AVX 8-K
Avax One Technology Ltd. (AVX)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
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| British Columbia | N/A | |||
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Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
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Item 1.01 Entry into a Material Definitive Agreement
As previously disclosed in the Current Report on Form 8-K filed by AVAX One Technology Ltd. (formerly known as AgriFORCE Growing Systems, Ltd.) (the “Company”) with the Securities and Exchange Commission on January 16, 2025, the Company entered into a Securities Purchase Agreement (“SPA”) with institutional investors (“Investors”) for an initial purchase of $7.7 million principal amount of debentures (“Debentures”) and accompanying warrants and up to an additional $42.3 million principal amount of Debentures and accompanying warrants.
On July 31, 2026 (the “Effective Date”), the Company entered into letter agreements (each, a “Repayment and Waiver Agreement”) with two of the Investors (the “Exiting Investors”) pursuant to which, in exchange for a waiver of a negative covenant of the Company in the Debentures held by the Exiting Investors and a release of any related claims against the Company in respect thereof, the Company agreed to (i) cancel the unfunded portion of each Exiting Investor’s principal under its Debenture and (ii) pay to each Exiting Investor an amount equal to (a) 110% of the outstanding funded principal of such Exiting Investor’s Debenture immediately prior to the Effective Date plus (b) all accrued interest on such Exiting Investor’s Debenture immediately prior to the Effective Date (collectively, the “Full Payoff Amount”). The Company delivered the applicable Full Payoff Amount to each Exiting Investor on August 3, 2026, and, as of such date, the Debentures previously held by each Exiting Investor were fully satisfied, discharged, cancelled and released.
On August 5, 2026, the Company entered into an agreement with one Investor (the “Remaining Investor” and the agreement with the Remaining Investor, the “Amendment”) pursuant to which, in exchange for a waiver of a negative covenant of the Company in the Debenture held by the Remaining Investor and a release of any related claims against the Company in respect thereof, the Company agreed to (i) increase the principal amount of the note from $7.7 million to $8.47 million (the “Principal”) and (ii) pay to the Remaining Investor an amount equal to (a) $1.05 million in partial repayment of the outstanding Principal (the “Repaid Principal”) plus (b) all accrued interest on the Repaid Principal (collectively, the “Partial Payoff Amount”). The Company expects to deliver the Partial Payoff Amount to the Remaining Investor on August 6, 2026, in partial satisfaction of the Company’s obligations to the Remaining Investor under its Debenture. In addition, the Amendment modifies negative covenants in the Remaining Investor’s Debenture concerning a “key person” provision” and concerning the amount of cash and Bitcoin the Company is required to have in its bank accounts or other custody from $100,000 to $3,500,000.
The foregoing descriptions of the Repayment and Waiver Agreements and the Amendment do not purport to be complete and are qualified in their entirety by reference to the full text of such documents, which are filed herewith as Exhibits 10.1 and 10.2, respectively, and are incorporated herein by reference.
Item 2.03 Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant
The information contained in Item 1.01 is incorporated herein by reference.
Item 8.01 Other Information
On August 5, 2026, the Company issued a press release announcing the transactions described herein. A copy of the press release is attached as Exhibit 99.1 and is incorporated herein by reference.
Item 9.01 Financial Statements and Exhibits
10.1 |
Form of Repayment and Waiver Agreement, dated as of July 31, 2026 | |
| 10.2 | Form of Amendment, dated as of August 5, 2026 | |
| 99.1 | Press Release dated August 5, 2026 | |
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document) |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
Date: August 5, 2026
| AVAX ONE TECHNOLOGY LTD. | ||
| By: | /s/ Peter Wylie Jr. | |
| Peter Wylie Jr. | ||
| Interim Chief Executive Officer | ||
Exhibit 10.1
AGREEMENT
This letter agreement (this “Agreement”) is made and entered into as of July 31, 2026 (the “Effective Date”) by and between AVAX One Technology Ltd. (formerly known as AgriFORCE Growing Systems Ltd., and referred to in the Note as “AgriFORCE Growth Systems Ltd.”), a British Columbia corporation (the “Company”), and _______________________ (the “Holder” and, together with the Company, the “Parties”).
This Agreement is entered into for the purpose of, among other things, (i) confirming the terms pursuant to which the Company has agreed to repay, and the Parties have agreed to cancel, that certain 5% Coupon, 10% Original Issue Discount Senior Secured Convertible Debenture, originally issued on January 2, 2026 (the “Note” or “Debenture”), in the original principal amount of $_____________, and (ii) waiving the Specified Breach (as defined below) under the Note, effective upon the Holder’s receipt of the Payoff Amount (as defined below). Reference is made to that certain Securities Purchase Agreement, dated as of January 16, 2025, among the Company and the purchasers signatory thereto, including the Holder (as amended, modified or supplemented from time to time, the “SPA”). The Note was originally issued to the Holder pursuant to the Holder’s exercise of its Required Holders’ Additional Investment right set forth in Section 2.4(a) of the SPA. Capitalized terms used herein and not otherwise defined shall have the respective meanings ascribed to such terms in the SPA or the Note, as applicable.
WHEREAS, Jolie Kahn has ceased to serve as Chief Executive Officer of the Company, and such departure constitutes a breach of Section 7(i) of the Note (the “Specified Breach”);
WHEREAS, the Company has changed its corporate name from AgriFORCE Growing Systems Ltd. to AVAX One Technology Ltd.;
WHEREAS, the Company desires to have the Specified Breach under the Note waived by the Holder, and the Holder is willing to grant such waiver in exchange for, and in consideration of, the repayment of the Note and the other agreements set forth herein; and
WHEREAS, to effect such waiver, the Parties agree to the covenants and conditions set forth herein.
NOW, THEREFORE, in consideration of the foregoing recitals, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and intending to be legally bound, the Parties agree as follows:
1. Waiver of Specified Breach; Release of Related Claims.
(a) Effective upon, and subject to, the Holder’s receipt of the Payoff Amount in full in accordance with Section 2, the Holder hereby irrevocably waives the Specified Breach, including any obligation of the Company to pay any previously requested Event of Default payment, Mandatory Default Amount or Event of Default Redemption Price related to the Specified Breach.
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In furtherance of the foregoing, and effective upon, and subject to, the Holder’s receipt of the Payoff Amount in full, the Holder, on behalf of itself and its successors and assigns (the “Holder Releasing Parties”), hereby forever, fully, unconditionally and irrevocably waives and releases the Company and each of its successors, assigns, parents, subsidiaries, affiliates, officers, directors, employees, attorneys and agents (collectively, the “Company Releasees”) from any and all claims, liabilities, obligations, debts, causes of action (whether at law or in equity or otherwise), defenses, counterclaims, setoffs, of any kind, whether known or unknown, whether liquidated or unliquidated, matured or unmatured, fixed or contingent, arising solely and directly out of the existence of the Specified Breach itself (collectively, the “Company Claims”). The Holder, on behalf of the Holder and each of the other Holder Releasing Parties, further agrees that it shall not, and it shall cause each of the other Holder Releasing Parties to not, commence, institute, assist or prosecute any lawsuit, action or other proceeding, whether judicial, administrative or otherwise, to prosecute, collect or enforce any Company Claim. Notwithstanding anything to the contrary in this paragraph, the Company Claims do not include, and the Holder does not release, waive, or impair, any right, claim, remedy or defense of the Holder or any Holder Releasing Party (i) to receive payment of, or conversion or delivery of Conversion Shares in respect of, any principal, interest, redemption amounts or other amounts owing under the Note or any other Transaction Document; (ii) arising from any failure by the Company to perform or comply with any of its obligations under the Note or any other Transaction Document (including any failure to make any payment when due or to timely deliver Conversion Shares), whether occurring before, on or after the date hereof; (iii) arising from any Event of Default other than the Specified Breach; (iv) in respect of the Holder’s security interests in, control over, or other rights with respect to the Blocked Account or any other collateral; or (v) arising from the fraud, willful misconduct or bad faith of any Company Releasee. For the avoidance of doubt, no failure by the Company to make any payment or deliver any Conversion Shares, and no other breach by the Company of its obligations under the Transaction Documents, shall be deemed a Company Claim or released hereunder by reason of being related to, connected with, or arising out of the Specified Breach.
(b) This waiver is limited precisely as written, relates solely to the Specified Breach, and shall not be construed as a waiver of any other breach of the Company’s obligations under the Note, including with respect to any other Event of Default (or any other event that with the passage of time or the giving of notice would constitute an Event of Default), whether now existing or hereafter arising, or as a continuing waiver of Section 7(i) of the Note (as amended hereby).
2. Repayment of Funded Principal and Accrued Interest; Cancellation of Unfunded Principal. Within one Business Day following the Effective Date, the Company shall pay to the Holder $_______________ (the “Payoff Amount”), which represents (a) 110% of the outstanding funded principal amount of the Note immediately prior to the Effective Date and (b) all accrued interest thereon immediately prior to the Effective Date. The Payoff Amount shall be delivered by the Company to the Holder by wire transfer of immediately available funds to the account specified, and otherwise pursuant to the instructions provided to, the Company by the Holder, in full satisfaction of the Company’s obligations to the Holder under the Note as of the Effective Date. If the Holder does not receive the Payoff Amount in full within three (3) Business Days following the Effective Date, then, at the Holder’s election, this Agreement (including the waiver and release set forth in Section 1) shall be null and void ab initio, and the rights, obligations, claims and demands of the Parties under the Note and the other Transaction Documents shall be reinstated in full as if this Agreement had never been executed. All principal amounts of the Note that remain unfunded as of the Effective Date are hereby unconditionally and irrevocably cancelled, and the Parties shall have no further rights or obligations in respect thereof. Upon the Holder’s receipt of the Payoff Amount, notwithstanding anything to the contrary in the Transaction Documents, including the Note, the Note shall be deemed fully and irrevocably satisfied, discharged, cancelled and released, and the Parties acknowledge and agree that they shall have no rights or obligations thereunder or with respect thereto, in each case, without any further action by either of the Parties; provided, however, that, within two (2) Business Days following the Holder’s receipt of the Payoff Amount, the Holder shall deliver to the Company the original Note marked ‘CANCELLED,’ (or, if the original Note cannot be located, a customary lost note affidavit and indemnity in lieu thereof), shall release and terminate any liens or security interests granted to it under the Transaction Documents in connection with the Note, solely to the extent securing the Note (and without affecting any lien, security interest or other right securing any other obligation under the Transaction Documents), and shall promptly execute and deliver such other documents as the Company may reasonably request to evidence such release, in each case at the Company’s sole cost and expense and without recourse to, or any representation, warranty or liability of, the Holder. In furtherance of, and without limiting, the foregoing, upon the Holder’s receipt of the Payoff Amount, the Note shall be immediately cancelled, terminated and of no further force or effect. For the avoidance of doubt, except as expressly set forth herein, nothing in this Agreement amends, waives, terminates or otherwise affects any of the rights or obligations of the Parties under the SPA, the Warrants or any other Transaction Document (other than the Note), each of which remains in full force and effect in accordance with its terms.
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3. Release; Non-Disparagement.
(a) In further consideration of the Holder’s execution of this Agreement, the Company, on behalf of itself and its successors, assigns, parents, subsidiaries, Affiliates, officers, directors, employees, agents and attorneys, hereby forever, fully, unconditionally and irrevocably waives and releases the Holder and each of its successors, assigns, parents, subsidiaries, affiliates, officers, directors, employees, attorneys and agents (collectively, the “_________ Releasees”) from any and all claims, liabilities, obligations, debts, causes of action (whether at law or in equity or otherwise), defenses, counterclaims, setoffs, of any kind, whether known or unknown, whether liquidated or unliquidated, matured or unmatured, fixed or contingent, directly or indirectly arising out of, connected with, resulting from or related to any act or omission by any _________ Releasee with respect to the Transaction Documents, the transactions contemplated thereby or any enforcement or attempted enforcement of the Transaction Documents by any _________ Releasee and any transactions in the Common Stock effected by any _________ Releasee (collectively, the “_________ Claims”). The Company further agrees that it shall not commence, institute, assist or prosecute any lawsuit, action or other proceeding, whether judicial, administrative or otherwise, to prosecute, collect or enforce any _________ Claim. Notwithstanding anything to the contrary in any of the Transaction Documents, the Company will promptly reimburse the Holder for all costs and expenses, including attorney’s fees, paid or incurred, in defending against any _________ Claims.
(b) The Company, on behalf of itself, its subsidiaries, and each of their respective officers, directors, employees, representatives and agents, agrees that it will not at any time make, publish or communicate to any Person any Disparaging (as defined below) remarks, comments or statements concerning the _________ Releasees. For purposes of this Agreement, “Disparaging” remarks, comments or statements are those that impugn, or threaten to impugn, the character, honesty, integrity, morality, legality, business acumen or abilities of the individual or Person being disparaged. Disparaging remarks shall expressly include, but not be limited to, any suggestion that the Holder violates or operates in contravention of federal or state securities laws, that its agreements are void or invalid, or any other remark, comment or statement that undermines the Holder’s reputation (whether made or given orally, in writing, in any digital medium, in any filing with any Governmental Entity or in any other manner to any Person). The Company further agrees that it shall be jointly and severally liable under this Section 3(b) for any Disparaging remarks, comments or statements of its officers, directors and/or employees.
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4. 8-K Filing; Cleansing. Notwithstanding Section 10 of the Note, the Company shall, by no later than 5:00pm., New York City time, on the third Business Day following the Effective Date of this Agreement, file a Current Report on Form 8-K disclosing all material terms of the transactions contemplated hereby to the extent required, and attaching a form of this Agreement (with the name of the Holder and its Affiliates redacted) as an exhibit thereto (the “8-K Filing”). Immediately following the filing of the 8-K Filing, the Holder shall not be in possession of any material, non-public information received from the Company or any of its subsidiaries or any of their respective officers, directors, employees, affiliates or agents that is not disclosed in the 8-K Filing. The Company shall not, and shall cause its officers, directors, employees, affiliates and agents not to, provide the Holder with any material, non-public information regarding the Company from and after the filing of the 8-K Filing without the express written consent of the Holder. The Company shall not disclose the name of the Holder in any filing, announcement, release or otherwise, unless such disclosure is required by law, rule or regulation or unless the Holder otherwise consents in writing.
5. Waivers. No provision of this Agreement may be waived, modified, supplemented or amended except in a written instrument signed by the Company and the Holder.
6. Interpretation; Notices; Governing Law. Section 9(a) (Notices), Section 9(d) (Governing Law), Section 9(f) (Severability) and Section 9(i) (Headings) of the Debenture shall apply to this Agreement mutatis mutandis.
7. Counterparts. This Agreement may be executed in two or more counterparts, each of which when so executed and delivered to the other party shall be deemed an original. The executed page(s) from each original may be joined together and attached to one such original and shall thereupon constitute one and the same instrument. Such counterparts may be delivered by facsimile or other electronic transmission and may be executed by electronic signature complying with the U.S. federal ESIGN Act of 2000 (including by DocuSign or similar service), which shall not impair the validity thereof.
[SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be executed as of the date first written above.
| AVAX ONE TECHNOLOGY LTD. | ||
| By: | ||
| Name: | Peter J. Wylie Jr. | |
| Title: | Interim CEO | |
| By: | ||
| Name: | ||
| Title: |
[Signature page to Letter Agreement (Repayment and Waiver of Debenture)]
Exhibit 10.2
AMENDMENT AND WAIVER
This Amendment and Waiver (this “Agreement”) is made and entered into as of August 5, 2026 (the “Effective Date”) by and between AVAX One Technology Ltd. (formerly known as AgriFORCE Growing Systems Ltd., and referred to in the Note as “AgriFORCE Growth Systems Ltd.”), a British Columbia corporation (the “Company”), and _______________________ (the “Holder” and, together with the Company, the “Parties”). The Holder is an entity managed by ______________.
This Agreement is entered into for the purpose of, among other things, (i) amending that certain 5% Coupon, 10% Original Issue Discount Senior Secured Convertible Debenture, originally issued on October 24, 2025 (the “Note” or “Debenture”), in the original principal amount of $7,700,000, and (ii) waiving the Specified Breach (as defined below) under the Note as of the date hereof. Reference is made to that certain Securities Purchase Agreement, dated as of January 16, 2025, among the Company and the purchasers signatory thereto, including the Holder (as amended, modified or supplemented from time to time, the “SPA”). The Note was originally issued to the Holder pursuant to the Holder’s exercise of its Required Holders’ Additional Investment right set forth in Section 2.4(a) of the SPA. Capitalized terms used herein and not otherwise defined shall have the respective meanings ascribed to such terms in the SPA or the Note, as applicable.
WHEREAS, Jolie Kahn has ceased to serve as Chief Executive Officer of the Company, and such departure constitutes a breach of Section 7(i) of the Note (the “Specified Breach”);
WHEREAS, the Company has changed its corporate name from AgriFORCE Growing Systems Ltd. to AVAX One Technology Ltd.;
WHEREAS, in connection with the SPA and the Note, (i) the Company’s subsidiary, Agriforce Investments, Inc. (“AII”), the Holder (in its capacity as “Lender”) and East West Bank (as “Deposit Holder”) entered into that certain Deposit Account Control Agreement (Blocked Account), dated as of January 14, 2025 (the “DACA”), with respect to blocked deposit account no. 8011006841 maintained at East West Bank (the “Blocked Account”), over which the Holder has exclusive control and a first-priority security interest, and (ii) certain funds have been deposited into and are held in the Blocked Account to secure the obligations under the Note and the other Transaction Documents; and the Parties acknowledge that the DACA is in full force and effect and the Blocked Account has been established and funded;
WHEREAS, the Holder constitutes the Required Holders whose consent is required to amend the Note and to waive the Specified Breach;
WHEREAS, the Company desires to have the Specified Breach under the Note waived by the Holder, and the Holder is willing to grant such waiver in exchange for, and in consideration of, the partial repayment of and the amendments to the Note and the other agreements set forth herein; and
WHEREAS, to effect such waiver, the Parties agree to the covenants and conditions set forth herein.
NOW, THEREFORE, in consideration of the foregoing recitals, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and intending to be legally bound, the Parties agree as follows:
1.
Amendment of Note. Concurrently with the execution and delivery of this Agreement by the Parties, the Note is hereby amended
as set forth in the marked copy of the Note attached hereto as Exhibit A, in which deletions are indicated by red strikethrough text
(indicated textually in the same manner as the following: stricken text) and insertions
are indicated by blue double-underlined text (indicated textually in the same manner as the following: double-underlined
text). Without limiting the foregoing, such amendments include adjusting the principal amount of the Note from $7,700,000 to $8,470,000
(the “Principal”), effective as of the Effective Date immediately prior to the repayment contemplated by Section 2 of this
Agreement and without giving any effect thereto.
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2. Partial Repayment of Funded Principal and Accrued Interest. Within one Business Day following the Effective Date, the Company shall pay to the Holder $1,300,000 (the “Partial Payoff Amount”), representing (a) $1,049,486.11 of the outstanding funded Principal as of the Effective Date, giving effect to the amendment to the Principal contemplated by Section 1 of this Agreement (the “Repaid Principal”) plus (b) $250,513.89 accrued interest thereon immediately prior to the Effective Date. The Partial Payoff Amount shall not originate from the Blocked Account but, rather, shall be delivered by the Company to the Holder by wire transfer of immediately available funds to the account specified, and otherwise pursuant to the instructions provided to, the Company by the Holder, in partial satisfaction of the Company’s obligations to the Holder under the Note as of the Effective Date. Upon the Holder’s receipt of the Partial Payoff Amount, notwithstanding anything to the contrary in the Transaction Documents the Repaid Principal and all accrued interest on the Repaid Principal shall be deemed fully and irrevocably satisfied, discharged, cancelled and released, and the Parties acknowledge and agree that they shall have no rights or obligations with respect thereto, in each case, without any further action by either of the Parties. Notwithstanding the foregoing, until the Partial Payoff Amount is received by the Holder in full, the Repaid Principal and accrued interest may be converted, in whole or in part, by the Holder into Common Stock pursuant to the terms of the Note. The Holder shall promptly execute and deliver such other documents as the Company may reasonably request to evidence such the partial repayment of the Note at the Company’s sole cost and expense and without recourse to, or any representation, warranty or liability of, the Holder. The Company represents and warranties that, after the Partial Payoff Amount is duly received by the Holder pursuant to this Section 2, the outstanding amount of the Note shall be reduced from $8,470,000 to $7,420,513.89, with $5,437,000 in cash balances at the Blocked Account.
3. Waiver of Specified Breach; Release of Related Claims.
| (a) | The Holder hereby irrevocably waives, on a one-time basis, the Specified Breach, including any obligation of the Company to pay any previously requested Event of Default payment, Mandatory Default Amount or Event of Default Redemption Price related to the Specified Breach. |
In furtherance of the foregoing, the Holder, on behalf of itself and its successors, assigns, parents, subsidiaries, Affiliates, officers, directors, employees, agents and attorneys (the “Holder Releasing Parties”), hereby forever, fully, unconditionally and irrevocably waives and releases the Company and each of its successors, assigns, parents, subsidiaries, affiliates, officers, directors, employees, attorneys and agents (collectively, the “Company Releasees”) from any and all claims, liabilities, obligations, debts, causes of action (whether at law or in equity or otherwise), defenses, counterclaims, setoffs, of any kind, whether known or unknown, whether liquidated or unliquidated, matured or unmatured, fixed or contingent, arising solely and directly out of the existence of the Specified Breach itself (collectively, the “Company Claims”). The Holder, on behalf of the Holder and each of the other Holder Releasing Parties, further agrees that it shall not, and it shall cause each of the other Holder Releasing Parties to not, commence, institute, assist or prosecute any lawsuit, action or other proceeding, whether judicial, administrative or otherwise, to prosecute, collect or enforce any Company Claim. Notwithstanding anything to the contrary in any of the Transaction Documents, the Holder Releasing Parties will promptly reimburse the Company Releasees for all costs and expenses, including attorney’s fees, paid or incurred, in defending against any Company Claims. Notwithstanding anything to the contrary in this paragraph, the Company Claims do not include, and the Holder does not release, waive, or impair, any right, claim, remedy or defense of the Holder or any Holder Releasing Party (i) to receive payment of, or conversion or delivery of Conversion Shares in respect of, any principal, interest, redemption amounts or other amounts owing under the Note or any other Transaction Document; (ii) arising from any failure by the Company to perform or comply with any of its obligations under the Note or any other Transaction Document (including any failure to make any payment when due or to timely deliver Conversion Shares), whether occurring before, on or after the date hereof; (iii) arising from any Event of Default other than the Specified Breach; (iv) in respect of the Holder’s security interests in, control over, or other rights with respect to the Blocked Account or any other collateral; or (v) arising from the fraud, willful misconduct or bad faith of any Company Releasee. For the avoidance of doubt, no failure by the Company to make any payment or deliver any Conversion Shares, and no other breach by the Company of its obligations under the Transaction Documents, shall be deemed a Company Claim or released hereunder by reason of being related to, connected with, or arising out of the Specified Breach.
| (b) | This waiver is limited precisely as written, relates solely, on a one-time basis, to the Specified Breach, and shall not be construed as a waiver of any other breach of the Company’s obligations under the Note, including with respect to any other Event of Default (or any other event that with the passage of time or the giving of notice would constitute an Event of Default), whether now existing or hereafter arising, or as a continuing waiver of Section 7(i) of the Note (as amended hereby). |
4. Several Exercise of Holder Rights; Required Holders. Notwithstanding anything to the contrary in the SPA, the Note or any other Transaction Document (including any provision requiring the consent, approval, waiver, direction or other action of the “Required Holders”), the Company agrees that, from and after the Effective Date, the Holder may, without the consent, approval or joinder of any other holder of Debentures, exercise, amend, waive, consent to or direct any and all rights, remedies and provisions under the Note and the other Transaction Documents solely with respect to the Holder’s own Debenture and the Holder’s own rights thereunder, and the Company shall give effect to and honor any such action by the Holder as if the Holder alone constituted the Required Holders with respect thereto. Solely for such purposes, each reference to “Required Holders” in the Note and the other Transaction Documents, as applied to any matter affecting solely the Holder’s Debenture or the Holder’s rights, shall be deemed to refer to the Holder. Nothing in this Section shall (i) require the Holder to obtain the consent of, or act jointly with, any other holder, or (ii) impair the right of any other holder to act severally with respect to such other holder’s own Debenture.
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5. Successor; Reaffirmation; Credit-Claim Standing. The Company confirms that it has changed its corporate name from AgriFORCE Growing Systems Ltd. to AVAX One Technology Ltd., that AVAX One Technology Ltd. is one and the same legal entity as AgriFORCE Growing Systems Ltd., and that AVAX One Technology Ltd. is the continuing obligor and successor with respect to all obligations of the Company under the Note and each other Transaction Document. The Company (as AVAX One Technology Ltd.) hereby ratifies, reaffirms and confirms each of its obligations under the Note (as amended hereby), the SPA and each other Transaction Document to which it is a party, all of which remain in full force and effect and constitute the legal, valid and binding obligations of the Company, enforceable against the Company in accordance with their respective terms. The Company acknowledges and agrees that the Note (as amended hereby) constitutes a valid, binding and enforceable indebtedness and credit claim of the Company and, as guaranteed by the Company’s subsidiaries pursuant to the Subsidiary Guarantee, of such subsidiaries. The Company and each of its subsidiaries reaffirms the Subsidiary Guarantee and each other guaranty, security or collateral document delivered in connection with the Note, in each case as a continuing obligation guaranteeing and/or securing the Note as amended hereby, and agrees that none of the amendments effected hereby impairs, releases or discharges any such guaranty, security interest or credit claim. The Company shall promptly execute and deliver, and shall cause each of its subsidiaries to execute and deliver, such further confirmations, reaffirmations and documents as the Holder may reasonably request to evidence the foregoing. The Company further acknowledges and agrees, and shall cause Agriforce Investments, Inc. to acknowledge and agree, that the DACA remains in full force and effect and that the Holder retains a first-priority, perfected security interest in, and exclusive control over, the Blocked Account and all funds and property credited thereto, in each case securing the Note (as amended hereby) and the other Transaction Documents, and that none of the amendments effected hereby impairs, releases or subordinates the DACA, the Blocked Account or such security interest or control.
6. Release; Non-Disparagement.
(a) In further consideration of the Holder’s execution of this Agreement, the Company, on behalf of itself and its successors, assigns, parents, subsidiaries, Affiliates, officers, directors, employees, agents and attorneys, hereby forever, fully, unconditionally and irrevocably waives and releases _____________, _______________, the Holder and each of their respective successors, assigns, parents, subsidiaries, affiliates, officers, directors, employees, attorneys and agents (collectively, the “ _____________ Releasees”) from any and all claims, liabilities, obligations, debts, causes of action (whether at law or in equity or otherwise), defenses, counterclaims, setoffs, of any kind, whether known or unknown, whether liquidated or unliquidated, matured or unmatured, fixed or contingent, directly or indirectly arising out of, connected with, resulting from or related to any act or omission by any ____________ Releasee with respect to the Transaction Documents, the transactions contemplated thereby or any enforcement or attempted enforcement of the Transaction Documents by any ____________ Releasee and any transactions in the Common Stock effected by any _____________ Releasee (collectively, the “ _________ Claims”). The Company further agrees that it shall not commence, institute, assist or prosecute any lawsuit, action or other proceeding, whether judicial, administrative or otherwise, to prosecute, collect or enforce any _______________ Claim. Notwithstanding anything to the contrary in any of the Transaction Documents, the Company will promptly reimburse the Holder for all costs and expenses, including attorney’s fees, paid or incurred, in defending against any ______________ Claims.
(b) The Company, on behalf of itself, its subsidiaries, and each of their respective officers, directors, employees, representatives and agents, agrees that it will not at any time make, publish or communicate to any Person any Disparaging (as defined below) remarks, comments or statements concerning the Holder, its affiliates and/or principals, including but not limited to ________________, the Holder’s investment manager, and _________________, its managing member, or their partners, members, employees, personnel, agents or representatives. For purposes of this Agreement, “Disparaging” remarks, comments or statements are those that impugn, or threaten to impugn, the character, honesty, integrity, morality, legality, business acumen or abilities of the individual or Person being disparaged. Disparaging remarks shall expressly include, but not be limited to, any suggestion that the Holder violates or operates in contravention of federal or state securities laws, that its agreements are void or invalid, or any other remark, comment or statement that undermines the Holder’s reputation (whether made or given orally, in writing, in any digital medium, in any filing with any Governmental Entity or in any other manner to any Person). The Company further agrees that it shall be jointly and severally liable under this Section 6(b) for any Disparaging remarks, comments or statements of its officers, directors and/or employees.
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7. 8-K Filing; Cleansing. Notwithstanding Section 10 of the Note, the Company shall, by no later than 5:00pm., New York City time, on the first Business Day following the Effective Date of this Agreement, file a Current Report on Form 8-K disclosing all material terms of the transactions contemplated hereby to the extent required, and attaching this Agreement (including Exhibit A), or a form hereof, as appropriate, as an exhibit thereto (the “8-K Filing”). Immediately following the filing of the 8-K Filing, the Holder shall not be in possession of any material, non-public information received from the Company or any of its subsidiaries or any of their respective officers, directors, employees, affiliates or agents that is not disclosed in the 8-K Filing. The Company shall not, and shall cause its officers, directors, employees, affiliates and agents not to, provide the Holder with any material, non-public information regarding the Company from and after the filing of the 8-K Filing without the express written consent of the Holder. The Company shall not disclose the name of the Holder in any filing, announcement, release or otherwise, unless such disclosure is required by law, rule or regulation or unless the Holder otherwise consents in writing.
8. Amendments; Waivers; No Other Amendment. No provision of this Agreement may be waived, modified, supplemented or amended except in a written instrument signed by the Company and the Holder. 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. Except as expressly modified by this Agreement, all terms, conditions and covenants contained in the Note and the other Transaction Documents shall remain in full force and effect. Each of this Agreement and the Note (as amended hereby) is a “Transaction Document” for all purposes of the SPA, the Note and the other Transaction Documents, and all references in the Transaction Documents to the “Transaction Documents” shall be deemed to include this Agreement and the Note as amended hereby. Further, all references in the Note to “the Debenture, “ “hereof, “ “hereunder” or words of similar import shall, following the Effective Date of this Agreement, be deemed to refer to the Debenture as amended by this Agreement.
9. Interpretation; Notices; Governing Law. Section 9(a) (Notices), Section 9(d) (Governing Law), Section 9(f) (Severability) and Section 9(i) (Headings) of the Debenture shall apply to this Agreement mutatis mutandis.
10. Counterparts. This Agreement may be executed in two or more counterparts, each of which when so executed and delivered to the other party shall be deemed an original. The executed page(s) from each original may be joined together and attached to one such original and shall thereupon constitute one and the same instrument. Such counterparts may be delivered by facsimile or other electronic transmission and may be executed by electronic signature complying with the U.S. federal ESIGN Act of 2000 (including by DocuSign or similar service), which shall not impair the validity thereof.
[SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be executed as of the date first written above.
| AVAX ONE TECHNOLOGY LTD. | ||
| By: | ||
| Name: | Peter J. Wylie Jr. | |
| Title: | Interim CEO | |
| By: | ||
| Name: | ||
| Title: |
| 5 |
EXHIBIT A
MARKED COPY OF THE NOTE SHOWING AMENDMENTS PURSUANT TO THIS AGREEMENT
REDLINED COPY - 5% COUPON, 10% ORIGINAL ISSUE DISCOUNT SENIOR SECURED CONVERTIBLE DEBENTURE
Marked to show the amendments effected by the Amendment and Waiver Agreement. Deletions are shown in red strikethrough; insertions are shown in blue double-underline. This marked copy is for review only and must be verified against the executed Debenture.
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. 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: October 24, 2025
Original Conversion Price (subject to adjustment herein): $2.41
$7,700,000$8,470,000
5% COUPON, 10% ORIGINAL ISSUE DISCOUNT SENIOR SECURED CONVERTIBLE DEBENTURE DUE OCTOBER 24, 2026
THIS
5% Coupon, 10% ORIGINAL ISSUE DISCOUNT SENIOR SECURED CONVERTIBLE DEBENTURE is one of a series of duly authorized and validly issued
5% Coupon, 10% Original Issue Discount Senior Secured Convertible Debentures of AgriFORCE Growth SystemsAVAX
One Technology Ltd., a British Columbia corporation (the “Company”), having its principal place of business at 800-525
West 8th Avenue Vancouver, BC V5Z 1C6, designated as its 5% Coupon, 10% Original Issue Discount Senior Secured Convertible Debenture
due October 124,
2026 (this debenture, the “Debenture” and, collectively with the other debentures of such series, the “Debentures”).
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 $7,700,000$8,470,000
on October 24, 2026 (the “Maturity Date”) or such earlier or later date as this Debenture 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 Debenture in accordance with the provisions hereof. The Maturity Date may be extended by six months (to April 24, 2027) at the election
of the Company by paying, at the end of month 12 after the Original Issue Date, a sum equal to six months interest on the principal amount
outstanding at the end of such month 12 at the rate of 8% per annum. The obligations under this Debenture are unsecured as to collateral
but are subject to the guaranties delivered by the Company’s subsidiaries, as set forth in the Securities Purchase Agreement (as
defined below). This Debenture is subject to the following additional provisions:
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Section 1. Definitions.
For the purposes hereof, in addition to the terms defined elsewhere in this Debenture, (a) capitalized terms not otherwise defined herein shall have the meanings set forth in the Purchase Agreement and (b) the following terms shall have the following meanings:
“Alternate Consideration” shall have the meaning set forth in Section 5(e).
“Bankruptcy Event” means any of the following events: (a) the Company or any Significant Subsidiary (as such term is defined in Rule 1-02(w) of Regulation S-X) thereof commences a case or other proceeding under any bankruptcy, reorganization, arrangement, adjustment of debt, relief of debtors, dissolution, insolvency or liquidation or similar law of any jurisdiction relating to the Company or any Significant Subsidiary thereof, (b) there is commenced against the Company or any Significant Subsidiary thereof any such case or proceeding that is not dismissed within 60 days after commencement, (c) the Company or any Significant Subsidiary thereof is adjudicated insolvent or bankrupt or any order of relief or other order approving any such case or proceeding is entered, (d) the Company or any Significant Subsidiary thereof suffers any appointment of any custodian or the like for it or any substantial part of its property that is not discharged or stayed within 60 calendar days after such appointment, (e) the Company or any Significant Subsidiary thereof makes a general assignment for the benefit of creditors, (f) the Company or any Significant Subsidiary thereof calls a meeting of its creditors with a view to arranging a composition, adjustment or restructuring of its debts, (g) the Company or any Significant Subsidiary thereof admits in writing that it is generally unable to pay its debts as they become due, (h) the Company or any Significant Subsidiary thereof, by any act or failure to act, expressly indicates its consent to, approval of or acquiescence in any of the foregoing or takes any corporate or other action for the purpose of effecting any of the foregoing.
“Base Conversion Price” shall have the meaning set forth in Section 5(b).
“Beneficial Ownership Limitation” shall have the meaning set forth in Section 4(d).
“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 are generally are open for use by customers on such day.
“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 49% of the voting securities of the Company (other than by means of conversion or exercise of the Debentures and the Securities issued together with the Debentures), (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 51% of the aggregate voting power of the Company or the successor entity of such transaction, (c) the Company (and all of its Subsidiaries, taken as a whole) 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 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.
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“Closing Sale Price” means, for any security as of any date, the last closing trade price for such security on the principal Trading Market, as reported by Bloomberg L.P., or, if the principal Trading Market begins to operate on an extended hours basis and does not designate the closing trade price, then the last trade price at 4:00 p.m., New York City time, as reported by Bloomberg L.P. If the Closing Sale Price cannot be so calculated on such date, it shall be the fair market value of a share of Common Stock as mutually determined by the Company and the Holder. All such determinations shall be appropriately adjusted for any stock dividend, stock split, stock combination or other similar transaction occurring during the applicable period
“Conversion” shall have the meaning ascribed to such term in Section 4.
“Conversion Amount” shall have the meaning ascribed to such term in Section 8.
“Conversion Date” shall have the meaning set forth in Section 4(a).
“Conversion Price” shall have the meaning set forth in Section 4(b).
“Conversion Schedule” means the Conversion Schedule in the form of Schedule 1 attached hereto.
“Conversion Shares” means, collectively, the shares of Common Stock issuable upon conversion of this Debenture in accordance with the terms hereof.
“Debenture Register” shall have the meaning set forth in Section 2(c).
“Dilutive Issuance” shall have the meaning set forth in Section 5(b).
“Dilutive Issuance Notice” shall have the meaning set forth in Section 5(b).
“Effectiveness Period” shall have the meaning set forth in the Registration Rights Agreement.
“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 Debenture, (c)(i) there is an effective Registration Statement pursuant
to which the Holder is permitted to utilize the prospectus thereunder to resell all of the shares of Common Stock issuable pursuant to
the Transaction Documents (and the Company believes, in good faith, that such effectiveness will continue uninterrupted for the foreseeable
future) or (ii) all of the Conversion Shares issuable pursuant to the Transaction Documents (and shares issuable in lieu of cash payments
of interest) may be resold pursuant to Rule 144 without volume or manner-of-sale restrictions or current public information requirements
as determined by the counsel to the Company as set forth in a written opinion letter to such effect, addressed and acceptable to the
Transfer Agent and the Holder, (d) 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), (e) there is a sufficient number of authorized but
unissued and otherwise unreserved shares of Common Stock for the issuance of all of the shares then issuable pursuant to the Transaction
Documents, (f) there is no existing Event of Default and no existing event which, with the passage of time or the giving of notice, would
constitute an Event of Default, (g) the issuance of the shares in question (or, in the case of a Monthly Redemption, the shares issuable
upon conversion in full of the Monthly Redemption Amount) to the Holder would not violate the limitations set forth in Section 4(d) herein,
(h) there has been no public announcement of a pending or proposed Fundamental Transaction or Change of Control Transaction that has
not been consummated, (i) the applicable Holder is not in possession of any information provided by the Company, any of its Subsidiaries,
or any of their officers, directors, employees, agents or Affiliates, that constitutes, or may constitute, material non-public information
and (j) for 17 out of 20 Trading Days, each Trading Day in a period of 20 consecutive
ending on the Trading Days
prior to the applicable date of determination in
question, the daily trading volume for the Common Stock on the principal Trading Market exceeds $[750,000]$750,000
per Trading Day, and the average daily trading volume during such period exceeds $750,000.
| A-3 |
“Event of Default” shall have the meaning set forth in Section 8(a).
“Event of Default Redemption Notice” shall have the meaning set forth in Section 8(b).
“Event of Default Redemption Price” shall have the meaning set forth in Section 8(b).
“Fundamental Transaction” shall have the meaning set forth in Section 5(e).
“Interest Payment Date” shall have the meaning set forth in Section 2(a).
“Issuable Maximum” shall have the meaning set forth in Section 4(e).
“Late Fees” shall have the meaning set forth in Section 2(d).
“Mandatory Default Amount” means the sum of (a) the greater of (i) the outstanding principal amount of this Debenture, plus all accrued and unpaid interest hereon, divided by the Conversion Price on the date the Mandatory Default Amount is either (A) demanded (if demand or notice is required to create an Event of Default) or otherwise due or (B) paid in full, whichever has a lower Conversion Price, multiplied by the VWAP on the date the Mandatory Default Amount is either (x) demanded or otherwise due or (y) paid in full, whichever has a higher VWAP, or (ii) 120% of the outstanding principal amount of this Debenture, plus 100% of accrued and unpaid interest hereon, and (b) all other amounts, costs, expenses and liquidated damages due in respect of this Debenture and the other Transaction Documents.
“Monthly Conversion Period” shall have the meaning set forth in Section 6(b) hereof.
“Monthly Conversion Price” shall have the meaning set forth in Section 6(b) hereof.
“Monthly Redemption” means the redemption of this Debenture pursuant to Section 6(b) hereof.
“Monthly
Redemption Amount” means, as to a Monthly Redemption, 1/25th1/10th
of the original principal amount of this Debenture, plus accrued but unpaid interest, liquidated damages and any other amounts then owing
to the Holder in respect of this Debenture. At the Company’s election, if the Equity Conditions are met with respect to such Monthly
Redemption, the Monthly Redemption Amount may be paid in cash or in registered shares of the Company’s Common Stock, as set forth
in Section 6(b). If the Company elects to extend the Maturity Date as provided by the preamble to this Debenture, the remaining 136
Monthly Redemption Amounts shall each be 1/13th1/6th
of the remaining outstanding Principal Amount of the Debenture on each such Monthly Redemption Date.
“Monthly Redemption Date” means the 1st of each month, commencing on December 1, 2025 and terminating upon the full redemption of this Debenture, and if the Debenture is issued in a tranche other than the initial tranche, the
Monthly Redemption Date shall commence on the three month anniversary of the date of issuance of the Debenture.
“Monthly Redemption Notice” shall have the meaning set forth in Section 6(b) hereof.
| A-4 |
“Delaware Courts” shall have the meaning set forth in Section 9(d).
“Notice of Conversion” shall have the meaning set forth in Section 4(a).
“Optional Redemption” shall have the meaning set forth in Section 6(a).
“Optional Redemption Amount” means the sum of (a) 105% of the then outstanding principal amount of the Debenture (110% after 12 months from the Original Issue Date), (b) accrued but unpaid interest and (c) all liquidated damages and other amounts due in respect of the Debenture.
“Optional Redemption Date” shall have the meaning set forth in Section 6(a).
“Optional Redemption Notice” shall have the meaning set forth in Section 6(a).
“Optional Redemption Notice Date” shall have the meaning set forth in Section 6(a).
“Optional Redemption Period” shall have the meaning set forth in Section 6(a).
“Original Issue Date” means the date of the first issuance of the Debentures, regardless of any transfers of any Debenture and regardless of the number of instruments which may be issued to evidence such Debentures.
“Permitted Indebtedness” means (a) the indebtedness evidenced by the Debentures, (b) the Indebtedness existing on the Original Issue Date and set forth on Schedule 3.1(bb) attached to the Purchase Agreement, (c) trade debt, lease obligations and purchase money indebtedness of up to $1,000,000, in the aggregate, incurred in connection with the acquisition of capital assets and lease obligations with respect to newly acquired or leased assets, (d) indebtedness that (i) is expressly subordinate to the Debentures pursuant to a written subordination agreement with the Purchasers that is acceptable to each Purchaser in its sole and absolute discretion and (ii) matures at a date later than the 91st day following the Maturity Date and (e) an Indebtedness which is an Exempt Issuance.
“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 under clauses (a), (b), (d) and (e) thereunder, and (d) Liens incurred in connection with Permitted Indebtedness under clause (c) thereunder, provided that such Liens are not secured by assets of the Company or its Subsidiaries other than the assets so acquired or leased.
“Purchase Agreement” means the Securities Purchase Agreement, dated as of January 16, 2025 among the Company and the original Holders, as amended, modified or supplemented from time to time in accordance with its terms. All capitalized terms used and not defined herein are used as defined in the Purchase Agreement, and the terms of this Debenture are used as defined in the Purchase Agreement and all representations and warranties made in the Purchase Agreement are reaffirmed as of the date hereof.
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“Registration Rights Agreement” means the Registration Rights Agreement, dated as of the date of the Purchase Agreement, among the Company and the original Holders, in the form of Exhibit B attached to the Purchase Agreement.
“Registration Statement” means a registration statement meeting the requirements set forth in the Registration Rights Agreement and covering the resale of the Underlying Shares by each Holder as provided for in the Registration Rights Agreement.
“Securities Act” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.
“Share Delivery Date” shall have the meaning set forth in Section 4(c)(ii).
“Successor Entity” shall have the meaning set forth in Section 5(e).
“Threshold Period” shall have the meaning set forth in Section 6(d).
“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 (or any successors to any of the foregoing).
“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 on 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.
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Section 2. Interest.
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 Debenture at the rate of 5% per annum for the first 12 months following the Original Issue Date and 8% per annum thereafter until the Maturity Date, payable on each Monthly Redemption Date (as to that principal amount then being redeemed), on each Conversion Date (as to that principal amount then being converted), 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) 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 (other than the Interest Conversion Shares issued prior to an Interest Notice Period) 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 Debenture is registered on the records of the Company regarding registration and transfers of this Debenture (the “Debenture Register”). Except as otherwise provided herein, if at any time the Company pays interest partially in cash and partially in shares of Common Stock to the holders of the Debentures, then such payment of cash shall be distributed ratably among the holders of the then-outstanding Debentures based on their (or their predecessor’s) initial purchases of Debentures pursuant to the Purchase Agreement.
c) Late Fee. All overdue accrued and unpaid interest to be paid hereunder shall entail a late fee at an interest rate equal to the lesser of 18% per annum or the maximum rate permitted by applicable law (the “Late Fees”) which shall accrue daily from the date such interest is due hereunder through and including the date of actual payment in full. Such Late Fee shall include any interest due and owing hereunder and shall include any other interest otherwise owed and not be in addition to any other interest otherwise owed.
d) Prepayment. Except as otherwise set forth in this Debenture, the Company may not prepay any portion of the principal amount of this Debenture if the Holder is a Required Holder without the prior written consent of such Required Holder. The Company must apply 50% of all gross proceeds (less sales commissions) from the sale of its Common Stock from an at-the-market offering (as defined in Rule 415 under the Securities Act) or from one or more public offerings with gross proceeds of $3,000,000 or more in the aggregate to prepay this Debenture (pro-rated among all Debentures), and shall be permitted to so prepay this Debenture notwithstanding any contrary provision of this Debenture or the Purchase Agreement. Such prepayments shall be made on a weekly basis (if any sales have been made during such week) on the Wednesday of the following week. The Company shall give notice to the Holder on the Monday of the following week that a prepayment will be made on that Wednesday, with the amount of such prepayment. Notwithstanding the foregoing, a Holder may, in its sole discretion, waive (in whole or in part) the Company’s notice or obligation, as applicable, to prepay its Debenture of any such proceeds from an at-the-market offering or from any such public offering, by written notice to the Company (which notice may be delivered by email), in which case the amount so waived shall not be applied to prepay such Holder’s Debenture and the Company shall have no obligation or right to so prepay such Holder’s Debenture to the extent so waived.
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Section 3. Registration of Transfers and Exchanges.
a) Different Denominations. This Debenture is exchangeable for an equal aggregate principal amount of Debentures 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 Debenture 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 Debenture Register. Prior to due presentment for transfer to the Company of this Debenture, the Company and any agent of the Company may treat the Person in whose name this Debenture is duly registered on the Debenture Register as the owner hereof for the purpose of receiving payment as herein provided and for all other purposes, whether or not this Debenture is overdue, and neither the Company nor any such agent shall be affected by notice to the contrary.
Section 4. Conversion.
a) Voluntary Conversion. At any time after the Original Issue Date until this Debenture is no longer outstanding, this Debenture 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 Debenture to be converted and the date on which such conversion shall be effected (such date, the “Conversion Date”). If no Conversion Date is specified in a Notice of Conversion, the Conversion Date shall be the date that such Notice of Conversion is deemed delivered hereunder. No ink-original Notice of Conversion shall be required, nor shall any medallion guarantee (or other type of guarantee or notarization) of any Notice of Conversion form be required. To effect conversions hereunder, the Holder shall not be required to physically surrender this Debenture to the Company unless the entire principal amount of this Debenture, plus all accrued and unpaid interest thereon, has been so converted in which case the Holder shall surrender this Debenture as promptly as is reasonably practicable after such conversion without delaying the Company’s obligation to deliver the shares on the Share Delivery Date. Conversions hereunder shall have the effect of lowering the outstanding principal amount of this Debenture 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 one (1) Business Day of delivery of such Notice of Conversion. In the event of any dispute or discrepancy, the records of the Holder shall be controlling and determinative in the absence of manifest error. The Holder, and any assignee by acceptance of this Debenture, acknowledge and agree that, by reason of the provisions of this paragraph, following conversion of a portion of this Debenture, the unpaid and unconverted principal amount of this Debenture may be less than the amount stated on the face hereof.
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b) Conversion Price. The conversion price in effect on any Conversion Date shall be equal to $2.41, subject to adjustment herein (the “Conversion Price”).
c) Mechanics of Conversion.
i.
Conversion Shares Issuable Upon Conversion of PrincipalConversion
Amount. The number of Conversion Shares issuable upon a conversion hereunder shall be determined by the quotient obtained by dividing
(x) the outstanding principal amountConversion
Amount of this Debenture to be converted, plus
all accrued and unpaid interest thereon, by (y) the Conversion
Price.
ii. Delivery of Conversion Shares Upon Conversion. Not later than the earlier of (i) two (2) Trading Days and (ii) the number of Trading Days comprising the Standard Settlement Period (as defined below) after each Conversion Date (the “Share Delivery Date”), the Company shall deliver, or cause to be delivered, to the Holder (A) the Conversion Shares which, on or after the earlier of (i) the six month anniversary of the Original Issue Date or (ii) the Effective Date, shall be free of restrictive legends and trading restrictions (other than those which may then be required by the Purchase Agreement) representing the number of Conversion Shares being acquired upon the conversion of this Debenture and (B) a bank check in the amount of accrued and unpaid interest. On or after the earlier of (i) the six month anniversary of the Original Issue Date or (ii) the Effective Date, the Company shall deliver any Conversion Shares required to be delivered by the Company under this Section 4(c) electronically through the Depository Trust Company or another established clearing corporation performing similar functions. 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 Conversion.
iii. Failure to Deliver Conversion Shares. If, in the case of any Notice of Conversion, such Conversion Shares 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 Conversion Shares, to rescind such Conversion, in which event the Company shall promptly return to the Holder any original Debenture delivered to the Company and the Holder shall promptly return to the Company the Conversion Shares 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 Debenture 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. In the event the Holder of this Debenture shall elect to convert any or all of the outstanding principal amount hereof, the Company may not refuse conversion based on any claim that the Holder or anyone associated or affiliated with the Holder has been engaged in any violation of law, agreement or for any other reason, unless an injunction from a court, on notice to Holder, restraining and or enjoining conversion of all or part of this Debenture shall have been sought and obtained, and the Company posts a surety bond for the benefit of the Holder in the amount of 150% of the outstanding principal amount of this Debenture, which is subject to the injunction, which bond shall remain in effect until the completion of arbitration/litigation of the underlying dispute and the proceeds of which shall be payable to the Holder to the extent it obtains judgment. In the absence of such injunction, the Company shall issue Conversion Shares or, if applicable, cash, upon a properly noticed conversion. If the Company fails for any reason to deliver to the Holder such Conversion Shares 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, $10 per Trading Day (increasing to $20 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 Conversion Shares 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 8 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.
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v. Compensation for Buy-In on Failure to Timely Deliver Conversion Shares 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 Conversion Shares 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 Debenture 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 Debenture 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 Conversion Shares upon conversion of this Debenture as required pursuant to the terms hereof.
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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 for the sole purpose of issuance upon conversion of this Debenture and payment of interest on this Debenture, 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 Debentures), 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 Debenture 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 and, if the Registration Statement is then effective under the Securities Act, shall be registered for public resale in accordance with such Registration Statement (subject to such Holder’s compliance with its obligations under the Registration Rights Agreement).
vii. Fractional Shares. No fractional shares or scrip representing fractional shares shall be issued upon the conversion of this Debenture. 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 Conversion Shares on conversion of this Debenture 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 Conversion Shares, 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 Conversion Shares upon conversion in a name other than that of the Holder of this Debenture so converted and the Company shall not be required to issue or deliver such Conversion Shares 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 and all fees to the Depository Trust Company (or another established clearing corporation performing similar functions) required for same-day electronic delivery of the Conversion Shares.
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d) Holder’s Conversion Limitations. The Company shall not effect any conversion of this Debenture, and a Holder shall not have the right to convert any portion of this Debenture, 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 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 conversion of this Debenture 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) conversion of the remaining, unconverted principal amount of this Debenture 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 (including, without limitation, any other Debentures or the Warrants) 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 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 Debenture 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 Debenture 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 Debenture may be converted (in relation to other securities owned by the Holder together with any Affiliates or Attribution Parties) and which principal amount of this Debenture is convertible, 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 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 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 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 Debenture, by the Holder or its Affiliates since the date as of which such number of outstanding shares of Common Stock was reported. The “Beneficial Ownership Limitation” shall be 4.99% of the number of shares of the Common Stock outstanding immediately after giving effect to the issuance of shares of Common Stock issuable upon conversion of this Debenture. The Holder, upon notice to the Company, may increase or decrease the Beneficial Ownership Limitation provisions of this Section 4(d), provided that the Beneficial Ownership Limitation in no event exceeds 9.99% of the number of shares of the Common Stock outstanding immediately after giving effect to the issuance of shares of Common Stock upon conversion of this Debenture 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 Debenture.
e) Issuance Limitations. Notwithstanding anything herein to the contrary, if the Company has not obtained Shareholder Approval, then the Company may not issue, upon conversion of this Debenture, a number of shares of Common Stock which, when aggregated with any shares of Common Stock issued on or after the Original Issue Date and prior to such Conversion Date (i) in connection with the conversion of any Debentures issued pursuant to the Purchase Agreement, (ii) in connection with the exercise of any Warrants issued pursuant to the Purchase Agreement and (iii) in connection with any warrants issued to any registered broker-dealer as a fee in connection with the issuance of the Securities pursuant to the Purchase Agreement, would exceed ______ shares of Common Stock (subject to adjustment for forward and reverse stock splits, recapitalizations and the like) (such number of shares, the “Issuable Maximum”). Each Holder shall be entitled to a portion of the Issuable Maximum equal to the quotient obtained by dividing (x) the original principal amount of the Holder’s Debenture by (y) the aggregate original principal amount of all Debentures issued on the Original Issue Date to all Holders. In addition, each Holder may allocate its pro-rata portion of the Issuable Maximum among Debentures and Warrants held by it in its sole discretion. Such portion shall be adjusted upward ratably in the event a Holder no longer holds any Debentures or Warrants and the amount of shares issued to the Holder pursuant to the Holder’s Debentures and Warrants was less than the Holder’s pro-rata share of the Issuable Maximum. For avoidance of doubt, unless and until any required Shareholder Approval is obtained and effective, warrants issued to any registered broker-dealer as a fee in connection with the Securities issued pursuant to the Purchase Agreement as described in clause (iii) above shall provide that such warrants shall not be allocated any portion of the Issuable Maximum and shall be unexercisable unless and until such Shareholder Approval is obtained and effective.
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Section 5. Certain Adjustments.
a) Stock Dividends and Stock Splits. If the Company, at any time while this Debenture 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 Debentures), (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 Debenture 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 simultaneously with the consummation
(or, if earlier, the announcement) of each Dilutive Issuance the Conversion Price shall be reduced to equal the Base Conversion Price,
provided that the Base Conversion Price shall not be less than $0.150 (subject to adjustment for reverse and forward stock splits, recapitalizations
and similar transactions following the date of the Purchase Agreement). 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 the Trading Day following the issuance of any Common Stock or Common Stock Equivalents subject to this Section
5(b), indicating therein the applicable issuance price, or applicable reset price, exchange price, conversion price and other pricing
terms (such notice, the “Dilutive Issuance Notice”). For purposes of clarification, whether or not the Company provides a
Dilutive Issuance Notice pursuant to this Section 5(b), upon the occurrence of any Dilutive Issuance, the Holder is entitled to receive
a number of Conversion Shares based upon the Base Conversion Price on or after the date of such Dilutive Issuance, regardless of whether
the Holder accurately refers to the Base Conversion Price in the Notice of Conversion.
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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 Debenture (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, that, 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 Debenture 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 Debenture, 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 conversion of this Debenture (without regard to any limitations on conversion 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, that, to the extent that the Holder’s right to participate in any such Distribution would result in the Holder exceeding the Beneficial Ownership Limitation, then the Holder shall not be entitled to participate in such Distribution to such extent (or in the beneficial ownership of any shares of Common Stock as a result of such Distribution to such extent) and the portion of such Distribution shall be held in abeyance for the benefit of the Holder until such time, if ever, as its right thereto would not result in the Holder exceeding the Beneficial Ownership Limitation).
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e) Fundamental Transaction. If, at any time while this Debenture is outstanding, (i) the Company, directly or indirectly, in one or more related transactions effects any merger or consolidation or plan of arrangement of the Company with or into another Person, (ii) the Company (and all of its Subsidiaries, taken as a whole), 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, merger 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 conversion of this Debenture, the Holder shall have the right to receive, for each Conversion Share that would have been issuable upon such conversion immediately prior to the occurrence of such Fundamental Transaction (without regard to any limitation in Section 4(d) on the conversion of this Debenture), 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 Debenture is convertible immediately prior to such Fundamental Transaction (without regard to any limitation in Section 4(d) on the conversion of this Debenture). For purposes of any such conversion, the determination of the Conversion Price shall be appropriately adjusted to apply to such Alternate Consideration based on the amount of Alternate Consideration issuable in respect of one (1) share of Common Stock in such Fundamental Transaction, and the Company shall apportion the Conversion Price among the Alternate Consideration in a reasonable manner reflecting the relative value of any different components of the Alternate Consideration. If holders of Common Stock are given any choice as to the securities, cash or property to be received in a Fundamental Transaction, then the Holder shall be given the same choice as to the Alternate Consideration it receives upon any conversion of this Debenture 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 Debenture and the other Transaction Documents (as defined in the Purchase Agreement) in accordance with the provisions of this Section 5(e) pursuant to written agreements in form and substance reasonably satisfactory to the Holder and approved by the Holder (without unreasonable delay) prior to such Fundamental Transaction and shall, at the option of the holder of this Debenture, deliver to the Holder in exchange for this Debenture a security of the Successor Entity evidenced by a written instrument substantially similar in form and substance to this Debenture which is convertible for a corresponding number of shares of capital stock of such Successor Entity (or its parent entity) equivalent to the shares of Common Stock acquirable and receivable upon conversion of this Debenture (without regard to any limitations on the conversion of this Debenture) prior to such Fundamental Transaction, and with a conversion price which applies the conversion price hereunder to such shares of capital stock (but taking into account the relative value of the shares of Common Stock pursuant to such Fundamental Transaction and the value of such shares of capital stock, such number of shares of capital stock and such conversion price being for the purpose of protecting the economic value of this Debenture 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 Debenture 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 Debenture and the other Transaction Documents with the same effect as if such Successor Entity had been named as the Company herein.
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f) Calculations. All calculations under this Section 5 shall be made to the nearest cent or the nearest 1/100th of a share, as the case may be. For purposes of this Section 5, the number of shares of Common Stock deemed to be issued and outstanding as of a given date shall be the sum of the number of shares of Common Stock (excluding any treasury shares of the Company) issued and outstanding.
g) Adjustment by the Company. Subject to the rules and regulation of the Principal Trading Market, the Company may at any time during the term of this Debenture, with the prior written consent of 75% of the initial Purchasers, reduce the then current Conversion Price of each of the Debentures to any amount and for any period of time deemed appropriate by the board of directors of the Company.
h) 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 (and all of its Subsidiaries, taken as a whole) 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 Debenture, and shall cause to be delivered to the Holder at its last address as it shall appear upon the Debenture Register, at least twenty (20) calendar days prior to the applicable record or effective date hereinafter specified, a notice stating (x) the date on which a record is to be taken for the purpose of such dividend, distribution, redemption, rights or warrants, or if a record is not to be taken, the date as of which the holders of the Common Stock of record to be entitled to such dividend, distributions, redemption, rights or warrants are to be determined or (y) the date on which such reclassification, consolidation, merger, sale, transfer or share exchange is expected to become effective or close, and the date as of which it is expected that holders of the Common Stock of record shall be entitled to exchange their shares of the Common Stock for securities, cash or other property deliverable upon such reclassification, consolidation, merger, sale, transfer or share exchange, provided that the failure to deliver such notice or any defect therein or in the delivery thereof shall not affect the validity of the corporate action required to be specified in such notice. To the extent that any notice provided hereunder constitutes, or contains, material, non-public information regarding the Company or any of the Subsidiaries, the Company shall simultaneously file such notice with the Commission pursuant to a Current Report on Form 8-K. The Holder shall remain entitled to convert this Debenture during the 20-day period commencing on the date of such notice through the effective date of the event triggering such notice except as may otherwise be expressly set forth herein.
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Section 6. Redemption.
a) Optional Redemption at Election of Company. Subject to the provisions of this Section 6(a), at any time after 90 days after the Effective Date, the Company may deliver a 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 some or all of the then outstanding principal amount of this Debenture for cash in an amount equal to the Optional Redemption Amount on the 20th Trading Day following the Optional Redemption Notice Date (such date, the “Optional Redemption Date”, such 20 Trading 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. The Company covenants and agrees that it will honor all Notices of Conversion tendered from the time of delivery of the Optional Redemption Notice through the date all amounts owing thereon are due and paid in full. The Company’s determination to pay an Optional Redemption in cash shall be applied ratably to all of the holders of the then outstanding Debentures based on their (or their predecessor’s) initial purchases of Debentures pursuant to the Purchase Agreement.
b)
Monthly Redemption. On each Monthly Redemption Date, the Company shall redeem the Monthly Redemption Amount (the “Monthly Redemption”).
The Monthly Redemption Amount payable on each Monthly Redemption Date shall be paid in cash; provided, however, as to any Monthly Redemption
and upon 30 calendar days’ prior written irrevocable notice (the “Monthly Redemption Notice”), in lieu of a cash redemption
payment the Company may elect to pay all or part of a Monthly Redemption Amount in Conversion Shares based on a conversion price equal
to the lesser of (i) the then applicable Conversion Price and (ii)
85% of the average of the lowest three of ten VWAPs on the ten Trading Days that are immediately prior
to the applicable82.5%
of the average of the three lowest VWAPs during the ten Trading Days immediately prior to the applicable Monthly
Redemption Date but not lower than the minimum adjusted price permitted by Nasdaq listing rules (subject
to adjustment for any stock dividend, stock split, stock combination or other similar event affecting the Common Stock
(the price calculated on the Trading Day immediately prior to the Monthly Redemption Date, the “Monthly Conversion Price”
and such pricing period, the “Monthly Conversion Period”); provided, further, that the Company may not pay the Monthly Redemption
Amount in Conversion Shares unless from the date the Holder receives the duly delivered Monthly Redemption Notice through and until the
date such Monthly Redemption is paid in full, the Equity Conditions have been satisfied, unless waived in writing by the Holder. The
Holder may convert, pursuant to Section 4(a), any principal amount of this Debenture subject to a Monthly Redemption at any time prior
to the date that the Monthly Redemption Amount, plus accrued but unpaid interest, liquidated damages and any other amounts then owing
to the Holder are due and paid in full, and any amount thus not converted, must be converted/paid pursuant to the Company’s Monthly
Redemption Notice. Unless otherwise indicated by the Holder in the applicable Notice of Conversion, any principal amount of this Debenture
converted during the applicable Monthly Conversion Period until the date the Monthly Redemption Amount is paid in full shall be first
applied to the principal amount subject to the Monthly Redemption Amount payable in cash and then to the Monthly Redemption Amount payable
in Conversion Shares. Any principal amount of this Debenture converted during the applicable Monthly Conversion Period in excess of the
Monthly Redemption Amount shall be applied against the last principal amount of this Debenture scheduled to be redeemed hereunder, in
reverse time order from the Maturity Date. The Company covenants and agrees that it will honor all Notices of Conversion tendered up
until such amounts are paid in full. The Company’s determination to pay a Monthly Redemption in cash, shares of Common Stock or
a combination thereof shall be applied ratably to all of the holders of the then outstanding Debentures based on their (or their predecessor’s)
initial purchases of Debentures pursuant to the Purchase Agreement. Notwithstanding anything to the foregoing, Monthly Redemption Amounts
may be deferred or reallocated as set forth in a written notice delivered by the Holder if the Holder is a Required Holder to the Company
from time to time (which may be delivered by email) and up to the entire remaining principal balance of their own Debenture may be accelerated
by the Required Holder in one more conversions at any time (each, an “Acceleration”, the date of such Acceleration, the “Acceleration
Date” and the accelerated amount, the “Acceleration Amount”), provided that shares received pursuant to such accelerations
may only be sold by the Required Holder (or its Affiliates) up to 20% of volume of shares of Common Stock then traded on the capital
markets on any given Trading Day (the “Leak Out Provision”), except that if the sale price of a share of the Common Stock
is at least three percent (3%) higher than the Company’s per share closing price (as reported by Bloomberg, LP) on the Trading
Day immediately prior to such date of determination, then the Leak Out Provision shall not apply on such date of determination. The Acceleration
Amount shall be paid in Conversion Shares based on a conversion price equal to the lesser of (i) the then applicable
Conversion Price and (ii) 85% of the lowest three of ten VWAPs on the ten Trading Days that are immediately
prior to the applicable82.5% of the average of the three
lowest VWAPs during the ten Trading Days immediately prior to the applicable Acceleration Date but
not lower than the minimum adjusted price permitted by Nasdaq listing rules (subject to adjustment for any stock dividend, stock split,
stock combination or other similar event affecting the Common Stock.
| A-17 |
c) Redemption Procedure. The payment of cash or issuance of Common Stock, as applicable, pursuant to a Monthly Redemption shall be payable on the Monthly Redemption Date. If any portion of the payment pursuant to a Monthly Redemption shall not be paid by the Company by the applicable due date, interest shall accrue thereon at an interest rate equal to the lesser of 18% per annum or the maximum rate permitted by applicable law until such amount is paid in full. Notwithstanding anything herein contained to the contrary, if any portion of the Monthly 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 Monthly Redemption, ab initio. Notwithstanding anything to the contrary in this Section 6, the Company’s determination to redeem in cash or its elections under Section 6(b) shall be applied ratably among the Holders of Debentures. The Holder may elect to convert the outstanding principal amount of the Debenture pursuant to Section 4 prior to actual payment in cash for any redemption under this Section 6 by the delivery of a Notice of Conversion to the Company.
d) Monthly Redemptions and Accelerations Deemed Conversions; Remedies. Each issuance of Conversion Shares in respect of a Monthly Redemption paid in Conversion Shares pursuant to Section 6(b), and each issuance of Conversion Shares in respect of any Acceleration Amount pursuant to Section 6(b), shall, for all purposes of this Debenture and the other Transaction Documents, be deemed a conversion of this Debenture pursuant to Section 4. Solely for such purposes, (i) each Monthly Redemption Date on which a Monthly Redemption Amount is due to be paid in Conversion Shares and (ii) each Acceleration Date shall be deemed a “Conversion Date” under Section 4, including for purposes of determining the Share Delivery Date and calculating any liquidated damages, Buy-In amounts, other damages or any breach hereunder. Accordingly, all of the rights, protections and remedies afforded to the Holder under Section 4 (including, without limitation, the Share Delivery Date and delivery requirements of Section 4(c)(ii), the Failure to Deliver Conversion Shares provisions of Section 4(c)(iii), the Obligation Absolute and partial liquidated damages provisions of Section 4(c)(iv), the Buy-In compensation provisions of Section 4(c)(v), and the Holder’s rescission rights), together with all other rights and remedies provided to the Holder in this Debenture and in the other Transaction Documents, shall apply with full force and effect to any failure by the Company to timely and properly deliver such Conversion Shares as required herein, and to any other breach by the Company of its obligations under this Section 6, with the same force and effect as if such failure or breach had occurred under Section 4. For the avoidance of doubt, any such failure or breach shall also constitute an Event of Default for purposes of Section 8.
Section 7. Negative Covenants.
As long as any portion of this Debenture remains outstanding, unless the Required Holders shall have otherwise given prior written consent, the Company shall not, and shall not permit any of the Subsidiaries to, directly or indirectly:
a) other than 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) other than 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) 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 or Warrant 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 Debenture;
e) repay, repurchase or offer to repay, repurchase or otherwise acquire any Indebtedness, other than the Debentures 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);
| A-18 |
h)
at any time, have available cash in its bank accounts and/or Bitcoin in custody of less than $100,000$3,500,000;
i)
not have Jolie Kahn, serve
as the Company’s Chief Executive Officer (“CEO”); provided,
that the Company’s failure to have Jolie Kahn serve as CEO shall not constitute a breach of this clause (i) or an Event of Default
for so long as each of the following is satisfied: (a) a suitable permanent replacement reasonably acceptable to the Holder is appointed
within 180 days of Jolie Kahn’s departure as CEO; (b) the other holders of the Debentures have similarly amended this key man provision,
rather than delivering an Event of Default notice to the Company in respect of such departure; and (c) no other Event of Default has
occurred since Jolie Kahn’s departure as CEO; or
j) enter into any agreement with respect to any of the foregoing.
Section 8. 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 Debenture or (B) interest, liquidated damages and other amounts owing to a Holder on any Debenture, 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 3 Trading Days;
ii. the Company shall fail to observe or perform any other covenant or agreement contained in the Debentures (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) or in any Transaction Document, which failure is not cured, if possible to cure, within the earlier to occur of (A) 5 Trading Days after notice of such failure sent by the Holder or by any other Holder to the Company and (B) 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 (vi) below);
iv. any representation or warranty made in this Debenture, 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;
v. the Company or any Significant Subsidiary (as such term is defined in Rule 1-02(w) of Regulation S-X) shall be subject to a Bankruptcy Event;
| A-19 |
vi. 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 $150,000, 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;
vii. the Common Stock shall not be eligible for listing or quotation for trading on a Trading Market and shall not be eligible to resume listing or quotation for trading thereon within five Trading Days;
viii. the Company (and all of its Subsidiaries, taken as a whole) shall be a party to any Change of Control Transaction or Fundamental Transaction or shall agree to sell or dispose of all or in excess of 33% of its assets in one transaction or a series of related transactions (whether or not such sale would constitute a Change of Control Transaction);
ix. the Initial Registration Statement (as defined in the Registration Rights Agreement) shall not have been declared effective by the Commission on or prior to the 120th calendar day after the Closing Date or the Company does not meet the current public information requirements under Rule 144 in respect of the Registrable Securities (as defined in the Registration Rights Agreement);
x. 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 8(a)(x);
xi. the Company shall fail for any reason to deliver Conversion Shares to a Holder prior to the fifth Trading Day after a Conversion Date pursuant to Section 4(c) or the Company shall provide at any time notice to the Holder, including by way of public announcement, of the Company’s intention to not honor requests for conversions of any Debentures in accordance with the terms hereof;
xii. any Person shall breach any agreement delivered to the initial Holders pursuant to Section 2.2 of the Purchase Agreement;
xiii. the electronic transfer by the Company of shares of Common Stock through the Depository Trust Company or another established clearing corporation is no longer available or is subject to a “chill”;
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 45 calendar days;
| A-20 |
xv. a false or inaccurate certification (including a false or inaccurate deemed certification) by the Company that the Equity Conditions are satisfied or that there has been no Equity Conditions Failure or as to whether any Event of Default has occurred; or
xvi. any Issuer Covered Person shall have suffered a Disqualification Event.
b)
Remedies Upon Event of Default. If any Event of Default occurs, the outstanding principal amount of this Debenture, 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 by written notice to the Company (an “Event
of Default Redemption Notice”), immediately due and payable in cash at the Mandatory Default
Amountthe Event of Default Redemption Price. Each
portion of this Debenture subject to redemption by the Company pursuant to this Section 8(b) shall be redeemed by the Company at a price
equal to the greater of (i) the Mandatory Default Amount and (ii) the product of (X) the Conversion Rate (calculated assuming an Acceleration
had occurred as of the date of the Event of Default Redemption Notice) with respect to the Conversion Amount in effect at such time as
the Holder delivers the Event of Default Redemption Notice, multiplied by (Y) the product of (1) 120% multiplied by (2) the greatest
Closing Sale Price of the Common Stock on any Trading Day during the period commencing on the date immediately preceding such Event of
Default and ending on the date the Company makes the entire payment required to be made under this Section 8(b) (the “Event of
Default Redemption Price”). For purposes of this Section 8(b): “Conversion Amount” means the portion of the outstanding
principal amount of this Debenture being redeemed, plus all accrued and unpaid interest thereon, all liquidated damages and other amounts
owing in respect thereof and all other amounts, costs, expenses and liquidated damages due in respect of this Debenture and the other
Transaction Documents; and “Conversion Rate” means the number of Conversion Shares issuable in respect of a Conversion Amount,
determined by dividing such Conversion Amount by the conversion price that would apply to an Acceleration Amount at such applicable date
of determination under Section 6(b) (i.e., the lesser of (i) the then Conversion Price and (ii) 82.5% of the average of the three lowest
VWAPs during the ten Trading Days immediately prior to the date of the Event of Default Redemption Notice). By way of clarification,
an Event of Default may only be called with the consent of the Required Holders. Commencing 5 days after the occurrence of any Event
of Default that results in the eventual acceleration of this Debenture, the interest rate on this Debenture shall accrue at an interest
rate equal to the lesser of 18% per annum or the maximum rate permitted under applicable law. Upon the payment in full of the Mandatory
Default AmountEvent of Default Redemption Price,
the Holder shall promptly surrender this Debenture 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 Debenture until such time, if any, as the Holder receives full payment pursuant
to this Section 8(b). No such rescission or annulment shall affect any subsequent Event of Default or impair any right consequent thereon.
| A-21 |
Section 9. Miscellaneous.
a) Notices. Monthly Redemption Notices must be delivered by email only, and may not be delivered on any United States Federal holiday. Any and all other 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 email attachment, or sent by a nationally recognized overnight courier service, addressed to the Company, at the address set forth above, or such other email address, or address as the Company may specify for such purposes by notice to the Holder delivered in accordance with this Section 9(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 email attachment, or sent by a nationally recognized overnight courier service addressed to each Holder at the email address or address of the Holder appearing on the books of the Company, or if no such email attachment 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 email attachment to the email address 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 email attachment to the email address set forth on the signature pages attached hereto on a day that is not a Trading Day or later than 5:30 p.m. (New York City time) on any Trading Day, (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 Debenture 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 Debenture at the time, place, and rate, and in the coin or currency, herein prescribed. This Debenture is a direct debt obligation of the Company. This Debenture ranks pari passu with all other Debentures now or hereafter issued under the terms set forth herein and is secured by a lien on all of the Company’s assets pursuant to the Security Agreement issued by the Company to the Holder in conjunction herewith.
c) Lost or Mutilated Debenture. If this Debenture shall be mutilated, lost, stolen or destroyed, the Company shall execute and deliver, in exchange and substitution for and upon cancellation of a mutilated Debenture, or in lieu of or in substitution for a lost, stolen or destroyed Debenture, a new Debenture for the principal amount of this Debenture so mutilated, lost, stolen or destroyed, but only upon receipt of evidence of such loss, theft or destruction of such Debenture, and of the ownership hereof, reasonably satisfactory to the Company.
d) Governing Law. All questions concerning the construction, validity, enforcement and interpretation of this Debenture shall be governed by and construed and enforced in accordance with the internal laws of the State of Delaware, without regard to the principles of conflict of laws thereof. Each party agrees that all legal proceedings concerning the interpretation, enforcement and defense of the transactions contemplated by any of the Transaction Documents (whether brought against a party hereto or its respective Affiliates, directors, officers, shareholders, employees or agents) shall be commenced in the state and federal courts sitting in the Wilmington Delaware (the “Delaware Courts”). Each party hereto hereby irrevocably submits to the exclusive jurisdiction of the Delaware Courts for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein (including with respect to the enforcement of any of the Transaction Documents), and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of such Delaware Courts, or such Delaware Courts are improper or inconvenient venue for such proceeding. Each party hereby irrevocably waives personal service of process and consents to process being served in any such suit, action or proceeding by mailing a copy thereof via registered or certified mail or overnight delivery (with evidence of delivery) to such party at the address in effect for notices to it under this Debenture 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 Debenture or the transactions contemplated hereby. If any party shall commence an action or proceeding to enforce any provisions of this Debenture, 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.
| A-22 |
e) Waiver. Any waiver by the Company or the Holder of a breach of any provision of this Debenture 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 Debenture. The failure of the Company or the Holder to insist upon strict adherence to any term of this Debenture 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 Debenture on any other occasion. Any waiver by the Company or the Holder must be in writing. Any amendment to this Debenture shall require the written consent of the Holder and the Company.
f) Severability. If any provision of this Debenture is invalid, illegal or unenforceable, the balance of this Debenture 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 Debenture as contemplated herein, wherever enacted, now or at any time hereafter in force, or which may affect the covenants or the performance of this Debenture, 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 Debenture shall be cumulative and in addition to all other remedies available under this Debenture 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 Debenture. 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 Debenture.
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 Debenture and shall not be deemed to limit or affect any of the provisions hereof.
Section 10. Disclosure.
Upon receipt or delivery by the Company of any notice in accordance with the terms of this Debenture, unless the Company has in good faith determined that the matters relating to such notice do not constitute material, nonpublic information relating to the Company or its Subsidiaries, the Company shall within two (2) Business Days after such receipt or delivery publicly disclose such material, nonpublic information on a Current Report on Form 8-K or otherwise. In the event that the Company believes that a notice contains material, non-public information relating to the Company or its Subsidiaries, the Company so shall indicate to the Holder contemporaneously with delivery of such notice, and in the absence of any such indication, the Holder shall be allowed to presume that all matters relating to such notice do not constitute material, nonpublic information relating to the Company or its Subsidiaries.
*********************
(Signature Page Follows)
| A-23 |
IN WITNESS WHEREOF, the Company has caused this Debenture to be duly executed by a duly authorized officer as of the date first above indicated.
| By: | ||
| Name: | ||
| Title: | ||
| A-24 |
ANNEX A
NOTICE OF CONVERSION
The
undersigned hereby elects to convert principal under the 5% Coupon, 10% Original Issue Discount Senior Secured Convertible Debenture
due [ October
24, 2026 of AgriFORCE Growth SystemsAVAX
One Technology Ltd., a British Columbia 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 Debenture, as determined in accordance with Section 13(d) of the Exchange Act.
The undersigned agrees to comply with the prospectus delivery requirements under the applicable securities laws in connection with any transfer of the aforesaid shares of Common Stock.
Conversion calculations:
| Date to Effect Conversion: | ||
| Principal Amount of Debenture to be Converted: | ||
| Number of shares of Common Stock to be issued: | ||
| Signature: | ||
| Name: | ||
| Address for Delivery of Common Stock Certificates: | ||
| Or | ||
| DWAC Instructions: | ||
| Broker No:____________ | ||
| Account No:___________ |
| A-25 |
Schedule 1
CONVERSION SCHEDULE
The
5% Coupon, 10% Original Issue Discount Senior Secured Convertible Debentures due on [ October
24, 2026 in the aggregate principal amount of $ are issued by AgriFORCE Growth SystemsAVAX
One Technology Ltd., a British Columbia corporation. This Conversion Schedule reflects conversions made under Section 4 of the
above referenced Debenture.
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 | |||
| A-26 |
Exhibit 99.1
AVAX One Strengthens Balance Sheet Through Successful Restructuring of Convertible Debt Facility
Company Retires Approximately $6.8 million of Its Convertible Debt Facility
WEST PALM BEACH, FL, August 5, 2026 - AVAX One Technology Ltd. (NASDAQ: AVX) (“AVAX One” or the “Company”) today announced that it has completed a restructuring of certain outstanding convertible debentures. The transactions included (i) the full repayment, retirement and cancellation of debentures held by two institutional investors and (ii) the reduction in the outstanding principal amount of a debenture held by another institutional investor and the amendment of certain provisions of that investor’s debenture, including a key-person covenant and increasing the covenant governing the minimum amount of cash and bitcoin the Company is required to maintain from $100,000 to $3.5 million.
In connection with the restructuring, the Company reduced its outstanding principal under those debentures by approximately $6.8 million and paid related repayment premiums and accrued interest thereon. The restructuring was funded with cash on hand and the reduction of the escrow receivable from one of the investors.
“We’re pleased to have successfully restructured our convertible debt facility, which meaningfully strengthens our balance sheet and reduces near-term liabilities,” said Peter Wylie, Interim CEO of AVAX One. “With the restructuring now complete, we can focus our attention on executing our strategy across our Avalanche digital asset treasury, bitcoin mining operations, and modular data center initiatives to drive long-term shareholder value.”
Additional information regarding the restructuring is included in the Company’s Current Report on Form 8-K filed with the U.S. Securities and Exchange Commission on August 5, 2026.
About AVAX One Technology Ltd.
AVAX One Technology Ltd. (NASDAQ: AVX) is a digital infrastructure company accelerating the transition to an onchain financial economy. The Company maintains a strategic Avalanche digital asset treasury, accumulating AVAX and generating onchain yield through native staking and ecosystem participation. It also operates bitcoin mining facilities and is developing modular data centers. These three pillars give public market investors unique exposure to both the onchain economy and the digital infrastructure layer. For more information, please visit www.avax-one.com.
Forward Looking Statements
This press release includes forward-looking information within the meaning of Canadian securities laws forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995 (collectively, “forward-looking statements”). These forward-looking statements generally can be identified by the use of words such as “anticipate,” “expect,” “plan,” “could,” “may,” “will,” “believe,” “estimate,” “forecast,” “goal,” “project,” and other words of similar meaning. These forward-looking statements address various matters including statements relating to the expected benefits of restructuring the Company’s debentures, including the impact on long-term shareholder value, expectations regarding future capital raising activity, the assets to be held by the Company, expectations regarding adoption of the Avalanche network, the expected future market, price and liquidity of the digital assets the Company acquires, the macro and political conditions surrounding digital assets, the Company’s plan for value creation and strategic advantages, market size and growth opportunities, regulatory conditions, competitive position and the interest of other entities in similar business strategies, technological and market trends, and the Company’s future financial condition and performance. Each forward-looking statement contained in this press release is subject to risks and uncertainties that could cause actual results to differ materially from those expressed or implied by such statement. Applicable risks and uncertainties include, among others, the proposed transactions described herein may not be completed in a timely manner or at all; failure to realize the anticipated benefits of the transactions and the proposed AVAX strategy; changes in business, market, financial, political and regulatory conditions; risks relating to the Company’s operations and business, including the highly volatile nature of the price of AVAX and other cryptocurrencies; the risk that the price of the Company’s securities may be highly correlated to the price of the digital assets that it holds; risks related to increased competition in the industries and markets in which the Company does and will operate (including the applicable digital assets market); risks relating to significant legal, commercial, regulatory and technical uncertainty regarding digital assets generally; risks relating to the treatment of crypto assets for U.S. and foreign tax purposes, as well as those risks and uncertainties identified in the Company’s filings with the SEC. The forward-looking statements in this press release speak only as of the date of this document, and the Company undertakes no obligation to update or revise any of these statements except to the extent required by applicable law.
Investor Relations Contact
Sean Mansouri, CFA or Aaron D’Souza
Elevate IR
(720) 330-2829
Media Contact
Ethan Lyle
Prospero