Delivery
Date until such Warrant Shares are delivered or Holder rescinds
such exercise. The Company agrees to maintain a transfer agent that
is a participant in the FAST program so long as this Warrant
remains outstanding and exercisable. As used herein,
“Standard Settlement
Period” means the standard settlement period,
expressed in a number of Trading Days, on the Company’s
primary Trading Market with respect to the Common Stock as in
effect on the date of delivery of the Notice of
Exercise.
ii. Delivery of New Warrants Upon
Exercise. If this Warrant shall have been exercised in part,
the Company shall, at the request of a Holder and upon surrender of
this Warrant certificate, at the time of delivery of the Warrant
Shares, deliver to the Holder a new Warrant evidencing the rights
of the Holder to purchase the unpurchased Warrant Shares called for
by this Warrant, which new Warrant shall in all other respects be
identical with this Warrant.
iii. Rescission
Rights. If the Company fails to cause the Transfer Agent to
transmit to the Holder the Warrant Shares pursuant to Section
2(d)(i) by the Warrant Share Delivery Date, then the Holder will
have the right to rescind such exercise.
iv. Compensation for Buy-In on Failure to
Timely Deliver Warrant Shares Upon Exercise. In addition to
any other rights available to the Holder, if the Company fails to
cause the Transfer Agent to transmit to the Holder the Warrant
Shares in accordance with the provisions of Section 2(d)(i) above
pursuant to an exercise on or before the Warrant Share Delivery
Date, and if after such date the Holder is required by its broker
to purchase (in an open market transaction or otherwise) or the
Holder’s brokerage firm otherwise purchases, shares of Common
Stock to deliver in satisfaction of a sale by the Holder of the
Warrant Shares which the Holder anticipated receiving upon such
exercise (a “Buy-In”), then the
Company shall (A) pay in cash to the Holder the amount, if any, by
which (x) the Holder’s total purchase price (including
brokerage commissions, if any) for the shares of Common Stock so
purchased exceeds (y) the amount obtained by multiplying (1) the
number of Warrant Shares that the Company was required to deliver
to the Holder in connection with the exercise at issue times (2)
the price at which the sell order giving rise to such purchase
obligation was executed, and (B) at the option of the Holder,
either reinstate the portion of the Warrant and equivalent number
of Warrant Shares for which such exercise was not honored (in which
case such exercise shall be deemed rescinded) or deliver to the
Holder the number of shares of Common Stock that would have been
issued had the Company timely complied with its exercise and
delivery obligations hereunder. For example, if the Holder
purchases Common Stock having a total purchase price of $11,000 to
cover a Buy-In with respect to an attempted exercise of shares of
Common Stock with an aggregate sale price giving rise to such
purchase obligation of $10,000, under clause (A) of the immediately
preceding sentence the Company shall be required to pay the Holder
$1,000. The Holder shall provide the Company written notice
indicating the amounts payable to the Holder in respect of the
Buy-In and, upon request of the Company, evidence of the amount of
such loss. Nothing herein shall limit a Holder’s right to
pursue any other remedies available to it hereunder, at law or in
equity including, without limitation, a decree of specific
performance and/or injunctive relief with respect to the
Company’s failure to timely deliver shares of Common Stock
upon exercise of the Warrant as required pursuant to the terms
hereof.
v. No Fractional Shares or Scrip.
No fractional shares or scrip representing fractional shares shall
be issued upon the exercise of this Warrant. As to any fraction of
a share which the Holder would otherwise be entitled to purchase
upon such exercise, the Company shall, at its election, either pay
a cash adjustment in respect of such final fraction in an amount
equal to such fraction multiplied by the Exercise Price or round up
to the next whole share.
vi. Charges, Taxes and Expenses.
Issuance of Warrant Shares shall be made without charge to the
Holder for any issue or transfer tax or other incidental expense in
respect of the issuance of such Warrant Shares, all of which taxes
and expenses shall be paid by the Company, and such Warrant Shares
shall be issued in the name of the Holder or in such name or names
as may be directed by the Holder; provided, however, that in the event that
Warrant Shares are to be issued in a name other than the name of
the Holder, this Warrant when surrendered for exercise shall be
accompanied by the Assignment Form attached hereto duly executed by
the Holder and the Company may require, as a condition thereto, the
payment of a sum sufficient to reimburse it for any transfer tax
incidental thereto. The Company shall pay all Transfer Agent fees
required for same-day processing of any Notice of Exercise and all
fees to the Depository Trust Company (or another established
clearing corporation performing similar functions) required for
same-day electronic delivery of the Warrant Shares.
vii. Closing
of Books. The Company will not close its stockholder books
or records in any manner which prevents the timely exercise of this
Warrant, pursuant to the terms hereof.
e) Holder’s
Exercise Limitations. The Company shall not effect any
exercise of this Warrant, and a Holder shall not have the right to
exercise any portion of this Warrant, pursuant to Section 2 or
otherwise, to the extent that after giving effect to such issuance
after exercise as set forth on the applicable Notice of Exercise,
the Holder (together with the Holder’s Affiliates, and any
other Persons acting as a group together with the Holder or any of
the Holder’s Affiliates (such Persons, “Attribution Parties”)),
would beneficially own in excess of the Beneficial Ownership
Limitation (as defined below). For purposes of the foregoing
sentence, the number of shares of Common Stock beneficially owned
by the Holder and its Affiliates and Attribution Parties shall
include the number of shares of Common Stock issuable upon exercise
of this Warrant with respect to which such determination is being
made, but shall exclude the number of shares of Common Stock which
would be issuable upon (i) exercise of the remaining, nonexercised
portion of this Warrant beneficially owned by the Holder or any of
its Affiliates or Attribution Parties and (ii) exercise or
conversion of the unexercised or nonconverted portion of any other
securities of the Company (including, without limitation, any other
Common Stock Equivalents) subject to a limitation on conversion or
exercise analogous to the limitation contained herein beneficially
owned by the Holder or any of its Affiliates or Attribution
Parties. Except as set forth in the preceding sentence, for
purposes of this Section 2(e), beneficial ownership shall be
calculated in accordance with Section 13(d) of the Exchange Act and
the rules and regulations promulgated thereunder, it being
acknowledged by the Holder that the Company is not representing to
the Holder that such calculation is in compliance with Section
13(d) of the Exchange Act and the Holder is solely responsible for
any schedules required to be filed in accordance therewith. To the
extent that the limitation contained in this Section 2(e) applies,
the determination of whether this Warrant is exercisable (in
relation to other securities owned by the Holder together with any
Affiliates and Attribution Parties) and of which portion of this
Warrant is exercisable shall be in the sole discretion of the
Holder, and the submission of a Notice of Exercise shall be deemed
to be the Holder’s determination of whether this Warrant is
exercisable (in relation to other securities owned by the Holder
together with any Affiliates and Attribution Parties) and of which
portion of this Warrant is exercisable, in each case subject to the
Beneficial Ownership Limitation, and the Company shall have no
obligation to verify or confirm the accuracy of such determination.
In addition, a determination as to any group status as contemplated
above shall be determined in accordance with Section 13(d) of the
Exchange Act and the rules and regulations promulgated thereunder.
For purposes of this Section 2(e), in determining the number of
outstanding shares of Common Stock, a Holder may rely on the number
of outstanding shares of Common Stock as reflected in (A) the
Company’s most recent periodic or annual report filed with
the Commission, as the case may be, (B) a more recent public
announcement by the Company or (C) a more recent written notice by
the Company or the Transfer Agent setting forth the number of
shares of Common Stock outstanding. Upon the written or oral
request of a Holder, the Company shall within two Trading Days
confirm orally and in writing to the Holder the number of shares of
Common Stock then outstanding. In any case, the number of
outstanding shares of Common Stock shall be determined after giving
effect to the conversion or exercise of securities of the Company,
including this Warrant, by the Holder or its Affiliates or
Attribution Parties since the date as of which such number of
outstanding shares of Common Stock was reported. The
“Beneficial
Ownership Limitation” shall be 4.99% of the number of
shares of the Common Stock outstanding immediately after giving
effect to the issuance of shares of Common Stock issuable upon
exercise of this Warrant. The Holder, upon notice to the Company,
may increase or decrease the Beneficial Ownership Limitation
provisions of this Section 2(e), provided that the Beneficial
Ownership Limitation in no event exceeds 9.99% of the number of
shares of the Common Stock outstanding immediately after giving
effect to the issuance of shares of Common Stock upon exercise of
this Warrant held by the Holder and the provisions of this Section
2(e) shall continue to apply. Any increase in the Beneficial
Ownership Limitation will not be effective until the 61st day after such
notice is delivered to the Company. The provisions of this
paragraph shall be construed and implemented in a manner otherwise
than in strict conformity with the terms of this Section 2(e) to
correct this paragraph (or any portion hereof) which may be
defective or inconsistent with the intended Beneficial Ownership
Limitation herein contained or to make changes or supplements
necessary or desirable to properly give effect to such limitation.
The limitations contained in this paragraph shall apply to a
successor holder of this Warrant.
Section
3.
Certain
Adjustments.
a) Stock Dividends and Splits. If
the Company, at any time while this Warrant is outstanding: (i)
pays a stock dividend or otherwise makes a distribution or
distributions on shares of its Common Stock or any other equity or
equity equivalent securities payable in shares of Common Stock
(which, for avoidance of doubt, shall not include any shares of
Common Stock issued by the Company upon exercise of this Warrant),
(ii) subdivides outstanding shares of Common Stock into a larger
number of shares, (iii) combines (including by way of reverse stock
split) outstanding shares of Common Stock into a smaller number of
shares or (iv) issues by reclassification of shares of the Common
Stock any shares of capital stock of the Company, then in each case
the Exercise Price shall be multiplied by a fraction of which the
numerator shall be the number of shares of Common Stock (excluding
treasury shares, if any) outstanding immediately before such event
and of which the denominator shall be the number of shares of
Common Stock outstanding immediately after such event, and the
number of shares issuable upon exercise of this Warrant shall be
proportionately adjusted such that the aggregate Exercise Price of
this Warrant shall remain unchanged. Any adjustment made pursuant
to this Section 3(a) shall become effective immediately after the
record date for the determination of stockholders entitled to
receive such dividend or distribution and shall become effective
immediately after the effective date in the case of a subdivision,
combination or re-classification. Notwithstanding the foregoing,
the provisions of this Section shall not apply to the Reverse Stock
Split.
b) Intentionally
Omitted.
c) Subsequent Rights Offerings.
In addition to any adjustments
pursuant to Section 3(a) above, if at any time the Company grants,
issues or sells any Common Stock Equivalents or rights to purchase
stock, warrants, securities or other property pro rata to the
record holders of any class of shares of Common Stock (the
“Purchase
Rights”), then the Holder
will be entitled to acquire, upon the terms applicable to such
Purchase Rights, the aggregate Purchase Rights which the Holder
could have acquired if the Holder had held the number of shares of
Common Stock acquirable upon complete exercise of this Warrant
(without regard to any limitations on exercise hereof, including
without limitation, the Beneficial Ownership Limitation)
immediately before the date on which a record is taken for the
grant, issuance or sale of such Purchase Rights, or, if no such
record is taken, the date as of which the record holders of shares
of Common Stock are to be determined for the grant, issue or sale
of such Purchase Rights (provided, however, to the extent that the
Holder’s right to participate in any such Purchase Right
would result in the Holder exceeding the Beneficial Ownership
Limitation, then the Holder shall not be entitled to participate in
such Purchase Right to such extent (or beneficial ownership of such
shares of Common Stock as a result of such Purchase Right to such
extent) and such Purchase Right to such extent shall be held in
abeyance for the Holder until such time, if ever, as its right
thereto would not result in the Holder exceeding the Beneficial
Ownership Limitation).
d) Pro
Rata Distributions. During such time as this Warrant is
outstanding, if the Company shall declare or make any dividend or
other distribution of its assets (or rights to acquire its assets)
to holders of shares of Common Stock, by way of return of capital
or otherwise (including, without limitation, any distribution of
cash, stock or other securities, property or options by way of a
dividend, spin off, reclassification, corporate rearrangement,
scheme of arrangement or other similar transaction) (a
“Distribution”), at any
time after the issuance of this Warrant, then, in each such case,
the Holder shall be entitled to participate in such Distribution to
the same extent that the Holder would have participated therein if
the Holder had held the number of shares of Common Stock acquirable
upon complete exercise of this Warrant (without regard to any
limitations on exercise hereof, including without limitation, the
Beneficial Ownership Limitation) immediately before the date of
which a record is taken for such Distribution, or, if no such
record is taken, the date as of which the record holders of shares
of Common Stock are to be determined for the participation in such
Distribution (provided, however, to the extent that the
Holder's right to participate in any such Distribution would result
in the Holder exceeding the Beneficial Ownership Limitation, then
the Holder shall not be entitled to participate in such
Distribution to such extent (or in the beneficial ownership of any
shares of Common Stock as a result of such Distribution to such
extent) and the portion of such Distribution shall be held in
abeyance for the benefit of the Holder until such time, if ever, as
its right thereto would not result in the Holder exceeding the
Beneficial Ownership Limitation).
e) Fundamental Transaction. If, at
any time while this Warrant is outstanding, (i) the Company,
directly or indirectly, in one or more related transactions effects
any merger or consolidation of the Company with or into another
Person, (ii) the Company, directly or indirectly, effects any sale,
lease, license, assignment, transfer, conveyance or other
disposition of all or substantially all of its assets in one or a
series of related transactions, (iii) any, direct or indirect,
purchase offer, tender offer or exchange offer (whether by the
Company or another Person) is completed pursuant to which holders
of Common Stock are permitted to sell, tender or exchange their
shares for other securities, cash or property and has been accepted
by the holders of 50% or more of the outstanding Common Stock, (iv)
the Company, directly or indirectly, in one or more related
transactions effects any reclassification, reorganization or
recapitalization of the Common Stock or any compulsory share
exchange pursuant to which the Common Stock is effectively
converted into or exchanged for other securities, cash or property,
or (v) the Company, directly or indirectly, in one or more related
transactions consummates a stock or share purchase agreement or
other business combination (including, without limitation, a
reorganization, recapitalization, spin-off or scheme of
arrangement) with another Person or group of Persons whereby such
other Person or group acquires more than 50% of the outstanding
shares of Common Stock (not including any shares of Common Stock
held by the other Person or other Persons making or party to, or
associated or affiliated with the other Persons making or party to,
such stock or share purchase agreement or other business
combination) (each a “Fundamental
Transaction”), then, upon any subsequent exercise of
this Warrant, the Holder shall have the right to receive, for each
Warrant Share that would have been issuable upon such exercise
immediately prior to the occurrence of such Fundamental
Transaction, at the option of the Holder (without regard to any
limitation in Section 2(e) on the exercise of this Warrant), the
number of shares of Common Stock of the successor or acquiring
corporation or of the Company, if it is the surviving corporation,
and any additional consideration (the “Alternate Consideration”)
receivable as a result of such Fundamental Transaction by a holder
of the number of shares of Common Stock for which this Warrant is
exercisable immediately prior to such Fundamental Transaction
(without regard to any limitation in Section 2(e) on the exercise
of this Warrant). For purposes of any such exercise, the
determination of the Exercise Price shall be appropriately adjusted
to apply to such Alternate Consideration based on the amount of
Alternate Consideration issuable in respect of one share of Common
Stock in such Fundamental Transaction, and the Company shall
apportion the Exercise Price among the Alternate Consideration in a
reasonable manner reflecting the relative value of any different
components of the Alternate Consideration. If holders of Common
Stock are given any choice as to the securities, cash or property
to be received in a Fundamental Transaction, then the Holder shall
be given the same choice as to the Alternate Consideration it
receives upon any exercise of this Warrant following such
Fundamental Transaction. The Company shall cause any successor
entity in a Fundamental Transaction in which the Company is not the
survivor (the “Successor Entity”) to
assume in writing all of the obligations of the Company under this
Warrant and the other Transaction Documents in accordance with the
provisions of this Section 3(e) pursuant to written agreements in
form and substance reasonably satisfactory to the Holder and
approved by the Holder (not to be unreasonably withheld,
conditioned or delayed) prior to such Fundamental Transaction and
shall, at the option of the Holder, deliver to the Holder in
exchange for this Warrant a security of the Successor Entity
evidenced by a written instrument substantially similar in form and
substance to this Warrant which is exercisable for a corresponding
number of shares of capital stock of such Successor Entity (or its
parent entity) equivalent to the shares of Common Stock acquirable
and receivable upon exercise of this Warrant (without regard to any
limitations on the exercise of this Warrant) prior to such
Fundamental Transaction, and with an exercise price which applies
the exercise price hereunder to such shares of capital stock (but
taking into account the relative value of the shares of Common
Stock pursuant to such Fundamental Transaction and the value of
such shares of capital stock, such number of shares of capital
stock and such exercise price being for the purpose of protecting
the economic value of this Warrant immediately prior to the
consummation of such Fundamental Transaction), and which is
reasonably satisfactory in form and substance to the Holder. Upon
the occurrence of any such Fundamental Transaction, the Successor
Entity shall succeed to, and be substituted for (so that from and
after the date of such Fundamental Transaction, the provisions of
this Warrant and the other Transaction Documents referring to the
“Company” shall refer instead to the Successor Entity),
and may exercise every right and power of the Company and shall
assume all of the obligations of the Company under this Warrant and
the other Transaction Documents with the same effect as if such
Successor Entity had been named as the Company herein.
f) Calculations. All calculations
under this Section 3 shall be made to the nearest cent or the
nearest 1/100th of a share, as the case may be. For purposes of
this Section 3, the number of shares of Common Stock deemed to be
issued and outstanding as of a given date shall be the sum of the
number of shares of Common Stock (excluding treasury shares, if
any) issued and outstanding.
g) Notice to Holder.
i. Adjustment to Exercise Price.
Whenever the Exercise Price is adjusted pursuant to any provision
of this Section 3, the Company shall promptly deliver to the Holder
by facsimile or email a notice setting forth the Exercise Price
after such adjustment and any resulting adjustment to the number of
Warrant Shares and setting forth a brief statement of the facts
requiring such adjustment.
ii. Notice to Allow Exercise by
Holder. If (A) the Company shall declare a dividend (or any
other distribution in whatever form) on the Common Stock, (B) the
Company shall declare a special nonrecurring cash dividend on or a
redemption of the Common Stock, (C) the Company shall authorize the
granting to all holders of the Common Stock rights or warrants to
subscribe for or purchase any shares of capital stock of any class
or of any rights, (D) the approval of any stockholders of the
Company shall be required in connection with any reclassification
of the Common Stock, any consolidation or merger to which the
Company is a party, any sale or transfer of all or substantially
all of the assets of the Company, or any compulsory share exchange
whereby the Common Stock is converted into other securities, cash
or property, or (E) the Company shall authorize the voluntary or
involuntary dissolution, liquidation or winding up of the affairs
of the Company, then, in each case, the Company shall cause to be
delivered by facsimile or email to the Holder at its last facsimile
number or email address as it shall appear upon the Warrant
Register of the Company, at least 20 calendar days prior to the
applicable record or effective date hereinafter specified, a notice
stating (x) the date on which a record is to be taken for the
purpose of such dividend, distribution, redemption, rights or
warrants, or if a record is not to be taken, the date as of which
the holders of the Common Stock of record to be entitled to such
dividend, distributions, redemption, rights or warrants are to be
determined or (y) the date on which such reclassification,
consolidation, merger, sale, transfer or share exchange is expected
to become effective or close, and the date as of which it is
expected that holders of the Common Stock of record shall be
entitled to exchange their shares of the Common Stock for
securities, cash or other property deliverable upon such
reclassification, consolidation, merger, sale, transfer or share
exchange; provided that the failure to deliver such notice or any
defect therein or in the delivery thereof shall not affect the
validity of the corporate action required to be specified in such
notice. To the extent that any notice provided in this Warrant
constitutes, or contains, material, non-public information
regarding the Company or any of the Subsidiaries, the Company shall
simultaneously publicly disseminate such notice. The Holder shall
remain entitled to exercise this Warrant during the period
commencing on the date of such notice to the effective date of the
event triggering such notice except as may otherwise be expressly
set forth herein.
Section
4.
Transfer of
Warrant.
a) Transferability. Subject to
compliance with any applicable securities laws and the conditions
set forth in Section 4(d) hereof and to the provisions of Section
4.1 of the Purchase Agreement, this Warrant and all rights
hereunder (including, without limitation, any registration rights)
are transferable, in whole or in part, upon surrender of this
Warrant at the principal office of the Company or its designated
agent, together with a written assignment of this Warrant
substantially in the form attached hereto duly executed by the
Holder or its agent or attorney and funds sufficient to pay any
transfer taxes payable upon the making of such transfer. Upon such
surrender and, if required, such payment, the Company shall execute
and deliver a new Warrant or Warrants in the name of the assignee
or assignees, as applicable, and in the denomination or
denominations specified in such instrument of assignment, and shall
issue to the assignor a new Warrant evidencing the portion of this
Warrant not so assigned, and this Warrant shall promptly be
cancelled. Notwithstanding anything
herein to the contrary, the Holder shall not be required to
physically surrender this Warrant to the Company unless the Holder
has assigned this Warrant in full, in which case, the Holder shall
surrender this Warrant to the Company within three (3) Trading Days
of the date the Holder delivers an assignment form to the Company
assigning this Warrant full. The Warrant, if properly assigned in
accordance herewith, may be exercised by a new holder for the
purchase of Warrant Shares without having a new Warrant
issued.
b) New Warrants. This Warrant may
be divided or combined with other Warrants upon presentation hereof
at the aforesaid office of the Company, together with a written
notice specifying the names and denominations in which new Warrants
are to be issued, signed by the Holder or its agent or attorney.
Subject to compliance with Section 4(a), as to any transfer which
may be involved in such division or combination, the Company shall
execute and deliver a new Warrant or Warrants in exchange for the
Warrant or Warrants to be divided or combined in accordance with
such notice. All Warrants issued on transfers or exchanges shall be
dated the original Issue Date and shall be identical with this
Warrant except as to the number of Warrant Shares issuable pursuant
thereto.
c) Warrant Register. The Company
shall register this Warrant, upon records to be maintained by the
Company for that purpose (the “Warrant Register”), in
the name of the record Holder hereof from time to time. The Company
may deem and treat the registered Holder of this Warrant as the
absolute owner hereof for the purpose of any exercise hereof or any
distribution to the Holder, and for all other purposes, absent
actual notice to the contrary.
d) Transfer
Restrictions. If, at the
time of the surrender of this Warrant
in connection with any transfer of this Warrant, the transfer of
this Warrant shall not be either (i) registered pursuant to an
effective registration
statement under the
Securities Act and under
applicable state securities or blue sky laws or (ii) eligible for
resale pursuant to Rule 144, the Company may require, as a
condition of allowing such transfer, that the Holder or transferee
of this Warrant, as the case may be, comply with the provisions of
the Purchase Agreement.
e) Representation by the Holder.
The Holder, by the acceptance hereof, represents and warrants that
it is acquiring this Warrant and, upon any exercise hereof, will
acquire the Warrant Shares issuable upon such exercise, for its own
account and not with a view to or for distributing or reselling
such Warrant Shares or any part thereof in violation of the
Securities Act or any applicable state securities law, except
pursuant to sales registered or exempted under the Securities
Act.
Section
5. Miscellaneous.
a) No Rights as Stockholder Until
Exercise. This Warrant does not entitle the Holder to any
voting rights, dividends or other rights as a stockholder of the
Company prior to the exercise hereof as set forth in Section
2(d)(i), except as expressly set forth in Section 3.
b) Loss, Theft, Destruction or Mutilation
of Warrant. The Company covenants that upon receipt by the
Company of evidence reasonably satisfactory to it of the loss,
theft, destruction or mutilation of this Warrant or any stock
certificate relating to the Warrant Shares, and in case of loss,
theft or destruction, of indemnity and/or security reasonably
satisfactory to it (which, in the case of the Warrant, shall not
include the posting of any bond), and upon surrender and
cancellation of such Warrant or stock certificate, if mutilated,
the Company will make and deliver a new Warrant or stock
certificate of like tenor and dated as of such cancellation, in
lieu of such Warrant or stock certificate.
c) Saturdays, Sundays, Holidays,
etc. If the last or appointed day for the taking of any
action or the expiration of any right required or granted herein
shall not be a Business Day, then, such action may be taken or such
right may be exercised on the next succeeding Business
Day.
d) Authorized Shares.
The
Company covenants that, after the consummation of the Reverse Stock
Split, during the period the Warrant is outstanding, it will
reserve from its authorized and unissued Common Stock a sufficient
number of shares to provide for the issuance of the Warrant Shares
upon the exercise of any purchase rights under this Warrant. The
Company further covenants that its issuance of this Warrant shall
constitute full authority to its officers who are charged with the
duty of issuing the necessary Warrant Shares upon the exercise of
the purchase rights under this Warrant. The Company will take all
such reasonable action as may be necessary to assure that such
Warrant Shares may be issued as provided herein without violation
of any applicable law or regulation, or of any requirements of the
Trading Market upon which the Common Stock may be listed. The
Company covenants that all Warrant Shares which may be issued upon
the exercise of the purchase rights represented by this Warrant
will, upon exercise of the purchase rights represented by this
Warrant and payment for such Warrant Shares in accordance herewith,
be duly authorized, validly issued, fully paid and nonassessable
and free from all taxes, liens and charges created by the Company
in respect of the issue thereof (other than taxes in respect of any
transfer occurring contemporaneously with such issue).
Except
and to the extent as waived or consented to by the Holder, the
Company shall not by any action, including, without limitation,
amending its certificate of incorporation or through any
reorganization, transfer of assets, consolidation, merger,
dissolution, issue or sale of securities or any other voluntary
action, avoid or seek to avoid the observance or performance of any
of the terms of this Warrant, but will at all times in good faith
assist in the carrying out of all such terms and in the taking of
all such actions as may be necessary or appropriate to protect the
rights of Holder as set forth in this Warrant against impairment.
Without limiting the generality of the foregoing, the Company will
(i) not increase the par value of any Warrant Shares above the
amount payable therefor upon such exercise immediately prior to
such increase in par value, (ii) take all such action as may be
necessary or appropriate in order that the Company may validly and
legally issue fully paid and nonassessable Warrant Shares upon the
exercise of this Warrant and (iii) use commercially reasonable
efforts to obtain all such authorizations, exemptions or consents
from any public regulatory body having jurisdiction thereof, as may
be, necessary to enable the Company to perform its obligations
under this Warrant.
Before
taking any action which would result in an adjustment in the number
of Warrant Shares for which this Warrant is exercisable or in the
Exercise Price, the Company shall obtain all such authorizations or
exemptions thereof, or consents thereto, as may be necessary from
any public regulatory body or bodies having jurisdiction
thereof.
e) Jurisdiction. All questions
concerning the construction, validity, enforcement and
interpretation of this Warrant shall be determined in accordance
with the provisions of the Purchase Agreement.
f) Restrictions. The Holder
acknowledges that the Warrant Shares acquired upon the exercise of
this Warrant, if not registered and the Holder does not utilize
cashless exercise, will have restrictions upon resale imposed by
state and federal securities laws.
g) Nonwaiver and Expenses. No
course of dealing or any delay or failure to exercise any right
hereunder on the part of Holder shall operate as a waiver of such
right or otherwise prejudice the Holder’s rights, powers or
remedies. Without limiting any other provision of this Warrant or
the Purchase Agreement, if the Company willfully and knowingly
fails to comply with any provision of this Warrant, which results
in any material damages to the Holder, the Company shall pay to the
Holder such amounts as shall be sufficient to cover any costs and
expenses including, but not limited to, reasonable attorneys’
fees, including those of appellate proceedings, incurred by the
Holder in collecting any amounts due pursuant hereto or in
otherwise enforcing any of its rights, powers or remedies
hereunder.
h) Notices. Any notice, request or
other document required or permitted to be given or delivered to
the Holder by the Company shall be delivered in accordance with the
notice provisions of the Purchase Agreement.
i) Limitation of Liability. No
provision hereof, in the absence of any affirmative action by the
Holder to exercise this Warrant to purchase Warrant Shares, and no
enumeration herein of the rights or privileges of the Holder, shall
give rise to any liability of the Holder for the purchase price of
any Common Stock or as a stockholder of the Company, whether such
liability is asserted by the Company or by creditors of the
Company.
j) Remedies. The Holder, in
addition to being entitled to exercise all rights granted by law,
including recovery of damages, will be entitled to specific
performance of its rights under this Warrant. The Company agrees
that monetary damages would not be adequate compensation for any
loss incurred by reason of a breach by it of the provisions of this
Warrant and hereby agrees to waive and not to assert the defense in
any action for specific performance that a remedy at law would be
adequate.
k) Successors and Assigns. Subject
to applicable securities laws, this Warrant and the rights and
obligations evidenced hereby shall inure to the benefit of and be
binding upon the successors and permitted assigns of the Company
and the successors and permitted assigns of Holder. The provisions
of this Warrant are intended to be for the benefit of any Holder
from time to time of this Warrant and shall be enforceable by the
Holder or holder of Warrant Shares.
l) Amendment. This Warrant may be
modified or amended or the provisions hereof waived with the
written consent of the Company and the
Holder.
m) Severability. Wherever
possible, each provision of this Warrant shall be interpreted in
such manner as to be effective and valid under applicable law, but
if any provision of this Warrant shall be prohibited by or invalid
under applicable law, such provision shall be ineffective to the
extent of such prohibition or invalidity, without invalidating the
remainder of such provisions or the remaining provisions of this
Warrant.
n) Headings. The headings used in
this Warrant are for the convenience of reference only and shall
not, for any purpose, be deemed a part of this
Warrant.
********************
(Signature Page Follows)
IN
WITNESS WHEREOF, the Company has caused this Warrant to be executed
by its officer thereunto duly authorized as of the date first above
indicated.
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GOIP GLOBAL, INC.
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By:__________________________________________
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NOTICE OF EXERCISE
(1) The undersigned
hereby elects to purchase ________ Warrant Shares of the Company
pursuant to the terms of the attached Warrant (only if exercised in
full), and tenders herewith payment of the exercise price in full,
together with all applicable transfer taxes, if any.
(2) Payment shall take
the form of lawful money of the United States; .
(3) Please issue said
Warrant Shares in the name of the undersigned or in such other name
as is specified below:
_______________________________
The
Warrant Shares shall be delivered to the following DWAC Account
Number:
_______________________________
_______________________________
_______________________________
(4)
Accredited
Investor. The undersigned is an “accredited
investor” as defined in Regulation D promulgated under the
Securities Act of 1933, as amended.
[SIGNATURE
OF HOLDER]
Name of
Investing Entity:
________________________________________________________________________
Signature of Authorized Signatory of Investing
Entity:
_________________________________________________
Name of
Authorized Signatory:
___________________________________________________________________
Title
of Authorized Signatory:
____________________________________________________________________
Date:
________________________________________________________________________________________
ASSIGNMENT FORM
(To assign the foregoing Warrant, execute this form and supply
required information. Do not use this form to purchase
shares.)
FOR
VALUE RECEIVED, the foregoing Warrant and all rights evidenced
thereby are hereby assigned to
Name:
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______________________________________
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(Please Print)
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Address:
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______________________________________
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Phone Number:
Email Address:
|
(Please
Print)
______________________________________
______________________________________
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Dated: _______________ __, ______
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Holder’s Signature: ______________
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Holder’s Address:
_______________
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NEITHER
THIS SECURITY NOR THE SECURITIES FOR WHICH THIS SECURITY IS
EXERCISABLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE
COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE
UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE “SECURITIES ACT”), AND,
ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR
PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT
SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND
IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS. THIS SECURITY
AND THE SECURITIES ISSUABLE UPON EXERCISE OF THIS SECURITY MAY BE
PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN
SECURED BY SUCH SECURITIES.
COMMON STOCK PURCHASE WARRANT
GOIP GLOBAL, INC.
Warrant
Shares: ____________
Initial Exercise
Date: June __, 2020
THIS
COMMON STOCK PURCHASE WARRANT (the “Warrant”) certifies that,
for value received, __________________- or its assigns (the
“Holder”) is entitled,
upon the terms and subject to the limitations on exercise and the
conditions hereinafter set forth, at any time on or after June __,
2020 (the “Initial
Exercise Date”) and on or prior to the close of
business at 5:00 p.m. (New York City time) on June __, 2022 (the
“Termination
Date) but not thereafter, to subscribe for and purchase from
GoIP Global, Inc., a Colorado corporation (the “Company”), up to ____
shares (as subject to adjustment hereunder, the “Warrant Shares”) of
Common Stock. The purchase price of one share of Common Stock under
this Warrant shall be equal to the Exercise Price, as defined in
Section 2(b).
Section
1. Definitions.
Capitalized terms used and not otherwise defined herein shall have
the meanings set forth in that certain Securities Purchase
Agreement (the “Purchase Agreement”),
dated June __, 2020, among the Company and the purchasers signatory
thereto.
Section
2. Exercise.
a) Exercise
of Warrant. Exercise of the purchase rights represented by
this Warrant may be made, in whole or in part, at any time or times
on or after the Initial Exercise Date and on or before the
Termination Date by delivery to the Company of a duly executed
facsimile copy or PDF copy submitted by electronic (or e-mail
attachment) of the Notice of Exercise in the form annexed hereto
(“Notice of
Exercise”). Within the earlier of (i) two (2) Trading
Days and (ii) the number of Trading Days comprising the Standard
Settlement Period (as defined in Section 2(d)(i) herein) following
the date of exercise as aforesaid, the Holder shall deliver the
aggregate Exercise Price for the shares specified in the applicable
Notice of Exercise by wire transfer or cashier’s check drawn
on a United States bank unless the cashless exercise procedure
specified in Section 2(c) below is specified in the applicable
Notice of Exercise. No
ink-original Notice of Exercise shall be required, nor shall any
medallion guarantee (or other type of guarantee or notarization) of
any Notice of Exercise form be required. Notwithstanding anything
herein to the contrary, the Holder shall not be required to
physically surrender this Warrant to the Company until the Holder
has purchased all of the Warrant Shares available hereunder and the
Warrant has been exercised in full, in which case, the Holder shall
surrender this Warrant to the Company for cancellation within two
(2) Trading Days of the date the final Notice of Exercise is
delivered to the Company. Partial exercises of this Warrant
resulting in purchases of a portion of the total number of Warrant
Shares available hereunder shall have the effect of lowering the
outstanding number of Warrant Shares purchasable hereunder in an
amount equal to the applicable number of Warrant Shares purchased.
The Holder and the Company shall maintain records showing the
number of Warrant Shares purchased and the date of such purchases.
The Company shall deliver any objection to any Notice of Exercise
within one (1) Business Days of receipt of such notice.
The Holder and any assignee, by
acceptance of this Warrant, acknowledge and agree that, by reason
of the provisions of this paragraph, following the purchase of a
portion of the Warrant Shares hereunder, the number of Warrant
Shares available for purchase hereunder at any given time may be
less than the amount stated on the face hereof.
b) Exercise Price. The exercise
price per share of the Common Stock under this Warrant shall be
$0.50, subject to adjustment hereunder (the “Exercise
Price”).
c) Intentionally
Omitted.
d)
Mechanics of
Exercise.
i. Delivery of Warrant Shares Upon
Exercise. Subject to the requirements of applicable law, the
Company shall cause the Warrant Shares purchased hereunder to be
transmitted by the Transfer Agent to the Holder by crediting the
account of the Holder’s or its designee’s balance
account with The Depository Trust Company through its Deposit or
Withdrawal at Custodian system (“DWAC”) if the Company is
then a participant in such system and either (A) there is an
effective registration statement permitting the issuance of the
Warrant Shares to or resale of the Warrant Shares by the Holder or
(B) the Warrant Shares are eligible for resale by the Holder
pursuant to Rule 144 (assuming cashless exercise of the Warrants),
and otherwise by physical delivery of a certificate, registered in
the Company’s share register in the name of the Holder or its
designee, for the number of Warrant Shares to which the Holder is
entitled pursuant to such exercise to the address specified by the
Holder in the Notice of Exercise by the date that is the earlier of
(i) the earlier of (A) three (3) Trading Days after the delivery to
the Company of the Notice of Exercise and (B) one (1) Trading Day
after delivery of the aggregate Exercise Price to the Company and
(ii) the number of Trading Days comprising the Standard Settlement
Period after the delivery to the Company of the Notice of Exercise
(such date, the “Warrant Share Delivery
Date”). Upon delivery of the Notice of Exercise, the
Holder shall be deemed for all corporate purposes to have become
the holder of record of the Warrant Shares with respect to which
this Warrant has been exercised, irrespective of the date of
delivery of the Warrant Shares, provided that payment of the
aggregate Exercise Price (other than in the case of a cashless
exercise) is received within the earlier of (i) three (3) Trading
Days and (ii) the number of Trading Days comprising the Standard
Settlement Period following delivery of the Notice of Exercise. If
the Company fails for any reason to deliver to the Holder the
Warrant Shares subject to a Notice of Exercise by the Warrant Share
Delivery Date, the Company shall pay to the Holder, in cash, as
liquidated damages and not as a penalty, for each $1,000 of Warrant
Shares subject to such exercise (based on the VWAP of the Common
Stock on the date of the applicable Notice of Exercise), $10 per
Trading Day (increasing to $20 per Trading Day on the fifth Trading
Day after such liquidated damages begin to accrue) for each Trading
Day after the first Business Day after the Warrant Share Delivery
Date until such Warrant Shares are delivered or Holder rescinds
such exercise. The Company agrees to maintain a transfer agent that
is a participant in the FAST program so long as this Warrant
remains outstanding and exercisable. As used herein,
“Standard Settlement
Period” means the standard settlement period,
expressed in a number of Trading Days, on the Company’s
primary Trading Market with respect to the Common Stock as in
effect on the date of delivery of the Notice of
Exercise.
ii. Delivery of New Warrants Upon
Exercise. If this Warrant shall have been exercised in part,
the Company shall, at the request of a Holder and upon surrender of
this Warrant certificate, at the time of delivery of the Warrant
Shares, deliver to the Holder a new Warrant evidencing the rights
of the Holder to purchase the unpurchased Warrant Shares called for
by this Warrant, which new Warrant shall in all other respects be
identical with this Warrant.
iii. Rescission
Rights. If the Company fails to cause the Transfer Agent to
transmit to the Holder the Warrant Shares pursuant to Section
2(d)(i) by the Warrant Share Delivery Date, then the Holder will
have the right to rescind such exercise.
iv. Compensation for Buy-In on Failure to
Timely Deliver Warrant Shares Upon Exercise. In addition to
any other rights available to the Holder, if the Company fails to
cause the Transfer Agent to transmit to the Holder the Warrant
Shares in accordance with the provisions of Section 2(d)(i) above
pursuant to an exercise on or before the Warrant Share Delivery
Date, and if after such date the Holder is required by its broker
to purchase (in an open market transaction or otherwise) or the
Holder’s brokerage firm otherwise purchases, shares of Common
Stock to deliver in satisfaction of a sale by the Holder of the
Warrant Shares which the Holder anticipated receiving upon such
exercise (a “Buy-In”), then the
Company shall (A) pay in cash to the Holder the amount, if any, by
which (x) the Holder’s total purchase price (including
brokerage commissions, if any) for the shares of Common Stock so
purchased exceeds (y) the amount obtained by multiplying (1) the
number of Warrant Shares that the Company was required to deliver
to the Holder in connection with the exercise at issue times (2)
the price at which the sell order giving rise to such purchase
obligation was executed, and (B) at the option of the Holder,
either reinstate the portion of the Warrant and equivalent number
of Warrant Shares for which such exercise was not honored (in which
case such exercise shall be deemed rescinded) or deliver to the
Holder the number of shares of Common Stock that would have been
issued had the Company timely complied with its exercise and
delivery obligations hereunder. For example, if the Holder
purchases Common Stock having a total purchase price of $11,000 to
cover a Buy-In with respect to an attempted exercise of shares of
Common Stock with an aggregate sale price giving rise to such
purchase obligation of $10,000, under clause (A) of the immediately
preceding sentence the Company shall be required to pay the Holder
$1,000. The Holder shall provide the Company written notice
indicating the amounts payable to the Holder in respect of the
Buy-In and, upon request of the Company, evidence of the amount of
such loss. Nothing herein shall limit a Holder’s right to
pursue any other remedies available to it hereunder, at law or in
equity including, without limitation, a decree of specific
performance and/or injunctive relief with respect to the
Company’s failure to timely deliver shares of Common Stock
upon exercise of the Warrant as required pursuant to the terms
hereof.
v. No Fractional Shares or Scrip.
No fractional shares or scrip representing fractional shares shall
be issued upon the exercise of this Warrant. As to any fraction of
a share which the Holder would otherwise be entitled to purchase
upon such exercise, the Company shall, at its election, either pay
a cash adjustment in respect of such final fraction in an amount
equal to such fraction multiplied by the Exercise Price or round up
to the next whole share.
vi. Charges, Taxes and Expenses.
Issuance of Warrant Shares shall be made without charge to the
Holder for any issue or transfer tax or other incidental expense in
respect of the issuance of such Warrant Shares, all of which taxes
and expenses shall be paid by the Company, and such Warrant Shares
shall be issued in the name of the Holder or in such name or names
as may be directed by the Holder; provided, however, that in the event that
Warrant Shares are to be issued in a name other than the name of
the Holder, this Warrant when surrendered for exercise shall be
accompanied by the Assignment Form attached hereto duly executed by
the Holder and the Company may require, as a condition thereto, the
payment of a sum sufficient to reimburse it for any transfer tax
incidental thereto. The Company shall pay all Transfer Agent fees
required for same-day processing of any Notice of Exercise and all
fees to the Depository Trust Company (or another established
clearing corporation performing similar functions) required for
same-day electronic delivery of the Warrant Shares.
vii. Closing
of Books. The Company will not close its stockholder books
or records in any manner which prevents the timely exercise of this
Warrant, pursuant to the terms hereof.
e) Holder’s
Exercise Limitations. The Company shall not effect any
exercise of this Warrant, and a Holder shall not have the right to
exercise any portion of this Warrant, pursuant to Section 2 or
otherwise, to the extent that after giving effect to such issuance
after exercise as set forth on the applicable Notice of Exercise,
the Holder (together with the Holder’s Affiliates, and any
other Persons acting as a group together with the Holder or any of
the Holder’s Affiliates (such Persons, “Attribution Parties”)),
would beneficially own in excess of the Beneficial Ownership
Limitation (as defined below). For purposes of the foregoing
sentence, the number of shares of Common Stock beneficially owned
by the Holder and its Affiliates and Attribution Parties shall
include the number of shares of Common Stock issuable upon exercise
of this Warrant with respect to which such determination is being
made, but shall exclude the number of shares of Common Stock which
would be issuable upon (i) exercise of the remaining, nonexercised
portion of this Warrant beneficially owned by the Holder or any of
its Affiliates or Attribution Parties and (ii) exercise or
conversion of the unexercised or nonconverted portion of any other
securities of the Company (including, without limitation, any other
Common Stock Equivalents) subject to a limitation on conversion or
exercise analogous to the limitation contained herein beneficially
owned by the Holder or any of its Affiliates or Attribution
Parties. Except as set forth in the preceding sentence, for
purposes of this Section 2(e), beneficial ownership shall be
calculated in accordance with Section 13(d) of the Exchange Act and
the rules and regulations promulgated thereunder, it being
acknowledged by the Holder that the Company is not representing to
the Holder that such calculation is in compliance with Section
13(d) of the Exchange Act and the Holder is solely responsible for
any schedules required to be filed in accordance therewith. To the
extent that the limitation contained in this Section 2(e) applies,
the determination of whether this Warrant is exercisable (in
relation to other securities owned by the Holder together with any
Affiliates and Attribution Parties) and of which portion of this
Warrant is exercisable shall be in the sole discretion of the
Holder, and the submission of a Notice of Exercise shall be deemed
to be the Holder’s determination of whether this Warrant is
exercisable (in relation to other securities owned by the Holder
together with any Affiliates and Attribution Parties) and of which
portion of this Warrant is exercisable, in each case subject to the
Beneficial Ownership Limitation, and the Company shall have no
obligation to verify or confirm the accuracy of such determination.
In addition, a determination as to any group status as contemplated
above shall be determined in accordance with Section 13(d) of the
Exchange Act and the rules and regulations promulgated thereunder.
For purposes of this Section 2(e), in determining the number of
outstanding shares of Common Stock, a Holder may rely on the number
of outstanding shares of Common Stock as reflected in (A) the
Company’s most recent periodic or annual report filed with
the Commission, as the case may be, (B) a more recent public
announcement by the Company or (C) a more recent written notice by
the Company or the Transfer Agent setting forth the number of
shares of Common Stock outstanding. Upon the written or oral
request of a Holder, the Company shall within two Trading Days
confirm orally and in writing to the Holder the number of shares of
Common Stock then outstanding. In any case, the number of
outstanding shares of Common Stock shall be determined after giving
effect to the conversion or exercise of securities of the Company,
including this Warrant, by the Holder or its Affiliates or
Attribution Parties since the date as of which such number of
outstanding shares of Common Stock was reported. The
“Beneficial
Ownership Limitation” shall be 4.99% of the number of
shares of the Common Stock outstanding immediately after giving
effect to the issuance of shares of Common Stock issuable upon
exercise of this Warrant. The Holder, upon notice to the Company,
may increase or decrease the Beneficial Ownership Limitation
provisions of this Section 2(e), provided that the Beneficial
Ownership Limitation in no event exceeds 9.99% of the number of
shares of the Common Stock outstanding immediately after giving
effect to the issuance of shares of Common Stock upon exercise of
this Warrant held by the Holder and the provisions of this Section
2(e) shall continue to apply. Any increase in the Beneficial
Ownership Limitation will not be effective until the 61st day after such
notice is delivered to the Company. The provisions of this
paragraph shall be construed and implemented in a manner otherwise
than in strict conformity with the terms of this Section 2(e) to
correct this paragraph (or any portion hereof) which may be
defective or inconsistent with the intended Beneficial Ownership
Limitation herein contained or to make changes or supplements
necessary or desirable to properly give effect to such limitation.
The limitations contained in this paragraph shall apply to a
successor holder of this Warrant.
Section
3. Certain
Adjustments.
a) Stock Dividends and Splits. If
the Company, at any time while this Warrant is outstanding: (i)
pays a stock dividend or otherwise makes a distribution or
distributions on shares of its Common Stock or any other equity or
equity equivalent securities payable in shares of Common Stock
(which, for avoidance of doubt, shall not include any shares of
Common Stock issued by the Company upon exercise of this Warrant),
(ii) subdivides outstanding shares of Common Stock into a larger
number of shares, (iii) combines (including by way of reverse stock
split) outstanding shares of Common Stock into a smaller number of
shares or (iv) issues by reclassification of shares of the Common
Stock any shares of capital stock of the Company, then in each case
the Exercise Price shall be multiplied by a fraction of which the
numerator shall be the number of shares of Common Stock (excluding
treasury shares, if any) outstanding immediately before such event
and of which the denominator shall be the number of shares of
Common Stock outstanding immediately after such event, and the
number of shares issuable upon exercise of this Warrant shall be
proportionately adjusted such that the aggregate Exercise Price of
this Warrant shall remain unchanged. Any adjustment made pursuant
to this Section 3(a) shall become effective immediately after the
record date for the determination of stockholders entitled to
receive such dividend or distribution and shall become effective
immediately after the effective date in the case of a subdivision,
combination or re-classification. Notwithstanding the foregoing,
the provisions of this Section shall not apply to the Reverse Stock
Split.
b) Intentionally
Omitted.
c) Subsequent Rights Offerings.
In addition to any adjustments
pursuant to Section 3(a) above, if at any time the Company grants,
issues or sells any Common Stock Equivalents or rights to purchase
stock, warrants, securities or other property pro rata to the
record holders of any class of shares of Common Stock (the
“Purchase
Rights”), then the Holder
will be entitled to acquire, upon the terms applicable to such
Purchase Rights, the aggregate Purchase Rights which the Holder
could have acquired if the Holder had held the number of shares of
Common Stock acquirable upon complete exercise of this Warrant
(without regard to any limitations on exercise hereof, including
without limitation, the Beneficial Ownership Limitation)
immediately before the date on which a record is taken for the
grant, issuance or sale of such Purchase Rights, or, if no such
record is taken, the date as of which the record holders of shares
of Common Stock are to be determined for the grant, issue or sale
of such Purchase Rights (provided, however, to the extent that the
Holder’s right to participate in any such Purchase Right
would result in the Holder exceeding the Beneficial Ownership
Limitation, then the Holder shall not be entitled to participate in
such Purchase Right to such extent (or beneficial ownership of such
shares of Common Stock as a result of such Purchase Right to such
extent) and such Purchase Right to such extent shall be held in
abeyance for the Holder until such time, if ever, as its right
thereto would not result in the Holder exceeding the Beneficial
Ownership Limitation).
d) Pro
Rata Distributions. During such time as this Warrant is
outstanding, if the Company shall declare or make any dividend or
other distribution of its assets (or rights to acquire its assets)
to holders of shares of Common Stock, by way of return of capital
or otherwise (including, without limitation, any distribution of
cash, stock or other securities, property or options by way of a
dividend, spin off, reclassification, corporate rearrangement,
scheme of arrangement or other similar transaction) (a
“Distribution”), at any
time after the issuance of this Warrant, then, in each such case,
the Holder shall be entitled to participate in such Distribution to
the same extent that the Holder would have participated therein if
the Holder had held the number of shares of Common Stock acquirable
upon complete exercise of this Warrant (without regard to any
limitations on exercise hereof, including without limitation, the
Beneficial Ownership Limitation) immediately before the date of
which a record is taken for such Distribution, or, if no such
record is taken, the date as of which the record holders of shares
of Common Stock are to be determined for the participation in such
Distribution (provided, however, to the extent that the
Holder's right to participate in any such Distribution would result
in the Holder exceeding the Beneficial Ownership Limitation, then
the Holder shall not be entitled to participate in such
Distribution to such extent (or in the beneficial ownership of any
shares of Common Stock as a result of such Distribution to such
extent) and the portion of such Distribution shall be held in
abeyance for the benefit of the Holder until such time, if ever, as
its right thereto would not result in the Holder exceeding the
Beneficial Ownership Limitation).
e) Fundamental Transaction. If, at
any time while this Warrant is outstanding, (i) the Company,
directly or indirectly, in one or more related transactions effects
any merger or consolidation of the Company with or into another
Person, (ii) the Company, directly or indirectly, effects any sale,
lease, license, assignment, transfer, conveyance or other
disposition of all or substantially all of its assets in one or a
series of related transactions, (iii) any, direct or indirect,
purchase offer, tender offer or exchange offer (whether by the
Company or another Person) is completed pursuant to which holders
of Common Stock are permitted to sell, tender or exchange their
shares for other securities, cash or property and has been accepted
by the holders of 50% or more of the outstanding Common Stock, (iv)
the Company, directly or indirectly, in one or more related
transactions effects any reclassification, reorganization or
recapitalization of the Common Stock or any compulsory share
exchange pursuant to which the Common Stock is effectively
converted into or exchanged for other securities, cash or property,
or (v) the Company, directly or indirectly, in one or more related
transactions consummates a stock or share purchase agreement or
other business combination (including, without limitation, a
reorganization, recapitalization, spin-off or scheme of
arrangement) with another Person or group of Persons whereby such
other Person or group acquires more than 50% of the outstanding
shares of Common Stock (not including any shares of Common Stock
held by the other Person or other Persons making or party to, or
associated or affiliated with the other Persons making or party to,
such stock or share purchase agreement or other business
combination) (each a “Fundamental
Transaction”), then, upon any subsequent exercise of
this Warrant, the Holder shall have the right to receive, for each
Warrant Share that would have been issuable upon such exercise
immediately prior to the occurrence of such Fundamental
Transaction, at the option of the Holder (without regard to any
limitation in Section 2(e) on the exercise of this Warrant), the
number of shares of Common Stock of the successor or acquiring
corporation or of the Company, if it is the surviving corporation,
and any additional consideration (the “Alternate Consideration”)
receivable as a result of such Fundamental Transaction by a holder
of the number of shares of Common Stock for which this Warrant is
exercisable immediately prior to such Fundamental Transaction
(without regard to any limitation in Section 2(e) on the exercise
of this Warrant). For purposes of any such exercise, the
determination of the Exercise Price shall be appropriately adjusted
to apply to such Alternate Consideration based on the amount of
Alternate Consideration issuable in respect of one share of Common
Stock in such Fundamental Transaction, and the Company shall
apportion the Exercise Price among the Alternate Consideration in a
reasonable manner reflecting the relative value of any different
components of the Alternate Consideration. If holders of Common
Stock are given any choice as to the securities, cash or property
to be received in a Fundamental Transaction, then the Holder shall
be given the same choice as to the Alternate Consideration it
receives upon any exercise of this Warrant following such
Fundamental Transaction. The Company shall cause any successor
entity in a Fundamental Transaction in which the Company is not the
survivor (the “Successor Entity”) to
assume in writing all of the obligations of the Company under this
Warrant and the other Transaction Documents in accordance with the
provisions of this Section 3(e) pursuant to written agreements in
form and substance reasonably satisfactory to the Holder and
approved by the Holder (not to be unreasonably withheld,
conditioned or delayed) prior to such Fundamental Transaction and
shall, at the option of the Holder, deliver to the Holder in
exchange for this Warrant a security of the Successor Entity
evidenced by a written instrument substantially similar in form and
substance to this Warrant which is exercisable for a corresponding
number of shares of capital stock of such Successor Entity (or its
parent entity) equivalent to the shares of Common Stock acquirable
and receivable upon exercise of this Warrant (without regard to any
limitations on the exercise of this Warrant) prior to such
Fundamental Transaction, and with an exercise price which applies
the exercise price hereunder to such shares of capital stock (but
taking into account the relative value of the shares of Common
Stock pursuant to such Fundamental Transaction and the value of
such shares of capital stock, such number of shares of capital
stock and such exercise price being for the purpose of protecting
the economic value of this Warrant immediately prior to the
consummation of such Fundamental Transaction), and which is
reasonably satisfactory in form and substance to the Holder. Upon
the occurrence of any such Fundamental Transaction, the Successor
Entity shall succeed to, and be substituted for (so that from and
after the date of such Fundamental Transaction, the provisions of
this Warrant and the other Transaction Documents referring to the
“Company” shall refer instead to the Successor Entity),
and may exercise every right and power of the Company and shall
assume all of the obligations of the Company under this Warrant and
the other Transaction Documents with the same effect as if such
Successor Entity had been named as the Company herein.
f) Calculations. All calculations
under this Section 3 shall be made to the nearest cent or the
nearest 1/100th of a share, as the case may be. For purposes of
this Section 3, the number of shares of Common Stock deemed to be
issued and outstanding as of a given date shall be the sum of the
number of shares of Common Stock (excluding treasury shares, if
any) issued and outstanding.
g) Notice to Holder.
i. Adjustment to Exercise Price.
Whenever the Exercise Price is adjusted pursuant to any provision
of this Section 3, the Company shall promptly deliver to the Holder
by facsimile or email a notice setting forth the Exercise Price
after such adjustment and any resulting adjustment to the number of
Warrant Shares and setting forth a brief statement of the facts
requiring such adjustment.
ii. Notice to Allow Exercise by
Holder. If (A) the Company shall declare a dividend (or any
other distribution in whatever form) on the Common Stock, (B) the
Company shall declare a special nonrecurring cash dividend on or a
redemption of the Common Stock, (C) the Company shall authorize the
granting to all holders of the Common Stock rights or warrants to
subscribe for or purchase any shares of capital stock of any class
or of any rights, (D) the approval of any stockholders of the
Company shall be required in connection with any reclassification
of the Common Stock, any consolidation or merger to which the
Company is a party, any sale or transfer of all or substantially
all of the assets of the Company, or any compulsory share exchange
whereby the Common Stock is converted into other securities, cash
or property, or (E) the Company shall authorize the voluntary or
involuntary dissolution, liquidation or winding up of the affairs
of the Company, then, in each case, the Company shall cause to be
delivered by facsimile or email to the Holder at its last facsimile
number or email address as it shall appear upon the Warrant
Register of the Company, at least 20 calendar days prior to the
applicable record or effective date hereinafter specified, a notice
stating (x) the date on which a record is to be taken for the
purpose of such dividend, distribution, redemption, rights or
warrants, or if a record is not to be taken, the date as of which
the holders of the Common Stock of record to be entitled to such
dividend, distributions, redemption, rights or warrants are to be
determined or (y) the date on which such reclassification,
consolidation, merger, sale, transfer or share exchange is expected
to become effective or close, and the date as of which it is
expected that holders of the Common Stock of record shall be
entitled to exchange their shares of the Common Stock for
securities, cash or other property deliverable upon such
reclassification, consolidation, merger, sale, transfer or share
exchange; provided that the failure to deliver such notice or any
defect therein or in the delivery thereof shall not affect the
validity of the corporate action required to be specified in such
notice. To the extent that any notice provided in this Warrant
constitutes, or contains, material, non-public information
regarding the Company or any of the Subsidiaries, the Company shall
simultaneously publicly disseminate such notice. The Holder shall
remain entitled to exercise this Warrant during the period
commencing on the date of such notice to the effective date of the
event triggering such notice except as may otherwise be expressly
set forth herein.
Section
4. Transfer
of Warrant.
a) Transferability. Subject to
compliance with any applicable securities laws and the conditions
set forth in Section 4(d) hereof and to the provisions of Section
4.1 of the Purchase Agreement, this Warrant and all rights
hereunder (including, without limitation, any registration rights)
are transferable, in whole or in part, upon surrender of this
Warrant at the principal office of the Company or its designated
agent, together with a written assignment of this Warrant
substantially in the form attached hereto duly executed by the
Holder or its agent or attorney and funds sufficient to pay any
transfer taxes payable upon the making of such transfer. Upon such
surrender and, if required, such payment, the Company shall execute
and deliver a new Warrant or Warrants in the name of the assignee
or assignees, as applicable, and in the denomination or
denominations specified in such instrument of assignment, and shall
issue to the assignor a new Warrant evidencing the portion of this
Warrant not so assigned, and this Warrant shall promptly be
cancelled. Notwithstanding anything
herein to the contrary, the Holder shall not be required to
physically surrender this Warrant to the Company unless the Holder
has assigned this Warrant in full, in which case, the Holder shall
surrender this Warrant to the Company within three (3) Trading Days
of the date the Holder delivers an assignment form to the Company
assigning this Warrant full. The Warrant, if properly assigned in
accordance herewith, may be exercised by a new holder for the
purchase of Warrant Shares without having a new Warrant
issued.
b) New Warrants. This Warrant may
be divided or combined with other Warrants upon presentation hereof
at the aforesaid office of the Company, together with a written
notice specifying the names and denominations in which new Warrants
are to be issued, signed by the Holder or its agent or attorney.
Subject to compliance with Section 4(a), as to any transfer which
may be involved in such division or combination, the Company shall
execute and deliver a new Warrant or Warrants in exchange for the
Warrant or Warrants to be divided or combined in accordance with
such notice. All Warrants issued on transfers or exchanges shall be
dated the original Issue Date and shall be identical with this
Warrant except as to the number of Warrant Shares issuable pursuant
thereto.
c) Warrant Register. The Company
shall register this Warrant, upon records to be maintained by the
Company for that purpose (the “Warrant Register”), in
the name of the record Holder hereof from time to time. The Company
may deem and treat the registered Holder of this Warrant as the
absolute owner hereof for the purpose of any exercise hereof or any
distribution to the Holder, and for all other purposes, absent
actual notice to the contrary.
d) Transfer
Restrictions. If, at the
time of the surrender of this Warrant
in connection with any transfer of this Warrant, the transfer of
this Warrant shall not be either (i) registered pursuant to an
effective registration
statement under the
Securities Act and under
applicable state securities or blue sky laws or (ii) eligible for
resale pursuant to Rule 144, the Company may require, as a
condition of allowing such transfer, that the Holder or transferee
of this Warrant, as the case may be, comply with the provisions of
the Purchase Agreement.
e) Representation by the Holder.
The Holder, by the acceptance hereof, represents and warrants that
it is acquiring this Warrant and, upon any exercise hereof, will
acquire the Warrant Shares issuable upon such exercise, for its own
account and not with a view to or for distributing or reselling
such Warrant Shares or any part thereof in violation of the
Securities Act or any applicable state securities law, except
pursuant to sales registered or exempted under the Securities
Act.
Section
5. Miscellaneous.
a) No Rights as Stockholder Until
Exercise. This Warrant does not entitle the Holder to any
voting rights, dividends or other rights as a stockholder of the
Company prior to the exercise hereof as set forth in Section
2(d)(i), except as expressly set forth in Section 3.
b) Loss, Theft, Destruction or Mutilation
of Warrant. The Company covenants that upon receipt by the
Company of evidence reasonably satisfactory to it of the loss,
theft, destruction or mutilation of this Warrant or any stock
certificate relating to the Warrant Shares, and in case of loss,
theft or destruction, of indemnity and/or security reasonably
satisfactory to it (which, in the case of the Warrant, shall not
include the posting of any bond), and upon surrender and
cancellation of such Warrant or stock certificate, if mutilated,
the Company will make and deliver a new Warrant or stock
certificate of like tenor and dated as of such cancellation, in
lieu of such Warrant or stock certificate.
c) Saturdays, Sundays, Holidays,
etc. If the last or appointed day for the taking of any
action or the expiration of any right required or granted herein
shall not be a Business Day, then, such action may be taken or such
right may be exercised on the next succeeding Business
Day.
d) Authorized Shares.
The
Company covenants that, after the consummation of the Reverse Stock
Split, during the period the Warrant is outstanding, it will
reserve from its authorized and unissued Common Stock a sufficient
number of shares to provide for the issuance of the Warrant Shares
upon the exercise of any purchase rights under this Warrant. The
Company further covenants that its issuance of this Warrant shall
constitute full authority to its officers who are charged with the
duty of issuing the necessary Warrant Shares upon the exercise of
the purchase rights under this Warrant. The Company will take all
such reasonable action as may be necessary to assure that such
Warrant Shares may be issued as provided herein without violation
of any applicable law or regulation, or of any requirements of the
Trading Market upon which the Common Stock may be listed. The
Company covenants that all Warrant Shares which may be issued upon
the exercise of the purchase rights represented by this Warrant
will, upon exercise of the purchase rights represented by this
Warrant and payment for such Warrant Shares in accordance herewith,
be duly authorized, validly issued, fully paid and nonassessable
and free from all taxes, liens and charges created by the Company
in respect of the issue thereof (other than taxes in respect of any
transfer occurring contemporaneously with such issue).
Except
and to the extent as waived or consented to by the Holder, the
Company shall not by any action, including, without limitation,
amending its certificate of incorporation or through any
reorganization, transfer of assets, consolidation, merger,
dissolution, issue or sale of securities or any other voluntary
action, avoid or seek to avoid the observance or performance of any
of the terms of this Warrant, but will at all times in good faith
assist in the carrying out of all such terms and in the taking of
all such actions as may be necessary or appropriate to protect the
rights of Holder as set forth in this Warrant against impairment.
Without limiting the generality of the foregoing, the Company will
(i) not increase the par value of any Warrant Shares above the
amount payable therefor upon such exercise immediately prior to
such increase in par value, (ii) take all such action as may be
necessary or appropriate in order that the Company may validly and
legally issue fully paid and nonassessable Warrant Shares upon the
exercise of this Warrant and (iii) use commercially reasonable
efforts to obtain all such authorizations, exemptions or consents
from any public regulatory body having jurisdiction thereof, as may
be, necessary to enable the Company to perform its obligations
under this Warrant.
Before
taking any action which would result in an adjustment in the number
of Warrant Shares for which this Warrant is exercisable or in the
Exercise Price, the Company shall obtain all such authorizations or
exemptions thereof, or consents thereto, as may be necessary from
any public regulatory body or bodies having jurisdiction
thereof.
e) Jurisdiction. All questions
concerning the construction, validity, enforcement and
interpretation of this Warrant shall be determined in accordance
with the provisions of the Purchase Agreement.
f) Restrictions. The Holder
acknowledges that the Warrant Shares acquired upon the exercise of
this Warrant, if not registered and the Holder does not utilize
cashless exercise, will have restrictions upon resale imposed by
state and federal securities laws.
g) Nonwaiver and Expenses. No
course of dealing or any delay or failure to exercise any right
hereunder on the part of Holder shall operate as a waiver of such
right or otherwise prejudice the Holder’s rights, powers or
remedies. Without limiting any other provision of this Warrant or
the Purchase Agreement, if the Company willfully and knowingly
fails to comply with any provision of this Warrant, which results
in any material damages to the Holder, the Company shall pay to the
Holder such amounts as shall be sufficient to cover any costs and
expenses including, but not limited to, reasonable attorneys’
fees, including those of appellate proceedings, incurred by the
Holder in collecting any amounts due pursuant hereto or in
otherwise enforcing any of its rights, powers or remedies
hereunder.
h) Notices. Any notice, request or
other document required or permitted to be given or delivered to
the Holder by the Company shall be delivered in accordance with the
notice provisions of the Purchase Agreement.
i) Limitation of Liability. No
provision hereof, in the absence of any affirmative action by the
Holder to exercise this Warrant to purchase Warrant Shares, and no
enumeration herein of the rights or privileges of the Holder, shall
give rise to any liability of the Holder for the purchase price of
any Common Stock or as a stockholder of the Company, whether such
liability is asserted by the Company or by creditors of the
Company.
j) Remedies. The Holder, in
addition to being entitled to exercise all rights granted by law,
including recovery of damages, will be entitled to specific
performance of its rights under this Warrant. The Company agrees
that monetary damages would not be adequate compensation for any
loss incurred by reason of a breach by it of the provisions of this
Warrant and hereby agrees to waive and not to assert the defense in
any action for specific performance that a remedy at law would be
adequate.
k) Successors and Assigns. Subject
to applicable securities laws, this Warrant and the rights and
obligations evidenced hereby shall inure to the benefit of and be
binding upon the successors and permitted assigns of the Company
and the successors and permitted assigns of Holder. The provisions
of this Warrant are intended to be for the benefit of any Holder
from time to time of this Warrant and shall be enforceable by the
Holder or holder of Warrant Shares.
l) Amendment. This Warrant may be
modified or amended or the provisions hereof waived with the
written consent of the Company and the
Holder.
m) Severability. Wherever
possible, each provision of this Warrant shall be interpreted in
such manner as to be effective and valid under applicable law, but
if any provision of this Warrant shall be prohibited by or invalid
under applicable law, such provision shall be ineffective to the
extent of such prohibition or invalidity, without invalidating the
remainder of such provisions or the remaining provisions of this
Warrant.
n) Headings. The headings used in
this Warrant are for the convenience of reference only and shall
not, for any purpose, be deemed a part of this
Warrant.
********************
(Signature Page Follows)
IN
WITNESS WHEREOF, the Company has caused this Warrant to be executed
by its officer thereunto duly authorized as of the date first above
indicated.
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GOIP GLOBAL, INC.
|
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By:__________________________________________
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NOTICE OF EXERCISE
(1) The undersigned
hereby elects to purchase ________ Warrant Shares of the Company
pursuant to the terms of the attached Warrant (only if exercised in
full), and tenders herewith payment of the exercise price in full,
together with all applicable transfer taxes, if any.
(2) Payment shall take
the form of lawful money of the United States; .
(3) Please issue said
Warrant Shares in the name of the undersigned or in such other name
as is specified below:
_______________________________
The
Warrant Shares shall be delivered to the following DWAC Account
Number:
_______________________________
_______________________________
_______________________________
(4)
Accredited
Investor. The undersigned is an “accredited
investor” as defined in Regulation D promulgated under the
Securities Act of 1933, as amended.
[SIGNATURE
OF HOLDER]
Name of
Investing Entity:
________________________________________________________________________
Signature of Authorized Signatory of Investing
Entity:
_________________________________________________
Name of
Authorized Signatory:
___________________________________________________________________
Title
of Authorized Signatory:
____________________________________________________________________
Date:
________________________________________________________________________________________
ASSIGNMENT FORM
(To assign the foregoing Warrant, execute this form and
supply required information. Do not use this form to purchase
shares.)
FOR
VALUE RECEIVED, the foregoing Warrant and all rights evidenced
thereby are hereby assigned to
Name:
|
______________________________________
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|
(Please Print)
|
Address:
|
______________________________________
|
Phone Number:
Email Address:
|
(Please
Print)
______________________________________
______________________________________
|
Dated: _______________ __, ______
|
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Holder’s Signature: ______________
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Holder’s Address: _______________
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NEITHER
THIS SECURITY NOR THE SECURITIES INTO WHICH THIS SECURITY IS
CONVERTIBLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE
COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE
UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE “SECURITIES ACT”), AND,
ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR
PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT
SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND
IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY
A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, THE
SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY.
THIS SECURITY AND THE SECURITIES ISSUABLE UPON CONVERSION OF THIS
SECURITY MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN
ACCOUNT OR OTHER LOAN SECURED BY SUCH SECURITIES.
Original
Issue Date: November 3, 2020
Original Principal Amount: $3,888,889
Purchase
Price: $3,500,000
ORIGINAL ISSUE DISCOUNT SENIOR SECURED
CONVERTIBLE PROMISSORY NOTE
DUE NOVEMBER 3, 2023
THIS
ORIGINAL ISSUE DISCOUNT SENIOR SECURED CONVERTIBLE PROMISSORY NOTE
is a duly authorized and validly issued debt obligation of
Transworld Holdings, Inc., a Delaware corporation (which was
formerly known as GoIP Global, Inc., a Colorado corporation) (the
“Company” or the
“Borrower”), having its
principal place of business at 3419 West Gray Court, Tampa, Florida
33609, designated as its Original Issue Discount Senior Secured
Convertible Promissory Note due November 3, 2023 (the
“Note”).
FOR
VALUE RECEIVED, the Company promises to pay to Arena Structured
Private Investments (Cayman), LLC or its registered assigns (the
“Holder”), or shall have
paid pursuant to the terms hereunder, the principal sum of
$3,888,889 and any other sums due hereunder on November 3, 2023
(the “Maturity
Date”), or such earlier date as this Note is required
or permitted to be repaid as provided hereunder, and to pay
interest to the Holder on the aggregate unconverted and then
outstanding principal amount of this Note in accordance with the
provisions hereof. This Note is subject to the following additional
provisions:
Section 1. Definitions. For the purposes
hereof, in addition to the terms defined elsewhere in this Note,
(a) capitalized terms not otherwise defined herein shall have the
meanings set forth in the Purchase Agreement and (b) the following
terms shall have the following meanings:
“Alternate Conversion
Price” means the greater of (i) $0.01 or (ii) 75% of
the average VWAP of the Common Stock for the five (5) Trading Days
on the Trading Market immediately preceding the date of conversion;
provided, however, that the Alternate Conversion price may not
exceed the Conversion Price of $0.25 per share, as adjusted
pursuant to the terms hereof.
“Bankruptcy Event”
means any of the following events: (a) the Company commences a case
or other proceeding under any bankruptcy, reorganization,
arrangement, adjustment of debt, relief of debtors, dissolution,
insolvency or liquidation or similar law of any jurisdiction
relating to the Company, (b) there is commenced against the Company
any such case or proceeding that is not dismissed within 60 days
after commencement, (c) the Company is adjudicated insolvent or
bankrupt or any order of relief or other order approving any such
case or proceeding is entered, (d) the Company suffers any
appointment of any custodian or the like for it or any substantial
part of its property that is not discharged or stayed within 60
calendar days after such appointment, (e) the Company makes a
general assignment for the benefit of creditors, (f) the Company
calls a meeting of its creditors with a view to arranging a
composition, adjustment or restructuring of its debts or (g) the
Company, by any act or failure to act, expressly indicates its
consent to, approval of or acquiescence in any of the foregoing or
takes any corporate or other action for the purpose of effecting
any of the foregoing.
“Beneficial Ownership
Limitation” shall have the meaning set forth in
Section 4(d).
“Business Day” means any
day except any Saturday, any Sunday, any day which is a federal
legal holiday in the United States or any day on which the New York
Federal Reserve Bank is closed.
“Buy-In” shall have the
meaning set forth in Section 4(c)(v).
“Change of Control
Transaction” means the occurrence after the date
hereof of any of the following: (a) an acquisition after the date
hereof by an individual or legal entity or “group” (as
described in Rule 13d-5(b)(1) promulgated under the Exchange Act)
of effective control (whether through legal or beneficial ownership
of capital stock of the Company, by contract or otherwise) of in
excess of fifty percent (50%) of the voting securities of the
Company (other than by means of conversion or exercise of the
Note), (b) the Company merges into or consolidates with any other
Person, or any Person merges into or consolidates with the Company
and, after giving effect to such transaction, the stockholders of
the Company immediately prior to such transaction own less than
fifty-one percent (51%) of the aggregate voting power of the
Company or the successor entity of such transaction, (c) the
Company sells or transfers all or substantially all of its assets
to another Person and the stockholders of the Company immediately
prior to such transaction own less than fifty-one percent (51%) of
the aggregate voting power of the acquiring entity immediately
after the transaction, (d) a replacement at one time or within a
three year period of more than one-half of the members of the Board
of Directors which is not approved by a majority of those
individuals who are members of the Board of Directors on the
Original Issue Date (or by those individuals who are serving as
members of the Board of Directors on any date whose nomination to
the Board of Directors was approved by a majority of the members of
the Board of Directors who are members on the date hereof), or (e)
the execution by the Company of an agreement to which the Company
is a party or by which it is bound, providing for any of the events
set forth in clauses (a) through (d) above.
“Conversion
Date” shall have the meaning set forth in Section 4(a).
“Conversion Price” shall
have the meaning set forth in Section 4(b). References
to “Conversion Price” herein may refer to the Alternate
Conversion Price and/or the Base Conversion Price, where
appropriate, based on the terms set forth herein.
“Conversion Shares” means,
collectively, the shares of Common Stock issuable upon conversion
of this Note in accordance with the terms hereof.
“Distribution”
shall have the meaning set forth in Section 5(c).
“Event of
Default” shall have the
meaning set forth in Section 6(a).
“Equity Conditions” means,
during the period in question, (a) the
Company shall have duly honored all conversions and redemptions
scheduled to occur or occurring by virtue of one or more Notices of
Conversion of the Holder, if any, (b) the Company shall have paid
all liquidated damages and other amounts owing to the Holder in
respect of this Note, (c) the Common Stock is trading on a
Trading Market and all of the shares issuable pursuant to the
Transaction Documents are listed or quoted for trading on such
Trading Market (and the Company believes, in good faith, that
trading of the Common Stock on a Trading Market will continue
uninterrupted for the foreseeable future), (d) there is a
sufficient number of authorized but unissued and otherwise
unreserved shares of Common Stock for the issuance of all of the
shares issuable pursuant to the Transaction Documents (including
upon conversion of the outstanding principal amount of the Note),
(e) there is no existing Event of Default or no existing event
which, with the passage of time or the giving of notice, would
constitute an Event of Default, (f) the issuance of the shares in
question to the Holder would not violate the limitations set forth
in Section 4(d)
herein, (g) there has been no public
announcement of a pending or proposed Fundamental Transaction or
Change of Control Transaction that has not been consummated, and
(h) the Holder is not in possession of any information provided by
the Company that constitutes, or may constitute, material
non-public information.
“Late Fees” shall have the
meaning set forth in Section 2(d).
“Mandatory Default Amount”
means either, at the Holder’s discretion (i) the conversion
of the outstanding principal amount of this Note, and, at the
Holder’s election, all accrued and unpaid interest hereon,
converted at the Alternate Conversion Price, or (ii) the payment of
100% of the outstanding principal amount of this Note and accrued
and unpaid interest hereon, in addition to, for both (i) and (ii)
above, the payment in cash of all other amounts, costs, expenses
and liquidated damages due in respect of this Note. In the event
the Holder makes the election described in (i) above but does not
elect to receive Conversion Shares in respect of all accrued and
unpaid interest on the Note, all accrued and unpaid interest shall
be paid to the Holder in cash no later than the date the Conversion
Shares are required to be delivered to the Holder.
“New York Courts” shall
have the meaning set forth in Section 8(d).
“Note Register” shall have
the meaning set forth in Section 2(c).
“Notice of Conversion”
shall have the meaning set forth in Section 4(a).
“Optional Redemption”
shall have the meaning set forth in Section 2(e).
“Optional Redemption
Amount” means the sum of (a) 100% of the then
outstanding principal amount of the Note, (b) accrued but unpaid
interest and (c) all liquidated damages and other amounts due in
respect of the Note.
“Optional Redemption Date”
shall have the meaning set forth in Section 2(e).
“Optional Redemption
Notice” shall have the meaning set forth in
Section
2(e).
“Optional Redemption Notice
Date” shall have the meaning set forth in Section 2(e).
“Optional Redemption
Period” shall
have the meaning set forth in Section 2(e).
“Original Issue Date”
means the date of the first issuance of the Note, as set forth on
the first page hereof, regardless of any transfers of any Note and
regardless of the number of instruments which may be issued to
evidence such Note.
“Purchase Agreement” means
the Securities Purchase Agreement, dated as of November 3, 2020
among the Company and the original Holder, as amended, modified or
supplemented from time to time in accordance with its
terms.
“Purchase
Rights” shall have the
meaning set forth in Section 5(c).
“Required Minimum” means,
as of any date, the number of shares of Common Stock that equals
the aggregate number of shares of Common Stock as shall be issuable
(taking into account the adjustments of Section 5) upon the
conversion of the then outstanding principal amount of this Note
and payment of interest hereunder. The initial reserve shall be
15,555,556 shares of Common Stock.
“Share Delivery Date”
shall have the meaning set forth in Section 4(c)(ii).
Section 2. Interest, Prepayment, Redemption and
Put Provisions.
a) Payment of Interest in Cash.
The Company shall pay interest to the Holder on the aggregate
unconverted and then outstanding principal amount of this Note at
the rate of eight percent (8%) per annum, payable quarterly on
January 1, April 1, July 1 and October 1, beginning on the first
such date after the Original Issue Date, on each Conversion Date
(as to that principal amount then being converted), on each
Optional Redemption Date (as to that principal amount then being
redeemed) and on the Maturity Date (each such date, an
“Interest Payment
Date”) (if any Interest Payment Date is not a Business
Day, then the applicable payment shall be due on the next
succeeding Business Day), in cash. Upon the occurrence of an Event
of Default, the Company shall pay interest to the Holder on the
aggregate unconverted and then outstanding principal amount of this
Note at the rate of twenty percent (20%) per annum.
b) Intentionally
Omitted.
c) Interest Calculations. Interest
shall be calculated on the basis of a 360-day year, consisting of
twelve 30 calendar day periods, and shall accrue daily commencing
on the Original Issue Date until payment in full of the outstanding
principal, together with all accrued and unpaid interest,
liquidated damages and other amounts which may become due
hereunder, has been made. Interest shall cease to accrue with
respect to any principal amount converted, provided that, the
Company actually delivers the Conversion Shares within the time
period required by Section
4(c)(ii) herein. Interest hereunder will be paid to the
Person in whose name this Note is registered on the records of the
Company regarding registration and transfers of this Note (the
“Note
Register”).
d) All
overdue accrued and unpaid interest to be paid hereunder shall
incur a late fee at an interest rate equal to the lesser of 20% per
annum (the “Late
Fees”) which shall accrue daily from the date such
interest is due hereunder through and including the date of actual
payment in full.
e) Optional
Redemption. At any time beginning on the eighteen (18) month
anniversary of the Original Issue Date and before the Maturity
Date, the Company may,
deliver a written notice to the Holder (an “Optional Redemption
Notice” and the date such
notice is deemed delivered hereunder, the
“Optional
Redemption Notice Date”)
of its irrevocable election to redeem all of the then outstanding
principal amount of this Note for cash in an amount equal to the
Optional Redemption Amount on the 30th
calendar day following the Optional
Redemption Notice Date (such date, the “Optional Redemption
Date”, such 30 day
period, the “Optional Redemption
Period” and such
redemption, the “Optional
Redemption”). The
Optional Redemption Amount is payable in full on the Optional
Redemption Date. The Company may only effect an Optional Redemption
if each of the Equity Conditions shall have been met (unless waived
in writing by the Holder) on each Trading Day during the period
commencing on the Optional Redemption Notice Date through to the
Optional Redemption Date and through and including the date
payment of the Optional Redemption Amount is actually made in
full. If any of the Equity Conditions
shall cease to be satisfied at any time during the Optional
Redemption Period, then the Holder may elect to nullify the
Optional Redemption Notice by notice to the Company within 3
Trading Days after the first day on which any such Equity Condition
has not been met (provided that if, by a provision of the
Transaction Documents, the Company is obligated to notify the
Holder of the non-existence of an Equity Condition, such notice
period shall be extended to the third Trading Day after proper
notice from the Company) in which case the Optional Redemption
Notice shall be null and void, ab initio.
f) SBA
Loan Redemption. From
the date hereof until the date that the Note is no longer
outstanding, upon any issuance by the Company or any of its
Subsidiaries of Indebtedness evidenced by a Small Business
Administration loan (a “SBA
Financing”), the Holder
shall have the right, upon one (1) day written notice (the
“SBA Financing
Redemption Date”), to
require the Company to use 50% of the gross proceeds received in
such SBA Financing, to the extent not prohibited under the terms of
the SBA Financing (the “SBA Financing
Redemption Amount”), to
redeem the Note at the Optional Redemption Amount (the
“SBA Financing
Redemption”). The SBA
Financing Redemption Amount payable on the SBA Financing Redemption
Date shall be paid in cash. The Company shall provide the Holder
with prompt written notice upon consummation of any SBA
Financing.
g) Redemption
Procedure. The Company
covenants and agrees that it will honor all Notices of Conversion
tendered from the time of delivery of the Optional Redemption
Notice or SBA Financing Notice through the date all amounts owing
thereon are due and paid in full. If any portion of the
payment pursuant to an Optional Redemption or SBA Financing
Redemption shall not be paid by the Company by the applicable due
date, Late Fees shall accrue until such amount is paid in full.
Notwithstanding anything herein contained to the contrary, if any
portion of the Optional Redemption Amount or SBA Financing
Redemption Amount, as applicable, remains unpaid after the Option
Redemption Date or the SBA Financing Redemption Date, as
applicable, the Holder may elect, by written notice to the Company
given at any time thereafter, to invalidate such Optional
Redemption, ab initio, and, the Company shall have no further right
to exercise such Optional Redemption. To effect an SBA Financing
Redemption hereunder, the Holder shall not be required to
physically surrender this Note to the Company unless the entire
principal amount of this Note, plus all accrued and unpaid interest
thereon, has been so redeemed. Partial SBA Financing Redemptions
hereunder shall have the effect of lowering the outstanding
principal amount of this Note in an amount equal to the applicable
amount redeemed. The Holder and the Company shall maintain records
showing the principal amount(s) redeemed and the date of such
redemption(s).
h) Put
Provision. Beginning on the
eighteen (18) month anniversary of the Initial Issuance Date (the
“Put
Date”), the Holder shall
have the right (the “Put
Right”), but not the
obligation, to cause the Company, at the written request of the
Holder (a “Put
Notice”), to prepay this
Note, in whole or in part, together with all accrued and unpaid
interest on this Note, upon seven (7) days prior written
notice. To effect the Holder’s exercise of its
Put Right hereunder, the Holder shall not be required to physically
surrender this Note to the Company unless the entire principal
amount of this Note, plus all accrued and unpaid interest thereon,
has been prepaid. Partial prepayments hereunder shall have the
effect of lowering the outstanding principal amount of this Note in
an amount equal to the applicable amount prepaid. The Holder and
the Company shall maintain records showing the principal amount(s)
and interest amount(s) prepaid and the date of such
prepayments.
Section 3. Registration of Transfers and
Exchanges.
a) Different Denominations. This
Note is exchangeable for an equal aggregate principal amount of
Notes of different authorized denominations, as requested by the
Holder surrendering the same. No service charge will be payable for
such registration of transfer or exchange.
b) Investment Representations.
This Note has been issued subject to certain investment
representations of the original Holder set forth in the Purchase
Agreement and may be transferred or exchanged only in compliance
with the Purchase Agreement and applicable federal and state
securities laws and regulations.
c) Reliance on Note Register.
Prior to due presentment for transfer to the Company of this Note,
the Company and any agent of the Company may treat the Person in
whose name this Note is duly registered on the Note Register as the
owner hereof for the purpose of receiving payment as herein
provided and for all other purposes, whether or not this Note is
overdue, and neither the Company nor any such agent shall be
affected by notice to the contrary. The Company shall update the
Note Register to reflect permitted transferees and assignees of the
Note.
Section 4. Conversion.
a) At any time after
the Original Issue Date until this Note is no longer outstanding,
this Note shall be convertible, in whole or in part, into shares of
Common Stock at the option of the Holder, at any time and from time
to time (subject to the conversion limitations set forth in
Section 4(d)
hereof). The Holder shall effect conversions by delivering to the
Company a Notice of Conversion, the form of which is attached
hereto as Annex A
(each, a “Notice of
Conversion”), specifying therein the principal amount
of this Note, and amount of accrued and unpaid interest (if any),
to be converted and the date on which such conversion shall be
effected (such date, the “Conversion Date”). If no
Conversion Date is specified in a Notice of Conversion, the
Conversion Date shall be the date that such Notice of Conversion is
deemed delivered hereunder. To effect conversions hereunder, the
Holder shall not be required to physically surrender this Note to
the Company unless the entire principal amount of this Note, plus
all accrued and unpaid interest thereon, has been so converted.
Conversions hereunder shall have the effect of lowering the
outstanding principal amount of this Note in an amount equal to the
applicable conversion. The Holder and the Company shall maintain
records showing the principal amount(s) converted and the date of
such conversion(s). The Company may deliver an objection to any
Notice of Conversion within two Business Days of delivery of such
Notice of Conversion, stating the basis of such objection and
citing the relevant Section of the Note upon which such objection
is based. In the event of any dispute or discrepancy, the Company
and the Holder shall work to resolve such dispute or discrepancy to
the mutual satisfaction of both parties. The Holder, and any assignee by acceptance of
this Note, acknowledge and agree that, by reason of the provisions
of this paragraph, following conversion of a portion of this Note,
the unpaid and unconverted principal amount of this Note may be
less than the amount stated on the face hereof.
b) Conversion Price. Except as
expressly set forth herein, the conversion price in effect on any
Conversion Date shall be equal to $0.25, subject to adjustment
herein (the “Conversion Price”).
Notwithstanding the foregoing, at any time during the continuance
of any Event of Default, the Conversion Price in effect shall be
equal to the Alternate Conversion Price. If at any time the
Conversion Price as determined hereunder for any conversion would
be less than the par value of the Common Stock, then at the sole
discretion of the Holder, the Conversion Price hereunder may equal
such par value for such conversion and the Conversion Amount for
such conversion may be increased to include Additional Principal,
where “Additional Principal” means such additional
amount to be added to the principal amount of this Note to the
extent necessary to cause the number of conversion shares issuable
upon such conversion to equal the same number of conversion shares
as would have been issued had the Conversion Price not been
adjusted by the Holder to the par value price. In the event the
Borrower has a DTC “Chill” on its shares, the Holder
may convert the Note at the Alternate Conversion Price while that
“Chill” is in effect. All such determinations to be
appropriately adjusted for any stock dividend, stock split, stock
combination, reclassification or similar transaction that
proportionately decreases or increases the Common Stock during such
measuring period.
c) Mechanics of
Conversion.
i. Conversion Shares Issuable Upon
Conversion of Principal Amount. The number of Conversion
Shares issuable upon a conversion hereunder shall be determined by
the quotient obtained by dividing (x) the outstanding principal
amount of this Note to be converted by (y) the Conversion
Price.
ii. Delivery of Certificate Upon
Conversion. Not later than three Trading Days after each
Conversion Date (the “Share Delivery Date”),
the Company shall deliver, or cause to be delivered, to the Holder
(A) a certificate or certificates representing the Conversion
Shares representing the number of Conversion Shares being acquired
upon the conversion of this Note and (B) a bank check in the amount
of accrued and unpaid interest (unless the Holder has elected to
receive Conversion Shares for the accrued and unpaid
interest).
iii. Failure
to Deliver Certificates. If, in the case of any Notice of
Conversion, such certificate or certificates are not delivered to
or as directed by the applicable Holder by the Share Delivery Date,
the Holder shall be entitled to elect by written notice to the
Company at any time on or before its receipt of such certificate or
certificates, to rescind such Notice of Conversion, ab initio, in
which event the Company shall promptly return to the Holder any
original Note delivered to the Company and the Holder shall
promptly return to the Company the Common Stock certificates issued
to such Holder pursuant to the rescinded Notice of
Conversion.
iv. Obligation Absolute; Partial
Liquidated Damages. The Company’s obligations to issue
and deliver the Conversion Shares upon conversion of this Note in
accordance with the terms hereof are absolute and unconditional,
irrespective of any action or inaction by the Holder to enforce the
same, any waiver or consent with respect to any provision hereof,
the recovery of any judgment against any Person or any action to
enforce the same, or any setoff, counterclaim, recoupment,
limitation or termination, or any breach or alleged breach by the
Holder or any other Person of any obligation to the Company or any
violation or alleged violation of law by the Holder or any other
Person, and irrespective of any other circumstance which might
otherwise limit such obligation of the Company to the Holder in
connection with the issuance of such Conversion Shares;
provided,
however, that such
delivery shall not operate as a waiver by the Company of any such
action the Company may have against the Holder. If the Company
fails for any reason to deliver to the Holder such certificate or
certificates pursuant to Section 4(c)(ii) by the Share
Delivery Date, the Company shall pay to the Holder, in cash, as
liquidated damages and not as a penalty, for each $1,000 of
principal amount being converted $5 per Trading Day (increasing to
$10 per Trading Day on the fifth (5th)
Trading Day after such liquidated damages begin to accrue) for each
Trading Day after such Share Delivery Date until such certificates
are delivered or Holder rescinds such conversion. Nothing herein
shall limit the Holder’s right to pursue actual damages or
declare an Event of Default pursuant to Section 6 hereof for the
Company’s failure to deliver Conversion Shares within the
period specified herein and the Holder shall have the right to
pursue all remedies available to it hereunder, at law or in equity
including, without limitation, a decree of specific performance
and/or injunctive relief. The exercise of any such rights shall not
prohibit the Holder from seeking to enforce damages pursuant to any
other Section hereof or under applicable law.
v. Compensation for Buy-In on Failure to
Timely Deliver Certificates Upon Conversion. In addition to
any other rights available to the Holder, if the Company fails for
any reason to deliver to the Holder such certificate or
certificates by the Share Delivery Date pursuant to Section 4(c)(ii), and if after
such Share Delivery Date the Holder is required by its brokerage
firm to purchase (in an open market transaction or otherwise), or
the Holder’s brokerage firm otherwise purchases, shares of
Common Stock to deliver in satisfaction of a sale by the Holder of
the Conversion Shares which the Holder was entitled to receive upon
the conversion relating to such Share Delivery Date (a
“Buy-In”), then the
Company shall (A) pay in cash to the Holder (in addition to any
other remedies available to or elected by the Holder) the amount,
if any, by which (x) the Holder’s total purchase price
(including any brokerage commissions) for the Common Stock so
purchased exceeds (y) the product of (1) the aggregate number of
shares of Common Stock that the Holder was entitled to receive from
the conversion at issue multiplied by (2) the actual sale price at
which the sell order giving rise to such purchase obligation was
executed (including any brokerage commissions) and (B) at the
option of the Holder, either reissue (if surrendered) this Note in
a principal amount equal to the principal amount of the attempted
conversion (in which case such conversion shall be deemed
rescinded) or deliver to the Holder the number of shares of Common
Stock that would have been issued if the Company had timely
complied with its delivery requirements under Section 4(c)(ii). For
example, if the Holder
purchases Common Stock having a total purchase price of $11,000 to
cover a Buy-In with respect to an attempted conversion of this Note
with respect to which the actual sale price of the Conversion
Shares (including any brokerage commissions) giving rise to such
purchase obligation was a total of $10,000 under clause (A) of the
immediately preceding sentence, the Company shall be required to
pay the Holder $1,000. The Holder shall provide the Company written
notice indicating the amounts payable to the Holder in respect of
the Buy-In and, upon request of the Company, evidence of the amount
of such loss. Nothing herein shall limit a Holder’s right to
pursue any other remedies available to it hereunder, at law or in
equity including, without limitation, a decree of specific
performance and/or injunctive relief with respect to the
Company’s failure to timely deliver certificates representing
shares of Common Stock upon conversion of this Note as required
pursuant to the terms hereof.
vi. Reservation of Shares Issuable Upon
Conversion. The Company covenants that it will at all times
reserve and keep available out of its authorized and unissued
shares of Common Stock a number of shares of Common Stock at least
equal to 100% of the Required Minimum (to be adjusted monthly) for
the sole purpose of issuance upon conversion of this Note and
payment of interest on this Note, each as herein provided, free
from preemptive rights or any
other actual contingent purchase rights of Persons other than the
Holder (and the other holders of the Note). The Company covenants
that all shares of Common Stock that shall be so issuable shall,
upon issue, be duly authorized, validly issued, fully paid and
nonassessable.
vii. Fractional
Shares. No fractional shares or scrip representing
fractional shares shall be issued upon the conversion of this Note.
As to any fraction of a share which the Holder would otherwise be
entitled to purchase upon such conversion, the Company shall at its
election, either pay a cash adjustment in respect of such final
fraction in an amount equal to such fraction multiplied by the
Conversion Price or round up to the next whole share.
viii. Transfer
Taxes and Expenses. The issuance of certificates for shares
of the Common Stock on conversion of this Note shall be made
without charge to the Holder hereof for any documentary stamp or
similar taxes that may be payable in respect of the issue or
delivery of such certificates, provided that, the Company shall not
be required to pay any tax that may be payable in respect of any
transfer involved in the issuance and delivery of any such
certificate upon conversion in a name other than that of the Holder
of this Note so converted and the Company shall not be required to
issue or deliver such certificates unless or until the Person or
Persons requesting the issuance thereof shall have paid to the
Company the amount of such tax or shall have established to the
satisfaction of the Company that such tax has been paid. The
Company shall pay all Transfer Agent fees required for same-day
processing of any Notice of Conversion.
d) Holder’s
Conversion Limitations. The Company shall not effect any
conversion of this Note, and a Holder shall not have the right to
convert any portion of this Note, to the extent that after giving
effect to the conversion set forth on the applicable Notice of
Conversion, the Holder (together with the Holder’s
Affiliates, and any Persons acting as a group together with the
Holder or any of the Holder’s Affiliates) (such Persons,
“Attribution
Parties”)) would beneficially own in excess of the
Beneficial Ownership Limitation (as defined below). For
purposes of the foregoing sentence, the number of shares of Common
Stock beneficially owned by the Holder and its Affiliates and
Attribution Parties shall include the number of shares of Common
Stock issuable upon conversion of this Note or any portion of this
Note with respect to which such determination is being made, but
shall exclude the number of shares of Common Stock which are
issuable upon (i) conversion of the remaining, unconverted
principal amount of this Note beneficially owned by the Holder or
any of its Affiliates or Attribution Parties and (ii) exercise or
conversion of the unexercised or unconverted portion of any other
securities of the Company subject to a limitation on conversion or
exercise analogous to the limitation contained herein beneficially
owned by the Holder or any of its Affiliates or Attribution Parties
(including, but not limited to, the senior secured notes and
warrants issued to Affiliates of the Holder in the May 2020
Financing). Except as set forth in the preceding sentence,
for purposes of this Section 4(d), beneficial
ownership shall be calculated in accordance with Section 13(d)
of the Exchange Act and the rules and regulations promulgated
thereunder. To the extent that the limitation contained in this
Section 4(d)
applies, the determination of whether this Note is convertible (in
relation to other securities owned by the Holder together with any
Affiliates and Attribution Parties) and the portion of principal
amount (and accrued but unpaid interest) of this Note that is
convertible shall be in the sole discretion of the Holder, and the
submission of a Notice of Conversion shall be deemed to be the
Holder’s determination of whether this Note may be converted
(in relation to other securities owned by the Holder together with
any Affiliates) and the portion of principal amount of this Note
(and, if applicable, accrued and unpaid interest) that is
convertible, in each case subject to the Beneficial Ownership
Limitation. To ensure compliance with this restriction, the Holder
will be deemed to represent to the Company each time it delivers a
Notice of Conversion that such Notice of Conversion has not
violated the restrictions set forth in this paragraph and the
Company shall have no obligation to
verify or confirm the accuracy of such determination.
In addition, a determination as to any group
status as contemplated above shall be determined in accordance with
Section 13(d) of the Exchange Act and the rules and
regulations promulgated thereunder. For purposes of this
Section 4(d),
in determining the number of outstanding shares of Common Stock,
the Holder may rely on the number of outstanding shares of Common
Stock as stated in the most recent of the following: (i) the
Company’s most recent periodic or annual report filed with
the Commission, as the case may be, (ii) a more recent public
announcement by the Company, or (iii) a more recent written notice
delivered by the Company or the Company’s transfer agent to
the Holder setting forth the number of shares of Common Stock
outstanding. Upon the written or oral request of the Holder,
the Company shall within one Trading Day confirm orally and in
writing to the Holder the number of shares of Common Stock then
outstanding. In any case, the number of outstanding shares of
Common Stock shall be determined after giving effect to the
conversion or exercise of securities of the Company, including this
Note, by the Holder or its Affiliates or Attribution Parties since
the date as of which such number of outstanding shares of Common
Stock was reported. The “Beneficial Ownership
Limitation” shall be 9.99% of the number of shares of
the Common Stock outstanding immediately after giving effect to the
issuance of shares of Common Stock issuable upon conversion of this
Note held by the Holder. The Holder may increase or decrease the
Beneficial Ownership Limitation provisions of this Section 4(d), provided that the
Beneficial Ownership Limitation in no event exceeds 9.99% of the
number of shares of the Common Stock outstanding immediately after
giving effect to the issuance of shares of Common Stock upon
conversion of this Note held by the Holder and the Beneficial
Ownership Limitation provisions of this Section 4(d) shall continue to
apply. Any increase in the Beneficial Ownership Limitation will not
be effective until the 61st day after such
notice is delivered to the Company. The Beneficial Ownership
Limitation provisions of this paragraph shall be construed and
implemented in a manner otherwise than in strict conformity with
the terms of this Section 4(d) to correct
this paragraph (or any portion hereof) which may be defective or
inconsistent with the intended Beneficial Ownership Limitation
contained herein or to make changes or
supplements necessary or desirable to properly give effect to such
limitation. The limitations
contained in this paragraph shall apply to a successor holder of
this Note.
Section 5. Certain
Adjustments.
a) Stock Dividends and Stock
Splits. If the Company, at any time while this Note is
outstanding: (i) pays a stock dividend or otherwise makes a
distribution or distributions payable in shares of Common Stock on
shares of Common Stock or any Common Stock Equivalents (which, for
avoidance of doubt, shall not include any shares of Common Stock
issued by the Company upon conversion of, or payment of interest
on, the Note), (ii) subdivides outstanding shares of Common Stock
into a larger number of shares, (iii) combines (including by way of
a reverse stock split) outstanding shares of Common Stock into a
smaller number of shares or (iv) issues, in the event of a
reclassification of shares of the Common Stock, any shares of
capital stock of the Company, then the Conversion Price shall be
multiplied by a fraction of which the numerator shall be the number
of shares of Common Stock (excluding any treasury shares of the
Company) outstanding immediately before such event, and of which
the denominator shall be the number of shares of Common Stock
outstanding immediately after such event. Any adjustment made
pursuant to this Section shall become effective immediately after
the record date for the determination of stockholders entitled to
receive such dividend or distribution and shall become effective
immediately after the effective date in the case of a subdivision,
combination or re-classification.
b) Subsequent Equity Sales. If, at
any time while this Note is outstanding, the Company or any
Subsidiary, as applicable, sells or grants any option to purchase
or sells or grants any right to reprice, or otherwise disposes of
or issues (or announces any sale, grant or any option to purchase
or other disposition), any Common Stock or Common Stock Equivalents
entitling any Person to acquire shares of Common Stock at an
effective price per share that is lower than the then Conversion
Price (such lower price, the “Base Conversion Price”
and such issuances, collectively, a “Dilutive Issuance”) (if
the holder of the Common Stock or Common Stock Equivalents so
issued shall at any time, whether by operation of purchase price
adjustments, reset provisions, floating conversion, exercise or
exchange prices or otherwise, or due to warrants, options or rights
per share which are issued in connection with such issuance, be
entitled to receive shares of Common Stock at an effective price
per share that is lower than the Conversion Price, such issuance
shall be deemed to have occurred for less than the Conversion Price
on such date of the Dilutive Issuance), then the Conversion Price
shall be reduced to equal the Base Conversion Price. Such
adjustment shall be made whenever such Common Stock or Common Stock
Equivalents are issued. Notwithstanding the foregoing, no adjustment will
be made under this Section 5(b)
in respect of an Exempt
Issuance. For the avoidance of doubt, if the Company engages
in an at-the-market offering, the Company shall be deemed to have
issued Common Stock at the lowest sale price at which the Common
Stock was sold in such offering. If the Company enters into a
Variable Rate Transaction, despite the prohibition set forth in the
Purchase Agreement, the Company shall be deemed to have issued
Common Stock or Common Stock Equivalents at the lowest possible
conversion price, exercise price or exchange rate (or other price)
at which such securities may be converted into or exchangeable or
exercised for. The Company shall notify the Holder in writing, no
later than 1 Business Day following the issuance of any Common
Stock or Common Stock Equivalents subject to this Section 5(b), indicating
therein the applicable issuance price, or applicable reset price,
exchange price, conversion price and other pricing terms (such
notice, the “Dilutive Issuance
Notice”). For purposes of clarification, whether or
not the Company provides a Dilutive Issuance Notice pursuant to
this Section 5(b),
upon the occurrence of any Dilutive Issuance, the Holder is
entitled to receive a number of Conversion Shares based upon the
Base Conversion Price (as adjusted in accordance with Section 5)(a)) on or after the
date of such Dilutive Issuance, regardless of whether the Holder
accurately refers to the Base Conversion Price in the Notice of
Conversion.
c) Subsequent Rights Offerings.
In addition to any adjustments
pursuant to Section 5(a)
and Section 5(b)
above, if at any time the Company
grants, issues or sells any Common Stock Equivalents or rights to
purchase stock, warrants, securities or other property pro rata to
the record holders of any class of shares of Common Stock (the
“Purchase
Rights”), then the Holder
will be entitled to acquire, upon the terms applicable to such
Purchase Rights, the aggregate Purchase Rights which the Holder
could have acquired if the Holder had held the number of shares of
Common Stock acquirable upon complete conversion of this Note
(without regard to any limitations on exercise hereof, including
without limitation, the Beneficial Ownership Limitation)
immediately before the date on which a record is taken for the
grant, issuance or sale of such Purchase Rights, or, if no such
record is taken, the date as of which the record holders of shares
of Common Stock are to be determined for the grant, issue or sale
of such Purchase Rights (provided, however, to the extent that the
Holder’s right to participate in any such Purchase Right
would result in the Holder exceeding the Beneficial Ownership
Limitation, then the Holder shall not be entitled to participate in
such Purchase Right to such extent (or beneficial ownership of such
shares of Common Stock as a result of such Purchase Right to such
extent) and such Purchase Right to such extent shall be held in
abeyance for the Holder until such time, if ever, as its right
thereto would not result in the Holder exceeding the Beneficial
Ownership Limitation).
d) Pro Rata Distributions. During
such time as this Note is outstanding, if the Company shall declare
or make any dividend or other distribution of its assets (or rights
to acquire its assets) to holders of shares of Common Stock, by way
of return of capital or otherwise (including, without limitation,
any distribution of cash, stock or other securities, property or
options by way of a dividend, spin off, reclassification, corporate
rearrangement, scheme of arrangement or other similar transaction)
(a “Distribution”), at any
time after the issuance of this Note, then, in each such case, the
Holder shall be entitled to participate in such Distribution to the
same extent that the Holder would have participated therein if the
Holder had held the number of shares of Common Stock acquirable
upon complete exercise of this Note (without regard to any
limitations on exercise hereof, including without limitation, the
Beneficial Ownership Limitation) immediately before the date of
which a record is taken for such Distribution, or, if no such
record is taken, the date as of which the record holders of shares
of Common Stock are to be determined for the participation in such
Distribution (provided, however, to the extent that the
Holder's right to participate in any such Distribution would result
in the Holder exceeding the Beneficial Ownership Limitation, then
the Holder shall not be entitled to participate in such
Distribution to such extent (or in the beneficial ownership of any
shares of Common Stock as a result of such Distribution to such
extent) and the portion of such Distribution shall be held in
abeyance for the benefit of the Holder until such time, if ever, as
its right thereto would not result in the Holder exceeding the
Beneficial Ownership Limitation).
e) Fundamental Transaction. If, at
any time while this Note is outstanding, (i) the Company effects
any merger or consolidation of the Company with or into another
Person, (ii) the Company effects any sale of all or substantially
all of its assets in one transaction or a series of related
transactions, (iii) any tender offer or exchange offer (whether by
the Company or another Person) is completed pursuant to which
holders of Common Stock are permitted to tender or exchange their
shares for other securities, cash or property, or (iv) the Company
effects any reclassification of the Common Stock or any compulsory
share exchange pursuant to which the Common Stock is effectively
converted into or exchanged for other securities, cash or property
(in any such case, a “Fundamental
Transaction”), then, upon any subsequent conversion of
this Note, the Holder shall have the right to receive, for each
Conversion Share that would have been issuable upon such conversion
immediately prior to the occurrence of such Fundamental
Transaction, the same kind and amount of securities, cash or
property as it would have been entitled to receive upon the
occurrence of such Fundamental Transaction if it had been,
immediately prior to such Fundamental Transaction, the holder of 1
share of Common Stock (the “Alternate
Consideration”). For purposes of any such conversion,
the determination of the Conversion Price shall be appropriately
adjusted to apply to such Alternate Consideration based on the
amount of Alternate Consideration issuable in respect of 1 share of
Common Stock in such Fundamental Transaction, and the Company shall
apportion the Conversion Price among the Alternate Consideration in
a reasonable manner reflecting the relative value of any different
components of the Alternate Consideration. If holders of Common
Stock are given any choice as to the securities, cash or property
to be received in a Fundamental Transaction, then the Holder shall
be given the same choice as to the Alternate Consideration it
receives upon any conversion of this Note following such
Fundamental Transaction. To the extent necessary to effectuate the
foregoing provisions, any successor to the Company or surviving
entity in such Fundamental Transaction shall issue to the Holder a
new Note consistent with the foregoing provisions and evidencing
the Holder’s right to convert such Note into Alternate
Consideration. The terms of any agreement pursuant to which a
Fundamental Transaction is effected shall include terms requiring
any such successor or surviving entity to comply with the
provisions of this Section
5(e) and insuring that this Note (or any such replacement
security) will be similarly adjusted upon any subsequent
transaction analogous to a Fundamental Transaction. For the
avoidance of doubt, the provisions of this Section shall not apply
to the acquisitions contemplated by the Charge Acquisition
Agreement or the PTGI Acquisition Agreement.
f) Calculations. All calculations
under this Section 5 shall be made to
the nearest cent or the nearest 1/100th of a share, as the case may
be. For purposes of this Section 5, the number of
shares of Common Stock deemed to be issued and outstanding as of a
given date shall be the sum of the number of shares of Common Stock
(excluding any treasury shares of the Company) issued and
outstanding.
g) Notice to the
Holder.
i. Adjustment to Conversion Price.
Whenever the Conversion Price is adjusted pursuant to any provision
of this Section 5, the Company
shall promptly deliver to each Holder a notice setting forth the
Conversion Price after such adjustment and setting forth a brief
statement of the facts requiring such adjustment.
ii. Notice to Allow Conversion by
Holder. If (A) the Company shall declare a dividend (or any
other distribution in whatever form) on the Common Stock, (B) the
Company shall declare a special nonrecurring cash dividend on or a
redemption of the Common Stock, (C) the Company shall authorize the
granting to all holders of the Common Stock of rights or warrants
to subscribe for or purchase any shares of capital stock of any
class or of any rights, (D) the approval of any stockholders of the
Company shall be required in connection with any reclassification
of the Common Stock, any consolidation or merger to which the
Company is a party, any sale or transfer of all or substantially
all of the assets of the Company, or any compulsory share exchange
whereby the Common Stock is converted into other securities, cash
or property or (E) the Company shall
authorize the voluntary or involuntary dissolution, liquidation or
winding up of the affairs of the Company, then, in each case, the
Company shall cause to be filed at each office or agency maintained
for the purpose of conversion of this Note, and shall cause to
be delivered to the Holder at
its last address as it shall appear upon the Note Register, at
least twenty (20) calendar days prior to the applicable record or
effective date hereinafter specified (or such shorter period as is
reasonably possible, but not less than ten (10) calendar days, if
twenty (20) calendar days is not reasonably possible), a notice
stating (x) the date on which a record is to be taken for
the purpose of such dividend, distribution, redemption, rights or
warrants, or if a record is not to be taken, the date as of which
the holders of the Common Stock of record to be entitled to such
dividend, distributions, redemption, rights or warrants are to be
determined or (y) the date on which such reclassification,
consolidation, merger, sale, transfer or share exchange is expected
to become effective or close, or the date on which the voluntary or involuntary dissolution, liquidation
or winding up of the affairs of the Company was authorized,
and the date as of which it is expected that holders of the Common
Stock of record shall be entitled to exchange their shares of the
Common Stock for securities, cash or other property deliverable
upon any such reclassification, consolidation, merger, sale,
transfer, share exchange, or voluntary
or involuntary dissolution, liquidation or winding up of the
affairs of the Company, provided that the failure to deliver
such notice or any defect therein or in the delivery thereof shall
not affect the validity of the corporate action required to be
specified in such notice. To the extent that any notice provided
hereunder constitutes, or contains, material, non-public
information regarding the Company or any of the Subsidiaries, the
Company shall simultaneously file such notice with the Commission
pursuant to a Current Report on Form 8-K or if it is not subject to
the reporting requirements of the Commission, a press release. The
Holder shall remain entitled to convert this Note during the 20-day
period commencing on the date of such notice through the effective
date of the event triggering such notice except as may otherwise be
expressly set forth herein.
Section 6. Events of Default.
a) “Event of Default” means,
wherever used herein, any of the following events (whatever the
reason for such event and whether such event shall be voluntary or
involuntary or effected by operation of law or pursuant to any
judgment, decree or order of any court, or any order, rule or
regulation of any administrative or governmental
body):
i. any
default in the payment of (A) the principal amount of the Note or
(B) interest, liquidated damages and other amounts owing to the
Holder on the Note, as and when the same shall become due and
payable (whether on a Conversion Date or the Maturity Date or by
acceleration or otherwise) which default, solely in the case of an
interest payment or other default under clause (B) above, is not
cured within five (5) Trading days;
ii. the
Company shall fail to observe or perform any other covenant or
agreement contained in the Note (other than a breach by the Company
of its obligations to deliver shares of Common Stock to the Holder
upon conversion, which breach is addressed in clause (xi) below)
which failure is not cured, if possible to cure, within the earlier
to occur of (A) five (5) Trading Days after notice of such
failure sent by the Holder to
the Company and (B) ten (10) Trading Days after the Company has
become or should have become aware of such
failure;
iii. a
breach, default, event of default or the failure observe or perform
any covenant or agreement (subject to any grace or cure period
provided in the applicable agreement, document or instrument) shall
occur under (A) any of the Transaction Documents or (B) any other
material agreement, lease, document or instrument to which the
Company or any Subsidiary is obligated, including the senior
secured notes, warrants and other transaction documents related to
the May 2020 Financing (and not covered by clause (v)
below);
iv. the
Company experiences a Material Adverse Effect;
v. any
Person shall breach any agreement delivered to the initial Holder
pursuant to Section 2.2 of the Purchase Agreement;
vi. any representation or warranty made in this Note, any other
Transaction Documents, any written statement pursuant hereto or
thereto or any other report, financial statement or certificate
made or delivered to the Holder or any other Holder shall be untrue
or incorrect in any material respect (or, to the extent such
representation or warranty is qualified by materiality or Material
Adverse Effect, in any respect) as of
the date when made or deemed made;
vii. the
Company or any Subsidiary shall default on any of its obligations
under any mortgage, credit agreement or other facility, indenture
agreement, factoring agreement or other instrument under which
there may be issued, or by which there may be secured or evidenced,
any indebtedness for borrowed money or money due under any long
term leasing or factoring arrangement that (a) involves an
obligation greater than $100,000, whether such indebtedness now
exists or shall hereafter be created, and (b) results in such
indebtedness becoming or being declared due and payable prior to
the date on which it would otherwise become due and
payable;
viii. the
Company or any Significant Subsidiary (as such term is defined in
Rule 1-02(w) of Regulation S-X) shall be subject to a Bankruptcy
Event;
ix. (A) the Common
Stock shall not be eligible for listing or quotation for trading,
or has been suspended from listing or quotation, on its Principal
Market and shall not resume listing or quotation for trading
thereon or on any other Trading Market (other than OTC Pink) within
three (3) Trading Days, or (B) the transfer of shares of Common
Stock through the Depository Trust Company System is no longer
available or “chilled”;
x. the Company shall
be a party to any Change of Control Transaction or shall agree to
sell or dispose of all or in excess of fifty percent (50%) of its
assets in one transaction or a series of related transactions
(whether or not such sale would constitute a Change of Control
Transaction);
xi. the Company shall
fail for any reason to deliver certificates to the Holder prior to
the fifth Trading Day after a Conversion Date or the Company shall
provide at any time notice to the Holder, including by way of
public announcement, of the Company’s intention to not honor
requests for conversions of the Note in accordance with the terms
hereof;
xii. the
Company fails to be in compliance with Rule 144(c)(1) (or
Rule 144(i)(2), if applicable);
xiii. the
occurrence of any levy upon or seizure or attachment of, or any
uninsured loss of or damage to, any property of the Borrower or any
Subsidiary having an aggregate fair value or repair cost (as the
case may be) in excess of $100,000 individually or in the
aggregate, and any such levy, seizure or attachment shall not be
set aside, bonded or discharged within forty-five (45) days after
the date thereof;
xiv. any
monetary judgment, writ or similar final process shall be entered
or filed against the Company, any Subsidiary or any of their
respective property or other assets for more than $100,000, and
such judgment, writ or similar final process shall remain
unvacated, unbonded or unstayed for a period of forty-five (45)
calendar days;
xv. prior to the
payment in full and satisfaction of the owed under this Note, any
security interest and Lien purported to be created by any
Transaction Document shall cease to be in full force and effect, or
shall cease to give the Holders, the Liens, rights, powers and
privileges purported to be created and granted under such
Transaction Documents (including a perfected first priority
security interest in and Lien on all of the Collateral thereunder
(except as otherwise expressly provided in such Transaction
Document)) in favor of the Holders, or shall be asserted by the
Company or any Affiliate(s) not to be a valid, perfected, first
priority (except as otherwise expressly provided in this Agreement
or any such Transaction Document) security interest in or Lien on
the Collateral covered thereby;
xvi. the
Company shall enter into any transaction or arrangement structured
in accordance with, based upon, or related or pursuant to, in whole
or in part, Section 3(a)(l0) of the Securities Act;
xvii. the
Company shall enter into a Variable Rate Transaction;
xviii. any
attempt by the Borrower or its officers, directors, and/or
affiliates to transmit, convey, disclose, or any actual
transmittal, conveyance, or disclosure by the Borrower or its
officers, directors, and/or affiliates of, material non-public
information concerning the Borrower, to the Holder or its
successors and assigns, which is not immediately cured by
Borrower’s public disclosure of such information on that same
date;
xix. the
Initial Registration Statement (as defined in the Registration
Rights Agreement) shall not have been filed by the Filing Date (as
defined in the Registration Rights Agreement) or declared effective
by the Commission on or prior to the Effectiveness Date (as defined
in the Registration Rights Agreement);
xx. if, during the
Effectiveness Period (as defined in the Registration Rights
Agreement), either (a) the effectiveness of the Registration
Statement lapses for any reason or (b) the Holder shall not be
permitted to resell Registrable Securities (as defined in the
Registration Rights Agreement) under the Registration Statement for
a period of more than 20 consecutive Trading Days or 30
non-consecutive Trading Days during any 12 month period;
provided,
however, that if
the Company is negotiating a merger, consolidation, acquisition or
sale of all or substantially all of its assets or a similar
transaction and, in the written opinion of counsel to the Company,
the Registration Statement would be required to be amended to
include information concerning such pending transaction(s) or the
parties thereto which information is not available or may not be
publicly disclosed at the time, the Company shall be permitted an
additional 10 consecutive Trading Days during any 12 month period
pursuant to this Section; or
xxi. the
closing of the Subsequent Financing does not occur on or prior to
the six (6) month anniversary of the Closing Date.
b) Remedies Upon Event of Default.
If any Event of Default occurs, at the Holder’s election (i)
the outstanding principal amount of this Note, plus accrued but
unpaid interest, liquidated damages and other amounts owing in
respect thereof through the date of acceleration, shall become
immediately due and payable in cash pursuant to clause (ii) of the
definition of Mandatory Default Amount, or (ii) the outstanding
principal amount of this Note, and, if elected by the Holder, all
accrued and unpaid interest hereon, shall be converted into share
of Common Stock at the Alternate Conversion Price pursuant to
clause (i) of the definition of Mandatory Default Amount. In the
event the Holder makes the election described in clause (ii) of
this Section above, but does not elect to receive Conversion Shares
in respect of all accrued and unpaid interest on the Note, all
accrued and unpaid interest shall be paid to the Holder in cash no
later than the date the Conversion Shares are required to be
delivered to the Holder. Commencing on the occurrence of any Event
of Default and for as long an Event of Default is not cured, the
interest rate on this Note as set forth in Section 2 above shall accrue at
a rate equal to 20% per annum . Upon the payment in full of the
Mandatory Default Amount, the Holder shall promptly surrender this
Note to or as directed by the Company. In connection with such
acceleration described herein, the Holder need not provide, and the
Company hereby waives, any presentment, demand, protest or other
notice of any kind, and the Holder may immediately and without
expiration of any grace period enforce any and all of its rights
and remedies hereunder and all other remedies available to it under
applicable law. Such acceleration may be rescinded and annulled by
Holder at any time prior to payment hereunder and the Holder shall
have all rights as a holder of the Note until such time, if any, as
the Holder receives full payment pursuant to this Section 6(b). No such
rescission or annulment shall affect any subsequent Event of
Default or impair any right consequent thereon. No such rescission
or annulment shall affect any subsequent Event of Default or impair
any right consequent thereon; and in addition to any other rights
and remedies available to the Holder in an Event of Default, the
Conversion Price in effect on any Conversion Date shall be equal to
the Alternate Conversion Price, subject to adjustment herein,
without any notice or any action taken by the Holder. The Borrower
shall pay the Holder hereof costs of collection, including
reasonable attorneys’ fees.
Section 7 Negative Covenants. As long as
any portion of this Note remains outstanding, unless the Holder
shall have otherwise given prior written consent, the Company shall
not, and shall not permit any of its subsidiaries (whether or not a
Subsidiary on the Original Issue Date) to, directly or
indirectly:
a) except for
Permitted Indebtedness, enter into, create, incur, assume,
guarantee or suffer to exist any indebtedness for borrowed money of
any kind, including, but not limited to, a guarantee, on or with
respect to any of its property or assets now owned or hereafter
acquired or any interest therein or any income or profits
therefrom;
b) except for
Permitted Liens, enter into, create, incur, assume or suffer to
exist any Liens of any kind, on or with respect to any of its
property or assets now owned or hereafter acquired or any interest
therein or any income or profits therefrom;
c) amend its charter
documents, including, without limitation, its certificate of
incorporation and bylaws, in any manner that materially and
adversely affects any rights of the Holder;
d) except for
Permitted Indebtedness, repay, repurchase or offer to repay,
repurchase or otherwise acquire more than a de minimis number of
shares of its Common Stock or Common Stock Equivalents other than
as to (i) the Conversion Shares as permitted or required under the
Transaction Documents and (ii) repurchases of Common Stock or
Common Stock Equivalents of departing officers and directors of the
Company, provided that such repurchases shall not exceed an
aggregate of $100,000 for all officers and directors during the
term of this Note;
e) repay, repurchase
or offer to repay, repurchase or otherwise acquire any
Indebtedness, other than the Liabilities, and other than regularly
scheduled principal and interest payments of Permitted Indebtedness
as such terms are in effect as of the Original Issue Date, provided
that such payments shall not be permitted if, at such time, or
after giving effect to such payment, any Event of Default exist or
occur; provided that neither the Company nor any of its
Subsidiaries shall make any cash payment in respect of the
Indebtedness issued pursuant to the Additional Note Financing or
the Subsequent Financing, until the full and final payment in cash
of the Liabilities;
f) pay cash dividends
or distributions on any equity securities of the
Company;
g) enter into any
transaction with any Affiliate of the Company which would be
required to be disclosed in any public filing with the Commission,
unless such transaction is made on an arm’s-length basis and
expressly approved by a majority of the disinterested directors of
the Company (even if less than a quorum otherwise required for
board approval);
h) sell, lease or
otherwise dispose of any significant portion of its assets or
acquire any assets or business on or after the Original Issue Date
other than as contemplated by the FedEx Route Acquisition
Agreements, the Charge Acquisition Agreement or the PTGI
Acquisition Agreement;
i) make or suffer to
exist any Investments using any proceeds from the Holder or any of
its Affiliates (including the holders of the senior secured notes
issued to Affiliates of the Holder in May 2020 Financing)
(including without limitation, loans and advances to, and other
Investments in, Subsidiaries), or commitments therefor, or to
become or remain a partner in any partnership or joint venture,
except for: (i) Investments in cash and cash equivalents; and (ii)
Investments in Subsidiaries that have guaranteed the Liabilities
and joined the Security Agreement as a debtor pursuant to Section
4.24(b) of the Purchase Agreement;
j) pay any
compensation that may be due and payable and/or accrued, whether in
cash, in kind or any combination thereof, to its executive
officers;
k) use any proceeds
from the Holder or any of its Affiliates (including the holders of
the senior secured notes issued to Affiliates of the Holder in the
May 2020 Financing) to pay any liquidated damages, penalties, fees
or other amounts that may be due and payable under the
Note;
l) file any
registration statement with respect to any securities issued
pursuant to the Additional Note Financing, the Subsequent Note
Financing or any other Indebtedness issued after the date hereof,
or otherwise cause such securities to become registered with the
SEC or under any state securities laws; and
m) enter into any
agreement with respect to any of the foregoing.
Section 8. Miscellaneous.
a) Notices. Any and all notices or
other communications or deliveries to be provided by the Holder
hereunder, including, without limitation, any Notice of Conversion,
shall be in writing and delivered personally, by facsimile,
electronic mail or sent by a nationally recognized overnight
courier service, addressed to the Company, at the facsimile number,
email address or mailing address set forth on its signature page
hereto, or such other facsimile number, electronic mail or address
as the Company may specify for such purposes by notice to the
Holder delivered in accordance with this Section 8(a). Any and all
notices or other communications or deliveries to be provided by the
Company hereunder shall be in writing and delivered personally, by
electronic mail, by facsimile, or sent by a nationally recognized
overnight courier service addressed to the Holder at the email
address, facsimile number or address of the Holder appearing on the
books of the Company, or if no such email address or facsimile
number or address appears on the books of the Company, at the
principal place of business of such Holder, as set forth in the
Purchase Agreement, or such other facsimile number, electronic mail
or address as the Holder may specify for such purposes by notice to
the Company delivered in accordance with this Section 8(a). Any notice
or other communication or deliveries hereunder shall be deemed
given and effective on the earliest of (i) the date of
transmission, if such notice or communication is delivered via
electronic mail or facsimile prior to 5:30 p.m. (New York City
time) on any Trading Day, (ii) the next Trading Day after the date
of transmission, if such notice or communication is delivered via
electronic mail or facsimile on a day that is not a Trading Day or
later than 5:30 p.m. (New York City time) on any Trading Day, (iii)
the second Trading Day following the date of mailing, if sent by
U.S. nationally recognized overnight courier service or (iv) upon
actual receipt by the party to whom such notice is required to be
given.
b) Absolute Obligation. Except as
expressly provided herein, no provision of this Note shall alter or
impair the obligation of the Company, which is absolute and
unconditional, to pay the principal of, liquidated damages and
accrued interest, as applicable, on this Note at the time, place,
and rate, and in the coin or currency, herein prescribed. This Note
is a direct debt obligation of the Company. This Note ranks
pari passu with all other Notes now
or hereafter issued under the terms set forth herein.
c) Lost or Mutilated Note. If this
Note shall be mutilated, lost, stolen or destroyed, the Company
shall execute and deliver, in exchange and substitution for and
upon cancellation of a mutilated Note, or in lieu of or in
substitution for a lost, stolen or destroyed Note, a new Note for
the principal amount of this Note so mutilated, lost, stolen or
destroyed, but only upon receipt of evidence of such loss, theft or
destruction of such Note, and of the ownership hereof, reasonably
satisfactory to the Company.
d) Governing Law. All questions
concerning the construction, validity, enforcement and
interpretation of this Note shall be governed by and construed and
enforced in accordance with the internal laws of the State of New
York, without regard to the principles of conflict of laws thereof.
Each party agrees that all legal proceedings concerning the
interpretation, enforcement and defense of the transactions
contemplated by any of the Transaction Documents (whether brought
against a party hereto or its respective Affiliates, directors,
officers, shareholders, employees or agents) shall be commenced in
the state and federal courts sitting in the City of New York,
Borough of Manhattan (the “New York Courts”). Each
party hereto hereby irrevocably submits to the exclusive
jurisdiction of the New York Courts for the adjudication of any
dispute hereunder or in connection herewith or with any transaction
contemplated hereby or discussed herein (including with respect to
the enforcement of any of the Transaction Documents), and hereby
irrevocably waives, and agrees not to assert in any suit, action or
proceeding, any claim that it is not personally subject to the
jurisdiction of such New York Courts, or such New York Courts are
improper or inconvenient venue for such proceeding. Each party
hereby irrevocably waives personal service of process and consents
to process being served in any such suit, action or proceeding by
mailing a copy thereof via registered or certified mail or
overnight delivery (with evidence of delivery) to such party at the
address in effect for notices to it under this Note and agrees that
such service shall constitute good and sufficient service of
process and notice thereof. Nothing contained herein shall be
deemed to limit in any way any right to serve process in any other
manner permitted by applicable law. Each party hereto hereby
irrevocably waives, to the fullest extent permitted by applicable
law, any and all right to trial by jury in any legal proceeding
arising out of or relating to this Note or the transactions
contemplated hereby. If any party shall commence an action or
proceeding to enforce any provisions of this Note, then the
prevailing party in such action or proceeding shall be reimbursed
by the other party for its attorneys' fees and other costs and
expenses incurred in the investigation, preparation and prosecution
of such action or proceeding.
e) Waiver. Any waiver by the
Company or the Holder of a breach of any provision of this Note
shall not operate as or be construed to be a waiver of any other
breach of such provision or of any breach of any other provision of
this Note. The failure of the Company or the Holder to insist upon
strict adherence to any term of this Note on one or more occasions
shall not be considered a waiver or deprive that party of the right
thereafter to insist upon strict adherence to that term or any
other term of this Note on any other occasion. Any waiver by the
Company or the Holder must be in writing.
f) Severability. If any provision
of this Note is invalid, illegal or unenforceable, the balance of
this Note shall remain in effect, and if any provision is
inapplicable to any Person or circumstance, it shall nevertheless
remain applicable to all other Persons and circumstances. If it
shall be found that any interest or other amount deemed interest
due hereunder violates the applicable law governing usury, the
applicable rate of interest due hereunder shall automatically be
lowered to equal the maximum rate of interest permitted under
applicable law. The Company covenants (to the extent that it may
lawfully do so) that it shall not at any time insist upon, plead,
or in any manner whatsoever claim or take the benefit or advantage
of, any stay, extension or usury law or other law which would
prohibit or forgive the Company from paying all or any portion of
the principal of or interest on this Note as contemplated herein,
wherever enacted, now or at any time hereafter in force, or which
may affect the covenants or the performance of this Note, and the
Company (to the extent it may lawfully do so) hereby expressly
waives all benefits or advantage of any such law, and covenants
that it will not, by resort to any such law, hinder, delay or
impede the execution of any power herein granted to the Holder, but
will suffer and permit the execution of every such as though no
such law has been enacted.
g) Remedies, Characterizations, Other
Obligations, Breaches and Injunctive Relief. The
remedies provided in this Note shall be cumulative and in addition
to all other remedies available under this Note and any of the
other Transaction Documents at law or in equity (including a decree
of specific performance and/or other injunctive relief), and
nothing herein shall limit the Holder’s right to pursue
actual and consequential damages for any failure by the Company to
comply with the terms of this Note. The Company covenants to
the Holder that there shall be no characterization concerning this
instrument other than as expressly provided herein. Amounts set
forth or provided for herein with respect to payments, conversion
and the like (and the computation thereof) shall be the amounts to
be received by the Holder and shall not, except as expressly
provided herein, be subject to any other obligation of the Company
(or the performance thereof). The Company acknowledges that a
breach by it of its obligations hereunder will cause irreparable
harm to the Holder and that the remedy at law for any such breach
may be inadequate. The Company therefore agrees that, in the event
of any such breach or threatened breach, the Holder shall be
entitled, in addition to all other available remedies, to an
injunction restraining any such breach or any such threatened
breach, without the necessity of showing economic loss and without
any bond or other security being required. The Company shall
provide all information and documentation to the Holder that is
requested by the Holder to enable the Holder to confirm the
Company’s compliance with the terms and conditions of this
Note.
h) Next Business Day. Whenever any
payment or other obligation hereunder shall be due on a day other
than a Business Day, such payment shall be made on the next
succeeding Business Day.
i) Headings. The headings
contained herein are for convenience only, do not constitute a part
of this Note and shall not be deemed to limit or affect any of the
provisions hereof.
j) Secured Obligation. The
obligations of the Company under this Note are secured by all
assets of the Company and each Subsidiary pursuant to the Amended
and Restated Security Agreement, dated as of November 3, 2020
between the Company, the Subsidiaries of the Company and the
Secured Parties (as defined therein).
(Signature Pages Follow)
IN
WITNESS WHEREOF, the Company has caused this Note to be duly
executed by a duly authorized officer as of the date first above
indicated.
TRANSWORLD HOLDINGS, INC.
|
By:__________________________________________
Name:
Title:
Mailing
Address for Notices:
Email
Address for delivery of Notices:
Facsimile
No. for delivery of Notices:
|
ANNEX A - NOTICE OF CONVERSION
The
undersigned hereby elects to convert principal (and, if applicable,
accrued and unpaid interest) under the Original Issue Discount
Senior Secured Convertible Promissory Note due November 3, 2023 of
Transworld Holdings, Inc., a Delaware corporation (the
“Company”), into shares of
common stock (the “Common Stock”), of the
Company according to the conditions hereof, as of the date written
below. If shares of Common Stock are to be issued in the name of a
person other than the undersigned, the undersigned will pay all
transfer taxes payable with respect thereto and is delivering
herewith such certificates and opinions as reasonably requested by
the Company in accordance therewith. No fee will be charged to the
holder for any conversion, except for such transfer taxes, if
any.
By the
delivery of this Notice of Conversion the undersigned represents
and warrants to the Company that its ownership of the Common Stock
does not exceed the amounts specified under Section 4(d) of this Note,
as determined in accordance with such Section.
The
undersigned agrees to comply with the prospectus delivery
requirements under the applicable securities laws in connection
with any transfer of the aforesaid shares of Common
Stock.
Conversion Information
Date to Effect
Conversion:
Outstanding
Principal Before
Conversion:
Outstanding
Interest Before
Conversion:
Principal Amount of
Note
to be Converted:
Interest Amount of
Note to be
Converted:
Conversion Price Calculations:
Total Shares of Common Stock to be Issued:
Outstanding
Principal After
Conversion:
Outstanding
Interest After
Conversion:
DWAC Instructions
Broker:
DTC#:
Account:
Account Name:
|
Physical Delivery
Issue to:
Address:
|
Schedule 1
CONVERSION SCHEDULE
This
Original Issue Discount Senior Secured Convertible Promissory Note
due on November 3, 2023 in the original principal amount of
$3,888,889 is issued by
Transworld Holdings, Inc., a Delaware corporation. This Conversion
Schedule reflects conversions made under Section 4 of the above
referenced Note.
Dated:
Date of
Conversion
(or for
first entry, Original Issue Date)
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Amount
of Conversion
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Aggregate
Principal Amount Remaining Subsequent to Conversion
(or
original Principal Amount)
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Company
Attest
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Exhibit 10.1
SECURITIES
PURCHASE AGREEMENT
THIS
SECURITIES PURCHASE AGREEMENT (the “Agreement”) is made as of
May 8, 2020, by and among GoIP Global, Inc., a Colorado corporation
(and together with all of its current and future, direct and/or
indirect, wholly owned and/or partially owned Subsidiaries,
collectively, the “Company”), and the Purchaser identified on the signature
pages hereto (each, including its successors and assigns, a
“Purchaser”
and, collectively, the “Purchasers”).
RECITALS
A. The
Company and the Purchasers are executing and delivering this
Agreement in reliance upon the exemption from securities
registration afforded by Section 4(a)(2) of the Securities Act (as
defined below), and/or Rule 506(b) of Regulation D
(“Regulation
D”) as promulgated by the United States Securities and
Exchange Commission under the Securities Act.
B. The
Purchasers, wishes to purchase, and the Company wishes to sell at
closing, upon the terms and conditions stated in this Agreement,
the Securities (as defined herein), all in the amounts and for the
price set forth on Schedule 1
hereto.
NOW,
THEREFORE, IN CONSIDERATION of the mutual covenants contained in
this Agreement, and for other good and valuable consideration, the
receipt and adequacy of which are hereby acknowledged, the Company
and the Purchaser hereby agrees as follows:
ARTICLE
1
DEFINITIONS
1.1 Defined Terms. In addition to
terms defined elsewhere in this Agreement or in any supplement,
amendment or exhibit hereto, when used herein, the following terms
shall have the following meanings:
(a) “Affiliate”
means any Person that, directly or indirectly through one or more
intermediaries, controls or is controlled by or is under common
control with a Person, as such terms are used in and construed
under Rule 405 of the Securities Act.
(b) “Business
Day” means any day
except any Saturday, any Sunday, any day which is a federal legal
holiday in the United States or any day on which banking
institutions in the State of New York are authorized or required by
law or other governmental action to close.
(c) “Closing”
shall have the meaning ascribed to such term in Section
2.1(a).
(d) “Closing
Date” means the
Trading Day on which all of the Transaction Documents have been
executed and delivered by the applicable parties thereto, and all
conditions precedent to (i) the Purchasers’ obligations to
pay the Purchase Price and (ii) the Company’s obligations to
deliver the Securities has been satisfied or waived with respect to
the Closing.
(e) “Common Stock” means (i)
the Company’s common stock, par value $0.001 per share, and
(ii) any capital stock into which such common stock shall have been
changed or any share capital resulting from a reclassification of
such common stock.
(f) “Commitment
Shares” means 7.5 shares
of the Company’s Series G Preferred Stock to be issued to the
Purchaser at Closing, which shall be convertible into 7.5% of the
Company’s issued and outstanding common stock upon
consummation of the Reverse Stock Split;
(g) “Common Stock Equivalents”
means any securities of the Company or the Subsidiaries which would
entitle the holder thereof to acquire at any time Common Stock,
including, without limitation, any debt, preferred stock, rights,
options, warrants or other instrument that is at any time
convertible into or exercisable or exchangeable for, or otherwise
entitles the holder thereof to receive, Common Stock.
(h) “Contingent Obligation”
means, as to any Person, any direct or indirect liability,
contingent or otherwise, of that Person with respect to any
indebtedness, lease, dividend or other obligation of another Person
if the primary purpose or intent of the Person incurring such
liability, or the primary effect thereof, is to provide assurance
to the obligee of such liability that such liability will be paid
or discharged, or that any agreements relating thereto will be
complied with, or that the holders of such liability will be
protected (in whole or in part) against loss with respect
thereto.
(i) “Control Agreement” means
an agreement in writing, in form and substance satisfactory to the
Purchasers and the Company, by and among Purchasers, the Company
and any bank at which any deposit account of the Company is at any
time maintained which provides that, upon and during the
continuation of an Event of Default (as defined in the Notes), such
bank will comply with instructions originated by the Purchaser
directing disposition of the funds in the deposit account without
further consent by Company and such other terms and conditions as
the Purchaser may require.
(j) “Conversion Date” has the
meaning set forth in the Notes.
(k) “Conversion Shares” means
all shares of Common Stock issuable upon conversion of any portion
of the Notes, and/or as any other payment due under the Notes
including, but not limited to interest and/or otherwise, but solely
to the extent and subject to any conditions set forth in the
Notes.
(l) “Dollar(s)” and
“$”
means lawful money of the United States.
(m) “Effective Date” means the
date that the initial Registration Statement filed by the Company
pursuant to the Registration Rights Agreement is first declared
effective by the Commission.
(n) “Event of Default” shall
have the meaning set forth in the Notes.
(o) “Exchange Act” means the
Securities Exchange Act of 1934, as amended, and the rules and
regulations promulgated thereunder.
(p) “Exempt Issuance” means
the issuance of (a) shares of Common Stock or options to employees,
officers, consultants, advisors or directors of the Company
pursuant to any stock or option plan duly adopted for such purpose
by a majority of the members of the Board of Directors or a
majority of the members of a committee of directors established for
such purpose, (b) securities upon the exercise or exchange of or
conversion of any Securities issued hereunder and/or other
securities exercisable or exchangeable for or convertible into
shares of Common Stock issued and outstanding on the date of this
Agreement, provided that such securities have not been amended
since the date of this Agreement to increase the number of such
securities or to decrease the exercise, exchange or conversion
price of such securities or (c) Permitted Indebtedness incurred in
satisfaction with clause 1.1(v)(c) hereunder.
(q) “GAAP” means generally
accepted accounting principles in the United States of America as
in effect from time to time.
(r) “Indebtedness” means, with
respect to any Person at any date, without duplication,
(a) all indebtedness of such Person for borrowed money,
(b) all obligations of such Person for the deferred purchase
price of property or services (but excluding trade payables
incurred in the ordinary course of business), (c) all
obligations of such Person evidenced by notes, bonds, debentures or
other similar instruments, (d) all indebtedness created or
arising under any conditional sale or other title retention
agreement with respect to property acquired by such Person (even
though the rights and remedies of the seller or the Purchaser under
such agreement in the event of default are limited to repossession
or sale of such property), (e) all capital lease obligations
of such Person, (f) all obligations of such Person, contingent
or otherwise, as an account party or applicant under acceptance,
letter of credit, surety bond or similar facilities, (g) all
obligations of such Person, contingent or otherwise, to purchase,
redeem, retire or otherwise acquire for value any capital stock of
such Person, (h) all obligations for any earn-out consideration,
(i) the liquidation value of preferred capital stock of such
Person, (j) all guarantee obligations of such Person in respect of
obligations of the kind referred to in clauses (a) through (i)
above, (k) all obligations of the kind referred to in
clauses (a) through (i) above secured by (or for which the
holder of such obligation has an existing right, contingent or
otherwise, to be secured by) any lien on property (including,
without limitation, accounts and contract rights) owned by such
Person, whether or not such Person has assumed or become liable for
the payment of such obligation and all obligations of such Person
in respect of hedge agreements; and (l) all Contingent Obligations
in respect to indebtedness or obligations of any Person of the kind
referred to in clauses (a)-(k) above. The Indebtedness of any
Person shall include, without duplication, the Indebtedness of any
other entity (including any partnership in which such Person is a
general partner) to the extent such Person is liable therefor as a
result of such Person’s ownership interest in or other
relationship with such entity, except to the extent the terms of
such Indebtedness expressly provide that such Person is not liable
therefor.
(s) “Liens” or
“liens”
means a lien, mortgage, charge pledge, security interest,
encumbrance, right of first refusal, preemptive right or other
restriction, or other clouds on title.
(t) “Liabilities” means all
direct or indirect liabilities, Indebtedness and obligations of any
kind of Company to the Purchaser, howsoever created, arising or
evidenced, whether now existing or hereafter arising (including
those acquired by assignment), absolute or contingent, due or to
become due, primary or secondary, joint or several, whether
existing or arising through discount, overdraft, purchase, direct
loan, participation, operation of law, or otherwise, including, but
not limited to, pursuant to the Notes, this Agreement and/or any of
the other Transaction Documents, all accrued but unpaid interest on
the Notes the principal, any letter of credit, any standby letter
of credit, and/or outside attorneys’ and paralegals’
fees or charges relating to the preparation of the Transaction
Documents and the enforcement of the Purchaser’s rights,
remedies and powers under this Agreement, the Notes and/or the
other Transaction Documents.
(u) “Lock-Up Agreement” means
the Lock-Up Agreement, dated as of the date hereof, by and among
the Company and KORR Value L.P., in the form of Exhibit F attached
hereto.
(v) “Material Adverse Effect”
means a material adverse effect on (a) the business, assets,
property, operations, or condition (financial or otherwise) of the
Company, (b) the validity or enforceability of this Agreement
or any of the other Transaction Documents or (c) the rights or
remedies of the Purchaser hereunder or thereunder.
(w) “Notes” means all of the
Original Issue Discount Senior Secured Convertible Promissory Notes
due May 8, 20211 that are owned by the Purchasers, which,
subject to the terms and conditions set forth in this Agreement,
shall be purchased from the Company pursuant to this Agreement; the
form of Note is annexed hereto as Exhibit A
and any and all Note(s) issued in exchange, transfer or replacement
of the Notes.
(x) “Permitted Indebtedness”
means (a) the indebtedness evidenced by the Notes, and (b) lease
obligations and purchase money indebtedness incurred in connection
with the acquisition of capital assets and lease obligations with
respect to newly acquired or leased assets in the ordinary course
of business, (c) indebtedness for up to (i) $500,000, if issued to
KORR Value L.P.. (or any successor lender who is subordinate to the
Purchaser) or (ii) if issued to anyone other than KORR Value L.P.,
that is acceptable to the Purchasers in their sole discretion and,
in the case of (i) and (ii) above, (1) is expressly subordinate to
the Notes pursuant to a written subordination agreement with the
Purchasers that is acceptable to Purchaser in its sole and absolute
discretion and (2) matures at a date later than 30 days after the
Maturity Date and (d) any indebtedness issued by the Company to any
SBA-approved lender.
(y) “Permitted Lien” means the
individual and collective reference to the following: (a) Liens for
taxes, assessments and other governmental charges or levies not yet
due or Liens for taxes, assessments and other governmental charges
or levies being contested in good faith and by appropriate
proceedings for which adequate reserves (in the good faith judgment
of the management of the Company) have been established in
accordance with GAAP; (b) Liens imposed by law which were incurred
in the ordinary course of the Company’s business, such as
carriers’, warehousemen’s and mechanics’ Liens,
statutory landlords’ Liens, and other similar Liens arising
in the ordinary course of the Company’s business, and which
(x) do not individually or in the aggregate materially detract from
the value of such property or assets or materially impair the use
thereof in the operation of the business of the Company and its
consolidated Subsidiaries or (y) are being contested in good faith
by appropriate proceedings, which proceedings have the effect of
preventing for the foreseeable future the forfeiture or sale of the
property or asset subject to such Lien; and (c) Liens incurred in
connection with Permitted Indebtedness thereunder; (d) Pledges and
deposits made in the ordinary course of business in compliance with
workers’ compensation, unemployment insurance and other
social security laws or regulations; (e) Deposits to secure the
performance of bids, trade contracts, leases, statutory
obligations, surety and appeal bonds, performance bonds and other
obligations of a like nature, in each case in the ordinary course
of business; and (f) any Liens in favor of the
Purchaser.
(z) “Person” means any
individual, sole proprietorship, partnership, joint venture, trust,
unincorporated organization, association, corporation, institution,
entity, party or government (whether national, federal, state,
county, city, municipal or otherwise including, without limitation,
any instrumentality, division, agency, body or department
thereof).
(aa) “Principal
Market” means the principal Trading Market on which
the Common Stock is listed or quoted for trading on the date in
question.
(bb) “Proceeding”
means an action, claim, suit, investigation or proceeding
(including, without limitation, an informal investigation or
partial proceeding, such as a deposition), whether commenced or
threatened.
(cc) “Purchase
Price” shall have the
meaning as set forth on Schedule 1 next to the heading
“Purchase Price,” in United States
Dollars.
(dd) “Registration
Rights Agreement” means the Registration Rights
Agreement, dated as of the Closing Date, by and between the Company
and the Purchaser as hereinafter amended and/or supplemented
altogether with all exhibits, schedules and annexes to such
Registration Rights Agreement, which Registration Rights Agreement
is annexed hereto as Exhibit D.
(ee) “Reverse
Stock Split” means the 500 for 1 reverse stock split
of the Company’s common stock which will take effect after
the Closing Date;
(ff) “Registration
Statement” means a
registration statement meeting the requirements set forth in the
Registration Rights Agreement and covering the resale of the
Conversion
Shares issuable upon conversion of the Note, the Warrant Shares
issuable upon exercise of the Warrants and the Commitment Shares by
the Purchasers as provided for in the Registration Rights
Agreement
(gg) “SEC”
or “Commission” means the
United States Securities and Exchange Commission.
(hh) “Securities”
means the Notes, the Warrants and Commitment Shares purchased
pursuant to this Agreement and all Underlying Shares and any
securities of the Company issued in replacement, substitution
and/or in connection with any exchange, conversion and/or any other
transaction pursuant to which all or any of such securities of the
Company to the Purchasers.
(ii) “Securities
Act” means the Securities Act of 1933, as amended, and
the rules and regulations promulgated thereunder.
(jj) “Security
Agreement” means the Security Agreement, dated on or
about the date hereof, by and among the Company, the Subsidiaries
of the Company, and the Purchaser as hereinafter amended and/or
supplemented altogether with all exhibits, schedules and annexes to
such Security Agreement, pursuant to which the Notes are secured by
the Collateral, which security interest in the Collateral shall be
perfected by the Purchaser’ UCC-1, filed with the Secretary
of State of the State of Delaware, to the extent perfectable by the
filing of a UCC-1 Financing Statement and such other documents and
instruments related thereto, which Security Agreement is annexed
hereto as Exhibit B.
(kk) “Series
G Preferred Stock” means the Company’s Series G
convertible preferred stock, par value $0.001 per
share;
(ll) “Short
Sales” means all “short sales” as defined
in Rule 200 of Regulation SHO under the Exchange Act (but shall not
be deemed to include the location and/or reservation of borrowable
shares of Common Stock).
(mm) “SMRH”
means Sheppard, Mullin, Richter & Hampton LLP, with offices
located at 30 Rockefeller Plaza, 39th
Floor, New
York, New York 10112.
(nn) Subordination
Agreement” means the
Subordination Agreement, dated as of the date hereof, by and among
KORR Value L.P., and the Purchasers, as the Creditors therein,
which Subordination Agreement is annexed hereto as
Exhibit C.
(oo) “Subsidiary”
means, with respect to any Person, a corporation, partnership,
limited liability company or other entity of which shares of stock
or other ownership interests having ordinary voting power (other
than stock or such other ownership interests having such power only
by reason of the happening of a contingency) to elect a majority of
the board of directors or other managers of such corporation,
partnership or other entity are at the time owned, or the
management of which is otherwise controlled, directly or indirectly
through one or more intermediaries, or both, by such Person all of
the Company’s Subsidiaries are set forth on Schedule 3.1(a)
hereto.
(pp) “Trading
Day” means a day on which the principal Trading Market
is open for trading.
(qq) “Trading
Market” means any of the following markets or
exchanges on which the Common Stock is listed or quoted for trading
on the date in question: the NYSE MKT, the Nasdaq Capital Market,
the Nasdaq Global Market, the Nasdaq Global Select Market, the New
York Stock Exchange, any market or quotation service of the OTC
Markets Group or the OTC Bulletin Board (or any successors to any
of the foregoing).
(rr) “Transaction
Documents” means, collectively, this Agreement, the
Notes, the Registration Rights Agreement, the Warrant, the Security
Agreement, and all financing statements (or comparable documents
now or hereafter filed in accordance with the UCC or other
comparable or similar laws, rules or regulations) in favor of the
Purchaser as secured parties perfecting all Liens the Purchaser
have on the Collateral (which security interests and Liens of the
Purchaser shall be senior to all Indebtedness of the Company), the
Subordination Agreement, the Lock-Up Agreement and such other
documents, instruments, certificates, supplements, amendments,
exhibits and schedules required and/or attached pursuant to this
Agreement and/or any of the above documents, and/or any other
document and/or instrument related to the above agreements,
documents and/or instruments, and the transactions hereunder and/or
thereunder and/or any other agreement, documents or instruments
required or contemplated hereunder or thereunder, whether now
existing or at any time hereafter arising.
(ss) “Transfer
Agent” means Manhattan Transfer Registrar Co. the
current transfer agent of the Company, with a mailing address of
38B Sheep Pasture Road, Port Jefferson, NY 11777 and a phone number
of 631-928-7655,
and any successor transfer agent of the Company.
(tt) “UCC”
means the Uniform Commercial Code of as in effect from time to time
in the State of New York; provided, however, that, in the event
that, by reason of mandatory provisions of law, any or all of the
attachment, perfection, priority, or remedies with respect to the
Purchaser’ Liens on any Collateral is governed by the Uniform
Commercial Code as enacted and in effect in a jurisdiction other
than the State of New York, the term “UCC” shall mean the
Uniform Commercial code as enacted and in effect in such other
jurisdiction solely for purposes of the provisions thereof relating
to such attachment, perfection, priority, or remedies.
(uu) “Underlying
Shares” means all Conversion Shares and Warrant
Shares.
(vv) “VWAP”
means, for any date, the price determined by the first of the
following clauses that applies: (a) if the Common Stock is then
listed or quoted on a Trading Market, the daily volume weighted
average price of the Common Stock for such date (or the nearest
preceding date) on the Trading Market on which the Common Stock is
then listed or quoted as reported by Bloomberg L.P. (based on a
Trading Day from 9:30 a.m. (New York City time) to 4:02 p.m. (New
York City time)), (b) if OTCQB or OTCQX is not a Trading
Market, the volume weighted average price of the Common Stock for
such date (or the nearest preceding date) on OTCQB or OTCQX as
applicable, (c) if the Common Stock is not then listed or quoted
for trading on OTCQB or OTCQX and if prices for the Common Stock
are then reported in the “Pink Sheets” published by OTC
Markets, Inc. (or a similar organization or agency succeeding to
its functions of reporting prices), the most recent bid price per
share of the Common Stock so reported, or (d) in all other
cases, the fair market value of a share of Common Stock as
determined by an independent appraiser selected in good faith by
the Purchaser of a majority in interest of the Securities then
outstanding and reasonably acceptable to the Company, the fees and
expenses of which shall be paid by the Company.
(ww) “Warrant(s)”
means the two (2)-year Common Stock Purchase Warrants of the
Company, to be issued at the Closing, the form of which is annexed
hereto as Exhibit E.
(xx) “Warrant
Shares” means all shares of Common Stock issuable upon
exercise of the Warrants and/or any other securities issuable upon
exercise of the Warrants.
1.2 Other Definitional
Provisions.
(a) Use of Defined Terms. Unless
otherwise specified therein, all terms defined in this Agreement
shall have the defined meanings when used in the other Transaction
Documents or any certificate or
other document made or delivered pursuant hereto or
thereto.
(b) Accounting Terms. As used
herein and in the other Transaction Documents, and any certificate
or other document made or delivered pursuant hereto or thereto,
accounting terms relating to the Company not defined in
Section 1.1
and accounting terms partly
defined in Section 1.1, to the extent not
defined, shall have the respective meanings given to them under
GAAP (provided that
all terms of an accounting or financial nature used herein shall be
construed, and all computations of amounts referred to herein shall
be made without giving effect to (i) any election under Accounting
Standards Codification 825-10-25 (previously referred to as
Statement of Financial Accounting Standards 159) (or any other
Accounting Standards Codification or Financial Accounting Standard
having a similar result or effect) to value any Indebtedness or
other liabilities of the Company at “fair value”, as
defined therein, and (ii) any treatment of Indebtedness in respect
of convertible debt instruments under Accounting Standards
Codification 470-20 (or any other Accounting Standards Codification
or Financial Accounting Standard having a similar result or effect)
to value any such Indebtedness in a reduced or bifurcated manner as
described therein, and such Indebtedness shall at all times be
valued at the full stated principal amount thereof).
(c) Construction. The words
“hereof”,
“herein” and
“hereunder” and words of
similar import when used in this Agreement shall refer to this
Agreement as a whole and not to any particular provision of this
Agreement, and section, schedule and exhibit references are to this
Agreement unless otherwise specified. The meanings given to terms
defined herein shall be equally applicable to both the singular and
plural forms of such
terms.
(d) UCC Terms. Terms used in this
Agreement that are defined in the UCC shall, unless the context
indicates otherwise or are
otherwise defined in this Agreement, have the meanings provided for
by the UCC.
ARTICLE
2
PURCHASE
AND SALE
2.1 Closing. On the Closing Date,
upon the terms and subject to the conditions set forth herein, the
Company agrees to sell, and the Purchasers each agree to purchase,
the Securities in such amounts as indicated on Schedule 1
hereto. Each Purchaser shall deliver to the Company, via
wire transfer immediately available funds equal to the Purchase
Price, and the Company shall deliver to the Purchaser the Note on
the Closing Date, and the Company and the Purchaser shall deliver
the other items set forth in Section 2.2 deliverable at the
Closing. Upon satisfaction of the covenants and conditions set
forth in Sections 2.2 and 2.3, the Closing shall occur at the
offices of SMRH or such other location as the parties shall
mutually agree.
2.2 Deliveries.
(a) On or prior to the
Closing Date, the Company shall deliver or cause to be delivered to
the Purchasers the following:
(i)
this Agreement duly executed by the Company;
(ii)
a Security Agreement providing the Purchaser
with a lien on all of the assets of the Company, duly executed by
the Company;
(iii)
a Note
registered in the name of the Purchaser with such principal amount
as set forth on Schedule
1;
(iv)
the
Warrant, registered in the name of the Purchaser, to purchase such
number of shares of Common Stock as set forth on Schedule 1;
(v)
the
Registration Rights Agreement duly executed by the
Company;
(vi)
the Company shall have delivered to the Purchasers
a certificate, in the form acceptable to the Purchaser and its
counsel, executed by the secretary of the Company dated as of the
Closing Date, as to (i) the resolutions as adopted by the
Company’s board of directors in a form acceptable to the
Purchaser, (ii) Articles of Incorporation or other organizational
document of each of the Company, and (iii) the Bylaws or other
organizational document of the Company, each as in effect at the
applicable Closing;
(vii)
the Purchasers shall have received a certificate,
duly executed by the Chief Executive Officer of the Company, dated
as of each the Closing Date, confirming compliance with Section
2.3(a)(i) and (ii) below and as to such other matters as may be
reasonably requested by the Purchasers and its counsel in the form
acceptable to the Purchasers;
(viii)
a certificate evidencing the formation and good
standing of the Company in each such entity’s jurisdiction of
formation issued by the Secretary of State (or comparable office)
of such jurisdiction of formation as of a date within five (5) days
of applicable Closing Date;
(ix)
a certificate evidencing the Company’s
qualification as a foreign corporation and good standing issued by
the Secretary of State (or comparable office) of each jurisdiction
in which the Company conducts business and is required to so
qualify, as of a date within five (5) days of the applicable
Closing Date;
(x)
the Company shall have delivered to the Purchasers
a certified copy of its articles of incorporation, as amended, as
certified by the Colorado Secretary of State;
(xi)
an
opinion of counsel to the Company, in such form as reasonably
acceptable to the Purchasers;
(xii)
the
Commitment Shares, registered in the name of the Purchaser as set
forth on Schedule
1;
(xiii)
evidence showing
the initial closing of the KORR Financing on orprior to the Closing
Date;
(xiv)
the Subordination
Agreement, duly executed by the Company and KORR Value,
L.P.;
(xv)
the Lock-Up Agreement,
duly executed by the Company andKORR Value,
L.P.;
(xv)
the
Company and the Subsidiaries shall
have delivered to the Purchasers such other documents, instruments,
opinions or certificates relating to the transactions contemplated
by this Agreement as the Purchasers or its counsel may reasonably
request.
(b)
On or prior to the Closing, each Purchaser shall deliver or cause
to be delivered to the Company the following:
(i)
this
Agreement duly executed by such Purchaser;
(ii)
the
Purchase Price subject to the closing by wire transfer;
and
(iii)
the
Security Agreement duly executed by such Purchaser;
(iv)
the Registration
Rights Agreement duly executed by suchPurchaser; and
(v)
the Subordination Agreement, duly executed by such
Purchaser.
2.3 Conditions to Purchase the
Securities. Subject to the terms and conditions of this
Agreement, each Purchaser will at a Closing purchase from the
Company the Securities in the amounts and for the Purchase Price as
set forth on Schedule 1, provided the
following:
(a) The obligations of
the Company hereunder in connection with the Closing are subject to
the following conditions being met:
(i)
the
accuracy in all material respects (or, to the extent
representations or warranties are qualified by materiality or
Material Adverse Effect, in all respects) when made and on the date
of the Closing of the representations and warranties of the
Purchaser contained herein (unless as of a specific date therein in
which case they shall be accurate as of such date);
(ii)
all
obligations, covenants and agreements of each Purchaser required to
be performed at or prior to the date of the Closing shall have been
performed;
(iii)
the
delivery by each Purchaser of the items set forth in Section 2.2(b)
of this Agreement;
(iv)
there
shall have been no Material Adverse Effect with respect to the
Company since the date hereof; and
(v)
no statute, rule, regulation, executive order,
decree, ruling or injunction shall have been enacted, entered,
promulgated or endorsed by any court or other federal,
state, local or other governmental authority of competent jurisdiction that prohibits the
consummation of any of the transactions contemplated by the
Transaction Documents.
(b) The
obligations of each Purchaser hereunder in connection with the
Closing are subject to the following conditions being
met:
(i)
the
accuracy in all material respects (or, to the extent
representations or warranties are qualified by materiality or
Material Adverse Effect, in all respects) when made and on the date
of the Closing of the representations and warranties of the Company
contained herein (unless as of a specific date therein in which
case they shall be accurate as of such date);
(ii)
all
obligations, covenants and agreements of the Company required to be
performed at or prior to the Closing shall have been performed in
all material respects;
(iii)
the
delivery by the Company of the items set forth in Section 2.2(a) of
this Agreement;
(iv)
there
shall have been no Material Adverse Effect with respect to the
Company since the date hereof;
(v)
the Company shall have obtained all governmental,
regulatory and third party consents and approvals, if any,
necessary for the entry into the Transaction Documents and the sale
of the Securities;
(vi)
the closing of the transactions contemplated by
the terms of that certain share exchange agreement, dated on even
date herewith, by and between the Company and Transworld
Enterprises, Inc.;
(vi)
no statute, rule, regulation, executive order,
decree, ruling or injunction shall have been enacted, entered,
promulgated or endorsed by any court or other federal,
state, local or other governmental authority of competent jurisdiction that prohibits the
consummation of any of the transactions contemplated by the
Transaction Documents; and
(vii)
consummation of a
debt financing by the Company with KORR Value L.P., on
substantially the same terms as the securities issued pursuant to
this Agreement, the gross proceeds of which, in the aggregate,
equal $500,000, $250,000 of
which will be received on or prior to the Closing Date, and is
subordinated to the Notes pursuant to the Subordination Agreement
and matures at least 1 Business Day after the Notes (the
“KORR
Financing”).
2.4 Purchase Price and Payment of the
Purchase Price for the Securities. The Purchase Price for
the Securities to be purchased by the Purchasers at a Closing shall
be as set forth on Schedule 1 and shall be
paid at the Closing (less all of the Purchaser’s Expenses (as
defined below)) by the Purchaser by wire transfer of immediately
available funds to the Company in accordance with the
Company’s written wiring instructions, against delivery of
the Securities.
ARTICLE
3
REPRESENTATIONS
AND WARRANTIES; OTHER ITEMS
3.1 Representation and Warranties of the
Company. Except as set forth in
the Disclosure Schedules, which Disclosure Schedules shall be
deemed a part hereof and shall qualify any representation or
otherwise made herein to the extent of the disclosure contained in
the corresponding section of the Disclosure Schedules (but in no
event shall qualify any indemnity obligation of the Company
hereunder), the Company (which for purposes of this
Section 3.1
means the Company and all of its Subsidiaries) represents and
warrants to the Purchasers that on the Closing Date (unless as of a
specific date set forth below):
(a) Subsidiaries. All of the direct
and indirect subsidiaries of the Company and the locations thereof
are set forth on Schedule
3.1(a). Except as set forth on Schedule 3.1(a), the Company
owns, directly or indirectly, all of the capital stock or other
equity interests of each Subsidiary free and clear of any Liens,
and all of the issued and outstanding shares of capital stock or
other interests of each Subsidiary are validly issued and are fully
paid, non-assessable and free of preemptive and similar
rights to subscribe for or
purchase securities. Schedule 3.1(a) sets forth, as
of the Closing Date, the jurisdiction of organization and the
location of the Company’s and its subsidiaries’
executive offices and other places of business.
(b) Organization, Etc. The Company
and each of the Subsidiaries is duly organized, validly existing
and in good standing under the laws of the state of their
respective organization and are duly qualified and in good standing or has
applied for qualification as a foreign corporation authorized to do
business in each jurisdiction where, because of the nature of its
activities or properties, such qualification is required except
where the failure to be so qualified would not reasonably be
expected to have a Material Adverse Effect.
(c) Authorization: No Conflict. The
execution, delivery and performance of the Transaction Documents
and the transactions contemplated thereby by the Company,
including, but not limited to, the sale and issuance of the
Securities for the Purchase Price, subject to the Reverse Split,
the reservation for issuance of
the Underlying Shares required to be reserved pursuant to the terms
of the Notes and the Warrants, of the
issuance the Underlying Shares into which the Notes and Warrants
are convertible and/or exercisable and the issuance and sale of the
Commitment Shares (i) are within the Company’s
corporate powers, (ii) have been duly authorized by all necessary action by
or on behalf of the Company (and/or its stockholders to the extent
required by law), (iii) the Company has received all necessary
and/or required governmental, regulatory and other approvals and
consents (if any shall be required), (iv) do not and shall not
contravene or conflict with any provision of, or require any
consents under (1) any law, rule, regulation or ordinance, (2) the
Company’s organizational documents; and/or (3) any agreement,
credit facility, debt or other instrument (evidencing a Company or
Subsidiary debt or otherwise) or other understanding to which the
Company or any Subsidiary is a party or by which any property or
asset of the Company or any Subsidiary is bound or affected except
as would not reasonably be expected to have a Material Adverse
Effect, and (v) do not result in, or require, the creation or
imposition of any Lien and/or encumbrance on any of the
Company’s properties or revenues pursuant to any law, rule,
regulation or ordinance or otherwise.
(d) Validity and Binding Nature.
The Transaction Documents to which the Company is a party are the
legal, valid and binding obligations of the Company, enforceable
against the Company in accordance with their respective terms,
except as enforceability may be limited by bankruptcy, insolvency,
reorganization and other similar laws of general application
affecting the rights and remedies of creditors and by general
equitable principles (whether enforcement is sought by proceedings
in equity or at law).
(e) Title to Assets. The Company
and the Subsidiaries have good and marketable title in fee simple
to all real property owned by them and good and marketable title in
all personal property owned by them that is material to the
business of the Company and the Subsidiaries, in each case free and clear
of all Liens, except for (i) Liens as do not materially affect the
value of such property and do not materially interfere with the use
made and proposed to be made of such property by the Company and
the Subsidiaries, (ii) Liens for the payment of federal, state or
other taxes, for which appropriate reserves have been made therefor
in accordance with GAAP and the payment of which is not delinquent,
and (iii) Permitted Liens. Any real property and facilities held
under lease by the Company and the Subsidiaries are held by them
under valid, subsisting and enforceable leases with which the
Company and the Subsidiaries are in compliance.
(f) Compliance.
Neither the Company nor any Subsidiary: (i) is in default under or
in violation of (and no event has occurred that has not been waived
that, with notice or lapse of time or both, would result in a
default by the Company or any Subsidiary under), nor has the
Company or any Subsidiary received notice of a claim that it is in
default under or that it is in violation of, any indenture, loan or
credit agreement or any other agreement or instrument to which it
is a party or by which it or any of its properties is bound
(whether or not such default or violation has been waived), (ii) is
in violation of any judgment, decree or order of any court,
arbitrator or other governmental authority or (iii) is or has been
in violation of any statute, rule, ordinance or regulation of any
governmental authority, including without limitation all foreign,
federal, state and local laws relating to securities, corporate
law, taxes, environmental protection, occupational health and
safety, product quality and safety and employment and labor
matters, except in each case as could not have or reasonably be
expected to result in a Material Adverse
Effect.
(g) Taxes. Except for matters that
would not, individually or in the aggregate, have or reasonably be
expected to result in a Material Adverse Effect, the Company and
its Subsidiaries each (i) has made or filed all United States
federal, state and local income and all foreign income and
franchise tax returns, reports and declarations required by any
jurisdiction to which it is subject, (ii) has paid all taxes and
other governmental assessments and charges that are material in
amount, shown or determined to be due on such returns, reports and
declarations and (iii) has set aside on its books provision
reasonably adequate for the payment of all material taxes for
periods subsequent to the periods to which such returns, reports or
declarations apply. There are no unpaid taxes in any material
amount claimed to be due by the taxing authority of any
jurisdiction, and the officers of the Company or of any Subsidiary
know of no basis for any such claim.
(h) Licenses and
Permits. The Company possesses
all certificates, authorizations, consents, approvals, orders,
licenses and permits issued by the appropriate federal, state or
foreign regulatory authorities (collectively, the
“Permits”),
including the FDA and any other state, federal or foreign agencies
or bodies engaged in the regulation of pharmaceuticals or
biohazardous materials, amongst other, necessary to conduct its
business as now conducted. All of such Permits are valid and in
full force and effect. There is no pending or, to the
Company’s knowledge, threatened action, suit, proceeding or
investigation that individually or in the aggregate would
reasonably be expected to lead to the revocation, modification,
termination, suspension or any other impairment of the rights of
the holder of any such Permit.
(i) Investment Company. The Company
is not (i) an “investment company” or a company
“controlled”, whether directly or indirectly, by an
“investment company”, within the meaning of the
Investment Company Act of 1940, as amended; or (ii) engaged principally, or as one of its
important activities, in the business of extending credit for the
purpose of purchasing or carrying margin stock (within the meaning
of Regulation U of the Board of Governors of the Federal Reserve
System).
(j) Absence of Defaults
and Conflicts.
The Company
is not (i) in violation of its charter, by-laws or similar
incorporation or organizational documents or (ii) in violation
or default in the performance or observance of any obligation,
agreement, covenant or condition contained in any contract,
indenture, mortgage, deed of trust, loan or credit agreement, note,
lease or other agreement or instrument to which the Company is a
party or by which it may be bound, or to which any of the property
or assets of the Company is subject (collectively,
“Agreements
and Instruments”),
except in the case of clause (ii), for such violations and defaults
that would not result in a Material Adverse Effect on the Company;
and the execution, delivery and performance of this Agreement and
the consummation of the transactions contemplated in this
Agreement, and compliance by the Company with its obligations under
this Agreement, do not and will not, whether with or without the
giving of notice or passage of time or both, conflict with or
result in a breach of any of the terms and provisions of, or
constitute a default or Repayment Event (as defined below) under,
or result in the creation or imposition of any lien, charge or
encumbrance upon any property or assets of the Company pursuant to,
the Agreements and Instruments, nor will such action result in any
violation of the provisions of the charter, by-laws or similar
organizational documents of the Company or any applicable law,
statute, rule, regulation, judgment, order, writ or decree of any
government, government instrumentality or court, domestic or
foreign, having jurisdiction over the Company or any of its assets,
properties or operations, except in each case (other than with
respect to such charter, by-laws or similar
organizational documents of the Company) for such conflicts,
violations, breaches or defaults which would not reasonably be
expected to result in a Material Adverse Effect on the Company. As
used herein, a “Repayment
Event”
means any
event or condition which gives the holder of any note, debenture or
other evidence of indebtedness that is material to the operations
or financial results of the Company (or any person acting on such
holder’s behalf) the right to require the repurchase,
redemption or repayment of all or a portion of such indebtedness by
the Company.
(k) Foreign Corrupt
Practices Act. Neither the Company
nor, to the Company’s knowledge, any of its affiliates,
directors, officers, employees, agents or other person acting on
behalf of the Company is aware of or has taken any action, directly
or indirectly, that would result in a material violation by such
person of the Foreign Corrupt Practices Act of 1977, as amended,
and the rules and regulations thereunder (the “FCPA”),
including, without limitation, making use of the mails or any means
or instrumentality of interstate commerce corruptly in furtherance
of an offer, payment, promise to pay or authorization of the
payment of money, or other property, gift, promise to give, or
authorization of the giving of anything of value to any
“foreign official” (as such term is defined in the
FCPA) or any foreign political party or official thereof or any
candidate for foreign political office, in contravention of the
FCPA and the Company and, to the Company’s knowledge, its
affiliates have conducted their businesses in material compliance
with the FCPA and have instituted and maintain policies and
procedures designed to ensure, and which are reasonably expected to
continue to ensure, continued compliance
therewith.
(l) Rule 506(d) Bad Actor Disqualification
Representations and Covenants.
(i) No Disqualification Events.
Neither the Company, nor any of its predecessors, affiliates, any
manager, executive officer, other officer of the Company
participating in the offering, any beneficial owner (as that term
is defined in Rule 13d-3 under the Exchange Act) of 20% or more of
the Company’s outstanding voting equity securities,
calculated on the basis of voting power, nor any promoter (as that
term is defined in Rule 405 under the Securities Act) connected
with the Company in any capacity as of the date of this Agreement
and on the Closing Date (each, a “Company Covered Person”
and, together, “Company Covered Persons”)
is subject to any of the “Bad Actor” disqualifications
described in Rule 506(d)(1)(i) to (viii) under the Securities Act
(a “Disqualification
Event”), except for a Disqualification Event covered
by Rule 506(d)(2) or (d)(3). The Company has exercised reasonable
care to determine (A) the identity of each person that is a
Company Covered Person; and (B) whether any Company Covered
Person is subject to a Disqualification Event. The Company will
comply with its disclosure obligations under Rule
506(e).
(ii) Other
Covered Persons. The Company is not aware of any person
(other than any Company Covered Person) who has been or will be
paid (directly or indirectly) remuneration in connection with the
purchase and sale of the Notes, and/or the Commitment Shares who is
subject to a Disqualification Event (each, an “Other Covered
Person”).
(iii) Reasonable
Notification Procedures. With respect to each Company
Covered Person, the Company has established procedures reasonably
designed to ensure that the Company receives notice from each such
Company Covered Person of (A) any Disqualification Event relating
to that Company Covered Person, and (B) any event that would, with
the passage of time, become a Disqualification Event relating to
that Company Covered Person; in each case occurring up to and
including the Closing Date.
(iv) Notice
of Disqualification Events. The Company will notify the
Purchaser immediately in writing upon becoming aware of (A) any
Disqualification Event relating to any Company Covered Person and
(B) any event that would, with the passage of time, become a
Disqualification Event relating to any Company Covered Person
and/or Other Covered Person.
(m) Accuracy of Information, etc.
No statement or information contained in this Agreement, any other
Transaction Document or any other document, certificate or
statement furnished to the Purchaser by or on behalf of the Company
in writing for use in connection with the transactions contemplated
by this Agreement and/or the other Transaction Documents contained,
as of the date such statement, information, document or certificate
was made or furnished, as the case may be, any untrue statement of
a material fact or omitted to state a material fact necessary to
make the statements contained herein or therein, taken as a whole,
not materially misleading. There is no fact known to the Company
that would reasonably be expected to have a Material Adverse Effect
that has not been expressly disclosed herein, in the other
Transaction Documents, or in any other documents, certificates and
statements furnished to the Purchaser for use in connection with
the transactions contemplated hereby and by the other
Documents.
(n) Solvency.
Based on the consolidated financial condition of the Company as of
the Closing Date, after giving effect to the receipt by the Company
of the proceeds from the sale of the Securities hereunder: (i) the
fair saleable value of the Company’s assets exceeds the
amount that will be required to be paid on or in respect of the
Company’s existing debts and other liabilities (including
known contingent liabilities) as they mature, (ii) the
Company’s assets do not constitute unreasonably small capital
to carry on its business as now conducted and as proposed to be
conducted including its capital needs taking into account the
particular capital requirements of the business conducted by the
Company, consolidated and projected capital requirements and
capital availability thereof, and (iii) the current cash flow of
the Company, together with the proceeds the Company would receive,
were it to liquidate all of its assets, after taking into account
all anticipated uses of the cash, would be sufficient to pay all
amounts on or in respect of its liabilities when such amounts are
required to be paid. The Company does not intend to incur debts
beyond its ability to pay such debts as they mature (taking into
account the timing and amounts of cash to be payable on or in
respect of its debt). The Company has no knowledge of any facts or
circumstances which lead it to believe that it will file for
reorganization or liquidation under the bankruptcy or
reorganization laws of any jurisdiction within one year from the
Closing Date. Schedule 3.1(n)
sets forth
as of the date hereof all outstanding secured and unsecured
Indebtedness of the Company or any Subsidiary, or for which the
Company or any Subsidiary has commitments. Neither the Company nor
any Subsidiary is in default with respect to any
Indebtedness.
(o) Transactions With
Affiliates and Employees. None of the officers
or directors of the Company or any Subsidiary and, to the knowledge
of the Company, none of the employees of the Company or any
Subsidiary is presently a party to any transaction with the Company
or any Subsidiary (other than for services as employees, officers
and directors), including any contract, agreement or other
arrangement providing for the furnishing of services to or by,
providing for rental of real or personal property to or from
providing for the borrowing of money from or lending of money to,
or otherwise requiring payments to or from any officer, director or
such employee or, to the knowledge of the Company, any entity in
which any officer, director, or any such employee has a substantial
interest or is an officer, director, trustee, stockholder, member
or partner, in each case in excess of $120,000 other than for: (i)
payment of salary or consulting fees for services rendered, (ii)
reimbursement for expenses incurred on behalf of the Company and
(iii) other employee benefits, including stock option agreements
under any stock option plan of the Company.
(p) Intellectual Property. The
Company has, or has rights to use, all patents, patent
applications, trademarks, trademark applications, service marks,
trade names, trade secrets, inventions, copyrights, licenses and
other intellectual property rights and similar rights as described
on Schedule 3.1(p) as necessary or required for use in connection
with its business and which the failure to so have would reasonably
be expected to have a Material Adverse Effect (collectively, the
“Intellectual
Property Rights”). The Company has not received a
notice (written or otherwise) that any material Intellectual
Property Right has expired, terminated or been abandoned, or is
expected to expire or terminate or be abandoned. The Company has
not received, since the date of the Balance Sheet Date, a written
notice of a claim or otherwise has any knowledge that the
Intellectual Property Rights violate or infringe upon the rights of
any Person, except as would not have or reasonably be expected to
have a Material Adverse Effect. To the knowledge of the Company,
all such Intellectual Property Rights are enforceable and there is
no existing infringement by another Person of any of the
Intellectual Property Rights. The Company has taken reasonable
security measures to protect the secrecy, confidentiality and value
of all of its intellectual property, except where failure to do so
would not, individually or in the aggregate, reasonably be expected
to have a Material Adverse Effect.
(q) USA Patriot Act. The Company is
in compliance, in all material respects, with (i) the Trading with
the Enemy Act, as amended, and each of the foreign assets control
regulations of the United States Treasury Department (31 C.F.R.,
Subtitle B, Chapter V, as amended) and any other enabling
legislation or executive order relating thereto, and (ii) the USA
Patriot Act (Title III of Pub. L. 107-56, signed into law on
October 26, 2001) (the “Act”). No part of the
proceeds of the Notes will be used, directly or indirectly, for any
payments to any governmental official or employee, political party,
official of a political party, candidate for political office, or
anyone else acting in an official capacity, in order to obtain,
retain or direct business or obtain any improper advantage, in
violation of the United States Foreign Corrupt Practices Act of
1977, as amended.
(r) Office of Foreign
Assets Control. Neither the
Company nor any Subsidiary nor, to the Company's knowledge, any
director, officer, agent, joint venture employee or affiliate of
the Company or any Subsidiary is currently, or in the past 5 years,
been subject to any U.S. sanctions administered by the Office of
Foreign Assets Control of the U.S. Treasury Department
(“OFAC”).
(s) Filings, Consents and
Approvals. Except as set forth
on Schedule
3.1(s), the Company is not
required to obtain any consent, waiver, authorization or order of,
give any notice to, or make any filing or registration with, any
court or other federal, state, local or other governmental
authority or other Person in connection with the execution,
delivery and performance by the Company of the Transaction
Documents, other than: (i) the filings required pursuant to the
Registration Rights Agreement and the declaration of effectiveness
by the SEC of the Registration Statement (ii) the notice and/or
application(s) to each applicable Trading Market for the issuance
and sale of the Securities and the listing of the Conversion Shares
and Commitment Shares for trading thereon in the time and manner
required thereby, and (iii) the filing of Form D with the
Commission and such filings as are required to be made under
applicable state securities laws (collectively, the
“Required
Approvals”).
(t) Authorization; Enforcement. All
corporate action on the part of the Company, its officers,
directors and stockholders necessary for the authorization,
execution and delivery of the Transaction Documents and the
performance of all obligations of the Company under the Transaction
Documents and have been taken on or prior to the date hereof. Each
of the Transaction Documents has been duly executed by the Company
and, when delivered in accordance with the terms hereof and
thereof, will constitute the valid and binding obligation of the
Company enforceable against the Company in accordance with its
terms, except: (i) as limited by applicable bankruptcy, insolvency,
reorganization, moratorium and other laws of general application
affecting enforcement of creditors’ rights generally, (ii) as
limited by general equitable principles regardless of whether such
enforcement is considered in a proceeding in equity or at law,
(iii) as limited by laws relating to the availability of specific
performance, injunctive relief or other equitable remedies and (iv)
insofar as indemnification and contribution provisions may be
limited by applicable law.
(u) Valid Issuance of Securities.
Each of the Notes has been duly authorized and, when issued and
paid for in accordance with this Agreement, will be duly and
validly issued, fully paid and nonassessable, free and clear of all
Liens and all restrictions on transfer other than those expressly
imposed by the federal securities laws and vest in the Purchaser
full and sole title and power to the Notes purchased hereby by the
Purchaser, free and clear of all Liens, and restrictions on
transfer other than those imposed by the federal securities laws.
All Conversion Shares, when issued pursuant to conversion of the
Notes, and all Commitment Shares, when issued pursuant to this
Agreement, will be duly and validly issued, fully paid and
nonassessable, will be free and clear of all Liens and vest in the
holder full and sole title and power to such securities. The
Company has reserved from its duly authorized unissued Common
Stock, the Required Minimum (as defined in the Notes), which
Required Minimum shall be continuously determined by the Company to
ensure that the Required Minimum is in reserve with the Transfer
Agent at all times. The Notes, the Conversion Shares, and the
Commitment Shares shall sometimes be collectively referred to as
the “Securities.”
(v) Offering. The offer and sale of
the Notes and the Commitment Shares, as contemplated by this
Agreement, are exempt from the registration requirements of the
Securities Act, and the qualification or registration requirements
of state securities laws or other applicable blue sky laws. Neither
the Company nor any authorized agent acting on its behalf will take
any action hereafter that would cause the loss of such
exemptions.
(w) Capitalization and Voting
Rights. The capitalization of
the Company is as set forth on Schedule
3.1(w), which
Schedule
3.1(w) shall also include the
number of shares of Common Stock owned beneficially, and of record,
by Affiliates of the Company as of the date hereof. The
authorized capital stock of the Company and all securities of the
Company issued and outstanding are set forth on Schedule 3.1(w) as
of the dates reflected therein. All of the outstanding shares of
Common Stock and other securities of the Company have been duly
authorized and validly issued, and are fully paid and
nonassessable. Except as set forth
on Schedule
3.1(w), no Person has any
right of first refusal, preemptive right, right of participation,
or any similar right to participate in the transactions
contemplated by the Transaction Documents. Except as set forth on Schedule 3.1(w), there are no
agreements or arrangements under which the Company is obligated to
register the sale of any of the Company’s securities under
the Securities Act. Except as set forth on Schedule 3.1(w), no shares of
Common Stock and/or other securities of the Company are entitled to
preemptive rights and there are no outstanding debt securities and
no contracts, commitments, understandings, or arrangements by which
the Company is or may become bound to issue additional shares of
the capital stock and/or other securities of the Company or
options, warrants, scrip, rights to subscribe to, calls or
commitments of any character whatsoever relating to, or securities
or rights convertible into or exchangeable for, any shares of
capital stock of the Company other than those issued or granted in
the ordinary course of business pursuant to the Company’s
equity incentive and/or compensatory plans or arrangements. Except
for customary transfer restrictions contained in agreements entered
into by the Company to sell restricted securities and/or as set
forth on Schedule
3.1(w), the Company is not a party to, and it has no
knowledge of, any agreement restricting the voting or transfer of
any shares of the capital stock and/or other securities of the
Company. Except as set forth on Schedule 3.1(w), the offer and
sale of all capital stock, convertible or exchangeable securities,
rights, warrants, options and/or any other securities of the
Company when any such securities of the Company were issued
complied with all applicable federal and state securities laws, and
no current and/or prior holder of any securities of the Company has
any right of rescission or damages or any “put” or
similar right with respect thereto that would reasonably be
expected to have a Material Adverse Effect. Except as set forth on
Schedule 3.1(w),
there are no securities or instruments of the Company containing
anti-dilution or similar provisions that will be triggered by the
issuance and/or sale of the Securities and/or the consummation of
the transactions described herein or in any of the other
Transaction Documents.
(x) Shell Company Status; Financial
Statements. The Company has been an issuer subject to Rule
144(i) under the Securities Act. The unaudited balance sheet of the
Company as of April 30, 2020 is included in Schedule 3.1(x) hereto. The
financial statements of the Company included on Schedule 3.1(x) have been
prepared in accordance with GAAP, except as may be otherwise
specified in such financial statements or the notes thereto and
except that unaudited financial statements may not contain all
footnotes required by GAAP, and fairly present in all material
respects the financial position of the Company and its consolidated
Subsidiaries as of and for the dates thereof and the results of
operations and cash flows for the periods then ended, subject to
normal, immaterial, year-end audit adjustments. For purposes of
this Section 3.1, April 30, 2020 is referred to as the
“Balance Sheet
Date”.
(y) Material Changes; Undisclosed Events,
Liabilities or Developments. Since the Balance Sheet Date:
(i) there has been no event, occurrence or development that has had
or that could reasonably be expected to result in a Material
Adverse Effect, (ii) the Company has not incurred any liabilities
(contingent or otherwise) other than (A) trade payables and accrued
expenses incurred in the ordinary course of business consistent
with past practice and (B) liabilities not required to be reflected
in the Company’s financial statements pursuant to GAAP or
disclosed in filings made with the Commission, (iii) the Company
has not altered its method of accounting, (iv) the Company has not
declared or made any dividend or distribution of cash or other
property to its stockholders or purchased, redeemed or made any
agreements to purchase or redeem any shares of its capital stock
and (v) the Company has not issued any equity securities to any
officer, director or Affiliate, except pursuant to existing Company
stock option plans. Except for the issuance of the Securities
contemplated by this Agreement or as set forth on Schedule 3.1(y), no event,
liability, fact, circumstance, occurrence or development has
occurred or exists or is reasonably expected to occur or exist with
respect to the Company or its Subsidiaries or their respective
businesses, properties, operations, assets or financial condition,
that would be required to be disclosed by the Company under
applicable securities laws at the time this representation is made
or deemed made that has not been publicly disclosed at least 1
Trading Day prior to the date that this representation is
made.
(z) Litigation.
Except as
set forth on Schedule
3.1(z), there is no action,
suit, inquiry, notice of violation, proceeding or investigation
pending or, to the knowledge of the Company, threatened against or
affecting the Company, any Subsidiary or any of their respective
properties before or by any court, arbitrator, governmental or
administrative agency or regulatory authority (federal, state,
county, local or foreign) (collectively, an
“Action”)
which (i) adversely affects or challenges the legality, validity or
enforceability of any of the Transaction Documents or the
Securities or (ii) could, if there were an unfavorable decision,
have or reasonably be expected to result in a Material Adverse
Effect. Neither the Company nor any Subsidiary, nor any director or
officer thereof, is or has been the subject of any Action involving
a claim of violation of or liability under federal or state
securities laws or a claim of breach of fiduciary duty. There has
not been, and to the knowledge of the Company, there is not pending
or contemplated, any investigation by the Commission involving the
Company or any current or former director or officer of the
Company. The Commission has not issued any stop order or other
order suspending the effectiveness of any registration statement
filed by the Company or any Subsidiary under the Exchange Act or
the Securities Act.
(aa) Disclosure.
Except with respect to the material terms and conditions of the
transactions contemplated by the Transaction Documents, the Company
confirms that neither it nor any other Person acting on its behalf
has provided any Purchaser or its respective agents or counsel with
any information that constitutes material, non-public information.
The Company understands that the Purchasers may rely on the
Transaction Documents, the information included therein, including,
but not limited to, the foregoing representation in purchasing the
Securities. All of the disclosure furnished by or on behalf of the
Company to the Purchaser in the Transaction Documents regarding,
among other matters relating to the Company, its business and the
transactions contemplated in the Transaction Documents, is true and
correct in all material respects as of the date made and does not
contain any untrue statement of a material fact or omit to state
any material fact necessary in order to make the statements made
therein, in light of the circumstances under which they were made,
not misleading. The Company acknowledges and agrees that none of
the Purchasers makes nor has made any representations or warranties
with respect to the transactions contemplated in the Transaction
Documents other than those specifically set forth in Section 3.2
hereof.
(bb) No
Integrated Offering. Assuming the accuracy of the
representations and warranties set forth in Section 3.2, neither the
Company, nor any of its affiliates, nor any Person acting on its or
their behalf has, directly or indirectly, made any offers or sales
of any security or solicited any offers to buy any security, under
circumstances that would cause the issuance and/or sale of the
Securities to be integrated with prior offerings of securities by
the Company for purposes of (i) the Securities Act that would
require the registration of any such Securities and/or any other
securities of the Company under the Securities Act, or (ii) any
stockholder-approval provisions of any Trading Market on which any
of the securities of the Company are listed, eligible for quotation
and/or designated.
(cc) Insurance.
The Company
is insured by insurers of recognized financial responsibility
against such losses and risks and in such amounts as are prudent
and customary in the business in which it is engaged; the Company
has not been refused any coverage sought or applied for; and the
Company does not have any reason to believe that it will not be
able to renew its existing insurance coverage as and when such
coverage expires or to obtain similar coverage from similar
insurers as may be necessary to continue its business at a cost
that would not have a Material Adverse Effect on the
Company.
(dd) Regulation
M Compliance. The Company has not, and to its knowledge no
one acting on its behalf has, (i) taken, directly or indirectly,
any action designed to cause or to result in the stabilization or
manipulation of the price of any security of the Company to
facilitate the sale or resale of any of the Securities, (ii) sold,
bid for, purchased, or paid any compensation for soliciting
purchases of, any of the Securities, or (iii) paid or agreed to pay
to any Person any compensation for soliciting another to purchase
any other securities of the Company.
(ee) Registration
Rights. Except as set forth
on Schedule
3.1(ee), no Person has any
right to cause the Company to effect the registration under the
Securities Act of any securities of the Company or any
Subsidiaries.
(ff) Labor
Relations. No labor dispute
exists or, to the knowledge of the Company, is imminent with
respect to any of the employees of the Company, which could
reasonably be expected to result in a Material Adverse Effect. None
of the Company’s or its Subsidiaries’ employees is a
member of a union that relates to such employee’s
relationship with the Company or such Subsidiary, and neither the
Company nor any of its Subsidiaries is a party to a collective
bargaining agreement, and the Company and its Subsidiaries believe
that their relationships with their employees are good. To the
knowledge of the Company, no executive officer of the Company or
any Subsidiary, is, or is now expected to be, in violation of any
material term of any employment contract, confidentiality,
disclosure or proprietary information agreement or non-competition
agreement, or any other contract or agreement or any restrictive
covenant in favor of any third party, and the continued employment
of each such executive officer does not subject the Company or any
of its Subsidiaries to any liability with respect to any of the
foregoing matters. The Company and its Subsidiaries are in
compliance with all U.S. federal, state, local and foreign laws and
regulations relating to employment and employment practices, terms
and conditions of employment and wages and hours, except where the
failure to be in compliance could not, individually or in the
aggregate, reasonably be expected to have a Material Adverse
Effect.
(gg) Dilutive
Effect. The Company understands and acknowledges that the
number of Underlying Shares issuable upon conversion and/or
exercise of the Notes and/or Warrants, pursuant to the terms
thereof, will increase in certain circumstances. The Company
further acknowledges that its obligations to issue Underlying
Shares pursuant to the terms of the Notes and/or Warrants in
accordance with this Agreement, the Notes and the Warrants is
absolute and unconditional regardless of the dilutive effect that
any such issuances may have on the percentage ownership interests
of other stockholders of the Company.
(hh) Application
of Takeover Protections; Rights Agreement. The Company
and its board of directors have taken all necessary action, if any,
in order to render inapplicable any control share acquisition,
business combination, poison pill (including any distribution under
a rights agreement) or other similar anti-takeover provisions under
the Company’s articles of incorporation, as amended, or the
laws of the jurisdiction of its formation that are or could become
applicable to the Purchaser as a result of the transactions
contemplated by this Agreement and/or the other Transaction
Documents, including, without limitation, the Company’s
issuance of the Securities and the Purchaser’s ownership of
the Securities. The Company has not adopted a stockholder rights
plan or similar arrangement relating to accumulations of beneficial
ownership of Common Stock or a change in control of the
Company.
(ii) Manipulation
of Price. The Company has not, and to its knowledge no one
acting on its behalf has, (i) taken, directly or indirectly, any
action designed to cause or to result, or that could reasonably be
expected to cause or result, in the stabilization or manipulation
of the price of any security of the Company to facilitate the sale
or resale of any of the Securities, (ii) sold, bid for, purchased,
or paid any compensation for soliciting purchases of, any of the
Securities, or (iii) paid or agreed to pay to any person any
compensation for soliciting another to purchase any other
securities of the Company.
(jj) DTC
Eligible. The Common Stock is DTC eligible and DTC has not
placed a “freeze” or a “chill” on the
Common Stock and the Company has no reason to believe that DTC has
any intention to make the Common Stock not DTC eligible, or place a
“freeze” or “chill” on the Common Stock. No
federal or state regulatory authority has indicated that it will
prohibit the listing of the Company’s securities based upon
its prior business in the cannabis or cannabis-related markets nor
will the Purchasers be prohibited from depositing, clearing or
settling the Securities, including through the DTC or
otherwise, on account of the Company’s prior business in the
cannabis or cannabis-related markets.
(kk) Listing
and Maintenance Requirements. The Company has not, in the 12 months preceding
the date hereof, received notice from any Trading Market on which
the Common Stock is or has been listed or quoted to the effect that
the Company is not in compliance with the listing or maintenance
requirements of such Trading Market. The Common Stock is
eligible for quotation on the Principal Market and the Company has
no reason to believe that the Principal Market has any intention of
delisting the Common Stock from the Principal Market. The issuance and sale of the Securities hereunder
does not contravene the rules and regulations of the Trading
Market. All Underlying Shares have been approved, if so
required, for listing or quotation on the Trading Market, subject
only to notice of issuance.
(ll) No
General Solicitation. Neither the Company, nor any of
its affiliates, nor, to the knowledge of the Company, any Person
acting on its behalf, has engaged in any form of general
solicitation or general advertising (within the meaning of
Regulation D) in connection with the offer or sale of the
Securities.
(mm) Acknowledgment
Regarding the Purchaser’s Purchase of Securities.
The Company acknowledges and agrees that the Purchaser is
acting solely in the capacity of an arm’s length purchaser
with respect to the other Transaction Documents and the
transactions contemplated hereby and thereby and that such
Purchaser is not (i) an officer or director of the Company,
(ii) an Affiliate of the Company or (iii) to the
knowledge of the Company, a “beneficial owner” of more
than 10% of the shares of Common Stock (as defined for purposes of
Rule 13d-3 of the Exchange Act. The Company further
acknowledges that the Purchaser is not acting as a financial
advisor or fiduciary of the Company (or in any similar capacity)
with respect to the Transaction Documents and the transactions
contemplated hereby and thereby, and any advice given by such
Purchaser or any of its representatives or agents in connection
with the Transaction Documents and the transactions contemplated
hereby and thereby is merely incidental to such Purchaser’s
purchase of the Securities. The Company further represents to
the Purchaser that the Company’s decision to enter into the
Transaction Documents has been based solely on the independent
evaluation by the Company and its representatives.
(nn) Off-Balance
Sheet Arrangements. There is no transaction,
arrangement, or other relationship between the Company and an
unconsolidated or other off-balance sheet entity that is required
to be disclosed by the Company in its Exchange Act filings and is
not so disclosed or that otherwise would be reasonably likely to
have a Material Adverse Effect.
(oo) Certain
Fees. No brokerage or
finder’s fees or commissions are or will be payable by the
Company or any Subsidiaries to any broker, financial advisor or
consultant, finder, placement agent, investment banker, bank or
other Person with respect to the transactions contemplated by the
Transaction Documents. The Purchaser shall have no obligation with
respect to any fees or with respect to any claims made by or on
behalf of other Persons for fees of a type contemplated in this
Section that may be due in connection with the transactions
contemplated by the Transaction Documents.
(pp) Money
Laundering. The operations of the
Company and its Subsidiaries are and have been conducted at all
times in compliance with applicable financial record-keeping and
reporting requirements, including but not limited to, Currency and
Foreign Transactions Reporting Act of 1970, as amended, applicable
money laundering statutes and applicable rules and regulations
thereunder (collectively, the “Money Laundering
Laws”), and no Action
or Proceeding by or before any court or governmental agency,
authority or body or any arbitrator involving the Company or any
Subsidiary with respect to the Money Laundering Laws is pending or,
to the knowledge of the Company or any Subsidiary,
threatened.
(qq) Environmental
Laws. The Company and its
Subsidiaries, to the best of the Company’s knowledge, (i) are
in compliance with all federal, state, local and foreign laws
relating to pollution or protection of human health or the
environment (including ambient air, surface water, groundwater,
land surface or subsurface strata), including laws relating to
emissions, discharges, releases or threatened releases of
chemicals, pollutants, contaminants, or toxic or hazardous
substances or wastes (collectively, “Hazardous
Materials”) into the
environment, or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or
handling of Hazardous Materials, as well as all authorizations,
codes, decrees, demands, or demand letters, injunctions, judgments,
licenses, notices or notice letters, orders, permits, plans or
regulations, issued, entered, promulgated or approved thereunder
(“Environmental
Laws”); (ii) have
received all permits licenses or other approvals required of them
under applicable Environmental Laws to conduct their respective
businesses; and (iii) are in compliance with all terms and
conditions of any such permit, license or approval where in each
clause (i), (ii) and (iii), the failure to so comply could be
reasonably expected to have, individually or in the aggregate, a
Material Adverse Effect.
(rr) Seniority.
As of the Closing Date, no Indebtedness or other claim against the
Company is senior to the Notes in right of payment, whether with
respect to interest or upon liquidation or dissolution, or
otherwise, other than indebtedness secured by purchase money
security interests (which is senior only as to underlying assets
covered thereby) and capital lease obligations (which is senior
only as to the property covered thereby).
3.2 Representation and Warranties of The
Purchaser. Each Purchaser, severally and not jointly, hereby
represents and warrants as of the date hereof and as of the Closing
Date to the Company as follows:
(a) Organization;
Authority. Such Purchaser is
either an individual or an entity duly incorporated or formed,
validly existing and in good standing under the laws of the
jurisdiction of its incorporation or formation with full right,
corporate, partnership, limited liability company or similar power
and authority to enter into and to consummate the transactions
contemplated by the Transaction Documents and otherwise to carry
out its obligations hereunder and thereunder. The execution and
delivery of the Transaction Documents and performance by such
Purchaser of the transactions contemplated by the Transaction
Documents have been duly authorized by all necessary corporate,
partnership, limited liability company or similar action, as
applicable, on the part of such Purchaser. Each Transaction
Document to which it is a party has been duly executed by such
Purchaser, and when delivered by such Purchaser in accordance with
the terms hereof, will constitute the valid and legally binding
obligation of such Purchaser, enforceable against it in accordance
with its terms, except: (i) as limited by general equitable
principles and applicable bankruptcy, insolvency, reorganization,
moratorium and other laws of general application affecting
enforcement of creditors’ rights generally, (ii) as limited
by laws relating to the availability of specific performance,
injunctive relief or other equitable remedies and (iii) insofar as
indemnification and contribution provisions may be limited by
applicable law.
(b) Own
Account. Such Purchaser
understands that the Securities are “restricted
securities” and have not been registered under the Securities
Act or any applicable state securities law and is acquiring the
Securities as principal for its own account and not with a view to
or for distributing or reselling such Securities or any part
thereof in violation of the Securities Act or any applicable state
securities law, has no present intention of distributing any of
such Securities in violation of the Securities Act or any
applicable state securities law and has no direct or indirect
arrangement or understandings with any other persons to distribute
or regarding the distribution of such Securities in violation of
the Securities Act or any applicable state securities law (this
representation and warranty not limiting such Purchaser’s
right to sell the Securities pursuant to an effective registration
statement or otherwise in compliance with applicable federal and
state securities laws). Such Purchaser is acquiring the Securities
hereunder in the ordinary course of its
business.
(c) Purchaser
Status. At the time such
Purchaser was offered the Securities, it was, and as of the date
hereof it is an “accredited investor” as defined in
Rule 501(a) under the Securities Act.
(d) Experience of Such
Purchaser. Such Purchaser,
either alone or together with its representatives, has such
knowledge, sophistication and experience in business and financial
matters so as to be capable of evaluating the merits and risks of
the prospective investment in the Securities, and has so evaluated
the merits and risks of such investment. Such Purchaser is able to
bear the economic risk of an investment in the Securities and, at
the present time, is able to afford a complete loss of such
investment.
(e) General
Solicitation. Such Purchaser is
not, to such Purchaser’s knowledge, purchasing the Securities
as a result of any advertisement, article, notice or other
communication regarding the Securities published in any newspaper,
magazine or similar media or broadcast over television or radio or
presented at any seminar or any other general solicitation or
general advertisement.
(f) Access to
Information. Such Purchaser
acknowledges that it has had the opportunity to review the
Transaction Documents (including all exhibits and schedules
thereto) and has been afforded (i) the opportunity to ask such
questions as it has deemed necessary of, and to receive answers
from, representatives of the Company concerning the terms and
conditions of the offering of the Securities and the merits and
risks of investing in the Securities; (ii) access to information
about the Company and its financial condition, results of
operations, business, properties, management and prospects
sufficient to enable it to evaluate its investment; and (iii) the
opportunity to obtain such additional information that the Company
possesses or can acquire without unreasonable effort or expense
that is necessary to make an informed investment decision with
respect to the investment.
(g) Certain Transactions and
Confidentiality. Such Purchaser has not directly or
indirectly, nor has any Person acting on behalf of or pursuant to
any understanding with such Purchaser, executed any purchases or
sales, including Short Sales, of the securities of the Company
during the period commencing as of the time that such Purchaser
first received a term sheet (written or oral) from the Company or
any other Person representing the Company setting forth the
material terms of the transactions contemplated hereunder and
ending immediately prior to the execution hereof. Notwithstanding
the foregoing, in the case of a Purchaser that is a multi-managed
investment vehicle, whereby separate portfolio managers manage
separate portions of such Purchaser’s assets and the
portfolio managers have no direct knowledge of the investment
decisions made by the portfolio managers managing other portions of
such Purchaser’s assets, the representation set forth above
shall only apply with respect to the portion of assets managed by
the portfolio manager that made the investment decision to purchase
the Securities covered by this Agreement. Other than to other
Persons party to this Agreement or to such Purchaser's
representatives, including, without limitation, its officers,
directors, partners, legal and other advisors, employees, agents
and Affiliates, such Purchaser has maintained the confidentiality
of all disclosures made to it in connection with this transaction
(including the existence and terms of this
transaction).
The Company acknowledges and agrees that the representations
contained in this Section 3.2 shall not modify, amend or affect
such Purchaser’s right to rely on the Company’s
representations and warranties contained in this Agreement or any
representations and warranties contained in any other Transaction
Document or any other document or instrument executed and/or
delivered in connection with this Agreement or the consummation of
the transaction contemplated hereby.
ARTICLE
4
OTHER
AGREEMENTS OF THE PARTIES
4.1 Transfer
Restrictions.
(a) The
Securities may only be disposed of in compliance with state and
federal securities laws. In connection with any transfer of
Securities other than pursuant to an effective registration
statement or Rule 144, to the Company or to an Affiliate of a
Purchaser or in connection with a pledge as contemplated in Section
4.1(b), the Company may require the transferor thereof to provide
to the Company an opinion of counsel selected by the transferor and
reasonably acceptable to the Company, the form and substance of
which opinion shall be reasonably satisfactory to the Company, to
the effect that such transfer does not require registration of such
transferred Securities under the Securities Act. As a condition of
transfer, any such transferee shall agree in writing to be bound by
the terms of this Agreement and shall have the rights and
obligations of a Purchaser under this Agreement.
(b) The
Purchaser agrees to the imprinting, so long as is required by this
Section 4.1, of a legend on any of the Securities in the following
form:
[NEITHER]
THIS SECURITY [NOR THE SECURITIES INTO WHICH THIS SECURITY IS
[CONVERTIBLE] HAS [NOT] BEEN REGISTERED WITH THE SECURITIES AND
EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN
RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND,
ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR
PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT
SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND
IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS. THIS SECURITY
[AND THE SECURITIES ISSUABLE UPON [CONVERSION] OF THIS SECURITY]
MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT WITH A
REGISTERED BROKER-DEALER OR OTHER LOAN WITH A FINANCIAL INSTITUTION
THAT IS AN “ACCREDITED INVESTOR” AS DEFINED IN RULE
501(a) UNDER THE SECURITIES ACT OR OTHER LOAN SECURED BY SUCH
SECURITIES.
The
Company acknowledges and agrees that a Purchaser may from time to
time pledge pursuant to a bona fide margin agreement with a
registered broker-dealer or grant a security interest in some or
all of the Securities to a financial institution that is an
“accredited investor” as defined in Rule 501(a) under
the Securities Act and who agrees to be bound by the provisions of
this Agreement and, if required under the terms of such
arrangement, such Purchaser may transfer pledged or secured
Securities to the pledgees or secured parties. Such a pledge or
transfer would not be subject to approval of the Company and no
legal opinion of legal counsel of the pledgee, secured party or
pledgor shall be required in connection therewith. Further, no
notice shall be required of such pledge. At the appropriate
Purchaser’s expense, the Company will execute and deliver
such reasonable documentation as a pledgee or secured party of
Securities may reasonably request in connection with a pledge or
transfer of the Securities, including, if the Securities are then
registered for resale on a registration statement, the preparation
and filing of any required prospectus supplement under Rule
424(b)(3) under the Securities Act or other applicable provision of
the Securities Act to appropriately amend the list of Selling
Stockholders thereunder.
(c) Certificates
evidencing the Commitment Shares and the Underlying Shares shall
not contain any legend (including the legend set forth in Section
4.1(b) hereof): (i) while a registration statement (including the
Registration Statement) covering the resale of such security is
effective under the Securities Act, (ii) following any sale of such
Commitment Shares or the Underlying Shares pursuant to Rule 144,
(iii) if such Commitment Shares or the Underlying Shares are
eligible for sale under Rule 144 or (iv) if such legend is not
required under applicable requirements of the Securities Act
(including judicial interpretations and pronouncements issued by
the staff of the Commission). The Company shall cause its counsel
to issue a legal opinion to the Transfer Agent promptly after the
Effective Date or at such time as such legend is no longer required
under this Section 4.1(c) if required by the Transfer Agent to
effect the removal of the legend hereunder, or if requested by a
Purchaser. If any portion of the Note is converted at a time when
there is an effective registration statement to cover the resale of
the Commitment Shares or Underlying Shares, or if such Commitment
Shares or Underlying Shares may be sold under Rule 144 and the
Company is then in compliance with the current public information
required under Rule 144, or if the Commitment Shares or Underlying
Shares may be sold under Rule 144 without the requirement for the
Company to be in compliance with the current public information
required under Rule 144 as to such Underlying Shares and without
volume or manner-of-sale restrictions or if such legend is not
otherwise required under applicable requirements of the Securities
Act (including judicial interpretations and pronouncements issued
by the staff of the Commission) then such Commitment Shares or
Underlying Shares shall be issued free of all legends. The Company
agrees that following the Effective Date or at such time as such
legend is no longer required under this Section 4.1(c), it will, no
later than the earlier of (i) three (3) Trading Days and (ii) the
number of Trading Days comprising the Standard Settlement Period
(as defined below) following the delivery by a Purchaser to the
Company or the Transfer Agent certificate(s) representing
Commitment Shares or Underlying Shares, as applicable, issued with
a restrictive legend (such date, the “Legend Removal
Date”), deliver or
cause to be delivered to such Purchaser a certificate representing
such shares that is free from all restrictive and other legends.
The Company may not make any notation on its records or give
instructions to the Transfer Agent that enlarge the restrictions on
transfer set forth in this Section 4. Certificates for Commitment
Shares or Underlying Shares subject to legend removal hereunder
shall be transmitted by the Transfer Agent to the Purchaser by
crediting the account of the Purchaser’s prime broker with
the Depository Trust Company System as directed by such Purchaser.
As used herein, “Standard Settlement
Period” means the
standard settlement period, expressed in a number of Trading Days,
on the Company’s primary Trading Market with respect to the
Common Stock as in effect on the date of delivery of a certificate
representing Underlying Shares, as applicable, issued with a
restrictive legend.
(d) In
addition to a Purchaser’s other available remedies, the
Company shall pay to a Purchaser, in cash, the greater of (i) as
partial liquidated damages and not as a penalty, for each $1,000 of
Commitment Shares or Underlying Shares (based on the VWAP of the
Common Stock on the date such Securities are submitted to the
Transfer Agent) delivered for removal of the restrictive legend and
subject to Section 4.1(c), $5 per Trading Day (increasing to $10
per Trading Day five (5) Trading Days after such damages have begun
to accrue) for each Trading Day after the Legend Removal Date until
such certificate is delivered without a legend and (ii) if the
Company fails to (i) issue and deliver (or cause to be delivered)
to a Purchaser by the Legend Removal Date a certificate
representing the Securities so delivered to the Company by such
Purchaser that is free from all restrictive and other legends or
(ii) if after the Legend Removal Date such Purchaser purchases (in
an open market transaction or otherwise) shares of Common Stock to
deliver in satisfaction of a sale by such Purchaser of all or any
portion of the number of shares of Common Stock, or a sale of a
number of shares of Common Stock equal to all or any portion of the
number of shares of Common Stock that such Purchaser anticipated
receiving from the Company without any restrictive legend, then, an
amount equal to the excess of such Purchaser’s total purchase
price (including brokerage commissions and other out-of-pocket
expenses, if any) for the shares of Common Stock so purchased
(including brokerage commissions and other out-of-pocket expenses,
if any) (the “Buy-In
Price”) over the
product of (A) such number of Shares or Conversion Shares, as
applicable, that the Company was required to deliver to such
Purchaser by the Legend Removal Date multiplied by (B) the lowest
closing sale price of the Common Stock on any Trading Day during
the period commencing on the date of the delivery by such Purchaser
to the Company of the applicable Shares or Conversion Shares (as
the case may be) and ending on the date of such delivery and
payment under this clause (ii).
4.2 Furnishing of
Information. Beginning on the
Closing Date, the Company shall use commercially reasonable efforts
to comply with the Pink Basic Disclosure Guidelines which set forth
the disclosure obligations that make up the “Alternative
Reporting Standard” for OTC Pink companies as such
obligations are published by the OTC Markets Group, Inc. In
addition, the Company shall file a Registration Statement on Form
8-A as soon as practicable, but in no event no later than five (5)
Trading Days, after the Effective Date of the Initial Registration
Statement (as defined in the Registration Rights Agreement).
If after the date hereof the Company becomes subject to the rules
and regulations of the Exchange Act and as long as any Purchaser
owns Securities, the Company covenants to timely file (or obtain
extensions in respect thereof and file within the applicable grace
period) all reports required to be filed by the Company after the
date hereof pursuant to the Exchange Act. As long as any Purchaser
owns Securities, if the Company is not required to file reports
pursuant to the Exchange Act, it will prepare and furnish to the
Purchasers and make publicly available in accordance with Rule
144(c) such information as is required for the Purchasers to sell
the Securities, including without limitation, under Rule 144. The
Company further covenants that it will take such further action as
any holder of Securities may reasonably request, to the extent
required from time to time to enable such Person to sell such
Securities without registration under the Securities Act, including
without limitation, within the requirements of the exemption
provided by Rule 144.
4.3 Integration.
The Company shall not sell, offer for sale or solicit offers to buy
or otherwise negotiate in respect of any security (as defined in
Section 2 of the Securities Act) that would be integrated with
the offer or sale of the Securities in a manner that would require
the registration under the Securities Act of the sale of the
Securities or that would be integrated with the offer or sale of
the Securities for purposes of the rules and regulations of any
Trading Market such that it would require shareholder approval
prior to the closing of such other transaction unless shareholder
approval is obtained before the closing of such subsequent
transaction.
4.4 Securities Laws
Disclosure; Publicity. The
Company shall (a) by 9:00am on the 2nd
Trading Day after the date of this
Agreement, issue a press release disclosing the material terms of
the transactions contemplated hereby. From and after the issuance
of such press release, the Company represents to the Purchaser that
it shall have publicly disclosed all material, non-public
information delivered to any of the Purchaser by the Company or any
of its Subsidiaries, or any of their respective officers,
directors, employees or agents in connection with the transactions
contemplated by the Transaction Documents. In addition, effective
upon the issuance of such press release, the Company acknowledges
and agrees that any and all confidentiality or similar obligations
under any agreement, whether written or oral, between the Company,
any of its Subsidiaries or any of their respective officers,
directors, agents, employees or Affiliates on the one hand, and any
of the Purchaser or any of their Affiliates on the other hand,
shall terminate. The Company and the Purchaser shall consult with
each other in issuing any other press releases with respect to the
transactions contemplated hereby, and neither the Company nor any
Purchaser shall issue any such press release nor otherwise make any
such public statement without the prior consent of the Company,
with respect to any press release of any Purchaser, or without the
prior consent of the Purchaser, with respect to any press release
of the Company, which consent shall not unreasonably be withheld or
delayed, except if such disclosure is required by law, in which
case the disclosing party shall promptly provide the other party
with prior notice of such public statement or communication.
Notwithstanding the foregoing, the Company shall not publicly
disclose the name of any Purchaser, or include the name of any
Purchaser in any filing with the Commission or any regulatory
agency or Trading Market, without the prior written consent of such
Purchaser, except (a) as required by federal securities law in
connection with the filing of final Transaction Documents with the
Commission and (b) to the extent such disclosure is required
by law or Trading Market regulations, in which case the Company
shall provide the Purchaser with prior notice of such disclosure
permitted under this clause (b).
4.5 Shareholder Rights
Plan. No claim will be made
or enforced by the Company or, with the consent of the Company, any
other Person, that any Purchaser is an “Acquiring
Person” under any
control share acquisition, business combination, poison pill
(including any distribution under a rights agreement) or similar
anti-takeover plan or arrangement in effect or hereafter adopted by
the Company, or that any Purchaser could be deemed to trigger the
provisions of any such plan or arrangement, by virtue of receiving
Securities under the Transaction Documents.
4.6 Non-Public
Information. Except
with respect to the material terms and conditions of the
transactions contemplated by the Transaction Documents, which shall
be disclosed pursuant to Section 4.4, the Company covenants
and agrees that neither it, nor any other Person acting on its
behalf will provide the Purchaser or its agents or counsel with any
information that constitutes, or the Company reasonably believes
constitutes, material non-public information, unless
prior thereto the Purchaser shall have consented to the receipt of
such information and agreed with the Company to keep such
information confidential. The Company understands and confirms that
the Purchaser shall be relying on the foregoing covenant in
effecting transactions in securities of the Company. To the extent
that the Company delivers any material, non-public information to a
Purchaser without such Purchaser’s consent, the Company
hereby covenants and agrees that such Purchaser shall not have any
duty of confidentiality to the Company, any of its Subsidiaries, or
any of their respective officers, directors, agents, employees or
Affiliates, or a duty to the Company, any of its Subsidiaries or
any of their respective officers, directors, agents, employees or
Affiliates not to trade on the basis of, such material,
non-public information, provided
that the Purchaser shall remain subject to applicable law. To the
extent that any notice provided pursuant to any Transaction
Document constitutes, or contains, material, non-public information regarding
the Company or any Subsidiaries, the Company shall simultaneously
file such notice with the Commission pursuant to a Current Report
on Form 8-K or if not subject
to the reporting requirements under the Commission, file a press
release. The Company understands
and confirms that the Purchaser shall be relying on the foregoing
covenant in effecting transactions in securities of the
Company.
4.7 Use of
Proceeds. Except as set forth
on Schedule 4.7
attached
hereto, the Company shall use the net proceeds from the sale of the
Securities hereunder for working capital purposes and shall not use
such proceeds: (a) for the satisfaction of any portion of the
Company’s debt (other than payment of trade payables in the
ordinary course of the Company’s business and prior
practices), (b) for the redemption of any Common Stock or Common
Stock Equivalents, (c) for the settlement of any outstanding
litigation or (d) in violation of FCPA, OFAC regulations or
Money Laundering Laws. The net proceeds from this offering and the
sale of the Securities to be sold hereunder will be held in the a
Control Account to be agreed upon between the parties on or after
the Closing Date.
4.8 Indemnification of
Purchaser. Subject
to the provisions of this Section 4.8, the Company will
indemnify and hold each Purchaser and its respective directors,
officers, shareholders, members, partners, employees and agents
(and any other Persons with a functionally equivalent role of a
Person holding such titles notwithstanding a lack of such title or
any other title), each Person who controls such Purchaser (within
the meaning of Section 15 of the Securities Act and
Section 20 of the Exchange Act), and the directors, officers,
shareholders, agents, members, partners or employees (and any other
Persons with a functionally equivalent role of a Person holding
such titles notwithstanding a lack of such title or any other
title) of such controlling persons (each, a
“Purchaser
Party”) harmless from
any and all losses, liabilities, obligations, claims,
contingencies, damages, costs and expenses, as incurred, arising
out of or relating to (i) any untrue or alleged untrue
statement of a material fact contained in such registration
statement, any prospectus or any form of prospectus or in any
amendment or supplement thereto or in any preliminary prospectus,
or arising out of or relating to any omission or alleged omission
of a material fact required to be stated therein or necessary to
make the statements therein (in the case of any prospectus or
supplement thereto, in the light of the circumstances under which
they were made) not misleading, except to the extent, but only to
the extent, that such untrue statements or omissions are based
solely upon information regarding such Purchaser Party furnished in
writing to the Company by such Purchaser Party expressly for use
therein, or (ii) any violation or alleged violation by the
Company of the Securities Act, the Exchange Act or any state
securities law, or any rule or regulation thereunder in connection
therewith. If any action shall be brought against any Purchaser
Party in respect of which indemnity may be sought pursuant to this
Agreement, such Purchaser Party shall promptly notify the Company
in writing, and the Company shall have the right to assume the
defense thereof with counsel of its own choosing reasonably
acceptable to the Purchaser Party. Any Purchaser Party shall have
the right to employ separate counsel in any such action and
participate in the defense thereof, but the fees and expenses of
such counsel shall be at the expense of such Purchaser Party except
to the extent that (x) the employment thereof has been
specifically authorized by the Company in writing, (y) the
Company has failed after a reasonable period of time to assume such
defense and to employ counsel or (z) in such action there is,
in the reasonable opinion of counsel, a material conflict on any
material issue between the position of the Company and the position
of such Purchaser Party, in which case the Company shall be
responsible for the reasonable fees and expenses of no more than
one such separate counsel. The Company will not be liable to any
Purchaser Party under this Agreement (1) for any settlement by
a Purchaser Party effected without the Company’s prior
written consent, which shall not be unreasonably withheld or
delayed; or (2) to the extent, but only to the extent that a
loss, claim, damage or liability is attributable to any Purchaser
Party’s breach of any of the representations, warranties,
covenants or agreements made by such Purchaser Party in this
Agreement or in the other Transaction Documents. The
indemnification required by this Section 4.8 shall be made by
periodic payments of the amount thereof during the course of the
investigation or defense, as and when bills are received or are
incurred. The indemnity agreements contained herein shall be in
addition to any cause of action or similar right of any Purchaser
Party against the Company or others and any liabilities the Company
may be subject to pursuant to law.
4.9 Reservation of Common
Stock. As of the date
hereof, subject to the Reverse Split, the Company has reserved and
the Company shall continue to reserve and keep available at all
times, free of preemptive rights, a sufficient number of shares of
Common Stock equal to the Required Minimum (as defined in the
Notes) for the purpose of enabling the Company to issue the
Conversion Shares and any other shares that may be issuable
pursuant to the Notes and all the Warrant Shares issuable pursuant
to the Warrants. If, on any date, the number of authorized
but unissued (and otherwise unreserved) shares of Common Stock is
less than the Required Minimum on such date, then the Board of
Directors shall use commercially reasonable efforts to amend the
Company’s certificate or articles of incorporation to
increase the number of authorized but unissued shares of Common
Stock to at least the Required Minimum at such time, as soon as
possible and in any event not later than the 75th day after such
date
4.10 Listing
of Common Stock. The Company hereby
agrees to use reasonable best efforts to maintain the listing or
quotation of the Common Stock on the Trading Market on which it is
currently listed, and concurrently with the Closing, the Company
shall apply to list or quote all of the Underlying Shares on such
Trading Market and promptly secure the listing of all of the
Underlying Shares on such Trading Market. The Company further
agrees, if the Company applies to have the Common Stock traded on
any other Trading Market, it will then include in such application
all of the Underlying Shares, and will take such other action as is
necessary to cause all of the Underlying Shares to be listed or
quoted on such other Trading Market as promptly as possible. The
Company will then take all action reasonably necessary to continue
the listing and trading of its Common Stock on a Trading Market and
will comply in all respects with the Company’s reporting,
filing and other obligations under the bylaws or rules of the
Trading Market. The Company agrees to maintain the eligibility of
the Common Stock for electronic transfer through the Depository
Trust Company or another established clearing corporation,
including, without limitation, by timely payment of fees to the
Depository Trust Company or such other established clearing
corporation in connection with such electronic
transfer
4.11 Certain
Transactions and Confidentiality. The Purchaser
covenants that neither it nor any Affiliate acting on its behalf or
pursuant to any understanding with it will execute any purchases or
sales, including Short Sales of any of the Company’s
securities during the period commencing with the execution of this
Agreement and ending at such time that the transactions
contemplated by this Agreement are first publicly announced
pursuant to the initial press release as described in
Section 4.4. The Purchaser, severally and not jointly
with the other Purchaser, covenants that until such time as the
transactions contemplated by this Agreement are publicly disclosed
by the Company pursuant to the initial press release as described
in Section 4.4, such Purchaser will maintain the
confidentiality of the existence and terms of this transaction and
the information included in the Disclosure
Schedules. Notwithstanding the foregoing and notwithstanding
anything contained in this Agreement to the contrary, the Company
expressly acknowledges and agrees that (i) no Purchaser makes
any representation, warranty or covenant hereby that it will not
engage in effecting transactions in any securities of the Company
after the time that the transactions contemplated by this Agreement
are first publicly announced, (ii) no Purchaser shall be restricted
or prohibited from effecting any transactions in any securities of
the Company in accordance with applicable securities laws from and
after the time that the transactions contemplated by this Agreement
are first publicly announced pursuant to the initial press release
as described in Section 4.4, (iii) the Purchaser has
not been asked by the Company to agree, nor has any Purchaser
agreed, to desist from purchasing or selling Securities which have
been issued under the terms of the Purchase Agreement, this Note or
any other Transaction Document, or “derivative”
securities based on securities issued by the Company or to hold the
Securities for any specified term, (iv) Purchaser shall not
be deemed to have any affiliation with or control over any
arm’s length counter-party in any “derivative”
transaction, (y) the Purchaser may engage in hedging
activities, other than Short Sales at various times during the
period that the Securities are outstanding, and (vi) no
Purchaser shall have any duty of confidentiality or duty not to
trade in the securities of the Company to the Company or its
Subsidiaries after the issuance of the initial press
release. Except as contemplated above, Company
acknowledges that such aforementioned hedging activities do not
constitute a breach of any of the Transaction
Documents.
4.12 Conversion
and Exercise Procedures. Each of the form of
Notice of Conversion in the Notes and the Notice of Exercise in the
Warrants set forth the totality of the procedures required of the
Purchasers in order to convert the Notes or exercise the Warrants.
No additional legal opinion, other information or instructions
shall be required of the Purchaser to exercise the Note or exercise
the Warrant. Without limiting the preceding sentences, no
ink-original Notice of Exercise or
Notice of Conversion shall be required, nor shall any medallion
guarantee (or other type of guarantee or notarization) of any
Notice of Exercise or Notice of Conversion form be required in
order to covert and/or exercise the Securities. The Company shall
honor conversions and/or exercises of the Securities and shall
deliver applicable Underlying Shares in accordance with the terms,
conditions and time periods set forth in the Transaction
Documents.
4.13 Form
D; Blue Sky Filings. The Company agrees to
timely file a Form D with respect to the Securities as required
under Regulation D and to provide a copy thereof, promptly upon
request of any Purchaser. The Company shall take such action as the
Company shall reasonably determine is necessary in order to obtain
an exemption for, or to qualify the Securities for, sale to the
Purchaser at the applicable Closing under applicable securities or
“Blue Sky” laws of the states of the United States, and
shall provide evidence of such actions promptly upon request of any
Purchaser.
4.14 Maintenance
of Property. So long as any Notes remain outstanding, the
Company shall use its commercially reasonable efforts to keep all
of its property, which is necessary or useful to the conduct of its
business, in good working order and condition, ordinary wear and
tear excepted.
4.15 Preservation
of Corporate Existence. So long as any Notes remain
outstanding, the Company shall preserve and maintain its corporate
existence, rights, privileges and franchises in the jurisdiction of
its incorporation, and qualify and remain qualified, as a foreign
corporation in each jurisdiction in which such qualification is
necessary in view of its business or operations and where the
failure to qualify or remain qualified would reasonably be expected
to have a Material Adverse Effect.
4.16 DTC
Program. At all times that the Securities are outstanding,
the Company will employ as the transfer agent for the Common Stock
and Conversion Shares a participant in the Depository Trust Company
Automated Securities Transfer Program and cause the Common Stock to
be transferable pursuant to such program.
4.17 Subsequent
Equity Sales. From the date hereof until such time as no
Purchaser holds any of the Notes, the Company shall be prohibited
from effecting or entering into an agreement to effect any issuance
by the Company or any of its Subsidiaries of Common Stock or Common
Stock Equivalents (or a combination of units thereof) involving a
Variable Rate Transaction. “Variable Rate
Transaction” means a transaction which is not
Permitted Indebtedness (including the KORR Financing) and in which
the Company (i) issues or sells any debt or equity securities that
are convertible into, exchangeable or exercisable for, or include
the right to receive additional shares of Common Stock either (A)
at a conversion price, exercise price or exchange rate or other
price that is based upon and/or varies with the trading prices of
or quotations for the shares of Common Stock at any time after the
initial issuance of such debt or equity securities, or (B) with a
conversion, exercise or exchange price that is subject to being
reset at some future date after the initial issuance of such debt
or equity security or upon the occurrence of specified or
contingent events directly or indirectly related to the business of
the Company or the market for the Common Stock or (ii) enters into,
or effects a transaction under, any agreement, including, but not
limited to, an equity line of credit, whereby the Company may issue
securities at a future determined price. Any Purchaser shall be
entitled to obtain injunctive relief against the Company to
preclude any such issuance, which remedy shall be in addition to
any right to collect damages.
4.18 Transfer
Agent Instructions. The Company shall issue irrevocable
instructions to the Transfer Agent in a form acceptable to the
Purchaser (the “Irrevocable Transfer Agent
Instructions”) to issue certificates or credit shares
via DWAC or otherwise to the applicable balance accounts at The
Depository Trust Company (“DTC”), registered in the
name of the Purchasers or its respective nominee(s), for the
Underlying Shares in such amounts as specified from time to time by
each Purchaser to the Company upon conversion of the Notes and/or
exercise of the Warrants. The Company represents and warrants that
no instruction other than the Irrevocable Transfer Agent
Instructions referred to in this Section will be given by the
Company to its Transfer Agent with respect to the Securities, and
that the Securities shall otherwise be freely transferable on the
books and records of the Company, as applicable, to the extent
provided in this Agreement and the other Transaction Documents. In
the event that such sale, assignment or transfer involves
Conversion Shares sold, assigned or transferred pursuant to an
effective registration statement or in compliance with Rule 144,
the transfer agent shall issue such shares to such Buyer, assignee
or transferee (as the case may be) without any restrictive legend
in accordance with Section 4.1 The Company acknowledges that a
breach by it of its obligations hereunder will cause irreparable
harm to Purchaser. Accordingly, the Company acknowledges that the
remedy at law for a breach of its obligations under this Section
will be inadequate and agrees, in the event of a breach or
threatened breach by the Company of the provisions of this Section,
that Purchaser shall be entitled, in addition to all other
available remedies, to an order and/or injunction restraining any
breach and requiring immediate issuance and transfer, without the
necessity of showing economic loss and without any bond or other
security being required. The Company shall cause its counsel to
issue the legal opinion referred to in the Irrevocable Transfer
Agent Instructions to the Company’s transfer agent from and
after the Applicable Date. Any fees (with respect to the transfer
agent, counsel to the Company or otherwise) associated with the
issuance of such opinion or the removal of any legends on any of
the Securities shall be borne by the Company. “Applicable
Date” means the first date on which all of the Underlying
Shares are eligible to be resold by the Purchaser pursuant to Rule
144 or an effective registration statement is in
effect.
4.19 True-Up.
(a) In the event that
the proceeds received by the Purchaser from the sale of all the
Conversion Shares and up to 50% of the Commitment Shares
(“Hurdle
Shares”) does not equal at least $750,000 (the
“Hurdle
Return”) on June 1, 2021 (the “True-Up Payment Date”),
the Company shall pay the Purchasers
their pro rata portion of an amount in cash (the
“True-Up
Payment”) equal to the
Hurdle Return less the proceeds previously realized by the
Purchaser from the sale of the Hurdle Shares, net of brokerage commissions and any other fees
incurred by Purchaser in connection with the sale of any Hurdle
Shares (“Net
Proceeds”).
(b) The True-Up Payment
will be paid by the Company on first Business Day after the True-Up
Payment Date to such account(s) as the Purchasers shall provide to
the Company in writing. If any portion of the True-Up Payment has
not been paid by the Company on the date set forth in this Section,
interest shall accrue on such unpaid amount until such amount is
paid in full at a rate equal to the lesser of (i) 20% per annum or
(ii) the maximum rate permitted by applicable law.
4.20 Public
Information. At any time during the period commencing from
the six (6) month anniversary of the Closing Date and ending at
such time that all of the Securities, may be sold without the
requirement for the Company to be in compliance with Rule 144(c)(1)
and otherwise without restriction or limitation pursuant to Rule
144, if the Company shall fail for any reason to satisfy the
current public information requirement under Rule 144(c) (a
“Public Information
Failure”) then, in addition to such Purchaser’s
other available remedies, the Company shall pay to a Purchaser, in
cash, as partial liquidated damages and not as a penalty, by reason
of any such delay in or reduction of its ability to sell the
Securities, an amount in cash equal to two percent (2.0%) of the
aggregate Subscription Amount of such Purchaser’s Securities
on the day of a Public Information Failure and on every thirtieth
(30th) day
(pro rated for periods totaling less than thirty days) thereafter
until the earlier of (a) the date such Public Information Failure
is cured and (b) such time that such public information is no
longer required for the Purchasers to transfer the Underlying
Shares pursuant to Rule 144. The payments to which a Purchaser
shall be entitled pursuant to this Section 4.19 are referred to
herein as “Public
Information Failure Payments.” Public Information
Failure Payments shall
be paid on the earlier of (i) the last day of the calendar month
during which such Public Information Failure Payments are incurred and (ii) the
third (3rd) Business Day after
the event or failure giving rise to the Public Information
Failure Payments is
cured. If an Event (as defined in the Registration Rights
Agreement) is occurring at the time of a Public Information
Failure, and the Company is (x) then obligated to pay, and (y)
timely pays the Purchasers partial liquidated damages under Section
2(b) of the Registration Rights Agreement for the period occurring
simultaneous with the applicable Public Information Failure (such
payments, the “Simultaneous Registration Rights
Partial Liquidated Damages”) and (z) has timely paid
the Purchasers all previously accrued partial liquidated damages
under Section 2(b) of the Registration Rights Agreement, the
Company may deduct the amounts paid in connection with such
Simultaneous Registration Rights Partial Liquidated Damages from
such Public Information Failure Payments due for such simultaneous
Public Information Failure. In the event the Company fails to make
Public Information Failure Payments in a timely manner, such
Public Information Failure Payments shall bear interest at
the rate of 1.5% per month (prorated for partial months) until paid
in full. Nothing herein shall limit such Purchaser’s right to
pursue actual damages for the Public Information Failure, and such
Purchaser shall have the right to pursue all remedies available to
it at law or in equity including, without limitation, a decree of
specific performance and/or injunctive relief.
4.21 KORR
Financing Subsequent Closing. Within thirty (30) calendar
days of the Closing Date (the “KORR Financing Deadline
Date”), the Company shall close on the additional
$250,000 of debt securities to be issued in the KORR Financing
(“KORR Financing
Subsequent Closing”). To the extent the KORR Financing
Subsequent Closing does not occur on or prior to the KORR Financing
Deadline Date, then, in addition to such Purchasers’ other
available remedies, an amount in cash, as partial liquidated
damages and not as a penalty, equal to $1,000 on the day the KORR
Financing Deadline Date and on every thirtieth (30th) day (pro rated for
periods totaling less than thirty days) thereafter until the KORR
Financing Subsequent Closing occurs. In addition, the Company shall
cause KORR Value L.P. to collectively provide the Purchasers such
number of shares of the Company’s Series D Preferred Stock or
Common Stock held by KORR Value L.P. which would be equal to 2.49%
of the Company’s issued and outstanding shares of common
stock on the Closing Date on the next Business Day after the KORR
Financing Deadline Date. Any such payments set forth in this
Section shall be shared pro rata among the Purchasers based on the
Subscription Amount divided by the aggregate amount of all Notes
issued on the Closing Date.
4.22 Litigation.
For as long as the Note is outstanding, the Company shall promptly,
to the extent not prohibited by law, give the Purchasers notice in
writing of any Action before or by any court, arbitrator,
governmental or administrative agency or regulatory authority
(federal, state, county, local or foreign) affecting the
Company, any Subsidiary, any director and/or officer including but
not limited to, any Action involving a claim of
violation of or liability under federal or state securities laws, a
claim of breach of fiduciary duty or any investigation by a
governmental or administrative agency or regulatory authority
(federal, state county, local or foreign). Any such
information provided to a Purchaser shall comply with the
requirements of Section 4.6 above.
4.23 Access
to Records. The Company shall provide each Purchaser and/or
any of its duly authorized representatives, attorneys or
accountants access to any and all bank records at the premises of
the Company where such records are kept, such access being afforded
without charge, but only during normal business hours. Any such
information provided to a Purchaser shall comply with the
requirements of Section 4.6 above.
ARTICLE
5
MISCELLANEOUS
5.1 Fees and Expenses. Except as
expressly set forth below and in the Transaction Documents to the
contrary, each party shall pay the reasonable, documented fees and
expenses of its advisers, counsel, accountants and other experts,
if any, and all other expenses incurred by such party incident to
the negotiation, preparation, execution, delivery and performance
of this Agreement. The Company shall pay all Transfer Agent fees
(including, without limitation, any fees required for same-day
processing of any instruction letter delivered by the Company and
any exercise notice delivered by a Purchaser), stamp taxes and
other taxes and duties levied in connection with the delivery of
any Securities to the Purchaser. Notwithstanding the foregoing, the
Company agrees to pay all direct and indirect costs and expenses of
the Purchaser related to the negotiation, due diligence,
preparation, closing, and all other items regarding or related to
this Agreement and the other Transaction Documents and all of the
transactions contemplated herein and/or therein, including, but not
limited to, the legal fees and expenses of the Purchaser’
legal counsel (collectively, the “Purchaser’s
Expenses”), all of which will be deducted and paid on
Closing Date. In addition, on the Closing Date, the Company shall
pay the Purchaser a closing fee equal to $30,000 payable in
cash.
5.2 Entire Agreement. The
Transaction Documents, together with the exhibits and schedules
thereto, contain the entire understanding of the parties with
respect to the subject matter hereof and thereof and supersede all
prior agreements and understandings, oral or written, with respect
to such matters, which the parties acknowledge have been merged
into such documents, exhibits and schedules.
5.3 Notices. Any and all notices or
other communications or deliveries required or permitted to be
provided hereunder shall be in writing and shall be deemed given
and effective on the earliest of: (a) the date of transmission, if
such notice or communication is delivered via facsimile or email
attachment at the facsimile number or email address as set forth on
the signature pages attached hereto at or prior to 5:30 p.m. (New
York City time) on a Business Day, (b) the next Business Day after
the date of transmission, if such notice or communication is
delivered via facsimile or email attachment at the facsimile number
or email address as set forth on the signature pages attached
hereto on a day that is not a Business Day or later than 5:30 p.m.
(New York City time) on any Business Day, (c) the second
(2nd)
Business Day following the date of mailing, if sent by U.S.
nationally recognized overnight courier service or (d) upon actual
receipt by the party to whom such notice is required to be given.
The address for such notices and communications shall be as set
forth on the signature pages attached hereto.
5.4 Amendments; Waivers. No
provision of this Agreement may be waived, modified, supplemented
or amended except in a written instrument signed, in the case of an
amendment, by the Company and the Purchaser or, in the case of a
waiver, by the party against whom enforcement of any such waived
provision is sought. No waiver of any default with respect to any
provision, condition or requirement of this Agreement shall be
deemed to be a continuing waiver in the future or a waiver of any
subsequent default or a waiver of any other provision, condition or
requirement hereof, nor shall any delay or omission of any party to
exercise any right hereunder in any manner impair the exercise of
any such right. Any amendment effected in accordance with
accordance with this Section 5.5 shall be binding upon the
Purchaser and holder of Securities and the Company.
5.5 Successors and Assigns. This
Agreement shall be binding upon and inure to the benefit of the
parties and their successors and permitted assigns. The Company may
not assign this Agreement or any rights or obligations hereunder
without the prior written consent of the Purchaser then holding
outstanding Notes (other than by merger). Purchaser may assign any
or all of its rights under this Agreement to any Person to whom
Purchaser assigns or transfers any Securities in compliance with
the Transaction Documents, provided that such transferee agrees in
writing to be bound, with respect to the transferred Securities, by
the provisions of the Transaction Documents that apply to the
“Purchaser,” and provided further that (i) such
transferee is an “accredited investor” within the
meaning of Rule 501 under the Securities Act and (ii) such
transferee is not a direct competitor of the Company or any
Subsidiary.
5.6 No Third-Party Beneficiaries.
This Agreement is intended for the benefit of the parties hereto
and their respective successors and permitted assigns and is not
for the benefit of, nor may any provision hereof be enforced by,
any other Person.
5.7 Governing Law; Exclusive
Jurisdiction. All questions concerning the construction,
validity, enforcement and interpretation of the Transaction
Documents shall be governed by and construed and enforced in
accordance with the internal laws of the State of New York, without
regard to the principles of conflicts of law thereof. Each party
agrees that all legal Proceedings concerning the interpretations,
enforcement and defense of the transactions contemplated by this
Agreement and any other Transaction Documents (whether brought
against a party hereto or its respective affiliates, directors,
officers, shareholders, partners, members, employees or agents)
shall be commenced exclusively in the state and federal courts
sitting in the City of New York. Each party hereby irrevocably
submits to the exclusive jurisdiction of the state and federal
courts sitting in the City of New York, Borough of Manhattan for
the adjudication of any dispute hereunder or in connection herewith
or with any transaction contemplated hereby or discussed herein
(including with respect to the enforcement of any of the
Transaction Documents), and hereby irrevocably waives, and agrees
not to assert in any Action or Proceeding, any claim that it is not
personally subject to the jurisdiction of any such court, that such
Action or Proceeding is improper or is an inconvenient venue for
such Proceeding. Each party hereby irrevocably waives personal
service of process and consents to process being served in any such
Action or Proceeding by mailing a copy thereof via registered or
certified mail or overnight delivery (with evidence of delivery) to
such party at the address in effect for notices to it under this
Agreement and agrees that such service shall constitute good and
sufficient service of process and notice thereof. Nothing contained
herein shall be deemed to limit in any way any right to serve
process in any other manner permitted by law. If any party shall
commence an Action or Proceeding to enforce any provisions of the
Transaction Documents, then, in addition to the obligations of the
Company elsewhere in this Agreement, the prevailing party in such
Action or Proceeding shall be reimbursed by the non-prevailing
party for its reasonable attorneys’ fees and other costs and
expenses incurred with the investigation, preparation and
prosecution of such Action or Proceeding.
5.8 Survival. The representations
and warranties contained herein shall survive the Closing and the
delivery of the Securities at Closing.
5.9 Execution. This Agreement may
be executed in two or more counterparts, all of which when taken
together shall be considered one and the same agreement and shall
become effective when counterparts have been signed by each party
and delivered to each other party, it being understood that the
parties need not sign the same counterpart. In the event that any
signature is delivered by facsimile transmission or by e-mail
delivery of a “.pdf” format data file, such signature
shall create a valid and binding obligation of the party executing
(or on whose behalf such signature is executed) with the same force
and effect as if such facsimile or “.pdf” signature
page were an original thereof.
5.10 Severability.
If any term, provision, covenant or restriction of this Agreement
is held by a court of competent jurisdiction to be invalid,
illegal, void or unenforceable, the remainder of the terms,
provisions, covenants and restrictions set forth herein shall
remain in full force and effect and shall in no way be affected,
impaired, or invalidated, as long as the essential terms and
conditions of this Note for each party remain valid, binding, and
enforceable. The parties shall use their commercially reasonable
efforts to find and employ an alternative means to achieve the same
or substantially the same result as that contemplated by such term,
provision, covenant or restriction.
5.11 Rescission
and Withdrawal Right. Notwithstanding
anything to the contrary contained in (and without limiting any
similar provisions of) any of the other Transaction Documents,
whenever any Purchaser exercises a right, election, demand or
option under a Transaction Document and the Company does not timely
perform its related obligations within the periods therein
provided, then such Purchaser may rescind or withdraw, in its sole
discretion from time to time upon written notice to the Company,
any relevant notice, demand or election in whole or in part without
prejudice to its future actions and rights; provided,
however,
that, in the case of a rescission of a conversion of the Note, the
Purchaser shall be required to return any shares of Common Stock
subject to any such rescinded conversion or exercise notice
concurrently with the return to such Purchaser of the aggregate
exercise price paid to the Company for such shares and the
restoration of such Purchaser’s right to acquire such shares
pursuant to such Purchaser’s Warrant (including, issuance of
a replacement warrant certificate evidencing such restored
right).
5.12 Replacement
of Securities. If any certificate or
instrument evidencing any Securities is mutilated, lost, stolen or
destroyed, the Company shall issue or cause to be issued in
exchange and substitution for and upon cancellation thereof (in the
case of mutilation), or in lieu of and substitution therefor, a new
certificate or instrument, but only upon receipt of evidence
reasonably satisfactory to the Company of such loss, theft or
destruction. The applicant for a new certificate or instrument
under such circumstances shall also pay any reasonable third-party
costs (including customary indemnity) associated with the issuance
of such replacement Securities.
5.13 Remedies.
In addition to being entitled to exercise all rights provided
herein or granted by law, including recovery of damages, each of
the Purchaser and the Company will be entitled to specific
performance under the Transaction Documents. The parties agree that
monetary damages may not be adequate compensation for any loss
incurred by reason of any breach of obligations contained in the
Transaction Documents and hereby agree to waive and not to assert
in any Action for specific performance of any such obligation the
defense that a remedy at law would be adequate.
5.14 Payment
Set Aside. To the extent that
the Company makes a payment or payments to any Purchaser pursuant
to any Transaction Document or a Purchaser enforces or exercises
its rights thereunder, and such payment or payments or the proceeds
of such enforcement or exercise or any part thereof are
subsequently invalidated, declared to be fraudulent or
preferential, set aside, recovered from, disgorged by or are
required to be refunded, repaid or otherwise restored to the
Company, a trustee, receiver or any other Person under any law
(including, without limitation, any bankruptcy law, state or
federal law, common law or equitable cause of action), then to the
extent of any such restoration the obligation or part thereof
originally intended to be satisfied shall be revived and continued
in full force and effect as if such payment had not been made or
such enforcement or setoff had not occurred.
5.15 Usury.
To the extent it may lawfully do so, the Company hereby agrees not
to insist upon or plead or in any manner whatsoever claim, and will
resist any and all efforts to be compelled to take the benefit or
advantage of, usury laws wherever enacted, now or at any time
hereafter in force, in connection with any Action or Proceeding
that may be brought by any Purchaser in order to enforce any right
or remedy under any Transaction Document. Notwithstanding any
provision to the contrary contained in any Transaction Document, it
is expressly agreed and provided that the total liability of the
Company under the Transaction Documents for payments in the nature
of interest shall not exceed the maximum lawful rate authorized
under applicable law (the “Maximum
Rate”), and, without
limiting the foregoing, in no event shall any rate of interest or
default interest, or both of them, when aggregated with any other
sums in the nature of interest that the Company may be obligated to
pay under the Transaction Documents exceed such Maximum Rate. It is
agreed that if the maximum contract rate of interest allowed by law
and applicable to the Transaction Documents is increased or
decreased by statute or any official governmental action subsequent
to the date hereof, the new maximum contract rate of interest
allowed by law will be the Maximum Rate applicable to the
Transaction Documents from the effective date thereof forward,
unless such application is precluded by applicable law. If under
any circumstances whatsoever, interest in excess of the Maximum
Rate is paid by the Company to any Purchaser with respect to
indebtedness evidenced by the Transaction Documents, such excess
shall be applied by such Purchaser to the unpaid principal balance
of any such indebtedness or be refunded to the Company, the manner
of handling such excess to be at such Purchaser’s
election.
5.16 Liquidated
Damages. The Company’s
obligations to pay any partial liquidated damages or other amounts
owing under the Transaction Documents is a continuing obligation of
the Company and shall not terminate until all unpaid partial
liquidated damages and other amounts have been paid notwithstanding
the fact that the instrument or security pursuant to which such
partial liquidated damages or other amounts are due and payable
shall have been canceled.
5.17 Saturdays,
Sundays, Holidays, etc. If the last or appointed day for the
taking of any action or the expiration of any right required or
granted herein shall not be a Business Day, then such action may be
taken or such right may be exercised on the next succeeding
Business Day.
5.18 Construction.
The parties agree that each of them and/or their respective counsel
have reviewed and had an opportunity to revise the Transaction
Documents and, therefore, the normal rule of construction to the
effect that any ambiguities are to be resolved against the drafting
party shall not be employed in the interpretation of the
Transaction Documents or any amendments thereto.
5.19 WAIVER OF JURY TRIAL. IN ANY ACTION, SUIT, OR
PROCEEDING IN ANY JURISDICTION BROUGHT BY ANY PARTY AGAINST ANY
OTHER PARTY, THE PARTIES EACH KNOWINGLY AND INTENTIONALLY, TO THE
GREATEST EXTENT PERMITTED BY APPLICABLE LAW, HEREBY ABSOLUTELY,
UNCONDITIONALLY, IRREVOCABLY AND EXPRESSLY WAIVES FOREVER TRIAL BY
JURY.
(Signature Pages Follow)
IN
WITNESS WHEREOF, the parties hereto have caused this Securities
Purchase Agreement to be duly executed by their respective
authorized signatories as of the date first indicated
above.
GOIP GLOBAL, INC.
|
Address for Notice:
|
By:__________________________________________
Name:
Title:
With a
copy to (which shall not constitute notice):
|
Email:
|
|
|
[REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE
PAGE FOR PURCHASER FOLLOWS]
PURCHASER
SIGNATURE PAGES TO GOIG SECURITIES PURCHASE AGREEMENT
IN
WITNESS WHEREOF, the undersigned have caused this Securities
Purchase Agreement to be duly executed by their respective
authorized signatories as of the date first indicated
above.
Name of
Purchaser:
_____________________________________________
Signature of Authorized Signatory of
Purchaser: __________________________________
Name of
Authorized Signatory:
_______________________________________
Title
of Authorized Signatory:
____________________________________________
Email
Address of Authorized Signatory: _____________________
Facsimile Number of
Authorized Signatory:
__________________________________________
Address
for Notice to Purchaser:
Address
for Delivery of Securities to Purchaser (if not same as address for
notice):
EIN
Number: ________________
EXHIBIT A
Form of Note
EXHIBIT B
Form of Security Agreement
EXHIBIT C
Form of Subordination Agreement
EXHIBIT D
Form of Registration Rights Agreement
EXHIBIT E
Form of Warrant
EXHIBIT F
Form of Lock-Up Agreement
Schedule 1
Purchase Price; Securities Purchased
|
|
Aggregate
Principal
Amount of
Notes
being
Purchased
|
Number of
Warrant Shares
issuable upon
exercise of
Warrant being
Purchased
|
Number of
Commitment
Shares to be
Issued
|
|
TOTAL
|
$2,700,000.00
|
$3,000,000.00
|
7,600,000
|
7.5
|
$30,000.00
|
Exhibit 10.2
REGISTRATION RIGHTS AGREEMENT
This
Registration Rights Agreement (this “Agreement”) is made and
entered into as of May 8, 2020, between GoIP Global, Inc., a
Colorado corporation (the “Company”), and each of
the several purchasers signatory hereto (each such purchaser, a
“Purchaser” and,
collectively, the “Purchasers”).
This
Agreement is made pursuant to the Securities Purchase Agreement,
dated as of the date hereof, between the Company and each Purchaser
(the “Purchase
Agreement”).
The
Company and each Purchaser hereby agrees as follows:
Capitalized
terms used and not otherwise defined herein that are defined in the
Purchase Agreement shall have the meanings given such terms in the
Purchase Agreement. As used in this Agreement, the following
terms shall have the following meanings:
“Advice” shall have the
meaning set forth in Section 6(d).
“Effectiveness Date”
means, with respect to the Initial Registration Statement required
to be filed hereunder, the 60th calendar day
following the Filing Date (or, with respect to any additional
Registration Statements which may be required pursuant to Section
2(c) or Section 3(c), the 60th calendar day
following the date on which an additional Registration Statement is
required to be filed hereunder; provided, however, that in the event the
Company is notified by the Commission that one or more of the above
Registration Statements will not be reviewed or is no longer
subject to further review and comments, the Effectiveness Date as
to such Registration Statement shall be the fifth Trading Day
following the date on which the Company is so notified if such date
precedes the dates otherwise required above, provided, further, if
such Effectiveness Date falls on a day that is not a Trading Day,
then the Effectiveness Date shall be the next succeeding Trading
Day.
“Effectiveness Period”
shall have the meaning set forth in Section 2(a).
“Event” shall have the
meaning set forth in Section 2(d).
“Event Date” shall have
the meaning set forth in Section 2(d).
“Filing Date” means, with
respect to the Initial Registration Statement required hereunder,
the 90th
calendar day following the date hereof and, with respect to any
additional Registration Statements which may be required pursuant
to Section 2(c) or Section 3(c), the earliest practical date on
which the Company is permitted by SEC Guidance to file such
additional Registration Statement related to the Registrable
Securities.
“Holder” or
“Holders” means the holder
or holders, as the case may be, from time to time of Registrable
Securities.
“Indemnified Party” shall
have the meaning set forth in Section 5(c).
“Indemnifying Party” shall
have the meaning set forth in Section 5(c).
“Initial Registration
Statement” means the initial Registration Statement
filed pursuant to this Agreement.
“Losses” shall have the
meaning set forth in Section 5(a).
“Plan of Distribution”
shall have the meaning set forth in Section 2(a).
“Prospectus” means the
prospectus included in a Registration Statement (including, without
limitation, a prospectus that includes any information previously
omitted from a prospectus filed as part of an effective
registration statement in reliance upon Rule 430A promulgated by
the Commission pursuant to the Securities Act), as amended or
supplemented by any prospectus supplement, with respect to the
terms of the offering of any portion of the Registrable Securities
covered by a Registration Statement, and all other amendments and
supplements to the Prospectus, including post-effective amendments,
and all material incorporated by reference or deemed to be
incorporated by reference in such Prospectus.
“Registrable Securities”
means, as of any date of determination, (a) all Conversion Shares
issuable upon conversion of the Notes (assuming on such date the
Notes are exercised in full without regard to any exercise
limitations therein), (b) all Warrant Shares issuable upon exercise
of the Warrants (assuming on such date the Warrants are exercised
in full without regard to any exercise limitations therein) (c) the
Commitment Shares, (d) any
additional shares of Common Stock issuable in connection with any
anti-dilution provisions in the Notes or the Warrants (in each
case, without giving effect to any limitations on conversion or
exercise set forth in the Notes or Warrants, as applicable)
and (e) any securities issued or then issuable upon any stock
split, dividend or other distribution, recapitalization or similar
event with respect to the foregoing; provided, however, that any such
Registrable Securities shall cease to be Registrable Securities
(and the Company shall not be required to maintain the
effectiveness of any, or file another, Registration Statement
hereunder with respect thereto) for so long as (a) a Registration
Statement with respect to the sale of such Registrable Securities
is declared effective by the Commission under the Securities Act
and such Registrable Securities have been disposed of by the Holder
in accordance with such effective Registration Statement, (b) such
Registrable Securities have been previously sold in accordance with
Rule 144, or (c) such securities become eligible for resale without
volume or manner-of-sale restrictions and without current public
information pursuant to Rule 144 as set forth in a written opinion
letter to such effect, addressed, delivered and acceptable to the
Transfer Agent and the affected Holders (assuming that such
securities and any securities issuable upon exercise, conversion or
exchange of which, or as a dividend upon which, such securities
were issued or are issuable, were at no time held by any Affiliate
of the Company, as reasonably determined by the Company, upon the
advice of counsel to the Company.
“Registration Statement”
means any registration statement required to be filed hereunder
pursuant to Section 2(a) and any additional registration statements
contemplated by Section 2(c) or Section 3(c), including (in each
case) the Prospectus, amendments and supplements to any such
registration statement or Prospectus, including pre- and
post-effective amendments, all exhibits thereto, and all material
incorporated by reference or deemed to be incorporated by reference
in any such registration statement.
“Rule 415” means Rule 415
promulgated by the Commission pursuant to the Securities Act, as
such Rule may be amended or interpreted from time to time, or any
similar rule or regulation hereafter adopted by the Commission
having substantially the same purpose and effect as such
Rule.
“Rule 424” means Rule 424
promulgated by the Commission pursuant to the Securities Act, as
such Rule may be amended or interpreted from time to time, or any
similar rule or regulation hereafter adopted by the Commission
having substantially the same purpose and effect as such
Rule.
“Selling Stockholder
Questionnaire” shall have the meaning set forth in
Section 3(a).
“SEC Guidance” means (i)
any publicly-available written or oral guidance of the Commission
staff, or any comments, requirements or requests of the Commission
staff and (ii) the Securities Act.
(a) On or prior to each
Filing Date, the Company shall prepare and file with the Commission
a Registration Statement covering the resale of all of the
Registrable Securities that are not then registered on an effective
Registration Statement for an offering to be made on a continuous
basis pursuant to Rule 415. Each Registration Statement filed
hereunder shall be on Form S-1 or such other form available to
register for resale the Registrable Securities as a secondary
offering and shall contain (unless otherwise directed by at least
85% in interest of the Holders) substantially the
“Plan of
Distribution” attached hereto as Annex A and substantially the
“Selling
Stockholder” section attached hereto as Annex B; provided, however, that no Holder shall
be required to be named as an “underwriter” without
such Holder’s express prior written consent. Subject to the
terms of this Agreement, the Company shall use its best efforts to
cause a Registration Statement filed under this Agreement
(including, without limitation, under Section 3(c)) to be declared
effective under the Securities Act as promptly as possible after
the filing thereof, but in any event no later than the applicable
Effectiveness Date, and shall use its best efforts to keep such
Registration Statement continuously effective under the Securities
Act until the date that all Registrable Securities covered by such
Registration Statement (i) have been sold, thereunder or pursuant
to Rule 144, or (ii) may be sold without volume or manner-of-sale
restrictions pursuant to Rule 144 and without the requirement for
the Company to be in compliance with the current public information
requirement under Rule 144, as determined by the counsel to the
Company pursuant to a written opinion letter to such effect,
addressed and acceptable to the Transfer Agent and the affected
Holders (the “Effectiveness Period”).
The Company shall telephonically request effectiveness of a
Registration Statement as of 5:00 p.m. Eastern Time on a Trading
Day. The Company shall immediately notify the Holders via facsimile
or by e-mail of the effectiveness of a Registration Statement by
the next Trading Day that the Company telephonically confirms
effectiveness with the Commission, which shall be the date
requested for effectiveness of such Registration Statement. The
Company shall, by 9:30 a.m. Eastern Time on the Trading Day five
(5) days after the effective date of such Registration Statement,
file a final Prospectus with the Commission as required by Rule
424. Failure to so notify the Holder within two (2) Trading Days of
such notification of effectiveness or failure to file a final
Prospectus as foresaid shall be deemed an Event under Section
2(d).
(b) Notwithstanding
the registration obligations set forth in Section 2(a), if the
Commission informs the Company that all of the Registrable
Securities cannot, as a result of the application of Rule 415, be
registered for resale as a secondary offering on a single
registration statement, the Company agrees to promptly inform each
of the Holders thereof and use its commercially reasonable efforts
to file amendments to the Initial Registration Statement as
required by the Commission, covering the maximum number of
Registrable Securities permitted to be registered by the
Commission, on Form S-1 or such other form available to register
for resale the Registrable Securities as a secondary offering,
subject to the provisions of Section 2(e) and subject to the
provisions of Section 2(d) with respect to the payment of
liquidated damages; provided, however, that prior to filing
such amendment, the Company shall be obligated to use diligent
efforts to advocate with the Commission for the registration of all
of the Registrable Securities in accordance with the SEC Guidance,
including without limitation, Compliance and Disclosure
Interpretation 612.09.
(c) Notwithstanding
any other provision of this Agreement and subject to the payment of
liquidated damages pursuant to Section 2(d), if the Commission or
any SEC Guidance sets forth a limitation on the number of
Registrable Securities permitted to be registered on a particular
Registration Statement as a secondary offering (and notwithstanding
that the Company used diligent efforts to advocate with the
Commission for the registration of all or a greater portion of
Registrable Securities), unless otherwise directed in writing by a
Holder as to its Registrable Securities, the number of Registrable
Securities to be registered on such Registration Statement will be
reduced as follows:
a.
First,
the Company shall reduce or eliminate any securities to be included
other than Registrable Securities;
b.
Second,
the Company shall reduce Registrable
Securities represented by Warrant Shares;
c.
Third,
the Company shall reduce Registrable Securities represented by
Conversion Shares; and
d.
Fourth, the Company shall reduce Registrable Securities represented by
Commitment Shares.
In
the event of a cutback hereunder, the Company shall give the Holder
at least five (5) Trading Days prior written notice along with the
calculations as to such Holder’s allotment. In the event the
Company amends the Initial Registration Statement in accordance
with the foregoing, the Company will use its best efforts to file
with the Commission, as promptly as allowed by Commission or SEC
Guidance provided to the Company or to registrants of securities in
general, one or more registration statements on Form S-1 or such
other form available to register for resale those Registrable
Securities that were not registered for resale on the Initial
Registration Statement, as amended.
(d) If: (i) the Initial
Registration Statement is not filed on or prior to its Filing Date
(if the Company files the Initial Registration Statement without
affording the Holders the opportunity to review and comment on the
same as required by Section 3(a) herein, the Company shall be
deemed to have not satisfied this clause (i)), or (ii) the Company
fails to file with the Commission a request for acceleration of a
Registration Statement in accordance with Rule 461 promulgated by
the Commission pursuant to the Securities Act, within five Trading
Days of the date that the Company is notified (orally or in
writing, whichever is earlier) by the Commission that such
Registration Statement will not be “reviewed” or will
not be subject to further review, or (iii) [reserved], or (iv) a
Registration Statement registering for resale all of the
Registrable Securities is not declared effective by the Commission
by the Effectiveness Date of the Initial Registration Statement,
(v) after the effective date of a Registration Statement, such
Registration Statement ceases for any reason to remain continuously
effective as to all Registrable Securities included in such
Registration Statement, or the Holders are otherwise not permitted
to utilize the Prospectus therein to resell such Registrable
Securities, for more than ten (10) consecutive calendar days or
more than an aggregate of fifteen (15) calendar days (which need
not be consecutive calendar days) during any 12-month period or
(vi) the Company shall fail for any reason to satisfy the current
public information requirement under Rule 144 as to the applicable
Registrable Securities (any such failure or breach being referred
to as an “Event”, and for purposes
of clauses (i) and (iv), the date on which such Event occurs, and
for purpose of clause (ii) the date on which such five (5) Trading
Day period is exceeded, and for purpose of clause (v) the date on
which such ten (10) or fifteen (15) calendar day period, as
applicable, is exceeded being referred to as “Event Date”), then, in
addition to any other rights the Holders may have hereunder or
under applicable law, on each such Event Date and on each monthly
anniversary of each such Event Date (if the applicable Event shall
not have been cured by such date) until the applicable Event is
cured, the Company shall pay to the Holders an amount in cash, as
partial liquidated damages and not as a penalty, their pro rata
portion of $50,000, on the Event Date and on every thirtieth
(30th) day
(pro rated for periods totaling less than thirty days) thereafter,
provided such amount shall increase by $25,000 on every thirty (30)
day anniversary of an Event Date. The foregoing liquidated damages
shall not apply if the Registerable Securities may be sold without
volume or manner-of-sale restrictions pursuant to Rule 144 at the
time the Event occurs, provided that the Company shall also be in
compliance with the current public information requirement under
Rule 144 to the extent required. If the Company fails to pay any
partial liquidated damages pursuant to this Section in full within
seven days after the date payable, the Company will pay interest
thereon at a rate of 18% per annum (or such lesser maximum amount
that is permitted to be paid by applicable law) to the Holder,
accruing daily from the date such partial liquidated damages are
due until such amounts, plus all such interest thereon, are paid in
full. The partial liquidated damages pursuant to the terms hereof
shall apply on a daily pro rata basis for any portion of a month
prior to the cure of an Event.
(e) [reserved]
(f) Notwithstanding
anything to the contrary contained herein, in no event shall the
Company be permitted to name any Holder or affiliate of a Holder as
any Underwriter without the prior written consent of such
Holder.
3.
Registration
Procedures.
In
connection with the Company’s registration obligations
hereunder, the Company shall:
(a) Not less than five
(5) Trading Days prior to the filing of each Registration Statement
and not less than one (1) Trading Day prior to the filing of any
related Prospectus or any amendment or supplement thereto
(including any document that would be incorporated or deemed to be
incorporated therein by reference), the Company shall (i) furnish
to each Holder copies of all such documents proposed to be filed,
which documents (other than those incorporated or deemed to be
incorporated by reference) will be subject to the review of such
Holders, and (ii) cause its officers and directors, counsel and
independent registered public accountants to respond to such
inquiries as shall be necessary, in the reasonable opinion of
respective counsel to each Holder, to conduct a reasonable
investigation within the meaning of the Securities Act. The Company
shall not file a Registration Statement or any such Prospectus or
any amendments or supplements thereto to which the Holders of a
majority of the Registrable Securities shall reasonably object in
good faith, provided that, the Company is notified of such
objection in writing no later than five (5) Trading Days after the
Holders have been so furnished copies of a Registration Statement
or one (1) Trading Day after the Holders have been so furnished
copies of any related Prospectus or amendments or supplements
thereto. Each Holder agrees to furnish to the Company a completed
questionnaire in the form attached to this Agreement as
Annex B (a
“Selling Stockholder
Questionnaire”) on a date that is not less than two
(2) Trading Days prior to the Filing Date or by the end of the
fourth (4th) Trading Day
following the date on which such Holder receives draft materials in
accordance with this Section.
(b) (i) Prepare and
file with the Commission such amendments, including post-effective
amendments, to a Registration Statement and the Prospectus used in
connection therewith as may be necessary to keep a Registration
Statement continuously effective as to the applicable Registrable
Securities for the Effectiveness Period and prepare and file with
the Commission such additional Registration Statements in order to
register for resale under the Securities Act all of the Registrable
Securities, (ii) cause the related Prospectus to be amended or
supplemented by any required Prospectus supplement (subject to the
terms of this Agreement), and, as so supplemented or amended, to be
filed pursuant to Rule 424, (iii) respond as promptly as reasonably
possible to any comments received from the Commission with respect
to a Registration Statement or any amendment thereto and provide as
promptly as reasonably possible to the Holders true and complete
copies of all correspondence from and to the Commission relating to
a Registration Statement (provided that, the Company shall excise
any information contained therein which would constitute material
non-public information regarding the Company or any of its
Subsidiaries), and (iv) comply in all material respects with the
applicable provisions of the Securities Act and the Exchange Act
with respect to the disposition of all Registrable Securities
covered by a Registration Statement during the applicable period in
accordance (subject to the terms of this Agreement) with the
intended methods of disposition by the Holders thereof set forth in
such Registration Statement as so amended or in such Prospectus as
so supplemented.
(c) If during the
Effectiveness Period, the number of Registrable Securities at any
time exceeds 100% of the number of shares of Common Stock then
registered in a Registration Statement, then the Company shall
file, as soon as reasonably practicable, an additional Registration
Statement covering the resale by the Holders of not less than the
number of such Registrable Securities.
(d) Notify the Holders
of Registrable Securities to be sold (which notice shall, pursuant
to clauses (iii) through (vi) hereof, be accompanied by an
instruction to suspend the use of the Prospectus until the
requisite changes have been made) as promptly as reasonably
possible (and, in the case of (i)(A) below, not less than one (1)
Trading Day prior to such filing) and (if requested by any such
Person) confirm such notice in writing no later than one (1)
Trading Day following the day (i)(A) when a Prospectus or any
Prospectus supplement or post-effective amendment to a Registration
Statement is proposed to be filed, (B) when the Commission notifies
the Company whether there will be a “review” of such
Registration Statement and whenever the Commission comments in
writing on such Registration Statement, and (C) with respect to a
Registration Statement or any post-effective amendment, when the
same has become effective, (ii) of any request by the Commission or
any other federal or state governmental authority for amendments or
supplements to a Registration Statement or Prospectus or for
additional information, (iii) of the issuance by the Commission or
any other federal or state governmental authority of any stop order
suspending the effectiveness of a Registration Statement covering
any or all of the Registrable Securities or the initiation of any
Proceedings for that purpose, (iv) of the receipt by the Company of
any notification with respect to the suspension of the
qualification or exemption from qualification of any of the
Registrable Securities for sale in any jurisdiction, or the
initiation or threatening of any Proceeding for such purpose, (v)
of the occurrence of any event or passage of time that makes the
financial statements included in a Registration Statement
ineligible for inclusion therein or any statement made in a
Registration Statement or Prospectus or any document incorporated
or deemed to be incorporated therein by reference untrue in any
material respect or that requires any revisions to a Registration
Statement, Prospectus or other documents so that, in the case of a
Registration Statement or the Prospectus, as the case may be, it
will not contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary
to make the statements therein, in light of the circumstances under
which they were made, not misleading, and (vi) of the occurrence or
existence of any pending corporate development with respect to the
Company that the Company believes may be material and that, in the
determination of the Company, makes it not in the best interest of
the Company to allow continued availability of a Registration
Statement or Prospectus, provided, however, in no event shall any
such notice contain any information which would constitute
material, non-public information regarding the Company or any of
its Subsidiaries.
(e) Use its best
efforts to avoid the issuance of, or, if issued, obtain the
withdrawal of (i) any order stopping or suspending the
effectiveness of a Registration Statement, or (ii) any suspension
of the qualification (or exemption from qualification) of any of
the Registrable Securities for sale in any jurisdiction, at the
earliest practicable moment.
(f) Furnish to each
Holder, without charge, at least one conformed copy of each such
Registration Statement and each amendment thereto, including
financial statements and schedules, all documents incorporated or
deemed to be incorporated therein by reference to the extent
requested by such Person, and all exhibits to the extent requested
by such Person (including those previously furnished or
incorporated by reference) promptly after the filing of such
documents with the Commission; provided, that any such item which
is available on the EDGAR system (or successor thereto) need not be
furnished in physical form.
(g) Subject to the
terms of this Agreement, the Company hereby consents to the use of
such Prospectus and each amendment or supplement thereto by each of
the selling Holders in connection with the offering and sale of the
Registrable Securities covered by such Prospectus and any amendment
or supplement thereto, except after the giving of any notice
pursuant to Section 3(d).
(h) Prior to any
resale of Registrable Securities by a Holder, use its commercially
reasonable efforts to register or qualify or cooperate with the
selling Holders in connection with the registration or
qualification (or exemption from the Registration or qualification)
of such Registrable Securities for the resale by the Holder under
the securities or Blue Sky laws of such jurisdictions within the
United States as any Holder reasonably requests in writing, to keep
each registration or qualification (or exemption therefrom)
effective during the Effectiveness Period and to do any and all
other acts or things reasonably necessary to enable the disposition
in such jurisdictions of the Registrable Securities covered by each
Registration Statement, provided that the Company shall not be
required to qualify generally to do business in any jurisdiction
where it is not then so qualified, subject the Company to any
material tax in any such jurisdiction where it is not then so
subject or file a general consent to service of process in any such
jurisdiction.
(i) If requested by a
Holder, cooperate with such Holder to facilitate the timely
preparation and delivery of certificates representing Registrable
Securities to be delivered to a transferee pursuant to a
Registration Statement, which certificates shall be free, to the
extent permitted by the Purchase Agreement, of all restrictive
legends, and to enable such Registrable Securities to be in such
denominations and registered in such names as any such Holder may
request.
(j) Upon the occurrence
of any event contemplated by Section 3(d), as promptly as
reasonably possible under the circumstances taking into account the
Company’s good faith assessment of any adverse consequences
to the Company and its stockholders of the premature disclosure of
such event, prepare a supplement or amendment, including a
post-effective amendment, to a Registration Statement or a
supplement to the related Prospectus or any document incorporated
or deemed to be incorporated therein by reference, and file any
other required document so that, as thereafter delivered, neither a
Registration Statement nor such Prospectus will contain an untrue
statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made,
not misleading. If the Company
notifies the Holders in accordance with clauses (iii) through (vi)
of Section 3(d) above to suspend the use of any Prospectus until
the requisite changes to such Prospectus have been made, then the
Holders shall suspend use of such Prospectus. The Company will use
its best efforts to ensure that the use of the Prospectus may be
resumed as promptly as is practicable. The Company shall be
entitled to exercise its right under this Section 3(j) to suspend
the availability of a Registration Statement and Prospectus,
subject to the payment of partial liquidated damages otherwise
required pursuant to Section 2(d), for a period not to exceed 60
calendar days (which need not be consecutive days) in any 12-month
period.
(k) Otherwise use
commercially reasonable efforts to comply with all applicable rules
and regulations of the Commission under the Securities Act and the
Exchange Act, including, without limitation, Rule 172 under the
Securities Act, file any final Prospectus, including any supplement
or amendment thereof, with the Commission pursuant to Rule 424
under the Securities Act, promptly inform the Holders in writing
if, at any time during the Effectiveness Period, the Company does
not satisfy the conditions specified in Rule 172 and, as a result
thereof, the Holders are required to deliver a Prospectus in
connection with any disposition of Registrable Securities and take
such other actions as may be reasonably necessary to facilitate the
registration of the Registrable Securities hereunder.
(l) Intentionally
Omitted.
(m) The Company may
require each selling Holder to furnish to the Company a certified
statement as to the number of shares of Common Stock beneficially
owned by such Holder and, if required by the Commission, the
natural persons thereof that have voting and dispositive control
over the shares. During any periods that the Company is unable to
meet its obligations hereunder with respect to the registration of
the Registrable Securities solely because any Holder fails to
furnish such information within three Trading Days of the
Company’s request, any liquidated damages that are accruing
at such time as to such Holder only shall be tolled and any Event
that may otherwise occur solely because of such delay shall be
suspended as to such Holder only, until such information is
delivered to the Company.
4.
Registration
Expenses. All fees and expenses incident to the performance
of or compliance with, this Agreement by the Company shall be borne
by the Company whether or not any Registrable Securities are sold
pursuant to a Registration Statement. The fees and expenses
referred to in the foregoing sentence shall include, without
limitation, (i) all registration and filing fees (including,
without limitation, fees and expenses of the Company’s
counsel and independent registered public accountants) (A) with
respect to filings made with the Commission, (B) with respect to
filings required to be made with any Trading Market on which the
Common Stock is then listed for trading, and (C) in compliance with
applicable state securities or Blue Sky laws reasonably agreed to
by the Company in writing (including, without limitation, fees and
disbursements of counsel for the Company in connection with Blue
Sky qualifications or exemptions of the Registrable Securities),
(ii) printing expenses (including, without limitation, expenses of
printing certificates for Registrable Securities), (iii) messenger,
telephone and delivery expenses, (iv) fees and disbursements of
counsel for the Company, (v) Securities Act liability insurance, if
the Company so desires such insurance, (vi) fees and expenses of
all other Persons retained by the Company in connection with the
consummation of the transactions contemplated by this Agreement and
(vii) reasonable and
reasonably-documented fees and disbursements, not to exceed $10,000
in the aggregate, of one counsel for the Purchasers. In
addition, the Company shall be responsible for all of its internal
expenses incurred in connection with the consummation of the
transactions contemplated by this Agreement (including, without
limitation, all salaries and expenses of its officers and employees
performing legal or accounting duties), the expense of any annual
audit and the fees and expenses incurred in connection with the
listing of the Registrable Securities on any securities exchange as
required hereunder. In no event shall the Company be responsible
for any broker or similar commissions of any Holder or, except to
the extent provided for in the Transaction Documents, any legal
fees or other costs of the Holders.
(a) Indemnification by the Company.
The Company shall, notwithstanding any termination of this
Agreement, indemnify and hold harmless each Holder, the officers,
directors, members, partners, agents, and employees (and any other
Persons with a functionally equivalent role of a Person holding
such titles, notwithstanding a lack of such title or any other
title) of each of them, each Person who controls any such Holder
(within the meaning of Section 15 of the Securities Act or Section
20 of the Exchange Act) and the officers, directors, members,
stockholders, partners, agents and employees (and any other Persons
with a functionally equivalent role of a Person holding such
titles, notwithstanding a lack of such title or any other title) of
each such controlling Person, to the fullest extent permitted by
applicable law, from and against any and all losses, claims,
damages, liabilities, costs (including, without limitation,
reasonable attorneys’ fees) and expenses (collectively,
“Losses”), as incurred,
arising out of or relating to (1) any untrue or alleged untrue
statement of a material fact contained in a Registration Statement,
any Prospectus or any form of prospectus or in any amendment or
supplement thereto or in any preliminary prospectus, or arising out
of or relating to any omission or alleged omission of a material
fact required to be stated therein or necessary to make the
statements therein (in the case of any Prospectus or supplement
thereto, in light of the circumstances under which they were made)
not misleading or (2) any violation or alleged violation by the
Company of the Securities Act, the Exchange Act or any state
securities law, or any rule or regulation thereunder, in connection
with the performance of its obligations under this Agreement,
except to the extent, but only to the extent, that (i) such untrue
statements or omissions are based solely upon information regarding
such Holder furnished in writing to the Company by such Holder
expressly for use therein, or to the extent that such information
relates to such Holder or such Holder’s proposed method of
distribution of Registrable Securities and was reviewed and
expressly approved in writing by such Holder expressly for use in a
Registration Statement, such Prospectus or in any amendment or
supplement thereto (it being understood that the Holder has
approved Annex A hereto for this purpose) or (ii) in the case of an
occurrence of an event of the type specified in Section
3(d)(iii)-(vi), the use by such Holder of an outdated, defective or
otherwise unavailable Prospectus after the Company has notified
such Holder in writing that the Prospectus is outdated, defective
or otherwise unavailable for use by such Holder and prior to the
receipt by such Holder of the Advice contemplated in Section 6(d).
The Company shall notify the Holders promptly of the institution,
threat or assertion of any Proceeding arising from or in connection
with the transactions contemplated by this Agreement of which the
Company is aware. Such indemnity shall remain in full force and
effect regardless of any investigation made by or on behalf of such
indemnified person and shall survive the transfer of any
Registrable Securities by any of the Holders in accordance with
Section 6(h).
(b) Indemnification by Holders.
Each Holder shall, severally and not jointly, indemnify and hold
harmless the Company, its directors, officers, agents and
employees, each Person who controls the Company (within the meaning
of Section 15 of the Securities Act and Section 20 of the Exchange
Act), and the directors, officers, agents or employees of such
controlling Persons, to the fullest extent permitted by applicable
law, from and against all Losses, as incurred, to the extent
arising out of or based solely upon: any untrue or alleged untrue
statement of a material fact contained in any Registration
Statement, any Prospectus, or in any amendment or supplement
thereto or in any preliminary prospectus, or arising out of or
relating to any omission or alleged omission of a material fact
required to be stated therein or necessary to make the statements
therein (in the case of any Prospectus or supplement thereto, in
light of the circumstances under which they were made) not
misleading (i) to the extent, but only to the extent, that such
untrue statement or omission is contained in any information so
furnished in writing by such Holder to the Company expressly for
inclusion in such Registration Statement or such Prospectus or (ii)
to the extent, but only to the extent, that such information
relates to such Holder’s information provided in the Selling
Stockholder Questionnaire or the proposed method of distribution of
Registrable Securities and was reviewed and expressly approved in
writing by such Holder expressly for use in a Registration
Statement (it being understood that the Holder has approved Annex A
hereto for this purpose), such Prospectus or in any amendment or
supplement thereto. In no event shall the liability of a selling
Holder be greater in amount than the dollar amount of the proceeds
(net of all expenses paid by such Holder in connection with any
claim relating to this Section 5 and the amount of any damages such
Holder has otherwise been required to pay by reason of such untrue
statement or omission) received by such Holder upon the sale of the
Registrable Securities included in the Registration Statement
giving rise to such indemnification obligation.
(c) Conduct of Indemnification
Proceedings. If any Proceeding shall be brought or asserted
against any Person entitled to indemnity hereunder (an
“Indemnified
Party”), such Indemnified Party shall promptly notify
the Person from whom indemnity is sought (the “Indemnifying Party”) in
writing, and the Indemnifying Party shall have the right to assume
the defense thereof, including the employment of counsel reasonably
satisfactory to the Indemnified Party and the payment of all fees
and expenses incurred in connection with defense thereof, provided
that the failure of any Indemnified Party to give such notice shall
not relieve the Indemnifying Party of its obligations or
liabilities pursuant to this Agreement, except (and only) to the
extent that it shall be finally determined by a court of competent
jurisdiction (which determination is not subject to appeal or
further review) that such failure shall have materially and
adversely prejudiced the Indemnifying Party.
An
Indemnified Party shall have the right to employ separate counsel
in any such Proceeding and to participate in the defense thereof,
but the fees and expenses of such counsel shall be at the expense
of such Indemnified Party or Parties unless: (1) the Indemnifying
Party has agreed in writing to pay such fees and expenses, (2) the
Indemnifying Party shall have failed promptly to assume the defense
of such Proceeding and to employ counsel reasonably satisfactory to
such Indemnified Party in any such Proceeding, or (3) the named
parties to any such Proceeding (including any impleaded parties)
include both such Indemnified Party and the Indemnifying Party, and
counsel to the Indemnified Party shall reasonably believe that a
material conflict of interest is likely to exist if the same
counsel were to represent such Indemnified Party and the
Indemnifying Party (in which case, if such Indemnified Party
notifies the Indemnifying Party in writing that it elects to employ
separate counsel at the expense of the Indemnifying Party, the
Indemnifying Party shall not have the right to assume the defense
thereof and the reasonable fees and expenses of no more than one
separate counsel shall be at the expense of the Indemnifying
Party). The Indemnifying Party shall not be liable for any
settlement of any such Proceeding effected without its written
consent, which consent shall not be unreasonably withheld or
delayed. No Indemnifying Party shall, without the prior written
consent of the Indemnified Party, effect any settlement of any
pending Proceeding in respect of which any Indemnified Party is a
party, unless such settlement includes an unconditional release of
such Indemnified Party from all liability on claims that are the
subject matter of such Proceeding.
Subject
to the terms of this Agreement, all reasonable fees and expenses of
the Indemnified Party (including reasonable fees and expenses to
the extent incurred in connection with investigating or preparing
to defend such Proceeding in a manner not inconsistent with this
Section) shall be paid to the Indemnified Party, as incurred,
within ten Trading Days of written notice thereof to the
Indemnifying Party, provided that the Indemnified Party shall
promptly reimburse the Indemnifying Party for that portion of such
fees and expenses applicable to such actions for which such
Indemnified Party is finally determined by a court of competent
jurisdiction (which determination is not subject to appeal or
further review) not to be entitled to indemnification
hereunder.
(d) Contribution. If the
indemnification under Section 5(a) or 5(b) is unavailable to an
Indemnified Party or insufficient to hold an Indemnified Party
harmless for any Losses, then each Indemnifying Party shall
contribute to the amount paid or payable by such Indemnified Party,
in such proportion as is appropriate to reflect the relative fault
of the Indemnifying Party and Indemnified Party in connection with
the actions, statements or omissions that resulted in such Losses
as well as any other relevant equitable considerations. The
relative fault of such Indemnifying Party and Indemnified Party
shall be determined by reference to, among other things, whether
any action in question, including any untrue or alleged untrue
statement of a material fact or omission or alleged omission of a
material fact, has been taken or made by, or relates to information
supplied by, such Indemnifying Party or Indemnified Party, and the
parties’ relative intent, knowledge, access to information
and opportunity to correct or prevent such action, statement or
omission. The amount paid or payable by a party as a result of any
Losses shall be deemed to include, subject to the limitations set
forth in this Agreement, any reasonable attorneys’ or other
fees or expenses incurred by such party in connection with any
Proceeding to the extent such party would have been indemnified for
such fees or expenses if the indemnification provided for in this
Section was available to such party in accordance with its
terms.
The
parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 5(d) were determined by pro
rata allocation or by any other method of allocation that does not
take into account the equitable considerations referred to in the
immediately preceding paragraph. In no event shall the contribution
obligation of a Holder of Registrable Securities be greater in
amount than the dollar amount of the proceeds (net of all expenses
paid by such Holder in connection with any claim relating to this
Section 5 and the amount of any damages such Holder has otherwise
been required to pay by reason of such untrue or alleged untrue
statement or omission or alleged omission) received by it upon the
sale of the Registrable Securities giving rise to such contribution
obligation.
The
indemnity and contribution agreements contained in this Section are
in addition to any liability that the Indemnifying Parties may have
to the Indemnified Parties.
(a) Remedies. In the event of a
breach by the Company or by a Holder of any of their respective
obligations under this Agreement, each Holder or the Company, as
the case may be, in addition to being entitled to exercise all
rights granted by law and under this Agreement, including recovery
of damages, shall be entitled to specific performance of its rights
under this Agreement. Each of the Company and each Holder agrees
that monetary damages would not provide adequate compensation for
any losses incurred by reason of a breach by it of any of the
provisions of this Agreement and hereby further agrees that, in the
event of any action for specific performance in respect of such
breach, it shall not assert or shall waive the defense that a
remedy at law would be adequate.
(b) No Piggyback on Registrations;
Prohibition on Filing Other Registration Statements. Neither
the Company nor any of its security holders (other than the Holders
in such capacity pursuant hereto) may include securities of the
Company in any Registration Statements other than the Registrable
Securities. The Company shall not file any other registration
statements until all Registrable Securities are registered pursuant
to a Registration Statement that is declared effective by the
Commission, provided that this Section 6(b) shall not prohibit the
Company from filing amendments to registration statements filed
prior to the date of this Agreement.
(c) [Reserved]
(d) Discontinued Disposition. By
its acquisition of Registrable Securities, each Holder agrees that,
upon receipt of a notice from the Company of the occurrence of any
event of the kind described in Section 3(d)(iii) through (vi), such
Holder will forthwith discontinue disposition of such Registrable
Securities under a Registration Statement until it is advised in
writing (the “Advice”) by the Company
that the use of the applicable Prospectus (as it may have been
supplemented or amended) may be resumed. The Company will use its
best efforts to ensure that the use of the Prospectus may be
resumed as promptly as is practicable. The Company agrees and
acknowledges that any periods during which the Holder is required
to discontinue the disposition of the Registrable Securities
hereunder shall be subject to the provisions of Section
2(d).
(e) Piggy-Back Registrations. If,
at any time during the Effectiveness Period, there is not an
effective Registration Statement covering all of the Registrable
Securities and the Company shall determine to prepare and file with
the Commission a registration statement relating to an offering for
its own account or the account of others under the Securities Act
of any of its equity securities, other than on Form S-4 or Form S-8
(each as promulgated under the Securities Act) or their then
equivalents relating to equity securities to be issued solely in
connection with any acquisition of any entity or business or equity
securities issuable in connection with the Company’s stock
option or other employee benefit plans, then the Company shall
deliver to each Holder a written notice of such determination and,
if within fifteen days after the date of the delivery of such
notice, any such Holder shall so request in writing, the Company
shall include in such registration statement all or any part of
such Registrable Securities such Holder requests to be registered;
provided,
however, that the
Company shall not be required to register any Registrable
Securities pursuant to this Section 6(e) that are eligible for
resale pursuant to Rule 144 (without volume restrictions or current
public information requirements) promulgated by the Commission
pursuant to the Securities Act or that are the subject of a then
effective Registration Statement that is available for resales or
other dispositions by such Holder.
(f) Amendments and Waivers. The
provisions of this Agreement, including the provisions of this
sentence, may not be amended, modified or supplemented, and waivers
or consents to departures from the provisions hereof may not be
given, unless the same shall be in writing and signed by the
Company and the Holders of 50.1% or more of the then outstanding
Registrable Securities (for purposes of clarification, this
includes any Registrable Securities issuable upon exercise or
conversion of any Security), provided that, if any amendment,
modification or waiver disproportionately and adversely impacts a
Holder (or group of Holders), the consent of such
disproportionately impacted Holder (or group of Holders) shall be
required. If a Registration Statement does not register all of the
Registrable Securities pursuant to a waiver or amendment done in
compliance with the previous sentence, then the number of
Registrable Securities to be registered for each Holder shall be
reduced pro rata among all Holders and each Holder shall have the
right to designate which of its Registrable Securities shall be
omitted from such Registration Statement. Notwithstanding the
foregoing, a waiver or consent to depart from the provisions hereof
with respect to a matter that relates exclusively to the rights of
a Holder or some Holders and that does not directly or indirectly
affect the rights of other Holders may be given only by such Holder
or Holders of all of the Registrable Securities to which such
waiver or consent relates; provided, however, that the provisions of
this sentence may not be amended, modified, or supplemented except
in accordance with the provisions of the first sentence of this
Section 6(f). No consideration shall be offered or paid to any
Person to amend or consent to a waiver or modification of any
provision of this Agreement unless the same consideration also is
offered to all of the parties to this Agreement.
(g) Notices. Any and all notices or
other communications or deliveries required or permitted to be
provided hereunder shall be delivered as set forth in the Purchase
Agreement.
(h) Successors and Assigns. This
Agreement shall inure to the benefit of and be binding upon the
successors and permitted assigns of each of the parties and shall
inure to the benefit of each Holder. The Company may not assign
(except by merger) its rights or obligations hereunder without the
prior written consent of all of the Holders of the then outstanding
Registrable Securities. Each Holder may assign their respective
rights hereunder in the manner and to the Persons as permitted
under Section 5.7 of the Purchase Agreement.
(i) No Inconsistent Agreements.
Neither the Company nor any of its Subsidiaries has entered, as of
the date hereof, nor shall the Company or any of its Subsidiaries,
on or after the date of this Agreement, enter into any agreement
with respect to its securities, that would have the effect of
impairing the rights granted to the Holders in this Agreement or
otherwise conflicts with the provisions hereof. Except as set forth
on Schedule 6(i),
neither the Company nor any of its Subsidiaries has previously
entered into any agreement granting any registration rights with
respect to any of its securities to any Person that have not been
satisfied in full.
(j) Execution and Counterparts.
This Agreement may be executed in two or more counterparts, all of
which when taken together shall be considered one and the same
agreement and shall become effective when counterparts have been
signed by each party and delivered to the other party, it being
understood that both parties need not sign the same counterpart. In
the event that any signature is delivered by facsimile transmission
or by e-mail delivery of a “.pdf” format data file,
such signature shall create a valid and binding obligation of the
party executing (or on whose behalf such signature is executed)
with the same force and effect as if such facsimile or
“.pdf” signature page were an original
thereof.
(k) Governing Law. All questions
concerning the construction, validity, enforcement and
interpretation of this Agreement shall be determined in accordance
with the provisions of the Purchase Agreement.
(l) Cumulative Remedies. The
remedies provided herein are cumulative and not exclusive of any
other remedies provided by law.
(m) Severability. If any term,
provision, covenant or restriction of this Agreement is held by a
court of competent jurisdiction to be invalid, illegal, void or
unenforceable, the remainder of the terms, provisions, covenants
and restrictions set forth herein shall remain in full force and
effect and shall in no way be affected, impaired or invalidated,
and the parties hereto shall use their commercially reasonable
efforts to find and employ an alternative means to achieve the same
or substantially the same result as that contemplated by such term,
provision, covenant or restriction. It is hereby stipulated and
declared to be the intention of the parties that they would have
executed the remaining terms, provisions, covenants and
restrictions without including any of such that may be hereafter
declared invalid, illegal, void or unenforceable.
(n) Headings. The headings in this
Agreement are for convenience only, do not constitute a part of the
Agreement and shall not be deemed to limit or affect any of the
provisions hereof.
********************
(Signature Pages Follow)
IN
WITNESS WHEREOF, the parties have executed this Registration Rights
Agreement as of the date first written above.
GOIP GLOBAL, INC.
|
By:__________________________________________
Name:
Title:
|
[SIGNATURE
PAGE OF HOLDERS FOLLOWS]
[SIGNATURE
PAGE OF HOLDERS TO GOIG RRA]
Name of
Holder: ______________________________
Signature of Authorized Signatory of
Holder: __________________________
Name of
Authorized Signatory: _________________________
Title
of Authorized Signatory: __________________________
[SIGNATURE PAGES
CONTINUE]
Annex A
Plan of Distribution
Each
Selling Stockholder (the “Selling Stockholders”) of
the securities and any of their pledgees, assignees and
successors-in-interest may, from time to time, sell any or all of
their securities covered hereby on the principal Trading Market or
any other stock exchange, market or trading facility on which the
securities are traded or in private transactions. These sales may
be at fixed or negotiated prices. A Selling Stockholder may use any
one or more of the following methods when selling
securities:
●
ordinary brokerage
transactions and transactions in which the broker-dealer solicits
purchasers;
●
block trades in
which the broker-dealer will attempt to sell the securities as
agent but may position and resell a portion of the block as
principal to facilitate the transaction;
●
purchases by a
broker-dealer as principal and resale by the broker-dealer for its
account;
●
an exchange
distribution in accordance with the rules of the applicable
exchange;
●
privately
negotiated transactions;
●
settlement of short
sales;
●
in transactions
through broker-dealers that agree with the Selling Stockholders to
sell a specified number of such securities at a stipulated price
per security;
●
through the writing
or settlement of options or other hedging transactions, whether
through an options exchange or otherwise;
●
a combination of
any such methods of sale; or
●
any other method
permitted pursuant to applicable law.
The
Selling Stockholders may also sell securities under Rule 144 or any
other exemption from registration under the Securities Act of 1933,
as amended (the “Securities Act”), if
available, rather than under this prospectus.
Broker-dealers
engaged by the Selling Stockholders may arrange for other
brokers-dealers to participate in sales. Broker-dealers may receive
commissions or discounts from the Selling Stockholders (or, if any
broker-dealer acts as agent for the purchaser of securities, from
the purchaser) in amounts to be negotiated, but, except as set
forth in a supplement to this Prospectus, in the case of an agency
transaction not in excess of a customary brokerage commission in
compliance with FINRA Rule 2440; and in the case of a principal
transaction a markup or markdown in compliance with FINRA
IM-2440.
In
connection with the sale of the securities or interests therein,
the Selling Stockholders may enter into hedging transactions with
broker-dealers or other financial institutions, which may in turn
engage in short sales of the securities in the course of hedging
the positions they assume. The Selling Stockholders may also sell
securities short and deliver these securities to close out their
short positions, or loan or pledge the securities to broker-dealers
that in turn may sell these securities. The Selling Stockholders
may also enter into option or other transactions with
broker-dealers or other financial institutions or create one or
more derivative securities which require the delivery to such
broker-dealer or other financial institution of securities offered
by this prospectus, which securities such broker-dealer or other
financial institution may resell pursuant to this prospectus (as
supplemented or amended to reflect such transaction).
The
Selling Stockholders and any broker-dealers or agents that are
involved in selling the securities may be deemed to be
“underwriters” within the meaning of the Securities Act
in connection with such sales. In such event, any commissions
received by such broker-dealers or agents and any profit on the
resale of the securities purchased by them may be deemed to be
underwriting commissions or discounts under the Securities Act.
Each Selling Stockholder has informed the Company that it does not
have any written or oral agreement or understanding, directly or
indirectly, with any person to distribute the
securities.
The
Company is required to pay certain fees and expenses incurred by
the Company incident to the registration of the securities. The
Company has agreed to indemnify the Selling Stockholders against
certain losses, claims, damages and liabilities, including
liabilities under the Securities Act.
We
agreed to keep this prospectus effective until the earlier of (i)
the date on which the securities may be resold by the Selling
Stockholders without registration and without regard to any volume
or manner-of-sale limitations by reason of Rule 144, without the
requirement for the Company to be in compliance with the current
public information under Rule 144 under the Securities Act or any
other rule of similar effect or (ii) all of the securities have
been sold pursuant to this prospectus or Rule 144 under the
Securities Act or any other rule of similar effect. The resale
securities will be sold only through registered or licensed brokers
or dealers if required under applicable state securities laws. In
addition, in certain states, the resale securities covered hereby
may not be sold unless they have been registered or qualified for
sale in the applicable state or an exemption from the registration
or qualification requirement is available and is complied
with.
Under
applicable rules and regulations under the Exchange Act, any person
engaged in the distribution of the resale securities may not
simultaneously engage in market making activities with respect to
the common stock for the applicable restricted period, as defined
in Regulation M, prior to the commencement of the distribution. In
addition, the Selling Stockholders will be subject to applicable
provisions of the Exchange Act and the rules and regulations
thereunder, including Regulation M, which may limit the timing of
purchases and sales of the common stock by the Selling Stockholders
or any other person. We will make copies of this prospectus
available to the Selling Stockholders and have informed them of the
need to deliver a copy of this prospectus to each purchaser at or
prior to the time of the sale (including by compliance with Rule
172 under the Securities Act).
SELLING SHAREHOLDERS
The
common stock being offered by the selling shareholders are those
previously issued to the selling shareholders, and those issuable
to the selling shareholders, upon conversion of the notes and
exercise of the warrants. For additional information regarding the
issuances of the notes and shares of common stock, see "Private
Placement" above. We are registering the shares of common stock in
order to permit the selling shareholders to offer the shares for
resale from time to time. Except for the ownership of the notes and
the shares of common stock, the selling shareholders have not had
any material relationship with us within the past three
years.
The
table below lists the selling shareholders and other information
regarding the beneficial ownership of the shares of common stock by
each of the selling shareholders. The second column lists the
number of shares of common stock beneficially owned by each selling
shareholder, based on its ownership of the shares of common stock,
notes and warrants, as of ________, 2020, assuming conversion of
the notes and exercise of warrants held by the selling shareholders
on that date, without regard to any limitations on
exercises.
The
third column lists the shares of common stock being offered by this
prospectus by the selling shareholders.
In
accordance with the terms of a registration rights agreement with
the selling shareholders, this prospectus generally covers the
resale of the sum of (i) the number of shares of common stock
issued to the selling shareholders as commitment shares, (ii) the
maximum number of shares of common stock issuable upon conversion
of the notes, determined as if the outstanding notes were exercised
in full as of the trading day immediately preceding the date this
registration statement was initially filed with the SEC and (iii)
the maximum number of shares of common stock issuable upon exercise
of the warrants, determined as if the outstanding warrants were
exercised in full as of the trading day immediately preceding the
date this registration statement was initially filed with the SEC,
each as of the trading day immediately preceding the applicable
date of determination and all subject to adjustment as provided in
the registration right agreement, without regard to any limitations
on the exercise of the notes. The fourth column assumes the sale
of all of the shares offered by the selling shareholders pursuant
to this prospectus.
Under
the terms of the notes, a selling shareholder may not exercise the
notes and/or exercise the warrants to the extent such exercise
would cause such selling shareholder, together with its affiliates
and attribution parties, to beneficially own a number of shares of
common stock which would exceed 4.99% of our then outstanding
common stock following such conversion, excluding for purposes of
such determination shares of common stock issuable upon exercise of
the notes which have not been converted. The number of shares in
the second column does not reflect this limitation. The selling
shareholders may sell all, some or none of their shares in this
offering. See "Plan of Distribution."
Name of Selling Shareholder
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Number of shares of Common
Stock Owned Prior to Offering
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Maximum Number of shares
of Common Stock to be Sold
Pursuant to this Prospectus
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Number of shares
of Common Stock
Owned After Offering
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Annex
C
GOIP GLOBAL, INC.
Selling Stockholder Notice and Questionnaire
The
undersigned beneficial owner of common stock (the
“Registrable
Securities”) of GoIP Global, Inc., a Colorado
corporation (the “Company”), understands
that the Company has filed or intends to file with the Securities
and Exchange Commission (the “Commission”) a
registration statement (the “Registration Statement”)
for the registration and resale under Rule 415 of the Securities
Act of 1933, as amended (the “Securities Act”), of the
Registrable Securities, in accordance with the terms of the
Registration Rights Agreement (the “Registration Rights
Agreement”) to which this document is annexed. A copy
of the Registration Rights Agreement is available from the Company
upon request at the address set forth below. All capitalized terms
not otherwise defined herein shall have the meanings ascribed
thereto in the Registration Rights Agreement.
Certain
legal consequences arise from being named as a selling stockholder
in the Registration Statement and the related prospectus.
Accordingly, holders and beneficial owners of Registrable
Securities are advised to consult their own securities law counsel
regarding the consequences of being named or not being named as a
selling stockholder in the Registration Statement and the related
prospectus.
NOTICE
The
undersigned beneficial owner (the “Selling Stockholder”) of
Registrable Securities hereby elects to include the Registrable
Securities owned by it in the Registration Statement.
The
undersigned hereby provides the following information to the
Company and represents and warrants that such information is
accurate:
QUESTIONNAIRE
1. Name.
(a)
Full Legal Name of
Selling Stockholder
(b)
Full Legal Name of
Registered Holder (if not the same as (a) above) through which
Registrable Securities are held:
(c)
Full Legal Name of
Natural Control Person (which means a natural person who directly
or indirectly alone or with others has power to vote or dispose of
the securities covered by this Questionnaire):
2.
Address for Notices to Selling Stockholder:
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Telephone:
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Fax:
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Contact
Person:
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3.
Broker-Dealer Status:
(a)
Are you a
broker-dealer?
(b)
If
“yes” to Section 3(a), did you receive your Registrable
Securities as compensation for investment banking services to the
Company?
Note:
If “no”
to Section 3(b), the Commission’s staff has indicated that
you should be identified as an underwriter in the Registration
Statement.
(c)
Are you an
affiliate of a broker-dealer?
(d)
If you are an
affiliate of a broker-dealer, do you certify that you purchased the
Registrable Securities in the ordinary course of business, and at
the time of the purchase of the Registrable Securities to be
resold, you had no agreements or understandings, directly or
indirectly, with any person to distribute the Registrable
Securities?
Note:
If “no”
to Section 3(d), the Commission’s staff has indicated that
you should be identified as an underwriter in the Registration
Statement.
4.
Beneficial Ownership of Securities of the Company Owned by the
Selling Stockholder.
Except as set forth below in this Item 4, the undersigned is not
the beneficial or registered owner of any securities of the Company
other than the securities issuable pursuant to the Purchase
Agreement.
(a)
Type and Amount of
other securities beneficially owned by the Selling
Stockholder:
5.
Relationships with the Company:
Except as set forth below, neither the undersigned nor any of its
affiliates, officers, directors or principal equity holders (owners
of 5% of more of the equity securities of the undersigned) has held
any position or office or has had any other material relationship
with the Company (or its predecessors or affiliates) during the
past three years.
State any
exceptions here:
The
undersigned agrees to promptly notify the Company of any material
inaccuracies or changes in the information provided herein that may
occur subsequent to the date hereof at any time while the
Registration Statement remains effective; provided, that the
undersigned shall not be required to notify the Company of any
changes to the number of securities held or owned by the
undersigned or its affiliates.
The
undersigned represents and warrants to the Company that it is
familiar with and understands Regulation M under the Securities
Exchange Act of 1934 and agrees to abide by the provisions of
Regulation M during any time Regulation M applies to the
undersigned via the Registrable Securities. By signing below, the
undersigned consents to the disclosure of the information contained
herein in its answers to Items 1 through 5 and the inclusion of
such information in the Registration Statement and the related
prospectus and any amendments or
supplements thereto. The undersigned understands that such
information will be relied upon by the Company in connection with
the preparation or amendment of the Registration Statement and the
related prospectus and any amendments or supplements
thereto.
IN
WITNESS WHEREOF the undersigned, by authority duly given, has
caused this Notice and Questionnaire to be executed and delivered
either in person or by its duly authorized agent.
Date:
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Beneficial
Owner:
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By:
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Name:
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Title:
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PLEASE FAX A COPY (OR EMAIL A .PDF COPY) OF THE COMPLETED AND
EXECUTED NOTICE AND QUESTIONNAIRE TO:
Exhibit 10.3
SECURITY AGREEMENT
This
SECURITY AGREEMENT, dated as of May 8, 2020 (this
“Agreement”), is among
GoIP Global, Inc., a Colorado corporation (the “Company”), the
Subsidiaries of the Company set forth on the signature pages hereto
(such subsidiaries, the “Subsidiaries” and,
together with the Company, the “Debtors”) and the holders
of the Company’s Original Issue Discount Senior Secured
Convertible Promissory Notes due twelve (12) months following their
issuance, in the aggregate principal amount of $3,000,000.00 (the
“Notes”) signatory hereto,
their endorsees, transferees and assigns (collectively, the
“Secured
Parties”).
W I T N E S S E T H:
WHEREAS, pursuant
to the Purchase Agreement (as defined in the Notes), the Secured
Parties have severally agreed to extend the loans to the Company
evidenced by the Notes;
WHEREAS, in order
to induce the Secured Parties to extend the loans evidenced by the
Notes, each Debtor has agreed to execute and deliver to the Secured
Parties this Agreement and to grant the Secured
Parties, pari passu with each other
Secured Party and through the Agent (as defined in Section 18 hereof), a
security interest in certain property of such Debtor to secure the
prompt payment, performance and discharge in full of all of the
Company’s obligations under the Notes.
NOW,
THEREFORE, in consideration of the agreements herein contained and
for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto
hereby agree as follows:
1. Certain
Definitions. As used in this Agreement, the following terms
shall have the meanings set forth in this Section 1. Terms
used but not otherwise defined in this Agreement that are defined
in Article 9 of the UCC (such as “account”,
“chattel paper”, “commercial tort claim”,
“deposit account”, “document”,
“equipment”, “fixtures”, “general
intangibles”, “goods”, “instruments”,
“inventory”, “investment property”,
“letter-of-credit rights”, “proceeds” and
“supporting obligations”) shall have the respective
meanings given such terms in Article 9 of the UCC. In addition to
the terms defined elsewhere in this Agreement, capitalized terms
not otherwise defined herein shall have the meanings set forth in
the Purchase Agreement.
(a)
“Collateral” means the
collateral in which the Secured Parties are granted a security
interest by this Agreement and which shall comprise all the assets
of the Debtors, including, without limitation, the following
personal property of the Debtors, whether presently owned or
existing or hereafter acquired or coming into existence, wherever
situated, and all additions and accessions thereto and all
substitutions and replacements thereof, and all proceeds, products
and accounts thereof, including, without limitation, all proceeds
from the sale or transfer of the Collateral and of insurance
covering the same and of any tort claims in connection therewith,
and all dividends, interest, cash, notes, securities, equity
interest or other property at any time and from time to time
acquired, receivable or otherwise distributed in respect of, or in
exchange for, any or all of the Pledged Securities (as defined
below):
(i)
All goods,
including, without limitation, (A) all machinery, equipment,
computers, motor vehicles, trucks, tanks, boats, ships, appliances,
furniture, special and general tools, fixtures, test and quality
control devices and other equipment of every kind and nature and
wherever situated, together with all documents of title and
documents representing the same, all additions and accessions
thereto, replacements therefor, all parts therefor, and all
substitutes for any of the foregoing and all other items used and
useful in connection with any Debtor’s businesses and all
improvements thereto; and (B) all inventory;
(ii)
All
contract rights and other general intangibles, including, without
limitation, all partnership interests, membership interests, stock
or other securities, rights under any of the Organizational
Documents, agreements related to the Pledged Securities, licenses,
distribution and other agreements, computer software (whether
“off-the-shelf”, licensed from any third party or
developed by any Debtor), computer software development rights,
leases, franchises, customer lists, quality control procedures,
grants and rights, goodwill, Intellectual Property and income tax
refunds;
(iii)
All
accounts, together with all instruments, all documents of title
representing any of the foregoing, all rights in any merchandising,
goods, equipment, motor vehicles and trucks which any of the same
may represent, and all right, title, security and guaranties with
respect to each account, including any right of stoppage in
transit;
(iv)
All
documents, letter-of-credit rights, instruments and chattel
paper;
(v)
All
commercial tort claims;
(vi)
All
deposit accounts and all cash (whether or not deposited in such
deposit accounts);
(vii)
All
investment property;
(viii)
All
supporting obligations;
(ix)
All
files, records, books of account, business papers, and computer
programs; and
(x)
the
products and proceeds of all of the foregoing Collateral set forth
in clauses (i)-(ix) above.
Without
limiting the generality of the foregoing, the “Collateral” shall include
all investment property and general intangibles respecting
ownership and/or other equity interests in each Subsidiary,
including, without limitation, the shares of capital stock and the
other equity interests listed on Schedule G hereto (as
the same may be modified from time to time pursuant to the terms
hereof), and any other shares of capital stock and/or other equity
interests of any other direct or indirect subsidiary of any Debtor
obtained in the future, and, in each case, all certificates
representing such shares and/or equity interests and, in each case,
all rights, options, warrants, stock, other securities and/or
equity interests that may hereafter be received, receivable or
distributed in respect of, or exchanged for, any of the foregoing
and all rights arising under or in connection with the Pledged
Securities, including, but not limited to, all dividends, interest
and cash.
Notwithstanding the
foregoing, nothing herein shall be deemed to constitute an
assignment of any asset which, in the event of an assignment,
becomes void by operation of applicable law or the assignment of
which is otherwise prohibited by applicable law (in each case to
the extent that such applicable law is not overridden by Sections
9-406, 9-407 and/or 9-408 of
the UCC or other similar applicable law); provided, however, that, to the extent
permitted by applicable law, this Agreement shall create a valid
security interest in such asset and, to the extent permitted by
applicable law, this Agreement shall create a valid security
interest in the proceeds of such asset.
(b)
“Intellectual
Property” means the collective reference to all
rights, priorities and privileges relating to intellectual
property, whether arising under United States, multinational or
foreign laws or otherwise, including, without limitation, (i) all
copyrights arising under the laws of the United States, any other
country or any political subdivision thereof, whether registered or
unregistered and whether published or unpublished, all
registrations and recordings thereof, and all applications in
connection therewith, including, without limitation, all
registrations, recordings and applications in the United States
Copyright Office, (ii) all letters patent of the United States, any
other country or any political subdivision thereof, all reissues
and extensions thereof, and all applications for letters patent of
the United States or any other country and all divisions,
continuations and continuations-in-part thereof, (iii) all
trademarks, trade names, corporate names, company names, business
names, fictitious business names, trade dress, service marks,
logos, domain names and other source or business identifiers, and
all goodwill associated therewith, now existing or hereafter
adopted or acquired, all registrations and recordings thereof, and
all applications in connection therewith, whether in the United
States Patent and Trademark Office or in any similar office or
agency of the United States, any State thereof or any other country
or any political subdivision thereof, or otherwise, and all common
law rights related thereto, (iv) all trade secrets arising under
the laws of the United States, any other country or any political
subdivision thereof, (v) all rights to obtain any reissues,
renewals or extensions of the foregoing, (vi) all licenses for any
of the foregoing, and (vii) all causes of action for infringement
of the foregoing.
(c)
“Necessary
Endorsement” means undated stock powers endorsed in
blank or other proper instruments of assignment duly executed and
such other instruments or documents as the Agent (as that term is
defined below) may reasonably request.
(d)
“Obligations” means all of
the liabilities and obligations (primary, secondary, direct,
contingent, sole, joint or several) due or to become due, or that
are now or may be hereafter contracted or acquired, or owing to, of
any Debtor to the Secured Parties under this Agreement, the Notes
and any other instruments, agreements or other documents executed
and/or delivered in connection herewith or therewith, in each case,
whether now or hereafter existing, voluntary or involuntary, direct
or indirect, absolute or contingent, liquidated or unliquidated,
whether or not jointly owed with others, and whether or not from
time to time decreased or extinguished and later increased, created
or incurred, and all or any portion of such obligations or
liabilities that are paid, to the extent all or any part of such
payment is avoided or recovered directly or indirectly from any of
the Secured Parties as a preference, fraudulent transfer or
otherwise as such obligations may be amended, supplemented,
converted, extended or modified from time to
time. Without limiting the generality of the foregoing,
the term “Obligations” shall include, without
limitation: (i) principal of, and interest on the Notes and
the loans extended pursuant thereto; (ii) any and all other fees,
indemnities, costs, obligations and liabilities of the Debtors from
time to time under or in connection with this Agreement, the Notes
and any other instruments, agreements or other documents executed
and/or delivered in connection herewith or therewith; and (iii) all
amounts (including but not limited to post-petition interest) in
respect of the foregoing that would be payable but for the fact
that the obligations to pay such amounts are unenforceable or not
allowable due to the existence of a bankruptcy, reorganization or
similar proceeding involving any Debtor.
(f)
“Organizational
Documents” means, with respect to any Debtor, the
documents by which such Debtor was organized (such as articles of
incorporation, certificate of incorporation, certificate of limited
partnership or articles of organization, and including, without
limitation, any certificates of designation for preferred stock or
other forms of preferred equity) and which relate to the internal
governance of such Debtor (such as bylaws, a partnership agreement
or an operating, limited liability or members
agreement).
(g)
“Pledged
Securities” shall have the meaning ascribed to such
term in Section 4(g).
(h)
“Purchase
Agreement” means the Securities Purchase Agreement,
dated as of May 8, 2020 among the Company and the original Holders,
as amended, modified or supplemented from time to time in
accordance with its terms.
2. Grant
of Security Interest in Collateral. As an inducement for the
Secured Parties to extend the loans as evidenced by the Notes and
to secure the complete and timely payment, performance and
discharge in full, as the case may be, of all of the Obligations,
each Debtor hereby unconditionally and irrevocably pledges, grants
and hypothecates to the Secured Parties a perfected, first priority
security interest in and to, a lien upon and a right of set-off
against all of their respective right, title and interest of
whatsoever kind and nature in and to, the Collateral (a
“Security
Interest” and, collectively, the “Security
Interests”).
3. Delivery
of Certain Collateral. Contemporaneously or prior
to the execution of this Agreement, each Debtor shall deliver or
cause to be delivered to the Agent (a) any and all certificates and
other instruments representing or evidencing the Pledged Securities
(if any), and (b) any and all certificates and other instruments or
documents representing any of the other Collateral, in each case,
together with all Necessary Endorsements. The Debtors
are, contemporaneously with the execution hereof, delivering to
Agent, or have previously delivered to Agent, a true and correct
copy of each Organizational Document governing any of the Pledged
Securities. Notwithstanding anything contained herein, prior to any
Event of Default, the Company shall have the right vote any Pledged
Securities and receive dividends therefrom.
4. Representations,
Warranties, Covenants and Agreements of the Debtors. Except
as set forth under the corresponding Section of the disclosure
schedules delivered to the Secured Parties concurrently herewith
(the “Disclosure
Schedules”), which Disclosure Schedules shall be
deemed a part hereof, each Debtor represents and warrants to, and
covenants and agrees with, the Secured Parties as
follows:
(a) The
Debtors have no place of business or offices where their respective
books of account and records are kept (other than temporarily at
the offices of its attorneys or accountants) or places where
Collateral is stored or located, except as set forth
on Schedule A attached
hereto. Except as specifically set forth
on Schedule A, each Debtor is
the record owner of the real property where such Collateral is
located, and there exist no mortgages or other liens on any such
real property except for Permitted Liens as set forth on
Schedule A. Except
as disclosed on Schedule A, none of such
Collateral is in the possession of any consignee, bailee,
warehouseman, agent or processor.
(b)
Except for Permitted Liens and as set forth on Schedule B attached
hereto, the Debtors are the sole owners of the Collateral, free and
clear of any liens, security interests, encumbrances, rights or
claims, and are fully authorized to grant the Security
Interests. Except as set forth on Schedule C attached
hereto, there is not on file in any governmental or regulatory
authority, agency or recording office an effective financing
statement, security agreement, license or transfer or any notice of
any of the foregoing (other than those that will be filed in favor
of the Secured Parties pursuant to this Agreement) covering or
affecting any of the Collateral. Except as set forth
on Schedule C attached
hereto and except pursuant to this Agreement, as long as this
Agreement shall be in effect, the Debtors shall not execute and
shall not knowingly permit to be on file in any such office or
agency any other financing statement or other document or
instrument (except to the extent filed or recorded in favor of the
Secured Parties pursuant to the terms of this
Agreement).
(c) No
written claim has been received that any Collateral or any
Debtor’s use of any Collateral violates the rights of any
third party. There has been no adverse decision to any
Debtor’s claim of ownership rights in or exclusive rights to
use the Collateral in any jurisdiction or to any Debtor’s
right to keep and maintain such Collateral in full force and
effect, and there is no proceeding involving said rights pending
or, to the best knowledge of any Debtor, threatened before any
court, judicial body, administrative or regulatory agency,
arbitrator or other governmental authority.
(d)
Each Debtor shall at all times maintain its books of account and
records relating to the Collateral at its principal place of
business and its Collateral at the locations set forth
on Schedule A attached
hereto and may not relocate such books of account and records or
tangible Collateral unless it delivers to the Secured Parties at
least thirty (30) days prior to such relocation (i) written notice
of such relocation and the new location thereof (which must be
within the United States) and (ii) evidence that appropriate
financing statements under the UCC and other necessary documents
have been filed and recorded and other steps have been taken to
perfect the Security Interests to create in favor of the Secured
Parties a valid, perfected and continuing perfected first priority
lien in the Collateral (to the extent such Collateral can be
perfected by the filing of a UCC financing statement).
(e)
This Agreement creates in favor of the Secured Parties a valid
first priority security interest in the Collateral, subject only to
Permitted Liens, securing the payment and performance of the
Obligations. Upon making the filings described in the immediately
following paragraph, all security interests created hereunder in
any Collateral which may be perfected by filing UCC financing
statements shall have been duly perfected. Except for (i) the
recordation of the Intellectual Property Security Agreement (as
defined in Section 4(dd) hereof) with respect to copyrights
and copyright applications referred to in paragraph (z) in the
United States Copyright Office, (ii) the recordation of the
Intellectual Property Security Agreement (as defined in
Section 4(dd) hereof) with respect to patents and trademarks
of the Debtors referred to in paragraph (bb) in the United States
Patent and Trademark Office, and (iii) the delivery of the
certificates and other instruments provided in Section 3, no
action is necessary to create, perfect or protect the security
interests created hereunder. Without limiting the generality of the
foregoing, except for the foregoing, no consent of any third
parties and no authorization, approval or other action by, and no
notice to or filing with, any governmental authority or regulatory
body is required for (x) the execution, delivery and performance of
this Agreement, (y) the creation or perfection of the Security
Interests created hereunder in the Collateral (to the extent such
Collateral can be perfected by the filing of a UCC financing
statement) or (z) the enforcement of the rights of the Agent
and the Secured Parties hereunder.
(f)
Each Debtor hereby authorizes the Agent to file one or more
financing statements under the UCC, with respect to the Security
Interests, with the proper filing and recording agencies in any
jurisdiction deemed proper by it.
(g) The
capital stock and other equity interests listed
on Schedule G hereto
(including all uncertificated equity interests consisting of
capital stock of any corporation as well as partnership or limited
liability company interests of any other entity) (the
“Pledged
Securities”) represent all of the capital stock and
other equity interests of the Guarantors, and represent all capital
stock and other equity interests owned, directly or indirectly, by
the Company. All of the Pledged Securities are validly
issued, fully paid and nonassessable, and the Company is the legal
and beneficial owner of the Pledged Securities, free and clear of
any lien, security interest or other encumbrance except for the
security interests created by this Agreement and other Permitted
Liens.
(h)
Except for Permitted Liens, each Debtor shall at all times maintain
the liens and Security Interests provided for hereunder as valid
and perfected, first priority (to the extent that such liens and
Security Interests can be perfected by the filing of a UCC
financing statement) liens and security interests in the Collateral
in favor of the Secured Parties until this Agreement and the
Security Interest hereunder shall be terminated pursuant to
Section 14
hereof. Each Debtor hereby agrees to defend the same
against the claims of any and all persons and entities. Each Debtor
shall safeguard and protect all Collateral for the account of the
Secured Parties. At the request of the Agent, each
Debtor will deliver to the Agent on behalf of the Secured Parties
at any time or from time to time one or more financing statements
pursuant to the UCC in form reasonably satisfactory to the Agent
and will pay the cost of filing the same in all public offices
wherever filing is, or is deemed by the Agent to be, necessary or
desirable to effect the rights and obligations provided for herein.
Without limiting the generality of the foregoing, each Debtor shall
pay all fees, taxes and other amounts necessary to maintain the
Collateral and the Security Interests hereunder, and each Debtor
shall obtain and furnish to the Agent from time to time, upon
demand, such releases and/or subordinations of claims and liens
which may be required to maintain the priority of the Security
Interests hereunder. In addition to the foregoing, each Debtor
shall promptly execute and deliver to the Agent such further deeds,
mortgages, assignments, security agreements, financing statements
or other instruments, documents, certificates and assurances and
take such further action as the Agent may from time to time request
and may in its sole discretion deem necessary to perfect, protect
or enforce the Secured Parties’ security interest in the
Collateral, including, without limitation, if applicable, the
execution and delivery of a separate security agreement with
respect to each Debtor’s Intellectual Property
(“Intellectual
Property Security Agreement”) in which the Secured
Parties have been granted a security interest hereunder,
substantially in a form reasonably acceptable to the Agent, which
Intellectual Property Security Agreement, other than as stated
therein, shall be subject to all of the terms and conditions
hereof.
(i) No
Debtor will transfer, pledge, hypothecate, encumber, license, sell
or otherwise dispose of any of the Collateral (except for Permitted
Liens or non-exclusive licenses granted by a Debtor in its ordinary
course of business, sales of inventory by a Debtor in its ordinary
course of business and the replacement of worn-out or obsolete
equipment by a Debtor in its ordinary course of business) without
the prior written consent of the Secured Party.
(j)
Each Debtor shall keep and preserve its equipment, inventory and
other tangible Collateral in good condition, repair and order
(other than ordinary use wear and tear) and shall not operate or
locate any such Collateral (or cause to be operated or located) in
any area excluded from insurance coverage.
(k)
Each Debtor shall maintain with financially sound and reputable
insurers, insurance with respect to the Collateral, including
Collateral hereafter acquired, against loss or damage of the kinds
and in the amounts customarily insured against by entities of
established reputation having similar properties similarly situated
and in such amounts as are customarily carried under similar
circumstances by other such entities and otherwise as is prudent
for entities engaged in similar businesses but in any event
sufficient to cover the full replacement cost thereof. Each Debtor
shall cause each insurance policy issued in connection herewith to
provide, and the insurer issuing such policy to certify to the
Agent, that (a) the Agent will be named as lender loss payee and
additional insured under each such insurance policy; (b) if such
insurance be proposed to be cancelled or materially changed for any
reason whatsoever, such insurer will promptly notify the Agent and
such cancellation or change shall not be effective as to the Agent
for at least thirty (30) days after receipt by the Agent of such
notice, unless the effect of such change is to extend or increase
coverage under the policy; and (c) the Agent will have the right
(but no obligation) at its election to remedy any default in the
payment of premiums within thirty (30) days of notice from the
insurer of such default. If no Event of Default (as defined in the
Notes) exists and if the proceeds arising out of any
claim. Loss payments received by any Debtor
after an Event of Default occurs and is continuing or in excess of
$100,000 for any occurrence or series of related occurrences, upon
approval by Agent, which approval shall not be unreasonably
withheld, delayed, denied or conditioned, loss payments in each
instance will be applied by the applicable Debtor to the repair
and/or replacement of property with respect to which the loss was
incurred to the extent reasonably feasible, and any loss payments
or the balance thereof remaining, to the extent not so applied,
shall be paid to the Agent on behalf of the Secured
Parties.
(l)
Each Debtor shall, within ten (10) days of obtaining knowledge
thereof, advise the Secured Parties, in sufficient detail, of any
material adverse change in the Collateral, and of the occurrence of
any event that would have a material adverse effect on the value of
the Collateral or on the Secured Parties’ security interest,
through the Agent, therein.
(m)
Upon reasonable prior notice (so long
as no Event of Default has occurred or continuing, which in either
such event, no prior notice is required), each Debtor shall
permit the Agent and its representatives and agents to inspect the
Collateral during normal business hours and to make copies of
records pertaining to the Collateral as may be reasonably requested
by the Agent from time to time.
(n)
Each Debtor shall promptly notify the Secured Parties in sufficient
detail upon becoming aware of any attachment, garnishment,
execution or other legal process levied against any material
portion of the Collateral and of any other information received by
such Debtor that may materially affect the value of the Collateral,
the Security Interest or the rights and remedies of the Secured
Parties hereunder.
(o) All
information heretofore, herein or hereafter supplied to the Secured
Parties by or on behalf of any Debtor with respect to the
Collateral is accurate and complete in all material respects as of
the date furnished.
(p) The
Debtors shall at all times preserve and keep in full force and
effect their respective valid existence and good standing and any
rights and franchises material to its business. No Debtor will
change its name, type of organization, jurisdiction of
organization, organizational identification number (if it has one),
legal or corporate structure, or identity, or add any new
fictitious name unless it provides at least thirty (30) days’
prior written notice to the Secured Parties of such change and, at
the time of such written notification, such Debtor provides any
financing statements or fixture filings necessary to perfect and
continue the perfection of the Security Interests granted and
evidenced by this Agreement.
(q)
Except in the ordinary course of business, no Debtor may consign
any of its inventory or sell any of its inventory on bill-and-hold,
sale-or-return, sale-on-approval, or other conditional terms of
sale without the consent of the Agent, which shall not be
unreasonably withheld, delayed, denied, or
conditioned.
(r) No
Debtor may relocate its chief executive office to a new location
without providing thirty (30) days’ prior written
notification thereof to the Secured Parties and so long as, at the
time of such written notification, such Debtor provides any
financing statements or fixture filings necessary to perfect and
continue the perfection of the Security Interests granted and
evidenced by this Agreement.
(s)
Each Debtor was organized and remains organized solely under the
laws of the state set forth next to such Debtor’s name
in Schedule D attached
hereto, which Schedule D sets forth
each Debtor’s organizational identification number or, if any
Debtor does not have one, states that one does not
exist.
(t) (i)
The actual name of each Debtor is the name set forth
in Schedule D attached
hereto; (ii) no Debtor has any trade names except as set forth
on Schedule E attached
hereto; (iii) no Debtor has used any name other than that
stated in the preamble hereto or as set forth on Schedule E for the
preceding five (5) years; and (iv) no entity has merged into any
Debtor or been acquired by any Debtor within the past five years
except as set forth on Schedule E.
(u)
Each Debtor, in its capacity as issuer, hereby agrees to comply
with any and all orders and instructions of Agent regarding the
Pledged Securities consistent with the terms of this Agreement
without the further consent of any Debtor as contemplated by
Section 8-106 (or any successor section) of the
UCC. Further, each Debtor agrees that it shall not enter
into a similar agreement (or one that would confer
“control” within the meaning of Article 8 of the UCC)
with any other person or entity.
(v)
Each Debtor shall cause each subsidiary of such Debtor to
immediately become a party hereto (an “Additional Debtor”), by
executing and delivering an Additional Debtor Joinder in
substantially the form of Annex A attached hereto
and comply with the provisions hereof applicable to the
Debtors. Concurrently therewith, the Additional Debtor
shall deliver replacement schedules for, or supplements to all
other Disclosure Schedules to (or referred to in) this Agreement,
as applicable, which replacement schedules shall supersede, or
supplements shall modify, the Disclosure Schedules then in
effect. The Additional Debtor shall also deliver such
authorizing resolutions, good standing certificates, incumbency
certificates, organizational documents, financing statements and
other information and documentation as the Agent may reasonably
request. Upon delivery of the foregoing to the Agent,
the Additional Debtor shall be and become a party to this Agreement
with the same rights and obligations as the Debtors, for all
purposes hereof as fully and to the same extent as if it were an
original signatory hereto and shall be deemed to have made the
representations, warranties and covenants set forth herein as of
the date of execution and delivery of such Additional Debtor
Joinder, and all references herein to the “Debtors”
shall be deemed to include each Additional Debtor.
(w)
Each Debtor shall vote the Pledged Securities to comply with the
covenants and agreements set forth herein and in the
Notes.
(x)
Each Debtor shall register the pledge of the applicable Pledged
Securities on the books of such Debtor. Each Debtor
shall notify each issuer of Pledged Securities to register the
pledge of the applicable Pledged Securities in the name of the
Secured Parties on the books of such issuer. Further,
except with respect to certificated securities delivered to the
Agent, the applicable Debtor shall deliver to Agent an
acknowledgement of pledge (which, where appropriate, shall comply
with the requirements of the relevant UCC with respect to
perfection by registration) signed by the issuer of the applicable
Pledged Securities, which acknowledgement shall confirm that: (a)
it has registered the pledge on its books and records; and (b) at
any time directed by Agent during the continuation of an Event of
Default, such issuer will transfer the record ownership of such
Pledged Securities into the name of any designee of Agent, will
take such steps as may be necessary to effect the transfer, and
will comply with all other instructions of Agent regarding such
Pledged Securities without the further consent of the applicable
Debtor.
(y) In
the event that, upon an occurrence of an Event of Default, Agent
shall sell all or any of the Pledged Securities to another party or
parties (herein called the “Transferee”) or shall
purchase or retain all or any of the Pledged Securities, each
Debtor shall, to the extent applicable: (i) deliver to Agent or the
Transferee, as the case may be, the articles of incorporation,
bylaws, minute books, stock certificate books, corporate seals,
deeds, leases, indentures, agreements, evidences of indebtedness,
books of account, financial records and all other Organizational
Documents and records of the Debtors and their direct and indirect
subsidiaries (but not including any items subject to the
attorney-client privilege related to this Agreement or any of the
transactions hereunder); (ii) use its best efforts to obtain
resignations of the persons then serving as officers and directors
of the Debtors and their direct and indirect subsidiaries, if so
requested; and (iii) use its best efforts to obtain any approvals
that are required by any governmental or regulatory body in order
to permit the sale of the Pledged Securities to the Transferee or
the purchase or retention of the Pledged Securities by Agent and
allow the Transferee or Agent to continue the business of the
Debtors and their direct and indirect subsidiaries.
(z)
Without limiting the generality of the other obligations of the
Debtors hereunder, each Debtor shall promptly (i) cause to be
registered at the United States Copyright Office all of its
material copyrights, (ii) following an Event of Default, upon the
written request of the Agent, cause the security interest
contemplated hereby with respect to all Intellectual Property
registered at the United States Copyright Office or United States
Patent and Trademark Office to be duly recorded at the applicable
office, and (iii) give the Agent notice whenever it acquires
(whether absolutely or by license) or creates any additional
material Intellectual Property.
(aa) Each
Debtor will from time to time, at the joint and several expense of
the Debtors, promptly execute and deliver all such further
instruments and documents, and take all such further action as may
be necessary or desirable, or as the Agent may reasonably request,
in order to perfect (to the extent such security interest can be
perfected by the filing of a UCC financing statement) and protect
any security interest granted or purported to be granted hereby or
to enable the Secured Parties to exercise and enforce their rights
and remedies hereunder and with respect to any Collateral or to
otherwise carry out the purposes of this Agreement.
(bb)
Schedule F attached
hereto lists all of the patents, patent applications, trademarks,
trademark applications, registered copyrights, and domain names
owned by any of the Debtors as of the date
hereof. Schedule F lists all
material licenses in favor of any Debtor for the use of any
patents, trademarks, copyrights and domain names as of the date
hereof. All material patents and trademarks of the
Debtors have been duly recorded at the United States Patent and
Trademark Office and all material copyrights of the Debtors have
been duly recorded at the United States Copyright
Office.
(cc) Each
Debtor shall promptly execute and deliver to the Agent such further
deeds, mortgages, assignments, security agreements, financing
statements or other instruments, documents, certificates and
assurances and take such further action as the Agent may from time
to time request and may in its sole discretion deem necessary to
perfect, protect or enforce the Secured Parties’ security
interest in the Collateral.
(dd)
Each Debtor
will not transfer, pledge, hypothecate, encumber, license, sell or
otherwise dispose of any of the Collateral (except for
non-exclusive licenses granted by a Debtor in its ordinary course
of business and sales of inventory by a Debtor in its ordinary
course of business) without the prior written consent of the
Agent.
5. Effect
of Pledge on Certain Rights. If any of the Collateral
subject to this Agreement consists of nonvoting equity or ownership
interests (regardless of class, designation, preference or rights)
that may be converted into voting equity or ownership interests
upon the occurrence of certain events (including, without
limitation, upon the transfer of all or any of the other stock or
assets of the issuer), it is agreed by Debtors that the pledge of
such equity or ownership interests pursuant to this Agreement or
the enforcement of any of Agent’s rights hereunder shall not
be deemed to be the type of event which would trigger such
conversion rights notwithstanding any provisions in the
Organizational Documents or agreements to which any Debtor is
subject or to which any Debtor is party.
6. Defaults.
The following events shall be “Events of
Default”:
(a) The
occurrence of an Event of Default (as defined in the Notes) under
the Notes;
(b) Any
representation or warranty of any Debtor in this Agreement shall
prove to have been incorrect in any material respect when
made;
(c) The
failure by any Debtor to observe or perform any of its obligations
hereunder for fifteen (15) days after delivery to such Debtor of
notice of such failure by or on behalf of a Secured Party unless
such default is capable of cure but cannot be cured within such
time frame and such Debtor is using best efforts to cure same in a
timely fashion; or
(d) If
any material provision of this Agreement shall at any time for any
reason be declared to be null and void, or the validity or
enforceability thereof shall be contested by any Debtor, or a
proceeding shall be commenced by any Debtor, or by any governmental
authority having jurisdiction over any Debtor, seeking to establish
the invalidity or unenforceability thereof, or any Debtor shall
deny that any Debtor has any liability or obligation purported to
be created under this Agreement.
7. Duty
to Hold in Trust.
(a)
Upon the occurrence and during the continuance of any Event of
Default, each Debtor shall upon receipt of any revenue, income,
dividend, interest or other sums subject to the Security Interests,
whether payable pursuant to the Notes or otherwise, or of any
check, draft, note, trade acceptance or other instrument evidencing
an obligation to pay any such sum, hold the same in trust for the
Secured Parties and shall forthwith endorse and transfer any such
sums or instruments, or both, to the Agent, pro-rata in proportion
to their respective then-currently outstanding principal amount of
Notes for application to the satisfaction of the Obligations (and
if any Notes is not outstanding, pro-rata in proportion to the
initial purchases of the remaining Notes).
(b) If
any Debtor shall become entitled to receive or shall receive any
material securities or other property (including, without
limitation, shares of Pledged Securities or instruments
representing Pledged Securities acquired after the date hereof, or
any options, warrants, rights or other similar property or
certificates representing a dividend, or any distribution in
connection with any recapitalization, reclassification or increase
or reduction of capital, or issued in connection with any
reorganization of such Debtor or any of its direct or indirect
subsidiaries) in respect of the Pledged Securities (whether as an
addition to, in substitution of, or in exchange for, such Pledged
Securities or otherwise), such Debtor agrees to (i) accept the same
as the agent of the Secured Parties; (ii) hold the same in trust on
behalf of and for the benefit of the Secured Parties; and (iii) to
deliver any and all certificates or instruments evidencing the same
to Agent on or before the close of business on the fifth
(5th)
business day following the receipt thereof by such Debtor, in the
exact form received together with the Necessary Endorsements, to be
held by Agent subject to the terms of this Agreement as
Collateral.
8. Rights
and Remedies Upon Default.
(a)
Upon the occurrence and during the continuance of any Event of
Default, the Secured Parties, acting through the Agent, shall have
the right to exercise all of the remedies conferred hereunder and
under the Notes, and the Secured Parties shall have all the rights
and remedies of a secured party under the UCC. Without
limitation, the Agent, for the benefit of the Secured Parties,
shall have the following rights and powers:
(i)
The Agent shall
have the right to take possession of the Collateral and, for that
purpose, enter, with the aid and assistance of any person, any
premises where the Collateral, or any part thereof, is or may be
placed and remove the same, and each Debtor shall assemble the
Collateral and make it available to the Agent at places which the
Agent shall reasonably select, whether at such Debtor’s
premises or elsewhere, and make available to the Agent, without
rent, all of such Debtor’s respective premises and facilities
for the purpose of the Agent taking possession of, removing or
putting the Collateral in saleable or disposable form.
(ii)
Upon
written notice to the Debtors by Agent, all rights of each Debtor
to exercise the voting and other consensual rights which it would
otherwise be entitled to exercise and all rights of each Debtor to
receive the dividends and interest which it would otherwise be
authorized to receive and retain, shall cease. Upon such
written notice, Agent shall have the right to receive, for the
benefit of the Secured Parties, any interest, cash dividends or
other payments on the Collateral and, at the option of Agent, to
exercise in such Agent’s discretion all voting rights
pertaining thereto. Without limiting the generality of
the foregoing, Agent shall have the right (but not the obligation)
to exercise all rights with respect to the Collateral as it were
the sole and absolute owner thereof, including, without limitation,
to vote and/or to exchange, at its sole discretion, any or all of
the Collateral in connection with a merger, reorganization,
consolidation, recapitalization or other readjustment concerning or
involving the Collateral or any Debtor or any of its direct or
indirect subsidiaries.
(iii)
The
Agent shall have the right to operate the business of each Debtor
using the Collateral and shall have the right to assign, sell,
lease or otherwise dispose of and deliver all or any part of the
Collateral, at public or private sale or otherwise, either with or
without special conditions or stipulations, for cash or on credit
or for future delivery, in such parcel or parcels and at such time
or times and at such place or places, and upon such terms and
conditions as the Agent may deem commercially reasonable, all
without (except as shall be required by applicable statute and
cannot be waived) advertisement or demand upon or notice to any
Debtor or right of redemption of a Debtor, which are hereby
expressly waived. Upon each such sale, lease, assignment
or other transfer of Collateral, the Agent, for the benefit of the
Secured Parties, may, unless prohibited by applicable law which
cannot be waived, purchase all or any part of the Collateral being
sold, free from and discharged of all trusts, claims, right of
redemption and equities of any Debtor, which are hereby waived and
released.
(iv)
The
Agent shall have the right (but not the obligation) to notify any
account debtors and any obligors under instruments or accounts to
make payments directly to the Agent, on behalf of the Secured
Parties, and to enforce the Debtors’ rights against such
account debtors and obligors.
(v)
The
Agent, for the benefit of the Secured Parties, may (but is not
obligated to) direct any financial intermediary or any other person
or entity holding any investment property to transfer the same to
the Agent, on behalf of the Secured Parties, or its
designee.
(vi)
The
Agent may (but is not obligated to) transfer any or all
Intellectual Property registered in the name of any Debtor at the
United States Patent and Trademark Office and/or Copyright Office
into the name of the Secured Parties or any designee or any
purchaser of any Collateral.
(b) The
Agent shall comply with any applicable law in connection with a
disposition of Collateral and such compliance will not be
considered adversely to affect the commercial reasonableness of any
sale of the Collateral. The Agent may sell the
Collateral without giving any warranties and may specifically
disclaim such warranties. If the Agent sells any of the
Collateral on credit, the Debtors will only be credited with
payments actually made by the purchaser. In addition,
each Debtor waives (except as shall be required by applicable
statute and cannot be waived) any and all rights that it may have
to a judicial hearing in advance of the enforcement of any of the
Agent’s rights and remedies hereunder, including, without
limitation, its right following an Event of Default to take
immediate possession of the Collateral and to exercise its rights
and remedies with respect thereto.
(c) For
the purpose of enabling the Agent to further exercise rights and
remedies under this Section 8 or elsewhere
provided by agreement or applicable law, each Debtor hereby grants
to the Agent, for the benefit of the Agent and the Secured Parties,
an irrevocable, nonexclusive license (exercisable without payment
of royalty or other compensation to such Debtor) to use, license or
sublicense following an Event of Default, any Intellectual Property
now owned or hereafter acquired by such Debtor, and wherever the
same may be located, and including in such license access to all
media in which any of the licensed items may be recorded or stored
and to all computer software and programs used for the compilation
or printout thereof.
9. Applications
of Proceeds. Upon the occurrence and during the continuance
of any Event of Default, the proceeds of any sale, lease or other
disposition by the Agent of the Collateral hereunder or from
payments made to the Agent on account of any insurance policy
insuring any portion of the Collateral shall be applied first, to
the expenses of retaking, holding, storing, processing and
preparing for sale, selling, and the like (including, without
limitation, any taxes, fees and other costs incurred in connection
therewith) of the Collateral, to the reasonable attorneys’
fees and expenses incurred by the Agent in enforcing the Secured
Parties’ rights hereunder and in connection with collecting,
storing and disposing of the Collateral, and then to satisfaction
of the Obligations pro rata among the Secured Parties (based on
then-outstanding principal amounts of Notes at the time of any such
determination), and to the payment of any other amounts required by
applicable law, after which the Secured Parties shall pay to the
applicable Debtor any surplus proceeds. If, upon the sale, license
or other disposition of all of the Collateral, the proceeds thereof
are insufficient to pay all amounts to which the Secured Parties
are legally entitled, the Debtors will be liable for the
deficiency, together with interest thereon, at the rate of 18% per
annum or the lesser amount permitted by applicable law (the
“Default
Rate”), and the reasonable fees of any attorneys
employed by the Secured Parties to collect such
deficiency. To the extent permitted by applicable law,
each Debtor waives all claims, damages and demands against the
Secured Parties arising out of the repossession, removal, retention
or sale of the Collateral, unless due solely to the gross
negligence or willful misconduct of the Secured Parties as
determined by a final judgment (not subject to further appeal) of a
court of competent jurisdiction.
10.
Securities Law
Provision. Each Debtor recognizes that Agent may
be limited in its ability to effect a sale to the public of all or
part of the Pledged Securities by reason of certain prohibitions in
the Securities Act of 1933, as amended, or other federal or state
securities laws (collectively, the “Securities Laws”), and
may be compelled to resort to one or more sales to a restricted
group of purchasers who may be required to agree to acquire the
Pledged Securities for their own account, for investment and not
with a view to the distribution or resale thereof. Each
Debtor agrees that sales so made may be at prices and on terms less
favorable than if the Pledged Securities were sold to the public,
and that Agent has no obligation to delay the sale of any Pledged
Securities for the period of time necessary to register the Pledged
Securities for sale to the public under the Securities
Laws. Each Debtor shall cooperate with Agent in its
attempt to satisfy any requirements under the Securities Laws
(including, without limitation, registration thereunder if
requested by Agent) applicable to the sale of the Pledged
Securities by Agent.
11. Costs
and Expenses. Each Debtor agrees to pay all reasonable
out-of-pocket fees, costs and expenses incurred in connection with
any filing required hereunder, including without limitation, any
financing statements pursuant to the UCC, continuation statements,
partial releases and/or termination statements related thereto or
any expenses of any searches reasonably required by the
Agent. The Debtors shall also pay all other claims and
charges which in the reasonable opinion of the Agent is reasonably
likely to prejudice, imperil or otherwise affect the Collateral or
the Security Interests therein. The Debtors will also,
upon demand, pay to the Agent the amount of any and all reasonable
expenses, including the reasonable fees and expenses of its counsel
and of any experts and agents, which the Agent, for the benefit of
the Secured Parties, may incur in connection with the creation,
perfection, protection, satisfaction, foreclosure, collection or
enforcement of the Security Interest and the preparation,
administration, continuance, amendment or enforcement of this
Agreement and pay to the Agent the amount of any and all reasonable
expenses, including the reasonable fees and expenses of its counsel
and of any experts and agents, which the Agent, for the benefit of
the Secured Parties, and the Secured Parties may incur in
connection with (i) the enforcement of this Agreement, (ii) the
custody or preservation of, or the sale of, collection from, or
other realization upon, any of the Collateral, or (iii) the
exercise or enforcement of any of the rights of the Secured Parties
under the Notes.
12. Responsibility
for Collateral. The Debtors assume all liabilities and
responsibility in connection with all Collateral, and the
Obligations shall in no way be affected or diminished by reason of
the loss, destruction, damage or theft of any of the Collateral or
its unavailability for any reason. Without limiting the
generality of the foregoing and except as required by applicable
law, (a) neither the Agent nor any Secured Party (i) has any duty
(either before or after an Event of Default) to collect any amounts
in respect of the Collateral or to preserve any rights relating to
the Collateral, or (ii) has any obligation to clean-up or otherwise
prepare the Collateral for sale, and (b) each Debtor shall remain
obligated and liable under each contract or agreement included in
the Collateral to be observed or performed by such Debtor
thereunder. Neither the Agent nor any Secured Party
shall have any obligation or liability under any such contract or
agreement by reason of or arising out of this Agreement or the
receipt by the Agent or any Secured Party of any payment relating
to any of the Collateral, nor shall the Agent or any Secured Party
be obligated in any manner to perform any of the obligations of any
Debtor under or pursuant to any such contract or agreement, to make
inquiry as to the nature or sufficiency of any payment received by
the Agent or any Secured Party in respect of the Collateral or as
to the sufficiency of any performance by any party under any such
contract or agreement, to present or file any claim, to take any
action to enforce any performance or to collect the payment of any
amounts which may have been assigned to the Agent or to which the
Agent or any Secured Party may be entitled at any time or
times.
13. Security
Interests Absolute. All rights of the Secured Parties and
all obligations of each Debtor hereunder, shall be absolute and
unconditional, irrespective of: (a) any lack of validity or
enforceability of this Agreement, the Notes or any agreement
entered into in connection with the foregoing, or any portion
hereof or thereof, against any other Debtor or Guarantor; (b) any
change in the time, manner or place of payment or performance of,
or in any other term of, all or any of the Obligations, or any
other amendment or waiver of or any consent to any departure from
the Notes or any other agreement entered into in connection with
the foregoing; (c) any exchange, release or nonperfection of any of
the Collateral, or any release or amendment or waiver of or consent
to departure from any other collateral for, or any guarantee, or
any other security, for all or any of the Obligations; (d) any
action by the Secured Parties to obtain, adjust, settle and cancel
in its sole discretion any insurance claims or matters made or
arising in connection with the Collateral; or (e) any other
circumstance which might otherwise constitute any legal or
equitable defense available to a Debtor, or a discharge of all or
any part of the Security Interests granted hereby. Until
the Obligations shall have been paid and performed in full (other
than contingent obligations for which no claim has been made), the
rights of the Secured Parties shall continue even if the
Obligations are barred for any reason, including, without
limitation, the running of the statute of
limitations. Each Debtor expressly waives presentment,
protest, notice of protest, demand, notice of nonpayment and demand
for performance. In the event that at any time any transfer of any
Collateral or any payment received by the Secured Parties hereunder
shall be deemed by final order of a court of competent jurisdiction
to have been a voidable preference or fraudulent conveyance under
the bankruptcy or insolvency laws of the United States, or shall be
deemed to be otherwise due to any party other than the Secured
Parties, then, in any such event, each Debtor’s obligations
hereunder shall survive cancellation of this Agreement, and shall
not be discharged or satisfied by any prior payment thereof and/or
cancellation of this Agreement, but shall remain a valid and
binding obligation enforceable in accordance with the terms and
provisions hereof. Each Debtor waives all right to
require the Secured Parties to proceed against any other person or
entity or to apply any Collateral which the Secured Parties may
hold at any time, or to marshal assets, or to pursue any other
remedy. Each Debtor waives any defense arising by reason of the
application of the statute of limitations to any obligation secured
hereby.
14. Term
of Agreement. This Agreement and the Security Interests
shall terminate on the date on which all payments under the Notes
have been indefeasibly paid in full and all other Obligations
(other than contingent obligations for which no claim has been
made) have been paid or discharged; provided, however, that all indemnities
of the Debtors contained in this Agreement (including, without
limitation, Annex B hereto) shall survive and remain operative and
in full force and effect regardless of the termination of this
Agreement.
15. Power
of Attorney; Further Assurances.
(a)
Each Debtor authorizes the Agent, and does hereby make, constitute
and appoint the Agent and its officers, agents, successors or
assigns with full power of substitution, as such Debtor’s
true and lawful attorney-in-fact, with power, in the name of the
Agent or such Debtor, to, after the occurrence and during the
continuance of an Event of Default, (i) endorse any note, checks,
drafts, money orders or other instruments of payment (including
payments payable under or in respect of any policy of insurance) in
respect of the Collateral that may come into possession of the
Agent; (ii) to sign and endorse any financing statement pursuant to
the UCC or any invoice, freight or express bill, bill of lading,
storage or warehouse receipts, drafts against debtors, assignments,
verifications and notices in connection with accounts, and other
documents relating to the Collateral; (iii) to pay or discharge
taxes, liens, security interests or other encumbrances at any time
levied or placed on or threatened against the Collateral; (iv) to
demand, collect, receipt for, compromise, settle and sue for monies
due in respect of the Collateral; (v) to transfer any Intellectual
Property or provide licenses respecting any Intellectual Property;
and (vi) generally, at the option of the Agent, and at the expense
of the Debtors, at any time, or from time to time, to execute and
deliver any and all documents and instruments and to do all acts
and things which the Agent deems necessary to protect, preserve and
realize upon the Collateral and the Security Interests granted
therein in order to effect the intent of this Agreement and the
Notes all as fully and effectually as the Debtors might or could
do; and each Debtor hereby ratifies all that said attorney shall
lawfully do or cause to be done by virtue hereof. This
power of attorney is coupled with an interest and shall be
irrevocable for the term of this Agreement and thereafter as long
as any of the Obligations shall be outstanding. The
designation set forth herein shall be deemed to amend and supersede
any inconsistent provision in the Organizational Documents or other
documents or agreements to which any Debtor is subject or to which
any Debtor is a party. Without limiting the generality
of the foregoing, after the occurrence and during the continuance
of an Event of Default, each Secured Party is specifically
authorized to execute and file any applications for or instruments
of transfer and assignment of any patents, trademarks, copyrights
or other Intellectual Property with the United States Patent and
Trademark Office and the United States Copyright
Office.
(b)
Each Debtor hereby irrevocably appoints the Agent as such
Debtor’s attorney-in-fact, with full authority in the place
and instead of such Debtor and in the name of such Debtor, from
time to time in the Agent’s discretion, to take any action
and to execute any instrument which the Agent may deem necessary or
advisable to accomplish the purposes of this Agreement, including
the filing, in its sole discretion, of one or more financing or
continuation statements and amendments thereto, relative to any of
the Collateral without the signature of such Debtor where permitted
by law, which financing statements may (but need not) describe the
Collateral as “all assets” or “all personal
property” or words of like import, and ratifies all such
actions taken by the Agent. This power of attorney is
coupled with an interest and shall be irrevocable for the term of
this Agreement and thereafter as long as any of the Obligations
shall be outstanding.
16. Notices.
All notices, requests, demands and other communications hereunder
shall be subject to the notice provision of the Purchase
Agreement.
17. Other
Security. To the extent that the Obligations are now or
hereafter secured by property other than the Collateral or by
the guarantee, endorsement or property of any other person, firm,
corporation or other entity, then the Agent shall have the right,
in its sole discretion, to pursue, relinquish, subordinate, modify
or take any other action with respect thereto, without in any way
modifying or affecting any of the Secured Parties’ rights and
remedies hereunder.
18. Appointment
of Agent. If and as applicable, the Secured
Parties hereby appoint Arena Investors LP to act as their agent
(“Agent”) for purposes of
exercising any and all rights and remedies of the Secured Parties
hereunder. Such appointment shall continue until revoked in writing
by the Secured Parties, at which time the Secured Parties shall
appoint a new Agent. The Agent shall have the rights,
responsibilities and immunities set forth in Annex
B hereto.
19. Miscellaneous.
(a) No
course of dealing between the Debtors and the Secured Parties, nor
any failure to exercise, nor any delay in exercising, on the part
of the Secured Parties, any right, power or privilege hereunder or
under the Notes shall operate as a waiver thereof; nor shall any
single or partial exercise of any right, power or privilege
hereunder or thereunder preclude any other or further exercise
thereof or the exercise of any other right, power or
privilege.
(b) All
of the rights and remedies of the Secured Parties with respect to
the Collateral, whether established hereby or by the Notes or by
any other agreements, instruments or documents or by law shall be
cumulative and may be exercised singly or
concurrently.
(c)
This Agreement, together with the exhibits and schedules hereto,
contains 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 this Agreement
and the exhibits and schedules hereto. No provision of this
Agreement may be waived, modified, supplemented or amended except
in a written instrument signed, in the case of an amendment, by the
Debtors and the Secured Party, or, in the case of a waiver, by the
party against whom enforcement of any such waived provision is
sought.
(d)
If any term, provision, covenant or restriction of this Agreement
is held by a court of competent jurisdiction to be invalid,
illegal, void or unenforceable, the remainder of the terms,
provisions, covenants and restrictions set forth herein shall
remain in full force and effect and shall in no way be affected,
impaired or invalidated, and the parties hereto shall use their
commercially reasonable efforts to find and employ an alternative
means to achieve the same or substantially the same result as that
contemplated by such term, provision, covenant or restriction. It
is hereby stipulated and declared to be the intention of the
parties that they would have executed the remaining terms,
provisions, covenants and restrictions without including any of
such that may be hereafter declared invalid, illegal, void or
unenforceable.
(e) 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.
(f)
This Agreement shall be binding upon and inure to the benefit of
the parties and their successors and permitted
assigns. The Company and the Subsidiaries may not assign
this Agreement or any rights or obligations hereunder without the
prior written consent of the Agent (other than by
merger). Any Secured Party may assign any or all of its
rights under this Agreement to any Person (as defined in the
Purchase Agreement) to whom such Secured Party assigns or transfers
any Obligations, provided such transferee agrees in writing to be
bound, with respect to the transferred Obligations, by the
provisions of this Agreement that apply to the “Secured
Parties.”
(g)
Each party shall take such further action and execute and deliver
such further documents as may be necessary or appropriate in order
to carry out the provisions and purposes of this
Agreement.
(h)
Except to the extent mandatorily governed by the jurisdiction or
situs where the Collateral is located, 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 New York, without
regard to the principles of conflicts of law
thereof. Except to the extent mandatorily governed by
the jurisdiction or situs where the Collateral is located, each
Debtor agrees that all proceedings concerning the interpretations,
enforcement and defense of the transactions contemplated by this
Agreement and the Notes (whether brought against a party hereto or
its respective affiliates, directors, officers, shareholders,
partners, members, employees or agents) shall be commenced
exclusively in the state and federal courts sitting in the City of
New York, Borough of Manhattan. Except to the extent
mandatorily governed by the jurisdiction or situs where the
Collateral is located, each Debtor hereby irrevocably submits to
the exclusive jurisdiction of the state and federal courts sitting
in the City of New York, Borough of Manhattan for the adjudication
of any dispute hereunder or in connection herewith or with any
transaction contemplated hereby or discussed herein, and hereby
irrevocably waives, and agrees not to assert in any proceeding, any
claim that it is not personally subject to the jurisdiction of any
such court, that such proceeding is improper. Each
party hereto hereby irrevocably waives, to the fullest extent
permitted by applicable law, any and all right to trial by jury in
any legal proceeding arising out of or relating to this Agreement
or the transactions contemplated hereby.
(i)
This Agreement may be executed in any number of counterparts, each
of which when so executed shall be deemed to be an original and,
all of which taken together shall constitute one and the same
Agreement. In the event that any signature is delivered by
facsimile transmission, such signature shall create a valid binding
obligation of the party executing (or on whose behalf such
signature is executed) the same with the same force and effect as
if such facsimile signature were the original thereof.
(j)
All Debtors shall jointly and severally be liable for the
obligations of each Debtor to the Secured Parties
hereunder.
(k)
Each Debtor agrees to indemnify, pay and hold harmless the Agent
and the Secured Parties and their respective assignees and
affiliates and their respective officers, directors, employees,
agents, consultants, auditors, and attorneys of any of them
(collectively, “Indemnitees”) from and
against any and all liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, claims, costs, expenses and
disbursements of any kind or nature whatsoever (including the
reasonable fees and disbursements of counsel for such Indemnitees
in connection with any investigative, administrative or judicial
proceeding commenced or threatened, whether or not such Purchaser
Indemnitee shall be designated a party thereto) imposed on,
incurred by or asserted against such Indemnitee in any way related
to or arising from or alleged to arise from this Agreement or the
Collateral, except any such losses, claims, liabilities, damages,
penalties, suits, costs and expenses which result from the gross
negligence or willful misconduct of the Indemnitee as determined by
a final, nonappealable decision of a court of competent
jurisdiction; provided that the Debtors shall not be obligated to
indemnify the Indemnitees, or have any liability, in excess of the
aggregate Purchase Price (as defined in the Purchase
Agreement). This indemnification provision is in
addition to, and not in limitation of, any other indemnification
provision in the Notes, the Purchase Agreement or any other
agreement, instrument or other document executed or delivered in
connection herewith or therewith.
(l)
Nothing in this Agreement shall be construed to subject Agent or
any Secured Party to liability as a partner in any Debtor or any if
its direct or indirect subsidiaries that is a partnership or as a
member in any Debtor or any of its direct or indirect subsidiaries
that is a limited liability company, nor shall Agent or any Secured
Party be deemed to have assumed any obligations under any
partnership agreement or limited liability company agreement, as
applicable, of any such Debtor or any of its direct or indirect
subsidiaries or otherwise, unless and until any such Secured Party
exercises its right to be substituted for such Debtor as a partner
or member, as applicable, pursuant hereto.
(m) To the
extent that the grant of the security interest in the Collateral
and the enforcement of the terms hereof require the consent,
approval or action of any partner or member, as applicable, of any
Debtor or any direct or indirect subsidiary of any Debtor or
compliance with any provisions of any of the Organizational
Documents, the Debtors hereby represent that all such consents and
approvals have been obtained.
[SIGNATURE
PAGE OF DEBTORS FOLLOWS]
IN
WITNESS WHEREOF, the parties hereto have caused this Security
Agreement to be duly executed on the day and year first above
written.
GOIP GLOBAL, INC.
By:__________________________________________
Name:
Title:
TRANSWORLD ENTERPRISES INC.
By:__________________________________________
Name:
Title:
[SIGNATURE
PAGE OF HOLDERS FOLLOWS]
[SIGNATURE
PAGE OF HOLDERS TO SECURITY AGREEMENT]
Name of
Investing Entity: __________________________
Signature of Authorized Signatory of Investing entity:
_________________________
Name of
Authorized Signatory: _________________________
Title
of Authorized Signatory: _________________________
ANNEX A
to
SECURITY AGREEMENT
FORM OF ADDITIONAL DEBTOR JOINDER
Security
Agreement dated as of May 8, 2020 made by GoIP Global, Inc. and its
subsidiaries party thereto from time to time, as Debtors to and in
favor of the Secured Parties identified therein (the
“Security
Agreement”).
Reference is made
to the Security Agreement as defined above; capitalized terms used
herein and not otherwise defined herein shall have the meanings
given to such terms in, or by reference in, the Security
Agreement.
The
undersigned hereby agrees that, upon delivery of this Additional
Debtor Joinder to the Secured Parties referred to above, the
undersigned shall (a) be an Additional Debtor under the Security
Agreement, (b) have all the rights and obligations of the Debtors
under the Security Agreement as fully and to the same extent as if
the undersigned was an original signatory thereto and (c) be deemed
to have made the representations and warranties set forth therein
as of the date of execution and delivery of this Additional Debtor
Joinder. WITHOUT LIMITING THE GENERALITY OF THE
FOREGOING, THE UNDERSIGNED SPECIFICALLY GRANTS TO THE SECURED
PARTIES A SECURITY INTEREST IN THE COLLATERAL AS MORE FULLY SET
FORTH IN THE SECURITY AGREEMENT AND ACKNOWLEDGES AND AGREES TO THE
WAIVER OF JURY TRIAL PROVISIONS SET FORTH THEREIN.
Attached hereto are
supplemental and/or replacement Disclosure Schedules to the
Security Agreement, as applicable.
An
executed copy of this Joinder shall be delivered to the Secured
Parties, and the Secured Parties may rely on the matters set forth
herein on or after the date hereof. This Joinder shall
not be modified, amended or terminated without the prior written
consent of the Secured Parties.
IN
WITNESS WHEREOF, the undersigned has caused this Joinder to be
executed in the name and on behalf of the undersigned.
[Name of Additional Debtor]
By:__________________________________________
Name:
Title:
Address:
Dated:
ANNEX B
to
SECURITY AGREEMENT
THE AGENT
1. Appointment.
The Secured Parties
(all capitalized terms used herein and not otherwise defined shall
have the respective meanings provided in the Security Agreement to
which this Annex B is attached (the “Agreement”)), by their
acceptance of the benefits of the Agreement, hereby designate Arena
Investors LP (“Agent”) as the Agent to
act as specified herein and in the Agreement. Each
Secured Party shall be deemed irrevocably to authorize the Agent to
take such action on its behalf under the provisions of the
Agreement and any other Transaction Document (as such term is
defined in the Purchase Agreement) and to exercise such powers and
to perform such duties hereunder and thereunder as are specifically
delegated to or required of the Agent by the terms hereof and
thereof and such other powers as are reasonably incidental
thereto. The Agent may perform any of its duties
hereunder by or through its agents or employees.
2. Nature
of Duties. The Agent shall have no
duties or responsibilities except those expressly set forth in the
Agreement. Neither the Agent nor any of its partners,
members, shareholders, officers, directors, employees or agents
shall be liable for any action taken or omitted by it as such under
the Agreement or hereunder or in connection herewith or therewith,
be responsible for the consequence of any oversight or error of
judgment or answerable for any loss, unless caused solely by its or
their gross negligence or willful misconduct as determined by a
final judgment (not subject to further appeal) of a court of
competent jurisdiction. The duties of the Agent shall be
mechanical and administrative in nature; the Agent shall not have
by reason of the Agreement or any other Transaction Document a
fiduciary relationship in respect of any Debtor or any Secured
Party; and nothing in the Agreement or any other Transaction
Document (as defined in the Purchase Agreement), expressed or
implied, is intended to or shall be so construed as to impose upon
the Agent any obligations in respect of the Agreement or any other
Transaction Document except as expressly set forth herein and
therein.
3. Lack
of Reliance on the Agent. Independently and
without reliance upon the Agent, each Secured Party, to the extent
it deems appropriate, has made and shall continue to make (i) its
own independent investigation of the financial condition and
affairs of the Company and its subsidiaries in connection with such
Secured Party’s investment in the Debtors, the creation and
continuance of the Obligations, the transactions contemplated by
the Transaction Documents, and the taking or not taking of any
action in connection therewith, and (ii) its own appraisal of the
creditworthiness of the Company and its subsidiaries, and of the
value of the Collateral from time to time, and the Agent shall have
no duty or responsibility, either initially or on a continuing
basis, to provide any Secured Party with any credit, market or
other information with respect thereto, whether coming into its
possession before any Obligations are incurred or at any time or
times thereafter. The Agent shall not be responsible to
the Debtors or any Secured Party for any recitals, statements,
information, representations or warranties herein or in any
document, certificate or other writing delivered in connection
herewith, or for the execution, effectiveness, genuineness,
validity, enforceability, perfection, collectability, priority or
sufficiency of the Agreement or any other Transaction Document, or
for the financial condition of the Debtors or the value of any of
the Collateral, or be required to make any inquiry concerning
either the performance or observance of any of the terms,
provisions or conditions of the Agreement or any other Transaction
Document, or the financial condition of the Debtors, or the value
of any of the Collateral, or the existence or possible existence of
any default or Event of Default under the Agreement, the Notes or
any of the other Transaction Documents.
4. Certain
Rights of the Agent. The Agent shall have the
right to take any action with respect to the Collateral, on behalf
of all of the Secured Parties. To the extent practical,
the Agent shall request instructions from the Secured Parties with
respect to any material act or action (including failure to act) in
connection with the Agreement or any other Transaction Document,
and shall be entitled to act or refrain from acting in accordance
with the instructions of the Secured Party; if such instructions
are not provided despite the Agent’s request therefor, the
Agent shall be entitled to refrain from such act or taking such
action, and if such action is taken, shall be entitled to
appropriate indemnification from the Secured Parties in respect of
actions to be taken by the Agent; and the Agent shall not incur
liability to any person or entity by reason of so
refraining. Without limiting the foregoing, (a) no
Secured Party shall have any right of action whatsoever against the
Agent as a result of the Agent acting or refraining from acting
hereunder in accordance with the terms of the Agreement or any
other Transaction Document, and the Debtors shall have no right to
question or challenge the authority of, or the instructions given
to, the Agent pursuant to the foregoing and (b) the Agent shall not
be required to take any action that the Agent believes (i) could
reasonably be expected to expose it to personal liability or (ii)
is contrary to this Agreement, the Transaction Documents or
applicable law.
5. Reliance. The
Agent shall be entitled to rely, and shall be fully protected in
relying, upon any writing, resolution, notice, statement,
certificate, telex, teletype or facsimile message, cablegram,
radiogram, order or other document or telephone message signed,
sent or made by the proper person or entity, and, with respect to
all legal matters pertaining to the Agreement and the other
Transaction Documents and its duties thereunder, upon advice of
counsel selected by it and upon all other matters pertaining to
this Agreement and the other Transaction Documents and its duties
thereunder, upon advice of other experts selected by
it. Anything to the contrary notwithstanding, the Agent
shall have no obligation whatsoever to any Secured Party to assure
that the Collateral exists or is owned by the Debtors or is cared
for, protected or insured or that the liens granted pursuant to the
Agreement have been properly or sufficiently or lawfully created,
perfected, or enforced or are entitled to any particular
priority.
6. Indemnification. To
the extent that the Agent is not reimbursed and indemnified by the
Debtors, the Secured Parties will jointly and severally reimburse
and indemnify the Agent, in proportion to their initially purchased
respective principal amounts of Notes, from and against any and all
liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements of any kind or
nature whatsoever which may be imposed on, incurred by or asserted
against the Agent in performing its duties hereunder or under the
Agreement or any other Transaction Document, or in any way relating
to or arising out of the Agreement or any other Transaction
Document except for those determined by a final judgment (not
subject to further appeal) of a court of competent jurisdiction to
have resulted solely from the Agent’s own gross negligence or
willful misconduct. Prior to taking any action hereunder
as Agent, the Agent may require each Secured Party to deposit with
it sufficient sums as it determines in good faith is necessary to
protect the Agent for costs and expenses associated with taking
such action.
7. Resignation
by the Agent.
(a) The
Agent may resign from the performance of all its functions and
duties under the Agreement and the other Transaction Documents at
any time by giving 30 days’ prior written notice (as provided
in the Agreement) to the Debtors and the Secured
Parties. Such resignation shall take effect upon the
appointment of a successor Agent pursuant to clauses (b) and (c)
below.
(b)
Upon any such notice of resignation, the Secured Parties shall
appoint a successor Agent hereunder.
(c)
If a successor Agent shall not have been so appointed within said
thirty (30)-day period, the Agent shall then appoint a successor
Agent who shall serve as Agent until such time, if any, as the
Secured Parties appoint a successor Agent as provided
above. If a successor Agent has not been appointed
within such thirty (30)-day period, the Agent may petition any
court of competent jurisdiction or may interplead the Debtors and
the Secured Parties in a proceeding for the appointment of a
successor Agent, and all fees, including, but not limited to,
extraordinary fees associated with the filing of interpleader and
expenses associated therewith, shall be payable by the Debtors on
demand.
8. Rights
with respect to Collateral. Each Secured Party agrees
with all other Secured Parties and the Agent (i) that it shall not,
and shall not attempt to, exercise any rights with respect to its
security interest in the Collateral, whether pursuant to any other
agreement or otherwise (other than pursuant to this Agreement), or
take or institute any action against the Agent or any of the other
Secured Parties in respect of the Collateral or its rights
hereunder (other than any such action arising from the breach of
this Agreement) and (ii) that such Secured Party has no other
rights with respect to the Collateral other than as set forth in
this Agreement and the other Transaction Documents. Upon
the acceptance of any appointment as Agent hereunder by a successor
Agent, such successor Agent shall thereupon succeed to and become
vested with all the rights, powers, privileges and duties of the
retiring Agent and the retiring Agent shall be discharged from its
duties and obligations under the Agreement. After any
retiring Agent’s resignation or removal hereunder as Agent,
the provisions of the Agreement including this Annex B shall inure
to its benefit as to any actions taken or omitted to be taken by it
while it was Agent.
Exhibit 10.4
SUBORDINATION AGREEMENT
SUBORDINATION
AGREEMENT (this “Agreement”), dated as of May 8,
2020, among the purchasers signatory to the Securities Purchase
Agreement (as defined below) (together with its respective
successors and assigns, including, any future holder of Senior Debt
(as defined below), the “Senior Creditors”), KORR Value
L.P. (collectively, the “Subordinated Creditors” and each,
individually, a “Subordinated
Creditor”), and GoIP Global, Inc., a Colorado
corporation (the “Company”).
WHEREAS, pursuant
to a Securities Purchase Agreement, dated as of May 8, 2020 (as
amended and in effect from time to time, including any replacement
agreement therefor, the “Securities Purchase Agreement”),
among the Company and the Senior Creditors, the Senior Creditors
has extended credit to the Company as evidenced by certain Senior
Secured Convertible Notes due May 8, 2021 in the aggregate
principal amount of $3,000,000.00 issued by the Company to the
Senior Creditors (together with any notes issued in exchange
therefor or replacement thereof or any additional investment made
by the Senior Creditors and as the same may be amended,
supplemented, restated or otherwise modified from time to time, the
“Senior Notes”);
and
WHEREAS, each
Subordinated Creditor has extended or agreed to extend credit to
the Company pursuant to certain promissory notes, dated on or about
the date hereof, issued by the Company in favor of such
Subordinated Creditor (as amended with the consent of the Senior
Creditors as provided herein and in effect from time to time,
collectively, the “Subordinated Agreements” and each,
individually, a “Subordinated
Agreement”); and
WHEREAS, in order
to induce the Senior Creditors to purchase Senior Notes and
otherwise extend credit to the Company pursuant to the Securities
Purchase Agreement, the Company and the Subordinated Creditors have
agreed to enter into this Agreement with and the Senior
Creditors.
NOW,
THEREFORE, in consideration of the foregoing, the mutual agreements
herein contained and other good and valuable consideration, the
receipt and adequacy of which are hereby acknowledged, the parties
hereto, intending to be legally bound, hereby agree as
follows:
1. Definitions. Terms not otherwise
defined herein have the same respective meanings given to them in
the Securities Purchase Agreement. In addition, the following terms
shall have the following meanings:
“Senior Debt” shall mean all
principal, interest, fees, costs, enforcement expenses (including
legal fees and disbursements), collateral protection expenses and
other reimbursement or indemnity obligations created or evidenced
by the Securities Purchase Agreement, the Senior Notes or any of
the other Transaction Documents or any prior, concurrent, or
subsequent notes, instruments or agreements of indebtedness,
liabilities or obligations of any type or form whatsoever relating
thereto in favor of the Senior Creditors (including without
limitation, the Senior Creditors’ respective successors,
assigns and participants). Without limiting any term contained in
the immediately preceding sentence, Senior Debt shall expressly
include any and all interest accruing or out of pocket costs or
expenses incurred after the date of any filing by or against any
Credit Party of any petition under any Bankruptcy Law regardless of
whether the Senior Creditors’ claim therefor is allowed or
allowable in the case or proceeding relating thereto.
“Subordinated Debt” shall mean all
principal, interest, fees, costs, enforcement expenses (including
legal fees and disbursements), collateral protection expenses and
other reimbursement and indemnity obligations of the Company to
each Subordinated Creditor created or evidenced by the applicable
Subordinated Agreement or any prior, concurrent or subsequent
guaranty, notes, instruments or agreements of indebtedness,
liabilities or obligations of any type or form whatsoever relating
thereto executed and delivered by the Company in favor of such
Subordinated Creditor.
“Subordinated Documents” shall mean
collectively, the Subordinated Agreements and any and all other
guaranties and security interests, mortgages and other liens
directly or indirectly guarantying or securing any of the
Subordinated Debt, and any and all other documents or instruments
evidencing or further guarantying or securing directly or
indirectly any of the Subordinated Debt, whether now existing or
hereafter created, copies of which Subordinated Documents are
attached hereto as Exhibit
A.
2. General. The Subordinated Debt and
any and all Subordinated Documents shall be and hereby are
subordinated and the Company is not permitted to pay, and no
Subordinated Creditor is permitted to receive, any payment on its
Subordinated Debt until the full and final payment in cash of the
Senior Debt, whether now or hereafter incurred or owed by the
Company. Notwithstanding the immediately preceding sentence, the
Company shall be permitted to pay, and each Subordinated Creditor
shall be permitted to receive,
3. Enforcement. No Subordinated Creditor
will take or omit to take any action or assert any claim with
respect to its Subordinated Debt or otherwise which is inconsistent
with the provisions of this Agreement. Without limiting the
foregoing, no Subordinated Creditor will assert, collect or enforce
its Subordinated Debt or any part thereof or take any action to
foreclose or realize upon its Subordinated Debt or any part thereof
or enforce any of its Subordinated Documents except to the extent
(but only to such extent) that the commencement of a legal action
may be required to toll the running of any applicable statute of
limitation. Until the Senior Debt has been finally paid in full in
cash, no Subordinated Creditor shall have any right of subrogation,
reimbursement, restitution, contribution or indemnity whatsoever
from any assets of the Company or any guarantor of or provider of
collateral security for the Senior Debt. Each Subordinated Creditor
further waives any and all rights with respect to
marshalling.
4. Payments Held in Trust. No
Subordinated Creditor will hold in trust and immediately pay over
to the Senior Creditors in the same form of payment received, with
appropriate endorsements, for application to the Senior Debt any
cash amount that the Company pays to such Subordinated Creditor
with respect to its Subordinated Debt, or as collateral for the
Senior Debt any other assets of the Company that such Subordinated
Creditor may receive with respect to its Subordinated Debt, except
with respect to payments expressly permitted pursuant to
Section 2. The Senior Creditors is irrevocably authorized to
supply any required endorsement or assignment which may have been
omitted.
5. Evidence of Subordination. The
Company and each Subordinated Creditor shall make appropriate
notations in their books to show the subordinate character of all
applicable Subordinated Debt which may now or hereafter be carried
on open account. Until the Senior Debt has been indefeasibly paid
in full, the Company shall not issue any instrument, security or
other writing evidencing any part of its Subordinated Debt except
as described in this Section 5 or at the request of and in the
manner requested by the Senior Creditors; and no Subordinated
Creditor shall subordinate any part of its Subordinated Debt except
to or in favor of the Senior Creditors.
6. Defense to Enforcement. If any
Subordinated Creditor, in contravention of the terms of this
Agreement, shall commence, prosecute or participate in any suit,
action or proceeding against the Company, then the Company may
interpose as a defense or plea the making of this Agreement, and
the Senior Creditors may intervene and interpose such defense or
plea in its name or in the name of the Company. If any Subordinated
Creditor, in contravention of the terms of this Agreement, shall
attempt to collect any of its Subordinated Debt or enforce any of
its Subordinated Documents, then the Senior Creditors or the
Company may, by virtue of this Agreement, restrain the enforcement
thereof in the name of the Senior Creditors or in the name of the
Company. If any Subordinated Creditor, in contravention of the
terms of this Agreement, obtains any cash or other assets of the
Company as a result of any administrative, legal or equitable
actions, or otherwise, such Subordinated Creditor agrees forthwith
to pay, deliver and assign to the Senior Creditors with appropriate
endorsements, any such cash for application to the Senior Debt and
any such other assets as collateral for the Senior
Debt.
7.
Bankruptcy, Etc.
(a)
Until all Senior Debt shall have been indefeasibly paid in full in
cash, no Subordinated Creditor will commence or join with any other
creditor or creditors of the Company in commencing any bankruptcy,
reorganization or insolvency proceedings against the
Company.
(b) At
any meeting of creditors of the Company or in the event of any case
or proceeding, voluntary or involuntary, for the distribution,
division or application of all or part of the assets of the Company
or the proceeds thereof, whether such case or proceeding be for the
liquidation, dissolution or winding up of the Company or its
businesses, a receivership, insolvency or bankruptcy case or
proceeding, an assignment for the benefit of creditors or a
proceeding by or against the Company for relief under any
bankruptcy law or any other law relating to the relief of debtors,
readjustment of indebtedness, reorganization, arrangement,
composition or extension or marshalling of assets or otherwise, the
Senior Creditors is hereby irrevocably authorized on behalf of each
Subordinated Creditor at any such meeting or in any such
proceeding:
(i) to
enforce claims comprising the Subordinated Debt either in its own
name or in the name of such Subordinated Creditor, by proof of
debt, proof of claim, suit or otherwise;
(ii) to
receive or collect any cash or other assets of the Company
distributed, divided or applied by way of dividend or payment, or
any securities issued on account of any Subordinated Debt, and
apply such cash to or to hold such other assets or securities as
collateral for the Senior Debt, and to apply to the Senior Debt any
cash proceeds of any realization upon such other assets or
securities that the Senior Creditors elects to effect, until all of
the Senior Debt shall have been paid in full in cash, rendering to
such Subordinated Creditor any surplus to which such Subordinated
Creditor is then entitled;
(iii)
to vote claims comprising the Subordinated Debt, to accept or
reject any plan of partial or complete liquidation, reorganization,
arrangement, composition or extension; and
(iv) to
take generally any action in connection with any such meeting or
proceeding which such Subordinated Creditor might otherwise
take.
8.
Lien Subordination.
(a) The
Subordinated Debt shall be unsecured and the Company shall not
grant any Liens to secure any of the Subordinated Debt. To the
extent any Lien is ever granted, the Senior Debt, the Securities
Purchase Agreement and the other Transaction Documents and any and
all other documents and instruments evidencing or creating the
Senior Debt and all guaranties, mortgages, security agreements,
pledges and other collateral guarantying or securing the Senior
Debt or any part thereof shall be senior to the Subordinated Debt
and the Subordinated Documents irrespective of the time of the
execution, delivery or issuance of any thereof or the filing or
recording for perfection of any thereof or the filing of any
financing statement or continuation statement relating to any
thereof. Each Subordinated Creditor hereby agrees, upon request of
the Senior Creditors at any time and from time to time, to execute
such other documents or instruments as may be requested by the
Senior Creditors further to evidence of public record or otherwise
the senior priority of the Senior Debt as contemplated hereby. Each
Subordinated Creditor further agrees to maintain on its books and
records such notations as the Senior Creditors may reasonably
request to reflect the subordination contemplated hereby and to
perfect or preserve the rights of the Senior Creditors
hereunder.
(b)
Each Subordinated Creditor agrees that, within two (2) days
following the Senior Creditors’s written request therefor,
such Subordinated Creditor will execute, deliver and file any and
all such termination statements, mortgage discharges, lien releases
and other agreements and instruments as the Senior Creditors
reasonably deems necessary or appropriate in order to give effect
to the preceding sentence. Each Subordinated Creditor hereby
irrevocably appoints the Senior Creditors, and its successors and
assigns, and their respective officers, with full power of
substitution, the true and lawful attorney(s) of such Subordinated
Creditor for the purpose of effecting any such executions,
deliveries and filings if and to the extent that such Subordinated
Creditor shall have failed to perform such obligations pursuant to
the foregoing provisions of this Section 8(b) within such
period.
9. Senior Creditors’ Freedom of
Dealing. Each Subordinated Creditor agrees, with respect to
the Senior Debt and any and all collateral therefor or guaranties
thereof, that the Company and the Senior Creditors, as applicable,
may agree to increase the amount of the Senior Debt or otherwise
modify, in any respect whatsoever, the terms of any of the Senior
Debt, and the Senior Creditors may grant extensions of the time of
payment or performance to and make compromises, including releases
of collateral or guaranties, and settlements with the Company and
all other Persons, in each case without the consent of such
Subordinated Creditor or the Company and without affecting the
agreements of such Subordinated Creditor or the Company contained
in this Agreement; provided, however, that nothing contained in
this Section 9 shall constitute a waiver of the right of the
Company itself to agree or consent to a settlement or compromise of
a claim which the Senior Creditors may have against the Company. To
the extent any Senior Creditors sells or assigns any of its Senior
Debt, each Subordinated Creditor agrees to execute and deliver any
and all documents and/or agreements reasonably requested by such
Senior Creditors to reflect the continued subordination by such
Subordinated Creditor of its Subordinated Debt in favor of such
purchaser or assignee of such Senior Debt.
10. Modification or Sale of the Subordinated
Debt. No Subordinated Creditor will, at any time while this
Agreement is in effect, modify any of the terms of any of its
Subordinated Debt or any of its Subordinated Documents; nor will
such Subordinated Creditor sell, transfer, pledge, assign,
hypothecate or otherwise dispose of any or all of its Subordinated
Debt unless such Subordinated Creditor provides prior written
notice of such event to the Senior Creditors and the person or
entity acquiring such interest in such Subordinated Debt enters
into a subordination agreement with the Senior Creditors in the
form of this Agreement along with any other documents and/or
agreements reasonably requested by the Senior Creditors. Any
transfer in violation of this Agreement shall be void ab
initio.
11. Company’s Obligations
Absolute. Nothing contained in this Agreement shall impair,
as between the Company and any Subordinated Creditor, the
obligation of the Company to pay to such Subordinated Creditor all
amounts payable in respect of its Subordinated Debt as and when the
same shall become due and payable in accordance with the terms
thereof, or prevent such Subordinated Creditor (except as expressly
otherwise provided in Section 3 or Section 6) from
exercising all rights, powers and remedies otherwise permitted by
its Subordinated Documents and by applicable law upon a default in
the payment of its Subordinated Debt or under its Subordinated
Documents, all, however, subject to the rights of the Senior
Creditors as set forth in this Agreement.
12. Termination of Subordination. This
Agreement shall continue in full force and effect, and the
obligations and agreements of each Subordinated Creditor and the
Company hereunder shall continue to be fully operative, until all
of the Senior Debt shall have been paid and satisfied in full in
cash and such full payment and satisfaction shall be final and not
avoidable. To the extent that the Company or any guarantor of or
provider of collateral for the Senior Debt makes any payment on the
Senior Debt that is subsequently invalidated, declared to be
fraudulent or preferential or set aside or is required to be repaid
to a trustee, receiver or any other party under any bankruptcy,
insolvency or reorganization act, state or federal law, common law
or equitable cause (such payment being hereinafter referred to as a
“Voided
Payment”), then to the extent of such Voided Payment,
that portion of the Senior Debt that had been previously satisfied
by such Voided Payment shall be revived and continue in full force
and effect as if such Voided Payment had never been made. In the
event that a Voided Payment is recovered from the Senior Creditors,
an Event of Default shall be deemed to have existed and to be
continuing under the Securities Purchase Agreement from the date of
the Senior Creditors’ initial receipt of such Voided Payment
until the full amount of such Voided Payment is restored to the
Senior Creditors. During any continuance of any such Event of
Default, this Agreement shall be in full force and effect with
respect to all of the Subordinated Debt. To the extent that any
Subordinated Creditor has received any payments with respect to its
Subordinated Debt subsequent to the date of the Senior
Creditors’ initial receipt of such Voided Payment and such
payments have not been invalidated, declared to be fraudulent or
preferential or set aside or are required to be repaid to a
trustee, receiver, or any other party under any bankruptcy act,
state or federal law, common law or equitable cause, such
Subordinated Creditor shall be obligated and hereby agrees that any
such payment so made or received shall be deemed to have been
received in trust for the benefit of the such Senior Creditors, and
such Subordinated Creditor hereby agrees to pay to the Senior
Creditors, upon demand, the full amount so received by such
Subordinated Creditor during such period of time to the extent
necessary fully to restore to the Senior Creditors the amount of
such Voided Payment. Upon the payment and satisfaction in full in
cash of all of the Senior Debt, which payment shall be final and
not avoidable, this Agreement will automatically terminate without
any additional action by any party hereto.
13. Specific Performance. The Senior
Creditors is hereby authorized to demand specific performance of
this Agreement, whether or not the Company shall have complied with
the provisions hereof applicable to it, at any time when any
Subordinated Creditor shall have failed to comply with any
provision hereof. Each Subordinated Creditor hereby irrevocably
waives any defense based on the adequacy of a remedy at law which
might be asserted as a bar to the remedy of specific performance
hereof in any action brought therefor by the Senior Creditors.
Except as required hereunder or under any of the other Transaction
Documents, each Subordinated Creditor further waives presentment,
notice and protest in connection with all negotiable instruments
evidencing Senior Debt to which it may be a party, notice of the
acceptance of this Agreement by the Senior Creditors, notice of any
loan made, extension granted or other action taken in reliance
hereon and all demands and notices of every kind in connection with
this Agreement or the Senior Debt.
14. Representations and Warranties. Each
Subordinated Creditor represents and warrants as
follows:
(a)
Such Subordinated Creditor which is not an individual is duly
organized, validly existing and in good standing under the laws of
the jurisdiction of its incorporation or formation and has all
requisite corporate or limited liability company, as applicable,
power and authority to enter into and perform this
Agreement.
(b) The
execution, delivery and performance by such Subordinated Creditor
of this Agreement and the transactions contemplated hereby
(i) have been duly authorized by all necessary corporate or
limited liability company, as applicable, action (except in the
case of individual Subordinated Creditors), and (ii) do not
(A) contravene such Subordinated Creditor’s constituent
documents, if applicable, (B) violate any requirement of law
to which such Subordinated Creditor is subject, or
(C) conflict with or result in the breach of, or constitute a
default under, any contractual obligation binding on such
Subordinated Creditor.
(c) No
authorization or approval or other action by, and no notice to or
filing with, any governmental authority or regulatory body or any
other third party is required for the due execution, delivery,
recordation, filing or performance by such Subordinated Creditor of
this Agreement.
(d)
This Agreement has been duly executed and delivered by such
Subordinated Creditor. This Agreement is the legal, valid and
binding obligation of such Subordinated Creditor, enforceable
against such Subordinated Creditor in accordance with its
terms.
15. Accuracy of Representations and
Warranties. If any representation or warranty contained
herein shall prove to have been materially false when made or in
the event of any breach by the Company or any Subordinated Creditor
in the performance of any of the terms hereof, the Senior Creditors
may, at their option, declare all Senior Debt to be due and
payable, without presentment, demand, protest, or notice of any
kind, notwithstanding any time or credit otherwise
allowed.
16. Additional Documents. The Company
and each Subordinated Creditor shall execute and deliver to the
Senior Creditors such further instruments and shall take such
further action as the Senior Creditors may at any time or times
request in order to carry out the provisions and intent of this
Agreement.
17. Legends. Any instrument or agreement
evidencing the Subordinated Debt shall specifically provide by an
appropriate legend conspicuously placed thereon that payment of any
and all amounts thereunder has been subordinated to prior payment
of Senior Debt in the manner and to the extent set forth in this
Subordination Agreement.
18. Notices. All notices and other
communications which are required and may be given pursuant to the
terms of this Agreement shall be in writing and shall be sufficient
and effective in all respects if given in writing or telecopied,
delivered or mailed by registered or certified mail, postage
prepaid, as follows:
(a) if
to a Senior Creditors or the Company, at the address set forth in
the Securities Purchase Agreement; and
(b) if
to the Subordinated Creditor, at:
KORR
Value, LP
1400
Old Country Road
Westbury New York
11590
or such
other address or addresses as any party hereto shall have
designated by written notice to the other parties hereto. Notices
shall be deemed given and effective upon the earlier to occur of
(x) the third day following deposit thereof in the U.S. mail
or (y) receipt by the party to whom such notice is
directed.
19. Governing Law. THIS AGREEMENT SHALL
BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, AND THE RIGHTS OF THE
PARTIES SHALL BE GOVERNED BY, THE INTERNAL LAW OF THE STATE OF NEW
YORK, EXCLUDING CHOICE-OF-LAW PRINCIPLES OF THE LAW OF SUCH STATE
THAT WOULD PERMIT THE APPLICATION OF THE LAWS OF A JURISDICTION
OTHER THAN SUCH STATE.
20. Waiver of Jury Trial. EACH OF THE
SUBORDINATED CREDITORS AND THE COMPANY IRREVOCABLY WAIVE ALL RIGHT
TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER
BASED ON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR RELATING TO
THIS AGREEMENT, OR ANY OTHER AGREEMENT, DOCUMENT OR INSTRUMENT
DELIVERED IN CONNECTION HEREWITH OR THEREWITH OR THE ACTIONS OF THE
SENIOR CREDITORS IN THE NEGOTIATION, ADMINISTRATION, PERFORMANCE OR
ENFORCEMENT HEREOF OR THEREOF.
21.
Personal Jurisdiction.
(a)
Each of the Subordinated Creditors and the Company irrevocably
submits to the non-exclusive jurisdiction of any New York state or
federal court sitting in the Borough of Manhattan, The City of New
York, over any suit, action or proceeding arising out of or
relating to this Agreement or any of the agreements, documents or
instruments delivered in connection herewith or therewith. To the
fullest extent permitted by applicable law, each of the
Subordinated Creditors irrevocably waives and agrees not to assert,
by way of motion, as a defense or otherwise, any claim that it is
not subject to the jurisdiction of any such court, any objection
that it may now or hereafter have to the laying of the venue of any
such suit, action or proceeding brought in any such court and any
claim that any such suit, action or proceeding brought in any such
court has been brought in an inconvenient forum.
(b)
Nothing in this Section 21 shall affect the right of the
Senior Creditors to serve process in any manner permitted by law,
or limit any right that the Senior Creditors may have to bring
proceedings against any Subordinated Creditor or the Company in the
courts of any appropriate jurisdiction or to enforce in any lawful
manner a judgment obtained in one jurisdiction in any other
jurisdiction.
22. Expenses. Each of the Subordinated
Creditors and the Company jointly and severally agree to pay upon
demand to any of the Senior Creditors the amount of any and all
out-of-pocket expenses, including the reasonable fees and expenses
of their counsel and of any experts or agents, which any Senior
Creditors may incur in connection with the exercise or enforcement
of any of the rights of any Senior Creditors
hereunder.
23. Miscellaneous. This Agreement may be
executed in several counterparts and by each party on a separate
counterpart, each of which when so executed and delivered shall be
an original, and all of which together shall constitute one
instrument. Delivery of an executed counterpart of a signature page
to this Agreement by telecopier or pdf shall be effective as
delivery of a manually executed counterpart of this Agreement. In
proving this Agreement, it shall not be necessary to produce or
account for more than one such counterpart signed by the party
against which enforcement is sought. The Senior Creditors may, in
their sole and absolute discretion, waive any provisions of this
Agreement benefiting the Senior Creditors; provided, however, that
such waiver shall be effective only if in writing and signed by the
Senior Creditors and shall be limited to the specific provision or
provisions expressly so waived. This Agreement shall be binding
upon the successors, assigns and participants of each Subordinated
Creditor and the Company and shall inure to the benefit of the
Senior Creditors and its respective successors, assigns and
participants, any purchaser or purchasers refunding or refinancing
any of the Senior Debt and their respective successors, assigns and
participants, but shall not otherwise create any rights or benefits
for any third party.
[Remainder
of page intentionally left blank; Next page is signature
page.]
IN
WITNESS WHEREOF, the parties hereto have executed or caused this
Agreement to be executed as of the date first above
written.
MT. WHITNEY SECURITIES, LLC
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By:
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Name:
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Title:
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ARENA ORIGINATING CO., LLC
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By:
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Name:
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Title:
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ARENA SPECIAL OPPORTUNITIES FUND, LP
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By:
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Name:
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Title:
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ARENA SPECIAL OPPORTUNITIES PARTNERS I, LP
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By:
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Name:
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Title:
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GOIP GLOBAL, INC.
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By:
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Name:
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Title:
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KORR VALUE, LP
By: KORR Acquisitions Group, Inc., its General Partner
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By:
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Name:
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Title:
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Exhibit 10.5
SECURITIES PURCHASE AGREEMENT
THIS
SECURITIES PURCHASE AGREEMENT (the “Agreement”) is made as of
May __, 2020, by and among GoIP Global, Inc., a Colorado
corporation (and together with all of its current and future,
direct and/or indirect, wholly owned and/or partially owned
Subsidiaries, collectively, the “Company”), and the Purchaser identified on the signature
pages hereto (each, including its successors and assigns, a
“Purchaser”
and, collectively, the “Purchasers”).
RECITALS
A. The
Company and the Purchasers are executing and delivering this
Agreement in reliance upon the exemption from securities
registration afforded by Section 4(a)(2) of the Securities Act (as
defined below), and/or Rule 506(b) of Regulation D
(“Regulation
D”) as promulgated by the United States Securities and
Exchange Commission under the Securities Act.
B. The
Purchasers, wishes to purchase, and the Company wishes to sell at
closing, upon the terms and conditions stated in this Agreement,
the Securities (as defined herein), all in the amounts and for the
price set forth on Schedule 1
hereto.
NOW,
THEREFORE, IN CONSIDERATION of the mutual covenants contained in
this Agreement, and for other good and valuable consideration, the
receipt and adequacy of which are hereby acknowledged, the Company
and the Purchaser hereby agrees as follows:
ARTICLE
1
DEFINITIONS
1.1 Defined Terms. In addition to
terms defined elsewhere in this Agreement or in any supplement,
amendment or exhibit hereto, when used herein, the following terms
shall have the following meanings:
(a) “Affiliate”
means any Person that, directly or indirectly through one or more
intermediaries, controls or is controlled by or is under common
control with a Person, as such terms are used in and construed
under Rule 405 of the Securities Act.
(b) “Business
Day” means any day
except any Saturday, any Sunday, any day which is a federal legal
holiday in the United States or any day on which banking
institutions in the State of New York are authorized or required by
law or other governmental action to close.
(c) “Closing”
shall have the meaning ascribed to such term in Section
2.1(a).
(d) “Closing
Date” means the
Trading Day on which all of the Transaction Documents have been
executed and delivered by the applicable parties thereto, and all
conditions precedent to (i) the Purchasers’ obligations to
pay the Purchase Price and (ii) the Company’s obligations to
deliver the Securities has been satisfied or waived with respect to
the Closing.
(e) “Common Stock” means (i)
the Company’s common stock, par value $0.001 per share, and
(ii) any capital stock into which such common stock shall have been
changed or any share capital resulting from a reclassification of
such common stock.
(f) “Common Stock Equivalents”
means any securities of the Company or the Subsidiaries which would
entitle the holder thereof to acquire at any time Common Stock,
including, without limitation, any debt, preferred stock, rights,
options, warrants or other instrument that is at any time
convertible into or exercisable or exchangeable for, or otherwise
entitles the holder thereof to receive, Common Stock.
(g) “Contingent Obligation”
means, as to any Person, any direct or indirect liability,
contingent or otherwise, of that Person with respect to any
indebtedness, lease, dividend or other obligation of another Person
if the primary purpose or intent of the Person incurring such
liability, or the primary effect thereof, is to provide assurance
to the obligee of such liability that such liability will be paid
or discharged, or that any agreements relating thereto will be
complied with, or that the holders of such liability will be
protected (in whole or in part) against loss with respect
thereto.
(h) “Conversion Date” has the
meaning set forth in the Notes.
(i) “Conversion Shares” means
all shares of Common Stock issuable upon conversion of any portion
of the Notes, and/or as any other payment due under the Notes
including, but not limited to interest and/or otherwise, but solely
to the extent and subject to any conditions set forth in the
Notes.
(j) “Dollar(s)” and
“$”
means lawful money of the United States.
(k) “Event of Default” shall
have the meaning set forth in the Notes.
(l) “Exchange Act” means the
Securities Exchange Act of 1934, as amended, and the rules and
regulations promulgated thereunder.
(m) “Exempt Issuance” means
the issuance of (a) shares of Common Stock or options to employees,
officers, consultants, advisors or directors of the Company
pursuant to any stock or option plan duly adopted for such purpose
by a majority of the members of the Board of Directors or a
majority of the members of a committee of directors established for
such purpose, (b) securities upon the exercise or exchange of or
conversion of any Securities issued hereunder and/or other
securities exercisable or exchangeable for or convertible into
shares of Common Stock issued and outstanding on the date of this
Agreement, provided that such securities have not been amended
since the date of this Agreement to increase the number of such
securities or to decrease the exercise, exchange or conversion
price of such securities or (c) Permitted Indebtedness incurred in
satisfaction with clause 1.1(v)(c) hereunder.
(n) “GAAP” means generally
accepted accounting principles in the United States of America as
in effect from time to time.
(o) “Indebtedness” means, with
respect to any Person at any date, without duplication,
(a) all indebtedness of such Person for borrowed money,
(b) all obligations of such Person for the deferred purchase
price of property or services (but excluding trade payables
incurred in the ordinary course of business), (c) all
obligations of such Person evidenced by notes, bonds, debentures or
other similar instruments, (d) all indebtedness created or
arising under any conditional sale or other title retention
agreement with respect to property acquired by such Person (even
though the rights and remedies of the seller or the Purchaser under
such agreement in the event of default are limited to repossession
or sale of such property), (e) all capital lease obligations
of such Person, (f) all obligations of such Person, contingent
or otherwise, as an account party or applicant under acceptance,
letter of credit, surety bond or similar facilities, (g) all
obligations of such Person, contingent or otherwise, to purchase,
redeem, retire or otherwise acquire for value any capital stock of
such Person, (h) all obligations for any earn-out consideration,
(i) the liquidation value of preferred capital stock of such
Person, (j) all guarantee obligations of such Person in respect of
obligations of the kind referred to in clauses (a) through (i)
above, (k) all obligations of the kind referred to in
clauses (a) through (i) above secured by (or for which the
holder of such obligation has an existing right, contingent or
otherwise, to be secured by) any lien on property (including,
without limitation, accounts and contract rights) owned by such
Person, whether or not such Person has assumed or become liable for
the payment of such obligation and all obligations of such Person
in respect of hedge agreements; and (l) all Contingent Obligations
in respect to indebtedness or obligations of any Person of the kind
referred to in clauses (a)-(k) above. The Indebtedness of any
Person shall include, without duplication, the Indebtedness of any
other entity (including any partnership in which such Person is a
general partner) to the extent such Person is liable therefor as a
result of such Person’s ownership interest in or other
relationship with such entity, except to the extent the terms of
such Indebtedness expressly provide that such Person is not liable
therefor.
(p) “Liens” or
“liens”
means a lien, mortgage, charge pledge, security interest,
encumbrance, right of first refusal, preemptive right or other
restriction, or other clouds on title.
(q) “Liabilities” means all
direct or indirect liabilities, Indebtedness and obligations of any
kind of Company to the Purchaser, howsoever created, arising or
evidenced, whether now existing or hereafter arising (including
those acquired by assignment), absolute or contingent, due or to
become due, primary or secondary, joint or several, whether
existing or arising through discount, overdraft, purchase, direct
loan, participation, operation of law, or otherwise, including, but
not limited to, pursuant to the Notes, this Agreement and/or any of
the other Transaction Documents, all accrued but unpaid interest on
the Notes the principal, any letter of credit, any standby letter
of credit, and/or outside attorneys’ and paralegals’
fees or charges relating to the preparation of the Transaction
Documents and the enforcement of the Purchaser’s rights,
remedies and powers under this Agreement, the Notes and/or the
other Transaction Documents.
(r) “Material
Adverse Effect” means a material adverse effect on
(a) the business, assets, property, operations, or condition
(financial or otherwise) of the Company, (b) the validity or
enforceability of this Agreement or any of the other Transaction
Documents or (c) the rights or remedies of the Purchaser
hereunder or thereunder.
(s) “Notes” means all of the
Original Issue Discount Senior Secured Convertible Promissory Notes
due May 9, 2021 that are owned by the Purchasers, which, subject to
the terms and conditions set forth in this Agreement, shall be
purchased from the Company pursuant to this Agreement; the form of
Note is annexed hereto as Exhibit A
and any and all Note(s) issued in exchange, transfer or replacement
of the Notes.
(t) “Permitted Indebtedness”
means (a) the indebtedness evidenced by the Notes, and (b) lease
obligations and purchase money indebtedness incurred in connection
with the acquisition of capital assets and lease obligations with
respect to newly acquired or leased assets in the ordinary course
of business, (c) any indebtedness issued to funds affiliated with
Arena Investors LP and (d) any indebtedness issued by the Company
to any SBA-approved lender.
(u) “Permitted Lien” means the
individual and collective reference to the following: (a) Liens for
taxes, assessments and other governmental charges or levies not yet
due or Liens for taxes, assessments and other governmental charges
or levies being contested in good faith and by appropriate
proceedings for which adequate reserves (in the good faith judgment
of the management of the Company) have been established in
accordance with GAAP; (b) Liens imposed by law which were incurred
in the ordinary course of the Company’s business, such as
carriers’, warehousemen’s and mechanics’ Liens,
statutory landlords’ Liens, and other similar Liens arising
in the ordinary course of the Company’s business, and which
(x) do not individually or in the aggregate materially detract from
the value of such property or assets or materially impair the use
thereof in the operation of the business of the Company and its
consolidated Subsidiaries or (y) are being contested in good faith
by appropriate proceedings, which proceedings have the effect of
preventing for the foreseeable future the forfeiture or sale of the
property or asset subject to such Lien; and (c) Liens incurred in
connection with Permitted Indebtedness thereunder; (d) Pledges and
deposits made in the ordinary course of business in compliance with
workers’ compensation, unemployment insurance and other
social security laws or regulations; (e) Deposits to secure the
performance of bids, trade contracts, leases, statutory
obligations, surety and appeal bonds, performance bonds and other
obligations of a like nature, in each case in the ordinary course
of business; and (f) any Liens in favor of the
Purchaser.
(v) “Person” means any
individual, sole proprietorship, partnership, joint venture, trust,
unincorporated organization, association, corporation, institution,
entity, party or government (whether national, federal, state,
county, city, municipal or otherwise including, without limitation,
any instrumentality, division, agency, body or department
thereof).
(w) “Principal
Market” means the principal Trading Market on which
the Common Stock is listed or quoted for trading on the date in
question.
(x) “Proceeding”
means an action, claim, suit, investigation or proceeding
(including, without limitation, an informal investigation or
partial proceeding, such as a deposition), whether commenced or
threatened.
(y) “Purchase
Price” shall have the
meaning as set forth on Schedule 1 next to the heading
“Purchase Price,” in United States
Dollars.
(z) “Reverse Stock Split”
means the 500 for 1 reverse stock split of the Company’s
common stock which will take effect after the Closing
Date;
(aa) “SEC”
or “Commission” means the
United States Securities and Exchange Commission.
(bb) “Securities”
means the Notes and the Warrants purchased pursuant to this
Agreement and all Underlying Shares and any securities of the
Company issued in replacement, substitution and/or in connection
with any exchange, conversion and/or any other transaction pursuant
to which all or any of such securities of the Company to the
Purchasers.
(cc) “Securities
Act” means the Securities Act of 1933, as amended, and
the rules and regulations promulgated thereunder.
(dd) “Short
Sales” means all “short sales” as defined
in Rule 200 of Regulation SHO under the Exchange Act (but shall not
be deemed to include the location and/or reservation of borrowable
shares of Common Stock).
(ee) Subordination
Agreement” means the
Subordination Agreement, dated as of the date hereof, by and among
funds affiliated with Arena Investors LP, and the Purchasers, as
the Creditors therein, which Subordination Agreement is
annexed hereto as Exhibit B.
(ff) “Subsidiary”
means, with respect to any Person, a corporation, partnership,
limited liability company or other entity of which shares of stock
or other ownership interests having ordinary voting power (other
than stock or such other ownership interests having such power only
by reason of the happening of a contingency) to elect a majority of
the board of directors or other managers of such corporation,
partnership or other entity are at the time owned, or the
management of which is otherwise controlled, directly or indirectly
through one or more intermediaries, or both, by such Person all of
the Company’s Subsidiaries are set forth on Schedule 3.1(a)
hereto.
(gg) “Trading
Day” means a day on which the principal Trading Market
is open for trading.
(hh) “Trading
Market” means any of the following markets or
exchanges on which the Common Stock is listed or quoted for trading
on the date in question: the NYSE MKT, the Nasdaq Capital Market,
the Nasdaq Global Market, the Nasdaq Global Select Market, the New
York Stock Exchange, any market or quotation service of the OTC
Markets Group or the OTC Bulletin Board (or any successors to any
of the foregoing).
(ii) “Transaction
Documents” means, collectively, this Agreement, the
Notes, the Warrant, the Subordination Agreement and such other
documents, instruments, certificates, supplements, amendments,
exhibits and schedules required and/or attached pursuant to this
Agreement and/or any of the above documents, and/or any other
document and/or instrument related to the above agreements,
documents and/or instruments, and the transactions hereunder and/or
thereunder and/or any other agreement, documents or instruments
required or contemplated hereunder or thereunder, whether now
existing or at any time hereafter arising.
(jj) “Transfer
Agent” means Manhattan Transfer Registrar Co. the
current transfer agent of the Company, with a mailing address of
38B Sheep Pasture Road, Port Jefferson, NY 11777 and a phone number
of 631-928-7655,
and any successor transfer agent of the Company.
(kk) “UCC”
means the Uniform Commercial Code of as in effect from time to time
in the State of New York; provided, however, that, in the event
that, by reason of mandatory provisions of law, any or all of the
attachment, perfection, priority, or remedies with respect to the
Purchaser’ Liens on any Collateral is governed by the Uniform
Commercial Code as enacted and in effect in a jurisdiction other
than the State of New York, the term “UCC” shall mean the
Uniform Commercial code as enacted and in effect in such other
jurisdiction solely for purposes of the provisions thereof relating
to such attachment, perfection, priority, or remedies.
(ll) “Underlying
Shares” means all Conversion Shares and Warrant
Shares.
(mm) “VWAP”
means, for any date, the price determined by the first of the
following clauses that applies: (a) if the Common Stock is then
listed or quoted on a Trading Market, the daily volume weighted
average price of the Common Stock for such date (or the nearest
preceding date) on the Trading Market on which the Common Stock is
then listed or quoted as reported by Bloomberg L.P. (based on a
Trading Day from 9:30 a.m. (New York City time) to 4:02 p.m. (New
York City time)), (b) if OTCQB or OTCQX is not a Trading
Market, the volume weighted average price of the Common Stock for
such date (or the nearest preceding date) on OTCQB or OTCQX as
applicable, (c) if the Common Stock is not then listed or quoted
for trading on OTCQB or OTCQX and if prices for the Common Stock
are then reported in the “Pink Sheets” published by OTC
Markets, Inc. (or a similar organization or agency succeeding to
its functions of reporting prices), the most recent bid price per
share of the Common Stock so reported, or (d) in all other
cases, the fair market value of a share of Common Stock as
determined by an independent appraiser selected in good faith by
the Purchaser of a majority in interest of the Securities then
outstanding and reasonably acceptable to the Company, the fees and
expenses of which shall be paid by the Company.
(nn) “Warrant(s)”
means the two (2)-year Common Stock Purchase Warrants of the
Company, to be issued at the Closing, the form of which is annexed
hereto as Exhibit C.
(oo) “Warrant
Shares” means all shares of Common Stock issuable upon
exercise of the Warrants and/or any other securities issuable upon
exercise of the Warrants.
1.2 Other Definitional
Provisions.
(a) Use of Defined Terms. Unless
otherwise specified therein, all terms defined in this Agreement
shall have the defined meanings when used in the other Transaction
Documents or any certificate or
other document made or delivered pursuant hereto or
thereto.
(b) Accounting Terms. As used
herein and in the other Transaction Documents, and any certificate
or other document made or delivered pursuant hereto or thereto,
accounting terms relating to the Company not defined in
Section 1.1
and accounting terms partly
defined in Section 1.1, to the extent not
defined, shall have the respective meanings given to them under
GAAP (provided that
all terms of an accounting or financial nature used herein shall be
construed, and all computations of amounts referred to herein shall
be made without giving effect to (i) any election under Accounting
Standards Codification 825-10-25 (previously referred to as
Statement of Financial Accounting Standards 159) (or any other
Accounting Standards Codification or Financial Accounting Standard
having a similar result or effect) to value any Indebtedness or
other liabilities of the Company at “fair value”, as
defined therein, and (ii) any treatment of Indebtedness in respect
of convertible debt instruments under Accounting Standards
Codification 470-20 (or any other Accounting Standards Codification
or Financial Accounting Standard having a similar result or effect)
to value any such Indebtedness in a reduced or bifurcated manner as
described therein, and such Indebtedness shall at all times be
valued at the full stated principal amount thereof).
(c) Construction. The words
“hereof”,
“herein” and
“hereunder” and words of
similar import when used in this Agreement shall refer to this
Agreement as a whole and not to any particular provision of this
Agreement, and section, schedule and exhibit references are to this
Agreement unless otherwise specified. The meanings given to terms
defined herein shall be equally applicable to both the singular and
plural forms of such
terms.
(d) UCC Terms. Terms used in this
Agreement that are defined in the UCC shall, unless the context
indicates otherwise or are
otherwise defined in this Agreement, have the meanings provided for
by the UCC.
ARTICLE
2
PURCHASE
AND SALE
2.1 Closing. On the Closing Date,
upon the terms and subject to the conditions set forth herein, the
Company agrees to sell, and the Purchasers each agree to purchase,
the Securities in such amounts as indicated on Schedule 1
hereto. Each Purchaser shall deliver to the Company, via
wire transfer immediately available funds equal to the Purchase
Price, and the Company shall deliver to the Purchaser the Note on
the Closing Date, and the Company and the Purchaser shall deliver
the other items set forth in Section 2.2 deliverable at the
Closing. Upon satisfaction of the covenants and conditions set
forth in Sections 2.2 and 2.3, the Closing shall occur at the
offices of the Company or such other location as the parties shall
mutually agree.
2.2 Deliveries.
(a) On or prior to the
Closing Date, the Company shall deliver or cause to be delivered to
the Purchasers the following:
(i)
this Agreement duly
executed by the Company;
(ii)
a Note
registered in the name of the Purchaser with such principal amount
as set forth on Schedule
1;
(iii)
the
Warrant, registered in the name of the Purchaser, to purchase such
number of shares of Common Stock as set forth on Schedule 1;
(iv)
the Subordination
Agreement, duly executed by the Company and the
Purchasers;
(v)
the
Company and the Subsidiaries shall
have delivered to the Purchasers such other documents, instruments,
opinions or certificates relating to the transactions contemplated
by this Agreement as the Purchasers or its counsel may reasonably
request.
(b)
On or prior to the Closing, each Purchaser shall deliver or cause
to be delivered to the Company the following:
(i)
this Agreement duly
executed by the Company;
(ii)
the
Purchase Price subject to the closing by wire transfer;
and
(iii)
the
Subordination Agreement, duly executed by such
Purchaser.
2.3 Conditions to Purchase the
Securities. Subject to the terms and conditions of this
Agreement, each Purchaser will at a Closing purchase from the
Company the Securities in the amounts and for the Purchase Price as
set forth on Schedule 1, provided the
following:
(a) The obligations of
the Company hereunder in connection with the Closing are subject to
the following conditions being met:
(i)
the accuracy in all
material respects (or, to the extent representations or warranties
are qualified by materiality or Material Adverse Effect, in all
respects) when made and on the date of the Closing of the
representations and warranties of the Purchaser contained herein
(unless as of a specific date therein in which case they shall be
accurate as of such date);
(ii)
all
obligations, covenants and agreements of each Purchaser required to
be performed at or prior to the date of the Closing shall have been
performed;
(iii)
the
delivery by each Purchaser of the items set forth in Section 2.2(b)
of this Agreement;
(iv)
there
shall have been no Material Adverse Effect with respect to the
Company since the date hereof; and
(v)
no statute, rule, regulation, executive order,
decree, ruling or injunction shall have been enacted, entered,
promulgated or endorsed by any court or other federal,
state, local or other governmental authority of competent jurisdiction that prohibits the
consummation of any of the transactions contemplated by the
Transaction Documents.
(b) The
obligations of each Purchaser hereunder in connection with the
Closing are subject to the following conditions being
met:
(i)
the accuracy in all
material respects (or, to the extent representations or warranties
are qualified by materiality or Material Adverse Effect, in all
respects) when made and on the date of the Closing of the
representations and warranties of the Company contained herein
(unless as of a specific date therein in which case they shall be
accurate as of such date);
(ii)
all
obligations, covenants and agreements of the Company required to be
performed at or prior to the Closing shall have been performed in
all material respects;
(iii)
the
delivery by the Company of the items set forth in Section 2.2(a) of
this Agreement;
(iv)
there
shall have been no Material Adverse Effect with respect to the
Company since the date hereof;
(v)
the Company shall have obtained all governmental,
regulatory and third party consents and approvals, if any,
necessary for the entry into the Transaction Documents and the sale
of the Securities;
(vi)
the closing of the transactions contemplated by
the terms of that certain share exchange agreement, dated on even
date herewith, by and between the Company and Transworld
Enterprises, Inc.; and
(vii)
no statute, rule, regulation, executive order,
decree, ruling or injunction shall have been enacted, entered,
promulgated or endorsed by any court or other federal,
state, local or other governmental authority of competent jurisdiction that prohibits the
consummation of any of the transactions contemplated by the
Transaction Documents;
2.4 Purchase Price and Payment of the
Purchase Price for the Securities. The Purchase Price for
the Securities to be purchased by the Purchasers at a Closing shall
be as set forth on Schedule 1 and shall be
paid at the Closing (less all of the Purchaser’s Expenses (as
defined below)) by the Purchaser by wire transfer of immediately
available funds to the Company in accordance with the
Company’s written wiring instructions, against delivery of
the Securities.
2.5
Subsequent Closing.
Each of the
Company and the Purchasers may, but are not obligated to, mutually
agree in writing to conduct a second closing on or before June 8,
2020 (the “Second
Closing”) to be held at
such place and time as the Company and the Purchasers may mutually
agree in writing (the “Second Closing
Date”). The
Company agrees that if the Purchasers does not agree to conduct a
Second Closing, the Company may not conduct a Second Closing with
another Investor. At such Second Closing, the Company
will deliver to the Purchasers the Note and Warrant to be purchased
by the Purchasers, against receipt by the Company of the
corresponding Purchase Price set forth on Schedule I hereto. Each
of the Notes and Warrants will be registered in such
Investor’s name in the Company’s records and will be on
the same terms and conditions as set forth
herein.
ARTICLE
3
REPRESENTATIONS
AND WARRANTIES; OTHER ITEMS
3.1 Representation and Warranties of the
Company. Except as set forth in
the Disclosure Schedules, which Disclosure Schedules shall be
deemed a part hereof and shall qualify any representation or
otherwise made herein to the extent of the disclosure contained in
the corresponding section of the Disclosure Schedules (but in no
event shall qualify any indemnity obligation of the Company
hereunder), the Company (which for purposes of this
Section 3.1
means the Company and all of its Subsidiaries) represents and
warrants to the Purchasers that on the Closing Date (unless as of a
specific date set forth below):
(a) Subsidiaries. All of the direct
and indirect subsidiaries of the Company and the locations thereof
are set forth on Schedule
3.1(a). Except as set forth on Schedule 3.1(a), the Company
owns, directly or indirectly, all of the capital stock or other
equity interests of each Subsidiary free and clear of any Liens,
and all of the issued and outstanding shares of capital stock or
other interests of each Subsidiary are validly issued and are fully
paid, non-assessable and free of preemptive and similar
rights to subscribe for or
purchase securities. Schedule 3.1(a) sets forth, as
of the Closing Date, the jurisdiction of organization and the
location of the Company’s and its subsidiaries’
executive offices and other places of business.
(b) Organization, Etc. The Company
and each of the Subsidiaries is duly organized, validly existing
and in good standing under the laws of the state of their
respective organization and are duly qualified and in good standing or has
applied for qualification as a foreign corporation authorized to do
business in each jurisdiction where, because of the nature of its
activities or properties, such qualification is required except
where the failure to be so qualified would not reasonably be
expected to have a Material Adverse Effect.
(c) Authorization: No Conflict. The
execution, delivery and performance of the Transaction Documents
and the transactions contemplated thereby by the Company,
including, but not limited to, the sale and issuance of the
Securities for the Purchase Price, subject to the Reverse Split,
the reservation for issuance of
the Underlying Shares required to be reserved pursuant to the terms
of the Notes and the Warrants, of the
issuance the Underlying Shares into which the Notes and Warrants
are convertible and/or exercisable (i) are within the
Company’s corporate powers, (ii) have been duly authorized by all necessary action by
or on behalf of the Company (and/or its stockholders to the extent
required by law), (iii) the Company has received all necessary
and/or required governmental, regulatory and other approvals and
consents (if any shall be required), (iv) do not and shall not
contravene or conflict with any provision of, or require any
consents under (1) any law, rule, regulation or ordinance, (2) the
Company’s organizational documents; and/or (3) any agreement,
credit facility, debt or other instrument (evidencing a Company or
Subsidiary debt or otherwise) or other understanding to which the
Company or any Subsidiary is a party or by which any property or
asset of the Company or any Subsidiary is bound or affected except
as would not reasonably be expected to have a Material Adverse
Effect, and (v) do not result in, or require, the creation or
imposition of any Lien and/or encumbrance on any of the
Company’s properties or revenues pursuant to any law, rule,
regulation or ordinance or otherwise.
(d) Validity and Binding Nature.
The Transaction Documents to which the Company is a party are the
legal, valid and binding obligations of the Company, enforceable
against the Company in accordance with their respective terms,
except as enforceability may be limited by bankruptcy, insolvency,
reorganization and other similar laws of general application
affecting the rights and remedies of creditors and by general
equitable principles (whether enforcement is sought by proceedings
in equity or at law).
(e) Title to Assets. The Company
and the Subsidiaries have good and marketable title in fee simple
to all real property owned by them and good and marketable title in
all personal property owned by them that is material to the
business of the Company and the Subsidiaries, in each case free and clear
of all Liens, except for (i) Liens as do not materially affect the
value of such property and do not materially interfere with the use
made and proposed to be made of such property by the Company and
the Subsidiaries, (ii) Liens for the payment of federal, state or
other taxes, for which appropriate reserves have been made therefor
in accordance with GAAP and the payment of which is not delinquent,
and (iii) Permitted Liens. Any real property and facilities held
under lease by the Company and the Subsidiaries are held by them
under valid, subsisting and enforceable leases with which the
Company and the Subsidiaries are in compliance.
(f) Compliance.
Neither the Company nor any Subsidiary: (i) is in default under or
in violation of (and no event has occurred that has not been waived
that, with notice or lapse of time or both, would result in a
default by the Company or any Subsidiary under), nor has the
Company or any Subsidiary received notice of a claim that it is in
default under or that it is in violation of, any indenture, loan or
credit agreement or any other agreement or instrument to which it
is a party or by which it or any of its properties is bound
(whether or not such default or violation has been waived), (ii) is
in violation of any judgment, decree or order of any court,
arbitrator or other governmental authority or (iii) is or has been
in violation of any statute, rule, ordinance or regulation of any
governmental authority, including without limitation all foreign,
federal, state and local laws relating to securities, corporate
law, taxes, environmental protection, occupational health and
safety, product quality and safety and employment and labor
matters, except in each case as could not have or reasonably be
expected to result in a Material Adverse
Effect.
(g) Taxes. Except for matters that
would not, individually or in the aggregate, have or reasonably be
expected to result in a Material Adverse Effect, the Company and
its Subsidiaries each (i) has made or filed all United States
federal, state and local income and all foreign income and
franchise tax returns, reports and declarations required by any
jurisdiction to which it is subject, (ii) has paid all taxes and
other governmental assessments and charges that are material in
amount, shown or determined to be due on such returns, reports and
declarations and (iii) has set aside on its books provision
reasonably adequate for the payment of all material taxes for
periods subsequent to the periods to which such returns, reports or
declarations apply. There are no unpaid taxes in any material
amount claimed to be due by the taxing authority of any
jurisdiction, and the officers of the Company or of any Subsidiary
know of no basis for any such claim.
(h) Licenses and
Permits. The Company possesses
all certificates, authorizations, consents, approvals, orders,
licenses and permits issued by the appropriate federal, state or
foreign regulatory authorities (collectively, the
“Permits”),
including the FDA and any other state, federal or foreign agencies
or bodies engaged in the regulation of pharmaceuticals or
biohazardous materials, amongst other, necessary to conduct its
business as now conducted. All of such Permits are valid and in
full force and effect. There is no pending or, to the
Company’s knowledge, threatened action, suit, proceeding or
investigation that individually or in the aggregate would
reasonably be expected to lead to the revocation, modification,
termination, suspension or any other impairment of the rights of
the holder of any such Permit.
(i) Investment Company. The Company
is not (i) an “investment company” or a company
“controlled”, whether directly or indirectly, by an
“investment company”, within the meaning of the
Investment Company Act of 1940, as amended; or (ii) engaged principally, or as one of its
important activities, in the business of extending credit for the
purpose of purchasing or carrying margin stock (within the meaning
of Regulation U of the Board of Governors of the Federal Reserve
System).
(j) Absence of Defaults
and Conflicts.
The Company
is not (i) in violation of its charter, by-laws or similar
incorporation or organizational documents or (ii) in violation
or default in the performance or observance of any obligation,
agreement, covenant or condition contained in any contract,
indenture, mortgage, deed of trust, loan or credit agreement, note,
lease or other agreement or instrument to which the Company is a
party or by which it may be bound, or to which any of the property
or assets of the Company is subject (collectively,
“Agreements
and Instruments”),
except in the case of clause (ii), for such violations and defaults
that would not result in a Material Adverse Effect on the Company;
and the execution, delivery and performance of this Agreement and
the consummation of the transactions contemplated in this
Agreement, and compliance by the Company with its obligations under
this Agreement, do not and will not, whether with or without the
giving of notice or passage of time or both, conflict with or
result in a breach of any of the terms and provisions of, or
constitute a default or Repayment Event (as defined below) under,
or result in the creation or imposition of any lien, charge or
encumbrance upon any property or assets of the Company pursuant to,
the Agreements and Instruments, nor will such action result in any
violation of the provisions of the charter, by-laws or similar
organizational documents of the Company or any applicable law,
statute, rule, regulation, judgment, order, writ or decree of any
government, government instrumentality or court, domestic or
foreign, having jurisdiction over the Company or any of its assets,
properties or operations, except in each case (other than with
respect to such charter, by-laws or similar
organizational documents of the Company) for such conflicts,
violations, breaches or defaults which would not reasonably be
expected to result in a Material Adverse Effect on the Company. As
used herein, a “Repayment
Event”
means any
event or condition which gives the holder of any note, debenture or
other evidence of indebtedness that is material to the operations
or financial results of the Company (or any person acting on such
holder’s behalf) the right to require the repurchase,
redemption or repayment of all or a portion of such indebtedness by
the Company.
(k) Foreign Corrupt
Practices Act. Neither the Company
nor, to the Company’s knowledge, any of its affiliates,
directors, officers, employees, agents or other person acting on
behalf of the Company is aware of or has taken any action, directly
or indirectly, that would result in a material violation by such
person of the Foreign Corrupt Practices Act of 1977, as amended,
and the rules and regulations thereunder (the “FCPA”),
including, without limitation, making use of the mails or any means
or instrumentality of interstate commerce corruptly in furtherance
of an offer, payment, promise to pay or authorization of the
payment of money, or other property, gift, promise to give, or
authorization of the giving of anything of value to any
“foreign official” (as such term is defined in the
FCPA) or any foreign political party or official thereof or any
candidate for foreign political office, in contravention of the
FCPA and the Company and, to the Company’s knowledge, its
affiliates have conducted their businesses in material compliance
with the FCPA and have instituted and maintain policies and
procedures designed to ensure, and which are reasonably expected to
continue to ensure, continued compliance
therewith.
(l) Rule 506(d) Bad Actor Disqualification
Representations and Covenants.
(i) No Disqualification Events.
Neither the Company, nor any of its predecessors, affiliates, any
manager, executive officer, other officer of the Company
participating in the offering, any beneficial owner (as that term
is defined in Rule 13d-3 under the Exchange Act) of 20% or more of
the Company’s outstanding voting equity securities,
calculated on the basis of voting power, nor any promoter (as that
term is defined in Rule 405 under the Securities Act) connected
with the Company in any capacity as of the date of this Agreement
and on the Closing Date (each, a “Company Covered Person”
and, together, “Company Covered Persons”)
is subject to any of the “Bad Actor” disqualifications
described in Rule 506(d)(1)(i) to (viii) under the Securities Act
(a “Disqualification
Event”), except for a Disqualification Event covered
by Rule 506(d)(2) or (d)(3). The Company has exercised reasonable
care to determine (A) the identity of each person that is a
Company Covered Person; and (B) whether any Company Covered
Person is subject to a Disqualification Event. The Company will
comply with its disclosure obligations under Rule
506(e).
(ii) Other
Covered Persons. The Company is not aware of any person
(other than any Company Covered Person) who has been or will be
paid (directly or indirectly) remuneration in connection with the
purchase and sale of the Notes, and/or the Warrants who is subject
to a Disqualification Event (each, an “Other Covered
Person”).
(iii) Reasonable
Notification Procedures. With respect to each Company
Covered Person, the Company has established procedures reasonably
designed to ensure that the Company receives notice from each such
Company Covered Person of (A) any Disqualification Event relating
to that Company Covered Person, and (B) any event that would, with
the passage of time, become a Disqualification Event relating to
that Company Covered Person; in each case occurring up to and
including the Closing Date.
(iv) Notice
of Disqualification Events. The Company will notify the
Purchaser immediately in writing upon becoming aware of (A) any
Disqualification Event relating to any Company Covered Person and
(B) any event that would, with the passage of time, become a
Disqualification Event relating to any Company Covered Person
and/or Other Covered Person.
(m) Accuracy of Information, etc.
No statement or information contained in this Agreement, any other
Transaction Document or any other document, certificate or
statement furnished to the Purchaser by or on behalf of the Company
in writing for use in connection with the transactions contemplated
by this Agreement and/or the other Transaction Documents contained,
as of the date such statement, information, document or certificate
was made or furnished, as the case may be, any untrue statement of
a material fact or omitted to state a material fact necessary to
make the statements contained herein or therein, taken as a whole,
not materially misleading. There is no fact known to the Company
that would reasonably be expected to have a Material Adverse Effect
that has not been expressly disclosed herein, in the other
Transaction Documents, or in any other documents, certificates and
statements furnished to the Purchaser for use in connection with
the transactions contemplated hereby and by the other
Documents.
(n) Solvency.
Based on the consolidated financial condition of the Company as of
the Closing Date, after giving effect to the receipt by the Company
of the proceeds from the sale of the Securities hereunder: (i) the
fair saleable value of the Company’s assets exceeds the
amount that will be required to be paid on or in respect of the
Company’s existing debts and other liabilities (including
known contingent liabilities) as they mature, (ii) the
Company’s assets do not constitute unreasonably small capital
to carry on its business as now conducted and as proposed to be
conducted including its capital needs taking into account the
particular capital requirements of the business conducted by the
Company, consolidated and projected capital requirements and
capital availability thereof, and (iii) the current cash flow of
the Company, together with the proceeds the Company would receive,
were it to liquidate all of its assets, after taking into account
all anticipated uses of the cash, would be sufficient to pay all
amounts on or in respect of its liabilities when such amounts are
required to be paid. The Company does not intend to incur debts
beyond its ability to pay such debts as they mature (taking into
account the timing and amounts of cash to be payable on or in
respect of its debt). The Company has no knowledge of any facts or
circumstances which lead it to believe that it will file for
reorganization or liquidation under the bankruptcy or
reorganization laws of any jurisdiction within one year from the
Closing Date. Schedule 3.1(n)
sets forth
as of the date hereof all outstanding secured and unsecured
Indebtedness of the Company or any Subsidiary, or for which the
Company or any Subsidiary has commitments. Neither the Company nor
any Subsidiary is in default with respect to any
Indebtedness.
(o) Transactions With
Affiliates and Employees. None of the officers
or directors of the Company or any Subsidiary and, to the knowledge
of the Company, none of the employees of the Company or any
Subsidiary is presently a party to any transaction with the Company
or any Subsidiary (other than for services as employees, officers
and directors), including any contract, agreement or other
arrangement providing for the furnishing of services to or by,
providing for rental of real or personal property to or from
providing for the borrowing of money from or lending of money to,
or otherwise requiring payments to or from any officer, director or
such employee or, to the knowledge of the Company, any entity in
which any officer, director, or any such employee has a substantial
interest or is an officer, director, trustee, stockholder, member
or partner, in each case in excess of $120,000 other than for: (i)
payment of salary or consulting fees for services rendered, (ii)
reimbursement for expenses incurred on behalf of the Company and
(iii) other employee benefits, including stock option agreements
under any stock option plan of the Company.
(p) Intellectual Property. The
Company has, or has rights to use, all patents, patent
applications, trademarks, trademark applications, service marks,
trade names, trade secrets, inventions, copyrights, licenses and
other intellectual property rights and similar rights as described
on Schedule 3.1(p) as necessary or required for use in connection
with its business and which the failure to so have would reasonably
be expected to have a Material Adverse Effect (collectively, the
“Intellectual
Property Rights”). The Company has not received a
notice (written or otherwise) that any material Intellectual
Property Right has expired, terminated or been abandoned, or is
expected to expire or terminate or be abandoned. The Company has
not received, since the date of the Balance Sheet Date, a written
notice of a claim or otherwise has any knowledge that the
Intellectual Property Rights violate or infringe upon the rights of
any Person, except as would not have or reasonably be expected to
have a Material Adverse Effect. To the knowledge of the Company,
all such Intellectual Property Rights are enforceable and there is
no existing infringement by another Person of any of the
Intellectual Property Rights. The Company has taken reasonable
security measures to protect the secrecy, confidentiality and value
of all of its intellectual property, except where failure to do so
would not, individually or in the aggregate, reasonably be expected
to have a Material Adverse Effect.
(q) USA Patriot Act. The Company is
in compliance, in all material respects, with (i) the Trading with
the Enemy Act, as amended, and each of the foreign assets control
regulations of the United States Treasury Department (31 C.F.R.,
Subtitle B, Chapter V, as amended) and any other enabling
legislation or executive order relating thereto, and (ii) the USA
Patriot Act (Title III of Pub. L. 107-56, signed into law on
October 26, 2001) (the “Act”). No part of the
proceeds of the Notes will be used, directly or indirectly, for any
payments to any governmental official or employee, political party,
official of a political party, candidate for political office, or
anyone else acting in an official capacity, in order to obtain,
retain or direct business or obtain any improper advantage, in
violation of the United States Foreign Corrupt Practices Act of
1977, as amended.
(r) Office of Foreign
Assets Control. Neither the
Company nor any Subsidiary nor, to the Company's knowledge, any
director, officer, agent, joint venture employee or affiliate of
the Company or any Subsidiary is currently, or in the past 5 years,
been subject to any U.S. sanctions administered by the Office of
Foreign Assets Control of the U.S. Treasury Department
(“OFAC”).
(s) Filings, Consents and
Approvals. Except as set forth
on Schedule
3.1(s), the Company is not
required to obtain any consent, waiver, authorization or order of,
give any notice to, or make any filing or registration with, any
court or other federal, state, local or other governmental
authority or other Person in connection with the execution,
delivery and performance by the Company of the Transaction
Documents, other than: (i) the filings required pursuant to the
Registration Rights Agreement and the declaration of effectiveness
by the SEC of the Registration Statement (ii) the notice and/or
application(s) to each applicable Trading Market for the issuance
and sale of the Securities and the listing of the Underlying Shares
for trading thereon in the time and manner required thereby, and
(iii) the filing of Form D with the Commission and such filings as
are required to be made under applicable state securities laws
(collectively, the “Required
Approvals”).
(t) Authorization; Enforcement. All
corporate action on the part of the Company, its officers,
directors and stockholders necessary for the authorization,
execution and delivery of the Transaction Documents and the
performance of all obligations of the Company under the Transaction
Documents and have been taken on or prior to the date hereof. Each
of the Transaction Documents has been duly executed by the Company
and, when delivered in accordance with the terms hereof and
thereof, will constitute the valid and binding obligation of the
Company enforceable against the Company in accordance with its
terms, except: (i) as limited by applicable bankruptcy, insolvency,
reorganization, moratorium and other laws of general application
affecting enforcement of creditors’ rights generally, (ii) as
limited by general equitable principles regardless of whether such
enforcement is considered in a proceeding in equity or at law,
(iii) as limited by laws relating to the availability of specific
performance, injunctive relief or other equitable remedies and (iv)
insofar as indemnification and contribution provisions may be
limited by applicable law.
(u) Valid Issuance of Securities.
Each of the Notes has been duly authorized and, when issued and
paid for in accordance with this Agreement, will be duly and
validly issued, fully paid and nonassessable, free and clear of all
Liens and all restrictions on transfer other than those expressly
imposed by the federal securities laws and vest in the Purchaser
full and sole title and power to the Notes purchased hereby by the
Purchaser, free and clear of all Liens, and restrictions on
transfer other than those imposed by the federal securities laws.
All Underlying Shares, when issued pursuant to conversion of the
Notes and/or exercise of the Warrants, when issued pursuant to this
Agreement, will be duly and validly issued, fully paid and
nonassessable, will be free and clear of all Liens and vest in the
holder full and sole title and power to such securities. The
Company has reserved from its duly authorized unissued Common
Stock, the Required Minimum (as defined in the Notes), which
Required Minimum shall be continuously determined by the Company to
ensure that the Required Minimum is in reserve with the Transfer
Agent at all times. The Notes, the Warrants and the Underlying
Shares shall sometimes be collectively referred to as the
“Securities.”
(v) Offering. The offer and sale of
the Securities, as contemplated by this Agreement, are exempt from
the registration requirements of the Securities Act, and the
qualification or registration requirements of state securities laws
or other applicable blue sky laws. Neither the Company nor any
authorized agent acting on its behalf will take any action
hereafter that would cause the loss of such
exemptions.
(w) Capitalization and Voting
Rights. The capitalization of
the Company is as set forth on Schedule
3.1(w), which
Schedule
3.1(w) shall also include the
number of shares of Common Stock owned beneficially, and of record,
by Affiliates of the Company as of the date hereof. The
authorized capital stock of the Company and all securities of the
Company issued and outstanding are set forth on Schedule 3.1(w) as
of the dates reflected therein. All of the outstanding shares of
Common Stock and other securities of the Company have been duly
authorized and validly issued, and are fully paid and
nonassessable. Except as set forth
on Schedule
3.1(w), no Person has any
right of first refusal, preemptive right, right of participation,
or any similar right to participate in the transactions
contemplated by the Transaction Documents. Except as set forth on Schedule 3.1(w), there are no
agreements or arrangements under which the Company is obligated to
register the sale of any of the Company’s securities under
the Securities Act. Except as set forth on Schedule 3.1(w), no shares of
Common Stock and/or other securities of the Company are entitled to
preemptive rights and there are no outstanding debt securities and
no contracts, commitments, understandings, or arrangements by which
the Company is or may become bound to issue additional shares of
the capital stock and/or other securities of the Company or
options, warrants, scrip, rights to subscribe to, calls or
commitments of any character whatsoever relating to, or securities
or rights convertible into or exchangeable for, any shares of
capital stock of the Company other than those issued or granted in
the ordinary course of business pursuant to the Company’s
equity incentive and/or compensatory plans or arrangements. Except
for customary transfer restrictions contained in agreements entered
into by the Company to sell restricted securities and/or as set
forth on Schedule
3.1(w), the Company is not a party to, and it has no
knowledge of, any agreement restricting the voting or transfer of
any shares of the capital stock and/or other securities of the
Company. Except as set forth on Schedule 3.1(w), the offer and
sale of all capital stock, convertible or exchangeable securities,
rights, warrants, options and/or any other securities of the
Company when any such securities of the Company were issued
complied with all applicable federal and state securities laws, and
no current and/or prior holder of any securities of the Company has
any right of rescission or damages or any “put” or
similar right with respect thereto that would reasonably be
expected to have a Material Adverse Effect. Except as set forth on
Schedule 3.1(w),
there are no securities or instruments of the Company containing
anti-dilution or similar provisions that will be triggered by the
issuance and/or sale of the Securities and/or the consummation of
the transactions described herein or in any of the other
Transaction Documents.
(x) Shell Company Status; Financial
Statements. The Company has been an issuer subject to Rule
144(i) under the Securities Act. The unaudited balance sheet of the
Company as of April 30, 2020 is included in Schedule 3.1(x) hereto. The
financial statements of the Company included on Schedule 3.1(x) have been
prepared in accordance with GAAP, except as may be otherwise
specified in such financial statements or the notes thereto and
except that unaudited financial statements may not contain all
footnotes required by GAAP, and fairly present in all material
respects the financial position of the Company and its consolidated
Subsidiaries as of and for the dates thereof and the results of
operations and cash flows for the periods then ended, subject to
normal, immaterial, year-end audit adjustments. For purposes of
this Section 3.1, April 30, 2020 is referred to as the
“Balance Sheet
Date”.
(y) Material Changes; Undisclosed Events,
Liabilities or Developments. Since the Balance Sheet Date:
(i) there has been no event, occurrence or development that has had
or that could reasonably be expected to result in a Material
Adverse Effect, (ii) the Company has not incurred any liabilities
(contingent or otherwise) other than (A) trade payables and accrued
expenses incurred in the ordinary course of business consistent
with past practice and (B) liabilities not required to be reflected
in the Company’s financial statements pursuant to GAAP or
disclosed in filings made with the Commission, (iii) the Company
has not altered its method of accounting, (iv) the Company has not
declared or made any dividend or distribution of cash or other
property to its stockholders or purchased, redeemed or made any
agreements to purchase or redeem any shares of its capital stock
and (v) the Company has not issued any equity securities to any
officer, director or Affiliate, except pursuant to existing Company
stock option plans. Except for the issuance of the Securities
contemplated by this Agreement or as set forth on Schedule 3.1(y), no event,
liability, fact, circumstance, occurrence or development has
occurred or exists or is reasonably expected to occur or exist with
respect to the Company or its Subsidiaries or their respective
businesses, properties, operations, assets or financial condition,
that would be required to be disclosed by the Company under
applicable securities laws at the time this representation is made
or deemed made that has not been publicly disclosed at least 1
Trading Day prior to the date that this representation is
made.
(z) Litigation.
Except as
set forth on Schedule
3.1(z), there is no action,
suit, inquiry, notice of violation, proceeding or investigation
pending or, to the knowledge of the Company, threatened against or
affecting the Company, any Subsidiary or any of their respective
properties before or by any court, arbitrator, governmental or
administrative agency or regulatory authority (federal, state,
county, local or foreign) (collectively, an
“Action”)
which (i) adversely affects or challenges the legality, validity or
enforceability of any of the Transaction Documents or the
Securities or (ii) could, if there were an unfavorable decision,
have or reasonably be expected to result in a Material Adverse
Effect. Neither the Company nor any Subsidiary, nor any director or
officer thereof, is or has been the subject of any Action involving
a claim of violation of or liability under federal or state
securities laws or a claim of breach of fiduciary duty. There has
not been, and to the knowledge of the Company, there is not pending
or contemplated, any investigation by the Commission involving the
Company or any current or former director or officer of the
Company. The Commission has not issued any stop order or other
order suspending the effectiveness of any registration statement
filed by the Company or any Subsidiary under the Exchange Act or
the Securities Act.
(aa) Disclosure.
Except with respect to the material terms and conditions of the
transactions contemplated by the Transaction Documents, the Company
confirms that neither it nor any other Person acting on its behalf
has provided any Purchaser or its respective agents or counsel with
any information that constitutes material, non-public information.
The Company understands that the Purchasers may rely on the
Transaction Documents, the information included therein, including,
but not limited to, the foregoing representation in purchasing the
Securities. All of the disclosure furnished by or on behalf of the
Company to the Purchaser in the Transaction Documents regarding,
among other matters relating to the Company, its business and the
transactions contemplated in the Transaction Documents, is true and
correct in all material respects as of the date made and does not
contain any untrue statement of a material fact or omit to state
any material fact necessary in order to make the statements made
therein, in light of the circumstances under which they were made,
not misleading. The Company acknowledges and agrees that none of
the Purchasers makes nor has made any representations or warranties
with respect to the transactions contemplated in the Transaction
Documents other than those specifically set forth in Section 3.2
hereof.
(bb) No
Integrated Offering. Assuming the accuracy of the
representations and warranties set forth in Section 3.2, neither the
Company, nor any of its affiliates, nor any Person acting on its or
their behalf has, directly or indirectly, made any offers or sales
of any security or solicited any offers to buy any security, under
circumstances that would cause the issuance and/or sale of the
Securities to be integrated with prior offerings of securities by
the Company for purposes of (i) the Securities Act that would
require the registration of any such Securities and/or any other
securities of the Company under the Securities Act, or (ii) any
stockholder-approval provisions of any Trading Market on which any
of the securities of the Company are listed, eligible for quotation
and/or designated.
(cc) Insurance.
The Company
is insured by insurers of recognized financial responsibility
against such losses and risks and in such amounts as are prudent
and customary in the business in which it is engaged; the Company
has not been refused any coverage sought or applied for; and the
Company does not have any reason to believe that it will not be
able to renew its existing insurance coverage as and when such
coverage expires or to obtain similar coverage from similar
insurers as may be necessary to continue its business at a cost
that would not have a Material Adverse Effect on the
Company.
(dd) Regulation
M Compliance. The Company has not, and to its knowledge no
one acting on its behalf has, (i) taken, directly or indirectly,
any action designed to cause or to result in the stabilization or
manipulation of the price of any security of the Company to
facilitate the sale or resale of any of the Securities, (ii) sold,
bid for, purchased, or paid any compensation for soliciting
purchases of, any of the Securities, or (iii) paid or agreed to pay
to any Person any compensation for soliciting another to purchase
any other securities of the Company.
(ee) Registration
Rights. Except as set forth
on Schedule
3.1(ee), no Person has any
right to cause the Company to effect the registration under the
Securities Act of any securities of the Company or any
Subsidiaries.
(ff) Labor
Relations. No labor dispute
exists or, to the knowledge of the Company, is imminent with
respect to any of the employees of the Company, which could
reasonably be expected to result in a Material Adverse Effect. None
of the Company’s or its Subsidiaries’ employees is a
member of a union that relates to such employee’s
relationship with the Company or such Subsidiary, and neither the
Company nor any of its Subsidiaries is a party to a collective
bargaining agreement, and the Company and its Subsidiaries believe
that their relationships with their employees are good. To the
knowledge of the Company, no executive officer of the Company or
any Subsidiary, is, or is now expected to be, in violation of any
material term of any employment contract, confidentiality,
disclosure or proprietary information agreement or non-competition
agreement, or any other contract or agreement or any restrictive
covenant in favor of any third party, and the continued employment
of each such executive officer does not subject the Company or any
of its Subsidiaries to any liability with respect to any of the
foregoing matters. The Company and its Subsidiaries are in
compliance with all U.S. federal, state, local and foreign laws and
regulations relating to employment and employment practices, terms
and conditions of employment and wages and hours, except where the
failure to be in compliance could not, individually or in the
aggregate, reasonably be expected to have a Material Adverse
Effect.
(gg) Dilutive
Effect. The Company understands and acknowledges that the
number of Underlying Shares issuable upon conversion and/or
exercise of the Notes and/or Warrants, pursuant to the terms
thereof, will increase in certain circumstances. The Company
further acknowledges that its obligations to issue Underlying
Shares pursuant to the terms of the Notes and/or Warrants in
accordance with this Agreement, the Notes and the Warrants is
absolute and unconditional regardless of the dilutive effect that
any such issuances may have on the percentage ownership interests
of other stockholders of the Company.
(hh) Application
of Takeover Protections; Rights Agreement. The Company
and its board of directors have taken all necessary action, if any,
in order to render inapplicable any control share acquisition,
business combination, poison pill (including any distribution under
a rights agreement) or other similar anti-takeover provisions under
the Company’s articles of incorporation, as amended, or the
laws of the jurisdiction of its formation that are or could become
applicable to the Purchaser as a result of the transactions
contemplated by this Agreement and/or the other Transaction
Documents, including, without limitation, the Company’s
issuance of the Securities and the Purchaser’s ownership of
the Securities. The Company has not adopted a stockholder rights
plan or similar arrangement relating to accumulations of beneficial
ownership of Common Stock or a change in control of the
Company.
(ii) Manipulation
of Price. The Company has not, and to its knowledge no one
acting on its behalf has, (i) taken, directly or indirectly, any
action designed to cause or to result, or that could reasonably be
expected to cause or result, in the stabilization or manipulation
of the price of any security of the Company to facilitate the sale
or resale of any of the Securities, (ii) sold, bid for, purchased,
or paid any compensation for soliciting purchases of, any of the
Securities, or (iii) paid or agreed to pay to any person any
compensation for soliciting another to purchase any other
securities of the Company.
(jj) DTC
Eligible. The Common Stock is DTC eligible and DTC has not
placed a “freeze” or a “chill” on the
Common Stock and the Company has no reason to believe that DTC has
any intention to make the Common Stock not DTC eligible, or place a
“freeze” or “chill” on the Common Stock. No
federal or state regulatory authority has indicated that it will
prohibit the listing of the Company’s securities based upon
its prior business in the cannabis or cannabis-related markets nor
will the Purchasers be prohibited from depositing, clearing or
settling the Securities, including through the DTC or
otherwise, on account of the Company’s prior business in the
cannabis or cannabis-related markets.
(kk) Listing
and Maintenance Requirements. The Company has not, in the 12 months preceding
the date hereof, received notice from any Trading Market on which
the Common Stock is or has been listed or quoted to the effect that
the Company is not in compliance with the listing or maintenance
requirements of such Trading Market. The Common Stock is
eligible for quotation on the Principal Market and the Company has
no reason to believe that the Principal Market has any intention of
delisting the Common Stock from the Principal Market. The issuance and sale of the Securities hereunder
does not contravene the rules and regulations of the Trading
Market. All Underlying Shares have been approved, if so
required, for listing or quotation on the Trading Market, subject
only to notice of issuance.
(ll) No
General Solicitation. Neither the Company, nor any of
its affiliates, nor, to the knowledge of the Company, any Person
acting on its behalf, has engaged in any form of general
solicitation or general advertising (within the meaning of
Regulation D) in connection with the offer or sale of the
Securities.
(mm) Acknowledgment
Regarding the Purchaser’s Purchase of Securities.
The Company acknowledges and agrees that the Purchaser is
acting solely in the capacity of an arm’s length purchaser
with respect to the other Transaction Documents and the
transactions contemplated hereby and thereby and that such
Purchaser is not (i) an officer or director of the Company,
(ii) an Affiliate of the Company or (iii) to the
knowledge of the Company, a “beneficial owner” of more
than 10% of the shares of Common Stock (as defined for purposes of
Rule 13d-3 of the Exchange Act. The Company further
acknowledges that the Purchaser is not acting as a financial
advisor or fiduciary of the Company (or in any similar capacity)
with respect to the Transaction Documents and the transactions
contemplated hereby and thereby, and any advice given by such
Purchaser or any of its representatives or agents in connection
with the Transaction Documents and the transactions contemplated
hereby and thereby is merely incidental to such Purchaser’s
purchase of the Securities. The Company further represents to
the Purchaser that the Company’s decision to enter into the
Transaction Documents has been based solely on the independent
evaluation by the Company and its representatives.
(nn) Off-Balance
Sheet Arrangements. There is no transaction,
arrangement, or other relationship between the Company and an
unconsolidated or other off-balance sheet entity that is required
to be disclosed by the Company in its Exchange Act filings and is
not so disclosed or that otherwise would be reasonably likely to
have a Material Adverse Effect.
(oo) Certain
Fees. No brokerage or
finder’s fees or commissions are or will be payable by the
Company or any Subsidiaries to any broker, financial advisor or
consultant, finder, placement agent, investment banker, bank or
other Person with respect to the transactions contemplated by the
Transaction Documents. The Purchaser shall have no obligation with
respect to any fees or with respect to any claims made by or on
behalf of other Persons for fees of a type contemplated in this
Section that may be due in connection with the transactions
contemplated by the Transaction Documents.
(pp) Money
Laundering. The operations of the
Company and its Subsidiaries are and have been conducted at all
times in compliance with applicable financial record-keeping and
reporting requirements, including but not limited to, Currency and
Foreign Transactions Reporting Act of 1970, as amended, applicable
money laundering statutes and applicable rules and regulations
thereunder (collectively, the “Money Laundering
Laws”), and no Action
or Proceeding by or before any court or governmental agency,
authority or body or any arbitrator involving the Company or any
Subsidiary with respect to the Money Laundering Laws is pending or,
to the knowledge of the Company or any Subsidiary,
threatened.
(qq) Environmental
Laws. The Company and its
Subsidiaries, to the best of the Company’s knowledge, (i) are
in compliance with all federal, state, local and foreign laws
relating to pollution or protection of human health or the
environment (including ambient air, surface water, groundwater,
land surface or subsurface strata), including laws relating to
emissions, discharges, releases or threatened releases of
chemicals, pollutants, contaminants, or toxic or hazardous
substances or wastes (collectively, “Hazardous
Materials”) into the
environment, or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or
handling of Hazardous Materials, as well as all authorizations,
codes, decrees, demands, or demand letters, injunctions, judgments,
licenses, notices or notice letters, orders, permits, plans or
regulations, issued, entered, promulgated or approved thereunder
(“Environmental
Laws”); (ii) have
received all permits licenses or other approvals required of them
under applicable Environmental Laws to conduct their respective
businesses; and (iii) are in compliance with all terms and
conditions of any such permit, license or approval where in each
clause (i), (ii) and (iii), the failure to so comply could be
reasonably expected to have, individually or in the aggregate, a
Material Adverse Effect.
(rr) Seniority.
As of the Closing Date, no Indebtedness or other claim against the
Company is senior to the Notes in right of payment, whether with
respect to interest or upon liquidation or dissolution, or
otherwise, other than indebtedness secured by purchase money
security interests (which is senior only as to underlying assets
covered thereby) and capital lease obligations (which is senior
only as to the property covered thereby).
3.2 Representation and Warranties of The
Purchaser. Each Purchaser, severally and not jointly, hereby
represents and warrants as of the date hereof and as of the Closing
Date to the Company as follows:
(a) Organization;
Authority. Such Purchaser is
either an individual or an entity duly incorporated or formed,
validly existing and in good standing under the laws of the
jurisdiction of its incorporation or formation with full right,
corporate, partnership, limited liability company or similar power
and authority to enter into and to consummate the transactions
contemplated by the Transaction Documents and otherwise to carry
out its obligations hereunder and thereunder. The execution and
delivery of the Transaction Documents and performance by such
Purchaser of the transactions contemplated by the Transaction
Documents have been duly authorized by all necessary corporate,
partnership, limited liability company or similar action, as
applicable, on the part of such Purchaser. Each Transaction
Document to which it is a party has been duly executed by such
Purchaser, and when delivered by such Purchaser in accordance with
the terms hereof, will constitute the valid and legally binding
obligation of such Purchaser, enforceable against it in accordance
with its terms, except: (i) as limited by general equitable
principles and applicable bankruptcy, insolvency, reorganization,
moratorium and other laws of general application affecting
enforcement of creditors’ rights generally, (ii) as limited
by laws relating to the availability of specific performance,
injunctive relief or other equitable remedies and (iii) insofar as
indemnification and contribution provisions may be limited by
applicable law.
(b) Own
Account. Such Purchaser
understands that the Securities are “restricted
securities” and have not been registered under the Securities
Act or any applicable state securities law and is acquiring the
Securities as principal for its own account and not with a view to
or for distributing or reselling such Securities or any part
thereof in violation of the Securities Act or any applicable state
securities law, has no present intention of distributing any of
such Securities in violation of the Securities Act or any
applicable state securities law and has no direct or indirect
arrangement or understandings with any other persons to distribute
or regarding the distribution of such Securities in violation of
the Securities Act or any applicable state securities law (this
representation and warranty not limiting such Purchaser’s
right to sell the Securities pursuant to an effective registration
statement or otherwise in compliance with applicable federal and
state securities laws). Such Purchaser is acquiring the Securities
hereunder in the ordinary course of its
business.
(c) Purchaser
Status. At the time such
Purchaser was offered the Securities, it was, and as of the date
hereof it is an “accredited investor” as defined in
Rule 501(a) under the Securities Act.
(d) Experience of Such
Purchaser. Such Purchaser,
either alone or together with its representatives, has such
knowledge, sophistication and experience in business and financial
matters so as to be capable of evaluating the merits and risks of
the prospective investment in the Securities, and has so evaluated
the merits and risks of such investment. Such Purchaser is able to
bear the economic risk of an investment in the Securities and, at
the present time, is able to afford a complete loss of such
investment.
(e) General
Solicitation. Such Purchaser is
not, to such Purchaser’s knowledge, purchasing the Securities
as a result of any advertisement, article, notice or other
communication regarding the Securities published in any newspaper,
magazine or similar media or broadcast over television or radio or
presented at any seminar or any other general solicitation or
general advertisement.
(f) Access to
Information. Such Purchaser
acknowledges that it has had the opportunity to review the
Transaction Documents (including all exhibits and schedules
thereto) and has been afforded (i) the opportunity to ask such
questions as it has deemed necessary of, and to receive answers
from, representatives of the Company concerning the terms and
conditions of the offering of the Securities and the merits and
risks of investing in the Securities; (ii) access to information
about the Company and its financial condition, results of
operations, business, properties, management and prospects
sufficient to enable it to evaluate its investment; and (iii) the
opportunity to obtain such additional information that the Company
possesses or can acquire without unreasonable effort or expense
that is necessary to make an informed investment decision with
respect to the investment.
(g) Certain Transactions and
Confidentiality. Such Purchaser has not directly or
indirectly, nor has any Person acting on behalf of or pursuant to
any understanding with such Purchaser, executed any purchases or
sales, including Short Sales, of the securities of the Company
during the period commencing as of the time that such Purchaser
first received a term sheet (written or oral) from the Company or
any other Person representing the Company setting forth the
material terms of the transactions contemplated hereunder and
ending immediately prior to the execution hereof. Notwithstanding
the foregoing, in the case of a Purchaser that is a multi-managed
investment vehicle, whereby separate portfolio managers manage
separate portions of such Purchaser’s assets and the
portfolio managers have no direct knowledge of the investment
decisions made by the portfolio managers managing other portions of
such Purchaser’s assets, the representation set forth above
shall only apply with respect to the portion of assets managed by
the portfolio manager that made the investment decision to purchase
the Securities covered by this Agreement. Other than to other
Persons party to this Agreement or to such Purchaser's
representatives, including, without limitation, its officers,
directors, partners, legal and other advisors, employees, agents
and Affiliates, such Purchaser has maintained the confidentiality
of all disclosures made to it in connection with this transaction
(including the existence and terms of this
transaction).
The Company acknowledges and agrees that the representations
contained in this Section 3.2 shall not modify, amend or affect
such Purchaser’s right to rely on the Company’s
representations and warranties contained in this Agreement or any
representations and warranties contained in any other Transaction
Document or any other document or instrument executed and/or
delivered in connection with this Agreement or the consummation of
the transaction contemplated hereby.
ARTICLE
4
OTHER
AGREEMENTS OF THE PARTIES
4.1 Transfer
Restrictions.
(a) The
Securities may only be disposed of in compliance with state and
federal securities laws. In connection with any transfer of
Securities other than pursuant to an effective registration
statement or Rule 144, to the Company or to an Affiliate of a
Purchaser or in connection with a pledge as contemplated in Section
4.1(b), the Company may require the transferor thereof to provide
to the Company an opinion of counsel selected by the transferor and
reasonably acceptable to the Company, the form and substance of
which opinion shall be reasonably satisfactory to the Company, to
the effect that such transfer does not require registration of such
transferred Securities under the Securities Act. As a condition of
transfer, any such transferee shall agree in writing to be bound by
the terms of this Agreement and shall have the rights and
obligations of a Purchaser under this Agreement.
(b) The
Purchaser agrees to the imprinting, so long as is required by this
Section 4.1, of a legend on any of the Securities in the following
form:
[NEITHER]
THIS SECURITY [NOR THE SECURITIES INTO WHICH THIS SECURITY IS
[CONVERTIBLE] HAS [NOT] BEEN REGISTERED WITH THE SECURITIES AND
EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN
RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND,
ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR
PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT
SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND
IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS. THIS SECURITY
[AND THE SECURITIES ISSUABLE UPON [CONVERSION] OF THIS SECURITY]
MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT WITH A
REGISTERED BROKER-DEALER OR OTHER LOAN WITH A FINANCIAL INSTITUTION
THAT IS AN “ACCREDITED INVESTOR” AS DEFINED IN RULE
501(a) UNDER THE SECURITIES ACT OR OTHER LOAN SECURED BY SUCH
SECURITIES.
The
Company acknowledges and agrees that a Purchaser may from time to
time pledge pursuant to a bona fide margin agreement with a
registered broker-dealer or grant a security interest in some or
all of the Securities to a financial institution that is an
“accredited investor” as defined in Rule 501(a) under
the Securities Act and who agrees to be bound by the provisions of
this Agreement and, if required under the terms of such
arrangement, such Purchaser may transfer pledged or secured
Securities to the pledgees or secured parties. Such a pledge or
transfer would not be subject to approval of the Company and no
legal opinion of legal counsel of the pledgee, secured party or
pledgor shall be required in connection therewith. Further, no
notice shall be required of such pledge. At the appropriate
Purchaser’s expense, the Company will execute and deliver
such reasonable documentation as a pledgee or secured party of
Securities may reasonably request in connection with a pledge or
transfer of the Securities, including, if the Securities are then
registered for resale on a registration statement, the preparation
and filing of any required prospectus supplement under Rule
424(b)(3) under the Securities Act or other applicable provision of
the Securities Act to appropriately amend the list of Selling
Stockholders thereunder.
(c) Certificates
evidencing the Underlying Shares shall not contain any legend
(including the legend set forth in Section 4.1(b) hereof): (i)
while a registration statement covering the resale of such security
is effective under the Securities Act, (ii) following any sale of
the Underlying Shares pursuant to Rule 144, (iii) if such
Underlying Shares are eligible for sale under Rule 144 or (iv) if
such legend is not required under applicable requirements of the
Securities Act (including judicial interpretations and
pronouncements issued by the staff of the Commission). The Company
shall cause its counsel to issue a legal opinion to the Transfer
Agent promptly after such time as such legend is no longer required
under this Section 4.1(c) if required by the Transfer Agent to
effect the removal of the legend hereunder, or if requested by a
Purchaser. If any portion of the Note is converted at a time when
there is an effective registration statement to cover the resale of
the Underlying Shares, or if such Underlying Shares may be sold
under Rule 144 and the Company is then in compliance with the
current public information required under Rule 144, or if the
Underlying Shares may be sold under Rule 144 without the
requirement for the Company to be in compliance with the current
public information required under Rule 144 as to such Underlying
Shares and without volume or manner-of-sale restrictions or if such
legend is not otherwise required under applicable requirements of
the Securities Act (including judicial interpretations and
pronouncements issued by the staff of the Commission) then such
Underlying Shares shall be issued free of all legends. The Company
agrees that at such time as such legend is no longer required under
this Section 4.1(c), it will, no later than the earlier of (i)
three (3) Trading Days and (ii) the number of Trading Days
comprising the Standard Settlement Period (as defined below)
following the delivery by a Purchaser to the Company or the
Transfer Agent certificate(s) representing Underlying Shares, as
applicable, issued with a restrictive legend (such date, the
“Legend Removal
Date”), deliver or
cause to be delivered to such Purchaser a certificate representing
such shares that is free from all restrictive and other legends.
The Company may not make any notation on its records or give
instructions to the Transfer Agent that enlarge the restrictions on
transfer set forth in this Section 4. Certificates for Underlying
Shares subject to legend removal hereunder shall be transmitted by
the Transfer Agent to the Purchaser by crediting the account of the
Purchaser’s prime broker with the Depository Trust Company
System as directed by such Purchaser. As used herein,
“Standard Settlement
Period” means the
standard settlement period, expressed in a number of Trading Days,
on the Company’s primary Trading Market with respect to the
Common Stock as in effect on the date of delivery of a certificate
representing Underlying Shares, as applicable, issued with a
restrictive legend.
(d) In
addition to a Purchaser’s other available remedies, the
Company shall pay to a Purchaser, in cash, the greater of (i) as
partial liquidated damages and not as a penalty, for each $1,000 of
Underlying Shares (based on the VWAP of the Common Stock on the
date such Securities are submitted to the Transfer Agent) delivered
for removal of the restrictive legend and subject to Section
4.1(c), $5 per Trading Day (increasing to $10 per Trading Day five
(5) Trading Days after such damages have begun to accrue) for each
Trading Day after the Legend Removal Date until such certificate is
delivered without a legend and (ii) if the Company fails to (i)
issue and deliver (or cause to be delivered) to a Purchaser by the
Legend Removal Date a certificate representing the Securities so
delivered to the Company by such Purchaser that is free from all
restrictive and other legends or (ii) if after the Legend Removal
Date such Purchaser purchases (in an open market transaction or
otherwise) shares of Common Stock to deliver in satisfaction of a
sale by such Purchaser of all or any portion of the number of
shares of Common Stock, or a sale of a number of shares of Common
Stock equal to all or any portion of the number of shares of Common
Stock that such Purchaser anticipated receiving from the Company
without any restrictive legend, then, an amount equal to the excess
of such Purchaser’s total purchase price (including brokerage
commissions and other out-of-pocket expenses, if any) for the
shares of Common Stock so purchased (including brokerage
commissions and other out-of-pocket expenses, if any) (the
“Buy-In
Price”) over the
product of (A) such number of Shares or Conversion Shares, as
applicable, that the Company was required to deliver to such
Purchaser by the Legend Removal Date multiplied by (B) the lowest
closing sale price of the Common Stock on any Trading Day during
the period commencing on the date of the delivery by such Purchaser
to the Company of the applicable Shares or Conversion Shares (as
the case may be) and ending on the date of such delivery and
payment under this clause (ii).
4.2 Furnishing of
Information. Beginning on the
Closing Date, the Company shall use commercially reasonable efforts
to comply with the Pink Basic Disclosure Guidelines which set forth
the disclosure obligations that make up the “Alternative
Reporting Standard” for OTC Pink companies as such
obligations are published by the OTC Markets Group, Inc. In
addition, the Company shall file a Registration Statement on Form
8-A as soon as practicable, but in no event no later than five (5)
Trading Days, after the Effective Date of the Initial Registration
Statement (as defined in the Registration Rights Agreement).
If after the date hereof the Company becomes subject to the rules
and regulations of the Exchange Act and as long as any Purchaser
owns Securities, the Company covenants to timely file (or obtain
extensions in respect thereof and file within the applicable grace
period) all reports required to be filed by the Company after the
date hereof pursuant to the Exchange Act. As long as any Purchaser
owns Securities, if the Company is not required to file reports
pursuant to the Exchange Act, it will prepare and furnish to the
Purchasers and make publicly available in accordance with Rule
144(c) such information as is required for the Purchasers to sell
the Securities, including without limitation, under Rule 144. The
Company further covenants that it will take such further action as
any holder of Securities may reasonably request, to the extent
required from time to time to enable such Person to sell such
Securities without registration under the Securities Act, including
without limitation, within the requirements of the exemption
provided by Rule 144.
4.3 Integration.
The Company shall not sell, offer for sale or solicit offers to buy
or otherwise negotiate in respect of any security (as defined in
Section 2 of the Securities Act) that would be integrated with
the offer or sale of the Securities in a manner that would require
the registration under the Securities Act of the sale of the
Securities or that would be integrated with the offer or sale of
the Securities for purposes of the rules and regulations of any
Trading Market such that it would require shareholder approval
prior to the closing of such other transaction unless shareholder
approval is obtained before the closing of such subsequent
transaction.
4.4 Securities Laws
Disclosure; Publicity. The
Company shall (a) by 9:00am on the 2nd
Trading Day after the date of this
Agreement, issue a press release disclosing the material terms of
the transactions contemplated hereby. From and after the issuance
of such press release, the Company represents to the Purchaser that
it shall have publicly disclosed all material, non-public
information delivered to any of the Purchaser by the Company or any
of its Subsidiaries, or any of their respective officers,
directors, employees or agents in connection with the transactions
contemplated by the Transaction Documents. In addition, effective
upon the issuance of such press release, the Company acknowledges
and agrees that any and all confidentiality or similar obligations
under any agreement, whether written or oral, between the Company,
any of its Subsidiaries or any of their respective officers,
directors, agents, employees or Affiliates on the one hand, and any
of the Purchaser or any of their Affiliates on the other hand,
shall terminate. The Company and the Purchaser shall consult with
each other in issuing any other press releases with respect to the
transactions contemplated hereby, and neither the Company nor any
Purchaser shall issue any such press release nor otherwise make any
such public statement without the prior consent of the Company,
with respect to any press release of any Purchaser, or without the
prior consent of the Purchaser, with respect to any press release
of the Company, which consent shall not unreasonably be withheld or
delayed, except if such disclosure is required by law, in which
case the disclosing party shall promptly provide the other party
with prior notice of such public statement or communication.
Notwithstanding the foregoing, the Company shall not publicly
disclose the name of any Purchaser, or include the name of any
Purchaser in any filing with the Commission or any regulatory
agency or Trading Market, without the prior written consent of such
Purchaser, except (a) as required by federal securities law in
connection with the filing of final Transaction Documents with the
Commission and (b) to the extent such disclosure is required
by law or Trading Market regulations, in which case the Company
shall provide the Purchaser with prior notice of such disclosure
permitted under this clause (b).
4.5 Shareholder Rights
Plan. No claim will be made
or enforced by the Company or, with the consent of the Company, any
other Person, that any Purchaser is an “Acquiring
Person” under any
control share acquisition, business combination, poison pill
(including any distribution under a rights agreement) or similar
anti-takeover plan or arrangement in effect or hereafter adopted by
the Company, or that any Purchaser could be deemed to trigger the
provisions of any such plan or arrangement, by virtue of receiving
Securities under the Transaction Documents.
4.6 Non-Public
Information. Except
with respect to the material terms and conditions of the
transactions contemplated by the Transaction Documents, which shall
be disclosed pursuant to Section 4.4, the Company covenants
and agrees that neither it, nor any other Person acting on its
behalf will provide the Purchaser or its agents or counsel with any
information that constitutes, or the Company reasonably believes
constitutes, material non-public information, unless
prior thereto the Purchaser shall have consented to the receipt of
such information and agreed with the Company to keep such
information confidential. The Company understands and confirms that
the Purchaser shall be relying on the foregoing covenant in
effecting transactions in securities of the Company. To the extent
that the Company delivers any material, non-public information to a
Purchaser without such Purchaser’s consent, the Company
hereby covenants and agrees that such Purchaser shall not have any
duty of confidentiality to the Company, any of its Subsidiaries, or
any of their respective officers, directors, agents, employees or
Affiliates, or a duty to the Company, any of its Subsidiaries or
any of their respective officers, directors, agents, employees or
Affiliates not to trade on the basis of, such material,
non-public information, provided
that the Purchaser shall remain subject to applicable law. To the
extent that any notice provided pursuant to any Transaction
Document constitutes, or contains, material, non-public information regarding
the Company or any Subsidiaries, the Company shall simultaneously
file such notice with the Commission pursuant to a Current Report
on Form 8-K or if not subject
to the reporting requirements under the Commission, file a press
release. The Company understands
and confirms that the Purchaser shall be relying on the foregoing
covenant in effecting transactions in securities of the
Company.
4.7 Use of
Proceeds. Except as set forth
on Schedule 4.7
attached
hereto, the Company shall use the net proceeds from the sale of the
Securities hereunder for working capital purposes and shall not use
such proceeds: (a) for the satisfaction of any portion of the
Company’s debt (other than payment of trade payables in the
ordinary course of the Company’s business and prior
practices), (b) for the redemption of any Common Stock or Common
Stock Equivalents, (c) for the settlement of any outstanding
litigation or (d) in violation of FCPA, OFAC regulations or
Money Laundering Laws. The net proceeds from this offering and the
sale of the Securities to be sold hereunder will be held in the a
Control Account to be agreed upon between the parties on or after
the Closing Date.
4.8 Indemnification of
Purchaser. Subject
to the provisions of this Section 4.8, the Company will
indemnify and hold each Purchaser and its respective directors,
officers, shareholders, members, partners, employees and agents
(and any other Persons with a functionally equivalent role of a
Person holding such titles notwithstanding a lack of such title or
any other title), each Person who controls such Purchaser (within
the meaning of Section 15 of the Securities Act and
Section 20 of the Exchange Act), and the directors, officers,
shareholders, agents, members, partners or employees (and any other
Persons with a functionally equivalent role of a Person holding
such titles notwithstanding a lack of such title or any other
title) of such controlling persons (each, a
“Purchaser
Party”) harmless from
any and all losses, liabilities, obligations, claims,
contingencies, damages, costs and expenses, as incurred, arising
out of or relating to (i) any untrue or alleged untrue
statement of a material fact contained in such registration
statement, any prospectus or any form of prospectus or in any
amendment or supplement thereto or in any preliminary prospectus,
or arising out of or relating to any omission or alleged omission
of a material fact required to be stated therein or necessary to
make the statements therein (in the case of any prospectus or
supplement thereto, in the light of the circumstances under which
they were made) not misleading, except to the extent, but only to
the extent, that such untrue statements or omissions are based
solely upon information regarding such Purchaser Party furnished in
writing to the Company by such Purchaser Party expressly for use
therein, or (ii) any violation or alleged violation by the
Company of the Securities Act, the Exchange Act or any state
securities law, or any rule or regulation thereunder in connection
therewith. If any action shall be brought against any Purchaser
Party in respect of which indemnity may be sought pursuant to this
Agreement, such Purchaser Party shall promptly notify the Company
in writing, and the Company shall have the right to assume the
defense thereof with counsel of its own choosing reasonably
acceptable to the Purchaser Party. Any Purchaser Party shall have
the right to employ separate counsel in any such action and
participate in the defense thereof, but the fees and expenses of
such counsel shall be at the expense of such Purchaser Party except
to the extent that (x) the employment thereof has been
specifically authorized by the Company in writing, (y) the
Company has failed after a reasonable period of time to assume such
defense and to employ counsel or (z) in such action there is,
in the reasonable opinion of counsel, a material conflict on any
material issue between the position of the Company and the position
of such Purchaser Party, in which case the Company shall be
responsible for the reasonable fees and expenses of no more than
one such separate counsel. The Company will not be liable to any
Purchaser Party under this Agreement (1) for any settlement by
a Purchaser Party effected without the Company’s prior
written consent, which shall not be unreasonably withheld or
delayed; or (2) to the extent, but only to the extent that a
loss, claim, damage or liability is attributable to any Purchaser
Party’s breach of any of the representations, warranties,
covenants or agreements made by such Purchaser Party in this
Agreement or in the other Transaction Documents. The
indemnification required by this Section 4.8 shall be made by
periodic payments of the amount thereof during the course of the
investigation or defense, as and when bills are received or are
incurred. The indemnity agreements contained herein shall be in
addition to any cause of action or similar right of any Purchaser
Party against the Company or others and any liabilities the Company
may be subject to pursuant to law.
4.9 Reservation of Common
Stock. As of the date
hereof, subject to the Reverse Split, the Company has reserved and
the Company shall continue to reserve and keep available at all
times, free of preemptive rights, a sufficient number of shares of
Common Stock equal to the Required Minimum (as defined in the
Notes) for the purpose of enabling the Company to issue the
Conversion Shares and any other shares that may be issuable
pursuant to the Notes and all the Warrant Shares issuable pursuant
to the Warrants. If, on any date, the number of authorized
but unissued (and otherwise unreserved) shares of Common Stock is
less than the Required Minimum on such date, then the Board of
Directors shall use commercially reasonable efforts to amend the
Company’s certificate or articles of incorporation to
increase the number of authorized but unissued shares of Common
Stock to at least the Required Minimum at such time, as soon as
possible and in any event not later than the 75th day after such
date
4.10 Listing
of Common Stock. The Company hereby
agrees to use reasonable best efforts to maintain the listing or
quotation of the Common Stock on the Trading Market on which it is
currently listed, and concurrently with the Closing, the Company
shall apply to list or quote all of the Underlying Shares on such
Trading Market and promptly secure the listing of all of the
Underlying Shares on such Trading Market. The Company further
agrees, if the Company applies to have the Common Stock traded on
any other Trading Market, it will then include in such application
all of the Underlying Shares, and will take such other action as is
necessary to cause all of the Underlying Shares to be listed or
quoted on such other Trading Market as promptly as possible. The
Company will then take all action reasonably necessary to continue
the listing and trading of its Common Stock on a Trading Market and
will comply in all respects with the Company’s reporting,
filing and other obligations under the bylaws or rules of the
Trading Market. The Company agrees to maintain the eligibility of
the Common Stock for electronic transfer through the Depository
Trust Company or another established clearing corporation,
including, without limitation, by timely payment of fees to the
Depository Trust Company or such other established clearing
corporation in connection with such electronic
transfer
4.11 Certain
Transactions and Confidentiality. The Purchaser
covenants that neither it nor any Affiliate acting on its behalf or
pursuant to any understanding with it will execute any purchases or
sales, including Short Sales of any of the Company’s
securities during the period commencing with the execution of this
Agreement and ending at such time that the transactions
contemplated by this Agreement are first publicly announced
pursuant to the initial press release as described in
Section 4.4. The Purchaser, severally and not jointly
with the other Purchaser, covenants that until such time as the
transactions contemplated by this Agreement are publicly disclosed
by the Company pursuant to the initial press release as described
in Section 4.4, such Purchaser will maintain the
confidentiality of the existence and terms of this transaction and
the information included in the Disclosure
Schedules. Notwithstanding the foregoing and notwithstanding
anything contained in this Agreement to the contrary, the Company
expressly acknowledges and agrees that (i) no Purchaser makes
any representation, warranty or covenant hereby that it will not
engage in effecting transactions in any securities of the Company
after the time that the transactions contemplated by this Agreement
are first publicly announced, (ii) no Purchaser shall be restricted
or prohibited from effecting any transactions in any securities of
the Company in accordance with applicable securities laws from and
after the time that the transactions contemplated by this Agreement
are first publicly announced pursuant to the initial press release
as described in Section 4.4, (iii) the Purchaser has
not been asked by the Company to agree, nor has any Purchaser
agreed, to desist from purchasing or selling Securities which have
been issued under the terms of the Purchase Agreement, this Note or
any other Transaction Document, or “derivative”
securities based on securities issued by the Company or to hold the
Securities for any specified term, (iv) Purchaser shall not
be deemed to have any affiliation with or control over any
arm’s length counter-party in any “derivative”
transaction, (y) the Purchaser may engage in hedging
activities, other than Short Sales at various times during the
period that the Securities are outstanding, and (vi) no
Purchaser shall have any duty of confidentiality or duty not to
trade in the securities of the Company to the Company or its
Subsidiaries after the issuance of the initial press
release. Except as contemplated above, Company
acknowledges that such aforementioned hedging activities do not
constitute a breach of any of the Transaction
Documents.
4.12 Conversion
and Exercise Procedures. Each of the form of
Notice of Conversion in the Notes and the Notice of Exercise in the
Warrants set forth the totality of the procedures required of the
Purchasers in order to convert the Notes or exercise the Warrants.
No additional legal opinion, other information or instructions
shall be required of the Purchaser to exercise the Note or exercise
the Warrant. Without limiting the preceding sentences, no
ink-original Notice of Exercise or
Notice of Conversion shall be required, nor shall any medallion
guarantee (or other type of guarantee or notarization) of any
Notice of Exercise or Notice of Conversion form be required in
order to covert and/or exercise the Securities. The Company shall
honor conversions and/or exercises of the Securities and shall
deliver applicable Underlying Shares in accordance with the terms,
conditions and time periods set forth in the Transaction
Documents.
4.13 Form
D; Blue Sky Filings. The Company agrees to
timely file a Form D with respect to the Securities as required
under Regulation D and to provide a copy thereof, promptly upon
request of any Purchaser. The Company shall take such action as the
Company shall reasonably determine is necessary in order to obtain
an exemption for, or to qualify the Securities for, sale to the
Purchaser at the applicable Closing under applicable securities or
“Blue Sky” laws of the states of the United States, and
shall provide evidence of such actions promptly upon request of any
Purchaser.
4.14 Maintenance
of Property. So long as any Notes remain outstanding, the
Company shall use its commercially reasonable efforts to keep all
of its property, which is necessary or useful to the conduct of its
business, in good working order and condition, ordinary wear and
tear excepted.
4.15 Preservation
of Corporate Existence. So long as any Notes remain
outstanding, the Company shall preserve and maintain its corporate
existence, rights, privileges and franchises in the jurisdiction of
its incorporation, and qualify and remain qualified, as a foreign
corporation in each jurisdiction in which such qualification is
necessary in view of its business or operations and where the
failure to qualify or remain qualified would reasonably be expected
to have a Material Adverse Effect.
4.16 DTC
Program. At all times that the Securities are outstanding,
the Company will employ as the transfer agent for the Common Stock
and Conversion Shares a participant in the Depository Trust Company
Automated Securities Transfer Program and cause the Common Stock to
be transferable pursuant to such program.
4.17 Subsequent
Equity Sales. From the date hereof until such time as no
Purchaser holds any of the Notes, the Company shall be prohibited
from effecting or entering into an agreement to effect any issuance
by the Company or any of its Subsidiaries of Common Stock or Common
Stock Equivalents (or a combination of units thereof) involving a
Variable Rate Transaction. “Variable Rate
Transaction” means a transaction which is not
Permitted Indebtedness (including the transactions contemplated by
this Agreement) and in which the Company (i) issues or sells any
debt or equity securities that are convertible into, exchangeable
or exercisable for, or include the right to receive additional
shares of Common Stock either (A) at a conversion price, exercise
price or exchange rate or other price that is based upon and/or
varies with the trading prices of or quotations for the shares of
Common Stock at any time after the initial issuance of such debt or
equity securities, or (B) with a conversion, exercise or exchange
price that is subject to being reset at some future date after the
initial issuance of such debt or equity security or upon the
occurrence of specified or contingent events directly or indirectly
related to the business of the Company or the market for the Common
Stock or (ii) enters into, or effects a transaction under, any
agreement, including, but not limited to, an equity line of credit,
whereby the Company may issue securities at a future determined
price. Any Purchaser shall be entitled to obtain injunctive relief
against the Company to preclude any such issuance, which remedy
shall be in addition to any right to collect damages.
ARTICLE
5
MISCELLANEOUS
5.1 Fees and Expenses. Except as
expressly set forth below and in the Transaction Documents to the
contrary, each party shall pay the reasonable, documented fees and
expenses of its advisers, counsel, accountants and other experts,
if any, and all other expenses incurred by such party incident to
the negotiation, preparation, execution, delivery and performance
of this Agreement. The Company shall pay all Transfer Agent fees
(including, without limitation, any fees required for same-day
processing of any instruction letter delivered by the Company and
any exercise notice delivered by a Purchaser), stamp taxes and
other taxes and duties levied in connection with the delivery of
any Securities to the Purchaser.
5.2 Entire Agreement. The
Transaction Documents, together with the exhibits and schedules
thereto, contain the entire understanding of the parties with
respect to the subject matter hereof and thereof and supersede all
prior agreements and understandings, oral or written, with respect
to such matters, which the parties acknowledge have been merged
into such documents, exhibits and schedules.
5.3 Notices. Any and all notices or
other communications or deliveries required or permitted to be
provided hereunder shall be in writing and shall be deemed given
and effective on the earliest of: (a) the date of transmission, if
such notice or communication is delivered via facsimile or email
attachment at the facsimile number or email address as set forth on
the signature pages attached hereto at or prior to 5:30 p.m. (New
York City time) on a Business Day, (b) the next Business Day after
the date of transmission, if such notice or communication is
delivered via facsimile or email attachment at the facsimile number
or email address as set forth on the signature pages attached
hereto on a day that is not a Business Day or later than 5:30 p.m.
(New York City time) on any Business Day, (c) the second
(2nd)
Business Day following the date of mailing, if sent by U.S.
nationally recognized overnight courier service or (d) upon actual
receipt by the party to whom such notice is required to be given.
The address for such notices and communications shall be as set
forth on the signature pages attached hereto.
5.4 Amendments; Waivers. No
provision of this Agreement may be waived, modified, supplemented
or amended except in a written instrument signed, in the case of an
amendment, by the Company and the Purchaser or, in the case of a
waiver, by the party against whom enforcement of any such waived
provision is sought. No waiver of any default with respect to any
provision, condition or requirement of this Agreement shall be
deemed to be a continuing waiver in the future or a waiver of any
subsequent default or a waiver of any other provision, condition or
requirement hereof, nor shall any delay or omission of any party to
exercise any right hereunder in any manner impair the exercise of
any such right. Any amendment effected in accordance with
accordance with this Section 5.5 shall be binding upon the
Purchaser and holder of Securities and the Company.
5.5 Successors and Assigns. This
Agreement shall be binding upon and inure to the benefit of the
parties and their successors and permitted assigns. The Company may
not assign this Agreement or any rights or obligations hereunder
without the prior written consent of the Purchaser then holding
outstanding Notes (other than by merger). Purchaser may assign any
or all of its rights under this Agreement to any Person to whom
Purchaser assigns or transfers any Securities in compliance with
the Transaction Documents, provided that such transferee agrees in
writing to be bound, with respect to the transferred Securities, by
the provisions of the Transaction Documents that apply to the
“Purchaser,” and provided further that (i) such
transferee is an “accredited investor” within the
meaning of Rule 501 under the Securities Act and (ii) such
transferee is not a direct competitor of the Company or any
Subsidiary.
5.6 No Third-Party Beneficiaries.
This Agreement is intended for the benefit of the parties hereto
and their respective successors and permitted assigns and is not
for the benefit of, nor may any provision hereof be enforced by,
any other Person.
5.7 Governing Law; Exclusive
Jurisdiction. All questions concerning the construction,
validity, enforcement and interpretation of the Transaction
Documents shall be governed by and construed and enforced in
accordance with the internal laws of the State of New York, without
regard to the principles of conflicts of law thereof. Each party
agrees that all legal Proceedings concerning the interpretations,
enforcement and defense of the transactions contemplated by this
Agreement and any other Transaction Documents (whether brought
against a party hereto or its respective affiliates, directors,
officers, shareholders, partners, members, employees or agents)
shall be commenced exclusively in the state and federal courts
sitting in the City of New York. Each party hereby irrevocably
submits to the exclusive jurisdiction of the state and federal
courts sitting in the City of New York, Borough of Manhattan for
the adjudication of any dispute hereunder or in connection herewith
or with any transaction contemplated hereby or discussed herein
(including with respect to the enforcement of any of the
Transaction Documents), and hereby irrevocably waives, and agrees
not to assert in any Action or Proceeding, any claim that it is not
personally subject to the jurisdiction of any such court, that such
Action or Proceeding is improper or is an inconvenient venue for
such Proceeding. Each party hereby irrevocably waives personal
service of process and consents to process being served in any such
Action or Proceeding by mailing a copy thereof via registered or
certified mail or overnight delivery (with evidence of delivery) to
such party at the address in effect for notices to it under this
Agreement and agrees that such service shall constitute good and
sufficient service of process and notice thereof. Nothing contained
herein shall be deemed to limit in any way any right to serve
process in any other manner permitted by law. If any party shall
commence an Action or Proceeding to enforce any provisions of the
Transaction Documents, then, in addition to the obligations of the
Company elsewhere in this Agreement, the prevailing party in such
Action or Proceeding shall be reimbursed by the non-prevailing
party for its reasonable attorneys’ fees and other costs and
expenses incurred with the investigation, preparation and
prosecution of such Action or Proceeding.
5.8 Survival. The representations
and warranties contained herein shall survive the Closing and the
delivery of the Securities at Closing.
5.9 Execution. This Agreement may
be executed in two or more counterparts, all of which when taken
together shall be considered one and the same agreement and shall
become effective when counterparts have been signed by each party
and delivered to each other party, it being understood that the
parties need not sign the same counterpart. In the event that any
signature is delivered by facsimile transmission or by e-mail
delivery of a “.pdf” format data file, such signature
shall create a valid and binding obligation of the party executing
(or on whose behalf such signature is executed) with the same force
and effect as if such facsimile or “.pdf” signature
page were an original thereof.
5.10 Severability.
If any term, provision, covenant or restriction of this Agreement
is held by a court of competent jurisdiction to be invalid,
illegal, void or unenforceable, the remainder of the terms,
provisions, covenants and restrictions set forth herein shall
remain in full force and effect and shall in no way be affected,
impaired, or invalidated, as long as the essential terms and
conditions of this Note for each party remain valid, binding, and
enforceable. The parties shall use their commercially reasonable
efforts to find and employ an alternative means to achieve the same
or substantially the same result as that contemplated by such term,
provision, covenant or restriction.
5.11 Rescission
and Withdrawal Right. Notwithstanding
anything to the contrary contained in (and without limiting any
similar provisions of) any of the other Transaction Documents,
whenever any Purchaser exercises a right, election, demand or
option under a Transaction Document and the Company does not timely
perform its related obligations within the periods therein
provided, then such Purchaser may rescind or withdraw, in its sole
discretion from time to time upon written notice to the Company,
any relevant notice, demand or election in whole or in part without
prejudice to its future actions and rights; provided,
however,
that, in the case of a rescission of a conversion of the Note, the
Purchaser shall be required to return any shares of Common Stock
subject to any such rescinded conversion or exercise notice
concurrently with the return to such Purchaser of the aggregate
exercise price paid to the Company for such shares and the
restoration of such Purchaser’s right to acquire such shares
pursuant to such Purchaser’s Warrant (including, issuance of
a replacement warrant certificate evidencing such restored
right).
5.12 Replacement
of Securities. If any certificate or
instrument evidencing any Securities is mutilated, lost, stolen or
destroyed, the Company shall issue or cause to be issued in
exchange and substitution for and upon cancellation thereof (in the
case of mutilation), or in lieu of and substitution therefor, a new
certificate or instrument, but only upon receipt of evidence
reasonably satisfactory to the Company of such loss, theft or
destruction. The applicant for a new certificate or instrument
under such circumstances shall also pay any reasonable third-party
costs (including customary indemnity) associated with the issuance
of such replacement Securities.
5.13 Remedies.
In addition to being entitled to exercise all rights provided
herein or granted by law, including recovery of damages, each of
the Purchaser and the Company will be entitled to specific
performance under the Transaction Documents. The parties agree that
monetary damages may not be adequate compensation for any loss
incurred by reason of any breach of obligations contained in the
Transaction Documents and hereby agree to waive and not to assert
in any Action for specific performance of any such obligation the
defense that a remedy at law would be adequate.
5.14 Payment
Set Aside. To the extent that
the Company makes a payment or payments to any Purchaser pursuant
to any Transaction Document or a Purchaser enforces or exercises
its rights thereunder, and such payment or payments or the proceeds
of such enforcement or exercise or any part thereof are
subsequently invalidated, declared to be fraudulent or
preferential, set aside, recovered from, disgorged by or are
required to be refunded, repaid or otherwise restored to the
Company, a trustee, receiver or any other Person under any law
(including, without limitation, any bankruptcy law, state or
federal law, common law or equitable cause of action), then to the
extent of any such restoration the obligation or part thereof
originally intended to be satisfied shall be revived and continued
in full force and effect as if such payment had not been made or
such enforcement or setoff had not occurred.
5.15 Usury.
To the extent it may lawfully do so, the Company hereby agrees not
to insist upon or plead or in any manner whatsoever claim, and will
resist any and all efforts to be compelled to take the benefit or
advantage of, usury laws wherever enacted, now or at any time
hereafter in force, in connection with any Action or Proceeding
that may be brought by any Purchaser in order to enforce any right
or remedy under any Transaction Document. Notwithstanding any
provision to the contrary contained in any Transaction Document, it
is expressly agreed and provided that the total liability of the
Company under the Transaction Documents for payments in the nature
of interest shall not exceed the maximum lawful rate authorized
under applicable law (the “Maximum
Rate”), and, without
limiting the foregoing, in no event shall any rate of interest or
default interest, or both of them, when aggregated with any other
sums in the nature of interest that the Company may be obligated to
pay under the Transaction Documents exceed such Maximum Rate. It is
agreed that if the maximum contract rate of interest allowed by law
and applicable to the Transaction Documents is increased or
decreased by statute or any official governmental action subsequent
to the date hereof, the new maximum contract rate of interest
allowed by law will be the Maximum Rate applicable to the
Transaction Documents from the effective date thereof forward,
unless such application is precluded by applicable law. If under
any circumstances whatsoever, interest in excess of the Maximum
Rate is paid by the Company to any Purchaser with respect to
indebtedness evidenced by the Transaction Documents, such excess
shall be applied by such Purchaser to the unpaid principal balance
of any such indebtedness or be refunded to the Company, the manner
of handling such excess to be at such Purchaser’s
election.
5.16 Liquidated
Damages. The Company’s
obligations to pay any partial liquidated damages or other amounts
owing under the Transaction Documents is a continuing obligation of
the Company and shall not terminate until all unpaid partial
liquidated damages and other amounts have been paid notwithstanding
the fact that the instrument or security pursuant to which such
partial liquidated damages or other amounts are due and payable
shall have been canceled.
5.17 Saturdays,
Sundays, Holidays, etc. If the last or appointed day for the
taking of any action or the expiration of any right required or
granted herein shall not be a Business Day, then such action may be
taken or such right may be exercised on the next succeeding
Business Day.
5.18 Construction.
The parties agree that each of them and/or their respective counsel
have reviewed and had an opportunity to revise the Transaction
Documents and, therefore, the normal rule of construction to the
effect that any ambiguities are to be resolved against the drafting
party shall not be employed in the interpretation of the
Transaction Documents or any amendments thereto.
5.19 WAIVER OF JURY TRIAL. IN ANY ACTION, SUIT, OR
PROCEEDING IN ANY JURISDICTION BROUGHT BY ANY PARTY AGAINST ANY
OTHER PARTY, THE PARTIES EACH KNOWINGLY AND INTENTIONALLY, TO THE
GREATEST EXTENT PERMITTED BY APPLICABLE LAW, HEREBY ABSOLUTELY,
UNCONDITIONALLY, IRREVOCABLY AND EXPRESSLY WAIVES FOREVER TRIAL BY
JURY.
(Signature Pages Follow)
IN
WITNESS WHEREOF, the parties hereto have caused this Securities
Purchase Agreement to be duly executed by their respective
authorized signatories as of the date first indicated
above.
GOIP GLOBAL, INC.
|
Address for Notice:
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By:__________________________________________
Name:
Title:
With a
copy to (which shall not constitute notice):
|
Email:
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|
|
[REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE
PAGE FOR PURCHASER FOLLOWS]
PURCHASER
SIGNATURE PAGES TO GOIG SECURITIES PURCHASE AGREEMENT
IN
WITNESS WHEREOF, the undersigned have caused this Securities
Purchase Agreement to be duly executed by their respective
authorized signatories as of the date first indicated
above.
Name of
Purchaser:
_____________________________________________
Signature of Authorized Signatory of
Purchaser: __________________________________
Name of
Authorized Signatory:
_______________________________________
Title
of Authorized Signatory: _____
_______________________________________
Email
Address of Authorized Signatory: _____________________
Facsimile Number of
Authorized Signatory:
__________________________________________
Address
for Notice to Purchaser:
Address
for Delivery of Securities to Purchaser (if not same as address for
notice):
EIN
Number: ________________
EXHIBIT A
Form of Note
EXHIBIT B
Form of Security Agreement
EXHIBIT C
Form of Subordination Agreement
EXHIBIT D
Form of Registration Rights Agreement
EXHIBIT E
Form of Warrant
EXHIBIT F
Form of Lock-Up Agreement
Schedule 1
Purchase Price; Securities Purchased
Name of
Purchaser
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Aggregate
Principal Amount
of Notes being
Purchased
|
Number of
Warrant Shares
issuable upon
exercise of
Warrant being
Purchased
|
Second Closing
Purchase Price
|
Aggregate
Principal Amount
of Second
Closing Notes
being
Purchased
|
Number of
Warrant Shares
issuable upon
exercise of
Warrant for
Second
Closing being
Purchased
|
|
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Exhibit 10.6
SECURITIES PURCHASE AGREEMENT
THIS
SECURITIES PURCHASE AGREEMENT (the “Agreement”) is made as of
______________, 2020, by and among GoIP Global, Inc., a Colorado
corporation (and together with all of its current and future,
direct and/or indirect, wholly owned and/or partially owned
Subsidiaries, collectively, the “Company”), and the Purchaser identified on the signature
pages hereto (each, including its successors and assigns, a
“Purchaser”
and, collectively, the “Purchasers”).
RECITALS
A. The
Company and the Purchasers are executing and delivering this
Agreement in reliance upon the exemption from securities
registration afforded by Section 4(a)(2) of the Securities Act (as
defined below), and/or Rule 506(b) of Regulation D
(“Regulation
D”) as promulgated by the United States Securities and
Exchange Commission under the Securities Act.
B. The
Purchasers, wishes to purchase, and the Company wishes to sell at
closing, upon the terms and conditions stated in this Agreement,
the Securities (as defined herein), all in the amounts and for the
price set forth on Schedule 1
hereto.
NOW,
THEREFORE, IN CONSIDERATION of the mutual covenants contained in
this Agreement, and for other good and valuable consideration, the
receipt and adequacy of which are hereby acknowledged, the Company
and the Purchaser hereby agrees as follows:
ARTICLE
1
DEFINITIONS
1.1 Defined Terms. In addition to
terms defined elsewhere in this Agreement or in any supplement,
amendment or exhibit hereto, when used herein, the following terms
shall have the following meanings:
(a) “Affiliate”
means any Person that, directly or indirectly through one or more
intermediaries, controls or is controlled by or is under common
control with a Person, as such terms are used in and construed
under Rule 405 of the Securities Act.
(b) “Business
Day” means any day
except any Saturday, any Sunday, any day which is a federal legal
holiday in the United States or any day on which banking
institutions in the State of New York are authorized or required by
law or other governmental action to close.
(c) “Closing”
shall have the meaning ascribed to such term in Section
2.1(a).
(d) “Closing
Date” means the
Trading Day on which all of the Transaction Documents have been
executed and delivered by the applicable parties thereto, and all
conditions precedent to (i) the Purchasers’ obligations to
pay the Purchase Price and (ii) the Company’s obligations to
deliver the Securities has been satisfied or waived with respect to
the Closing.
(e) “Common Stock” means (i)
the Company’s common stock, par value $0.001 per share, and
(ii) any capital stock into which such common stock shall have been
changed or any share capital resulting from a reclassification of
such common stock.
(f) “Common Stock Equivalents”
means any securities of the Company or the Subsidiaries which would
entitle the holder thereof to acquire at any time Common Stock,
including, without limitation, any debt, preferred stock, rights,
options, warrants or other instrument that is at any time
convertible into or exercisable or exchangeable for, or otherwise
entitles the holder thereof to receive, Common Stock.
(g) “Contingent Obligation”
means, as to any Person, any direct or indirect liability,
contingent or otherwise, of that Person with respect to any
indebtedness, lease, dividend or other obligation of another Person
if the primary purpose or intent of the Person incurring such
liability, or the primary effect thereof, is to provide assurance
to the obligee of such liability that such liability will be paid
or discharged, or that any agreements relating thereto will be
complied with, or that the holders of such liability will be
protected (in whole or in part) against loss with respect
thereto.
(h) “Conversion Date” has the
meaning set forth in the Notes.
(i) “Conversion Shares” means
all shares of Common Stock issuable upon conversion of any portion
of the Notes, and/or as any other payment due under the Notes
including, but not limited to interest and/or otherwise, but solely
to the extent and subject to any conditions set forth in the
Notes.
(j) “Dollar(s)” and
“$”
means lawful money of the United States.
(k) “Event of Default” shall
have the meaning set forth in the Notes.
(l) “Exchange Act” means the
Securities Exchange Act of 1934, as amended, and the rules and
regulations promulgated thereunder.
(m) “Exempt Issuance” means
the issuance of (a) shares of Common Stock or options to employees,
officers, consultants, advisors or directors of the Company
pursuant to any stock or option plan duly adopted for such purpose
by a majority of the members of the Board of Directors or a
majority of the members of a committee of directors established for
such purpose, (b) securities upon the exercise or exchange of or
conversion of any Securities issued hereunder and/or other
securities exercisable or exchangeable for or convertible into
shares of Common Stock issued and outstanding on the date of this
Agreement, provided that such securities have not been amended
since the date of this Agreement to increase the number of such
securities or to decrease the exercise, exchange or conversion
price of such securities or (c) Permitted Indebtedness incurred in
satisfaction with clause 1.1(v)(c) hereunder.
(n) “GAAP” means generally
accepted accounting principles in the United States of America as
in effect from time to time.
(o) “Indebtedness” means, with
respect to any Person at any date, without duplication,
(a) all indebtedness of such Person for borrowed money,
(b) all obligations of such Person for the deferred purchase
price of property or services (but excluding trade payables
incurred in the ordinary course of business), (c) all
obligations of such Person evidenced by notes, bonds, debentures or
other similar instruments, (d) all indebtedness created or
arising under any conditional sale or other title retention
agreement with respect to property acquired by such Person (even
though the rights and remedies of the seller or the Purchaser under
such agreement in the event of default are limited to repossession
or sale of such property), (e) all capital lease obligations
of such Person, (f) all obligations of such Person, contingent
or otherwise, as an account party or applicant under acceptance,
letter of credit, surety bond or similar facilities, (g) all
obligations of such Person, contingent or otherwise, to purchase,
redeem, retire or otherwise acquire for value any capital stock of
such Person, (h) all obligations for any earn-out consideration,
(i) the liquidation value of preferred capital stock of such
Person, (j) all guarantee obligations of such Person in respect of
obligations of the kind referred to in clauses (a) through (i)
above, (k) all obligations of the kind referred to in
clauses (a) through (i) above secured by (or for which the
holder of such obligation has an existing right, contingent or
otherwise, to be secured by) any lien on property (including,
without limitation, accounts and contract rights) owned by such
Person, whether or not such Person has assumed or become liable for
the payment of such obligation and all obligations of such Person
in respect of hedge agreements; and (l) all Contingent Obligations
in respect to indebtedness or obligations of any Person of the kind
referred to in clauses (a)-(k) above. The Indebtedness of any
Person shall include, without duplication, the Indebtedness of any
other entity (including any partnership in which such Person is a
general partner) to the extent such Person is liable therefor as a
result of such Person’s ownership interest in or other
relationship with such entity, except to the extent the terms of
such Indebtedness expressly provide that such Person is not liable
therefor.
(p) “Liens” or
“liens”
means a lien, mortgage, charge pledge, security interest,
encumbrance, right of first refusal, preemptive right or other
restriction, or other clouds on title.
(q) “Liabilities” means all
direct or indirect liabilities, Indebtedness and obligations of any
kind of Company to the Purchaser, howsoever created, arising or
evidenced, whether now existing or hereafter arising (including
those acquired by assignment), absolute or contingent, due or to
become due, primary or secondary, joint or several, whether
existing or arising through discount, overdraft, purchase, direct
loan, participation, operation of law, or otherwise, including, but
not limited to, pursuant to the Notes, this Agreement and/or any of
the other Transaction Documents, all accrued but unpaid interest on
the Notes the principal, any letter of credit, any standby letter
of credit, and/or outside attorneys’ and paralegals’
fees or charges relating to the preparation of the Transaction
Documents and the enforcement of the Purchaser’s rights,
remedies and powers under this Agreement, the Notes and/or the
other Transaction Documents.
(r) “Material
Adverse Effect” means a material adverse effect on
(a) the business, assets, property, operations, or condition
(financial or otherwise) of the Company, (b) the validity or
enforceability of this Agreement or any of the other Transaction
Documents or (c) the rights or remedies of the Purchaser
hereunder or thereunder.
(s) “Notes” means all of the
Original Issue Discount Convertible Promissory Notes due
____________, 2021 that are owned by the Purchasers, which, subject
to the terms and conditions set forth in this Agreement, shall be
purchased from the Company pursuant to this Agreement; the form of
Note is annexed hereto as Exhibit A
and any and all Note(s) issued in exchange, transfer or replacement
of the Notes.
(t) “Permitted Indebtedness”
means (a) the indebtedness evidenced by the Notes, and (b) lease
obligations and purchase money indebtedness incurred in connection
with the acquisition of capital assets and lease obligations with
respect to newly acquired or leased assets in the ordinary course
of business, (c) any indebtedness issued to funds affiliated with
Arena Investors LP and (d) any indebtedness issued by the Company
to any SBA-approved lender.
(u) “Permitted Lien” means the
individual and collective reference to the following: (a) Liens for
taxes, assessments and other governmental charges or levies not yet
due or Liens for taxes, assessments and other governmental charges
or levies being contested in good faith and by appropriate
proceedings for which adequate reserves (in the good faith judgment
of the management of the Company) have been established in
accordance with GAAP; (b) Liens imposed by law which were incurred
in the ordinary course of the Company’s business, such as
carriers’, warehousemen’s and mechanics’ Liens,
statutory landlords’ Liens, and other similar Liens arising
in the ordinary course of the Company’s business, and which
(x) do not individually or in the aggregate materially detract from
the value of such property or assets or materially impair the use
thereof in the operation of the business of the Company and its
consolidated Subsidiaries or (y) are being contested in good faith
by appropriate proceedings, which proceedings have the effect of
preventing for the foreseeable future the forfeiture or sale of the
property or asset subject to such Lien; and (c) Liens incurred in
connection with Permitted Indebtedness thereunder; (d) Pledges and
deposits made in the ordinary course of business in compliance with
workers’ compensation, unemployment insurance and other
social security laws or regulations; (e) Deposits to secure the
performance of bids, trade contracts, leases, statutory
obligations, surety and appeal bonds, performance bonds and other
obligations of a like nature, in each case in the ordinary course
of business; and (f) any Liens in favor of the
Purchaser.
(v) “Person” means any
individual, sole proprietorship, partnership, joint venture, trust,
unincorporated organization, association, corporation, institution,
entity, party or government (whether national, federal, state,
county, city, municipal or otherwise including, without limitation,
any instrumentality, division, agency, body or department
thereof).
(w) “Principal
Market” means the principal Trading Market on which
the Common Stock is listed or quoted for trading on the date in
question.
(x) “Proceeding”
means an action, claim, suit, investigation or proceeding
(including, without limitation, an informal investigation or
partial proceeding, such as a deposition), whether commenced or
threatened.
(y) “Purchase
Price” shall have the
meaning as set forth on Schedule 1 next to the heading
“Purchase Price,” in United States
Dollars.
(z) “Reverse Stock Split”
means the 500 for 1 reverse stock split of the Company’s
common stock which will take effect after the Closing
Date;
(aa) “SEC”
or “Commission” means the
United States Securities and Exchange Commission.
(bb) “Securities”
means the Notes and the Warrants purchased pursuant to this
Agreement and all Underlying Shares and any securities of the
Company issued in replacement, substitution and/or in connection
with any exchange, conversion and/or any other transaction pursuant
to which all or any of such securities of the Company to the
Purchasers.
(cc) “Securities
Act” means the Securities Act of 1933, as amended, and
the rules and regulations promulgated thereunder.
(dd) “Short
Sales” means all “short sales” as defined
in Rule 200 of Regulation SHO under the Exchange Act (but shall not
be deemed to include the location and/or reservation of borrowable
shares of Common Stock).
(ee) Subordination
Agreement” means the
Subordination Agreement, dated as of the date hereof, by and among
funds affiliated with Arena Investors LP, and the Purchasers, as
the Creditors therein, which Subordination Agreement is
annexed hereto as Exhibit B.
(ff) “Subsidiary”
means, with respect to any Person, a corporation, partnership,
limited liability company or other entity of which shares of stock
or other ownership interests having ordinary voting power (other
than stock or such other ownership interests having such power only
by reason of the happening of a contingency) to elect a majority of
the board of directors or other managers of such corporation,
partnership or other entity are at the time owned, or the
management of which is otherwise controlled, directly or indirectly
through one or more intermediaries, or both, by such Person all of
the Company’s Subsidiaries are set forth on Schedule 3.1(a)
hereto.
(gg) “Trading
Day” means a day on which the principal Trading Market
is open for trading.
(hh) “Trading
Market” means any of the following markets or
exchanges on which the Common Stock is listed or quoted for trading
on the date in question: the NYSE MKT, the Nasdaq Capital Market,
the Nasdaq Global Market, the Nasdaq Global Select Market, the New
York Stock Exchange, any market or quotation service of the OTC
Markets Group or the OTC Bulletin Board (or any successors to any
of the foregoing).
(ii) “Transaction
Documents” means, collectively, this Agreement, the
Notes, the Warrant, the Subordination Agreement and such other
documents, instruments, certificates, supplements, amendments,
exhibits and schedules required and/or attached pursuant to this
Agreement and/or any of the above documents, and/or any other
document and/or instrument related to the above agreements,
documents and/or instruments, and the transactions hereunder and/or
thereunder and/or any other agreement, documents or instruments
required or contemplated hereunder or thereunder, whether now
existing or at any time hereafter arising.
(jj) “Transfer
Agent” means Manhattan Transfer Registrar Co. the
current transfer agent of the Company, with a mailing address of
38B Sheep Pasture Road, Port Jefferson, NY 11777 and a phone number
of 631-928-7655,
and any successor transfer agent of the Company.
(kk) “UCC”
means the Uniform Commercial Code of as in effect from time to time
in the State of New York; provided, however, that, in the event
that, by reason of mandatory provisions of law, any or all of the
attachment, perfection, priority, or remedies with respect to the
Purchaser’ Liens on any Collateral is governed by the Uniform
Commercial Code as enacted and in effect in a jurisdiction other
than the State of New York, the term “UCC” shall mean the
Uniform Commercial code as enacted and in effect in such other
jurisdiction solely for purposes of the provisions thereof relating
to such attachment, perfection, priority, or remedies.
(ll) “Underlying
Shares” means all Conversion Shares and Warrant
Shares.
(mm) “VWAP”
means, for any date, the price determined by the first of the
following clauses that applies: (a) if the Common Stock is then
listed or quoted on a Trading Market, the daily volume weighted
average price of the Common Stock for such date (or the nearest
preceding date) on the Trading Market on which the Common Stock is
then listed or quoted as reported by Bloomberg L.P. (based on a
Trading Day from 9:30 a.m. (New York City time) to 4:02 p.m. (New
York City time)), (b) if OTCQB or OTCQX is not a Trading
Market, the volume weighted average price of the Common Stock for
such date (or the nearest preceding date) on OTCQB or OTCQX as
applicable, (c) if the Common Stock is not then listed or quoted
for trading on OTCQB or OTCQX and if prices for the Common Stock
are then reported in the “Pink Sheets” published by OTC
Markets, Inc. (or a similar organization or agency succeeding to
its functions of reporting prices), the most recent bid price per
share of the Common Stock so reported, or (d) in all other
cases, the fair market value of a share of Common Stock as
determined by an independent appraiser selected in good faith by
the Purchaser of a majority in interest of the Securities then
outstanding and reasonably acceptable to the Company, the fees and
expenses of which shall be paid by the Company.
(nn) “Warrant(s)”
means the two (2)-year Common Stock Purchase Warrants of the
Company, to be issued at the Closing, the form of which is annexed
hereto as Exhibit C.
(oo) “Warrant
Shares” means all shares of Common Stock issuable upon
exercise of the Warrants and/or any other securities issuable upon
exercise of the Warrants.
1.2 Other Definitional
Provisions.
(a) Use of Defined Terms. Unless
otherwise specified therein, all terms defined in this Agreement
shall have the defined meanings when used in the other Transaction
Documents or any certificate or
other document made or delivered pursuant hereto or
thereto.
(b) Accounting Terms. As used
herein and in the other Transaction Documents, and any certificate
or other document made or delivered pursuant hereto or thereto,
accounting terms relating to the Company not defined in
Section 1.1
and accounting terms partly
defined in Section 1.1, to the extent not
defined, shall have the respective meanings given to them under
GAAP (provided that
all terms of an accounting or financial nature used herein shall be
construed, and all computations of amounts referred to herein shall
be made without giving effect to (i) any election under Accounting
Standards Codification 825-10-25 (previously referred to as
Statement of Financial Accounting Standards 159) (or any other
Accounting Standards Codification or Financial Accounting Standard
having a similar result or effect) to value any Indebtedness or
other liabilities of the Company at “fair value”, as
defined therein, and (ii) any treatment of Indebtedness in respect
of convertible debt instruments under Accounting Standards
Codification 470-20 (or any other Accounting Standards Codification
or Financial Accounting Standard having a similar result or effect)
to value any such Indebtedness in a reduced or bifurcated manner as
described therein, and such Indebtedness shall at all times be
valued at the full stated principal amount thereof).
(c) Construction. The words
“hereof”,
“herein” and
“hereunder” and words of
similar import when used in this Agreement shall refer to this
Agreement as a whole and not to any particular provision of this
Agreement, and section, schedule and exhibit references are to this
Agreement unless otherwise specified. The meanings given to terms
defined herein shall be equally applicable to both the singular and
plural forms of such
terms.
(d) UCC Terms. Terms used in this
Agreement that are defined in the UCC shall, unless the context
indicates otherwise or are
otherwise defined in this Agreement, have the meanings provided for
by the UCC.
ARTICLE
2
PURCHASE
AND SALE
2.1 Closing. On the Closing Date,
upon the terms and subject to the conditions set forth herein, the
Company agrees to sell, and the Purchasers each agree to purchase,
the Securities in such amounts as indicated on Schedule 1
hereto. Each Purchaser shall deliver to the Company, via
wire transfer immediately available funds equal to the Purchase
Price, and the Company shall deliver to the Purchaser the Note on
the Closing Date, and the Company and the Purchaser shall deliver
the other items set forth in Section 2.2 deliverable at the
Closing. Upon satisfaction of the covenants and conditions set
forth in Sections 2.2 and 2.3, the Closing shall occur at the
offices of the Company or such other location as the parties shall
mutually agree.
2.2 Deliveries.
(a) On or prior to the
Closing Date, the Company shall deliver or cause to be delivered to
the Purchasers the following:
(i) this
Agreement duly executed by the Company;
(ii) a
Note registered in the name of the Purchaser with such principal
amount as set forth on Schedule 1;
(iii) the
Warrant, registered in the name of the Purchaser, to purchase such
number of shares of Common Stock as set forth on Schedule 1;
(iv) the
Subordination Agreement, duly executed by the Company and the
Purchasers;
(xv) the
Company and the Subsidiaries shall
have delivered to the Purchasers such other documents, instruments,
opinions or certificates relating to the transactions contemplated
by this Agreement as the Purchasers or its counsel may reasonably
request.
(b) On
or prior to the Closing, each Purchaser shall deliver or cause to
be delivered to the Company the following:
(i) this
Agreement duly executed by such Purchaser;
(ii) the
Purchase Price subject to the closing by wire transfer;
and
(v)
the Subordination Agreement, duly executed by such
Purchaser.
2.3 Conditions to Purchase the
Securities. Subject to the terms and conditions of this
Agreement, each Purchaser will at a Closing purchase from the
Company the Securities in the amounts and for the Purchase Price as
set forth on Schedule 1, provided the
following:
(a) The obligations of
the Company hereunder in connection with the Closing are subject to
the following conditions being met:
(i) the
accuracy in all material respects (or, to the extent
representations or warranties are qualified by materiality or
Material Adverse Effect, in all respects) when made and on the date
of the Closing of the representations and warranties of the
Purchaser contained herein (unless as of a specific date therein in
which case they shall be accurate as of such date);
(ii) all
obligations, covenants and agreements of each Purchaser required to
be performed at or prior to the date of the Closing shall have been
performed;
(iii) the
delivery by each Purchaser of the items set forth in Section 2.2(b)
of this Agreement;
(iv) there
shall have been no Material Adverse Effect with respect to the
Company since the date hereof; and
(v) no
statute, rule, regulation, executive order, decree, ruling or
injunction shall have been enacted, entered, promulgated or
endorsed by any court or other federal, state, local or
other governmental authority of
competent jurisdiction that prohibits the consummation of any of
the transactions contemplated by the Transaction
Documents.
(b) The
obligations of each Purchaser hereunder in connection with the
Closing are subject to the following conditions being
met:
(i) the
accuracy in all material respects (or, to the extent
representations or warranties are qualified by materiality or
Material Adverse Effect, in all respects) when made and on the date
of the Closing of the representations and warranties of the Company
contained herein (unless as of a specific date therein in which
case they shall be accurate as of such date);
(ii) all
obligations, covenants and agreements of the Company required to be
performed at or prior to the Closing shall have been performed in
all material respects;
(iii) the
delivery by the Company of the items set forth in Section 2.2(a) of
this Agreement;
(iv) there
shall have been no Material Adverse Effect with respect to the
Company since the date hereof;
(v) the
Company shall have obtained all governmental, regulatory and third
party consents and approvals, if any, necessary for the entry into
the Transaction Documents and the sale of the
Securities;
(vi) the
closing of the transactions contemplated by the terms of that
certain share exchange agreement, dated on even date herewith, by
and between the Company and Transworld Enterprises, Inc.;
and
(vi) no
statute, rule, regulation, executive order, decree, ruling or
injunction shall have been enacted, entered, promulgated or
endorsed by any court or other federal, state, local or
other governmental authority of
competent jurisdiction that prohibits the consummation of any of
the transactions contemplated by the Transaction
Documents;
2.4 Purchase Price and Payment of the
Purchase Price for the Securities. The Purchase Price for
the Securities to be purchased by the Purchasers at a Closing shall
be as set forth on Schedule 1 and shall be
paid at the Closing (less all of the Purchaser’s Expenses (as
defined below)) by the Purchaser by wire transfer of immediately
available funds to the Company in accordance with the
Company’s written wiring instructions, against delivery of
the Securities.
ARTICLE
3
REPRESENTATIONS
AND WARRANTIES; OTHER ITEMS
3.1 Representation and Warranties of the
Company. Except as set forth in
the Disclosure Schedules, which Disclosure Schedules shall be
deemed a part hereof and shall qualify any representation or
otherwise made herein to the extent of the disclosure contained in
the corresponding section of the Disclosure Schedules (but in no
event shall qualify any indemnity obligation of the Company
hereunder), the Company (which for purposes of this
Section 3.1
means the Company and all of its Subsidiaries) represents and
warrants to the Purchasers that on the Closing Date (unless as of a
specific date set forth below):
(a) Subsidiaries. All of the direct
and indirect subsidiaries of the Company and the locations thereof
are set forth on Schedule
3.1(a). Except as set forth on Schedule 3.1(a), the Company
owns, directly or indirectly, all of the capital stock or other
equity interests of each Subsidiary free and clear of any Liens,
and all of the issued and outstanding shares of capital stock or
other interests of each Subsidiary are validly issued and are fully
paid, non-assessable and free of preemptive and similar
rights to subscribe for or
purchase securities. Schedule 3.1(a) sets forth, as
of the Closing Date, the jurisdiction of organization and the
location of the Company’s and its subsidiaries’
executive offices and other places of business.
(b) Organization, Etc. The Company
and each of the Subsidiaries is duly organized, validly existing
and in good standing under the laws of the state of their
respective organization and are duly qualified and in good standing or has
applied for qualification as a foreign corporation authorized to do
business in each jurisdiction where, because of the nature of its
activities or properties, such qualification is required except
where the failure to be so qualified would not reasonably be
expected to have a Material Adverse Effect.
(c) Authorization: No Conflict. The
execution, delivery and performance of the Transaction Documents
and the transactions contemplated thereby by the Company,
including, but not limited to, the sale and issuance of the
Securities for the Purchase Price, subject to the Reverse Split,
the reservation for issuance of
the Underlying Shares required to be reserved pursuant to the terms
of the Notes and the Warrants, of the
issuance the Underlying Shares into which the Notes and Warrants
are convertible and/or exercisable (i) are within the
Company’s corporate powers, (ii) have been duly authorized by all necessary action by
or on behalf of the Company (and/or its stockholders to the extent
required by law), (iii) the Company has received all necessary
and/or required governmental, regulatory and other approvals and
consents (if any shall be required), (iv) do not and shall not
contravene or conflict with any provision of, or require any
consents under (1) any law, rule, regulation or ordinance, (2) the
Company’s organizational documents; and/or (3) any agreement,
credit facility, debt or other instrument (evidencing a Company or
Subsidiary debt or otherwise) or other understanding to which the
Company or any Subsidiary is a party or by which any property or
asset of the Company or any Subsidiary is bound or affected except
as would not reasonably be expected to have a Material Adverse
Effect, and (v) do not result in, or require, the creation or
imposition of any Lien and/or encumbrance on any of the
Company’s properties or revenues pursuant to any law, rule,
regulation or ordinance or otherwise.
(d) Validity and Binding Nature.
The Transaction Documents to which the Company is a party are the
legal, valid and binding obligations of the Company, enforceable
against the Company in accordance with their respective terms,
except as enforceability may be limited by bankruptcy, insolvency,
reorganization and other similar laws of general application
affecting the rights and remedies of creditors and by general
equitable principles (whether enforcement is sought by proceedings
in equity or at law).
(e) Title to Assets. The Company
and the Subsidiaries have good and marketable title in fee simple
to all real property owned by them and good and marketable title in
all personal property owned by them that is material to the
business of the Company and the Subsidiaries, in each case free and clear
of all Liens, except for (i) Liens as do not materially affect the
value of such property and do not materially interfere with the use
made and proposed to be made of such property by the Company and
the Subsidiaries, (ii) Liens for the payment of federal, state or
other taxes, for which appropriate reserves have been made therefor
in accordance with GAAP and the payment of which is not delinquent,
and (iii) Permitted Liens. Any real property and facilities held
under lease by the Company and the Subsidiaries are held by them
under valid, subsisting and enforceable leases with which the
Company and the Subsidiaries are in compliance.
(f) Compliance.
Neither the Company nor any Subsidiary: (i) is in default under or
in violation of (and no event has occurred that has not been waived
that, with notice or lapse of time or both, would result in a
default by the Company or any Subsidiary under), nor has the
Company or any Subsidiary received notice of a claim that it is in
default under or that it is in violation of, any indenture, loan or
credit agreement or any other agreement or instrument to which it
is a party or by which it or any of its properties is bound
(whether or not such default or violation has been waived), (ii) is
in violation of any judgment, decree or order of any court,
arbitrator or other governmental authority or (iii) is or has been
in violation of any statute, rule, ordinance or regulation of any
governmental authority, including without limitation all foreign,
federal, state and local laws relating to securities, corporate
law, taxes, environmental protection, occupational health and
safety, product quality and safety and employment and labor
matters, except in each case as could not have or reasonably be
expected to result in a Material Adverse
Effect.
(g) Taxes. Except for matters that
would not, individually or in the aggregate, have or reasonably be
expected to result in a Material Adverse Effect, the Company and
its Subsidiaries each (i) has made or filed all United States
federal, state and local income and all foreign income and
franchise tax returns, reports and declarations required by any
jurisdiction to which it is subject, (ii) has paid all taxes and
other governmental assessments and charges that are material in
amount, shown or determined to be due on such returns, reports and
declarations and (iii) has set aside on its books provision
reasonably adequate for the payment of all material taxes for
periods subsequent to the periods to which such returns, reports or
declarations apply. There are no unpaid taxes in any material
amount claimed to be due by the taxing authority of any
jurisdiction, and the officers of the Company or of any Subsidiary
know of no basis for any such claim.
(h) Licenses and
Permits. The Company possesses
all certificates, authorizations, consents, approvals, orders,
licenses and permits issued by the appropriate federal, state or
foreign regulatory authorities (collectively, the
“Permits”),
including the FDA and any other state, federal or foreign agencies
or bodies engaged in the regulation of pharmaceuticals or
biohazardous materials, amongst other, necessary to conduct its
business as now conducted. All of such Permits are valid and in
full force and effect. There is no pending or, to the
Company’s knowledge, threatened action, suit, proceeding or
investigation that individually or in the aggregate would
reasonably be expected to lead to the revocation, modification,
termination, suspension or any other impairment of the rights of
the holder of any such Permit.
(i) Investment Company. The Company
is not (i) an “investment company” or a company
“controlled”, whether directly or indirectly, by an
“investment company”, within the meaning of the
Investment Company Act of 1940, as amended; or (ii) engaged principally, or as one of its
important activities, in the business of extending credit for the
purpose of purchasing or carrying margin stock (within the meaning
of Regulation U of the Board of Governors of the Federal Reserve
System).
(j) Absence of Defaults
and Conflicts.
The Company
is not (i) in violation of its charter, by-laws or similar
incorporation or organizational documents or (ii) in violation
or default in the performance or observance of any obligation,
agreement, covenant or condition contained in any contract,
indenture, mortgage, deed of trust, loan or credit agreement, note,
lease or other agreement or instrument to which the Company is a
party or by which it may be bound, or to which any of the property
or assets of the Company is subject (collectively,
“Agreements
and Instruments”),
except in the case of clause (ii), for such violations and defaults
that would not result in a Material Adverse Effect on the Company;
and the execution, delivery and performance of this Agreement and
the consummation of the transactions contemplated in this
Agreement, and compliance by the Company with its obligations under
this Agreement, do not and will not, whether with or without the
giving of notice or passage of time or both, conflict with or
result in a breach of any of the terms and provisions of, or
constitute a default or Repayment Event (as defined below) under,
or result in the creation or imposition of any lien, charge or
encumbrance upon any property or assets of the Company pursuant to,
the Agreements and Instruments, nor will such action result in any
violation of the provisions of the charter, by-laws or similar
organizational documents of the Company or any applicable law,
statute, rule, regulation, judgment, order, writ or decree of any
government, government instrumentality or court, domestic or
foreign, having jurisdiction over the Company or any of its assets,
properties or operations, except in each case (other than with
respect to such charter, by-laws or similar
organizational documents of the Company) for such conflicts,
violations, breaches or defaults which would not reasonably be
expected to result in a Material Adverse Effect on the Company. As
used herein, a “Repayment
Event”
means any
event or condition which gives the holder of any note, debenture or
other evidence of indebtedness that is material to the operations
or financial results of the Company (or any person acting on such
holder’s behalf) the right to require the repurchase,
redemption or repayment of all or a portion of such indebtedness by
the Company.
(k) Foreign Corrupt
Practices Act. Neither the Company
nor, to the Company’s knowledge, any of its affiliates,
directors, officers, employees, agents or other person acting on
behalf of the Company is aware of or has taken any action, directly
or indirectly, that would result in a material violation by such
person of the Foreign Corrupt Practices Act of 1977, as amended,
and the rules and regulations thereunder (the “FCPA”),
including, without limitation, making use of the mails or any means
or instrumentality of interstate commerce corruptly in furtherance
of an offer, payment, promise to pay or authorization of the
payment of money, or other property, gift, promise to give, or
authorization of the giving of anything of value to any
“foreign official” (as such term is defined in the
FCPA) or any foreign political party or official thereof or any
candidate for foreign political office, in contravention of the
FCPA and the Company and, to the Company’s knowledge, its
affiliates have conducted their businesses in material compliance
with the FCPA and have instituted and maintain policies and
procedures designed to ensure, and which are reasonably expected to
continue to ensure, continued compliance
therewith.
(l) Rule 506(d) Bad Actor Disqualification
Representations and Covenants.
(i) No Disqualification Events.
Neither the Company, nor any of its predecessors, affiliates, any
manager, executive officer, other officer of the Company
participating in the offering, any beneficial owner (as that term
is defined in Rule 13d-3 under the Exchange Act) of 20% or more of
the Company’s outstanding voting equity securities,
calculated on the basis of voting power, nor any promoter (as that
term is defined in Rule 405 under the Securities Act) connected
with the Company in any capacity as of the date of this Agreement
and on the Closing Date (each, a “Company Covered Person”
and, together, “Company Covered Persons”)
is subject to any of the “Bad Actor” disqualifications
described in Rule 506(d)(1)(i) to (viii) under the Securities Act
(a “Disqualification
Event”), except for a Disqualification Event covered
by Rule 506(d)(2) or (d)(3). The Company has exercised reasonable
care to determine (A) the identity of each person that is a
Company Covered Person; and (B) whether any Company Covered
Person is subject to a Disqualification Event. The Company will
comply with its disclosure obligations under Rule
506(e).
(ii) Other
Covered Persons. The Company is not aware of any person
(other than any Company Covered Person) who has been or will be
paid (directly or indirectly) remuneration in connection with the
purchase and sale of the Notes, and/or the Warrants who is subject
to a Disqualification Event (each, an “Other Covered
Person”).
(iii) Reasonable
Notification Procedures. With respect to each Company
Covered Person, the Company has established procedures reasonably
designed to ensure that the Company receives notice from each such
Company Covered Person of (A) any Disqualification Event relating
to that Company Covered Person, and (B) any event that would, with
the passage of time, become a Disqualification Event relating to
that Company Covered Person; in each case occurring up to and
including the Closing Date.
(iv) Notice
of Disqualification Events. The Company will notify the
Purchaser immediately in writing upon becoming aware of (A) any
Disqualification Event relating to any Company Covered Person and
(B) any event that would, with the passage of time, become a
Disqualification Event relating to any Company Covered Person
and/or Other Covered Person.
(m) Accuracy of Information, etc.
No statement or information contained in this Agreement, any other
Transaction Document or any other document, certificate or
statement furnished to the Purchaser by or on behalf of the Company
in writing for use in connection with the transactions contemplated
by this Agreement and/or the other Transaction Documents contained,
as of the date such statement, information, document or certificate
was made or furnished, as the case may be, any untrue statement of
a material fact or omitted to state a material fact necessary to
make the statements contained herein or therein, taken as a whole,
not materially misleading. There is no fact known to the Company
that would reasonably be expected to have a Material Adverse Effect
that has not been expressly disclosed herein, in the other
Transaction Documents, or in any other documents, certificates and
statements furnished to the Purchaser for use in connection with
the transactions contemplated hereby and by the other
Documents.
(n) Solvency.
Based on the consolidated financial condition of the Company as of
the Closing Date, after giving effect to the receipt by the Company
of the proceeds from the sale of the Securities hereunder: (i) the
fair saleable value of the Company’s assets exceeds the
amount that will be required to be paid on or in respect of the
Company’s existing debts and other liabilities (including
known contingent liabilities) as they mature, (ii) the
Company’s assets do not constitute unreasonably small capital
to carry on its business as now conducted and as proposed to be
conducted including its capital needs taking into account the
particular capital requirements of the business conducted by the
Company, consolidated and projected capital requirements and
capital availability thereof, and (iii) the current cash flow of
the Company, together with the proceeds the Company would receive,
were it to liquidate all of its assets, after taking into account
all anticipated uses of the cash, would be sufficient to pay all
amounts on or in respect of its liabilities when such amounts are
required to be paid. The Company does not intend to incur debts
beyond its ability to pay such debts as they mature (taking into
account the timing and amounts of cash to be payable on or in
respect of its debt). The Company has no knowledge of any facts or
circumstances which lead it to believe that it will file for
reorganization or liquidation under the bankruptcy or
reorganization laws of any jurisdiction within one year from the
Closing Date. Schedule 3.1(n)
sets forth
as of the date hereof all outstanding secured and unsecured
Indebtedness of the Company or any Subsidiary, or for which the
Company or any Subsidiary has commitments. Neither the Company nor
any Subsidiary is in default with respect to any
Indebtedness.
(o) Transactions With
Affiliates and Employees. None of the officers
or directors of the Company or any Subsidiary and, to the knowledge
of the Company, none of the employees of the Company or any
Subsidiary is presently a party to any transaction with the Company
or any Subsidiary (other than for services as employees, officers
and directors), including any contract, agreement or other
arrangement providing for the furnishing of services to or by,
providing for rental of real or personal property to or from
providing for the borrowing of money from or lending of money to,
or otherwise requiring payments to or from any officer, director or
such employee or, to the knowledge of the Company, any entity in
which any officer, director, or any such employee has a substantial
interest or is an officer, director, trustee, stockholder, member
or partner, in each case in excess of $120,000 other than for: (i)
payment of salary or consulting fees for services rendered, (ii)
reimbursement for expenses incurred on behalf of the Company and
(iii) other employee benefits, including stock option agreements
under any stock option plan of the Company.
(p) Intellectual Property. The
Company has, or has rights to use, all patents, patent
applications, trademarks, trademark applications, service marks,
trade names, trade secrets, inventions, copyrights, licenses and
other intellectual property rights and similar rights as described
on Schedule 3.1(p) as necessary or required for use in connection
with its business and which the failure to so have would reasonably
be expected to have a Material Adverse Effect (collectively, the
“Intellectual
Property Rights”). The Company has not received a
notice (written or otherwise) that any material Intellectual
Property Right has expired, terminated or been abandoned, or is
expected to expire or terminate or be abandoned. The Company has
not received, since the date of the Balance Sheet Date, a written
notice of a claim or otherwise has any knowledge that the
Intellectual Property Rights violate or infringe upon the rights of
any Person, except as would not have or reasonably be expected to
have a Material Adverse Effect. To the knowledge of the Company,
all such Intellectual Property Rights are enforceable and there is
no existing infringement by another Person of any of the
Intellectual Property Rights. The Company has taken reasonable
security measures to protect the secrecy, confidentiality and value
of all of its intellectual property, except where failure to do so
would not, individually or in the aggregate, reasonably be expected
to have a Material Adverse Effect.
(q) USA Patriot Act. The Company is
in compliance, in all material respects, with (i) the Trading with
the Enemy Act, as amended, and each of the foreign assets control
regulations of the United States Treasury Department (31 C.F.R.,
Subtitle B, Chapter V, as amended) and any other enabling
legislation or executive order relating thereto, and (ii) the USA
Patriot Act (Title III of Pub. L. 107-56, signed into law on
October 26, 2001) (the “Act”). No part of the
proceeds of the Notes will be used, directly or indirectly, for any
payments to any governmental official or employee, political party,
official of a political party, candidate for political office, or
anyone else acting in an official capacity, in order to obtain,
retain or direct business or obtain any improper advantage, in
violation of the United States Foreign Corrupt Practices Act of
1977, as amended.
(r) Office of Foreign
Assets Control. Neither the
Company nor any Subsidiary nor, to the Company's knowledge, any
director, officer, agent, joint venture employee or affiliate of
the Company or any Subsidiary is currently, or in the past 5 years,
been subject to any U.S. sanctions administered by the Office of
Foreign Assets Control of the U.S. Treasury Department
(“OFAC”).
(s) Filings, Consents and
Approvals. Except as set forth
on Schedule
3.1(s), the Company is not
required to obtain any consent, waiver, authorization or order of,
give any notice to, or make any filing or registration with, any
court or other federal, state, local or other governmental
authority or other Person in connection with the execution,
delivery and performance by the Company of the Transaction
Documents, other than: (i) the filings required pursuant to the
Registration Rights Agreement and the declaration of effectiveness
by the SEC of the Registration Statement (ii) the notice and/or
application(s) to each applicable Trading Market for the issuance
and sale of the Securities and the listing of the Underlying Shares
for trading thereon in the time and manner required thereby, and
(iii) the filing of Form D with the Commission and such filings as
are required to be made under applicable state securities laws
(collectively, the “Required
Approvals”).
(t) Authorization; Enforcement. All
corporate action on the part of the Company, its officers,
directors and stockholders necessary for the authorization,
execution and delivery of the Transaction Documents and the
performance of all obligations of the Company under the Transaction
Documents and have been taken on or prior to the date hereof. Each
of the Transaction Documents has been duly executed by the Company
and, when delivered in accordance with the terms hereof and
thereof, will constitute the valid and binding obligation of the
Company enforceable against the Company in accordance with its
terms, except: (i) as limited by applicable bankruptcy, insolvency,
reorganization, moratorium and other laws of general application
affecting enforcement of creditors’ rights generally, (ii) as
limited by general equitable principles regardless of whether such
enforcement is considered in a proceeding in equity or at law,
(iii) as limited by laws relating to the availability of specific
performance, injunctive relief or other equitable remedies and (iv)
insofar as indemnification and contribution provisions may be
limited by applicable law.
(u) Valid Issuance of Securities.
Each of the Notes has been duly authorized and, when issued and
paid for in accordance with this Agreement, will be duly and
validly issued, fully paid and nonassessable, free and clear of all
Liens and all restrictions on transfer other than those expressly
imposed by the federal securities laws and vest in the Purchaser
full and sole title and power to the Notes purchased hereby by the
Purchaser, free and clear of all Liens, and restrictions on
transfer other than those imposed by the federal securities laws.
All Underlying Shares, when issued pursuant to conversion of the
Notes and/or exercise of the Warrants, when issued pursuant to this
Agreement, will be duly and validly issued, fully paid and
nonassessable, will be free and clear of all Liens and vest in the
holder full and sole title and power to such securities. The
Company has reserved from its duly authorized unissued Common
Stock, the Required Minimum (as defined in the Notes), which
Required Minimum shall be continuously determined by the Company to
ensure that the Required Minimum is in reserve with the Transfer
Agent at all times. The Notes, the Warrants and the Underlying
Shares shall sometimes be collectively referred to as the
“Securities.”
(v) Offering. The offer and sale of
the Securities, as contemplated by this Agreement, are exempt from
the registration requirements of the Securities Act, and the
qualification or registration requirements of state securities laws
or other applicable blue sky laws. Neither the Company nor any
authorized agent acting on its behalf will take any action
hereafter that would cause the loss of such
exemptions.
(w) Capitalization and Voting
Rights. The capitalization of
the Company is as set forth on Schedule
3.1(w), which
Schedule
3.1(w) shall also include the
number of shares of Common Stock owned beneficially, and of record,
by Affiliates of the Company as of the date hereof. The
authorized capital stock of the Company and all securities of the
Company issued and outstanding are set forth on Schedule 3.1(w) as
of the dates reflected therein. All of the outstanding shares of
Common Stock and other securities of the Company have been duly
authorized and validly issued, and are fully paid and
nonassessable. Except as set forth
on Schedule
3.1(w), no Person has any
right of first refusal, preemptive right, right of participation,
or any similar right to participate in the transactions
contemplated by the Transaction Documents. Except as set forth on Schedule 3.1(w), there are no
agreements or arrangements under which the Company is obligated to
register the sale of any of the Company’s securities under
the Securities Act. Except as set forth on Schedule 3.1(w), no shares of
Common Stock and/or other securities of the Company are entitled to
preemptive rights and there are no outstanding debt securities and
no contracts, commitments, understandings, or arrangements by which
the Company is or may become bound to issue additional shares of
the capital stock and/or other securities of the Company or
options, warrants, scrip, rights to subscribe to, calls or
commitments of any character whatsoever relating to, or securities
or rights convertible into or exchangeable for, any shares of
capital stock of the Company other than those issued or granted in
the ordinary course of business pursuant to the Company’s
equity incentive and/or compensatory plans or arrangements. Except
for customary transfer restrictions contained in agreements entered
into by the Company to sell restricted securities and/or as set
forth on Schedule
3.1(w), the Company is not a party to, and it has no
knowledge of, any agreement restricting the voting or transfer of
any shares of the capital stock and/or other securities of the
Company. Except as set forth on Schedule 3.1(w), the offer and
sale of all capital stock, convertible or exchangeable securities,
rights, warrants, options and/or any other securities of the
Company when any such securities of the Company were issued
complied with all applicable federal and state securities laws, and
no current and/or prior holder of any securities of the Company has
any right of rescission or damages or any “put” or
similar right with respect thereto that would reasonably be
expected to have a Material Adverse Effect. Except as set forth on
Schedule 3.1(w),
there are no securities or instruments of the Company containing
anti-dilution or similar provisions that will be triggered by the
issuance and/or sale of the Securities and/or the consummation of
the transactions described herein or in any of the other
Transaction Documents.
(x) Shell Company Status; Financial
Statements. The Company has been an issuer subject to Rule
144(i) under the Securities Act. The unaudited balance sheet of the
Company as of April 30, 2020 is included in Schedule 3.1(x) hereto. The
financial statements of the Company included on Schedule 3.1(x) have been
prepared in accordance with GAAP, except as may be otherwise
specified in such financial statements or the notes thereto and
except that unaudited financial statements may not contain all
footnotes required by GAAP, and fairly present in all material
respects the financial position of the Company and its consolidated
Subsidiaries as of and for the dates thereof and the results of
operations and cash flows for the periods then ended, subject to
normal, immaterial, year-end audit adjustments. For purposes of
this Section 3.1, April 30, 2020 is referred to as the
“Balance Sheet
Date”.
(y) Material Changes; Undisclosed Events,
Liabilities or Developments. Since the Balance Sheet Date:
(i) there has been no event, occurrence or development that has had
or that could reasonably be expected to result in a Material
Adverse Effect, (ii) the Company has not incurred any liabilities
(contingent or otherwise) other than (A) trade payables and accrued
expenses incurred in the ordinary course of business consistent
with past practice and (B) liabilities not required to be reflected
in the Company’s financial statements pursuant to GAAP or
disclosed in filings made with the Commission, (iii) the Company
has not altered its method of accounting, (iv) the Company has not
declared or made any dividend or distribution of cash or other
property to its stockholders or purchased, redeemed or made any
agreements to purchase or redeem any shares of its capital stock
and (v) the Company has not issued any equity securities to any
officer, director or Affiliate, except pursuant to existing Company
stock option plans. Except for the issuance of the Securities
contemplated by this Agreement or as set forth on Schedule 3.1(y), no event,
liability, fact, circumstance, occurrence or development has
occurred or exists or is reasonably expected to occur or exist with
respect to the Company or its Subsidiaries or their respective
businesses, properties, operations, assets or financial condition,
that would be required to be disclosed by the Company under
applicable securities laws at the time this representation is made
or deemed made that has not been publicly disclosed at least 1
Trading Day prior to the date that this representation is
made.
(z) Litigation.
Except as
set forth on Schedule
3.1(z), there is no action,
suit, inquiry, notice of violation, proceeding or investigation
pending or, to the knowledge of the Company, threatened against or
affecting the Company, any Subsidiary or any of their respective
properties before or by any court, arbitrator, governmental or
administrative agency or regulatory authority (federal, state,
county, local or foreign) (collectively, an
“Action”)
which (i) adversely affects or challenges the legality, validity or
enforceability of any of the Transaction Documents or the
Securities or (ii) could, if there were an unfavorable decision,
have or reasonably be expected to result in a Material Adverse
Effect. Neither the Company nor any Subsidiary, nor any director or
officer thereof, is or has been the subject of any Action involving
a claim of violation of or liability under federal or state
securities laws or a claim of breach of fiduciary duty. There has
not been, and to the knowledge of the Company, there is not pending
or contemplated, any investigation by the Commission involving the
Company or any current or former director or officer of the
Company. The Commission has not issued any stop order or other
order suspending the effectiveness of any registration statement
filed by the Company or any Subsidiary under the Exchange Act or
the Securities Act.
(aa) Disclosure.
Except with respect to the material terms and conditions of the
transactions contemplated by the Transaction Documents, the Company
confirms that neither it nor any other Person acting on its behalf
has provided any Purchaser or its respective agents or counsel with
any information that constitutes material, non-public information.
The Company understands that the Purchasers may rely on the
Transaction Documents, the information included therein, including,
but not limited to, the foregoing representation in purchasing the
Securities. All of the disclosure furnished by or on behalf of the
Company to the Purchaser in the Transaction Documents regarding,
among other matters relating to the Company, its business and the
transactions contemplated in the Transaction Documents, is true and
correct in all material respects as of the date made and does not
contain any untrue statement of a material fact or omit to state
any material fact necessary in order to make the statements made
therein, in light of the circumstances under which they were made,
not misleading. The Company acknowledges and agrees that none of
the Purchasers makes nor has made any representations or warranties
with respect to the transactions contemplated in the Transaction
Documents other than those specifically set forth in Section 3.2
hereof.
(bb) No
Integrated Offering. Assuming the accuracy of the
representations and warranties set forth in Section 3.2, neither the
Company, nor any of its affiliates, nor any Person acting on its or
their behalf has, directly or indirectly, made any offers or sales
of any security or solicited any offers to buy any security, under
circumstances that would cause the issuance and/or sale of the
Securities to be integrated with prior offerings of securities by
the Company for purposes of (i) the Securities Act that would
require the registration of any such Securities and/or any other
securities of the Company under the Securities Act, or (ii) any
stockholder-approval provisions of any Trading Market on which any
of the securities of the Company are listed, eligible for quotation
and/or designated.
(cc) Insurance.
The Company
is insured by insurers of recognized financial responsibility
against such losses and risks and in such amounts as are prudent
and customary in the business in which it is engaged; the Company
has not been refused any coverage sought or applied for; and the
Company does not have any reason to believe that it will not be
able to renew its existing insurance coverage as and when such
coverage expires or to obtain similar coverage from similar
insurers as may be necessary to continue its business at a cost
that would not have a Material Adverse Effect on the
Company.
(dd) Regulation
M Compliance. The Company has not, and to its knowledge no
one acting on its behalf has, (i) taken, directly or indirectly,
any action designed to cause or to result in the stabilization or
manipulation of the price of any security of the Company to
facilitate the sale or resale of any of the Securities, (ii) sold,
bid for, purchased, or paid any compensation for soliciting
purchases of, any of the Securities, or (iii) paid or agreed to pay
to any Person any compensation for soliciting another to purchase
any other securities of the Company.
(ee) Registration
Rights. Except as set forth
on Schedule
3.1(ee), no Person has any
right to cause the Company to effect the registration under the
Securities Act of any securities of the Company or any
Subsidiaries.
(ff) Labor
Relations. No labor dispute
exists or, to the knowledge of the Company, is imminent with
respect to any of the employees of the Company, which could
reasonably be expected to result in a Material Adverse Effect. None
of the Company’s or its Subsidiaries’ employees is a
member of a union that relates to such employee’s
relationship with the Company or such Subsidiary, and neither the
Company nor any of its Subsidiaries is a party to a collective
bargaining agreement, and the Company and its Subsidiaries believe
that their relationships with their employees are good. To the
knowledge of the Company, no executive officer of the Company or
any Subsidiary, is, or is now expected to be, in violation of any
material term of any employment contract, confidentiality,
disclosure or proprietary information agreement or non-competition
agreement, or any other contract or agreement or any restrictive
covenant in favor of any third party, and the continued employment
of each such executive officer does not subject the Company or any
of its Subsidiaries to any liability with respect to any of the
foregoing matters. The Company and its Subsidiaries are in
compliance with all U.S. federal, state, local and foreign laws and
regulations relating to employment and employment practices, terms
and conditions of employment and wages and hours, except where the
failure to be in compliance could not, individually or in the
aggregate, reasonably be expected to have a Material Adverse
Effect.
(gg) Dilutive
Effect. The Company understands and acknowledges that the
number of Underlying Shares issuable upon conversion and/or
exercise of the Notes and/or Warrants, pursuant to the terms
thereof, will increase in certain circumstances. The Company
further acknowledges that its obligations to issue Underlying
Shares pursuant to the terms of the Notes and/or Warrants in
accordance with this Agreement, the Notes and the Warrants is
absolute and unconditional regardless of the dilutive effect that
any such issuances may have on the percentage ownership interests
of other stockholders of the Company.
(hh) Application
of Takeover Protections; Rights Agreement. The Company
and its board of directors have taken all necessary action, if any,
in order to render inapplicable any control share acquisition,
business combination, poison pill (including any distribution under
a rights agreement) or other similar anti-takeover provisions under
the Company’s articles of incorporation, as amended, or the
laws of the jurisdiction of its formation that are or could become
applicable to the Purchaser as a result of the transactions
contemplated by this Agreement and/or the other Transaction
Documents, including, without limitation, the Company’s
issuance of the Securities and the Purchaser’s ownership of
the Securities. The Company has not adopted a stockholder rights
plan or similar arrangement relating to accumulations of beneficial
ownership of Common Stock or a change in control of the
Company.
(ii) Manipulation
of Price. The Company has not, and to its knowledge no one
acting on its behalf has, (i) taken, directly or indirectly, any
action designed to cause or to result, or that could reasonably be
expected to cause or result, in the stabilization or manipulation
of the price of any security of the Company to facilitate the sale
or resale of any of the Securities, (ii) sold, bid for, purchased,
or paid any compensation for soliciting purchases of, any of the
Securities, or (iii) paid or agreed to pay to any person any
compensation for soliciting another to purchase any other
securities of the Company.
(jj) DTC
Eligible. The Common Stock is DTC eligible and DTC has not
placed a “freeze” or a “chill” on the
Common Stock and the Company has no reason to believe that DTC has
any intention to make the Common Stock not DTC eligible, or place a
“freeze” or “chill” on the Common Stock. No
federal or state regulatory authority has indicated that it will
prohibit the listing of the Company’s securities based upon
its prior business in the cannabis or cannabis-related markets nor
will the Purchasers be prohibited from depositing, clearing or
settling the Securities, including through the DTC or
otherwise, on account of the Company’s prior business in the
cannabis or cannabis-related markets.
(kk) Listing
and Maintenance Requirements. The Company has not, in the 12 months preceding
the date hereof, received notice from any Trading Market on which
the Common Stock is or has been listed or quoted to the effect that
the Company is not in compliance with the listing or maintenance
requirements of such Trading Market. The Common Stock is
eligible for quotation on the Principal Market and the Company has
no reason to believe that the Principal Market has any intention of
delisting the Common Stock from the Principal Market. The issuance and sale of the Securities hereunder
does not contravene the rules and regulations of the Trading
Market. All Underlying Shares have been approved, if so
required, for listing or quotation on the Trading Market, subject
only to notice of issuance.
(ll) No
General Solicitation. Neither the Company, nor any of
its affiliates, nor, to the knowledge of the Company, any Person
acting on its behalf, has engaged in any form of general
solicitation or general advertising (within the meaning of
Regulation D) in connection with the offer or sale of the
Securities.
(mm) Acknowledgment
Regarding the Purchaser’s Purchase of Securities.
The Company acknowledges and agrees that the Purchaser is
acting solely in the capacity of an arm’s length purchaser
with respect to the other Transaction Documents and the
transactions contemplated hereby and thereby and that such
Purchaser is not (i) an officer or director of the Company,
(ii) an Affiliate of the Company or (iii) to the
knowledge of the Company, a “beneficial owner” of more
than 10% of the shares of Common Stock (as defined for purposes of
Rule 13d-3 of the Exchange Act. The Company further
acknowledges that the Purchaser is not acting as a financial
advisor or fiduciary of the Company (or in any similar capacity)
with respect to the Transaction Documents and the transactions
contemplated hereby and thereby, and any advice given by such
Purchaser or any of its representatives or agents in connection
with the Transaction Documents and the transactions contemplated
hereby and thereby is merely incidental to such Purchaser’s
purchase of the Securities. The Company further represents to
the Purchaser that the Company’s decision to enter into the
Transaction Documents has been based solely on the independent
evaluation by the Company and its representatives.
(nn) Off-Balance
Sheet Arrangements. There is no transaction,
arrangement, or other relationship between the Company and an
unconsolidated or other off-balance sheet entity that is required
to be disclosed by the Company in its Exchange Act filings and is
not so disclosed or that otherwise would be reasonably likely to
have a Material Adverse Effect.
(oo) Certain
Fees. No brokerage or
finder’s fees or commissions are or will be payable by the
Company or any Subsidiaries to any broker, financial advisor or
consultant, finder, placement agent, investment banker, bank or
other Person with respect to the transactions contemplated by the
Transaction Documents. The Purchaser shall have no obligation with
respect to any fees or with respect to any claims made by or on
behalf of other Persons for fees of a type contemplated in this
Section that may be due in connection with the transactions
contemplated by the Transaction Documents.
(pp) Money
Laundering. The operations of the
Company and its Subsidiaries are and have been conducted at all
times in compliance with applicable financial record-keeping and
reporting requirements, including but not limited to, Currency and
Foreign Transactions Reporting Act of 1970, as amended, applicable
money laundering statutes and applicable rules and regulations
thereunder (collectively, the “Money Laundering
Laws”), and no Action
or Proceeding by or before any court or governmental agency,
authority or body or any arbitrator involving the Company or any
Subsidiary with respect to the Money Laundering Laws is pending or,
to the knowledge of the Company or any Subsidiary,
threatened.
(qq) Environmental
Laws. The Company and its
Subsidiaries, to the best of the Company’s knowledge, (i) are
in compliance with all federal, state, local and foreign laws
relating to pollution or protection of human health or the
environment (including ambient air, surface water, groundwater,
land surface or subsurface strata), including laws relating to
emissions, discharges, releases or threatened releases of
chemicals, pollutants, contaminants, or toxic or hazardous
substances or wastes (collectively, “Hazardous
Materials”) into the
environment, or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or
handling of Hazardous Materials, as well as all authorizations,
codes, decrees, demands, or demand letters, injunctions, judgments,
licenses, notices or notice letters, orders, permits, plans or
regulations, issued, entered, promulgated or approved thereunder
(“Environmental
Laws”); (ii) have
received all permits licenses or other approvals required of them
under applicable Environmental Laws to conduct their respective
businesses; and (iii) are in compliance with all terms and
conditions of any such permit, license or approval where in each
clause (i), (ii) and (iii), the failure to so comply could be
reasonably expected to have, individually or in the aggregate, a
Material Adverse Effect.
(rr) Seniority.
As of the Closing Date, no Indebtedness or other claim against the
Company is senior to the Notes in right of payment, whether with
respect to interest or upon liquidation or dissolution, or
otherwise, other than indebtedness secured by purchase money
security interests (which is senior only as to underlying assets
covered thereby) and capital lease obligations (which is senior
only as to the property covered thereby).
3.2 Representation and Warranties of The
Purchaser. Each Purchaser, severally and not jointly, hereby
represents and warrants as of the date hereof and as of the Closing
Date to the Company as follows:
(a) Organization;
Authority. Such Purchaser is
either an individual or an entity duly incorporated or formed,
validly existing and in good standing under the laws of the
jurisdiction of its incorporation or formation with full right,
corporate, partnership, limited liability company or similar power
and authority to enter into and to consummate the transactions
contemplated by the Transaction Documents and otherwise to carry
out its obligations hereunder and thereunder. The execution and
delivery of the Transaction Documents and performance by such
Purchaser of the transactions contemplated by the Transaction
Documents have been duly authorized by all necessary corporate,
partnership, limited liability company or similar action, as
applicable, on the part of such Purchaser. Each Transaction
Document to which it is a party has been duly executed by such
Purchaser, and when delivered by such Purchaser in accordance with
the terms hereof, will constitute the valid and legally binding
obligation of such Purchaser, enforceable against it in accordance
with its terms, except: (i) as limited by general equitable
principles and applicable bankruptcy, insolvency, reorganization,
moratorium and other laws of general application affecting
enforcement of creditors’ rights generally, (ii) as limited
by laws relating to the availability of specific performance,
injunctive relief or other equitable remedies and (iii) insofar as
indemnification and contribution provisions may be limited by
applicable law.
(b) Own
Account. Such Purchaser
understands that the Securities are “restricted
securities” and have not been registered under the Securities
Act or any applicable state securities law and is acquiring the
Securities as principal for its own account and not with a view to
or for distributing or reselling such Securities or any part
thereof in violation of the Securities Act or any applicable state
securities law, has no present intention of distributing any of
such Securities in violation of the Securities Act or any
applicable state securities law and has no direct or indirect
arrangement or understandings with any other persons to distribute
or regarding the distribution of such Securities in violation of
the Securities Act or any applicable state securities law (this
representation and warranty not limiting such Purchaser’s
right to sell the Securities pursuant to an effective registration
statement or otherwise in compliance with applicable federal and
state securities laws). Such Purchaser is acquiring the Securities
hereunder in the ordinary course of its
business.
(c) Purchaser
Status. At the time such
Purchaser was offered the Securities, it was, and as of the date
hereof it is an “accredited investor” as defined in
Rule 501(a) under the Securities Act.
(d) Experience of Such
Purchaser. Such Purchaser,
either alone or together with its representatives, has such
knowledge, sophistication and experience in business and financial
matters so as to be capable of evaluating the merits and risks of
the prospective investment in the Securities, and has so evaluated
the merits and risks of such investment. Such Purchaser is able to
bear the economic risk of an investment in the Securities and, at
the present time, is able to afford a complete loss of such
investment.
(e) General
Solicitation. Such Purchaser is
not, to such Purchaser’s knowledge, purchasing the Securities
as a result of any advertisement, article, notice or other
communication regarding the Securities published in any newspaper,
magazine or similar media or broadcast over television or radio or
presented at any seminar or any other general solicitation or
general advertisement.
(f) Access to
Information. Such Purchaser
acknowledges that it has had the opportunity to review the
Transaction Documents (including all exhibits and schedules
thereto) and has been afforded (i) the opportunity to ask such
questions as it has deemed necessary of, and to receive answers
from, representatives of the Company concerning the terms and
conditions of the offering of the Securities and the merits and
risks of investing in the Securities; (ii) access to information
about the Company and its financial condition, results of
operations, business, properties, management and prospects
sufficient to enable it to evaluate its investment; and (iii) the
opportunity to obtain such additional information that the Company
possesses or can acquire without unreasonable effort or expense
that is necessary to make an informed investment decision with
respect to the investment.
(g) Certain Transactions and
Confidentiality. Such Purchaser has not directly or
indirectly, nor has any Person acting on behalf of or pursuant to
any understanding with such Purchaser, executed any purchases or
sales, including Short Sales, of the securities of the Company
during the period commencing as of the time that such Purchaser
first received a term sheet (written or oral) from the Company or
any other Person representing the Company setting forth the
material terms of the transactions contemplated hereunder and
ending immediately prior to the execution hereof. Notwithstanding
the foregoing, in the case of a Purchaser that is a multi-managed
investment vehicle, whereby separate portfolio managers manage
separate portions of such Purchaser’s assets and the
portfolio managers have no direct knowledge of the investment
decisions made by the portfolio managers managing other portions of
such Purchaser’s assets, the representation set forth above
shall only apply with respect to the portion of assets managed by
the portfolio manager that made the investment decision to purchase
the Securities covered by this Agreement. Other than to other
Persons party to this Agreement or to such Purchaser's
representatives, including, without limitation, its officers,
directors, partners, legal and other advisors, employees, agents
and Affiliates, such Purchaser has maintained the confidentiality
of all disclosures made to it in connection with this transaction
(including the existence and terms of this
transaction).
The Company acknowledges and agrees that the representations
contained in this Section 3.2 shall not modify, amend or affect
such Purchaser’s right to rely on the Company’s
representations and warranties contained in this Agreement or any
representations and warranties contained in any other Transaction
Document or any other document or instrument executed and/or
delivered in connection with this Agreement or the consummation of
the transaction contemplated hereby.
ARTICLE
4
OTHER
AGREEMENTS OF THE PARTIES
4.1 Transfer
Restrictions.
(a) The
Securities may only be disposed of in compliance with state and
federal securities laws. In connection with any transfer of
Securities other than pursuant to an effective registration
statement or Rule 144, to the Company or to an Affiliate of a
Purchaser or in connection with a pledge as contemplated in Section
4.1(b), the Company may require the transferor thereof to provide
to the Company an opinion of counsel selected by the transferor and
reasonably acceptable to the Company, the form and substance of
which opinion shall be reasonably satisfactory to the Company, to
the effect that such transfer does not require registration of such
transferred Securities under the Securities Act. As a condition of
transfer, any such transferee shall agree in writing to be bound by
the terms of this Agreement and shall have the rights and
obligations of a Purchaser under this Agreement.
(b) The
Purchaser agrees to the imprinting, so long as is required by this
Section 4.1, of a legend on any of the Securities in the following
form:
[NEITHER]
THIS SECURITY [NOR THE SECURITIES INTO WHICH THIS SECURITY IS
[CONVERTIBLE] HAS [NOT] BEEN REGISTERED WITH THE SECURITIES AND
EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN
RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND,
ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR
PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT
SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND
IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS. THIS SECURITY
[AND THE SECURITIES ISSUABLE UPON [CONVERSION] OF THIS SECURITY]
MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT WITH A
REGISTERED BROKER-DEALER OR OTHER LOAN WITH A FINANCIAL INSTITUTION
THAT IS AN “ACCREDITED INVESTOR” AS DEFINED IN RULE
501(a) UNDER THE SECURITIES ACT OR OTHER LOAN SECURED BY SUCH
SECURITIES.
The
Company acknowledges and agrees that a Purchaser may from time to
time pledge pursuant to a bona fide margin agreement with a
registered broker-dealer or grant a security interest in some or
all of the Securities to a financial institution that is an
“accredited investor” as defined in Rule 501(a) under
the Securities Act and who agrees to be bound by the provisions of
this Agreement and, if required under the terms of such
arrangement, such Purchaser may transfer pledged or secured
Securities to the pledgees or secured parties. Such a pledge or
transfer would not be subject to approval of the Company and no
legal opinion of legal counsel of the pledgee, secured party or
pledgor shall be required in connection therewith. Further, no
notice shall be required of such pledge. At the appropriate
Purchaser’s expense, the Company will execute and deliver
such reasonable documentation as a pledgee or secured party of
Securities may reasonably request in connection with a pledge or
transfer of the Securities, including, if the Securities are then
registered for resale on a registration statement, the preparation
and filing of any required prospectus supplement under Rule
424(b)(3) under the Securities Act or other applicable provision of
the Securities Act to appropriately amend the list of Selling
Stockholders thereunder.
(c) Certificates
evidencing the Underlying Shares shall not contain any legend
(including the legend set forth in Section 4.1(b) hereof): (i)
while a registration statement covering the resale of such security
is effective under the Securities Act, (ii) following any sale of
the Underlying Shares pursuant to Rule 144, (iii) if such
Underlying Shares are eligible for sale under Rule 144 or (iv) if
such legend is not required under applicable requirements of the
Securities Act (including judicial interpretations and
pronouncements issued by the staff of the Commission). The Company
shall cause its counsel to issue a legal opinion to the Transfer
Agent promptly after such time as such legend is no longer required
under this Section 4.1(c) if required by the Transfer Agent to
effect the removal of the legend hereunder, or if requested by a
Purchaser. If any portion of the Note is converted at a time when
there is an effective registration statement to cover the resale of
the Underlying Shares, or if such Underlying Shares may be sold
under Rule 144 and the Company is then in compliance with the
current public information required under Rule 144, or if the
Underlying Shares may be sold under Rule 144 without the
requirement for the Company to be in compliance with the current
public information required under Rule 144 as to such Underlying
Shares and without volume or manner-of-sale restrictions or if such
legend is not otherwise required under applicable requirements of
the Securities Act (including judicial interpretations and
pronouncements issued by the staff of the Commission) then such
Underlying Shares shall be issued free of all legends. The Company
agrees that at such time as such legend is no longer required under
this Section 4.1(c), it will, no later than the earlier of (i)
three (3) Trading Days and (ii) the number of Trading Days
comprising the Standard Settlement Period (as defined below)
following the delivery by a Purchaser to the Company or the
Transfer Agent certificate(s) representing Underlying Shares, as
applicable, issued with a restrictive legend (such date, the
“Legend Removal
Date”), deliver or
cause to be delivered to such Purchaser a certificate representing
such shares that is free from all restrictive and other legends.
The Company may not make any notation on its records or give
instructions to the Transfer Agent that enlarge the restrictions on
transfer set forth in this Section 4. Certificates for Underlying
Shares subject to legend removal hereunder shall be transmitted by
the Transfer Agent to the Purchaser by crediting the account of the
Purchaser’s prime broker with the Depository Trust Company
System as directed by such Purchaser. As used herein,
“Standard Settlement
Period” means the
standard settlement period, expressed in a number of Trading Days,
on the Company’s primary Trading Market with respect to the
Common Stock as in effect on the date of delivery of a certificate
representing Underlying Shares, as applicable, issued with a
restrictive legend.
(d) In
addition to a Purchaser’s other available remedies, the
Company shall pay to a Purchaser, in cash, the greater of (i) as
partial liquidated damages and not as a penalty, for each $1,000 of
Underlying Shares (based on the VWAP of the Common Stock on the
date such Securities are submitted to the Transfer Agent) delivered
for removal of the restrictive legend and subject to Section
4.1(c), $5 per Trading Day (increasing to $10 per Trading Day five
(5) Trading Days after such damages have begun to accrue) for each
Trading Day after the Legend Removal Date until such certificate is
delivered without a legend and (ii) if the Company fails to (i)
issue and deliver (or cause to be delivered) to a Purchaser by the
Legend Removal Date a certificate representing the Securities so
delivered to the Company by such Purchaser that is free from all
restrictive and other legends or (ii) if after the Legend Removal
Date such Purchaser purchases (in an open market transaction or
otherwise) shares of Common Stock to deliver in satisfaction of a
sale by such Purchaser of all or any portion of the number of
shares of Common Stock, or a sale of a number of shares of Common
Stock equal to all or any portion of the number of shares of Common
Stock that such Purchaser anticipated receiving from the Company
without any restrictive legend, then, an amount equal to the excess
of such Purchaser’s total purchase price (including brokerage
commissions and other out-of-pocket expenses, if any) for the
shares of Common Stock so purchased (including brokerage
commissions and other out-of-pocket expenses, if any) (the
“Buy-In
Price”) over the
product of (A) such number of Shares or Conversion Shares, as
applicable, that the Company was required to deliver to such
Purchaser by the Legend Removal Date multiplied by (B) the lowest
closing sale price of the Common Stock on any Trading Day during
the period commencing on the date of the delivery by such Purchaser
to the Company of the applicable Shares or Conversion Shares (as
the case may be) and ending on the date of such delivery and
payment under this clause (ii).
4.2 Furnishing of
Information. Beginning on the
Closing Date, the Company shall use commercially reasonable efforts
to comply with the Pink Basic Disclosure Guidelines which set forth
the disclosure obligations that make up the “Alternative
Reporting Standard” for OTC Pink companies as such
obligations are published by the OTC Markets Group, Inc. In
addition, the Company shall file a Registration Statement on Form
8-A as soon as practicable, but in no event no later than five (5)
Trading Days, after the Effective Date of the Initial Registration
Statement (as defined in the Registration Rights Agreement).
If after the date hereof the Company becomes subject to the rules
and regulations of the Exchange Act and as long as any Purchaser
owns Securities, the Company covenants to timely file (or obtain
extensions in respect thereof and file within the applicable grace
period) all reports required to be filed by the Company after the
date hereof pursuant to the Exchange Act. As long as any Purchaser
owns Securities, if the Company is not required to file reports
pursuant to the Exchange Act, it will prepare and furnish to the
Purchasers and make publicly available in accordance with Rule
144(c) such information as is required for the Purchasers to sell
the Securities, including without limitation, under Rule 144. The
Company further covenants that it will take such further action as
any holder of Securities may reasonably request, to the extent
required from time to time to enable such Person to sell such
Securities without registration under the Securities Act, including
without limitation, within the requirements of the exemption
provided by Rule 144.
4.3 Integration.
The Company shall not sell, offer for sale or solicit offers to buy
or otherwise negotiate in respect of any security (as defined in
Section 2 of the Securities Act) that would be integrated with
the offer or sale of the Securities in a manner that would require
the registration under the Securities Act of the sale of the
Securities or that would be integrated with the offer or sale of
the Securities for purposes of the rules and regulations of any
Trading Market such that it would require shareholder approval
prior to the closing of such other transaction unless shareholder
approval is obtained before the closing of such subsequent
transaction.
4.4 Securities Laws
Disclosure; Publicity. The
Company shall (a) by 9:00am on the 2nd
Trading Day after the date of this
Agreement, issue a press release disclosing the material terms of
the transactions contemplated hereby. From and after the issuance
of such press release, the Company represents to the Purchaser that
it shall have publicly disclosed all material, non-public
information delivered to any of the Purchaser by the Company or any
of its Subsidiaries, or any of their respective officers,
directors, employees or agents in connection with the transactions
contemplated by the Transaction Documents. In addition, effective
upon the issuance of such press release, the Company acknowledges
and agrees that any and all confidentiality or similar obligations
under any agreement, whether written or oral, between the Company,
any of its Subsidiaries or any of their respective officers,
directors, agents, employees or Affiliates on the one hand, and any
of the Purchaser or any of their Affiliates on the other hand,
shall terminate. The Company and the Purchaser shall consult with
each other in issuing any other press releases with respect to the
transactions contemplated hereby, and neither the Company nor any
Purchaser shall issue any such press release nor otherwise make any
such public statement without the prior consent of the Company,
with respect to any press release of any Purchaser, or without the
prior consent of the Purchaser, with respect to any press release
of the Company, which consent shall not unreasonably be withheld or
delayed, except if such disclosure is required by law, in which
case the disclosing party shall promptly provide the other party
with prior notice of such public statement or communication.
Notwithstanding the foregoing, the Company shall not publicly
disclose the name of any Purchaser, or include the name of any
Purchaser in any filing with the Commission or any regulatory
agency or Trading Market, without the prior written consent of such
Purchaser, except (a) as required by federal securities law in
connection with the filing of final Transaction Documents with the
Commission and (b) to the extent such disclosure is required
by law or Trading Market regulations, in which case the Company
shall provide the Purchaser with prior notice of such disclosure
permitted under this clause (b).
4.5 Shareholder Rights
Plan. No claim will be made
or enforced by the Company or, with the consent of the Company, any
other Person, that any Purchaser is an “Acquiring
Person” under any
control share acquisition, business combination, poison pill
(including any distribution under a rights agreement) or similar
anti-takeover plan or arrangement in effect or hereafter adopted by
the Company, or that any Purchaser could be deemed to trigger the
provisions of any such plan or arrangement, by virtue of receiving
Securities under the Transaction Documents.
4.6 Non-Public
Information. Except
with respect to the material terms and conditions of the
transactions contemplated by the Transaction Documents, which shall
be disclosed pursuant to Section 4.4, the Company covenants
and agrees that neither it, nor any other Person acting on its
behalf will provide the Purchaser or its agents or counsel with any
information that constitutes, or the Company reasonably believes
constitutes, material non-public information, unless
prior thereto the Purchaser shall have consented to the receipt of
such information and agreed with the Company to keep such
information confidential. The Company understands and confirms that
the Purchaser shall be relying on the foregoing covenant in
effecting transactions in securities of the Company. To the extent
that the Company delivers any material, non-public information to a
Purchaser without such Purchaser’s consent, the Company
hereby covenants and agrees that such Purchaser shall not have any
duty of confidentiality to the Company, any of its Subsidiaries, or
any of their respective officers, directors, agents, employees or
Affiliates, or a duty to the Company, any of its Subsidiaries or
any of their respective officers, directors, agents, employees or
Affiliates not to trade on the basis of, such material,
non-public information, provided
that the Purchaser shall remain subject to applicable law. To the
extent that any notice provided pursuant to any Transaction
Document constitutes, or contains, material, non-public information regarding
the Company or any Subsidiaries, the Company shall simultaneously
file such notice with the Commission pursuant to a Current Report
on Form 8-K or if not subject
to the reporting requirements under the Commission, file a press
release. The Company understands
and confirms that the Purchaser shall be relying on the foregoing
covenant in effecting transactions in securities of the
Company.
4.7 Use of
Proceeds. Except as set forth
on Schedule 4.7
attached
hereto, the Company shall use the net proceeds from the sale of the
Securities hereunder for working capital purposes and shall not use
such proceeds: (a) for the satisfaction of any portion of the
Company’s debt (other than payment of trade payables in the
ordinary course of the Company’s business and prior
practices), (b) for the redemption of any Common Stock or Common
Stock Equivalents, (c) for the settlement of any outstanding
litigation or (d) in violation of FCPA, OFAC regulations or
Money Laundering Laws. The net proceeds from this offering and the
sale of the Securities to be sold hereunder will be held in the a
Control Account to be agreed upon between the parties on or after
the Closing Date.
4.8 Indemnification of
Purchaser. Subject
to the provisions of this Section 4.8, the Company will
indemnify and hold each Purchaser and its respective directors,
officers, shareholders, members, partners, employees and agents
(and any other Persons with a functionally equivalent role of a
Person holding such titles notwithstanding a lack of such title or
any other title), each Person who controls such Purchaser (within
the meaning of Section 15 of the Securities Act and
Section 20 of the Exchange Act), and the directors, officers,
shareholders, agents, members, partners or employees (and any other
Persons with a functionally equivalent role of a Person holding
such titles notwithstanding a lack of such title or any other
title) of such controlling persons (each, a
“Purchaser
Party”) harmless from
any and all losses, liabilities, obligations, claims,
contingencies, damages, costs and expenses, as incurred, arising
out of or relating to (i) any untrue or alleged untrue
statement of a material fact contained in such registration
statement, any prospectus or any form of prospectus or in any
amendment or supplement thereto or in any preliminary prospectus,
or arising out of or relating to any omission or alleged omission
of a material fact required to be stated therein or necessary to
make the statements therein (in the case of any prospectus or
supplement thereto, in the light of the circumstances under which
they were made) not misleading, except to the extent, but only to
the extent, that such untrue statements or omissions are based
solely upon information regarding such Purchaser Party furnished in
writing to the Company by such Purchaser Party expressly for use
therein, or (ii) any violation or alleged violation by the
Company of the Securities Act, the Exchange Act or any state
securities law, or any rule or regulation thereunder in connection
therewith. If any action shall be brought against any Purchaser
Party in respect of which indemnity may be sought pursuant to this
Agreement, such Purchaser Party shall promptly notify the Company
in writing, and the Company shall have the right to assume the
defense thereof with counsel of its own choosing reasonably
acceptable to the Purchaser Party. Any Purchaser Party shall have
the right to employ separate counsel in any such action and
participate in the defense thereof, but the fees and expenses of
such counsel shall be at the expense of such Purchaser Party except
to the extent that (x) the employment thereof has been
specifically authorized by the Company in writing, (y) the
Company has failed after a reasonable period of time to assume such
defense and to employ counsel or (z) in such action there is,
in the reasonable opinion of counsel, a material conflict on any
material issue between the position of the Company and the position
of such Purchaser Party, in which case the Company shall be
responsible for the reasonable fees and expenses of no more than
one such separate counsel. The Company will not be liable to any
Purchaser Party under this Agreement (1) for any settlement by
a Purchaser Party effected without the Company’s prior
written consent, which shall not be unreasonably withheld or
delayed; or (2) to the extent, but only to the extent that a
loss, claim, damage or liability is attributable to any Purchaser
Party’s breach of any of the representations, warranties,
covenants or agreements made by such Purchaser Party in this
Agreement or in the other Transaction Documents. The
indemnification required by this Section 4.8 shall be made by
periodic payments of the amount thereof during the course of the
investigation or defense, as and when bills are received or are
incurred. The indemnity agreements contained herein shall be in
addition to any cause of action or similar right of any Purchaser
Party against the Company or others and any liabilities the Company
may be subject to pursuant to law.
4.9 Reservation of Common
Stock. As of the date
hereof, subject to the Reverse Split, the Company has reserved and
the Company shall continue to reserve and keep available at all
times, free of preemptive rights, a sufficient number of shares of
Common Stock equal to the Required Minimum (as defined in the
Notes) for the purpose of enabling the Company to issue the
Conversion Shares and any other shares that may be issuable
pursuant to the Notes and all the Warrant Shares issuable pursuant
to the Warrants. If, on any date, the number of authorized
but unissued (and otherwise unreserved) shares of Common Stock is
less than the Required Minimum on such date, then the Board of
Directors shall use commercially reasonable efforts to amend the
Company’s certificate or articles of incorporation to
increase the number of authorized but unissued shares of Common
Stock to at least the Required Minimum at such time, as soon as
possible and in any event not later than the 75th day after such
date
4.10 Listing
of Common Stock. The Company hereby
agrees to use reasonable best efforts to maintain the listing or
quotation of the Common Stock on the Trading Market on which it is
currently listed, and concurrently with the Closing, the Company
shall apply to list or quote all of the Underlying Shares on such
Trading Market and promptly secure the listing of all of the
Underlying Shares on such Trading Market. The Company further
agrees, if the Company applies to have the Common Stock traded on
any other Trading Market, it will then include in such application
all of the Underlying Shares, and will take such other action as is
necessary to cause all of the Underlying Shares to be listed or
quoted on such other Trading Market as promptly as possible. The
Company will then take all action reasonably necessary to continue
the listing and trading of its Common Stock on a Trading Market and
will comply in all respects with the Company’s reporting,
filing and other obligations under the bylaws or rules of the
Trading Market. The Company agrees to maintain the eligibility of
the Common Stock for electronic transfer through the Depository
Trust Company or another established clearing corporation,
including, without limitation, by timely payment of fees to the
Depository Trust Company or such other established clearing
corporation in connection with such electronic
transfer
4.11 Certain
Transactions and Confidentiality. The Purchaser
covenants that neither it nor any Affiliate acting on its behalf or
pursuant to any understanding with it will execute any purchases or
sales, including Short Sales of any of the Company’s
securities during the period commencing with the execution of this
Agreement and ending at such time that the transactions
contemplated by this Agreement are first publicly announced
pursuant to the initial press release as described in
Section 4.4. The Purchaser, severally and not jointly
with the other Purchaser, covenants that until such time as the
transactions contemplated by this Agreement are publicly disclosed
by the Company pursuant to the initial press release as described
in Section 4.4, such Purchaser will maintain the
confidentiality of the existence and terms of this transaction and
the information included in the Disclosure
Schedules. Notwithstanding the foregoing and notwithstanding
anything contained in this Agreement to the contrary, the Company
expressly acknowledges and agrees that (i) no Purchaser makes
any representation, warranty or covenant hereby that it will not
engage in effecting transactions in any securities of the Company
after the time that the transactions contemplated by this Agreement
are first publicly announced, (ii) no Purchaser shall be restricted
or prohibited from effecting any transactions in any securities of
the Company in accordance with applicable securities laws from and
after the time that the transactions contemplated by this Agreement
are first publicly announced pursuant to the initial press release
as described in Section 4.4, (iii) the Purchaser has
not been asked by the Company to agree, nor has any Purchaser
agreed, to desist from purchasing or selling Securities which have
been issued under the terms of the Purchase Agreement, this Note or
any other Transaction Document, or “derivative”
securities based on securities issued by the Company or to hold the
Securities for any specified term, (iv) Purchaser shall not
be deemed to have any affiliation with or control over any
arm’s length counter-party in any “derivative”
transaction, (y) the Purchaser may engage in hedging
activities, other than Short Sales at various times during the
period that the Securities are outstanding, and (vi) no
Purchaser shall have any duty of confidentiality or duty not to
trade in the securities of the Company to the Company or its
Subsidiaries after the issuance of the initial press
release. Except as contemplated above, Company
acknowledges that such aforementioned hedging activities do not
constitute a breach of any of the Transaction
Documents.
4.12 Conversion
and Exercise Procedures. Each of the form of
Notice of Conversion in the Notes and the Notice of Exercise in the
Warrants set forth the totality of the procedures required of the
Purchasers in order to convert the Notes or exercise the Warrants.
No additional legal opinion, other information or instructions
shall be required of the Purchaser to exercise the Note or exercise
the Warrant. Without limiting the preceding sentences, no
ink-original Notice of Exercise or
Notice of Conversion shall be required, nor shall any medallion
guarantee (or other type of guarantee or notarization) of any
Notice of Exercise or Notice of Conversion form be required in
order to covert and/or exercise the Securities. The Company shall
honor conversions and/or exercises of the Securities and shall
deliver applicable Underlying Shares in accordance with the terms,
conditions and time periods set forth in the Transaction
Documents.
4.13 Form
D; Blue Sky Filings. The Company agrees to
timely file a Form D with respect to the Securities as required
under Regulation D and to provide a copy thereof, promptly upon
request of any Purchaser. The Company shall take such action as the
Company shall reasonably determine is necessary in order to obtain
an exemption for, or to qualify the Securities for, sale to the
Purchaser at the applicable Closing under applicable securities or
“Blue Sky” laws of the states of the United States, and
shall provide evidence of such actions promptly upon request of any
Purchaser.
4.14 DTC
Program. At all times that the Securities are outstanding,
the Company will employ as the transfer agent for the Common Stock
and Conversion Shares a participant in the Depository Trust Company
Automated Securities Transfer Program and cause the Common Stock to
be transferable pursuant to such program.
4.15 Subsequent
Equity Sales. From the date hereof until such time as no
Purchaser holds any of the Notes, the Company shall be prohibited
from effecting or entering into an agreement to effect any issuance
by the Company or any of its Subsidiaries of Common Stock or Common
Stock Equivalents (or a combination of units thereof) involving a
Variable Rate Transaction. “Variable Rate
Transaction” means a transaction which is not
Permitted Indebtedness (including the transactions contemplated by
this Agreement) and in which the Company (i) issues or sells any
debt or equity securities that are convertible into, exchangeable
or exercisable for, or include the right to receive additional
shares of Common Stock either (A) at a conversion price, exercise
price or exchange rate or other price that is based upon and/or
varies with the trading prices of or quotations for the shares of
Common Stock at any time after the initial issuance of such debt or
equity securities, or (B) with a conversion, exercise or exchange
price that is subject to being reset at some future date after the
initial issuance of such debt or equity security or upon the
occurrence of specified or contingent events directly or indirectly
related to the business of the Company or the market for the Common
Stock or (ii) enters into, or effects a transaction under, any
agreement, including, but not limited to, an equity line of credit,
whereby the Company may issue securities at a future determined
price. Any Purchaser shall be entitled to obtain injunctive relief
against the Company to preclude any such issuance, which remedy
shall be in addition to any right to collect damages.
ARTICLE
5
MISCELLANEOUS
5.1 Fees and Expenses. Except as
expressly set forth below and in the Transaction Documents to the
contrary, each party shall pay the reasonable, documented fees and
expenses of its advisers, counsel, accountants and other experts,
if any, and all other expenses incurred by such party incident to
the negotiation, preparation, execution, delivery and performance
of this Agreement. The Company shall pay all Transfer Agent fees
(including, without limitation, any fees required for same-day
processing of any instruction letter delivered by the Company and
any exercise notice delivered by a Purchaser), stamp taxes and
other taxes and duties levied in connection with the delivery of
any Securities to the Purchaser.
5.2 Entire Agreement. The
Transaction Documents, together with the exhibits and schedules
thereto, contain the entire understanding of the parties with
respect to the subject matter hereof and thereof and supersede all
prior agreements and understandings, oral or written, with respect
to such matters, which the parties acknowledge have been merged
into such documents, exhibits and schedules.
5.3 Notices. Any and all notices or
other communications or deliveries required or permitted to be
provided hereunder shall be in writing and shall be deemed given
and effective on the earliest of: (a) the date of transmission, if
such notice or communication is delivered via facsimile or email
attachment at the facsimile number or email address as set forth on
the signature pages attached hereto at or prior to 5:30 p.m. (New
York City time) on a Business Day, (b) the next Business Day after
the date of transmission, if such notice or communication is
delivered via facsimile or email attachment at the facsimile number
or email address as set forth on the signature pages attached
hereto on a day that is not a Business Day or later than 5:30 p.m.
(New York City time) on any Business Day, (c) the second
(2nd)
Business Day following the date of mailing, if sent by U.S.
nationally recognized overnight courier service or (d) upon actual
receipt by the party to whom such notice is required to be given.
The address for such notices and communications shall be as set
forth on the signature pages attached hereto.
5.4 Amendments; Waivers. No
provision of this Agreement may be waived, modified, supplemented
or amended except in a written instrument signed, in the case of an
amendment, by the Company and the Purchaser or, in the case of a
waiver, by the party against whom enforcement of any such waived
provision is sought. No waiver of any default with respect to any
provision, condition or requirement of this Agreement shall be
deemed to be a continuing waiver in the future or a waiver of any
subsequent default or a waiver of any other provision, condition or
requirement hereof, nor shall any delay or omission of any party to
exercise any right hereunder in any manner impair the exercise of
any such right. Any amendment effected in accordance with
accordance with this Section 5.5 shall be binding upon the
Purchaser and holder of Securities and the Company.
5.5 Successors and Assigns. This
Agreement shall be binding upon and inure to the benefit of the
parties and their successors and permitted assigns. The Company may
not assign this Agreement or any rights or obligations hereunder
without the prior written consent of the Purchaser then holding
outstanding Notes (other than by merger). Purchaser may assign any
or all of its rights under this Agreement to any Person to whom
Purchaser assigns or transfers any Securities in compliance with
the Transaction Documents, provided that such transferee agrees in
writing to be bound, with respect to the transferred Securities, by
the provisions of the Transaction Documents that apply to the
“Purchaser,” and provided further that (i) such
transferee is an “accredited investor” within the
meaning of Rule 501 under the Securities Act and (ii) such
transferee is not a direct competitor of the Company or any
Subsidiary.
5.6 No Third-Party Beneficiaries.
This Agreement is intended for the benefit of the parties hereto
and their respective successors and permitted assigns and is not
for the benefit of, nor may any provision hereof be enforced by,
any other Person.
5.7 Governing Law; Exclusive
Jurisdiction. All questions concerning the construction,
validity, enforcement and interpretation of the Transaction
Documents shall be governed by and construed and enforced in
accordance with the internal laws of the State of New York, without
regard to the principles of conflicts of law thereof. Each party
agrees that all legal Proceedings concerning the interpretations,
enforcement and defense of the transactions contemplated by this
Agreement and any other Transaction Documents (whether brought
against a party hereto or its respective affiliates, directors,
officers, shareholders, partners, members, employees or agents)
shall be commenced exclusively in the state and federal courts
sitting in the City of New York. Each party hereby irrevocably
submits to the exclusive jurisdiction of the state and federal
courts sitting in the City of New York, Borough of Manhattan for
the adjudication of any dispute hereunder or in connection herewith
or with any transaction contemplated hereby or discussed herein
(including with respect to the enforcement of any of the
Transaction Documents), and hereby irrevocably waives, and agrees
not to assert in any Action or Proceeding, any claim that it is not
personally subject to the jurisdiction of any such court, that such
Action or Proceeding is improper or is an inconvenient venue for
such Proceeding. Each party hereby irrevocably waives personal
service of process and consents to process being served in any such
Action or Proceeding by mailing a copy thereof via registered or
certified mail or overnight delivery (with evidence of delivery) to
such party at the address in effect for notices to it under this
Agreement and agrees that such service shall constitute good and
sufficient service of process and notice thereof. Nothing contained
herein shall be deemed to limit in any way any right to serve
process in any other manner permitted by law. If any party shall
commence an Action or Proceeding to enforce any provisions of the
Transaction Documents, then, in addition to the obligations of the
Company elsewhere in this Agreement, the prevailing party in such
Action or Proceeding shall be reimbursed by the non-prevailing
party for its reasonable attorneys’ fees and other costs and
expenses incurred with the investigation, preparation and
prosecution of such Action or Proceeding.
5.8 Survival. The representations
and warranties contained herein shall survive the Closing and the
delivery of the Securities at Closing.
5.9 Execution. This Agreement may
be executed in two or more counterparts, all of which when taken
together shall be considered one and the same agreement and shall
become effective when counterparts have been signed by each party
and delivered to each other party, it being understood that the
parties need not sign the same counterpart. In the event that any
signature is delivered by facsimile transmission or by e-mail
delivery of a “.pdf” format data file, such signature
shall create a valid and binding obligation of the party executing
(or on whose behalf such signature is executed) with the same force
and effect as if such facsimile or “.pdf” signature
page were an original thereof.
5.10 Severability.
If any term, provision, covenant or restriction of this Agreement
is held by a court of competent jurisdiction to be invalid,
illegal, void or unenforceable, the remainder of the terms,
provisions, covenants and restrictions set forth herein shall
remain in full force and effect and shall in no way be affected,
impaired, or invalidated, as long as the essential terms and
conditions of this Note for each party remain valid, binding, and
enforceable. The parties shall use their commercially reasonable
efforts to find and employ an alternative means to achieve the same
or substantially the same result as that contemplated by such term,
provision, covenant or restriction.
5.11 Rescission
and Withdrawal Right. Notwithstanding
anything to the contrary contained in (and without limiting any
similar provisions of) any of the other Transaction Documents,
whenever any Purchaser exercises a right, election, demand or
option under a Transaction Document and the Company does not timely
perform its related obligations within the periods therein
provided, then such Purchaser may rescind or withdraw, in its sole
discretion from time to time upon written notice to the Company,
any relevant notice, demand or election in whole or in part without
prejudice to its future actions and rights; provided,
however,
that, in the case of a rescission of a conversion of the Note, the
Purchaser shall be required to return any shares of Common Stock
subject to any such rescinded conversion or exercise notice
concurrently with the return to such Purchaser of the aggregate
exercise price paid to the Company for such shares and the
restoration of such Purchaser’s right to acquire such shares
pursuant to such Purchaser’s Warrant (including, issuance of
a replacement warrant certificate evidencing such restored
right).
5.12 Replacement
of Securities. If any certificate or
instrument evidencing any Securities is mutilated, lost, stolen or
destroyed, the Company shall issue or cause to be issued in
exchange and substitution for and upon cancellation thereof (in the
case of mutilation), or in lieu of and substitution therefor, a new
certificate or instrument, but only upon receipt of evidence
reasonably satisfactory to the Company of such loss, theft or
destruction. The applicant for a new certificate or instrument
under such circumstances shall also pay any reasonable third-party
costs (including customary indemnity) associated with the issuance
of such replacement Securities.
5.13 Remedies.
In addition to being entitled to exercise all rights provided
herein or granted by law, including recovery of damages, each of
the Purchaser and the Company will be entitled to specific
performance under the Transaction Documents. The parties agree that
monetary damages may not be adequate compensation for any loss
incurred by reason of any breach of obligations contained in the
Transaction Documents and hereby agree to waive and not to assert
in any Action for specific performance of any such obligation the
defense that a remedy at law would be adequate.
5.14 Payment
Set Aside. To the extent that
the Company makes a payment or payments to any Purchaser pursuant
to any Transaction Document or a Purchaser enforces or exercises
its rights thereunder, and such payment or payments or the proceeds
of such enforcement or exercise or any part thereof are
subsequently invalidated, declared to be fraudulent or
preferential, set aside, recovered from, disgorged by or are
required to be refunded, repaid or otherwise restored to the
Company, a trustee, receiver or any other Person under any law
(including, without limitation, any bankruptcy law, state or
federal law, common law or equitable cause of action), then to the
extent of any such restoration the obligation or part thereof
originally intended to be satisfied shall be revived and continued
in full force and effect as if such payment had not been made or
such enforcement or setoff had not occurred.
5.15 Usury.
To the extent it may lawfully do so, the Company hereby agrees not
to insist upon or plead or in any manner whatsoever claim, and will
resist any and all efforts to be compelled to take the benefit or
advantage of, usury laws wherever enacted, now or at any time
hereafter in force, in connection with any Action or Proceeding
that may be brought by any Purchaser in order to enforce any right
or remedy under any Transaction Document. Notwithstanding any
provision to the contrary contained in any Transaction Document, it
is expressly agreed and provided that the total liability of the
Company under the Transaction Documents for payments in the nature
of interest shall not exceed the maximum lawful rate authorized
under applicable law (the “Maximum
Rate”), and, without
limiting the foregoing, in no event shall any rate of interest or
default interest, or both of them, when aggregated with any other
sums in the nature of interest that the Company may be obligated to
pay under the Transaction Documents exceed such Maximum Rate. It is
agreed that if the maximum contract rate of interest allowed by law
and applicable to the Transaction Documents is increased or
decreased by statute or any official governmental action subsequent
to the date hereof, the new maximum contract rate of interest
allowed by law will be the Maximum Rate applicable to the
Transaction Documents from the effective date thereof forward,
unless such application is precluded by applicable law. If under
any circumstances whatsoever, interest in excess of the Maximum
Rate is paid by the Company to any Purchaser with respect to
indebtedness evidenced by the Transaction Documents, such excess
shall be applied by such Purchaser to the unpaid principal balance
of any such indebtedness or be refunded to the Company, the manner
of handling such excess to be at such Purchaser’s
election.
5.16 Liquidated
Damages. The Company’s
obligations to pay any partial liquidated damages or other amounts
owing under the Transaction Documents is a continuing obligation of
the Company and shall not terminate until all unpaid partial
liquidated damages and other amounts have been paid notwithstanding
the fact that the instrument or security pursuant to which such
partial liquidated damages or other amounts are due and payable
shall have been canceled.
5.17 Saturdays,
Sundays, Holidays, etc. If the last or appointed day for the
taking of any action or the expiration of any right required or
granted herein shall not be a Business Day, then such action may be
taken or such right may be exercised on the next succeeding
Business Day.
5.18 Construction.
The parties agree that each of them and/or their respective counsel
have reviewed and had an opportunity to revise the Transaction
Documents and, therefore, the normal rule of construction to the
effect that any ambiguities are to be resolved against the drafting
party shall not be employed in the interpretation of the
Transaction Documents or any amendments thereto.
5.19 WAIVER
OF JURY TRIAL. IN ANY ACTION, SUIT, OR PROCEEDING IN ANY
JURISDICTION BROUGHT BY ANY PARTY AGAINST ANY OTHER PARTY, THE
PARTIES EACH KNOWINGLY AND INTENTIONALLY, TO THE GREATEST EXTENT
PERMITTED BY APPLICABLE LAW, HEREBY ABSOLUTELY, UNCONDITIONALLY,
IRREVOCABLY AND EXPRESSLY WAIVES FOREVER TRIAL BY
JURY.
IN
WITNESS WHEREOF, the parties hereto have caused this Securities
Purchase Agreement to be duly executed by their respective
authorized signatories as of the date first indicated
above.
GOIP GLOBAL, INC.
|
Address for Notice:
|
By:__________________________________________
Name:
Title:
With a
copy to (which shall not constitute notice):
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Email:
|
|
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[REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE
PAGE FOR PURCHASER FOLLOWS]
PURCHASER
SIGNATURE PAGES TO GOIG SECURITIES PURCHASE AGREEMENT
IN
WITNESS WHEREOF, the undersigned have caused this Securities
Purchase Agreement to be duly executed by their respective
authorized signatories as of the date first indicated
above.
Name of
Purchaser:
_____________________________________________
Signature of Authorized Signatory of
Purchaser: __________________________________
Name of
Authorized Signatory:
_______________________________________
Title
of Authorized Signatory: _____
_______________________________________
Email
Address of Authorized Signatory: _____________________
Facsimile Number of
Authorized Signatory:
__________________________________________
Address
for Notice to Purchaser:
Address
for Delivery of Securities to Purchaser (if not same as address for
notice):
EIN
Number: ________________
EXHIBIT A
Form of Note
EXHIBIT B
Form of Subordination Agreement
EXHIBIT C
Form of Warrant
Schedule 1
Purchase Price; Securities Purchased
Name
of
Purchaser
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Purchase
Price
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Aggregate
Principal Amount of Notes being Purchased
|
Number
of Warrant Shares issuable upon exercise of Warrant being
Purchased
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|
|
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Exhibit 10.7
SUBORDINATION AGREEMENT
SUBORDINATION
AGREEMENT (this “Agreement”), dated as of
___________, 2020, among the purchasers signatory to the Securities
Purchase Agreement (as defined below) (together with its respective
successors and assigns, including, any future holder of Senior Debt
(as defined below), the “Senior Creditors”),
_________________ (collectively, the “Subordinated Creditors” and each,
individually, a “Subordinated
Creditor”), and GoIP Global, Inc., a Colorado
corporation (the “Company”).
WHEREAS, pursuant
to a Securities Purchase Agreement, dated as of May 8, 2020 (as
amended and in effect from time to time, including any replacement
agreement therefor, the “Securities Purchase Agreement”),
among the Company and the Senior Creditors, the Senior Creditors
has extended credit to the Company as evidenced by certain Senior
Secured Convertible Notes due May 8, 2021 in the aggregate
principal amount of $3,000,000.00 issued by the Company to the
Senior Creditors (together with any notes issued in exchange
therefor or replacement thereof or any additional investment made
by the Senior Creditors and as the same may be amended,
supplemented, restated or otherwise modified from time to time, the
“Senior Notes”);
and
WHEREAS, each
Subordinated Creditor has extended or agreed to extend credit to
the Company pursuant to certain promissory notes, dated on or about
the date hereof, issued by the Company in favor of such
Subordinated Creditor (as amended with the consent of the Senior
Creditors as provided herein and in effect from time to time,
collectively, the “Subordinated Agreements” and each,
individually, a “Subordinated
Agreement”); and
WHEREAS, in order
to induce the Senior Creditors to purchase Senior Notes and
otherwise extend credit to the Company pursuant to the Securities
Purchase Agreement, the Company and the Subordinated Creditors have
agreed to enter into this Agreement with and the Senior
Creditors.
NOW,
THEREFORE, in consideration of the foregoing, the mutual agreements
herein contained and other good and valuable consideration, the
receipt and adequacy of which are hereby acknowledged, the parties
hereto, intending to be legally bound, hereby agree as
follows:
1. Definitions. Terms not otherwise
defined herein have the same respective meanings given to them in
the Securities Purchase Agreement. In addition, the following terms
shall have the following meanings:
“Senior Debt” shall mean all
principal, interest, fees, costs, enforcement expenses (including
legal fees and disbursements), collateral protection expenses and
other reimbursement or indemnity obligations created or evidenced
by the Securities Purchase Agreement, the Senior Notes or any of
the other Transaction Documents or any prior, concurrent, or
subsequent notes, instruments or agreements of indebtedness,
liabilities or obligations of any type or form whatsoever relating
thereto in favor of the Senior Creditors (including without
limitation, the Senior Creditors’ respective successors,
assigns and participants). Without limiting any term contained in
the immediately preceding sentence, Senior Debt shall expressly
include any and all interest accruing or out of pocket costs or
expenses incurred after the date of any filing by or against any
Credit Party of any petition under any Bankruptcy Law regardless of
whether the Senior Creditors’ claim therefor is allowed or
allowable in the case or proceeding relating thereto.
“Subordinated Debt” shall mean all
principal, interest, fees, costs, enforcement expenses (including
legal fees and disbursements), collateral protection expenses and
other reimbursement and indemnity obligations of the Company to
each Subordinated Creditor created or evidenced by the applicable
Subordinated Agreement or any prior, concurrent or subsequent
guaranty, notes, instruments or agreements of indebtedness,
liabilities or obligations of any type or form whatsoever relating
thereto executed and delivered by the Company in favor of such
Subordinated Creditor.
“Subordinated Documents” shall mean
collectively, the Subordinated Agreements and any and all other
guaranties and security interests, mortgages and other liens
directly or indirectly guarantying or securing any of the
Subordinated Debt, and any and all other documents or instruments
evidencing or further guarantying or securing directly or
indirectly any of the Subordinated Debt, whether now existing or
hereafter created, copies of which Subordinated Documents are
attached hereto as Exhibit
A.
2. General. The Subordinated Debt and
any and all Subordinated Documents shall be and hereby are
subordinated and the Company is not permitted to pay, and no
Subordinated Creditor is permitted to receive, any payment on its
Subordinated Debt until the full and final payment in cash of the
Senior Debt, whether now or hereafter incurred or owed by the
Company. Notwithstanding the immediately preceding sentence, the
Company shall be permitted to pay, and each Subordinated Creditor
shall be permitted to receive,
3. Enforcement. No Subordinated Creditor
will take or omit to take any action or assert any claim with
respect to its Subordinated Debt or otherwise which is inconsistent
with the provisions of this Agreement. Without limiting the
foregoing, no Subordinated Creditor will assert, collect or enforce
its Subordinated Debt or any part thereof or take any action to
foreclose or realize upon its Subordinated Debt or any part thereof
or enforce any of its Subordinated Documents except to the extent
(but only to such extent) that the commencement of a legal action
may be required to toll the running of any applicable statute of
limitation. Until the Senior Debt has been finally paid in full in
cash, no Subordinated Creditor shall have any right of subrogation,
reimbursement, restitution, contribution or indemnity whatsoever
from any assets of the Company or any guarantor of or provider of
collateral security for the Senior Debt. Each Subordinated Creditor
further waives any and all rights with respect to
marshalling.
4. Payments Held in Trust. No
Subordinated Creditor will hold in trust and immediately pay over
to the Senior Creditors in the same form of payment received, with
appropriate endorsements, for application to the Senior Debt any
cash amount that the Company pays to such Subordinated Creditor
with respect to its Subordinated Debt, or as collateral for the
Senior Debt any other assets of the Company that such Subordinated
Creditor may receive with respect to its Subordinated Debt, except
with respect to payments expressly permitted pursuant to
Section 2. The Senior Creditors is irrevocably authorized to
supply any required endorsement or assignment which may have been
omitted.
5. Evidence of Subordination. The
Company and each Subordinated Creditor shall make appropriate
notations in their books to show the subordinate character of all
applicable Subordinated Debt which may now or hereafter be carried
on open account. Until the Senior Debt has been indefeasibly paid
in full, the Company shall not issue any instrument, security or
other writing evidencing any part of its Subordinated Debt except
as described in this Section 5 or at the request of and in the
manner requested by the Senior Creditors; and no Subordinated
Creditor shall subordinate any part of its Subordinated Debt except
to or in favor of the Senior Creditors.
6. Defense to Enforcement. If any
Subordinated Creditor, in contravention of the terms of this
Agreement, shall commence, prosecute or participate in any suit,
action or proceeding against the Company, then the Company may
interpose as a defense or plea the making of this Agreement, and
the Senior Creditors may intervene and interpose such defense or
plea in its name or in the name of the Company. If any Subordinated
Creditor, in contravention of the terms of this Agreement, shall
attempt to collect any of its Subordinated Debt or enforce any of
its Subordinated Documents, then the Senior Creditors or the
Company may, by virtue of this Agreement, restrain the enforcement
thereof in the name of the Senior Creditors or in the name of the
Company. If any Subordinated Creditor, in contravention of the
terms of this Agreement, obtains any cash or other assets of the
Company as a result of any administrative, legal or equitable
actions, or otherwise, such Subordinated Creditor agrees forthwith
to pay, deliver and assign to the Senior Creditors with appropriate
endorsements, any such cash for application to the Senior Debt and
any such other assets as collateral for the Senior
Debt.
7.
Bankruptcy, Etc.
(a)
Until all Senior Debt shall have been indefeasibly paid in full in
cash, no Subordinated Creditor will commence or join with any other
creditor or creditors of the Company in commencing any bankruptcy,
reorganization or insolvency proceedings against the
Company.
(b) At
any meeting of creditors of the Company or in the event of any case
or proceeding, voluntary or involuntary, for the distribution,
division or application of all or part of the assets of the Company
or the proceeds thereof, whether such case or proceeding be for the
liquidation, dissolution or winding up of the Company or its
businesses, a receivership, insolvency or bankruptcy case or
proceeding, an assignment for the benefit of creditors or a
proceeding by or against the Company for relief under any
bankruptcy law or any other law relating to the relief of debtors,
readjustment of indebtedness, reorganization, arrangement,
composition or extension or marshalling of assets or otherwise, the
Senior Creditors is hereby irrevocably authorized on behalf of each
Subordinated Creditor at any such meeting or in any such
proceeding:
(i) to
enforce claims comprising the Subordinated Debt either in its own
name or in the name of such Subordinated Creditor, by proof of
debt, proof of claim, suit or otherwise;
(ii) to
receive or collect any cash or other assets of the Company
distributed, divided or applied by way of dividend or payment, or
any securities issued on account of any Subordinated Debt, and
apply such cash to or to hold such other assets or securities as
collateral for the Senior Debt, and to apply to the Senior Debt any
cash proceeds of any realization upon such other assets or
securities that the Senior Creditors elects to effect, until all of
the Senior Debt shall have been paid in full in cash, rendering to
such Subordinated Creditor any surplus to which such Subordinated
Creditor is then entitled;
(iii)
to vote claims comprising the Subordinated Debt, to accept or
reject any plan of partial or complete liquidation, reorganization,
arrangement, composition or extension; and
(iv) to
take generally any action in connection with any such meeting or
proceeding which such Subordinated Creditor might otherwise
take.
8.
Lien Subordination.
(a) The
Subordinated Debt shall be unsecured and the Company shall not
grant any Liens to secure any of the Subordinated Debt. To the
extent any Lien is ever granted, the Senior Debt, the Securities
Purchase Agreement and the other Transaction Documents and any and
all other documents and instruments evidencing or creating the
Senior Debt and all guaranties, mortgages, security agreements,
pledges and other collateral guarantying or securing the Senior
Debt or any part thereof shall be senior to the Subordinated Debt
and the Subordinated Documents irrespective of the time of the
execution, delivery or issuance of any thereof or the filing or
recording for perfection of any thereof or the filing of any
financing statement or continuation statement relating to any
thereof. Each Subordinated Creditor hereby agrees, upon request of
the Senior Creditors at any time and from time to time, to execute
such other documents or instruments as may be requested by the
Senior Creditors further to evidence of public record or otherwise
the senior priority of the Senior Debt as contemplated hereby. Each
Subordinated Creditor further agrees to maintain on its books and
records such notations as the Senior Creditors may reasonably
request to reflect the subordination contemplated hereby and to
perfect or preserve the rights of the Senior Creditors
hereunder.
(b)
Each Subordinated Creditor agrees that, within two (2) days
following the Senior Creditors’s written request therefor,
such Subordinated Creditor will execute, deliver and file any and
all such termination statements, mortgage discharges, lien releases
and other agreements and instruments as the Senior Creditors
reasonably deems necessary or appropriate in order to give effect
to the preceding sentence. Each Subordinated Creditor hereby
irrevocably appoints the Senior Creditors, and its successors and
assigns, and their respective officers, with full power of
substitution, the true and lawful attorney(s) of such Subordinated
Creditor for the purpose of effecting any such executions,
deliveries and filings if and to the extent that such Subordinated
Creditor shall have failed to perform such obligations pursuant to
the foregoing provisions of this Section 8(b) within such
period.
9. Senior Creditors’ Freedom of
Dealing. Each Subordinated Creditor agrees, with respect to
the Senior Debt and any and all collateral therefor or guaranties
thereof, that the Company and the Senior Creditors, as applicable,
may agree to increase the amount of the Senior Debt or otherwise
modify, in any respect whatsoever, the terms of any of the Senior
Debt, and the Senior Creditors may grant extensions of the time of
payment or performance to and make compromises, including releases
of collateral or guaranties, and settlements with the Company and
all other Persons, in each case without the consent of such
Subordinated Creditor or the Company and without affecting the
agreements of such Subordinated Creditor or the Company contained
in this Agreement; provided, however, that nothing contained in
this Section 9 shall constitute a waiver of the right of the
Company itself to agree or consent to a settlement or compromise of
a claim which the Senior Creditors may have against the Company. To
the extent any Senior Creditors sells or assigns any of its Senior
Debt, each Subordinated Creditor agrees to execute and deliver any
and all documents and/or agreements reasonably requested by such
Senior Creditors to reflect the continued subordination by such
Subordinated Creditor of its Subordinated Debt in favor of such
purchaser or assignee of such Senior Debt.
10. Modification or Sale of the Subordinated
Debt. No Subordinated Creditor will, at any time while this
Agreement is in effect, modify any of the terms of any of its
Subordinated Debt or any of its Subordinated Documents; nor will
such Subordinated Creditor sell, transfer, pledge, assign,
hypothecate or otherwise dispose of any or all of its Subordinated
Debt unless such Subordinated Creditor provides prior written
notice of such event to the Senior Creditors and the person or
entity acquiring such interest in such Subordinated Debt enters
into a subordination agreement with the Senior Creditors in the
form of this Agreement along with any other documents and/or
agreements reasonably requested by the Senior Creditors. Any
transfer in violation of this Agreement shall be void ab
initio.
11. Company’s Obligations
Absolute. Nothing contained in this Agreement shall impair,
as between the Company and any Subordinated Creditor, the
obligation of the Company to pay to such Subordinated Creditor all
amounts payable in respect of its Subordinated Debt as and when the
same shall become due and payable in accordance with the terms
thereof, or prevent such Subordinated Creditor (except as expressly
otherwise provided in Section 3 or Section 6) from
exercising all rights, powers and remedies otherwise permitted by
its Subordinated Documents and by applicable law upon a default in
the payment of its Subordinated Debt or under its Subordinated
Documents, all, however, subject to the rights of the Senior
Creditors as set forth in this Agreement.
12. Termination of Subordination. This
Agreement shall continue in full force and effect, and the
obligations and agreements of each Subordinated Creditor and the
Company hereunder shall continue to be fully operative, until all
of the Senior Debt shall have been paid and satisfied in full in
cash and such full payment and satisfaction shall be final and not
avoidable. To the extent that the Company or any guarantor of or
provider of collateral for the Senior Debt makes any payment on the
Senior Debt that is subsequently invalidated, declared to be
fraudulent or preferential or set aside or is required to be repaid
to a trustee, receiver or any other party under any bankruptcy,
insolvency or reorganization act, state or federal law, common law
or equitable cause (such payment being hereinafter referred to as a
“Voided
Payment”), then to the extent of such Voided Payment,
that portion of the Senior Debt that had been previously satisfied
by such Voided Payment shall be revived and continue in full force
and effect as if such Voided Payment had never been made. In the
event that a Voided Payment is recovered from the Senior Creditors,
an Event of Default shall be deemed to have existed and to be
continuing under the Securities Purchase Agreement from the date of
the Senior Creditors’ initial receipt of such Voided Payment
until the full amount of such Voided Payment is restored to the
Senior Creditors. During any continuance of any such Event of
Default, this Agreement shall be in full force and effect with
respect to all of the Subordinated Debt. To the extent that any
Subordinated Creditor has received any payments with respect to its
Subordinated Debt subsequent to the date of the Senior
Creditors’ initial receipt of such Voided Payment and such
payments have not been invalidated, declared to be fraudulent or
preferential or set aside or are required to be repaid to a
trustee, receiver, or any other party under any bankruptcy act,
state or federal law, common law or equitable cause, such
Subordinated Creditor shall be obligated and hereby agrees that any
such payment so made or received shall be deemed to have been
received in trust for the benefit of the such Senior Creditors, and
such Subordinated Creditor hereby agrees to pay to the Senior
Creditors, upon demand, the full amount so received by such
Subordinated Creditor during such period of time to the extent
necessary fully to restore to the Senior Creditors the amount of
such Voided Payment. Upon the payment and satisfaction in full in
cash of all of the Senior Debt, which payment shall be final and
not avoidable, this Agreement will automatically terminate without
any additional action by any party hereto.
13. Specific Performance. The Senior
Creditors is hereby authorized to demand specific performance of
this Agreement, whether or not the Company shall have complied with
the provisions hereof applicable to it, at any time when any
Subordinated Creditor shall have failed to comply with any
provision hereof. Each Subordinated Creditor hereby irrevocably
waives any defense based on the adequacy of a remedy at law which
might be asserted as a bar to the remedy of specific performance
hereof in any action brought therefor by the Senior Creditors.
Except as required hereunder or under any of the other Transaction
Documents, each Subordinated Creditor further waives presentment,
notice and protest in connection with all negotiable instruments
evidencing Senior Debt to which it may be a party, notice of the
acceptance of this Agreement by the Senior Creditors, notice of any
loan made, extension granted or other action taken in reliance
hereon and all demands and notices of every kind in connection with
this Agreement or the Senior Debt.
14. Representations and Warranties. Each
Subordinated Creditor represents and warrants as
follows:
(a)
Such Subordinated Creditor which is not an individual is duly
organized, validly existing and in good standing under the laws of
the jurisdiction of its incorporation or formation and has all
requisite corporate or limited liability company, as applicable,
power and authority to enter into and perform this
Agreement.
(b) The
execution, delivery and performance by such Subordinated Creditor
of this Agreement and the transactions contemplated hereby
(i) have been duly authorized by all necessary corporate or
limited liability company, as applicable, action (except in the
case of individual Subordinated Creditors), and (ii) do not
(A) contravene such Subordinated Creditor’s constituent
documents, if applicable, (B) violate any requirement of law
to which such Subordinated Creditor is subject, or
(C) conflict with or result in the breach of, or constitute a
default under, any contractual obligation binding on such
Subordinated Creditor.
(c) No
authorization or approval or other action by, and no notice to or
filing with, any governmental authority or regulatory body or any
other third party is required for the due execution, delivery,
recordation, filing or performance by such Subordinated Creditor of
this Agreement.
(d)
This Agreement has been duly executed and delivered by such
Subordinated Creditor. This Agreement is the legal, valid and
binding obligation of such Subordinated Creditor, enforceable
against such Subordinated Creditor in accordance with its
terms.
15. Accuracy of Representations and
Warranties. If any representation or warranty contained
herein shall prove to have been materially false when made or in
the event of any breach by the Company or any Subordinated Creditor
in the performance of any of the terms hereof, the Senior Creditors
may, at their option, declare all Senior Debt to be due and
payable, without presentment, demand, protest, or notice of any
kind, notwithstanding any time or credit otherwise
allowed.
16. Additional Documents. The Company
and each Subordinated Creditor shall execute and deliver to the
Senior Creditors such further instruments and shall take such
further action as the Senior Creditors may at any time or times
request in order to carry out the provisions and intent of this
Agreement.
17. Legends. Any instrument or agreement
evidencing the Subordinated Debt shall specifically provide by an
appropriate legend conspicuously placed thereon that payment of any
and all amounts thereunder has been subordinated to prior payment
of Senior Debt in the manner and to the extent set forth in this
Subordination Agreement.
18. Notices. All notices and other
communications which are required and may be given pursuant to the
terms of this Agreement shall be in writing and shall be sufficient
and effective in all respects if given in writing or telecopied,
delivered or mailed by registered or certified mail, postage
prepaid, as follows:
(a) if
to a Senior Creditors or the Company, at the address set forth in
the Securities Purchase Agreement; and
(b) if
to the Subordinated Creditor, at:
[NAME]
or such
other address or addresses as any party hereto shall have
designated by written notice to the other parties hereto. Notices
shall be deemed given and effective upon the earlier to occur of
(x) the third day following deposit thereof in the U.S. mail
or (y) receipt by the party to whom such notice is
directed.
19. Governing Law. THIS AGREEMENT SHALL
BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, AND THE RIGHTS OF THE
PARTIES SHALL BE GOVERNED BY, THE INTERNAL LAW OF THE STATE OF NEW
YORK, EXCLUDING CHOICE-OF-LAW PRINCIPLES OF THE LAW OF SUCH STATE
THAT WOULD PERMIT THE APPLICATION OF THE LAWS OF A JURISDICTION
OTHER THAN SUCH STATE.
20. Waiver of Jury Trial. EACH OF THE
SUBORDINATED CREDITORS AND THE COMPANY IRREVOCABLY WAIVE ALL RIGHT
TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER
BASED ON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR RELATING TO
THIS AGREEMENT, OR ANY OTHER AGREEMENT, DOCUMENT OR INSTRUMENT
DELIVERED IN CONNECTION HEREWITH OR THEREWITH OR THE ACTIONS OF THE
SENIOR CREDITORS IN THE NEGOTIATION, ADMINISTRATION, PERFORMANCE OR
ENFORCEMENT HEREOF OR THEREOF.
21.
Personal Jurisdiction.
(a)
Each of the Subordinated Creditors and the Company irrevocably
submits to the non-exclusive jurisdiction of any New York state or
federal court sitting in the Borough of Manhattan, The City of New
York, over any suit, action or proceeding arising out of or
relating to this Agreement or any of the agreements, documents or
instruments delivered in connection herewith or therewith. To the
fullest extent permitted by applicable law, each of the
Subordinated Creditors irrevocably waives and agrees not to assert,
by way of motion, as a defense or otherwise, any claim that it is
not subject to the jurisdiction of any such court, any objection
that it may now or hereafter have to the laying of the venue of any
such suit, action or proceeding brought in any such court and any
claim that any such suit, action or proceeding brought in any such
court has been brought in an inconvenient forum.
(b)
Nothing in this Section 21 shall affect the right of the
Senior Creditors to serve process in any manner permitted by law,
or limit any right that the Senior Creditors may have to bring
proceedings against any Subordinated Creditor or the Company in the
courts of any appropriate jurisdiction or to enforce in any lawful
manner a judgment obtained in one jurisdiction in any other
jurisdiction.
22. Expenses. Each of the Subordinated
Creditors and the Company jointly and severally agree to pay upon
demand to any of the Senior Creditors the amount of any and all
out-of-pocket expenses, including the reasonable fees and expenses
of their counsel and of any experts or agents, which any Senior
Creditors may incur in connection with the exercise or enforcement
of any of the rights of any Senior Creditors
hereunder.
23. Miscellaneous. This Agreement may be
executed in several counterparts and by each party on a separate
counterpart, each of which when so executed and delivered shall be
an original, and all of which together shall constitute one
instrument. Delivery of an executed counterpart of a signature page
to this Agreement by telecopier or pdf shall be effective as
delivery of a manually executed counterpart of this Agreement. In
proving this Agreement, it shall not be necessary to produce or
account for more than one such counterpart signed by the party
against which enforcement is sought. The Senior Creditors may, in
their sole and absolute discretion, waive any provisions of this
Agreement benefiting the Senior Creditors; provided, however, that
such waiver shall be effective only if in writing and signed by the
Senior Creditors and shall be limited to the specific provision or
provisions expressly so waived. This Agreement shall be binding
upon the successors, assigns and participants of each Subordinated
Creditor and the Company and shall inure to the benefit of the
Senior Creditors and its respective successors, assigns and
participants, any purchaser or purchasers refunding or refinancing
any of the Senior Debt and their respective successors, assigns and
participants, but shall not otherwise create any rights or benefits
for any third party.
[Remainder
of page intentionally left blank; Next page is signature
page.]
IN
WITNESS WHEREOF, the parties hereto have executed or caused this
Agreement to be executed as of the date first above
written.
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[NAME]
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ARENA ORIGINATING CO., LLC
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ARENA SPECIAL OPPORTUNITIES FUND, LP
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ARENA SPECIAL OPPORTUNITIES PARTNERS I, LP
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By:
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GOIP GLOBAL, INC.
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[NAME]
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By:
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Name:
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Title:
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SECURITIES PURCHASE AGREEMENT
THIS
SECURITIES PURCHASE AGREEMENT (the “Agreement”) is made as of
November 3, 2020, by and among Transworld Holdings, Inc., a
Delaware corporation (which was formerly known as GoIP Global,
Inc., a Colorado corporation) (and together with all of its current
and future, direct and/or indirect, wholly owned and/or partially
owned Subsidiaries, collectively, the “Company”), and the Purchaser identified on the signature
pages hereto (including its successors and assigns, the
“Purchaser”).
RECITALS
A. The
Company and the Purchaser are executing and delivering this
Agreement in reliance upon the exemption from securities
registration afforded by Section 4(a)(2) of the Securities Act (as
defined below), and/or Rule 506(b) of Regulation D
(“Regulation
D”) as promulgated by the United States Securities and
Exchange Commission under the Securities Act.
B. The
Purchaser, wishes to purchase, and the Company wishes to sell at
closing, upon the terms and conditions stated in this Agreement,
the Securities (as defined herein), all in the amounts and for the
price set forth on Schedule 1
hereto.
NOW,
THEREFORE, IN CONSIDERATION of the mutual covenants contained in
this Agreement, and for other good and valuable consideration, the
receipt and adequacy of which are hereby acknowledged, the Company
and the Purchaser hereby agrees as follows:
ARTICLE 1
DEFINITIONS
1.1 Defined Terms. In addition to
terms defined elsewhere in this Agreement or in any supplement,
amendment or exhibit hereto, when used herein, the following terms
shall have the following meanings:
(a) “Additional
Note Financing” shall have the meaning ascribed to such term in
Section 2.3(b).
(b) “Affiliate”
means any Person that, directly or indirectly through one or more
intermediaries, controls or is controlled by or is under common
control with a Person, as such terms are used in and construed
under Rule 405 of the Securities Act, including, among others,
executive officers, directors, large stockholders, subsidiaries,
parent entities and sister companies.
(c) “Business
Day” means any day
except any Saturday, any Sunday, any day which is a federal legal
holiday in the United States or any day on which banking
institutions in the State of New York are authorized or required by
law or other governmental action to close.
(d) “Charge
Acquisition Agreement” means that
certain Stock Acquisition Agreement, dated September 25, 2020, by
and among the Company, Transworld Enterprises, Inc., GetCharged,
Inc., the stockholders of GetCharged, Inc. and Andrew Fox, as
representative of the stockholders.
(e) “Closing
Date” means the
Trading Day on which all of the Transaction Documents have been
executed and delivered by the applicable parties thereto, and all
conditions precedent to the parties’ obligations hereunder
have been satisfied or waived, including (i) the Purchaser’s
obligations to pay the Purchase Price, including the
occurrence of the Closing Event and (ii) the
Company’s obligations to deliver the
Securities.
(f) “Closing Event” shall
refer to the closing of the transactions contemplated by the Charge
Acquisition Agreement, the occurrence of which shall be a condition
precedent to the Closing.
(g) “Collateral”
shall have the meaning ascribed to such term as set forth in the
Security Agreement.
(h) “Commitment
Shares” means 903,226
shares of the Company’s Common Stock to be issued to the
Purchaser at Closing.
(i) “Common Stock” means (i)
the Company’s common stock, par value $0.001 per share, and
(ii) any capital stock into which such common stock shall have been
changed or any share capital resulting from a reclassification of
such common stock.
(j) “Common Stock Equivalents”
means any securities of the Company or the Subsidiaries which would
entitle the holder thereof to acquire at any time Common Stock,
including, without limitation, any debt, preferred stock, rights,
options, warrants or other instrument that is at any time
convertible into or exercisable or exchangeable for, or otherwise
entitles the holder thereof to receive, Common Stock.
(k) “Contingent Obligation”
means, as to any Person, any direct or indirect liability,
contingent or otherwise, of that Person with respect to any
indebtedness, lease, dividend or other obligation of another Person
if the primary purpose or intent of the Person incurring such
liability, or the primary effect thereof, is to provide assurance
to the obligee of such liability that such liability will be paid
or discharged, or that any agreements relating thereto will be
complied with, or that the holders of such liability will be
protected (in whole or in part) against loss with respect
thereto.
(l) “Controlled Account” means
a deposit account pursuant to which the written authorization an
officer of the Purchaser is required to direct disposition of the
funds in such deposit account.
(m) “Conversion
Date” has the meaning set forth in the
Note.
(n) “Conversion Shares” means
all shares of Common Stock issuable upon conversion of any portion
of the Note (including, at the Purchaser’s election pursuant
to the conditions set forth in the Note, accrued and unpaid
interest thereon), but solely to the extent and subject to any
conditions set forth in the Note.
(o) “Dollar(s)” and
“$”
means lawful money of the United States.
(p) “Effective Date” means the
date that the initial Registration Statement filed by the Company
pursuant to the Registration Rights Agreement is first declared
effective by the Commission.
(q) “Event of Default” shall
have the meaning set forth in the Note.
(r) “Exchange Act” means the
Securities Exchange Act of 1934, as amended, and the rules and
regulations promulgated thereunder.
(s) “Exempt Issuance” means
the issuance of (a) shares of Common Stock or options to employees,
officers, consultants, advisors or directors of the Company in
consideration of services to the Company pursuant to any stock or
option plan duly adopted for such purpose by a majority of the
members of the Board of Directors or a majority of the members of a
committee of directors established for such purpose, (b) securities
upon the exercise or exchange of or conversion of any Securities
issued hereunder and/or other securities exercisable or
exchangeable for or convertible into shares of Common Stock issued
and outstanding on the date of this Agreement, provided that such
securities have not been amended since the date of this Agreement
to increase the number of such securities or to decrease the
exercise, exchange or conversion price of such securities, (c)
Permitted Indebtedness incurred in accordance with Section
1.1(cc)(e) hereunder or (d) any securities issued to shareholders
of GetCharged, Inc.
in accordance with the terms of the Charge Acquisition
Agreement.
(t) “FedEx Route Acquisition
Agreements” means, collectively, the transactions
contemplated by (i) that certain Asset
Purchase Agreement, dated August 27, 2020, by and between
Transworld Enterprises, Inc. and APS Transportation, Inc., a New York
corporation, and (ii)
that
certain Asset Purchase Agreement, dated August 10, 2020, by and
between Transworld Enterprises, Inc. and Romolos Corp., a New York
corporation.
(u) “GAAP” means generally
accepted accounting principles in the United States of America as
in effect from time to time.
(v) “Indebtedness” means, with
respect to any Person at any date, without duplication,
(a) all indebtedness of such Person for borrowed money,
(b) all obligations of such Person for the deferred purchase
price of property or services (but excluding trade payables
incurred in the ordinary course of business), (c) all
obligations of such Person evidenced by notes, bonds, debentures or
other similar instruments, (d) all indebtedness created or
arising under any conditional sale or other title retention
agreement with respect to property acquired by such Person (even
though the rights and remedies of the seller or the Purchaser under
such agreement in the event of default are limited to repossession
or sale of such property), (e) all capital lease obligations
of such Person, (f) all obligations of such Person, contingent
or otherwise, as an account party or applicant under acceptance,
letter of credit, surety bond or similar facilities, (g) all
obligations of such Person, contingent or otherwise, to purchase,
redeem, retire or otherwise acquire for value any capital stock of
such Person, (h) all obligations for any earn-out consideration,
(i) the liquidation value of preferred capital stock of such
Person, (j) all guarantee obligations of such Person in respect of
obligations of the kind referred to in clauses (a) through (i)
above, (k) all obligations of the kind referred to in
clauses (a) through (i) above secured by (or for which the
holder of such obligation has an existing right, contingent or
otherwise, to be secured by) any lien on property (including,
without limitation, accounts and contract rights) owned by such
Person, whether or not such Person has assumed or become liable for
the payment of such obligation and all obligations of such Person
in respect of hedge agreements; and (l) all Contingent Obligations
in respect to indebtedness or obligations of any Person of the kind
referred to in clauses (a)-(k) above. The Indebtedness of any
Person shall include, without duplication, the Indebtedness of any
other entity (including any partnership in which such Person is a
general partner) to the extent such Person is liable therefor as a
result of such Person’s ownership interest in or other
relationship with such entity, except to the extent the terms of
such Indebtedness expressly provide that such Person is not liable
therefor.
(w) “Investment” means any
investment (including, without limitation, any loan or advance) in
or to any Person, whether payment therefor is made in cash or
capital stock or other equity interests or otherwise, and whether
such Investment is by acquisition of capital stock or other equity
interests or Indebtedness, or by loan, advance, transfer of
property out of the ordinary course of business, capital
contribution, equity or profit sharing interest, extension of
credit on terms other than those normal in the ordinary course of
business or otherwise.
(x) “Liens”
or “liens” means a lien,
mortgage, charge pledge, security interest, encumbrance, right of
first refusal, preemptive right or other restriction, or other
clouds on title.
(y) “Liabilities” means all
direct or indirect liabilities, Indebtedness and obligations of any
kind of Company to the Purchaser, howsoever created, arising or
evidenced, whether now existing or hereafter arising (including
those acquired by assignment), absolute or contingent, due or to
become due, primary or secondary, joint or several, whether
existing or arising through discount, overdraft, purchase, direct
loan, participation, operation of law, or otherwise, including, but
not limited to, pursuant to the Note, this Agreement and/or any of
the other Transaction Documents, all accrued but unpaid interest on
the Note the principal, any letter of credit, any standby letter of
credit, and/or outside attorneys’ and paralegals’ fees
or charges relating to the preparation of the Transaction Documents
and the enforcement of the Purchaser’s rights, remedies and
powers under this Agreement, the Note and/or the other Transaction
Documents.
(z) “Material Adverse Effect”
means a material adverse effect on (a) the business, assets,
property, operations, or condition (financial or otherwise) of the
Company, (b) the validity or enforceability of this Agreement
or any of the other Transaction Documents, (c) the rights or
remedies of the Purchaser hereunder or thereunder, or (d) the
ability of the Company to perform its obligations under any
Transaction Document.
(aa) “May
2020 Financing” means the Company’s financing
which closed on May 8, 2020 involving the sale and issuance of
senior secured notes in an aggregate principal amount of
$3,000,000, warrants for the purchase of an aggregate of 7,600,000 shares of Common
Stock and 7.5 shares of series
G convertible preferred stock to Affiliates of the Purchaser
for an aggregate purchase price of $2,700,000.
(bb) “Note”
means all of the Original Issue Discount Senior Secured Convertible
Promissory Notes due on the third anniversary of the Closing Date
that are owned by the Purchaser, which, subject to the terms and
conditions set forth in this Agreement, shall be purchased from the
Company pursuant to this Agreement, and any and all Note(s) issued
in exchange, transfer or replacement of the Note(s); the form of
Note is annexed hereto as Exhibit A.
(cc) “Permitted
Indebtedness” means (a) the indebtedness evidenced by
the Note, (b) any indebtedness of the Company outstanding as of the
date of this Agreement, (c) lease obligations and purchase money
indebtedness incurred in connection with the acquisition of capital
assets and lease obligations with respect to newly acquired or
leased assets in the ordinary course of business, (d) indebtedness
for up to $2,500,000 to be issued in the Additional Note Financing
and the Subsequent Financing as contemplated by this Agreement,
that (1) is subordinated in right of payment to the Note and the
convertible promissory notes issued to Affiliates of the Purchaser
in the May 2020 Financing, and (2) matures at a date later than 90
days after the Maturity Date, (e) any indebtedness issued by the
Company to any SBA-approved lender and (f) any indebtedness issued
by PTGI upon consummation of the transactions contemplated by the
PTGI Acquisition Agreement, on or after the date hereof, provided
such indebtedness is non-recourse to the Company and its
Subsidiaries (other than PTGI).
(dd) “Permitted
Lien” means the individual and collective reference to
the following: (a) Liens for taxes, assessments and other
governmental charges or levies not yet due or Liens for taxes,
assessments and other governmental charges or levies being
contested in good faith and by appropriate proceedings for which
adequate reserves (in the good faith judgment of the management of
the Company) have been established in accordance with GAAP; (b)
Liens imposed by law which were incurred in the ordinary course of
the Company’s business, such as carriers’,
warehousemen’s and mechanics’ Liens, statutory
landlords’ Liens, and other similar Liens arising in the
ordinary course of the Company’s business, and which (x) do
not individually or in the aggregate materially detract from the
value of such property or assets or materially impair the use
thereof in the operation of the business of the Company and its
consolidated Subsidiaries or (y) are being contested in good faith
by appropriate proceedings, which proceedings have the effect of
preventing for the foreseeable future the forfeiture or sale of the
property or asset subject to such Lien; (c) Liens incurred in
connection with Permitted Indebtedness thereunder; (d) pledges and
deposits made in the ordinary course of business in compliance with
workers’ compensation, unemployment insurance and other
social security laws or regulations; (e) Deposits to secure the
performance of bids, trade contracts, leases, statutory
obligations, surety and appeal bonds, performance bonds and other
obligations of a like nature, in each case in the ordinary course
of business; (f) any Liens in favor of the Purchaser; and (g) Liens
securing Indebtedness of the type described in clause (f) of the
definition of Permitted Indebtedness, provided such Liens do not
extend to any Collateral.
(ee) “Person”
means any individual, sole proprietorship, partnership, joint
venture, trust, unincorporated organization, association,
corporation, institution, entity, party or government (whether
national, federal, state, county, city, municipal or otherwise
including, without limitation, any instrumentality, division,
agency, body or department thereof).
(ff) “Principal
Market” means the principal Trading Market on which
the Common Stock is listed or quoted for trading on the date in
question.
(gg) “Proceeding”
means an action, claim, suit, investigation or proceeding
(including, without limitation, an informal investigation or
partial proceeding, such as a deposition), whether commenced or
threatened.
(hh) “PTGI”
means PTGI International Carrier Services Inc., a Delaware
corporation.
(ii) “PTGI
Acquisition Agreement” means that
certain Stock Purchase Agreement, dated October 2, 2020, by and
among the Company, ICS Group Holdings Inc., a Delaware corporation,
HC2 Holdings Inc., a Delaware corporation and
PTGI.
(jj) “Purchase
Price” shall have the
meaning as set forth on
Schedule 1 next to the heading
“Purchase Price,” in United States
Dollars.
(kk) “Registration
Rights Agreement” means the Registration Rights
Agreement, dated as of the Closing Date, by and between the Company
and the Purchaser as hereinafter amended and/or supplemented
altogether with all exhibits, schedules and annexes to such
Registration Rights Agreement, which Registration Rights Agreement
is annexed hereto as Exhibit D.
(ll) “Registration
Statement” means a
registration statement meeting the requirements set forth in the
Registration Rights Agreement and covering the resale of the
Conversion
Shares issuable upon conversion of the Note and the Commitment
Shares as provided for in the Registration Rights
Agreement.
(mm) “SEC”
or “Commission” means the
United States Securities and Exchange Commission.
(nn) “Securities”
means the Note and the Commitment
Shares purchased pursuant to this Agreement and all
Underlying Shares and any securities of the Company issued to the
Purchaser in replacement, substitution and/or in connection with
any exchange, conversion and/or any other transaction involving all
or any of such securities of the Company.
(oo) “Securities
Act” means the Securities Act of 1933, as amended, and
the rules and regulations promulgated thereunder.
(pp) “Security
Agreement” means the Amended and Restated Security
Agreement, dated on or about the date hereof, by and among the
Company, the Subsidiaries of the Company, and the Purchaser as
hereinafter amended and/or supplemented altogether with all
exhibits, schedules and annexes to such Security Agreement,
pursuant to which the Note is secured by the Collateral, which
security interest in the Collateral shall be perfected by the
Purchaser’s UCC-1, filed with the Secretary of State of the
State of Delaware, to the extent perfectable by the filing of a
UCC-1 Financing Statement and such other documents and instruments
related thereto, which Security Agreement is annexed hereto as
Exhibit B.
(qq) “Short
Sales” means all “short sales” as defined
in Rule 200 of Regulation SHO under the Exchange Act (but shall not
be deemed to include the location and/or reservation of borrowable
shares of Common Stock).
(rr) “SMRH”
means Sheppard, Mullin, Richter & Hampton LLP, with offices
located at 30 Rockefeller Plaza, 39th
Floor, New
York, New York 10112.
(ss) “Subordinated
Note Financing” mean the subordinate promissory
notes with
an aggregate principal amount of $1,096,444 issued by the Company
between May 8, 2020 and the date of this Agreement.
(tt) “Subordination
Agreement” means
the Amended and Restated Subordination Agreement, dated as of the
date hereof, by and among KORR Value L.P., the Purchaser and
the Affiliates of the Purchaser who were issued convertible
promissory notes in the May 2020 Financing, as the Creditors
therein, and the Company which Subordination Agreement is annexed
hereto as Exhibit C, as amended,
restated, supplemented or otherwise modified from time to time in
accordance with its terms.
(uu) “Subsequent
Financing”
shall have the meaning ascribed to such term in Section
4.20.
(vv) “Subsequent
Financing
Closing” shall have the
meaning ascribed to such term in Section 4.20.
(ww) “Subsequent
Financing
Deadline Date” shall have the
meaning ascribed to such term in Section 4.20.
(xx) “Subsidiary”
means, with respect to any Person, a corporation, partnership,
limited liability company or other entity of which shares of stock
or other ownership interests having ordinary voting power (other
than stock or such other ownership interests having such power only
by reason of the happening of a contingency) to elect a majority of
the board of directors or other managers of such corporation,
partnership or other entity are at the time owned, or the
management of which is otherwise controlled, directly or indirectly
through one or more intermediaries, or both, by such Person. All of
the Company’s Subsidiaries are set forth on Schedule 3.1(a)
hereto.
(yy) “Subsidiary
Guaranty Agreement” means each Guaranty Agreement,
substantially in the form of annexed hereto as Exhibit E, between a Subsidiary
and the Purchaser, as amended, restated, supplemented or otherwise
modified from time to time.
(zz) “Trading
Day” means a day on which the principal Trading Market
is open for trading.
(aa) “Trading
Market” means any of the following markets or
exchanges on which the Common Stock is listed or quoted for trading
on the date in question: the NYSE MKT, the Nasdaq Capital Market,
the Nasdaq Global Market, the Nasdaq Global Select Market, the New
York Stock Exchange, any market or quotation service of the OTC
Markets Group or the OTC Bulletin Board (or any successors to any
of the foregoing).
(bb) “Transaction
Documents” means, collectively, this Agreement, the
Note, the Registration Rights Agreement, the Security Agreement,
each Subsidiary Guaranty Agreement, and all financing statements
(or comparable documents now or hereafter filed in accordance with
the UCC or other comparable or similar laws, rules or regulations)
in favor of the Purchaser as secured parties perfecting all Liens
the Purchaser have on the Collateral (which security interests and
Liens of the Purchaser shall be senior to all Indebtedness of the
Company), the Subordination Agreement, any control agreement or
similar agreement related the Controlled Account, and such other
documents, instruments, certificates, supplements, amendments,
exhibits and schedules required and/or attached pursuant to this
Agreement and/or any of the above documents, and/or any other
document and/or instrument related to the above agreements,
documents and/or instruments, and the transactions hereunder and/or
thereunder and/or any other agreement, documents or instruments
required or contemplated hereunder or thereunder, whether now
existing or at any time hereafter arising.
(cc) “Transfer
Agent” means Manhattan Transfer Registrar Co. the
current transfer agent of the Company, with a mailing address of
38B Sheep Pasture Road, Port Jefferson, NY 11777 and a phone number
of 631-928-7655,
and any successor transfer agent of the Company.
(dd) “UCC”
means the Uniform Commercial Code as in effect from time to time in
the State of New York; provided, however, that, in the event
that, by reason of mandatory provisions of law, any or all of the
attachment, perfection, priority, or remedies with respect to the
Purchaser’s Liens on any Collateral is governed by the
Uniform Commercial Code as enacted and in effect in a jurisdiction
other than the State of New York, the term “UCC” shall mean the
Uniform Commercial code as enacted and in effect in such other
jurisdiction solely for purposes of the provisions thereof relating
to such attachment, perfection, priority, or remedies.
(ee) “Underlying
Shares” means all Conversion Shares.
(ff) “VWAP”
means, for any date, the price determined by the first of the
following clauses that applies: (a) if the Common Stock is then
listed or quoted on a Trading Market, the daily volume weighted
average price of the Common Stock for such date (or the nearest
preceding date) on the Trading Market on which the Common Stock is
then listed or quoted as reported by Bloomberg L.P. (based on a
Trading Day from 9:30 a.m. (New York City time) to 4:02 p.m. (New
York City time)), (b) if OTCQB or OTCQX is not a Trading
Market, the volume weighted average price of the Common Stock for
such date (or the nearest preceding date) on OTCQB or OTCQX as
applicable, (c) if the Common Stock is not then listed or quoted
for trading on OTCQB or OTCQX and if prices for the Common Stock
are then reported in the “Pink Sheets” published by OTC
Markets, Inc. (or a similar organization or agency succeeding to
its functions of reporting prices), the most recent bid price per
share of the Common Stock so reported, or (d) in all other
cases, the fair market value of a share of Common Stock as
determined by an independent appraiser selected in good faith by
the Purchaser of a majority in interest of the Securities then
outstanding and reasonably acceptable to the Company, the fees and
expenses of which shall be paid by the Company.
1.2 Other Definitional
Provisions.
(a) Use of Defined Terms. Unless
otherwise specified therein, all terms defined in this Agreement
shall have the defined meanings when used in the other Transaction
Documents or any certificate or
other document made or delivered pursuant hereto or
thereto.
(b) Accounting Terms. As used
herein and in the other Transaction Documents, and any certificate
or other document made or delivered pursuant hereto or thereto,
accounting terms relating to the Company not defined in
Section 1.1
and accounting terms partly
defined in Section 1.1, to the extent not
defined, shall have the respective meanings given to them under
GAAP (provided that
all terms of an accounting or financial nature used herein shall be
construed, and all computations of amounts referred to herein shall
be made without giving effect to (i) any election under Accounting
Standards Codification 825-10-25 (previously referred to as
Statement of Financial Accounting Standards 159) (or any other
Accounting Standards Codification or Financial Accounting Standard
having a similar result or effect) to value any Indebtedness or
other liabilities of the Company at “fair value”, as
defined therein, and (ii) any treatment of Indebtedness in respect
of convertible debt instruments under Accounting Standards
Codification 470-20 (or any other Accounting Standards Codification
or Financial Accounting Standard having a similar result or effect)
to value any such Indebtedness in a reduced or bifurcated manner as
described therein, and such Indebtedness shall at all times be
valued at the full stated principal amount thereof).
(c) Construction. The words
“hereof”,
“herein” and
“hereunder” and words of
similar import when used in this Agreement shall refer to this
Agreement as a whole and not to any particular provision of this
Agreement, and section, schedule and exhibit references are to this
Agreement unless otherwise specified. The meanings given to terms
defined herein shall be equally applicable to both the singular and
plural forms of such
terms.
(d) UCC Terms. Terms used in this
Agreement that are defined in the UCC shall, unless the context
indicates otherwise or are
otherwise defined in this Agreement, have the meanings provided for
by the UCC.
ARTICLE 2
PURCHASE
AND SALE
2.1 Closing. On the Closing Date,
time being of the essence, subject to the occurrence of the Closing
Event and the other conditions set forth in Section 2.3, upon the
terms and subject to the conditions set forth herein, the Company
agrees to sell, and the Purchaser agrees to purchase, the
Securities in such amounts as indicated on
Schedule 1 hereto. The
Purchaser shall deliver to the Company, via wire transfer,
immediately available funds equal to the Purchase Price, and the
Company shall deliver to the Purchaser the Note on the Closing
Date, and the Company and the Purchaser shall deliver the other
items set forth in Section 2.2 deliverable at the Closing. Upon
satisfaction of the covenants and conditions set forth in Sections
2.2 and 2.3, the Closing shall occur at the offices of SMRH or such
other location as the parties shall mutually agree.
2.2 Deliveries.
(a) On or prior to the
Closing Date, the Company shall deliver or cause to be delivered to
the Purchaser the following:
(i) this
Agreement duly executed by the Company;
(ii) a
Security Agreement providing the Purchaser with a lien on all of
the assets of the Company, duly executed by the
Company;
(iii) a
Note registered in the name of the Purchaser with such principal
amount as set forth on Schedule 1;
(iv) the
Commitment Shares, registered in the name of the Purchaser as set
forth on Schedule
1;
(v) the
Registration Rights Agreement duly executed by the
Company;
(vi) a
certificate, in the form acceptable to the Purchaser and its
counsel, executed by the secretary of the Company dated as of the
Closing Date, as to (i) the resolutions as adopted by the
Company’s board of directors relating to the transactions
contemplated by this Agreement in a form acceptable to the
Purchaser, (ii) Certificate of Incorporation or other similar
organizational document of the Company, and (iii) the Bylaws or
other similar organizational document of the Company, each as in
effect at the Closing;
(vii) a
certificate for each Subsidiary of the Company, in the form
acceptable to the Purchaser and its counsel, executed by the
secretary of such Subsidiary dated as of the Closing Date, as to
(i) the resolutions as adopted by the Subsidiary’s board of
directors or other governing body relating to the transactions
contemplated by this Agreement in a form acceptable to the
Purchaser, (ii) Certificate of Incorporation or other similar
organizational document of such Subsidiary, and (iii) the Bylaws or
other similar organizational document of such Subsidiary, each as
in effect at the Closing;
(vii) a
certificate, duly executed by the Chief Executive Officer of the
Company, dated as of the Closing Date, confirming compliance with
Section 2.3(a)(i) and (ii) below and as to such other matters as
may be reasonably requested by the Purchaser and its counsel in the
form acceptable to the Purchaser;
(viii) certificates
evidencing the good standing of the Company and each Company
Subsidiary in such entity’s jurisdiction of incorporation
issued by the Secretary of State (or comparable office) of such
jurisdiction of formation as of a date within five (5) days of the
Closing Date;
(ix) an
opinion of counsel to the Company, in such form as reasonably
acceptable to the Purchaser;
(x) the
Subordination Agreement, duly executed by the Company and the
lenders party thereto;
(xi) a
Subsidiary Guaranty Agreement for each Subsidiary of the
Company;
(xii)
evidence showing the closing of the Additional Note Financing on or
prior to the Closing Date; and
(xiii)
such other documents, instruments,
opinions or certificates relating to the transactions contemplated
by this Agreement as the Purchaser or its counsel may reasonably
request.
(b) On
or prior to the Closing, the Purchaser shall deliver or cause to be
delivered to the Company the following:
(i) this
Agreement duly executed by the Purchaser;
(ii) the
Purchase Price subject to the closing by wire
transfer;
(iii) the
Security Agreement duly executed by the Purchaser;
(iv)
the Registration
Rights Agreement duly executed by thePurchaser; and
(v)
the Subordination Agreement, duly executed by the
Purchaser.
2.3 Conditions to Purchase the
Securities. Subject to the terms and conditions of this
Agreement, the Purchaser will at the Closing purchase from the
Company the Securities in the amounts and for the Purchase Price as
set forth on Schedule 1, provided the
following:
(a) The obligations of
the Company hereunder in connection with the Closing are subject to
the following conditions being met:
(i) the
accuracy in all material respects (or, to the extent
representations or warranties are qualified by materiality or
Material Adverse Effect, in all respects) when made and on the date
of the Closing of the representations and warranties of the
Purchaser contained herein (unless as of a specific date therein in
which case they shall be accurate as of such date);
(ii) all
obligations, covenants and agreements of the Purchaser required to
be performed at or prior to the date of the Closing shall have been
performed;
(iii) the
delivery by the Purchaser of the items set forth in Section 2.2(b)
of this Agreement;
(iv) there
shall have been no Material Adverse Effect with respect to the
Company since the date hereof; and
(v) no
statute, rule, regulation, executive order, decree, ruling or
injunction shall have been enacted, entered, promulgated or
endorsed by any court or other federal, state, local or
other governmental authority of
competent jurisdiction that prohibits the consummation of any of
the transactions contemplated by the Transaction
Documents.
(b) The
obligations of the Purchaser hereunder in connection with the
Closing are subject to the following conditions being
met:
(i) the
accuracy in all material respects (or, to the extent
representations or warranties are qualified by materiality or
Material Adverse Effect, in all respects) when made and on the date
of the Closing of the representations and warranties of the Company
contained herein (unless as of a specific date therein in which
case they shall be accurate as of such date);
(ii) all
obligations, covenants and agreements of the Company required to be
performed at or prior to the Closing shall have been performed in
all material respects;
(iii) the
delivery by the Company of the items set forth in Section 2.2(a) of
this Agreement;
(iv) there
shall have been no Material Adverse Effect with respect to the
Company since the date hereof;
(v) the
Company shall have obtained all governmental, regulatory and third
party consents and approvals, if any, necessary for the entry into
the Transaction Documents and the sale of the
Securities;
(vi) satisfaction
of the Closing Event;
(vii) consummation
of a debt financing by the Company on or prior to the Closing Date,
the gross proceeds of which, in the aggregate, equal $500,000 and is subordinated to the
Note and matures 90 days after the Note (the
“Additional
Note Financing”); and
(vi) no
statute, rule, regulation, executive order, decree, ruling or
injunction shall have been enacted, entered, promulgated or
endorsed by any court or other federal, state, local or
other governmental authority of
competent jurisdiction that prohibits the consummation of any of
the transactions contemplated by the Transaction
Documents.
2.4 Purchase Price and Payment of the
Purchase Price for the Securities. The Purchase Price for
the Securities to be purchased by the Purchaser at the Closing
shall be as set forth on Schedule 1 and shall be
paid at the Closing (less all of the Purchaser’s Expenses (as
defined below)) by the Purchaser by wire transfer of immediately
available funds to the Company in accordance with the
Company’s written wiring instructions, against delivery of
the Securities.
ARTICLE
3
REPRESENTATIONS
AND WARRANTIES; OTHER ITEMS
3.1 Representation and Warranties of the
Company. Except as set forth in
the Disclosure Schedules, which Disclosure Schedules shall be
deemed a part hereof and shall qualify any representation or
otherwise made herein to the extent of the disclosure contained in
the corresponding section of the Disclosure Schedules (but in no
event shall qualify any indemnity obligation of the Company
hereunder), the Company (which for purposes of this
Section 3.1
means the Company and all of its Subsidiaries) represents and
warrants to the Purchaser that on the Closing Date (unless as of a
specific date set forth below):
(a) Subsidiaries. All of the direct
and indirect subsidiaries of the Company and the locations thereof
are set forth on Schedule
3.1(a). The Company owns, directly or indirectly, all of the
capital stock or other equity interests of each Subsidiary free and
clear of any Liens, and all of the issued and outstanding shares of
capital stock or other interests of each Subsidiary are validly
issued and are fully paid, non-assessable and free of preemptive
and similar rights to subscribe
for or purchase securities. Schedule 3.1(a) sets forth, as
of the Closing Date, the jurisdiction of organization and the
location of the Company’s and its subsidiaries’
executive offices and other places of business.
(b) Organization, Etc. The Company
and each of the Subsidiaries is duly organized, validly existing
and in good standing under the laws of the state of their
respective organization and are duly qualified and in good standing or has
applied for qualification as a foreign corporation authorized to do
business in each jurisdiction where, because of the nature of its
activities or properties, such qualification is required except
where the failure to be so qualified would not reasonably be
expected to have a Material Adverse Effect.
(c) Authorization: No Conflict. The
execution, delivery and performance of the Transaction Documents
and the transactions contemplated thereby by the Company,
including, but not limited to, the sale and issuance of the
Securities for the Purchase Price, the reservation for issuance of the Underlying
Shares required to be reserved pursuant to the terms of the Note,
of the issuance the Underlying Shares
into which the Note is convertible and the issuance and sale of the
Commitment Shares (i) are within the Company’s
corporate powers, (ii) have been duly authorized by all necessary action by
or on behalf of the Company (and/or its stockholders to the extent
required by law), (iii) have received all necessary and/or
required governmental, regulatory and other approvals and consents
(if any shall be required), (iv) do not and shall not contravene or
conflict in any material respect with any provision of, or require
any consents under (1) any law, rule, regulation or ordinance, (2)
the Company’s organizational documents; and/or (3) any
agreement, credit facility, debt or other instrument (evidencing a
Company or Subsidiary debt or otherwise) or other understanding to
which the Company or any Subsidiary is a party or by which any
property or asset of the Company or any Subsidiary is bound or
affected, and (v) other than the Liens granted to the Purchaser
pursuant to the Transaction Documents, do not result in, or
require, the creation or imposition of any Lien and/or encumbrance
on any of the Company’s properties or revenues pursuant to
any law, rule, regulation or ordinance or otherwise.
(d) Validity and Binding Nature.
The Transaction Documents to which the Company is a party are the
legal, valid and binding obligations of the Company, enforceable
against the Company in accordance with their respective terms,
except as enforceability may be limited by bankruptcy, insolvency,
reorganization and other similar laws of general application
affecting the rights and remedies of creditors and by general
equitable principles (whether enforcement is sought by proceedings
in equity or at law).
(e) Title to Assets. The Company
and the Subsidiaries have good and marketable title in fee simple
to all real property owned by them and good and marketable title in
all personal property owned by them that is material to the
business of the Company and the Subsidiaries, in each case free and clear
of all Liens, except for (i) Liens as do not materially affect the
value of such property and do not materially interfere with the use
made and proposed to be made of such property by the Company and
the Subsidiaries, (ii) Liens for the payment of federal, state or
other taxes, for which appropriate reserves have been made therefor
in accordance with GAAP and the payment of which is not delinquent,
and (iii) Permitted Liens. Any real property and facilities held
under lease by the Company and the Subsidiaries are held by them
under valid, subsisting and enforceable leases with which the
Company and the Subsidiaries are in compliance.
(f) Compliance.
Neither the Company nor any Subsidiary: (i) is in default under or
in violation of (and no event has occurred that has not been waived
that, with notice or lapse of time or both, would result in a
default by the Company or any Subsidiary under), nor has the
Company or any Subsidiary received notice of a claim that it is in
default under or that it is in violation of, any indenture, loan or
credit agreement or any other agreement or instrument to which it
is a party or by which it or any of its properties is bound
(whether or not such default or violation has been waived), (ii) is
in violation of any judgment, decree or order of any court,
arbitrator or other governmental authority or (iii) is or has been
in violation of any statute, rule, ordinance or regulation of any
governmental authority, including without limitation all foreign,
federal, state and local laws relating to securities, corporate
law, taxes, environmental protection, occupational health and
safety, product quality and safety and employment and labor
matters, except in each case as could not have or reasonably be
expected to result in a Material Adverse
Effect.
(g) Taxes. Except for matters that
would not, individually or in the aggregate, have or reasonably be
expected to result in a Material Adverse Effect, the Company and
its Subsidiaries each (i) has made or filed all United States
federal, state and local income and all foreign income and
franchise tax returns, reports and declarations required by any
jurisdiction to which it is subject, (ii) has paid all taxes and
other governmental assessments and charges that are material in
amount, shown or determined to be due on such returns, reports and
declarations and (iii) has set aside on its books provision
reasonably adequate for the payment of all material taxes for
periods subsequent to the periods to which such returns, reports or
declarations apply. There are no unpaid taxes in any material
amount claimed to be due by the taxing authority of any
jurisdiction, and the officers of the Company or of any Subsidiary
know of no basis for any such claim.
(h) Licenses and
Permits. The Company possesses
all certificates, authorizations, consents, approvals, orders,
licenses and permits issued by the appropriate federal, state or
foreign regulatory authorities (collectively, the
“Permits”),
necessary to conduct its business as now conducted. All of such
Permits are valid and in full force and effect. There is no pending
or, to the Company’s knowledge, threatened action, suit,
proceeding or investigation that individually or in the aggregate
would reasonably be expected to lead to the revocation,
modification, termination, suspension or any other impairment of
the rights of the holder of any such Permit.
(i) Investment Company. The Company
is not (i) an “investment company” or a company
“controlled”, whether directly or indirectly, by an
“investment company”, within the meaning of the
Investment Company Act of 1940, as amended; or (ii) engaged principally, or as one of its
important activities, in the business of extending credit for the
purpose of purchasing or carrying margin stock (within the meaning
of Regulation U of the Board of Governors of the Federal Reserve
System).
(j) Absence of Defaults
and Conflicts.
The Company
is not (i) in violation of its charter, by-laws or similar
incorporation or organizational documents or (ii) in violation
or default in the performance or observance of any material
obligation, agreement, covenant or condition contained in any
contract, indenture, mortgage, deed of trust, loan or credit
agreement, note, lease or other agreement or instrument to which
the Company is a party or by which it may be bound, or to which any
of the property or assets of the Company is subject
(collectively, “Agreements and
Instruments”). The execution,
delivery and performance of this Agreement and the consummation of
the transactions contemplated in this Agreement and the other
Transaction Documents, and compliance by the Company with its
obligations under this Agreement and the other Transaction
Documents, do not and will not, whether with or without the giving
of notice or passage of time or both, (w) conflict with or result
in a breach of any of the terms and provisions of, or constitute a
default or Repayment Event (as defined below) under, (x) result in
the creation or imposition of any lien, charge or encumbrance
(other than Permitted Liens) upon any property or assets of the
Company pursuant to, the Agreements and Instruments, (y) result in
any violation of the provisions of the charter, by-laws or similar
organizational documents of the Company, or (z) result in any
applicable law, statute, rule, regulation, judgment, order, writ or
decree of any government, government instrumentality or court,
domestic or foreign, having jurisdiction over the Company or any of
its assets, properties or operations, except in the case of this
clause (z) for such conflicts, violations, breaches or defaults
which would not reasonably be expected to result in a Material
Adverse Effect on the Company. As used herein, a
“Repayment
Event”
means any
event or condition which gives the holder of any note, debenture or
other evidence of indebtedness that is material to the operations
or financial results of the Company (or any person acting on such
holder’s behalf) the right to require the repurchase,
redemption or repayment of all or a portion of such indebtedness by
the Company.
(k) Foreign Corrupt
Practices Act. Neither the Company
nor, to the Company’s knowledge, any of its affiliates,
directors, officers, employees, agents or other person acting on
behalf of the Company is aware of or has taken any action, directly
or indirectly, that would result in a material violation by such
person of the Foreign Corrupt Practices Act of 1977, as amended,
and the rules and regulations thereunder (the “FCPA”),
including, without limitation, making use of the mails or any means
or instrumentality of interstate commerce corruptly in furtherance
of an offer, payment, promise to pay or authorization of the
payment of money, or other property, gift, promise to give, or
authorization of the giving of anything of value to any
“foreign official” (as such term is defined in the
FCPA) or any foreign political party or official thereof or any
candidate for foreign political office, in contravention of the
FCPA and the Company and, to the Company’s knowledge, its
affiliates have conducted their businesses in material compliance
with the FCPA and have instituted and maintain policies and
procedures designed to ensure, and which are reasonably expected to
continue to ensure, continued compliance
therewith.
(l) Rule 506(d) Bad Actor Disqualification
Representations and Covenants.
(i) No Disqualification Events.
Neither the Company, nor any of its predecessors, affiliates, any
manager, executive officer, other officer of the Company
participating in the offering, any beneficial owner (as that term
is defined in Rule 13d-3 under the Exchange Act) of 20% or more of
the Company’s outstanding voting equity securities,
calculated on the basis of voting power, nor any promoter (as that
term is defined in Rule 405 under the Securities Act) connected
with the Company in any capacity as of the date of this Agreement
and on the Closing Date (each, a “Company Covered Person”
and, together, “Company Covered Persons”)
is subject to any of the “Bad Actor” disqualifications
described in Rule 506(d)(1)(i) to (viii) under the Securities Act
(a “Disqualification
Event”), except for a Disqualification Event covered
by Rule 506(d)(2) or (d)(3). The Company has exercised reasonable
care to determine (A) the identity of each person that is a
Company Covered Person; and (B) whether any Company Covered
Person is subject to a Disqualification Event. The Company has
complied with its disclosure obligations under Rule
506(e).
(ii) Other
Covered Persons. The Company is not aware of any person
(other than any Company Covered Person) who has been or will be
paid (directly or indirectly) remuneration in connection with the
purchase and sale of the Note and the Commitment Shares who is
subject to a Disqualification Event (each, an “Other Covered
Person”).
(iii) Reasonable
Notification Procedures. With respect to each Company
Covered Person, the Company has established procedures reasonably
designed to ensure that the Company receives notice from each such
Company Covered Person of (A) any Disqualification Event relating
to that Company Covered Person, and (B) any event that would, with
the passage of time, become a Disqualification Event relating to
that Company Covered Person; in each case occurring up to and
including the Closing Date.
(iv) Notice
of Disqualification Events. The Company will notify the
Purchaser immediately in writing upon becoming aware of (A) any
Disqualification Event relating to any Company Covered Person and
(B) any event that would, with the passage of time, become a
Disqualification Event relating to any Company Covered Person
and/or Other Covered Person.
(m) Accuracy of Information, etc.
No statement or information contained in this Agreement, any other
Transaction Document or any other document, certificate or
statement furnished to the Purchaser by or on behalf of the Company
in writing for use in connection with the transactions contemplated
by this Agreement and/or the other Transaction Documents contained,
as of the date such statement, information, document or certificate
was made or furnished, as the case may be, any untrue statement of
a material fact or omitted to state a material fact necessary to
make the statements contained herein or therein, taken as a whole,
not materially misleading. There is no fact known to the Company
that would reasonably be expected to materially affect the Company
that has not been expressly disclosed herein, in the other
Transaction Documents, or in any other documents, certificates and
written statements furnished to the Purchaser for use in connection
with the transactions contemplated hereby and by the other
Transaction Documents.
(n) Solvency.
Based on the consolidated financial condition of the Company as of
the Closing Date, after giving effect to the receipt by the Company
of the proceeds from the sale of the Securities hereunder: (i) the
fair saleable value of the Company’s assets exceeds the
amount that will be required to be paid on or in respect of the
Company’s existing debts and other liabilities (including
known contingent liabilities) as they mature, (ii) the
Company’s assets do not constitute unreasonably small capital
to carry on its business as now conducted and as proposed to be
conducted including its capital needs taking into account the
particular capital requirements of the business conducted by the
Company, consolidated and projected capital requirements and
capital availability thereof, and (iii) the current cash flow of
the Company, together with the proceeds the Company would receive,
were it to liquidate all of its assets, after taking into account
all anticipated uses of the cash, would be sufficient to pay all
amounts on or in respect of its liabilities when such amounts are
required to be paid. The Company does not intend to incur debts
beyond its ability to pay such debts as they mature (taking into
account the timing and amounts of cash to be payable on or in
respect of its debt). The Company has no knowledge of any facts or
circumstances which lead it to believe that it will file for
reorganization or liquidation under the bankruptcy or
reorganization laws of any jurisdiction within one year from the
Closing Date. Schedule 3.1(n)
sets forth
as of the date hereof all outstanding secured and unsecured
Indebtedness of the Company or any Subsidiary, or for which the
Company or any Subsidiary has commitments. Neither the Company nor
any Subsidiary is in default with respect to any
Indebtedness.
(o) Transactions With
Affiliates and Employees. None of the officers
or directors of the Company or any Subsidiary and, to the knowledge
of the Company, none of the employees of the Company or any
Subsidiary is presently a party to any transaction with the Company
or any Subsidiary (other than for services as employees, officers
and directors), including any contract, agreement or other
arrangement providing for the furnishing of services to or by,
providing for rental of real or personal property to or from
providing for the borrowing of money from or lending of money to,
or otherwise requiring payments to or from any officer, director or
such employee or, to the knowledge of the Company, any entity in
which any officer, director, or any such employee has a substantial
interest or is an officer, director, trustee, stockholder, member
or partner, in each case in excess of $120,000 other than for: (i)
payment of salary or consulting fees for services rendered, (ii)
reimbursement for expenses incurred on behalf of the Company and
(iii) other employee benefits, including stock option agreements
under any stock option plan of the Company.
(p) Intellectual Property. The
Company has, or has rights to use, all patents, patent
applications, trademarks, trademark applications, service marks,
trade names, trade secrets, inventions, copyrights, licenses and
other intellectual property rights and similar rights as described
on Schedule 3.1(p)
that are material to the conduct of its business (collectively, the
“Intellectual
Property Rights”). The Company has not received a
notice (written or otherwise) that any material Intellectual
Property Right has expired, terminated or been abandoned, or is
expected to expire or terminate or be abandoned. The Company has
not received, since the Balance Sheet Date, a written notice of a
claim or otherwise has any knowledge that the Intellectual Property
Rights violate or infringe upon the rights of any Person, except as
would not have or reasonably be expected to have a Material Adverse
Effect. To the knowledge of the Company, all such Intellectual
Property Rights are enforceable and there is no existing
infringement by another Person of any of the Intellectual Property
Rights. The Company has taken commercially reasonable security
measures to protect the secrecy, confidentiality and value of all
of its intellectual property.
(q) USA Patriot Act. The Company is
in compliance, in all material respects, with (i) the Trading with
the Enemy Act, as amended, and each of the foreign assets control
regulations of the United States Treasury Department (31 C.F.R.,
Subtitle B, Chapter V, as amended) and any other enabling
legislation or executive order relating thereto, and (ii) the USA
Patriot Act (Title III of Pub. L. 107-56, signed into law on
October 26, 2001) (the “Act”). No part of the
proceeds of the Note will be used, directly or indirectly, for any
payments to any governmental official or employee, political party,
official of a political party, candidate for political office, or
anyone else acting in an official capacity, in order to obtain,
retain or direct business or obtain any improper advantage, in
violation of the United States Foreign Corrupt Practices Act of
1977, as amended.
(r) Office of Foreign
Assets Control. Neither the
Company nor any Subsidiary nor, to the Company’s knowledge,
any director, officer, agent, joint venture employee or affiliate
of the Company or any Subsidiary is currently, or in the past 5
years, has been subject to any U.S. sanctions administered by the
Office of Foreign Assets Control of the U.S. Treasury Department
(“OFAC”).
(s) Filings, Consents and
Approvals. The Company is not
required to obtain any consent, waiver, authorization or order of,
give any notice to, or make any filing or registration with, any
court or other federal, state, local or other governmental
authority or other Person in connection with the execution,
delivery and performance by the Company of the Transaction
Documents, other than: (i) the filings required pursuant to the
Registration Rights Agreement and the declaration of effectiveness
by the SEC of the Registration Statement, (ii) the notice and/or
application(s) to each applicable Trading Market for the issuance
and sale of the Securities and the listing of the Conversion Shares
and Commitment Shares for trading thereon in the time and manner
required thereby, and (iii) the filing of Form D with the
Commission and such filings as are required to be made under
applicable state securities laws (collectively, the
“Required
Approvals”).
(t) Authorization; Enforcement. All
corporate action on the part of the Company, its officers,
directors and stockholders necessary for the authorization,
execution and delivery of the Transaction Documents and the
performance of all obligations of the Company under the Transaction
Documents and have been taken on or prior to the date hereof. Each
of the Transaction Documents has been duly executed by the Company
and, when delivered in accordance with the terms hereof and
thereof, will constitute the valid and binding obligation of the
Company enforceable against the Company in accordance with its
terms, except: (i) as limited by applicable bankruptcy, insolvency,
reorganization, moratorium and other laws of general application
affecting enforcement of creditors’ rights generally, (ii) as
limited by general equitable principles regardless of whether such
enforcement is considered in a proceeding in equity or at law,
(iii) as limited by laws relating to the availability of specific
performance, injunctive relief or other equitable remedies and (iv)
insofar as indemnification and contribution provisions may be
limited by applicable law.
(u) Valid Issuance of Securities.
The Note has been duly authorized and, when issued and paid for in
accordance with this Agreement, will be duly and validly issued,
fully paid and nonassessable, free and clear of all Liens and all
restrictions on transfer other than those expressly imposed by the
federal securities laws and vest in the Purchaser full and sole
title and power to the Note purchased hereby by the Purchaser, free
and clear of all Liens, and restrictions on transfer other than
those imposed by the federal securities laws. All Conversion
Shares, when issued pursuant to conversion of the Note, and all
Commitment Shares, when issued pursuant to this Agreement, will be
duly and validly issued, fully paid and nonassessable, will be free
and clear of all Liens and vest in the holder full and sole title
and power to such securities. The Company has reserved from its
duly authorized unissued Common Stock, the Required Minimum (as
defined in the Note), which Required Minimum shall be continuously
determined by the Company to ensure that the Required Minimum is in
reserve with the Transfer Agent at all times.
(v) Offering. The offer and sale of
the Note and the Commitment Shares, when issued pursuant to this
Agreement, as contemplated by this Agreement, are exempt from the
registration requirements of the Securities Act, and the
qualification or registration requirements of state securities laws
or other applicable blue sky laws. Neither the Company nor any
authorized agent acting on its behalf will take any action
hereafter that would cause the loss of such
exemptions.
(w) Capitalization and Voting
Rights. The capitalization of
the Company is as set forth on Schedule
3.1(w), which
Schedule
3.1(w) shall also include the
number of shares of Common Stock owned beneficially, and of record,
by Affiliates of the Company as of the date hereof. The
authorized capital stock of the Company and all securities of the
Company issued and outstanding are set forth on Schedule 3.1(w) as of the dates
reflected therein. All of the outstanding shares of Common Stock
and other securities of the Company have been duly authorized and
validly issued, and are fully paid and nonassessable. Except as set forth
on Schedule
3.1(w), no Person has any
right of first refusal, preemptive right, right of participation,
or any similar right to participate in the transactions
contemplated by the Transaction Documents. Except as set forth on Schedule 3.1(w), there are no
agreements or arrangements under which the Company is obligated to
register the sale of any of the Company’s securities under
the Securities Act. Except as set forth on Schedule 3.1(w), no shares of
Common Stock and/or other securities of the Company are entitled to
preemptive rights and there are no outstanding debt securities and
no contracts, commitments, understandings, or arrangements by which
the Company is or may become bound to issue additional shares of
the capital stock and/or other securities of the Company or
options, warrants, scrip, rights to subscribe to, calls or
commitments of any character whatsoever relating to, or securities
or rights convertible into or exchangeable for, any shares of
capital stock of the Company other than those issued or granted in
the ordinary course of business pursuant to the Company’s
equity incentive and/or compensatory plans or arrangements. Except
for customary transfer restrictions contained in agreements entered
into by the Company to sell restricted securities and/or as set
forth on Schedule
3.1(w), the Company is not a party to, and it has no
knowledge of, any agreement restricting the voting or transfer of
any shares of the capital stock and/or other securities of the
Company. Except as set forth on Schedule 3.1(w), the offer and
sale of all capital stock, convertible or exchangeable securities,
rights, warrants, options and/or any other securities of the
Company, when any such securities of the Company were issued,
complied in all material respects with all applicable federal and
state securities laws, and no current and/or prior holder of any
securities of the Company has any right of rescission or damages or
any “put” or similar right with respect thereto. Except
as set forth on Schedule
3.1(w), there are no securities or instruments of the
Company containing anti-dilution or similar provisions that will be
triggered by the issuance and/or sale of the Securities and/or the
consummation of the transactions described herein or in any of the
other Transaction Documents.
(x) Shell Company Status; Financial
Statements. The Company has been an issuer subject to Rule
144(i) under the Securities Act. The unaudited financial statements
of the Company as of June 30, 2020 is included in Schedule 3.1(x) hereto. The
financial statements of the Company included on Schedule 3.1(x) have been
prepared in accordance with GAAP, except as may be otherwise
specified in such financial statements or the notes thereto and
except that unaudited financial statements may not contain all
footnotes required by GAAP, and fairly present in all material
respects the financial position of the Company and its consolidated
Subsidiaries as of and for the dates thereof and the results of
operations and cash flows for the periods then ended, subject to
normal, immaterial, year-end audit adjustments. For purposes of
this Section 3.1, June 30, 2020 is referred to as the
“Balance Sheet
Date”.
(y) Material Changes; Undisclosed Events,
Liabilities or Developments. Since the Balance Sheet Date:
(i) there has been no event, occurrence or development that has had
or that could reasonably be expected to be materially adverse to
the Company, (ii) the Company has not incurred any liabilities
(contingent or otherwise) other than (A) trade payables and accrued
expenses incurred in the ordinary course of business consistent
with past practice and (B) liabilities not required to be reflected
in the Company’s financial statements pursuant to GAAP or
disclosed in filings made with the Commission (if the Company is an
issuer required to file periodic reports under the Exchange Act),
(iii) the Company has not altered its method of accounting, (iv)
the Company has not declared or made any dividend or distribution
of cash or other property to its stockholders or purchased,
redeemed or made any agreements to purchase or redeem any shares of
its capital stock and (v) the Company has not issued any equity
securities to any officer, director or Affiliate, except pursuant
to existing Company stock option plans. Except for the issuance of
the Securities contemplated by this Agreement or as set forth on
Schedule
3.1(y), no
event, liability, fact, circumstance, occurrence or development has
occurred or exists or is reasonably expected to occur or exist with
respect to the Company or its Subsidiaries or their respective
businesses, properties, operations, assets or financial condition,
that would be required to be disclosed by the Company under
applicable securities laws at the time this representation is made
or deemed made that has not been publicly disclosed at least 1
Trading Day prior to the date that this representation is
made.
(z) Litigation.
There is no
action, suit, inquiry, notice of violation, proceeding or
investigation pending or, to the knowledge of the Company,
threatened against or affecting the Company, any Subsidiary or any
of their respective properties before or by any court, arbitrator,
governmental or administrative agency or regulatory authority
(federal, state, county, local or foreign) (collectively, an
“Action”)
which (i) adversely affects or challenges the legality, validity or
enforceability of any of the Transaction Documents or the
Securities or (ii) could, if there were an unfavorable decision,
have or reasonably be expected to result in a Material Adverse
Effect. Neither the Company nor any Subsidiary, nor any director or
officer thereof, is or has been the subject of any Action involving
a claim of violation of or liability under federal or state
securities laws or a claim of breach of fiduciary duty. There has
not been, and to the knowledge of the Company, there is not pending
or contemplated, any investigation by the Commission involving the
Company or any current or former director or officer of the
Company. The Commission has not issued any stop order or other
order suspending the effectiveness of any registration statement
filed by the Company or any Subsidiary under the Exchange Act or
the Securities Act.
(aa) Disclosure.
Except with respect to the material terms and conditions of the
transactions contemplated by the Transaction Documents, the Company
confirms that neither it nor any other Person acting on its behalf
has provided any Purchaser or its respective agents or counsel with
any information that constitutes material, non-public information.
The Company understands that the Purchaser may rely on the
Transaction Documents, the information included therein, including,
but not limited to, the foregoing representation in purchasing the
Securities. All of the disclosure furnished by or on behalf of the
Company to the Purchaser in the Transaction Documents regarding,
among other matters relating to the Company, its business and the
transactions contemplated in the Transaction Documents, is true and
correct in all material respects as of the date made and does not
contain any untrue statement of a material fact or omit to state
any material fact necessary in order to make the statements made
therein, in light of the circumstances under which they were made,
not misleading. The Company acknowledges and agrees that the
Purchaser does not make nor has made any representations or
warranties with respect to the transactions contemplated in the
Transaction Documents other than those specifically set forth in
Section 3.2
hereof.
(bb) No
Integrated Offering. Assuming the accuracy of the
representations and warranties set forth in Section 3.2, neither the
Company, nor any of its affiliates, nor any Person acting on its or
their behalf has, directly or indirectly, made any offers or sales
of any security or solicited any offers to buy any security, under
circumstances that would cause the issuance and/or sale of the
Securities to be integrated with prior offerings of securities by
the Company for purposes of (i) the Securities Act that would
require the registration of any such Securities and/or any other
securities of the Company under the Securities Act, or that would
invalidate the exemptions from registration relied upon by the
Company, or (ii) any stockholder-approval provisions of any Trading
Market on which any of the securities of the Company are listed,
eligible for quotation and/or designated.
(cc) Insurance.
The Company
is insured by insurers of recognized financial responsibility
against such losses and risks and in such amounts as are prudent
and customary in the business in which it is engaged; the Company
has not been refused any coverage sought or applied for; and the
Company does not have any reason to believe that it will not be
able to renew its existing insurance coverage as and when such
coverage expires or to obtain similar coverage from similar
insurers as may be necessary to continue its
business.
(dd) Regulation
M Compliance. The Company has not, and to its knowledge no
one acting on its behalf has, (i) taken, directly or indirectly,
any action designed to cause or to result in the stabilization or
manipulation of the price of any security of the Company to
facilitate the sale or resale of any of the Securities, (ii) sold,
bid for, purchased, or paid any compensation for soliciting
purchases of, any of the Securities, or (iii) paid or agreed to pay
to any Person any compensation for soliciting another to purchase
any other securities of the Company.
(ee) Registration
Rights. Except as set forth
on Schedule
3.1(ee), no Person has any
right to cause the Company to effect the registration under the
Securities Act of any securities of the Company or any
Subsidiaries.
(ff) Labor
Relations. No labor dispute
exists or, to the knowledge of the Company, is imminent with
respect to any of the employees of the Company, which could
reasonably be expected to result in a Material Adverse Effect. None
of the Company’s or its Subsidiaries’ employees is a
member of a union that relates to such employee’s
relationship with the Company or such Subsidiary, and neither the
Company nor any of its Subsidiaries is a party to a collective
bargaining agreement, and the Company and its Subsidiaries believe
that their relationships with their employees are good. To the
knowledge of the Company, no executive officer of the Company or
any Subsidiary, is, or is now expected to be, in violation of any
material term of any employment contract, confidentiality,
disclosure or proprietary information agreement or non-competition
agreement, or any other contract or agreement or any restrictive
covenant in favor of any third party, and the continued employment
of each such executive officer does not subject the Company or any
of its Subsidiaries to any liability with respect to any of the
foregoing matters. The Company and its Subsidiaries are in
compliance with all U.S. federal, state, local and foreign laws and
regulations relating to employment and employment practices, terms
and conditions of employment and wages and hours, except where the
failure to be in compliance could not, individually or in the
aggregate, reasonably be expected to have a Material Adverse
Effect.
(gg) Dilutive
Effect. The Company understands and acknowledges that the
number of Underlying Shares issuable upon conversion of the Note,
pursuant to the terms thereof, will increase in certain
circumstances. The Company further acknowledges that its
obligations to issue Underlying Shares pursuant to the terms of the
Note in accordance with this Agreement and the Note is absolute and
unconditional regardless of the dilutive effect that any such
issuances may have on the percentage ownership interests of other
stockholders of the Company.
(hh) Application
of Takeover Protections; Rights Agreement. The Company
and its board of directors have taken all necessary action, if any,
in order to render inapplicable any control share acquisition,
business combination, poison pill (including any distribution under
a rights agreement) or other similar anti-takeover provisions under
the Company’s certificate of incorporation, as amended, or
the laws of the jurisdiction of its formation that are or could
become applicable to the Purchaser as a result of the transactions
contemplated by this Agreement and/or the other Transaction
Documents, including, without limitation, the Company’s
issuance of the Securities and the Purchaser’s ownership of
the Securities. The Company has not adopted a stockholder rights
plan or similar arrangement relating to accumulations of beneficial
ownership of Common Stock or a change in control of the
Company.
(ii) Manipulation
of Price. The Company has not, and to its knowledge no one
acting on its behalf has, (i) taken, directly or indirectly, any
action designed to cause or to result, or that could reasonably be
expected to cause or result, in the stabilization or manipulation
of the price of any security of the Company to facilitate the sale
or resale of any of the Securities, (ii) sold, bid for, purchased,
or paid any compensation for soliciting purchases of, any of the
Securities, or (iii) paid or agreed to pay to any person any
compensation for soliciting another to purchase any other
securities of the Company.
(jj) DTC
Eligible. The Common Stock is DTC eligible and DTC has not
placed a “freeze” or a “chill” on the
Common Stock and the Company has no reason to believe that DTC has
any intention to make the Common Stock not DTC eligible, or place a
“freeze” or “chill” on the Common Stock. No
federal or state regulatory authority has indicated that it will
prohibit the listing of the Company’s securities based upon
its prior business in the cannabis or cannabis-related markets nor
will the Purchaser be prohibited from depositing, clearing or
settling the Securities, including through the DTC or
otherwise, on account of the Company’s prior business in the
cannabis or cannabis-related markets.
(kk) Listing
and Maintenance Requirements. The Company has not, in the 12 months preceding
the date hereof, received notice from any Trading Market on which
the Common Stock is or has been listed or quoted to the effect that
the Company is not in compliance with the listing or maintenance
requirements of such Trading Market. The Common Stock is
eligible for quotation on the Principal Market and the Company has
no reason to believe that the Principal Market has any intention of
delisting or no longer quoting the Common Stock from the Principal
Market. The issuance and sale of the
Securities hereunder does not contravene the rules and regulations
of the Trading Market. All Commitment Shares and Underlying
Shares have been approved, if so required, for listing or quotation
on the Trading Market, subject only to notice of
issuance.
(ll) No
General Solicitation. Neither the Company, nor any of
its affiliates, nor, to the knowledge of the Company, any Person
acting on its behalf, has engaged in any form of general
solicitation or general advertising (within the meaning of
Regulation D) in connection with the offer or sale of the
Securities.
(mm) Acknowledgment
Regarding the Purchaser’s Purchase of Securities.
The Company acknowledges and agrees that the Purchaser is
acting solely in the capacity of an arm’s length purchaser
with respect to the other Transaction Documents and the
transactions contemplated hereby and thereby and that the Purchaser
is not (i) an officer or director of the Company, (ii) an
Affiliate of the Company or (iii) to the knowledge of the
Company, a “beneficial owner” of more than 10% of the
shares of Common Stock (as defined for purposes of Rule 13d-3
of the Exchange Act). The Company further acknowledges that
the Purchaser is not acting as a financial advisor or fiduciary of
the Company (or in any similar capacity) with respect to the
Transaction Documents and the transactions contemplated hereby and
thereby, and any advice given by the Purchaser or any of its
representatives or agents in connection with the Transaction
Documents and the transactions contemplated hereby and thereby is
merely incidental to the Purchaser’s purchase of the
Securities. The Company further represents to the Purchaser
that the Company’s decision to enter into the Transaction
Documents has been based solely on the independent evaluation by
the Company and its representatives.
(nn) Off-Balance
Sheet Arrangements. There is no transaction,
arrangement, or other relationship between the Company and an
unconsolidated or other off-balance sheet entity that is required
to be disclosed by the Company in its Exchange Act filings and is
not so disclosed.
(oo) Certain
Fees. No brokerage or
finder’s fees or commissions are or will be payable by the
Company or any Subsidiaries to any broker, financial advisor or
consultant, finder, placement agent, investment banker, bank or
other Person with respect to the transactions contemplated by the
Transaction Documents. The Purchaser shall have no obligation with
respect to any fees or with respect to any claims made by or on
behalf of other Persons for fees of a type contemplated in this
Section that may be due in connection with the transactions
contemplated by the Transaction Documents.
(pp) Anti-Money
Laundering, Anti-Bribery and Anti-Corruption;
Sanctions.
(i) Neither the Company
nor, any of its Subsidiaries or Affiliates or any director or
officer of any of them is an individual or entity currently, or has
not in the past 5 years been, subject to any Sanctions or is on any
Sanctions List.
(ii) Each
of the Company, any of its Subsidiaries and Affiliates and their
respective directors, officers, employees and, to the knowledge of
the Company, agents and any other person or entity acting on behalf
of the Company, has complied with the Money Laundering,
Anti-Corruption and Anti-Bribery Laws, in each case as applicable
to them, and no action, suit or proceeding by or before any court
or any arbitrator or any governmental agency, authority or body
involving the Company and any of its Subsidiaries or their
respective directors or officers and, to the knowledge of the
Company, the employees, agents, or representatives of each of them,
is pending or threatened with respect to Money Laundering,
Anti-Corruption and Anti-Bribery Laws.
(iii) Neither
the Company nor any of its Subsidiaries nor their respective
directors or officers, nor, to the knowledge of the Company, the
employees or agents of any of them has:
A.
used any corporate
funds (nor will it use any proceeds from the Notes) for any
unlawful contribution, gift, entertainment or unlawful expense
relating to political activity;
B.
taken any action in
furtherance of an unlawful offer, payment, promise to pay, or
authorization or approval of the payment or giving of money,
property, gifts or (anything else of value, directly or indirectly,
to any “government official” (including any officer or
employee of a government or government owned or controlled entity
or of a public international organization, or any person acting in
an official capacity for or on behalf of any of the foregoing, or
any political party or party official or candidate for public
office) or made any other bribe, rebate, payoff, influence payment
or kickback intended to improperly influence official action or
secure an improper advantage;
C.
nor will it use any
proceeds from the Notes in furtherance of any such unlawful payment
or violation of Sanctions or Money Laundering, Anti-Corruption and
Anti-Bribery Laws.
(iv) The
Company and each Subsidiary will promote and ensure compliance with
Money Laundering, Anti-Corruption and Anti-Bribery Laws in all
jurisdictions where they operate and with the representations and
warranties contained herein.
(v) As used in this
Section 3.1(pp):
A.
“Money
Laundering, Anti-Corruption and Anti-Bribery Laws”
means money laundering and anti- corruption statutes of all
jurisdictions (including, the Foreign Corrupt Practices Act of
1977, the OECD Convention on Bribery of Foreign Public Officials in
International Business Transactions, and any similar national or
local law or regulation in the United Kingdom or elsewhere where
the Company and each other Subsidiary conducts business), the rules
and regulations thereunder and any related or similar rules,
regulations or guidelines, issued, administered or enforced by any
governmental agency or any such jurisdiction.
B.
“Sanctions” means any laws
or regulations or restrictive measures relating to economic or
financial sanctions or trade embargoes imposed, administered or
enforced from time to time by a Sanctions Authority.
C.
“Sanctions
Authority” means (i) the United Nations Security
Council; (ii) the United States government; (iii) the European
Union; (iv) the United Kingdom government; (v) the respective
governmental institutions and agencies of any of the foregoing,
including without limitation, OFAC, the United States Department of
State and Department of Commerce, and Her Majesty's Treasury; and
(vi) any other governmental institution or agency with
responsibility for imposing, administering or enforcing Sanctions
with jurisdiction over the Company or any of its subsidiaries
(together, “Sanctions
Authorities”).
D.
“Sanctions
List” means the Specially Designated Nationals and
Blocked Persons List maintained by OFAC, the Denied Persons List
maintained by the U.S. Department of Commerce, the Consolidated
List of Financial Sanctions Targets maintained by Her Majesty's
Treasury, or any other list issued or maintained by any Sanctions
Authority of persons subject to Sanctions (including investment or
related restrictions), each as amended, supplemented or substituted
from time to time.
(qq) Environmental
Laws. The Company and its
Subsidiaries, to the best of the Company’s knowledge, (i) are
in compliance with all federal, state, local and foreign laws
relating to pollution or protection of human health or the
environment (including ambient air, surface water, groundwater,
land surface or subsurface strata), including laws relating to
emissions, discharges, releases or threatened releases of
chemicals, pollutants, contaminants, or toxic or hazardous
substances or wastes (collectively, “Hazardous
Materials”) into the
environment, or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or
handling of Hazardous Materials, as well as all authorizations,
codes, decrees, demands, or demand letters, injunctions, judgments,
licenses, notices or notice letters, orders, permits, plans or
regulations, issued, entered, promulgated or approved thereunder
(“Environmental
Laws”); (ii) have
received all permits, licenses or other approvals required of them
under applicable Environmental Laws to conduct their respective
businesses; and (iii) are in compliance with all terms and
conditions of any such permit, license or approval where in each
clause (i), (ii) and (iii), the failure to so comply could be
reasonably expected to have, individually or in the aggregate, a
Material Adverse Effect.
(rr) Seniority.
As of the Closing Date, (i) all Indebtedness, other than the Note
and the indebtedness issued to Affiliates of the Purchaser in the
May 2020 Financing, is subordinated to the Note and the
indebtedness issued to Affiliates of the Purchaser in the May 2020
Financing, and (ii) no Indebtedness or other claim against the
Company is senior to or pari passu with the Note or indebtedness
issued to Affiliates of the Purchaser in the May 2020 Financing in
right of payment (except that the Note and the indebtedness issued
to Affiliates of the Purchaser in the May 2020 Financing are pari
passu with each other), whether with respect to interest or upon
liquidation or dissolution, or otherwise, other than indebtedness
secured by purchase money security interests (which is senior only
as to underlying assets covered thereby) and capital lease
obligations (which is senior only as to the property covered
thereby).
3.2 Representation and Warranties of the
Purchaser. The Purchaser, severally and not jointly, hereby
represents and warrants as of the date hereof and as of the Closing
Date to the Company as follows:
(a) Organization;
Authority. The Purchaser is
either an individual or an entity duly incorporated or formed,
validly existing and in good standing under the laws of the
jurisdiction of its incorporation or formation with full right,
corporate, partnership, limited liability company or similar power
and authority to enter into and to consummate the transactions
contemplated by the Transaction Documents and otherwise to carry
out its obligations hereunder and thereunder. The execution and
delivery of the Transaction Documents and performance by the
Purchaser of the transactions contemplated by the Transaction
Documents have been duly authorized by all necessary corporate,
partnership, limited liability company or similar action, as
applicable, on the part of the Purchaser. Each Transaction Document
to which it is a party has been duly executed by the Purchaser, and
when delivered by the Purchaser in accordance with the terms
hereof, will constitute the valid and legally binding obligation of
the Purchaser, enforceable against it in accordance with its terms,
except: (i) as limited by general equitable principles and
applicable bankruptcy, insolvency, reorganization, moratorium and
other laws of general application affecting enforcement of
creditors’ rights generally, (ii) as limited by laws relating
to the availability of specific performance, injunctive relief or
other equitable remedies and (iii) insofar as indemnification and
contribution provisions may be limited by applicable
law.
(b) Own
Account. The Purchaser
understands that the Securities are “restricted
securities” and have not been registered under the Securities
Act or any applicable state securities law and is acquiring the
Securities as principal for its own account and not with a view to
or for distributing or reselling such Securities or any part
thereof in violation of the Securities Act or any applicable state
securities law, has no present intention of distributing any of
such Securities in violation of the Securities Act or any
applicable state securities law and has no direct or indirect
arrangement or understandings with any other persons to distribute
or regarding the distribution of such Securities in violation of
the Securities Act or any applicable state securities law (this
representation and warranty not limiting the Purchaser’s
right to sell the Securities pursuant to an effective registration
statement or otherwise in compliance with applicable federal and
state securities laws). The Purchaser is acquiring the Securities
hereunder in the ordinary course of its
business.
(c) Purchaser
Status. At the time the
Purchaser was offered the Securities, it was, and as of the date
hereof it is an “accredited investor” as defined in
Rule 501(a) under the Securities Act.
(d) Experience of
Purchaser. The Purchaser, either
alone or together with its representatives, has such knowledge,
sophistication and experience in business and financial matters so
as to be capable of evaluating the merits and risks of the
prospective investment in the Securities, and has so evaluated the
merits and risks of such investment. The Purchaser is able to bear
the economic risk of an investment in the Securities and, at the
present time, is able to afford a complete loss of such
investment.
(e) General
Solicitation. The Purchaser is not,
to the Purchaser’s knowledge, purchasing the Securities as a
result of any advertisement, article, notice or other communication
regarding the Securities published in any newspaper, magazine or
similar media or broadcast over television or radio or presented at
any seminar or any other general solicitation or general
advertisement.
(f) Access to
Information. The Purchaser
acknowledges that it has had the opportunity to review the
Transaction Documents (including all exhibits and schedules
thereto) and has been afforded (i) the opportunity to ask such
questions as it has deemed necessary of, and to receive answers
from, representatives of the Company concerning the terms and
conditions of the offering of the Securities and the merits and
risks of investing in the Securities; (ii) access to information
about the Company and its financial condition, results of
operations, business, properties, management and prospects
sufficient to enable it to evaluate its investment; and (iii) the
opportunity to obtain such additional information that the Company
possesses or can acquire without unreasonable effort or expense
that is necessary to make an informed investment decision with
respect to the investment.
(g) Certain Transactions and
Confidentiality. The Purchaser has not directly or
indirectly, nor has any Person acting on behalf of or pursuant to
any understanding with the Purchaser, executed any purchases or
sales, including Short Sales, of the securities of the Company
during the period commencing as of the time that the Purchaser
first received a term sheet (written or oral) from the Company or
any other Person representing the Company setting forth the
material terms of the transactions contemplated hereunder and
ending immediately prior to the execution hereof. Notwithstanding
the foregoing, if the Purchaser is a multi-managed investment
vehicle, whereby separate portfolio managers manage separate
portions of the Purchaser’s assets and the portfolio managers
have no direct knowledge of the investment decisions made by the
portfolio managers managing other portions of the Purchaser’s
assets, the representation set forth above shall only apply with
respect to the portion of assets managed by the portfolio manager
that made the investment decision to purchase the Securities
covered by this Agreement. Other than to other Persons party to
this Agreement or to the Purchaser's representatives, including,
without limitation, its officers, directors, partners, legal and
other advisors, employees, agents and Affiliates, the Purchaser has
maintained the confidentiality of all disclosures made to it in
connection with this transaction (including the existence and terms
of this transaction).
The Company acknowledges and agrees that the representations
contained in this Section 3.2 shall not modify, amend or affect
such Purchaser’s right to rely on the Company’s
representations and warranties contained in this Agreement or any
representations and warranties contained in any other Transaction
Document or any other document or instrument executed and/or
delivered in connection with this Agreement or the consummation of
the transaction contemplated hereby.
ARTICLE
4
OTHER
AGREEMENTS OF THE PARTIES
4.1 Transfer
Restrictions.
(a) The
Securities may only be disposed of in compliance with state and
federal securities laws. In connection with any transfer of
Securities other than pursuant to an effective registration
statement or Rule 144, to the Company or to an Affiliate of the
Purchaser or in connection with a pledge as contemplated in Section
4.1(b), the Company may require the transferor thereof to provide
to the Company an opinion of counsel selected by the transferor and
reasonably acceptable to the Company, the form and substance of
which opinion shall be reasonably satisfactory to the Company, to
the effect that such transfer does not require registration of such
transferred Securities under the Securities Act. As a condition of
transfer, any such transferee shall agree in writing to be bound by
the terms of this Agreement and shall have the rights and
obligations of the Purchaser under this Agreement.
(b) The
Purchaser agrees to the imprinting, so long as is required by this
Section 4.1, of a legend on any of the Securities in the following
form:
[NEITHER]
THIS SECURITY [NOR THE SECURITIES INTO WHICH THIS SECURITY IS
[CONVERTIBLE] HAS [NOT] BEEN REGISTERED WITH THE SECURITIES AND
EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN
RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND,
ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR
PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT
SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND
IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS. THIS SECURITY
[AND THE SECURITIES ISSUABLE UPON [CONVERSION] OF THIS SECURITY]
MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT WITH A
REGISTERED BROKER-DEALER OR OTHER LOAN WITH A FINANCIAL INSTITUTION
THAT IS AN “ACCREDITED INVESTOR” AS DEFINED IN RULE
501(a) UNDER THE SECURITIES ACT OR OTHER LOAN SECURED BY SUCH
SECURITIES.
The
Company acknowledges and agrees that the Purchaser may from time to
time pledge pursuant to a bona fide margin agreement with a
registered broker-dealer or grant a security interest in some or
all of the Securities to a financial institution that is an
“accredited investor” as defined in Rule 501(a) under
the Securities Act and who agrees to be bound by the provisions of
this Agreement and, if required under the terms of such
arrangement, the Purchaser may transfer pledged or secured
Securities to the pledgees or secured parties. Such a pledge or
transfer would not be subject to approval of the Company and no
legal opinion of legal counsel of the pledgee, secured party or
pledgor shall be required in connection therewith. Further, no
notice shall be required of such pledge. At the Purchaser’s
expense, the Company will execute and deliver such reasonable
documentation as a pledgee or secured party of Securities may
reasonably request in connection with a pledge or transfer of the
Securities, including, if the Securities are then registered for
resale on a registration statement, the preparation and filing of
any required prospectus supplement under Rule 424(b)(3) under the
Securities Act or other applicable provision of the Securities Act
to appropriately amend the list of selling stockholders
thereunder.
(c) Certificates
evidencing the Commitment Shares and the Underlying Shares shall
not contain any legend (including the legend set forth in Section
4.1(b) hereof): (i) when they
have been sold while a registration
statement (including the Registration Statement) covering the
resale of such security is effective under the Securities Act, (ii)
following any sale of such Commitment Shares and/or the Underlying
Shares pursuant to Rule 144, (iii) if such Commitment Shares and/or
the Underlying Shares are eligible for sale under Rule 144 and a
sale or transfer will be taking place prior to the Company’s
next periodic report becomes due under the Exchange Act or (iv) if
such legend is not required under applicable requirements of the
Securities Act (including judicial interpretations and
pronouncements issued by the staff of the Commission). The Company
shall cause its counsel to issue a legal opinion to the Transfer
Agent promptly after the Effective Date or at such time as such
legend is no longer required under this Section 4.1(c) if required
by the Transfer Agent to effect the removal of the legend
hereunder, or if requested by the Purchaser. If any portion of the
Note is converted at a time when there is an effective registration
statement to cover any sale of the Underlying Shares, or if such
Commitment Shares and/or the Underlying Shares have been sold under
Rule 144 and the Company is then in compliance with the current
public information required under Rule 144, or if the Commitment
Shares and/or the Underlying Shares may be sold under Rule 144
without the requirement for the Company to be in compliance with
the current public information required under Rule 144 as to such
Commitment Shares and/or Underlying Shares and without volume or
manner-of-sale restrictions provided the conditions of Rule
144(i)(2) have been satisfied and a sale of such shares will be
taking place prior to the Company’s next annual or quarterly
report becoming due under its reporting obligations under the
Exchange Act or if such legend is not otherwise required under
applicable requirements of the Securities Act (including judicial
interpretations and pronouncements issued by the staff of the
Commission) then such Commitment Shares and/or the Underlying
Shares shall be issued free of all legends. The Company agrees that
following the Effective Date or at such time as such legend is no
longer required under this Section 4.1(c), it will, no later than
the earlier of (i) three (3) Trading Days and (ii) the number of
Trading Days comprising the Standard Settlement Period (as defined
below) following the delivery by the Purchaser to the Company or
the Transfer Agent of certificate(s) representing the Commitment
Shares and/or the Underlying Shares, as applicable, issued with a
restrictive legend (such date, the “Legend Removal
Date”), deliver or
cause to be delivered to the Purchaser a certificate representing
such shares that is free from all restrictive and other legends.
The Company may not make any notation on its records or give
instructions to the Transfer Agent that enlarge the restrictions on
transfer set forth in this Section 4. Certificates for Commitment
Shares and/or Underlying Shares subject to legend removal hereunder
shall be transmitted by the Transfer Agent to the Purchaser by
crediting the account of the Purchaser’s prime broker with
the Depository Trust Company System as directed by the Purchaser.
As used herein, “Standard Settlement
Period” means the
standard settlement period, expressed in a number of Trading Days,
on the Company’s primary Trading Market with respect to the
Common Stock as in effect on the date of delivery of a certificate
representing the Commitment Shares and/or the Underlying Shares, as
applicable, issued with a restrictive legend.
(d) In
addition to the Purchaser’s other available remedies, the
Company shall pay to the Purchaser, in cash, the greater of (i) as
partial liquidated damages and not as a penalty, for each $1,000 of
Commitment Shares and/or Underlying Shares (based on the VWAP of
the Common Stock on the date such Securities are submitted to the
Transfer Agent) delivered for removal of the restrictive legend and
subject to Section 4.1(c), $5 per Trading Day (increasing to $10
per Trading Day five (5) Trading Days after such damages have begun
to accrue) for each Trading Day after the Legend Removal Date until
such certificate is delivered without a legend and (ii) if the
Company fails to (x) issue and deliver (or cause to be delivered)
to the Purchaser by the Legend Removal Date a certificate
representing the Securities so delivered to the Company by the
Purchaser that is free from all restrictive and other legends or
(y) if after the Legend Removal Date the Purchaser purchases (in an
open market transaction or otherwise) shares of Common Stock to
deliver in satisfaction of a sale by the Purchaser of all or any
portion of the number of shares of Common Stock, or a sale of a
number of shares of Common Stock equal to all or any portion of the
number of shares of Common Stock that the Purchaser anticipated
receiving from the Company without any restrictive legend, then, an
amount equal to the excess of the Purchaser’s total purchase
price (including brokerage commissions and other out-of-pocket
expenses, if any) for the shares of Common Stock so purchased
(including brokerage commissions and other out-of-pocket expenses,
if any) (the “Buy-In
Price”) over the
product of (A) such number of Commitment Shares or Conversion
Shares, as applicable, that the Company was required to deliver to
the Purchaser by the Legend Removal Date multiplied by (B) the
lowest closing sale price of the Common Stock on any Trading Day
during the period commencing on the date of the delivery by the
Purchaser to the Company of the applicable Commitment Shares or
Conversion Shares (as the case may be) and ending on the date of
such delivery and payment under this clause
(ii).
4.2 Furnishing of
Information. Beginning on the
Closing Date, the Company shall use commercially reasonable efforts
to comply with the Pink Basic Disclosure Guidelines which set forth
the disclosure obligations that make up the “Alternative
Reporting Standard” for OTC Pink companies as such
obligations are published by the OTC Markets Group, Inc. In
addition, the Company shall file a Registration Statement on Form
8-A as soon as practicable, but in no event no later than five (5)
Trading Days, after the effective date of first registration
statement filed by the Company that is declared effective by the
SEC which registers securities held by the Purchaser or any of its
Affiliates. If after the date hereof the Company becomes
subject to the rules and regulations of the Exchange Act and as
long as the Purchaser
owns Securities, the Company covenants to timely file (or obtain
extensions in respect thereof and file within the applicable grace
period) all reports required to be filed by the Company after the
date hereof pursuant to the Exchange Act. As long as the Purchaser
owns Securities, if the Company is not required to file reports
pursuant to the Exchange Act, it will prepare and furnish to the
Purchaser and make publicly available in accordance with Rule
144(c) such information as is required for the Purchaser to sell
the Securities, including without limitation, under Rule 144. In
addition, the Company shall file with Commission current
“Form 10 information”, as defined in Rule 144(i)(3), as
soon as practicable after the date the Company becomes subject to
the rules and regulations of the Exchange Act, reflecting its
status as an entity that is no longer an issuer described in Rule
144(i)(1)(i). The Company further covenants that it will take such
further action as any holder of Securities may reasonably request,
to the extent required from time to time to enable such Person to
sell such Securities without registration under the Securities Act,
including without limitation, within the requirements of the
exemption provided by Rule 144.
4.3 Integration.
The Company shall not sell, offer for sale or solicit offers to buy
or otherwise negotiate in respect of any security (as defined in
Section 2 of the Securities Act) that would be integrated with
the offer or sale of the Securities in a manner that would require
the registration under the Securities Act of the sale of the
Securities or that would be integrated with the offer or sale of
the Securities for purposes of the rules and regulations of any
Trading Market such that it would require shareholder approval
prior to the closing of such other transaction unless shareholder
approval is obtained before the closing of such subsequent
transaction.
4.4 Securities
Laws Disclosure; Publicity. The
Company shall by 9:00am on the 2nd
Trading Day after the date of this
Agreement, issue a press release disclosing the material terms of
the transactions contemplated hereby, which press release shall
have been approved by the Purchaser prior to its release (which
approval shall not unreasonably be withheld or delayed). From and
after the issuance of such press release, the Company represents to
the Purchaser that it shall have publicly disclosed all material,
non-public information delivered to the Purchaser by the Company or
any of its Subsidiaries, or any of their respective officers,
directors, employees or agents in connection with the transactions
contemplated by the Transaction Documents. In addition, effective
upon the issuance of such press release, the Company acknowledges
and agrees that any and all confidentiality or similar obligations
under any agreement, whether written or oral, between the Company,
any of its Subsidiaries or any of their respective officers,
directors, agents, employees or Affiliates on the one hand, and the
Purchaser or any of its Affiliates on the other hand, shall
terminate. The Company and the Purchaser shall consult with each
other in issuing any other press releases with respect to the
transactions contemplated hereby, and neither the Company nor the
Purchaser shall issue any such press release nor otherwise make any
such public statement without the prior consent of the Company,
with respect to any press release of the Purchaser, or without the
prior consent of the Purchaser, with respect to any press release
of the Company, which consent shall not unreasonably be withheld or
delayed, except if such disclosure is required by law, in which
case the disclosing party shall promptly provide the other party
with prior notice of such public statement or communication.
Notwithstanding the foregoing, the Company shall not, without the
prior written consent of the Purchaser, (a) use the name of the
Purchaser, “Arena Investors LP,” “Arena” or
any other derivative thereof (each, a “Trade
Name”) in any press
releases or other public disclosures (including in any filing with
the Commission or any regulatory agency or Trading Market),
offering documents, sales materials, brochures or similar publicity
or promotional materials, or for promotional purposes, whether
orally or in writing, except (x) as required by federal
securities law and the rules and regulations promulgated thereunder
in connection with the filing of final Transaction Documents, any
disclosure required pursuant to any reports required to be
filed by the Company pursuant to the Exchange Act after the date
hereof or the Registration Statement
with the Commission, (y) to the extent such disclosure is
required by law or Trading Market regulations, including
the
“Alternative Reporting Standard” required by OTC
Markets, in which case the
Company shall provide the Purchaser with prior notice of such
disclosure permitted under this clause (y), or (z) as required
under Delaware General Corporation Law or (b) represent that an
investment in the Company or any product or any service provided by
the Company has been approved or endorsed by the Purchaser.
Following any such written consent, which shall not be
unreasonably withheld or delayed, the Company shall provide the Purchaser with a
copy of such written or other materials using the Trade Name if
requested by the Purchaser. The Purchaser shall be deemed to
have provided prior written consent of the disclosure of the
Purchaser’s name to other stockholders and investors in the
Company, and to potential investors in the Company (that to the
extent such information has not already been publicly disclosed,
have been informed of the confidential nature thereof) that in the
course of their due diligence require disclosure of the identity of
the existing investors in the Company.
4.5 Shareholder Rights
Plan. No claim will be made
or enforced by the Company or, with the consent of the Company, any
other Person, that the Purchaser is an “Acquiring
Person” under any
control share acquisition, business combination, poison pill
(including any distribution under a rights agreement) or similar
anti-takeover plan or arrangement in effect or hereafter adopted by
the Company, or that the Purchaser could be deemed to trigger the
provisions of any such plan or arrangement, by virtue of receiving
Securities under the Transaction Documents.
4.6 Non-Public
Information. Except
with respect to the material terms and conditions of the
transactions contemplated by the Transaction Documents, which shall
be disclosed pursuant to Section 4.4, the Company covenants
and agrees that neither it, nor any other Person acting on its
behalf will provide the Purchaser or its agents or counsel with any
information that constitutes, or the Company reasonably believes
constitutes, material non-public information, unless
prior thereto the Purchaser shall have consented to the receipt of
such information and agreed with the Company to keep such
information confidential. The Company understands and confirms that
the Purchaser shall be relying on the foregoing covenant in
effecting transactions in securities of the Company. To the extent
that the Company delivers any material, non-public information to the
Purchaser without the Purchaser’s consent, the Company hereby
covenants and agrees that the Purchaser shall not have any duty of
confidentiality to the Company, any of its Subsidiaries, or any of
their respective officers, directors, agents, employees or
Affiliates, or a duty to the Company, any of its Subsidiaries or
any of their respective officers, directors, agents, employees or
Affiliates not to trade on the basis of, such material,
non-public information, provided
that the Purchaser shall remain subject to applicable law. To the
extent that any notice provided pursuant to any Transaction
Document constitutes, or contains, material, non-public information regarding
the Company or any Subsidiaries, the Company shall simultaneously
file such notice with the Commission pursuant to a Current Report
on Form 8-K or if not subject
to the reporting requirements under the Commission, file a press
release. The Company understands
and confirms that the Purchaser shall be relying on the foregoing
covenant in effecting transactions in securities of the
Company.
4.7 Use of
Proceeds. Subject to the terms
and conditions set forth on Schedule 4.7
attached
hereto, the Company shall use the net proceeds from the sale of the
Securities hereunder for working capital purposes and shall not use
such proceeds: (a) for the satisfaction of any portion of the
Company’s debt (other than payment of trade payables in the
ordinary course of the Company’s business and prior
practices), (b) for the redemption of any Common Stock or Common
Stock Equivalents, (c) for the settlement of any outstanding
litigation or (d) in violation of FCPA, OFAC regulations or
Money Laundering, Anti-Corruption and Anti-Bribery Laws. $3,000,000
of the Purchase Price will be held in the Controlled Account
established pursuant to Section 4.24(a), subject to restrictions on
release and use as set forth in Schedule 4.7
attached
hereto. Notwithstanding the foregoing, the Company may receive
permission to use such funds to the extent expressly agreed to in
advance, in writing (including electronic mail) by the Purchaser.
Notwithstanding anything to the contrary in the Transaction
Documents or otherwise, neither the Company nor its Subsidiaries
may use any portion of the Purchase Price or any other
proceeds from the Purchaser or any of its Affiliates (including the
proceeds from the sale of the senior secured notes issued to
Affiliates of the Purchaser in the May 2020 Financing) to pay any
liquidated damages, penalties, fees or other amounts due and
payable to the Purchaser or its Affiliates under the Transaction
Documents, the transaction documents relating to the May 2020
Financing or otherwise without the express advance written consent
of the Purchaser (including at the election of the Purchaser, in
the case of an Event of Default under the Note, to repay the
Company’s obligations under the Note, including the
outstanding principal amount of the Note, accrued but unpaid
interest, liquidated damages and/or other amounts owing in respect
thereof through the date of acceleration using the proceeds in the
Controlled Account).
4.8 Indemnification of
Purchaser. Subject
to the provisions of this Section 4.8, the Company will
indemnify and hold the Purchaser and its respective directors,
officers, shareholders, members, partners, employees and agents
(and any other Persons with a functionally equivalent role of a
Person holding such titles notwithstanding a lack of such title or
any other title), each Person who controls the Purchaser (within
the meaning of Section 15 of the Securities Act and
Section 20 of the Exchange Act), and the directors, officers,
shareholders, agents, members, partners or employees (and any other
Persons with a functionally equivalent role of a Person holding
such titles notwithstanding a lack of such title or any other
title) of such controlling persons (each, a
“Purchaser
Party”) harmless from
any and all losses, liabilities, obligations, claims,
contingencies, damages, costs and expenses, as incurred, arising
out of or relating to (i) any untrue or alleged untrue
statement of a material fact contained in any registration
statement filed by the Company, any prospectus or any form of
prospectus or in any amendment or supplement thereto or in any
preliminary prospectus, or arising out of or relating to any
omission or alleged omission of a material fact required to be
stated therein or necessary to make the statements therein (in the
case of any prospectus or supplement thereto, in the light of the
circumstances under which they were made) not misleading, except to
the extent, but only to the extent, that such untrue statements or
omissions are based solely upon information regarding such
Purchaser Party furnished in writing to the Company by such
Purchaser Party expressly for use therein, or (ii) any
violation or alleged violation by the Company of the Securities
Act, the Exchange Act or any state securities law, or any rule or
regulation thereunder in connection therewith. If any action shall
be brought against any Purchaser Party in respect of which
indemnity may be sought pursuant to this Agreement, such Purchaser
Party shall promptly notify the Company in writing, and the Company
shall have the right to assume the defense thereof with counsel of
its own choosing reasonably acceptable to the Purchaser Party. Any
Purchaser Party shall have the right to employ separate counsel in
any such action and participate in the defense thereof, but the
fees and expenses of such counsel shall be at the expense of such
Purchaser Party except to the extent that (x) the employment
thereof has been specifically authorized by the Company in writing,
(y) the Company has failed after a reasonable period of time
to assume such defense and to employ counsel or (z) in such
action there is, in the reasonable opinion of counsel, a material
conflict on any material issue between the position of the Company
and the position of such Purchaser Party, in which case the Company
shall be responsible for the reasonable fees and expenses of no
more than one such separate counsel. The Company will not be liable
to any Purchaser Party under this Agreement (1) for any
settlement by a Purchaser Party effected without the
Company’s prior written consent, which shall not be
unreasonably withheld or delayed; or (2) to the extent, but
only to the extent that a loss, claim, damage or liability is
attributable to any Purchaser Party’s breach of any of the
representations, warranties, covenants or agreements made by such
Purchaser Party in this Agreement or in the other Transaction
Documents. The indemnification required by this Section 4.8
shall be made by periodic payments of the amount thereof during the
course of the investigation or defense, as and when bills are
received or are incurred. The indemnity agreements contained herein
shall be in addition to any cause of action or similar right of any
Purchaser Party against the Company or others and any liabilities
the Company may be subject to pursuant to law.
4.9 Reservation of Common
Stock. As of the date
hereof, the Company has reserved and the Company shall continue to
reserve and keep available at all times, free of preemptive rights,
a sufficient number of shares of Common Stock equal to the Required
Minimum (as defined in the Note) for the purpose of enabling the
Company to issue the Conversion Shares and any other shares that
may be issuable pursuant to the Note. If, on any date, the
number of authorized but unissued (and otherwise unreserved) shares
of Common Stock is less than the Required Minimum on such date,
then the Board of Directors shall use commercially reasonable
efforts to amend the Company’s certificate or articles of
incorporation to increase the number of authorized but unissued
shares of Common Stock to at least the Required Minimum at such
time, as soon as possible and in any event not later than the 75th
day after such date
4.10 Listing
of Common Stock. The Company hereby
agrees to use reasonable best efforts to maintain the listing or
quotation of the Common Stock on the Trading Market on which it is
currently listed, and concurrently with the Closing, the Company
shall apply to list or quote all of the Commitment Shares and the
Underlying Shares on such Trading Market and promptly secure the
listing of all of the Commitment Shares and the Underlying Shares
on such Trading Market. The Company further agrees, if the Company
applies to have the Common Stock traded on any other Trading Market
(including in accordance with Section 4.23), it will then include
in such application all of the Commitment Shares and the Underlying
Shares, and will take such other action as is necessary to cause
all of the Commitment Shares and the Underlying Shares to be listed
or quoted on such other Trading Market as promptly as possible. The
Company will then take all action reasonably necessary to continue
the listing and trading of its Common Stock on such Trading Market
and will comply in all respects with the Company’s reporting,
filing and other obligations under the bylaws or rules of the
Trading Market. The Company agrees to maintain the eligibility of
the Common Stock for electronic transfer through the Depository
Trust Company or another established clearing corporation,
including, without limitation, by timely payment of fees to the
Depository Trust Company or such other established clearing
corporation in connection with such electronic
transfer.
4.11 Certain
Transactions and Confidentiality. The Purchaser
covenants that neither it nor any Affiliate acting on its behalf or
pursuant to any understanding with it will execute any purchases or
sales, including Short Sales of any of the Company’s
securities during the period commencing with the execution of this
Agreement and ending at such time that the transactions
contemplated by this Agreement are first publicly announced
pursuant to the initial press release as described in
Section 4.4. The Purchaser covenants that until such
time as the transactions contemplated by this Agreement are
publicly disclosed by the Company pursuant to the initial press
release as described in Section 4.4, such Purchaser will
maintain the confidentiality of the existence and terms of this
transaction and the information included in the Disclosure
Schedules. Notwithstanding the foregoing and notwithstanding
anything contained in this Agreement to the contrary, the Company
expressly acknowledges and agrees that (i) no Purchaser makes
any representation, warranty or covenant hereby that it will not
engage in effecting transactions in any securities of the Company
after the time that the transactions contemplated by this Agreement
are first publicly announced, (ii) no Purchaser shall be restricted
or prohibited from effecting any transactions in any securities of
the Company in accordance with applicable securities laws from and
after the time that the transactions contemplated by this Agreement
are first publicly announced pursuant to the initial press release
as described in Section 4.4, (iii) the Purchaser has
not been asked by the Company to agree, nor has the Purchaser
agreed, to desist from purchasing or selling Securities which have
been issued under the terms of this Agreement, the Note or any
other Transaction Document, or “derivative” securities
based on securities issued by the Company or to hold the Securities
for any specified term, (iv) the Purchaser shall not be
deemed to have any affiliation with or control over any arm’s
length counter-party in any “derivative” transaction,
(v) the Purchaser may engage in hedging activities, other than
Short Sales at various times during the period that the Securities
are outstanding, and (vi) no
Purchaser shall have any duty of confidentiality or duty not to
trade in the securities of the Company to the Company or its
Subsidiaries after the issuance of the initial press
release. Except as contemplated above, Company
acknowledges that such aforementioned hedging activities do not
constitute a breach of any of the Transaction
Documents.
4.12 Conversion
Procedures. The form of Notice of
Conversion in the Note sets forth the totality of the procedures
required of the Purchaser in order to convert the Note. No
additional legal opinion, other information or instructions shall
be required of the Purchaser to exercise the Note. Without limiting
the preceding sentences, no ink-original Notice of Conversion
shall be required, nor shall any medallion guarantee (or other type
of guarantee or notarization) of any Notice of Conversion form be
required in order to covert the Note. The Company shall honor
conversions of the Note and shall deliver the Underlying Shares in
accordance with the terms, conditions and time periods set forth in
the Transaction Documents.
4.13 Form
D; Blue Sky Filings. The Company agrees to
timely file a Form D with respect to the Securities with the
Commission as required under Regulation D, and with the applicable
securities regulators in the states in which the Securities were
sold, and to provide copies thereof, promptly upon request of the
Purchaser. The Company shall take such further action as the
Company shall reasonably determine is necessary in order to obtain
an exemption for, or to qualify the Securities for, sale to the
Purchaser at the Closing under applicable securities or “Blue
Sky” laws of the states of the United States, and shall
provide evidence of such actions promptly upon request of the
Purchaser.
4.14 Maintenance
of Property. So long as the Note remains outstanding, the
Company shall use its commercially reasonable efforts to keep all
of its property, which is necessary or useful to the conduct of its
business, in good working order and condition, ordinary wear and
tear excepted.
4.15 Preservation
of Corporate Existence. So long as the Note remains
outstanding, the Company shall preserve and maintain its corporate
existence, rights, privileges and franchises in the jurisdiction of
its incorporation, and qualify and remain qualified, as a foreign
corporation in each jurisdiction in which such qualification is
necessary in view of its business or operations and where the
failure to qualify or remain qualified would reasonably be expected
to have a Material Adverse Effect.
4.16 DTC
Program. At all times that the Securities are outstanding,
the Company will employ as the transfer agent for the Common Stock
and Conversion Shares a participant in the Depository Trust Company
Automated Securities Transfer Program and cause the Common Stock to
be transferable pursuant to such program.
4.17 Subsequent
Equity Sales. From the date hereof until such time as
the
Purchaser no longer holds the Note, the Company shall be prohibited
from effecting or entering into an agreement to effect any issuance
by the Company or any of its Subsidiaries of Common Stock or Common
Stock Equivalents (or a combination of units thereof) involving a
Variable Rate Transaction. “Variable Rate
Transaction” means a transaction which is not
Permitted Indebtedness and in which the Company (i) issues or sells
any debt or equity securities that are convertible into,
exchangeable or exercisable for, or include the right to receive
additional shares of Common Stock either (A) at a conversion price,
exercise price or exchange rate or other price that is based upon
and/or varies with the trading prices of or quotations for the
shares of Common Stock at any time after the initial issuance of
such debt or equity securities, or (B) with a conversion, exercise
or exchange price that is subject to being reset at some future
date after the initial issuance of such debt or equity security or
upon the occurrence of specified or contingent events directly or
indirectly related to the business of the Company or the market for
the Common Stock or (ii) enters into, or effects a transaction
under, any agreement, including, but not limited to, an equity line
of credit, whereby the Company may issue securities at a future
determined price. The foregoing restrictions shall not include any
agreement for an at-the-market offering. The Purchaser shall be
entitled to obtain injunctive relief against the Company to
preclude any such issuance, which remedy shall be in addition to
any right to collect damages.
4.18 Transfer
Agent Instructions. The Company shall issue irrevocable
instructions to the Transfer Agent in a form acceptable to the
Purchaser (the “Irrevocable Transfer Agent
Instructions”) to issue certificates or credit shares
via DWAC or otherwise to the applicable balance accounts at The
Depository Trust Company (“DTC”), registered in the
name of the Purchaser or its respective nominee(s), for the
Underlying Shares in such amounts as specified from time to time by
the Purchaser to the Company upon conversion of the Note. The
Company represents and warrants that no instruction other than the
Irrevocable Transfer Agent Instructions referred to in this Section
will be given by the Company to its Transfer Agent with respect to
the Securities, and that the Securities shall otherwise be freely
transferable on the books and records of the Company, as
applicable, to the extent provided in this Agreement and the other
Transaction Documents. In the event that such sale, assignment or
transfer involves Conversion Shares sold, assigned or transferred
pursuant to an effective registration statement or in compliance
with Rule 144, the transfer agent shall issue such shares to such
Buyer, assignee or transferee (as the case may be) without any
restrictive legend in accordance with Section 4.1. The Company
acknowledges that a breach by it of its obligations hereunder will
cause irreparable harm to Purchaser. Accordingly, the Company
acknowledges that the remedy at law for a breach of its obligations
under this Section will be inadequate and agrees, in the event of a
breach or threatened breach by the Company of the provisions of
this Section, that Purchaser shall be entitled, in addition to all
other available remedies, to an order and/or injunction restraining
any breach and requiring immediate issuance and transfer, without
the necessity of showing economic loss and without any bond or
other security being required. The Company shall cause its counsel
to issue the legal opinion referred to in the Irrevocable Transfer
Agent Instructions to the Company’s transfer agent from and
after the Applicable Date. Any fees (with respect to the transfer
agent, counsel to the Company or otherwise) associated with the
issuance of such opinion or the removal of any legends on any of
the Securities shall be borne by the Company. “Applicable Date” means
the first date on which all of the Underlying Shares are eligible
to be resold by the Purchaser pursuant to Rule 144 or an effective
registration statement is in effect.
4.19 Public
Information. At any time during the period commencing from
the six (6) month anniversary of the Closing Date and ending at
such time that all of the Securities, may be sold without the
requirement for the Company to be in compliance with Rule 144(c)(1)
and otherwise without restriction or limitation pursuant to Rule
144, if the Company shall fail for any reason to satisfy the
current public information requirement under Rule 144(c) (a
“Public Information
Failure”) then, in addition to the Purchaser’s
other available remedies, the Company shall pay to the Purchaser,
in cash, as partial liquidated damages and not as a penalty, by
reason of any such delay in or reduction of its ability to sell the
Securities, an amount in cash equal to two percent (2.0%) of the
aggregate Purchase Price of the
Purchaser’s Securities on the day of a Public Information
Failure and on every thirtieth (30th) day (pro rated for
periods totaling less than thirty days) thereafter until the
earlier of (a) the date such Public Information Failure is cured
and (b) such time that such public information is no longer
required for the Purchaser to transfer the Underlying Shares
pursuant to Rule 144. The payments to which the Purchaser
shall be entitled pursuant to this Section 4.19 are referred to
herein as “Public
Information Failure Payments.” Public Information
Failure Payments shall
be paid on the earlier of (i) the last day of the calendar month
during which such Public Information Failure Payments are incurred and (ii) the
third (3rd) Business Day after
the event or failure giving rise to the Public Information
Failure Payments is
cured. If an Event (as defined in the Registration Rights
Agreement) is occurring at the time of a Public Information
Failure, and the Company is (x) then obligated to pay, and (y)
timely pays the Purchaser partial liquidated damages under Section
2(d) of the Registration Rights Agreement for the period occurring
simultaneous with the applicable Public Information Failure (such
payments, the “Simultaneous Registration Rights
Partial Liquidated Damages”) and (z) has timely paid
the Purchaser all previously accrued partial liquidated damages
under Section 2(d) of the Registration Rights Agreement, the
Company may deduct the amounts paid in connection with such
Simultaneous Registration Rights Partial Liquidated Damages from
such Public Information Failure Payments due for such simultaneous
Public Information Failure. In the event the Company fails to make
Public Information Failure Payments in a timely manner, such
Public Information Failure Payments shall bear interest at
the rate of 1.5% per month (prorated for partial months) until paid
in full. Nothing herein shall limit such Purchaser’s right to
pursue actual damages for the Public Information Failure, and
the
Purchaser shall have the right to pursue all remedies available to
it at law or in equity including, without limitation, a decree of
specific performance and/or injunctive relief.
4.20 Additional
Financing. Within sixty (60) calendar days of the Closing
Date (the “Subsequent Financing Deadline
Date”), the Company shall sell in one or more closings
indebtedness which shall be subordinated to the Purchaser and shall
mature at least 90 days after the Note (the “Subsequent Financing”)
for aggregate gross proceeds equal to or exceeding $2,000,000
(“Subsequent
Financing Closing”). To the extent the Subsequent
Financing Subsequent Closing does not occur on or prior to the
Subsequent Financing Deadline Date, then, in addition to
the
Purchaser’s other available remedies, an amount in cash, as
partial liquidated damages and not as a penalty, shall be payable
by the Company to the Purchaser equal to $60,000 on the day of the
Subsequent Financing Deadline Date and on every thirtieth
(30th) day
(pro rated for periods totaling less than thirty days) thereafter
until the Subsequent Financing Subsequent Closing occurs; provided,
the amount set forth above shall increase by $30,000 on every
thirtieth (30th) day after the
Subsequent Financing Deadline Date if such closing(s) for the
Subsequent Financing have not taken place. The payments to which
the
Purchaser shall be entitled pursuant to this Section 4.20 are
referred to herein as “Subsequent Financing Failure
Payments.” Subsequent Financing Failure Payments shall be paid on the
earlier of (i) the last day of the calendar month during which such
Subsequent Financing Failure Payments are incurred and (ii) the
third (3rd) Business Day after
the event or failure giving rise to the Subsequent Financing
Failure Payments is
cured. The Company acknowledges and agrees that if the Subsequent
Financing Closing does not occur by the six (6) month anniversary
of the Closing Date, it shall be an Event of Default (as defined in
the Note) under the Note.
4.21 Litigation.
For as long as the Note is outstanding, the Company shall promptly,
to the extent not prohibited by law, give the Purchaser notice in
writing of any Action before or by any court, arbitrator,
governmental or administrative agency or regulatory authority
(federal, state, county, local or foreign) affecting the
Company, any Subsidiary, any director and/or officer including but
not limited to, any Action involving a claim of
violation of or liability under federal or state securities laws, a
claim of breach of fiduciary duty or any investigation by a
governmental or administrative agency or regulatory authority
(federal, state county, local or foreign). Any such
information provided to the Purchaser
shall comply with the requirements of Section 4.6
above.
4.22 Access
to Records. The Company shall provide the Purchaser
and/or any of its duly authorized representatives, attorneys or
accountants access to any and all bank records at the premises of
the Company where such records are kept, such access being afforded
without charge, but only during normal business hours. Any such
information provided to the Purchaser
shall comply with the requirements of Section 4.6
above.
4.23 OTC
Markets; National Securities Exchange.
(a) As
soon as reasonably practicable after the Closing, the Company shall
use its reasonable best efforts to meet the eligibility
requirements for listing its shares of Common Stock on the OTCQB or
OTCQX and upon meeting such requirements, the Company shall
promptly take all necessary and appropriate actions to quote its
shares of Common Stock on such over-the-counter
market.
(b) As soon as reasonably
practicable after the Company meets the qualitative and
quantitative listing standards for listing on a national securities
exchange, the Company shall use reasonable best efforts to
take all necessary and appropriate actions to list its shares of
Common Stock for trading on such national securities
exchange.
4.24 Post-Closing
Actions. The
Company shall and shall cause each of its relevant Subsidiaries to
execute and deliver the documents and complete the tasks set forth
in this Section as soon as reasonably practicable and in each case
no later than the time limit specified in this Section or such
longer time as the Purchaser may agree in its sole
discretion:
(a) The Company shall establish the
Controlled Account not later than thirty (30) calendar days after
the Closing, in form and substance satisfactory to the Purchaser,
and upon establishment of such Controlled Account, the Company
shall immediately cause $3,000,000 of the Purchase Price proceeds
to be deposited therein. The parties agree that the proceeds in the
Controlled Account shall only be released, transferred, spent or
otherwise utilized with the prior written approval of the Purchaser
and in accordance with the terms of Schedule
4.7. The Company
acknowledges and agrees that until such Controlled Account has been
established and funded, it shall not use more than $500,000 of the
Purchase Price proceeds (net of all Purchaser’s Expenses)
that are payable in connection with this transactions contemplated
by the Transaction Documents) without the prior written consent of
the Purchaser, and subject to the terms and conditions of Section
4.7; and
(b) Any Person (other
than PTGI) acquired by the Company, or that otherwise becomes a
Subsidiary of the Company, on or after the date of this Agreement
shall enter into a Subsidiary Guaranty Agreement and be joined to
the Security Agreement as a debtor not later than one (1) calendar
day after the consummation of such acquisition by the Company or
the date the Person otherwise becomes a Subsidiary of the
Company.
4.25 Future
Financings. Except
for Permitted Indebtedness and for so long as Liabilities are
outstanding, neither the Company, nor any of its Subsidiaries,
shall enter into, create, incur, assume, guarantee or suffer
to exist any Indebtedness. Despite the foregoing prohibition and
for so long as Liabilities are outstanding, if at any time the
Company or any of its Subsidiaries issues or incurs any
Indebtedness other than Permitted Indebtedness, in addition to the
Purchaser’s other available remedies, the Company shall pay
to the Purchaser, in cash, as partial liquidated damages and not as
a penalty, on each date of any such issuance or incurrence of
Indebtedness, $30,000. Any such Indebtedness shall be expressly
subordinated to the Note and the convertible promissory notes
issued to Affiliates of the Purchaser in the May 2020 Financing,
and the holders of such Indebtedness shall not be granted any
registration rights, nor shall the Company register, or cause to be
registered, with the SEC or any state securities commission the
notes or other debt instruments representing such Indebtedness or
any equity securities issuable in connection with such
Indebtedness. In addition, the Company shall not grant any
registration rights in connection with the Additional Note
Financing or the Subsequent Financing, nor shall the Company
register, or cause to be registered, with the SEC or any state
securities commission the notes or other debt instruments
representing such Indebtedness issued in the Additional Note
Financing or the Subsequent Financing or any equity securities
issuable in connection with such Indebtedness issued in the
Additional Note Financing or the Subsequent Financing.
ARTICLE
5
MISCELLANEOUS
5.1 Fees and Expenses. Except as
expressly set forth below and in the Transaction Documents to the
contrary, each party shall pay the reasonable, documented fees and
expenses of its advisers, counsel, accountants and other experts,
if any, and all other expenses incurred by such party incident to
the negotiation, preparation, execution, delivery and performance
of this Agreement. The Company shall pay all Transfer Agent fees
(including, without limitation, any fees required for same-day
processing of any instruction letter delivered by the Company and
any exercise notice delivered by the Purchaser),
stamp taxes and other taxes and duties levied in connection with
the delivery of any Securities to the Purchaser. Notwithstanding
the foregoing, the Company agrees to pay all direct and indirect
costs and expenses of the Purchaser related to the negotiation, due
diligence, preparation, closing, and all other items regarding or
related to this Agreement and the other Transaction Documents and
all of the transactions contemplated herein and/or therein,
including, but not limited to, the legal fees and expenses of the
Purchaser’s legal counsel (collectively, the
“Purchaser’s
Expenses”), all of which will be deducted and paid on
Closing Date.
5.2 Entire Agreement. The
Transaction Documents, together with the exhibits and schedules
thereto, contain the entire understanding of the parties with
respect to the subject matter hereof and thereof and supersede all
prior agreements and understandings, oral or written, with respect
to such matters, which the parties acknowledge have been merged
into such documents, exhibits and schedules.
5.3 Notices. Any and all notices or
other communications or deliveries required or permitted to be
provided hereunder shall be in writing and shall be deemed given
and effective on the earliest of: (a) the date of transmission, if
such notice or communication is delivered via facsimile or email
attachment at the facsimile number or email address as set forth on
the signature pages attached hereto at or prior to 5:30 p.m. (New
York City time) on a Business Day, (b) the next Business Day after
the date of transmission, if such notice or communication is
delivered via facsimile or email attachment at the facsimile number
or email address as set forth on the signature pages attached
hereto on a day that is not a Business Day or later than 5:30 p.m.
(New York City time) on any Business Day, (c) the second
(2nd)
Business Day following the date of mailing, if sent by U.S.
nationally recognized overnight courier service or (d) upon actual
receipt by the party to whom such notice is required to be given.
The address for such notices and communications shall be as set
forth on the signature pages attached hereto.
5.4 Amendments; Waivers. No
provision of this Agreement may be waived, modified, supplemented
or amended except in a written instrument signed, in the case of an
amendment, by the Company and the Purchaser or, in the case of a
waiver, by the party against whom enforcement of any such waived
provision is sought. No waiver of any default with respect to any
provision, condition or requirement of this Agreement shall be
deemed to be a continuing waiver in the future or a waiver of any
subsequent default or a waiver of any other provision, condition or
requirement hereof, nor shall any delay or omission of any party to
exercise any right hereunder in any manner impair the exercise of
any such right. Any amendment effected in accordance with
accordance with this Section 5.4 shall be binding upon the
Purchaser and holder of Securities and the Company.
5.5 Successors and Assigns. This
Agreement shall be binding upon and inure to the benefit of the
parties and their successors and permitted assigns. The Company may
not assign this Agreement or any rights or obligations hereunder
without the prior written consent of the Purchaser then holding the
outstanding Note (other than by merger). Purchaser may assign any
or all of its rights under this Agreement to any Person to whom
Purchaser assigns or transfers any Securities in compliance with
the Transaction Documents, provided that such transferee agrees in
writing to be bound, with respect to the transferred Securities, by
the provisions of the Transaction Documents that apply to the
“Purchaser,” and provided further that (i) such
transferee is an “accredited investor” within the
meaning of Rule 501 under the Securities Act and (ii) such
transferee is not a direct competitor of the Company or any
Subsidiary.
5.6 No Third-Party Beneficiaries.
This Agreement is intended for the benefit of the parties hereto
and their respective successors and permitted assigns and is not
for the benefit of, nor may any provision hereof be enforced by,
any other Person.
5.7 Governing Law; Exclusive
Jurisdiction. All questions concerning the construction,
validity, enforcement and interpretation of the Transaction
Documents shall be governed by and construed and enforced in
accordance with the internal laws of the State of New York, without
regard to the principles of conflicts of law thereof. Each party
agrees that all legal Proceedings concerning the interpretations,
enforcement and defense of the transactions contemplated by this
Agreement and any other Transaction Documents (whether brought
against a party hereto or its respective affiliates, directors,
officers, shareholders, partners, members, employees or agents)
shall be commenced exclusively in the state and federal courts
sitting in the City of New York. Each party hereby irrevocably
submits to the exclusive jurisdiction of the state and federal
courts sitting in the City of New York, Borough of Manhattan for
the adjudication of any dispute hereunder or in connection herewith
or with any transaction contemplated hereby or discussed herein
(including with respect to the enforcement of any of the
Transaction Documents), and hereby irrevocably waives, and agrees
not to assert in any Action or Proceeding, any claim that it is not
personally subject to the jurisdiction of any such court, that such
Action or Proceeding is improper or is an inconvenient venue for
such Proceeding. Each party hereby irrevocably waives personal
service of process and consents to process being served in any such
Action or Proceeding by mailing a copy thereof via registered or
certified mail or overnight delivery (with evidence of delivery) to
such party at the address in effect for notices to it under this
Agreement and agrees that such service shall constitute good and
sufficient service of process and notice thereof. Nothing contained
herein shall be deemed to limit in any way any right to serve
process in any other manner permitted by law. If any party shall
commence an Action or Proceeding to enforce any provisions of the
Transaction Documents, then, in addition to the obligations of the
Company elsewhere in this Agreement, the prevailing party in such
Action or Proceeding shall be reimbursed by the non-prevailing
party for its reasonable attorneys’ fees and other costs and
expenses incurred with the investigation, preparation and
prosecution of such Action or Proceeding.
5.8 Survival. The representations
and warranties contained herein shall survive the Closing and the
delivery of the Securities at Closing.
5.9 Execution. This Agreement may
be executed in two or more counterparts, all of which when taken
together shall be considered one and the same agreement and shall
become effective when counterparts have been signed by each party
and delivered to each other party, it being understood that the
parties need not sign the same counterpart. In the event that any
signature is delivered by facsimile transmission or by e-mail
delivery of a “.pdf” format data file, such signature
shall create a valid and binding obligation of the party executing
(or on whose behalf such signature is executed) with the same force
and effect as if such facsimile or “.pdf” signature
page were an original thereof.
5.10 Severability.
If any term, provision, covenant or restriction of this Agreement
is held by a court of competent jurisdiction to be invalid,
illegal, void or unenforceable, the remainder of the terms,
provisions, covenants and restrictions set forth herein shall
remain in full force and effect and shall in no way be affected,
impaired, or invalidated, as long as the essential terms and
conditions of the Note for each party remain valid, binding, and
enforceable. The parties shall use their commercially reasonable
efforts to find and employ an alternative means to achieve the same
or substantially the same result as that contemplated by such term,
provision, covenant or restriction.
5.11 Rescission
and Withdrawal Right. Notwithstanding
anything to the contrary contained in (and without limiting any
similar provisions of) any of the other Transaction Documents,
whenever the Purchaser exercises a right, election, demand or
option under a Transaction Document and the Company does not timely
perform its related obligations within the periods therein
provided, then the Purchaser may rescind or withdraw, in its sole
discretion from time to time upon written notice to the Company,
any relevant notice, demand or election in whole or in part without
prejudice to its future actions and rights; provided,
however,
that, in the case of a rescission of a conversion of the Note, the
Purchaser shall be required to return any shares of Common Stock
subject to any such rescinded conversion or exercise notice
concurrently with the return to the Purchaser of the aggregate
exercise price paid to the Company for such
shares.
5.12 Replacement
of Securities. If any certificate or
instrument evidencing any Securities is mutilated, lost, stolen or
destroyed, the Company shall issue or cause to be issued in
exchange and substitution for and upon cancellation thereof (in the
case of mutilation), or in lieu of and substitution therefor, a new
certificate or instrument, but only upon receipt of evidence
reasonably satisfactory to the Company of such loss, theft or
destruction. The applicant for a new certificate or instrument
under such circumstances shall also pay any reasonable third-party
costs (including customary indemnity) associated with the issuance
of such replacement Securities.
5.13 Remedies.
In addition to being entitled to exercise all rights provided
herein or granted by law, including recovery of damages, each of
the Purchaser and the Company will be entitled to specific
performance under the Transaction Documents. The parties agree that
monetary damages may not be adequate compensation for any loss
incurred by reason of any breach of obligations contained in the
Transaction Documents and hereby agree to waive and not to assert
in any Action for specific performance of any such obligation the
defense that a remedy at law would be adequate.
5.14 Payment
Set Aside. To the extent that
the Company makes a payment or payments to the Purchaser pursuant
to any Transaction Document or the Purchaser enforces or exercises
its rights thereunder, and such payment or payments or the proceeds
of such enforcement or exercise or any part thereof are
subsequently invalidated, declared to be fraudulent or
preferential, set aside, recovered from, disgorged by or are
required to be refunded, repaid or otherwise restored to the
Company, a trustee, receiver or any other Person under any law
(including, without limitation, any bankruptcy law, state or
federal law, common law or equitable cause of action), then to the
extent of any such restoration the obligation or part thereof
originally intended to be satisfied shall be revived and continued
in full force and effect as if such payment had not been made or
such enforcement or setoff had not occurred.
5.15 Usury.
To the extent it may lawfully do so, the Company hereby agrees not
to insist upon or plead or in any manner whatsoever claim, and will
resist any and all efforts to be compelled to take the benefit or
advantage of, usury laws wherever enacted, now or at any time
hereafter in force, in connection with any Action or Proceeding
that may be brought by the Purchaser in order to enforce any right
or remedy under any Transaction Document. Notwithstanding any
provision to the contrary contained in any Transaction Document, it
is expressly agreed and provided that the total liability of the
Company under the Transaction Documents for payments in the nature
of interest shall not exceed the maximum lawful rate authorized
under applicable law (the “Maximum
Rate”), and, without
limiting the foregoing, in no event shall any rate of interest or
default interest, or both of them, when aggregated with any other
sums in the nature of interest that the Company may be obligated to
pay under the Transaction Documents exceed such Maximum Rate. It is
agreed that if the maximum contract rate of interest allowed by law
and applicable to the Transaction Documents is increased or
decreased by statute or any official governmental action subsequent
to the date hereof, the new maximum contract rate of interest
allowed by law will be the Maximum Rate applicable to the
Transaction Documents from the effective date thereof forward,
unless such application is precluded by applicable law. If under
any circumstances whatsoever, interest in excess of the Maximum
Rate is paid by the Company to the Purchaser with respect to
indebtedness evidenced by the Transaction Documents, such excess
shall be applied by the Purchaser to the unpaid principal balance
of any such indebtedness or be refunded to the Company, the manner
of handling such excess to be at the Purchaser’s
election.
5.16 Liquidated
Damages. The Company’s
obligations to pay any partial liquidated damages or other amounts
owing under the Transaction Documents is a continuing obligation of
the Company and shall not terminate until all unpaid partial
liquidated damages and other amounts have been paid notwithstanding
the fact that the instrument or security pursuant to which such
partial liquidated damages or other amounts are due and payable
shall have been canceled.
5.17 Saturdays,
Sundays, Holidays, etc. If the last or appointed day for the
taking of any action or the expiration of any right required or
granted herein shall not be a Business Day, then such action may be
taken or such right may be exercised on the next succeeding
Business Day.
5.18 Construction.
The parties agree that each of them and/or their respective counsel
have reviewed and had an opportunity to revise the Transaction
Documents and, therefore, the normal rule of construction to the
effect that any ambiguities are to be resolved against the drafting
party shall not be employed in the interpretation of the
Transaction Documents or any amendments thereto.
5.19 WAIVER
OF JURY TRIAL. IN ANY ACTION, SUIT, OR PROCEEDING IN ANY
JURISDICTION BROUGHT BY ANY PARTY AGAINST ANY OTHER PARTY, THE
PARTIES EACH KNOWINGLY AND INTENTIONALLY, TO THE GREATEST EXTENT
PERMITTED BY APPLICABLE LAW, HEREBY ABSOLUTELY, UNCONDITIONALLY,
IRREVOCABLY AND EXPRESSLY WAIVES FOREVER TRIAL BY
JURY.
(Signature Pages Follow)
IN
WITNESS WHEREOF, the parties hereto have caused this Securities
Purchase Agreement to be duly executed by their respective
authorized signatories as of the date first indicated
above.
TRANSWORLD HOLDINGS, INC.
|
Address
for Notice:
|
By:__________________________________________
Name:
Title:
With a
copy to (which shall not constitute notice):
|
Facsimile
No.:
Email:
|
|
|
[REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE
PAGE FOR PURCHASER FOLLOWS]
PURCHASER
SIGNATURE PAGES TO GOIG SECURITIES PURCHASE AGREEMENT
IN
WITNESS WHEREOF, the undersigned have caused this Securities
Purchase Agreement to be duly executed by their respective
authorized signatories as of the date first indicated
above.
Name of
Purchaser: __________________________________
Signature of Authorized Signatory of
Purchaser: __________________________________
Name of
Authorized Signatory: __________________________________
Title
of Authorized Signatory: Authorized
Signatory
Email
Address of Authorized Signatory: lcutler@arenaco.com
Facsimile Number of
Authorized Signatory: 212.612.3207
Address
for Notice to Purchaser:
405
Lexington Avenue, 59th Floor
New
York, NY 10174
Address
for Delivery of Securities to Purchaser (if not same as address for
notice):
FEIN
Number: 98-1406045
EXHIBIT A
Form of Note
EXHIBIT B
Form of Amended and Restated Security Agreement
EXHIBIT C
Form of Amended and Restated Subordination Agreement
EXHIBIT D
Form of Registration Rights Agreement
EXHIBIT E
Form of Subsidiary Guaranty Agreement
Schedule 1
Purchase Price; Securities Purchased
Name
ofPurchaser
|
Purchase
Price
|
Aggregate
Principal Amount of Notes being Purchased
|
Number
of Commitment Shares to be Issued
|
|
$3,500,000.00
|
$3,888,889.00
|
903,226
|
|
|
|
|
TOTAL
|
$3,500,000.00
|
$3,888,889.00
|
903,226
|
REGISTRATION RIGHTS AGREEMENT
This
Registration Rights Agreement (this “Agreement”) is made and
entered into as of November 3, 2020, between Transworld Holdings,
Inc., a Delaware corporation (which was formerly known as GoIP
Global, Inc., a Colorado corporation) (the “Company”), and the
purchaser signatory hereto (the “Purchaser”).
This
Agreement is made pursuant to the Securities Purchase Agreement,
dated as of the date hereof, between the Company and the Purchaser
(the “Purchase
Agreement”).
The
Company and the Purchaser hereby agrees as follows:
Capitalized
terms used and not otherwise defined herein that are defined in the
Purchase Agreement shall have the meanings given such terms in the
Purchase Agreement. As used in this Agreement, the following
terms shall have the following meanings:
“Advice”
shall have the meaning set forth in Section 6(d).
“Effectiveness Period”
shall have the meaning set forth in Section 2(a).
“Event” shall have the
meaning set forth in Section 2(d).
“Event Date” shall have
the meaning set forth in Section 2(d).
“Filing Date” means, (a)
with respect to the Initial Registration Statement required
hereunder, the 90th calendar day
following the date hereof, provided that if the
registration statement filed pursuant to the terms of that certain
registration rights agreement, dated May 8, 2020, by and among the
Company and Affiliates of the Purchaser, is not effective on or
prior to the 90th calendar day
following the date hereof, the Filing Date means the earlier of (i)
the 20th
calendar day following the effective date of such registration
statement, and (ii) the 120th calendar day
following the date hereof, and (b) with respect to any additional
Registration Statements which may be required pursuant to Section
2(c) or Section 3(c), the earliest practical date on which the
Company is permitted by SEC Guidance to file such additional
Registration Statement related to the Registrable
Securities.
“Holder”
or “Holders” means the holder
or holders, as the case may be, from time to time of Registrable
Securities. The initial Holder is the Purchaser.
“Indemnified Party” shall
have the meaning set forth in Section 5(c).
“Indemnifying Party” shall
have the meaning set forth in Section 5(c).
“Initial Registration
Statement” means the initial Registration Statement
filed pursuant to this Agreement.
“Losses” shall have the
meaning set forth in Section 5(a).
“Plan of Distribution”
shall have the meaning set forth in Section 2(a).
“Prospectus” means the
prospectus included in a Registration Statement (including, without
limitation, a prospectus that includes any information previously
omitted from a prospectus filed as part of an effective
registration statement in reliance upon Rule 430A promulgated by
the Commission pursuant to the Securities Act), as amended or
supplemented by any prospectus supplement, with respect to the
terms of the offering of any portion of the Registrable Securities
covered by a Registration Statement, and all other amendments and
supplements to the Prospectus, including post-effective amendments,
and all material incorporated by reference or deemed to be
incorporated by reference in such Prospectus.
“Registrable Securities”
means, as of any date of determination, (a) all Conversion Shares
issuable upon conversion of the Note (assuming on such date the
Note is converted in full without regard to any conversion
limitations therein), (b) the Commitment Shares, (c) any additional shares of Common Stock
issuable in connection with any anti-dilution provisions in the
Note (without giving effect to any limitations on conversion set
forth in the Note) and (d) any securities issued or then
issuable upon any stock split, dividend or other distribution,
recapitalization or similar event with respect to the foregoing;
provided,
however, that any
such Registrable Securities shall cease to be Registrable
Securities (and the Company shall not be required to maintain the
effectiveness of any, or file another, Registration Statement
hereunder with respect thereto) for so long as (i) a Registration
Statement with respect to the sale of such Registrable Securities
is declared effective by the Commission under the Securities Act
and such Registrable Securities have been disposed of by the Holder
in accordance with such effective Registration Statement, (ii) such
Registrable Securities have been previously sold in accordance with
Rule 144, or (iii) such securities become eligible for resale
without volume or manner-of-sale restrictions and without current
public information pursuant to Rule 144, and the conditions of Rule
144(i)(2) have been met, as set forth in a written opinion letter
to such effect, addressed, delivered and acceptable to the Transfer
Agent and the affected Holders (assuming that such securities and
any securities issuable upon exercise, conversion or exchange of
which, or as a dividend upon which, such securities were issued or
are issuable, were at no time held by any Affiliate of the Company,
as reasonably determined by the Company, upon the advice of counsel
to the Company.
“Registration Statement”
means any registration statement required to be filed hereunder
pursuant to Section 2(a) and any additional registration statements
contemplated by Section 2(c) or Section 3(c), including (in each
case) the Prospectus, amendments and supplements to any such
registration statement or Prospectus, including pre- and
post-effective amendments, all exhibits thereto, and all material
incorporated by reference or deemed to be incorporated by reference
in any such registration statement.
“Rule
415” means Rule 415 promulgated by the Commission
pursuant to the Securities Act, as such Rule may be amended or
interpreted from time to time, or any similar rule or regulation
hereafter adopted by the Commission having substantially the same
purpose and effect as such Rule.
“Rule 424” means Rule 424
promulgated by the Commission pursuant to the Securities Act, as
such Rule may be amended or interpreted from time to time, or any
similar rule or regulation hereafter adopted by the Commission
having substantially the same purpose and effect as such
Rule.
“Selling Stockholder
Questionnaire” shall have the meaning set forth in
Section 3(a).
“SEC Guidance” means (i)
any publicly-available written or oral guidance of the Commission
staff, or any comments, requirements or requests of the Commission
staff and (ii) the Securities Act.
(a) On or prior to each
Filing Date, the Company shall prepare and file with the Commission
a Registration Statement covering the resale of all of the
Registrable Securities that are not then registered on an effective
Registration Statement for an offering to be made on a continuous
basis pursuant to Rule 415. Each Registration Statement filed
hereunder shall be on Form S-1 or such other form available to
register for resale the Registrable Securities as a secondary
offering and shall contain (unless otherwise directed by at least
85% in interest of the Holders) substantially the
“Plan of
Distribution” attached hereto as Annex A and substantially the
“Selling
Stockholder” section attached hereto as Annex B; provided, however, that no Holder shall
be required to be named as an “underwriter” without
such Holder’s express prior written consent. Subject to the
terms of this Agreement, the Company shall use its best efforts to
cause a Registration Statement filed under this Agreement
(including, without limitation, under Section 3(c)) to be declared
effective under the Securities Act as promptly as possible after
the filing thereof, and shall use its best efforts to keep such
Registration Statement continuously effective under the Securities
Act until the date that all Registrable Securities covered by such
Registration Statement (i) have been sold, thereunder or pursuant
to Rule 144, or (ii) may be sold without volume or manner-of-sale
restrictions pursuant to Rule 144 and without the requirement for
the Company to be in compliance with the current public information
requirement under Rule 144, and the conditions of Rule 144(i)(2)
have been met, as determined by the counsel to the Company pursuant
to a written opinion letter to such effect, addressed and
acceptable to the Transfer Agent and the affected Holders (the
“Effectiveness
Period”). The Company shall telephonically request
effectiveness of a Registration Statement as of 5:00 p.m. Eastern
Time on a Trading Day. The Company shall immediately notify the
Holders via facsimile or by e-mail of the effectiveness of a
Registration Statement by the next Trading Day that the Company
telephonically confirms effectiveness with the Commission, which
shall be the date requested for effectiveness of such Registration
Statement. The Company shall, by 9:30 a.m. Eastern Time on the
Trading Day five (5) days after the effective date of such
Registration Statement, file a final Prospectus with the Commission
as required by Rule 424. Failure to so notify the Holder within two
(2) Trading Days of such notification of effectiveness or failure
to file a final Prospectus as foresaid shall be deemed an Event
under Section 2(d).
(b) Notwithstanding
the registration obligations set forth in Section 2(a), if the
Commission informs the Company that all of the Registrable
Securities cannot, as a result of the application of Rule 415, be
registered for resale as a secondary offering on a single
registration statement, the Company agrees to promptly inform each
of the Holders thereof and use its reasonable best efforts to file
amendments to the Initial Registration Statement as required by the
Commission, covering the maximum number of Registrable Securities
permitted to be registered by the Commission, on Form S-1 or such
other form available to register for resale the Registrable
Securities as a secondary offering, subject to the provisions of
Section 2(d) with respect to the payment of liquidated damages;
provided,
however, that prior
to filing such amendment, the Company shall be obligated to use
diligent efforts to advocate with the Commission for the
registration of all of the Registrable Securities in accordance
with the SEC Guidance, including without limitation, Compliance and
Disclosure Interpretation 612.09.
(c) Notwithstanding
any other provision of this Agreement and subject to the payment of
liquidated damages pursuant to Section 2(d), if the Commission or
any SEC Guidance sets forth a limitation on the number of
Registrable Securities permitted to be registered on a particular
Registration Statement as a secondary offering (and notwithstanding
that the Company used diligent efforts to advocate with the
Commission for the registration of all or a greater portion of
Registrable Securities), unless otherwise directed in writing by a
Holder as to its Registrable Securities, the number of Registrable
Securities to be registered on such Registration Statement will be
reduced as follows:
a.
First,
the Company shall reduce or eliminate any securities to be included
other than Registrable Securities;
b.
Second,
the Company shall reduce Registrable
Securities represented by Conversion Shares;
and
c.
Third, the Company shall reduce Registrable Securities represented by
Commitment Shares.
In
the event of a cutback hereunder, the Company shall give the Holder
at least five (5) Trading Days prior written notice along with the
calculations as to such Holder’s allotment. In the event the
Company amends the Initial Registration Statement in accordance
with the foregoing, the Company will use its best efforts to file
with the Commission, as promptly as allowed by Commission or SEC
Guidance provided to the Company or to registrants of securities in
general, one or more registration statements on Form S-1 or such
other form available to register for resale those Registrable
Securities that were not registered for resale on the Initial
Registration Statement, as amended.
(d) If: (i) the Initial
Registration Statement is not filed on or prior to its Filing Date
(if the Company files the Initial Registration Statement without
affording the Holders the opportunity to review and comment on the
same as required by Section 3(a) herein, the Company shall be
deemed to have not satisfied this clause (i)), or (ii) the Company
fails to file with the Commission a request for acceleration of a
Registration Statement in accordance with Rule 461 promulgated by
the Commission pursuant to the Securities Act, within five Trading
Days of the date that the Company is notified (orally or in
writing, whichever is earlier) by the Commission that such
Registration Statement will not be “reviewed” or will
not be subject to further review, or (iii) [reserved], or (iv)
[reserved], (v) after the effective date of a Registration
Statement, such Registration Statement ceases for any reason to
remain continuously effective as to all Registrable Securities
included in such Registration Statement, or the Holders are
otherwise not permitted to utilize the Prospectus therein to resell
such Registrable Securities, for more than ten (10) consecutive
calendar days or more than an aggregate of fifteen (15) calendar
days (which need not be consecutive calendar days) during any
12-month period or (vi) the Company shall fail for any reason to
satisfy the current public information requirement under Rule 144
or the requirements of Rule 144(i)(2) as to the applicable
Registrable Securities (any such failure or breach being referred
to as an “Event”, and for purposes
of clauses (i) and (iv), the date on which such Event occurs, and
for purpose of clause (ii) the date on which such five (5) Trading
Day period is exceeded, and for purpose of clause (v) the date on
which such ten (10) or fifteen (15) calendar day period, as
applicable, is exceeded being referred to as “Event Date”), then, in
addition to any other rights the Holders may have hereunder or
under applicable law, on each such Event Date and on each monthly
anniversary of each such Event Date (if the applicable Event shall
not have been cured by such date) until the applicable Event is
cured, the Company shall pay to the Holders an amount in cash, as
partial liquidated damages and not as a penalty, their pro rata
portion of $60,000, on the Event Date and on every thirtieth
(30th) day
(pro rated for periods totaling less than thirty days) thereafter,
provided such amount shall increase by $30,000 on every thirty (30)
day anniversary of an Event Date. The foregoing liquidated damages
shall not apply if the Registrable Securities may be sold without
volume or manner-of-sale restrictions pursuant to Rule 144 at the
time the Event occurs, provided that the Company shall also be in
compliance with the requirements of Rule 144(i)(2) and the current
public information requirement under Rule 144 to the extent
required. If the Company fails to pay any partial liquidated
damages pursuant to this Section in full within seven days after
the date payable, the Company will pay interest thereon at a rate
of 18% per annum (or such lesser maximum amount that is permitted
to be paid by applicable law) to the Holder, accruing daily from
the date such partial liquidated damages are due until such
amounts, plus all such interest thereon, are paid in full. The
partial liquidated damages pursuant to the terms hereof shall apply
on a daily pro rata basis for any portion of a month prior to the
cure of an Event.
(e) [reserved]
(f) Notwithstanding
anything to the contrary contained herein, in no event shall the
Company be permitted to name any Holder or affiliate of a Holder as
any Underwriter without the prior written consent of such
Holder.
3.
Registration
Procedures.
In
connection with the Company’s registration obligations
hereunder, the Company shall:
(a) Not less than five
(5) Trading Days prior to the filing of each Registration Statement
and not less than one (1) Trading Day prior to the filing of any
related Prospectus or any amendment or supplement thereto
(including any document that would be incorporated or deemed to be
incorporated therein by reference), the Company shall (i) furnish
to each Holder copies of all such documents proposed to be filed,
which documents (other than those incorporated or deemed to be
incorporated by reference) will be subject to the review of such
Holders, and (ii) cause its officers and directors, counsel and
independent registered public accountants to respond to such
inquiries as shall be necessary, in the reasonable opinion of
respective counsel to each Holder, to conduct a reasonable
investigation within the meaning of the Securities Act. The Company
shall not file a Registration Statement or any such Prospectus or
any amendments or supplements thereto to which the Holders of a
majority of the Registrable Securities shall reasonably object in
good faith, provided that, the Company is notified of such
objection in writing no later than five (5) Trading Days after the
Holders have been so furnished copies of a Registration Statement
or one (1) Trading Day after the Holders have been so furnished
copies of any related Prospectus or amendments or supplements
thereto. Each Holder agrees to furnish to the Company a completed
questionnaire in the form attached to this Agreement as
Annex B (a
“Selling Stockholder
Questionnaire”) on a date that is not less than two
(2) Trading Days prior to the Filing Date or by the end of the
fourth (4th) Trading Day
following the date on which such Holder receives draft materials in
accordance with this Section.
(b) (i) Prepare and
file with the Commission such amendments, including post-effective
amendments, to a Registration Statement and the Prospectus used in
connection therewith as may be necessary to keep a Registration
Statement continuously effective as to the applicable Registrable
Securities for the Effectiveness Period and prepare and file with
the Commission such additional Registration Statements in order to
register for resale under the Securities Act all of the Registrable
Securities, (ii) cause the related Prospectus to be amended or
supplemented by any required Prospectus supplement (subject to the
terms of this Agreement), and, as so supplemented or amended, to be
filed pursuant to Rule 424, (iii) respond as promptly as reasonably
possible to any comments received from the Commission with respect
to a Registration Statement or any amendment thereto and provide as
promptly as reasonably possible to the Holders true and complete
copies of all correspondence from and to the Commission relating to
a Registration Statement (provided that, the Company shall excise
any information contained therein which would constitute material
non-public information regarding the Company or any of its
Subsidiaries), and (iv) comply in all material respects with the
applicable provisions of the Securities Act and the Exchange Act
with respect to the disposition of all Registrable Securities
covered by a Registration Statement during the applicable period in
accordance (subject to the terms of this Agreement) with the
intended methods of disposition by the Holders thereof set forth in
such Registration Statement as so amended or in such Prospectus as
so supplemented.
(c) If during the
Effectiveness Period, the number of Registrable Securities at any
time exceeds 100% of the number of shares of Common Stock
constituting Registrable Securities then registered in a
Registration Statement, then the Company shall file, as soon as
reasonably practicable, an additional Registration Statement
covering the resale by the Holders of not less than the number of
such Registrable Securities.
(d) Notify the Holders
of Registrable Securities to be sold (which notice shall, pursuant
to clauses (iii) through (vi) hereof, be accompanied by an
instruction to suspend the use of the Prospectus until the
requisite changes have been made) as promptly as reasonably
possible (and, in the case of (i)(A) below, not less than one (1)
Trading Day prior to such filing) and (if requested by any such
Person) confirm such notice in writing no later than one (1)
Trading Day following the day (i)(A) when a Prospectus or any
Prospectus supplement or post-effective amendment to a Registration
Statement is proposed to be filed, (B) when the Commission notifies
the Company whether there will be a “review” of such
Registration Statement and whenever the Commission comments in
writing on such Registration Statement, and (C) with respect to a
Registration Statement or any post-effective amendment, when the
same has become effective, (ii) of any request by the Commission or
any other federal or state governmental authority for amendments or
supplements to a Registration Statement or Prospectus or for
additional information, (iii) of the issuance by the Commission or
any other federal or state governmental authority of any stop order
suspending the effectiveness of a Registration Statement covering
any or all of the Registrable Securities or the initiation of any
Proceedings for that purpose, (iv) of the receipt by the Company of
any notification with respect to the suspension of the
qualification or exemption from qualification of any of the
Registrable Securities for sale in any jurisdiction, or the
initiation or threatening of any Proceeding for such purpose, (v)
of the occurrence of any event or passage of time that makes the
financial statements included in a Registration Statement
ineligible for inclusion therein or any statement made in a
Registration Statement or Prospectus or any document incorporated
or deemed to be incorporated therein by reference untrue in any
material respect or that requires any revisions to a Registration
Statement, Prospectus or other documents so that, in the case of a
Registration Statement or the Prospectus, as the case may be, it
will not contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary
to make the statements therein, in light of the circumstances under
which they were made, not misleading, and (vi) of the occurrence or
existence of any pending corporate development with respect to the
Company that the Company believes may be material and that, in the
determination of the Company, makes it not in the best interest of
the Company to allow continued availability of a Registration
Statement or Prospectus, provided, however, in no event shall any
such notice contain any information which would constitute
material, non-public information regarding the Company or any of
its Subsidiaries.
(e) Use its best
efforts to avoid the issuance of, or, if issued, obtain the
withdrawal of (i) any order stopping or suspending the
effectiveness of a Registration Statement, or (ii) any suspension
of the qualification (or exemption from qualification) of any of
the Registrable Securities for sale in any jurisdiction, at the
earliest practicable moment.
(f) Furnish to each
Holder, without charge, at least one conformed copy of each such
Registration Statement and each amendment thereto, including
financial statements and schedules, all documents incorporated or
deemed to be incorporated therein by reference to the extent
requested by such Person, and all exhibits to the extent requested
by such Person (including those previously furnished or
incorporated by reference) promptly after the filing of such
documents with the Commission; provided, that any such item which
is available on the EDGAR system (or successor thereto) need not be
furnished in physical form.
(g) Subject to the
terms of this Agreement, the Company hereby consents to the use of
such Prospectus and each amendment or supplement thereto by each of
the selling Holders in connection with the offering and sale of the
Registrable Securities covered by such Prospectus and any amendment
or supplement thereto, except after the giving of any notice
pursuant to Section 3(d).
(h) Prior to any
resale of Registrable Securities by a Holder, or from time to time
as requested by the Holder, use its reasonable best efforts to
register or qualify or cooperate with the selling Holders in
connection with the
registration or qualification (or exemption from
the Registration or qualification) of such Registrable Securities
for the resale by the Holder under the securities or Blue Sky laws
of such jurisdictions within the United States as any Holder
reasonably requests in writing, to keep each registration or
qualification (or exemption therefrom) effective during the
Effectiveness Period and to do any and all other acts or things
reasonably necessary to enable the disposition in such
jurisdictions of the Registrable Securities covered by each
Registration Statement, provided that the Company shall not be
required to qualify generally to do business in any jurisdiction
where it is not then so qualified, subject the Company to any
material tax in any such jurisdiction where it is not then so
subject or file a general consent to service of process in any such
jurisdiction.
(i) If requested by a
Holder, cooperate with such Holder to facilitate the timely
preparation and delivery of certificates representing Registrable
Securities to be delivered to a transferee pursuant to a
Registration Statement, which certificates shall be free, to the
extent permitted by the Purchase Agreement, of all restrictive
legends, and to enable such Registrable Securities to be in such
denominations and registered in such names as any such Holder may
request.
(j) Upon the occurrence
of any event contemplated by Section 3(d), as promptly as
reasonably possible under the circumstances taking into account the
Company’s good faith assessment of any adverse consequences
to the Company and its shareholders of the premature disclosure of
such event, prepare a supplement or amendment, including a
post-effective amendment, to a Registration Statement or a
supplement to the related Prospectus or any document incorporated
or deemed to be incorporated therein by reference, and file any
other required document so that, as thereafter delivered, neither a
Registration Statement nor such Prospectus will contain an untrue
statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made,
not misleading. If the Company
notifies the Holders in accordance with clauses (iii) through (vi)
of Section 3(d) above to suspend the use of any Prospectus until
the requisite changes to such Prospectus have been made, then the
Holders shall suspend use of such Prospectus. The Company will use
its best efforts to ensure that the use of the Prospectus may be
resumed as promptly as is practicable. The Company shall be
entitled to exercise its right under this Section 3(j) to suspend
the availability of a Registration Statement and Prospectus,
subject to the payment of partial liquidated damages otherwise
required pursuant to Section 2(d), for a period not to exceed 60
calendar days (which need not be consecutive days) in any 12-month
period.
(k) Otherwise use
reasonable best efforts to comply with all applicable rules and
regulations of the Commission under the Securities Act and the
Exchange Act, including, without limitation, Rule 172 under the
Securities Act, file any final Prospectus, including any supplement
or amendment thereof, with the Commission pursuant to Rule 424
under the Securities Act, promptly inform the Holders in writing
if, at any time during the Effectiveness Period, the Company does
not satisfy the conditions specified in Rule 172 and, as a result
thereof, the Holders are required to deliver a Prospectus in
connection with any disposition of Registrable Securities and take
such other actions as may be reasonably necessary to facilitate the
registration of the Registrable Securities hereunder.
(l) Intentionally
Omitted.
(m) The Company may
require each selling Holder to furnish to the Company a certified
statement as to the number of shares of Common Stock beneficially
owned by such Holder and, if required by the Commission, the
natural persons thereof that have voting and dispositive control
over the shares. During any periods that the Company is unable to
meet its obligations hereunder with respect to the registration of
the Registrable Securities solely because any Holder fails to
furnish such information within three Trading Days of the
Company’s request, any liquidated damages that are accruing
at such time as to such Holder only shall be tolled and any Event
that may otherwise occur solely because of such delay shall be
suspended as to such Holder only, until such information is
delivered to the Company.
4.
Registration Expenses. All fees
and expenses incident to the performance of or compliance with,
this Agreement by the Company shall be borne by the Company whether
or not any Registrable Securities are sold pursuant to a
Registration Statement. The fees and expenses referred to in the
foregoing sentence shall include, without limitation, (i) all
registration and filing fees (including, without limitation, fees
and expenses of the Company’s counsel and independent
registered public accountants) (A) with respect to filings made
with the Commission, (B) with respect to filings required to be
made with any Trading Market on which the Common Stock is then
listed for trading, and (C) in compliance with applicable state
securities or Blue Sky laws reasonably agreed to by the Company in
writing (including, without limitation, fees and disbursements of
counsel for the Company in connection with Blue Sky qualifications
or exemptions of the Registrable Securities), (ii) printing
expenses (including, without limitation, expenses of printing
certificates for Registrable Securities), (iii) messenger,
telephone and delivery expenses, (iv) fees and disbursements of
counsel for the Company, (v) Securities Act liability insurance, if
the Company so desires such insurance, (vi) fees and expenses of
all other Persons retained by the Company in connection with the
consummation of the transactions contemplated by this Agreement and
(vii) reasonable and
reasonably-documented fees and disbursements, not to exceed $10,000
in the aggregate, of one counsel for the Purchaser. In
addition, the Company shall be responsible for all of its internal
expenses incurred in connection with the consummation of the
transactions contemplated by this Agreement (including, without
limitation, all salaries and expenses of its officers and employees
performing legal or accounting duties), the expense of any annual
audit and the fees and expenses incurred in connection with the
listing of the Registrable Securities on any securities exchange as
required hereunder. In no event shall the Company be responsible
for any broker or similar commissions of any Holder or, except to
the extent provided for in the Transaction Documents, any legal
fees or other costs of the Holders.
(a) Indemnification by the Company.
The Company shall, notwithstanding any termination of this
Agreement, indemnify and hold harmless each Holder, the officers,
directors, members, partners, agents, and employees (and any other
Persons with a functionally equivalent role of a Person holding
such titles, notwithstanding a lack of such title or any other
title) of each of them, each Person who controls any such Holder
(within the meaning of Section 15 of the Securities Act or Section
20 of the Exchange Act) and the officers, directors, members,
shareholders, partners, agents and employees (and any other Persons
with a functionally equivalent role of a Person holding such
titles, notwithstanding a lack of such title or any other title) of
each such controlling Person, to the fullest extent permitted by
applicable law, from and against any and all losses, claims,
damages, liabilities, costs (including, without limitation,
reasonable attorneys’ fees) and expenses (collectively,
“Losses”), as incurred,
arising out of or relating to (1) any untrue or alleged untrue
statement of a material fact contained in a Registration Statement,
any Prospectus or any form of prospectus or in any amendment or
supplement thereto or in any preliminary prospectus, or arising out
of or relating to any omission or alleged omission of a material
fact required to be stated therein or necessary to make the
statements therein (in the case of any Prospectus or supplement
thereto, in light of the circumstances under which they were made)
not misleading or (2) any violation or alleged violation by the
Company of the Securities Act, the Exchange Act or any state
securities law, or any rule or regulation thereunder, in connection
with the performance of its obligations under this Agreement,
except to the extent, but only to the extent, that (i) such untrue
statements or omissions are based solely upon information regarding
such Holder furnished in writing to the Company by such Holder
expressly for use therein, or to the extent that such information
relates to such Holder or such Holder’s proposed method of
distribution of Registrable Securities and was reviewed and
expressly approved in writing by such Holder expressly for use in a
Registration Statement, such Prospectus or in any amendment or
supplement thereto (it being understood that the Holder has
approved Annex A hereto for this purpose) or (ii) in the case of an
occurrence of an event of the type specified in Section
3(d)(iii)-(vi), the use by such Holder of an outdated, defective or
otherwise unavailable Prospectus after the Company has notified
such Holder in writing that the Prospectus is outdated, defective
or otherwise unavailable for use by such Holder and prior to the
receipt by such Holder of the Advice contemplated in Section 6(d).
The Company shall notify the Holders promptly of the institution,
threat or assertion of any Proceeding arising from or in connection
with the transactions contemplated by this Agreement of which the
Company is aware. Such indemnity shall remain in full force and
effect regardless of any investigation made by or on behalf of such
indemnified person and shall survive the transfer of any
Registrable Securities by any of the Holders in accordance with
Section 6(h).
(b) Indemnification by Holders.
Each Holder shall, severally and not jointly, indemnify and hold
harmless the Company, its directors, officers, agents and
employees, each Person who controls the Company (within the meaning
of Section 15 of the Securities Act and Section 20 of the Exchange
Act), and the directors, officers, agents or employees of such
controlling Persons, to the fullest extent permitted by applicable
law, from and against all Losses, as incurred, to the extent
arising out of or based solely upon: any untrue or alleged untrue
statement of a material fact contained in any Registration
Statement, any Prospectus, or in any amendment or supplement
thereto or in any preliminary prospectus, or arising out of or
relating to any omission or alleged omission of a material fact
required to be stated therein or necessary to make the statements
therein (in the case of any Prospectus or supplement thereto, in
light of the circumstances under which they were made) not
misleading (i) to the extent, but only to the extent, that such
untrue statement or omission is contained in any information so
furnished in writing by such Holder to the Company expressly for
inclusion in such Registration Statement or such Prospectus or (ii)
to the extent, but only to the extent, that such information
relates to such Holder’s information provided in the Selling
Stockholder Questionnaire or the proposed method of distribution of
Registrable Securities and was reviewed and expressly approved in
writing by such Holder expressly for use in a Registration
Statement (it being understood that the Holder has approved Annex A
hereto for this purpose), such Prospectus or in any amendment or
supplement thereto. In no event shall the liability of a selling
Holder be greater in amount than the dollar amount of the proceeds
(net of all expenses paid by such Holder in connection with any
claim relating to this Section 5 and the amount of any damages such
Holder has otherwise been required to pay by reason of such untrue
statement or omission) received by such Holder upon the sale of the
Registrable Securities included in the Registration Statement
giving rise to such indemnification obligation.
(c) Conduct of Indemnification
Proceedings. If any Proceeding shall be brought or asserted
against any Person entitled to indemnity hereunder (an
“Indemnified
Party”), such Indemnified Party shall promptly notify
the Person from whom indemnity is sought (the “Indemnifying Party”) in
writing, and the Indemnifying Party shall have the right to assume
the defense thereof, including the employment of counsel reasonably
satisfactory to the Indemnified Party and the payment of all fees
and expenses incurred in connection with defense thereof, provided
that the failure of any Indemnified Party to give such notice shall
not relieve the Indemnifying Party of its obligations or
liabilities pursuant to this Agreement, except (and only) to the
extent that it shall be finally determined by a court of competent
jurisdiction (which determination is not subject to appeal or
further review) that such failure shall have materially and
adversely prejudiced the Indemnifying Party.
An
Indemnified Party shall have the right to employ separate counsel
in any such Proceeding and to participate in the defense thereof,
but the fees and expenses of such counsel shall be at the expense
of such Indemnified Party or Parties unless: (1) the Indemnifying
Party has agreed in writing to pay such fees and expenses, (2) the
Indemnifying Party shall have failed promptly to assume the defense
of such Proceeding and to employ counsel reasonably satisfactory to
such Indemnified Party in any such Proceeding, or (3) the named
parties to any such Proceeding (including any impleaded parties)
include both such Indemnified Party and the Indemnifying Party, and
counsel to the Indemnified Party shall reasonably believe that a
material conflict of interest is likely to exist if the same
counsel were to represent such Indemnified Party and the
Indemnifying Party (in which case, if such Indemnified Party
notifies the Indemnifying Party in writing that it elects to employ
separate counsel at the expense of the Indemnifying Party, the
Indemnifying Party shall not have the right to assume the defense
thereof and the reasonable fees and expenses of no more than one
separate counsel shall be at the expense of the Indemnifying
Party). The Indemnifying Party shall not be liable for any
settlement of any such Proceeding effected without its written
consent, which consent shall not be unreasonably withheld or
delayed. No Indemnifying Party shall, without the prior written
consent of the Indemnified Party, effect any settlement of any
pending Proceeding in respect of which any Indemnified Party is a
party, unless such settlement includes an unconditional release of
such Indemnified Party from all liability on claims that are the
subject matter of such Proceeding.
Subject
to the terms of this Agreement, all reasonable fees and expenses of
the Indemnified Party (including reasonable fees and expenses to
the extent incurred in connection with investigating or preparing
to defend such Proceeding in a manner not inconsistent with this
Section) shall be paid to the Indemnified Party, as incurred,
within ten Trading Days of written notice thereof to the
Indemnifying Party, provided that the Indemnified Party shall
promptly reimburse the Indemnifying Party for that portion of such
fees and expenses applicable to such actions for which such
Indemnified Party is finally determined by a court of competent
jurisdiction (which determination is not subject to appeal or
further review) not to be entitled to indemnification
hereunder.
(d) Contribution. If the
indemnification under Section 5(a) or 5(b) is unavailable to an
Indemnified Party or insufficient to hold an Indemnified Party
harmless for any Losses, then each Indemnifying Party shall
contribute to the amount paid or payable by such Indemnified Party,
in such proportion as is appropriate to reflect the relative fault
of the Indemnifying Party and Indemnified Party in connection with
the actions, statements or omissions that resulted in such Losses
as well as any other relevant equitable considerations. The
relative fault of such Indemnifying Party and Indemnified Party
shall be determined by reference to, among other things, whether
any action in question, including any untrue or alleged untrue
statement of a material fact or omission or alleged omission of a
material fact, has been taken or made by, or relates to information
supplied by, such Indemnifying Party or Indemnified Party, and the
parties’ relative intent, knowledge, access to information
and opportunity to correct or prevent such action, statement or
omission. The amount paid or payable by a party as a result of any
Losses shall be deemed to include, subject to the limitations set
forth in this Agreement, any reasonable attorneys’ or other
fees or expenses incurred by such party in connection with any
Proceeding to the extent such party would have been indemnified for
such fees or expenses if the indemnification provided for in this
Section was available to such party in accordance with its
terms.
The
parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 5(d) were determined by pro
rata allocation or by any other method of allocation that does not
take into account the equitable considerations referred to in the
immediately preceding paragraph. In no event shall the contribution
obligation of a Holder of Registrable Securities be greater in
amount than the dollar amount of the proceeds (net of all expenses
paid by such Holder in connection with any claim relating to this
Section 5 and the amount of any damages such Holder has otherwise
been required to pay by reason of such untrue or alleged untrue
statement or omission or alleged omission) received by it upon the
sale of the Registrable Securities giving rise to such contribution
obligation.
The
indemnity and contribution agreements contained in this Section are
in addition to any liability that the Indemnifying Parties may have
to the Indemnified Parties.
(a) Remedies. In the event of a
breach by the Company or by a Holder of any of their respective
obligations under this Agreement, each Holder or the Company, as
the case may be, in addition to being entitled to exercise all
rights granted by law and under this Agreement, including recovery
of damages, shall be entitled to specific performance of its rights
under this Agreement. Each of the Company and each Holder agrees
that monetary damages would not provide adequate compensation for
any losses incurred by reason of a breach by it of any of the
provisions of this Agreement and hereby further agrees that, in the
event of any action for specific performance in respect of such
breach, it shall not assert or shall waive the defense that a
remedy at law would be adequate.
(b) No Piggyback on Registrations;
Prohibition on Filing Other Registration Statements. Neither
the Company nor any of its security holders (other than the Holders
in such capacity pursuant hereto) may include securities of the
Company in any Registration Statements other than the Registrable
Securities or any securities held by Affiliates of the Holders. The
Company shall not file any other registration statements until at
least six months after all Registrable Securities are registered
pursuant to a Registration Statement that is declared effective by
the Commission, provided that this Section 6(b) shall not prohibit
the Company from filing amendments to registration statements filed
prior to the date of this Agreement.
(c) [Reserved]
(d) Discontinued Disposition. By
its acquisition of Registrable Securities, each Holder agrees that,
upon receipt of a notice from the Company of the occurrence of any
event of the kind described in Section 3(d)(iii) through (vi), such
Holder will forthwith discontinue disposition of such Registrable
Securities under a Registration Statement until it is advised in
writing (the “Advice”) by the Company
that the use of the applicable Prospectus (as it may have been
supplemented or amended) may be resumed. The Company will use its
best efforts to ensure that the use of the Prospectus may be
resumed as promptly as is practicable. The Company agrees and
acknowledges that any periods during which the Holder is required
to discontinue the disposition of the Registrable Securities
hereunder shall be subject to the provisions of Section
2(d).
(e) Piggy-Back Registrations. If,
at any time during the Effectiveness Period, there is not an
effective Registration Statement covering all of the Registrable
Securities and the Company shall determine to prepare and file with
the Commission a registration statement relating to an offering for
its own account or the account of others under the Securities Act
of any of its equity securities, other than on Form S-4 or Form S-8
(each as promulgated under the Securities Act) or their then
equivalents relating to equity securities to be issued solely in
connection with any acquisition of any entity or business or equity
securities issuable in connection with the Company’s stock
option or other employee benefit plans, then the Company shall
deliver to each Holder a written notice of such determination and,
if within fifteen days after the date of the delivery of such
notice, any such Holder shall so request in writing, the Company
shall include in such registration statement all or any part of
such Registrable Securities such Holder requests to be registered;
provided,
however, that the
Company shall not be required to register any Registrable
Securities pursuant to this Section 6(e) that are eligible for
resale pursuant to Rule 144 (without volume restrictions or current
public information requirements) promulgated by the Commission
pursuant to the Securities Act or that are the subject of a then
effective Registration Statement that is available for resales or
other dispositions by such Holder.
(f) Amendments and Waivers. The
provisions of this Agreement, including the provisions of this
sentence, may not be amended, modified or supplemented, and waivers
or consents to departures from the provisions hereof may not be
given, unless the same shall be in writing and signed by the
Company and the Holders of 50.1% or more of the then outstanding
Registrable Securities (for purposes of clarification, this
includes any Registrable Securities issuable upon exercise or
conversion of any Security), provided that, if any amendment,
modification or waiver disproportionately and adversely impacts a
Holder (or group of Holders), the consent of such
disproportionately impacted Holder (or group of Holders) shall be
required. If a Registration Statement does not register all of the
Registrable Securities pursuant to a waiver or amendment done in
compliance with the previous sentence, then the number of
Registrable Securities to be registered for each Holder shall be
reduced pro rata among all Holders and each Holder shall have the
right to designate which of its Registrable Securities shall be
omitted from such Registration Statement. Notwithstanding the
foregoing, a waiver or consent to depart from the provisions hereof
with respect to a matter that relates exclusively to the rights of
a Holder or some Holders and that does not directly or indirectly
affect the rights of other Holders may be given only by such Holder
or Holders of all of the Registrable Securities to which such
waiver or consent relates; provided, however, that the provisions of
this sentence may not be amended, modified, or supplemented except
in accordance with the provisions of the first sentence of this
Section 6(f). No consideration shall be offered or paid to any
Person to amend or consent to a waiver or modification of any
provision of this Agreement unless the same consideration also is
offered to all of the parties to this Agreement.
(g) Notices. Any and all notices or
other communications or deliveries required or permitted to be
provided hereunder shall be delivered as set forth in the Purchase
Agreement.
(h) Successors and Assigns. This
Agreement shall inure to the benefit of and be binding upon the
successors and permitted assigns of each of the parties and shall
inure to the benefit of each Holder. The Company may not assign
(except by merger) its rights or obligations hereunder without the
prior written consent of all of the Holders of the then outstanding
Registrable Securities. Each Holder may assign their respective
rights hereunder in the manner and to the Persons as permitted
under Section 5.5 of the Purchase Agreement.
(i) No Inconsistent Agreements.
Neither the Company nor any of its Subsidiaries has entered, as of
the date hereof, nor shall the Company or any of its Subsidiaries,
on or after the date of this Agreement, enter into any agreement
with respect to its securities, that would have the effect of
impairing the rights granted to the Holders in this Agreement or
otherwise conflicts with the provisions hereof. Except as set forth
on Schedule 6(i),
neither the Company nor any of its Subsidiaries has previously
entered into any agreement granting any registration rights with
respect to any of its securities to any Person that have not been
satisfied in full.
(j) Execution and Counterparts.
This Agreement may be executed in two or more counterparts, all of
which when taken together shall be considered one and the same
agreement and shall become effective when counterparts have been
signed by each party and delivered to the other party, it being
understood that both parties need not sign the same counterpart. In
the event that any signature is delivered by facsimile transmission
or by e-mail delivery of a “.pdf” format data file,
such signature shall create a valid and binding obligation of the
party executing (or on whose behalf such signature is executed)
with the same force and effect as if such facsimile or
“.pdf” signature page were an original
thereof.
(k) Governing Law. All questions
concerning the construction, validity, enforcement and
interpretation of this Agreement shall be determined in accordance
with the provisions of the Purchase Agreement.
(l) Cumulative Remedies. The
remedies provided herein are cumulative and not exclusive of any
other remedies provided by law.
(m) Severability. If any term,
provision, covenant or restriction of this Agreement is held by a
court of competent jurisdiction to be invalid, illegal, void or
unenforceable, the remainder of the terms, provisions, covenants
and restrictions set forth herein shall remain in full force and
effect and shall in no way be affected, impaired or invalidated,
and the parties hereto shall use their commercially reasonable
efforts to find and employ an alternative means to achieve the same
or substantially the same result as that contemplated by such term,
provision, covenant or restriction. It is hereby stipulated and
declared to be the intention of the parties that they would have
executed the remaining terms, provisions, covenants and
restrictions without including any of such that may be hereafter
declared invalid, illegal, void or unenforceable.
(n) Headings. The headings in this
Agreement are for convenience only, do not constitute a part of the
Agreement and shall not be deemed to limit or affect any of the
provisions hereof.
********************
(Signature Pages Follow)
IN
WITNESS WHEREOF, the parties have executed this Registration Rights
Agreement as of the date first written above.
TRANSWORLD HOLDINGS, INC.
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By:__________________________________________
Name:
Title:
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[SIGNATURE
PAGE OF HOLDERS FOLLOWS]
[SIGNATURE
PAGE OF PURCHASER TO GOIG RRA]
Name of
Purchaser: __________________________________
Signature of Authorized Signatory of
Purchaser: __________________________
Name of
Authorized Signatory: __________________________________
Title
of Authorized Signatory: Authorized
Signatory
[SIGNATURE PAGES
CONTINUE]
Annex A
Plan of Distribution
Each
Selling Stockholder (the “Selling Shareholders”) of
the securities and any of their pledgees, assignees and
successors-in-interest may, from time to time, sell any or all of
their securities covered hereby on the principal Trading Market or
any other stock exchange, market or trading facility on which the
securities are traded or in private transactions. These sales may
be at fixed or negotiated prices. A Selling Stockholder may use any
one or more of the following methods when selling
securities:
●
ordinary brokerage
transactions and transactions in which the broker-dealer solicits
purchasers;
●
block trades in
which the broker-dealer will attempt to sell the securities as
agent but may position and resell a portion of the block as
principal to facilitate the transaction;
●
purchases by a
broker-dealer as principal and resale by the broker-dealer for its
account;
●
an exchange
distribution in accordance with the rules of the applicable
exchange;
●
privately
negotiated transactions;
●
settlement of short
sales;
●
in transactions
through broker-dealers that agree with the Selling Shareholders to
sell a specified number of such securities at a stipulated price
per security;
●
through the writing
or settlement of options or other hedging transactions, whether
through an options exchange or otherwise;
●
a combination of
any such methods of sale; or
●
any other method
permitted pursuant to applicable law.
The
Selling Shareholders may also sell securities under Rule 144 or any
other exemption from registration under the Securities Act of 1933,
as amended (the “Securities Act”), if
available, rather than under this prospectus.
Broker-dealers
engaged by the Selling Shareholders may arrange for other
brokers-dealers to participate in sales. Broker-dealers may receive
commissions or discounts from the Selling Shareholders (or, if any
broker-dealer acts as agent for the purchaser of securities, from
the purchaser) in amounts to be negotiated, but, except as set
forth in a supplement to this Prospectus, in the case of an agency
transaction not in excess of a customary brokerage commission in
compliance with FINRA Rule 2440; and in the case of a principal
transaction a markup or markdown in compliance with FINRA
IM-2440.
In
connection with the sale of the securities or interests therein,
the Selling Shareholders may enter into hedging transactions with
broker-dealers or other financial institutions, which may in turn
engage in short sales of the securities in the course of hedging
the positions they assume. The Selling Shareholders may also sell
securities short and deliver these securities to close out their
short positions, or loan or pledge the securities to broker-dealers
that in turn may sell these securities. The Selling Shareholders
may also enter into option or other transactions with
broker-dealers or other financial institutions or create one or
more derivative securities which require the delivery to such
broker-dealer or other financial institution of securities offered
by this prospectus, which securities such broker-dealer or other
financial institution may resell pursuant to this prospectus (as
supplemented or amended to reflect such transaction).
The
Selling Shareholders and any broker-dealers or agents that are
involved in selling the securities may be deemed to be
“underwriters” within the meaning of the Securities Act
in connection with such sales. In such event, any commissions
received by such broker-dealers or agents and any profit on the
resale of the securities purchased by them may be deemed to be
underwriting commissions or discounts under the Securities Act.
Each Selling Stockholder has informed the Company that it does not
have any written or oral agreement or understanding, directly or
indirectly, with any person to distribute the
securities.
The
Company is required to pay certain fees and expenses incurred by
the Company incident to the registration of the securities. The
Company has agreed to indemnify the Selling Shareholders against
certain losses, claims, damages and liabilities, including
liabilities under the Securities Act.
We
agreed to keep this prospectus effective until the earlier of (i)
the date on which the securities may be resold by the Selling
Shareholders without registration and without regard to any volume
or manner-of-sale limitations by reason of Rule 144, without the
requirement for the Company to be in compliance with the current
public information under Rule 144 under the Securities Act or any
other rule of similar effect or (ii) all of the securities have
been sold pursuant to this prospectus or Rule 144 under the
Securities Act or any other rule of similar effect. The resale
securities will be sold only through registered or licensed brokers
or dealers if required under applicable state securities laws. In
addition, in certain states, the resale securities covered hereby
may not be sold unless they have been registered or qualified for
sale in the applicable state or an exemption from the registration
or qualification requirement is available and is complied
with.
Under
applicable rules and regulations under the Exchange Act, any person
engaged in the distribution of the resale securities may not
simultaneously engage in market making activities with respect to
the common stock for the applicable restricted period, as defined
in Regulation M, prior to the commencement of the distribution. In
addition, the Selling Shareholders will be subject to applicable
provisions of the Exchange Act and the rules and regulations
thereunder, including Regulation M, which may limit the timing of
purchases and sales of the common stock by the Selling Shareholders
or any other person. We will make copies of this prospectus
available to the Selling Shareholders and have informed them of the
need to deliver a copy of this prospectus to each purchaser at or
prior to the time of the sale (including by compliance with Rule
172 under the Securities Act).
Annex B
SELLING SHAREHOLDERS
The
common stock being offered by the selling shareholders are those
previously issued to the selling shareholders, and those issuable
to the selling shareholders, upon conversion of the notes. For
additional information regarding the issuances of the notes, see
"Private Placement" above. We are registering the shares of common
stock in order to permit the selling shareholders to offer the
shares for resale from time to time. Except for the ownership of
the notes and the shares of common stock, the selling shareholders
have not had any material relationship with us within the past
three years.
The
table below lists the selling shareholders and other information
regarding the beneficial ownership of the shares of common stock by
each of the selling shareholders. The second column lists the
number of shares of common stock beneficially owned by each selling
shareholder, based on its ownership of the shares of common stock,
notes and warrants, as of ________, 2020, assuming conversion of
the notes and exercise of warrants held by the selling shareholders
on that date, without regard to any limitations on
exercises.
The
third column lists the shares of common stock being offered by this
prospectus by the selling shareholders.
In
accordance with the terms of a registration rights agreement with
the selling shareholders, this prospectus generally covers the
resale of the sum of (i) the number of shares of common stock
issued to the selling shareholders as commitment shares, and (ii)
the maximum number of shares of common stock issuable upon
conversion of the notes, determined as if the outstanding notes
were exercised in full as of the trading day immediately preceding
the date this registration statement was initially filed with the
SEC, subject to adjustment as provided in the registration right
agreement, without regard to any limitations on the conversion of
the notes. The fourth
column assumes the sale of all of the shares offered by the selling
shareholders pursuant to this prospectus.
Under
the terms of the notes, a selling shareholder may not exercise the
notes and/or exercise the warrants to the extent such exercise
would cause such selling shareholder, together with its affiliates
and attribution parties, to beneficially own a number of shares of
common stock which would exceed 9.99% of our then outstanding
common stock following such conversion, excluding for purposes of
such determination shares of common stock issuable upon conversion
of the notes which have not been converted. The number of shares in
the second column does not reflect this limitation. The selling
shareholders may sell all, some or none of their shares in this
offering. See "Plan of Distribution."
Name of Selling Shareholder
|
Number of shares of Common Stock Owned Prior to
Offering
|
Maximum Number of shares of Common Stock to be Sold Pursuant to
this Prospectus
|
Number of shares of Common Stock Owned After Offering
|
Annex
C
TRANSWORLD HOLDINGS, INC.
Selling Stockholder Notice and Questionnaire
The
undersigned beneficial owner of common stock (the
“Registrable
Securities”) of Transworld Holdings, Inc., a Delaware
corporation (the “Company”), understands
that the Company has filed or intends to file with the Securities
and Exchange Commission (the “Commission”) a
registration statement (the “Registration Statement”)
for the registration and resale under Rule 415 of the Securities
Act of 1933, as amended (the “Securities Act”), of the
Registrable Securities, in accordance with the terms of the
Registration Rights Agreement (the “Registration Rights
Agreement”) to which this document is annexed. A copy
of the Registration Rights Agreement is available from the Company
upon request at the address set forth below. All capitalized terms
not otherwise defined herein shall have the meanings ascribed
thereto in the Registration Rights Agreement.
Certain
legal consequences arise from being named as a selling stockholder
in the Registration Statement and the related prospectus.
Accordingly, holders and beneficial owners of Registrable
Securities are advised to consult their own securities law counsel
regarding the consequences of being named or not being named as a
selling stockholder in the Registration Statement and the related
prospectus.
NOTICE
The
undersigned beneficial owner (the “Selling Stockholder”) of
Registrable Securities hereby elects to include the Registrable
Securities owned by it in the Registration Statement.
The
undersigned hereby provides the following information to the
Company and represents and warrants that such information is
accurate:
QUESTIONNAIRE
1. Name.
(a)
Full Legal Name of
Selling Stockholder
(b)
Full Legal Name of
Registered Holder (if not the same as (a) above) through which
Registrable Securities are held:
(c)
Full Legal Name of
Natural Control Person (which means a natural person who directly
or indirectly alone or with others has power to vote or dispose of
the securities covered by this Questionnaire):
2.
Address for Notices to Selling Stockholder:
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|
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Telephone:
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Fax:
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Contact
Person:
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3.
Broker-Dealer Status:
(a)
Are you a
broker-dealer?
(b)
If
“yes” to Section 3(a), did you receive your Registrable
Securities as compensation for investment banking services to the
Company?
Note:
If “no”
to Section 3(b), the Commission’s staff has indicated that
you should be identified as an underwriter in the Registration
Statement.
(c)
Are you an
affiliate of a broker-dealer?
(d)
If you are an
affiliate of a broker-dealer, do you certify that you purchased the
Registrable Securities in the ordinary course of business, and at
the time of the purchase of the Registrable Securities to be
resold, you had no agreements or understandings, directly or
indirectly, with any person to distribute the Registrable
Securities?
Note:
If “no”
to Section 3(d), the Commission’s staff has indicated that
you should be identified as an underwriter in the Registration
Statement.
4.
Beneficial Ownership of Securities of the Company Owned by the
Selling Stockholder.
Except as set forth below in this Item 4, the undersigned is not
the beneficial or registered owner of any securities of the Company
other than the securities issuable pursuant to the Purchase
Agreement.
(a)
Type and Amount of
other securities beneficially owned by the Selling
Stockholder:
5.
Relationships with the Company:
Except as set forth below, neither the undersigned nor any of its
affiliates, officers, directors or principal equity holders (owners
of 5% of more of the equity securities of the undersigned) has held
any position or office or has had any other material relationship
with the Company (or its predecessors or affiliates) during the
past three years.
State any
exceptions here:
The
undersigned agrees to promptly notify the Company of any material
inaccuracies or changes in the information provided herein that may
occur subsequent to the date hereof at any time while the
Registration Statement remains effective; provided, that the
undersigned shall not be required to notify the Company of any
changes to the number of securities held or owned by the
undersigned or its affiliates.
The
undersigned represents and warrants to the Company that it is
familiar with and understands Regulation M under the Securities
Exchange Act of 1934 and agrees to abide by the provisions of
Regulation M during any time Regulation M applies to the
undersigned via the Registrable Securities. By signing below, the
undersigned consents to the disclosure of the information contained
herein in its answers to Items 1 through 5 and the inclusion of
such information in the Registration Statement and the related
prospectus and any amendments or
supplements thereto. The undersigned understands that such
information will be relied upon by the Company in connection with
the preparation or amendment of the Registration Statement and the
related prospectus and any amendments or supplements
thereto.
IN
WITNESS WHEREOF the undersigned, by authority duly given, has
caused this Selling Stockholder Notice and Questionnaire to be
executed and delivered either in person or by its duly authorized
agent.
Name:
Title:
PLEASE FAX A COPY (OR EMAIL A .PDF COPY) OF THE COMPLETED AND
EXECUTED NOTICE AND QUESTIONNAIRE TO:
Schedule 6(i)
Registration rights
were granted relating to the securities issued to funds managed by
Arena Investors LP pursuant to the terms of the May 2020
Financing.
AMENDED AND RESTATED
SECURITY AGREEMENT
This
AMENDED AND RESTATED SECURITY AGREEMENT, dated as of November 3,
2020 (this “Agreement”), is among
Transworld Holdings, Inc., a Delaware corporation (formerly known
as GoIP Global, Inc., a Colorado corporation) (the
“Company”), the
Subsidiaries of the Company set forth on the signature pages hereto
(such subsidiaries, the “Subsidiaries” and,
together with the Company, the “Debtors”) and the holders
of the Notes (as defined herein) signatory hereto, their endorsees,
transferees and assigns (collectively, the “Secured
Parties”).
W I T N E S S E T H:
WHEREAS, the
Company has issued to the Secured Parties the following promissory
notes: (a) the Company’s Original Issue Discount Senior
Secured Convertible Promissory Notes issued on May 8, 2020 and due
twelve (12) months following their issuance, in the aggregate
principal amount of $3,000,000.00 (the “May 2020 Notes”) and (b)
the Company’s Original Issue Discount Senior Secured
Convertible Promissory Notes issued as of the date hereof and due
twelve (12) months following their issuance, in the aggregate
principal amount of $3,888,889.00 (the “November 2020 Notes” and,
together with the May 2020 Notes, the “Notes”)
WHEREAS, pursuant
to the Securities Purchase Agreement dated as of May 8, 2020 (as
amended, modified or supplemented from time to time in accordance
with its terms, the “May 2020 Purchase
Agreement”), the Secured Parties have severally agreed
to extend the loans to the Company evidenced by the May 2020
Notes;
WHEREAS, pursuant
to the Securities Purchase Agreement dated as of the date hereof
(as amended, modified or supplemented from time to time in
accordance with its terms, the “November 2020 Purchase
Agreement” and together with the May 2020 Purchase
Agreement, the “Purchase Agreements” and
each individually a “Purchase Agreement”), the
Secured Parties have severally agreed to extend the loans to the
Company evidenced by the November 2020 Notes;
WHEREAS, in order
to induce the Secured Parties to extend the loans evidenced by the
May 2020 Notes, each Debtor agreed to execute and deliver to the
Secured Parties that certain Security Agreement dated as of May 8,
2020 (the “Existing
Security Agreement”);
WHEREAS, in order
to induce the Secured Parties to extend the loans evidenced by the
November 2020 Notes, the Secured Parties and each Debtor have
agreed to amend and restate the Existing Security Agreement and
each Debtor has agreed to grant the Secured
Parties, pari passu with each other
Secured Party and through the Agent (as defined in Section 18 hereof), a
security interest in certain property of such Debtor to secure the
prompt payment, performance and discharge in full of all of the
Company’s obligations under the Notes; and
WHEREAS, each
Debtor party to the Existing Security Agreement wishes to affirm
its obligations under the terms of the Existing Security Agreement
and wishes to amend and restate the terms of the Existing Security
Agreement pursuant to the terms of this Agreement;
NOW,
THEREFORE, in consideration of the agreements herein contained and
for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto
hereby agree as follows:
1. Certain
Definitions. As used in this Agreement, the following terms
shall have the meanings set forth in this Section 1. Terms
used but not otherwise defined in this Agreement that are defined
in Article 9 of the UCC (such as “account”,
“chattel paper”, “commercial tort claim”,
“deposit account”, “document”,
“equipment”, “fixtures”, “general
intangibles”, “goods”, “instruments”,
“inventory”, “investment property”,
“letter-of-credit rights”, “proceeds” and
“supporting obligations”) shall have the respective
meanings given such terms in Article 9 of the UCC. In addition to
the terms defined elsewhere in this Agreement, capitalized terms
not otherwise defined herein shall have the meanings set forth in
the Purchase Agreement.
(a) “Collateral”
means the collateral in which the Secured Parties are granted a
security interest by this Agreement and which shall comprise all
the assets of the Debtors, including, without limitation, the
following personal property of the Debtors, whether presently owned
or existing or hereafter acquired or coming into existence,
wherever situated, and all additions and accessions thereto and all
substitutions and replacements thereof, and all proceeds, products
and accounts thereof, including, without limitation, all proceeds
from the sale or transfer of the Collateral and of insurance
covering the same and of any tort claims in connection therewith,
and all dividends, interest, cash, notes, securities, equity
interest or other property at any time and from time to time
acquired, receivable or otherwise distributed in respect of, or in
exchange for, any or all of the Pledged Securities (as defined
below):
(i) All
goods, including, without limitation, (A) all machinery, equipment,
computers, motor vehicles, trucks, tanks, boats, ships, appliances,
furniture, special and general tools, fixtures, test and quality
control devices and other equipment of every kind and nature and
wherever situated, together with all documents of title and
documents representing the same, all additions and accessions
thereto, replacements therefor, all parts therefor, and all
substitutes for any of the foregoing and all other items used and
useful in connection with any Debtor’s businesses and all
improvements thereto; and (B) all inventory;
(ii) All
contract rights and other general intangibles, including, without
limitation, all partnership interests, membership interests, stock
or other securities, rights under any of the Organizational
Documents, agreements related to the Pledged Securities, licenses,
distribution and other agreements, computer software (whether
“off-the-shelf”, licensed from any third party or
developed by any Debtor), computer software development rights,
leases, franchises, customer lists, quality control procedures,
grants and rights, goodwill, Intellectual Property and income tax
refunds;
(iii) All
accounts, together with all instruments, all documents of title
representing any of the foregoing, all rights in any merchandising,
goods, equipment, motor vehicles and trucks which any of the same
may represent, and all right, title, security and guaranties with
respect to each account, including any right of stoppage in
transit;
(iv) All
documents, letter-of-credit rights, instruments and chattel
paper;
(v) All
commercial tort claims;
(vi) All
deposit accounts and all cash (whether or not deposited in such
deposit accounts);
(vii) All
investment property;
(viii) All
supporting obligations;
(ix) All
files, records, books of account, business papers, and computer
programs; and
(x) the
products and proceeds of all of the foregoing Collateral set forth
in clauses (i)-(ix) above.
Without
limiting the generality of the foregoing, the “Collateral” shall include
all investment property and general intangibles respecting
ownership and/or other equity interests in each Subsidiary,
including, without limitation, the shares of capital stock and the
other equity interests listed on Schedule G hereto (as
the same may be modified from time to time pursuant to the terms
hereof), and any other shares of capital stock and/or other equity
interests of any other direct or indirect subsidiary of any Debtor
obtained in the future, and, in each case, all certificates
representing such shares and/or equity interests and, in each case,
all rights, options, warrants, stock, other securities and/or
equity interests that may hereafter be received, receivable or
distributed in respect of, or exchanged for, any of the foregoing
and all rights arising under or in connection with the Pledged
Securities, including, but not limited to, all dividends, interest
and cash.
Notwithstanding the
foregoing, nothing herein shall be deemed to constitute an
assignment of any asset which, in the event of an assignment,
becomes void by operation of applicable law or the assignment of
which is otherwise prohibited by applicable law (in each case to
the extent that such applicable law is not overridden by Sections
9-406, 9-407 and/or 9-408 of
the UCC or other similar applicable law); provided, however, that, to the extent
permitted by applicable law, this Agreement shall create a valid
security interest in such asset and, to the extent permitted by
applicable law, this Agreement shall create a valid security
interest in the proceeds of such asset.
(b) “Intellectual
Property” means the collective reference to all
rights, priorities and privileges relating to intellectual
property, whether arising under United States, multinational or
foreign laws or otherwise, including, without limitation, (i) all
copyrights arising under the laws of the United States, any other
country or any political subdivision thereof, whether registered or
unregistered and whether published or unpublished, all
registrations and recordings thereof, and all applications in
connection therewith, including, without limitation, all
registrations, recordings and applications in the United States
Copyright Office, (ii) all letters patent of the United States, any
other country or any political subdivision thereof, all reissues
and extensions thereof, and all applications for letters patent of
the United States or any other country and all divisions,
continuations and continuations-in-part thereof, (iii) all
trademarks, trade names, corporate names, company names, business
names, fictitious business names, trade dress, service marks,
logos, domain names and other source or business identifiers, and
all goodwill associated therewith, now existing or hereafter
adopted or acquired, all registrations and recordings thereof, and
all applications in connection therewith, whether in the United
States Patent and Trademark Office or in any similar office or
agency of the United States, any State thereof or any other country
or any political subdivision thereof, or otherwise, and all common
law rights related thereto, (iv) all trade secrets arising under
the laws of the United States, any other country or any political
subdivision thereof, (v) all rights to obtain any reissues,
renewals or extensions of the foregoing, (vi) all licenses for any
of the foregoing, and (vii) all causes of action for infringement
of the foregoing.
(c) “Necessary
Endorsement” means undated stock powers endorsed in
blank or other proper instruments of assignment duly executed and
such other instruments or documents as the Agent (as that term is
defined below) may reasonably request.
(d) “Obligations”
means all of the liabilities and obligations (primary, secondary,
direct, contingent, sole, joint or several) due or to become due,
or that are now or may be hereafter contracted or acquired, or
owing to, of any Debtor to the Secured Parties under this
Agreement, the Notes and any other instruments, agreements or other
documents executed and/or delivered in connection herewith or
therewith, in each case, whether now or hereafter existing,
voluntary or involuntary, direct or indirect, absolute or
contingent, liquidated or unliquidated, whether or not jointly owed
with others, and whether or not from time to time decreased or
extinguished and later increased, created or incurred, and all or
any portion of such obligations or liabilities that are paid, to
the extent all or any part of such payment is avoided or recovered
directly or indirectly from any of the Secured Parties as a
preference, fraudulent transfer or otherwise as such obligations
may be amended, supplemented, converted, extended or modified from
time to time. Without limiting the generality of the
foregoing, the term “Obligations” shall include,
without limitation: (i) principal of, and interest on the
Notes and the loans extended pursuant thereto; (ii) any and all
other fees, indemnities, costs, obligations and liabilities of the
Debtors from time to time under or in connection with this
Agreement, the Notes and any other instruments, agreements or other
documents executed and/or delivered in connection herewith or
therewith; and (iii) all amounts (including but not limited to
post-petition interest) in respect of the foregoing that would be
payable but for the fact that the obligations to pay such amounts
are unenforceable or not allowable due to the existence of a
bankruptcy, reorganization or similar proceeding involving any
Debtor.
(f) “Organizational
Documents” means, with respect to any Debtor, the
documents by which such Debtor was organized (such as articles of
incorporation, certificate of incorporation, certificate of limited
partnership or articles of organization, and including, without
limitation, any certificates of designation for preferred stock or
other forms of preferred equity) and which relate to the internal
governance of such Debtor (such as bylaws, a partnership agreement
or an operating, limited liability or members
agreement).
(g) “Pledged
Securities” shall have the meaning ascribed to such
term in Section 4(g).
(h) “Purchase
Agreement” shall have the meaning given to such term
in the preamble.
2. Reaffirmation
and Grant of Security Interest in Collateral. Each Debtor
party to the Existing Security Agreement reaffirms the security
interest granted under the terms and conditions of the Existing
Security Agreement and agrees that such security interest remains
in full force and effect and is hereby ratified, reaffirmed and
confirmed. Each Debtor party to the Existing Security Agreement
acknowledges and agrees with the Secured Parties that the Existing
Security Agreement is amended, restated, and superseded in its
entirety pursuant to the terms hereof. Furthermore, as an
inducement for the Secured Parties to extend the loans as evidenced
by the Notes and to secure the complete and timely payment,
performance and discharge in full, as the case may be, of all of
the Obligations, each Debtor hereby unconditionally and irrevocably
pledges, grants and hypothecates to the Secured Parties a
perfected, first priority security interest in and to, a lien upon
and a right of set-off against all of their respective right, title
and interest of whatsoever kind and nature in and to, the
Collateral (a “Security Interest” and,
collectively, the “Security
Interests”).
3. Delivery
of Certain Collateral. Contemporaneously or prior
to the execution of this Agreement, each Debtor shall deliver or
cause to be delivered to the Agent (a) any and all certificates and
other instruments representing or evidencing the Pledged Securities
(if any), and (b) any and all certificates and other instruments or
documents representing any of the other Collateral, in each case,
together with all Necessary Endorsements. The Debtors
are, contemporaneously with the execution hereof, delivering to
Agent, or have previously delivered to Agent, a true and correct
copy of each Organizational Document governing any of the Pledged
Securities. Notwithstanding anything contained herein, prior to any
Event of Default, the Company shall have the right vote any Pledged
Securities and receive dividends therefrom.
4. Representations,
Warranties, Covenants and Agreements of the Debtors. Except
as set forth under the corresponding Section of the disclosure
schedules delivered to the Secured Parties concurrently herewith
(the “Disclosure
Schedules”), which Disclosure Schedules shall be
deemed a part hereof, each Debtor represents and warrants to, and
covenants and agrees with, the Secured Parties as
follows:
(a) The
Debtors have no place of business or offices where their respective
books of account and records are kept (other than temporarily at
the offices of its attorneys or accountants) or places where
Collateral is stored or located, except as set forth
on Schedule A attached
hereto. Except as specifically set forth
on Schedule A, each Debtor is
the record owner of the real property where such Collateral is
located, and there exist no mortgages or other liens on any such
real property except for Permitted Liens as set forth on
Schedule A. Except
as disclosed on Schedule A, none of such
Collateral is in the possession of any consignee, bailee,
warehouseman, agent or processor.
(b) Except
for Permitted Liens and as set forth on Schedule B attached
hereto, the Debtors are the sole owners of the Collateral, free and
clear of any liens, security interests, encumbrances, rights or
claims, and are fully authorized to grant the Security
Interests. Except as set forth on Schedule C attached
hereto, there is not on file in any governmental or regulatory
authority, agency or recording office an effective financing
statement, security agreement, license or transfer or any notice of
any of the foregoing (other than those that will be filed in favor
of the Secured Parties pursuant to this Agreement) covering or
affecting any of the Collateral. Except as set forth
on Schedule C attached
hereto and except pursuant to this Agreement, as long as this
Agreement shall be in effect, the Debtors shall not execute and
shall not knowingly permit to be on file in any such office or
agency any other financing statement or other document or
instrument (except to the extent filed or recorded in favor of the
Secured Parties pursuant to the terms of this
Agreement).
(c) No
written claim has been received that any Collateral or any
Debtor’s use of any Collateral violates the rights of any
third party. There has been no adverse decision to any
Debtor’s claim of ownership rights in or exclusive rights to
use the Collateral in any jurisdiction or to any Debtor’s
right to keep and maintain such Collateral in full force and
effect, and there is no proceeding involving said rights pending
or, to the best knowledge of any Debtor, threatened before any
court, judicial body, administrative or regulatory agency,
arbitrator or other governmental authority.
(d) Each
Debtor shall at all times maintain its books of account and records
relating to the Collateral at its principal place of business and
its Collateral at the locations set forth on Schedule A attached
hereto and may not relocate such books of account and records or
tangible Collateral unless it delivers to the Secured Parties at
least thirty (30) days prior to such relocation (i) written notice
of such relocation and the new location thereof (which must be
within the United States) and (ii) evidence that appropriate
financing statements under the UCC and other necessary documents
have been filed and recorded and other steps have been taken to
perfect the Security Interests to create in favor of the Secured
Parties a valid, perfected and continuing perfected first priority
lien in the Collateral (to the extent such Collateral can be
perfected by the filing of a UCC financing statement).
(e) This
Agreement creates in favor of the Secured Parties a valid first
priority security interest in the Collateral, subject only to
Permitted Liens, securing the payment and performance of the
Obligations. Upon making the filings described in the immediately
following paragraph, all security interests created hereunder in
any Collateral which may be perfected by filing UCC financing
statements shall have been duly perfected. Except for (i) the
recordation of the Intellectual Property Security Agreement (as
defined in Section 4(dd) hereof) with respect to copyrights
and copyright applications referred to in paragraph (z) in the
United States Copyright Office, (ii) the recordation of the
Intellectual Property Security Agreement (as defined in
Section 4(dd) hereof) with respect to patents and trademarks
of the Debtors referred to in paragraph (bb) in the United States
Patent and Trademark Office, and (iii) the delivery of the
certificates and other instruments provided in Section 3, no
action is necessary to create, perfect or protect the security
interests created hereunder. Without limiting the generality of the
foregoing, except for the foregoing, no consent of any third
parties and no authorization, approval or other action by, and no
notice to or filing with, any governmental authority or regulatory
body is required for (x) the execution, delivery and performance of
this Agreement, (y) the creation or perfection of the Security
Interests created hereunder in the Collateral (to the extent such
Collateral can be perfected by the filing of a UCC financing
statement) or (z) the enforcement of the rights of the Agent
and the Secured Parties hereunder.
(f) Each
Debtor hereby authorizes the Agent to file one or more financing
statements under the UCC, with respect to the Security Interests,
with the proper filing and recording agencies in any jurisdiction
deemed proper by it.
(g) The
capital stock and other equity interests listed
on Schedule G hereto
(including all uncertificated equity interests consisting of
capital stock of any corporation as well as partnership or limited
liability company interests of any other entity) (the
“Pledged
Securities”) represent all of the capital stock and
other equity interests of the Debtors, and represent all capital
stock and other equity interests owned, directly or indirectly, by
the Company. All of the Pledged Securities are validly
issued, fully paid and nonassessable, and the Company is the legal
and beneficial owner of the Pledged Securities, free and clear of
any lien, security interest or other encumbrance except for the
security interests created by this Agreement and other Permitted
Liens.
(h) Except
for Permitted Liens, each Debtor shall at all times maintain the
liens and Security Interests provided for hereunder as valid and
perfected, first priority (to the extent that such liens and
Security Interests can be perfected by the filing of a UCC
financing statement) liens and security interests in the Collateral
in favor of the Secured Parties until this Agreement and the
Security Interest hereunder shall be terminated pursuant to
Section 14
hereof. Each Debtor hereby agrees to defend the same
against the claims of any and all persons and entities. Each Debtor
shall safeguard and protect all Collateral for the account of the
Secured Parties. At the request of the Agent, each
Debtor will deliver to the Agent on behalf of the Secured Parties
at any time or from time to time one or more financing statements
pursuant to the UCC in form reasonably satisfactory to the Agent
and will pay the cost of filing the same in all public offices
wherever filing is, or is deemed by the Agent to be, necessary or
desirable to effect the rights and obligations provided for herein.
Without limiting the generality of the foregoing, each Debtor shall
pay all fees, taxes and other amounts necessary to maintain the
Collateral and the Security Interests hereunder, and each Debtor
shall obtain and furnish to the Agent from time to time, upon
demand, such releases and/or subordinations of claims and liens
which may be required to maintain the priority of the Security
Interests hereunder. In addition to the foregoing, each Debtor
shall promptly execute and deliver to the Agent such further deeds,
mortgages, assignments, security agreements, financing statements
or other instruments, documents, certificates and assurances and
take such further action as the Agent may from time to time request
and may in its sole discretion deem necessary to perfect, protect
or enforce the Secured Parties’ security interest in the
Collateral, including, without limitation, if applicable, the
execution and delivery of a separate security agreement with
respect to each Debtor’s Intellectual Property
(“Intellectual
Property Security Agreement”) in which the Secured
Parties have been granted a security interest hereunder,
substantially in a form reasonably acceptable to the Agent, which
Intellectual Property Security Agreement, other than as stated
therein, shall be subject to all of the terms and conditions
hereof.
(i) No
Debtor will transfer, pledge, hypothecate, encumber, license, sell
or otherwise dispose of any of the Collateral (except for Permitted
Liens or non-exclusive licenses granted by a Debtor in its ordinary
course of business, sales of inventory by a Debtor in its ordinary
course of business and the replacement of worn-out or obsolete
equipment by a Debtor in its ordinary course of business) without
the prior written consent of the Secured Party.
(j) Each
Debtor shall keep and preserve its equipment, inventory and other
tangible Collateral in good condition, repair and order (other than
ordinary use wear and tear) and shall not operate or locate any
such Collateral (or cause to be operated or located) in any area
excluded from insurance coverage.
(k) Each
Debtor shall maintain with financially sound and reputable
insurers, insurance with respect to the Collateral, including
Collateral hereafter acquired, against loss or damage of the kinds
and in the amounts customarily insured against by entities of
established reputation having similar properties similarly situated
and in such amounts as are customarily carried under similar
circumstances by other such entities and otherwise as is prudent
for entities engaged in similar businesses but in any event
sufficient to cover the full replacement cost thereof. Each Debtor
shall cause each insurance policy issued in connection herewith to
provide, and the insurer issuing such policy to certify to the
Agent, that (a) the Agent will be named as lender loss payee and
additional insured under each such insurance policy; (b) if such
insurance be proposed to be cancelled or materially changed for any
reason whatsoever, such insurer will promptly notify the Agent and
such cancellation or change shall not be effective as to the Agent
for at least thirty (30) days after receipt by the Agent of such
notice, unless the effect of such change is to extend or increase
coverage under the policy; and (c) the Agent will have the right
(but no obligation) at its election to remedy any default in the
payment of premiums within thirty (30) days of notice from the
insurer of such default. If no Event of Default (as defined in the
Notes) exists and if the proceeds arising out of any
claim. Loss payments received by any Debtor
after an Event of Default occurs and is continuing or in excess of
$100,000 for any occurrence or series of related occurrences, upon
approval by Agent, which approval shall not be unreasonably
withheld, delayed, denied or conditioned, loss payments in each
instance will be applied by the applicable Debtor to the repair
and/or replacement of property with respect to which the loss was
incurred to the extent reasonably feasible, and any loss payments
or the balance thereof remaining, to the extent not so applied,
shall be paid to the Agent on behalf of the Secured
Parties.
(l) Each
Debtor shall, within ten (10) days of obtaining knowledge thereof,
advise the Secured Parties, in sufficient detail, of any material
adverse change in the Collateral, and of the occurrence of any
event that would have a material adverse effect on the value of the
Collateral or on the Secured Parties’ security interest,
through the Agent, therein.
(m) Upon
reasonable prior notice (so long as no
Event of Default has occurred or continuing, which in either such
event, no prior notice is required), each Debtor shall
permit the Agent and its representatives and agents to inspect the
Collateral during normal business hours and to make copies of
records pertaining to the Collateral as may be reasonably requested
by the Agent from time to time.
(n) Each
Debtor shall promptly notify the Secured Parties in sufficient
detail upon becoming aware of any attachment, garnishment,
execution or other legal process levied against any material
portion of the Collateral and of any other information received by
such Debtor that may materially affect the value of the Collateral,
the Security Interest or the rights and remedies of the Secured
Parties hereunder.
(o) All
information heretofore, herein or hereafter supplied to the Secured
Parties by or on behalf of any Debtor with respect to the
Collateral is accurate and complete in all material respects as of
the date furnished.
(p) The
Debtors shall at all times preserve and keep in full force and
effect their respective valid existence and good standing and any
rights and franchises material to its business. No Debtor will
change its name, type of organization, jurisdiction of
organization, organizational identification number (if it has one),
legal or corporate structure, or identity, or add any new
fictitious name unless it provides at least thirty (30) days’
prior written notice to the Secured Parties of such change and, at
the time of such written notification, such Debtor provides any
financing statements or fixture filings necessary to perfect and
continue the perfection of the Security Interests granted and
evidenced by this Agreement.
(q) Except
in the ordinary course of business, no Debtor may consign any of
its inventory or sell any of its inventory on bill-and-hold,
sale-or-return, sale-on-approval, or other conditional terms of
sale without the consent of the Agent, which shall not be
unreasonably withheld, delayed, denied, or
conditioned.
(r) No
Debtor may relocate its chief executive office to a new location
without providing thirty (30) days’ prior written
notification thereof to the Secured Parties and so long as, at the
time of such written notification, such Debtor provides any
financing statements or fixture filings necessary to perfect and
continue the perfection of the Security Interests granted and
evidenced by this Agreement.
(s) Each
Debtor was organized and remains organized solely under the laws of
the state set forth next to such Debtor’s name
in Schedule D attached
hereto, which Schedule D sets forth
each Debtor’s organizational identification number or, if any
Debtor does not have one, states that one does not
exist.
(t) (i)
The actual name of each Debtor is the name set forth
in Schedule D attached
hereto; (ii) no Debtor has any trade names except as set forth
on Schedule E attached
hereto; (iii) no Debtor has used any name other than that
stated in the preamble hereto or as set forth on Schedule E for the
preceding five (5) years; and (iv) no entity has merged into any
Debtor or been acquired by any Debtor within the past five years
except as set forth on Schedule E.
(u) Each
Debtor, in its capacity as issuer, hereby agrees to comply with any
and all orders and instructions of Agent regarding the Pledged
Securities consistent with the terms of this Agreement without the
further consent of any Debtor as contemplated by Section 8-106
(or any successor section) of the UCC. Further, each
Debtor agrees that it shall not enter into a similar agreement (or
one that would confer “control” within the meaning of
Article 8 of the UCC) with any other person or entity.
(v) Each
Debtor shall cause each subsidiary of such Debtor to immediately
become a party hereto (an “Additional Debtor”), by
executing and delivering an Additional Debtor Joinder in
substantially the form of Annex A attached hereto
and comply with the provisions hereof applicable to the
Debtors. Concurrently therewith, the Additional Debtor
shall deliver replacement schedules for, or supplements to all
other Disclosure Schedules to (or referred to in) this Agreement,
as applicable, which replacement schedules shall supersede, or
supplements shall modify, the Disclosure Schedules then in
effect. The Additional Debtor shall also deliver such
authorizing resolutions, good standing certificates, incumbency
certificates, organizational documents, financing statements and
other information and documentation as the Agent may reasonably
request. Upon delivery of the foregoing to the Agent,
the Additional Debtor shall be and become a party to this Agreement
with the same rights and obligations as the Debtors, for all
purposes hereof as fully and to the same extent as if it were an
original signatory hereto and shall be deemed to have made the
representations, warranties and covenants set forth herein as of
the date of execution and delivery of such Additional Debtor
Joinder, and all references herein to the “Debtors”
shall be deemed to include each Additional Debtor.
(w) Each
Debtor shall vote the Pledged Securities to comply with the
covenants and agreements set forth herein and in the
Notes.
(x) Each
Debtor shall register the pledge of the applicable Pledged
Securities on the books of such Debtor. Each Debtor
shall notify each issuer of Pledged Securities to register the
pledge of the applicable Pledged Securities in the name of the
Secured Parties on the books of such issuer. Further,
except with respect to certificated securities delivered to the
Agent, the applicable Debtor shall deliver to Agent an
acknowledgement of pledge (which, where appropriate, shall comply
with the requirements of the relevant UCC with respect to
perfection by registration) signed by the issuer of the applicable
Pledged Securities, which acknowledgement shall confirm that: (a)
it has registered the pledge on its books and records; and (b) at
any time directed by Agent during the continuation of an Event of
Default, such issuer will transfer the record ownership of such
Pledged Securities into the name of any designee of Agent, will
take such steps as may be necessary to effect the transfer, and
will comply with all other instructions of Agent regarding such
Pledged Securities without the further consent of the applicable
Debtor.
(y) In
the event that, upon an occurrence of an Event of Default, Agent
shall sell all or any of the Pledged Securities to another party or
parties (herein called the “Transferee”) or shall
purchase or retain all or any of the Pledged Securities, each
Debtor shall, to the extent applicable: (i) deliver to Agent or the
Transferee, as the case may be, the articles of incorporation,
bylaws, minute books, stock certificate books, corporate seals,
deeds, leases, indentures, agreements, evidences of indebtedness,
books of account, financial records and all other Organizational
Documents and records of the Debtors and their direct and indirect
subsidiaries (but not including any items subject to the
attorney-client privilege related to this Agreement or any of the
transactions hereunder); (ii) use its best efforts to obtain
resignations of the persons then serving as officers and directors
of the Debtors and their direct and indirect subsidiaries, if so
requested; and (iii) use its best efforts to obtain any approvals
that are required by any governmental or regulatory body in order
to permit the sale of the Pledged Securities to the Transferee or
the purchase or retention of the Pledged Securities by Agent and
allow the Transferee or Agent to continue the business of the
Debtors and their direct and indirect subsidiaries.
(z) Without
limiting the generality of the other obligations of the Debtors
hereunder, each Debtor shall promptly (i) cause to be registered at
the United States Copyright Office all of its material copyrights,
(ii) following an Event of Default, upon the written request of the
Agent, cause the security interest contemplated hereby with respect
to all Intellectual Property registered at the United States
Copyright Office or United States Patent and Trademark Office to be
duly recorded at the applicable office, and (iii) give the Agent
notice whenever it acquires (whether absolutely or by license) or
creates any additional material Intellectual Property.
(aa) Each
Debtor will from time to time, at the joint and several expense of
the Debtors, promptly execute and deliver all such further
instruments and documents, and take all such further action as may
be necessary or desirable, or as the Agent may reasonably request,
in order to perfect (to the extent such security interest can be
perfected by the filing of a UCC financing statement) and protect
any security interest granted or purported to be granted hereby or
to enable the Secured Parties to exercise and enforce their rights
and remedies hereunder and with respect to any Collateral or to
otherwise carry out the purposes of this Agreement.
(bb) Schedule F attached
hereto lists all of the patents, patent applications, trademarks,
trademark applications, registered copyrights, and domain names
owned by any of the Debtors as of the date
hereof. Schedule F lists all
material licenses in favor of any Debtor for the use of any
patents, trademarks, copyrights and domain names as of the date
hereof. All material patents and trademarks of the
Debtors have been duly recorded at the United States Patent and
Trademark Office and all material copyrights of the Debtors have
been duly recorded at the United States Copyright
Office.
(cc)
Each Debtor shall promptly execute and deliver to the Agent such
further deeds, mortgages, assignments, security agreements,
financing statements or other instruments, documents, certificates
and assurances and take such further action as the Agent may from
time to time request and may in its sole discretion deem necessary
to perfect, protect or enforce the Secured Parties’ security
interest in the Collateral.
(dd) Each
Debtor will not transfer, pledge, hypothecate, encumber, license,
sell or otherwise dispose of any of the Collateral (except for
non-exclusive licenses granted by a Debtor in its ordinary course
of business and sales of inventory by a Debtor in its ordinary
course of business) without the prior written consent of the
Agent.
5. Effect
of Pledge on Certain Rights. If any of the Collateral
subject to this Agreement consists of nonvoting equity or ownership
interests (regardless of class, designation, preference or rights)
that may be converted into voting equity or ownership interests
upon the occurrence of certain events (including, without
limitation, upon the transfer of all or any of the other stock or
assets of the issuer), it is agreed by Debtors that the pledge of
such equity or ownership interests pursuant to this Agreement or
the enforcement of any of Agent’s rights hereunder shall not
be deemed to be the type of event which would trigger such
conversion rights notwithstanding any provisions in the
Organizational Documents or agreements to which any Debtor is
subject or to which any Debtor is party.
6. Defaults.
The following events shall be “Events of
Default”:
(a) The
occurrence of an Event of Default (as defined in the Notes) under
the Notes;
(b) Any
representation or warranty of any Debtor in this Agreement shall
prove to have been incorrect in any material respect when
made;
(c) The
failure by any Debtor to observe or perform any of its obligations
hereunder for fifteen (15) days after delivery to such Debtor of
notice of such failure by or on behalf of a Secured Party unless
such default is capable of cure but cannot be cured within such
time frame and such Debtor is using best efforts to cure same in a
timely fashion; or
(d) If
any material provision of this Agreement shall at any time for any
reason be declared to be null and void, or the validity or
enforceability thereof shall be contested by any Debtor, or a
proceeding shall be commenced by any Debtor, or by any governmental
authority having jurisdiction over any Debtor, seeking to establish
the invalidity or unenforceability thereof, or any Debtor shall
deny that any Debtor has any liability or obligation purported to
be created under this Agreement.
7. Duty
to Hold in Trust.
(a) Upon
the occurrence and during the continuance of any Event of Default,
each Debtor shall upon receipt of any revenue, income, dividend,
interest or other sums subject to the Security Interests, whether
payable pursuant to the Notes or otherwise, or of any check, draft,
note, trade acceptance or other instrument evidencing an obligation
to pay any such sum, hold the same in trust for the Secured Parties
and shall forthwith endorse and transfer any such sums or
instruments, or both, to the Agent, pro-rata in proportion to their
respective then-currently outstanding principal amount of Notes for
application to the satisfaction of the Obligations (and if any
Notes is not outstanding, pro-rata in proportion to the initial
purchases of the remaining Notes).
(b) If
any Debtor shall become entitled to receive or shall receive any
material securities or other property (including, without
limitation, shares of Pledged Securities or instruments
representing Pledged Securities acquired after the date hereof, or
any options, warrants, rights or other similar property or
certificates representing a dividend, or any distribution in
connection with any recapitalization, reclassification or increase
or reduction of capital, or issued in connection with any
reorganization of such Debtor or any of its direct or indirect
subsidiaries) in respect of the Pledged Securities (whether as an
addition to, in substitution of, or in exchange for, such Pledged
Securities or otherwise), such Debtor agrees to (i) accept the same
as the agent of the Secured Parties; (ii) hold the same in trust on
behalf of and for the benefit of the Secured Parties; and (iii) to
deliver any and all certificates or instruments evidencing the same
to Agent on or before the close of business on the fifth
(5th)
business day following the receipt thereof by such Debtor, in the
exact form received together with the Necessary Endorsements, to be
held by Agent subject to the terms of this Agreement as
Collateral.
8. Rights
and Remedies Upon Default.
(a) Upon
the occurrence and during the continuance of any Event of Default,
the Secured Parties, acting through the Agent, shall have the right
to exercise all of the remedies conferred hereunder and under the
Notes, and the Secured Parties shall have all the rights and
remedies of a secured party under the UCC. Without
limitation, the Agent, for the benefit of the Secured Parties,
shall have the following rights and powers:
(i) The
Agent shall have the right to take possession of the Collateral
and, for that purpose, enter, with the aid and assistance of any
person, any premises where the Collateral, or any part thereof, is
or may be placed and remove the same, and each Debtor shall
assemble the Collateral and make it available to the Agent at
places which the Agent shall reasonably select, whether at such
Debtor’s premises or elsewhere, and make available to the
Agent, without rent, all of such Debtor’s respective premises
and facilities for the purpose of the Agent taking possession of,
removing or putting the Collateral in saleable or disposable
form.
(ii) Upon
written notice to the Debtors by Agent, all rights of each Debtor
to exercise the voting and other consensual rights which it would
otherwise be entitled to exercise and all rights of each Debtor to
receive the dividends and interest which it would otherwise be
authorized to receive and retain, shall cease. Upon such
written notice, Agent shall have the right to receive, for the
benefit of the Secured Parties, any interest, cash dividends or
other payments on the Collateral and, at the option of Agent, to
exercise in such Agent’s discretion all voting rights
pertaining thereto. Without limiting the generality of
the foregoing, Agent shall have the right (but not the obligation)
to exercise all rights with respect to the Collateral as it were
the sole and absolute owner thereof, including, without limitation,
to vote and/or to exchange, at its sole discretion, any or all of
the Collateral in connection with a merger, reorganization,
consolidation, recapitalization or other readjustment concerning or
involving the Collateral or any Debtor or any of its direct or
indirect subsidiaries.
(iii) The
Agent shall have the right to operate the business of each Debtor
using the Collateral and shall have the right to assign, sell,
lease or otherwise dispose of and deliver all or any part of the
Collateral, at public or private sale or otherwise, either with or
without special conditions or stipulations, for cash or on credit
or for future delivery, in such parcel or parcels and at such time
or times and at such place or places, and upon such terms and
conditions as the Agent may deem commercially reasonable, all
without (except as shall be required by applicable statute and
cannot be waived) advertisement or demand upon or notice to any
Debtor or right of redemption of a Debtor, which are hereby
expressly waived. Upon each such sale, lease, assignment
or other transfer of Collateral, the Agent, for the benefit of the
Secured Parties, may, unless prohibited by applicable law which
cannot be waived, purchase all or any part of the Collateral being
sold, free from and discharged of all trusts, claims, right of
redemption and equities of any Debtor, which are hereby waived and
released.
(iv) The
Agent shall have the right (but not the obligation) to notify any
account debtors and any obligors under instruments or accounts to
make payments directly to the Agent, on behalf of the Secured
Parties, and to enforce the Debtors’ rights against such
account debtors and obligors.
(v) The
Agent, for the benefit of the Secured Parties, may (but is not
obligated to) direct any financial intermediary or any other person
or entity holding any investment property to transfer the same to
the Agent, on behalf of the Secured Parties, or its
designee.
(vi) The
Agent may (but is not obligated to) transfer any or all
Intellectual Property registered in the name of any Debtor at the
United States Patent and Trademark Office and/or Copyright Office
into the name of the Secured Parties or any designee or any
purchaser of any Collateral.
(b) The
Agent shall comply with any applicable law in connection with a
disposition of Collateral and such compliance will not be
considered adversely to affect the commercial reasonableness of any
sale of the Collateral. The Agent may sell the
Collateral without giving any warranties and may specifically
disclaim such warranties. If the Agent sells any of the
Collateral on credit, the Debtors will only be credited with
payments actually made by the purchaser. In addition,
each Debtor waives (except as shall be required by applicable
statute and cannot be waived) any and all rights that it may have
to a judicial hearing in advance of the enforcement of any of the
Agent’s rights and remedies hereunder, including, without
limitation, its right following an Event of Default to take
immediate possession of the Collateral and to exercise its rights
and remedies with respect thereto.
(c) For
the purpose of enabling the Agent to further exercise rights and
remedies under this Section 8 or elsewhere
provided by agreement or applicable law, each Debtor hereby grants
to the Agent, for the benefit of the Agent and the Secured Parties,
an irrevocable, nonexclusive license (exercisable without payment
of royalty or other compensation to such Debtor) to use, license or
sublicense following an Event of Default, any Intellectual Property
now owned or hereafter acquired by such Debtor, and wherever the
same may be located, and including in such license access to all
media in which any of the licensed items may be recorded or stored
and to all computer software and programs used for the compilation
or printout thereof.
9. Applications
of Proceeds. Upon the occurrence and during the continuance
of any Event of Default, the proceeds of any sale, lease or other
disposition by the Agent of the Collateral hereunder or from
payments made to the Agent on account of any insurance policy
insuring any portion of the Collateral shall be applied first, to
the expenses of retaking, holding, storing, processing and
preparing for sale, selling, and the like (including, without
limitation, any taxes, fees and other costs incurred in connection
therewith) of the Collateral, to the reasonable attorneys’
fees and expenses incurred by the Agent in enforcing the Secured
Parties’ rights hereunder and in connection with collecting,
storing and disposing of the Collateral, and then to satisfaction
of the Obligations pro rata among the Secured Parties (based on
then-outstanding principal amounts of Notes at the time of any such
determination), and to the payment of any other amounts required by
applicable law, after which the Secured Parties shall pay to the
applicable Debtor any surplus proceeds. If, upon the sale, license
or other disposition of all of the Collateral, the proceeds thereof
are insufficient to pay all amounts to which the Secured Parties
are legally entitled, the Debtors will be liable for the
deficiency, together with interest thereon, at the rate of 18% per
annum or the lesser amount permitted by applicable law (the
“Default
Rate”), and the reasonable fees of any attorneys
employed by the Secured Parties to collect such
deficiency. To the extent permitted by applicable law,
each Debtor waives all claims, damages and demands against the
Secured Parties arising out of the repossession, removal, retention
or sale of the Collateral, unless due solely to the gross
negligence or willful misconduct of the Secured Parties as
determined by a final judgment (not subject to further appeal) of a
court of competent jurisdiction.
10. Securities
Law Provision. Each Debtor recognizes that Agent
may be limited in its ability to effect a sale to the public of all
or part of the Pledged Securities by reason of certain prohibitions
in the Securities Act of 1933, as amended, or other federal or
state securities laws (collectively, the “Securities Laws”), and
may be compelled to resort to one or more sales to a restricted
group of purchasers who may be required to agree to acquire the
Pledged Securities for their own account, for investment and not
with a view to the distribution or resale thereof. Each
Debtor agrees that sales so made may be at prices and on terms less
favorable than if the Pledged Securities were sold to the public,
and that Agent has no obligation to delay the sale of any Pledged
Securities for the period of time necessary to register the Pledged
Securities for sale to the public under the Securities
Laws. Each Debtor shall cooperate with Agent in its
attempt to satisfy any requirements under the Securities Laws
(including, without limitation, registration thereunder if
requested by Agent) applicable to the sale of the Pledged
Securities by Agent.
11. Costs
and Expenses. Each Debtor agrees to pay all reasonable
out-of-pocket fees, costs and expenses incurred in connection with
any filing required hereunder, including without limitation, any
financing statements pursuant to the UCC, continuation statements,
partial releases and/or termination statements related thereto or
any expenses of any searches reasonably required by the
Agent. The Debtors shall also pay all other claims and
charges which in the reasonable opinion of the Agent is reasonably
likely to prejudice, imperil or otherwise affect the Collateral or
the Security Interests therein. The Debtors will also,
upon demand, pay to the Agent the amount of any and all reasonable
expenses, including the reasonable fees and expenses of its counsel
and of any experts and agents, which the Agent, for the benefit of
the Secured Parties, may incur in connection with the creation,
perfection, protection, satisfaction, foreclosure, collection or
enforcement of the Security Interest and the preparation,
administration, continuance, amendment or enforcement of this
Agreement and pay to the Agent the amount of any and all reasonable
expenses, including the reasonable fees and expenses of its counsel
and of any experts and agents, which the Agent, for the benefit of
the Secured Parties, and the Secured Parties may incur in
connection with (i) the enforcement of this Agreement, (ii) the
custody or preservation of, or the sale of, collection from, or
other realization upon, any of the Collateral, or (iii) the
exercise or enforcement of any of the rights of the Secured Parties
under the Notes.
12. Responsibility
for Collateral. The Debtors assume all liabilities and
responsibility in connection with all Collateral, and the
Obligations shall in no way be affected or diminished by reason of
the loss, destruction, damage or theft of any of the Collateral or
its unavailability for any reason. Without limiting the
generality of the foregoing and except as required by applicable
law, (a) neither the Agent nor any Secured Party (i) has any duty
(either before or after an Event of Default) to collect any amounts
in respect of the Collateral or to preserve any rights relating to
the Collateral, or (ii) has any obligation to clean-up or otherwise
prepare the Collateral for sale, and (b) each Debtor shall remain
obligated and liable under each contract or agreement included in
the Collateral to be observed or performed by such Debtor
thereunder. Neither the Agent nor any Secured Party
shall have any obligation or liability under any such contract or
agreement by reason of or arising out of this Agreement or the
receipt by the Agent or any Secured Party of any payment relating
to any of the Collateral, nor shall the Agent or any Secured Party
be obligated in any manner to perform any of the obligations of any
Debtor under or pursuant to any such contract or agreement, to make
inquiry as to the nature or sufficiency of any payment received by
the Agent or any Secured Party in respect of the Collateral or as
to the sufficiency of any performance by any party under any such
contract or agreement, to present or file any claim, to take any
action to enforce any performance or to collect the payment of any
amounts which may have been assigned to the Agent or to which the
Agent or any Secured Party may be entitled at any time or
times.
13. Security
Interests Absolute. All rights of the Secured Parties and
all obligations of each Debtor hereunder, shall be absolute and
unconditional, irrespective of: (a) any lack of validity or
enforceability of this Agreement, the Notes or any agreement
entered into in connection with the foregoing, or any portion
hereof or thereof, against any other Debtor or Guarantor; (b) any
change in the time, manner or place of payment or performance of,
or in any other term of, all or any of the Obligations, or any
other amendment or waiver of or any consent to any departure from
the Notes or any other agreement entered into in connection with
the foregoing; (c) any exchange, release or nonperfection of any of
the Collateral, or any release or amendment or waiver of or consent
to departure from any other collateral for, or any guarantee, or
any other security, for all or any of the Obligations; (d) any
action by the Secured Parties to obtain, adjust, settle and cancel
in its sole discretion any insurance claims or matters made or
arising in connection with the Collateral; or (e) any other
circumstance which might otherwise constitute any legal or
equitable defense available to a Debtor, or a discharge of all or
any part of the Security Interests granted hereby. Until
the Obligations shall have been paid and performed in full (other
than contingent obligations for which no claim has been made), the
rights of the Secured Parties shall continue even if the
Obligations are barred for any reason, including, without
limitation, the running of the statute of
limitations. Each Debtor expressly waives presentment,
protest, notice of protest, demand, notice of nonpayment and demand
for performance. In the event that at any time any transfer of any
Collateral or any payment received by the Secured Parties hereunder
shall be deemed by final order of a court of competent jurisdiction
to have been a voidable preference or fraudulent conveyance under
the bankruptcy or insolvency laws of the United States, or shall be
deemed to be otherwise due to any party other than the Secured
Parties, then, in any such event, each Debtor’s obligations
hereunder shall survive cancellation of this Agreement, and shall
not be discharged or satisfied by any prior payment thereof and/or
cancellation of this Agreement, but shall remain a valid and
binding obligation enforceable in accordance with the terms and
provisions hereof. Each Debtor waives all right to
require the Secured Parties to proceed against any other person or
entity or to apply any Collateral which the Secured Parties may
hold at any time, or to marshal assets, or to pursue any other
remedy. Each Debtor waives any defense arising by reason of the
application of the statute of limitations to any obligation secured
hereby.
14. Term
of Agreement. This Agreement and the Security Interests
shall terminate on the date on which all payments under the Notes
have been indefeasibly paid in full and all other Obligations
(other than contingent obligations for which no claim has been
made) have been paid or discharged; provided, however, that all indemnities
of the Debtors contained in this Agreement (including, without
limitation, Annex B hereto) shall survive and remain operative and
in full force and effect regardless of the termination of this
Agreement.
15. Power
of Attorney; Further Assurances.
(a) Each
Debtor authorizes the Agent, and does hereby make, constitute and
appoint the Agent and its officers, agents, successors or assigns
with full power of substitution, as such Debtor’s true and
lawful attorney-in-fact, with power, in the name of the Agent or
such Debtor, to, after the occurrence and during the continuance of
an Event of Default, (i) endorse any note, checks, drafts, money
orders or other instruments of payment (including payments payable
under or in respect of any policy of insurance) in respect of the
Collateral that may come into possession of the Agent; (ii) to sign
and endorse any financing statement pursuant to the UCC or any
invoice, freight or express bill, bill of lading, storage or
warehouse receipts, drafts against debtors, assignments,
verifications and notices in connection with accounts, and other
documents relating to the Collateral; (iii) to pay or discharge
taxes, liens, security interests or other encumbrances at any time
levied or placed on or threatened against the Collateral; (iv) to
demand, collect, receipt for, compromise, settle and sue for monies
due in respect of the Collateral; (v) to transfer any Intellectual
Property or provide licenses respecting any Intellectual Property;
and (vi) generally, at the option of the Agent, and at the expense
of the Debtors, at any time, or from time to time, to execute and
deliver any and all documents and instruments and to do all acts
and things which the Agent deems necessary to protect, preserve and
realize upon the Collateral and the Security Interests granted
therein in order to effect the intent of this Agreement and the
Notes all as fully and effectually as the Debtors might or could
do; and each Debtor hereby ratifies all that said attorney shall
lawfully do or cause to be done by virtue hereof. This
power of attorney is coupled with an interest and shall be
irrevocable for the term of this Agreement and thereafter as long
as any of the Obligations shall be outstanding. The
designation set forth herein shall be deemed to amend and supersede
any inconsistent provision in the Organizational Documents or other
documents or agreements to which any Debtor is subject or to which
any Debtor is a party. Without limiting the generality
of the foregoing, after the occurrence and during the continuance
of an Event of Default, each Secured Party is specifically
authorized to execute and file any applications for or instruments
of transfer and assignment of any patents, trademarks, copyrights
or other Intellectual Property with the United States Patent and
Trademark Office and the United States Copyright
Office.
(b) Each
Debtor hereby irrevocably appoints the Agent as such Debtor’s
attorney-in-fact, with full authority in the place and instead of
such Debtor and in the name of such Debtor, from time to time in
the Agent’s discretion, to take any action and to execute any
instrument which the Agent may deem necessary or advisable to
accomplish the purposes of this Agreement, including the filing, in
its sole discretion, of one or more financing or continuation
statements and amendments thereto, relative to any of the
Collateral without the signature of such Debtor where permitted by
law, which financing statements may (but need not) describe the
Collateral as “all assets” or “all personal
property” or words of like import, and ratifies all such
actions taken by the Agent. This power of attorney is
coupled with an interest and shall be irrevocable for the term of
this Agreement and thereafter as long as any of the Obligations
shall be outstanding.
16. Notices.
All notices, requests, demands and other communications hereunder
shall be subject to the notice provision of the Purchase
Agreement.
17. Other
Security. To the extent that the Obligations are now or
hereafter secured by property other than the Collateral or by
the guarantee, endorsement or property of any other person, firm,
corporation or other entity, then the Agent shall have the right,
in its sole discretion, to pursue, relinquish, subordinate, modify
or take any other action with respect thereto, without in any way
modifying or affecting any of the Secured Parties’ rights and
remedies hereunder.
18. Appointment
of Agent. If and as applicable, the Secured
Parties hereby appoint Arena Investors LP to act as their agent
(“Agent”) for purposes of
exercising any and all rights and remedies of the Secured Parties
hereunder. Such appointment shall continue until revoked in writing
by the Secured Parties, at which time the Secured Parties shall
appoint a new Agent. The Agent shall have the rights,
responsibilities and immunities set forth in Annex
B hereto.
19. Miscellaneous.
(a) No
course of dealing between the Debtors and the Secured Parties, nor
any failure to exercise, nor any delay in exercising, on the part
of the Secured Parties, any right, power or privilege hereunder or
under the Notes shall operate as a waiver thereof; nor shall any
single or partial exercise of any right, power or privilege
hereunder or thereunder preclude any other or further exercise
thereof or the exercise of any other right, power or
privilege.
(b) All
of the rights and remedies of the Secured Parties with respect to
the Collateral, whether established hereby or by the Notes or by
any other agreements, instruments or documents or by law shall be
cumulative and may be exercised singly or
concurrently.
(c) This
Agreement, together with the exhibits and schedules hereto,
contains 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 this Agreement
and the exhibits and schedules hereto. No provision of this
Agreement may be waived, modified, supplemented or amended except
in a written instrument signed, in the case of an amendment, by the
Debtors and the Secured Party, or, in the case of a waiver, by the
party against whom enforcement of any such waived provision is
sought.
(d) If
any term, provision, covenant or restriction of this Agreement is
held by a court of competent jurisdiction to be invalid, illegal,
void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions set forth herein shall remain in full
force and effect and shall in no way be affected, impaired or
invalidated, and the parties hereto shall use their commercially
reasonable efforts to find and employ an alternative means to
achieve the same or substantially the same result as that
contemplated by such term, provision, covenant or restriction. It
is hereby stipulated and declared to be the intention of the
parties that they would have executed the remaining terms,
provisions, covenants and restrictions without including any of
such that may be hereafter declared invalid, illegal, void or
unenforceable.
(e) 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.
(f) This
Agreement shall be binding upon and inure to the benefit of the
parties and their successors and permitted assigns. The
Company and the Subsidiaries may not assign this Agreement or any
rights or obligations hereunder without the prior written consent
of the Agent (other than by merger). Any Secured Party
may assign any or all of its rights under this Agreement to any
Person (as defined in the Purchase Agreement) to whom such Secured
Party assigns or transfers any Obligations, provided such
transferee agrees in writing to be bound, with respect to the
transferred Obligations, by the provisions of this Agreement that
apply to the “Secured Parties.”
(g) Each
party shall take such further action and execute and deliver such
further documents as may be necessary or appropriate in order to
carry out the provisions and purposes of this
Agreement.
(h) Except
to the extent mandatorily governed by the jurisdiction or situs
where the Collateral is located, 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 New York, without
regard to the principles of conflicts of law
thereof. Except to the extent mandatorily governed by
the jurisdiction or situs where the Collateral is located, each
Debtor agrees that all proceedings concerning the interpretations,
enforcement and defense of the transactions contemplated by this
Agreement and the Notes (whether brought against a party hereto or
its respective affiliates, directors, officers, shareholders,
partners, members, employees or agents) shall be commenced
exclusively in the state and federal courts sitting in the City of
New York, Borough of Manhattan. Except to the extent
mandatorily governed by the jurisdiction or situs where the
Collateral is located, each Debtor hereby irrevocably submits to
the exclusive jurisdiction of the state and federal courts sitting
in the City of New York, Borough of Manhattan for the adjudication
of any dispute hereunder or in connection herewith or with any
transaction contemplated hereby or discussed herein, and hereby
irrevocably waives, and agrees not to assert in any proceeding, any
claim that it is not personally subject to the jurisdiction of any
such court, that such proceeding is improper. Each
party hereto hereby irrevocably waives, to the fullest extent
permitted by applicable law, any and all right to trial by jury in
any legal proceeding arising out of or relating to this Agreement
or the transactions contemplated hereby.
(i) This
Agreement may be executed in any number of counterparts, each of
which when so executed shall be deemed to be an original and, all
of which taken together shall constitute one and the same
Agreement. In the event that any signature is delivered by
facsimile transmission, such signature shall create a valid binding
obligation of the party executing (or on whose behalf such
signature is executed) the same with the same force and effect as
if such facsimile signature were the original thereof.
(j) All
Debtors shall jointly and severally be liable for the obligations
of each Debtor to the Secured Parties hereunder.
(k) Each
Debtor agrees to indemnify, pay and hold harmless the Agent and the
Secured Parties and their respective assignees and affiliates and
their respective officers, directors, employees, agents,
consultants, auditors, and attorneys of any of them (collectively,
“Indemnitees”) from and
against any and all liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, claims, costs, expenses and
disbursements of any kind or nature whatsoever (including the
reasonable fees and disbursements of counsel for such Indemnitees
in connection with any investigative, administrative or judicial
proceeding commenced or threatened, whether or not such Purchaser
Indemnitee shall be designated a party thereto) imposed on,
incurred by or asserted against such Indemnitee in any way related
to or arising from or alleged to arise from this Agreement or the
Collateral, except any such losses, claims, liabilities, damages,
penalties, suits, costs and expenses which result from the gross
negligence or willful misconduct of the Indemnitee as determined by
a final, nonappealable decision of a court of competent
jurisdiction; provided that the Debtors shall not be obligated to
indemnify the Indemnitees, or have any liability, in excess of the
aggregate Purchase Price (as defined in the Purchase
Agreement). This indemnification provision is in
addition to, and not in limitation of, any other indemnification
provision in the Notes, the Purchase Agreement or any other
agreement, instrument or other document executed or delivered in
connection herewith or therewith.
(l) Nothing
in this Agreement shall be construed to subject Agent or any
Secured Party to liability as a partner in any Debtor or any if its
direct or indirect subsidiaries that is a partnership or as a
member in any Debtor or any of its direct or indirect subsidiaries
that is a limited liability company, nor shall Agent or any Secured
Party be deemed to have assumed any obligations under any
partnership agreement or limited liability company agreement, as
applicable, of any such Debtor or any of its direct or indirect
subsidiaries or otherwise, unless and until any such Secured Party
exercises its right to be substituted for such Debtor as a partner
or member, as applicable, pursuant hereto.
(m) To
the extent that the grant of the security interest in the
Collateral and the enforcement of the terms hereof require the
consent, approval or action of any partner or member, as
applicable, of any Debtor or any direct or indirect subsidiary of
any Debtor or compliance with any provisions of any of the
Organizational Documents, the Debtors hereby represent that all
such consents and approvals have been obtained.
[SIGNATURE
PAGE OF DEBTORS FOLLOWS]
IN
WITNESS WHEREOF, the parties hereto have caused this Amended and
Restated Security Agreement to be duly executed on the day and year
first above written.
TRANSWORLD HOLDINGS, INC.
By:__________________________________________
Name:
Andrew Fox
Title:
CEO
TRANSWORLD ENTERPRISES INC.
By:__________________________________________
Name:
Kenneth Orr
Title:
President
GETCHARGED, INC.
By:__________________________________________
Name:
Andrew Fox
Title:
CEO
[SIGNATURE
PAGE OF HOLDERS FOLLOWS]
[SIGNATURE
PAGE OF HOLDERS TO AMENDED AND RESTATED SECURITY
AGREEMENT]
Name of
Investing Entity: Arena
Structured Private Investments (Cayman), LLC
Signature of Authorized Signatory of Investing entity:
_________________________
Name of
Authorized Signatory: Lawrence Cutler
Title
of Authorized Signatory: Authorized
Signatory
[SIGNATURE
PAGE OF HOLDERS TO AMENDED AND RESTATED SECURITY
AGREEMENT]
Name of
Investing Entity: Mt.
Whitney Securities LLC
Signature of Authorized Signatory of Investing entity:
_________________________
Name of
Authorized Signatory: Lawrence Cutler
Title
of Authorized Signatory: Authorized
Signatory
[SIGNATURE
PAGE OF HOLDERS TO AMENDED AND RESTATED SECURITY
AGREEMENT]
Name of
Investing Entity: Arena
Originating Co., LLC
Signature of Authorized Signatory of Investing entity:
_________________________
Name of
Authorized Signatory: Lawrence Cutler
Title
of Authorized Signatory: Authorized
Signatory
[SIGNATURE
PAGE OF HOLDERS TO AMENDED AND RESTATED SECURITY
AGREEMENT]
Name of
Investing Entity: Arena
Special Opportunities Fund, LP
Signature of Authorized Signatory of Investing entity:
_________________________
Name of
Authorized Signatory: Lawrence Cutler
Title
of Authorized Signatory: Authorized
Signatory
[SIGNATURE
PAGE OF HOLDERS TO AMENDED AND RESTATED SECURITY
AGREEMENT]
Name of
Investing Entity: Arena
Special Opportunities Partners I, LLC
Signature of Authorized Signatory of Investing entity:
_________________________
Name of
Authorized Signatory: Lawrence Cutler
Title
of Authorized Signatory: Authorized
Signatory
ANNEX A
to
AMENDED AND RESTATED
SECURITY AGREEMENT
FORM OF ADDITIONAL DEBTOR JOINDER
Amended
and Restated Security Agreement dated as of November 3, 2020 made
by Transworld Holdings, Inc., a Delaware corporation (formerly
known as GoIP Global, Inc., a Colorado corporation) and its
subsidiaries party thereto from time to time, as Debtors to and in
favor of the Secured Parties identified therein (the
“Security
Agreement”).
Reference is made
to the Security Agreement as defined above; capitalized terms used
herein and not otherwise defined herein shall have the meanings
given to such terms in, or by reference in, the Security
Agreement.
The
undersigned hereby agrees that, upon delivery of this Additional
Debtor Joinder to the Secured Parties referred to above, the
undersigned shall (a) be an Additional Debtor under the Security
Agreement, (b) have all the rights and obligations of the Debtors
under the Security Agreement as fully and to the same extent as if
the undersigned was an original signatory thereto and (c) be deemed
to have made the representations and warranties set forth therein
as of the date of execution and delivery of this Additional Debtor
Joinder. WITHOUT LIMITING THE GENERALITY OF THE
FOREGOING, THE UNDERSIGNED SPECIFICALLY GRANTS TO THE SECURED
PARTIES A SECURITY INTEREST IN THE COLLATERAL AS MORE FULLY SET
FORTH IN THE SECURITY AGREEMENT AND ACKNOWLEDGES AND AGREES TO THE
WAIVER OF JURY TRIAL PROVISIONS SET FORTH THEREIN.
Attached hereto are
supplemental and/or replacement Disclosure Schedules to the
Security Agreement, as applicable.
An
executed copy of this Joinder shall be delivered to the Secured
Parties, and the Secured Parties may rely on the matters set forth
herein on or after the date hereof. This Joinder shall
not be modified, amended or terminated without the prior written
consent of the Secured Parties.
IN
WITNESS WHEREOF, the undersigned has caused this Joinder to be
executed in the name and on behalf of the undersigned.
[Name of Additional Debtor]
By:__________________________________________
Name:
Title:
Address:
Dated:
ANNEX B
to
AMENDED AND RESTATED
SECURITY AGREEMENT
THE AGENT
1. Appointment.
The Secured Parties
(all capitalized terms used herein and not otherwise defined shall
have the respective meanings provided in the Security Agreement to
which this Annex B is attached (the “Agreement”)), by their
acceptance of the benefits of the Agreement, hereby designate Arena
Investors LP (“Agent”) as the Agent to
act as specified herein and in the Agreement. Each
Secured Party shall be deemed irrevocably to authorize the Agent to
take such action on its behalf under the provisions of the
Agreement and any other Transaction Document (as such term is
defined in the Purchase Agreement) and to exercise such powers and
to perform such duties hereunder and thereunder as are specifically
delegated to or required of the Agent by the terms hereof and
thereof and such other powers as are reasonably incidental
thereto. The Agent may perform any of its duties
hereunder by or through its agents or employees.
2. Nature
of Duties. The Agent shall have no
duties or responsibilities except those expressly set forth in the
Agreement. Neither the Agent nor any of its partners,
members, shareholders, officers, directors, employees or agents
shall be liable for any action taken or omitted by it as such under
the Agreement or hereunder or in connection herewith or therewith,
be responsible for the consequence of any oversight or error of
judgment or answerable for any loss, unless caused solely by its or
their gross negligence or willful misconduct as determined by a
final judgment (not subject to further appeal) of a court of
competent jurisdiction. The duties of the Agent shall be
mechanical and administrative in nature; the Agent shall not have
by reason of the Agreement or any other Transaction Document a
fiduciary relationship in respect of any Debtor or any Secured
Party; and nothing in the Agreement or any other Transaction
Document (as defined in the Purchase Agreement), expressed or
implied, is intended to or shall be so construed as to impose upon
the Agent any obligations in respect of the Agreement or any other
Transaction Document except as expressly set forth herein and
therein.
3. Lack
of Reliance on the Agent. Independently and
without reliance upon the Agent, each Secured Party, to the extent
it deems appropriate, has made and shall continue to make (i) its
own independent investigation of the financial condition and
affairs of the Company and its subsidiaries in connection with such
Secured Party’s investment in the Debtors, the creation and
continuance of the Obligations, the transactions contemplated by
the Transaction Documents, and the taking or not taking of any
action in connection therewith, and (ii) its own appraisal of the
creditworthiness of the Company and its subsidiaries, and of the
value of the Collateral from time to time, and the Agent shall have
no duty or responsibility, either initially or on a continuing
basis, to provide any Secured Party with any credit, market or
other information with respect thereto, whether coming into its
possession before any Obligations are incurred or at any time or
times thereafter. The Agent shall not be responsible to
the Debtors or any Secured Party for any recitals, statements,
information, representations or warranties herein or in any
document, certificate or other writing delivered in connection
herewith, or for the execution, effectiveness, genuineness,
validity, enforceability, perfection, collectability, priority or
sufficiency of the Agreement or any other Transaction Document, or
for the financial condition of the Debtors or the value of any of
the Collateral, or be required to make any inquiry concerning
either the performance or observance of any of the terms,
provisions or conditions of the Agreement or any other Transaction
Document, or the financial condition of the Debtors, or the value
of any of the Collateral, or the existence or possible existence of
any default or Event of Default under the Agreement, the Notes or
any of the other Transaction Documents.
4. Certain
Rights of the Agent. The Agent shall have the
right to take any action with respect to the Collateral, on behalf
of all of the Secured Parties. To the extent practical,
the Agent shall request instructions from the Secured Parties with
respect to any material act or action (including failure to act) in
connection with the Agreement or any other Transaction Document,
and shall be entitled to act or refrain from acting in accordance
with the instructions of the Secured Party; if such instructions
are not provided despite the Agent’s request therefor, the
Agent shall be entitled to refrain from such act or taking such
action, and if such action is taken, shall be entitled to
appropriate indemnification from the Secured Parties in respect of
actions to be taken by the Agent; and the Agent shall not incur
liability to any person or entity by reason of so
refraining. Without limiting the foregoing, (a) no
Secured Party shall have any right of action whatsoever against the
Agent as a result of the Agent acting or refraining from acting
hereunder in accordance with the terms of the Agreement or any
other Transaction Document, and the Debtors shall have no right to
question or challenge the authority of, or the instructions given
to, the Agent pursuant to the foregoing and (b) the Agent shall not
be required to take any action that the Agent believes (i) could
reasonably be expected to expose it to personal liability or (ii)
is contrary to this Agreement, the Transaction Documents or
applicable law.
5. Reliance. The
Agent shall be entitled to rely, and shall be fully protected in
relying, upon any writing, resolution, notice, statement,
certificate, telex, teletype or facsimile message, cablegram,
radiogram, order or other document or telephone message signed,
sent or made by the proper person or entity, and, with respect to
all legal matters pertaining to the Agreement and the other
Transaction Documents and its duties thereunder, upon advice of
counsel selected by it and upon all other matters pertaining to
this Agreement and the other Transaction Documents and its duties
thereunder, upon advice of other experts selected by
it. Anything to the contrary notwithstanding, the Agent
shall have no obligation whatsoever to any Secured Party to assure
that the Collateral exists or is owned by the Debtors or is cared
for, protected or insured or that the liens granted pursuant to the
Agreement have been properly or sufficiently or lawfully created,
perfected, or enforced or are entitled to any particular
priority.
6. Indemnification. To
the extent that the Agent is not reimbursed and indemnified by the
Debtors, the Secured Parties will jointly and severally reimburse
and indemnify the Agent, in proportion to their initially purchased
respective principal amounts of Notes, from and against any and all
liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements of any kind or
nature whatsoever which may be imposed on, incurred by or asserted
against the Agent in performing its duties hereunder or under the
Agreement or any other Transaction Document, or in any way relating
to or arising out of the Agreement or any other Transaction
Document except for those determined by a final judgment (not
subject to further appeal) of a court of competent jurisdiction to
have resulted solely from the Agent’s own gross negligence or
willful misconduct. Prior to taking any action hereunder
as Agent, the Agent may require each Secured Party to deposit with
it sufficient sums as it determines in good faith is necessary to
protect the Agent for costs and expenses associated with taking
such action.
7. Resignation
by the Agent.
(a) The
Agent may resign from the performance of all its functions and
duties under the Agreement and the other Transaction Documents at
any time by giving 30 days’ prior written notice (as provided
in the Agreement) to the Debtors and the Secured
Parties. Such resignation shall take effect upon the
appointment of a successor Agent pursuant to clauses (b) and (c)
below.
(b) Upon
any such notice of resignation, the Secured Parties shall appoint a
successor Agent hereunder.
(c) If
a successor Agent shall not have been so appointed within said
thirty (30)-day period, the Agent shall then appoint a successor
Agent who shall serve as Agent until such time, if any, as the
Secured Parties appoint a successor Agent as provided
above. If a successor Agent has not been appointed
within such thirty (30)-day period, the Agent may petition any
court of competent jurisdiction or may interplead the Debtors and
the Secured Parties in a proceeding for the appointment of a
successor Agent, and all fees, including, but not limited to,
extraordinary fees associated with the filing of interpleader and
expenses associated therewith, shall be payable by the Debtors on
demand.
8. Rights
with respect to Collateral. Each Secured Party agrees
with all other Secured Parties and the Agent (i) that it shall not,
and shall not attempt to, exercise any rights with respect to its
security interest in the Collateral, whether pursuant to any other
agreement or otherwise (other than pursuant to this Agreement), or
take or institute any action against the Agent or any of the other
Secured Parties in respect of the Collateral or its rights
hereunder (other than any such action arising from the breach of
this Agreement) and (ii) that such Secured Party has no other
rights with respect to the Collateral other than as set forth in
this Agreement and the other Transaction Documents. Upon
the acceptance of any appointment as Agent hereunder by a successor
Agent, such successor Agent shall thereupon succeed to and become
vested with all the rights, powers, privileges and duties of the
retiring Agent and the retiring Agent shall be discharged from its
duties and obligations under the Agreement. After any
retiring Agent’s resignation or removal hereunder as Agent,
the provisions of the Agreement including this Annex B shall inure
to its benefit as to any actions taken or omitted to be taken by it
while it was Agent.
Final
AMENDED AND RESTATED
SUBORDINATION AGREEMENT
AMENDED
AND RESTATED SUBORDINATION AGREEMENT (this “Agreement”), dated as of November
3, 2020, among the purchasers signatory to the Securities Purchase
Agreements (as defined below) (together with their respective
successors and assigns, including, any future holder of Senior Debt
(as defined below), the “Senior Creditors”), KORR Value
L.P. (collectively, the “Subordinated Creditors” and each,
individually, a “Subordinated
Creditor”), and Transworld Holdings, Inc., a Delaware
corporation (formerly known as GoIP Global, Inc., a Colorado
corporation) (the “Company”).
WHEREAS, pursuant
to a Securities Purchase Agreement, dated as of May 8, 2020 (as
amended and in effect from time to time, including any replacement
agreement therefor, the “May
2020 Securities Purchase Agreement”), among the
Company and the Senior Creditors, the Senior Creditors have
extended credit to the Company as evidenced by certain Senior
Secured Convertible Notes in the aggregate principal amount of
$3,000,000.00 issued by the Company to the Senior Creditors
(together with any notes issued in exchange therefor or replacement
thereof or any additional investment made by the Senior Creditors
and as the same may be amended, supplemented, restated or otherwise
modified from time to time, the “May 2020 Senior Notes”);
and
WHEREAS, pursuant
to a Securities Purchase Agreement, dated as of the date hereof (as
amended and in effect from time to time, including any replacement
agreement therefor, the “October 2020 Securities Purchase
Agreement” and together with the May 2020 Securities
Purchase Agreement, the “Securities Purchase Agreements”),
among the Company and the Senior Creditors, the Senior Creditors
have extended credit to the Company as evidenced by certain Senior
Secured Convertible Notes in the aggregate principal amount of
$3,888,889.00 issued by the Company to the Senior Creditors
(together with any notes issued in exchange therefor or replacement
thereof or any additional investment made by the Senior Creditors
and as the same may be amended, supplemented, restated or otherwise
modified from time to time, the “October 2020 Senior Notes” and
together with the May 2020 Senior Notes, the “Senior Notes”); and
WHEREAS, each
Subordinated Creditor has extended or agreed to extend credit to
the Company pursuant to certain promissory notes, dated on or about
the date hereof, issued by the Company in favor of such
Subordinated Creditor (as amended with the consent of the Senior
Creditors as provided herein and in effect from time to time,
collectively, the “Subordinated Agreements” and each,
individually, a “Subordinated
Agreement”);
WHEREAS, in order
to induce the Senior Creditors to purchase May 2020 Senior Notes
and otherwise extend credit to the Company pursuant to the May 2020
Securities Purchase Agreement, the Company, the Senior Creditors
and the Subordinated Creditors entered into that certain
Subordination Agreement dated as of May 8, 2020 (the
“Existing Subordination
Agreement”); and
WHEREAS, in order
to induce the Senior Creditors to purchase the October 2020 Senior
Notes and otherwise extend credit to the Company pursuant to the
October Securities Purchase Agreement, the Company, the Senior
Creditors and the Subordinated Creditors desire to amend and
restated the Existing Subordination Agreement.
NOW,
THEREFORE, in consideration of the foregoing, the mutual agreements
herein contained and other good and valuable consideration, the
receipt and adequacy of which are hereby acknowledged, the parties
hereto, intending to be legally bound, hereby agree that the
Existing Subordination Agreement is hereby amended, restated and
replaced in its entirety as follows:
1. Definitions. Terms not otherwise
defined herein have the same respective meanings given to them in
the Securities Purchase Agreements. In addition, the following
terms shall have the following meanings:
“Senior Debt” shall mean all
principal, interest, fees, costs, enforcement expenses (including
legal fees and disbursements), collateral protection expenses and
other reimbursement or indemnity obligations created or evidenced
by the Securities Purchase Agreements, the Senior Notes or any of
the other Transaction Documents or any prior, concurrent, or
subsequent notes, instruments or agreements of indebtedness,
liabilities or obligations of any type or form whatsoever relating
thereto in favor of the Senior Creditors (including without
limitation, the Senior Creditors’ respective successors,
assigns and participants). Without limiting any term contained in
the immediately preceding sentence, Senior Debt shall expressly
include any and all interest accruing or out of pocket costs or
expenses incurred after the date of any filing by or against any
Credit Party of any petition under any Bankruptcy Law regardless of
whether the Senior Creditors’ claim therefor is allowed or
allowable in the case or proceeding relating thereto.
“Subordinated Debt” shall mean all
principal, interest, fees, costs, enforcement expenses (including
legal fees and disbursements), collateral protection expenses and
other reimbursement and indemnity obligations of the Company to
each Subordinated Creditor created or evidenced by the applicable
Subordinated Agreement or any prior, concurrent or subsequent
guaranty, notes, instruments or agreements of indebtedness,
liabilities or obligations of any type or form whatsoever relating
thereto executed and delivered by the Company in favor of such
Subordinated Creditor.
“Subordinated Documents” shall mean
collectively, the Subordinated Agreements and any and all other
guaranties and security interests, mortgages and other liens
directly or indirectly guarantying or securing any of the
Subordinated Debt, and any and all other documents or instruments
evidencing or further guarantying or securing directly or
indirectly any of the Subordinated Debt, whether now existing or
hereafter created, copies of which Subordinated Documents are
attached hereto as Exhibit
A.
2. General. The Subordinated Debt and
any and all Subordinated Documents shall be and hereby are
subordinated and the Company is not permitted to pay, and no
Subordinated Creditor is permitted to receive, any payment on its
Subordinated Debt until the full and final payment in cash of the
Senior Debt, whether now or hereafter incurred or owed by the
Company.
3. Enforcement. No Subordinated Creditor
will take or omit to take any action or assert any claim with
respect to its Subordinated Debt or otherwise which is inconsistent
with the provisions of this Agreement. Without limiting the
foregoing, no Subordinated Creditor will assert, collect or enforce
its Subordinated Debt or any part thereof or take any action to
foreclose or realize upon its Subordinated Debt or any part thereof
or enforce any of its Subordinated Documents except to the extent
(but only to such extent) that the commencement of a legal action
may be required to toll the running of any applicable statute of
limitation. Until the Senior Debt has been finally paid in full in
cash, no Subordinated Creditor shall have any right of subrogation,
reimbursement, restitution, contribution or indemnity whatsoever
from any assets of the Company or any guarantor of or provider of
collateral security for the Senior Debt. Each Subordinated Creditor
further waives any and all rights with respect to
marshalling.
4. Payments Held in Trust. Each
Subordinated Creditor will hold in trust and immediately pay over
to the Senior Creditors in the same form of payment received, with
appropriate endorsements, for application to the Senior Debt any
cash amount that the Company pays to such Subordinated Creditor
with respect to its Subordinated Debt, or as collateral for the
Senior Debt any other assets of the Company that such Subordinated
Creditor may receive with respect to its Subordinated Debt, except
with respect to payments expressly permitted pursuant to
Section 2. The Senior Creditors are irrevocably authorized to
supply any required endorsement or assignment which may have been
omitted.
5. Evidence of Subordination. The
Company and each Subordinated Creditor shall make appropriate
notations in their books to show the subordinate character of all
applicable Subordinated Debt which may now or hereafter be carried
on open account. Until the Senior Debt has been indefeasibly paid
in full, the Company shall not issue any instrument, security or
other writing evidencing any part of its Subordinated Debt except
as described in this Section 5 or at the request of and in the
manner requested by the Senior Creditors; and no Subordinated
Creditor shall subordinate any part of its Subordinated Debt except
to or in favor of the Senior Creditors.
6. Defense to Enforcement. If any
Subordinated Creditor, in contravention of the terms of this
Agreement, shall commence, prosecute or participate in any suit,
action or proceeding against the Company, then the Company may
interpose as a defense or plea the making of this Agreement, and
the Senior Creditors may intervene and interpose such defense or
plea in its name or in the name of the Company. If any Subordinated
Creditor, in contravention of the terms of this Agreement, shall
attempt to collect any of its Subordinated Debt or enforce any of
its Subordinated Documents, then the Senior Creditors or the
Company may, by virtue of this Agreement, restrain the enforcement
thereof in the name of the Senior Creditors or in the name of the
Company. If any Subordinated Creditor, in contravention of the
terms of this Agreement, obtains any cash or other assets of the
Company as a result of any administrative, legal or equitable
actions, or otherwise, such Subordinated Creditor agrees forthwith
to pay, deliver and assign to the Senior Creditors with appropriate
endorsements, any such cash for application to the Senior Debt and
any such other assets as collateral for the Senior
Debt.
7.
Bankruptcy, Etc.
(a)
Until all Senior Debt shall have been indefeasibly paid in full in
cash, no Subordinated Creditor will commence or join with any other
creditor or creditors of the Company in commencing any bankruptcy,
reorganization or insolvency proceedings against the
Company.
(b) At
any meeting of creditors of the Company or in the event of any case
or proceeding, voluntary or involuntary, for the distribution,
division or application of all or part of the assets of the Company
or the proceeds thereof, whether such case or proceeding be for the
liquidation, dissolution or winding up of the Company or its
businesses, a receivership, insolvency or bankruptcy case or
proceeding, an assignment for the benefit of creditors or a
proceeding by or against the Company for relief under any
bankruptcy law or any other law relating to the relief of debtors,
readjustment of indebtedness, reorganization, arrangement,
composition or extension or marshalling of assets or otherwise, the
Senior Creditors are hereby irrevocably authorized on behalf of
each Subordinated Creditor at any such meeting or in any such
proceeding:
(i) to
enforce claims comprising the Subordinated Debt either in its own
name or in the name of such Subordinated Creditor, by proof of
debt, proof of claim, suit or otherwise;
(ii) to
receive or collect any cash or other assets of the Company
distributed, divided or applied by way of dividend or payment, or
any securities issued on account of any Subordinated Debt, and
apply such cash to or to hold such other assets or securities as
collateral for the Senior Debt, and to apply to the Senior Debt any
cash proceeds of any realization upon such other assets or
securities that the Senior Creditors elects to effect, until all of
the Senior Debt shall have been paid in full in cash, rendering to
such Subordinated Creditor any surplus to which such Subordinated
Creditor is then entitled;
(iii)
to vote claims comprising the Subordinated Debt, to accept or
reject any plan of partial or complete liquidation, reorganization,
arrangement, composition or extension; and
(iv) to
take generally any action in connection with any such meeting or
proceeding which such Subordinated Creditor might otherwise
take.
8.
Lien Subordination.
(a) The
Subordinated Debt shall be unsecured and the Company shall not
grant any Liens to secure any of the Subordinated Debt. To the
extent any Lien is ever granted, the Senior Debt, the Securities
Purchase Agreements and the other Transaction Documents and any and
all other documents and instruments evidencing or creating the
Senior Debt and all guaranties, mortgages, security agreements,
pledges and other collateral guarantying or securing the Senior
Debt or any part thereof shall be senior to the Subordinated Debt
and the Subordinated Documents irrespective of the time of the
execution, delivery or issuance of any thereof or the filing or
recording for perfection of any thereof or the filing of any
financing statement or continuation statement relating to any
thereof. Each Subordinated Creditor hereby agrees, upon request of
the Senior Creditors at any time and from time to time, to execute
such other documents or instruments as may be requested by the
Senior Creditors further to evidence of public record or otherwise
the senior priority of the Senior Debt as contemplated hereby. Each
Subordinated Creditor further agrees to maintain on its books and
records such notations as the Senior Creditors may reasonably
request to reflect the subordination contemplated hereby and to
perfect or preserve the rights of the Senior Creditors
hereunder.
(b)
Each Subordinated Creditor agrees that, within two (2) days
following the Senior Creditors’s written request therefor,
such Subordinated Creditor will execute, deliver and file any and
all such termination statements, mortgage discharges, lien releases
and other agreements and instruments as the Senior Creditors
reasonably deem necessary or appropriate in order to give effect to
the preceding sentence. Each Subordinated Creditor hereby
irrevocably appoints the Senior Creditors, and their respective
successors and assigns, and their respective officers, with full
power of substitution, the true and lawful attorney(s) of such
Subordinated Creditor for the purpose of effecting any such
executions, deliveries and filings if and to the extent that such
Subordinated Creditor shall have failed to perform such obligations
pursuant to the foregoing provisions of this Section 8(b)
within such period.
9. Senior Creditors’ Freedom of
Dealing. Each Subordinated Creditor agrees, with respect to
the Senior Debt and any and all collateral therefor or guaranties
thereof, that the Company and the Senior Creditors, as applicable,
may agree to increase the amount of the Senior Debt or otherwise
modify, in any respect whatsoever, the terms of any of the Senior
Debt, and the Senior Creditors may grant extensions of the time of
payment or performance to and make compromises, including releases
of collateral or guaranties, and settlements with the Company and
all other Persons, in each case without the consent of such
Subordinated Creditor or the Company and without affecting the
agreements of such Subordinated Creditor or the Company contained
in this Agreement; provided, however, that nothing contained in
this Section 9 shall constitute a waiver of the right of the
Company itself to agree or consent to a settlement or compromise of
a claim which the Senior Creditors may have against the Company. To
the extent any Senior Creditors sells or assigns any of its Senior
Debt, each Subordinated Creditor agrees to execute and deliver any
and all documents and/or agreements reasonably requested by such
Senior Creditors to reflect the continued subordination by such
Subordinated Creditor of its Subordinated Debt in favor of such
purchaser or assignee of such Senior Debt.
10. Modification or Sale of the Subordinated
Debt. No Subordinated Creditor will, at any time while this
Agreement is in effect, modify any of the terms of any of its
Subordinated Debt or any of its Subordinated Documents; nor will
such Subordinated Creditor sell, transfer, pledge, assign,
hypothecate or otherwise dispose of any or all of its Subordinated
Debt unless such Subordinated Creditor provides prior written
notice of such event to the Senior Creditors and the person or
entity acquiring such interest in such Subordinated Debt enters
into a subordination agreement with the Senior Creditors in the
form of this Agreement along with any other documents and/or
agreements reasonably requested by the Senior Creditors. Any
transfer in violation of this Agreement shall be void ab
initio.
11. Company’s Obligations
Absolute. Nothing contained in this Agreement shall impair,
as between the Company and any Subordinated Creditor, the
obligation of the Company to pay to such Subordinated Creditor all
amounts payable in respect of its Subordinated Debt as and when the
same shall become due and payable in accordance with the terms
thereof, or prevent such Subordinated Creditor (except as expressly
otherwise provided in Section 3 or Section 6) from
exercising all rights, powers and remedies otherwise permitted by
its Subordinated Documents and by applicable law upon a default in
the payment of its Subordinated Debt or under its Subordinated
Documents, all, however, subject to the rights of the Senior
Creditors as set forth in this Agreement.
12. Termination of Subordination. This
Agreement shall continue in full force and effect, and the
obligations and agreements of each Subordinated Creditor and the
Company hereunder shall continue to be fully operative, until all
of the Senior Debt shall have been paid and satisfied in full in
cash and such full payment and satisfaction shall be final and not
avoidable. To the extent that the Company or any guarantor of or
provider of collateral for the Senior Debt makes any payment on the
Senior Debt that is subsequently invalidated, declared to be
fraudulent or preferential or set aside or is required to be repaid
to a trustee, receiver or any other party under any bankruptcy,
insolvency or reorganization act, state or federal law, common law
or equitable cause (such payment being hereinafter referred to as a
“Voided
Payment”), then to the extent of such Voided Payment,
that portion of the Senior Debt that had been previously satisfied
by such Voided Payment shall be revived and continue in full force
and effect as if such Voided Payment had never been made. In the
event that a Voided Payment is recovered from the Senior Creditors,
an Event of Default shall be deemed to have existed and to be
continuing under the Securities Purchase Agreement from the date of
the Senior Creditors’ initial receipt of such Voided Payment
until the full amount of such Voided Payment is restored to the
Senior Creditors. During any continuance of any such Event of
Default, this Agreement shall be in full force and effect with
respect to all of the Subordinated Debt. To the extent that any
Subordinated Creditor has received any payments with respect to its
Subordinated Debt subsequent to the date of the Senior
Creditors’ initial receipt of such Voided Payment and such
payments have not been invalidated, declared to be fraudulent or
preferential or set aside or are required to be repaid to a
trustee, receiver, or any other party under any bankruptcy act,
state or federal law, common law or equitable cause, such
Subordinated Creditor shall be obligated and hereby agrees that any
such payment so made or received shall be deemed to have been
received in trust for the benefit of the such Senior Creditors, and
such Subordinated Creditor hereby agrees to pay to the Senior
Creditors, upon demand, the full amount so received by such
Subordinated Creditor during such period of time to the extent
necessary fully to restore to the Senior Creditors the amount of
such Voided Payment. Upon the payment and satisfaction in full in
cash of all of the Senior Debt, which payment shall be final and
not avoidable, this Agreement will automatically terminate without
any additional action by any party hereto.
13. Specific Performance. The Senior
Creditors are hereby authorized to demand specific performance of
this Agreement, whether or not the Company shall have complied with
the provisions hereof applicable to it, at any time when any
Subordinated Creditor shall have failed to comply with any
provision hereof. Each Subordinated Creditor hereby irrevocably
waives any defense based on the adequacy of a remedy at law which
might be asserted as a bar to the remedy of specific performance
hereof in any action brought therefor by the Senior Creditors.
Except as required hereunder or under any of the other Transaction
Documents, each Subordinated Creditor further waives presentment,
notice and protest in connection with all negotiable instruments
evidencing Senior Debt to which it may be a party, notice of the
acceptance of this Agreement by the Senior Creditors, notice of any
loan made, extension granted or other action taken in reliance
hereon and all demands and notices of every kind in connection with
this Agreement or the Senior Debt.
14. Representations and Warranties. Each
Subordinated Creditor represents and warrants as
follows:
(a)
Such Subordinated Creditor which is not an individual is duly
organized, validly existing and in good standing under the laws of
the jurisdiction of its incorporation or formation and has all
requisite corporate or limited liability company, as applicable,
power and authority to enter into and perform this
Agreement.
(b) The
execution, delivery and performance by such Subordinated Creditor
of this Agreement and the transactions contemplated hereby
(i) have been duly authorized by all necessary corporate or
limited liability company, as applicable, action (except in the
case of individual Subordinated Creditors), and (ii) do not
(A) contravene such Subordinated Creditor’s constituent
documents, if applicable, (B) violate any requirement of law
to which such Subordinated Creditor is subject, or
(C) conflict with or result in the breach of, or constitute a
default under, any contractual obligation binding on such
Subordinated Creditor.
(c) No
authorization or approval or other action by, and no notice to or
filing with, any governmental authority or regulatory body or any
other third party is required for the due execution, delivery,
recordation, filing or performance by such Subordinated Creditor of
this Agreement.
(d)
This Agreement has been duly executed and delivered by such
Subordinated Creditor. This Agreement is the legal, valid and
binding obligation of such Subordinated Creditor, enforceable
against such Subordinated Creditor in accordance with its
terms.
15. Accuracy of Representations and
Warranties. If any representation or warranty contained
herein shall prove to have been materially false when made or in
the event of any breach by the Company or any Subordinated Creditor
in the performance of any of the terms hereof, the Senior Creditors
may, at their option, declare all Senior Debt to be due and
payable, without presentment, demand, protest, or notice of any
kind, notwithstanding any time or credit otherwise
allowed.
16. Additional Documents. The Company
and each Subordinated Creditor shall execute and deliver to the
Senior Creditors such further instruments and shall take such
further action as the Senior Creditors may at any time or times
request in order to carry out the provisions and intent of this
Agreement.
17. Legends. Any instrument or agreement
evidencing the Subordinated Debt shall specifically provide by an
appropriate legend conspicuously placed thereon that payment of any
and all amounts thereunder has been subordinated to prior payment
of Senior Debt in the manner and to the extent set forth in this
Subordination Agreement.
18. Notices. All notices and other
communications which are required and may be given pursuant to the
terms of this Agreement shall be in writing and shall be sufficient
and effective in all respects if given in writing or telecopied,
delivered or mailed by registered or certified mail, postage
prepaid, as follows:
(a) if
to a Senior Creditor or the Company, at the address set forth in
the applicable Securities Purchase Agreement; and
(b) if
to the Subordinated Creditor, at:
KORR
Value, LP
1400
Old Country Road
Westbury New York
11590
or such
other address or addresses as any party hereto shall have
designated by written notice to the other parties hereto. Notices
shall be deemed given and effective upon the earlier to occur of
(x) the third day following deposit thereof in the U.S. mail
or (y) receipt by the party to whom such notice is
directed.
19. Governing Law. THIS AGREEMENT SHALL
BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, AND THE RIGHTS OF THE
PARTIES SHALL BE GOVERNED BY, THE INTERNAL LAW OF THE STATE OF NEW
YORK, EXCLUDING CHOICE-OF-LAW PRINCIPLES OF THE LAW OF SUCH STATE
THAT WOULD PERMIT THE APPLICATION OF THE LAWS OF A JURISDICTION
OTHER THAN SUCH STATE.
20. Waiver of Jury Trial. EACH OF THE
SUBORDINATED CREDITORS AND THE COMPANY IRREVOCABLY WAIVE ALL RIGHT
TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER
BASED ON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR RELATING TO
THIS AGREEMENT, OR ANY OTHER AGREEMENT, DOCUMENT OR INSTRUMENT
DELIVERED IN CONNECTION HEREWITH OR THEREWITH OR THE ACTIONS OF THE
SENIOR CREDITORS IN THE NEGOTIATION, ADMINISTRATION, PERFORMANCE OR
ENFORCEMENT HEREOF OR THEREOF.
21.
Personal Jurisdiction.
(a)
Each of the Subordinated Creditors and the Company irrevocably
submits to the non-exclusive jurisdiction of any New York state or
federal court sitting in the Borough of Manhattan, The City of New
York, over any suit, action or proceeding arising out of or
relating to this Agreement or any of the agreements, documents or
instruments delivered in connection herewith or therewith. To the
fullest extent permitted by applicable law, each of the
Subordinated Creditors irrevocably waives and agrees not to assert,
by way of motion, as a defense or otherwise, any claim that it is
not subject to the jurisdiction of any such court, any objection
that it may now or hereafter have to the laying of the venue of any
such suit, action or proceeding brought in any such court and any
claim that any such suit, action or proceeding brought in any such
court has been brought in an inconvenient forum.
(b)
Nothing in this Section 21 shall affect the right of the
Senior Creditors to serve process in any manner permitted by law,
or limit any right that the Senior Creditors may have to bring
proceedings against any Subordinated Creditor or the Company in the
courts of any appropriate jurisdiction or to enforce in any lawful
manner a judgment obtained in one jurisdiction in any other
jurisdiction.
22. Expenses. Each of the Subordinated
Creditors and the Company jointly and severally agree to pay upon
demand to any of the Senior Creditors the amount of any and all
out-of-pocket expenses, including the reasonable fees and expenses
of their counsel and of any experts or agents, which any Senior
Creditors may incur in connection with the exercise or enforcement
of any of the rights of any Senior Creditors
hereunder.
23. Miscellaneous. This Agreement may be
executed in several counterparts and by each party on a separate
counterpart, each of which when so executed and delivered shall be
an original, and all of which together shall constitute one
instrument. Delivery of an executed counterpart of a signature page
to this Agreement by telecopier or pdf shall be effective as
delivery of a manually executed counterpart of this Agreement. In
proving this Agreement, it shall not be necessary to produce or
account for more than one such counterpart signed by the party
against which enforcement is sought. The Senior Creditors may, in
their sole and absolute discretion, waive any provisions of this
Agreement benefiting the Senior Creditors; provided, however, that
such waiver shall be effective only if in writing and signed by the
Senior Creditors and shall be limited to the specific provision or
provisions expressly so waived. This Agreement shall be binding
upon the successors, assigns and participants of each Subordinated
Creditor and the Company and shall inure to the benefit of the
Senior Creditors and their respective successors, assigns and
participants, any purchaser or purchasers refunding or refinancing
any of the Senior Debt and their respective successors, assigns and
participants, but shall not otherwise create any rights or benefits
for any third party.
24.
Amendment and Restatement.
This Agreement amends and restates in its entirety the Existing
Subordination Agreement and is not and shall not constitute a
novation thereof. Notwithstanding the amendment and restatement of
the Existing Subordination Agreement by this Agreement, the
obligations of the Subordinated Creditors and the Company under the
Existing Subordination Agreement remain outstanding and shall
constitute continuing obligations under this Agreement without
novation. Such obligations shall in all respects be continuing and
this Agreement shall not be deemed to result in a novation of such
obligations.
[Remainder
of page intentionally left blank; Next page is signature
page.]
IN
WITNESS WHEREOF, the parties hereto have executed or caused this
Agreement to be executed as of the date first above
written.
SENIOR CREDITORS:
MT. WHITNEY SECURITIES, LLC
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By:
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Name:
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Title:
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ARENA ORIGINATING CO., LLC
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By:
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Name:
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Title:
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ARENA SPECIAL OPPORTUNITIES FUND, LP
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By:
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Name:
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Title:
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ARENA SPECIAL OPPORTUNITIES PARTNERS I, LP
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By:
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Name:
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Title:
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ARENA STRUCTURED PRIVATE INVESTMENTS (CAYMAN), LLC
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By:
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Name:
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Title:
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COMPANY:
TRANSWORLD HOLDINGS, INC.
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By:
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Name:
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Andrew Fox
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Title:
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CEO
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SUBORDINATED
CREDITORS:
KORR VALUE, LP
By: KORR Acquisitions Group, Inc., its General Partner
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By:
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Name:
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Kenneth
Orr
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Title:
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GUARANTY AGREEMENT
THIS
GUARANTY AGREEMENT (this “Guaranty”) is entered into as of
November 3, 2020 by and among each of the parties identified as a
Guarantor on the signature pages hereto (each, a
“Guarantor”, and
collectively, the “Guarantors”), in favor of the
purchasers signatory to the Securities Purchase Agreements (as
defined below) (together with their respective successors and
assigns, including, any future holder of the Notes (as defined
below), the “Holders”). Capitalized terms used
herein and not otherwise defined shall have the meanings ascribed
thereto in the Securities Purchase Agreements (as defined
below).
RECITALS
WHEREAS, pursuant
to a Securities Purchase Agreement, dated as of May 8, 2020 (as
amended and in effect from time to time, including any replacement
agreement therefor, the “May
2020 Securities Purchase Agreement”), among Transworld
Holdings, Inc., a Delaware corporation (formerly known as GoIP
Global, Inc., a Colorado corporation) (the “Company”) and the Holders, the
Holders have extended credit to the Company as evidenced by certain
Senior Secured Convertible Notes in the aggregate principal amount
of $3,000,000.00 issued by the Company to the Holders (together
with any notes issued in exchange therefor or replacement thereof
or any additional investment made by the Holders and as the same
may be amended, supplemented, restated or otherwise modified from
time to time, the “May 2020
Senior Notes”); and
WHEREAS, pursuant
to a Securities Purchase Agreement, dated as of the date hereof (as
amended and in effect from time to time, including any replacement
agreement therefor, the “October 2020 Securities Purchase
Agreement” and together with the May 2020 Securities
Purchase Agreement, the “Securities Purchase Agreements”),
among the Company and the Holders, the Holders have extended credit
to the Company as evidenced by certain Senior Secured Convertible
Notes in the aggregate principal amount of $3,888,889.00 issued by
the Company to the Holders (together with any notes issued in
exchange therefor or replacement thereof or any additional
investment made by the Holders and as the same may be amended,
supplemented, restated or otherwise modified from time to time, the
“October 2020 Senior
Notes” and together with the May 2020 Senior Notes,
the “Senior
Notes”); and
WHEREAS, each
Guarantor will derive substantial direct and indirect benefit from
the provision of the loans evidenced by the Notes.
NOW,
THEREFORE, in consideration of these premises and other good and
valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto agree as
follows:
1. The
Guaranty. Each Guarantor hereby guarantees, as a co-obligor
and not merely as surety, to the Holders, the prompt payment of all
Liabilities (including without limitation principal, premium if
any, and interest (including all interest that accrues after the
commencement of any proceeding under Applicable Insolvency Laws of
the Company or any Guarantor (the Company and each Guarantor
collectively referred to herein as the “Note Parties” and each
individually, a “Note
Party”) at the rate provided in the respective
Transaction Document, whether or not a claim for post-petition
interest is allowed in such proceeding under Applicable Insolvency
Laws) on the Notes, and all obligations which, but for the
automatic stay under 11 U.S.C. Section 362 (or similar successor
statute), would become due), whenever arising, in full when due
(whether at stated maturity, as a mandatory prepayment, by
acceleration or otherwise in accordance with any Transaction
Document) strictly in accordance with the terms thereof
(hereinafter, collectively, the “Guaranteed Obligations”). Each
Guarantor hereby further agrees that if any of the Guaranteed
Obligations are not paid in full when due (whether at stated
maturity, as a mandatory prepayment, by acceleration or otherwise
in accordance with any Transaction Document), such Guarantor will
promptly pay the same, without any demand or notice whatsoever, and
that in the case of any extension of time of payment or renewal of
any of the Guaranteed Obligations, the same will be promptly paid
in full when due (whether at extended maturity, as a mandatory
prepayment, by acceleration or otherwise in accordance with any
Transaction Document) in accordance with the terms of such
extension or renewal. This Guaranty is a guaranty of payment and
not of collection. This Guaranty is a continuing guaranty and shall
apply to all Guaranteed Obligations whenever arising.
2. Joint
and Several Liability.
(a)
Each of the Guarantors is accepting joint and several liability
hereunder in consideration of the financial accommodations to be
provided by the Holders under the Transaction Documents, for the
mutual benefit, directly and indirectly, of each of the Note
Parties and other Guarantors (if any) and in consideration of the
undertakings of each of the Guarantors to accept joint and several
liability for the obligations of each of the Note
Parties.
(b)
Each of the Guarantors jointly and severally hereby irrevocably and
unconditionally accepts, not merely as a surety but also as a
co-obligor, joint and several liability with the other Guarantors
with respect to the payment and performance of all of the
Guaranteed Obligations, it being the intention of the parties
hereto that all the Guaranteed Obligations shall be the joint and
several obligations of the Guarantors without preferences or
distinction among them.
(c)
If and to the extent that any of the Note Parties or Guarantors
shall fail to make any payment with respect to any of the
Guaranteed Obligations as and when due or to perform any of the
Guaranteed Obligations in accordance with the terms thereof, then
in each such event, the other Guarantors will make such payment
with respect to, or perform, such Guaranteed
Obligation.
3. Obligations
Unconditional. The obligations of each of the Guarantors
under Section 1
hereof are absolute and unconditional, irrespective of the value,
genuineness, validity, regularity or enforceability of any of the
Transaction Documents, or any other agreement or instrument
referred to therein, or any substitution, release or exchange of
any other guaranty of or security for any of the Guaranteed
Obligations, and, to the fullest extent permitted by applicable
law, irrespective of any other circumstance whatsoever which might
otherwise constitute a legal or equitable discharge or defense of a
surety or guarantor other than payment in full of the Guaranteed
Obligations (other than contingent indemnification obligations to
the extent no claim giving rise thereto has been asserted) and
termination of the Purchase Agreements in accordance with their
terms, it being the intent of this Section 3 that the obligations
of each Guarantor hereunder shall be absolute and unconditional
under any and all circumstances. Each Guarantor agrees that it
shall have no right of subrogation, indemnity, reimbursement or
contribution against any Note Party for amounts paid under this
Guaranty until the Guaranteed Obligations are paid in full (other
than contingent indemnification obligations to the extent no claim
giving rise thereto has been asserted) and the Purchase Agreements
have terminated in accordance with its terms. Without limiting the
generality of the foregoing, it is agreed that, to the fullest
extent permitted by applicable law, the occurrence of any one or
more of the following shall not alter or impair the liability of
any Guarantor hereunder which shall remain absolute and
unconditional as described above:
(a)
at any time or from time to time, without notice to any Guarantor,
the time for any performance of or compliance with any of the
Guaranteed Obligations shall be extended, or such performance or
compliance shall be waived;
(b)
any of the acts mentioned in any of the provisions of any of the
Purchase Agreements, the Transaction Documents, or any other
agreement or instrument referred to in the Purchase Agreements or
the Transaction Documents shall be done or omitted;
(c)
the maturity of any of the Guaranteed Obligations shall be
accelerated, or any of the Guaranteed Obligations shall be
modified, supplemented or amended in any respect, or any right
under any of the Purchase Agreements, the Transaction Documents, or
any other agreement or instrument referred to in the Purchase
Agreements or the Transaction Documents shall be waived or any
other guarantee of any of the Guaranteed Obligations or any
security therefor shall be released or exchanged in whole or in
part or otherwise dealt with, in each case, in accordance with the
Transaction Documents; or
(d)
any of the Guaranteed Obligations shall be determined to be void or
voidable (including, without limitation, for the benefit of any
creditor of any Guarantor) or shall be subordinated to the claims
of any Person (including, without limitation, any creditor of any
Guarantor).
4. Reinstatement.
The obligations of each Guarantor under this Guaranty shall be
automatically reinstated if and to the extent that for any reason
any payment by or on behalf of any Person in respect of the
Guaranteed Obligations is rescinded or must be otherwise restored
by any holder of any of the Guaranteed Obligations, whether as a
result of any proceedings in bankruptcy or reorganization or
otherwise, and each Guarantor agrees that it will indemnify each
Holder on demand for all reasonable out-of-pocket costs and
expenses (including, without limitation, reasonable fees and
out-of-pocket expenses of counsel) incurred by any Holder in
connection with such rescission or restoration, including any such
costs and expenses incurred in defending against any claim alleging
that such payment constituted a preference, fraudulent transfer or
similar payment under any bankruptcy, insolvency or similar
law.
5. Certain
Additional Waivers. With respect to its obligations
hereunder, each Guarantor hereby expressly waives diligence,
presentment, demand of payment, protest and all notices whatsoever,
to the extent permitted by applicable law, and any requirement that
any Holder exhaust any right, power or remedy or proceed against
any Person under any of the Purchase Agreements, the Transaction
Documents or any other agreement or instrument referred to in the
Purchase Agreements or the Transaction Documents, or against any
other Person under any other guarantee of, or security for, any of
the Guaranteed Obligations.
6. Remedies.
Each Guarantor agrees that, to the fullest extent permitted by
applicable law, as between such Guarantor and the Holders, the
Guaranteed Obligations may be declared to be forthwith due and
payable for purposes of Section 1 hereof
notwithstanding any stay, injunction or other prohibition
preventing such declaration (or preventing the Guaranteed
Obligations from becoming automatically due and payable) as against
any other Person and that, in the event of such declaration (or the
Guaranteed Obligations being deemed to have become automatically
due and payable), the Guaranteed Obligations (whether or not due
and payable by any other Person) shall forthwith become due and
payable by the Guarantors for purposes of said Section 1.
7. Limitation
on Guaranteed Obligations. Notwithstanding any provision to
the contrary contained herein or in any other of the Transaction
Documents, the obligations of each Guarantor hereunder shall be
limited to an aggregate amount equal to the largest amount that
would not render its obligations hereunder subject to avoidance
under applicable law (whether federal or state and including,
without limitation, 11 U.S.C. Section 548 (or similar successor
statute)), after taking into account, among other things, such
Guarantor’s right of contribution and indemnification from
each other Guarantor under applicable law.
The
Guarantors hereby agree, as among themselves, that if any Guarantor
shall become an Excess Funding Company (as defined below), each
other Guarantor shall, on demand of such Excess Funding Company
(but subject to the next sentence hereof and to subsection (B)
below), pay to such Excess Funding Company an amount equal to such
Guarantor’s Pro Rata Share (as defined below and determined,
for this purpose, without reference to the properties, assets,
liabilities and debts of such Excess Funding Company) of such
Excess Funding Company’s Excess Payment (as defined below).
The payment obligation of any Guarantor to any Excess Funding
Company under this Section
7 shall be subordinate and subject in right of payment to
the prior payment in full of the Guaranteed Obligations of such
Guarantor under the other provisions of this Guaranty, and such
Excess Funding Company shall not exercise any right or remedy with
respect to such excess until payment and satisfaction in full of
all of such Guaranteed Obligations. For purposes hereof, (i)
“Excess Funding
Company” means, in respect of any Guaranteed
Obligations arising under the other provisions of this Guaranty
(hereafter, the “Joint
Obligations”), a Guarantor that has paid an amount in
excess of its Pro Rata Share of the Joint Obligations; (ii)
“Excess Payment”
means, in respect of any Joint Obligations, the amount paid by an
Excess Funding Company in excess of its Pro Rata Share of such
Joint Obligations; and (iii) “Pro Rata Share”, for the purposes
of this Section 7,
means, for any Guarantor, the ratio (expressed as a percentage) of
(A) the amount by which the aggregate present fair salable value of
all of its assets and properties exceeds the amount of all debts
and liabilities of such Guarantor (including contingent,
subordinated, unmatured, and unliquidated liabilities, but
excluding the obligations of such Guarantor hereunder) to (B) the
amount by which the aggregate present fair salable value of all
assets and other properties of such Guarantor and all of the other
Note Parties exceeds the amount of all of the debts and liabilities
(including contingent, subordinated, unmatured, and unliquidated
liabilities, but excluding the obligations of such Guarantor and
the other Note Parties hereunder) of such Guarantor and all of the
other Note Parties, all as of the Closing Date (if any Guarantor
becomes a party hereto subsequent to the Closing Date, then for the
purposes of this Section
7 such subsequent Guarantor shall be deemed to have been a
Guarantor as of the Closing Date and the information pertaining to,
and only pertaining to, such Guarantor as of the date such
Guarantor became a Guarantor shall be deemed true as of the Closing
Date).
8. Representations.
(a)
Each Guarantor hereby represents and warrants that it is duly
organized, validly existing and in good standing under the laws of
the jurisdiction of its formation or incorporation and in each
other jurisdiction in which the failure to be so qualified could
reasonably be expected to have a Material Adverse
Effect.
(b)
Each Guarantor further represents and warrants that it has the
power and authority to enter into this Guaranty and to perform its
obligations and to consummate the transactions contemplated hereby
and has by proper action duly authorized the execution and delivery
of this Guaranty.
(c)
Each Guarantor further represents and warrants that this Guaranty
constitutes the legal, valid and binding obligation of such
Guarantor enforceable in accordance with its terms, subject to
bankruptcy laws and other similar laws of general application
affecting rights of creditors and subject to the application of the
rules of equity, including those respecting the availability of
specific performance.
(d)
Each Guarantor further represents and warrants that it has
knowledge of the other Note Parties’ financial condition and
affairs and represents and agrees that it will keep so informed
while this Guaranty is in force. Each Guarantor agrees that no
Holder will have any obligation to investigate the financial
condition or affairs of the other Note Parties for the benefit of
such Guarantor nor to advise such Guarantor of any fact respecting,
or any change in, the financial condition or affairs of the other
Note Parties which might come to the knowledge of the Holders at
any time, whether or not any Holder knows or believes or has reason
to know or believe that any such fact or change is unknown to such
Guarantor or might (or does) materially increase the risk of such
Guarantor as a guarantor or might (or would) affect the willingness
of such Guarantor to continue as a guarantor with respect to the
Guaranteed Obligations.
9. Incorporated
Provisions. Each Guarantor acknowledges, agrees to, and
agrees to perform, as applicable, all of the representations,
warranties, covenants, waivers and other provisions pertaining to
it as a Guarantor or Subsidiary contained in any Transaction
Document.
10.
Amendment. This
Guaranty may be amended or modified only in a writing executed by
the parties hereto.
11.
Termination. This
Guaranty shall terminate automatically upon the indefeasible
payment in full in cash of the Guaranteed Obligations. Upon the
sale, transfer, conveyance or other disposition of all of the
equity interests of any Guarantor in a transaction permitted
pursuant to the Transaction Documents (other than to a Note Party)
and the application of the proceeds thereof as provided in the
Transaction Documents, such Guarantor shall cease to be a
“Guarantor” for purposes of the Transaction Documents
and shall be released from its obligations hereunder.
12.
Counterparts. This
Guaranty may be executed in any number of counterparts, each of
which where so executed and delivered shall be an original, but all
of which shall constitute one and the same instrument. It shall not
be necessary in making proof of this Guaranty to produce or account
for more than one such counterpart. Facsimile or electronic
transmissions of any executed original document and/or
retransmission of any executed facsimile or electronic transmission
shall be deemed to be the same as the delivery of an executed
original. At the request of any party hereto, the other parties
hereto shall confirm such transmissions by executing duplicate
original documents and delivering the same to the requesting party
or parties.
13.
Headings. The
headings of the sections and subsections hereof are provided for
convenience only and shall not in any way affect the meaning,
construction or interpretation of any provision of this
Guaranty.
14.
Governing Law; Submission
to Jurisdiction; Waiver of Jury Trial; Notice THIS GUARANTY AND THE RIGHTS AND
OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY,
CONSTRUED IN ACCORDANCE WITH, AND ENFORCED UNDER, THE LAWS OF THE
STATE OF NEW YORK, WITHOUT REGARD TO THE PRINCIPLES OF CONFLICTS OF
LAW OF SUCH STATE THAT WOULD REQUIRE THE APPLICATION OF THE LAW OF
ANOTHER JURISDICTION. THE PROVISIONS OF THE PURCHASE AGREEMENTS
RELATING TO SUBMISSION TO JURISDICTION, WAIVER OF JURY TRIAL AND
VENUE ARE HEREBY INCORPORATED BY REFERENCE HEREIN, MUTATIS
MUTANDIS.
15.
Entirety. This
Guaranty represents the entire agreement of the parties hereto and
thereto, and supersedes all prior agreements and understandings,
oral or written, if any, including any commitment letters or
correspondence relating to the transactions contemplated
herein.
16.
Holder Assigns.
This Guaranty is intended for and shall inure to the benefit of
each and every person who shall from time to time be or become the
owner or holder of (or participant in) any of the Guaranteed
Obligations, and each and every reference herein to a
“Holder” shall include and refer to each and every
successor or assignee of a Holder, as applicable, at any time
holding or owning any part of or interest (or participation) in any
part of the Guaranteed Obligations. Each Holder shall be entitled to rely upon
and be the third party beneficiary of the provisions of this
Guaranty and shall be entitled to enforce the terms and provisions
hereof to the same extent as if such Holder were directly party
hereto. This Guaranty shall be transferable and negotiable by such
Persons only with the same force and effect, and to the same
extent, that the Guaranteed Obligations are transferable and
negotiable, it being understood and stipulated that upon assignment
or transfer by any Holder of any of the Guaranteed Obligations the
legal holder or owner of said Guaranteed Obligations (or a part
thereof or interest therein thus transferred or assigned by a
Holder) shall (except as otherwise stipulated by a Holder in its
assignment) have and may exercise all of the rights granted to the
Holders under this Guaranty to the extent of that part of or
interest in the Guaranteed Obligations thus assigned or transferred
to said person. Each Guarantor expressly waives notice of transfer
or assignment of the Guaranteed Obligations, or any part thereof,
or of the rights of the Holders hereunder. Failure to give notice
will not affect the liabilities of any Guarantor
hereunder.
[Signature
Page Follows]
Each of
the parties hereto has caused a counterpart of this Guaranty to be
duly executed and delivered as of the date first above
written.
GUARANTORS:
TRANSWORLD
ENTERPRISES INC.
GETCHARGED,
INC.
[Signature
Page to Guaranty Agreement (Transworld)]
-6-
Accepted
and agreed to as of the date first above written.
HOLDERS:
MT. WHITNEY SECURITIES, LLC
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By:
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Name:
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Lawrence Cutler
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Title:
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Authorized Signatory
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ARENA ORIGINATING CO., LLC
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By:
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Name:
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Lawrence Cutler
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Title:
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Authorized Signatory
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ARENA SPECIAL OPPORTUNITIES FUND, LP
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By:
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Name:
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Lawrence Cutler
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Title:
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Authorized Signatory
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ARENA SPECIAL OPPORTUNITIES PARTNERS I, LP
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By:
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Name:
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Lawrence Cutler
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Title:
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Authorized Signatory
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ARENA STRUCTURED PRIVATE INVESTMENTS (CAYMAN), LLC
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Lawrence Cutler
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Authorized Signatory
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[Signature Page to Subsidiary Guaranty Agreement]
-7-
Exhibit 10.13
Execution Version
FIRST AMENDMENT TO NOTE
This
First Amendment (this “Amendment”) is made and
entered into as of December 8, 2020 by and among Transworld
Holdings, Inc., a Delaware
corporation (which was formerly known as GoIP Global, Inc.,
a Colorado corporation) (the “Company”)
and the purchasers signatory to the Purchase Agreement (as defined
below) (each a, “Purchaser” and
collectively, the “Purchasers”).
WHEREAS, pursuant to a Securities
Purchase Agreement, dated as of May 8, 2020 (as amended and in
effect from time to time, including any replacement agreement
therefor, the “Purchase Agreement”),
among the Company and the Purchasers, the Purchasers have extended
credit to the Company as evidenced by certain Original Issue
Discount Senior Secured Convertible Promissory Notes in the
aggregate principal amount of $3,000,000.00 issued by the Company
to the Purchasers (together with any notes issued in exchange
therefor or replacement thereof, as the same may be amended,
supplemented, restated or otherwise modified from time to time, the
“Notes”);
WHEREAS, obligations under the Notes are
due and payable on May 8, 2021 (the “Maturity
Date”);
WHEREAS, the Company and the Purchasers
desire to extend the Maturity Date of the Notes for an additional
six (6) months such that the Notes will become due and payable on
May 8, 2022.
NOW, THEREFORE, in consideration of the
mutual agreements herein contained, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. Definitions;
Transaction Documents. Capitalized terms used herein without
definition shall have the meanings assigned to such terms in the
Purchase Agreement and the Notes. This Amendment shall constitute a
Transaction Document for all purposes of the Purchase Agreement,
the Note and the other Transaction Documents.
2. Extension of
Maturity Date of the Note. The reference in the introductory
paragraph of the Note to May 8, 2021 as the “Maturity
Date” is hereby amended such that the Maturity Date of the
Note shall be May 8, 2022.
3. Not a
Novation. This Agreement is a modification only and not a
novation. This Agreement is to be considered attached to the Notes
and made a part thereof.
4. Conditions to
Effectiveness. This Amendment shall become effective upon
receipt by the Company and the Purchasers of counterpart signatures
to this Amendment duly executed and delivered by the Company and
the Purchasers.
5. No Implied
Amendment or Waiver. Except as expressly set forth in this
Amendment, this Amendment shall not, by implication or otherwise,
limit, impair, constitute a waiver of or otherwise affect any
rights or remedies of the Purchasers under the Purchase Agreement,
the Note or the other Transaction Documents, or alter, modify,
amend or in any way affect any of the terms, obligations or
covenants contained in the Purchase Agreement, the Note or the
other Transaction Documents, all of which shall continue in full
force and effect. Nothing in this Amendment shall be construed to
imply any willingness on the part of the Purchasers to agree to or
grant any similar or future amendment, consent or waiver of any of
the terms and conditions of the Purchase Agreement, the Note or the
other Transaction Documents.
6. Counterparts. This
Amendment may be executed by the parties hereto in several
counterparts, each of which shall be an original and all of which
shall constitute together but one and the same agreement. Delivery
of an executed counterpart of a signature page of this Amendment by
e-mail (e.g., “pdf” or “tiff”) or fax
transmission shall be effective as delivery of a manually executed
counterpart of this Amendment.
7. Governing
Law. THIS AMENDMENT SHALL BE A CONTRACT MADE UNDER AND
GOVERNED BY THE INTERNAL LAWS OF THE STATE OF NEW YORK APPLICABLE
TO CONTRACTS MADE AND TO BE PREPARED ENTIRELY WITHIN SUCH STATE,
WITHOUT REGARD TO CONFLICT OF LAWS PRINCIPLES.
[Remainder of Page Intentionally Left
Blank.]
IN WITNESS WHEREOF, the parties hereto
have caused this Amendment to be executed by their respective
officers thereunto duly authorized as of the day and year first
above written.
TRANSWORLD HOLDINGS, INC.
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By: /s/
Andrew Fox
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Name:
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Title:
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MT. WHITNEY SECURITIES, LLC
ARENA ORIGINATION CO., LLC
ARENA SPECIAL OPPORTUNITIES FUND, LP
ARENA SPECIAL OPPORTUNITIES PARTNERS I, LP
as
Purchasers
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By: /s/
Lawrence Cutler
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Name:
Lawrence Cutler
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Title: Authorized
Signatory
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SECOND AMENDMENT AND WAIVER
This
Second Amendment and Waiver (this “Amendment”) is made and
entered into as of December 8, 2020 by and among Transworld
Holdings, Inc., a Delaware
corporation (which was formerly known as GoIP Global, Inc.,
a Colorado corporation) (the “Company”)
and the purchasers signatory to the Purchase Agreement (as defined
below) (each a, “Purchaser” and
collectively, the “Purchasers”).
WHEREAS, pursuant to a Securities
Purchase Agreement, dated as of May 8, 2020 (as amended and in
effect from time to time, including any replacement agreement
therefor, the “Purchase Agreement”),
among the Company and the Purchasers, the Purchasers have extended
credit to the Company as evidenced by certain Original Issue
Discount Senior Secured Convertible Promissory Notes in the
aggregate principal amount of $3,000,000.00 issued by the Company
to the Purchasers (as amended by that certain First Amendment to
the Note, dated as of November 3, 2020, together with any notes
issued in exchange therefor or replacement thereof, as the same may
be amended, supplemented, restated or otherwise modified from time
to time, the “Notes”);
WHEREAS, pursuant to a Registration
Rights Agreement, dated as of May 8, 2020 (as amended and in effect
from time to time, including any replacement agreement therefor,
the “Registration
Rights Agreement”), among the Company and the
Purchasers, the Company agreed to register the securities issued to
the Purchasers pursuant to the Purchase Agreement;
WHEREAS, the Company and the Purchasers
desire to amend the Note to (i) provide that the Alternative
Conversion Price may only be utilized for any Event of Default that
occurs on or after the Maturity Date and (ii) remove the failure of
having the Registration Statement effective by the Effectiveness
Date as an Event of Default under the Notes; and
WHEREAS, the Company and the Purchasers
desire to confirm the Purchasers’ waiver of their respective
right to receive any penalties which shall be due and payable as a
result of the failure to have the Registration Statement declared
effective for the period beginning November 8, 2020 through
[January 8, 2021] (the
“Registration Penalty
Waiver”).
NOW, THEREFORE, in consideration of the
mutual agreements herein contained, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. Definitions;
Transaction Documents. Capitalized terms used herein without
definition shall have the meanings assigned to such terms in the
Purchase Agreement, the Notes and the Registration Rights
Agreement. This Amendment shall constitute a Transaction Document
for all purposes of the Purchase Agreement, the Notes and the other
Transaction Documents.
2. Not a
Novation. This Agreement is a modification only and not a
novation. This Agreement is to be considered attached to the Notes
and made a part thereof.
3. Confirmation of
Waiver. The
Company and the Purchasers agree to the Registration Penalty
Waiver.
4. Amendment to
Section 4(b) of the Note. Section 4(b) of the Note is hereby
amended and restated as follows.
“Conversion Price. The
conversion price in effect on any Conversion Date shall be equal to
$0.25 after the Reverse Stock Split, subject to adjustment herein
(the “Conversion
Price”). Notwithstanding the foregoing, at any time
during the continuance of any Event of Default after the Maturity
Date, the Conversion Price in effect shall be equal to the
Alternate Conversion Price. If at any time the Conversion Price as
determined hereunder for any conversion would be less than the par
value of the Common Stock, then at the sole discretion of the
Holder, the Conversion Price hereunder may equal such par value for
such conversion and the Conversion Amount for such conversion may
be increased to include Additional Principal, where
“Additional Principal” means such additional amount to
be added to the Principal Amount to the extent necessary to cause
the number of conversion shares issuable upon such conversion to
equal the same number of conversion shares as would have been
issued had the Conversion Price not been adjusted by the Holder to
the par value price. In the event the Borrower has a DTC
“Chill” on its shares after the Maturity Date, the
Holder may convert the Note at the Alternate Conversion Price while
that “Chill” is in effect. All such determinations to
be appropriately adjusted for any stock dividend, stock split,
stock combination, reclassification or similar transaction that
proportionately decreases or increases the Common Stock during such
measuring period.”
5. Amendment to
Section 1 of the Note. The definition of “Mandatory Default
Amount” in Sectio 1 of the Note is hereby amended and
restated in its entirety as follows:
“Mandatory Default Amount”
means either, at the Holder’s discretion (i) the conversion
of the outstanding principal amount of this Note, plus all accrued
and unpaid interest hereon, converted at the Conversion Price, or
if after the Maturity Date, at the Alternate Conversion Price or
(ii) the payment of 120% of the outstanding principal amount of
this Note and accrued and unpaid interest hereon, in addition to,
for both (i) and (ii) above, the payment of all other amounts,
costs, expenses and liquidated damages due in respect of this
Note.”
6. Amendment to
Section 6 of the Note.
(a) Clause (a)(xix) of
Section 6 of the Note is hereby amended and restated as
follows:
“(xix) the
Initial Registration Statement (as defined in the Registration
Rights Agreement) shall not have been filed by the Filing Date (as
defined in the Registration Rights
Agreement);”
(b)
Clause (b) of
Section 6 of the Note is hereby amended and restated as
follows:
“Remedies Upon Event of Default.
If any Event of Default occurs, the outstanding principal amount of
this Note, plus accrued but unpaid interest, liquidated damages and
other amounts owing in respect thereof through the date of
acceleration, shall become, at the Holder’s election,
immediately due and payable in cash pursuant to clause (ii) of the
Mandatory Default Amount. Commencing on the occurrence of any Event
of Default and for as long an Event of Default is not cured, the
interest rate on this Note as set forth in Section 2 above shall
accrue at an interest rate equal to 20% per annum or the maximum
rate permitted under applicable law. Upon the payment in full of
the Mandatory Default Amount, the Holder shall promptly surrender
this Note to or as directed by the Company. In connection with such
acceleration described herein, the Holder need not provide, and the
Company hereby waives, any presentment, demand, protest or other
notice of any kind, and the Holder may immediately and without
expiration of any grace period enforce any and all of its rights
and remedies hereunder and all other remedies available to it under
applicable law. Such acceleration may be rescinded and annulled by
Holder at any time prior to payment hereunder and the Holder shall
have all rights as a holder of the Note until such time, if any, as
the Holder receives full payment pursuant to this Section 6(b). No such
rescission or annulment shall affect any subsequent Event of
Default or impair any right consequent thereon. No such rescission
or annulment shall affect any subsequent Event of Default or impair
any right consequent thereon; and in addition to any other rights
and remedies available to the Holder in an Event of Default, the
Conversion Price in effect on any Conversion Date after the
Maturity Date shall be equal to the Alternate Conversion Price,
subject to adjustment herein, without any notice or any action
taken by the Holder. The Borrower shall pay the Holder hereof costs
of collection, including reasonable attorneys’
fees
7. Conditions to
Effectiveness. This Amendment shall become effective upon
receipt by the Company and the Purchasers of counterpart signatures
to this Amendment duly executed and delivered by the Company and
the Purchasers.
8. No Implied
Amendment or Waiver. Except as expressly set forth in this
Amendment, this Amendment shall not, by implication or otherwise,
limit, impair, constitute a waiver of or otherwise affect any
rights or remedies of the Purchasers under the Purchase Agreement,
the Note or the other Transaction Documents, or alter, modify,
amend or in any way affect any of the terms, obligations or
covenants contained in the Purchase Agreement, the Note or the
other Transaction Documents, all of which shall continue in full
force and effect. Nothing in this Amendment shall be construed to
imply any willingness on the part of the Purchasers to agree to or
grant any similar or future amendment, consent or waiver of any of
the terms and conditions of the Purchase Agreement, the Note or the
other Transaction Documents.
9. Counterparts. This
Amendment may be executed by the parties hereto in several
counterparts, each of which shall be an original and all of which
shall constitute together but one and the same agreement. Delivery
of an executed counterpart of a signature page of this Amendment by
e-mail (e.g., “pdf” or “tiff”) or fax
transmission shall be effective as delivery of a manually executed
counterpart of this Amendment.
10. Governing
Law. THIS AMENDMENT SHALL BE A CONTRACT MADE UNDER AND
GOVERNED BY THE INTERNAL LAWS OF THE STATE OF NEW YORK APPLICABLE
TO CONTRACTS MADE AND TO BE PREPARED ENTIRELY WITHIN SUCH STATE,
WITHOUT REGARD TO CONFLICT OF LAWS PRINCIPLES.
[Remainder of Page Intentionally Left
Blank.]
IN WITNESS WHEREOF, the parties hereto
have caused this Amendment to be executed by their respective
officers thereunto duly authorized as of the day and year first
above written.
TRANSWORLD HOLDINGS, INC.
|
|
By: /s/
Andrew
Fox
|
Name:
|
Title:
|
MT. WHITNEY SECURITIES, LLC
ARENA ORIGINATION CO., LLC
ARENA SPECIAL OPPORTUNITIES FUND, LP
ARENA SPECIAL OPPORTUNITIES PARTNERS I, LP
as
Purchasers
|
|
By: /s/
Lawrence
Cutler
|
Name:
Lawrence Cutler
|
Title: Authorized
Signatory
|
FIRST AMENDMENT AND WAIVER
This
First Amendment and Waiver (this “Amendment”) is made and
entered into as of December 8, 2020 by and among Transworld
Holdings, Inc., a Delaware
corporation (which was formerly known as GoIP Global, Inc.,
a Colorado corporation) (the “Company”)
and the purchasers signatory to the Purchase Agreement (as defined
below) (each a, “Purchaser” and
collectively, the “Purchasers”).
WHEREAS, pursuant to a Securities
Purchase Agreement, dated as of November 3, 2020 (as amended and in
effect from time to time, including any replacement agreement
therefor, the “Purchase Agreement”),
among the Company and the Purchaser, the Purchaser has extended
credit to the Company as evidenced by certain Original Issue
Discount Senior Secured Convertible Promissory Note in the
aggregate principal amount of $3,888,889.00 issued by the Company
to the Purchaser (together with any notes issued in exchange
therefor or replacement thereof, as the same may be amended,
supplemented, restated or otherwise modified from time to time, the
“Note”); and
WHEREAS, the Company and the Purchasers
desire to amend the Note to provide that the Alternative Conversion
Price may only be utilized for any Event of Default that occurs on
or after the Maturity Date.
NOW, THEREFORE, in consideration of the
mutual agreements herein contained, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. Definitions;
Transaction Documents. Capitalized terms used herein without
definition shall have the meanings assigned to such terms in the
Purchase Agreement and the Note. This Amendment shall constitute a
Transaction Document for all purposes of the Purchase Agreement,
the Notes and the other Transaction Documents.
2. Not a
Novation. This Agreement is a modification only and not a
novation. This Agreement is to be considered attached to the Note
and made a part thereof.
3. Amendment to
Section 4(b) of the Note. Section 4(b) of the Note is hereby
amended and restated as follows.
“Conversion Price. Except as
expressly set forth herein, the conversion price in effect on any
Conversion Date shall be equal to $0.25, subject to adjustment
herein (the “Conversion Price”).
Notwithstanding the foregoing, at any time during the continuance
of any Event of Default which occurs after the Maturity Date, the
Conversion Price in effect shall be equal to the Alternate
Conversion Price. If at any time the Conversion Price as determined
hereunder for any conversion would be less than the par value of
the Common Stock, then at the sole discretion of the Holder, the
Conversion Price hereunder may equal such par value for such
conversion and the Conversion Amount for such conversion may be
increased to include Additional Principal, where “Additional
Principal” means such additional amount to be added to the
principal amount of this Note to the extent necessary to cause the
number of conversion shares issuable upon such conversion to equal
the same number of conversion shares as would have been issued had
the Conversion Price not been adjusted by the Holder to the par
value price. In the event the Borrower has a DTC
“Chill” on its shares, the Holder may convert the Note
at the Alternate Conversion Price after the Maturity Date while
that “Chill” is in effect. All such determinations to
be appropriately adjusted for any stock dividend, stock split,
stock combination, reclassification or similar transaction that
proportionately decreases or increases the Common Stock during such
measuring period.”
4. Amendment to
Section 1 of the Note. The definition of “Mandatory
Default Amount” in Section 1 of the Note is hereby amended
and restated in its entirety as follows:
“Mandatory Default Amount”
means either, at the Holder’s discretion (i) the conversion
of the outstanding principal amount of this Note, and, at the
Holder’s election, all accrued and unpaid interest hereon,
converted at the Conversion Price, or after the Maturity Date, at
the Alternate Conversion Price, or (ii) the payment of 100% of the
outstanding principal amount of this Note and accrued and unpaid
interest hereon, in addition to, for both (i) and (ii) above, the
payment in cash of all other amounts, costs, expenses and
liquidated damages due in respect of this Note. In the event the
Holder makes the election described in (i) above but does not elect
to receive Conversion Shares in respect of all accrued and unpaid
interest on the Note, all accrued and unpaid interest shall be paid
to the Holder in cash no later than the date the Conversion Shares
are required to be delivered to the Holder.”
5. Amendment to
Section 6 of the Note. Clause (b) of Section 6 of the Note
is hereby amended and restated as follows:
“Remedies Upon Event of Default.
If any Event of Default occurs, at the Holder’s election (i)
the outstanding principal amount of this Note, plus accrued but
unpaid interest, liquidated damages and other amounts owing in
respect thereof through the date of acceleration, shall become
immediately due and payable in cash pursuant to clause (ii) of the
definition of Mandatory Default Amount, or (ii) the outstanding
principal amount of this Note, and, if elected by the Holder, all
accrued and unpaid interest hereon, shall be converted into share
of Common Stock at the Conversion Price or if after the Maturity
Date, at the Alternate Conversion Price pursuant to clause (i) of
the definition of Mandatory Default Amount. In the event the Holder
makes the election described in clause (ii) of this Section above,
but does not elect to receive Conversion Shares in respect of all
accrued and unpaid interest on the Note, all accrued and unpaid
interest shall be paid to the Holder in cash no later than the date
the Conversion Shares are required to be delivered to the Holder.
Commencing on the occurrence of any Event of Default and for as
long an Event of Default is not cured, the interest rate on this
Note as set forth in Section 2 above shall accrue at
a rate equal to 20% per annum . Upon the payment in full of the
Mandatory Default Amount, the Holder shall promptly surrender this
Note to or as directed by the Company. In connection with such
acceleration described herein, the Holder need not provide, and the
Company hereby waives, any presentment, demand, protest or other
notice of any kind, and the Holder may immediately and without
expiration of any grace period enforce any and all of its rights
and remedies hereunder and all other remedies available to it under
applicable law. Such acceleration may be rescinded and annulled by
Holder at any time prior to payment hereunder and the Holder shall
have all rights as a holder of the Note until such time, if any, as
the Holder receives full payment pursuant to this Section 6(b). No such
rescission or annulment shall affect any subsequent Event of
Default or impair any right consequent thereon. No such rescission
or annulment shall affect any subsequent Event of Default or impair
any right consequent thereon; and in addition to any other rights
and remedies available to the Holder in an Event of Default, the
Conversion Price in effect on any Conversion Date shall be equal to
the Conversion Price, or if after the Maturity Date, at the
Alternate Conversion Price, subject to adjustment herein, without
any notice or any action taken by the Holder. The Borrower shall
pay the Holder hereof costs of collection, including reasonable
attorneys’ fees.”
6. Conditions to
Effectiveness. This Amendment shall become effective upon
receipt by the Company and the Purchasers of counterpart signatures
to this Amendment duly executed and delivered by the Company and
the Purchasers.
7. No Implied
Amendment or Waiver. Except as expressly set forth in this
Amendment, this Amendment shall not, by implication or otherwise,
limit, impair, constitute a waiver of or otherwise affect any
rights or remedies of the Purchasers under the Purchase Agreement,
the Note or the other Transaction Documents, or alter, modify,
amend or in any way affect any of the terms, obligations or
covenants contained in the Purchase Agreement, the Note or the
other Transaction Documents, all of which shall continue in full
force and effect. Nothing in this Amendment shall be construed to
imply any willingness on the part of the Purchasers to agree to or
grant any similar or future amendment, consent or waiver of any of
the terms and conditions of the Purchase Agreement, the Note or the
other Transaction Documents.
8. Counterparts. This
Amendment may be executed by the parties hereto in several
counterparts, each of which shall be an original and all of which
shall constitute together but one and the same agreement. Delivery
of an executed counterpart of a signature page of this Amendment by
e-mail (e.g., “pdf” or “tiff”) or fax
transmission shall be effective as delivery of a manually executed
counterpart of this Amendment.
9. Governing
Law. THIS AMENDMENT SHALL BE A CONTRACT MADE UNDER AND
GOVERNED BY THE INTERNAL LAWS OF THE STATE OF NEW YORK APPLICABLE
TO CONTRACTS MADE AND TO BE PREPARED ENTIRELY WITHIN SUCH STATE,
WITHOUT REGARD TO CONFLICT OF LAWS PRINCIPLES.
[Remainder of Page Intentionally Left
Blank.]
IN WITNESS WHEREOF, the parties hereto
have caused this Amendment to be executed by their respective
officers thereunto duly authorized as of the day and year first
above written.
TRANSWORLD HOLDINGS, INC.
|
|
By: /s/
Andrew
Fox
|
Name:
|
Title:
|
ARENA STRUCTURED PRIVATE INVESTMENTS (CAYMAN), LLC
as
Purchaser
|
|
By: /s/
Lawrence
Cutler
|
Name:
Lawrence Cutler
|
Title: Authorized
Signatory
|
SECURITIES
PURCHASE AGREEMENT
This
Securities Purchase Agreement (this “Agreement”) is dated as
of December 3, 2020, between Transworld Holdings, Inc., a Delaware
corporation (the “Company”), and each
purchaser identified on the signature pages hereto (each, including
its successors and assigns, a “Purchaser” and
collectively, the “Purchasers”).
WHEREAS, subject to
the terms and conditions set forth in this Agreement and pursuant
to Section 4(a)(2) of the Securities Act of 1933, as amended (the
“Securities
Act”), and Rule 506 promulgated thereunder, the
Company desires to issue and sell to each Purchaser, and each
Purchaser, severally and not jointly, desires to purchase from the
Company, securities of the Company as more fully described in this
Agreement.
NOW,
THEREFORE, IN CONSIDERATION of the mutual covenants contained in
this Agreement, and for other good and valuable consideration the
receipt and adequacy of which are hereby acknowledged, the Company
and each Purchaser agree as follows:
ARTICLE I.
DEFINITIONS
1.1 Definitions.
In addition to the terms defined elsewhere in this Agreement,
capitalized terms that are not otherwise defined herein have the
meanings set forth in this Section 1.1:
“Acquiring Person” shall
have the meaning ascribed to such term in Section 4.7.
“Action” shall have the
meaning ascribed to such term in Section 3.1(j).
“Affiliate” means any
Person that, directly or indirectly through one or more
intermediaries, controls or is controlled by or is under common
control with a Person, as such terms are used in and construed
under Rule 405 under the Securities Act.
“BHCA” shall have the
meaning ascribed to such term in Section 3.1(oo).
“Board of
Directors” means
the board of directors of the Company.
“Business Day” means any
day other than Saturday, Sunday or other day on which commercial
banks in The City of New York are authorized or required by law to
remain closed; provided,
however,
for clarification, commercial banks shall not be deemed to be
authorized or required by law to remain closed due to “stay
at home”, “shelter-in-place”,
“non-essential employee” or any other similar
orders or restrictions or the closure of any physical branch
locations at the direction of any governmental authority so long as
the electronic funds transfer systems (including for wire
transfers) of commercial banks in The City of New York generally
are open for use by customers on such day.
“Closing” means the
closing of the purchase and sale of the Securities pursuant to
Section 2.1.
“Closing Date” means the
Trading Day on which all of the Transaction Documents have been
executed and delivered by the applicable parties thereto, and all
conditions precedent to (i) the Purchasers’ obligations to
pay the Subscription Amount and (ii) the Company’s
obligations to deliver the Securities, in each case, have been
satisfied or waived.
“Code” means the United
States Internal Revenue Code of 1986, as amended.
“Closing Statement” means
the Closing Statement in the form on Annex A attached
hereto.
“Commission” means the
United States Securities and Exchange Commission.
“Common Stock” means the
common stock of the Company, par value $0.0001 per share, and any other
class of securities into which such securities may hereafter be
reclassified or changed.
“Common Stock Equivalents”
means any securities of the Company or the Subsidiaries which would
entitle the holder thereof to acquire at any time Common Stock,
including, without limitation, any debt, preferred stock, right,
option, warrant or other instrument that is at any time convertible
into or exercisable or exchangeable for, or otherwise entitles the
holder thereof to receive, Common Stock.
“Company Auditor” means
Seligson & Giannattasio, LLP, with offices located at 723 N.
Broadway, White Plains, New York 10603, and any successor
accounting firm of the Company.
“Company Counsel” means
Sheppard, Mullin, Richter & Hampton LLP, with offices located
at 30 Rockefeller Plaza, New York, New York 10112.
“Disclosure Schedules”
shall have the meaning ascribed to such term in Section
3.1.
“Evaluation Date” shall
have the meaning ascribed to such term in Section
3.1(r).
“Exchange Act” means the
Securities Exchange Act of 1934, as amended, and the rules and
regulations promulgated thereunder.
“Exempt
Issuance” means the issuance of (a) shares of Common
Stock or options to employees, officers or directors of the Company
pursuant to any stock or option plan duly adopted for such purpose,
by a majority of the non-employee members of the Board of Directors
or a majority of the members of a committee of non-employee
directors established for such purpose for services rendered to the
Company, (b) securities upon the exercise or exchange of or
conversion of any Securities issued hereunder and/or other
securities exercisable or exchangeable for or convertible into
shares of Common Stock issued and outstanding on the date of this
Agreement, provided that such securities have not been amended
since the date of this Agreement to increase the number of such
securities or to decrease the exercise price, exchange price or
conversion price of such securities (other than in connection with
stock splits or combinations) or to extend the term of such
securities, and (c) securities issued pursuant to acquisitions or
strategic transactions approved by a majority of the disinterested
directors of the Company, provided that such securities are issued
as “restricted securities” (as defined in Rule 144) and
carry no registration rights that require or permit the filing of
any registration statement in connection therewith during the
prohibition period in Section 4.13(a) herein, and provided that any
such issuance shall only be to a Person (or to the equityholders of
a Person) which is, itself or through its subsidiaries, an
operating company or an owner of an asset in a business synergistic
with the business of the Company and shall provide to the Company
additional benefits in addition to the investment of funds, but
shall not include a transaction in which the Company is issuing
securities primarily for the purpose of raising capital or to an
entity whose primary business is investing in
securities.
“FCPA” means the Foreign
Corrupt Practices Act of 1977, as amended, and the rules and
regulations thereunder.
“Federal Reserve” shall
have the meaning ascribed to such term in Section
3.1(oo).
“GAAP” shall have the
meaning ascribed to such term in Section 3.1(h).
“Indebtedness” shall have
the meaning ascribed to such term in Section 3.1(bb).
“Intellectual Property
Rights” shall have the meaning ascribed to such term
in Section 3.1(o).
“Legend Removal Date”
shall have the meaning ascribed to such term in Section
4.1(d).
“Lien” means a lien,
charge, pledge, security interest, encumbrance, right of first
refusal, preemptive right or other restriction.
“Material Adverse Effect”
shall have the meaning assigned to such term in Section
3.1(b).
“Material Permits” shall
have the meaning ascribed to such term in Section
3.1(n).
“Person”
means an individual or corporation, partnership, trust,
incorporated or unincorporated association, joint venture, limited
liability company, joint stock company, government (or an agency or
subdivision thereof) or other entity of any kind.
“Per Share Purchase Price”
equals $0.25.
“Placement Agent” means
The Special Equities Group, LLC a division of Bradley Woods &
Co. Ltd.
“Proceeding” means an
action, claim, suit, investigation or proceeding (including,
without limitation, an informal investigation or partial
proceeding, such as a deposition), whether commenced or
threatened.
“Public Company
Date” means the date on
which the Company (or any successor/surviving entity in a reverse
merger or other business combination transaction) becomes subject
to the reporting requirements of the Exchange
Act.
“Public Information
Failure” shall have the meaning ascribed to such term
in Section 4.3(b).
“Public Information Failure
Payments” shall have the meaning ascribed to such term
in Section 4.3(b).
“Purchaser Party” shall
have the meaning ascribed to such term in Section
4.10.
“Registration Statement”
means a registration statement meeting the requirements set forth
in the Section 4.12 of this Agreement and covering the resale of
the Shares by each Purchaser.
“Required Approvals” shall
have the meaning ascribed to such term in Section
3.1(e).
“Required Registration
Statement(s)” means the registration statement(s)
required to be filed pursuant to the Registration Rights Agreements
entered into in connection with the financings completed by the
Company in March 2020 and November 2020.
“Rule 144” means Rule 144
promulgated by the Commission pursuant to the Securities Act, as
such Rule may be amended or interpreted from time to time, or any
similar rule or regulation hereafter adopted by the Commission
having substantially the same purpose and effect as such
Rule.
“Securities”
means the Shares.
“Securities Act” means the
Securities Act of 1933, as amended, and the rules and regulations
promulgated thereunder.
“Shares”
means the Common Stock issued or issuable to each Purchaser
pursuant to this Agreement.
“Short Sales” means all
“short sales” as defined in Rule 200 of Regulation SHO
under the Exchange Act (but shall not be deemed to include locating
and/or borrowing shares of Common Stock).
“Subscription Amount”
means, as to each Purchaser, the aggregate amount to be paid for
the Shares purchased hereunder as specified below such
Purchaser’s name on the signature page of this Agreement and
next to the heading “Subscription Amount,” in United
States dollars and in immediately available funds.
“Subsidiary”
means any subsidiary of the Company as set forth on Schedule 3.1(a) and shall,
where applicable, also include any direct or indirect subsidiary of
the Company formed or acquired after the date hereof.
“Trading Day” means a day
on which the principal Trading Market is open for
trading.
“Trading Market” means any
of the following markets or exchanges on which the Common Stock is
listed or quoted for trading on the date in question: the NYSE
American, the Nasdaq Capital Market, the Nasdaq Global Market, the
Nasdaq Global Select Market, the New York Stock Exchange, OTCQB,
OTCQX or The Pink Open Market (or any successors to any of the
foregoing).
“Transaction Documents”
means this Agreement, all exhibits and schedules thereto and
hereto, and any other documents or agreements executed in
connection with the transactions contemplated
hereunder.
“Transfer Agent” means
Manhattan Stock Transfer Co., the current transfer agent of the
Company, with a mailing address of 38B Sheep Pasture Rd., Port
Jefferson, NY 11777, and any successor transfer agent of the
Company.
“Variable Rate
Transaction” shall have
the meaning ascribed to such term in Section
4.13(b).
“VWAP” means, for any
date, the price determined by the first of the following clauses
that applies: (a) if the Common Stock is then listed or quoted on a
Trading Market, the daily volume weighted average price of the
Common Stock for such date (or the nearest preceding date) on the
Trading Market on which the Common Stock is then listed or quoted
as reported by Bloomberg L.P. (based on a Trading Day from 9:30
a.m. (New York City time) to 4:02 p.m. (New York City time)),
(b) if the Common Stock is quoted for trading on the OTCQB or
OTCQX, as applicable, and if the OTCQB or OTCQX is not a Trading
Market, the volume weighted average price of the Common Stock for
such date (or the nearest preceding date) on OTCQB or OTCQX as
applicable, (c) if the Common Stock is not then listed or quoted
for trading on OTCQB or OTCQX and if prices for the Common Stock
are then reported in The Pink Open Market (or a similar
organization or agency succeeding to its functions of reporting
prices), the most recent bid price per share of the Common Stock so
reported, or (d) in all other cases, the fair market value of
a share of Common Stock as determined by an independent appraiser
selected in good faith by the Purchasers of a majority in interest
of the Securities then outstanding and reasonably acceptable to the
Company, the fees and expenses of which shall be paid by the
Company.
ARTICLE II.
PURCHASE AND SALE
2.1 Closing. On the Closing Date,
upon the terms and subject to the conditions set forth herein,
substantially concurrent with the execution and delivery of this
Agreement by the parties hereto, the Company agrees to sell, and
the Purchasers, severally and not jointly, agree to purchase, up to
an aggregate of $2,500,000 of shares of Common Stock for each
Purchaser equal to such Purchaser’s Subscription Amount at
the Per Share Purchase Price as set forth on the signature page
hereto executed by such Purchaser, as determined by pursuant to
Section 2.2(a). The aggregate number of shares of Common Stock sold
hereunder shall be up to 10,000,000. Each Purchaser shall deliver
directly to the Company, via wire transfer or a certified check,
immediately available funds equal to such Purchasers Subscription
Amount and the Company shall deliver to each Purchaser its
respective shares of Common Stock as determined pursuant to Section
2.2(a), and the Company and each Purchaser shall deliver the other
items set forth in Section 2.2 deliverable at the Closing. Upon
satisfaction of the covenants and conditions set forth in Sections
2.2 and 2.3, the Closing shall occur at the offices of the Company
or such other location as the parties shall mutually
agree.
(a) Deliveries.
On or prior to the Closing Date, the Company shall deliver or cause
to be delivered to each Purchaser the following:
(i) this Agreement duly
executed by the Company;
(ii) a
legal opinion of Company Counsel, substantially in the form of
Exhibit A attached
hereto;
(iii) a
certificate evidencing a number of Shares (or in lieu thereof
evidence of Shares held in book-entry form) equal to such
Purchaser’s Subscription Amount at the Closing divided by the
Per Share Purchase Price, registered in the name of such Purchaser;
and
(iv) the
Company shall have provided each Purchaser with the Company’s
wire instructions, on Company letterhead and executed by the Chief
Executive Officer.
(b) On or prior to the
Closing Date, each Purchaser shall deliver or cause to be delivered
to the Company, the following:
(i) this Agreement duly
executed by such Purchaser; and
(ii) such
Purchaser’s Subscription Amount by wire transfer to the
Company to the account specified in writing by the
Company.
(a) The obligations of
the Company hereunder in connection with the Closing are subject to
the following conditions being met:
(i) the accuracy in all
material respects (or, to the extent representations or warranties
are qualified by materiality or Material Adverse Effect, in all
respects) on the Closing Date of the representations and warranties
of the Purchasers contained herein (unless as of a specific date
therein in which case they shall be accurate as of such
date);
(ii) all
obligations, covenants and agreements of each Purchaser required to
be performed at or prior to the Closing Date shall have been
performed; and
(iii) the
delivery by each Purchaser of the items set forth in Section 2.2(b)
of this Agreement.
(b) The respective
obligations of the Purchasers hereunder in connection with the
Closing are subject to the following conditions being
met:
(i) the accuracy in all
material respects (or, to the extent representations or warranties
are qualified by materiality or Material Adverse Effect, in all
respects) when made and on the Closing Date of the representations
and warranties of the Company contained herein (unless as of a
specific date therein in which case they shall be accurate as of
such date);
(ii) all
obligations, covenants and agreements of the Company required to be
performed at or prior to the Closing Date shall have been
performed;
(iii) the
delivery by the Company of the items set forth in Section 2.2(a) of
this Agreement;
(iv) there
shall have been no Material Adverse Effect with respect to the
Company since the date hereof; and
(v) from the date
hereof to the Closing Date, trading in the Common Stock shall not
have been suspended by the Commission or the Company’s
principal Trading Market and, at any time prior to the Closing
Date, trading in securities generally as reported by Bloomberg L.P.
shall not have been suspended or limited, or minimum prices shall
not have been established on securities whose trades are reported
by such service, or on any Trading Market, nor shall a banking
moratorium have been declared either by the United States or New
York State authorities nor shall there have occurred any material
outbreak or escalation of hostilities or other national or
international calamity of such magnitude in its effect on, or any
material adverse change in, any financial market which, in each
case, in the reasonable judgment of such Purchaser, makes it
impracticable or inadvisable to purchase the Securities at the
Closing.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES
3.1 Representations
and Warranties of the Company. Except as set forth in the
Disclosure Schedules, which Disclosure Schedules shall be deemed a
part hereof and shall qualify any representation or otherwise made
herein to the extent of the disclosure contained in the
corresponding section of the Disclosure Schedules, the Company
hereby makes the following representations and warranties to each
Purchaser as of the date hereof and as of the Closing:
(a) Subsidiaries. All of the direct
and indirect subsidiaries of the Company are set forth on
Schedule 3.1(a).
Except as set forth in Schedule 3.1(a), the Company
owns, directly or indirectly, all of the capital stock or other
equity interests of each Subsidiary free and clear of any Liens,
and all of the issued and outstanding shares of capital stock of
each Subsidiary are validly issued and are fully paid,
non-assessable and free of preemptive and similar rights to
subscribe for or purchase securities. If the Company has no
subsidiaries, all other references to the Subsidiaries or any of
them in the Transaction Documents shall be
disregarded.
(b) Organization and Qualification.
The Company and each of the Subsidiaries is an entity duly
incorporated or otherwise organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation or
organization, with the requisite power and authority to own and use
its properties and assets and to carry on its business as currently
conducted. Neither the Company nor any Subsidiary is in violation
nor default of any of the provisions of its respective certificate
or articles of incorporation, bylaws or other organizational or
charter documents. Each of the Company and the Subsidiaries is duly
qualified to conduct business and is in good standing as a foreign
corporation or other entity in each jurisdiction in which the
nature of the business conducted or property owned by it makes such
qualification necessary, except where the failure to be so
qualified or in good standing, as the case may be, could not have
or reasonably be expected to result in: (i) a material adverse
effect on the legality, validity or enforceability of any
Transaction Document, (ii) a material adverse effect on the results
of operations, assets, business or condition (financial or
otherwise) of the Company and the Subsidiaries, taken as a whole,
or (iii) a material adverse effect on the Company’s ability
to perform in any material respect on a timely basis its
obligations under any Transaction Document (any of (i), (ii) or
(iii), a “Material
Adverse Effect”) and no Proceeding has been instituted
in any such jurisdiction revoking, limiting or curtailing or
seeking to revoke, limit or curtail such power and authority or
qualification.
(c) Authorization; Enforcement. The
Company has the requisite corporate power and authority to enter
into and to consummate the transactions contemplated by this
Agreement and each of the other Transaction Documents and otherwise
to carry out its obligations hereunder and thereunder. The
execution and delivery of this Agreement and each of the other
Transaction Documents by the Company and the consummation by it of
the transactions contemplated hereby and thereby have been duly
authorized by all necessary action on the part of the Company and
no further action is required by the Company, the Board of
Directors or the Company’s stockholders in connection
herewith or therewith other than in connection with the Required
Approvals. This Agreement and each other Transaction Document to
which it is a party has been (or upon delivery will have been) duly
executed by the Company and, when delivered in accordance with the
terms hereof and thereof, will constitute the valid and binding
obligation of the Company enforceable against the Company in
accordance with its terms, except (i) as limited by general
equitable principles and applicable bankruptcy, insolvency,
reorganization, moratorium and other laws of general application
affecting enforcement of creditors’ rights generally, (ii) as
limited by laws relating to the availability of specific
performance, injunctive relief or other equitable remedies and
(iii) insofar as indemnification and contribution provisions may be
limited by applicable law.
(d) No Conflicts. The execution,
delivery and performance by the Company of this Agreement and the
other Transaction Documents to which it is a party, the issuance
and sale of the Securities and the consummation by it of the
transactions contemplated hereby and thereby do not and will not:
(i) conflict with or violate any provision of the Company’s
or any Subsidiary’s certificate or articles of incorporation,
bylaws or other organizational or charter documents, (ii) conflict
with, or constitute a default (or an event that with notice or
lapse of time or both would become a default) under, result in the
creation of any Lien upon any of the properties or assets of the
Company or any Subsidiary, or give to others any rights of
termination, amendment, anti-dilution or similar adjustments,
acceleration or cancellation (with or without notice, lapse of time
or both) of, any agreement, credit facility, debt or other
instrument (evidencing a Company or Subsidiary debt or otherwise)
or other understanding to which the Company or any Subsidiary is a
party or by which any property or asset of the Company or any
Subsidiary is bound or affected, or (iii) subject to the Required
Approvals, conflict with or result in a violation of any law, rule,
regulation, order, judgment, injunction, decree or other
restriction of any court or governmental authority to which the
Company or a Subsidiary is subject (including federal and state
securities laws and regulations), or by which any property or asset
of the Company or a Subsidiary is bound or affected; except in the
case of each of clauses (ii) and (iii), such as could not have or
reasonably be expected to result in a Material Adverse
Effect.
(e) Filings, Consents and
Approvals. The Company is not required to obtain any
consent, waiver, authorization or order of, give any notice to, or
make any filing or registration with, any court or other federal,
state, local or other governmental authority or other Person in
connection with the execution, delivery and performance by the
Company of the Transaction Documents, other than: (i) the filings
required pursuant to Section 4.6 of this Agreement, (ii) the filing
with the Commission required pursuant to the Section 4.12 of this
Agreement, (iii) the notice and/or application(s) to each
applicable Trading Market for the issuance and sale of the
Securities thereon in the time and manner required thereby, and
(iv) the filing of Form D with the Commission and such filings as
are required to be made under applicable state securities laws
(collectively, the “Required
Approvals”).
(f) Issuance of the Securities. The
Securities are duly authorized and, when issued and paid for in
accordance with the applicable Transaction Documents, will be duly
and validly issued, fully paid and nonassessable, free and clear of
all Liens imposed by the Company other than restrictions on
transfer provided for in the Transaction Documents.
(g) Capitalization. The capitalization of the Company is as set forth
on Schedule
3.1(g),
which Schedule
3.1(g) shall also include
the number of shares of Common Stock owned beneficially, and of
record, by Affiliates of the Company as of the date hereof. Except
as set forth on Schedule
3.1(g), the Company has not
issued any capital stock, other than pursuant to the exercise of
employee stock options under the Company’s stock option
plans, the issuance of shares of Common Stock to employees pursuant
to the Company’s employee stock purchase plans and pursuant
to the conversion and/or exercise of Common Stock Equivalents
outstanding as of the date of the most recent annual financial
statement. No Person has any right of first refusal, preemptive
right, right of participation, or any similar right to participate
in the transactions contemplated by the Transaction Documents.
Except as a result of the purchase and sale of the Securities or as
set forth on Schedule
3.1(g), there are no
outstanding options, warrants, scrip rights to subscribe to, calls
or commitments of any character whatsoever relating to, or
securities, rights or obligations convertible into or exercisable
or exchangeable for, or giving any Person any right to subscribe
for or acquire any shares of Common Stock or the capital stock of
any Subsidiary, or contracts, commitments, understandings or
arrangements by which the Company or any Subsidiary is or may
become bound to issue additional shares of Common Stock or Common
Stock Equivalents or capital stock of any Subsidiary. The issuance
and sale of the Securities will not obligate the Company or any
Subsidiary to issue shares of Common Stock or other securities to
any Person (other than the Purchasers) and will not result in a
right of any holder of Company securities to adjust the exercise,
conversion, exchange or reset price under any of such securities.
There are no outstanding securities or instruments of the Company
or any Subsidiary that contain any redemption or similar
provisions, and there are no contracts, commitments, understandings
or arrangements by which the Company or any Subsidiary is or may
become bound to redeem a security of the Company or such
Subsidiary. The Company does not have any stock appreciation rights
or “phantom stock” plans or any similar plan or
agreement. All of the outstanding shares of capital stock of the
Company are duly authorized, validly issued, fully paid and
nonassessable, have been issued in compliance with all federal and
state securities laws, and none of such outstanding shares was
issued in violation of any preemptive rights or similar rights to
subscribe for or purchase securities. No further approval or
authorization of any stockholder, the Board of Directors or others
is required for the issuance and sale of the Securities. There are
no stockholders agreements, voting agreements or other similar
agreements with respect to the Company’s capital stock to
which the Company is a party or, to the knowledge of the Company,
between or among any of the Company’s
stockholders.
(h) Financial Statements.
Attached hereto
as Schedule
3.1(h) are the annual
financial statements of the Company for the past two fiscal years
and the unaudited financial statements for the Company for the
period ended September 30, 2020. The financial statements of the
Company on Schedule
3.1(h) comply in all
material respects with applicable accounting requirements and the
rules and regulations of the Commission with respect thereto as in
effect at the time of filing. Such financial statements have been
prepared in accordance with United States generally accepted
accounting principles applied on a consistent basis during the
periods involved (“GAAP”),
except as may be otherwise specified in such financial statements
or the notes thereto and except that unaudited financial statements
may not contain all footnotes required by GAAP, and fairly present
in all material respects the financial position of the Company and
its consolidated Subsidiaries as of and for the dates thereof and
the results of operations and cash flows for the periods then
ended, subject, in the case of unaudited statements, to normal,
immaterial, year-end audit adjustments. For purposes of this
Section 3.1, September 30, 2020 is referred to as the
“Balance Sheet
Date”.
(i) Material Changes; Undisclosed Events,
Liabilities or Developments. Except as set forth on
Schedule 3.1(i),
since the Balance Sheet Date: (i) there has been no event,
occurrence or development that has had or that could reasonably be
expected to result in a Material Adverse Effect, (ii) the Company
has not incurred any liabilities (contingent or otherwise) other
than (A) trade payables and accrued expenses incurred in the
ordinary course of business consistent with past practice and (B)
liabilities reflected in the Company’s financial statement
issued subsequent to the Balance Sheet Date, or than are not
required to be reflected in the Company’s financial
statements pursuant to GAAP, (iii) the Company has not altered its
method of accounting, (iv) the Company has not declared or made any
dividend or distribution of cash or other property to its
stockholders or purchased, redeemed or made any agreements to
purchase or redeem any shares of its capital stock and (v) the
Company has not issued any equity securities to any officer,
director or Affiliate, except pursuant to existing Company stock
option plans. Except for the
issuance of the Securities contemplated by this Agreement, no
event, liability, fact, circumstance, occurrence or development has
occurred or exists, or is reasonably expected to occur or exist,
with respect to the Company or its Subsidiaries or their respective
businesses, prospects, properties, operations, assets or financial
condition, that would be required to be disclosed by the Company
under applicable securities laws at the time this representation is
made or deemed made that has not been publicly disclosed at least 1
Trading Day prior to the date that this representation is
made.
(j) Litigation. There is no action,
suit, inquiry, notice of violation, proceeding or investigation
pending or, to the knowledge of the Company, threatened against or
affecting the Company, any Subsidiary or any of their respective
properties before or by any court, arbitrator, governmental or
administrative agency or regulatory authority (federal, state,
county, local or foreign) (collectively, an “Action”) except as set
forth on Schedule
3.1(j). None of the Actions set
forth on Schedule 3.1(j)
(i) adversely effects or challenges
the legality, validity or enforceability of any of the Transaction
Documents or the Securities or (ii) could, if there were an
unfavorable decision, have or reasonably be expected to result in a
Material Adverse Effect. Neither the Company nor any
Subsidiary, nor any director or officer thereof, is or has been the
subject of any Action involving a claim of violation of or
liability under federal or state securities laws or a claim of
breach of fiduciary duty. There has not been, and to the knowledge
of the Company, there is not pending or contemplated, any
investigation by the Commission involving the Company or any
current or former director or officer of the Company.
(k) Labor Relations. No labor
dispute exists or, to the knowledge of the Company, is imminent
with respect to any of the employees of the Company, which could
reasonably be expected to result in a Material Adverse Effect. None
of the Company’s or its Subsidiaries’ employees is a
member of a union that relates to such employee’s
relationship with the Company or such Subsidiary, and neither the
Company nor any of its Subsidiaries is a party to a collective
bargaining agreement, and the Company and its Subsidiaries believe
that their relationships with their employees are good. To the
knowledge of the Company, no executive officer of the Company or
any Subsidiary, is, or is now expected to be, in violation of any
material term of any employment contract, confidentiality,
disclosure or proprietary information agreement or non-competition
agreement, or any other contract or agreement or any restrictive
covenant in favor of any third party, and the continued employment
of each such executive officer does not subject the Company or any
of its Subsidiaries to any liability with respect to any of the
foregoing matters. The Company and its Subsidiaries are in
compliance with all U.S. federal, state, local and foreign laws and
regulations relating to employment and employment practices, terms
and conditions of employment and wages and hours, except where the
failure to be in compliance could not, individually or in the
aggregate, reasonably be expected to have a Material Adverse
Effect.
(l) Compliance. Except as set forth
on Schedule 3.1(l),
neither the Company nor any Subsidiary: (i) is in default under or
in violation of (and no event has occurred that has not been waived
that, with notice or lapse of time or both, would result in a
default by the Company or any Subsidiary under), nor has the
Company or any Subsidiary received notice of a claim that it is in
default under or that it is in violation of, any indenture, loan or
credit agreement or any other agreement or instrument to which it
is a party or by which it or any of its properties is bound
(whether or not such default or violation has been waived), (ii) is
in violation of any judgment, decree or order of any court,
arbitrator or other governmental authority or (iii) is or has been
in violation of any statute, rule, ordinance or regulation of any
governmental authority, including without limitation all foreign,
federal, state and local laws relating to taxes, environmental
protection, occupational health and safety, product quality and
safety and employment and labor matters, except in each case as
could not have or reasonably be expected to result in a Material
Adverse Effect.
(m) Environmental
Laws. The
Company and its Subsidiaries (i) are in compliance with all
federal, state, local and foreign laws relating to pollution or
protection of human health or the environment (including ambient
air, surface water, groundwater, land surface or subsurface
strata), including laws relating to emissions, discharges, releases
or threatened releases of chemicals, pollutants, contaminants, or
toxic or hazardous substances or wastes (collectively,
“Hazardous
Materials”) into the environment, or otherwise
relating to the manufacture, processing, distribution, use,
treatment, storage, disposal, transport or handling of Hazardous
Materials, as well as all authorizations, codes, decrees, demands,
or demand letters, injunctions, judgments, licenses, notices or
notice letters, orders, permits, plans or regulations, issued,
entered, promulgated or approved thereunder (“Environmental Laws”);
(ii) have received all permits licenses or other approvals required
of them under applicable Environmental Laws to conduct their
respective businesses; and (iii) are in compliance with all terms
and conditions of any such permit, license or approval where in
each clause (i), (ii) and (iii), the failure to so comply could be
reasonably expected to have, individually or in the aggregate, a
Material Adverse Effect.
(n) Regulatory Permits. The Company
and the Subsidiaries possess all certificates, authorizations and
permits issued by the appropriate federal, state, local or foreign
regulatory authorities necessary to conduct their respective
businesses except where the failure to possess such permits could
not reasonably be expected to result in a Material Adverse Effect
(“Material
Permits”), and neither the Company nor any Subsidiary
has received any notice of proceedings relating to the revocation
or modification of any Material Permit.
(o) Title to Assets. The Company
and the Subsidiaries have good and marketable title in fee simple
to all real property owned by them and good and marketable title in
all personal property owned by them that is material to the
business of the Company and the Subsidiaries, in each case free and
clear of all Liens, except for (i) Liens as do not materially
affect the value of such property and do not materially interfere
with the use made and proposed to be made of such property by the
Company and the Subsidiaries and (ii) Liens for the payment of
federal, state or other taxes, for which appropriate reserves have
been made therefor in accordance with GAAP and, the payment of
which is neither delinquent nor subject to penalties. Any real
property and facilities held under lease by the Company and the
Subsidiaries are held by them under valid, subsisting and
enforceable leases with which the Company and the Subsidiaries are
in compliance.
(p) Intellectual Property. The
Company and the Subsidiaries have, or have rights to use, all
patents, patent applications, trademarks, trademark applications,
service marks, trade names, trade secrets, inventions, copyrights,
licenses and other intellectual property rights and similar rights
as necessary or required for use in connection with their
respective businesses and which the failure to so have could have a
Material Adverse Effect (collectively, the “Intellectual Property
Rights”). None of, and neither the Company nor any
Subsidiary has received a notice (written or otherwise) that any
of, the Intellectual Property Rights has expired, terminated or
been abandoned, or is expected to expire or terminate or be
abandoned, within two (2) years from the date of this Agreement.
Neither the Company nor any Subsidiary has received, since the
Balance Sheet Date, a written notice of a claim or otherwise has
any knowledge that the Intellectual Property Rights violate or
infringe upon the rights of any Person, except as could not have or
reasonably be expected to not have a Material Adverse Effect. To
the knowledge of the Company, all such Intellectual Property Rights
are enforceable and there is no existing infringement by another
Person of any of the Intellectual Property Rights. The Company and
its Subsidiaries have taken reasonable security measures to protect
the secrecy, confidentiality and value of all of their intellectual
properties, except where failure to do so could not, individually
or in the aggregate, reasonably be expected to have a Material
Adverse Effect.
(q) Insurance. The Company and the
Subsidiaries are insured by insurers of recognized financial
responsibility against such losses and risks and in such amounts as
are prudent and customary in the businesses in which the Company
and the Subsidiaries are engaged. Neither the Company nor any
Subsidiary has any reason to believe that it will not be able to
renew its existing insurance coverage as and when such coverage
expires or to obtain similar coverage from similar insurers as may
be necessary to continue its business without a significant
increase in cost.
(r) Transactions with Affiliates and
Employees. Except as set forth on Schedule 3.1(r), none of the
officers or directors of the Company or any Subsidiary and, to the
knowledge of the Company, none of the employees of the Company or
any Subsidiary is presently a party to any transaction with the
Company or any Subsidiary (other than for services as employees,
officers and directors), including any contract, agreement or other
arrangement providing for the furnishing of services to or by,
providing for rental of real or personal property to or from,
providing for the borrowing of money from or lending of money to or
otherwise requiring payments to or from any officer, director or
such employee or, to the knowledge of the Company, any entity in
which any officer, director, or any such employee has a substantial
interest or is an officer, director, trustee, stockholder, member
or partner, in each case in excess of $120,000 other than for (i)
payment of salary or consulting fees for services rendered, (ii)
reimbursement for expenses incurred on behalf of the Company and
(iii) other employee benefits, including stock option agreements
under any stock option plan of the Company.
(s) Internal Accounting
Controls. The Company and the
Subsidiaries maintain a system of internal accounting controls
sufficient to provide reasonable assurance that: (i) transactions
are executed in accordance with management’s general or
specific authorizations, (ii) transactions are recorded as
necessary to permit preparation of financial statements in
conformity with GAAP and to maintain asset accountability, (iii)
access to assets is permitted only in accordance with
management’s general or specific authorization, and (iv) the
recorded accountability for assets is compared with the existing
assets at reasonable intervals and appropriate action is taken with
respect to any differences.
(t) Certain Fees. Except for the
fees and expenses of the Placement Agent, no brokerage or
finder’s fees or commissions are or will be payable by the
Company or any Subsidiary to any broker, financial advisor or
consultant, finder, placement agent, investment banker, bank or
other Person with respect to the transactions contemplated by the
Transaction Documents. The Purchasers shall have no obligation with
respect to any fees or with respect to any claims made by or on
behalf of other Persons for fees of a type contemplated in this
Section that may be due in connection with the transactions
contemplated by the Transaction Documents.
(u) Private Placement. Assuming the
accuracy of the Purchasers’ representations and warranties
set forth in Section 3.2, no registration under the Securities Act
is required for the offer and sale of the Securities by the Company
to the Purchasers as contemplated hereby. The issuance and sale of
the Securities hereunder does not contravene the rules and
regulations of the Trading Market.
(v) Investment Company. The Company
is not, and is not an Affiliate of, and immediately after receipt
of payment for the Securities, will not be or be an Affiliate of,
an “investment company” within the meaning of the
Investment Company Act of 1940, as amended. The Company shall
conduct its business in a manner so that it will not become an
“investment company” subject to registration under the
Investment Company Act of 1940, as amended.
(w) Registration Rights. Other than
as set forth on Schedule
3.1(w), and except for the rights granted to the Purchasers,
no Person has any right to cause the Company or any Subsidiary to
effect the registration under the Securities Act of any securities
of the Company or any Subsidiary.
(x) Maintenance Requirements; DTC.
The Company has not, in the 12 months
preceding the date hereof, received notice from any Trading Market
on which the Common Stock is or has been listed or quoted to the
effect that the Company is not in compliance with the listing or
maintenance requirements of such Trading Market. The Company is,
and has no reason to believe that it will not in the foreseeable
future continue to be, in compliance with all applicable listing
and maintenance requirements. The Common Stock is currently
eligible for electronic transfer through the Depository Trust
Company or another established clearing corporation and the Company
is current in payment of the fees to the Depository Trust Company
(or such other established clearing corporation) in connection with
such electronic transfer.
(y) Application of Takeover
Protections. Except as set forth on Schedule 3.1(v), there are no
control share acquisition, business combination, poison pill
(including any distribution under a rights agreement) or other
similar anti-takeover provision under the Company’s
certificate of incorporation (or similar charter documents) or the
laws of its state of incorporation that is or could become
applicable to the Purchasers as a result of the Purchasers and the
Company fulfilling their obligations or exercising their rights
under the Transaction Documents, including without limitation as a
result of the Company’s issuance of the Securities and the
Purchasers’ ownership of the Securities.
(z) Disclosure. Except with respect
to the material terms and conditions of the transactions
contemplated by the Transaction Documents, the Company confirms
that neither it nor any other Person acting on its behalf has
provided any of the Purchasers or their agents or counsel with any
information that it believes constitutes or might constitute
material, non-public information. The Company understands and
confirms that the Purchasers will rely on the foregoing
representation in effecting transactions in securities of the
Company. All of the disclosure furnished by or on behalf of the
Company to the Purchasers regarding the Company and its
Subsidiaries, their respective businesses and the transactions
contemplated hereby, including the Disclosure Schedules to this
Agreement, is true and correct 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 the
light of the circumstances under which they were made, not
misleading. The press releases disseminated by the Company during
the twelve months preceding the date of this Agreement taken as a
whole do not contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or
necessary in order to make the statements therein, in the light of
the circumstances under which they were made and when made, not
misleading. The Company acknowledges and agrees that no Purchaser
makes or has made any representations or warranties with respect to
the transactions contemplated hereby other than those specifically
set forth in Section 3.2 hereof.
(aa) No
Integrated Offering. Assuming the accuracy of the
Purchasers’ representations and warranties set forth in
Section 3.2, neither the Company, nor any of its Affiliates, nor
any Person acting on its or their behalf has, directly or
indirectly, made any offers or sales of any security or solicited
any offers to buy any security, under circumstances that would
cause this offering of the Securities to be integrated with prior
offerings by the Company for purposes of (i) the Securities Act
which would require the registration of any such securities under
the Securities Act, or (ii) any applicable shareholder approval
provisions of any Trading Market on which any of the securities of
the Company are listed or designated.
(bb) Solvency.
Based on the consolidated financial condition of the Company as of
the Closing Date, after giving effect to the receipt by the Company
of the proceeds from the sale of the Securities hereunder, the
Company’s assets do not constitute unreasonably small capital
to carry on its business as now conducted and as proposed to be
conducted including its capital needs taking into account the
particular capital requirements of the business conducted by the
Company, consolidated and projected capital requirements and
capital availability thereof. The Company does not intend to incur
debts beyond its ability to pay such debts as they mature (taking
into account the timing and amounts of cash to be payable on or in
respect of its debt). The Company has no knowledge of any facts or
circumstances which lead it to believe that it will file for
reorganization or liquidation under the bankruptcy or
reorganization laws of any jurisdiction within one year from the
Closing Date. Schedule
3.1(bb) sets forth as of the date hereof all outstanding
secured and unsecured Indebtedness of the Company or any
Subsidiary, or for which the Company or any Subsidiary has
commitments. For the purposes of this Agreement,
“Indebtedness”
means (x) any liabilities for borrowed money or amounts owed in
excess of $10,000 (other than trade accounts payable incurred in
the ordinary course of business), (y) all guaranties, endorsements
and other contingent obligations in respect of indebtedness of
others, whether or not the same are or should be reflected in the
Company’s consolidated balance sheet (or the notes thereto),
except guaranties by endorsement of negotiable instruments for
deposit or collection or similar transactions in the ordinary
course of business; and (z) the present value of any lease payments
in excess of $10,000 due under leases required to be capitalized in
accordance with GAAP. Neither the Company nor any Subsidiary is in
default with respect to any Indebtedness.
(cc) Tax
Status. Except for matters that would not, individually or
in the aggregate, have or reasonably be expected to result in a
Material Adverse Effect, the Company and its Subsidiaries each (i)
has made or filed all United States federal, state and local income
and all foreign income and franchise tax returns, reports and
declarations required by any jurisdiction to which it is subject,
(ii) has paid all taxes and other governmental assessments and
charges that are material in amount, shown or determined to be due
on such returns, reports and declarations and (iii) has set aside
on its books provision reasonably adequate for the payment of all
material taxes for periods subsequent to the periods to which such
returns, reports or declarations apply. There are no unpaid taxes
in any material amount claimed to be due by the taxing authority of
any jurisdiction, and the officers of the Company or of any
Subsidiary know of no basis for any such claim.
(dd) No
General Solicitation. Neither the Company nor any Person
acting on behalf of the Company has offered or sold any of the
Securities by any form of general solicitation or general
advertising. The Company has offered the Securities for sale only
to the Purchasers and certain other “accredited
investors” within the meaning of Rule 501 under the
Securities Act.
(ee) Foreign
Corrupt Practices. Neither the Company nor any Subsidiary,
nor to the knowledge of the Company or any Subsidiary, any agent or
other person acting on behalf of the Company or any Subsidiary, has
(i) directly or indirectly, used any funds for unlawful
contributions, gifts, entertainment or other unlawful expenses
related to foreign or domestic political activity, (ii) made any
unlawful payment to foreign or domestic government officials or
employees or to any foreign or domestic political parties or
campaigns from corporate funds, (iii) failed to disclose fully any
contribution made by the Company or any Subsidiary (or made by any
person acting on its behalf of which the Company is aware) which is
in violation of law or (iv) violated in any material respect any
provision of FCPA.
(ff) Intentionally
Omitted.
(gg) No
Disagreements with Accountants and Lawyers. There are no
disagreements of any kind presently existing, or reasonably
anticipated by the Company to arise, between the Company and the
accountants and lawyers formerly or presently employed by the
Company and the Company is current with respect to any fees owed to
its accountants and lawyers which could affect the Company’s
ability to perform any of its obligations under any of the
Transaction Documents.
(hh) Acknowledgment
Regarding Purchasers’ Purchase of Securities. The
Company acknowledges and agrees that each of the Purchasers is
acting solely in the capacity of an arm’s length purchaser
with respect to the Transaction Documents and the transactions
contemplated thereby. The Company further acknowledges that no
Purchaser is acting as a financial advisor or fiduciary of the
Company (or in any similar capacity) with respect to the
Transaction Documents and the transactions contemplated thereby and
any advice given by any Purchaser or any of their respective
representatives or agents in connection with the Transaction
Documents and the transactions contemplated thereby is merely
incidental to the Purchasers’ purchase of the Securities. The
Company further represents to each Purchaser that the
Company’s decision to enter into this Agreement and the other
Transaction Documents has been based solely on the independent
evaluation of the transactions contemplated hereby by the Company
and its representatives.
(ii) Acknowledgment
Regarding Purchaser’s Trading Activity. Anything in this Agreement or elsewhere herein
to the contrary notwithstanding (except for Sections 3.2(g) and
4.15 hereof), it is understood and acknowledged by the Company
that: (i) none of the Purchasers has been asked by the Company to
agree, nor has any Purchaser agreed, to desist from purchasing or
selling, long and/or short, securities of the Company, or
“derivative” securities based on securities issued by
the Company or to hold the Securities for any specified term, (ii)
past or future open market or other transactions by any Purchaser,
specifically including, without limitation, Short Sales or
“derivative” transactions, before or after the closing
of this or future private placement transactions, may negatively
impact the market price of the Company’s publicly-traded
securities, (iii) any Purchaser, and counter-parties in
“derivative” transactions to which any such Purchaser
is a party, directly or indirectly, may presently have a
“short” position in the Common Stock and (iv) each
Purchaser shall not be deemed to have any affiliation with or
control over any arm’s length counter-party in any
“derivative” transaction. The Company further
understands and acknowledges that (y) one or more Purchasers may
engage in hedging activities at various times during the period
that the Securities are outstanding, and (z) such hedging
activities (if any) could reduce the value of the existing
stockholders’ equity interests in the Company at and after
the time that the hedging activities are being conducted. The
Company acknowledges that such aforementioned hedging activities do
not constitute a breach of any of the Transaction
Documents.
(jj) Regulation
M Compliance. The Company has not, and to its
knowledge no one acting on its behalf has, (i) taken, directly or
indirectly, any action designed to cause or to result in the
stabilization or manipulation of the price of any security of the
Company to facilitate the sale or resale of any of the Securities,
(ii) sold, bid for, purchased, or paid any compensation for
soliciting purchases of, any of the Securities, or (iii) paid or
agreed to pay to any Person any compensation for soliciting another
to purchase any other securities of the Company.
(kk) Stock
Option Plans. Each stock option granted by the Company under
the Company’s stock option plan was granted (i) in accordance
with the terms of the Company’s stock option plan and (ii)
with an exercise price at least equal to the fair market value of
the Common Stock on the date such stock option would be considered
granted under GAAP and applicable law. No stock option granted
under the Company’s stock option plan has been backdated. The
Company has not knowingly granted, and there is no and has been no
Company policy or practice to knowingly grant, stock options prior
to, or otherwise knowingly coordinate the grant of stock options
with, the release or other public announcement of material
information regarding the Company or its Subsidiaries or their
financial results or prospects.
(ll) Office
of Foreign Assets Control. Neither the Company nor any
Subsidiary nor, to the Company's knowledge, any director, officer,
agent, employee or affiliate of the Company or any Subsidiary is
currently subject to any U.S. sanctions administered by the Office
of Foreign Assets Control of the U.S. Treasury Department
(“OFAC”).
(mm) U.S.
Real Property Holding Corporation. The Company is not and
has never been a U.S. real property holding corporation within the
meaning of Section 897 of the Internal Revenue Code of 1986, as
amended, and the Company shall so certify upon Purchaser’s
request.
(nn) Bank
Holding Company Act. Neither the Company nor any of its
Subsidiaries or Affiliates is subject to the Bank Holding Company
Act of 1956, as amended (the “BHCA”) and to regulation
by the Board of Governors of the Federal Reserve System (the
“Federal
Reserve”). Neither the Company nor any of its
Subsidiaries or Affiliates owns or controls, directly or
indirectly, five percent (5%) or more of the outstanding shares of
any class of voting securities or twenty-five percent or more of
the total equity of a bank or any entity that is subject to the
BHCA and to regulation by the Federal Reserve. Neither the Company
nor any of its Subsidiaries or Affiliates exercises a controlling
influence over the management or policies of a bank or any entity
that is subject to the BHCA and to regulation by the Federal
Reserve.
(oo) Money
Laundering. The operations of the Company and its
Subsidiaries are and have been conducted at all times in compliance
with applicable financial record-keeping and reporting requirements
of the Currency and Foreign Transactions Reporting Act of 1970, as
amended, applicable money laundering statutes and applicable rules
and regulations thereunder (collectively, the “Money Laundering Laws”),
and no Action or Proceeding by or before any court or governmental
agency, authority or body or any arbitrator involving the Company
or any Subsidiary with respect to the Money Laundering Laws is
pending or, to the knowledge of the Company or any Subsidiary,
threatened.
(pp) No
Disqualification Events. With respect to the
Securities to be offered and sold hereunder in reliance on Rule 506
under the Securities Act, none of the Company, any of its
predecessors, any affiliated issuer, any director, executive
officer, other officer of the Company participating in the offering
hereunder, any beneficial owner of 20% or more of the
Company’s outstanding voting equity securities, calculated on
the basis of voting power, nor any promoter (as that term is
defined in Rule 405 under the Securities Act) connected with the
Company in any capacity at the time of sale (each, an
“Issuer Covered
Person” and, together, “Issuer Covered Persons”)
is subject to any of the “Bad Actor” disqualifications
described in Rule 506(d)(1)(i) to (viii) under the Securities Act
(a “Disqualification
Event”), except for a Disqualification Event covered
by Rule 506(d)(2) or (d)(3). The Company has exercised reasonable
care to determine whether any Issuer Covered Person is subject to a
Disqualification Event. The Company has complied, to the extent
applicable, with its disclosure obligations under Rule 506(e), and
has furnished to the Purchasers a copy of any disclosures provided
thereunder, a copy of which is set forth on Schedule 3.1(pp).
(qq) Other
Covered Persons. Other than the Placement Agent, the Company
is not aware of any person (other than any Issuer Covered Person)
that has been or will be paid (directly or indirectly) remuneration
for solicitation of purchasers in connection with the sale of any
Securities.
(rr) Notice
of Disqualification Events. The Company will notify the
Purchasers and the Placement Agent in writing, prior to the Closing
Date of (i) any Disqualification Event relating to any Issuer
Covered Person and (ii) any event that would, with the passage of
time, become a Disqualification Event relating to any Issuer
Covered Person.
3.2 Representations
and Warranties of the Purchasers. Each Purchaser, for itself
and for no other Purchaser, hereby represents and warrants as of
the date hereof and as of the Closing Date to the Company as
follows (unless as of a specific date therein, in which case they
shall be accurate as of such date):
(a) Organization;
Authority. Such Purchaser is either an individual or an
entity duly incorporated or formed, validly existing and in good
standing under the laws of the jurisdiction of its incorporation or
formation with full right, corporate, partnership, limited
liability company or similar power and authority to enter into and
to consummate the transactions contemplated by the Transaction
Documents and otherwise to carry out its obligations hereunder and
thereunder. The execution and delivery of the Transaction Documents
and performance by such Purchaser of the transactions contemplated
by the Transaction Documents have been duly authorized by all
necessary corporate, partnership, limited liability company or
similar action, as applicable, on the part of such Purchaser. Each
Transaction Document to which it is a party has been duly executed
by such Purchaser, and when delivered by such Purchaser in
accordance with the terms hereof, will constitute the valid and
legally binding obligation of such Purchaser, enforceable against
it in accordance with its terms, except (i) as limited by general
equitable principles and applicable bankruptcy, insolvency,
reorganization, moratorium and other laws of general application
affecting enforcement of creditors’ rights generally, (ii) as
limited by laws relating to the availability of specific
performance, injunctive relief or other equitable remedies and
(iii) insofar as indemnification and contribution provisions may be
limited by applicable law.
(b) Own
Account. Such Purchaser understands that the Securities are
“restricted securities” and have not been registered
under the Securities Act or any applicable state securities law and
is acquiring the Securities as principal for its own account and
not with a view to or for distributing or reselling such Securities
or any part thereof in violation of the Securities Act or any
applicable state securities law, has no present intention of
distributing any of such Securities in violation of the Securities
Act or any applicable state securities law and has no direct or
indirect arrangement or understandings with any other persons to
distribute or regarding the distribution of such Securities in
violation of the Securities Act or any applicable state securities
law (this representation and warranty not limiting such
Purchaser’s right to sell the Securities pursuant to the
Registration Statement or otherwise in compliance with applicable
federal and state securities laws). Such Purchaser is acquiring the
Securities hereunder in the ordinary course of its
business.
(c) Purchaser
Status. At the time such Purchaser was offered the Shares,
it was, and as of the date hereof it is, an “accredited
investor” as defined in Rule 501(a) under the Securities
Act.
(d) Experience
of Such Purchaser. Such Purchaser, either alone or together
with its representatives, has such knowledge, sophistication and
experience in business and financial matters so as to be capable of
evaluating the merits and risks of the prospective investment in
the Securities, and has so evaluated the merits and risks of such
investment. Such Purchaser is able to bear the economic risk of an
investment in the Securities and, at the present time, is able to
afford a complete loss of such investment.
(e) General
Solicitation. Such Purchaser is not, to such
Purchaser’s knowledge, purchasing the Securities as a result
of any advertisement, article, notice or other communication
regarding the Securities published in any newspaper, magazine or
similar media or broadcast over television or radio or presented at
any seminar or, to the knowledge of such Purchaser, any other
general solicitation or general advertisement.
(f) Access
to Information. Such Purchaser acknowledges that it has had
the opportunity to review the Transaction Documents (including all
exhibits and schedules thereto) and has been afforded (i) the
opportunity to ask such questions as it has deemed necessary of,
and to receive answers from, representatives of the Company
concerning the terms and conditions of the offering of the
Securities and the merits and risks of investing in the Securities;
(ii) access to information about the Company and its financial
condition, results of operations, business, properties, management
and prospects sufficient to enable it to evaluate its investment;
and (iii) the opportunity to obtain such additional information
that the Company possesses or can acquire without unreasonable
effort or expense that is necessary to make an informed investment
decision with respect to the investment. Such Purchaser
acknowledges and agrees that neither the Placement Agent nor any
Affiliate of the Placement Agent has provided such Purchaser with
any information or advice with respect to the Securities nor is
such information or advice necessary or desired. Neither the
Placement Agent nor any Affiliate has made or makes any
representation as to the Company or the quality of the Securities
and the Placement Agent and any Affiliate may have acquired
non-public information with respect to the Company which such
Purchaser agrees need not be provided to it. In connection
with the issuance of the Securities to such Purchaser, neither the
Placement Agent nor any of its Affiliates has acted as a financial
advisor or fiduciary to such Purchaser.
(g) Certain
Transactions and Confidentiality. Other than consummating the transactions
contemplated hereunder, such Purchaser has not, nor has any Person
acting on behalf of or pursuant to any understanding with such
Purchaser, directly or indirectly executed any purchases or sales,
including Short Sales, of the securities of the Company during
the period commencing as of the time that such Purchaser
first received a term sheet (written or oral) from the Company or
any other Person representing the Company setting forth the
material terms of the transactions contemplated hereunder and
ending immediately prior to the execution hereof. Notwithstanding the foregoing, in the
case of a Purchaser that is a multi-managed investment vehicle
whereby separate portfolio managers manage separate portions of
such Purchaser’s assets and the portfolio managers have no
direct knowledge of the investment decisions made by the portfolio
managers managing other portions of such Purchaser’s assets,
the representation set forth above shall only apply with respect to
the portion of assets managed by the portfolio manager that made
the investment decision to purchase the Securities covered by this
Agreement. Other than to other Persons party to this Agreement or
to such Purchaser’s representatives, including, without
limitation, its officers, directors, partners, legal and other
advisors, employees, agents and Affiliates, such Purchaser has
maintained the confidentiality of all disclosures made to it in
connection with this transaction (including the existence and terms
of this transaction). Notwithstanding the foregoing, for the
avoidance of doubt, nothing contained herein shall constitute a
representation or warranty, or preclude any actions, with respect
to locating or borrowing shares in order to effect Short Sales or
similar transactions in the future.
The
Company acknowledges and agrees that the representations contained
in this Section 3.2 shall not modify, amend or affect such
Purchaser’s right to rely on the Company’s
representations and warranties contained in this Agreement or any
representations and warranties contained in any other Transaction
Document or any other document or instrument executed and/or
delivered in connection with this Agreement or the consummation of
the transactions contemplated hereby.
ARTICLE IV.
OTHER AGREEMENTS OF THE PARTIES
4.1 Transfer
Restrictions.
(a) The Securities may
only be disposed of in compliance with state and federal securities
laws. In connection with any transfer of Securities other than
pursuant to an effective registration statement or Rule 144, to the
Company or to an Affiliate of a Purchaser or in connection with a
pledge as contemplated in Section 4.1(b), the Company may require
the transferor thereof to provide to the Company an opinion of
counsel selected by the transferor and reasonably acceptable to the
Company, the form and substance of which opinion shall be
reasonably satisfactory to the Company, to the effect that such
transfer does not require registration of such transferred
Securities under the Securities Act. As a condition of transfer,
any such transferee shall agree in writing to be bound by the terms
of this Agreement and shall have the rights and obligations of a
Purchaser under this Agreement.
(b) The Purchasers
agree to the imprinting, so long as is required by this Section
4.1, of a legend on any of the Securities in the following
form:
THIS
SECURITY HAS NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE
COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE
UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE “SECURITIES ACT”), AND,
ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR
PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT
SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND
IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS. THIS SECURITY
MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT WITH A
REGISTERED BROKER-DEALER OR OTHER LOAN WITH A FINANCIAL INSTITUTION
THAT IS AN “ACCREDITED INVESTOR” AS DEFINED IN RULE
501(a) UNDER THE SECURITIES ACT OR OTHER LOAN SECURED BY SUCH
SECURITIES.
The
Company acknowledges and agrees that a Purchaser may from time to
time pledge pursuant to a bona fide margin agreement with a
registered broker-dealer or grant a security interest in some or
all of the Securities to a financial institution that is an
“accredited investor” as defined in Rule 501(a) under
the Securities Act and, if required under the terms of such
arrangement, such Purchaser may transfer pledged or secured
Securities to the pledgees or secured parties. Such a pledge or
transfer would not be subject to approval of the Company and no
legal opinion of legal counsel of the pledgee, secured party or
pledgor shall be required in connection therewith. Further, no
notice shall be required of such pledge. At the appropriate
Purchaser’s expense, the Company will execute and deliver
such reasonable documentation as a pledgee or secured party of
Securities may reasonably request in connection with a pledge or
transfer of the Securities, including, if the Securities are
subject to registration statement required pursuant Section 4.12 of
this Agreement, the preparation and filing of any required
prospectus supplement under Rule 424(b)(3) under the Securities Act
or other applicable provision of the Securities Act to
appropriately amend the list of selling stockholders
thereunder.
(c) Each Purchaser,
severally and not jointly with the other Purchasers, agrees with
the Company that such Purchaser will sell any Securities pursuant
to either the registration requirements of the Securities Act,
including any applicable prospectus delivery requirements, or an
exemption therefrom, and that if Securities are sold pursuant to a
Registration Statement, they will be sold in compliance with the
plan of distribution set forth therein, and acknowledges that the
removal of the restrictive legend from certificates representing
Securities as set forth in this Section 4.1 is predicated upon the
Company’s reliance upon this understanding.
(d) Certificates
evidencing the Shares shall not contain any legend (including the
legend set forth in Section 4.1(b) hereof): (i) when they have been sold while a registration
statement (including the Registration Statement) covering the
resale of such security is effective under the Securities Act, (ii)
following any sale of such Shares pursuant to Rule 144, (iii) if
such Shares are eligible for sale under Rule 144 and a sale or
transfer will be taking place prior to the Company’s next
periodic report becomes due under the Exchange Act or (iv) if such
legend is not required under applicable requirements of the
Securities Act (including judicial interpretations and
pronouncements issued by the staff of the Commission). The Company
shall cause its counsel to issue a legal opinion to the Transfer
Agent promptly after the Effective Date or at such time as such
legend is no longer required under this Section 4.1(d) if required
by the Transfer Agent to effect the removal of the legend
hereunder, or if requested by the Purchaser. If such Shares have
been sold under Rule 144 and the Company is then in compliance with
the current public information required under Rule 144, or if the
Shares may be sold under Rule 144 without the requirement for the
Company to be in compliance with the current public information
required under Rule 144 as to such Shares and without volume or
manner-of-sale restrictions provided the conditions of Rule
144(i)(2) have been satisfied and a sale of such shares will be
taking place prior to the Company’s next annual or quarterly
report becoming due under its reporting obligations under the
Exchange Act or if such legend is not otherwise required under
applicable requirements of the Securities Act (including judicial
interpretations and pronouncements issued by the staff of the
Commission) then such Shares shall be issued free of all legends.
The Company agrees that following the Effective Date or at such
time as such legend is no longer required under this Section
4.1(d), it will, no later than the earlier of (i) three (3) Trading
Days and (ii) the number of Trading Days comprising the Standard
Settlement Period (as defined below) following the delivery by the
Purchaser to the Company or the Transfer Agent of certificate(s)
representing the Shares issued with a restrictive legend (such
date, the “Legend Removal
Date”), deliver or
cause to be delivered to the Purchaser a certificate representing
such shares that is free from all restrictive and other legends.
The Company may not make any notation on its records or give
instructions to the Transfer Agent that enlarge the restrictions on
transfer set forth in this Section 4. Certificates for Shares
subject to legend removal hereunder shall be transmitted by the
Transfer Agent to the Purchaser by crediting the account of the
Purchaser’s prime broker with the Depository Trust Company
System as directed by the Purchaser. As used herein,
“Standard Settlement
Period” means the
standard settlement period, expressed in a number of Trading Days,
on the Company’s primary Trading Market with respect to the
Common Stock as in effect on the date of delivery of a certificate
representing the Shares issued with a restrictive
legend.
(e) From and after the Public Company
Date, in addition to such Purchaser’s other
available remedies, the Company shall pay to a Purchaser, in cash,
(i) as partial liquidated damages and not as a penalty, for each
$1,000 of Shares (based on the VWAP of the Common Stock on the date
such Securities are submitted to the Transfer Agent) delivered for
removal of the restrictive legend and subject to Section 4.1(d),
$10 per Trading Day (increasing to $20 per Trading Day five (5)
Trading Days after such damages have begun to accrue) for each
Trading Day after the Legend Removal Date until such certificate is
delivered without a legend and (ii) if the Company fails to (a)
issue and deliver (or cause to be delivered) to a Purchaser by the
Legend Removal Date a certificate representing the Securities so
delivered to the Company by such Purchaser that is free from all
restrictive and other legends and (b) if after the Legend Removal
Date such Purchaser purchases (in an open market transaction or
otherwise) shares of Common Stock to deliver in satisfaction of a
sale by such Purchaser of all or any portion of the number of
shares of Common Stock, or a sale of a number of shares of Common
Stock equal to all or any portion of the number of shares of Common
Stock that such Purchaser anticipated receiving from the Company
without any restrictive legend, then, an amount equal to the excess
of such Purchaser’s total purchase price (including brokerage
commissions and other out-of-pocket expenses, if any) for the
shares of Common Stock so purchased (including brokerage
commissions and other out-of-pocket expenses, if any) (the
“Buy-In
Price”) over the product of (A) such number of Shares
that the Company was required to deliver to such Purchaser by the
Legend Removal Date multiplied by (B) the lowest closing sale price
of the Common Stock on any Trading Day during the period commencing
on the date of the delivery by such Purchaser to the Company of the
applicable Shares and ending on the date of such delivery and
payment under this clause (ii).
4.2 Acknowledgment
of Dilution. The Company acknowledges that the issuance of
the Securities may result in dilution of the outstanding shares of
Common Stock, which dilution may be substantial under certain
market conditions. The Company further acknowledges that its
obligations under the Transaction Documents, are unconditional and
absolute and not subject to any right of set off, counterclaim,
delay or reduction, regardless of the effect of any such dilution
or any claim the Company may have against any Purchaser and
regardless of the dilutive effect that such issuance may have on
the ownership of the other stockholders of the
Company.
4.3 Furnishing
of Information; Public Information.
(a) If
the Common Stock is not registered under Section 12(b) or 12(g) of
the Exchange Act on the date hereof, the Company agrees to cause
the Common Stock to be registered under Section 12(g) of the
Exchange Act on or prior to the one hundred and eighty (180) days
following the date hereof. Following the Public Company Date, for a
period of at least twelve (12) months, the Company covenants to
maintain the registration of the Common Stock under Section 12(b)
or 12(g) of the Exchange Act and to timely file (or obtain
extensions in respect thereof and file within the applicable grace
period) all reports required to be filed by the Company pursuant to
the Exchange Act, provided that, if after becoming subject to the
Exchange Act, the Company is thereafter no longer required to file
reports pursuant to the Exchange Act, the Company will, for as long
as any Purchaser owns Securities, prepare and furnish to the
Purchasers and make publicly available in accordance with Rule
144(c) such information as is required for the Purchasers to sell
the Securities, including without limitation, under Rule 144. The
Company further covenants that it will take such further action as
any holder of Securities may reasonably request, to the extent
required from time to time to enable such Person to sell such
Securities without registration under the Securities Act,
including, without limitation, within the requirements of the
exemption provided by Rule 144.
(b) At
any time during the period commencing from the twelve (12) month
anniversary of the date hereof and ending at such time that all of
the Securities may be sold without the requirement for the Company
to be in compliance with Rule 144(c)(1) and otherwise without
restriction or limitation pursuant to Rule 144, if the Company (i)
shall fail for any reason to satisfy the current public information
requirement under Rule 144(c) or (ii) has ever been an issuer
described in Rule 144(i)(1)(i) or becomes an issuer in the future,
and the Company shall fail to satisfy any condition set forth in
Rule 144(i)(2) (a “Public Information
Failure”) then, in addition to such Purchaser’s
other available remedies, the Company shall pay to a Purchaser, in
cash, as partial liquidated damages and not as a penalty, by reason
of any such delay in or reduction of its ability to sell the
Securities, an amount in cash equal to one percent (1.0%) of the
aggregate Subscription Amount of such Purchaser’s Securities
on the day of a Public Information Failure and on every thirtieth
(30th) day
(pro-rated for periods totaling less than thirty days) thereafter
until the earlier of (a) the date such Public Information Failure
is cured and (b) such time that such public information is no
longer required for the Purchasers to transfer the Shares
pursuant to Rule 144. The payments to which a Purchaser shall
be entitled pursuant to this Section 4.3(b) are referred to herein
as “Public
Information Failure Payments.” Public
Information Failure Payments shall be paid on the
earlier of (i) the last day of the calendar month during which such
Public Information Failure Payments are incurred and (ii) the
third (3rd) Business Day after
the event or failure giving rise to the Public Information
Failure Payments is
cured. In the event the Company fails to make Public
Information Failure Payments in a timely manner, such
Public Information Failure Payments shall bear interest at
the rate of 1.5% per month (prorated for partial months) until paid
in full. Nothing herein shall limit such Purchaser’s right to
pursue actual damages for the Public Information Failure, and such
Purchaser shall have the right to pursue all remedies available to
it at law or in equity including, without limitation, a decree of
specific performance and/or injunctive relief.
4.4 Integration.
The Company shall not sell, offer for sale or solicit offers to buy
or otherwise negotiate in respect of any security (as defined in
Section 2 of the Securities Act) that would be integrated with the
offer or sale of the Securities in a manner that would require the
registration under the Securities Act of the sale of the Securities
or that would be integrated with the offer or sale of the
Securities for purposes of the rules and regulations of any Trading
Market such that it would require shareholder approval prior to the
closing of such other transaction unless shareholder approval is
obtained before the closing of such subsequent
transaction.
4.5 Reservation
of Common Stock. As of the date hereof, the Company has
reserved and the Company shall continue to reserve and keep
available at all times, free of preemptive rights, a sufficient
number of shares of Common Stock for the purpose of enabling the
Company to issue Shares pursuant to this Agreement.
4.6 Securities
Laws Disclosure; Publicity. From and after the Public Company Date, the
Company acknowledges and agrees that (i) all material, non-public
information delivered to any of the Purchasers by the Company or
any of its Subsidiaries, or any of their respective officers,
directors, employees or agents in connection with the transactions
contemplated by the Transaction Documents shall have been publicly
disclosed and (ii) any and all confidentiality or similar
obligations under any agreement, whether written or oral, between
the Company, any of its Subsidiaries or any of their respective
officers, directors, agents, employees or Affiliates on the one
hand, and any of the Purchasers or any of their Affiliates on the
other hand, shall terminate. From and after the Public Company
Date, upon a Closing hereunder, the Company shall promptly issue a
press release disclosing the material terms of such closing and
shall filed a Current Report on Form 8-K as required by the
Exchange Act. From and after the Public Company Date, the Company
shall not publicly disclose the name of any Purchaser in any press
release, or include the name of any Purchaser in any filing with
the Commission or any regulatory agency or Trading Market, without
the prior written consent of such Purchaser, except: (a) as
required by federal securities law in connection with any
registration statement contemplated by the Section 4.12 of this
Agreement or the Company’s reporting requirements under the
Exchange Act and (b) to the extent such disclosure is required by
law or Trading Market regulations, in which case the Company shall
provide the Purchasers with prior notice of such disclosure
permitted under this clause (b).
4.7 Shareholder
Rights Plan. No claim will be made or enforced by the
Company or, with the consent of the Company, any other Person, that
any Purchaser is an “Acquiring Person” under
any control share acquisition, business combination, poison pill
(including any distribution under a rights agreement) or similar
anti-takeover plan or arrangement in effect or hereafter adopted by
the Company, or that any Purchaser could be deemed to trigger the
provisions of any such plan or arrangement, by virtue of receiving
Securities under the Transaction Documents or under any other
agreement between the Company and the Purchasers.
4.8 Non-Public
Information. From and after the
Public Company Date, the Company covenants and agrees that neither
it, nor any other Person acting on its behalf will provide any
Purchaser or its agents or counsel with any information that
constitutes, or the Company reasonably believes constitutes,
material non-public information, unless prior thereto such
Purchaser shall have consented to the receipt of such information
and agreed with the Company to keep such information confidential.
On or prior to the Public Company Date, the Company agrees to
publicly disclose any and all material non-public information
provided to the Purchasers. The Company understands and confirms
that each Purchaser shall be relying on the foregoing covenant in
effecting transactions in securities of the Company. To the extent
that the Company delivers any material, non-public information to a
Purchaser without such Purchaser’s consent, the Company
hereby covenants and agrees that such Purchaser shall not have any
duty of confidentiality to Company, any of its Subsidiaries, or any
of their respective officers, directors, agents, employees or
Affiliates, or a duty to the Company, and of its Subsidiaries or
any of their respective officers, directors, agents, employees or
Affiliates not to trade on the basis of, such material, non-public
information, provided that the Purchaser shall remain subject to
applicable law. To the extent that any notice provided pursuant to
any Transaction Document constitutes, or contains, material,
non-public information regarding the Company or any Subsidiaries,
the Company shall simultaneously file such notice with the
Commission pursuant to a Current Report on Form 8-K. The Company
understands and confirms that each Purchaser shall be relying on
the foregoing covenant in effecting transactions in securities of
the Company.
4.9 Use
of Proceeds. Except as set forth on Schedule 4.9 attached hereto,
the Company shall use the net proceeds from the sale of the
Securities hereunder for working capital purposes (including,
without limitation, marketing, advertising and brand awareness) and
shall not use such proceeds: (a) for the satisfaction of any
portion of the Company’s debt (other than payment of trade
payables in the ordinary course of the Company’s business and
prior practices), (b) for the redemption of any Common Stock or
Common Stock Equivalents, (c) for the settlement of any outstanding
litigation or (d) in violation of FCPA or OFAC
regulations.
4.10 Indemnification
of Purchasers. Subject to the provisions of this Section
4.10, the Company will indemnify and hold each Purchaser and its
directors, officers, shareholders, members, partners, employees and
agents (and any other Persons with a functionally equivalent role
of a Person holding such titles notwithstanding a lack of such
title or any other title), each Person who controls such Purchaser
(within the meaning of Section 15 of the Securities Act and Section
20 of the Exchange Act), and the directors, officers, shareholders,
agents, members, partners or employees (and any other Persons with
a functionally equivalent role of a Person holding such titles
notwithstanding a lack of such title or any other title) of such
controlling persons (each, a “Purchaser Party”)
harmless from any and all losses, liabilities, obligations, claims,
contingencies, damages, costs and expenses, including all
judgments, amounts paid in settlements, court costs and reasonable
attorneys’ fees and costs of investigation that any such
Purchaser Party may suffer or incur as a result of or relating to
(a) any breach of any of the representations, warranties, covenants
or agreements made by the Company in this Agreement or in the other
Transaction Documents or (b) any action instituted against the
Purchaser Parties in any capacity, or any of them or their
respective Affiliates, by any stockholder of the Company who is not
an Affiliate of such Purchaser Party, with respect to any of the
transactions contemplated by the Transaction Documents (unless such
action is solely based upon a material breach of such Purchaser
Party’s representations, warranties or covenants under the
Transaction Documents or any agreements or understandings such
Purchaser Party may have with any such stockholder or any
violations by such Purchaser Party of state or federal securities
laws or any conduct by such Purchaser Party which is finally
judicially determined to constitute fraud, gross negligence or
willful misconduct). If any action shall be brought against any
Purchaser Party in respect of which indemnity may be sought
pursuant to this Agreement, such Purchaser Party shall promptly
notify the Company in writing, and the Company shall have the right
to assume the defense thereof with counsel of its own choosing
reasonably acceptable to the Purchaser Party. Any Purchaser Party
shall have the right to employ separate counsel in any such action
and participate in the defense thereof, but the fees and expenses
of such counsel shall be at the expense of such Purchaser Party
except to the extent that (i) the employment thereof has been
specifically authorized by the Company in writing, (ii) the Company
has failed after a reasonable period of time to assume such defense
and to employ counsel or (iii) in such action there is, in the
reasonable opinion of counsel, a material conflict on any material
issue between the position of the Company and the position of such
Purchaser Party, in which case the Company shall be responsible for
the reasonable fees and expenses of no more than one such separate
counsel. The Company will not be liable to any Purchaser Party
under this Agreement (y) for any settlement by a Purchaser Party
effected without the Company’s prior written consent, which
shall not be unreasonably withheld or delayed; or (z) to the
extent, but only to the extent that a loss, claim, damage or
liability is attributable to any Purchaser Party’s breach of
any of the representations, warranties, covenants or agreements
made by such Purchaser Party in this Agreement or in the other
Transaction Documents. The
indemnification required by this Section 4.10 shall be made by
periodic payments of the amount thereof during the course of the
investigation or defense, as and when bills are received or are
incurred. The indemnity agreements contained herein shall be in
addition to any cause of action or similar right of any Purchaser
Party against the Company or others and any liabilities the Company
may be subject to pursuant to law.
4.11 Listing
of Securities. The Company hereby agrees to use best efforts
to maintain the listing or quotation of the Common Stock on the
Trading Market on which it is currently listed. The Company further
agrees, if the Company applies to have the Common Stock traded on
any other Trading Market, it will then include in such application
all of the Shares. The Company will then take all action reasonably
necessary to continue the listing or quotation and trading of its
Common Stock on a Trading Market and will comply in all respects
with the Company’s reporting, filing and other obligations
under the bylaws or rules of the Trading Market. The Company shall
establish and maintain the eligibility of the Common Stock for
electronic transfer through the Depository Trust Company or another
established clearing corporation, including, without limitation, by
timely payment of fees to the Depository Trust Company or such
other established clearing corporation in connection with such
electronic transfer.
4.12
Demand
Registration.
(a) If at any time
after thirty (30) days following the effectiveness of the
Required Registration Statement(s), the Company receives a request
from Purchasers holding at least 50% of the Shares then outstanding
that the Company file a Form S-1 registration statement,
then the Company shall (i) within ten (10) days after the
date such request is given, give notice thereof (the
“Demand
Notice”) to all
Purchasers; and (ii) as soon as practicable, and in any event
within thirty (30) days after the date such request, file a
Form S-1 registration statement under the Securities Act
covering all Shares requested to be registered, as specified by
notice given by each such Purchaser to the Company within twenty
(20) days of the date the Demand Notice is given, and in each
case, subject to the limitations set forth below.
(b) Notwithstanding
the foregoing obligations, if the Company furnishes to Purchasers
requesting a registration pursuant to this Section 4.12 a
certificate signed by the Company’s chief executive officer
stating that in the good faith judgment of the Company’s
Board of Directors it would be materially detrimental to the
Company and its stockholders for such registration statement to
either become effective or remain effective for as long as such
registration statement otherwise would be required to remain
effective, because such action would (i) materially interfere
with a significant acquisition, corporate reorganization, or other
similar transaction involving the Company; (ii) require
premature disclosure of material information that the Company has a
bona fide business purpose for preserving as confidential; or
(iii) render the Company unable to comply with requirements
under the Securities Act or Exchange Act, then the Company shall
have the right to defer taking action with respect to such filing,
and any time periods with respect to filing or effectiveness
thereof shall be tolled correspondingly, for a period of not more
than ninety (90) days after the request is
given; provided, however,
that the Company may not invoke this right more than once in any
twelve (12) month period; and provided, further,
that the Company shall not register any securities for its own
account or that of any other stockholder during such ninety
(90) day period.
(c) The Company shall not
be obligated to effect, or to take any action to effect, any
registration pursuant to this Section 4.12 during the period
that is sixty (60) days before the Company’s good faith
estimate of the date of filing of, and ending on a date that is one
hundred eighty (180) days after the effective date of, a
registration statement filed in connection with a Company-initiated
registration, provided,
that the Company is actively employing in good faith commercially
reasonable efforts to cause such registration statement to become
effective.
4.13 Subsequent
Equity Sales. (a)From the date hereof until the date that is
twelve (12) months following the effective date of the Registration
Statement, the Company shall be prohibited from incurring any
Indebtedness or effecting or entering into an agreement to effect
any issuance by the Company or any of its Subsidiaries of Common
Stock or Common Stock Equivalents (or a combination of units
thereof) involving a Variable Rate Transaction. “Variable Rate
Transaction” means a transaction in which the Company
(i) issues or sells any debt or equity securities that are
convertible into, exchangeable or exercisable for, or include the
right to receive, additional shares of Common Stock either (A) at a
conversion price, exercise price or exchange rate or other price
that is based upon, and/or varies with, the trading prices of or
quotations for the shares of Common Stock at any time after the
initial issuance of such debt or equity securities or (B) with a
conversion, exercise or exchange price that is subject to being
reset at some future date after the initial issuance of such debt
or equity security or upon the occurrence of specified or
contingent events directly or indirectly related to the business of
the Company or the market for the Common Stock or (ii) enters into,
or effects a transaction under, any agreement, including, but not
limited to, an equity line of credit or at-the-market offering,
whereby the Company may issue securities at a future determined
price; provided that the Company shall be permitted to enter into
and utilize an at-the-market offering facility with a registered
broker dealer as selling agent commencing 180 days following the
Public Company Date. Any Purchaser shall be entitled to obtain
injunctive relief against the Company to preclude any such
issuance, which remedy shall be in addition to any right to collect
damages.
(b)Notwithstanding
the foregoing, this Section 4.13 shall not apply in respect of an
Exempt Issuance, except that no Variable Rate Transaction shall be
an Exempt Issuance.
4.14 Equal
Treatment of Purchasers. No consideration (including any
modification of any Transaction Document) shall be offered or paid
to any Person to amend or consent to a waiver or modification of
any provision of the Transaction Documents unless the same
consideration is also offered to all of the parties to the
Transaction Documents. For clarification purposes, this provision
constitutes a separate right granted to each Purchaser by the
Company and negotiated separately by each Purchaser, and is
intended for the Company to treat the Purchasers as a class and
shall not in any way be construed as the Purchasers acting in
concert or as a group with respect to the purchase, disposition or
voting of Securities or otherwise.
4.15 Company
Acknowledgement on Certain Transactions. The Company expressly acknowledges and agrees
that (i) no Purchaser makes any representation, warranty or
covenant hereby that it will not engage in effecting transactions
in any securities of the Company following the Public Company Date,
(ii) no Purchaser shall be restricted or prohibited from effecting
any transactions in any securities of the Company in accordance
with applicable securities laws from and after the Public Company
Date and (iii) no Purchaser shall have any duty of confidentiality
or duty not to trade in the securities of the Company to the
Company or its Subsidiaries from and after the Public Company Date.
Notwithstanding anything herein to the contrary, each Purchaser
agrees, severally and not jointly with any other Purchaser, that
such Purchaser will not enter into any Short Sales from the period
commencing on the Closing Date and ending on the date that such
Purchaser no longer holds any Securities.
4.16 Form
D; Blue Sky Filings. The Company agrees to timely file a
Form D with respect to the Securities as required under Regulation
D and to provide a copy thereof, promptly upon request of any
Purchaser. The Company shall take such action as the Company shall
reasonably determine is necessary in order to obtain an exemption
for, or to qualify the Securities for, sale to the Purchasers at
the Closing under applicable securities or “Blue Sky”
laws of the states of the United States, and shall provide evidence
of such actions promptly upon request of any
Purchaser.
ARTICLE V.
MISCELLANEOUS
5.1 Termination.
This Agreement may be terminated by any Purchaser, as to such
Purchaser’s obligations hereunder only and without any effect
whatsoever on the obligations between the Company and the other
Purchasers, by written notice to the Company, if the Closing has
not been consummated on or before the fifth (5th) Trading Day
following the date hereof; provided, however, that no such
termination will affect the right of any party to sue for any
breach by any other party (or parties).
5.2 Fees
and Expenses. The Company shall deliver to each Purchaser,
prior to the Closing, a completed and executed copy of the Closing
Statement, attached hereto as Annex A. Except as expressly
set forth in the Transaction Documents to the contrary, each party
shall pay the fees and expenses of its advisers, counsel,
accountants and other experts, if any, and all other expenses
incurred by such party incident to the negotiation, preparation,
execution, delivery and performance of this Agreement. The Company
shall pay all Transfer Agent fees (including, without limitation,
any fees required for same-day processing of any instruction letter
delivered by the Company and any conversion or exercise notice
delivered by a Purchaser), stamp taxes and other taxes and duties
levied in connection with the delivery of any Securities to the
Purchasers.
5.3 Entire
Agreement. The Transaction Documents, together with the
exhibits and schedules thereto, contain the entire understanding of
the parties with respect to the subject matter hereof and thereof
and supersede all prior agreements and understandings, oral or
written, with respect to such matters, which the parties
acknowledge have been merged into such documents, exhibits and
schedules.
5.4 Notices.
Any and all notices or other communications or deliveries required
or permitted to be provided hereunder shall be in writing and shall
be deemed given and effective on the earliest of: (a) the time of
transmission, if such notice or communication is delivered via
facsimile at the facsimile number or email attachment at the e-mail
address as set forth on the signature pages attached hereto at or
prior to 5:30 p.m. (New York City time) on a Trading Day, (b) the
next Trading Day after the time of transmission, if such notice or
communication is delivered via facsimile or email attachment at the
facsimile number or e-mail address as set forth on the signature
pages attached hereto on a day that is not a Trading Day or later
than 5:30 p.m. (New York City time) on any Trading Day, (c) the
second (2nd) Trading Day
following the date of mailing, if sent by U.S. nationally
recognized overnight courier service or (d) upon actual receipt by
the party to whom such notice is required to be given. The address
for such notices and communications shall be as set forth on the
signature pages attached hereto. Following the Public Company Date, to
the extent that any notice provided pursuant to any Transaction
Document constitutes, or contains, material, non-public information
regarding the Company or any of the Subsidiaries, the Company shall
simultaneously file such notice with the Commission pursuant to a
Current Report on Form 8-K.
5.5 Amendments;
Waivers. No provision of this Agreement may be waived,
modified, supplemented or amended except in a written instrument
signed, in the case of an amendment, by the Company and Purchasers
which purchased at least 50.1% in interest of the Common Stock
based on the initial Subscription Amounts hereunder or, in the case
of a waiver, by the party against whom enforcement of any such
waived provision is sought, provided that if any amendment,
modification or waiver disproportionately and adversely impacts a
Purchaser (or group of Purchasers), the consent of such
disproportionately impacted Purchaser (or group of Purchasers)
shall also be required. 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. Any proposed amendment or waiver that
disproportionately, materially and adversely affects the rights and
obligations of any Purchaser relative to the comparable rights and
obligations of the other Purchasers shall require the prior written
consent of such adversely affected Purchaser. Any amendment
effected in accordance with this Section 5.5 shall be binding upon
each Purchaser and holder of Securities and the
Company.
5.6 Headings.
The headings herein are for convenience only, do not constitute a
part of this Agreement and shall not be deemed to limit or affect
any of the provisions hereof.
5.7 Successors
and Assigns. This Agreement shall be binding upon and inure
to the benefit of the parties and their successors and permitted
assigns. The Company may not assign this Agreement or any rights or
obligations hereunder without the prior written consent of each
Purchaser (other than by merger). Any Purchaser may assign any or
all of its rights under this Agreement to any Person to whom such
Purchaser assigns or transfers any Securities, provided that such
transferee agrees in writing to be bound, with respect to the
transferred Securities, by the provisions of the Transaction
Documents that apply to the “Purchasers.”
5.8 No
Third-Party Beneficiaries. The Placement Agent shall be the
third party beneficiary of the representations and warranties of
the Company in Section 3.1 hereof and with respect to the
representations and warranties of the Purchasers in Section 3.2
hereof. This Agreement is intended for the benefit of the parties
hereto and their respective successors and permitted assigns and is
not for the benefit of, nor may any provision hereof be enforced
by, any other Person, except as otherwise set forth in Section
4.10.
5.9 Governing
Law. All questions concerning the construction, validity,
enforcement and interpretation of the Transaction Documents shall
be governed by and construed and enforced in accordance with the
internal laws of the State of New York, without regard to the
principles of conflicts of law thereof. Each party agrees that all
legal Proceedings concerning the interpretations, enforcement and
defense of the transactions contemplated by this Agreement and any
other Transaction Documents (whether brought against a party hereto
or its respective affiliates, directors, officers, shareholders,
partners, members, employees or agents) shall be commenced
exclusively in the state and federal courts sitting in the City of
New York. Each party hereby irrevocably submits to the exclusive
jurisdiction of the state and federal courts sitting in the City of
New York, Borough of Manhattan for the adjudication of any dispute
hereunder or in connection herewith or with any transaction
contemplated hereby or discussed herein (including with respect to
the enforcement of any of the Transaction Documents), and hereby
irrevocably waives, and agrees not to assert in any Action or
Proceeding, any claim that it is not personally subject to the
jurisdiction of any such court, that such Action or Proceeding is
improper or is an inconvenient venue for such Proceeding. Each
party hereby irrevocably waives personal service of process and
consents to process being served in any such Action or Proceeding
by mailing a copy thereof via registered or certified mail or
overnight delivery (with evidence of delivery) to such party at the
address in effect for notices to it under this Agreement and agrees
that such service shall constitute good and sufficient service of
process and notice thereof. Nothing contained herein shall be
deemed to limit in any way any right to serve process in any other
manner permitted by law. If any party shall commence an Action or
Proceeding to enforce any provisions of the Transaction Documents,
then, in addition to the obligations of the Company under Section
4.10, the prevailing party in such Action or Proceeding shall be
reimbursed by the non-prevailing party for its reasonable
attorneys’ fees and other costs and expenses incurred with
the investigation, preparation and prosecution of such Action or
Proceeding.
5.10 Survival.
The representations and warranties contained herein shall survive
the Closing and the delivery of the Securities.
5.11 Execution.
This Agreement may be executed in two or more counterparts, all of
which when taken together shall be considered one and the same
agreement and shall become effective when counterparts have been
signed by each party and delivered to each other party, it being
understood that the parties need not sign the same counterpart. In
the event that any signature is delivered by facsimile transmission
or by e-mail delivery of a “.pdf” format data file,
such signature shall create a valid and binding obligation of the
party executing (or on whose behalf such signature is executed)
with the same force and effect as if such facsimile or
“.pdf” signature page were an original
thereof.
5.12 Severability.
If any term, provision, covenant or restriction of this Agreement
is held by a court of competent jurisdiction to be invalid,
illegal, void or unenforceable, the remainder of the terms,
provisions, covenants and restrictions set forth herein shall
remain in full force and effect and shall in no way be affected,
impaired or invalidated, and the parties hereto shall use their
commercially reasonable efforts to find and employ an alternative
means to achieve the same or substantially the same result as that
contemplated by such term, provision, covenant or restriction. It
is hereby stipulated and declared to be the intention of the
parties that they would have executed the remaining terms,
provisions, covenants and restrictions without including any of
such that may be hereafter declared invalid, illegal, void or
unenforceable.
5.13 Rescission
and Withdrawal Right. Notwithstanding anything to the
contrary contained in (and without limiting any similar provisions
of) any of the other Transaction Documents, whenever any Purchaser
exercises a right, election, demand or option under a Transaction
Document and the Company does not timely perform its related
obligations within the periods therein provided, then such
Purchaser may rescind or withdraw, in its sole discretion from time
to time upon written notice to the Company, any relevant notice,
demand or election in whole or in part without prejudice to its
future actions and rights.
5.14 Replacement
of Securities. If any certificate or instrument evidencing
any Securities is mutilated, lost, stolen or destroyed, the Company
shall issue or cause to be issued in exchange and substitution for
and upon cancellation thereof (in the case of mutilation), or in
lieu of and substitution therefor, a new certificate or instrument,
but only upon receipt of evidence reasonably satisfactory to the
Company of such loss, theft or destruction. The applicant for a new
certificate or instrument under such circumstances shall also pay
any reasonable third-party costs (including customary indemnity)
associated with the issuance of such replacement
Securities.
5.15 Remedies.
In addition to being entitled to exercise all rights provided
herein or granted by law, including recovery of damages, each of
the Purchasers and the Company will be entitled to specific
performance under the Transaction Documents. The parties agree that
monetary damages may not be adequate compensation for any loss
incurred by reason of any breach of obligations contained in the
Transaction Documents and hereby agree to waive and not to assert
in any Action for specific performance of any such obligation the
defense that a remedy at law would be adequate.
5.16
Payment Set Aside. To the
extent that the Company makes a payment or payments to any
Purchaser pursuant to any Transaction Document or a Purchaser
enforces or exercises its rights thereunder, and such payment or
payments or the proceeds of such enforcement or exercise or any
part thereof are subsequently invalidated, declared to be
fraudulent or preferential, set aside, recovered from, disgorged by
or are required to be refunded, repaid or otherwise restored to the
Company, a trustee, receiver or any other Person under any law
(including, without limitation, any bankruptcy law, state or
federal law, common law or equitable cause of action), then to the
extent of any such restoration the obligation or part thereof
originally intended to be satisfied shall be revived and continued
in full force and effect as if such payment had not been made or
such enforcement or setoff had not occurred.
5.17
Independent Nature of
Purchasers’ Obligations and Rights. The obligations of
each Purchaser under any Transaction Document are several and not
joint with the obligations of any other Purchaser, and no Purchaser
shall be responsible in any way for the performance or
non-performance of the obligations of any other Purchaser under any
Transaction Document. Nothing contained herein or in any other
Transaction Document, and no action taken by any Purchaser pursuant
hereto or thereto, shall be deemed to constitute the Purchasers as
a partnership, an association, a joint venture or any other kind of
entity, or create a presumption that the Purchasers are in any way
acting in concert or as a group with respect to such obligations or
the transactions contemplated by the Transaction Documents. Each
Purchaser shall be entitled to independently protect and enforce
its rights, including, without limitation, the rights arising out
of this Agreement or out of the other Transaction Documents, and it
shall not be necessary for any other Purchaser to be joined as an
additional party in any Proceeding for such purpose. Each Purchaser
has been represented by its own separate legal counsel in its
review and negotiation of the Transaction Documents. For reasons of
administrative convenience only, each Purchaser and its respective
counsel have chosen to communicate with the Company through EGS.
EGS does not represent all of the Purchasers and only represents
Placement Agent. The Company has elected to provide all Purchasers
with the same terms and Transaction Documents for the convenience
of the Company and not because it was required or requested to do
so by any of the Purchasers. It is expressly understood and agreed
that each provision contained in this Agreement and in each other
Transaction Document is between the Company and a Purchaser,
solely, and not between the Company and the Purchasers collectively
and not between and among the Purchasers.
5.18
Liquidated Damages. The
Company’s obligations to pay any partial liquidated damages
or other amounts owing under the Transaction Documents is a
continuing obligation of the Company and shall not terminate until
all unpaid partial liquidated damages and other amounts have been
paid notwithstanding the fact that the instrument or security
pursuant to which such partial liquidated damages or other amounts
are due and payable shall have been canceled.
5.19
Saturdays, Sundays, Holidays,
etc.
If the last or
appointed day for the taking of any action or the expiration of any
right required or granted herein shall not be a Business Day, then
such action may be taken or such right may be exercised on the next
succeeding Business Day.
5.20
Construction. The parties agree
that each of them and/or their respective counsel have reviewed and
had an opportunity to revise the Transaction Documents and,
therefore, the normal rule of construction to the effect that any
ambiguities are to be resolved against the drafting party shall not
be employed in the interpretation of the Transaction Documents or
any amendments thereto. In addition, each and every reference to
share prices and shares of Common Stock in any Transaction Document
shall be subject to adjustment for reverse and forward stock
splits, stock dividends, stock combinations and other similar
transactions of the Common Stock that occur after the date of this
Agreement.
5.21 WAIVER
OF JURY TRIAL. IN ANY
ACTION, SUIT, OR PROCEEDING IN ANY JURISDICTION BROUGHT BY ANY
PARTY AGAINST ANY OTHER PARTY, THE PARTIES EACH KNOWINGLY AND
INTENTIONALLY, TO THE GREATEST EXTENT PERMITTED BY APPLICABLE LAW,
HEREBY ABSOLUTELY, UNCONDITIONALLY, IRREVOCABLY AND EXPRESSLY
WAIVES FOREVER TRIAL BY JURY.
(Signature Pages Follow)
IN
WITNESS WHEREOF, the parties hereto have caused this Securities
Purchase Agreement to be duly executed by their respective
authorized signatories as of the date first indicated
above.
TRANSWORL HOLDINGS, INC.
|
Address
for Notice:
|
By:__________________________________________
Name:
Title:
With a
copy to (which shall not constitute notice):
|
Email:
Fax:
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|
|
[REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE
PAGE FOR PURCHASER FOLLOWS]
[PURCHASER
SIGNATURE PAGES TO TRWO SECURITIES PURCHASE AGREEMENT]
IN
WITNESS WHEREOF, the undersigned have caused this Securities
Purchase Agreement to be duly executed by their respective
authorized signatories as of the date first indicated
above.
Name of
Purchaser:
____________________________________________________
Signature of Authorized Signatory of
Purchaser: __________________________
Name of
Authorized Signatory:
____________________________________
Title
of Authorized Signatory:
_____________________________________
Email
Address of Authorized Signatory:
___________________________________________
Facsimile Number of
Authorized Signatory:
_________________________________________
Address
for Notice to Purchaser:
Address
for Delivery of Securities to Purchaser (if not same as address for
notice):
Subscription
Amount: $____________
Shares
of Common Stock: _____________
EIN
Number: _______________________
[SIGNATURE
PAGES CONTINUE]
Annex A
CLOSING STATEMENT
Pursuant
to the attached Securities Purchase Agreement, dated as of the date
hereto, the purchasers shall purchase up to $_____ of Common Stock
from Transworld Holdings, Inc., a Delaware corporation (the
“Company”). All funds will
be wired into an account maintained by the Company. All funds will
be disbursed in accordance with this Closing
Statement.
Disbursement Date:
_____ ___,
2020
I. PURCHASE PRICE
|
|
Gross Proceeds to be Received
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$
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|
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II. DISBURSEMENTS
|
|
|
$
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|
|
|
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$
|
|
|
|
|
$
|
|
|
|
|
$
|
|
|
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$
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Total Amount Disbursed:
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$
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WIRE INSTRUCTIONS:
Please see attached.
|
|
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Acknowledged
and agreed to
this
___ day of _________, 2020
TRANSWORLD HOLDINGS, INC.
By:
_________________________
Name:
Title:
CONSENT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We
hereby consent to the incorporation by reference in this
Registration Statement on Form S-1 of GoIP Global, Inc. of our
report dated June 4, 2020, relating to the audited balance sheets
of GoIP Global, Inc. as of December 31, 2019 and 2018, and the
related statements of operations, changes in stockholders’
deficit and cash flows, and the related notes for the years then
ended.
/s/ Accell Audit & Compliance, P.A.
Tampa,
Florida
February 11,
2021
Exhibit
23.2
Consent
of Independent Registered Public Accounting Firm
We
consent to the incorporation by reference in this Registration
Statement on Form S-1 of Charge Enterprises, Inc of our report
dated February 3, 2021, relating to our audit of the consolidated
financial statements for PTGI International Carrier Services, Inc
and subsidiaries as of and for the years ended December 31, 2019
and 2018. Our report included an explanatory paragraph expressing
substantial doubt about the ability of PTGI International Carrier
Services, Inc. to continue as a going concern.
We also
consent to the reference to our Firm under the caption
“Experts” in the Prospectus, which is part of this
Registration Statement.
/s/Seligson & Giannattasio, LLP
Seligson
& Giannattasio, LLP
White
Plains, New York
February
11, 2021
Exhibit 23.3
CONSENT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We
hereby consent to the incorporation by reference in this
Registration Statement on Form S-1 of Get Charged Inc, Inc. of our
report dated January 11, 2021, relating to the audited balance
sheets of Get Charged Inc., as of December 31, 2018, and our report
dated July 27, 2020, relating to the audited balance sheets of Get
Charged Inc., as of December 31, 2019, and the related statements
of operations, changes in stockholders’ deficit and cash
flows, and the related notes for the years then ended.
/s/
K.K. Mehta CPA Associates PLLC
Bishok
Dhungana (Brian), CPA, MSA
Partner