GTLL 8-K
Global Technologies Ltd (GTLL)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
CURRENT REPORT
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ITEM 1.01. ENTRY INTO A MATERIAL DEFINITIVE AGREEMENT.
As previously reported on the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on June 20, 2023, the Company (the “Buyer”) and TXC Services, LLC (“Seller”) (together, the “Parties”) entered into a Membership Interest Purchase Agreement (“MIPA”) for the purchase of all 2,500,000 issued and outstanding Membership Units (“Membership Units”) of Fox Trot Tango, LLC (“FTT”), a Delaware limited liability company.
On July 25, 2023, the Parties entered into an Amended and Restated Membership Interest Purchase Agreement, Assignment, Secured Convertible Note, Securities Purchase Agreement and a Security Agreement and Pledge of Membership Units. In addition, the Company executed a Guaranty Agreement for the benefit of TK Management Services, LLC.
On this same date, the Company’s new wholly owned subsidiary, FTT, executed a Deed to Secure Debt in favor of the Seller.
Amended and Restated Membership Interest Purchase Agreement (“Amended MIPA”)
The purchase price for the purchase of all Membership Units shall be $6,500,000 payable from the Buyer to the Seller as follows:
(a) Buyer’s assumption of a certain promissory note in favor of TK Management Services, Inc. (“TK”), in the principal amount of $1,500,000 dated January 6, 2022 (“TK Secured Note”) secured by the Property as collateral, pursuant to a certain Deed to Secure Debt, Assignment of Leases and Rents, Security Agreement, Financing Statement and Fixture Filing (“TK Security Deed”) and other liabilities; and
(b) The issuance of a Secured Convertible Note, in the principal amount of $1,600,000, in favor of Seller (“Seller Secured Note”) and Securities Purchase Agreement (“Seller SPA”), secured by the Property as collateral, pursuant to a certain Deed to Secure Debt, Assignment of Leases and Rents, Security Agreement, Financing Statement and Fixture Filing (“Seller Security Deed”), subordinate to the TK Security Deed and by the Purchased Interest; and
(c) Earn-Out Lease Milestones. Seller shall receive up to Six Hundred and Eighty (680) shares of Series L Preferred Stock (“Series L Preferred”) valued at up to $3,400,000, based on the following earn-out lease milestones:
| (i) | Lease of 25% of the square footage of the Property, Seller shall receive 25% of the Series L Preferred; | |
| (ii) | Lease of 50% of the square footage of the Property, Seller shall receive 50% of the Series L Preferred; | |
| (iii) | Lease of 75% of the square footage of the Property, Seller shall receive 75% of the Series L Preferred; and | |
| (iv) | Lease of 100% of the Property, Seller shall receive 100% of the Series L Preferred. |
In the event that the Buyer is in default under this Agreement, or any of the Transaction Documents including, but not limited to, the assumption and guaranty of the TK Secured Note, the TK Security Deed, the Seller Secured Note, Seller SPA, the Seller Security Deed or if Buyer fails to issue to Seller duly authorized the Series L Preferred, the Seller shall have the right to exercise any and all remedies under the this Agreement and the other Transaction Documents, including, but not limited to, exercising its right to receive a return of the Purchased Interest pursuant to an assignment from Buyer, without recourse by the Buyer, in accordance with the Collateral Assignment.
Securities Purchase Agreement (“Seller SPA”)
On July 25, 2023, the Company and TXC Services, LLC entered into the Seller SPA for the issuance and sale of a Secured Convertible Note with an initial principal amount of $1,600,000 (the “Seller Secured Note”).
The Securities Purchase Agreement provides for the purchase by the Investor and the sale by the Company of the Seller Secured Note. The Securities Purchase Agreement contains representations and warranties of the Company and the Investor that are typical for transactions of this type. The representations and warranties made by the Company in the Securities Purchase Agreement are qualified by reference to certain exceptions contained in disclosure schedules delivered to the Investor. Accordingly, the representations and warranties contained in the Securities Purchase Agreement should not be relied upon by third parties who have not reviewed those disclosure schedules and the documentation surrounding the transaction as a whole.
The Securities Purchase Agreement also obligates the Company to indemnify the Investor for certain losses resulting from (1) any misrepresentation or breach of any representation or warranty made by the Company or any subsidiary of the Company, (2) any breach of any obligation of the Company or, any subsidiary of the Company, of the Securities Purchase Agreement or any agreements and instruments entered into or connection with the Securities Purchase Agreement and (3) certain third party claims.
Secured Convertible Note (“Seller Secured Note”)
On July 25, 2023, the Company and FTT (collectively, the “Borrower”) executed the Seller Secured Note payable to TXC Services, LLC (“Holder”) in the principal amount of $1,600,000. The Seller Secured Note has a term of one (1) year, Maturity Date of July 25, 2024, and bears interest at 6% per annum. Any Principal Amount or interest on this Seller Secured Note which is not paid when due shall bear interest at the rate of eighteen percent (18%) per annum from the due date thereof until the same is paid (“Default Interest”).
The Seller Secured Note is convertible, in whole or in part, at any time and from time to time before maturity at the option of the Holder. The per share conversion price into which Principal Amount and interest (including any Default Interest) under this Seller Secured Note shall be convertible into shares of Common Stock hereunder shall be 100% multiplied by the Market Price (as defined herein) subject to adjustment as described herein (“Conversion Price”). “Market Price” means the lowest one (1) Trading Price (as defined below) for the Common Stock during the three (3) Trading Day period ending on the last complete Trading Day prior to the Conversion Date subject to adjustment as provided in this Seller Secured Note. The Seller Secured Note will contain certain limitations on conversion. It provides that no conversion may be made if, after giving effect to the conversion, the Investor would own in excess of 9.99% of the Company’s outstanding shares of Common Stock. This percentage may be increased or decreased to a percentage not to exceed 9.99%, at the option of the Investor, except any increase will not be effective until 61 days prior notice to the Company.
The Seller Secured Note will impose penalties on the Company for any failure to timely deliver any shares of its Common Stock issuable upon conversion.
The Seller Secured Note will contain events of default that are typical for transactions of this type, as well as the following events:
| ● | the failure to issue Conversion Shares registered with the SEC or pursuant an exemption of the applicable Registration Statement in accordance with Regulation A. from and after the Public Company Date, the suspension from trading or the failure of the Common Stock to be trading or listed (as applicable) on an Eligible Market for a period of five (5) consecutive Trading Days; | |
| ● | except to the extent the Company is in compliance with Section 9(b), at any time following the tenth (10th) consecutive day that the Holder’s Authorized Share Allocation (as defined in Section 9(a)) is less than 200% of the sum of (A) the number of shares of Common Stock that the Holder would be entitled to receive upon a conversion of the full Conversion Amount of this Note (without regard to any limitations on conversion set forth in Section 3(d) or otherwise; | |
| ● | waste committed on the Real property, or damage to the Real Property as a result of the intentional misconduct or gross negligence of the Borrower; | |
| ● | the failure of the Company to pay property taxes, assessments, or other charges, and/or failure to procure and maintain the insurance policies for the Real Property; | |
| ● | the failure to deliver and insurance or condemnation proceeds or awards or any security deposits received by Borrower; | |
| ● | the failure of fixtures and/or personal property from the Real Property to the extent not replaced by comparable fixtures; | |
| ● | the occurrence of any default under, redemption of or acceleration prior to maturity of any indebtedness of the Company or a subsidiary; | |
| ● | the invalidity of any material provision of the Security Documents or if the enforceability of validity of any material provision of the Security Documents is contested by the Company; | |
| ● | the failure of the Security Documents to perfect or maintain the Investor’s first priority security interest; and | |
| ● | the failure to comply with certain covenants of the Seller Secured Note. |
The Seller Secured Note will contain a variety of covenants on the part of Company that are typical for transactions of this type, as well as the following covenants:
| ● | the Seller Secured Note will rank senior to all other indebtedness of the Company, except that it shall remain subordinate to the TK Security Deed; | |
| ● | the Company will not incur other indebtedness, except for certain permitted indebtedness; | |
| ● | the Company will not incur any liens, except for certain permitted liens; | |
| ● | the Company will not, directly or indirectly, redeem or repay all or any portion of any permitted indebtedness if at the time such payment is due or is made or, after giving effect to such payment, an event constituting, or that with the passage of time and without being cured would constitute, an event of default has occurred and is continuing; and | |
| ● | the Company will not redeem, repurchase or pay any dividend or distribution on its Common Stock or any other capital stock. |
Secured Promissory Note between Fox Trot Tango, LLC and TK Management Services, LLC (“TK Secured Note”)
On January 6, 2023, Fox Trot Tango, LLC (the “Borrower”) issued the TK Secured Note to TK Management Services, LLC (the “Lender”) in the principal amount of 1,500,000. The TK Secured Note accrues interest at 12% per annum and matures in one year, January 6, 2024 (the “Maturity Date”). In the event of default, the TK Secured Note shall accrue interest at 12% per annum. At Closing, the Borrower prepaid six months of interest and a $15,000 origination fee. Monthly payments of $15,000 begin on August 6, 2023, with a balloon payment due at the Maturity Date.
The TK Secured Note and the Secured Indebtedness are secured by the TK Security Deed. In the event of default, the Lender shall have all of the rights and remedies reserved in the TK Security Deed and other loan documents and shall have full recourse to the Real Property and other collateral.
Guaranty Agreement between the Company and TK Management Services, LLC
Global Technologies, Ltd (“Guarantor”) agreed to assume and guaranty all liabilities and obligations under the TK Secured Note and TK Security Deed previously executed by its new wholly owned subsidiary, Fox Trot Tango, LLC (“Borrower”).
Guarantor hereby unconditionally and irrevocably waives any right to revoke this Guaranty and acknowledges that this Guaranty is continuing in nature and applies to all presently existing and future Guaranteed Obligations.
Security Agreement and Pledge of Membership interest between the Company and TXC Services, LLC
Global Technologies, Ltd (“Pledgor”) has agreed to grant to TXC Services, LLC (“Pledgee”) a security interest (the “Security Interest”) in and to all of its right, title and ownership interest in and to the Interests whether derived under the Certificate of Formation, the Operating Agreement, or otherwise, including, the Pledgor’s status as a Member of Fox Trot Tango, LLC (“FTT”), and the Pledgor’s right to participate in the management of the business and affairs of FTT (“Collateral”) to secure all liabilities and obligations of Pledgor to Pledgee.
To secure the complete and timely satisfaction of all liabilities, indebtedness and obligations of Pledgor to Pledgee under the Transaction Documents (collectively, the “Obligations”) pertaining to the Amended MIPA, the Pledgor herewith pledges, delivers, and assigns to the Pledgee and grants a first lien and security interest in favor of the Pledgee in and to the Interest (including Pledgor Total Rights in the Company). Provided there is not an Event of Default (as defined below), the aforesaid pledge shall be released within five (5) days after the date when the Pledgor and Company) have performed all Obligations under the Transaction Documents.
The Pledgor does hereby appoint Pledgee or its assignee, as Pledgor’s true and lawful attorney and in its name, place and stead, upon the occurrence of an Event of Default to cause the Interests to be transferred on the books of FTT to the name of Pledgee or to such other party as is designated by Pledgee. In furtherance of the preceding, Pledgor has delivered to Pledgee the Assignment of Member’s Interests, which instrument Pledgee shall hold in escrow and shall be entitled to (but not obligated to) release from escrow upon the occurrence of an Event of Default under any of the Transaction Documents.
The foregoing provides only brief descriptions of the material terms of the Transaction documents and does not purport to be a complete description of the rights and obligations of the parties thereunder, and such descriptions are qualified in their entirety by reference to the full text of each document filed as exhibits to this Current Report on Form 8-K and are incorporated herein by reference.
ITEM 2.03. CREATION OF A DIRECT FINANCIAL OBLIGATION OR AN OBLIGATION UNDER AN OFF-BALANCE SHEET ARRANGEMENT.
The information included in Item 1.01 of this Current Report on Form 8-K is hereby incorporated by reference into this Item 2.03.
ITEM 3.02. UNREGISTERED SALE OF EQUITY SECURITIES.
The information included in Item 1.01 of this Current Report on Form 8-K is hereby incorporated by reference into this Item 3.02.
The issuance of the Seller Secured Note due July 25, 2024 and the issuance of the shares of common stock issuable upon conversion of the Seller Secured Note will be exempt from registration under Securities Act Section 4(a)(2) and Securities Act Rule 506(b). The Investor is sophisticated and represented in writing that they were an accredited investor and acquired the securities for their own account for investment purposes. A legend will be placed on the Seller Secured Note and the stock certificates issued upon conversion of the Seller Secured Note, subject to the terms of the transaction documents, stating that the securities have not been registered under the Securities Act and cannot be sold or otherwise transferred without registration or an exemption therefrom.
ITEM 9.01. FINANCIAL STATEMENTS AND EXHIBITS.
(d) Exhibits.
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.
| GLOBAL TECHNOLOGIES, LTD | ||
| Date: July 31, 2023 | By: | /s/ Fredrick Cutcher |
| Name: | Fredrick Cutcher | |
| Title: | Chief Executive Officer | |
Exhibit 10.1
AMENDED AND RESTATED MEMBERSHIP INTEREST PURCHASE AGREEMENT
This Amended and Restated Membership Interest Purchase Agreement (the “Agreement”) is made as of July 25, 2023, by and between TXC Services, LLC, a Delaware Limited Liability Company, with an address at: 30725 US Highway 19 North, Suite 335, Palm Harbor, FL 34684 (“Seller” or “TXC”) and Global Technologies, Ltd (the “Buyer”), a Delaware corporation, with an address at: 8 Campus Dr., Suite 105, Parsippany, NJ 07054 (“Buyer”).
RECITALS
WHEREAS, Foxx Trot Tango, LLC, a Delaware limited liability company (the “Company”); and
WHEREAS, the Company’s asset is the Property (as defined herein); and
WHEREAS, a certain membership interest purchase agreement was entered into by the original members of the Company on or as of June 9, 2023 under which certain Common Membership Units (“Units”), were sold and transferred; and
WHEREAS, pursuant to a certain membership interest purchase agreement effective as of May 17, 2022, Seller acquired 100% of the outstanding Units; and
WHEREAS, as of the date of this Agreement, Seller is the sole member and the owner of 2,500,000 Units out of the 2,500,000 Units outstanding, constituting a one hundred percent (100%) ownership interest in the Company (“Interest” or “Interests”); and
WHEREAS, Seller desires to sell to Buyer and Buyer desires to purchase from Seller the Interests; and
WHEREAS, Seller agrees to sell, and Buyer agrees to buy the Interests (as defined herein), except for certain Excluded Assets (as defined herein), and the Seller agrees to sell and assign the Interests, under the terms and conditions of this Agreement.
NOW, THEREFORE, in consideration of the foregoing recitals, which are incorporated by reference herein, and the respective representations, warranties, covenants and agreements set forth below, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Buyer and Seller agree as follows:
ARTICLE I
DEFINITIONS
1.1 Certain Definitions. For purposes of this Agreement, the following terms have the following meanings:
“Affiliate” of a specified Person means a Person who, directly or indirectly through one or more intermediaries, controls, is controlled by, or is under common control with, such specified Person.
“Building” means the building / premises comprising approximately 250,000 square feet of warehouse. space located on the Land, owned by the Company.
“Closing Date” means the date and time as of which the Closing actually takes place.
“Contemplated Transactions” means all of the transactions contemplated by this Agreement, including: (a) the sale of the Interest by Seller to Buyer; (b) the performance by Buyer and Seller of their respective covenants and obligations under this Agreement; and (c) Buyer’s acquisition and ownership of the Interest and exercise of control over the Company.
“Encumbrance” or “Lien” means any charge, claim, community property interest, condition, equitable interest, lien, option, pledge, security interest, hypothecation, mortgage, right of first refusal, or similar encumbrance or restriction of any kind, including, without limitation, any restriction on use, voting, transfer, receipt of income, or exercise of any other attribute of ownership.
“Excluded Assets” means all rights title and interests in and to rental income, accounts receivables and claims relating thereto, in connection a certain lease agreement for the Property dated October 19, 2022, which shall be assigned to Seller or its nominee or assigns (“October 2022 Lease”).
“ERISA” means the Employee Retirement Income Security Act of 1974, as amended, or any successor law, and regulations and rules issued pursuant to that Act or any successor law.
“Equipment” means all equipment, trade fixtures and other personal property located in the Building, owned by the Company.
“GAAP” means generally accepted United States accounting principles, applied on a basis consistent with the basis on which the Financial Statements were prepared.
“Governmental Authorization” means any approval, consent, license, permit, waiver, or other authorization issued, granted, given, or otherwise made available by or under the authority of any Governmental Body or pursuant to any legal requirement.
“Governmental Body” means any (a) nation, state, province, county, city, town, village, district, or other jurisdiction of any nature; (b) federal, state, provincial, local, municipal, foreign, or other government; (c) governmental or quasi-governmental authority of any nature (including any governmental agency, branch, department, official, or entity and any court or other tribunal); (d) multi-national organization or body; or (e) body exercising, or entitled to exercise, any administrative, executive, judicial, legislative, police, regulatory, or taxing authority or power of any nature.
“Income Taxes” means all Taxes based upon or measured by gross or net receipts or gross or net income, including Taxes in the nature of minimum taxes, tax preference items, and alternative minimum taxes, and Taxes on capital or net worth or capital stock, but excluding Taxes that are in the nature of sales, use, property, Transfer, recording, or similar Taxes.
“Indebtedness,” with respect to any Person, shall mean and include all obligations which, in accordance with GAAP, should be classified on a balance sheet of such Person as liabilities, and in any event shall include (a) all indebtedness of such Person for (i) borrowed money or (ii) the deferred purchase price of property, (b) all obligations of such Person evidenced by notes, bonds, debentures, guarantees, reimbursement agreements, or other similar instruments, (c) all indebtedness created or arising under any conditional sale or other title retention agreement with respect to property acquired by such Person, (d) all obligations of such Person as lessee under leases that have been or should be, in accordance with GAAP, recorded as capital leases, and (e) all obligations, contingent or otherwise, of such Person under acceptance, letter of credit or similar facilities.
“Intellectual Property” means (a) patents, patent applications and inventions and discoveries that may be patentable, (b) trademarks, service marks, trade names, fictional business names, service marks, trade dress and domain names, together with the goodwill associated therewith, (c) copyrights, including copyrights in computer software, (d) all rights in mask works, (e) confidential and proprietary information, including trade secrets, know-how, customer lists, software, technical information, data, process technology, plans, drawings, and blue prints, (f) registrations and applications for registration of the foregoing, and (g) all causes of action, if any, for infringement, conversion or misuse of any of the foregoing, and all rights of recovery related thereto.
“IRC” or “Code” means the Internal Revenue Code of 1986, as amended, or any successor law, and regulations issued by the IRS pursuant to the Internal Revenue Code or any successor law.
“IRS” means the United States Internal Revenue Service or any successor agency, and, to the extent relevant, the United States Department of the Treasury.
“Land” means approximately 25 acres of land located at 101 Seabrook Drive, Sylvester, GA 31791, owned by the Company.
“Lease” means any lease, rental agreement or rights to use Property pertaining to the occupancy of any space on the Property with a tenant.
“Legal Requirement” means any federal, state, provincial, local, municipal, foreign, international, multinational, or other administrative order, constitution, law, ordinance, principle of common law, regulation, statute, or treaty.
“Liability” means and includes any direct or indirect, primary or secondary, liability, Indebtedness, obligation, penalty, expense (including costs of investigation, collection and defense), claim, deficiency, guaranty or endorsement of or by any Person (other than endorsements of notes, bills and checks presented to banks for collection or deposit in the Ordinary Course of Business) of any type, whether accrued, absolute, contingent, liquidated, unliquidated, matured, unmatured or otherwise.
“Material Adverse Effect” or “Material Adverse Change” means a material adverse change in the financial condition, business, assets, liabilities, properties, results of operations or prospects of the Company.
“Ordinary Course of Business” means in the ordinary course of the Company’s business consistent with past practices.
“Organizational Documents” means (a) the articles or certificate of incorporation and the bylaws of a corporation; (b) the partnership agreement and any statement of partnership of a general partnership; (c) the limited partnership agreement and the certificate of limited partnership of a limited partnership; (d) articles of organization and operating agreement of a limited liability company; (e) any charter or similar document adopted or filed in connection with the creation, formation, or organization of a Person; and (t) any amendment to any of the foregoing.
“Person” means any individual, corporation (including any non-profit corporation), general or limited partnership, limited liability company, joint venture, estate, trust, association, organization, labor union, or other entity or Governmental Body.
“Property” means the Land, Building and Equipment collectively, owned by the Company.
“Related Person” shall mean and include, with regard to any natural Person, their ancestors, descendants or siblings, any Persons married to any of such individuals and any trustees or other fiduciaries acting for such Person’s benefit or for the benefit of any such individual.
“Securities Act” means the Securities Act of 1933, as amended, or any successor law, and regulations and rules issued pursuant to that Act or any successor law and any state law that may be applicable to the Contemplated Transactions.
“Tax” or “Taxes” means all taxes, charges, fees, levies or other similar assessments or liabilities, including, without limitation, income, gross receipts, ad valorem, premium, value-added, excise, real property, personal property, sales, use, services, transfer, withholding, employment, payroll and franchise taxes imposed by the United States of America or any state, province, government, foreign taxing authority or any agency thereof, and any interest, fines, penalties, assessments or additions to tax resulting from, attributable to or incurred in connection with any tax or any contest or dispute thereof.
“Tax Losses” shall mean and include (i) any Tax relating to the Company, its assets or operations for or with respect to any period up to and including the Closing Date, which are or will be required to be paid by the Company after the Closing Date and (ii) any increases in Tax of the Company relating to any period after the Closing Date arising out of or in connection with any breach or inaccuracy in any representation or warranty or any breach of any covenant or agreement made or to be performed by Seller pursuant to this Agreement. For purposes of the preceding sentence, Tax paid by the Company shall include amounts offset by a taxing authority against any claim, refund or credit otherwise due such Company.
“Tax Return” means any return (including any information return), report, statement, schedule, notice, form, or other document or information filed with or submitted to, or required to be filed with or submitted to, any Governmental Body in connection with the determination, assessment, collection, or payment of any Tax or in connection with the administration, implementation, or enforcement of or compliance with any Legal Requirement relating to any Tax.
“Transaction Documents” means this Agreement, the documents set forth as Exhibits to this Agreements and other documents in connection with this the transaction.
“Units” and “Interest” and “Interests” have the meanings set forth in this Agreement, and are used interchangeable to reflect the ownership of the Company.
ARTICLE 2.
SALE AND TRANSFER OF INTEREST; PURCHASE PRICE
2.1 Interest and Assets Subject to the terms and conditions of this Agreement, at the Closing, Seller will sell, assign and transfer the Interest to Buyer, and Buyer will purchase from Seller the Interests in the Company from Seller in accordance with the Assignment of Membership Units, attached hereto as Exhibit A, with the exception of the Excluded Assets which will be assigned to Seller or its nominee or assigns (“Purchased Interest”), which owns the Property, free and clear of all liens, claims and encumbrances, other than the guaranty and assumption of certain liabilities set forth in Section 2.2. At the time of execution of this Agreement, and from time to time thereafter, Seller shall execute and deliver other documents and instruments, and take other actions, as Buyer may reasonably request, in order to fully vest in Buyer all right, title, and interest in and to the Purchased Interest.
2.2 Purchase Price. The purchase price is up to $6,500,000 for the Purchased Interest (the “Purchase Price”) payable from Buyer to Seller as follows:
(a) Buyer’s assumption and guaranty of the Company’s performance under that certain promissory note in favor of TK Management Services, Inc., in the principal amount of $1,500,000 dated January 6, 2022 (“TK Secured Note”) secured by the Property as collateral, pursuant to a certain Deed to Secure Debt, Assignment of Leases and Rents, Security Agreement, Financing Statement and Fixture Filing (“TK Security Deed”) and other liabilities set forth in Schedule 2.2 and in accordance with a Guaranty Agreement”. The TK Secured Note, TK Security Deed and Guaranty Agreement are attached hereto as Exhibits B, C and D respectively; and
(b) Convertible secured promissory note, in the principal amount of $1,600,000, in favor of Seller (“Seller Secured Note”) and Securities Purchase Agreement (“Seller SPA”), secured by the Property as collateral, pursuant to a certain Deed to Secure Debt, Assignment of Leases and Rents, Security Agreement, Financing Statement and Fixture Filing, subordinate to the TK Security Deed (“Seller Security Deed”) and by the Purchased Interest as set forth in the Security Agreement and Pledge of Membership Interests including the Assignment of Member’s Interests (collectively “Collateral Assignment”). The Seller Secured Note, Seller SPA, Seller Security Deed, and Collateral Assignment, are attached hereto as Exhibits E, F, G and H respectively; and
(c) Earn-Out Lease Milestones. Seller shall receive up to Six Hundred and Eighty (680) Series L Preferred Stock (“Series L Preferred”) valued at up to $3,400,000, based on the following earn-out lease milestones:
(i) Lease of 25% of the square footage of the Property, Seller shall receive 25% of the Series L Preferred;
(ii) Lease of 50% of the square footage of the Property, Seller shall receive 50% of the Series L Preferred;
(iii) Lease of 75% of the square footage of the Property, Seller shall receive 75% of the Series L Preferred;
(iv) Lease of 100% of the Property, Seller shall receive 100% of the Series L Preferred;
Notwithstanding the foregoing, to satisfy the earn-out lease milestones above, the tenant shall have occupied the Property and have paid market rent (as determined by Seller) for a minimum of one (1) year.
The certificate of designation, issuance documents and related resolutions shall be in the form attached hereto in Exhibit I.
Notwithstanding the above, Buyer shall pay to Seller the cash sum of $15,000 at the signing of this Agreement, to be credited toward the Purchase Price, in the event that the closing occurs by the Closing Deadline.
2.3 Notice of Sale/Consent. Buyer shall provide Seller twenty (20) days written notice to Seller of its intent to sell the Property or the Purchased Interest (“property sale”). Seller’s written consent, in its sole and complete discretion, is required in the event that the net proceeds from the property sale are insufficient to pay off and satisfied in full the TK Secured Note and the Seller Secured Note.
2.4 Lease of the Property. Buyer shall provide Seller twenty (20) days written notice to Seller of its intent to Lease the Property (“proposed Lease”). If the proposed Lease term is for a period in excess of (1) year, and Buyer is in default under any of the Transaction Documents and/or has not paid off and satisfied in full TK Secured Note, the Seller Secured Note and other financial obligations, Buyer shall not have the right to Lease the Property for a period of in excess of one (1) year, without Seller’s written consent, which may be withheld for any or no reason in its sole and complete discretion.
2.5 Default/Remedies.
(a) Events of Default. In the event that the Buyer is in default under this Agreement, or any of the Transaction Documents including, but not limited to, the assumption and guaranty of the TK Secured Note, the TK Security Deed, the Seller Secured Note, Seller SPA, the Seller Security Deed or if Buyer fails to issue to Seller duly authorized the Series L Preferred, the Seller shall have the right to exercise any and all remedies under the this Agreement and the other Transaction Documents, including, but not limited to, exercising its right to receive a return of the Purchased Interest pursuant to an assignment from Buyer, without recourse by the Buyer, in accordance with the Collateral Assignment.
(b) Cross-Default. A default in this Agreement, shall constitute a default in the Transaction Documents and other agreements described in this Agreement to be delivered by the parties at Closing, and a default in any one or more of such agreements shall constitute a default in this Agreement.
(c) Remedies. If an Event of Default occurs as described above, the Seller has the right to exercise all rights and remedies under any Transaction Document, including, but not limited to, the right to receive and own 100% of the membership interests in the Company pursuant to the Collateral Assignment. In such event, the Buyer forfeits any claims for the return of any portion of the Purchase Price paid, which will be treated as liquidated damages.
(d) Non-Exclusive Remedies. The remedies set forth in this Agreement shall be in addition to, and shall not be to the exclusion of, any other remedies available to the Parties at law or in equity under this Agreement.
2.5 Allocation of Purchase Price.
(a) The Parties agree that, for federal income tax purposes, the sale of the Purchased Interest to Buyer shall be treated as a sale by the Seller to the Buyer of the of one hundred percent (100%) interest in the assets of the Company on the Closing Date.
(b) The Buyer and the Seller agree the Purchase Price Allocation shall be 5% for goodwill and 95% for the Property. The Buyer and the Seller and their respective Affiliates shall use the Purchase Price Allocation for all Tax reporting purposes.
(c) Reserved.
(d) Except to the extent otherwise required pursuant to a “determination” within the meaning of Code Section 1313(a) (or any comparable provision of state, local or foreign law), neither the Seller nor the Buyer shall take, or shall permit any of its Affiliates to take, a Tax position (whether on a Tax Return or otherwise) that is inconsistent with the Purchase Price Allocation.
(e) The Buyer and the Seller shall promptly inform one another in writing of any challenge by any taxing authority to any allocation made pursuant to this Section 2.3 and shall consult and keep one another informed with respect to the status of such challenge.
ARTICLE 3.
CLOSING, TERMINATION
3.1 Closing. The purchase and sale (the “Closing”) provided for in this Agreement will take place electronically within 60 days of the satisfaction of the conditions set forth in Articles 7 and 8 of this Agreement or such time and place as the parties agree (“Closing Deadline”). The Deliverables set forth in Section 3.2 (“Closing Obligations”), shall be signed and exchanged at the Closing.
3.2 Closing Obligations. At the Closing:
(a) Deliveries by Seller. Seller will deliver, or cause to be delivered, to Buyer:
(i) written consents or approvals in form and substance satisfactory to Buyer of each person or entity whose consent or approval is required to consummate the Contemplated Transactions;
(ii) all such further instruments and documents as Buyer or Buyer’s counsel may reasonably request for the more effective conveyance, assignment or transfer to the Buyer of the Purchased Interests and consummation of the Contemplated Transactions.
(b) Deliveries by Buyer. Buyer will deliver to Seller:
(i) the Purchase Price as set forth in Article 2.2 herein;
(ii) an executed copy of the third Amended and Restated Limited Liability Company Agreement of the Company dated as of the date of this Agreement (the “Third Amended Company Agreement”), attached hereto as Exhibit J.
(iii) written consents or approvals in the form and substance satisfactory to Seller of each person or entity whose consent or approval is required to consummate the Contemplated Transactions; and
(iv) all such further instruments and documents as Seller or Seller’s counsel may reasonably request for the more effective conveyance, assignment or transfer by the Seller of the Purchased Interest and consummation of the Contemplated Transactions.
(c) Deliveries by Seller and Buyer. The Seller and the Buyer, shall execute or cause to be executed, as applicable, the Transaction Documents.
3.3 Termination. This Agreement and the transactions contemplated by it may be terminated at any time prior to the Closing Date:
(a) By the mutual consent of Seller and Buyer at any time;
(b) By Seller, upon a breach of or failure to perform in any material respect any representation, warranty, covenant or agreement on the part of Buyer set forth in this Agreement, such that the conditions set forth in Article 8 of this Agreement cannot be satisfied on or prior to the Closing Deadline;
(c) By Buyer upon a breach of or failure to perform in any material respect any representation, warranty, covenant or agreement on the part of Seller set forth in this Agreement, such that the conditions set forth in Article 7 of this Agreement cannot be satisfied on or prior to the Closing Deadline;
(d) By Buyer at any time, if Buyer determines in good faith that there has occurred any Material Adverse Change, or any condition or event which is reasonably expected to result in a Material Adverse Change, with respect to the Company; or
(e) By Seller or Buyer, if the Closing shall not have occurred on or prior to the Closing Deadline.
3.4 Notice of Termination. Notice of termination of this Agreement, as provided for in this Article 3, shall be given by the party so terminating to the other parties hereto in accordance with Section 10.1 of this Agreement.
3.5 Effect of Termination. In the event of a termination of this Agreement pursuant to Section 3.3 hereof, this Agreement, other than Section 10.2, shall become void and of no further force and effect, and each party shall pay the costs and expenses incurred by it in connection with this Agreement, and no party (or any of its agents, counsel, representatives, Affiliates or assigns) shall be liable to any other party for any Loss hereunder. It is agreed that time is of the essence in the performance and satisfaction of this Agreement and each of the conditions specified in Articles 7 and 8 of this Agreement are material for purposes of this Agreement.
ARTICLE 4.
REPRESENTATIONS AND WARRANTIES OF SELLER
As an inducement to Buyer to enter into this Agreement and to consummate the Contemplated Transactions, Seller hereby in good faith represents and warrants to Buyer, as of the date hereof and as of the Closing Date, as follows:
4.1 Organization and Good Standing. The Company is a limited liability company, duly organized, validly existing and in good standing under the laws of the State of Delaware, with full power and authority to conduct its business as it is now being conducted, to own or use the properties and assets that it purports to own or use, and to perform all of its obligations.
4.2 Authority; No Conflict. This Agreement constitutes the legal, valid and binding obligation of Seller, enforceable against Seller in accordance with its terms. Upon the execution and delivery by Seller of this Agreement, this Agreement will constitute the legal, valid and binding obligations of Seller, enforceable against Seller in accordance with its respective terms. Seller has the absolute and unrestricted right, power, authority, and capacity to execute and deliver this Agreement and to perform its obligations under this Agreement.
4.3 Required Consents. The Unanimous Consent of the Company’s Board of Managers and/or Board of Directors of each party, in connection with the execution and delivery of this Agreement or the consummation or performance of any of the Contemplated Transactions.
4.4 Assets. The assets of the Company includes, but is not limited to, the real property located in the State of Georgia, free and clean of claims, liens and encumbrances and accounts receivable for unpaid and accrued rental/occupancy income.
4.5 Financial Statements. Not Applicable.
4.6 Books and Records. Not Applicable.
4.7 Title to Properties; Encumbrances. Not Applicable.
4.8 Condition and Sufficiency of Property. Seller in good faith represents and warrants to Buyer to the extent that Seller has actual knowledge thereof, as of the date hereof and as of the Closing Date, the assets of the Company are structurally sound, are in good operating condition and repair, and are adequate for the uses to which they are being put, and none is in need of maintenance or repairs except for ordinary, routine maintenance and repairs that are not material in nature or cost. The assets and properties owned by the Company are sufficient for the current conduct of the Company’ businesses.
4.9 Accounts Receivable. Accrued rent/occupancy income through the Closing Date.
4.10 Taxes. Not Applicable.
4.11 Legal Compliance. Seller in good faith represents and warrants to Buyer that, as of the date hereof and as of the Closing Date, the Company has complied in all material respects with all applicable laws of federal, state, local, and foreign governments and no action, suit, proceeding, hearing or investigation, complaint, claim, demand, or notice has been filed or commenced against any of them alleging any failure so to comply.
4.12 Litigation. Seller in good faith represents and warrants to Buyer that, as of the date hereof and as of the Closing Date, there is no litigation, action, suit, governmental investigation, arbitration, proceeding (including administrative proceedings) (collectively referred to as “Litigation”) presently pending or, to the best knowledge of Seller, presently threatened against or involving the Company or any of its assets or rights or which could affect the performance of this Agreement or the consummation of the Contemplated Transactions and Seller knows of no valid basis for any potential Litigation. There are no outstanding judgments, awards, orders or decrees against or involving the Company or its respective assets. The Company is not in default with respect to any order, writ, injunction, or decree of any federal, state, local, or foreign court, department, agency, or instrumentality.
4.13 Contracts; No Defaults. Seller in good faith represents and warrants to Buyer that, as of the date hereof and as of the Closing Date, Seller has disclosed and Buyer is in possession of all material contracts, agreements, or commitments in any way related to the Company, including without limitation:
(a) all guaranties or indemnities;
(b) all consulting, management service or any other similar type contracts;
(c) all agreements with any labor union or collective bargaining organization;
(d) all employment agreements, severance agreements, indemnification agreements, executive compensation plans, incentive compensation plans, bonus plans, deferred compensation agreements, employee noncompetition, confidentiality and or secrecy agreements, employee pension plans or retirement plans, employee profit-sharing plans, employee stock purchase and stock option plans, group life insurance, hospitalization and dental insurance, disability insurance, clothing allowance program, service record award program; performance award program, tuition reimbursement program, savings plan, or other plans or arrangements providing for benefits for employees;
(e) all contracts with any brokers, salesmen, advertisers, commissioned agents or sales representatives;
(f) all powers of attorney given by the Company to any person or organization for any purpose;
(g) all agreements limiting the freedom of the Company or its employees to compete in any line of business or in any geographic area or with any person;
(h) all other contracts, series of contracts, leases of personal property, arrangements, or agreements which involve future payments, performance of services or the purchase or sale of goods and/or materials of an individual amount or value in excess of Twenty Thousand Dollars ($20,000.00) or which extends beyond the Closing Date;
(i) any agreement, contract or commitment which might reasonably be expected to have a potential Material Adverse Effect on the business or operations of the Company; and
(j) all leases of real property.
Each of the contracts and agreements disclosed to Seller pursuant to Section 4.14 is in full force and effect, and there exists no known event of noncompliance, default or event of default by the Company as a party to such contract or agreement, or to the best of Seller’s knowledge, any other party thereto, or any event, occurrence, condition or act (including the Contemplated Transactions), which, with the giving of notice, the lapse of time, or both, would become a default or event of default thereunder, which would constitute an event of noncompliance which would allow a party thereto to require acceleration of performance thereunder by the Company party thereto, or which would result in the creation of any material lien, charge, or encumbrance upon any assets of the Company. The Company has not received notice from any other party that such other party claims the Company to be in noncompliance or default under the contract concerned, or intends, either based on a claimed default by the Company under the contract concerned or based on a claimed right to do so in the absence of default by the Company, to suspend, cancel, or terminate such contract prior to the normal date of expiration set forth therein. All such agreements were entered into on an arm’s length basis. Seller has caused to be made available for inspection and copying by Buyer and its advisers true, complete and correct copies of all documents (including all amendments, supplements, extensions and modifications) referred to herein or in any Schedule attached hereto.
4.14 Employees. Not Applicable.
4.15 Intellectual Property. Not Applicable
4.16 Bank Accounts; Powers of Attorney. Not Applicable.
4.17 Brokers or Finders. Company and its agents have incurred no Liability for brokerage or finders’ fees or agents’ commissions or other similar payment in connection with this Agreement.
4.18 Disclosure. No representation or warranty of Seller in this Agreement or any certificate delivered pursuant hereto or otherwise in connection with the Contemplated Transactions omits to state a material fact necessary to make the statements herein or therein, in light of the circumstances in which they were made, not misleading.
4.19 Subsidiaries; Investments. The Company has no subsidiaries and no investment (debt or equity, but excluding Ordinary Course of Business depositary relationships), or legally binding commitments to make such investments, in any corporation, joint venture, general or limited partnership, other business enterprise, or other Person.
4.20 Dealings with Affiliates. Not Applicable.
ARTICLE 5.
REPRESENTATIONS AND WARRANTIES OF BUYER
As an inducement to Seller to enter into this Agreement and to consummate the Contemplated Transactions, Buyer hereby represents and warrants to Seller, as of the date hereof and as of the Closing Date, as follows:
5.1 Organization and Good Standing. Buyer is a limited liability company duly organized, validly existing, and in good standing under the laws of the State of Delaware.
5.2 Authority: No Conflict.
(a) Enforceability. This Agreement constitutes the legal, valid, and binding obligation of Buyer, enforceable against Buyer in accordance with its terms. Upon the execution and delivery by Buyer of this Agreement, this Agreement will constitute the legal, valid, and binding obligations of Buyer, enforceable against Buyer in accordance with its respective terms. Buyer has the absolute and unrestricted right, power, and authority to execute and deliver this Agreement and to perform its obligations under this Agreement.
(b) No Conflict. Neither the execution and delivery of this Agreement by Buyer nor the consummation or performance of any of the Contemplated Transactions by Buyer will give any Person the right to prevent, delay, or otherwise interfere with any of the Contemplated Transactions pursuant to: any provision of Buyer Organizational Documents; any resolution adopted by the board of directors or the stockholders of Buyer; any legal requirement or order to which Buyer may be subject; or any contract to which Buyer is a party or by which Buyer may be bound.
5.3 Consents. Buyer is not and will not be required to obtain any consent from any Person in connection with the execution and delivery of this Agreement or the consummation or performance of any of the Contemplated Transactions to enter into the transactions contemplated by this Agreement.
5.4 Investment Intent. Buyer is acquiring the Purchased Interest for its own account and not with a view to their distribution within the meaning of the Securities Act. Buyer has had access to and received all information of Seller and the Company that it has requested to determine whether to enter into this Agreement and has had the opportunity to review such information with counsel and advisors of its choice.
5.5 Certain Proceedings. As of the date hereof, there is no pending proceeding that has been commenced against Buyer and that challenges, or may have the effect of preventing, delaying, making illegal, or otherwise interfering with, any of the Contemplated Transactions. To Buyer’s knowledge, no such proceeding has been threatened as of the date hereof.
5.6 Brokers or Finders. Buyer and its officers and agents have incurred no liability for brokerage or finders’ fees or agents’ commissions or other similar payment in connection with this Agreement.
5.7 Sufficiency of Funds. Subject to the provisions of Section 7.7 of this Agreement, Buyer has sufficient cash on hand or other sources of immediately available funds to enable Buyer to make payment of the Purchase Price and other payments set forth in Section 2.2 and to consummate the Closing.
ARTICLE 6.
COVENANTS
6.1 Indebtedness; Liens: Retained Liabilities. With the exception of the Assumed Liabilities set forth in Schedule 2.2, which shall survive the Closing, Seller shall obtain a release of all Liens and Encumbrances on the Purchased Interests and on the assets and properties of the Company prior to or at Closing.
6.2 Covenant Not to Solicit. Not Applicable.
6.3 Further Assurances. The Parties agree (a) to furnish upon request to each other such further information, (b) to execute and deliver to each other such other documents, and (c) to do such other acts and things, all as the other party may reasonably request for the purpose of carrying out the intent of this Agreement and the documents referred to in this Agreement.
6.4 Assistance. After the Closing Date, Seller shall:
| (a) | make available to Buyer and to any taxing authority, as reasonably requested, all information, records, and documents relating to Taxes of the Company or its Subsidiaries (including information necessary to file extensions and make estimated Tax payments); | |
| (b) | provide timely notice in writing to Buyer of any pending or threatened tax audits or assessments of the Company or its Subsidiaries for taxable periods for which Buyer may have a liability under this Article 6; and | |
| (c) | furnish Buyer with copies of all correspondence received from any taxing authority in connection with any Tax audit or information request with respect to any such taxable period. |
6.5 Operation in Usual Manner. From and after the date of this Agreement until the Closing, except to the extent Buyer consents in writing:
(a) Seller will not sell, pledge, convey, transfer or encumber or enter into any agreement for the transfer or sale of the Company or any of the Company’s property or assets.
(b) Seller will conduct the business of the Company in the usual and customary manner and not dispose of any material property or assets, or incur any material obligation, and will use reasonable commercial efforts (without making any commitments on behalf of Buyer) to preserve the goodwill of the business.
(c) Seller will not enter into any contract or commitment, incur any liability or engage in any transaction on behalf of, or relating to the business of the Company, requiring an expenditure in excess of $250,000.00, other than in the Ordinary Course of Business and consistent with past practices, or which is reasonably necessary for the consummation of the transactions contemplated by this Agreement and then only with the prior written consent of Buyer.
(d) Seller will notify Buyer in writing of any claim, lawsuit, action or proceeding that may be asserted, commenced or threatened (where Seller has knowledge of such threat and has reason to believe that such threat is likely to result in any such action or proceeding) against Seller or Company.
(e) Seller will notify Buyer promptly in writing of any fact or occurrence which causes or, as of the Closing Date, would cause any of Seller’s representations and warranties to be false, inaccurate or misleading.
6.6 Access to Information. From and after the date of this Agreement, Seller shall give Buyer, its counsel, accountants and other representatives, full access during Seller’s normal business hours, subject to reasonable security measures and reasonable prior notice, to all of the Assets and all books, records, agreements and commitments relating to the Company, and shall furnish or cause to be furnished to Buyer’s representatives during such period all such information concerning the Company as Buyer may reasonably request, subject to the provisions of Section 10.2 hereof.
6.7 Compliance with Laws. Seller will comply with all material applicable laws, rules and regulations of any Governmental Body relating to the Company or the business of the Company or required to be complied with by Seller in the performance of this Agreement and for the consummation of the Contemplated Transactions.
6.8 Intentionally Omitted.
ARTICLE 7.
CONDITIONS PRECEDENT TO BUYER’S OBLIGATION TO CLOSE
Buyer’s obligation to purchase the Purchased Interest and to take the other actions required to be taken by Buyer at the Closing is subject to the satisfaction of each of the following conditions (any of which may be waived by Buyer, in whole or in part):
7.1 Accuracy of Representations. The representations and warranties of Seller set forth in this Agreement shall be true and correct as of Closing in all material respects, in good faith and to the extent Seller has knowledge thereof.
7.2 Seller’s Performance.
(a) Covenants: All of the covenants and obligations that Seller is required to perform or to comply with pursuant to this Agreement at or prior to the Closing (considered collectively), and each of these covenants and obligations (considered individually), must have been duly performed and complied with in all material respects.
(b) Documents. Each document required to be delivered by Seller pursuant to Section 3.2 must have been delivered.
7.3 Consents. Each of the required consents must have been obtained and must be in full force and effect.
7.4 No Proceedings. Since the date of this Agreement, there must not have been commenced or threatened against the Company, or against any Person affiliated with the Company, any legal proceeding (a) involving any challenge to, or seeking damages or other relief in connection with, any of the Contemplated Transactions, or (b) that may have the effect of preventing, delaying, making illegal, or otherwise interfering with any of the Contemplated Transactions.
7.5 No Claim Regarding Ownership. There must not have been made or threatened by any Person any claim asserting that such Person is the holder or the beneficial owner of, or has the right to acquire or to obtain beneficial ownership of, any voting, equity, or ownership interest in the Company.
7.6 No Prohibition. Neither the consummation nor the performance of any of the Contemplated Transactions will, directly or indirectly, materially contravene, conflict with, or result in a material violation of, or cause Buyer or any Person affiliated with Buyer to suffer any Material Adverse Consequence under, (a) any applicable legal requirement or order, or (b) any legal requirement or order that has been published, introduced, or otherwise proposed by or before any Governmental Body.
7.7 Intentionally Omitted.
7.8 Intentionally Omitted.
7.9 Intentionally Omitted.
ARTICLE 8.
CONDITIONS PRECEDENT TO SELLER’S OBLIGATION TO CLOSE
Seller’s obligation to sell the Interests and to take the other actions required to be taken by Seller at the Closing is subject to the satisfaction of each of the following conditions (any of which may be waived by Seller, in whole or in part):
8.1 Accuracy of Representations. The representations and warranties of Buyer set forth in this Agreement shall be true and correct as of Closing in all material respects.
8.2 Buyer’s Performance.
(a) All of the covenants and obligations that Buyer is required to perform or to comply with pursuant to this Agreement at or prior to the Closing (considered collectively), and each of these covenants and obligations (considered individually), must have been performed and complied with in all material respects.
`(b) Documents. Buyer must have delivered each of the documents required to be delivered by Buyer and must be prepared to make the cash payments required to be made by Buyer pursuant thereto.
8.3 No Injunction. There must not be in effect any legal requirement or any injunction or other order that prohibits the sale of the Interest by Seller to Buyer.
8.4 Intentionally omitted.
ARTICLE 9.
INDEMNIFICATION
9.1 Seller’s Indemnity. Seller agrees to indemnify, defend, and hold harmless Buyer from and against any and all losses, liabilities, damages, costs, and expenses (including court costs and reasonable attorneys’ fees) (collectively, “Damages”) incurred by Buyer to the extent arising from or attributable to; (a) the breach of any representation or warranty of Seller contained in this Agreement; (b) any breach of any covenant or agreement of Seller contained in this Agreement; and (c) the operation of the Company prior to the Closing Date (including but not limited to Damages arising by reason of (A) acts or omissions of the Company occurring prior to the Closing Date).
9.2 Reserved.
9.3. Buyer’s Indemnity. Buyer agrees to indemnify, defend, and hold harmless Seller from and against any and all losses, liabilities, damages, costs, and expenses (including court costs and reasonable attorneys’ fees) (collectively, “Damages”) incurred by Seller to the extent arising from or attributable to; (a) the breach of any representation or warranty of Buyer contained in this Agreement, (b) the TK Note, the TK Security Deed, the Seller Secured Note, Seller SPA and Seller Security Deed; and (c) the operation of the Company after the Closing Date (including but not limited to Damages arising by reason of acts or omissions of the Company occurring after the Closing Date).
9.4 Survival. All representations and warranties of any party contained in this Agreement shall survive the execution and delivery of this Agreement and the consummation of the Contemplated Transactions, but shall be extinguished and be of no further force or effect one (1) year after the Closing Date, provided that with respect to any “Tax Claim” (as herein defined), such representations and warranties shall terminate on the date upon which the Liability to which any such Tax Lass may relate is barred by all applicable statutes of limitation.
9.5 Procedure for Indemnification.
(a) Promptly after receipt by an indemnified party of notice of the commencement of any proceeding against it by a third party, such indemnified party will, if a claim is to be made against any indemnifying party with respect to such action, give notice to the indemnifying party of the commencement of such claim.
(b) The indemnifying parry will be entitled to participate in such proceeding and to the extent that it wishes to assume the defense of such proceeding with counsel reasonably satisfactory to the indemnified party and, after notice from the indemnifying party to the indemnified party of its election to assume the defense of such proceeding, the indemnifying party will not, as long as it diligently conducts such defense, be liable to the indemnified party for any fees of other counsel or any other expenses with respect to the defense of such proceeding subsequently incurred by the indemnified party in connection with the defense of such proceeding. In connection with any indemnification, the indemnified party will cooperate with all reasonable requests of the indemnifying party. A claim for indemnification for any matter not involving a third party claim may be asserted by prompt written notice to the party from whom indemnification is sought, subject to any limitations contained in this Article 9.
(c) The indemnifying party shall have ten (10) days to object to any notice of claim or loss made by an indemnified party. If the indemnifying party objects to such notice of claim or loss, or fails to respond in such time period, the parties shall endeavor in good faith to settle the dispute through negotiation. If the dispute cannot be resolved through negotiation, or another mutually agreeable dispute resolution mechanism, either of the parties has the right to request non-binding mediation.
ARTICLE 10
GENERAL PROVISIONS
10.1 Notices. Notices and other communications required by this Agreement will be in writing and delivered by any courier or telecopy (facsimile). All notices will be addressed as follows:
If to Seller:
TXC Services, LLC
30725 US Highway 19 North
Suite 335
Palm Harbor, FL 34684
If to Buyer and the Company:
Global Technologies, Ltd.
8 Campus Dr.
Suite 105
Parsippany, NJ 07054
or such address as shall be furnished by such notice to the other parties or to such other addresses as may be designated by a proper notice. Notices will be deemed to be effective upon receipt (or refusal thereof) if sent by recognized overnight delivery service and upon electronically verified transmission, if such delivery is by facsimile or telecopy transmittal, provided that any such facsimile or telecopy transmittal is confirmed by sending, within twenty-four (24) hours, a copy of such transmittal by overnight delivery service for next-day delivery.
10.2 Confidentiality. Buyer and Seller will maintain in confidence, and will cause the officers, employees, agents, and advisors of Buyer and the Company to maintain in confidence, any written, oral, or other information obtained in confidence from another party or the Company in connection with this Agreement or the Contemplated Transactions, unless (a) such information is already known to such party or to others not bound by a duty of confidentiality or such information becomes publicly available through no fault of such party, (b) the use of such information is necessary or appropriate in making any filing or obtaining any consent or approval required for the consummation of the Contemplated Transactions, or (c) the furnishing or use of such information is required by legal proceedings. If the Contemplated Transactions are not consummated, each party will return or destroy as much of such written information as the other party may reasonably request.
10.3 Binding Agreement; Assignment. This Agreement and the right of the parties hereunder shall be binding upon and inure to the benefit of the parties hereto and their respective successors, assigns, heirs, estates and legal representatives. This Agreement shall not be assigned by either party without the express written consent of the other party, which consent shall not be unreasonably withheld or delayed.
10.4 Entire Agreement; Amendment. This Agreement and the Exhibits and Schedules attached hereto constitute the entire Agreement and understanding between the parties hereto and supersede and revoke any prior agreement or understanding relating to the subject matter of this Agreement. No change, amendment, termination, or attempted waiver of any of the provisions hereof shall be binding upon the other party unless reduced to writing and signed by the party against whom such change, amendment, termination, or waiver is sought to be enforced.
10.5 Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original and all of which together shall constitute one and the same instrument. Receipt of telecopied or scanned and emailed signature pages shall have the same legal effect as the receipt of original signature pages.
10.6 Expenses. The parties hereto will each pay their own attorneys and accountant fees, expenses and disbursements in connection with the negotiation and preparation of this Agreement and the other Contemplated Transactions and all other costs and expenses incurred in performing and complying with all conditions to be performed under this Agreement and the other Contemplated Transactions,
10.7 Further Assurances. Upon reasonable request from time to time, the parties hereto will deliver and/or execute such further instruments as are necessary or appropriate to the consummation of the transactions contemplated by this Agreement.
10.8 Construction. Within this Agreement, the singular shall include the plural and the plural shall include the singular, and any gender shall include the other genders, all as the meaning in the context of this Agreement shall require. Nothing in this Agreement shall be construed against the draftsperson solely on the basis of drafting alone, given that both parties fully reviewed and negotiated this Agreement with their counsel. The captions used in this Agreement are inserted for convenience only and shall not constitute a part hereof.
10.9 Exhibits and Schedules. All Exhibits and Schedules attached to this Agreement are by this reference incorporated herein and made an essential part hereof.
10.10 Governing Law. This Agreement shall be governed and regulated and the rights and liabilities of all parties hereto shall be construed in accordance with the laws of the State of Delaware, without regard to conflicts or choice of laws rules.
10.11 No Third-Party Beneficiaries. This Agreement is not intended, and shall not be deemed, to confer upon or give any Person except the parties hereto and their respective successors and assigns any remedy, claim, liability, reimbursement, cause of action or other right under or by reason of this Agreement.
10.12 Time of Essence. Time is of the essence for this Agreement.
[SIGNATURE PAGE TO FOLLOW]
IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be executed as of the date first above written.
| Seller | ||
| TXC SERVICES, LLC | ||
| By: | Christopher Ferguson | |
| Title: | Manager | |
| Buyer | ||
| Global Technologies, Inc. | ||
| By: | Frederick Kalei Cutcher | |
| Title: | CEO | |
Schedule 2.2
Assumption and Guaranty of Company’s Performance
under the TK Secured Note and TK Security Deed
The Buyer hereby assumes and, guarantees the Company’s performance of all obligations under the TK Secured Note in the principal amount of $1,500,000 and TK Security Deed dated on or about January 6, 2023 pursuant to the Guaranty Agreement attached hereto as Exhibit D.
Exhibit 10.2
ASSIGNMENT OF MEMBERSHIP UNITS
THIS ASSIGNMENT OF MEMBERSHIP UNITS (this “Assignment”) is made as of July 25, 2023 (the “Effective Date”), by and between TXC Services, LLC (“Assignor”) and Global Technologies, Ltd (“Assignee”).
WHEREAS, Assignor and Assignee are parties to an amended and restated membership interest purchase agreement and transaction documents dated the same date of this Assignment (the “MIPA”), whereby Assignor agreed to sell and Assignee agreed to buy all of Assignor’s common membership units/interests (“Units”) in Foxx Trot Tango, LLC (the “Company”). A copy of the MIPA is attached hereto as Exhibit A; and
WHEREAS, the parties wish to effect the transfer of Assignor rights, title and interest in the Units, as set forth below.
NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:
1. Assignor hereby assigns to Assignee, and Assignee hereby accepts from Assignor, all of Assignor’s right, title and interest in and to the Units.
2. To induce the Assignee to enter into this Assignment and to accept this Assignment, Assignor hereby represents and warrants to Assignee that Assignor’s interest in the Unit are free and clear of all security interests, liens, adverse claims, and any other encumbrances of any nature whatsoever.
3. As the owner of the Units, Assignee assumes all obligations under the Third Amended and Restated Limited Liability Company Agreement dated the same date of this Assignment.
4. Assignor hereby agrees to execute any other documents and take any other action as may be commercially reasonable to effectuate the transactions contemplated by this Assignment.
5. This Assignment shall bind and inure to the benefit of Assignor and Assignee and their respective successors and assigns.
6. This Assignment shall be governed by the laws of the State of Wyoming without the laws of any other jurisdiction.
7. This Assignment may be executed in as many counterparts as may be required; and it shall not be necessary that the signatures of, or on behalf of, each party, or that the signatures of all persons required to bind any party, appear on each counterpart; but it shall be sufficient that the signature of; or on behalf of, each party, appear on one or more of the counterparts. All counterparts shall collectively constitute a single agreement.
[SIGNATURE PAGE TO FOLLOW]
IN WITNESS WHEREOF, Assignor and Assignee have executed this Assignment on the date first written above.
| Assignor | ||
| TXC SERVICES, LLC | ||
| By: | Christopher Ferguson | |
| Title: | Manager | |
| Global Technologies, Ltd | ||
| By: | Frederick Kalei Cutcher, CEO | |
EXHIBIT A
Amended and Restated Membership Interest Purchase Agreement
Exhibit 10.3
Exhibit 10.4
Exhibit 10.5
GUARANTY AGREEMENT
THIS GUARANTY AGREEMENT (this “Guaranty”), dated as of the 25th day of July 2023, is made by Global Technologies, Ltd, a Delaware corporation, with an address at: 8 Campus Dr., Suite 105, Parsippany, NJ 07054 (hereinafter referred to as “Guarantor”), for the benefit of TK Management Services, LLC, a Pennsylvania limited liability company having an address at PO Box 425, New Hope, PA 18938 (together with its successors and assigns, “Lender”).
Recitals
A. Lender made a loan to Foxx Trot Tango, LLC, a Wyoming limited liability company (“Borrower”), in the principal amount of $1,500,000 (the “Loan”).
B. The Loan is evidenced by that certain promissory note in the amount of the Loan, dated as of January 6, 2023, executed by Borrower in favor of Lender (as the same may be amended, restated, replaced, supplemented, or otherwise modified from time to time, the “Note”) and secured by that certain deed to secure debt, dated as of the date hereof, executed by Borrower in favor of Lender (as the same may be amended, restated, replaced, supplemented, or otherwise modified from time to time, the “Security Instrument”) and that certain assignment of leases and rents, dated as of the date hereof, executed by Borrower in favor of Lender (as the same may be amended, restated, replaced, supplemented, or otherwise modified from time to time, the “Assignment of Leases and Rents”). The Note, Security Instrument, the Assignment of Leases and Rents, and all other documents evidencing, securing, or guarantying the Loan are herein collectively referred to as the “Loan Documents.”
D. Pursuant to a certain Amended and Restated Membership Interest Purchase Agreement (“MIPA”) and Transactions Documents included as part of the MIPA (“Transaction Documents”) Guarantor agreed to assume and guaranty all liabilities and obligations under the Note and Loan Document , as the sole member of the Borrower, owns a direct or indirect interest in Borrower and acknowledges that it will derive substantial benefits from Lender’s making the Loan to Borrower in accordance with the Transaction Documents.
NOW THEREFORE, in consideration of the premises and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Guarantor hereby agrees for the benefit of Lender as follows:
ARTICLE
I
DEFINITIONS
Section 1.01 Defined Terms. Capitalized terms used but not defined in this Guaranty shall have the meanings ascribed to such terms in the Loan Documents unless otherwise specified.
ARTICLE
II
GUARANTY OF LOAN OBLIGATIONS
Section 2.01 Guaranteed Obligations. Guarantor hereby irrevocably, absolutely, and unconditionally guarantees to Lender the full and prompt payment and performance when due, whether at stated maturity, prepayment, acceleration, demand, or otherwise of all Borrower’s obligations and liabilities (including amounts that would become due but for the operation of the automatic stay under Section 362(a) of the Bankruptcy Code) for which Borrower is or shall become personally liable pursuant to the Note, Security Instrument, and other Loan Documents (the “Guaranteed Obligations”).
Section 2.02 Continuing Obligation. This Guaranty is a continuing obligation and shall remain in full force and effect and shall only be discharged if and when the Loan has been paid in full and all obligations thereunder have been fully performed. Notwithstanding the foregoing, this Guaranty shall be reinstated if at any time any payment of any of the Guaranteed Obligations is rescinded or must be returned by Lender to Borrower, Guarantor, or to any guarantor, trustee, receiver, or other representative of any of them. If any Person constituting Guarantor shall be a natural person, this Guaranty shall continue after such Person’s death, in which event this Guaranty shall be binding upon Guarantor’s heirs, estate, and legal representatives.
Section 2.03 Guaranty of Payment and Performance. This is a continuing guaranty of payment and performance and is not a guaranty of collection. Guarantor hereby acknowledges that it is liable for the Guaranteed Obligations as a primary obligor. Guarantor hereby irrevocably agrees that Lender has the right to require Guarantor to pay, comply, and satisfy its obligations and liabilities under this Guaranty and that Lender shall have the right to proceed immediately against Guarantor directly without being required to recover payment or performance first from Borrower or any other party, and Lender shall not be required to first sue on the Note, demonstrate that the collateral securing the Loan is inadequate security, or demonstrate that Lender has exercised or exhausted (to any degree) Lender’s other rights and remedies in respect of the Loan.
ARTICLE
III
GENERAL TERMS AND CONDITIONS
Section 3.01 Payments, Interest on Amounts. Amounts payable to Lender under this Guaranty shall be immediately due and payable on Lender’s written demand and shall be paid without reduction by setoff, defense, counterclaim, or crossclaim. Interest shall accrue on any judgment obtained by Lender in connection with the enforcement or collection of amounts due under this Guaranty at the lesser of the Default Rate (as defined in the Note) or the maximum interest rate permitted by law from the date of judgment until such judgment shall be paid in full.
Section 3.02 Remedies. Guarantor acknowledges that following an Event of Default under the Loan, Lender shall be entitled to accelerate the Loan and exercise all rights and remedies permitted under the Loan Documents, at law, or in equity, including, without limitation enforcement of this Guaranty.
(a) Remedies Cumulative. All rights and remedies of Lender are cumulative and may be exercised independently, concurrently, or successively in Lender’s sole discretion and as often as occasion therefor shall arise.
(b) No Waiver. Lender’s delay or failure to exercise any right or remedy with respect to the Loan shall not be deemed a waiver of such right or remedy; and no partial exercise by Lender of any right or remedy shall preclude further exercise thereof.
(c) No Right to Notice Imputed. Notice or demand given to Borrower in any instance shall not entitle Borrower to notice or demand in any other circumstance (whether similar or not) nor constitute a waiver by Lender of its right to take any future action in any circumstance without notice or demand unless notice is expressly required by this Guaranty.
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(d) Lender’s Discretionary Rights. Lender may release security for the Loan or any party liable therefor, may grant extensions, renewals, or forbearances with respect to the Loan and may accept partial or past due payments, grant indulgences, or apply security held to the payment of the Loan, in each case without prejudice to Lender’s rights under this Guaranty and without such action being deemed an accord and satisfaction or reinstatement of the Loan. Lender shall not be deemed as a consequence of exercising (or its failure or delay to exercise) any rights hereunder to have waived any rights or remedies or be estopped from further exercising any of its rights and remedies.
(e) Right of Setoff. Upon the occurrence of a default under this Guaranty, Lender is hereby authorized at any time and from time to time, to the fullest extent permitted by law, and without prior notice to Guarantor (such notice being hereby expressly waived by Guarantor), to setoff and apply any and all deposits and sums of Guarantor held by Lender in whatever currency to the amounts owed to Lender under this Guaranty.
Section 3.03 Enforcement Costs. Guarantor hereby agrees to pay, on written demand by Lender, all costs incurred by Lender in collecting any amounts payable under this Guaranty or enforcing or protecting its rights under this Guaranty, in each case whether or not legal proceedings are commenced. Such fees and expenses shall include, without limitation, [reasonable] attorneys’ fees, court fees, costs of pre-trial, trial, and appellate proceedings, and the cost of collection. Enforcement costs incurred by Lender shall be immediately due and payable and shall bear interest at the Default Rate from the date the cost is incurred until paid in full if not paid within [NUMBER] days of demand. Guarantor’s obligations under this Section 3.03 shall survive termination of the Loan and payment in full of the Guaranteed Obligations and all other amounts payable under this Guaranty and any release or termination of this Guaranty.
Section 3.04 Unimpaired Liability; Waivers of Defense.
(a) Unimpaired Liability. Guarantor hereby guarantees that the Guaranteed Obligations will be paid strictly in accordance with the terms of the Loan Documents regardless of any law, order, or regulation now or hereafter in effect in any jurisdiction affecting any terms contained in the Loan Documents or the rights of Lender with respect thereto. The obligations of Guarantor under this Guaranty shall be independent of the obligations of Guarantor in any other guaranty or indemnity agreement and shall be independent from the obligations of any other guarantor or indemnitor under the Loan.
(b) Waivers of Guarantor’s Defenses. Guarantor hereby acknowledges and agrees that the waivers in Section 3.04 are given to the fullest extent permitted by law and that the Guaranteed Obligations secured by this Guaranty shall not be released, terminated, discharged, limited, or impaired by reason of:
(i) Borrower’s lack of power or authority to enter into any of the Loan Documents;
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(ii) The severance of any provision from any Loan Document due to illegality or lack of enforceability;
(iii) Any modification, supplement, rescission, waiver, release, extension, or other amendment to any Loan Document, including, without limitation:
(A) Any increase in the Debt or Guaranteed Obligations resulting from the extension of additional credit, any increase to the interest rate, or otherwise;
(B) The approval of any Transfer; or
(C) The granting of any extensions of time to pay or perform the Obligations under the Loan;
(iv) Any failure by Lender to record any Loan Document or perfect Lender’s security interests in the Loan’s collateral;
(v) Any failure by any Person to protect, secure, or insure any collateral given for the Loan;
(vi) Any exchange, substitution, or release of any collateral, or the acceptance of additional collateral as security for the Loan;
(vii) Any exercise by Lender of a foreclosure (judicial or otherwise) or the acceptance of a deed-in-lieu of foreclosure;
(viii) Any sale or disposition of any collateral or the application of any proceeds thereof to all or part of the Guaranteed Obligations or the Debt;
(ix) Any failure of Lender to marshal assets of Borrower or any other party;
(x) Any default, failure, or delay (willful or otherwise) of any Person in the performance of the Obligations under the Loan;
(xi) Any negligence by Lender in the administration or enforcement of the Loan;
(xii) Any delay enforcing the Debt or the Obligations, including, without limitation, the Guaranteed Obligations;
(xiii) Any bankruptcy, insolvency, reorganization, dissolution, liquidation, or other restructuring of Borrower, SPE Equity Owner, Guarantor, or Lender;
(xiv) The death, incompetence, disability, insolvency, or bankruptcy of any natural Person constituting Guarantor, or the failure of Lender to enforce any claims against the estate of such Person in any probate, bankruptcy, or other proceeding against such Person;
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(xv) Any failure of Lender to disclose information to Guarantor relating to the Loan, including, without limitation the financial condition of Borrower or the operation and performance of the Property;
(xvi) The failure of any Person constituting Guarantor to execute this Guaranty, or the release (in whole or part) of such Person’s obligations or liabilities with respect to the Guaranteed Obligations;
(xvii) Any sale, transfer, grant, conveyance, or assignment of Borrower’s interest in the Property, or any transfer or assignment of interests in the ownership of Borrower regardless of whether any of the foregoing is permitted under the Loan Documents;
(xviii) Any delay by Lender to assert any claim, demand performance, or enforce any right or remedy allowed under any Loan Document, at law, or in equity;
(xix) Any defense, setoff, claim, or counterclaim (other than a defense of payment or performance) which Guarantor may have against Borrower, SPE Equity Owner, Lender, or any other guarantor or indemnitor under the Loan;
(xx) Any inaccuracy in any representation or warranty made by Borrower;
(xxi) Any other circumstance of any nature whatsoever that might otherwise constitute a defense (legal, equitable, or otherwise) to the Guaranteed Obligations; and/or
(xxii) Any other circumstance of any nature whatsoever that might otherwise constitute a defense (legal, equitable, or otherwise) available to, or a discharge of, this Guaranty, the Guaranteed Obligations, the obligations of Guarantor hereunder or the obligations of any other person or party relating to this Guaranty or otherwise with respect to the Loan, including, but not limited to, the defenses set forth in O.C.G.A. §§ 10-7-20, 10-7-21, 10-7-22, and 10-7-23.
Section 3.05 Waivers of Guarantor’s Rights. The waivers in this Section 3.05 are given to the fullest extent permitted by applicable law.
(a) Waiver of Right of Revocation. Guarantor hereby unconditionally and irrevocably waives any right to revoke this Guaranty and acknowledges that this Guaranty is continuing in nature and applies to all presently existing and future Guaranteed Obligations.
(b) Waiver of Notices. Guarantor acknowledges the provisions of the Loan Documents, and waives any right that Guarantor has to receive notice of:
(i) acceptance of this Guaranty, or demand for performance hereunder;
(ii) any advances made by Lender to Borrower or to any guarantor or indemnitor;
(iii) any amendment, modification, replacement, or extension of the Note or other Loan Documents;
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(iv) the occurrence of any default or any Event of Default under any of the Loan Documents or Lender’s acceleration of the Loan;
(v) Lender’s transfer, disposition, or hypothecation of the Loan or any part thereof;
(vi) any action by Lender to enforce or foreclose any lien secured by the Guaranteed Obligations;
(vii) any prospective or actual sale or foreclosure (or posting or advertising for sale or foreclosure) of any collateral for the Loan;
(viii) protest, proof of nonpayment, or default by Borrower or any guarantor or indemnitor; or
(ix) any other action at any time taken or omitted by Lender, and, generally, all demands and notices of every kind in connection with this Guaranty, the Loan Documents, and any documents or agreements evidencing, securing, or guarantying the Loan.
(c) Waiver of Statute of Limitations. Guarantor waives any defense based upon failure of Lender to commence an action against Borrower or any other guarantor or indemnitor (whether or not after notice) within the time prescribed by applicable law concerning limitations of actions commonly referred to as the “statute of limitations.”
(d) Waiver of Joinder. Guarantor hereby waives joinder in any proceeding brought by Lender to collect the Debt.
(e) Waiver of Right to Privacy. Guarantor hereby waives any and all rights at law, if any, to prohibit disclosure by Lender of any information relating to the Loan or this Guaranty to agents, successors, and assignees, including, without limitation, in connection with any transfer made under Section 3.11.
(f) Waiver of Claims Against Lender. To the fullest extent permitted by applicable law, Guarantor hereby waives any and all claims against Lender on any theory of liability and waives all damages, including, without limitation special, indirect, consequential, and punitive damages arising out of, or in connection with, this Guaranty, any other Loan Document, or the transactions contemplated hereby.
(g) Waiver of Creditor’s Rights Under Debtor Relief Laws. Guarantor hereby waives any and all rights to be deemed a “creditor” (as defined in Section 101 of the Bankruptcy Code) of Borrower, or any other guarantor or indemnitor by reason of the existence of this Guaranty. If Borrower or any guarantor or indemnitor becomes a debtor in any proceeding under the Bankruptcy Code or any other and all other liquidation, bankruptcy, assignment for the benefit of creditors, conservatorship, moratorium, receivership, insolvency, rearrangement, reorganization, or similar debtor relief laws of the United States or any state or other applicable jurisdictions in effect from time to time (collectively, “Debtor Relief Laws”), then in connection therewith Guarantor hereby waives all such rights as “creditor” under Debtor Relief Laws. This waiver is given to induce Lender to make the Loan.
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(h) Waiver of Venue; Forum Selection. Guarantor irrevocably and unconditionally waives, to the fullest extent permitted under applicable law, any objection that it may now or hereafter have to the laying of venue of any action or proceeding arising out of this Guaranty in any court selected by Lender, or the defense of improper venue and/or an inconvenient forum in any such court.
(i) WAIVER OF JURY TRIAL. TO THE FULLEST EXTENT PERMITTED BY LAW AS SUCH RIGHT SHALL NOW OR HEREAFTER EXIST, GUARANTOR HEREBY WAIVES ANY RIGHT TO TRIAL BY JURY WITH RESPECT TO THIS GUARANTY AND OTHER LOAN DOCUMENTS. GUARANTOR AGREES NOT TO ELECT A TRIAL BY JURY ON ANY ISSUE TRIABLE BY JURY OF RIGHT. THIS WAIVER SHALL APPLY TO ANY CLAIM, COUNTERCLAIM, OR OTHER ACTION ARISING IN CONNECTION WITH THE LOAN OR THIS GUARANTY. THIS JURY TRIAL WAIVER IS GIVEN KNOWINGLY AND VOLUNTARILY BY GUARANTOR AND IS INTENDED TO APPLY SEPARATELY IN EACH INSTANCE FOR WHICH A RIGHT TO A JURY TRIAL WOULD OTHERWISE ACCRUE. LENDER IS HEREBY AUTHORIZED TO FILE A COPY OF THIS GUARANTY (OR THE PROVISIONS OF THIS SECTION) IN ANY PROCEEDING AS CONCLUSIVE EVIDENCE OF THIS WAIVER.
(j) Waiver of Action Against Borrower. Guarantor agrees that Lender need not attempt to collect any Guaranteed Obligations from Borrower or any other loan party or to realize upon any collateral, but may require Guarantor to make immediate payment of all of the Guaranteed Obligations to Lender when due, whether by maturity, acceleration, or otherwise, or at any time thereafter. Guarantor waives any defense based upon failure of Lender to commence an action against Borrower or any other loan party whether or not after notice (the right to require Lender to take action against Borrower as required by O.C.G.A. § 10-7-24 being hereby expressly waived) and whether or not within the time prescribed by applicable law concerning limitations of actions commonly referred to as the “statute of limitations.”
(k) Waiver of Confirmation of Nonjudicial Power of Sale Foreclosure. Guarantor acknowledges that Lender may, at its election and without notice to or demand upon Guarantor, foreclose on any collateral (including any real property) or other collateral held by it by one or more judicial or non-judicial sales, accept an assignment of any such collateral in lieu of foreclosure, compromise, or adjust any part of the Guaranteed Obligations, make any other accommodation with Borrower or any loan party or exercise any other right or remedy available to it against Borrower or any other loan party, without affecting or impairing in any way the liability of Guarantor hereunder except to the extent the Guaranteed Obligations (other than contingent or unliquidated obligations or liabilities) have been indefeasibly paid in full. Guarantor hereby waives any defense arising out of such election by Lender even though such election operates, pursuant to applicable law, to impair or to extinguish any right of subrogation, reimbursement, exoneration, contribution, or indemnification or other right or remedy of Guarantor against Borrower or any other loan party or any collateral, including Lender’s failure to obtain a judicial confirmation of any nonjudicial power of sale pursuant to O.C.G.A. § 44-14-161, or otherwise. Guarantor further acknowledges and agrees that if Lender forecloses on any collateral for the Loan, then: (i) the amount of the Secured Indebtedness may be reduced only by the price for which that collateral is sold at the foreclosure sale, even if the collateral is worth more than the sale price; (ii) Lender may collect from Guarantor even if Lender, by foreclosing on the real property collateral, has destroyed any right Guarantor may have to collect from Borrower; and (iii) Lender shall not be restricted or prohibited from recovering a deficiency judgment after any foreclosure sale and shall not be restricted from pursuing a deficiency judgment against Borrower or any loan party prior to any foreclosure sale.
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Section 3.06 Consequences of Borrower’s Bankruptcy.
(a) Direct Enforcement Against Guarantor. If Borrower shall be subject to the protection of the Bankruptcy Code or other Debtor Relief Laws having the effect of preventing or delaying Lender from taking enforcement action against Borrower, including, without limitation, acceleration of the Loan, Lender may, as against Guarantor, nevertheless declare the Loan due and payable and enforce all Lender’s rights and remedies against Guarantor as provided herein.
(b) Reinstatement Upon Preference or Fraudulent Transfers. If any payment made on the Loan, whether made by Borrower, any other guarantor or indemnitor of the Loan, or any other Person, is required to be refunded or recovered from Lender as a preference or a fraudulent transfer or is otherwise set aside pursuant to the Bankruptcy Code or other Debtor Relief Laws, then such payment shall not be considered made under this Guaranty and Guarantor’s liability shall continue with respect to any such payment and the obligation shall be deemed reinstated with the same effect as if such payment had not been made.
Section 3.07 Guarantor Claims.
(a) No Enforcement Action Permitted. Without the prior written consent of Lender, Guarantor agrees not to exercise or enforce any Guarantor Claims, nor foreclose, repossess, sequester, or institute any action or proceedings under Debtor Relief Laws (judicial or otherwise) to enforce any rights, judgments, liens, or security interests on assets owned by Borrower or any other guarantor or indemnitor. As used in this Guaranty, the term “Guarantor Claims” shall mean all debts and liabilities now or hereafter owed to Guarantor by Borrower, or by any guarantor, indemnitor, or other party to the Loan, without regard to whether such debts and liabilities are direct, contingent, primary, secondary, several, joint and several, or regardless of whether they are evidenced by note, or other instrument. Guarantor Claims shall include, without limitation, all rights and claims of Guarantor against Borrower or any other party to the Loan as a result of Guarantor’s payment of all or a portion of the Guaranteed Obligations, including rights and claims arising by subrogation or otherwise.
(b) Subordination of Guarantor Claims. Guarantor hereby subordinates to the lien and security interests created under the Loan Documents (including Lender’s right to payment of the Debt and Guaranteed Obligations) all claims and rights of payment, now existing or hereafter arising, that Guarantor may have against Borrower. Guarantor hereby acknowledges and agrees that it shall not be entitled to enforce any such rights or claims or receive any payment therefor until the Debt and all Guaranteed Obligations shall be indefeasibly paid in full to Lender.
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(c) Forbearance of Guarantor’s Right of Subrogation. Guarantor hereby expressly forbears any right of recourse to or any claim or judgment against Borrower or any other guarantor or indemnitor under the Loan until ninety-one days after the Guaranteed Obligations have been satisfied in full. If any amount shall nevertheless be paid to Guarantor by Borrower or any other guarantor or indemnitor prior to ninety-one days after payment in full of the Guaranteed Obligations, such amount shall be held in trust for the benefit of Lender and shall immediately paid to Lender to be credited and applied to the Guaranteed Obligations, whether matured or unmatured. If the deferral of such rights shall be unenforceable for any reason, Guarantor agrees that its rights of subrogation shall be junior and subordinate to Lender’s rights and its rights of contribution against any other guarantor or indemnitor shall be junior and subordinate to Lender’s rights against each other guarantor and indemnitor.
(d) Lender’s Rights to Bankruptcy Claims. In the event of receivership, bankruptcy, reorganization, arrangement, debtor’s relief, or other insolvency proceedings under any Debtor Relief Law involving Borrower, or any other guarantor or indemnitor of the Loan, as debtor, Lender shall have the right to prove its claim in any such proceeding and receive directly from the receiver, trustee, or other court custodian all amounts which would otherwise be payable in connection with Guarantor Claims. Guarantor hereby assigns all such amounts to Lender. If Lender applies such amounts to the Guaranteed Obligations, any such payment owed Guarantor, and which, as between Borrower or any other party and Guarantor, shall constitute a credit upon Guarantor Claims, then upon indefeasible payment in full to Lender of the Guaranteed Obligations, Guarantor shall become subrogated to the rights of Lender to the extent that such payments have been applied toward the Guaranteed Obligations, and such subrogation shall be with respect to that proportion of the Guaranteed Obligations which would have been unpaid if such amounts had not applied to the Guaranteed Obligations.
Section 3.08 Trust Provisions. If Guarantor receives any funds, payments, claims, or distributions which are prohibited by this Guaranty or payable to Lender pursuant to this Guaranty, Guarantor agrees to hold such amounts in trust for Lender. Guarantor shall have no right of ownership over such amounts except to pay such amount promptly to Lender. Guarantor covenants to pay all amounts in trust to Lender within 10 Business Days after Guarantor’s receipt thereof.
Section 3.09 Lender’s Right to Deficiency Judgment. Guarantor acknowledges and agrees that if Lender forecloses the Loan, Lender shall be entitled to pursue, to the fullest extent permitted by applicable law, a deficiency judgment on the Note after any foreclosure sale.
Section 3.10 Application of Loan Payments. Without limiting any other provision of this Guaranty, Guarantor acknowledges and agrees that, to the extent Lender receives any amounts owed under any Loan Documents including, without limitation, any voluntary payments or prepayments by Borrower of principal and interest, insurance or condemnation proceeds, or proceeds from the sale at foreclosure of any collateral given to secure the Loan, then, to the extent not prohibited by applicable law, such amounts need not be applied to or credited against the Guaranteed Obligations, but instead, may be applied by Lender to any portions of the Debt in such order and priority as Lender shall determine in its sole discretion.
Section 3.11 Transfer by Lender. Guarantor acknowledges and agrees that Lender, without notice to or consent by Guarantor, may assign all or any portion of its rights hereunder in connection with any sale of the Loan to any party, including without limitation, to loan servicers, and each such assignee shall be entitled to exercise all of Lender’s rights and remedies hereunder. Guarantor further acknowledges and agrees that Lender may, in its sole discretion, provide any information which Lender has or may hereafter acquire relating to the Loan, the Property, Borrower, or Guarantor to third parties having a present or prospective interest in the administration, enforcement, ownership, purchase, or participation of the Loan.
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ARTICLE
IV
REPRESENTATIONS AND WARRANTIES
Guarantor hereby makes the following representations and warranties, all of which shall survive the execution hereof.
Section 4.01 Adequate Consideration. Guarantor is the owner of a direct or indirect interest in Borrower, and has received, or will receive, direct or indirect benefit from the Loan and that the value of the consideration and benefits received and to be received by Guarantor as a result of Lender making the Loan to Borrower is adequate and reasonable.
Section 4.02 Power and Authority. Guarantor is of legal age and has legal capacity to enter into this Guaranty. Guarantor (and each Person comprising Guarantor, as applicable) is duly organized, validly existing, and in good standing under the laws of the State where entity is organized and is duly qualified to do business in each jurisdiction where it conducts business and is required to qualify; and that the individual signing this Guaranty on behalf of Guarantor has the requisite power and authority to enter into and bind the Guarantor under this Guaranty.
Section 4.03 No Conflict; No Required Consents. The execution, delivery, and performance by Guarantor of this Guaranty and the consummation of the transactions contemplated hereunder do not, and will not, contravene or conflict with any law, statute, or regulation to which Guarantor is subject nor constitute a default (or an event which with notice or lapse of time, or both, would constitute a default) under, or result in the breach of, any court order, indenture, security instrument, or agreement to which Guarantor is a party or which may be binding on Guarantor. No authorization or approval or other action by, and no notice to or filing with, any governmental authority or any Person (other than those that have been obtained) is required for the consummation of this Guaranty or the due execution, delivery, or performance by Guarantor of this Guaranty. There are no conditions precedent to the effectiveness of this Guaranty that have not been satisfied or waived.
Section 4.04 Enforceability. This Guaranty is a legal, valid, and binding obligation of Guarantor and is enforceable in accordance with its terms, except as limited by bankruptcy, insolvency, or other laws of general application relating to the enforcement of creditors’ rights.
Section 4.05 No Material Adverse Change; No Litigation. No material adverse change has occurred to the net worth, assets, financial condition, or liabilities of Guarantor since the date of the financial statements that were most recently delivered by Guarantor to Lender. No litigation, investigation, or proceeding is pending before any arbitrator, court, or governmental authority and, to the best of Guarantor’s knowledge and belief, none is threatened by or against Guarantor or against any assets of Guarantor which could have a material adverse effect on Guarantor or Guarantor’s assets.
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Section 4.06 Recertification of Statements. All statements and information furnished [in writing] to Lender by or on behalf of Guarantor in connection with this Guaranty or any other Loan Document is true, accurate, and complete and no statement or information omits a material fact which has the effect of making such information misleading.
Section 4.07 Due Diligence; Legal Counsel. Guarantor has had adequate opportunity to review the Loan Documents and discuss this Guaranty with legal counsel. Guarantor has independently conducted due diligence on Borrower, the Property, and any other matter deemed necessary by Guarantor and has concluded all investigations to its satisfaction and approved the Loan Documents. Guarantor acknowledges that it has entered into this Guaranty (and any other Loan Document to which Guarantor is or may become a party) without reliance upon any statements by Lender.
Section 4.08 Solvency. As of the date hereof, and after giving effect to this Guaranty and the obligation evidenced hereby, Guarantor is and shall remain solvent, and has and shall continue to have assets which, when fairly valued, exceed Guarantor’s obligations, debts, and liabilities (including contingent liabilities). Guarantor has, and shall continue to have after making this Guaranty, sufficient assets to satisfy its obligations and liabilities under this Guaranty.
Section 4.09 Commercial Purpose. The Loan is for investment, business, or commercial purposes and not for personal, family, household, or agricultural purposes.
Section 4.10 Taxes Paid. Guarantor has filed all required federal, state, and local tax returns and has paid all taxes as shown on such returns as they have become due. No claims have been assessed and are unpaid with respect to such taxes.
ARTICLE
V
SPECIAL COVENANTS
Section 5.01 Financial Covenants.
(a) Financial Statements. Upon request by Lender, Guarantor shall furnish or cause to be furnished to Lender the financial statements within 30 days of receipt of said request. All financial statements shall be certified to Lender and prepared in reasonable detail in accordance with consistently applied accounting methods acceptable to Lender.
(b) Further Assurances. Guarantor agrees to provide such other financial information about the Guarantor and the transactions contemplated by the Loan Documents as Lender may reasonably request from time to time.
Section 5.02 Covenants Regarding Existence and Transfers. Guarantor shall maintain its existence in good standing and, shall not sell, mortgage, pledge, or transfer all or any material portion of its real or personal property, business, or assets without having first obtained Lender’s prior written consent.
Section 5.03 Agreement to Authorize Inspection of Credit. Guarantor agrees that Lender may, at its option, obtain a third-party credit report on Guarantor from time to time. Guarantor authorizes Lender to obtain such reports from any reporting agency of Lender’s choice.
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Section 5.04 Compliance with Anti-Terrorism, Embargo, Sanctions, and Anti-Money Laundering Laws. Not applicable.
Section 5.05 SPE Compliance. Not applicable.
Section 5.06 Guarantor Bound. Guarantor agrees that it shall be bound conclusively by any order or judgment of any court in any action and in any jurisdiction brought by Lender against Borrower in connection with Loan as if Guarantor were a party to such action even if not joined as a party.
ARTICLE
VI
MISCELLANEOUS
Section 6.01 Notices. Unless specifically stated otherwise in this Guaranty, all notices, requests, and communications required or permitted to be delivered under this Guaranty shall be in writing and delivered to all Persons at the addresses designated below, by one of the following methods.
(a) By Hand Delivery. Delivery by hand, whereby delivery is deemed to have occurred at the time of actual delivery.
(b) Overnight Delivery. Overnight, one-day delivery service by a nationally (or regionally) recognized overnight courier service, whereby delivery is deemed to have occurred the Business Day following deposit with the courier.
(c) Certified Mail. Certified mail return receipt requested and postage-prepaid, whereby delivery is deemed to have occurred on the third Business Day following deposit with the United States Postal Service.
(d) Electronic Mail. Electronic transmission (facsimile or email) provided that the transmission is completed no later than 5:00 pm ET on a Business Day and the original also is sent via overnight courier or U.S. Mail, whereby delivery is deemed to have occurred at the end of the Business Day on which electronic transmission is completed.
| To Guarantor: | Global Technologies Ltd 8 Campus Dr., Suite 105, Parsippany, NJ 07054 | |
| with a copy to: | Name: Address: Telephone: Facsimile: Email: | |
| To Lender: | Name: TK Management Services, LLC Address: PO Box 425, New Hope, PA 18938 Telephone: N/A Facsimile: N/A Email: [email protected] | |
| with a copy to: | Name: Address: Telephone: Facsimile: Email: |
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Either party may change its address for purposes of this Section 6.01 by giving written notice to the other party as provided in this Section 6.01, except that no change of address shall be effective against the other party until written notice thereof shall be received or deemed received pursuant to the provisions of this Section 6.01. Notices to counsel or parties other than Guarantor, Lender, their permitted successors and assigns, or the Loan’s servicer, whether now or hereafter designated by a party as entitled to notice hereunder, are for convenience only and any failure to notify such other parties shall not affect the validity of any notice if sent in accordance with this Section 6.01.
Section 6.02 Binding Effect; Joint and Several Liability. This Guaranty is binding upon Guarantor, its heirs, legal representatives and successors and assigns and inures to the benefit of Lender and its respective successors and assigns. Guarantor may not delegate or transfer its obligations under this Guaranty. If more than one Person shall constitute Guarantor, each such Person shall be jointly and severally liable as Guarantor hereunder and agrees that Lender may enforce the provisions hereof against one or more of such Persons without seeking to enforce the same against any co-Guarantor.
Section 6.03 Severability. Any provision of this Guaranty which is determined by a court of competent jurisdiction or government body to be invalid, unenforceable, or illegal shall be ineffective only to the extent of such determination. Such determination shall not affect the validity, enforceability, or legality of any other provision, nor shall such determination apply in any circumstance or to any party not controlled by the determination of such court or government body.
Section 6.04 Duplicate Original; Counterparts. This Guaranty may be executed in any number of counterparts, each of which shall constitute an original, but all taken together shall constitute a single agreement. Delivery of an executed counterpart of a signature page to this Guaranty by facsimile or in electronic (that is, “pdf” or “tif”) format shall be effective as delivery of a manually executed counterpart of this Guaranty. The acknowledgment of any Guarantor (if more than one) is not required as a condition to the binding effect of this Guaranty on any Guarantor whose signature is affixed to this Guaranty or any counterpart thereof.
Section 6.05 Construction of Terms. Defined terms used in this Guaranty may be used interchangeably in singular or plural form, and pronouns shall be construed to cover all genders. Article and section headings are for convenience only and shall not be used in interpreting the meaning of the provisions set forth in this Guaranty. The words “herein,” “hereof,” and “hereunder” and words of similar import refer to this Guaranty as a whole and not to any particular section, paragraph, or subdivision. The word “section” refers to the entire section and not to any particular subsection paragraph, or subdivision of that section. The term “Guaranty” and each of the Loan Documents referred to herein means the agreement as executed, and if applicable, as modified. The term “including” shall not infer limitation. This Guaranty shall be construed without regard to any presumption or rule that disfavors the drafting party when construing or interpreting legal agreements.
Section 6.06 Governing Law. This Guaranty and any claim, controversy, dispute, or cause of action (whether in contract, equity, tort, or contract) based upon, arising out of, or relating to this Guaranty and the transactions contemplated hereby shall be governed by and construed in accordance with the laws of the State of Georgia.
Section 6.07 Submission to Jurisdiction. Guarantor irrevocably and unconditionally agrees that any legal action, suit, or proceeding arising out of or relating to this Guaranty may be brought in the courts of the State of Georgia or of the United States of America for the Southern District of Georgia. Guarantor shall submit to the jurisdiction of any such court in any such action, suit, or proceeding. Final judgment against Guarantor in any action, suit, or proceeding shall be conclusive and may be enforced in any other jurisdiction by suit on the judgment. Nothing in this Section shall affect or impair Lender’s right to serve legal process in any manner permitted by law or Lender’s right to bring any action or proceeding against Guarantor or Guarantor’s property in the courts of any other jurisdiction.]
Section 6.08 Time of the Essence. Time shall be of the essence with respect to all of Guarantor’s obligations under this Guaranty.
[signature page follows]
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IN WITNESS WHEREOF, the said Guarantor has signed and sealed this deed this 6th day of January 2023.
| Signed,
sealed, and delivered this __ day of July 2023, in the presence of: |
||||
| WITNESS: | GUARANTOR: | |||
| Global Technologies, Ltd | ||||
| By: | By: | Frederick Kalei Cutcher, CEO | ||
| Name: | ||||
| NOTARY PUBLIC: | ||||
| [NOTARY PUBLIC NAME] | ||||
| By: | ||||
| Name: | ||||
| My Commission Expires: | ||||
| (NOTARY SEAL) | ||||
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Exhibit 10.6
SECURED CONVERTIBLE NOTE
NEITHER THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE CONVERTIBLE HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR(B) AN EXEMPTION THERETO PURSUANT TO SEC REGULATION A OR (C) AN OPINION OF COUNSEL TO THE HOLDER (IF REQUESTED BY THE COMPANY), IN A FORM REASONABLY ACCEPTABLE TO THE COMPANY, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD OR ELIGIBLE TO BE SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID ACT. NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES. ANY TRANSFEREE OF THIS NOTE SHOULD CAREFULLY REVIEW THE TERMS OF THIS NOTE, INCLUDING SECTIONS 3(c)(iii) AND 18(a)HEREOF. THE PRINCIPAL AMOUNT REPRESENTED BY THIS NOTE AND, ACCORDINGLY, THE SECURITIES ISSUABLE UPON CONVERSION HEREOF MAY BE LESS THAN THE AMOUNTS SET FORTH ON THE FACE HEREOF PURSUANT TO SECTION 3(c)(iii) OF THIS NOTE.
global technologies, ltd
Secured Convertible Note
| Issuance Date: July 25, 2023 | Principal Amount: U.S. $1,600,000 |
THIS SECURED CONVERTIBLE NOTE (this “Note”) is duly authorized and validly issued promissory note of Global Technologies, Ltd, a Delaware corporation (“GTLL”) and Foxx Trot Tango, LLC, a Wyoming limited liability company GTLL’s solely owned subsidiary (“FTT” or “Company”), (collectively the “Borrower”), in favor of TXC Services, LLC, a Delaware limited liability company (“TXC” or “Holder”).
FOR VALUE RECEIVED, Borrower promises to pay to TXC or its registered assigns (the “Holder”), with an address at 30725 US Highway 19 North, Suite 335, Palm Harbor, FL 34684, or shall have paid pursuant to the terms hereunder, the principal sum of One Million Six Hundred Thousand Dollars ($1,600,000.00), plus accrued but unpaid interest thereon, on July 25, 2024 (the “Maturity Date”) or such earlier date as this Note is required or permitted to be repaid or such later date if extended by the Holder as provided hereunder, and to pay interest, if any, to the Holder on the aggregate unconverted and then outstanding principal amount of this Note in accordance with the provisions hereof.
WHEREAS, this Note (also referred to at times as the ‘Seller Secured Note”) is being made pursuant to that certain Amended and Restated Membership Interest Purchase Agreement, and related transaction documents dated the same day as this Note (collectively the “MIPA” or “Transaction Documents”), between Holder, as seller and GTLL, as buyer, of all membership interests in and to FTT, attached hereto as Exhibit 1; and
WHEREAS, this Note is secured by, among other things, a lien on a certain property owned by FTT as defined in the MIPA (the “Property”), evidenced by a subordinate Deed to Secure Debt, Assignment of Leases and Rents, Security Agreement, Financing Statement and Fixture Filing recorded against the Property (“Seller Security Deed”), and the collateral set forth in the Security Agreement and Pledge of Membership Interests including the Assignment of Member’s Interests (referred to collectively as the “Collateral Assignment”) copies of which are attached to the MIPA as Exhibit G and Exhibit H respectively;
WHEREAS, the TXC Security Deed is subordinate to a promissory note in favor of TK Management Services, Inc. (“TK Secured Note”) dated January 6, 2023 evidenced by first position Deed to Secure Debt, Assignment of Leases and Rents, Security Agreement, Financing Statement and Fixture Filing recorded against the Property ( “TK Security Deed”), copies of which are attached to the MIPA as Exhibits B and C respectively.
1. PAYMENTS OF PRINCIPAL. The Company acknowledges and agrees that this Note was issued at with no issue discount. On the Maturity Date, the Company shall pay to the Holder an amount in cash representing all outstanding Principal, accrued and unpaid Interest and accrued and unpaid Late Charges (as defined in Section 24(c)) on such Principal and Interest. Other than as specifically permitted by this Note, the Company may not prepay any portion of the outstanding Principal, accrued and unpaid Interest or accrued and unpaid Late Charges on Principal and Interest, if any, provided, however, that, upon the prior written consent of the Holder, the Company may at any time prepay any portion of the outstanding Conversion Amount at a price equal to 130% of the Conversion Amount to be redeemed, including, without limitation, any accrued and unpaid Interest and Late Charges, if any, on such Conversion Amount and Interest through the applicable date of prepayment, except that in connection with a Change of Control prepayments shall be made pursuant to Section 5.
2. INTEREST; DEFAULT RATE. Interest shall accrue at an annual rate of six percent (6%) (“Interest Rate”), subject to increase as set forth herein, from the Original Issue Date through Maturity. Principal and Interest shall be due and payable on the Maturity Date. From and after the occurrence and during the continuance of any Event of Default, Interest shall accrue hereunder at a rate of eighteen percent (18.0%) per annum (the “Default Rate”) and shall be computed on the basis of a 360-day year and twelve 30-day months and shall be payable in arrears on the first Business Day of the calendar month immediately succeeding the month during which an Event of Default has occurred or is continuing, as applicable (a “Default Interest Date”). Accrued and unpaid Interest, if any, shall also be payable as part of the Conversion Amount upon any redemption or conversion hereunder occurring prior to a Default Interest Date. In the event that such Event of Default is subsequently cured or waived in writing by the Holder (and no other Event of Default then exists, including, without limitation, for the Company’s failure to pay such Interest at the Default Rate on the applicable Default Interest Date), Interest shall cease to accrue hereunder as of the calendar day immediately following the date of such cure or waiver; provided that Interest as calculated and unpaid during the continuance of such Event of Default shall continue to apply to the extent relating to the days after the occurrence of such Event of Default through and including the date of such cure or waiver of such Event of Default.
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3. CONVERSION OF NOTES. At any time after the Issuance Date this Note shall be convertible into validly issued, fully paid and non-assessable shares of Common Stock, on the terms and conditions set forth in this Section 3.
(a) Conversion Right. Subject to the provisions of Section 3(d), at any time or times on or after the Issuance Date, the Holder shall be entitled to convert any portion of the outstanding and unpaid Conversion Amount (as defined below) into validly issued, fully paid and non-assessable shares of Common Stock in accordance with Section 3(c), at the Conversion Rate (as defined below). The Company shall not issue any fraction of a share of Common Stock upon any conversion. If the issuance would result in the issuance of a fraction of a share of Common Stock, the Company shall round such fraction of a share of Common Stock up to the nearest whole share. The Company shall pay any and all transfer, stamp, issuance and similar taxes, costs and expenses (including, without limitation, fees and expenses of the Transfer Agent (as defined below)) that may be payable with respect to the issuance and delivery of Common Stock upon conversion of any Conversion Amount.
(b) Conversion Rate. The number of shares of Common Stock issuable upon conversion of any Conversion Amount pursuant to Section 3(a) shall be determined by dividing (x) such Conversion Amount by (y) the Conversion Price (the “Conversion Rate”).
(i) “Conversion Amount” means the sum of (x) portion of the Principal to be converted, redeemed or otherwise with respect to which this determination is being made and (y) all accrued and unpaid Interest with respect to such portion of the Principal amount and accrued and unpaid Late Charges with respect to such portion of such Principal and such Interest, if any.
(ii) “Conversion Price” means, the conversion price for the principal and interest in connection with voluntary conversions by the Holder shall be 100% multiplied by the Market Price (as defined herein) subject to adjustment as described herein (“Conversion Price”). Market Price” means the lowest one (1) Trading Price (as defined below) for the Common Stock during the three (3) Trading Day period ending on the last complete Trading Day prior to the Conversion Date. “Trading Prices” means, for any security as of any date, the lowest traded price on the Over-the Counter Pink Marketplace, OTCQB, or applicable trading market (the “OTCQB”) as reported by a reliable reporting service (“Reporting Service”) designated by the Holder (i.e. www.Nasdaq.com) or, if the OTCQB is not the principal trading market for such security, on the principal securities exchange or trading market where such security is listed or traded or, if the lowest intraday trading price of such security is not available in any of the foregoing manners, the lowest intraday price of any market makers for such security that are quoted on the OTC Markets. If the Trading Prices cannot be calculated for such security on such date in the manner provided above, the Trading Prices shall be the fair market value as mutually determined by the Borrower and the holders of a majority in interest of the Notes being converted for which the calculation of the Trading Prices are required in order to determine the Conversion Price of such Notes. “Trading Day” shall mean any day on which the Common Stock is tradable for any period on the OTCQB, or on the principal securities exchange or other securities market on which the Common Stock is then being traded, subject to adjustment as provided herein.
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(c) Mechanics of Conversion.
(i) Optional Conversion. To convert any Conversion Amount into shares of Common Stock on any date following the Issuance Date (a “Conversion Date”), the Holder shall deliver (whether via electronic mail or otherwise), for receipt on or prior to 11:59 p.m., New York time, on such date, a copy of an executed notice of conversion in the form attached hereto as Exhibit II (a “Conversion Notice”) to the Company. If required by Section 3(c)(iii), within two (2) Trading Days following a conversion of this Note as aforesaid, the Holder shall surrender this Note to a nationally recognized overnight delivery service for delivery to the Company (or an indemnification undertaking with respect to this Note in the case of its loss, theft or destruction as contemplated by Section 18(b)). On or before the first (1st) Trading Day following the date of receipt of a Conversion Notice, the Company shall transmit by electronic mail an acknowledgment of confirmation of receipt of such Conversion Notice and representation as to whether such shares of Common Stock may then be resold pursuant to Rule 144 or an effective and available registration statement, or an exemption to registration requirements pursuant to SEC Regulation A, in the form attached hereto as Exhibit III, to the Holder and the Company’s transfer agent, if any (the “Transfer Agent”) which confirmation shall constitute an instruction to the Transfer Agent to process such Conversion Notice in accordance with the terms herein. On or before the second (2nd) Trading Day following the date on which the Company has received a Conversion Notice (or such earlier date as required pursuant to the 1934 Act or other applicable law, rule or regulation for the settlement of a trade initiated on the applicable Conversion Date of such shares of Common Stock issuable pursuant to such Conversion Notice) (a “Share Delivery Deadline”), the Company shall (1) provided that the Transfer Agent is participating in The Depository Trust Company’s (“DTC”) Fast Automated Securities Transfer Program (“FAST”), credit such aggregate number of shares of Common Stock to which the Holder shall be entitled pursuant to such conversion to the Holder’s or its designee’s balance account with DTC through its Deposit/Withdrawal at Custodian system or (2) if the Transfer Agent is not participating in FAST, upon the request of the Holder, issue and deliver (via reputable overnight courier) to the address as specified in the Conversion Notice, a certificate, registered in the name of the Holder or its designee, for the number of shares of Common Stock to which the Holder shall be entitled pursuant to such conversion. If this Note is physically surrendered for conversion pursuant to Section 3(c)(iii) and the outstanding Principal of this Note is greater than the Principal portion of the Conversion Amount being converted, then the Company shall as soon as practicable and in no event later than five (5) Business Days after receipt of this Note and at its own expense, issue and deliver to the Holder (or its designee) a new Note (in accordance with Section 18(d)) representing the outstanding Principal not converted. The Person or Persons entitled to receive the shares of Common Stock issuable upon a conversion of this Note shall be treated for all purposes as the record holder or holders of such shares of Common Stock on the applicable Conversion Date.
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(ii) Company’s Failure to Timely Convert. If the Company shall fail on or prior to the applicable Share Delivery Deadline, if the Transfer Agent is not participating in FAST, to issue and deliver to the Holder (or its designee) a certificate for the number of shares of Common Stock to which the Holder is entitled and register such shares of Common Stock on the Company’s share register or, if the Transfer Agent is participating in FAST, to credit the balance account of the Holder or the Holder’s designee with DTC for such number of shares of Common Stock to which the Holder is entitled upon the Holder’s conversion of this Note (as the case may be) (the “Unavailable Conversion Shares”) is not available for the resale of such Unavailable Conversion Shares and the Company (x) so notify the Holder and (y) deliver the shares of Common Stock electronically without any restrictive legend by crediting such aggregate number of shares of Common Stock to which the Holder is entitled pursuant to such conversion to the Holder’s or its designee’s balance account with DTC through its Deposit/Withdrawal At Custodian system (the event described in the immediately foregoing clause (II) is hereinafter referred as a “Notice Failure” and together with the event described in clause (I) above, a “Conversion Failure”), then, in addition to all other remedies available to the Holder, (1) the Company shall pay in cash to the Holder on each day after such Share Delivery Deadline that the issuance of such shares of Common Stock is not timely effected an amount equal to one percent (1%) of the product of (A) the sum of the number of shares of Common Stock not issued to the Holder on or prior to the applicable Share Delivery Deadline and to which the Holder is entitled, multiplied by (B) any trading price of the Common Stock selected by the Holder in writing as in effect at any time during the period beginning on the applicable Conversion Date and ending on the applicable Share Delivery Deadline and (2) the Holder, upon written notice to the Company, may void its Conversion Notice with respect to, and retain or have returned (as the case may be) any portion of this Note that has not been converted pursuant to such Conversion Notice, provided that the voiding of a Conversion Notice shall not affect the Company’s obligations to make any payments which have accrued prior to the date of such notice pursuant to this Section 3(c)(ii) or otherwise. In addition to the foregoing, if on or prior to the Share Delivery Deadline either (A) if the Transfer Agent is not participating in FAST, the Company shall fail to issue and deliver to the Holder (or its designee) a certificate and register such shares of Common Stock on the Company’s share register or, if the Transfer Agent is participating in FAST, the Transfer Agent shall fail to credit the balance account of the Holder or the Holder’s designee with DTC for the number of shares of Common Stock to which the Holder is entitled upon the Holder’s conversion hereunder or pursuant to the Company’s obligation pursuant to clause (II) below or (B) a Notice Failure occurs, and if on or after such Share Delivery Deadline the Holder purchases (in an open market transaction or otherwise) shares of Common Stock corresponding to all or any portion of the number of shares of Common Stock issuable upon such conversion that the Holder is entitled to receive from the Company and has not received from the Company in connection with such Conversion Failure or Notice Failure, as applicable (a “Buy-In”), then, in addition to all other remedies available to the Holder, the Company shall, within two (2) Business Days after receipt of the Holder’s request and in the Holder’s discretion, either: (I) pay cash to the Holder in an amount equal to the Holder’s total purchase price (including brokerage commissions and other reasonable out-of-pocket expenses, if any) for the shares of Common Stock so purchased (including, without limitation, by any other Person in respect, or on behalf, of the Holder) (the “Buy-In Price”), at which point the Company’s obligation to so issue and deliver such certificate (and to issue such shares of Common Stock) or credit the balance account of such Holder or such Holder’s designee, as applicable, with DTC for the number of shares of Common Stock to which the Holder is entitled upon the Holder’s conversion hereunder (as the case may be) (and to issue such shares of Common Stock) shall terminate, or (II) promptly honor its obligation to so issue and deliver to the Holder a certificate or certificates representing such shares of Common Stock or credit the balance account of such Holder or such Holder’s designee, as applicable, with DTC for the number of shares of Common Stock to which the Holder is entitled upon the Holder’s conversion hereunder (as the case may be) and pay cash to the Holder in an amount equal to the excess (if any) of the Buy-In Price over the product of (x) such number of shares of Common Stock multiplied by (y) the lowest Closing Sale Price of the Common Stock on any Trading Day during the period commencing on the date of the applicable Conversion Notice and ending on the date of such issuance and payment under this clause (II) (the “Buy-In Payment Amount”). Nothing shall limit the Holder’s right to pursue any other remedies available to it hereunder, at law or in equity, including, without limitation, a decree of specific performance and/or injunctive relief with respect to the Company’s failure to timely deliver certificates representing shares of Common Stock (or to electronically deliver such shares of Common Stock) upon the conversion of this Note as required pursuant to the terms hereof.
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(iii) Registration; Book-Entry. The Company shall maintain a register (the “Register”) for the recordation of the names and addresses of the holders of each Note and the principal amount of the Notes held by such holders (the “Registered Notes”). The entries in the Register shall be conclusive and binding for all purposes absent manifest error. The Company and the holders of the Notes shall treat each Person whose name is recorded in the Register as the owner of a Note for all purposes (including, without limitation, the right to receive payments of Principal and Interest hereunder) notwithstanding notice to the contrary. A Registered Note may be assigned, transferred or sold in whole or in part only by registration of such assignment or sale on the Register. Upon its receipt of a written request to assign, transfer or sell all or part of any Registered Note by the holder thereof, the Company shall record the information contained therein in the Register and issue one or more new Registered Notes in the same aggregate principal amount as the principal amount of the surrendered Registered Note to the designated assignee or transferee pursuant to Section 18, provided that if the Company does not so record an assignment, transfer or sale (as the case may be) of all or part of any Registered Note within two (2) Business Days of such a request, then the Register shall be automatically deemed updated to reflect such assignment, transfer or sale (as the case may be). Notwithstanding anything to the contrary in this Section 3(c)(iii), the Holder may assign any Note or any portion thereof to an Affiliate of the Holder or a Related Fund of the Holder without delivering a request to assign or sell the Note to the Company and the recordation of such assignment or sale in the Register (a “Related Party Assignment”); provided, that (x) the Company may continue to deal solely with such assigning or selling Holder unless and until the Holder has delivered a request to assign or sell the Note or portion thereof to the Company for recordation in the Register; (y) the failure of such assigning or selling Holder to deliver a request to assign or sell the Note or portion thereof to the Company shall not affect the legality, validity, or binding effect of such assignment or sale and (z) such assigning or selling Holder shall, acting solely for this purpose as a non-fiduciary agent of the Company, maintain a register (the “Related Party Register”) comparable to the Register on behalf of the Company, and any such assignment or sale shall be effective upon recordation of such assignment or sale in the Related Party Register. Notwithstanding anything to the contrary set forth in this Section 3, following conversion of any portion of this Note in accordance with the terms hereof, the Holder shall not be required to physically surrender this Note to the Company unless (A) the full Conversion Amount represented by this Note is being converted (in which event this Note shall be delivered to the Company following conversion thereof as contemplated by Section 3(c)(i)) or (B) the Holder has provided the Company with prior written notice (which notice may be included in a Conversion Notice) requesting reissuance of this Note upon physical surrender of this Note. The Holder and the Company shall maintain records showing the Principal, Interest and Late Charges converted and/or paid (as the case may be) and the dates of such conversions, and/or payments (as the case may be) or shall use such other method, reasonably satisfactory to the Holder and the Company, so as not to require physical surrender of this Note upon conversion. If the Company does not update the Register to record such Principal, Interest and Late Charges converted and/or paid (as the case may be) and the dates of such conversions, and/or payments (as the case may be) within two (2) Business Days of such occurrence, then the Register shall be automatically deemed updated to reflect such occurrence.
(iv) Pro Rata Conversion; Disputes. In the event that the Company receives a Conversion Notice from more than one holder of Notes for the same Conversion Date and the Company can convert some, but not all, of such portions of the Notes submitted for conversion, the Company, subject to Section 3(d), shall convert from each holder of Notes electing to have Notes converted on such date a pro rata amount of such holder’s portion of its Notes submitted for conversion based on the principal amount of Notes submitted for conversion on such date by such holder relative to the aggregate principal amount of all Notes submitted for conversion on such date. In the event of a dispute as to the number of shares of Common Stock issuable to the Holder in connection with a conversion of this Note, the Company shall issue to the Holder the number of shares of Common Stock not in dispute and resolve such dispute in accordance with Section 23.
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(d) Limitations on Conversions. Notwithstanding anything to the contrary contained herein, the Company shall not effect the conversion of any portion of this Note, and the Holder shall not have the right to convert any portion of this Note pursuant to the terms and conditions of this Note and any such conversion shall be null and void and treated as if never made, to the extent that after giving effect to such conversion, the Holder together with the other Attribution Parties collectively would beneficially own in excess of 9.99% (the “Maximum Percentage”) of the shares of Common Stock outstanding immediately after giving effect to such conversion. For purposes of the foregoing sentence, the aggregate number of shares of Common Stock beneficially owned by the Holder and the other Attribution Parties shall include the number of shares of Common Stock held by the Holder and all other Attribution Parties plus the number of shares of Common Stock issuable upon conversion of this Note with respect to which the determination of such sentence is being made, but shall exclude shares of Common Stock which would be issuable upon (A) conversion of the remaining, nonconverted portion of this Note beneficially owned by the Holder or any of the other Attribution Parties and (B) exercise or conversion of the unexercised or nonconverted portion of any other securities of the Company (including, without limitation, any convertible notes or convertible preferred stock or warrants) beneficially owned by the Holder or any other Attribution Party subject to a limitation on conversion or exercise analogous to the limitation contained in this Section 3(d). For purposes of this Section 3(d), beneficial ownership shall be calculated in accordance with Section 13(d) of the 1934 Act. For purposes of determining the number of outstanding shares of Common Stock the Holder may acquire upon the conversion of this Note without exceeding the Maximum Percentage, the Holder may rely on the number of outstanding shares of Common Stock as reflected in (x) the Company’s most recent Annual Report on Form 10-K, Quarterly Report on Form 10-Q, Current Report on Form 8-K or other public filing with the SEC, as the case may be, (y) a more recent public announcement by the Company or (z) any other written notice by the Company or the Transfer Agent, if any, setting forth the number of shares of Common Stock outstanding (the “Reported Outstanding Share Number”). If the Company receives a Conversion Notice from the Holder at a time when the actual number of outstanding shares of Common Stock is less than the Reported Outstanding Share Number, the Company shall notify the Holder in writing of the number of shares of Common Stock then outstanding and, to the extent that such Conversion Notice would otherwise cause the Holder’s beneficial ownership, as determined pursuant to this Section 3(d), to exceed the Maximum Percentage, the Holder must notify the Company of a reduced number of shares of Common Stock to be purchased pursuant to such Conversion Notice. For any reason at any time, upon the written or oral request of the Holder, the Company shall within one (1) Business Day confirm orally and in writing or by electronic mail to the Holder the number of shares of Common Stock then outstanding. In any case, the number of outstanding shares of Common Stock shall be determined after giving effect to the conversion or exercise of securities of the Company, including this Note, by the Holder and any other Attribution Party since the date as of which the Reported Outstanding Share Number was reported. In the event that the issuance of shares of Common Stock to the Holder upon conversion of this Note results in the Holder and the other Attribution Parties being deemed to beneficially own, in the aggregate, more than the Maximum Percentage of the number of outstanding shares of Common Stock (as determined under Section 13(d) of the 1934 Act), the number of shares so issued by which the Holder’s and the other Attribution Parties’ aggregate beneficial ownership exceeds the Maximum Percentage (the “Excess Shares”) shall be deemed null and void and shall be cancelled ab initio, and the Holder shall not have the power to vote or to transfer the Excess Shares. Upon delivery of a written notice to the Company, the Holder may from time to time increase (with such increase not effective until the sixty-first (61st) day after delivery of such notice) or decrease the Maximum Percentage to any other percentage not in excess of 9.99% as specified in such notice; provided that (i) any such increase in the Maximum Percentage will not be effective until the sixty-first (61st) day after such notice is delivered to the Company and (ii) any such increase or decrease will apply only to the Holder and the other Attribution Parties and not to any other holder of Notes that is not an Attribution Party of the Holder. For purposes of clarity, the shares of Common Stock issuable pursuant to the terms of this Note in excess of the Maximum Percentage shall not be deemed to be beneficially owned by the Holder for any purpose including for purposes of Section 13(d) or Rule 16a-1(a)(1) of the 1934 Act. No prior inability to convert this Note pursuant to this paragraph shall have any effect on the applicability of the provisions of this paragraph with respect to any subsequent determination of convertibility. The provisions of this paragraph shall be construed and implemented in a manner otherwise than in strict conformity with the terms of this Section 3(d) to the extent necessary to correct this paragraph (or any portion of this paragraph) which may be defective or inconsistent with the intended beneficial ownership limitation contained in this Section 3(d) or to make changes or supplements necessary or desirable to properly give effect to such limitation. The limitation contained in this paragraph may not be waived and shall apply to a successor holder of this Note.
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4. RIGHTS UPON EVENT OF DEFAULT.
(a) Event of Default. Subject to the last sentence of this Section 4(a), each of the following events shall constitute an “Event of Default” and each of the events in clauses (ix), (x) and (xi) shall also constitute a “Bankruptcy Event of Default”:
(i) the failure to issue Conversion Shares registered with the SEC or pursuant an exemption of the applicable Registration Statement in accordance with Regulation A. from and after the Public Company Date, the suspension from trading or the failure of the Common Stock to be trading or listed (as applicable) on an Eligible Market for a period of five (5) consecutive Trading Days;
(ii) the Company’s (A) failure to cure a Conversion Failure or a Delivery Failure by delivery of the required number of shares of Common Stock within five (5) Trading Days after the applicable Conversion Date or Exercise Date) (as the case may be) or (B) written notice to any holder of the Notes, including, without limitation, by way of public announcement or through any of its agents and such notice of such Company’s agent is not withdrawn by the Company within one (1) Trading Day, at any time, of its intention not to comply, as required, with a request for conversion of any Notes into shares of Common Stock that is requested in accordance with the provisions of the Notes, other than pursuant to Section 3(d);
(iii) except to the extent the Company is in compliance with Section 9(b) below, at any time following the tenth (10th) consecutive day that the Holder’s Authorized Share Allocation (as defined in Section 9(a) below) is less than 200% of the sum of (A) the number of shares of Common Stock that the Holder would be entitled to receive upon a conversion of the full Conversion Amount of this Note (without regard to any limitations on conversion set forth in Section 3(d) or otherwise;
(iv) the Company’s, any Guarantor or any Subsidiary’s failure to pay to the Holder any amount of Principal, Interest, Late Charges or other amounts when and as due under this Note (including, without limitation, the Company’s, any Guarantor’s or any Subsidiary’s failure to pay any redemption payments or amounts hereunder) or any other Transaction Document or any other agreement, document, certificate or other instrument delivered in connection with the transactions contemplated hereby and thereby, and such failure remains uncured for a period of at least five (5) Trading Days;
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(v) the Company fails to remove any restrictive legend on any certificate or any shares of Common Stock issued to the Holder upon conversion or exercise (as the case may be) of any Securities (as defined in the Securities Purchase Agreement) acquired by the Holder under the Securities Purchase Agreement (including this Note) as and when required by such Securities or the Securities Purchase Agreement, unless otherwise then prohibited by applicable federal securities laws, and any such failure remains uncured for at least five (5) Trading Days;
(vi) the occurrence of any default under, redemption of or acceleration prior to maturity of at least an aggregate of $250,000 of Indebtedness of the Company, any Guarantor or any Subsidiary, other than with respect to this Note in which case only if such default, redemption or acceleration, as applicable, remains uncured for a period of at least five (5) Trading Days;
(vii) bankruptcy, insolvency, reorganization or liquidation proceedings or other proceedings for the relief of debtors shall be instituted by or against the Company, any Guarantor or any Subsidiary and, if instituted against the Company, any Guarantor or any Subsidiary by a third party, shall not be dismissed within sixty (60) days of their initiation;
(viii) the commencement by the Company, any Guarantor or any Subsidiary of a voluntary case or proceeding under any applicable federal, state or foreign bankruptcy, insolvency, reorganization or other similar law or of any other case or proceeding to be adjudicated a bankrupt or insolvent, or the consent by it to the entry of a decree, order, judgment or other similar document in respect of the Company, any Guarantor or any Subsidiary in an involuntary case or proceeding under any applicable federal, state or foreign bankruptcy, insolvency, reorganization or other similar law or to the commencement of any bankruptcy or insolvency case or proceeding against it, or the filing by it of a petition or answer or consent seeking reorganization or relief under any applicable federal, state or foreign law, or the consent by it to the filing of such petition or to the appointment of or taking possession by a custodian, receiver, liquidator, assignee, trustee, sequestrator or other similar official of the Company, any Guarantor or any Subsidiary or of any substantial part of its property, or the making by it of an assignment for the benefit of creditors, or the execution of a composition of debts, or the occurrence of any other similar federal, state or foreign proceeding, or the admission by it in writing of its inability to pay its debts generally as they become due, the taking of corporate action by the Company, any Guarantor or any Subsidiary in furtherance of any such action or the taking of any action by any Person to commence a Uniform Commercial Code foreclosure sale or any other similar action under federal, state or foreign law;
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(ix) the entry by a court of (i) a decree, order, judgment or other similar document in respect of the Company, any Guarantor or any Subsidiary of a voluntary or involuntary case or proceeding under any applicable federal, state or foreign bankruptcy, insolvency, reorganization or other similar law or (ii) a decree, order, judgment or other similar document adjudging the Company, any Guarantor or any Subsidiary as bankrupt or insolvent, or approving as properly filed a petition seeking liquidation, reorganization, arrangement, adjustment or composition of or in respect of the Company, any Guarantor or any Subsidiary under any applicable federal, state or foreign law or (iii) a decree, order, judgment or other similar document appointing a custodian, receiver, liquidator, assignee, trustee, sequestrator or other similar official of the Company, any Guarantor or any Subsidiary or of any substantial part of its property, or ordering the winding up or liquidation of its affairs, and the continuance of any such decree, order, judgment or other similar document or any such other decree, order, judgment or other similar document unstayed and in effect for a period of sixty (60) consecutive days;
(x) a final judgment or judgments for the payment of money aggregating in excess of $250,000 are rendered against the Company, any Guarantor and/or any Subsidiary and which judgments are not, within sixty (60) days after the entry thereof, bonded, discharged, settled or stayed pending appeal, or are not discharged within sixty (60) days after the expiration of such stay; provided, however, any judgment which is covered by insurance or an indemnity from a credit worthy party shall not be included in calculating the $250,000 amount set forth above so long as the Company provides the Holder a written statement from such insurer or indemnity provider (which written statement shall be reasonably satisfactory to the Holder) to the effect that such judgment is covered by insurance or an indemnity and the Company, such Guarantor or such Subsidiary (as the case may be) will receive the proceeds of such insurance or indemnity within sixty (60) days of the issuance of such judgment;
(xi) the Company, any Guarantor and/or any Subsidiary, individually or in the aggregate, either (i) fails to pay, when due, or within any applicable grace period, any payment with respect to any Indebtedness in excess of $250,000 due to any third party (other than, with respect to unsecured Indebtedness only, payments contested by the Company, such Guarantor and/or such Subsidiary (as the case may be) in good faith by proper proceedings and with respect to which adequate reserves have been set aside for the payment thereof in accordance with GAAP) or is otherwise in breach or violation of any agreement for monies owed or owing in an amount in excess of $250,000, which breach or violation permits the other party thereto to declare a default or otherwise accelerate amounts due thereunder, or (ii) suffer to exist any other circumstance or event that would, with or without the passage of time or the giving of notice, result in a default that has not been cured or waived for thirty (30) days or event of default under any agreement binding the Company, any Guarantor or any Subsidiary, which default or event of default would or is likely to have a material adverse effect on the business, assets, operations (including results thereof), liabilities, properties, condition (including financial condition) or prospects of the Company, any Guarantor or any Subsidiary, individually or in the aggregate, in which case only if such failure remains uncured for a period of at least three (3) Trading Days;
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(xii) other than as specifically set forth in another clause of this Section 4(a), the Company, any Guarantor or any Subsidiary breaches any representation or warranty, in any material respect (other than representations or warranties subject to material adverse effect or materiality, which may not be breached in any respect) or any covenant or other term or condition of any Transaction Document, except, in the case of a breach of a covenant or other term or condition that is curable, only if such breach remains uncured for a period of five (5) consecutive Trading Days;
(xiii) a false or inaccurate written certification by the Company as to whether any Event of Default or an Equity Conditions Failure has occurred or as to whether any Release Condition or the Price Condition or the Volume Condition is satisfied;
(xiv) any breach or failure in any respect by the Company, any Guarantor or any Subsidiary to comply with clauses (a)-(d), (f), (g), (n) and (p) of Section 13 of this Note;
(xv) any Material Adverse Effect occurs and remains uncured following a period of five (5) Trading Days;
(xvi) other than as specifically set forth in Section 4(a)(xix) or in any other clause of this Section 4(a), the Company, any Guarantor or any Subsidiary shall fail to perform or comply (I) in any material respect with any covenant or agreement contained in any Security Document or (II) in any respect with any covenant or agreement contained in any Security Document that is qualified by materiality or Material Adverse Effect;
(xvii) any material provision of any Security Document) shall at any time for any reason (other than pursuant to the express terms thereof) cease to be valid and binding on or enforceable against the Company, any Guarantor or any Subsidiary intended to be a party thereto, or the validity or enforceability thereof shall be contested by any party thereto, or a proceeding shall be commenced by the Company, any Guarantor or any Subsidiary or any governmental authority having jurisdiction over any of them, seeking to establish the invalidity or unenforceability thereof, or the Company, any Guarantor or any Subsidiary shall deny in writing that it has any liability or obligation purported to be created under any Security Document;
(xviii) any Security Document, after delivery thereof pursuant hereto, shall for any reason fail or cease to create a valid and perfected and, except to the extent permitted by the terms hereof or thereof, first priority Lien (as defined in Section 13(c)) in favor of the Holder of the Note on any Collateral purported to be covered thereby, except to the extent the Holder determines not to pursue perfection of any applicable Lien;
(xix) Reserved.
(xx) any material damage to, or loss, theft or destruction of the Collateral, whether or not insured; or
(xxi) other than as specifically set forth in another clause of this Section 4(a), any Event of Default occurs with respect to any Other Note.
(xxii) a default in this Agreement, shall constitute a default in the Transaction Documents and other agreements described in this Agreement to be delivered by the parties at Closing, and a default in any one or more of such agreements shall constitute a default in this Agreement.
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(b) Notice of an Event of Default; Redemption Right. Upon the occurrence of an Event of Default with respect to this Note or any other Note, the Company shall within two (2) Business Days deliver written notice thereof via electronic mail and overnight courier (with next day delivery specified) (an “Event of Default Notice”) to the Holder. At any time after the earlier of the Holder’s receipt of an Event of Default Notice and the Holder becoming aware of an Event of Default and ending (such ending date, the “Event of Default Right Expiration Date”) on the twentieth (20th) Trading Day after the later of (x) the date such Event of Default is cured and (y) the Holder’s receipt of an Event of Default Notice that includes (I) a reasonable description of the applicable Event of Default, (II) a certification as to whether, in the opinion of the Company, such Event of Default is capable of being cured and, if applicable, a reasonable description of any existing plans of the Company to cure such Event of Default and (III) a certification as to the date the Event of Default occurred and, if cured on or prior to the date of such Event of Default Notice, the applicable Event of Default Right Expiration Date, the Holder may require the Company to redeem (regardless of whether such Event of Default has been cured on or prior to the Event of Default Right Expiration Date) all or any portion of this Note by delivering written notice thereof (the “Event of Default Redemption Notice” and the date the Holder delivers such notice to the Company, the “Event of Default Redemption Notice Date”) to the Company, which Event of Default Redemption Notice shall indicate the portion of this Note the Holder is electing to redeem. Each portion of this Note subject to redemption by the Company pursuant to this Section 4(b) shall be redeemed by the Company at a price equal to (i) in the event that (A) there is no Equity Conditions Failure on any Trading Day during the period commencing on the applicable Event of Default Redemption Notice Date and ending on the related Event of Default Redemption Date (as defined in Section 11(a)), inclusive (such period, an “Event of Default Redemption Right Period”), (B) the Price Condition is satisfied on each Trading Day during the applicable Event of Default Redemption Right Period and (C) the Volume Condition is satisfied on each Trading Day during the applicable Event of Default Redemption Right Period, the product of (x) the Conversion Amount to be redeemed multiplied by (y) the Event of Default Redemption Premium and (ii) in the event that (A) there is an Equity Conditions Failure on any Trading Day during the applicable Event of Default Redemption Right Period, (B) the Price Condition is not satisfied on any Trading Day during the applicable Event of Default Redemption Right Period or (C) the Volume Condition is not satisfied on any Trading Day during the applicable Event of Default Redemption Right Period, the greater of (x) the product of (A) the Conversion Amount to be redeemed multiplied by (B) the Event of Default Redemption Premium and (y) the product of (A) the Conversion Rate with respect to the Conversion Amount in effect at such time as the Holder delivers an Event of Default Redemption Notice multiplied by (B) the product of (1) the Event of Default Redemption Premium 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 4(b) (the “Event of Default Redemption Price”). Redemptions required by this Section 4(b) shall be made in accordance with the provisions of Section 11. To the extent redemptions required by this Section 4(b) are deemed or determined by a court of competent jurisdiction to be prepayments of this Note by the Company, such redemptions shall be deemed to be voluntary prepayments. Notwithstanding anything to the contrary in this Section 4, but subject to Section 3(d), until the Event of Default Redemption Price (together with any Late Charges thereon) is paid in full, the Conversion Amount submitted for redemption under this Section 4(b) (together with any Late Charges thereon) may be converted, in whole or in part, by the Holder into Common Stock pursuant to the terms of this Note. In the event of the Company’s redemption of any portion of this Note under this Section 4(b), the Holder’s damages would be uncertain and difficult to estimate because of the parties’ inability to predict future interest rates and the uncertainty of the availability of a suitable substitute investment opportunity for the Holder. Accordingly, any redemption premium due under this Section 4(b) is intended by the parties to be, and shall be deemed, a reasonable estimate of the Holder’s actual loss of its investment opportunity and not as a penalty. Any redemption upon an Event of Default shall not constitute an election of remedies by the Holder, and all other rights and remedies of the Holder shall be preserved.
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(c) Mandatory Redemption upon Bankruptcy Event of Default. Notwithstanding anything to the contrary herein, and notwithstanding any conversion that is then required or in process, upon any Bankruptcy Event of Default, whether occurring prior to or following the Maturity Date, the Company shall immediately pay to the Holder an amount in cash representing (i) all outstanding Principal, accrued and unpaid Interest and accrued and unpaid Late Charges on such Principal and Interest, multiplied by (ii) the Event of Default Redemption Premium, in addition to any and all other amounts due hereunder, without the requirement for any notice or demand or other action by the Holder or any other person or entity, provided that the Holder may, in its sole discretion, waive such right to receive payment upon a Bankruptcy Event of Default, in whole or in part, and any such waiver shall not affect any other rights of the Holder hereunder, including any other rights in respect of such Bankruptcy Event of Default, any right to conversion, and any right to payment of the Event of Default Redemption Price or any other Redemption Price, as applicable.
(d) Notwithstanding anything to the contrary, upon any Event of Default hereunder, Holder may exercise any and all remedies under the Transaction Documents, including but not limited to those set forth in the Seller Security Deed and the Collateral Assignment.
5. RIGHTS UPON FUNDAMENTAL TRANSACTION.
(a) Assumption. The Company shall not enter into or be party to a Fundamental Transaction unless the Successor Entity assumes in writing all of the obligations of the Company under this Note and the other Transaction Documents in accordance with the provisions of this Section 5(a) pursuant to written agreements in form and substance satisfactory to the Holder and approved by the Holder prior to such Fundamental Transaction, including agreements to deliver to each holder of Notes in exchange for such Notes a security of the Successor Entity evidenced by a written instrument substantially similar in form and substance to the Notes, including, without limitation, having a principal amount and interest rate equal to the principal amounts then outstanding and the interest rates of the Notes held by such holder, having similar conversion rights as the Notes and having similar ranking and security to the Notes, and satisfactory to the Holder. Upon the occurrence of any Fundamental Transaction, the Successor Entity shall succeed to, and be substituted for (so that from and after the date of such Fundamental Transaction, the provisions of this Note and the other Transaction Documents referring to the “Company” shall refer instead to the Successor Entity), and may exercise every right and power of the Company and shall assume all of the obligations of the Company under this Note and the other Transaction Documents with the same effect as if such Successor Entity had been named as the Company herein. Upon consummation of a Fundamental Transaction, the Successor Entity shall deliver to the Holder confirmation that there shall be issued upon conversion or redemption of this Note at any time after the consummation of such Fundamental Transaction, in lieu of the shares of Common Stock (or other securities, cash, assets or other property (except such items still issuable under Sections 6 and 15, which shall continue to be receivable thereafter)) issuable upon the conversion or redemption of the Notes prior to such Fundamental Transaction, such shares of the publicly traded common stock (or their equivalent) of the Successor Entity (including its Parent Entity) which the Holder would have been entitled to receive upon the happening of such Fundamental Transaction had this Note been converted immediately prior to such Fundamental Transaction (without regard to any limitations on the conversion of this Note), as adjusted in accordance with the provisions of this Note. Notwithstanding the foregoing, the Holder may elect, at its sole option, by delivery of written notice to the Company to waive this Section 5(a) to permit the Fundamental Transaction without the assumption of this Note. The provisions of this Section 5 shall apply similarly and equally to successive Fundamental Transactions and shall be applied without regard to any limitations on the conversion of this Note.
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(b) Notice of a Change of Control. No sooner than twenty (20) Trading Days nor later than ten (10) Trading Days prior to the consummation of a Change of Control (the “Change of Control Date”), but not prior to the public announcement of such Change of Control, the Company shall deliver written notice thereof via electronic mail and overnight courier to the Holder (a “Change of Control Notice”).
(c) Holder Change of Control Redemption Right. At any time during the period beginning after the Holder’s receipt of a Change of Control Notice or the Holder becoming aware of a Change of Control if a Change of Control Notice is not delivered to the Holder in accordance with the immediately preceding sentence (as applicable) and ending on twenty (20) Trading Days after the later of (A) the date of consummation of such Change of Control or (B) the date of receipt of such Change of Control Notice or (C) the date of the announcement of such Change of Control, the Holder may require the Company to redeem all or any portion of this Note by delivering written notice thereof (a “Holder Change of Control Redemption Notice”) to the Company, which Holder Change of Control Redemption Notice shall indicate the Conversion Amount the Holder is electing to redeem. The portion of this Note subject to redemption pursuant to this Section 5(c) shall be redeemed by the Company in cash at a price equal to the greatest of (i) the product of (x) the Holder Change of Control Redemption Premium multiplied by (y) the Conversion Amount being redeemed, (ii) the product of (x) the Holder Change of Control Redemption Premium multiplied by (y) the product of (A) the Conversion Amount being redeemed multiplied by (B) the quotient determined by dividing (I) the greatest Closing Sale Price of the shares of Common Stock during the period beginning on the date immediately preceding the earlier to occur of (1) the consummation of the applicable Change of Control and (2) the public announcement of such Change of Control and ending on the date the Holder delivers the Holder Change of Control Redemption Notice by (II) the Conversion Price then in effect and (iii) the product of (y) the Holder Change of Control Redemption Premium multiplied by (z) the product of (A) the Conversion Amount being redeemed multiplied by (B) the quotient of (I) the aggregate cash consideration and the aggregate cash value of any non-cash consideration per share of Common Stock to be paid to the holders of the shares of Common Stock upon consummation of such Change of Control (any such non-cash consideration constituting publicly-traded securities shall be valued at the highest of the Closing Sale Price of such securities as of the Trading Day immediately prior to the consummation of such Change of Control, the Closing Sale Price of such securities on the Trading Day immediately following the public announcement of such proposed Change of Control and the Closing Sale Price of such securities on the Trading Day immediately prior to the public announcement of such proposed Change of Control) divided by (II) the Conversion Price then in effect (the “Holder Change of Control Redemption Price”).
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(d) Company Redemption Right. If the Holder does not exercise its redemption right set forth in Section 5(c) with respect to the entirety of this Note, so long as (i) no Equity Conditions Failure occurs as of the Company Change of Control Redemption Notice Date (as defined below) or the Company Change of Control Redemption Date (as defined below) and (ii) the Volume Condition has been satisfied as of the Company Change of Control Redemption Notice Date and the Company Change of Control Redemption Date (the conditions set forth in clauses (i) and (ii) collectively, the “Company Change of Control Redemption Conditions”) the Company or the Successor Entity, as applicable, may, at its sole option, redeem the entirety of this Note at a price equal to 150% of the Conversion Amount to be redeemed, including, without limitation, any accrued and unpaid Interest and Late Charges, if any, on such Conversion Amount and Interest through the applicable Company Change of Control Redemption Date (the “Company Change of Control Redemption Price”). The Company may exercise its right to require redemption under this Section 5(d) by delivering a ten (10) Trading Day prior written notice thereof by electronic mail and overnight courier to the Holder and all, but not less than all, of the holders of the Other Notes (the “Company Change of Control Redemption Notice” and the date the Holder and all the holders of the Other Notes received such notice is referred to as the “Company Change of Control Redemption Notice Date”). The Company Change of Control Redemption Notice shall be irrevocable. The Company Change of Control Redemption Notice shall (i) state the date on which the Company’s redemption of this Note pursuant to this Section 5(d) shall occur, which date shall be the date of the consummation of the applicable Change of Control, (ii) state the aggregate Conversion Amount of the Notes which the Company has elected to be subject to the Company Change of Control Redemption from the Holder and all of the holders of the Other Notes pursuant to this Section 5(d) (and analogous provisions under the Other Notes) on the Company Change of Control Redemption Date (such aggregate Conversion Amount of the Notes with respect to the Holder, the “Company Change of Control Redemption Amount”) , (iii) state the applicable Company Change of Control Redemption Price and (iv) certify that each Company Change of Control Redemption Condition has been satisfied as of the Company Change of Control Redemption Notice Date and that the Company Change of Control Redemption Conditions are expected to be satisfied on the Company Change of Control Redemption Date. If after the Company Change of Control Redemption Notice Date when the Company confirmed that the Company Change of Control Redemption Conditions have been satisfied as of the Company Change of Control Redemption Notice Date, one or more Company Change of Control Redemption Conditions fail or is reasonably expected to fail on the Company Change of Control Redemption Date, the Company shall promptly, but in any event within one (1) Business Day of such failure or of the Company becoming aware of such expected failure, provide the Holder a subsequent written notice to that effect. If a Company Change of Control Redemption Condition fails (which is not waived in writing by the Holder) on the Company Change of Control Redemption Date, then the Company’s redemption pursuant to this Section 5(d) shall be null and void with respect to all or any part designated by the Holder of the unconverted Company Change of Control Redemption Amount and the Holder shall be entitled to all the rights of a holder of this Note with respect to such amount of the Company Change of Control Redemption Amount. The Company may not deliver more than one (1) Company Change of Control Redemption Notice.
(e) Redemptions required by this Section 5 shall be made in accordance with the provisions of Section 11 and shall have priority to payments to shareholders in connection with such Change of Control. To the extent redemptions required by this Section 5 are deemed or determined by a court of competent jurisdiction to be prepayments of this Note by the Company, such redemptions shall be deemed to be voluntary prepayments. Notwithstanding anything to the contrary in this Section 5, but subject to Section 3(d), until the Holder Change of Control Redemption Price or the Company Change of Control Redemption Price, as applicable, (in each case, together with any Late Charges thereon) is paid in full, the Conversion Amount subject to redemption under this Section 5 (together with any Late Charges thereon) may be converted, in whole or in part, by the Holder into Common Stock pursuant to Section 3. In the event of the Company’s redemption of any portion of this Note under this Section 5, the Holder’s damages would be uncertain and difficult to estimate because of the parties’ inability to predict future interest rates and the uncertainty of the availability of a suitable substitute investment opportunity for the Holder. Accordingly, any redemption premium due under this Section 5 is intended by the parties to be, and shall be deemed, a reasonable estimate of the Holder’s actual loss of its investment opportunity and not as a penalty.
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6. RIGHTS UPON ISSUANCE OF PURCHASE RIGHTS AND OTHER CORPORATE EVENTS.
(a) Purchase Rights. In addition to any adjustments pursuant to Section 7 below, if at any time the Company grants, issues or sells any Options, Convertible Securities or rights to purchase stock, warrants, securities or other property pro rata to all or substantially all of the record holders of any class of Common Stock (the “Purchase Rights”), then the Holder will be entitled to acquire, upon the terms applicable to such Purchase Rights, the aggregate Purchase Rights which the Holder could have acquired if the Holder had held the number of shares of Common Stock acquirable upon complete conversion of this Note (without taking into account any limitations or restrictions on the convertibility of this Note and assuming for such purpose that the Note was converted at the Conversion Price as of the applicable record date) immediately prior to 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 and the other Attribution Parties exceeding the Maximum Percentage, then the Holder shall not be entitled to participate in such Purchase Right to the extent of the Maximum Percentage (and shall not be entitled to beneficial ownership of such shares of Common Stock as a result of such Purchase Right (and beneficial ownership) to the extent of any such excess) and such Purchase Right to such extent shall be held in abeyance (and, if such Purchase Right has an expiration date, maturity date or other similar provision, such term shall be extended by such number of days held in abeyance, if applicable) for the benefit of the Holder until such time or times, if ever, as its right thereto would not result in the Holder and the other Attribution Parties exceeding the Maximum Percentage, at which time or times the Holder shall be granted such right (and any Purchase Right granted, issued or sold on such initial Purchase Right or on any subsequent Purchase Right held similarly in abeyance (and, if such Purchase Right has an expiration date, maturity date or other similar provision, such term shall be extended by such number of days held in abeyance, if applicable)) to the same extent as if there had been no such limitation).
(b) Other Corporate Events. In addition to and not in substitution for any other rights hereunder, prior to the consummation of any Fundamental Transaction pursuant to which holders of shares of Common Stock are entitled to receive securities or other assets with respect to or in exchange for shares of Common Stock (a “Corporate Event”), the Company shall make appropriate provision to ensure that the Holder will thereafter have the right to receive upon a conversion of this Note, at the Holder’s option (i) in addition to the shares of Common Stock receivable upon such conversion, such securities or other assets to which the Holder would have been entitled with respect to such shares of Common Stock had such shares of Common Stock been held by the Holder upon the consummation of such Corporate Event (without taking into account any limitations or restrictions on the convertibility of this Note) or (ii) in lieu of the shares of Common Stock otherwise receivable upon such conversion, such securities or other assets received by the holders of shares of Common Stock in connection with the consummation of such Corporate Event in such amounts as the Holder would have been entitled to receive had this Note initially been issued with conversion rights for the form of such consideration (as opposed to shares of Common Stock) at a conversion rate for such consideration commensurate with the Conversion Rate. Provision made pursuant to the preceding sentence shall be in a form and substance satisfactory to the Holder. The provisions of this Section 6 shall apply similarly and equally to successive Corporate Events and shall be applied without regard to any limitations on the conversion or redemption of this Note.
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7. RIGHTS UPON ISSUANCE OF OTHER SECURITIES.
(a) Adjustment of Conversion Price upon Subdivision or Combination of Common Stock. Without limiting any provision of Section 6 or Section 15, if the Company at any time on or after the Subscription Date subdivides (by any stock split, stock dividend, stock combination, reverse stock split, recapitalization or other similar transaction) one or more classes of its outstanding shares of Common Stock into a greater number of shares, the Conversion Price in effect immediately prior to such subdivision will be proportionately reduced. Without limiting any provision of Section 6 or Section 15, if the Company at any time on or after the Subscription Date combines (by any stock split, stock dividend, stock combination, reverse stock split, recapitalization or other similar transaction) one or more classes of its outstanding shares of Common Stock into a smaller number of shares, the Conversion Price in effect immediately prior to such combination will be proportionately increased. Any adjustment pursuant to this Section 7(a) shall become effective immediately after the effective date of such subdivision or combination. If any event requiring an adjustment under this Section 7(a) occurs during the period that a Conversion Price is calculated hereunder, then the calculation of such Conversion Price shall be adjusted appropriately to reflect such event.
(b) Calculations. All calculations under this Section 7 shall be made by rounding to the nearest cent or the nearest 1/100th of a share, as applicable. The number of shares of Common Stock outstanding at any given time shall not include shares owned or held by or for the account of the Company, and the disposition of any such shares shall be considered an issue or sale of Common Stock.
(c) Voluntary Adjustment by Company. Subject to the rules and regulations of the Principal Market, the Company may at any time during the term of this Note, with the prior written consent of the Required Holders, reduce the then current Conversion Price of each of the Notes to any amount and for any period of time deemed appropriate by the board of directors of the Company.
8. NONCIRCUMVENTION. The Company hereby covenants and agrees that the Company will not, by amendment of its Articles of Incorporation (as defined in the Securities Purchase Agreement), Bylaws (as defined in the Securities Purchase Agreement) or through any reorganization, transfer of assets, consolidation, merger, scheme of arrangement, dissolution, issue or sale of securities, or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Note, and will at all times in good faith carry out all of the provisions of this Note and take all action as may be required to protect the rights of the Holder of this Note. Without limiting the generality of the foregoing or any other provision of this Note or the other Transaction Documents, the Company (a) shall not increase the par value of any shares of Common Stock receivable upon conversion of this Note above the Conversion Price then in effect, and (b) shall take all such actions as may be necessary or appropriate in order that the Company may validly and legally issue fully paid and nonassessable shares of Common Stock upon the conversion of this Note. Notwithstanding anything herein to the contrary, if after the Issuance Date, the Holder is not permitted to convert this Note in full for any reason (other than pursuant to restrictions set forth in Section 3(d) hereof), the Company shall use its best efforts to promptly remedy such failure, including, without limitation, obtaining such consents or approvals as necessary to permit such conversion into shares of Common Stock.
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9. RESERVATION OF AUTHORIZED SHARES.
(a) Reservation. So long as any Notes remain outstanding, the Company shall at all times reserve at least 200% of the number of shares of Common Stock as shall from time to time be necessary to effect the conversion of all of the Notes then outstanding (without regard to any limitations on conversions and assuming such Notes remain outstanding until the Maturity Date) at the Conversion Price then in effect (the “Required Reserve Amount”). The Required Reserve Amount (including, without limitation, each increase in the number of shares so reserved) shall be allocated pro rata among the holders of the Notes based on the original principal amount of the Notes held by each holder on the Closing Date or increase in the number of reserved shares, as the case may be (the “Authorized Share Allocation”). In the event that a holder shall sell or otherwise transfer any of such holder’s Notes, each transferee shall be allocated a pro rata portion of such holder’s Authorized Share Allocation. Any shares of Common Stock reserved and allocated to any Person which ceases to hold any Notes shall be allocated to the remaining holders of Notes, pro rata based on the principal amount of the Notes then held by such holders.
(b) Insufficient Authorized Shares. If, notwithstanding Section 9(a), and not in limitation thereof, at any time while any of the Notes remain outstanding the Company does not have a sufficient number of authorized and unreserved shares of Common Stock to satisfy its obligation to reserve for issuance upon conversion of the Notes at least a number of shares of Common Stock equal to the Required Reserve Amount (an “Authorized Share Failure”), then the Company shall immediately take all action necessary to increase the Company’s authorized shares of Common Stock to an amount sufficient to allow the Company to reserve the Required Reserve Amount for the Notes then outstanding. Without limiting the generality of the foregoing sentence, as soon as practicable after the date of the occurrence of an Authorized Share Failure, but in no event later than ninety (90) days after the occurrence of such Authorized Share Failure, the Company shall hold a meeting of its shareholders for the approval of an increase in the number of authorized shares of Common Stock. In connection with such meeting, the Company shall (i) from and after the Public Company Date provide each shareholder with a proxy statement and (ii) use its best efforts to solicit its shareholders’ approval of such increase in authorized shares of Common Stock and to cause its board of directors to recommend to the shareholders that they approve such proposal. In the event that the Company is prohibited from issuing shares of Common Stock pursuant to the terms of this Note due to the failure by the Company to have sufficient shares of Common Stock available out of the authorized but unissued shares of Common Stock (such unavailable number of shares of Common Stock, the “Authorized Failure Shares”), in lieu of delivering such Authorized Failure Shares to the Holder, the Company shall pay cash in exchange for the redemption of such portion of the Conversion Amount convertible into such Authorized Failure Shares at a price equal to the sum of (i) the product of (x) such number of Authorized Failure Shares and (y) the greatest Closing Sale Price of the Common Stock on any Trading Day during the period commencing on the date the Holder delivers the applicable Conversion Notice with respect to such Authorized Failure Shares to the Company and ending on the date of such issuance and payment under this Section 9(a); and (ii) to the extent the Holder purchases (in an open market transaction or otherwise) shares of Common Stock to deliver in satisfaction of a sale by the Holder of Authorized Failure Shares, any brokerage commissions and other out-of-pocket expenses, if any, of the Holder incurred in connection therewith. Nothing contained in Section 9(a) or this Section 9(b) shall limit any obligations of the Company under any provision of the Securities Purchase Agreement.
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10. OPTIONAL REDEMPTION AT THE HOLDER’S ELECTION. At any time or times after (i) the Price Condition is not satisfied as of the applicable Holder Optional Redemption Notice Date or (ii) the Volume Condition is not satisfied as of the applicable Holder Optional Redemption Notice Date (a “Holder Optional Redemption”) all or any portion of the Conversion Amount of this Note then outstanding by delivering written notice thereof (a “Holder Optional Redemption Notice” and the date the Holder delivers such notice to the Company, a “Holder Optional Redemption Notice Date”) to the Company which notice shall state (i) the portion of this Note that is being redeemed by the Holder, (ii) the date on which the Holder Optional Redemption shall occur, which date shall be the second (2nd) Business Day from the applicable Holder Optional Redemption Notice Date (a “Holder Optional Redemption Date”) and (iii) the wire instructions for the payment of the applicable Holder Optional Redemption Price (as defined below) to the Holder. The portion of this Note subject to redemption pursuant to this Section 10 shall be redeemed by the Company in cash at a price equal to the Conversion Amount being redeemed, including, without limitation, any accrued and unpaid Interest and Late Charges, if any, on such Conversion Amount and Interest through the applicable Holder Optional Redemption Date (a “Holder Optional Redemption Price”). On the applicable Holder Optional Redemption Date, the Company shall deliver or shall cause to be delivered to the Holder the Holder Optional Redemption Price in cash by wire transfer of immediately available funds pursuant to wire instructions provided by the Holder in writing to the Company. Holder Optional Redemptions made pursuant to this Section 10 shall be made in accordance with Section 11. To the extent redemptions required by this Section 10 are deemed or determined by a court of competent jurisdiction to be prepayments of the Note by the Company, such redemptions shall be deemed to be voluntary prepayments. Notwithstanding anything to the contrary in this Section 10, but subject to Section 3(d), until the Holder Optional Redemption Price (together with any Late Charges thereon) is paid in full, the Conversion Amount submitted for redemption under this Section 10 (together with any Late Charges thereon) may be converted, in whole or in part, by the Holder into Common Stock pursuant to Section 3. The parties hereto agree that in the event of the Company’s redemption of any portion of the Note under this Section 10, the Holder’s damages would be uncertain and difficult to estimate because of the parties’ inability to predict future interest rates and the uncertainty of the availability of a suitable substitute investment opportunity for the Holder.
11. REDEMPTIONS.
(a) Mechanics. The Company shall deliver the applicable Event of Default Redemption Price to the Holder in cash within five (5) Business Days after the Company’s receipt of the Holder’s Event of Default Redemption Notice (the “Event of Default Redemption Date”). If the Holder has submitted a Holder Change of Control Redemption Notice in accordance with Section 5(c), the Company shall deliver the applicable Holder Change of Control Redemption Price to the Holder in cash concurrently with the consummation of such Change of Control if such notice is received prior to the consummation of such Change of Control and within five (5) Business Days after the Company’s receipt of such notice otherwise. If the Company has submitted a Company Change of Control Redemption Notice in accordance with Section 5(d), the Company shall deliver the applicable Company Change of Control Redemption Price to the Holder in cash concurrently with the consummation of such Change of Control. The Company shall deliver the applicable Holder Optional Redemption Price to the Holder on the Holder Optional Redemption Date. Notwithstanding anything herein to the contrary, in connection with any redemption hereunder at a time the Holder is entitled to receive a cash payment under any of the other Transaction Documents, at the option of the Holder delivered in writing to the Company, the applicable Redemption Price hereunder shall be increased by the amount of such cash payment owed to the Holder under such other Transaction Document and, upon payment in full or conversion in accordance herewith, shall satisfy the Company’s payment obligation under such other Transaction Document. In the event of a redemption of less than all of the Conversion Amount of this Note, at the option of the Holder, the Company shall promptly cause to be issued and delivered to the Holder a new Note (in accordance with Section 18(d)) representing the outstanding Principal which has not been redeemed. In the event that the Company does not pay the applicable Redemption Price to the Holder within the time period required, at any time thereafter and until the Company pays such unpaid Redemption Price in full, the Holder shall have the option, in lieu of redemption, to require the Company to promptly return to the Holder all or any portion of this Note representing the Conversion Amount that was submitted for redemption and for which the applicable Redemption Price (together with any Late Charges thereon) has not been paid. Upon the Company’s receipt of such notice, (x) the applicable Redemption Notice shall be null and void with respect to such Conversion Amount, (y) the Company shall immediately return this Note, or issue a new Note (in accordance with Section 18(d)), to the Holder, and in each case the principal amount of this Note or such new Note (as the case may be) shall be increased by an amount equal to the difference between (1) the applicable Redemption Price (as the case may be, and as adjusted pursuant to this Section 11, if applicable) minus (2) the Principal portion of the Conversion Amount submitted for redemption. The Holder’s delivery of a notice voiding a Redemption Notice and exercise of its rights following such notice shall not affect the Company’s obligations to make any payments of Late Charges which have accrued prior to the date of such notice with respect to the Conversion Amount subject to such notice.
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12. VOTING RIGHTS. The Holder shall have no voting rights as the holder of this Note, except as required by law and as expressly provided in this Note.
13. COVENANTS. Until all of the Notes have been converted, redeemed or otherwise satisfied in accordance with their terms, without the prior written consent of the Required Holders:
(a) Rank. All payments due under this Note (a) shall rank pari passu with all Other Notes and Permitted Indebtedness that is not expressly subordinated in right of payment to this Note and (b) shall be senior to all other Indebtedness of the Company and its Subsidiaries that is expressly subordinated in right of payment to this Note.
(b) Incurrence of Indebtedness. The Company shall not, and the Company shall cause each of its Subsidiaries to not, and each Guarantor shall not, and each Guarantor shall cause each of its Subsidiaries to not, directly or indirectly, incur or guarantee, assume or suffer to exist any Indebtedness (other than (i) the Indebtedness evidenced by this Note and the Other Notes and (ii) other Permitted Indebtedness).
(c) Existence of Liens. The Company shall not, and the Company shall cause each of its Subsidiaries to not, and each Guarantor shall not, and each Guarantor shall cause each of its Subsidiaries to not, directly or indirectly, allow or suffer to exist any mortgage, lien, pledge, charge, security interest or other encumbrance upon or in any property or assets (including accounts and contract rights) owned by the Company or any of its Subsidiaries (collectively, “Liens”) other than Permitted Liens.
(d) Restricted Payments. The Company shall not, and the Company shall cause each of its Subsidiaries to not, and each Guarantor shall not, and each Guarantor shall cause each of its Subsidiaries to not, directly or indirectly, redeem, defease, repurchase, repay or make any payments in respect of, by the payment of cash or cash equivalents (in whole or in part, whether by way of open market purchases, tender offers, private transactions or otherwise), all or any portion of any Indebtedness (other than the Notes or Permitted Indebtedness secured by Permitted Liens) whether by way of payment in respect of principal of (or premium, if any) or interest on, such Indebtedness if at the time such payment is due or is otherwise made or, after giving effect to such payment, (i) an event constituting an Event of Default has occurred and is continuing or (ii) an event that with the passage of time and without being cured would constitute an Event of Default has occurred and is continuing; provided that the Company shall be permitted to make such payments if the aggregate of such payments is less than $150,000 minus the principal amount of any Indebtedness incurred pursuant to the exception in Section 13(g)(ii).
(e) Restriction on Redemption and Cash Dividends. The Company shall not, and the Company shall cause each of its Subsidiaries to not, and each Guarantor shall not, and each Guarantor shall cause each of its Subsidiaries to not, directly or indirectly, redeem, repurchase or declare or pay any cash dividend or distribution on any of its capital stock, except that any such cash dividend or capital may be paid to the Company or a Guarantor.
(f) Restriction on Transfer of Assets. The Company shall not, and the Company shall cause each of its Subsidiaries to not, and each Guarantor shall not, and each Guarantor shall cause each of its Subsidiaries to not, directly or indirectly, sell, lease, license, assign, transfer, spin-off, split-off, close, convey or otherwise dispose of any assets or rights of the Company or any Subsidiary owned or hereafter acquired whether in a single transaction or a series of related transactions, other than (i) sales, leases, licenses, assignments, transfers, conveyances and other dispositions of such assets or rights by the Company and its Subsidiaries in the ordinary course of business consistent with its past practice, (ii) sales of inventory and product in the ordinary course of business and (iii) sales, leases, licenses, assignments, transfers, conveyances and other dispositions to the Company or a Guarantor.
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(g) Intentionally Omitted.
(h) Change in Nature of Business. The Company shall not, and the Company shall cause each of its Subsidiaries to not, and each Guarantor shall not, and each Guarantor shall cause each of its Subsidiaries to not, directly or indirectly, engage in any material line of business substantially different from those lines of business conducted by or publicly contemplated to be conducted by it on the Subscription Date or any business substantially related or incidental thereto. The Company shall not, and the Company shall cause each of its Subsidiaries to not, and each Guarantor shall not, and each Guarantor shall cause each of its Subsidiaries to not, directly or indirectly, modify its or their corporate structure or purpose.
(i) Preservation of Existence, Etc. The Company shall maintain and preserve, and cause each of its Subsidiaries to maintain and preserve, and each Guarantor shall maintain and preserve, and each Guarantor shall cause each of its Subsidiaries to maintain and preserve, its existence, rights and privileges, and become or remain, and cause each of its Subsidiaries to become or remain, duly qualified and in good standing in each jurisdiction in which the character of the properties owned or leased by it or in which the transaction of its business makes such qualification necessary.
(j) Maintenance of Properties, Etc. The Company shall maintain and preserve, and cause each of its Subsidiaries to maintain and preserve, and each Guarantor shall maintain and preserve, and each Guarantor shall cause each of its Subsidiaries to maintain and preserve, all of its material properties which are necessary or useful in the proper conduct of its business in good working order and condition, ordinary wear and tear excepted, and comply, and cause each of its Subsidiaries to comply, at all times with the provisions of all leases to which it is a party as lessee or under which it occupies property, so as to prevent any loss or forfeiture thereof or thereunder.
(k) Maintenance of Intellectual Property Rights. The Company and each Guarantor will, and will cause each of its Subsidiaries to, take all action necessary or advisable to maintain all of the Intellectual Property Rights of the Company, any Guarantor and/or any of their Subsidiaries that are necessary or material to the conduct of its business in full force and effect.
(l) Maintenance of Insurance. The Company shall maintain, and cause each of its Subsidiaries to maintain, and each Guarantor shall maintain, and each Guarantor shall cause each of its Subsidiaries to maintain, insurance with responsible and reputable insurance companies or associations (including, without limitation, comprehensive general liability, hazard, rent and business interruption insurance) with respect to its properties (including all real properties leased or owned by it) and business, in such amounts and covering such risks as is required by any governmental authority having jurisdiction with respect thereto or as is carried generally in accordance with sound business practice by companies in similar businesses similarly situated.
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(m) Transactions with Affiliates. The Company shall not, nor shall it permit any of its Subsidiaries to, and each Guarantor shall not, not shall it permit any of its Subsidiaries to, enter into, renew, extend or be a party to, any transaction or series of related transactions (including, without limitation, the purchase, sale, lease, transfer or exchange of property or assets of any kind or the rendering of services of any kind) with any affiliate, except transactions in the ordinary course of business in a manner and to an extent consistent with past practice and necessary or desirable for the prudent operation of its business, for fair consideration and on terms no less favorable to it or its Subsidiaries than would be obtainable in a comparable arm’s length transaction with a Person that is not an affiliate thereof.
(n) Restricted Issuances. The Company shall not, and each Guarantor shall not, directly or indirectly, without the prior written consent of the holders of a majority in aggregate principal amount of the Notes then outstanding, (i) issue any Notes (other than as contemplated by the Securities Purchase Agreement and the Notes) or (ii) issue any other securities that would cause a breach or default under the Notes.
(o) Independent Investigation. At the request of the Holder either (x) at any time when an Event of Default has occurred and is continuing, (y) upon the occurrence of an event that with the passage of time or giving of notice would constitute an Event of Default or (z) at any time the Holder reasonably believes an Event of Default may have occurred or be continuing, the Company shall hire an independent, reputable investment bank selected by the Company and approved by the Holder to investigate as to whether any breach of this Note has occurred (the “Independent Investigator”). If the Independent Investigator determines that such breach of this Note has occurred, the Independent Investigator shall notify the Company of such breach and the Company shall deliver written notice to each holder of a Note of such breach. In connection with such investigation, the Independent Investigator may, during normal business hours, inspect all contracts, books, records, personnel, offices and other facilities and properties of the Company, each Guarantor and each of their Subsidiaries and, to the extent available to the Company and each Guarantor after the Company uses reasonable efforts to obtain them, the records of its legal advisors and accountants (including the accountants’ work papers) and any books of account, records, reports and other papers not contractually required of the Company or such Guarantor to be confidential or secret, or subject to attorney-client or other evidentiary privilege, and the Independent Investigator may make such copies and inspections thereof as the Independent Investigator may reasonably request. The Company and each Guarantor shall furnish the Independent Investigator with such financial and operating data and other information with respect to the business and properties of the Company and each Guarantor as the Independent Investigator may reasonably request. The Company and each Guarantor shall permit the Independent Investigator to discuss the affairs, finances and accounts of the Company and each Guarantor with, and to make proposals and furnish advice with respect thereto to, the Company’s officers, directors, key employees and independent public accountants or any of them (and by this provision the Company and each Guarantor authorizes said accountants to discuss with such Independent Investigator the finances and affairs of the Company, each Guarantor and any of their Subsidiaries), all at such reasonable times, upon reasonable notice, and as often as may be reasonably requested.
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(p) Control Account. Not applicable.
14. SECURITY. This Note is secured to the extent and in the manner set forth in the Security Documents.
15. RESERVED.
16. AMENDING THE TERMS OF THIS NOTE. Except for Section 3(d), which may not be amended, modified or waived by the parties hereto, the prior written consent of the Required Holders shall be required for any amendment, modification or waiver to this Note. Any amendment, modification or waiver so approved shall be binding upon all existing and future holders of this Note; provided, however, that no such change, waiver or, as applied to any of the Notes held by any particular holder of Notes, shall, without the written consent of that particular holder, (i) reduce the amount of Principal, reduce the amount of accrued and unpaid Interest, or extend the Maturity Date, of the Notes, (ii) disproportionally and adversely affect any rights under the Notes of any holder of Notes; or (iii) modify any of the provisions of, or impair the right of any holder of Notes under, this Section 16.
17. TRANSFER. This Note and any shares of Common Stock issued upon conversion of this Note may be offered, sold, assigned or transferred by the Holder without the consent of the Company, subject only to the provisions of Section 2(g) of the Securities Purchase Agreement.
18. REISSUANCE OF THIS NOTE.
(a) Transfer. If this Note is to be transferred, the Holder shall surrender this Note to the Company, whereupon the Company will forthwith issue and deliver upon the order of the Holder a new Note (in accordance with Section 18(d)), registered as the Holder may request, representing the outstanding Principal being transferred by the Holder and, if less than the entire outstanding Principal is being transferred, a new Note (in accordance with Section 18(d)) to the Holder representing the outstanding Principal not being transferred. The Holder and any assignee, by acceptance of this Note, acknowledge and agree that, by reason of the provisions of Section 3(c)(iii) following conversion or redemption of any portion of this Note, the outstanding Principal represented by this Note may be less than the Principal stated on the face of this Note.
(b) Lost, Stolen or Mutilated Note. Upon receipt by the Company of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of this Note (as to which a written certification and the indemnification contemplated below shall suffice as such evidence), and, in the case of loss, theft or destruction, of any indemnification undertaking by the Holder to the Company in customary and reasonable form and, in the case of mutilation, upon surrender and cancellation of this Note, the Company shall execute and deliver to the Holder a new Note (in accordance with Section 18(d) ) representing the outstanding Principal.
(c) Note Exchangeable for Different Denominations. This Note is exchangeable, upon the surrender hereof by the Holder at the principal office of the Company, for a new Note or Notes (in accordance with Section 18(d) and in principal amounts of at least $1,000) representing in the aggregate the outstanding Principal of this Note, and each such new Note will represent such portion of such outstanding Principal as is designated by the Holder at the time of such surrender.
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(d) Issuance of New Notes. Whenever the Company is required to issue a new Note pursuant to the terms of this Note, such new Note (i) shall be of like tenor with this Note, (ii) shall represent, as indicated on the face of such new Note, the Principal remaining outstanding (or in the case of a new Note being issued pursuant to Section18(a) or Section 18(c), the Principal designated by the Holder which, when added to the principal represented by the other new Notes issued in connection with such issuance, does not exceed the Principal remaining outstanding under this Note immediately prior to such issuance of new Notes), (iii) shall have an issuance date, as indicated on the face of such new Note, which is the same as the Issuance Date of this Note, (iv) shall have the same rights and conditions as this Note, and (v) shall represent accrued and unpaid Interest and Late Charges on the Principal and Interest of this Note, from the Issuance Date.
19. REMEDIES, CHARACTERIZATIONS, OTHER OBLIGATIONS, BREACHES AND INJUNCTIVE RELIEF. The remedies provided in this Note shall be cumulative and in addition to all other remedies available under this Note and any of the other Transaction Documents at law or in equity (including a decree of specific performance and/or other injunctive relief), and nothing herein shall limit the Holder’s right to pursue actual and consequential damages for any failure by the Company to comply with the terms of this Note. No failure on the part of the Holder to exercise, and no delay in exercising, any right, power or remedy hereunder shall operate as a waiver thereof; nor shall any single or partial exercise by the Holder of any right, power or remedy preclude any other or further exercise thereof or the exercise of any other right, power or remedy. In addition, the exercise of any right or remedy of the Holder at law or equity or under this Note or any of the documents shall not be deemed to be an election of Holder’s rights or remedies under such documents or at law or equity. 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 specific performance and/or temporary, preliminary and permanent injunctive or other equitable relief from any court of competent jurisdiction in any such case without the necessity of proving actual damages and without posting a bond or other security. The Company shall provide all information and documentation to the Holder that is requested by the Holder to enable the Holder to confirm the Company’s compliance with the terms and conditions of this Note.
20. PAYMENT OF COLLECTION, ENFORCEMENT AND OTHER COSTS. If (a) this Note is placed in the hands of an attorney for collection or enforcement or is collected or enforced through any legal proceeding or the Holder otherwise takes action to collect amounts due under this Note or to enforce the provisions of this Note or (b) there occurs any bankruptcy, reorganization, receivership of the Company or other proceedings affecting Company creditors’ rights and involving a claim under this Note, then the Company shall pay the costs incurred by the Holder for such collection, enforcement or action or in connection with such bankruptcy, reorganization, receivership or other proceeding, including, without limitation, reasonable attorneys’ fees and disbursements. The Company expressly acknowledges and agrees that no amounts due under this Note shall be affected, or limited, by the fact that the purchase price paid for this Note was less than the original Principal amount hereof.
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21. CONSTRUCTION; HEADINGS. This Note shall be deemed to be jointly drafted by the Company and the initial Holder and shall not be construed against any such Person as the drafter hereof. The headings of this Note are for convenience of reference and shall not form part of, or affect the interpretation of, this Note. Unless the context clearly indicates otherwise, each pronoun herein shall be deemed to include the masculine, feminine, neuter, singular and plural forms thereof. The terms “including,” “includes,” “include” and words of like import shall be construed broadly as if followed by the words “without limitation.” The terms “herein,” “hereunder,” “hereof” and words of like import refer to this entire Note instead of just the provision in which they are found. Unless expressly indicated otherwise, all section references are to sections of this Note. Terms used in this Note and not otherwise defined herein, but defined in the other Transaction Documents, shall have the meanings ascribed to such terms on the Closing Date in such other Transaction Documents unless otherwise consented to in writing by the Holder.
22. FAILURE OR INDULGENCE NOT WAIVER. No failure or delay on the part of the Holder in the exercise of any power, right or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such power, right or privilege preclude other or further exercise thereof or of any other right, power or privilege. No waiver shall be effective unless it is in writing and signed by an authorized representative of the waiving party. Notwithstanding the foregoing, nothing contained in this Section 22 shall permit any waiver of any provision of Section 3(d).
23. DISPUTE RESOLUTION.
(a) Submission to Dispute Resolution.
(i) In the case of a dispute relating to a Closing Bid Price, a Closing Sale Price, a Conversion Price or a fair market value or the arithmetic calculation of a Conversion Rate, or the applicable Redemption Price (as the case may be) (including, without limitation, a dispute relating to the determination of any of the foregoing), the Company or the Holder (as the case may be) shall submit the dispute to the other party via electronic mail (A) if by the Company, within two (2) Business Days after the occurrence of the circumstances giving rise to such dispute or (B) if by the Holder at any time after the Holder learned of the circumstances giving rise to such dispute. If the Holder and the Company are unable to promptly resolve such dispute relating to such Closing Bid Price, such Closing Sale Price, such Conversion Price, such fair market value, or the arithmetic calculation of such Conversion Rate or such applicable Redemption Price (as the case may be), at any time after the second (2nd) Business Day following such initial notice by the Company or the Holder (as the case may be) of such dispute to the Company or the Holder (as the case may be), then the Holder may, at its sole option, select an independent, reputable investment bank to resolve such dispute.
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(ii) The Holder and the Company shall each deliver to such investment bank (A) a copy of the initial dispute submission so delivered in accordance with the first sentence of this Section 23 and (B) written documentation supporting its position with respect to such dispute, in each case, no later than 5:00 p.m. (New York time) by the fifth (5th) Business Day immediately following the date on which the Holder selected such investment bank (the “Dispute Submission Deadline”) (the documents referred to in the immediately preceding clauses (A) and (B) are collectively referred to herein as the “Required Dispute Documentation”) (it being understood and agreed that if either the Holder or the Company fails to so deliver all of the Required Dispute Documentation by the Dispute Submission Deadline, then the party who fails to so submit all of the Required Dispute Documentation shall no longer be entitled to (and hereby waives its right to) deliver or submit any written documentation or other support to such investment bank with respect to such dispute and such investment bank shall resolve such dispute based solely on the Required Dispute Documentation that was delivered to such investment bank prior to the Dispute Submission Deadline). Unless otherwise agreed to in writing by both the Company and the Holder or otherwise requested by such investment bank, neither the Company nor the Holder shall be entitled to deliver or submit any written documentation or other support to such investment bank in connection with such dispute (other than the Required Dispute Documentation).
(iii) The Company and the Holder shall cause such investment bank to determine the resolution of such dispute and notify the Company and the Holder of such resolution no later than ten (10) Business Days immediately following the Dispute Submission Deadline. The fees and expenses of such investment bank shall be borne solely by the Company, and such investment bank’s resolution of such dispute shall be final and binding upon all parties absent manifest error.
(b) Miscellaneous. The Company expressly acknowledges and agrees that (i) this Section 23 constitutes an agreement to arbitrate between the Company and the Holder (and constitutes an arbitration agreement) pursuant to Delaware Code Title 10 Chapter 57 - Uniform Arbitration Act (“UAA”) and that the Holder is authorized to apply for an order to compel arbitration pursuant to UAA in order to compel compliance with this Section 23, (ii) the terms of this Note and each other applicable Transaction Document shall serve as the basis for the selected investment bank’s resolution of the applicable dispute, such investment bank shall be entitled (and is hereby expressly authorized) to make all findings, determinations and the like that such investment bank determines are required to be made by such investment bank in connection with its resolution of such dispute and in resolving such dispute such investment bank shall apply such findings, determinations and the like to the terms of this Note and any other applicable Transaction Documents, (iii) the Holder (and only the Holder), in its sole discretion, shall have the right to submit any dispute described in this Section 23 to any state or federal court sitting in the State of Delaware, in lieu of utilizing the procedures set forth in this Section 23 and (iv) nothing in this Section 23 shall limit the Holder from obtaining any injunctive relief or other equitable remedies (including, without limitation, with respect to any matters described in this Section 23).
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24. NOTICES; CURRENCY; PAYMENTS.
(a) Notices. Whenever notice is required to be given under this Note, unless otherwise provided herein, such notice shall be given in accordance with Section 9(f) of the Securities Purchase Agreement. The Company shall provide the Holder with prompt written notice of all actions taken pursuant to this Note, including in reasonable detail a description of such action and the reason therefore. Without limiting the generality of the foregoing, the Company will give written notice to the Holder at least fifteen (15) days prior to the date on which the Company closes its books or takes a record (A) with respect to any dividend or distribution upon the Common Stock, (B) with respect to any grant, issuances, or sales of any Options, Convertible Securities or rights to purchase stock, warrants, securities or other property to holders of shares of Common Stock or (C) for determining rights to vote with respect to any Fundamental Transaction, dissolution or liquidation, provided in each case that such information shall be made known to the public prior to or in conjunction with such notice being provided to the Holder.
(b) Currency. All dollar amounts referred to in this Note are in United States Dollars (“U.S. Dollars”), and all amounts owing under this Note shall be paid in U.S. Dollars. All amounts denominated in other currencies (if any) shall be converted into the U.S. Dollar equivalent amount in accordance with the Exchange Rate on the date of calculation. “Exchange Rate” means, in relation to any amount of currency to be converted into U.S. Dollars pursuant to this Note, the U.S. Dollar exchange rate as published in the Wall Street Journal on the relevant date of calculation (it being understood and agreed that where an amount is calculated with reference to, or over, a period of time, the date of calculation shall be the final date of such period of time).
(c) Payments. Whenever any payment of cash is to be made by the Company to any Person pursuant to this Note, unless otherwise expressly set forth herein, such payment shall be made via wire transfer of immediately available funds by providing the Company with prior written notice setting out such request and the Holder’s wire transfer instructions, provided that the Holder may elect to receive a payment of cash in lawful money of the United States of America by a certified check drawn on the account of the Company and sent via overnight courier service to such Person at such address as previously provided to the Company in writing (which address, in the case of each of the Buyers, shall initially be as set forth on the Schedule of Buyers attached to the Securities Purchase Agreement). Whenever any amount expressed to be due by the terms of this Note is due on any day which is not a Business Day, the same shall instead be due on the next succeeding day which is a Business Day. Any amount of Principal or other amounts due under the Transaction Documents which is not paid when due (except to the extent such amount is simultaneously accruing Interest at the Default Rate hereunder) shall result in a late charge being incurred and payable by the Company in an amount equal to interest on such amount at the rate of eighteen percent (18%) per annum from the date such amount was due until the same is paid in full (“Late Charge”).
25. CANCELLATION. After all Principal, accrued Interest, Late Charges and other amounts at any time owed on this Note have been paid in full, this Note shall automatically be deemed canceled, shall be surrendered to the Company for cancellation and shall not be reissued.
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26. WAIVER OF NOTICE. To the extent permitted by law, the Company hereby irrevocably waives demand, notice, presentment, protest and all other demands and notices in connection with the delivery, acceptance, performance, default or enforcement of this Note and the Securities Purchase Agreement.
27. GOVERNING LAW. This Note shall be construed and enforced in accordance with, and all questions concerning the construction, validity, interpretation and performance of this Note shall be governed by, the internal laws of the State of Delaware, without giving effect to any choice of law or conflict of law provision or rule that would cause the application of the laws of any jurisdictions other than the State of Delaware. Except as otherwise required by Section 23 above, the Company hereby irrevocably submits to the exclusive jurisdiction of the state and federal courts sitting in the State of Delaware for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein, and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of any such court, that such suit, action or proceeding is brought in an inconvenient forum or that the venue of such suit, action or proceeding is improper. Nothing contained herein shall be deemed to limit in any way any right to serve process in any manner permitted by law. Nothing contained herein shall be deemed to limit in any way any right to serve process in any manner permitted by law. Nothing contained herein (i) shall be deemed or operate to preclude the Holder from bringing suit or taking other legal action against the Company in any other jurisdiction to collect on the Company’s obligations to the Holder, to realize on any collateral or any other security for such obligations, or to enforce a judgment or other court ruling in favor of the Holder or (ii) shall limit, or shall be deemed or construed to limit, any provision of Section 23. THE COMPANY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE TO, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION WITH OR ARISING OUT OF THIS NOTE OR ANY TRANSACTION CONTEMPLATED HEREBY.
28. JUDGMENT CURRENCY.
(a) If for the purpose of obtaining or enforcing judgment against the Company in any court in any jurisdiction it becomes necessary to convert into any other currency (such other currency being hereinafter in this Section 28 referred to as the “Judgment Currency”) an amount due in U.S. dollars under this Note, the conversion shall be made at the Exchange Rate prevailing on the Trading Day immediately preceding:
(i) the date actual payment of the amount due, in the case of any proceeding in the courts of Delaware or in the courts of any other jurisdiction that will give effect to such conversion being made on such date: or
(ii) the date on which the foreign court determines, in the case of any proceeding in the courts of any other jurisdiction (the date as of which such conversion is made pursuant to this Section 28(a)(ii)being hereinafter referred to as the “Judgment Conversion Date”).
(b) If in the case of any proceeding in the court of any jurisdiction referred to in Section 28(a)(ii)above, there is a change in the Exchange Rate prevailing between the Judgment Conversion Date and the date of actual payment of the amount due, the applicable party shall pay such adjusted amount as may be necessary to ensure that the amount paid in the Judgment Currency, when converted at the Exchange Rate prevailing on the date of payment, will produce the amount of US dollars which could have been purchased with the amount of Judgment Currency stipulated in the judgment or judicial order at the Exchange Rate prevailing on the Judgment Conversion Date.
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(c) Any amount due from the Company under this provision shall be due as a separate debt and shall not be affected by judgment being obtained for any other amounts due under or in respect of this Note.
29. SEVERABILITY. If any provision of this Note is prohibited by law or otherwise determined to be invalid or unenforceable by a court of competent jurisdiction, the provision that would otherwise be prohibited, invalid or unenforceable shall be deemed amended to apply to the broadest extent that it would be valid and enforceable, and the invalidity or unenforceability of such provision shall not affect the validity of the remaining provisions of this Note so long as this Note as so modified continues to express, without material change, the original intentions of the parties as to the subject matter hereof and the prohibited nature, invalidity or unenforceability of the provision(s) in question does not substantially impair the respective expectations or reciprocal obligations of the parties or the practical realization of the benefits that would otherwise be conferred upon the parties. The parties will endeavor in good faith negotiations to replace the prohibited, invalid or unenforceable provision(s) with a valid provision(s), the effect of which comes as close as possible to that of the prohibited, invalid or unenforceable provision(s).
30. MAXIMUM PAYMENTS. Without limiting Section 9(d) of the Securities Purchase Agreement, nothing contained herein shall be deemed to establish or require the payment of a rate of interest or other charges in excess of the maximum permitted by applicable law. In the event that the rate of interest required to be paid or other charges hereunder exceed the maximum permitted by such law, any payments in excess of such maximum shall be credited against amounts owed by the Company to the Holder and thus refunded to the Company.
31. CERTAIN DEFINITIONS. For purposes of this Note, the following terms shall have the following meanings:
(a) “1934 Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations thereunder.
(b) “Affiliate” shall have the meaning ascribed to such term in Rule 405 of the Securities Act of 1933, as amended.
(c) “Attribution Parties” means, collectively, the following Persons: (i) any investment vehicle, including, any funds, feeder funds or managed accounts, currently, or from time to time after the Issuance Date, directly or indirectly managed or advised by the Holder’s investment manager or any of its Affiliates or principals, (ii) any direct or indirect Affiliates of the Holder or any of the foregoing, (iii) any Person acting or who could be deemed to be acting as a Group together with the Holder or any of the foregoing and (iv) any other Persons whose beneficial ownership of the Common Stock would or could be aggregated with the Holder’s and the other Attribution Parties for purposes of Section 13(d) of the 1934 Act. For clarity, the purpose of the foregoing is to subject collectively the Holder and all other Attribution Parties to the Maximum Percentage.
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(d) Intentionally Omitted.
(e) “Bloomberg” means Bloomberg, L.P.
(f) “Business Day” means any day other than Saturday, Sunday or other day on which commercial banks in The City of New York are authorized or required by law to remain closed; provided, however, for clarification, commercial banks shall not be deemed to be authorized or required by law to remain closed due to “stay at home”, “shelter-in-place”, “non-essential employee” or any other similar orders or restrictions or the closure of any physical branch locations at the direction of any governmental authority so long as the electronic funds transfer systems (including for wire transfers) of commercial banks in The City of New York generally are open for use by customers on such day.
(g) “Change of Control” means any Fundamental Transaction other than (i) any merger of the Company or any of its, direct or indirect, wholly-owned Subsidiaries with or into any of the foregoing Persons, (ii) any reorganization, recapitalization or reclassification of the shares of Common Stock in which holders of the Company’s voting power immediately prior to such reorganization, recapitalization or reclassification continue after such reorganization, recapitalization or reclassification to hold publicly traded securities and, directly or indirectly, are, in all material respects, the holders of the voting power of the surviving entity (or entities with the authority or voting power to elect the members of the board of directors (or their equivalent if other than a corporation) of such entity or entities) after such reorganization, recapitalization or reclassification, or (iii) pursuant to a migratory merger effected solely for the purpose of changing the jurisdiction of incorporation of the Company or any of its Subsidiaries.
(h) “Closing Bid Price” and “Closing Sale Price” means, for any security as of any date (I) on and after the Public Company Date, the last closing bid price and last closing trade price, respectively, for such security on the Principal Market, as reported by Bloomberg, or, if the Principal Market begins to operate on an extended hours basis and does not designate the closing bid price or the closing trade price (as the case may be) then the last bid price or last trade price, respectively, of such security prior to 4:00:00 p.m., New York time, as reported by Bloomberg, or, if the Principal Market is not the principal securities exchange or trading market for such security, the last closing bid price or last trade price, respectively, of such security on the principal securities exchange or trading market where such security is listed or traded as reported by Bloomberg, or if the foregoing do not apply, the last closing bid price or last trade price, respectively, of such security in the over-the-counter market on the electronic bulletin board for such security as reported by Bloomberg, or, if no closing bid price or last trade price, respectively, is reported for such security by Bloomberg, the average of the bid prices, or the ask prices, respectively, of any market makers for such security as reported in the “pink sheets” by OTC Markets Group Inc. (formerly Pink Sheets LLC) or (II) prior to the Public Company Date, the fair market value of the shares reasonably acceptable to the Required Holders, based on the most recent valuation determined as of the applicable date of determination taking into account the most recent bona fide capital raise consummated prior to the applicable date of determination. If the Closing Bid Price or the Closing Sale Price cannot be calculated for a security on a particular date on any of the foregoing bases, the Closing Bid Price or the Closing Sale Price (as the case may be) of such security on such date shall be the fair market value as mutually determined by the Company and the Holder. If the Company and the Holder are unable to agree upon the fair market value of such security, then such dispute shall be resolved in accordance with the procedures in Section 23. All such determinations shall be appropriately adjusted for any stock splits, stock dividends, stock combinations, recapitalizations or other similar transactions during such period.
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(i) “Closing Date” shall have the meaning set forth in the Securities Purchase Agreement, which date is the date the Company initially issued the Notes pursuant to the terms of the Securities Purchase Agreement.
(j) “Collateral” shall have the meaning as set forth in the Security Documents.
(k) “Collateral Agent” shall have the meaning as set forth in the Securities Purchase Agreement.
(l) “Common Stock” means (i) the Company’s shares of common stock, $0.00001 par value per share, and (ii) any capital stock into which such common stock shall have been changed or any share capital resulting from a reclassification of such common stock.
(m) “Control Account” Not applicable.
(n) “Convertible Securities” means any stock or other security (other than Options) that is at any time and under any circumstances, directly or indirectly, convertible into, exercisable or exchangeable for, or which otherwise entitles the holder thereof to acquire, any shares of Common Stock.
(o) “Eligible Market” means The New York Stock Exchange, the NYSE American, the Nasdaq Capital Market, the Nasdaq Global Select Market, the Nasdaq Global Market, or the OTC Markets.
(p) “Equity Conditions” means, with respect to any given date of determination: (i) on each day during the period beginning thirty (30) calendar days prior to the applicable date of determination and ending on and including the applicable date of determination (the “Equity Conditions Measuring Period”), one or more registration statements, or an exemption pursuant to SEC Regulation A shall be effective and the prospectus contained therein shall be available on such applicable date of determination (with, for the avoidance of doubt, any shares of Common Stock previously issued pursuant to such prospectus deemed unavailable) for the resale of all shares of Common Stock issuable pursuant to the terms of the Notes (without regard to any limitations on conversion set forth in Section 3(d) or otherwise) (the “Conversion Shares”) \; (ii) on each day during the Equity Conditions Measuring Period, the Common Stock (including all of the Conversion Shares) is listed or designated for quotation (as applicable) on an Eligible Market and shall not have been suspended from trading on an Eligible Market (other than suspensions of not more than two (2) days and occurring prior to the applicable date of determination due to business announcements by the Company) nor shall delisting or suspension by an Eligible Market have been threatened (with a reasonable prospect of delisting occurring after giving effect to all applicable notice, appeal, compliance and hearing periods) or reasonably likely to occur or pending as evidenced by a writing by such Eligible Market; (iii) during the Equity Conditions Measuring Period, the Company shall have delivered on a timely basis all shares of Common Stock issuable pursuant to the terms of any securities issued by the Company that are then held by the Holder, including, without limitation pursuant to the terms of the Notes; (iv) on each day during the Equity Conditions Measuring Period, all of the Conversion Shares may be issued in full without violating the rules or regulations of the Eligible Market on which the Common Stock is then listed or designated for quotation (as applicable); (v) on each day during the Equity Conditions Measuring Period, no public announcement of a pending, proposed or intended Fundamental Transaction shall have occurred which has not been abandoned, terminated or consummated; (vi) on each day during the Equity Conditions Measuring Period, the Company shall have no knowledge of any fact that would reasonably be expected to cause the applicable Registration Statement, or an exemption to the filing requirements, to not be effective or the prospectus contained therein to not be available for the resale of any of the Conversion Shares; (vii) on each day during the Equity Conditions Measuring Period, the Holder shall not be in possession of any material, non-public information provided by the Company, any of its Subsidiaries or any of their respective affiliates, employees, officers, representatives, agents or the like; (viii) on each day during the Equity Conditions Measuring Period, the Company shall have been in compliance in material respects will each covenant and other term or condition of each Transaction Document, including, without limitation, the Company shall not have failed to timely make any payment pursuant to any Transaction Document, nor shall there have occurred an event that with the passage of time or giving of notice would constitute such a breach of any covenant and other term or condition of each Transaction Document; (ix) [reserved]; (x) on each day during the Equity Conditions Measuring Period, all shares of Common Stock issuable pursuant to the terms of the Notes may be issued in full without violating Section 3(d) hereof (or the equivalent provisions of any applicable Other Notes), (xi) on each day during the Equity Conditions Measuring Period, (A) no Authorized Share Failure shall exist or be continuing and (B) all of the Conversion Shares may be issued in full without resulting in an Authorized Share Failure; and (xii) on each day during the Equity Conditions Measuring Period, no bona fide dispute shall exist, by and between any of holders of Notes, the Company, the Principal Market (or such applicable Eligible Market in which the Common Stock of the Company is then principally trading) and/or FINRA with respect to any term or provision of the Notes or any other Transaction Document.
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(q) “Equity Conditions Failure” means that on each day during the period beginning on the twentieth (20th) Trading Day prior to the applicable date of determination and ending on and including the applicable date of determination, the Equity Conditions have not been satisfied (or waived in writing by the Holder).
(r) “Event of Default Redemption Premium” means 130%.
(s) “Fundamental Transaction” means (A) that the Company shall, directly or indirectly, including through Subsidiaries, Affiliates or otherwise, in one or more related transactions, (i) consolidate or merge with or into (whether or not the Company is the surviving corporation) another Subject Entity, or (ii) sell, assign, transfer, convey or otherwise dispose of all or substantially all of the properties or assets of the Company or any of its “significant subsidiaries” (as defined in Rule 1-02 of Regulation S-X) to one or more Subject Entities, or (iii) make, or allow one or more Subject Entities to make, or allow the Company to be subject to or have its Common Stock be subject to or party to one or more Subject Entities making, a purchase, tender or exchange offer that is accepted by the holders of at least either (x) 50% of the outstanding shares of Common Stock, (y) 50% of the outstanding shares of Common Stock calculated as if any shares of Common Stock held by all Subject Entities making or party to, or Affiliated with any Subject Entities making or party to, such purchase, tender or exchange offer were not outstanding; or (z) such number of shares of Common Stock such that all Subject Entities making or party to, or Affiliated with any Subject Entity making or party to, such purchase, tender or exchange offer, become collectively the beneficial owners (as defined in Rule 13d-3 under the 1934 Act) of at least 50% of the outstanding shares of Common Stock, or (iv) consummate a stock or share purchase agreement or other business combination (including, without limitation, a reorganization, recapitalization, spin-off or scheme of arrangement) with one or more Subject Entities whereby all such Subject Entities, individually or in the aggregate, acquire, either (x) at least 50% of the outstanding shares of Common Stock, (y) at least 50% of the outstanding shares of Common Stock calculated as if any shares of Common Stock held by all the Subject Entities making or party to, or Affiliated with any Subject Entity making or party to, such stock purchase agreement or other business combination were not outstanding; or (z) such number of shares of Common Stock such that the Subject Entities become collectively the beneficial owners (as defined in Rule 13d-3 under the 1934 Act) of at least 50% of the outstanding shares of Common Stock, or (v) reorganize, recapitalize or reclassify its Common Stock, (B) that the Company shall, directly or indirectly, including through Subsidiaries, Affiliates or otherwise, in one or more related transactions, allow any Subject Entity individually or the Subject Entities in the aggregate to be or become the “beneficial owner” (as defined in Rule 13d-3 under the 1934 Act), directly or indirectly, whether through acquisition, purchase, assignment, conveyance, tender, tender offer, exchange, reduction in outstanding shares of Common Stock, merger, consolidation, business combination, reorganization, recapitalization, spin-off, scheme of arrangement, reorganization, recapitalization or reclassification or otherwise in any manner whatsoever, of either (x) at least 50% of the aggregate ordinary voting power represented by issued and outstanding Common Stock, (y) at least 50% of the aggregate ordinary voting power represented by issued and outstanding Common Stock not held by all such Subject Entities as of the Subscription Date calculated as if any shares of Common Stock held by all such Subject Entities were not outstanding, or (z) a percentage of the aggregate ordinary voting power represented by issued and outstanding shares of Common Stock or other equity securities of the Company sufficient to allow such Subject Entities to effect a statutory short form merger or other transaction requiring other shareholders of the Company to surrender their shares of Common Stock without approval of the shareholders of the Company or (C) directly or indirectly, including through Subsidiaries, Affiliates or otherwise, in one or more related transactions, the issuance of or the entering into any other instrument or transaction structured in a manner to circumvent, or that circumvents, the intent of this definition in which case this definition shall be construed and implemented in a manner otherwise than in strict conformity with the terms of this definition to the extent necessary to correct this definition or any portion of this definition which may be defective or inconsistent with the intended treatment of such instrument or transaction.
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(t) “GAAP” means United States generally accepted accounting principles, consistently applied.
(u) “Group” means a “group” as that term is used in Section 13(d) of the 1934 Act and as defined in Rule 13d-5 thereunder.
(v) “Guarantor” shall have the meaning ascribed to such term in the Guarantee Agreement (as defined in the Securities Purchase Agreement).
(w) “Holder Change of Control Redemption Premium” means 130%.
(x) “Indebtedness” shall have the meaning ascribed to such term in the Securities Purchase Agreement.
(y) “Intellectual Property Rights” shall have the meaning ascribed to such term in the Securities Purchase Agreement.
(z) “Issuance Date” means the date set forth above as the Issuance Date.
(aa) “Material Adverse Effect” shall have the meaning ascribed to such term in the Securities Purchase Agreement, except that, solely for purposes of Section 4(a)(xvii), such term shall not include the word “prospects”.
(bb) “Maturity Date” shall mean July 25, 2024; provided, however, the Maturity Date may be extended at the option of the Holder in the event that, and for so long as, an Event of Default set forth in clauses (vi), (v) or (vii) of Section 4(a) shall have occurred and be continuing or any event shall have occurred and be continuing that with the passage of time and the failure to cure would result in such an Event of Default.
(cc) “Options” means any rights, warrants or options to subscribe for or purchase shares of Common Stock or Convertible Securities.
(dd) “Parent Entity” of a Person means an entity that, directly or indirectly, controls the applicable Person and whose common stock or equivalent equity security is quoted or listed on an Eligible Market, or, if there is more than one such Person or Parent Entity, the Person or Parent Entity with the largest public market capitalization as of the date of consummation of the Fundamental Transaction.
(ee) “Permitted Indebtedness” means (a) Indebtedness evidenced by this Note and the Other Notes, (b) Indebtedness set forth on Schedule 3(s) to the Securities Purchase Agreement, as in effect as of the Subscription Date, (c) Indebtedness secured by, or unsecured but as described in, Permitted Liens pursuant to clauses (n) and (o) of the definition of Permitted Liens, (d) lease obligations of up to $200,000 in the aggregate, (e) trade accounts payable incurred in the ordinary course of business, (f) endorsement of negotiable instruments for deposit or collection or similar transactions in the ordinary course of business, not to exceed $200,000 in the aggregate outstanding at any time, (g) vendor payment guarantees entered into in the ordinary course of business and consistent with past practices, not to exceed $200,000 in the aggregate outstanding at any time, (h) Indebtedness that (A) is expressly subordinated to the Notes and the Other Notes pursuant to a written subordination agreement with the Holders that is reasonably acceptable to the Required Holders and (B) does not require any payment of principal, whether at maturity, pursuant to amortization, a sinking fund or otherwise, at a date earlier than 91 days following the Maturity Date, (i) Indebtedness in respect of obligations relating to corporate credit cards, purchase cards or bank card products, in the ordinary course of business and consistent with past practices, (j) Indebtedness consisting of intercompany loans and advances among the Company and any Guarantors, (k) guarantees of Indebtedness otherwise expressly permitted hereunder and (l) funds or credit or other support received by the Company or any Subsidiary of the Company from, or with the credit or other support of, any governmental authority, and incurred with the intent to mitigate (in the good faith determination of the Company) through liquidity or other financial relief the impact of the COVID-19 global pandemic on the business and operations of the Company and its Subsidiaries through a program with the express purpose of addressing the impact of the COVID-19 global pandemic.
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(ff) “Permitted Liens” means (a) any Lien for taxes, assessments and other governmental charges or levies not otherwise delinquent 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 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 (i) 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 (ii) 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) and (i) thereunder, (d) banker’s liens, rights of set-off and Liens in favor of financial institutions incurred in the ordinary course of business arising in connection with bank accounts and securities accounts, (e) Liens arising from judgments, decrees or attachments in circumstances not constituting an Event of Default, (f) easements, reservations, rights-of-way, restrictions, minor defects or irregularities in title and similar charges or encumbrances affecting real property not constituting a Material Adverse Effect and not making the property unsuitable for its purpose, (g) pledges or deposits in the ordinary course of business in connection with workers’ compensation, unemployment insurance and other social security legislation consistent with past practices, (h) deposits to secure the performance of bids, trade contracts and leases (other than Indebtedness), statutory obligations, surety and appeal bonds, indemnity and performance bonds and other obligations of a like nature incurred in the ordinary course of business and consistent with past practices, (i) licenses, sublicenses, leases or subleases (other than relating to Intellectual Property Rights granted to others in the ordinary course of business not interfering in any material respect with the business of the Company and its Subsidiaries consistent with past practices, (j) pledges and deposits in the ordinary course of business securing liability to insurance carriers providing property, casualty or liability insurance to the Company or any Subsidiary (including obligations in respect of letters of credit or bank guarantees for the benefit of such insurance carriers) consistent with past practices, (k) rights of first refusal, voting, redemption, transfer or other restrictions (including call provisions and buy-sell provisions) with respect to the equity interests of any joint venture, (l) to the extent constituting a Lien, cash escrow arrangements securing indemnification obligations associated with an acquisition or other investment, (m) Liens solely on cash earnest money deposits made by the Company or any of its Subsidiaries in connection with any letter of intent or purchase agreement for an acquisition or other investment, (n) Liens (i) upon or in any equipment acquired or held by the Company or any of its Subsidiaries to secure the purchase price of such equipment or Indebtedness incurred solely for the purpose of financing the acquisition or lease of such equipment, or (ii) existing on such equipment at the time of its acquisition, provided that the Lien is confined solely to the property so acquired and improvements thereon, and the proceeds of such equipment, in either case, with respect to Indebtedness in an aggregate amount not to exceed $500,000 and (o) Liens incurred in connection with the extension, renewal or refinancing of the Indebtedness secured by Liens of the type described in clause (n) above, provided that any extension, renewal or replacement Lien shall be limited to the property encumbered by the existing Lien and the principal amount of the Indebtedness being extended, renewed or refinanced does not increase.
(gg) “Person” means an individual, a limited liability company, a partnership, a joint venture, a corporation, a trust, an unincorporated organization, any other entity or a government or any department or agency thereof.
(hh) “Price Condition” means, with respect to a particular date of determination, the VWAP of the Common Stock on each Trading Day during the previous ten (10) Trading Days exceeded 125% of the Conversion Price then in effect. All such determinations to be appropriately adjusted for any stock splits, stock dividends, stock combinations, recapitalizations or other similar transactions during any such measuring period.
(ii) “Principal Market” means the Eligible Market that is the principal securities exchange market for the Common Stock after the Public Company Date.
(jj) “Public Company Date” means the date on which the shares of Common Stock of the Company (or its direct or indirect successor, subsidiary or parent company, whose securities are issued or issuable to holders of Common Stock), whether as a result, a public offering, merger, reverse merger, recapitalization, reorganization or otherwise, are registered under the 1934 Act.
(kk) “Redemption Notices” means, collectively, the Event of Default Redemption Notices, the Holder Change of Control Redemption Notices, the Company Change of Control Redemption Notice, the Holder Optional Redemption Notices, and each of the foregoing, individually, a “Redemption Notice.”
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(ll) “Redemption Prices” means, collectively, Event of Default Redemption Prices, the Holder Change of Control Redemption Prices, the Holder Optional Redemption Prices, the Company Change of Control Redemption Price and each of the foregoing, individually, a “Redemption Price.”
(mm) “Registration Rights Agreement” Not Applicable.
(nn) “Registration Statement” Not Applicable.
(oo) “Related Fund” means, with respect to any Person, a fund or account managed by such Person or an Affiliate of such Person.
(pp) “Required Holders” means the holders of a majority in aggregate principal amount of the Notes then outstanding, including Hillcrest Ridgewood Partners, LLC or any of its affiliates holds any Notes.
(qq) “SEC” means the United States Securities and Exchange Commission or the successor thereto.
(rr) “Securities Purchase Agreement” means that certain securities purchase agreement, dated as of the same date of this Agreement, by and among the Company and the initial holder of the this Note pursuant to which the Company issued this Note, as may be amended from time to time.
(ss) “Security Documents” shall have the meaning as set forth in the Securities Purchase Agreement.
(tt) Intentionally Omitted.
(uu) “Subsidiaries” shall have the meaning as set forth in the Securities Purchase Agreement.
(vv) “Subject Entity” means any Person, Persons or Group or any Affiliate or associate of any such Person, Persons or Group.
(ww) “Successor Entity” means the Person (or, if so elected by the Holder, the Parent Entity) formed by, resulting from or surviving any Fundamental Transaction or the Person (or, if so elected by the Holder, the Parent Entity) with which such Fundamental Transaction shall have been entered into.
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(xx) “Trading Day” means (A) prior to the Public Company Date, any Business Day and (B) from and after the Public Company Date, as applicable, (x) with respect to all price or trading volume determinations relating to the Common Stock, any day on which the Common Stock is traded on the Principal Market, or, if the Principal Market is not the principal trading market for the Common Stock, then on the principal securities exchange or securities market on which the Common Stock is then traded, provided that “Trading Day” shall not include any day on which the Common Stock is scheduled to trade on such exchange or market for less than 4.5 hours or any day that the Common Stock is suspended from trading during the final hour of trading on such exchange or market (or if such exchange or market does not designate in advance the closing time of trading on such exchange or market, then during the hour ending at 4:00:00 p.m., New York time) unless such day is otherwise designated as a Trading Day in writing by the Holder or (y) with respect to all determinations other than price or trading volume determinations relating to the Common Stock, any day on which The New York Stock Exchange (or any successor thereto) is open for trading of securities.
(yy) “Transaction Documents” shall have the meaning ascribed to such term in the Securities Purchase Agreement.
(zz) “Volume Condition” means, with respect to a particular date of determination, the aggregate daily dollar composite trading volume (as reported on Bloomberg) of the Common Stock on the Principal Market during the previous twenty (20) Trading Days is at least $500,000 dollar value.
(aaa) “VWAP” means, for any security as of any date from and after the Public Company Date, the dollar volume-weighted average price for such security on the Principal Market (or, if the Principal Market is not the principal trading market for such security, then on the principal securities exchange or securities market on which such security is then traded), during the period beginning at 9:30 a.m., New York time, and ending at 4:00 p.m., New York time, as reported by Bloomberg through its “VAP” function (set to 09:30 start time and 16:00 end time) or, if the foregoing does not apply, the dollar volume-weighted average price of such security in the over-the-counter market on the electronic bulletin board for such security during the period beginning at 9:30 a.m., New York time, and ending at 4:00 p.m., New York time, as reported by Bloomberg, or, if no dollar volume-weighted average price is reported for such security by Bloomberg for such hours, the average of the highest closing bid price and the lowest closing ask price of any of the market makers for such security as reported in the “pink sheets” by OTC Markets Group Inc. (formerly Pink Sheets LLC). If the VWAP cannot be calculated for such security on such date on any of the foregoing bases (including, without limitation, prior to the Public Company Date), the VWAP of such security on such date shall be the fair market value as mutually determined by the Company and the Holder. If the Company and the Holder are unable to agree upon the fair market value of such security, then such dispute shall be resolved in accordance with the procedures in Section 23. All such determinations shall be appropriately adjusted for any stock dividend, stock split, stock combination, recapitalization or other similar transaction during such period.
(bbb) “Warrants” Not Applicable.
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32. DISCLOSURE. Upon delivery by the Company to the Holder (or receipt by the Company from the Holder) of any notice in accordance with the terms of this Note, unless the Company has in good faith determined that the matters relating to such notice do not constitute material, non-public information relating to the Company, or any of their respective Subsidiaries, the Company shall on or prior to 9:00 am, New York city time on the Business Day immediately following such notice delivery date, publicly disclose such material, non-public 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 any of their respective Subsidiaries, the Company shall so indicate to the Holder explicitly in writing in such notice (or immediately upon receipt of notice from the Holder, as applicable), and in the absence of any such written indication in such notice (or notification from the Company immediately upon receipt of notice from the Holder), the Holder shall be entitled to presume that information contained in the notice does not constitute material, non-public information relating to the Company, or any of their respective Subsidiaries. Nothing contained in this Section 32 shall limit any obligations of the Company, or any rights of the Holder, under Section 4(i) of the Securities Purchase Agreement.
33. ABSENCE OF TRADING AND DISCLOSURE RESTRICTIONS. The Company acknowledges and agrees that the Holder is not a fiduciary or agent of the Company and that the Holder shall have no obligation to (a) maintain the confidentiality of any information provided by the Company or (b) refrain from trading any securities of the Company while in possession of such information in the absence of a written non-disclosure agreement signed by an officer of the Holder that explicitly provides for such confidentiality and trading restrictions. In the absence of such an executed, written non-disclosure agreement, the Company acknowledges that the Holder may freely trade in any securities issued by the Company that it may possess and use any information provided by the Company in connection with such trading activity, and may disclose any such information to any third party.
[signature page follows]
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IN WITNESS WHEREOF, the Company has caused this Note to be duly executed as of the Issuance Date set out above.
| GLOBAL TECHNOLOGIES, LTD. | ||
| By: | Frederick Kalei Cutcher | |
| Title: | Chief Executive Officer | |
| FOXX TROT TANGO, LLC | ||
| By: | Global Technologies, LTD | |
| By: | Frederick Kalei Cutcher | |
| Title: | CEO and authorized agent | |
Senior Secured Convertible Note - Signature Page
exhibit 1
mIPA and exhibits
EXHIBIT
II
GLOBAL
TECHNOLOGIES, LTD
CONVERSION NOTICE
Reference is made to the Secured Convertible Note (the “Note”) issued to the undersigned by Global Technologies, LTD, a Delaware corporation (the “Company”). In accordance with and pursuant to the Note, the undersigned hereby elects to convert the Conversion Amount (as defined in the Note) of the Note indicated below into shares of Common Stock, $0.00001 par value per share (the “Common Stock”), of the Company, as of the date specified below. Capitalized terms not defined herein shall have the meaning as set forth in the Note.
Date of Conversion: |
| Aggregate Principal to be converted: | |||
| Aggregate accrued and unpaid Interest and accrued and unpaid Late Charges with respect to such portion of the Aggregate Principal and such Aggregate Interest to be converted: | |||
| AGGREGATE CONVERSION AMOUNT TO BE CONVERTED: | |||
Please confirm the following information:
| Conversion Price: |
Number of shares of Common Stock to be issued: |
| Please issue the Common Stock into which the Note is being converted to Holder, or for its benefit, as follows: | ||
| ☐ | Check here if requesting delivery as a certificate to the following name and to the following address: | |
| Issue to: | |||
| ☐ | Check here if requesting delivery by Deposit/Withdrawal at Custodian as follows: |
| DTC Participant: | ||
| DTC Number: | ||
| Account Number: | ||
| Date: ________________ ___, _____ | |||
| Name of Registered Holder | |||
| By: | |||
| Name: | |||
| Title: | |||
| Tax ID: | |||
| Facsimile: | |||
| E-mail Address: | |||
Exhibit III
ACKNOWLEDGMENT
The Company hereby (a) acknowledges this Conversion Notice, (b) certifies that the above indicated number of shares of Common Stock [are][are not] eligible to be resold by the Holder either (i) pursuant to Rule 144 (subject to the Holder’s execution and delivery to the Company of a customary 144 representation letter),(ii) an effective and available registration statement or (iii) an exemption pursuant to SEC Regulation A and (c) hereby directs _________________ to issue the above indicated number of shares of Common Stock in accordance with the Transfer Agent Instructions dated _____________, 2023 from the Company and acknowledged and agreed to by ________________________.
| GLOBAL TECHNOLOGIES, LTD. | ||
| By: | Frederick Kalei Cutcher | |
| Title: | CEO | |
Exhibit 10.7
SECURITIES PURCHASE AGREEMENT
THIS SECURITIES PURCHASE AGREEMENT (the “Agreement”), dated as of July 25, 2023, is by and among Global Technologies LTD, a Delaware corporation an office located at 8 Campus Dr., Suite 105, Parsippany, NJ 07054 (the “Company”), and TXC Services, LLC, a Delaware limited liability company with an office located at: 30725 US Highway 19 North, Suite 335, Palm Harbor, FL 34684 ( “Buyer”).
RECITALS
A. The Company and each Buyer is executing and delivering this Agreement in reliance upon the exemption from securities registration afforded by Section 4(a)(2) of the Securities Act of 1933, as amended (the “1933 Act”), and Rule 506(b) of Regulation D (“Regulation D”) as promulgated by the United States Securities and Exchange Commission (the “SEC”) under the 1933 Act.
B. The Company has authorized the sale of a Secured Convertible Note of the Company, in the aggregate original principal amount of $1,600,000.00, substantially in the form attached hereto as Exhibit A (the “Note”), which Note shall be convertible into shares of Common Stock (as defined below) (the shares of Common Stock issuable pursuant to the terms of the Notes, including, without limitation, upon conversion or otherwise, collectively, the “Conversion Shares”), in accordance with the terms of the Notes.
C. The Notes, the Guarantees, and the Conversion Shares, are collectively referred to herein as the “Securities.”
AGREEMENT
NOW, THEREFORE, in consideration of the premises and the mutual covenants contained herein and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Company and each Buyer hereby agree as follows:
1. PURCHASE AND SALE OF NOTES.
(a) Purchase of Notes . Subject to the satisfaction (or waiver) of the conditions set forth in Sections 6 and 7 below, the Company shall issue and sell to each Buyer, and each Buyer severally, but not jointly, agrees to purchase from the Company on the Closing Date (as defined in Section 1(b) below) a Note in the original principal amount as is set forth opposite such Buyer’s name in column (3) on the Schedule of Buyer.
(b) Closing. The closing (the “Closing”) of the sale of the Notes by the Company and the purchase of the Notes by the Buyer shall take place remotely by electronic transfer of the Closing documentation. The date and time of the Closing (the “Closing Date”) shall be 10:00 a.m., New York time, on the first (1st) Business Day on which the conditions to the Closing set forth in Sections 6 and 7 below are satisfied or waived (or such other date as is mutually agreed to in writing by the Company and each Buyer). As used herein “Business Day” means any day other than Saturday, Sunday or other day on which commercial banks in The City of New York are authorized or required by law to remain closed; provided, however, for clarification, commercial banks shall not be deemed to be authorized or required by law to remain closed due to “stay at home”, “shelter-in-place”, “non-essential employee” or any other similar orders or restrictions or the closure of any physical branch locations at the direction of any governmental authority so long as the electronic funds transfer systems (including for wire transfers) of commercial banks in The City of New York generally are open for use by customers on such day.
(c) Purchase Price. The aggregate purchase price for the Notes to be purchased by each Buyer (the “Purchase Price”) shall be the amount set forth opposite such Buyer’s name in column (5) on the Schedule of Buyer. Each Buyer and the Company agree that the Note constitute an “investment unit” for purposes of Section 1273(c)(2) of the Internal Revenue Code of 1986, as amended (the “Code”). Form of Payment. On the Closing Date, (i) each Buyer shall pay its respective Purchase Price (less, in the case of any Buyer, the amounts that may be withheld pursuant to Section 4(g)) to the Company for the Notes to be issued and sold to such Buyer at the Closing, by wire transfer of immediately available funds in accordance with the Flow of Funds Letter (as defined below) and (ii) the Company shall deliver to each Buyer a Note in the aggregate original principal amount as is set forth opposite such Buyer’s name in column (3) of the Schedule of Buyer, in each case, duly executed on behalf of the Company and registered in the name of such Buyer or its designee.
2. BUYER’S REPRESENTATIONS AND WARRANTIES.
Each Buyer, severally and not jointly, represents and warrants to the Company with respect to only itself that, as of the date hereof and as of the Closing Date:
(a) Organization; Authority. Such Buyer is an entity duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization with the requisite power and authority to enter into and to consummate the transactions contemplated by the Transaction Documents (as defined below) to which it is a party and otherwise to carry out its obligations hereunder and thereunder.
(b) No Public Sale or Distribution. Such Buyer (i) is acquiring its Note, (upon conversion of its Note will acquire the Conversion Shares issuable upon conversion thereof, and for its own account and not with a view towards, or for resale in connection with, the public sale or distribution thereof in violation of applicable securities laws, except pursuant to sales registered or exempted under the 1933 Act; provided, however, by making the representations herein, such Buyer does not agree, or make any representation or warranty, to hold any of the Securities for any minimum or other specific term and reserves the right to dispose of the Securities at any time in accordance with or pursuant to a registration statement or an exemption from registration under the 1933 Act. Such Buyer does not presently have any agreement or understanding, directly or indirectly, with any Person to distribute any of the Securities in violation of applicable securities laws. For purposes of this Agreement, “Person” means an individual, a limited liability company, a partnership, a joint venture, a corporation, a trust, an unincorporated organization, any other entity and any Governmental Entity or any department or agency thereof.
(c) Accredited Investor Status. Such Buyer is an “accredited investor” as that term is defined in Rule 501(a) of Regulation D.
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(d) Reliance on Exemptions. Such Buyer understands that the Securities are being offered and sold to it in reliance on specific exemptions from the registration requirements of United States federal and state securities laws and that the Company is relying in part upon the truth and accuracy of, and such Buyer’s compliance with, the representations, warranties, agreements, acknowledgments and understandings of such Buyer set forth herein in order to determine the availability of such exemptions and the eligibility of such Buyer to acquire the Securities.
(e) Information. Such Buyer and its advisors, if any, have been furnished with all materials relating to the business, finances and operations of the Company and materials relating to the offer and sale of the Securities that have been requested by such Buyer and such Buyer has had the opportunity to review the Company’s public filings with the SEC. Such Buyer and its advisors, if any, have been afforded the opportunity to ask questions of the Company in order that such Buyer can make an informed investment decision with respect to the investment. Neither such inquiries nor any other due diligence investigations conducted by such Buyer or its advisors, if any, or its representatives shall modify, amend or affect such Buyer’s right to rely on the Company’s representations and warranties contained herein. Such Buyer understands that its investment in the Securities involves a high degree of risk. Such Buyer has sought such accounting, legal and tax advice as it has considered necessary to make an informed investment decision with respect to its acquisition of the Securities.
(f) No Governmental Review. Such Buyer understands that no United States federal or state agency or any other government or governmental agency has passed on or made any recommendation or endorsement of the Securities or the fairness or suitability of the investment in the Securities nor have such authorities passed upon or endorsed the merits of the offering of the Securities.
(g) Transfer or Resale. Such Buyer understands that except as provided in the Registration Rights Agreement and Section 4(h) hereof: (i) the Securities have not been and are not being registered under the 1933 Act or any state securities laws, and may not be offered for sale, sold, assigned or transferred unless (A) subsequently registered thereunder, (B) such Buyer shall have delivered to the Company (if requested by the Company) an opinion of counsel, in a form reasonably acceptable to the Company, to the effect that such Securities to be sold, assigned or transferred may be sold, assigned or transferred pursuant to an exemption from such registration, or (C) such Buyer provides the Company with reasonable assurance that such Securities can be sold, assigned or transferred pursuant to Rule 144 or Rule 144A promulgated under the 1933 Act (or a successor rule thereto) (collectively, “Rule 144”); (ii) any sale of the Securities made in reliance on Rule 144 may be made only in accordance with the terms of Rule 144, and further, if Rule 144 is not applicable, any resale of the Securities under circumstances in which the seller (or the Person through whom the sale is made) may be deemed to be an underwriter (as that term is defined in the 1933 Act) may require compliance with some other exemption under the 1933 Act or the rules and regulations of the SEC promulgated thereunder; and (iii) neither the Company nor any other Person is under any obligation to register the Securities under the 1933 Act or any state securities laws or to comply with the terms and conditions of any exemption thereunder. Notwithstanding the foregoing, the Securities may be pledged in connection with a bona fide margin account or other loan or financing arrangement secured by the Securities and such pledge of Securities shall not be deemed to be a transfer, sale or assignment of the Securities hereunder, and no Buyer effecting a pledge of Securities shall be required to provide the Company with any notice thereof or otherwise make any delivery to the Company pursuant to this Agreement or any other Transaction Document (as defined in Section 3(b)), including, without limitation, this Section 2(g).
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(h) Validity; Enforcement. This Agreement and the Registration Rights Agreement have been duly and validly authorized, executed and delivered on behalf of such Buyer and shall constitute the legal, valid and binding obligations of such Buyer enforceable against such Buyer in accordance with their respective terms, except as such enforceability may be limited by general principles of equity or to applicable bankruptcy, insolvency, reorganization, moratorium, liquidation and other similar laws relating to, or affecting generally, the enforcement of applicable creditors’ rights and remedies.
(i) No Conflicts. The execution, delivery and performance by such Buyer of this Agreement and the Registration Rights Agreement and the consummation by such Buyer of the transactions contemplated hereby and thereby will not (i) result in a violation of the organizational documents of such Buyer, or (ii) conflict with, or constitute a default (or an event which with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation of, any agreement, indenture or instrument to which such Buyer is a party, or (iii) result in a violation of any law, rule, regulation, order, judgment or decree (including federal and state securities laws) applicable to such Buyer, except in the case of clauses (ii) and (iii) above, for such conflicts, defaults, rights or violations which would not, individually or in the aggregate, reasonably be expected to have a material adverse effect on the ability of such Buyer to perform its obligations hereunder.
(j) Available Assets. Such Buyer has sufficient available assets (whether cash, cash equivalents or similar assets) to pay the Purchase Price hereunder to the extent required by the terms thereof.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company represents and warrants to each of the Buyer that, as of the date hereof and as of the Closing Date:
(a) Organization and Qualification. Each of the Company and each of its Subsidiaries are entities duly organized and validly existing and in good standing under the laws of the jurisdiction in which they are formed, and have the requisite power and authority to own their properties and to carry on their business as now being conducted and as presently proposed to be conducted. Each of the Company and each of its Subsidiaries is duly qualified as a foreign entity to do business and is in good standing in every jurisdiction in which its ownership of property or the nature of the business conducted by it makes such qualification necessary, except to the extent that the failure to be so qualified or be in good standing would not reasonably be expected to have a Material Adverse Effect (as defined below). As used in this Agreement, “Material Adverse Effect” means any material adverse effect on (i) the business, properties, assets, liabilities, operations (including results thereof), condition (financial or otherwise) or prospects of the Company or any Subsidiary, individually or taken as a whole, (ii) the transactions contemplated hereby or in any of the other Transaction Documents or any other agreements or instruments to be entered into in connection herewith or therewith or (iii) the authority or ability of the Company or any of its Subsidiaries to perform any of their respective obligations under any of the Transaction Documents (as defined below). Other than the Persons (as defined below) set forth on Schedule 3(a), the Company has no Subsidiaries. “Subsidiaries” means any Person in which the Company, directly or indirectly, (I) owns a majority of the outstanding capital stock or holds a majority equity or similar interest of such Person or (II) controls or operates all or any part of the business, operations or administration of such Person, and each of the foregoing, is individually referred to herein as a “Subsidiary.” Schedule 3(a)(i) sets forth the Subsidiaries on the date hereof and Schedule 3(a)(ii) sets forth the Subsidiaries expected on the Closing Date.
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(b) Authorization; Enforcement; Validity. The Company has the requisite power and authority to enter into and perform its obligations under this Agreement and the other Transaction Documents and to issue the Securities in accordance with the terms hereof and thereof. Each Subsidiary has the requisite power and authority to enter into and perform its obligations under the Transaction Documents to which it is a party. The execution and delivery of this Agreement and the other Transaction Documents by the Company and its Subsidiaries, and the consummation by the Company and its Subsidiaries of the transactions contemplated hereby and thereby (including, without limitation, the issuance of the Notes and the reservation for issuance and issuance of the Conversion Shares issuable upon conversion of the Notes have been duly authorized by the Company’s board of directors and each of its Subsidiaries’ board of directors or other governing body, as applicable, and (other than the filing with the SEC of one or more Registration Statements in accordance with the requirements of the Registration Rights Agreement, a Form D with the SEC and any other filings as may be required by any state securities agencies) no further filing, consent or authorization is required by the Company, its Subsidiaries, their respective boards of directors or their stockholders or other governing body. This Agreement has been, and the other Transaction Documents to which it is a party will be prior to the Closing, duly executed and delivered by the Company, and each constitutes the legal, valid and binding obligations of the Company, enforceable against the Company in accordance with its respective terms, except as such enforceability may be limited by general principles of equity or applicable bankruptcy, insolvency, reorganization, moratorium, liquidation or similar laws relating to, or affecting generally, the enforcement of applicable creditors’ rights and remedies and except as rights to indemnification and to contribution may be limited by federal or state securities law. Prior to the Closing, the Transaction Documents to which each Subsidiary is a party will be duly executed and delivered by each such Subsidiary, and shall constitute the legal, valid and binding obligations of each such Subsidiary, enforceable against each such Subsidiary in accordance with their respective terms, except as such enforceability may be limited by general principles of equity or applicable bankruptcy, insolvency, reorganization, moratorium, liquidation or similar laws relating to, or affecting generally, the enforcement of applicable creditors’ rights and remedies and except as rights to indemnification and to contribution may be limited by federal or state securities law. “Transaction Documents” means, collectively, this Agreement, the MIPA and its exhibits, including, but not limited to the Note, and the Irrevocable Transfer Agent Instructions (as defined below), the Security Documents (as defined below) and each of the other agreements and instruments entered into or delivered by any of the parties hereto in connection with the transactions contemplated hereby and thereby, as may be amended from time to time. “Security Documents” means the Seller Security Deed, the Security Agreement and Pledge of Membership Interests including the Assignment of Member’s Interests (the “Collateral Assignment”), , , any and all financing statements, security agreements, pledges, assignments, opinions of counsel under the MIPA and any other Transaction Document.
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(c) Issuance of Securities. The issuance of the Notes are duly authorized and upon issuance in accordance with the terms of the Transaction Documents shall be validly issued, fully paid and non-assessable and free from all preemptive or similar rights, mortgages, defects, claims, liens, pledges, charges, taxes, rights of first refusal, encumbrances, security interests and other encumbrances (collectively, “Liens”) with respect to the issuance thereof. As of the Closing, the Company shall have reserved from its duly authorized capital stock not less than the sum of (i) the maximum number of Conversion Shares issuable upon conversion of the Notes (assuming for purposes hereof that (x) the Notes are convertible at the initial Conversion Price (as defined in the Notes), and (y) any such conversion shall not take into account any limitations on the conversion of the Notes set forth in the Notes).). Upon issuance or conversion in accordance with the Notes, the Conversion Shares, respectively, when issued, will be validly issued, fully paid and nonassessable and free from all preemptive or similar rights or Liens with respect to the issue thereof, with the holders being entitled to all rights accorded to a holder of Common Stock. Subject to the accuracy of the representations and warranties of the Buyer in this Agreement, the offer and issuance by the Company of the Securities is exempt from registration under the 1933 Act.
(d) No Conflicts. The execution, delivery and performance of the Transaction Documents by the Company and its Subsidiaries and the consummation by the Company and its Subsidiaries of the transactions contemplated hereby and thereby (including, without limitation, the issuance of the Notes, , the Conversion Shares and the reservation for issuance of the Conversion Shares will not (i) result in a violation of the Articles of Incorporation (as defined below) (including, without limitation, any certificate of designation contained therein), Bylaws (as defined below), certificate of formation, memorandum of association, articles of association, bylaws or other organizational documents of the Company or any of its Subsidiaries, or any capital stock or other securities of the Company or any of its Subsidiaries, (ii) to the knowledge of the officers and directors of the Company, conflict with, or constitute a default (or an event which with notice or lapse of time or both would become a default) in any respect under, or give to others any rights of termination, amendment, acceleration or cancellation of, any agreement, indenture or instrument to which the Company or any of its Subsidiaries is a party, or (iii) result in a violation of any law, rule, regulation, order, judgment or decree (including, without limitation, foreign, federal and state securities laws and regulations and the rules and regulations of the Nasdaq Capital Market (the “Principal Market”) and including all applicable foreign, federal and state laws, rules and regulations) applicable to the Company or any of its Subsidiaries or by which any property or asset of the Company or any of its Subsidiaries is bound or affected.
(e) Consents. Neither the Company nor any Subsidiary is required to obtain any consent from, authorization or order of, or make any filing or registration with (other than the filing with the SEC of one or more Registration Statements in accordance with the requirements of the Registration Rights Agreement, a Form D with the SEC and any other filings as may be required by any state securities agencies), any Governmental Entity (as defined below) or any regulatory or self-regulatory agency or any other Person in order for it to execute, deliver or perform any of its respective obligations under or contemplated by the Transaction Documents, in each case, in accordance with the terms hereof or thereof. All consents, authorizations, orders, filings and registrations which the Company or any Subsidiary is required to obtain pursuant to the preceding sentence have been or will be obtained or effected on or prior to the Closing Date, and neither the Company nor any of its Subsidiaries are aware of any facts or circumstances which might prevent the Company or any of its Subsidiaries from obtaining or effecting any of the registration, application or filings contemplated by the Transaction Documents. “Governmental Entity” means any nation, state, county, city, town, village, district, or other political jurisdiction of any nature, federal, state, local, municipal, foreign, or other government, governmental or quasi-governmental authority of any nature (including any governmental agency, branch, department, official, or entity and any court or other tribunal), multi-national organization or body; or body exercising, or entitled to exercise, any administrative, executive, judicial, legislative, police, regulatory, or taxing authority or power of any nature or instrumentality of any of the foregoing, including any entity or enterprise owned or controlled by a government or a public international organization or any of the foregoing.
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(f) Acknowledgment Regarding Buyer’s Purchase of Securities. The Company acknowledges and agrees that each Buyer is acting solely in the capacity of an arm’s length purchaser with respect to the Transaction Documents and the transactions contemplated hereby and thereby and that no Buyer is (i) an officer or director of the Company or any of its Subsidiaries, (ii) an “affiliate” (as defined in Rule 144) of the Company or any of its Subsidiaries or (iii) to its knowledge, a “beneficial owner” of more than 10% of the shares of Common Stock (as defined for purposes of Rule 13d-3 of the Securities Exchange Act of 1934, as amended (the “1934 Act”)). The Company further acknowledges that no Buyer is acting as a financial advisor or fiduciary of the Company or any of its Subsidiaries (or in any similar capacity) with respect to the Transaction Documents and the transactions contemplated hereby and thereby, and any advice given by a Buyer or any of its representatives or agents in connection with the Transaction Documents and the transactions contemplated hereby and thereby is merely incidental to such Buyer’s purchase of the Securities. The Company further represents to each Buyer that the Company’s and each Subsidiary’s decision to enter into the Transaction Documents to which it is a party has been based solely on the independent evaluation by the Company, each Subsidiary and their respective representatives.
(g) No General Solicitation; No Placement Agent’s Fees. Neither the Company, nor any of its Subsidiaries or affiliates, nor any Person acting on its or their behalf, has engaged in any form of general solicitation or general advertising (within the meaning of Regulation D) in connection with the offer or sale of the Securities. There shall be no placement agent’s fees, financial advisory fees, or brokers’ commissions (other than for Persons engaged by any Buyer or its investment advisor). The Company shall pay, and hold each Buyer harmless against, any liability, loss or expense (including, without limitation, attorney’s fees and out-of-pocket expenses) arising in connection with any placement agent claim.
(h) No Integrated Offering. None of the Company, its Subsidiaries or any of their affiliates, nor any Person acting on their behalf has, directly or indirectly, made any offers or sales of any security or solicited any offers to buy any security, under circumstances that would require registration of the issuance of any of the Securities under the 1933 Act, whether through integration with prior offerings or otherwise, or cause this offering of the Securities to require approval of stockholders of the Company for purposes of the 1933 Act or under any applicable stockholder approval provisions, including, without limitation, under the rules and regulations of any exchange or automated quotation system on which any of the securities of the Company are listed or designated for quotation. None of the Company, its Subsidiaries, their affiliates nor any Person acting on their behalf will take any action or steps that would require registration of the issuance of any of the Securities under the 1933 Act or cause the offering of any of the Securities to be integrated with other offerings of securities of the Company.
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(i) Dilutive Effect. The Company understands and acknowledges that the number of Conversion Shares will increase in certain circumstances. The Company further acknowledges that its obligation to issue the Conversion Shares pursuant to the terms of the Notes in accordance with this Agreement and the Notes in accordance with this Agreement, the Notes is, in each case, absolute and unconditional regardless of the dilutive effect that such issuance may have on the ownership interests of other stockholders of the Company.
(j) Application of Takeover Protections; Rights Agreement. The Company and its board of directors have taken all necessary action, if any, in order to render inapplicable any control share acquisition, interested stockholder, business combination, poison pill (including, without limitation, any distribution under a rights agreement), stockholder rights plan or other similar anti-takeover provision under the Articles of Incorporation, Bylaws or other organizational documents or the laws of the jurisdiction of its incorporation or otherwise which is or could become applicable to any Buyer as a result of the transactions contemplated by this Agreement, including, without limitation, the Company’s issuance of the Securities and any Buyer’s ownership of the Securities. The Company and its board of directors have taken all necessary action, if any, in order to render inapplicable any stockholder rights plan or similar arrangement relating to accumulations of beneficial ownership of shares of Common Stock or a change in control of the Company or any of its Subsidiaries.
(k) SEC Documents; Financial Statements. The Company has delivered or has made available to the Buyer or their respective representatives true, correct and complete copies of each of the reports, schedules, forms, proxy statements, statements and other documents filed by it with the SEC pursuant to the reporting requirements of the 1934 Act (all of the foregoing filed prior to the date hereof and all exhibits and appendices included therein and financial statements, notes and schedules thereto and documents incorporated by reference therein being hereinafter referred to as the “SEC Documents”) not available on the EDGAR system. As of their respective dates, the SEC Documents complied in all material respects with the requirements of the 1934 Act and the rules and regulations of the SEC promulgated thereunder applicable to the SEC Documents, and none of the SEC Documents, at the time they were filed with the SEC, contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. The financial statements of the Company and/or the Subsidiaries set forth on Schedule 3(k) (the “Financial Statements”), have been prepared in accordance with generally accepted accounting principles (“GAAP”), consistently applied, during the periods involved (except (i) as may be otherwise indicated in such financial statements or the notes thereto, or (ii) in the case of unaudited interim statements, to the extent they may exclude footnotes or may be condensed or summary statements) and fairly present in all material respects the financial position of the Company as of the dates thereof and the results of its operations and cash flows for the periods then ended (subject, in the case of unaudited statements, to normal year-end audit adjustments which will not be material, either individually or in the aggregate). The reserves, if any, established by the Company or the lack of reserves, if applicable, are reasonable based upon facts and circumstances known by the Company on the date hereof and there are no loss contingencies that are required to be accrued by the Statement of Financial Accounting Standard No. 5 of the Financial Accounting Standards Board which are not provided for by the Company in its financial statements or otherwise. No other information provided by or on behalf of the Company to any of the Buyer which is not included in the SEC Documents (including, without limitation, information referred to in Section 2(e) of this Agreement or in the disclosure schedules to this Agreement) contains any untrue statement of a material fact or omits to state any material fact necessary in order to make the statements therein not misleading, in the light of the circumstance under which they are or were made. The Company is not currently contemplating to amend or restate any of the financial statements (including, without limitation, any notes or any letter of the independent accountants of the Company with respect thereto), nor is the Company currently aware of facts or circumstances which would require the Company to amend or restate any of the Financial Statements, in each case, in order for any of the Financials Statements to be in compliance with GAAP. The Company has not been informed by its independent accountants that they recommend that the Company amend or restate any of the Financial Statements or that there is any need for the Company to amend or restate any of the Financial Statements.
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(l) Absence of Certain Changes.
Except as set forth on Schedule 3(l), since the date of the Company’s and/or its Subsidiaries’ most recent audited Financial Statements, there has been no material adverse change and no material adverse development in the business, assets, liabilities, properties, operations (including results thereof), condition (financial or otherwise) or prospects of the Company or any of its Subsidiaries. Except as set forth on Schedule 3(l), since the date of the Company’s and/or its Subsidiaries’ most recent audited Financial Statements, neither the Company nor any of its Subsidiaries has (i) declared or paid any dividends (ii) sold any assets, individually or in the aggregate, outside of the ordinary course of business, (iii) made any capital expenditures, individually or in the aggregate, outside of the ordinary course of business or (iv) made any revaluation of any of their respective assets, including, without limitation, writing down the value of capitalized inventory or writing off notes or accounts receivable or any sale of assets other than in the ordinary course of business. Neither the Company nor any of its Subsidiaries has taken any steps to seek protection pursuant to any law or statute relating to bankruptcy, insolvency, reorganization, receivership, liquidation or winding up, nor does the Company or any Subsidiary have any knowledge or reason to believe that any of their respective creditors intend to initiate involuntary bankruptcy proceedings or any actual knowledge of any fact which would reasonably lead a creditor to do so. The Company and its Subsidiaries, individually and on a consolidated basis, are not as of the date hereof, and after giving effect to the transactions contemplated hereby to occur at the Closing and the transactions contemplated by Section 7(xv) hereof, will not be Insolvent (as defined below). For purposes of this Section 0, “Insolvent” means, (i) with respect to the Company and its Subsidiaries, on a consolidated basis, (A) the present fair saleable value of the Company’s and its Subsidiaries’ assets is less than the amount required to pay the Company’s and its Subsidiaries’ total Indebtedness (as defined below), (B) the Company and its Subsidiaries are unable to pay their debts and liabilities, subordinated, contingent or otherwise, as such debts and liabilities become absolute and matured or (C) the Company and its Subsidiaries intend to incur or believe that they will incur debts that would be beyond their ability to pay as such debts mature; and (ii) with respect to the Company and each Subsidiary, individually, (A) the present fair saleable value of the Company’s or such Subsidiary’s (as the case may be) assets is less than the amount required to pay its respective total Indebtedness, (B) the Company or such Subsidiary (as the case may be) is unable to pay its respective debts and liabilities, subordinated, contingent or otherwise, as such debts and liabilities become absolute and matured or (C) the Company or such Subsidiary (as the case may be) intends to incur or believes that it will incur debts that would be beyond its respective ability to pay as such debts mature. Except as set forth on Schedule 3(l), neither the Company nor any of its Subsidiaries has engaged in any business or in any transaction, and is not about to engage in any business or in any transaction, for which the Company’s or such Subsidiary’s remaining assets constitute unreasonably small capital with which to conduct the business in which it is engaged as such business is now conducted and is proposed to be conducted.
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(m) No Undisclosed Events, Liabilities, Developments or Circumstances. Except as set forth in Schedule 3(m), no event, liability, development or circumstance has occurred or exists, or is reasonably expected to exist or occur with respect to the Company, any of its Subsidiaries or any of their respective businesses, properties, liabilities, prospects, operations (including results thereof) or condition (financial or otherwise), that (i) would be required to be disclosed by the Company under applicable securities laws on a registration statement on Form S-1 filed with the SEC relating to an issuance and sale by the Company of its Common Stock and which has not been publicly announced, (ii) would have a material adverse effect on any Buyer’s investment hereunder or (iii) would have a Material Adverse Effect.
(n) Conduct of Business; Regulatory Permits. Neither the Company nor any of its Subsidiaries is in violation of any term of or in default under its Articles of Incorporation, any certificate of designation, preferences or rights of any other outstanding series of preferred stock of the Company or any of its Subsidiaries or Bylaws or their organizational charter, certificate of formation, memorandum of association, articles of association, Articles of Incorporation or certificate of incorporation or bylaws, respectively. Neither the Company nor any of its Subsidiaries is in violation of any judgment, decree or order or any statute, ordinance, rule or regulation applicable to the Company or any of its Subsidiaries, and neither the Company nor any of its Subsidiaries will conduct its business in violation of any of the foregoing, except in all cases for possible violations which would not, individually or in the aggregate, have a Material Adverse Effect. The Company and each of its Subsidiaries possess all certificates, authorizations and permits issued by the appropriate regulatory authorities necessary to conduct their respective businesses, except where the failure to possess such certificates, authorizations or permits would not have, individually or in the aggregate, a Material Adverse Effect, and neither the Company nor any such Subsidiary has received any notice of proceedings relating to the revocation or modification of any such certificate, authorization or permit. There is no agreement, commitment, judgment, injunction, order or decree binding upon the Company or any of its Subsidiaries or to which the Company or any of its Subsidiaries is a party which has or would reasonably be expected to have the effect of prohibiting or materially impairing any business practice of the Company or any of its Subsidiaries, any acquisition of property by the Company or any of its Subsidiaries or the conduct of business by the Company or any of its Subsidiaries as currently conducted other than such effects, individually or in the aggregate, which have not had and would not reasonably be expected to have a Material Adverse Effect with respect to the Company or any of its Subsidiaries.
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(o) Foreign Corrupt Practices. Neither the Company, the Company’s Subsidiaries or any director, officer, agent, employee, nor any other person acting for or on behalf of the foregoing (individually and collectively, a “Company Affiliate”) have violated the U.S. Foreign Corrupt Practices Act (the “FCPA”) or any other applicable anti-bribery or anti-corruption laws, nor has any Company Affiliate offered, paid, promised to pay, or authorized the payment of any money, or offered, given, promised to give, or authorized the giving of anything of value, to any officer, employee or any other person acting in an official capacity for any Governmental Entity to any political party or official thereof or to any candidate for political office (individually and collectively, a “Government Official”) or to any person under circumstances where such Company Affiliate knew or was aware of a high probability that all or a portion of such money or thing of value would be offered, given or promised, directly or indirectly, to any Government Official, for the purpose of:
(i) (A) influencing any act or decision of such Government Official in his/her official capacity, (B) inducing such Government Official to do or omit to do any act in violation of his/her lawful duty, (C) securing any improper advantage, or (D) inducing such Government Official to influence or affect any act or decision of any Governmental Entity, or
(ii) assisting the Company or its Subsidiaries in obtaining or retaining business for or with, or directing business to, the Company or its Subsidiaries.
(p) Sarbanes-Oxley Act. The Company and each Subsidiary is in compliance with any and all applicable requirements of the Sarbanes-Oxley Act of 2002, as amended, and any and all applicable rules and regulations promulgated by the SEC thereunder.
(q) Transactions With Affiliates. Other than as set forth on Schedule 3(q), no current or former employee, partner, director, officer or stockholder (direct or indirect) of the Company or its Subsidiaries, or any associate, or, to the knowledge of the Company, any affiliate of any thereof, or any relative with a relationship no more remote than first cousin of any of the foregoing, is presently, or has ever been, (i) a party to any transaction with the Company or its Subsidiaries (including any contract, agreement or other arrangement providing for the furnishing of services by, or rental of real or personal property from, or otherwise requiring payments to, any such director, officer or stockholder or such associate or affiliate or relative Subsidiaries (other than for ordinary course services as employees, officers or directors of the Company or any of its Subsidiaries)) or (ii) the direct or indirect owner of an interest in any corporation, firm, association or business organization which is a competitor, supplier or customer of the Company or its Subsidiaries (except for a passive investment (direct or indirect) in less than 5% of the common stock of a company whose securities are traded on or quoted through an Eligible Market (as defined in the Notes)), nor does any such Person receive income from any source other than the Company or its Subsidiaries which relates to the business of the Company or its Subsidiaries or should properly accrue to the Company or its Subsidiaries. No employee, officer, stockholder or director of the Company or any of its Subsidiaries or member of his or her immediate family is indebted to the Company or its Subsidiaries, as the case may be, nor is the Company or any of its Subsidiaries indebted (or committed to make loans or extend or guarantee credit) to any of them, other than (i) for payment of salary for services rendered, (ii) reimbursement for reasonable expenses incurred on behalf of the Company, and (iii) for other standard employee benefits made generally available to all employees or executives (including stock option agreements outstanding under any stock option plan approved by the Board of Directors of the Company).
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(r) Equity Capitalization.
(i) Definitions:
(A) “Common Stock” means (x) the Company’s shares of common stock, $0.0001 par value per share, and (y) any capital stock into which such common stock shall have been changed or any share capital resulting from a reclassification of such common stock.
(B) “Convertible Securities” means any capital stock or other security of the Company or any of the Company Subsidiaries that is at any time and under any circumstances directly or indirectly convertible into, exercisable or exchangeable for, or which otherwise entitles the holder thereof to acquire, any capital stock or other security of the Company (including, without limitation, Common Stock) or any of the Company Subsidiaries.
(C) “Preferred Stock” means certain classed of Preferred Stock accordance with the terms of such certificates of designation. https://www.sec.gov/edgar/searchedgar/companysearch.
(ii) Authorized and Outstanding Capital Stock. As of the Issuance Date, the authorized stock of the Company will consist of the following classes: (A)14,991,000,000 authorized shares of Common Stock, par value $0.0001, of which 14,488,440,097 is outstanding at the time of this Agreement, (B) 500,000 authorized shares of Series L Preferred Stock are authorized, of which a maximum of 276 will be issued and outstanding at the time of this Agreement and (C) other Preferred Stock.
(iii) Valid Issuance; Available Shares; Affiliates. All of such outstanding shares are duly authorized and have been, or upon issuance will be, validly issued and are fully paid and nonassessable. Schedule 3(r)(iii) sets forth the number of shares of Common Stock that are (A) reserved for issuance pursuant to Convertible Securities (as defined below) (other than the Notes) and (B) that are, as of the date hereof, owned by Persons who are “affiliates” (as defined in Rule 405 of the 1933 Act and calculated based on the assumption that only officers, directors and holders of at least 10% of the Company’s issued and outstanding Common Stock are “affiliates” without conceding that any such Persons are “affiliates” for purposes of federal securities laws) of the Company or any of its Subsidiaries. Except as set forth on Schedule 3(r)(iii), to the Company’s knowledge, no Person owns 10% or more of the Company’s issued and outstanding shares of Common Stock (calculated based on the assumption that all Convertible Securities (as defined below), whether or not presently exercisable or convertible, have been fully exercised or converted (as the case may be) taking account of any limitations on exercise or conversion (including “blockers”) contained therein without conceding that such identified Person is a 10% stockholder for purposes of federal securities laws).
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(iv) Existing Securities; Obligations. Except as set forth on Schedule 3(r)(iv): (A) none of the Company’s or any Subsidiary’s shares, interests or capital stock is subject to preemptive rights or any other similar rights or Liens suffered or permitted by the Company or any Subsidiary; (B) there are no outstanding options, warrants, scrip, rights to subscribe to, calls or commitments of any character whatsoever relating to, or securities or rights convertible into, or exercisable or exchangeable for, any shares, interests or capital stock of the Company or any of its Subsidiaries, or contracts, commitments, understandings or arrangements by which the Company or any of its Subsidiaries is or may become bound to issue additional shares, interests or capital stock of the Company or any of its Subsidiaries or options, warrants, scrip, rights to subscribe to, calls or commitments of any character whatsoever relating to, or securities or rights convertible into, or exercisable or exchangeable for, any shares, interests or capital stock of the Company or any of its Subsidiaries; (C) there are no agreements or arrangements under which the Company or any of its Subsidiaries is obligated to register the sale of any of their securities under the 1933 Act (except pursuant to the Registration Rights Agreement); (D) there are no outstanding securities or instruments of the Company or any of its Subsidiaries which contain any redemption or similar provisions, and there are no contracts, commitments, understandings or arrangements by which the Company or any of its Subsidiaries is or may become bound to redeem a security of the Company or any of its Subsidiaries; (E) there are no securities or instruments containing anti-dilution or similar provisions that will be triggered by the issuance of the Securities; and (F) neither the Company nor any Subsidiary has any stock appreciation rights or “phantom stock” plans or agreements or any similar plan or agreement.
(v) Organizational Documents. The Company has furnished to the Buyer true, correct and complete copies of the Company’s Articles of Incorporation, as amended and as in effect on the date hereof (the “Articles of Incorporation” which definition shall also apply to the Company’s future Certificate of Incorporation upon an expected conversion into a Delaware corporation), and the Company’s bylaws, as amended and as in effect on the date hereof (the “Bylaws” which definition shall also apply to the Company’s future Bylaws upon an expected conversion into a Delaware corporation), and the terms of all Convertible Securities and the material rights of the holders thereof in respect thereto.
(s) Indebtedness and Other Contracts. Neither the Company nor any of its Subsidiaries, (i) except as disclosed on Schedule 3(s), has any outstanding debt securities, notes, credit agreements, credit facilities or other agreements, documents or instruments evidencing Indebtedness of the Company or any of its Subsidiaries or by which the Company or any of its Subsidiaries is or may become bound, (ii) other than with respect to the indebtedness disclosed on Schedule 3(s), is a party to any contract, agreement or instrument, the violation of which, or default under which, by the other party(ies) to such contract, agreement or instrument would reasonably be expected to result in a Material Adverse Effect, (iii) other than with respect to the indebtedness disclosed on Schedule 3(s), has any financing statements securing obligations in any amounts filed in connection with the Company or any of its Subsidiaries; (iv) is in violation of any term of, or in default under, any contract, agreement or instrument relating to any Indebtedness, except where such violations and defaults would not result, individually or in the aggregate, in a Material Adverse Effect, or (v) is a party to any contract, agreement or instrument relating to any Indebtedness, the performance of which, in the judgment of the Company’s officers, has or is expected to have a Material Adverse Effect. Neither the Company nor any of its Subsidiaries have any liabilities or obligations required to be disclosed in the Financial Statements which are not so disclosed in the Financial Statements, other than those incurred in the ordinary course of the Company’s or its Subsidiaries’ respective businesses and which, individually or in the aggregate, do not or would not have a Material Adverse Effect. For purposes of this Agreement: (x) “Indebtedness” of any Person means, without duplication (A) all indebtedness for borrowed money, (B) all obligations issued, undertaken or assumed as the deferred purchase price of property or services (including, without limitation, “capital leases” in accordance with GAAP) (other than trade payables entered into in the ordinary course of business consistent with past practice), (C) all reimbursement or payment obligations with respect to letters of credit, surety bonds and other similar instruments, (D) all obligations evidenced by notes, bonds, debentures or similar instruments, including obligations so evidenced incurred in connection with the acquisition of property, assets or businesses, (E) all indebtedness created or arising under any conditional sale or other title retention agreement, or incurred as financing, in either case with respect to any property or assets acquired with the proceeds of such indebtedness (even though the rights and remedies of the seller or bank under such agreement in the event of default are limited to repossession or sale of such property), (F) all monetary obligations under any leasing or similar arrangement which, in connection with GAAP, consistently applied for the periods covered thereby, is classified as a capital lease, (G) all indebtedness referred to in clauses (A) through (F) above secured by (or for which the holder of such Indebtedness has an existing right, contingent or otherwise, to be secured by) any Lien upon or in any property or assets (including accounts and contract rights) owned by any Person, even though the Person which owns such assets or property has not assumed or become liable for the payment of such indebtedness, and (H) all Contingent Obligations in respect of indebtedness or obligations of others of the kinds referred to in clauses (A) through (G) above; and (y) “Contingent Obligation” means, as to any Person, any direct or indirect liability, contingent or otherwise, of that Person with respect to any Indebtedness, lease, dividend or other obligation of another Person if the primary purpose or intent of the Person incurring such liability, or the primary effect thereof, is to provide assurance to the obligee of such liability that such liability will be paid or discharged, or that any agreements relating thereto will be complied with, or that the holders of such liability will be protected (in whole or in part) against loss with respect thereto.
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(t) Litigation. There is no action, suit, arbitration, proceeding, inquiry or investigation before or by the Principal Market, any court, public board, other Governmental Entity, self-regulatory organization or body pending or, to the knowledge of the Company, threatened against or affecting the Company or any of its Subsidiaries, the Common Stock or any of the Company’s or its Subsidiaries’ officers or directors, whether of a civil or criminal nature or otherwise, in their capacities as such, except as set forth in Schedule 3(t). No director, officer or employee of the Company or any of its subsidiaries has willfully violated 18 U.S.C. §1519 or engaged in spoliation in reasonable anticipation of litigation. Without limitation of the foregoing, there has not been, and to the knowledge of the Company, there is not pending or contemplated, any investigation by the SEC involving the Company, any of its Subsidiaries or any current or former director or officer of the Company or any of its Subsidiaries. The SEC has not issued any stop order or other order suspending the effectiveness of any registration statement filed by the Company under the 1933 Act or the 1934 Act. After reasonable inquiry of its employees, the Company is not aware of any fact which might result in or form the basis for any such action, suit, arbitration, investigation, inquiry or other proceeding. Neither the Company nor any of its Subsidiaries is subject to any order, writ, judgment, injunction, decree, determination or award of any Governmental Entity.
(u) Insurance. The Company and each of its Subsidiaries are insured by insurers of recognized financial responsibility against such losses and risks and in such amounts as management of the Company believes to be prudent and customary in the businesses in which the Company and its Subsidiaries are engaged. Neither the Company nor any such Subsidiary has been refused any insurance coverage sought or applied for, and neither the Company nor any such Subsidiary has any reason to believe that it will be unable to renew its existing insurance coverage as and when such coverage expires or to obtain similar coverage from similar insurers as may be necessary to continue its business at a cost that would not have a Material Adverse Effect.
(v) Employee Relations. Neither the Company nor any of its Subsidiaries is a party to any collective bargaining agreement or employs any member of a union. The Company and its Subsidiaries believe that their relations with their employees are good. No executive officer (as defined in Rule 501(f) promulgated under the 1933 Act) or other key employee of the Company or any of its Subsidiaries has notified the Company or any such Subsidiary that such officer intends to leave the Company or any such Subsidiary or otherwise terminate such officer’s employment with the Company or any such Subsidiary. No executive officer or other key employee of the Company or any of its Subsidiaries is, or is now expected to be, in violation of any material term of any employment contract, confidentiality, disclosure or proprietary information agreement, non-competition agreement, or any other contract or agreement or any restrictive covenant, and the continued employment of each such executive officer or other key employee (as the case may be) does not subject the Company or any of its Subsidiaries to any liability with respect to any of the foregoing matters. The Company and its Subsidiaries are in compliance with all federal, state, local and foreign laws and regulations respecting labor, employment and employment practices and benefits, terms and conditions of employment and wages and hours, except where failure to be in compliance would not, either individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect.
(w) Title.
(i) Real Property. Each of the Company and its Subsidiaries (as the case may be) holds good title to all real property, leases in real property, facilities or other interests in real property owned or held by the Company or any of its Subsidiaries (the “Real Property”) owned by the Company or any of its Subsidiaries (as applicable). The Real Property is free and clear of all Liens and is not subject to any rights of way, building use restrictions, exceptions, variances, reservations, or limitations of any nature except for (a) Liens for current taxes not yet due and (b) zoning laws and other land use restrictions that do not impair the present or anticipated use of the property subject thereto. Any Real Property held under lease by the Company or any of its Subsidiaries are held by them under valid, subsisting and enforceable leases with such exceptions as are not material and do not interfere with the use made and proposed to be made of such property and buildings by the Company or any of its Subsidiaries.
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(ii) Fixtures and Equipment. Each of the Company and its Subsidiaries (as applicable) has good title to, or a valid leasehold interest in, the tangible personal property, equipment, improvements, fixtures, and other personal property and appurtenances that are used by the Company or its Subsidiary in connection with the conduct of its business (the “Fixtures and Equipment”). The Fixtures and Equipment are structurally sound, are in good operating condition and repair, are adequate for the uses to which they are being put, are not in need of maintenance or repairs except for ordinary, routine maintenance and repairs and are sufficient for the conduct of the Company’s and/or its Subsidiaries’ businesses (as applicable) in the manner as conducted prior to the Closing. Each of the Company and its Subsidiaries owns all of its Fixtures and Equipment free and clear of all Liens except for (a) liens for current taxes not yet due and (b) zoning laws and other land use restrictions that do not impair the present or anticipated use of the property subject thereto.
(x) Intellectual Property Rights. The Company and its Subsidiaries own or possess adequate rights or licenses to use all trademarks, trade names, service marks, service mark registrations, service names, original works of authorship, patents, patent rights, copyrights, inventions, licenses, approvals, governmental authorizations, trade secrets and other intellectual property rights and all applications and registrations therefor (“Intellectual Property Rights”) necessary to conduct their respective businesses as now conducted and presently proposed to be conducted. Each of patents owned by the Company or any of its Subsidiaries is listed on Schedule 3(x)(i). Except as set forth in Schedule 3(x)(ii), none of the Company’s Intellectual Property Rights have expired or terminated or have been abandoned or are expected to expire or terminate or are expected to be abandoned, within three (3) years from the date of this Agreement. The Company does not have any knowledge of any infringement by the Company or its Subsidiaries of Intellectual Property Rights of others. There is no claim, action or proceeding being made or brought, or to the knowledge of the Company or any of its Subsidiaries, being threatened, against the Company or any of its Subsidiaries regarding its Intellectual Property Rights. Neither the Company nor any of its Subsidiaries is aware of any facts or circumstances which might give rise to any of the foregoing infringements or claims, actions or proceedings. The Company and its Subsidiaries have taken reasonable security measures to protect the secrecy, confidentiality and value of all of their Intellectual Property Rights.
(y) Environmental Laws(i) . (i) The Company and its Subsidiaries (A) are in compliance with any and all Environmental Laws (as defined below), (B) have received all permits, licenses or other approvals required of them under applicable Environmental Laws to conduct their respective businesses and (C) are in compliance with all terms and conditions of any such permit, license or approval where, in each of the foregoing clauses (A), (B) and (C), the failure to so comply would be reasonably expected to have, individually or in the aggregate, a Material Adverse Effect. The term “Environmental Laws” means all federal, state, local or foreign laws relating to pollution or protection of human health or the environment (including, without limitation, ambient air, surface water, groundwater, land surface or subsurface strata), including, without limitation, laws relating to emissions, discharges, releases or threatened releases of chemicals, pollutants, contaminants, or toxic or hazardous substances or wastes (collectively, “Hazardous Materials”) into the environment, or otherwise relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of Hazardous Materials, as well as all authorizations, codes, decrees, demands or demand letters, injunctions, judgments, licenses, notices or notice letters, orders, permits, plans or regulations issued, entered, promulgated or approved thereunder.
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(ii) No Hazardous Materials:
(A) have been disposed of or otherwise released from any Real Property of the Company or any of its Subsidiaries in violation of any Environmental Laws; or
(B) are present on, over, beneath, in or upon a Real Property or any portion thereof in quantities that would constitute a violation of any Environmental Laws. No prior use by the Company or any of its Subsidiaries of any Real Property has occurred that violates any Environmental Laws, which violation would have a material adverse effect on the business of the Company or any of its Subsidiaries.
(iii) Neither the Company nor any of its Subsidiaries knows of any other person who or entity which has stored, treated, recycled, disposed of or otherwise located on any Real Property any Hazardous Materials, including, without limitation, such substances as asbestos and polychlorinated biphenyls.
(iv) None of the Real Properties are on any federal or state “Superfund” list or Liability Information System (“CERCLIS”) list or any state environmental agency list of sites under consideration for CERCLIS, nor subject to any environmental related Liens.
(z) Subsidiary Rights. The Company or one of its Subsidiaries has the unrestricted right to vote, and (subject to limitations imposed by applicable law) to receive dividends and distributions on, all capital securities of its Subsidiaries as owned by the Company or such Subsidiary.
(aa) Tax Status. The Company and each of its Subsidiaries (i) has timely made or filed (allowing for all lawful extensions) all foreign, federal and state income and all other tax returns, reports and declarations required by any jurisdiction to which it is subject, (ii) has timely paid all taxes and other governmental assessments and charges that are material in amount, shown or determined to be due on such returns, reports and declarations, except those being contested in good faith and (iii) has set aside on its books provision reasonably adequate for the payment of all taxes for periods subsequent to the periods to which such returns, reports or declarations apply. There are no unpaid taxes in any material amount claimed to be due by the taxing authority of any jurisdiction, and the officers of the Company and its Subsidiaries know of no basis for any such claim. The Company is not operated in such a manner as to qualify as a passive foreign investment company, as defined in Section 1297 of the Code. The net operating loss carryforwards (“NOLs”) for United States federal income tax purposes of the consolidated group of which the Company is the common parent, if any, shall not be adversely effected by the transactions contemplated hereby. The transactions contemplated hereby do not constitute an “ownership change” within the meaning of Section 382 of the Code, thereby preserving the Company’s ability to utilize such NOLs.
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(bb) Internal Accounting and Disclosure Controls. The Company and each of its Subsidiaries maintains internal control over financial reporting (as such term is defined in Rule 13a-15(f) under the 1934 Act) that is effective to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles, including that (i) transactions are executed in accordance with management’s general or specific authorizations, (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with GAAP and to maintain asset and liability accountability, (iii) access to assets or incurrence of liabilities is permitted only in accordance with management’s general or specific authorization and (iv) the recorded accountability for assets and liabilities is compared with the existing assets and liabilities at reasonable intervals and appropriate action is taken with respect to any difference. The Company maintains disclosure controls and procedures (as such term is defined in Rule 13a-15(e) under the 1934 Act) that are effective in ensuring that information required to be disclosed by the Company in the reports that it files or submits under the 1934 Act is recorded, processed, summarized and reported, within the time periods specified in the rules and forms of the SEC, including, without limitation, controls and procedures designed to ensure that information required to be disclosed by the Company in the reports that it files or submits under the 1934 Act is accumulated and communicated to the Company’s management, including its principal executive officer or officers and its principal financial officer or officers, as appropriate, to allow timely decisions regarding required disclosure. Neither the Company nor any of its Subsidiaries has received any notice or correspondence from any accountant, Governmental Entity or other Person relating to any potential material weakness or significant deficiency in any part of the internal controls over financial reporting of the Company or any of its Subsidiaries. The representations contained in this Section 3(bb) apply only at the time of the Closing.
(cc) Off Balance Sheet Arrangements. There is no transaction, arrangement, or other relationship between the Company or any of its Subsidiaries and an unconsolidated or other off balance sheet entity that would be reasonably likely to have a Material Adverse Effect.
(dd) Investment Company Status. The Company is not, and upon consummation of the sale of the Securities will not be, an “investment company,” an affiliate of an “investment company,” a company controlled by an “investment company” or an “affiliated person” of, or “promoter” or “principal underwriter” for, an “investment company” as such terms are defined in the Investment Company Act of 1940, as amended.
(ee) Acknowledgement Regarding Buyer’ Trading Activity. It is understood and acknowledged by the Company that (i) none of the Buyer have been asked by the Company or any of its Subsidiaries to agree, nor has any Buyer agreed with the Company or any of its Subsidiaries, to desist from effecting any transactions in or with respect to (including, without limitation, purchasing or selling, long and/or short) any securities of the Company, or “derivative” securities based on securities issued by the Company or to hold any of the Securities for any specified term; (ii) any Buyer, and counterparties in “derivative” transactions to which any such Buyer is a party, directly or indirectly, presently may have a “short” position in the Common Stock which was established prior to such Buyer’s knowledge of the transactions contemplated by the Transaction Documents; (iii) each Buyer shall not be deemed to have any affiliation with or control over any arm’s length counterparty in any “derivative” transaction; and (iv) each Buyer may rely on the Company’s obligation to timely deliver shares of Common Stock upon conversion, exercise or exchange, as applicable, of the Securities as and when required pursuant to the Transaction Documents for purposes of effecting trading in the Common Stock of the Company. The Company further understands and acknowledges that one or more Buyer may engage in hedging and/or trading activities (including, without limitation, the location and/or reservation of borrowable shares of Common Stock) at various times during the period that the Securities are outstanding, including, without limitation, during the periods that the value and/or number of Conversion Shares, as applicable, deliverable with respect to the Securities are being determined and such hedging and/or trading activities (including, without limitation, the location and/or reservation of borrowable shares of Common Stock), if any, can reduce the value of the existing stockholders’ equity interest in the Company both at and after the time the hedging and/or trading activities are being conducted. The Company acknowledges that such aforementioned hedging and/or trading activities do not constitute a breach of this Agreement, the Notes or any other Transaction Document or any of the documents executed in connection herewith or therewith.
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(ff) Manipulation of Price. Neither the Company nor any of its Subsidiaries has, and, to the knowledge of the Company, no Person acting on their behalf has, directly or indirectly, (i) taken any action designed to cause or to result in the stabilization or manipulation of the price of any security of the Company or any of its Subsidiaries to facilitate the sale or resale of any of the Securities, (ii) sold, bid for, purchased, or paid any compensation for soliciting purchases of, any of the Securities), (iii) paid or agreed to pay to any Person any compensation for soliciting another to purchase any other securities of the Company or any of its Subsidiaries or (iv) paid or agreed to pay any Person for research services with respect to any securities of the Company or any of its Subsidiaries.
(gg) U.S. Real Property Holding Corporation. Neither the Company nor any of its Subsidiaries is, or has ever been, and so long as any of the Securities are held by any of the Buyer, shall become, a U.S. real property holding corporation within the meaning of Section 897 of the Code, and the Company and each Subsidiary shall so certify upon any Buyer’s request.
(hh) Registration Eligibility. The Company is eligible to register the Underlying Securities for resale by the Buyer using Form S-1 promulgated under the 1933 Act. “Underlying Securities” means (i) the Conversion Shares, and (ii) any capital stock of the Company issued or issuable with respect to the Conversion Shares, , including, without limitation, (1) as a result of any stock split, stock dividend, recapitalization, exchange or similar event or otherwise and (2) shares of capital stock of the Company into which the shares of Common Stock are converted or exchanged and shares of capital stock of a Successor Entity into which the shares of Common Stock are converted, exercised or exchanged, in each case, without regard to any limitations on conversion of the Notes.
(ii) Transfer Taxes. On the Closing Date, all stock transfer or other taxes (other than income or similar taxes) which are required to be paid in connection with the issuance, sale and transfer of the Securities to be sold to each Buyer hereunder will be, or will have been, fully paid or provided for by the Company, and all laws imposing such taxes will be or will have been complied with.
(jj) Bank Holding Company Act. Neither the Company nor any of its Subsidiaries is subject to the Bank Holding Company Act of 1956, as amended (the “BHCA”) and to regulation by the Board of Governors of the Federal Reserve System (the “Federal Reserve”). Neither the Company nor any of its Subsidiaries or affiliates owns or controls, directly or indirectly, five percent (5%) or more of the outstanding shares of any class of voting securities or twenty-five percent (25%) or more of the total equity of a bank or any entity that is subject to the BHCA and to regulation by the Federal Reserve. Neither the Company nor any of its Subsidiaries or affiliates exercises a controlling influence over the management or policies of a bank or any entity that is subject to the BHCA and to regulation by the Federal Reserve.
(kk) Shell Company Status. The Company is not, and has never been, an issuer identified in, or subject to, Rule 144(i).
(ll) Illegal or Unauthorized Payments; Political Contributions. Neither the Company nor any of its Subsidiaries nor, to the best of the Company’s knowledge (after reasonable inquiry of its officers and directors), any of the officers, directors, employees, agents or other representatives of the Company or any of its Subsidiaries or any other business entity or enterprise with which the Company or any Subsidiary is or has been affiliated or associated, has, directly or indirectly, made or authorized any payment, contribution or gift of money, property, or services, whether or not in contravention of applicable law, (i) as a kickback or bribe to any Person or (ii) to any political organization, or the holder of or any aspirant to any elective or appointive public office except for personal political contributions not involving the direct or indirect use of funds of the Company or any of its Subsidiaries.
(mm) Money Laundering. The Company and its Subsidiaries are in compliance with, and have not previously violated, the USA Patriot Act of 2001 and all other applicable U.S. and non-U.S. anti-money laundering laws and regulations, including, without limitation, the laws, regulations and Executive Orders and sanctions programs administered by the U.S. Office of Foreign Assets Control, including, but not limited, to (i) Executive Order 13224 of September 23, 2001 entitled, “Blocking Property and Prohibiting Transactions With Persons Who Commit, Threaten to Commit, or Support Terrorism” (66 Fed. Reg. 49079 (2001)); and (ii) any regulations contained in 31 CFR, Subtitle B, Chapter V.
(nn) Management. Except as set forth in Schedule 3(nn) hereto, during the past five year period, no current or former officer or director or, to the knowledge of the Company, no current ten percent (10%) or greater stockholder of the Company or any of its Subsidiaries has been the subject of:
(i) a petition under bankruptcy laws or any other insolvency or moratorium law or the appointment by a court of a receiver, fiscal agent or similar officer for such Person, or any partnership in which such person was a general partner at or within two years before the filing of such petition or such appointment, or any corporation or business association of which such person was an executive officer at or within two (2) years before the time of the filing of such petition or such appointment;
(ii) a conviction in a criminal proceeding or a named subject of a pending criminal proceeding (excluding traffic violations that do not relate to driving while intoxicated or driving under the influence);
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(iii) any order, judgment or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining any such person from, or otherwise limiting, the following activities:
(1) Acting as a futures commission merchant, introducing broker, commodity trading advisor, commodity pool operator, floor broker, leverage transaction merchant, any other person regulated by the United States Commodity Futures Trading Commission (the “CFTC”) or an associated person of any of the foregoing, or as an investment adviser, underwriter, broker or dealer in securities, or as an affiliated person, director or employee of any investment company, bank, savings and loan association or insurance company, or engaging in or continuing any conduct or practice in connection with such activity;
(2) Engaging in any particular type of business practice; or
(3) Engaging in any activity in connection with the purchase or sale of any security or commodity or in connection with any violation of securities laws or commodities laws;
(iv) any order, judgment or decree, not subsequently reversed, suspended or vacated, of any authority barring, suspending or otherwise limiting for more than sixty (60) days the right of any such person to engage in any activity described in the preceding sub paragraph, or to be associated with persons engaged in any such activity;
(v) a finding by a court of competent jurisdiction in a civil action or by the SEC or other authority to have violated any securities law, regulation or decree and the judgment in such civil action or finding by the SEC or any other authority has not been subsequently reversed, suspended or vacated; or
(vi) a finding by a court of competent jurisdiction in a civil action or by the CFTC to have violated any federal commodities law, and the judgment in such civil action or finding has not been subsequently reversed, suspended or vacated.
(oo) Stock Option Plans(b) . Each stock option granted by the Company was granted (i) in accordance with the terms of the applicable stock option plan of the Company and (ii) with an exercise price at least equal to the fair market value of the Common Stock on the date such stock option would be considered granted under GAAP and applicable law. No stock option granted under the Company’s stock option plan has been backdated. The Company has not knowingly granted, and there is no and has been no policy or practice of the Company to knowingly grant, stock options prior to, or otherwise knowingly coordinate the grant of stock options with, the release or other public announcement of material information regarding the Company or its Subsidiaries or their financial results or prospects.
(pp) No Disagreements with Accountants and Lawyers(c) . There are no material disagreements of any kind presently existing, or reasonably anticipated by the Company to arise, between the Company and the accountants and lawyers formerly or presently employed by the Company and the Company is current with respect to any fees owed to its accountants and lawyers which would affect the Company’s ability to perform any of its obligations under any of the Transaction Documents. In addition, on or prior to the date hereof, the Company had discussions with its accountants about its financial statements previously filed with the SEC. Based on those discussions, the Company has no reason to believe that it will need to restate any such financial statements or any part thereof.
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(qq) No Disqualification Events(d) . With respect to Securities to be offered and sold hereunder in reliance on Rule 506(b) under the 1933 Act (“Regulation D Securities”), none of the Company, any of its predecessors, any affiliated issuer, any director, executive officer, other officer of the Company participating in the offering contemplated hereby, any beneficial owner of 20% or more of the Company’s outstanding voting equity securities, calculated on the basis of voting power, nor any promoter (as that term is defined in Rule 405 under the 1933 Act) connected with the Company in any capacity at the time of sale (each, an “Issuer Covered Person” and, together, “Issuer Covered Persons”) is subject to any of the “Bad Actor” disqualifications described in Rule 506(d)(1)(i) to (viii) under the 1933 Act (a “Disqualification Event”), except for a Disqualification Event covered by Rule 506(d)(2) or (d)(3). The Company has exercised reasonable care to determine whether any Issuer Covered Person is subject to a Disqualification Event. The Company has complied, to the extent applicable, with its disclosure obligations under Rule 506(e), and has furnished to the Buyer a copy of any disclosures provided thereunder.
(rr) Other Covered Persons(e) . The Company is not aware of any Person that has been or will be paid (directly or indirectly) remuneration for solicitation of Buyer or potential purchasers in connection with the sale of any Regulation D Securities.
(ss) No Additional Agreements. The Company does not have any agreement or understanding with any Buyer with respect to the transactions contemplated by the Transaction Documents other than as specified in the Transaction Documents.
(tt) Public Utility Holding Act. None of the Company nor any of its Subsidiaries is a “holding company,” or an “affiliate” of a “holding company,” as such terms are defined in the Public Utility Holding Act of 2005.
(uu) Federal Power Act. None of the Company nor any of its Subsidiaries is subject to regulation as a “public utility” under the Federal Power Act, as amended.
(vv) Ranking of Notes. At the Closing, no Indebtedness will be senior to, or pari passu with, the Notes in right of payment, whether with respect to payment or redemptions, interest, damages, upon liquidation or dissolution or otherwise (other than Permitted Indebtedness (as defined in the Notes) secured by Permitted Liens (as defined in the Notes)).
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(ww) Disclosure. The Company confirms that neither it nor any other Person acting on its behalf has provided any of the Buyer or their agents or counsel with any information that constitutes or would reasonably be expected to constitute material, non-public information concerning the Company, or any of its Subsidiaries, other than the existence of the transactions contemplated by this Agreement, the transaction contemplated by Section 7(xv) and the other Transaction Documents. The Company understands and confirms that each of the Buyer will rely on the foregoing representations in effecting transactions in securities of the Company. All disclosure provided to the Buyer regarding the Company, and its Subsidiaries, their businesses and the transactions contemplated hereby, including the schedules to this Agreement, furnished by or on behalf of the Company or any of its Subsidiaries is true and correct and does not contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements made therein, in the light of the circumstances under which they were made, not misleading. All of the written information furnished after the date hereof by or on behalf of the Company or any of its Subsidiaries to each Buyer pursuant to or in connection with this Agreement and the other Transaction Documents, taken as a whole, will be true and correct in all material respects as of the date on which such information is so provided and will not contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements made therein, in the light of the circumstances under which they were made, not misleading. Each press release issued by the Company or any of its Subsidiaries during the twelve (12) months preceding the date of this Agreement did not at the time of release contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they are made, not misleading. No event or circumstance has occurred or information exists with respect to the Company or any of its Subsidiaries or its or their business, properties, liabilities, prospects, operations (including results thereof) or conditions (financial or otherwise), which, under applicable law, rule or regulation, requires public disclosure at or before the date hereof or announcement by the Company but which has not been so publicly disclosed. All financial projections and forecasts that have been prepared by or on behalf of the Company or any of its Subsidiaries and made available to you have been prepared in good faith based upon reasonable assumptions and represented, at the time each such financial projection or forecast was delivered to each Buyer, the Company’s best estimate of future financial performance (it being recognized that such financial projections or forecasts are not to be viewed as facts and that the actual results during the period or periods covered by any such financial projections or forecasts may differ from the projected or forecasted results). The Company acknowledges and agrees that no Buyer makes or has made any representations or warranties with respect to the transactions contemplated hereby other than those specifically set forth in Section 2.
(xx) Stockholder Approval. The Company has obtained the approval by its stockholders of the transactions contemplated by the Transaction Documents.
4. COVENANTS.
(a) Reasonable Best Efforts. Each Buyer shall use its reasonable best efforts to timely satisfy each of the covenants hereunder and conditions to be satisfied by it as provided in Section 6 of this Agreement. The Company shall use its reasonable best efforts to timely satisfy each of the covenants hereunder and conditions to be satisfied by it as provided in Section 7 of this Agreement.
(b) Form D and Blue Sky. The Company shall file a Form D with respect to the Securities as required under Regulation D and provide a copy thereof to each Buyer promptly after such filing. The Company shall, on or before the Closing Date, take such action as the Company shall reasonably determine is necessary in order to obtain an exemption for, or to, qualify the Securities for sale to the Buyer at the Closing pursuant to this Agreement under applicable securities or “Blue Sky” laws of the states of the United States (or to obtain an exemption from such qualification), and shall provide evidence of any such action so taken to the Buyer on or prior to the Closing Date. Without limiting any other obligation of the Company under this Agreement, the Company shall timely make all filings and reports relating to the offer and sale of the Securities required under all applicable securities laws (including, without limitation, all applicable federal securities laws and all applicable “Blue Sky” laws), and the Company shall comply with all applicable foreign, federal, state and local laws, statutes, rules, regulations and the like relating to the offering and sale of the Securities to the Buyer.
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(c) Reporting Status(a) . Immediately following the Public Company Date (as defined below) and until the date on which the Buyer shall have sold all of the Underlying Securities (the “Reporting Period”), the Company shall timely file all reports required to be filed with the SEC pursuant to the 1934 Act, and the Company shall not terminate its status as an issuer required to file reports under the 1934 Act even if the 1934 Act or the rules and regulations thereunder would no longer require or otherwise permit such termination. As used herein, “Public Company Date” means the date on which the shares of Common Stock of the Company (or its direct or indirect successor, subsidiary or parent company, whose securities are issued or issuable to holders of Common Stock), whether as a result of a public offering, merger, reverse merger, recapitalization, reorganization or otherwise, are registered under the 1934 Act.
(d) Use of Proceeds. The Company will use the proceeds from the sale of the Securities for general corporate purposes, but not, directly or indirectly, for (i) the satisfaction of any indebtedness of the Company or any of its Subsidiaries, (ii) the redemption or repurchase of any securities of the Company or any of its Subsidiaries, or (iii) the settlement of any outstanding litigation.
(e) Financial Information Post-Public Company Date. From and after the Closing Date, and as so long as any Securities remain outstanding, the Company agrees to send the following to each holder of Note (each, an “Investor”) (i) unless the following are filed with the SEC through EDGAR and are available to the public through the EDGAR system, within one (1) Business Day after the filing thereof with the SEC, a copy of its Annual Reports on Form 10-K and Quarterly Reports on Form 10-Q, any interim reports or any consolidated balance sheets, income statements, stockholders’ equity statements and/or cash flow statements for any period other than annual, any Current Reports on Form 8-K and any registration statements (other than on Form S-8) or amendments filed pursuant to the 1933 Act, (ii) unless the following are either filed with the SEC through EDGAR or are otherwise widely disseminated via a recognized news release service (such as PR Newswire), on the same day as the release thereof, facsimile copies of all press releases issued by the Company or any of its Subsidiaries and (iii) unless the following are filed with the SEC through EDGAR, copies of any notices and other information made available or given to the stockholders of the Company generally, contemporaneously with the making available or giving thereof to the stockholders.
(f) Listing. As of the Public Company Date, the Company shall secure the listing or designation for quotation (as the case may be) of all of the Underlying Securities upon each national securities exchange and automated quotation system, if any, upon which the Common Stock is then listed or designated for quotation (as the case may be) (subject to official notice of issuance) and shall maintain such listing or designation for quotation (as the case may be) of all Underlying Securities from time to time issuable under the terms of the Transaction Documents on such national securities exchange or automated quotation system. After the Public Company Date, the Company shall maintain the Common Stock’s listing or authorization for quotation (as the case may be) on The New York Stock Exchange, the NYSE American, the Nasdaq Capital Market, the Nasdaq Global Market or the Nasdaq Global Select Market, or the OTC Markets (each, an “Eligible Market”). Neither the Company nor any of its Subsidiaries shall take any action which would be reasonably expected to result in the delisting or suspension of the Common Stock on an Eligible Market. The Company shall pay all fees and expenses in connection with satisfying its obligations under this Section 4(f).
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(g) Fees. The Company shall reimburse the lead Buyer a non-accountable amount of (x) $10,000.00 for all costs and expenses incurred by it or its affiliates in connection with the structuring, documentation, negotiation and closing of the transactions contemplated by the Transaction Documents plus (y) all reasonable legal fees of outside counsel and disbursements of $25,000.00, counsel to the lead Buyer, any other reasonable fees and expenses in connection with the structuring, documentation, negotiation and closing of the transactions contemplated by the Transaction Documents and due diligence and regulatory filings in connection therewith) (the “Transaction Expenses”), which amount, at the option of the lead Buyer, may be withheld by such Buyer from its applicable Purchase Price at the Closing; provided, that the Company shall promptly reimburse on demand for all Transaction Expenses not so reimbursed through such withholding at the Closing. The Company shall be responsible for the payment of any placement agent’s fees, financial advisory fees, transfer agent fees, DTC (as defined below) fees or broker’s commissions (other than for Persons engaged by any Buyer) relating to or arising out of the transactions contemplated hereby. The Company shall pay, and hold each Buyer harmless against, any liability, loss or expense (including, without limitation, reasonable attorneys’ fees and out-of-pocket expenses) arising in connection with any claim relating to any such payment. Except as otherwise set forth in the Transaction Documents, each party to this Agreement shall bear its own expenses in connection with the sale of the Securities to the Buyer.
(h) Pledge of Securities. Notwithstanding anything to the contrary contained in this Agreement, the Company acknowledges and agrees that the Securities may be pledged by an Investor in connection with a bona fide margin agreement or other loan or financing arrangement that is secured by the Securities. The pledge of Securities shall not be deemed to be a transfer, sale or assignment of the Securities hereunder, and no Investor effecting a pledge of Securities shall be required to provide the Company with any notice thereof or otherwise make any delivery to the Company pursuant to this Agreement or any other Transaction Document, including, without limitation, Section 2(g) hereof; provided, however, that an Investor and its pledgee shall be required to comply with the provisions of Section 2(g) hereof in order to effect a sale, transfer or assignment of Securities to such pledgee. The Company hereby agrees to execute and deliver such documentation as a pledge of the Securities may reasonably request in connection with a pledge of the Securities to such pledgee by a Buyer.
(i) Disclosure of Transactions and Other Material Information.
(i) Disclosure of Transaction. The Company shall file a Current Report on Form 8-K describing all the material terms of the transactions contemplated by the Transaction Documents and the transactions contemplated by Section 7(xv) hereof, in each case, in the form required by the 1934 Act and attaching all the material Transaction Documents (including, without limitation, this Agreement (and all schedules to this Agreement), the form of Note, and the form of the Registration Rights Agreement and the material documents in connection with the transactions contemplated by Section 7(xv) hereof (including all attachments, the “8-K Filing”). From and after the filing of the 8-K Filing, the Company, and its Subsidiaries shall have disclosed all material, non-public information (if any) provided to any of the Buyer by the Company, or any of its Subsidiaries or any of their respective officers, directors, employees or agents in connection with the transactions contemplated by the Transaction Documents and the transactions contemplated by Section 7(xv) hereof. In addition, effective upon the filing of the 8-K Filing, each of the Company, and its Subsidiaries acknowledges and agrees that any and all confidentiality or similar obligations under any agreement, whether written or oral, between the Company, any of its Subsidiaries or any of their respective officers, directors, affiliates, employees or agents, on the one hand, and any of the Buyer or any of their affiliates, on the other hand, shall terminate and be of no further force or effect.
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(ii) Limitations on Disclosure. The Company shall not, and the Company shall cause each of their Subsidiaries not to, and each of its and their respective officers, directors, employees and agents not to, provide any Buyer with any material, non-public information regarding the Company, or any of its Subsidiaries from and after the date hereof without the express prior written consent of such Buyer (which may be granted or withheld in such Buyer’s sole discretion). In the event of a breach of any of the foregoing covenants, including, without limitation, Section 4(o) of this Agreement, or any of the covenants or agreements contained in any other Transaction Document, by the Company, or of its Subsidiaries, or any of its or their respective officers, directors, employees and agents (as determined in the reasonable good faith judgment of such Buyer), in addition to any other remedy provided herein or in the Transaction Documents, such Buyer shall have the right to make a public disclosure, in the form of a press release, public advertisement or otherwise, of such breach or such material, non-public information, as applicable, without the prior approval by the Company, or any of its Subsidiaries, or any of its or their respective officers, directors, employees or agents. No Buyer shall have any liability to the Company, or any of its Subsidiaries, or any of its or their respective officers, directors, employees, affiliates, stockholders or agents, for any such disclosure. To the extent that the Company, or any other such person delivers any material, non-public information to a Buyer without such Buyer’s consent, the Company hereby covenants and agrees that such Buyer shall not have any duty of confidentiality with respect to, or a duty not to trade on the basis of, such material, non-public information. Subject to the foregoing, the Company, its Subsidiaries nor any Buyer shall issue any press releases or any other public statements with respect to the transactions contemplated hereby; provided, however, the Company and shall be entitled, without the prior approval of any Buyer, to make any press release or other public disclosure with respect to such transactions (i) in substantial conformity with the 8-K Filing and contemporaneously therewith and (ii) as is required by applicable law and regulations (provided that in the case of clause (i) each Buyer shall be consulted by the Company, as applicable, in connection with any such press release or other public disclosure prior to its release). Without the prior written consent of the applicable Buyer (which may be granted or withheld in such Buyer’s sole discretion), the Company and shall not (and shall cause each of their Subsidiaries and affiliates to not) disclose the name of such Buyer in any filing, announcement, release or otherwise. Notwithstanding anything contained in this Agreement to the contrary and without implication that the contrary would otherwise be true, each of the Company expressly acknowledges and agrees that no Buyer shall have (unless expressly agreed to by a particular Buyer after the date hereof in a written definitive and binding agreement executed by the Company, and such particular Buyer (it being understood and agreed that no Buyer may bind any other Buyer with respect thereto)), any duty of confidentiality with respect to, or a duty not to trade on the basis of, any material, non-public information regarding the Company, or any of its Subsidiaries.
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(iii) Other Confidential Information. Disclosure Failures; Disclosure Delay Payments. In addition to other remedies set forth in this Section 4(i), and without limiting anything set forth in any other Transaction Document, at any time after the Closing Date if the Company, any of its Subsidiaries, or any of their respective officers, directors, employees or agents, provides any Buyer with material non-public information relating to the Company, or any of its Subsidiaries (each, the “Confidential Information”), the Company shall, on or prior to the applicable Required Disclosure Date (as defined below), publicly disclose such Confidential Information on a Current Report on Form 8-K or otherwise (each, a “Disclosure”). From and after such Disclosure, the Company shall have disclosed all Confidential Information provided to such Buyer by the Company, or any of its Subsidiaries or any of their respective officers, directors, employees or agents, including, without limitation, in connection with the transactions contemplated by the Transaction Documents and the transactions contemplated by Section 7(xv) hereof. In addition, effective upon such Disclosure, the Company acknowledges and agrees that any and all confidentiality or similar obligations under any agreement, whether written or oral, between the Company, any of its Subsidiaries or any of their respective officers, directors, affiliates, employees or agents, on the one hand, and any of the Buyer or any of their affiliates, on the other hand, shall terminate and be of no further force or effect. In the event that the Company fails to effect such Disclosure on or prior to the Required Disclosure Date and such Buyer shall have possessed Confidential Information for at least ten (10) consecutive Trading Days (each, a “Disclosure Failure”), then, as partial relief for the damages to such Buyer by reason of any such delay in, or reduction of, its ability to buy or sell shares of Common Stock after such Required Disclosure Date (which remedy shall not be exclusive of any other remedies available at law or in equity), the Company shall pay to such Buyer an amount in cash equal to the greater of (I) one and a half percent (1.5%) of the aggregate Purchase Price and (II) the applicable Disclosure Restitution Amount, on each of the following dates (each, a “Disclosure Delay Payment Date”): (i) on the date of such Disclosure Failure and (ii) on every thirty (30) day anniversary such Disclosure Failure until the earlier of (x) the date such Disclosure Failure is cured and (y) such time as all such non-public information provided to such Buyer shall cease to be Confidential Information (as evidenced by a certificate, duly executed by an authorized officer of the Company to the foregoing effect) (such earlier date, as applicable, a “Disclosure Cure Date”). Following the initial Disclosure Delay Payment for any particular Disclosure Failure, without limiting the foregoing, if a Disclosure Cure Date occurs prior to any thirty (30) day anniversary of such Disclosure Failure, then such Disclosure Delay Payment (prorated for such partial month) shall be made on the second (2nd) Business Day after such Disclosure Cure Date. The payments to which an Investor shall be entitled pursuant to this Section 4(i) are referred to herein as “Disclosure Delay Payments.” In the event the Company fails to make Disclosure Delay Payments in a timely manner in accordance with the foregoing, such Disclosure Delay Payments shall bear interest at the rate of two percent (2%) per month (prorated for partial months) until paid in full.
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(iv) For the purpose of this Agreement the following definitions shall apply:
(1) “Disclosure Failure Market Price” means, as of any Disclosure Delay Payment Date, the price computed as the quotient of (I) the sum of the five (5) highest VWAPs of the Common Stock during the applicable Disclosure Restitution Period (as defined below), divided by (II) five (5) (such period, the “Disclosure Failure Measuring Period”). All such determinations to be appropriately adjusted for any share dividend, share split, share combination, reclassification or similar transaction that proportionately decreases or increases the Common Stock during such Disclosure Failure Measuring Period.
(2) “Disclosure Restitution Amount” means, as of any Disclosure Delay Payment Date, the product of (x) difference of (I) the Disclosure Failure Market Price less (II) the lowest purchase price, per share of Common Stock, of any Common Stock issued or issuable to such Buyer pursuant to this Agreement or any other Transaction Documents, multiplied by (y) 10% of the aggregate daily dollar trading volume of the Common Stock on the Principal Market for each Trading Day either (1) with respect to the initial Disclosure Delay Payment Date, during the period commencing on the applicable Required Disclosure Date through and including the Trading Day immediately prior to the initial Disclosure Delay Payment Date or (2) with respect to each other Disclosure Delay Payment Date, during the period commencing the immediately preceding Disclosure Delay Payment Date through and including the Trading Day immediately prior to such applicable Disclosure Delay Payment Date (such applicable period, the “Disclosure Restitution Period”).
(3) “Required Disclosure Date” means (x) if such Buyer authorized the delivery of such Confidential Information, either (I) if the Company and such Buyer have mutually agreed upon a date (as evidenced by an e-mail or other writing) of Disclosure of such Confidential Information, such agreed upon date or (II) otherwise, the seventh (7th) calendar day after the date such Buyer first received any Confidential Information or (y) if such Buyer did not authorize the delivery of such Confidential Information, the first (1st) Business Day after such Buyer’s receipt of such Confidential Information.
(j) Additional Registration Statements. Until the Applicable Date (as defined below) and at any time thereafter while any registration statement is not effective or the prospectus contained therein is not available for use or any Current Public Information Failure (as defined in the Registration Rights Agreement) exists, the Company shall not file a registration statement or an offering statement under the 1933 Act relating to securities that are not the Underlying Securities. “Applicable Date” means the earlier of (i) four (4) months after the Public Company Date and (ii) thirty (30) days after the Release Conditions (as defined in the Notes) have all been satisfied.
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(k) Additional Issuance of Securities. So long as any Buyer beneficially owns any Securities, the Company will not, without the prior written consent of the Required Holders, issue any Notes (other than to the Buyer as contemplated hereby) and the Company shall not issue any other securities that would cause a breach or default under the Notes. The Company agrees that for the period commencing on the date hereof and ending on the date immediately following the Applicable Date (provided that such period shall be extended by the number of calendar days during such period and any extension thereof contemplated by this proviso on which any Registration Statement is not effective or any prospectus contained therein is not available for use or any Current Public Information Failure exists) (the “Restricted Period”), neither the Company nor any of its Subsidiaries shall directly or indirectly issue, offer, sell, grant any option or right to purchase, or otherwise dispose of (or announce any issuance, offer, sale, grant of any option or right to purchase or other disposition of) any equity security or any equity-linked or related security (including, without limitation, any “equity security” (as that term is defined under Rule 405 promulgated under the 1933 Act), any Convertible Securities (as defined below), any debt, any preferred stock or any purchase rights) (any such issuance, offer, sale, grant, disposition or announcement (whether occurring during the Restricted Period or at any time thereafter) is referred to as a “Subsequent Placement”). Notwithstanding the foregoing, this Section 0 shall not apply in respect of the issuance of (i) shares of Common Stock or standard options to purchase Common Stock to directors, officers or employees of the Company in their capacity as such pursuant to an Approved Stock Plan (as defined below), provided that (1) such securities are issued as “restricted securities” (as defined in Rule 144) and carry no registration rights that require or permit the filing of any registration statement in connection therewith during the prohibition period set forth herein, (2) all such issuances (taking into account the shares of Common Stock issuable upon exercise of such options) after the date hereof pursuant to this clause (i) do not, in the aggregate, exceed more than 20% of the Common Stock issued and outstanding immediately following the Issuance Date and (3) the exercise price of any such options is not lowered, none of such options are amended to increase the number of shares issuable thereunder and none of the terms or conditions of any such options are otherwise materially changed in any manner that adversely affects any of the Buyer; (ii) shares of Common Stock issued upon the conversion or exercise of Convertible Securities (other than standard options to purchase Common Stock issued pursuant to an Approved Stock Plan that are covered by clause (i) above) issued prior to the date hereof, provided that the conversion, exercise or other method of issuance (as the case may be) of any such Convertible Security is made solely pursuant to the conversion, exercise or other method of issuance (as the case may be) provisions of such Convertible Security that were in effect on the date immediately prior to the date of this Agreement, the conversion, exercise or issuance price of any such Convertible Securities (other than standard options to purchase Common Stock issued pursuant to an Approved Stock Plan that are covered by clause (i) above) is not lowered, none of such Convertible Securities (other than standard options to purchase Common Stock issued pursuant to an Approved Stock Plan that are covered by clause (i) above) are amended to increase the number of shares issuable thereunder and none of the terms or conditions of any such Convertible Securities (other than standard options to purchase Common Stock issued pursuant to an Approved Stock Plan that are covered by clause (i) above) are otherwise materially changed in any manner that adversely affects any of the Buyer; (iii) the Conversion Shares; provided, that the terms of the Notes are not amended, modified or changed on or after the date hereof, , (iv) any Common Stock issued or issuable by the Company on or prior to the Closing in a Permitted Subsequent Placement; provided, that the terms of the Permitted Subsequent Placement are not amended, modified or changed on or after the date hereof, (v) shares of Common Stock issued pursuant to acquisitions or strategic transactions, provided that such securities are issued as “restricted securities” (as defined in Rule 144) and carry no registration rights that require or permit the filing of any registration statement in connection therewith during the prohibition period set forth herein, and provided that any such issuance shall only be to a Person (or to the equity holders of a Person) which is, itself or through its subsidiaries, an operating company or an owner of an asset in a business synergistic with the business of the Company and shall provide to the Company additional benefits in addition to the investment of funds, (1) but shall not include a transaction in which the Company is issuing securities primarily for the purpose of raising capital or to an entity whose primary business is investing in securities and (2) all such issuances after the date hereof pursuant to this clause (vi) do not, in the aggregate, exceed more than 10% of the Common Stock issued and outstanding immediately following the Issuance Date and (vii) as set forth in Schedule 4(k), provided that such securities set forth in Schedule 4(k)(i)1 are issued as “restricted securities” (as defined in Rule 144) and carry no registration rights that require or permit the filing of any registration statement in connection therewith during the prohibition period set forth herein (each of the foregoing in clauses (i) through (vi), collectively the “Excluded Securities”). “Approved Stock Plan” means any employee benefit plan which has been approved by the board of directors of the Company prior to or subsequent to the date hereof pursuant to which shares of Common Stock and standard options to purchase Common Stock may be issued to any employee, officer or director for services provided to the Company in their capacity as such.
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(l) Reservation of Shares. So long as any of the Notes remain outstanding, the Company shall take all action necessary to at all times have authorized, and reserved for the purpose of issuance, no less than 200% of (i) the maximum number of shares of Common Stock issuable upon conversion of all the Notes then outstanding (assuming for purposes hereof that (x) the Notes are convertible at the Conversion Price then in effect, and (y) any such conversion shall not take into account any limitations on the conversion of the Notes set forth in the Notes) (collectively, the “Required Reserve Amount”); provided that at no time shall the number of shares of Common Stock reserved pursuant to this Section 4(l) be reduced other than proportionally in connection with any conversion, exercise and/or redemption, as applicable of Notes. If at any time the number of shares of Common Stock authorized and reserved for issuance is not sufficient to meet the Required Reserve Amount, the Company will promptly take all corporate action necessary to authorize and reserve a sufficient number of shares, including, without limitation, calling a special meeting of stockholders to authorize additional shares to meet the Company’s obligations pursuant to the Transaction Documents, in the case of an insufficient number of authorized shares, obtain stockholder approval of an increase in such authorized number of shares, and voting the management shares of the Company in favor of an increase in the authorized shares of the Company to ensure that the number of authorized shares is sufficient to meet the Required Reserve Amount.
(m) Conduct of Business. The business of the Company and its Subsidiaries shall not be conducted in violation of any law, ordinance or regulation of any Governmental Entity, except where such violations would not reasonably be expected to result, either individually or in the aggregate, in a Material Adverse Effect.
(n) Other Notes; Variable Securities. So long as the Notes remain outstanding, the Company and each Subsidiary shall be prohibited from effecting or entering into an agreement to effect any Subsequent Placement involving a Variable Rate Transaction. “Variable Rate Transaction” means a transaction in which the Company or any Subsidiary (i) issues or sells any Convertible Securities either (A) at a conversion, exercise or exchange rate or other price that is based upon and/or varies with the trading prices of or quotations for the shares of Common Stock at any time after the initial issuance of such Convertible Securities, or (B) with a conversion, exercise or exchange price that is subject to being reset at some future date after the initial issuance of such Convertible Securities or upon the occurrence of specified or contingent events directly or indirectly related to the business of the Company or the market for the Common Stock, other than pursuant to a customary “weighted average” anti-dilution provision or (ii) enters into any agreement (including, without limitation, an equity line of credit or an “at-the-market” offering) whereby the Company or any Subsidiary may sell securities at a future determined price (other than standard and customary “preemptive” or “participation” rights). Each Buyer shall be entitled to obtain injunctive relief against the Company and its Subsidiaries to preclude any such issuance, which remedy shall be in addition to any right to collect damages.
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(o) Participation Right. At any time on or prior to the earlier of (i) the third anniversary of the Issuance Date, neither the Company nor any of its Subsidiaries shall, directly or indirectly, effect any Subsequent Placement unless the Company shall have first complied with this Section 4(o). The Company acknowledges and agrees that the right set forth in this Section 4(o) is a right granted by the Company, separately, to each Buyer.
(i) At least three (3) Trading Days prior to any proposed or intended Subsequent Placement, the Company shall deliver to each Buyer a written notice (each such notice, a “Pre-Notice”), which Pre-Notice shall not contain any information (including, without limitation, material, non-public information) other than: (A) if the proposed Offer Notice (as defined below) constitutes or contains material, non-public information, a statement asking whether the Investor is willing to accept material non-public information or (B) if the proposed Offer Notice does not constitute or contain material, non-public information, (x) a statement that the Company proposes or intends to effect a Subsequent Placement, (y) a statement that the statement in clause (x) above does not constitute material, non-public information and (z) a statement informing such Buyer that it is entitled to receive an Offer Notice (as defined below) with respect to such Subsequent Placement upon its written request. Upon the written request of a Buyer within two (2) Trading Days after the Company’s delivery to such Buyer of such Pre-Notice, and only upon a written request by such Buyer, the Company shall promptly, but no later than one (1) Trading Day after such request, deliver to such Buyer an irrevocable written notice (the “Offer Notice”) of any proposed or intended issuance or sale or exchange (the “Offer”) of the securities being offered (the “Offered Securities”) in a Subsequent Placement, which Offer Notice shall (A) identify and describe the Offered Securities, (B) describe the price and other terms upon which they are to be issued, sold or exchanged, and the number or amount of the Offered Securities to be issued, sold or exchanged, (C) identify the Persons (if known) to which or with which the Offered Securities are to be offered, issued, sold or exchanged and (D) offer to issue and sell to or exchange with such Buyer in accordance with the terms of the Offer such Buyer’s pro rata portion of 50% of the Offered Securities, provided that the number of Offered Securities which such Buyer shall have the right to subscribe for under this Section 4(o) shall be (x) based on such Buyer’s pro rata portion of the aggregate original principal amount of the Notes purchased hereunder by all Buyer (the “Basic Amount”), and (y) with respect to each Buyer that elects to purchase its Basic Amount, any additional portion of the Offered Securities attributable to the Basic Amounts of other Buyer as such Buyer shall indicate it will purchase or acquire should the other Buyer subscribe for less than their Basic Amounts (the “Undersubscription Amount”), which process shall be repeated until each Buyer shall have an opportunity to subscribe for any remaining Undersubscription Amount.
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(ii) To accept an Offer, in whole or in part, such Buyer must deliver a written notice to the Company prior to the end of the third (3rd) Business Day after such Buyer’s receipt of the Offer Notice (the “Offer Period”), setting forth the portion of such Buyer’s Basic Amount that such Buyer elects to purchase and, if such Buyer shall elect to purchase all of its Basic Amount, the Undersubscription Amount, if any, that such Buyer elects to purchase (in either case, the “Notice of Acceptance”). If the Basic Amounts subscribed for by all Buyer are less than the total of all of the Basic Amounts, then each Buyer who has set forth an Undersubscription Amount in its Notice of Acceptance shall be entitled to purchase, in addition to the Basic Amounts subscribed for, the Undersubscription Amount it has subscribed for; provided, however, if the Undersubscription Amounts subscribed for exceed the difference between the total of all the Basic Amounts and the Basic Amounts subscribed for (the “Available Undersubscription Amount”), each Buyer who has subscribed for any Undersubscription Amount shall be entitled to purchase only that portion of the Available Undersubscription Amount as the Basic Amount of such Buyer bears to the total Basic Amounts of all Buyer that have subscribed for Undersubscription Amounts, subject to rounding by the Company to the extent it deems reasonably necessary. Notwithstanding the foregoing, if the Company desires to modify or amend the terms and conditions of the Offer prior to the expiration of the Offer Period, the Company may deliver to each Buyer a new Offer Notice and the Offer Period shall expire on the third (3rd) Business Day after such Buyer’s receipt of such new Offer Notice.
(iii) The Company shall have ten (10) Business Days from the expiration of the Offer Period above (A) to offer, issue, sell or exchange all or any part of such Offered Securities as to which a Notice of Acceptance has not been given by a Buyer (the “Refused Securities”) pursuant to a definitive agreement(s) (the “Subsequent Placement Agreement”), but only to the offerees described in the Offer Notice (if so described therein) and only upon terms and conditions (including, without limitation, unit prices and interest rates) that are not more favorable to the acquiring Person or Persons or less favorable to the Company than those set forth in the Offer Notice and (B) to publicly announce (x) the execution of such Subsequent Placement Agreement, and (y) either (I) the consummation of the transactions contemplated by such Subsequent Placement Agreement or (II) the termination of such Subsequent Placement Agreement, which shall be filed with the SEC on a Current Report on Form 8-K with such Subsequent Placement Agreement and any documents contemplated therein filed as exhibits thereto.
(iv) In the event the Company shall propose to sell less than all the Refused Securities (any such sale to be in the manner and on the terms specified in Section 4(o)(iii) above), then each Buyer may, at its sole option and in its sole discretion, withdraw its Notice of Acceptance or reduce the number or amount of the Offered Securities specified in its Notice of Acceptance to an amount that shall be not less than the number or amount of the Offered Securities that such Buyer elected to purchase pursuant to Section 4(o)(ii) above multiplied by a fraction, (i) the numerator of which shall be the number or amount of Offered Securities the Company actually proposes to issue, sell or exchange (including Offered Securities to be issued or sold to Buyer pursuant to this Section 4(o) prior to such reduction) and (ii) the denominator of which shall be the original amount of the Offered Securities. In the event that any Buyer so elects to reduce the number or amount of Offered Securities specified in its Notice of Acceptance, the Company may not issue, sell or exchange more than the reduced number or amount of the Offered Securities unless and until such securities have again been offered to the Buyer in accordance with Section 4(o)(i) above.
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(v) Upon the closing of the issuance, sale or exchange of all or less than all of the Refused Securities, such Buyer shall acquire from the Company, and the Company shall issue to such Buyer, the number or amount of Offered Securities specified in its Notice of Acceptance, as reduced pursuant to Section 4(o)(iv) above if such Buyer has so elected, upon the terms and conditions specified in the Offer. The purchase by such Buyer of any Offered Securities is subject in all cases to the preparation, execution and delivery by the Company and such Buyer of a separate purchase agreement relating to such Offered Securities reasonably satisfactory in form and substance to such Buyer and its counsel.
(vi) Any Offered Securities not acquired by a Buyer or other Persons in accordance with this Section 4(o) may not be issued, sold or exchanged until they are again offered to such Buyer under the procedures specified in this Agreement.
(vii) The Company and each Buyer agree that if any Buyer elects to participate in the Offer, (x) neither the Subsequent Placement Agreement with respect to such Offer nor any other transaction documents related thereto (collectively, the “Subsequent Placement Documents”) shall include any term or provision whereby such Buyer shall be required to agree to any restrictions on trading as to any securities of the Company or be required to consent to any amendment to or termination of, or grant any waiver, release or the like under or in connection with, any agreement previously entered into with the Company or any instrument received from the Company, (y) shall include any representation, warranty or covenant more adverse to such Buyer than as set forth in the Transaction Documents and (z) any registration rights set forth in such Subsequent Placement Documents shall be similar in all material respects to the registration rights contained in the Registration Rights Agreement.
(viii) Notwithstanding anything to the contrary in this Section 4(o) and unless otherwise agreed to by such Buyer, the Company shall either confirm in writing to such Buyer that the transaction with respect to the Subsequent Placement has been abandoned or shall publicly disclose its intention to issue the Offered Securities, in either case, in such a manner such that such Buyer will not be in possession of any material, non-public information, by the fifth (5th) Business Day following delivery of the Offer Notice. If by such fifth (5th) Business Day, no public disclosure regarding a transaction with respect to the Offered Securities has been made, and no notice regarding the abandonment of such transaction has been received by such Buyer, such transaction shall be deemed to have been abandoned and such Buyer shall not be in possession of any material, non-public information with respect to the Company or any of its Subsidiaries. Should the Company decide to pursue such transaction with respect to the Offered Securities, the Company shall provide such Buyer with another Offer Notice and such Buyer will again have the right of participation set forth in this Section 4(o). The Company shall not be permitted to deliver more than one such Offer Notice to such Buyer in any sixty (60) day period, except as expressly contemplated by the last sentence of Section 4(o)(ii).
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(ix) The restrictions contained in this Section 4(o) shall not apply in connection with the issuance of any Excluded Securities. The Company shall not circumvent the provisions of this Section 4(o) by providing terms or conditions to one Buyer that are not provided to all.
(x) Notwithstanding the foregoing, if any Offer to which this Section 4(o) applies is to be conducted or marketed on a “bought deal” or “overnight” or “intraday” basis, then (i) the period for the Company to deliver a Pre-Notice and Offer Notice shall be “as soon as reasonably practicable and without undue delay” by the Company acting reasonably and in good faith and (ii) the period for the Purchaser to deliver a Notice of Acceptance under shall be “as soon as reasonably practicable and without undue delay and in no event more than twenty four (24) hours after receipt of the Pre-Notice or Offer Notice, as applicable” by the Purchaser, in each case having regard to the specific circumstances surrounding such Offer.
(p) Dilutive Issuances. For so long as the Notes remain outstanding, the Company shall not, in any manner, enter into or affect any Subsequent Placement if the effect of such Subsequent Placement is to cause the Company to be required to issue upon conversion of any Notes in excess of that number of shares of Common Stock which the Company may issue upon conversion of the Notes without breaching the Company’s obligations under the rules or regulations of the Principal Market.
(q) Passive Foreign Investment Company. The Company shall conduct its business, and shall cause its Subsidiaries to conduct their respective businesses, in such a manner as will ensure that the Company will not be deemed to constitute a passive foreign investment company within the meaning of Section 1297 of the Code.
(r) Restriction on Redemption and Cash Dividends. So long as any Notes are outstanding, the Company shall not, directly or indirectly, redeem, or declare or pay any cash dividend or distribution on, any securities of the Company without the prior express written consent of the Buyer.
(s) Corporate Existence. So long as any Buyer beneficially owns any Notes, the Company shall not be party to any Fundamental Transaction (as defined in the Notes) unless the Company is in compliance with the applicable provisions governing Fundamental Transactions set forth in the Notes.
(t) Stock Splits. Until the Notes and all notes issued pursuant to the terms thereof are no longer outstanding, the Company shall not effect any stock combination, reverse stock split or other similar transaction (or make any public announcement or disclosure with respect to any of the foregoing) without the prior written consent of the Required Holders (as defined below), except in the case of a reverse stock split, such reverse stock split is required to remain in compliance with the rules and regulations of the Principal Market, in which case no such consent shall be required.
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(u) Conversion and Exercise Procedures. Each of the form of Conversion Notice (as defined in the Note) Note set forth the totality of the procedures required of a Buyer in order to convert the Notes. Except as provided in Section 5(d), no additional legal opinion, other information or instructions shall be required of the Buyer to convert their Notes. The Company shall honor the conversions of the Note and shall deliver the Conversion Shares in accordance with the terms, conditions and time periods set forth in the Notes..
(v) Regulation M. The Company will not take any action prohibited by Regulation M under the 1934 Act, in connection with the distribution of the Securities contemplated hereby.
(w) General Solicitation(f) . None of the Company, any of its affiliates (as defined in Rule 501(b) under the 1933 Act) or any person acting on behalf of the Company or such affiliate will solicit any offer to buy or offer or sell the Securities by means of any form of general solicitation or general advertising within the meaning of Regulation D, including: (i) any advertisement, article, notice or other communication published in any newspaper, magazine or similar medium or broadcast over television or radio; and (ii) any seminar or meeting whose attendees have been invited by any general solicitation or general advertising.
(x) Integration(g) . None of the Company, any of its affiliates (as defined in Rule 501(b) under the 1933 Act), or any person acting on behalf of the Company or such affiliate will sell, offer for sale, or solicit offers to buy or otherwise negotiate in respect of any security (as defined in the 1933 Act) which will be integrated with the sale of the Securities in a manner which would require the registration of the Securities under the 1933 Act or require stockholder approval under the rules and regulations of the Principal Market and the Company will take all action that is appropriate or necessary to assure that its offerings of other securities will not be integrated for purposes of the 1933 Act or the rules and regulations of the Principal Market, with the issuance of Securities contemplated hereby.
(y) Notice of Disqualification Events(a) . The Company will notify the Buyer in writing, prior to the Closing Date of (i) any Disqualification Event relating to any Issuer Covered Person and (ii) any event that would, with the passage of time, become a Disqualification Event relating to any Issuer Covered Person.
(i) Collateral Agent. Buyer does not appoint Collateral Agent hereunder.
(z) Closing Documents. On or prior to fourteen (14) calendar days after the Closing Date, the Company agrees to deliver, or cause to be delivered, to each Buyer a complete closing set of the executed Transaction Documents, Securities and any other document required to be delivered to any party pursuant to Section 7 hereof or otherwise.
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5. REGISTER; TRANSFER AGENT INSTRUCTIONS; LEGEND.
(a) Register. The Company shall maintain at its principal executive offices (or such other office or agency of the Company as it may designate by notice to each holder of Securities), a register for the Notes in which the Company shall record the name and address of the Person in whose name the Notes have been issued (including the name and address of each transferee), the principal amount of the Notes held by such Person, the number of Conversion Shares issuable pursuant to the terms of the Note n. The Company shall keep the register open and available at all times during business hours for inspection of any Buyer or its legal representatives.
(b) Transfer Agent Instructions. As of the Public Company Date, the Company shall issue irrevocable instructions to its transfer agent and any subsequent transfer agent (as applicable, the “Transfer Agent”) in a form acceptable to each of the Buyer (the “Irrevocable Transfer Agent Instructions”) to issue certificates or credit shares to the applicable balance accounts at The Depository Trust Company (“DTC”), registered in the name of each Buyer or its respective nominee(s), for the Conversion Shares in such amounts as specified from time to time by each Buyer to the Company upon conversion of the Notes. The Company represents and warrants that no instruction other than the Irrevocable Transfer Agent Instructions referred to in this Section 5(b), and stop transfer instructions to give effect to Section 2(g) hereof, will be given by the Company to its transfer agent with respect to the Securities, and that the Securities shall otherwise be freely transferable on the books and records of the Company, as applicable, to the extent provided in this Agreement and the other Transaction Documents. If a Buyer effects a sale, assignment or transfer of the Securities in accordance with Section 2(g), the Company shall permit the transfer and shall promptly instruct its transfer agent to issue one or more certificates or credit shares to the applicable balance accounts at DTC in such name and in such denominations as specified by such Buyer to effect such sale, transfer or assignment. In the event that such sale, assignment or transfer involves Conversion Shares sold, assigned or transferred pursuant to an effective registration statement or in compliance with Rule 144, the transfer agent shall issue such shares to such Buyer, assignee or transferee (as the case may be) without any restrictive legend in accordance with Section 5(d) below. The Company acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to a Buyer. Accordingly, the Company acknowledges that the remedy at law for a breach of its obligations under this Section 5(b) will be inadequate and agrees, in the event of a breach or threatened breach by the Company of the provisions of this Section 5(b), that a Buyer shall be entitled, in addition to all other available remedies, to an order and/or injunction restraining any breach and requiring immediate issuance and transfer, without the necessity of showing economic loss and without any bond or other security being required. The Company shall cause its counsel to issue the legal opinion referred to in the Irrevocable Transfer Agent Instructions to the Company’s transfer agent on each Effective Date (as defined in the Registration Rights Agreement). Any fees (with respect to the transfer agent, counsel to the Company or otherwise) associated with the issuance of such opinion or the removal of any legends on any of the Securities shall be borne by the Company.
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(c) Legends. Each Buyer understands that the Securities have been issued (or will be issued in the case of the Conversion Shares) pursuant to an exemption from registration or qualification under the 1933 Act and applicable state securities laws, and except as set forth below, the Securities shall bear any legend as required by the “blue sky” laws of any state and a restrictive legend in substantially the following form (and a stop-transfer order may be placed against transfer of such stock certificates):
[NEITHER THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE [CONVERTIBLE] [EXERCISABLE] HAVE BEEN][THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN] REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL TO THE HOLDER (IF REQUESTED BY THE COMPANY), IN A FORM REASONABLY ACCEPTABLE TO THE COMPANY, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD OR ELIGIBLE TO BE SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID ACT. NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES.
(d) Removal of Legends. Certificates evidencing Securities shall not be required to contain the legend set forth in Section 5(c) above or any other legend (i) while a registration statement (including a Registration Statement) covering the resale of such Securities is effective under the 1933 Act, (ii) following any sale of such Securities pursuant to Rule 144 (assuming the transferor is not an affiliate of the Company), (iii) if such Securities are eligible to be sold, assigned or transferred under Rule 144 (provided that a Buyer provides the Company with reasonable assurances that such Securities are eligible for sale, assignment or transfer under Rule 144 which shall not include an opinion of Buyer’s counsel), (iv) in connection with a sale, assignment or other transfer (other than under Rule 144), provided that such Buyer provides the Company with an opinion of counsel to such Buyer, in a generally acceptable form, to the effect that such sale, assignment or transfer of the Securities may be made without registration under the applicable requirements of the 1933 Act or (v) if such legend is not required under applicable requirements of the 1933 Act (including, without limitation, controlling judicial interpretations and pronouncements issued by the SEC). If a legend is not required pursuant to the foregoing, the Company shall no later than two (2) Trading Days (or such earlier date as required pursuant to the 1934 Act or other applicable law, rule or regulation for the settlement of a trade initiated on the date such Buyer delivers such legended certificate representing such Securities to the Company) following the delivery by a Buyer to the Company or the transfer agent (with notice to the Company) of a legended certificate representing such Securities (endorsed or with stock powers attached, signatures guaranteed, and otherwise in form necessary to affect the reissuance and/or transfer, if applicable), together with any other deliveries from such Buyer as may be required above in this Section 5(d), as directed by such Buyer, either: (A) provided that the Company’s transfer agent is participating in the DTC Fast Automated Securities Transfer Program and such Securities are Conversion Shares, credit the aggregate number of shares of Common Stock to which such Buyer shall be entitled to such Buyer’s or its designee’s balance account with DTC through its Deposit/Withdrawal at Custodian system or (B) if the Company’s transfer agent is not participating in the DTC Fast Automated Securities Transfer Program, issue and deliver (via reputable overnight courier) to such Buyer, a certificate representing such Securities that is free from all restrictive and other legends, registered in the name of such Buyer or its designee (the date by which such credit is so required to be made to the balance account of such Buyer’s or such Buyer’s designee with DTC or such certificate is required to be delivered to such Buyer pursuant to the foregoing is referred to herein as the “Required Delivery Date”, and the date such shares of Common Stock are actually delivered without restrictive legend to such Buyer or such Buyer’s designee with DTC, as applicable, the “Share Delivery Date”). The Company shall be responsible for any transfer agent fees or DTC fees with respect to any issuance of Securities or the removal of any legends with respect to any Securities in accordance herewith.
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(e) Failure to Timely Deliver; Buy-In. If the Company fails to fail, for any reason or for no reason, to issue and deliver (or cause to be delivered) to a Buyer (or its designee) by the Required Delivery Date, either (I) if the Transfer Agent is not participating in the DTC Fast Automated Securities Transfer Program, a certificate for the number of Conversion Shares to which such Buyer is entitled and register such Conversion Shares on the Company’s share register or, if the Transfer Agent is participating in the DTC Fast Automated Securities Transfer Program, to credit the balance account of such Buyer or such Buyer’s designee with DTC for such number of Conversion Shares submitted for legend removal by such Buyer pursuant to Section 5(d) above or (II) if the Registration Statement covering the resale of the Conversion Shares) submitted for legend removal by such Buyer pursuant to Section 5(d) above (the “Unavailable Shares”) is not available for the resale of such Unavailable Shares and the Company fails to promptly, but in no event later than as required pursuant to the Registration Rights Agreement (x) so notify such Buyer and (y) deliver the Conversion Shares, electronically without any restrictive legend by crediting such aggregate number of Conversion Shares submitted for legend removal by such Buyer pursuant to Section 5(d) above to such Buyer’s or its designee’s balance account with DTC through its Deposit/Withdrawal At Custodian system (the event described in the immediately foregoing clause (II) is hereinafter referred as a “Notice Failure” and together with the event described in clause (I) above, a “Delivery Failure”), then, in addition to all other remedies available to such Buyer, the Company shall pay in cash to such Buyer on each day after the Share Delivery Date and during such Delivery Failure an amount equal to 2% of the product of (A) the sum of the number of shares of Common Stock not issued to such Buyer on or prior to the Required Delivery Date and to which such Buyer is entitled, and (B) any trading price of the Common Stock selected by such Buyer in writing as in effect at any time during the period beginning on the date of the delivery by such Buyer to the Company of the applicable Conversion Shares and ending on the applicable Share Delivery Date. In addition to the foregoing, if on or prior to the Required Delivery Date either (I) if the Transfer Agent is not participating in the DTC Fast Automated Securities Transfer Program, the Company shall fail to issue and deliver a certificate to a Buyer and register such shares of Common Stock on the Company’s share register or, if the Transfer Agent is participating in the DTC Fast Automated Securities Transfer Program, credit the balance account of such Buyer or such Buyer’s designee with DTC for the number of shares of Common Stock to which such Buyer submitted for legend removal by such Buyer pursuant to Section 5(d) above (ii) below or (II) a Notice Failure occurs, and if on or after such Trading Day such Buyer purchases (in an open market transaction or otherwise) shares of Common Stock to deliver in satisfaction of a sale by such Buyer of shares of Common Stock submitted for legend removal by such Buyer pursuant to Section 5(d) above that such Buyer is entitled to receive from the Company (a “Buy-In”), then the Company shall, within two (2) Trading Days after such Buyer’s request and in such Buyer’s discretion, either (i) pay cash to such Buyer in an amount equal to such Buyer’s total purchase price (including brokerage commissions and other out-of-pocket expenses, if any, for the shares of Common Stock so purchased) (the “Buy-In Price”), at which point the Company’s obligation to so deliver such certificate or credit such Buyer’s balance account shall terminate and such shares shall be cancelled, or (ii) promptly honor its obligation to so deliver to such Buyer a certificate or certificates or credit the balance account of such Buyer or such Buyer’s designee with DTC representing such number of shares of Common Stock that would have been so delivered if the Company timely complied with its obligations hereunder and pay cash to such Buyer in an amount equal to the excess (if any) of the Buy-In Price over the product of (A) such number of shares of Conversion Shares that the Company was required to deliver to such Buyer by the Required Delivery Date multiplied by (B) the lowest Closing Sale of the Common Stock on any Trading Day during the period commencing on the date of the delivery by such Buyer to the Company of the applicable Conversion Shares and ending on the date of such delivery and payment under this clause (ii). Nothing shall limit such Buyer’s right to pursue any other remedies available to it hereunder, at law or in equity, including, without limitation, a decree of specific performance and/or injunctive relief with respect to the Company’s failure to timely deliver certificates representing shares of Common Stock (or to electronically deliver such shares of Common Stock) as required pursuant to the terms hereof. Notwithstanding anything herein to the contrary, with respect to any given Notice Failure and/or Delivery Failure, this Section 5(e) shall not apply to the applicable Buyer the extent the Company has already paid such amounts in full to such Buyer with respect to such Notice Failure and/or Delivery Failure, as applicable, pursuant to the analogous sections of the Note, as applicable, held by such Buyer.
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(f) FAST Compliance. Immediately following the Public Company Date the Company shall maintain a transfer agent that participates in the DTC Fast Automated Securities Transfer Program.
6. CONDITIONS TO THE COMPANY’S OBLIGATION TO SELL.
(a) The obligation of the Company hereunder to issue and sell the Note to Buyer at the Closing is subject to the satisfaction, at or before the Closing Date, of each of the following conditions, provided that these conditions are for the Company’s sole benefit and may be waived by the Company at any time in its sole discretion by providing each Buyer with prior written notice thereof:
(i) Such Buyer shall have executed each of the other Transaction Documents to which it is a party and delivered the same to the Company.
(ii) The representations and warranties of such Buyer shall be true and correct in all material respects as of the date when made and as of the Closing Date as though originally made at that time (except for representations and warranties that speak as of a specific date, which shall be true and correct as of such specific date), and such Buyer shall have performed, satisfied and complied in all material respects with the covenants, agreements and conditions required by this Agreement to be performed, satisfied or complied with by such Buyer at or prior to the Closing Date.
7. CONDITIONS TO EACH BUYER’S OBLIGATION TO PURCHASE.
(a) The obligation of each Buyer hereunder to purchase its Note at the Closing is subject to the satisfaction, at or before the Closing Date, of each of the following conditions, provided that these conditions are for each Buyer’s sole benefit and may be waived by such Buyer at any time in its sole discretion by providing the Company with prior written notice thereof:
(i) The Company and each Subsidiary (as the case may be) shall have duly executed and delivered to such Buyer each of the Transaction Documents to which it is a party and the Company shall have duly executed and delivered to such Buyer (A) a Note in such original principal amount as is set forth across from such Buyer’s name in column (3) of the Schedule of Buyer.
(ii) Such Buyer shall have received the opinion of Haynes and Boone, LLP, the Company’s counsel, dated as of the Closing Date, in the form acceptable to such Buyer.
(iii) The Company shall have delivered to such Buyer a copy of the Irrevocable Transfer Agent Instructions, in the form acceptable to such Buyer, which instructions shall have been delivered to and acknowledged in writing by the Company’s transfer agent.
(iv) The Company shall have delivered to such Buyer a certificate evidencing the formation and good standing of the Company and each of its Subsidiaries in each such entity’s jurisdiction of formation issued by the Secretary of State (or comparable office) of such jurisdiction of formation as of a date within ten (10) days of the Closing Date.
(v) The Company shall have delivered to such Buyer a certificate evidencing the Company’s and each Subsidiary’s qualification as a foreign corporation and good standing issued by the Secretary of State (or comparable office) of each jurisdiction in which the Company and each Subsidiary conducts business and is required to so qualify, as of a date within ten (10) days of the Closing Date.
(vi) The Company shall have delivered to such Buyer a certified copy of the Articles of Incorporation as certified by the Secretary of State of the Company’s jurisdiction of incorporation within ten (10) days of the Closing Date.
(vii) Each Subsidiary shall have delivered to such Buyer a certified copy of its Articles of Incorporation (or such equivalent organizational document) as certified by the Secretary of State (or comparable office) of such Subsidiary’s jurisdiction of incorporation within ten (10) days of the Closing Date.
(viii) The Company and each Subsidiary shall have delivered to such Buyer a certificate, in the form acceptable to such Buyer, executed by the Secretary of the Company and each Subsidiary and dated as of the Closing Date, as to (i) the resolutions consistent with Section 3(b) as adopted by the Company’s and each Subsidiary’s board of directors in a form reasonably acceptable to such Buyer, (ii) the Articles of Incorporation of the Company and the organizational documents of each Subsidiary and (iii) the Bylaws of the Company and the bylaws of each Subsidiary, each as in effect at the Closing.
(ix) Each and every representation and warranty of the Company shall be true and correct as of the date when made and as of the Closing Date as though originally made at that time (except for representations and warranties that speak as of a specific date, which shall be true and correct as of such specific date) and the Company shall have performed, satisfied and complied in all respects with the covenants, agreements and conditions required to be performed, satisfied or complied with by the Company at or prior to the Closing Date. Such Buyer shall have received a certificate, duly executed by the Chief Executive Officer of the Company, dated as of the Closing Date, to the foregoing effect and as to such other matters as may be reasonably requested by such Buyer in the form acceptable to such Buyer.
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(x) The Company shall have obtained all governmental, regulatory or third party consents and approvals, if any, necessary for the sale of the Securities.
(xi) No statute, rule, regulation, executive order, decree, ruling or injunction shall have been enacted, entered, promulgated or endorsed by any court or Governmental Entity of competent jurisdiction that prohibits the consummation of any of the transactions contemplated by the Transaction Documents.
(xii) Since the date of execution of this Agreement, no event or series of events shall have occurred that reasonably would have or result in a Material Adverse Effect.
(xiii) The completion of business, legal and financial due diligence satisfactory to the Buyer, in their sole discretion.
(xiv) The entering into a binding agreement for the sale of Common Stock or Convertible Securities generating at least $5,000, but no more than $500,000, of net proceeds at an effective purchase price per share not less than sixty percent (60%) of the Conversion Price (as defined in the Notes) after giving effect all securities issued in the offering, as reasonably determined by the Buyer pursuant to binding transaction documents satisfactory to the Buyer, in their sole discretion.
(xv) Reserved
(xvi) The Buyer shall have received all documents, instruments, filings and recordations and searches reasonably necessary in connection with the perfection of a valid security interest in the Collateral of the Company, and, in the case of UCC filings, such filings shall be in proper form for filing.
(xvii) The Buyer shall have received the results of searches (including comparable searches in any jurisdiction outside the United States) for any effective UCC financing statements, tax liens or judgment liens filed against the Company or any of the Company Subsidiaries or any property of any of the foregoing, which results shall not show any such liens (other than Permitted Liens acceptable to the Buyer).
(xviii) The Company and its Subsidiaries shall have delivered to such Buyer such other documents, instruments or certificates relating to the transactions contemplated by this Agreement as such Buyer or its counsel may reasonably request.
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8. RESERVED
9. MISCELLANEOUS.
(a) Governing Law; Jurisdiction; Jury Trial. All questions concerning the construction, validity, enforcement and interpretation of this Agreement shall be governed by the internal laws of the State of Delaware, without giving effect to any choice of law or conflict of law provision or rule (whether of the State of Delaware or any other jurisdictions) that would cause the application of the laws of any jurisdictions other than the State of Delaware. The Company hereby irrevocably submits to the exclusive jurisdiction of the state and federal courts sitting in State of Delaware, for the adjudication of any dispute hereunder or in connection herewith or under any of the other Transaction Documents or with any transaction contemplated hereby or thereby, and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of any such court, that such suit, action or proceeding is brought in an inconvenient forum or that the venue of such suit, action or proceeding is improper. 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 to such party at the address for such notices to it under this Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any manner permitted by law. Nothing contained herein shall be deemed or operate to preclude any Buyer from bringing suit or taking other legal action against the Company in any other jurisdiction to collect on the Company’s obligations to such Buyer or to enforce a judgment or other court ruling in favor of such Buyer. EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE TO, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR UNDER ANY OTHER TRANSACTION DOCUMENT OR IN CONNECTION WITH OR ARISING OUT OF THIS AGREEMENT, ANY OTHER TRANSACTION DOCUMENT OR ANY TRANSACTION CONTEMPLATED HEREBY OR THEREBY.
(b) Counterparts. This Agreement may be executed in two or more identical counterparts, all of which shall be considered one and the same agreement and shall become effective when counterparts have been signed by each party and delivered to the other party. In the event that any signature is delivered by facsimile transmission or by an e-mail which contains a portable document format (.pdf) file of an executed signature page, such signature page shall create a valid and binding obligation of the party executing (or on whose behalf such signature is executed) with the same force and effect as if such signature page were an original thereof. Counterparts may be delivered via facsimile, electronic mail (including pdf or any electronic signature complying with the U.S. federal ESIGN Act of 2000, e.g., www.docusign.com) or other transmission method and any counterpart so delivered shall be deemed to have been duly and validly delivered and be valid and effective for all purposes.
(c) Headings; Gender. The headings of this Agreement are for convenience of reference and shall not form part of, or affect the interpretation of, this Agreement. Unless the context clearly indicates otherwise, each pronoun herein shall be deemed to include the masculine, feminine, neuter, singular and plural forms thereof. The terms “including,” “includes,” “include” and words of like import shall be construed broadly as if followed by the words “without limitation.” The terms “herein,” “hereunder,” “hereof” and words of like import refer to this entire Agreement instead of just the provision in which they are found.
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(d) Severability; Maximum Payment Amounts. If any provision of this Agreement is prohibited by law or otherwise determined to be invalid or unenforceable by a court of competent jurisdiction, the provision that would otherwise be prohibited, invalid or unenforceable shall be deemed amended to apply to the broadest extent that it would be valid and enforceable, and the invalidity or unenforceability of such provision shall not affect the validity of the remaining provisions of this Agreement so long as this Agreement as so modified continues to express, without material change, the original intentions of the parties as to the subject matter hereof and the prohibited nature, invalidity or unenforceability of the provision(s) in question does not substantially impair the respective expectations or reciprocal obligations of the parties or the practical realization of the benefits that would otherwise be conferred upon the parties. The parties will endeavor in good faith negotiations to replace the prohibited, invalid or unenforceable provision(s) with a valid provision(s), the effect of which comes as close as possible to that of the prohibited, invalid or unenforceable provision(s). Notwithstanding anything to the contrary contained in this Agreement or any other Transaction Document (and without implication that the following is required or applicable), it is the intention of the parties that in no event shall amounts and value paid by the Company and/or any of its Subsidiaries (as the case may be), or payable to or received by any of the Buyer, under the Transaction Documents (including without limitation, any amounts that would be characterized as “interest” under applicable law) exceed amounts permitted under any applicable law. Accordingly, if any obligation to pay, payment made to any Buyer, or collection by any Buyer pursuant the Transaction Documents is finally judicially determined to be contrary to any such applicable law, such obligation to pay, payment or collection shall be deemed to have been made by mutual mistake of such Buyer, the Company and its Subsidiaries and such amount shall be deemed to have been adjusted with retroactive effect to the maximum amount or rate of interest, as the case may be, as would not be so prohibited by the applicable law. Such adjustment shall be effected, to the extent necessary, by reducing or refunding, at the option of such Buyer, the amount of interest or any other amounts which would constitute unlawful amounts required to be paid or actually paid to such Buyer under the Transaction Documents. For greater certainty, to the extent that any interest, charges, fees, expenses or other amounts required to be paid to or received by such Buyer under any of the Transaction Documents or related thereto are held to be within the meaning of “interest” or another applicable term to otherwise be violative of applicable law, such amounts shall be pro-rated over the period of time to which they relate.
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(e) Entire Agreement; Amendments. This Agreement, the other Transaction Documents and the schedules and exhibits attached hereto and thereto and the instruments referenced herein and therein supersede all other prior oral or written agreements between the Buyer, the Company, its Subsidiaries, their affiliates and Persons acting on their behalf, including, without limitation, any transactions by any Buyer with respect to Common Stock or the Securities, and the other matters contained herein and therein, and this Agreement, the other Transaction Documents, the schedules and exhibits attached hereto and thereto and the instruments referenced herein and therein contain the entire understanding of the parties solely with respect to the matters covered herein and therein; provided, however, nothing contained in this Agreement or any other Transaction Document shall (or shall be deemed to) (i) have any effect on any agreements any Buyer has entered into with, or any instruments any Buyer has received from, the Company or any of its Subsidiaries prior to the date hereof with respect to any prior investment made by such Buyer in the Company or (ii) waive, alter, modify or amend in any respect any obligations of the Company or any of its Subsidiaries, or any rights of or benefits to any Buyer or any other Person, in any agreement entered into prior to the date hereof between or among the Company and/or any of its Subsidiaries and any Buyer, or any instruments any Buyer received from the Company and/or any of its Subsidiaries prior to the date hereof, and all such agreements and instruments shall continue in full force and effect. Except as specifically set forth herein or therein, neither the Company nor any Buyer makes any representation, warranty, covenant or undertaking with respect to such matters. For clarification purposes, the Recitals are part of this Agreement. No provision of this Agreement may be amended other than by an instrument in writing signed by the Company and the Required Holders (as defined below), and any amendment to any provision of this Agreement made in conformity with the provisions of this Section 9(e) shall be binding on all Buyer and holders of Securities, as applicable; provided that no such amendment shall be effective to the extent that it (A) applies to less than all of the holders of the Securities then outstanding or (B) imposes any obligation or liability on any Buyer without such Buyer’s prior written consent (which may be granted or withheld in such Buyer’s sole discretion). No waiver shall be effective unless it is in writing and signed by an authorized representative of the waiving party, provided that the Required Holders may waive any provision of this Agreement, and any waiver of any provision of this Agreement made in conformity with the provisions of this Section 9(e) shall be binding on all Buyer and holders of Securities, as applicable, provided that no such waiver shall be effective to the extent that it (1) applies to less than all of the holders of the Securities then outstanding (unless a party gives a waiver as to itself only) or (2) imposes any obligation or liability on any Buyer without such Buyer’s prior written consent (which may be granted or withheld in such Buyer’s sole discretion). No consideration (other than reimbursement of legal fees) shall be offered or paid to any Person to amend or consent to a waiver or modification of any provision of any of the Transaction Documents unless the same consideration also is offered to all of the parties to the Transaction Documents, of the holder of the Note. From the date hereof and while the Note is outstanding, the Company shall not be permitted to receive any consideration from a Buyer or a holder of Notes that is not otherwise contemplated by the Transaction Documents in order to, directly or indirectly, induce the Company or any Subsidiary (i) to treat such Buyer or holder of Notes in a manner that is more favorable than to other similarly situated Buyer, or (ii) to treat any Buyer(s) or holder(s) of Notes in a manner that is less favorable than the Buyer or holder of Notes that is paying such consideration; provided, however, that the determination of whether a Buyer has been treated more or less favorably than another Buyer shall disregard any securities of the Company purchased or sold by any Buyer. The Company has not, directly or indirectly, made any agreements with any Buyer relating to the terms or conditions of the transactions contemplated by the Transaction Documents except as set forth in the Transaction Documents. Without limiting the foregoing, the Company confirms that, except as set forth in this Agreement, no Buyer has made any commitment or promise or has any other obligation to provide any financing to the Company, any Subsidiary or otherwise. As a material inducement for each Buyer to enter into this Agreement, the Company expressly acknowledges and agrees that (x) no due diligence or other investigation or inquiry conducted by a Buyer, any of its advisors or any of its representatives shall affect such Buyer’s right to rely on, or shall modify or qualify in any manner or be an exception to any of, the Company’s representations and warranties contained in this Agreement or any other Transaction Document and (y) unless a provision of this Agreement or any other Transaction Document is expressly preceded by the phrase “except as disclosed in the SEC Documents,” nothing contained in any of the SEC Documents shall affect such Buyer’s right to rely on, or shall modify or qualify in any manner or be an exception to any of, the Company’s representations and warranties contained in this Agreement or any other Transaction Document. “Required Holders” means (I) prior to the Closing Date, each Buyer entitled to purchase Notes at the Closing and (II) on or after the Closing Date, holders of a majority of the Underlying Securities as of such time (excluding any Underlying Securities held by the Company or any of its Subsidiaries as of such time) issued or issuable hereunder or pursuant to the Notes (or the Buyer, with respect to any waiver or amendment of Section 4(o)).
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(f) Notices. Any notices, consents, waivers or other communications required or permitted to be given under the terms of this Agreement must be in writing and will be deemed to have been delivered: (i) upon receipt, when delivered personally; (ii) upon receipt, when sent by facsimile (provided confirmation of transmission is mechanically or electronically generated and kept on file by the sending party) or electronic mail (provided that such sent email is kept on file (whether electronically or otherwise) by the sending party and the sending party does not receive an automatically generated message from the recipient’s email server that such e-mail could not be delivered to such recipient); or (iii) one (1) Business Day after deposit with an overnight courier service with next day delivery specified, in each case, properly addressed to the party to receive the same. The addresses, facsimile numbers and e-mail addresses for such communications shall be:
If to the Company:
Global Technologies, Ltd.
8 Campus Dr.
Suite 105
Parsippany, NJ 07054
With a copy (for informational purposes only) to:
If to the Transfer Agent:
To be provided.
If to a Buyer, to its address, e-mail address and facsimile number set forth on the Schedule of Buyer, with copies to such Buyer’s representatives as set forth on the Schedule of Buyer,
with a copy (for informational purposes only) to:
or to such other address, e-mail address and/or facsimile number and/or to the attention of such other Person as the recipient party has specified by written notice given to each other party five (5) days prior to the effectiveness of such change, provided that Schulte Roth & LLP shall only be provided copies of notices sent to the lead Buyer. Written confirmation of receipt (A) given by the recipient of such notice, consent, waiver or other communication, (B) mechanically or electronically generated by the sender’s facsimile machine or e-mail containing the time, date, recipient facsimile number and, with respect to each facsimile transmission, an image of the first page of such transmission or (C) provided by an overnight courier service shall be rebuttable evidence of personal service, receipt by facsimile or receipt from an overnight courier service in accordance with clause (i), (ii) or (iii) above, respectively.
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(g) Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the parties and their respective successors and assigns, including any purchasers of any of the Notes. The Company shall not assign this Agreement or any rights or obligations hereunder without the prior written consent of the Required Holders, including, without limitation, by way of a Fundamental Transaction as defined in the Notes. A Buyer may assign some or all of its rights hereunder in connection with any transfer of any of its Securities without the consent of the Company, in which event such assignee shall be deemed to be a Buyer hereunder with respect to such assigned rights.
(h) No Third Party Beneficiaries. This Agreement is intended for the benefit of the parties hereto and their respective permitted successors and assigns, and is not for the benefit of, nor may any provision hereof be enforced by, any other Person, other than the Indemnitees referred to in Section 9(k).
(i) Survival. The representations, warranties, agreements and covenants shall survive the Closing. Each Buyer shall be responsible only for its own representations, warranties, agreements and covenants hereunder.
(j) Further Assurances. Each party shall do and perform, or cause to be done and performed, all such further acts and things, and shall execute and deliver all such other agreements, certificates, instruments and documents, as any other party may reasonably request in order to carry out the intent and accomplish the purposes of this Agreement and the consummation of the transactions contemplated hereby.
(k) Indemnification. In consideration of each Buyer’s execution and delivery of the Transaction Documents and acquiring the Securities thereunder and in addition to all of the Company’s other obligations under the Transaction Documents, the Company shall defend, protect, indemnify and hold harmless each Buyer and each holder of any Securities and all of their stockholders, partners, members, officers, directors, employees and direct or indirect investors and any of the foregoing Persons’ agents or other representatives (including, without limitation, those retained in connection with the transactions contemplated by this Agreement) (collectively, the “Indemnitees”) from and against any and all actions, causes of action, suits, claims, losses, costs, penalties, fees, liabilities and damages, and expenses in connection therewith (irrespective of whether any such Indemnitee is a party to the action for which indemnification hereunder is sought), and including reasonable attorneys’ fees and disbursements (the “Indemnified Liabilities”), incurred by any Indemnitee as a result of, or arising out of, or relating to (i) any misrepresentation or breach of any representation or warranty made by the Company or any Subsidiary in any of the Transaction Documents, (ii) any breach of any covenant, agreement or obligation of the Company or any Subsidiary contained in any of the Transaction Documents or (iii) any cause of action, suit, proceeding or claim brought or made against such Indemnitee by a third party (including for these purposes a derivative action brought on behalf of the Company or any Subsidiary) or which otherwise involves such Indemnitee that arises out of or results from (A) the execution, delivery, performance or enforcement of any of the Transaction Documents, (B) any transaction financed or to be financed in whole or in part, directly or indirectly, with the proceeds of the issuance of the Securities, (C) any disclosure properly made by such Buyer pursuant to Section 4(i), or (D) the status of such Buyer or holder of the Securities either as an investor in the Company pursuant to the transactions contemplated by the Transaction Documents or as a party to this Agreement (including, without limitation, as a party in interest or otherwise in any action or proceeding for injunctive or other equitable relief). To the extent that the foregoing undertaking by the Company may be unenforceable for any reason, the Company shall make the maximum contribution to the payment and satisfaction of each of the Indemnified Liabilities which is permissible under applicable law.
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(i) Promptly after receipt by an Indemnitee under this Section 9(k) of notice of the commencement of any action or proceeding (including any governmental action or proceeding) involving an Indemnified Liability, such Indemnitee shall, if a claim in respect thereof is to be made against the Company under this Section 9(k), deliver to the Company a written notice of the commencement thereof, and the Company shall have the right to participate in, and, to the extent the Company so desires, to assume control of the defense thereof with counsel mutually satisfactory to the Company and the Indemnitee; provided, however, that an Indemnitee shall have the right to retain its own counsel with the fees and expenses of such counsel to be paid by the Company if: (A) the Company has agreed in writing to pay such fees and expenses; (B) the Company shall have failed promptly to assume the defense of such Indemnified Liability and to employ counsel reasonably satisfactory to such Indemnitee in any such Indemnified Liability; or (C) the named parties to any such Indemnified Liability (including any impleaded parties) include both such Indemnitee and the Company, and such Indemnitee shall have been advised by counsel that a conflict of interest is likely to exist if the same counsel were to represent such Indemnitee and the Company (in which case, if such Indemnitee notifies the Company in writing that it elects to employ separate counsel at the expense of the Company, then the Company shall not have the right to assume the defense thereof and such counsel shall be at the expense of the Company), provided further, that in the case of clause (C) above the Company shall not be responsible for the reasonable fees and expenses of more than one (1) separate legal counsel for the Indemnitees. The Indemnitee shall reasonably cooperate with the Company in connection with any negotiation or defense of any such action or Indemnified Liability by the Company and shall furnish to the Company all information reasonably available to the Indemnitee which relates to such action or Indemnified Liability. The Company shall keep the Indemnitee reasonably apprised at all times as to the status of the defense or any settlement negotiations with respect thereto. The Company shall not be liable for any settlement of any action, claim or proceeding effected without its prior written consent, provided, however, that the Company shall not unreasonably withhold, delay or condition its consent. The Company shall not, without the prior written consent of the Indemnitee, consent to entry of any judgment or enter into any settlement or other compromise which does not include as an unconditional term thereof the giving by the claimant or plaintiff to such Indemnitee of a release from all liability in respect to such Indemnified Liability or litigation, and such settlement shall not include any admission as to fault on the part of the Indemnitee. Following indemnification as provided for hereunder, the Company shall be subrogated to all rights of the Indemnitee with respect to all third parties, firms or corporations relating to the matter for which indemnification has been made. The failure to deliver written notice to the Company within a reasonable time of the commencement of any such action shall not relieve the Company of any liability to the Indemnitee under this Section 9(k), except to the extent that the Company is materially and adversely prejudiced in its ability to defend such action.
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(ii) The indemnification required by this Section 9(k) shall be made by periodic payments of the amount thereof during the course of the investigation or defense, within ten (10) days after bills are received or Indemnified Liabilities are incurred.
(iii) The indemnity agreement contained herein shall be in addition to (A) any cause of action or similar right of the Indemnitee against the Company or others, and (B) any liabilities the Company may be subject to pursuant to the law.
(l) Construction. The language used in this Agreement will be deemed to be the language chosen by the parties to express their mutual intent, and no rules of strict construction will be applied against any party. No specific representation or warranty shall limit the generality or applicability of a more general representation or warranty. Each and every reference to share prices, shares of Common Stock and any other numbers in this Agreement that relate to the Common Stock shall be automatically adjusted for any stock splits, stock dividends, stock combinations, recapitalizations or other similar transactions that occur with respect to the Common Stock after the date of this Agreement. Notwithstanding anything in this Agreement to the contrary, for the avoidance of doubt, nothing contained herein shall constitute a representation or warranty against, or a prohibition of, any actions with respect to the borrowing of, arrangement to borrow, identification of the availability of, and/or securing of, securities of the Company or any Subsidiary (as the case may be) in order for such Buyer (or its broker or other financial representative) to effect short sales or similar transactions in the future.
(m) Remedies. Each Buyer and in the event of assignment by Buyer of its rights and obligations hereunder, each holder of Securities, shall have all rights and remedies set forth in the Transaction Documents and all rights and remedies which such holders have been granted at any time under any other agreement or contract and all of the rights which such holders have under any law. Any Person having any rights under any provision of this Agreement shall be entitled to enforce such rights specifically (without posting a bond or other security), to recover damages by reason of any breach of any provision of this Agreement and to exercise all other rights granted by law. Furthermore, the Company recognizes that in the event that it or any Subsidiary fails to perform, observe, or discharge any or all of its or such Subsidiary’s (as the case may be) obligations under the Transaction Documents, any remedy at law would inadequate relief to the Buyer. The Company therefore agrees that the Buyer shall be entitled to specific performance and/or temporary, preliminary and permanent injunctive or other equitable relief from any court of competent jurisdiction in any such case without the necessity of proving actual damages and without posting a bond or other security. The remedies provided in this Agreement and the other Transaction Documents shall be cumulative and in addition to all other remedies available under this Agreement and the other Transaction Documents, at law or in equity (including a decree of specific performance and/or other injunctive relief).
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(n) Withdrawal Right. Notwithstanding anything to the contrary contained in (and without limiting any similar provisions of) the Transaction Documents, whenever any Buyer exercises a right, election, demand or option under a Transaction Document and the Company or any Subsidiary does not timely perform its related obligations within the periods therein provided, then such Buyer may rescind or withdraw, in its sole discretion from time to time upon written notice to the Company or such Subsidiary (as the case may be), any relevant notice, demand or election in whole or in part without prejudice to its future actions and rights.
(o) Payment Set Aside; Currency. To the extent that the Company makes a payment or payments to any Buyer hereunder or pursuant to any of the other Transaction Documents or any of the Buyer enforce or exercise their rights hereunder or thereunder, and such payment or payments or the proceeds of such enforcement or exercise or any part thereof are subsequently invalidated, declared to be fraudulent or preferential, set aside, recovered from, disgorged by or are required to be refunded, repaid or otherwise restored to the Company or any Subsidiary (as the case may be), a trustee, receiver or any other Person under any law (including, without limitation, any bankruptcy law, foreign, state or federal law, common law or equitable cause of action), then to the extent of any such restoration the obligation or part thereof originally intended to be satisfied shall be revived and continued in full force and effect as if such payment had not been made or such enforcement or setoff had not occurred. Unless otherwise expressly indicated, all dollar amounts referred to in this Agreement and the other Transaction Documents are in United States Dollars (“U.S. Dollars”), and all amounts owing under this Agreement and all other Transaction Documents shall be paid in U.S. Dollars. All amounts denominated in other currencies (if any) shall be converted into the U.S. Dollar equivalent amount in accordance with the Exchange Rate on the date of calculation. “Exchange Rate” means, in relation to any amount of currency to be converted into U.S. Dollars pursuant to this Agreement, the U.S. Dollar exchange rate as published in the Wall Street Journal on the relevant date of calculation.
(p) Judgment Currency.
(i) If for the purpose of obtaining or enforcing judgment against the Company or any Subsidiary in connection with this Agreement or any other Transaction Document in any court in any jurisdiction it becomes necessary to convert into any other currency (such other currency being hereinafter in this Section 9(p) referred to as the “Judgment Currency”) an amount due in US Dollars under this Agreement, the conversion shall be made at the Exchange Rate prevailing on the Trading Day immediately preceding:
(1) the date actual payment of the amount due, in the case of any proceeding in the courts of Delaware or in the courts of any other jurisdiction that will give effect to such conversion being made on such date: or
(2) the date on which the foreign court determines, in the case of any proceeding in the courts of any other jurisdiction (the date as of which such conversion is made pursuant to this Section 9(p)(i)(2) being hereinafter referred to as the “Judgment Conversion Date”).
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(ii) If in the case of any proceeding in the court of any jurisdiction referred to in Section 9(p)(i)(2) above, there is a change in the Exchange Rate prevailing between the Judgment Conversion Date and the date of actual payment of the amount due, the applicable party shall pay such adjusted amount as may be necessary to ensure that the amount paid in the Judgment Currency, when converted at the Exchange Rate prevailing on the date of payment, will produce the amount of US Dollars which could have been purchased with the amount of Judgment Currency stipulated in the judgment or judicial order at the Exchange Rate prevailing on the Judgment Conversion Date.
(iii) Any amount due from the Company or any Subsidiary (as the case may be) under this provision shall be due as a separate debt and shall not be affected by judgment being obtained for any other amounts due under or in respect of this Agreement or any other Transaction Document.
(q) Independent Nature of Buyer’ Obligations and Rights. The obligations of each Buyer under the Transaction Documents are several and not joint with the obligations of any other Buyer, and no Buyer shall be responsible in any way for the performance of the obligations of any other Buyer under any Transaction Document. Nothing contained herein or in any other Transaction Document, and no action taken by any Buyer pursuant hereto or thereto, shall be deemed to constitute the Buyer as, and the Company, and any Subsidiary thereof (as the case may be) acknowledges that the Buyer do not so constitute, a partnership, an association, a joint venture or any other kind of group or entity, or create a presumption that the Buyer are in any way acting in concert or as a group or entity, and the Company and any Subsidiary shall not assert any such claim with respect to such obligations or the transactions contemplated by the Transaction Documents or any matters, and the Company and any Subsidiary thereof (as the case may be) acknowledges that the Buyer are not acting in concert or as a group, and the Company and any Subsidiary thereof (as the case may be) shall not assert any such claim, with respect to such obligations or the transactions contemplated by the Transaction Documents. The decision of each Buyer to purchase Securities pursuant to the Transaction Documents has been made by such Buyer independently of any other Buyer. Each Buyer acknowledges that no other Buyer has acted as agent for such Buyer in connection with such Buyer making its investment hereunder and that no other Buyer will be acting as agent of such Buyer in connection with monitoring such Buyer’s investment in the Securities or enforcing its rights under the Transaction Documents. The Company and each Buyer confirms that each Buyer has independently participated with the Company and its Subsidiaries in the negotiation of the transaction contemplated hereby with the advice of its own counsel and advisors. Each Buyer shall be entitled to independently protect and enforce its rights, including, without limitation, the rights arising out of this Agreement or out of any other Transaction Documents, and it shall not be necessary for any other Buyer to be joined as an additional party in any proceeding for such purpose. The use of a single agreement to effectuate the purchase and sale of the Securities contemplated hereby was solely in the control of the Company, not the action or decision of any Buyer, and was done solely for the convenience of the Company and its Subsidiaries and not because it was required or requested to do so by any Buyer. It is expressly understood and agreed that each provision contained in this Agreement and in each other Transaction Document is between the Company, each Subsidiary and a Buyer, solely, and not between the Company, its Subsidiaries and the Buyer collectively and not between and among the Buyer.
[signature pages follow]
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IN WITNESS WHEREOF, each Buyer, and the Company have caused their respective signature page to this Agreement to be duly executed as of the date first written above.
| COMPANY: | ||
| Global Technologies, Inc. | ||
| By: | Frederick Kalei Cutcher | |
| Title: | CEO | |
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IN WITNESS WHEREOF, each Buyer, and the Company have caused their respective signature page to this Agreement to be duly executed as of the date first written above.
| BUYER: | ||
| txc services, llc | ||
| By: | ||
| Christopher Ferguson | ||
| Title: | Manager | |
SCHEDULE OF BUYER
| (1) | (2) | (3) | (5) | (6) | (7) | |||||||||||
| Buyer | Address | Original Principal Amount of Notes | Aggregate Number of Warrant Shares | Purchase Price | Legal Representative’s Address and Facsimile Number | |||||||||||
| .TXC Services, LLC | Please deliver any notices to an address to be provided by Buyer to 30725 US Highway 19 North, Suite 335, Palm Harbor, FL 34684 | $ | 1,600,000 | 0 | $ | 1,600,000 | [TO BE PROVIDED] | |||||||||
EXHIBIT A
Note
Exhibit 10.8
[SPACE RESERVED FOR RECORDING INFORMATION]
RECORD AND RETURN TO:
TXC SERVICES, LLC
30725 US HIGHWAY 19 NORTH
SUITE 335
PALM HARBOR, FL 34684
DEED TO SECURE DEBT, ASSIGNMENT OF LEASES AND RENTS, SECURITY AGREEMENT, FINANCING STATEMENT, AND FIXTURE FILING
CLERK’S COVER SHEET/HB 974 DISCLOSURES
Date of Document: July 28, 2023
Signatories to the Document: Borrower (Grantor): Foxx Trot Tango, LLC
Signatories to the Document: Lender (Grantee): TXC Services, LLC
Mailing Address of Borrower (Grantee): 8 Campus Dr., Suite 105, Parsippany, NJ 07054
Property Address: 101 Seabrook Drive, Sylvester, GA 31791
County: Worth
Map and Parcel ID Number(s): NO 0074005300A
Original Loan Amount: $1,600,000
Initial Maturity Date: July 25, 2024
Intangible Recording Tax: [$AMOUNT - N/A]
Intangible Recording Tax Exemption, if Applicable: [EXEMPTION]
THIS COVER PAGE IS FOR REFERENCE ONLY. IN THE EVENT OF A CONFLICT, THE TERMS OF THE ATTACHED DEED TO SECURE DEBT CONTROL.
TABLE OF CONTENTS
| ARTICLE I GRANT OF SECURITY INTERESTS AND OBLIGATIONS SECURED | 5 |
| Section 1.02 Obligations Secured; Incorporation by Reference | 7 |
| Section 1.03 Security Deed as Security Agreement and Financing Statement. | 7 |
| Section 1.04 Security Deed as Fixture Filing. | 8 |
| ARTICLE II ASSIGNMENT OF LEASES AND RENTS | 8 |
| Section 2.01 Assignment of Leases and Rents. | 8 |
| Section 2.02 Revocable License. | 9 |
| Section 2.03 Grantee’s Rights After License Revocation. | 10 |
| ARTICLE III SINGLE PURPOSE ENTITY REQUIREMENTS | 10 |
| Section 3.01 Formation and Existence. | 10 |
| Section 3.02 Separateness Covenants and Requirements. | 10 |
| ARTICLE IV REPRESENTATIONS AND WARRANTIES | 10 |
| Section 4.01 Organization and Legal Status. | 11 |
| Section 4.02 Power and Authority; Enforceability. | 11 |
| Section 4.03 No Legal Conflict or Impediment. | 11 |
| Section 4.04 No Litigation. | 12 |
| Section 4.05 Business Purpose of Loan. | 12 |
| Section 4.06 Warranty of Title; Perfection and Priority of Lien; Permitted Encumbrances. | 12 |
| Section 4.07 Property Condition. | 13 |
| Section 4.08 No Condemnation. | 13 |
| Section 4.09 Environmental Representations and Warranties; Property Compliance with Law. | 13 |
| Section 4.10 Separate Tax Lot. | 14 |
| Section 4.11 Flood Zone. | 14 |
| Section 4.12 Adequate Utilities. | 14 |
| Section 4.13 Public Access. | 14 |
| Section 4.14 Boundaries. | 14 |
| Section 4.15 Mechanic’s Liens. | 14 |
| Section 4.16 Special Assessments and Transfer Taxes. | 14 |
| Section 4.17 Insurance. | 15 |
| Section 4.18 Leases. | 15 |
| Section 4.19 Property Management | 16 |
| Section 4.20 Financial Condition | 17 |
| Section 4.21 Real Property and Income Taxes. | 17 |
| Section 4.22 No Foreign Person. | 17 |
| Section 4.23 No Illegal Activity as Source of Funds. | 17 |
| Section 4.24 Compliance with Anti-Terrorism, Embargo, Sanctions, and Anti-Money Laundering Laws. | 17 |
| Section 4.25 Brokers’ and Finders’ Fees. | 19 |
| Section 4.26 Complete Disclosure; No Change in Facts or Circumstances. | 19 |
| Section 4.28 [DEAL SPECIFIC REPRESENTATION[S]]. | 20 |
| Section 4.29 Survival. | 20 |
| 2 |
| ARTICLE V BORROWER COVENANTS AND LOAN REQUIREMENTS | 20 |
| Section 5.01 Property Covenants and Requirements. | 20 |
| Section 5.02 Leasing Covenants. | 22 |
| Section 5.03 Insurance Coverages. | 22 |
| Section 5.04 Existence, Financial and Reporting Covenants. | 26 |
| Section 5.05 Covenants of Continued Cooperation. | 27 |
| ARTICLE VI LOAN ESCROWS | 29 |
| Section 6.01 Tax and Insurance Escrows. | 29 |
| Section 6.02 Maintenance of Accounts. | 29 |
| ARTICLE VII CASUALTY AND CONDEMNATION | 29 |
| Section 7.01 Provisions Applicable to Casualty and Condemnation. | 29 |
| Section 7.02 Casualty. | 30 |
| Section 7.03 Condemnation. | 31 |
| ARTICLE VIII NO TRANSFERS; DUE ON SALE | 33 |
| Section 8.01 Prohibition Against Transfers. | 33 |
| Section 8.02 Due on Sale. | 33 |
| Section 8.03 Permitted Transfers. | 33 |
| Section 8.04 Conditional One-Time Transfer Right. | 34 |
| ARTICLE IX EVENTS OF DEFAULT; REMEDIES | 35 |
| Section 9.01 Events of Default. | 35 |
| Section 9.02 Grantee’s Remedies. | 37 |
| Section 9.03 Omnibus Provisions Pertaining to Grantee’s Rights and Remedies. | 40 |
| ARTICLE X MISCELLANEOUS | 41 |
| Section 10.01 Notices. | 41 |
| Section 10.02 Usury Saving Clause. | 42 |
| Section 10.03 No Joint Venture; No Third-Party Beneficiaries. | 42 |
| Section 10.04 Grantee Approval. | 42 |
| Section 10.05 Performance at Grantor’s Expense. | 42 |
| Section 10.06 Joint and Several Obligations. | 43 |
| Section 10.07 Grantee’s Right of Assignment. | 43 |
| Section 10.08 No Merger. | 43 |
| Section 10.09 After-Acquired Property. | 43 |
| Section 10.10 Waiver of Jury Trial. | 43 |
| Section 10.11 Time of the Essence. | 43 |
| Section 10.12 Special Waivers. | 44 |
| Section 10.13 Security Deed Not a Mortgage. | 44 |
| Section 10.14 Headings; Time of the Essence. | 44 |
| 3 |
DEED TO SECURE DEBT, ASSIGNMENT OF LEASES AND RENTS, SECURITY AGREEMENT, FINANCING STATEMENT, AND FIXTURE FILING
This Deed to Secure Debt, Assignment of Leases and Rents, Security Agreement, Financing Statement, and Fixture Filing (as amended, amended and restated, supplemented, renewed, or otherwise modified from time to time, this “Security Deed”), dated and executed on July 28, 2023, with an effective date of July 25, 2023, is made by Foxx Trot Tango, LLC, a Wyoming limited liability company having its principal office at 8 Campus Dr., Suite 105, Parsippany, NJ 07054 (“Grantor”), in favor of TXC Services, LLC, a Delaware limited liability company, having an office at : 30725 US Highway 19 North, Suite 335, Palm Harbor, FL 34684 (together with its successors and assigns, “Grantee”).
THIS SECURITY DEED SERVES AS A FIXTURE FILING UNDER THE GEORGIA UNIFORM COMMERCIAL CODE PURSUANT TO O.C.G.A. § 11-9-502. GRANTEE DESIRES THIS FIXTURE FILING TO BE INDEXED AGAINST THE GRANTOR AS THE RECORD OWNER OF THE REAL ESTATE DESCRIBED HEREIN.
Recitals
| A. | This Security Deed is given by Grantor to Grantee to secure that certain loan made as of July 25, 2023 (“Loan”) in the original principal amount of One Million Six Hundred Thousand Dollars and 00/100 Dollars ($1,600,000). | |
| B. | The Loan is evidenced by, among other things, a promissory note, dated as of the July 25, 2023 given by Grantor, as borrower, in favor of Grantee, as lender (such promissory note, together with any and all extensions, renewals, replacements, restatements, modifications, or consolidations thereof, whether one or more, collectively, “Note”) which Note provides, among other things, for final payment of principal and interest under the Note, if not sooner paid or payable as provided therein, to be due on or before July 25, 2024, the Note by this reference thereto being incorporated herein. | |
| C. | The Note and this Security Deed is being made pursuant to that certain Amended and Restated Membership Interest Purchase Agreement, and related transaction documents dated July 25, 2023, between Grantee, as seller and Global Technologies, Ltd. (“GTLL”), as buyer, of all membership interests in and to Grantor, collectively the “MIPA”) | |
| D. | All Loan Documents and the MIPA, as each may be amended, restated, supplemented, or otherwise modified from time to time in accordance with its terms hereof, collectively referred to as, “Transaction Documents.” | |
| E. | Notwithstanding anything to the contrary herein, this Security Deed is subordinate to a promissory note in the principal amount of One Million Five Hundred Thousand Dollars ($1,500,000) in favor of TK Management Services, Inc. (“TK Secured Note”) dated January 6, 2023 evidenced by first position Deed to Secure Debt, Assignment of Leases and Rents, Security Agreement, Financing Statement and Fixture Filing recorded against the Property ( “TK Security Deed”), copies of which are attached to the MIPA as exhibits. |
| 4 |
| F. | Grantor hereby desires to secure the payment of all principal and interest payments that accrue or are due and payable from time to time in accordance with the MIPA and the Note, together with all other amounts due in accordance with the other Loan Documents (collectively, hereafter “Debt”) and to further secure the performance and observance of all obligations of Grantor under this Security Deed and other Loan Documents and Transaction Documents. | |
| G. | The Debt and all covenants, obligations, payments, and liabilities of every kind and nature owed by Grantor to Grantee, whether direct or indirect, absolute or contingent, due or to become due, now existing or hereinafter incurred, arising under, out of, or in connection with the Transaction Documents, including the Loan and the Loan Documents are hereafter, collectively, “Obligations.” |
NOW, THEREFORE, in consideration of the premises and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and in order to secure the due and punctual payment and performance of all Obligations as and when the same becomes due and payable, Grantor hereby represents, warrants, covenants, and agrees for the benefit of Grantee as follows:
ARTICLE I
GRANT OF SECURITY INTERESTS AND OBLIGATIONS SECURED
Section 1.01 Grant to Grantee. In order to secure the due and punctual payment and performance of all the Obligations as and when the same becomes due and payable, whether at a stated due date, maturity date, by acceleration, or otherwise, Borrower hereby irrevocably and absolutely does by these presents GRANT, CONVEY, WARRANT, SET OVER, TRANSFER, ASSIGN, BARGAIN, AND SELL to Lender, its successors and assigns, with all powers of sale and all statutory rights under the laws of the State of Georgia, and grants to Lender a security interest in, all of Borrower’s present and hereafter acquired estate, right, title and interest in, to, and under the following described property now owned or held or hereafter acquired from time to time (collectively referred to herein as the “Property”):
(a) Land. All that certain tract or parcel of land lying and being in Worth County, Georgia and being more particularly described in Exhibit A attached hereto and incorporated herein by reference, together with all utilities, rights, interests, and estates of every kind and nature therein, including, without limitation, and to the full extent owned by Grantor, development rights, air rights, water, water rights, and rights to minerals and other natural resources that can be extracted therefrom (collectively, “Land”).
(b) Improvements. All buildings, structures, and improvements of every kind and nature whatsoever now or hereafter situated on the Land (collectively, “Improvements”).
(c) Easements and Appurtenances. All easements, rights-of-way or use, strips and gores of land, streets, alleyways, passages, utility reservations, capacity rights, water courses, privileges, liberties, tenements, hereditaments, and appurtenances of any kind or nature belonging, relating, or appertaining to the Land or the Improvements, or any part thereof, including, without limitation, any reversionary or remainder estates together with the income and profits therefrom (collectively, “Easements and Appurtenances”).
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(d) Fixtures. All goods of every kind and nature that becomes attached to, affixed to, or installed on the Land or Improvements thereby creating rights and interests arising under the Georgia real property law, including any item defined as fixtures under the Uniform Commercial Code as adopted by Georgia (the “UCC”) together with all replacements and substitutions thereof (collectively, “Fixtures”).
(e) Personal Property. All equipment, building systems, machinery, materials, supplies, and items of personal property of every kind and nature (other than Fixtures) now or hereafter located on or used in connection with the operation of the Land or Improvements, together with all replacements and substitutions thereof (collectively, “Personal Property”).
(f) Leases and Rents. All of Grantor’s right, title, and interest in all leases, ground leases, subleases, licenses, and other agreement granting another the right to use or occupy any part of the Property, including, without limitation, the right to receive and apply rents, together with all restatements, renewals, extensions, amendments, or supplements thereof (individually, a “Lease” and, collectively, “Leases”), whether now or hereafter existing, and all Rents thereon. The term “Rents” shall mean, collectively:
(i) All rents, ground rents, additional rents, income, revenues, profits, cash proceeds, and other monetary benefits now due or hereafter becoming due from the tenancy, use, occupancy, or bailment of any portion of the Property;
(ii) All guaranties, letters of credit, promissory notes, security deposits, and other credit support given by any tenant, occupant, or guarantor in connection with any Lease;
(iii) All claims and rights to the payment of damages arising from the rejection of any Lease under the Bankruptcy Reform Act of 1978, codified as 11 U.S.C. §101 et. seq., and the regulations issued thereunder, both as hereafter modified from time to time (the “Bankruptcy Code”); and
(iv) All rights to casualty and condemnation proceeds assigned to Grantor under any Lease.
(g) Property Tax Refunds. All refunds, rebates, and credits in connection with any reduction in Taxes, including, without limitation, rebates as a result of tax certiorari or other such proceedings. As used in the Loan Documents, “Taxes” means all real estate taxes, government assessments or impositions, lienable water charges, lienable sewer rents, assessments due under owner association documents, and all similar charges, now or hereafter levied or assessed against the Land and Improvements.
(h) Proceeds of Property Sale. All proceeds and profits arising from the sale or conversion (voluntary or involuntary) of any Property into cash (whether made in one payment or in a stream of payments) and any liquidation claims applicable thereto.
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(i) Intangibles. All chattel paper, claims, trade names, trademarks, service marks, logos, copyrights, goodwill, books and records, and all other general intangibles related to or used in connection with the ownership or operation of the Property.
(j) Property Agreement. All agreements, services contracts, supply contracts, permits, franchises, and licenses (including, without limitation and to the extent assignable, liquor licenses), if any, pertaining to the ownership or operation of the Property, together with all amendments, restatements, supplements, renewals, extensions, and substitutions thereof and all of Grantor’s rights, if any, to sums due Grantor thereunder (collectively, “Property Agreements”).
(k) Omnibus Rights. Any and all other rights of Grantor in and to the Property, including any other rights associated with any Property described in the foregoing subsections (a) through (j) inclusive.
TO HAVE AND TO HOLD the Property and the rights, remedies, and privileges hereby granted and conveyed unto Grantee forever, in fee simple, PROVIDED, HOWEVER, if Grantor shall pay the Debt and perform all other Obligations in the time and manner provided in the Loan Documents, then the conveyance and granting made herein shall cease and be of no further force and effect.
IN FURTHERANCE OF THE ABOVE GRANT, Grantor hereby warrants that Grantee has good and marketable title in fee simple to the Property, is lawfully seized and possessed of the Property and every part thereof, and has the right to convey same; that Grantor will forever warrant and defend the title to the Property unto Grantee against the claims of all persons whomsoever; and that the Property is unencumbered except as set forth on Grantee’s title insurance policy dated on or about even date herewith regarding the Property.
Section 1.02 Obligations Secured; Incorporation by Reference. This Security Deed is given to secure the due and punctual payment and performance of all Obligations set forth in the Note and other Loan Documents as and when the same shall become due, whether at the stated due date, at maturity, by acceleration, or otherwise. All the covenants, conditions, and agreements contained in the Note and other Loan Documents are hereby made a part of this Security Deed to the same extent and with the same force as if fully set forth herein. In the event of a conflict between the terms of this Security Deed and any other Loan Document, the terms of this Security Deed shall govern.
Section 1.03 Security Deed as Security Agreement and Financing Statement.
(a) Designation as Security Agreement. This Security Deed shall constitute a security agreement and financing statement within the meaning of the UCC, as adopted in Georgia, from time to time with respect to all of Grantor’s present and future estate, right, title, and interest in and to such Property conveyed to Grantee pursuant to Section 1.01 that is not real property.
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(b) Separate Security Agreements. If Grantor has executed and delivered one or more separate security agreements in connection with the Loan, such security agreements and the security interests created thereby are in addition to and not in substitution of this Security Deed and security interests created hereby, and this Security Deed shall be in addition to and not in substitution of such security agreements and security interests. In all cases, this Security Deed and the aforesaid security agreements shall be applied and enforced in harmony with and in conjunction with each other to the end that Grantee realizes its rights, interests, and remedies in each to the greatest extent permitted by law. If conflicts exist among this Security Deed and such other security agreements, Grantee may elect which of such instruments govern with respect to each category of Property encumbered by such instruments and agreements.
Section 1.04 Security Deed as Fixture Filing. The filing or recording of this Security Deed shall constitute a fixture filing with respect to that portion of the Property which is or is to become Fixtures and Equipment to the fullest extent permitted under Georgia law. The “Secured Party” is Grantee and the “Debtor” is Grantor. The name, type of organization, jurisdiction of organization, and addresses of the Secured Party and of the Debtor are set out in the preamble to this Security Deed.
ARTICLE II
ASSIGNMENT OF LEASES AND RENTS
Section 2.01 Assignment of Leases and Rents.
(a) Absolute Assignment of Leases and Rents. Subject to the senior rights of TK Management Services, Inc. to the collateral, including, but not limited to the Property, under the TK Secured Note and TK Security Deed (“TK Senior Rights”), in furtherance of the grant, pledge, and conveyance of all Leases and Rents pursuant to Section 1.01(f) hereof, Grantor hereby absolutely, presently, irrevocably, and unconditionally grants, assigns, and transfers to Grantee all of Grantor’s present and future right, title, interest, and estate in, to, and under all current and future Leases and Rents, and the absolute, present, irrevocable, and unconditional right to receive, collect, and possess all Rents. This assignment constitutes an absolute, present, irrevocable, and unconditional assignment of Leases and Rents, not merely a collateral assignment to further secure the lien of this Security Deed.
(b) Grantee Exculpation. Subject to the TK Senior Rights, notwithstanding the present, absolute nature of the assignment made under this Article II, such assignment shall not be construed to:
(i) Bind Grantee to the performance of any of the covenants, conditions, or provisions contained in any Lease or otherwise impose any obligation upon Grantee.
(ii) Create or impose, any responsibility, obligation, or liability upon Grantee of any kind or nature, including without limitation, for:
(A) the control, care, maintenance, management, or repair of the Property;
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(B) any dangerous or defective condition of the Property, including, without limitation, the presence of any environmental contamination or hazardous condition;
(C) any waste committed on the Property by any Person; or
(D) any negligence in the management, upkeep, repair, or control of the Property.
Section 2.02 Revocable License.
(a) Grant of Revocable License. Subject to the TK Senior Rights, notwithstanding the present grant, assignment, and transfer of Leases and Rents from Grantor to Grantee made in Section 2.01, [and subject to the terms of the Lockbox Agreement] Grantee hereby grants to Grantor a revocable license to collect and receive Rents as they become due, and to retain, use, and apply Rents to the payment of the Obligations and to the costs and expenses of operating and maintaining the Property, and to exercise all rights as landlord under any Lease, in each case subject to the terms of this Security Deed and the other Loan Documents.
(b) Revocation of License. Subject to the TK Senior Rights, from and after the occurrence of any Event of Default (as hereinafter defined), the revocable license granted to Grantor pursuant to Section 2.01(a) shall immediately cease without the necessity of notice from Grantee and become void and of no further force or effect. Grantee’s right under this Section to revoke the license granted hereby is in addition to all other rights and remedies available to Grantee at law and in equity. From and after revocation:
(i) Grantee shall immediately and automatically be entitled to receive, collect, and possess all Rents, whether or not Grantee enters upon or takes control of the Property, has a receiver appointed, or takes any other action permitted by the Loan Documents, at law, or in equity;
(ii) Grantor shall immediately, upon written demand by Grantee, notify all tenants under Leases, in writing, that all Rents due from and after the date of such notice shall be paid to Grantee at the address set forth in such notice;
(iii) All Rents then or thereafter received by Grantor shall be immediately delivered to Grantee without the necessity of written demand, and until delivered, shall be held in trust for the benefit of Grantee; and
(iv) All Rents received by Grantee pursuant to this Section 2.02(b) may, at Grantee’s sole option, be applied to the Debt or in payment of any other Obligation set forth in the Loan Documents, in such order or priority as Grantee shall determine in its sole discretion.
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Section 2.03 Grantee’s Rights After License Revocation. Subject to the TK Senior Rights, from and after any revocation of the license granted pursuant to Section 2.02(a), Grantee shall have the right, but not the obligation, at its option and in addition to its other rights and remedies available to Grantee under law, acting personally or through an agent, and without the necessity of taking possession of the Property or bringing any enforcement action or proceeding, including, without limitation, foreclosure, or the appointment of a receiver, to take any or all of the following actions to the fullest extent permitted by law:
(a) Direct Payments of Rent. Notify tenants or other Persons that all Leases have been assigned to Grantee and that all Rents are to be paid at the direction of Grantee. The term “Person” means an individual, partnership, limited partnership, corporation, limited liability company, business trust, joint stock company, trust, unincorporated association, joint venture, governmental authority, or any other entity of whatever nature each hereinafter referred to individually and/or collectively as the context requires.
(b) Modify Lease Obligations. Settle, compromise, release, extend the time of payment for, and make allowances, adjustments, and discounts of any Rents or other obligations in, to, and under Leases.
(c) Rent the Property and Modify Leases. Lease all or any part of the Property and/or modify, amend, renew, or terminate any Leases.
(d) Perform Lease Obligations. Perform any and all obligations of Grantor under Leases and exercise any and all rights of Grantor therein contained to the full extent of Grantor’s rights and obligations thereunder.
ARTICLE III
SINGLE PURPOSE ENTITY REQUIREMENTS
Section 3.01 Formation and Existence. Grantor hereby makes the following representations, warranties, and covenants with respect to itself, Ltd, its parent.
(a) Borrower Formation and Existence. Grantor is a single purpose entity within the meaning of Section 3.02 and shall remain a single purpose entity at all times until the Loan has been repaid in full.
Section 3.02 RESERVED.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
Grantor acknowledges and agrees that in making the Loan evidenced by the Loan Documents, Grantee has relied on the truth, completeness, and accuracy of the representations and warranties made by Grantor herein. Grantor hereby makes the representations and warranties contained in this Article IV to Grantee as of the Effective Date.
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Section 4.01 Organization and Legal Status.
(a) Due Formation, Existence, and Good Standing. The Grantor and Guarantor, are duly organized, validly existing, and in good standing under the laws of each of their respective states of formation.
(b) Qualification to do Business. Grantor is duly qualified to transact business in Georgia.
(c) Legal Authority to Own Property. Grantor has all necessary approvals (governmental, contractual, or otherwise) and full power and authority to own, operate, and lease the Property and to carry out the business required to be conducted to own, operate, and lease the Property in full accordance with the terms, covenants, and conditions contained in the Loan Documents.
(d) Grantor’s Identity. Grantor’s true, complete, and correct legal name is stated on the first page of this Security Deed. Grantor is a “registered organization” within the meaning of the UCC and Grantor’s organizational identification number issued by its state of organization is correctly set out on the signature page to this Security Deed.
Section 4.02 Power and Authority; Enforceability.
(a) Power and Authority. Grantor has full power, authority, and legal right to execute, deliver, and perform all obligations under the Loan Documents and has taken all necessary action to authorize: (i) the borrowing of the Loan on the terms and conditions set forth in the Loan Documents; (ii) the execution and delivery of all Loan Documents; and (iii) Grantor’s performance under all Loan Documents. The officer or representative of Grantor signing the Loan Documents on behalf of Grantor has been duly authorized and empowered to do so.
(b) Enforceability. The Loan Documents constitute legal, valid, and binding obligations of Grantor, enforceable against Grantor in accordance with their terms, except as such enforcement may be limited by bankruptcy, insolvency, reorganization, moratorium, or other similar laws affecting the enforcement of creditors’ rights generally, and by general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law).
Section 4.03 No Legal Conflict or Impediment. With respect to the Grantor’s execution, delivery, and performance of its obligations under the Loan Documents the following is true, accurate, and complete [to [the best of] Grantor’s knowledge, information, and belief]:
(a) Third Party Agreements. The Loan does not violate, contravene, breach, or result in a default under any agreement or instrument to which Grantor is a party or by which the Property is bound or may be affected.
(b) Applicable Law; Usury. The Loan does not violate any Applicable Law (including, without limitation, usury laws). As used in the Loan Documents, the term “Applicable Law” means individually and in the aggregate: (i) the organizational documents governing the applicable Person; and (ii) any law, regulation, ordinance, code, decree, treaty, ruling, or determination of any arbitrator, court, governmental authority, or Executive Order (as hereinafter defined) issued by the President of the United States, in each case applicable to or binding upon such Person or to which such Person or any of such Person’s property (including without limitation, the Property) may be subject including, without limitation, laws, ordinances, and regulations pertaining to the taxing, zoning, occupancy, use, environmental compliance, and subdivision of real property in Georgia.
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(c) No Other Resulting Liens. The Loan does not result in the creation or imposition of any Lien whatsoever upon any of Grantor’s assets, except the Liens created by the Loan Documents. As used in the Loan Documents, the term “Lien” means any mortgage, pledge, hypothecation, assignment, deposit arrangement, encumbrance, lien filing (whether statutory, judicial, or otherwise), preference, priority, security agreement (other than this Security Deed [and the Security Agreement defined herein]), or preferential arrangement of any kind or nature whatsoever, including, without limitation, any conditional sale or title retention agreement, mechanic’s liens, or any financing statement under the UCC or comparable law of any jurisdiction in respect of any of the foregoing.
(d) No Other Consents or Filings. The Loan does not require any authorization or consent from, or any filing with, any third party or governmental authority to perfect Grantee’s security interest in the Property except for: (i) the recordation of this Security Deed in the appropriate land records in the county where the Property is located; and (ii) the filing or recording (as applicable) of UCC-1 financing statements securing or further securing Grantee’s security interests in personal property and fixtures filed in the appropriate filing offices in the state of Grantor’s formation and also recorded in the county where the Property is located.
Section 4.04 No Litigation. No action, suit, or proceeding, whether investigative, judicial, or administrative is currently pending or, to the best of Grantor’s knowledge, information, or belief, affecting, threatened, or contemplated against Grantor, or the Property that has not been disclosed by Grantor in writing to Grantee.
Section 4.05 Business Purpose of Loan. The proceeds of the Loan are for, and shall be used for, the purpose of carrying on a business or commercial enterprise and not for personal, family, or household purposes.
Section 4.06 Warranty of Title; Perfection and Priority of Lien; Permitted Encumbrances.
(a) Warranty of Title. Grantor has good, marketable, and insurable fee simple/leasehold title of record to the Property, free and clear of all Liens whatsoever except for the Liens created in favor of Grantee pursuant to the Loan Documents and the Permitted Encumbrances. None of the Permitted Encumbrances, individually or in the aggregate: (i) interferes with the benefits of the security intended to be provided by this Security Deed in any material respect; (ii) adversely affects the value of the Property in any material respect; or (iii) adversely impairs the use and operation of the Property in any material respect. Grantor shall forever preserve its title to the Property and validity of all Liens created in favor of Grantee under the Loan Documents and shall forever warrant and defend the same to and for the benefit of Grantee against all claims of all others. The term “Permitted Encumbrances” means only those matters listed as exceptions on the Grantee title insurance policy issued to Grantee in connection with this Loan and any other Lien thereafter approved by Grantee in writing.
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(b) Perfection and Priority of Lien.
(i) This Security Deed, when properly recorded, creates a valid perfected lien on the Property, junior to the TK Note and TK Security Deed, subject to the Permitted Encumbrances.
(ii) The Assignment of Leases and Rents, when properly recorded, creates a valid assignment and security interest in the Leases and Rents, junior to the TK Note and TK Security Deed.
(iii) The UCC financing statements, when filed or recorded, as applicable, creates a valid, perfected security interest, junior to the TK Note and TK Security Deed in the collateral defined therein (to the extent a security interest in such collateral can be perfected by the filing of a UCC financing statement).
Section 4.07 Property Condition. The Improvements are structurally sound, in good repair, and free of defects in materials and workmanship. The Improvements have been constructed and installed in compliance with the plans and specifications relating thereto. All major building systems within the Improvements (including, without limitation, heating and air conditioning systems, electrical systems, plumbing systems, septic systems, and sewer systems) are in good working order and condition and in compliance with all Applicable Law. The Property is free from any damage caused by fire or other casualty. Grantor has not received written notice from any insurance company or bonding company of any defects or inadequacies in the Property, or any part thereof, which would adversely affect insurability, or impose extraordinary premiums, or result in the termination or threatened termination of any insurance policy or surety bond.
Section 4.08 No Condemnation. No Condemnation proceeding has been commenced or, to the best of Grantor’s knowledge, information, and belief, is contemplated for all or any portion of the Property, or for the relocation or closure of roadways providing access to or from the Property.
Section 4.09 Environmental Representations and Warranties; Property Compliance with Law.
(a) Environmental Representations and Warranties. To the best of Grantor’s knowledge, after due inquiry, any tenant or occupant of the Property, has at any time released or permitted the presence of any Hazardous Materials, (as defined in the Environmental Indemnity) on or about the Property except as expressly disclosed to Grantee in writing. All operations and activities at the Property, and all use and occupancy of the Property are in compliance with all Environmental Laws, as defined in the Environmental Indemnity. Grantor does not know of, nor has it received, any notice of other communication from any Person pertaining to any violation of or liability under Environmental Laws that may adversely affect the Property or Grantor. Grantor has provided Grantee, in writing, with all information known to Grantor and contained in Grantor’s files that relates to the Property’s environmental condition, including, without limitation, all known environmental reports of the Property.
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(b) Property Compliance With Law. The Property and its present and contemplated use and occupancy complies with Applicable Law in all material respects. Grantor has obtained all licenses, permits, registrations, certificates, and approvals from all governmental or quasi-governmental agencies (including, without limitation, those relating to zoning, building codes, land use, and environmental compliance) which may be necessary for the use, occupancy, and operation of the Property and the conduct of Grantor’s business thereon. All licenses, permits, registrations, certificates, and approvals are in full force and effect as of the date hereof and Grantor has no knowledge or notice of any revocation thereof.[To Grantor’s knowledge, information, and belief, no event or condition exists which could result in the revocation, suspension, or forfeiture thereof.
Section 4.10 Separate Tax Lot. The Property is assessed for real estate tax purposes as one or more whole independent tax lot or lots, separate from any adjoining land or improvements not constituting a part of the Property.
Section 4.11 Flood Zone. Except as otherwise disclosed on the survey of the Property provided to Grantee in connection with the Loan, no portion of the Improvements is located in an area identified by the Federal Emergency Management Agency or any successor thereto, as an area having special flood hazards.
Section 4.12 Adequate Utilities. The Property is adequately served by all utilities required for the current or contemplated use thereof. All water and sewer systems are provided to the Property by public utilities, and the Property has accepted or is equipped to accept such utility services.
Section 4.13 Public Access. All public roads and streets necessary for access to the Property for the current or contemplated use thereof have been completed, are serviceable and all-weather, and are physically and legally open for public use.
Section 4.14 Boundaries. All the Improvements lie wholly within the boundaries and building restriction lines of the Property, and no easements or other encumbrances affecting the Property (including, without limitation, the Permitted Encumbrances) encroach upon any of the Improvements. No improvements on adjacent properties encroach onto the Property.
Section 4.15 Mechanic’s Liens. No mechanic’s liens, materialman’s liens, or other Liens or claims have been, or may be, filed for work, labor, or materials affecting the Property which are or may become Liens prior, equal, or subordinate to this Security Deed.
Section 4.16 Special Assessments and Transfer Taxes. No unpaid assessments for public improvements or otherwise affects the Property or, to the best of Grantor’s knowledge, information, or belief, are pending, nor are improvements contemplated to the Property that may result in any such assessments. All transfer taxes, if applicable, or other similar tax required to be paid by any Person under applicable Legal Requirements in connection with the execution, delivery, recordation, filing, and perfection of this Security Deed and any other Loan Documents, have been paid or will be paid, in full at time on or before recordation of this Security Deed.
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Section 4.17 Insurance. Grantor has obtained and delivered to Grantee original or certified copies of all insurance policies required pursuant to Section 5.03 of this Security Deed. All premiums charged for the coverages under such policies (“Insurance Premiums”) have been prepaid in full for no less than one year. No claims have been made that are pending under any such insurance policies, and neither Grantor nor any other Person has done, by act or omission, anything which would impair the coverage of any insurance policy.
Section 4.18 Leases. With respect to the Leases:
(a) Rent Roll. The Rent Roll (as defined herein) is true, complete, and correct and the Property is not subject to any Leases other than those identified on the Rent Roll. All Rents due under all Leases are currently paid, except as shown on the Rent Roll. The term “Rent Roll” shall mean a statement certified by Grantor to be true, correct, and complete setting forth: (i) the names of each and all tenants of the Property; (ii) the portion of Property occupied by each tenant; (iii) the base rent and any other charges payable under each Lease; (iv) the term of each Lease including the commencement and expiration dates of each lease, and any unexpired extension options; (v) any tenant in default including the nature and duration of such default; and (vi) any other information reasonable requested or required by Grantee.
(b) Delivery of all Leases; Lease Form. Grantor has delivered to Grantee true and complete copies of all Leases affecting the Property and the standard form of lease used to let the Property, if any. There are no verbal or written agreements existing which terminate, modify, or supplement any of the Leases, except as disclosed to Grantee in writing.
(c) Lease Subordination. Each Lease is subordinate to the lien of this Security Deed either by its terms or by separate written agreement executed and delivered by the tenant under the applicable Lease.
(d) Owner of Leasehold Interests. Grantor is the sole owner, as lessor, of the leasehold estates created under the Leases. Grantor has not assigned, pledged, transferred, or encumbered its right, title, or interests in and to the Leases and Rents, except to Grantee pursuant to this Security Deed and the Assignment of Leases and Rents.
(e) Arm’s-Length Leases. All Leases are bona fide, arm’s-length agreements with tenants unrelated to Grantor or any Affiliate of Grantor.
(f) No Prepaid Rent. No Rents on any Lease have been collected for more than one (1) month in advance. For purposes of this subsection, security deposits held Grantor in respect of any Lease shall not be deemed prepaid Rents.
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(g) Security Deposits. All security deposits reflected on the Rent Roll have been collected and are being held by Grantor in the full amount reported on the Rent Roll and in compliance with all requirements of Applicable Law.
(h) No Tenant Improvements Required. All work required to have been performed by Grantor under each Lease has been fully performed and unconditionally accepted by the tenants under each Lease.
(i) No Offsets or Defenses. [To Grantor’s knowledge, information, and belief,] [n/N]o offsets or defenses exist in favor of any tenant to the payment of any portion of the Rent.
(j) No Monetary Obligation to Tenants. Grantor owes no monetary obligation to any tenant under any Lease.
(k) No Notice of Dispute. Grantor has not received a notice of default from any tenant or any other notice disputing the terms, validity, or enforceability of any Lease or any provision thereof.
(l) No Tenant Default or Bankruptcy. Each Lease is in full force and effect, and to Grantor’s knowledge, information, and belief, no default or event of default, and no circumstance which with the passage of time, or the giving of notice, or both, would constitute a default or event of default exists under any Lease. To Grantor’s knowledge, information, and belief, no tenant is a debtor in any bankruptcy, reorganization, insolvency, or similar proceeding.
(m) No Purchase Options or Rights of First Refusal. No Lease contains:
(i) any option or right of first refusal to purchase all or any portion of the Property, or similar right granting the potential to acquire ownership interests in the Property;
(ii) any option or right to renew or extend the term of the Lease except as disclosed to Grantee on the Rent Roll or in writing; or
(iii) any option or right of first refusal to lease or occupy additional space at the Property except as disclosed to Grantee on the Rent Roll or in writing.
(n) No Broker’s Commissions. No broker’s commissions, finder’s fees, or similar payment obligations are due and unpaid by Grantor (or any Affiliate of Grantor) with respect to any Lease except as expressly disclosed to Grantee in writing.
Section 4.19 Property Management. The Property is self-managed by the Grantor and no Person, other than Grantor has authority to collect rents, negotiate leases, or take any other action with respect to the use, operation, or management of the Property.
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Section 4.20 Financial Condition.
(a) Solvency. Grantor is currently solvent and has received reasonably equivalent value in exchange for the Loan and the Liens and security interests granted to or in favor of Grantee in connection with the Loan. Grantor has not entered into this Loan with the intent to hinder, delay, or defraud any creditor. Immediately following the making of the Loan, the fair saleable value of Grantor’s assets shall be greater than Grantor’s known liabilities.
(b) No Change in Financial Condition. Since the date of its formation, Grantor has not filed or consented to the filing of any petition, either voluntary or involuntary, in any proceeding seeking the insolvency, bankruptcy, liquidation, or reorganization of Grantor or Guarantor. Since the date of most recent statements submitted to Grantee with respect to Grantor, and any of their respective constituent equity owners, general partners, or managing members of any of them, no change has occurred in the financial condition of any such party that would make the financial statements, reports, certificates or other documents submitted in connection with the Loan inaccurate, incomplete, or otherwise misleading in any material respect or which would have a Material Adverse Effect on the Grantor’s ability to own, operate, or lease the Property.
Section 4.21 Real Property and Income Taxes.
(a) Real Property Taxes. All real property taxes due and owning in respect of the Property and/or the Collateral have been paid, or if outstanding, an escrow of funds in an amount sufficient to cover such payments has been established and insured against under Grantee’s title insurance policy.
(b) Income Taxes. Grantor has filed all federal, state, county, municipal, and city income tax returns required and have paid all taxes and related liabilities which have become due pursuant to such returns. Grantor has no known tax liability in respect of any such taxes and related liabilities for tax periods prior to the Effective Date of this Security Deed.
Section 4.22 No Foreign Person. Grantor is not a “foreign Person” within the meaning of §1445(f)(3) of the Tax Code.
Section 4.23 No Illegal Activity as Source of Funds. No portion of the Property has been or shall be purchased, improved, equipped, or furnished with proceeds of any illegal activity.
Section 4.24 Compliance with Anti-Terrorism, Embargo, Sanctions, and Anti-Money Laundering Laws.
(a) Compliance with Laws. The Grantor and Guarantor is in compliance with: (i) the Office of Foreign Assets Control sanctions and regulations promulgated under the authority granted by the Trading with the Enemy Act, 12 U.S.C. § 95 (a) et seq. (“OFAC”); (ii) the International Emergency Economic Powers Act, 50 U.S.C. § 1701, et seq., as the same apply to it or its activities; and (iii) the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001, as amended from time to time (“Patriot Act”) and all rules and regulations promulgated under the Patriot Act applicable to any of them. Grantor agrees to confirm the representations and warranties made in this Section in writing to Grantee or any designee of Grantee from time to time, upon request. In furtherance thereof:
(i) no such Person is now, nor has ever been, under investigation by any governmental authority for, nor has been charged with or convicted of a crime under, 18 U.S.C. §§ 1956 or 1957 or any predicate offense thereunder;
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(ii) no such Person has ever been assessed a civil penalty under any anti-money laundering laws or predicate offenses thereunder;
(iii) no such Person has had any of its funds seized, frozen, or forfeited in any action relating to any anti-money laundering laws or predicate offenses thereunder;
(iv) each such Person has taken such steps and implemented such policies as are reasonably necessary to ensure that it is not promoting, facilitating, or otherwise furthering, intentionally or unintentionally, the transfer, deposit, or withdrawal of criminally derived property, or of money or monetary instruments which are (or which such party has reason to believe are) the proceeds of any illegal activity or which are intended to be used to promote or further any illegal activity; and
(v) each such Person has taken such steps and implemented such policies as are reasonably necessary to ensure that it is in compliance with all laws and regulations applicable to its business for the prevention of money laundering and with anti-terrorism laws and regulations, with respect both to the source of funds from its investors and from its operations, and that such steps include the development and implementation of an anti-money laundering compliance program within the meaning of Section 352 of the Patriot Act, to the full extent such a party is required to develop such a program under the rules and regulations promulgated pursuant to Section 352 of the Patriot Act.
(b) No Dealings with Embargoed Persons. No assets of Grantor constitute property of, or are beneficially owned, directly or indirectly, by any Person subject to trade restrictions under U.S. law (individually or collectively, an “Embargoed Person”) including but not limited to: (i) the International Emergency Economic Powers Act, 50 U.S.C. §§ 1701 et seq.; (ii) The Trading with the Enemy Act, 50 U.S.C. App. 1 et seq.; and (iii) any Executive Orders or regulations promulgated thereunder. No Embargoed Person has any interest of any nature whatsoever in the Grantor; and none of the funds of Grantor have been derived from any unlawful activity such that neither an investment in the Grantor (whether directly or indirectly) nor the execution, delivery, and performance of this Security Deed or any of the Loan Documents and transactions contemplated hereby or thereby is in violation of law.
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(c) No Dealings with Prohibited Persons. The Grantor is, nor to the best of Grantor’s knowledge, information, and belief, after having made reasonable inquiry, neither (i) any Person, other than Grantor, owning any interest or (ii) any commercial tenant at the Property is a Prohibited Person. As used in the Loan Documents, the term “Prohibited Person” shall mean any Person:
(i) listed in the Annex to, or otherwise subject to the provisions of, that certain Executive Order No. 13224 on Terrorist Financing, effective September 24, 2001, and relating to Blocking Property and Prohibiting Transactions With Persons Who Commit, Threaten to Commit or Support Terrorism (“Executive Order”);
(ii) named as a “specifically designated national (SDN)” on the most current list published by the U.S. Treasury Department Office of Foreign Assets Control at its official website (http://www.treas.gov.ofac/t11sdn.pdf) or at any replacement website or other replacement official publication of such list or that is named on any other Governmental Authority list;
(iii) acting, directly or indirectly, in contravention of any anti-money laundering law, with terrorist organizations or narcotics traffickers, including those Persons that are included on any relevant lists maintained by the United Nations, North Atlantic Treaty Organization, Financial Action Task Force on Money Laundering, U.S. Office of Foreign Assets Control, U.S. Securities and Exchange Commission, U.S. Federal Bureau of Investigation, U.S. Central Intelligence Agency, U.S. Internal Revenue Service, all as may be amended or superseded from time to time; or
(iv) that is owned or controlled by, or acting for or on behalf of, any Person described in clause (i), (ii), or (iii) above.
Section 4.25 Brokers’ and Finders’ Fees. Grantor has not engaged or used any broker, placement agent, or finder in connection with the transaction evidenced by the Loan Documents who may be owed a commission or other compensation other than those paid and shown on the official closing statement signed by Grantor and delivered as of the Effective Date (“Closing Statement”).
Section 4.26 Complete Disclosure; No Change in Facts or Circumstances. Grantor has disclosed to Grantee all material facts and has not failed to disclose any material fact that could cause any representation or warranty made herein to be materially inaccurate, incomplete, or misleading. All information provided in or supplied with the application for the Loan, or in satisfaction of the terms thereof, remains true, complete, and correct in all material respects, and no adverse change in any condition or fact has occurred that would make any information, representation, or warranty materially inaccurate, incomplete, or misleading.
Section 4.27 ERISA Compliance. Grantor is not and will not be an “employee benefit plan” as defined in § 3(3) of ERISA, subject to Title I of ERISA. None of the assets of Grantor constitute or will constitute “plan assets” of one or more such plans within the meaning of 29 C.F.R. § 2510.3-101. Grantor is not and will not be a “governmental plan” within the meaning of § 3(3) of ERISA.
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Section 4.28 [DEAL SPECIFIC REPRESENTATION[S]].
Section 4.29 Survival. The representations and warranties contained in this Article IV shall survive for so long as the Loan shall remain payable or any Obligation shall remain subject to performance.
ARTICLE V
BORROWER COVENANTS AND LOAN REQUIREMENTS
Section 5.01 Property Covenants and Requirements.
(a) Obligation to Pay Taxes and Property Charges. Grantor shall promptly and fully pay all Taxes and Property Charges now or hereafter assessed or levied against the Property prior to the delinquency thereof. As used in the Loan Documents, the term “Property Charges” means all ground rents, maintenance charges, impositions (other than Taxes) and similar charges, including, without limitation, fees for the use of vaults, chutes, and adjoining areas, now or hereafter assessed or imposed against the Property, or any part thereof, together with any penalties thereon. Except to the extent funds sufficient to fully pay such charges have been deposited into the Tax Escrow Account established under Section 6.01 hereof, Grantor shall furnish to Grantee, upon request, evidence satisfactory to Grantee that all Taxes and other Property Charges have been paid and are not delinquent.
(b) Obligation to Discharge Liens. Grantor shall promptly cause to be paid and discharged (or bonded over) any Lien or charge which may be or become a Lien against the Property, including, without limitation, mechanic’s liens, materialman’s liens, judgments, and tax liens. After prior written notice to Grantee, Grantor, at its own expense, may contest the amount, validity, or application, in whole or in part, of any Taxes, Property Charges, or Liens by appropriate legal proceeding, promptly initiated and conducted expeditiously in good faith with proper due diligence, provided that:
(i) no Event of Default exists under the Loan;
(ii) such proceeding either suspends the collection of such amounts, or if not suspended, Grantor establishes an escrow with the Grantee in an amount equal to 125% of the lien;
(iii) such proceeding does not put the Property in danger of being sold for such delinquency;
(iv) such proceeding is conducted in accordance with law and is not prohibited under any other agreement or obligation to which Grantor or the Property is subject; and
(v) Grantor shall furnish to Grantee all other items and information reasonably requested by Grantee].
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(c) Maintenance of Property. Grantor shall maintain the Property in a good and safe condition and repair.
(i) Removal, Demolition, and Material Alteration. No portion of the Property shall be removed, demolished, or materially altered[, except for normal repair or replacement in the ordinary course of business] without Grantee’s prior written consent. Grantor shall promptly repair or replace any portion of the Property which may become worn, damaged, or dilapidated.
(ii) Waste. Grantor shall not commit or suffer any waste of the Property or do or permit to be done thereon anything that may in any way impair the value of the Property, increase the risk of fire or other hazard on the Property, or invalidate or allow the cancellation of the insurance coverage required to be maintained by Grantor hereunder.
(d) Use of Property. Grantor shall not allow changes in the use of the Property without Grantee’s prior written consent. Grantor shall not initiate, join in, consent to any change in, or seek any variance under any private restrictive covenant or zoning or land use ordinance limiting or defining the uses which may be made of the Property. If use of all or any portion of the Property is or shall become a nonconforming use, Grantor will not cause or permit the nonconforming use to be discontinued or the nonconforming portion of the Property to be abandoned without Grantee’s prior written consent.
(e) Compliance With Laws; Environmental Compliance. Grantor shall promptly and fully comply with all Applicable Law now or hereafter affecting the Property, including, without limitation all Environmental Laws (as defined in the Environmental Indemnity). Grantor shall do or cause to be done all things necessary to preserve, renew, and keep in full force and effect all rights, licenses, permits, and franchises required for the operation of the Property. Grantor shall not engage in any Prohibited Activities and Conditions (as defined in the Environmental Indemnity) nor shall Borrower commit, permit, or suffer to exist any act or omission leading to forfeiture of the Property or any part thereof, or the rents and income derived therefrom. Grantor shall notify Grantee promptly of Grantor’s knowledge or receipt of any notice relating to a violation of any Applicable Law, or of the commencement of any proceedings or investigations which relate to compliance with Applicable Law. At Grantee’s request, Grantor shall provide Grantee with copies of all notices, reports, or other documents relating to any litigation or governmental investigation relating to Grantor or the Property.
(f) Compliance With Property Agreements. Grantor shall observe and perform in a timely manner each and every obligation to be observed or performed by Grantor pursuant to the terms of any agreement or recorded instrument affecting or pertaining to the Property or used in connection with the operation of the Property including, without limitation, the Property Agreements.
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(g) Property Management. Grantor shall manage the Property in a first-class manner. Grantor shall not enter into any property management agreement without the prior written consent of Grantee. Grantee shall have the right to approve both the property manager and the terms of any property management agreement. Grantee’s approval may be conditioned, inter alia, upon receiving an assignment and subordination of the property management agreement on such form as approved by Grantee in its reasonable discretion. In such assignment and subordination agreement Grantor shall assign all its rights and interests in the property management agreement and the property manager shall subordinate its rights and interests, including, without limitation, its rights to any management fees. Each of Grantor and the property manager shall further acknowledge among other rights, Grantee’s right to terminate the property management agreement upon an Event of Default with or without cause.
Section 5.02 Leasing Covenants. Grantor shall observe and perform all obligations imposed upon the lessor under any Leases now existing or hereinafter entered into, and shall not do or permit to be done anything to impair the value of any of the Leases. Upon Grantee’s request, Grantor shall promptly send Grantee copies of all default notices sent or received by Grantor under any Lease (other than residential Leases). Grantor shall enforce all terms, covenants, and conditions contained in the Leases in a commercially reasonable manner and shall not collect any Rents more than one (1) month in advance (other than a security deposit). Pursuant to Article II hereof, Grantor has assigned Grantee all of its rights and interest in Leases and Rents and shall not further assign or pledge its interests in any of the Leases or Rents, except in connection with this Loan. Grantor acknowledges and agrees that Grantee’s consent shall be required in connection with all proposed new Leases and all renewals, extensions, amendments, and supplements to existing Leases.
Section 5.03 Insurance Coverages. Grantor shall obtain and maintain at its own expense during the term of the Loan such insurance coverages (including, without limitation, the policy type, minimum coverage amounts, maximum deductibles, and acceptable exclusions) as Grantor shall deem reasonably necessary considering, among other things, the location, use, and occupancy of the Property and shall comply with all terms, covenants, and obligations in Article VII with respect to any proceeds thereof in the event of a Casualty or Condemnation (as hereinafter defined). Grantee reserves the right to periodically review and modify the insurance requirements hereunder in Grantor’s sole/reasonable discretion. As of the date hereof, Grantor acknowledges it maintains and agrees it shall maintain the insurance coverages set forth in this Section 5.03, subject to Grantee’s right to amend any insurance coverages required hereunder.
(a) Property Insurance. Grantor shall maintain comprehensive property insurance under one or more insurance policies insuring against the perils of, without limitation, fire, water, burglary, theft, malicious mischief, riot, civil commotion, vandalism, and any other peril now or hereafter covered under a “causes of loss-special form” policy. Each policy shall include the endorsements required hereunder and shall comply with all covenants contained herein.
(i) Full Replacement Value Endorsement. Such policy or policies shall insure the Improvements [(exclusive of footings, foundations, underground utilities, and paving) and Personal Property in an amount equal to one hundred percent (100%) of full replacement cost, without taking into account depreciation, as reasonably determined by Grantee from time to time. Grantee may, at any time and from time to time, increase the coverage requirements under this Section to reflect increases to the full replacement cost of the Improvements and Personal Property as determined by Grantee. In making its determination, Grantee may rely on its own appraiser or engineer.
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(ii) Boiler and Machinery Insurance. Upon request of Grantee, Grantor shall maintain comprehensive boiler and machinery insurance and systems breakdown coverage (without exclusion for explosion), insuring, without limitation, all boilers, turbines, engines, or other pressure vessels, and machinery and equipment (including, without limitation, heating, ventilation, and air-conditioning equipment, refrigeration equipment, sprinkler systems, electrical systems, pipes, conduits, and similar machinery and components) located in or servicing the Property. The coverage under such boiler and machinery insurance shall be in such amount per accident equal to one hundred percent (100%) of full replacement cost (as reasonably determined and adjusted from time to time by Grantee). Such insurance shall also provide coverage against business interruption and loss of income or use arising from the Casualty. The policy shall name Grantee and TK Management Services, LLC, as insureds under a standard joint loss clause and shall provide that all proceeds be paid to TK Management Services, LLC first and then to Grantee.
(iii) Business Interruption or Loss of Rental Income Insurance. Grantor shall maintain business interruption insurance, with loss payable to Grantee TK Management Services, Inc., insuring against lost Rents resulting from any insured peril. Coverage shall be on an “as loss sustained” basis in an amount equal to one hundred percent (100%) of the Income (as herein defined) for the Property for a period of not less than 12 months from the date of casualty, with a 12 month extended period of indemnity. The amount of coverage as of the Effective Date shall be determined by Grantee and TK Management Services, Inc. and adjusted at least once each year based on a reasonable estimate of projected gross Rent for the next ensuing 12-month period. Grantee may hold and apply all proceeds paid under such policy as permitted under the Loan Documents. No proceeds paid to Grantee shall be deemed to relieve Grantor of any obligations under the Loan Documents. For purposes of this coverage, “income” means the sum of the total, then ascertainable Rents payable under the Leases; and the total ascertainable amount of all other payments to be received by Grantor from third parties which are the legal obligation of the Property’s tenants, occupants, and licensees, reduced to the extent such amounts would not be received because of operating expenses not incurred during the period that any portion of the Property cannot be occupied as a result of the Casualty.
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(b) Commercial General Liability Insurance. Grantor shall maintain commercial general liability insurance coverage with “products and completed operations coverage,” insuring against bodily injury, death, and property damage, including all legal liability to the extent insurable and all court costs, legal fees, and expenses arising out of, or connected with, the possession, use, leasing, operation, maintenance, or condition of the Property in such amounts as may be required by Grantee from time to time, but in no event less than Two Million Dollars ($2,000,000) per occurrence and Four Million Dollars ($4,000,000) in the annual aggregate. The liability coverage must provide for claims to be made on an occurrence basis. The policy must name Grantee and TK Management Services, Inc. as additional insureds. The insurance coverage required hereby may be satisfied by a layering of commercial general liability, umbrella liability, and excess liability policies, but in no event shall the commercial general liability policy be written for an amount less than Two Million Dollars ($2,000,000) per occurrence and Four Million Dollars ($4,000,000) in the aggregate for bodily injury and property damage liability.
(c) Additional Insurance Coverage Requirements. Without limiting the foregoing, Grantee shall maintain the following additional insurance coverages, if applicable, in such amounts and with such deductibles as determined by Grantee and TK Management Services, Inc. in its reasonable discretion, including, without limitation:
(i) Ordinance or Law Coverage if any part of the Improvements is or shall later become a legal non-conforming use under Applicable Law and such insurance shall also include endorsements for “Loss to Undamaged Portion of the Building,” “Demolition Cost,” “Increased Cost of Construction,” and “Post-Loss Ordinance or Law Option,” all in such coverage amounts as Grantee shall determine in its reasonable discretion.
(ii) Flood Insurance if the Property is ever designated in a flood zone. Such coverage shall be satisfactory to Grantee its reasonable discretion.
(iii) Workers’ compensation insurance for all employees employed at the Property which, if applicable, can be purchased on an “if any” basis. All coverage and coverage limits shall be in compliance with the laws of the State of Georgia.
(iv) Motor vehicles liability insurance for all owned and non-owned automobile liability on an “if any” basis insuring against liability occurring on or about the Property or arising from the use of the Property.
(v) Builder’s risk insurance during any period of construction, renovation, or alteration of the Improvements.
(vi) “Dram Shop” or similar coverage if alcoholic beverages are sold on the Property.
(vii) Fidelity bond coverage for any employees or agents authorized to collect or handle Rents or other income of the Property.
(viii) Any other insurance Grantee deems necessary to cover any other insurable hazards with respect to the Property whether now known or later discovered, and any replacements, substitutions, or additions to any of the coverages required hereunder.
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(d) Policy Prohibitions. No policy shall:
(i) exclude coverage for windstorm damage and, if such coverage is limited after a storm is named, such policies shall contain a “Named Storm Endorsement”;
(ii) permit Grantor or Grantee from becoming a co-insurer within the terms of the applicable policy; or
(iii) except as otherwise expressly provided herein, have a deductible exceeding Fifty Thousand Dollars ($50,000).
(e) Qualified Insurers. All insurance shall be issued under valid and enforceable policies issued by one or more domestic insurers authorized to issue insurance in Georgia [and acceptable to Grantee in its reasonable discretion. Grantee’s approval of the insurer or the insurance coverage is not a representation or warranty concerning the sufficiency of any coverage.
(f) Policy Requirements. All policies shall be for a term of not less than one (1) year and, unless indicated to the contrary herein, shall insure and name Grantee as beneficiary under a so-called “standard mortgagee clause.” Each policy shall provide coverage that: (i) prohibits cancellation or termination before the policy’s expiration date; (ii) permits recovery by Grantee notwithstanding any defense to claims that may be available to the insurer due to the acts or omissions of Grantor; (iii) permits proceeds to be directly payable to Grantee; (iv) entitles Grantee to at least ten (10) days prior written notice of cancellation for nonpayment of premiums and at least thirty (30) days prior written notice of non-renewal or modification; and (v) contains a waiver of subrogation endorsement as to Grantee. If the required insurance coverage is provided under a blanket policy covering the Property and other properties or assets not secured by this Loan, such blanket policy must specify the portion of total coverage that is allocated to the Property and any sublimit in such blanket policy which is applicable to the policy. A blanket policy shall comply in all other respects with the requirements of this Section.
(g) Evidence of Insurance. Grantor shall deliver to Grantee evidence of the insurance coverages required under this Section, together with proof of payment for the first years’ premiums, on or before the Effective Date and thereafter, not less than Thirty (30) days before the expiration date of each policy. All evidence of insurance coverage shall be in form and substance satisfactory to Grantee in its sole discretion. All evidence of insurance shall accurately reflect the coverages available under each such policy and shall satisfy all requirements hereunder. Grantee shall have the right at any time and from time to time to require further assurances from the insurer or its agent regarding the effectiveness of any policy and the coverages provided therein.
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(h) Grantee’s Right to Obtain Insurance. If Grantor fails to obtain or maintain the insurance coverages required hereunder or shall fail to provide Grantee satisfactory evidence of all required insurance coverages, and if Grantor fails to cure such deficiency within Five (5) of days after notice by Grantee of such deficiency, an Event of Default shall be deemed to have occurred upon which no further notice or right of cure shall be available to Grantor. Upon such Event of Default, Grantee shall have the right to obtain all required insurance not provided by Grantor. All amounts advanced by Grantee to procure such insurance shall be added to the principal amount secured by this Security Deed and bear interest at the Default Rate. As used herein and in the Loan Documents, the “Default Rate” shall have the meaning given to such term under the Note. Grantee shall have no liability for the performance of any insurer selected or approved by Grantee.
(i) Post-Closing Obligations: Insurance. Grantor shall secure the required insurance policies set forth in this Section 5.03, within a reasonable time after closing, not to exceed three (3) months.
Section 5.04 Existence, Financial and Reporting Covenants.
(a) Continued Existence and Good Standing. Grantor shall maintain its existence in accordance with Article III of this Security Deed and shall remain in good standing in Georgia and shall not dissolve or any Guarantor to dissolve.
(b) Payment of Debt and Performance of Obligations. Grantor shall fully and punctually pay all amounts and perform all Obligations when and as required by the Loan Documents. Grantor may not prepay the Loan except in strict accordance with the Note. As used in the Loan Documents, the term “Business Day” or “business day” means any day other than a Saturday, a Sunday, or days when federal banks located in the State of Georgia are closed for a legal holiday or by government directive. [liquidity]:
(c) Books and Records. Grantor shall keep adequate books and records of account with respect to its financial condition and the financial condition and operation of the Property, in accordance with GAAP or such other method acceptable to Grantee, which method must be consistently applied.
(d) Financial Reporting of the Property. Upon request, within the time periods proscribed by this Section 5.04(d), Grantor shall furnish all financial statements and information reasonably requested by Grantee, each prepared in such detail as required by Grantee and each certified by a Responsible Officer to be true, complete, and correct. As used in the Loan Documents, the term “Responsible Officer” means, as to any Person, an individual who is a managing member, general partner, chief executive officer, president, or vice president of such Person, or, with respect to financial matters, the chief financial officer or treasurer of such Person, or other officer authorized by such Person to deliver documents and information with respect to the financial matters under this Loan.
(e) Financial Statements and Other Information on Guarantor. Upon request, Grantor shall cause and each Guarantor to provide to Grantee as soon as available, but in any event within Forty-Five (45) days after the close of such entity’s fiscal year, such parties’ personal financial statements in form satisfactory to Grantee, certified by an independent auditor to be accurate and complete. Upon request, Grantor and each Guarantor to provide such additional financial information, including without limitation, copies of state and federal tax returns within Thirty (30) days of Grantee’s request.
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(f) Additional Information. Promptly, upon request, Grantor shall provide such other information relating to the Grantor, the Property, or any other Person or matter, including without limitation, the Leases, as Grantee may reasonably request from time to time.
(g) Grantee’s Rights of Examination and Audit. Grantee and its agents shall have the right, upon prior written notice to Grantor, to examine the books, records, statements, and files evidencing the financial condition of Grantor and the Property and to make copies and abstracts from such materials, except, however, no advance notice shall be required if a default or Event of Default is then existing under the Loan. Grantee shall also have the right not more than once annually in the absence of an Event of Default to conduct an independent audit of the Grantor’s books, records, statements, and files. If Grantee’s audit discloses an error of more than Ten Percent (10%) percent or if the Loan is then in default, Grantor shall pay all costs of Grantee’s audit. Any unpaid amounts due hereunder shall be added to principal and shall bear interest at the Default Rate until paid in full. The payment of all amounts due hereunder shall be secured by this Security Deed and all collateral secured hereunder.
Section 5.05 Covenants of Continued Cooperation.
(a) Obligation to Maintain Existence. Grantor will continue to engage in the businesses presently conducted to the extent the same are necessary for the ownership, maintenance, management, and operation of the Property. Grantor will qualify to do business and will remain in good standing under the laws of Georgia and each other jurisdiction as and to the extent the same are required for the ownership, maintenance, management, and operation of the Property. Grantor shall continuously maintain its existence and its rights, licenses, permits and franchises to do business in Georgia and shall not dissolve or permit its dissolution. Grantor shall not change its name, form of legal entity, or its location as a registered organization within the meaning of the UCC.
(b) ERISA Compliance. Grantor shall not engage in any transaction which would cause the representation in Section 4.27 of this Security Deed to become untrue or inaccurate. Throughout the term of the Loan, Grantor agrees to deliver to Grantee such certifications or other evidence as requested by Grantor in its sole discretion to confirm compliance with Grantor’s obligations under this Section or to confirm that Grantor’s representations and warranties regarding ERISA remain true.
(c) Compliance with Anti-Terrorism, Embargo, Sanctions, and Anti-Money Laundering Laws. Throughout the term of the Loan, including after giving effect to any Transfers (as defined herein), Grantor shall comply with all Applicable Law and shall not, at any time during the term of the Loan, take any action, or permit any action to be taken, that would cause Grantor’s representations and warranties in Section 4.24 of this Security Deed to become untrue or inaccurate. Grantor shall provide to Grantee copies of all notices, reports, and other communications exchanged with, or received from, governmental authorities relating to all investigations and shall pay the cost of all expenses for complying with Applicable Law in connection with the representations and warranties made in Section 4.24.
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(d) Replacement Documents. Upon receipt of an affidavit from an officer of Grantee affirming the loss, theft, destruction, or mutilation of the Note or any other Loan Document not of public record, Grantor shall execute and deliver a replacement original of the lost, stolen, destroyed, or mutilated document within Ten (10) business days of Grantee’s request. In the case of a mutilated document, Grantee shall, at the request of Grantor, exchange with Grantor the original mutilated document for its replacement.
(e) Loan Estoppels. Grantor shall deliver to Grantee or Grantee’s designee within Thirty (30) days of Grantee’s written request but no more than 4 times annually, a statement certified by a Responsible Officer of Grantor, acknowledging any facts or circumstances pertinent to the Loan, the Grantor, the Property, or the Loan Documents as requested by Grantee, including, without limitation, the unpaid principal amount of the Loan; the Applicable Interest Rate as defined in and charged under the Note; the date monthly debt service payments under the Note are due; the maturity date of the Loan; and the date that the last payment of interest and, if applicable, principal was paid under the Note.
(f) Tenant Estoppels. Grantor shall deliver to Grantee within Ten (10) business days following Grantee’s written request, a duly executed estoppel certificate from any non-residential tenant identified by Grantee. All tenant estoppels shall satisfy the requirements for delivery of estoppels under the applicable tenant’s Lease in form and substance satisfactory to Grantee.
(g) Payment of Costs. Except to the extent expressly prohibited by law, Grantor shall pay all taxes and fees, including transfer taxes, filing, registration, and recording fees, and all expenses incident to the preparation, execution, acknowledgment, negotiation, review, and release of the Note, this Security Deed, and other Loan Documents, together with all replacements, modifications, extensions, consolidations, or restatements of the same.
(h) Grantee’s Right of Entry Inspection. Grantee and its agents may enter the Property upon prior notice to Grantor (notice to be given unless an Event of Default or an emergency exists, as determined by Grantee in good faith) to inspect the Property and Grantor’s books and records relating to the Property.
(i) Further Acts and Assurances. Grantor, at Grantor’s expense, agrees to take such further actions and execute such further documents as Grantee may reasonably request to carry out the intent of the Loan Documents or to establish and protect the rights and remedies created or intended to be created in favor of Grantee under the Loan Documents or to protect the value of the Property and Grantee’s security interests or liens therein.
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ARTICLE VI
LOAN ESCROWS
Section 6.01 Tax and Insurance Escrows.
(a) Tax Escrow Account. Not Applicable.
(b) Insurance Escrow Account. Not Applicable.
Section 6.02 Maintenance of Accounts: Not Applicable.
ARTICLE VII
CASUALTY AND CONDEMNATION
If the Property, or any portion thereof, shall be damaged or destroyed by Casualty or become subject to any Condemnation, the terms, covenants, and conditions of this Article VII shall apply. As used in the Loan Documents, the term “Casualty” means the occurrence of damage or destruction to the Property, or any part thereof, by fire, flood, vandalism, windstorm, hurricane, earthquake, acts of terrorism, or any other peril; and the term “Condemnation” means the taking by any Governmental Authority of the Property or any part thereof through eminent domain or otherwise, including, without limitation, any transfer made in lieu of or in anticipation of the exercise or threatened exercise of such taking.
Section 7.01 Provisions Applicable to Casualty and Condemnation.
(a) Obligation to Notify Grantee. Grantor shall promptly notify Grantee and TK Management Services, Inc., in writing, of any actual or threatened Condemnation or of any Casualty that damages or renders the Property or any part thereof unusable.
(b) Grantee Consent Required. Grantor shall not make any agreement in lieu of Condemnation or accept any insurance proceeds with respect to a Casualty without Grantee’s prior written consent. Grantor shall provide Grantee with copies of all notices or filings made or received by Grantor in connection with any Casualty or Condemnation or with respect to collection of any insurance proceeds or Condemnation award, as applicable.
(c) Payment and Trust Provisions. Grantor hereby grants Grantee the authority, at Grantee’s option either to settle and adjust any claim arising with respect to the Casualty or Condemnation without Grantor’s consent, or to allow Grantor to settle and adjust such claim; provided that, in either case, the insurance proceeds or Condemnation award, as applicable, is paid directly to Grantee. If any portion of the insurance proceeds or Condemnation award, as applicable, shall be paid to Grantor, Grantor shall hold such amounts in trust for the benefit of Grantee and shall promptly remit such amounts to Grantee immediately upon request.
(d) Continuing Loan Obligations. Notwithstanding that a Casualty or Condemnation has occurred, or that rights to a Condemnation award or insurance proceeds are pending, no Casualty or Condemnation shall be deemed to excuse any payment obligations of Grantor hereunder and Grantor shall continue to pay the Debt and other payment obligations under the Loan Documents in strict accordance with the terms of the Note and other Loan Documents.
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(e) Payment of Grantee’s Expenses. All expenses incurred by Grantee in the settlement and collection of amounts paid with respect to a Casualty or Condemnation (including, without limitation, reasonable legal fees and expenses) and with respect to the administering the repair and restoration as provided in Section 7.01(f) shall be deducted from such amounts and reimbursed to Grantee prior to any application as provided hereunder. As used in the Loan Documents, the term “Restoration Proceeds” means any insurance proceeds or Condemnation awards paid or payable on account of a Casualty or Condemnation, as applicable (including, without limitation, any business interruption insurance proceeds) less Grantee’s reimbursable expenses as provided in this Section 7.01(e).
(f) Grantor Obligation to Repair and Restore. If Grantee makes Restoration Proceeds available to Grantor, Grantor shall diligently repair and restore the Property to at least equal value and substantially the same character as existed immediately prior to such Casualty or Condemnation. All plans and specification for the repair and restoration and all contractors, subcontractors, and materialmen to be engaged in the repair and restoration, as well as the contracts under which they have been engaged, shall be subject to Grantee’s prior review and written approval. Grantee may engage, at Grantor’s expense, an independent engineer or inspector to assist Grantee in its review of any requests and to inspect the Property while work is in progress and at completion, which amounts can be deducted from insurance proceeds and condemnation awards as provided in Section 7.01(e).
Section 7.02 Casualty.
(a) Release of Restoration Proceeds for Casualty. If the Property shall be damaged or destroyed, in whole or in part, by any Casualty, then provided that insurance proceeds shall be received by Grantee as provided in Section 7.01(c) and provided further that all conditions precedent set out in Section 7.02(b) shall be satisfied in Grantee’s judgment, then, such proceeds shall be held by Grantee in a trust fund used to fund the Property’s repair and restoration. In such event, Grantee shall disburse Restoration Proceeds for the repair and reconstruction of the Property on an “as work progresses” basis in accordance with customary construction lending requisition criteria and retainages. In no event shall the Loan be reduced, except to the extent and by the amount of which Restoration Proceeds are applied to the Debt as provided herein. Provided no Event of Default shall have occurred, said trust fund shall be interest-bearing and interest, if any, shall be paid or credited to Grantor.
(b) Conditions Precedent to Release of Restoration Proceeds for Casualty. The following conditions precedent shall apply to any release of Restoration Proceeds in connection with any Casualty:
(i) No Event of Default shall have occurred and be continuing under the Loan.
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(ii) The Casualty shall not have occurred within Six (6) months of the Maturity Date. As used in this Security Deed, “Maturity Date” shall have the meaning ascribed to such term in the Note.
(iii) Restoration Proceeds in respect of the Casualty are sufficient to restore the Property to substantially the same condition that existed prior to the Casualty.
(iv) In Grantee’s sole determination, restoration can be completed no later than the earliest of:
(A) Six (6) months from the date the Casualty occurred or the expiration of Grantor’s business interruption insurance, whichever is earlier;
(B) the earliest date by which completion is required under any Lease; or
(C) the earliest date by which completion is required under Applicable Law to preserve the right to rebuild the Improvements as they existed prior to the Casualty.
(c) Application of Restoration Proceeds for Casualty to the Debt. If at any time any condition precedent of Section 7.02(b) is not met, then Grantee may apply Restoration Proceeds to the Debt. No Prepayment Premium shall be applicable to any such application. As used in this Security Deed and other Loan Documents, the term “Prepayment Premium” shall have the meaning set out in the Note.
(d) Payment of Surplus Restoration Proceeds for Casualty. Provided no Event of Default shall be then existing, any excess Restoration Proceeds in respect of a Casualty after completion of all repairs and restoration shall[, at Grantee’s option, either] be released to Grantor or shall continue to be held pursuant hereto to pay any shortfall to Property operating expenses.
Section 7.03 Condemnation.
(a) Application of Restoration Proceeds for Condemnation. In the event of a Condemnation other than a Partial Condemnation, Grantee shall apply the Restoration Proceeds pursuant to Section 7.03(d) of this Security Deed. The term “Partial Condemnation” means a taking by Condemnation affecting less than Ten (10) percent ([NUMBER]%) of the Land and no portion of the Improvements and, as to the Land taken, such Land lies only along the perimeter of the Property.
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(b) Release of Restoration Proceeds for Partial Condemnation. In the event of a Partial Condemnation and provided that the condemnation award shall be received by Grantee pursuant to Section 7.01(c) and all conditions precedent set out in Section 7.03(c) are satisfied in Grantee’s judgment, then, such proceeds shall be held by Grantee in a trust fund used to fund the Property’s repair and restoration. Grantee shall disburse Restoration Proceeds for the repair and reconstruction of the Property that is subject to Partial Condemnation on an “as work progresses” basis in accordance with customary construction lending requisition criteria and retainages. In no event shall the Security Deed lien be reduced, except to the extent and by the amount of which Restoration Proceeds are applied to the Debt as provided herein. Provided no Event of Default shall have occurred, said trust fund shall be interest-bearing and interest, if any, shall be paid or credited to Grantor.
(c) Conditions Precedent to Release of Restoration Proceeds for Partial Condemnation. The following conditions precedent shall apply to any release of Restoration Proceeds in connection with any Partial Condemnation:
(i) No Event of Default shall have occurred and be continuing under the Loan.
(ii) The Partial Condemnation shall not have occurred within Six (6) months of the Maturity Date.
(iii) Restoration Proceeds in respect of the Partial Condemnation are sufficient to restore the Property to substantially the same condition that existed prior to the Partial Condemnation.
(iv) In Grantee’s sole determination, restoration can be completed no later than the earlier of:
(A) Six (6)) months from the date the Partial Condemnation occurred; or
(B) the earliest date by which completion is required under Applicable Law to preserve the right to rebuild the Improvements as they existed prior to the Partial Condemnation.
(d) Application of Restoration Proceeds for Condemnation. In the event of a Condemnation other than a Partial Condemnation, or if at any time any condition precedent of Section 7.03(c) is not satisfied, then Grantee may apply Restoration Proceeds to the Debt. No Prepayment Premium shall be applicable to any such application. Any excess Condemnation award remaining in the trust fund after the completion of all repairs and restoration undertaken pursuant to Section 7.03(b) shall be applied to the Debt.
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ARTICLE VIII
NO TRANSFERS; DUE ON SALE
Section 8.01 Prohibition Against Transfers. Grantor shall not permit any Transfer or cause any Transfer to occur other than a Permitted Transfer, as defined in Section 8.03 of this Security Deed. Any Transfer made in violation hereof shall be an Event of Default. As used herein and in the other Loan Documents, the term “Transfer” means any action by which either: (a) the legal or beneficial ownership of the Equity Interests in Borrower or in the Guarantor; or (b) the legal or equitable title to the Property, or any part thereof; or (c) the cash generated by the Property or any portion thereof, is sold, assigned, transferred, hypothecated, pledged, or otherwise encumbered or disposed of, whether undertaken directly or indirectly, or occurring by operation of law or otherwise. By way of illustration and not limitation, the term Transfer includes the sale, conveyance, assignment, or the grant of an option, security deed, deed of trust, pledge, or security interest in, or any other transfer in whole or in part of, the Property, as security or otherwise; the grant of an easement affecting the Property or any other agreement granting rights in or restricting the use or development of the Property, including, without limitation, air, water, and mineral rights; an installment sale wherein Borrower agrees to sell the Property for a price to be paid in installments; or an agreement by Borrower to lease all or a substantial part of the Property for a use other than actual occupancy by a space tenant thereunder.
Section 8.02 Due on Sale. Upon any Transfer other than a Permitted Transfer, the Loan shall be immediately due and payable in full, together with all amounts due under the Loan Documents[, including, without limitation, the Prepayment Premium].
Section 8.03 Permitted Transfers. Grantee shall have the right in its sole discretion to approve, conditionally approve, or disapprove any Transfer, including a Permitted Transfer, proposed by Grantor. As used in the Loan Documents, the term “Permitted Transfer” means:
(a) Transfers of Equity Interests which, in the aggregate over the term of the Loan:
(i) do not exceed forty-nine percent (49%) of the total interests in Grantor or in Guarantor, as applicable, or result in any Person holding an Equity Interest in Grantor, as applicable, which exceeds forty-nine percent (49%) of the total Equity Interests in Grantor, as applicable; and
(ii) do not result in a change of Control. As used in the Loan Documents, the term “Control” means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person whether through ownership, voting rights, beneficial interest, by contract, or by any other means and shall be construed to apply equally to variations of the defined term, including, without limitation terms such as “controlled,” “controlling,” or “controlled by.”
(b) Transfers with respect to any Person whose stocks or certificates are traded on a nationally recognized stock exchange.
(c) Transfers which have been approved by Grantee in accordance with Section 8.04 of this Security Deed.
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(d) Permitted Encumbrances.
(e) Transfers of worn out or obsolete furnishings, fixtures, or equipment that are promptly replaced with property of equivalent value and functionality.
(f) New or renewal Leases approved by Grantee or those permitted without prior approval in accordance with this Security Deed.
Section 8.04 Conditional One-Time Transfer Right. Notwithstanding the prohibition against Transfers in Section 8.01, Grantee agrees not to unreasonably withhold its consent to a one-time Transfer or sale (excluding a pledge, security dee, assignment, encumbrance, or other transfer as security for an obligation) of the Property and Grantor’s obligations under the Loan Documents during the term of the Loan, provided Grantor satisfies all of the following conditions:
(a) No Event of Default. No Event of Default, or event which with the giving of notice or passage of time, or both, could become an Event of Default shall have occurred and be continuing.
(b) Full Disclosure. Grantor shall have supplied all information requested by Grantee in its sole discretion to evaluate the proposed Transfer.
(c) Approval of Proposed Transferee. Grantee shall have approved the proposed transferee, including, without limitation, its ownership structure, financial condition, and management experience for comparable properties, which approval shall be in Grantee’s sole discretion.
(d) Approval of Proposed Substitute Guarantor. Grantee shall have approved each proposed substitute Guarantor, including, without limitation, its financial condition and creditworthiness, which approval shall be in Grantee’s sole discretion.
(e) Execution and Delivery of Transfer Documents. Each of Grantor, Guarantor, the proposed transferee, and each proposed substitute Guarantor shall have executed and delivered such documents and instruments effectuating the proposed Transfer and the assumption of the Loan and all obligations thereunder as may be required or requested by Grantee. Such documents and instruments may modify the terms of the Loan as Grantee deems necessary, including without limitation, amounts held in reserve, the scope of the guaranties and indemnities, or such other modifications as may be required by Grantee in its sole discretion.
(f) Legal Opinions. Grantor shall have delivered such legal opinions as may be requested by Grantee, including, without limitation, substantive nonconsolidation opinions and tax opinions, if applicable, which shall be acceptable to Lender in its sole discretion.
(g) Payment of Transfer Fee. Grantor shall have paid a transfer fee equal to Three (3) percent of the outstanding principal balance of the Loan prior to the effective date of such Transfer.
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(h) Payment of Fees and Expenses. Grantee shall have received payment for all fees, costs, and expenses it incurs in connection with any proposed Transfer pursuant to this Section 8.04. Grantor shall pay such amounts without regard to whether the proposed Transfer is approved or disapproved. In addition to all other rights and remedies of Grantee hereunder, any unpaid amounts due pursuant to this Section 8.04 shall be secured by this Security Deed, added to principal, and bear interest at the Default Rate until paid in full.
ARTICLE IX
EVENTS OF DEFAULT; REMEDIES
Section 9.01 Events of Default. The occurrence of any one or more of the following events shall, at Grantee’s option, constitute an “Event of Default” under this Security Deed and the Loan:
(a) Payment Default. If Grantor shall fail to pay on the date such payment is due, subject to any applicable notice and cure period, any payment required to be made by Grantor under this Security Deed, the Note, or any other Loan Document.
(b) Maturity Default. If unpaid principal, accrued but unpaid interest, and all other amounts outstanding under the Loan are not paid in full on or before the Maturity Date, time being of the essence.
(c) Cross-Default. If an “Event of Default” (as that term is defined in the applicable Loan Document) occurs under any the MIPA or any other Loan or other transaction Document.
(d) False Representation or Warranty. If any representation or warranty made by Grantor, or any Guarantor in any Loan Document, or in any certificate, report, financial statement, or other instrument or document furnished to Grantee in connection with the Loan or in any request hereafter made for Grantee’s consent shall be false or misleading in any material respect.
(e) Insolvency, Bankruptcy, and Debtor Relief.
(i) Admission of Insolvency. If Grantor or any Guarantor shall admit in writing [other than to Grantee] of its inability to pay its debts as they become due or make an assignment for the benefit of creditors; or generally not pay its debts as they become due.
(ii) Voluntary Bankruptcy and Debtor Relief. If Grantor, or any Guarantor shall commence any case, proceeding, or other action under any existing or future law of any jurisdiction, domestic or foreign, relating to bankruptcy, insolvency, reorganization, conservatorship, or relief of debtors seeking to have an order for relief entered with respect to it, or seeking to adjudicate it as bankrupt or insolvent, or seeking reorganization, arrangement, adjustment, winding-up, liquidation, dissolution, composition, or other relief with respect to it or its debts; or seeking appointment of a receiver, trustee, custodian, conservators, or other similar official for it or for all or any substantial part of its assets.
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(iii) Involuntary Bankruptcy. If there shall be commenced against Grantor, or any Guarantor any case, proceeding, or other action of a nature referred to in subsection (f)(ii) above by any party other than Grantee which results in the entry of an order for relief or any such adjudication or appointment or remains undismissed, undischarged, or unbonded for a period of Three (3) months.
(f) Attachment or Distraint. If there shall be commenced against Grantor, or any Guarantor any case, proceeding, or other action seeking issuance of a warrant of attachment, execution, distraint, or similar process against all or a substantial part of the Property which results in the entry of an order for any such relief which shall not have been vacated, discharged, stayed, or bonded pending appeal within Ten (10) days days from the entry thereof.
(g) Judgments and Liens. If any judgment for monetary damages is entered against Grantor, or any Guarantor or if any Lien other than a Permitted Encumbrance is filed against the Property which, in Grantee’s reasonable judgment, has a Material Adverse Effect or is not covered to Grantee’s satisfaction by collectible insurance proceeds. As used in the Loan Documents, the term “Material Adverse Effect” means, with respect to any circumstance, act, condition, or event of whatever nature, including determinations made in any litigation, arbitration, or governmental investigation or proceeding, whether singly or in conjunction with any other event, act, condition, circumstances, whether or not related, which in Grantee’s reasonable judgment causes a material change or adverse effect upon: (i) the business, operations, prospects, or financial condition of Grantor or Guarantor; (ii) the ability of either Grantor or Guarantor to perform its Obligations under any Loan Document to which it is a party; (iii) the use, value, or condition of the Property; (iv) the compliance of the Property with any Applicable Law; or (v) the validity, priority, or enforceability of any Loan Document or the liens, rights, or remedies of Grantee thereunder, including, without limitation, recourse against the Property; or (vi) the occupancy rate of the Property.
(h) Transfer Violation. If a Transfer shall occur in violation of Article VIII of this Security Deed or in violation of any terms and conditions contained in Grantee’s consent to a Transfer.
(i) Insurance Default. If Grantor fails to obtain, pay for (but only to the extent sufficient funds are unavailable in the Insurance Escrow Account), or timely deliver evidence of the insurance coverages required under the Loan within the time period prescribed by this Security Deed.
(j) Violating Formation and Existence Requirements. If Grantor or any Guarantor shall dissolve or fail to remain in good standing and authorized to do business in Georgia or breaches any covenants contained in Article III of this Security Deed, as applicable.
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(k) Prohibited Action in Respect of Leases. If Grantor breaches any covenant contained in Section 5.02 of this Security Deed.
(l) Prohibited Prepayment Default. If Grantor prepays the Loan in violation of the Note or, if prepayment is permitted, fails to pay any applicable Prepayment Premium when required.
(m) [Reserved]
(n) Other Defaults. Except to the extent otherwise specifically set forth in this Security Deed or other Loan Document, if any other default shall occur which is not cured:
(i) in the case of any default which can be cured by the payment of a sum of money, pursuant to the Note; or
(ii) in the case of any other default, within the time periods set forth in the Note.
Section 9.02 Grantee’s Remedies. Upon the occurrence and during the continuance of an Event of Default, in addition to all other rights, remedies, and powers of Grantee at law or in equity, all of which Grantee hereby reserves, Grantee may take any action described in this Section to the fullest extent permitted by law. Any and all actions taken hereunder may be pursued by Grantee in its own name or in the name of Grantee’s nominee, without notice or demand of any kind, except as otherwise expressly required in the Loan Documents or by law. Grantee may exercise all rights, remedies, and powers at such time and in such manner as Grantee determines in its sole discretion, including, without limitation, exercising one or more remedies concurrently, without impairing or adversely affecting any other rights, remedies, and powers granted or reserved hereunder.
(a) Entry and Possession. Grantee shall have the right to enter upon and take possession of the Property, and dispossess and exclude Grantor, its agents, and servants by summary proceedings or otherwise. In furtherance hereof, Grantee shall have all rights granted at law or in equity to mortgagee-in-possession, including, without limitation, taking possession of all books, records, and accounts relating to the Property; using, operating, managing, and controlling the Property and every part thereof; and entering into, enforcing, and modifying Leases and Property Agreements.
(b) Protective Advances. Grantee shall have the right to make any payments or incur any expenses that Grantee shall deem necessary or advisable to protect or preserve the Property and Grantee’s Lien and security interests therein. In furtherance of this right, Grantor hereby authorizes Grantee to make such payments and to incur such expenses in Grantee’s reasonable discretion to protect the Property and Grantee’s security interests therein. All amounts paid by Grantee hereunder shall be secured by this Security Deed and added to the Debt with interest thereon at the Default Rate from the date of payment until repayment in full. Grantee shall be subrogated to the rights of Grantor, if any, under any contract or agreement paid, or any debt or Lien discharged, by a protective advance made by Grantee.
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(c) Acceleration. Grantee may declare the entire Debt immediately due, payable, and collectible, regardless of maturity, and, upon such event, the entire Debt shall become immediately due, payable, and collectible; and thereupon Grantee may exercise all rights and remedies granted hereunder or at law, with or without notice to Grantor, including, without limitation, instituting any proceedings to foreclose this Security Deed, by judicial action or by any other action permitted hereunder or by Applicable Law. If acceleration shall occur prior to the Open Date, an amount equal to the Prepayment Premium shall be added to the balance of the Debt. As used herein or in the Loan Documents, the terms “Open Date” shall have the meaning ascribed to such term in the Note.
(d) Foreclosure. Grantee may, with or without taking possession of the Property, institute a foreclosure proceeding in accordance with Georgia law or any Applicable Law in effect on the date foreclosure is commenced, or take any other action as may be allowed, at law or in equity, for the complete or partial foreclosure of this Security Deed to the full extent permitted by law. In the case of a judicial proceeding, Grantee may proceed to final judgment and execution for the amount owed as of the date of the judgment, together with all costs of suit, reasonable attorneys’ fees, and interest on the judgment at the maximum rate permitted by law from the date of the judgment until paid. Grantee may bid at any foreclosure sale and may purchase the Property in such proceedings. If Grantee shall be the winning bidder at a foreclosure sale, then, in lieu of paying cash, Grantee may satisfy all or a portion of the purchase bid by taking a credit against the bid amount for any outstanding Debt then due Grantee, including, without limitation, the costs and expenses of enforcing the Obligations, up to the aggregate outstanding Debt then due.
(e) Power of Sale. Grantee may sell and dispose of the Property at public auction, at the usual place for conducting sales at the courthouse in the county where the Property or any part thereof may be located, to the highest bidder for cash, first advertising the time, terms, and place of such sale by publishing a notice thereof once a week for four consecutive weeks immediately preceding the date of sale (without regard to the actual number of days) in a newspaper in which sheriff’s advertisements are published in said county, all other notice being hereby waived by Grantor to the fullest extent permitted by applicable law; and Grantee may thereupon execute and deliver to the purchaser at said sale a sufficient conveyance of the Property in fee simple, which conveyance may contain recitals as to the happening of the default upon which the execution of the power of sale, herein granted, depends, and said recitals shall be presumptive evidence that all preliminary acts prerequisite to said sale and deed were in all things duly complied with; and Grantor hereby constitutes and appoints Grantee or its assigns agent and attorney-in-fact to make such recitals, sale, and conveyance, and all the acts of such attorney-in-fact are hereby ratified, and Grantor agrees that such recitals shall be binding and conclusive upon Grantor and that the conveyance to be made by Grantee, or its assigns (and in the event of a deed in lieu of foreclosure, then as to such conveyance) shall be effectual to bar all right, title and interest, equity of redemption, including all statutory redemption, homestead, dower, curtesy, and all other exemptions of Grantor, or its successors in interest, in and to said Property; the power and agency hereby granted are coupled with an interest and are irrevocable by bankruptcy, insolvency, incompetency, death, dissolution, or otherwise, and are in addition to any and all other remedies which Grantee may have at law or in equity. One or more exercises of the powers herein granted shall not extinguish or exhaust the power unless the Secured Indebtedness is paid in full and all other obligations under this Security Deed are fully performed or the entire Property is sold. At any such sale, Grantee, its agents, representatives, successors, or assigns may bid for and acquire, as purchaser, the Property or any part thereof and may at its option credit bid by reducing the Secured Indebtedness by the amount bid at the sale.
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(f) Deficiency Judgment. Except as otherwise provided in the Loan Documents or by Applicable Law, Grantee may sue for and obtain a judgment for any deficiency remaining on the Debt after applying all amounts received by Grantee in furtherance of the exercise of its rights to enforce this Security Deed.
(g) UCC Foreclosure and Other Rights. With respect to any Personal Property, Grantee may exercise all rights, remedies, and powers accruing to Grantee under the Loan Documents, the UCC, or any other remedy available at law or in equity. In furtherance thereof, Grantee may take possession of any Property and take such measures as Grantee deems necessary for the care, protection, and preservation of such Property. Grantee shall have the right to require Grantor, at its sole expense, to assemble any Property and make it available to Grantee at such time and place as Grantee may direct. In exercising the right to sell any Personal Property pursuant to the UCC, Grantor hereby agrees that ten (10) days’ prior written notice of such action shall constitute reasonable advance notice to Grantor.
(h) Appointment of Receiver. Grantee may apply for the appointment of a receiver of the Rents, or the Property, or both, without notice to Grantor. Grantee shall be entitled to the appointment of a receiver as a matter of right, without consideration of the value of the Property securing the Debt, or the solvency of any Person liable for the payment of such amounts. Grantor hereby consents to such appointment, whether during the pendency of a foreclosure proceeding or otherwise, and waives notice of any application therefor, unless notice is expressly required by Applicable Law.
(i) Right to Sue. Grantee may, from time to time, take any legal action permitted by Applicable Law to recover any sums due under the Loan Documents, without regard to whether the Loan has been accelerated, or whether foreclosure and any other enforcement action has been commenced. Grantee may exercise this right without prejudicing Grantee’s right to concurrently take any other enforcement action, including, without limitation, foreclosure.
(j) No Obligation to Marshal Assets. In exercising its rights and remedies under this Security Deed, Grantee shall have no obligation to marshal assets or to realize upon all of the Property. Grantor hereby waives any right to have any of the Property marshaled in connection with any sale or other exercise of Grantee’s rights, remedies, and powers hereunder.
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Section 9.03 Omnibus Provisions Pertaining to Grantee’s Rights and Remedies.
(a) Remedies Cumulative. The rights, powers, and remedies of Grantee hereunder are separate, distinct, and cumulative with all other rights, powers, and remedies of Grantee in the other Loan Documents, at law, or in equity, each of which may be exercised independently, concurrently, and successively in Grantee’s sole discretion. Grantee’s election of any right, power, or remedy shall not deemed exclusive of any other and shall not bar or limit the exercise of any other right, power, or remedy.
(b) No Waiver. No delay or failure by Grantee to accelerate the Loan or exercise any right, power, or remedy shall be deemed a waiver by Grantee of, or estop Grantee from, the future exercise thereof. No partial exercise of any right, power, or remedy shall preclude the further exercise thereof. Notice or demand given to Grantor in any instance shall not entitle Grantor to notice or demand in any other instance, except as expressly required by the Loan Documents or by Applicable Law. Grantee may release security for the Loan, may release any party liable therefor, may grant extensions and forbearances, may accept partial or past due amounts, and may apply any sums or other security held by Grantee to the repayment of the Loan, in each case without prejudice to Grantee and without such action being deemed an accord and satisfaction or a reinstatement of the Loan.
(c) Discontinuance of Proceedings. If Grantee commences the enforcement of any right, power, or remedy, whether afforded under the Loan Documents or otherwise and such enforcement is then discontinued or abandoned for any reason, then and in every such case, Grantee shall be restored to its former positions and rights hereunder without waiver of any Event of Default and without novation, and all rights, powers, and remedies of Grantee shall continue as if no such enforcement had been commenced.
(d) Reimbursement for Enforcement Costs. Grantor shall reimburse Grantee immediately upon demand for all costs, fees, and expenses (including, without limitation, loan servicing fees and [reasonable] attorney fees) incurred by Grantee in connection with any enforcement action taken in accordance with this Article. All sums so incurred shall be added to the Debt and shall be secured by this Security Deed. The exercise by Grantor of any statutory rights of redemption shall be expressly conditioned on Grantor’s payment of the foregoing and on the payment and performance of all obligations required under any applicable redemption statute.
(e) Right of Setoff. In addition to, but not in limitation of, any rights, remedies, and powers granted to Grantee under the Loan Documents, at law, or in equity, Grantee is hereby authorized at any time and from time to time, without notice to Grantor or any other Person, such notice being hereby expressly waived, to apply to the Obligations owed Grantee under the Loan Documents any amounts then deposited in any escrow or reserve account, if any, or in Grantee’s possession, or over which Grantee has a security interest, including without limitation any Restoration Proceeds. Such right shall be exercisable by Grantee irrespective of whether Grantee has made any demand or declared any Obligations due and owing, and irrespective of whether the Obligations for which such amounts are secured have matured.
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(f) Application of Proceeds. The proceeds of the Property, together with any other sums that may be held by Grantee under this Security Deed, whether under the provisions of this Article or otherwise, shall be applied in the order Grantee determine in its sole discretion, except as otherwise expressly required by the Loan Documents, an order from a Georgia court of competent jurisdiction, or the requirements of Applicable Law.
ARTICLE X
MISCELLANEOUS
Section 10.01 Notices. Unless specifically stated otherwise in this Security Deed, all notices, requests, and communications required or permitted to be delivered hereunder shall be in writing and delivered to all Persons at the addresses below, by one of the following methods:
(a) By Hand Delivery. Hand delivery, whereby delivery is deemed to have occurred at the time of delivery.
(b) Overnight Delivery. A nationally recognized overnight courier company, whereby delivery is deemed to have occurred the Business Day following deposit with the courier.
(c) Certified Mail. Certified mail return receipt requested and postage-prepaid, whereby delivery is deemed to have occurred on the third Business Day following deposit with the United States Postal Service.
(d) Electronic Delivery. Electronic transmission (facsimile or email) provided that the transmission is completed no later than [HOUR] p.m. on a Business Day and the original also is sent via overnight courier or U.S. Mail, whereby delivery is deemed to have occurred at the end of the Business Day on which such electronic transmission is completed, provided the duplicate physical notice is sent as required hereunder.
| To Grantor: | Foxx Trot Tango, LLC Address: 8 Campus Drive, Suite 105 Parsippany, NJ 07054 | |
| To Grantee: | TXC Services, LLC 30725 US Highway 19 North, Suite 335, Palm Harbor, FL 34684 | |
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Any party may change its address for purposes of this Section 10.01 by giving written notice as provided in this Section. Notices to counsel or parties other than Grantor, Grantee, their permitted successors and assigns, or the Loan’s servicer, whether now or hereafter designated by a party as entitled to notice hereunder, are for convenience only and any failure to notify such other parties shall not affect the validity of any notice if sent in accordance with this Section 10.01.
Section 10.02 Usury Saving Clause. At no time is Grantor required to pay interest on the Loan or on any other payment due hereunder or under any of the other Loan Documents at a rate which would subject Grantee either to civil or criminal liability as of result of being in excess of the maximum interest rate permitted by law. If interest, or any amount deemed interest, whether paid or payable by Grantor exceeds or is deemed to exceed the maximum interest rate permitted by Applicable Law, then the amount to be paid shall be reduced by such amount so that the amount to be paid shall not exceed the maximum rate permitted by law. Any payments made in excess of such maximum interest rate shall be deemed to have been payments of principal in inverse order of maturity and not of interest.
Section 10.03 No Joint Venture; No Third-Party Beneficiaries. Grantor and Grantee intend that the relationship created hereunder and under each of the other Loan Documents is solely that of borrower and lender. Nothing herein or in any of the other Loan Documents is intended to create, nor shall it be construed as creating, anything but a debtor-creditor relationship between Grantor and Grantee and no such relationship shall be drawn or implied from any of Grantee’s actions or from any prior relationship between the parties. No rights reserved or granted to Grantee under the Loan shall be deemed to confer those rights on anyone other than Grantee and its successors and assigns. Grantee shall have no obligation to Grantor or any other Person in respect of the Debt or the Property, or any part thereof, and no party shall be deemed a third party beneficiary entitled to enforce the performance or observance of any of the rights or obligations created in favor of Grantee under the Loan Documents.
Section 10.04 Grantee Approval. Wherever the Loan Documents give Grantee the right to approve or disapprove an action, grant or withhold its consent, waive a requirement, or make any decision, all such matters shall be determined by Grantee in its sole discretion, unless expressly provided otherwise in the Loan Documents. By approving or granting consent, accepting or waiving performance, making decisions, Grantee shall not be deemed to have warranted or affirmed the sufficiency, completeness, legality, or effectiveness of the subject matter or of Grantor’s compliance with Applicable Law or constitute an undertaking by Grantee to perform any Obligation of Grantor.
Section 10.05 Performance at Grantor’s Expense. Grantor acknowledges and agrees that Grantee reserves the right to collect from Grantor a fee based on a reasonable estimate of the administrative costs as determined by Grantee to review or process any request to: (a) modify or waive any provision of the Loan Documents; (b) release or substitute Property; or (c) obtain Grantee’s approval or consent whenever required by the Loan Documents including, without limitation, in connection with: (i) a Transfer request; (ii) matters affecting Leases, including amending existing Leases or entering into new Leases; (iii) making improvements or alterations to the Property; and (iv) entering into easements or other agreements affecting the Property. Grantor agrees to pay such fees, along with all reasonable legal fees and expenses incurred by Grantee within Thirty (30) days of demand. Any amounts payable by Grantor hereunder shall become part of the Debt and be secured by this Security Deed.
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Section 10.06 Joint and Several Obligations. If Grantor shall consist of more than one party, each shall be jointly and severally liable for all Debt and other Obligations of Grantor under this Security Deed and the Loan Documents.
Section 10.07 Grantee’s Right of Assignment. This Security Deed may be assigned, sold, or transferred, in whole or in part, by Grantee to any Person at any time without notice to or the consent of Grantor.
Section 10.08 No Merger. In the event that Grantee’s interest under this Security Deed and title to the Property or any estate therein shall become vested in the same Person or entity, this Security Deed shall not merge in such title but shall continue as a valid lien on the Property for the amount secured hereby, unless expressly provided otherwise in writing executed by the Person in whom such interests, title, and estate are vested.
Section 10.09 After-Acquired Property. This Security Deed shall encumber, encompass, cover, and apply to and include any and all “after-acquired property” of Grantor located at and in any way associated with the use or operation of Property, and such after-acquired property shall be a part of the Property. This Section is intended to be and is an “after-acquired property clause” and shall be construed in accordance with the provisions of the applicable laws of the state in which the Land and Improvements are located that authorize or govern after-acquired property clauses in security deeds.
Section 10.10 Waiver of Jury Trial. GRANTOR HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES, TO THE EXTENT PERMITTED BY GEORGIA LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY PROCEEDING DIRECTLY OR INDIRECTLY RELATING TO THIS SECURITY DEED, THE OTHER LOAN DOCUMENTS, THE DEBT, OR THE LOAN WHETHER BASED ON CONTRACT, EQUITY, TORT, OR ANY OTHER THEORY. WAIVER OF RIGHT TO TRIAL BY JURY IS GIVEN KNOWINGLY AND VOLUNTARILY BY GRANTOR, AND IS INTENDED TO ENCOMPASS INDIVIDUALLY EACH INSTANCE AND EACH ISSUE AS TO WHICH THE RIGHT TO A TRIAL BY JURY WOULD OTHERWISE ACCRUE. GRANTEE IS HEREBY AUTHORIZED TO FILE A COPY OF THIS PARAGRAPH IN ANY PROCEEDING AS CONCLUSIVE EVIDENCE OF THIS WAIVER BY GRANTOR.
Section 10.11 Time of the Essence. Grantor and Grantee acknowledge and agree that, except as otherwise expressly provided in this Security Deed, TIME IS OF THE ESSENCE with respect to all of Grantor’s Obligations (including, without limitation, the giving of Notices, the delivery of documents, the payment of money, and the performance of Obligations) required or permitted to be taken under this Security Deed and the other Loan Documents.
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Section 10.12 Special Waivers. WITHOUT LIMITING ANY OTHER PROVISION CONTAINED HEREIN OR IN THE OTHER LOAN DOCUMENTS, BORROWER EXPRESSLY: (1) ACKNOWLEDGES LENDER’S RIGHT TO ACCELERATE THE DEBT AND THE POWER OF ATTORNEY GIVEN HEREIN TO LENDER TO SELL THE PROPERTY BY NONJUDICIAL FORECLOSURE UPON DEFAULT BY BORROWER WITHOUT ANY JUDICIAL HEARING AND WITHOUT ANY NOTICE OTHER THAN SUCH NOTICE AS IS SPECIFICALLY REQUIRED TO BE GIVEN UNDER THE PROVISIONS OF THIS SECURITY INSTRUMENT; (2) WAIVES ANY AND ALL RIGHTS WHICH BORROWER MAY HAVE UNDER THE FIFTH AND FOURTEENTH AMENDMENTS TO THE CONSTITUTION OF THE UNITED STATES, THE VARIOUS PROVISIONS OF THE CONSTITUTION FOR THE STATE OF GEORGIA, OR BY REASON OF ANY OTHER APPLICABLE LAW, TO NOTICE AND TO JUDICIAL HEARING PRIOR TO THE EXERCISE BY LENDER OF ANY RIGHT OR REMEDY PROVIDED TO LENDER IN THIS SECURITY INSTRUMENT, EXCEPT SUCH NOTICE AS IS SPECIFICALLY REQUIRED TO BE PROVIDED IN THIS SECURITY INSTRUMENT; (3) ACKNOWLEDGES THAT BORROWER HAS READ THIS SECURITY INSTRUMENT AND ANY AND ALL QUESTIONS REGARDING THE LEGAL EFFECT OF THIS SECURITY INSTRUMENT AND ITS PROVISIONS HAVE BEEN EXPLAINED FULLY TO BORROWER AND BORROWER HAS BEEN AFFORDED AN OPPORTUNITY TO CONSULT WITH COUNSEL OF BORROWER’S CHOICE PRIOR TO EXECUTING THIS SECURITY INSTRUMENT; (4) ACKNOWLEDGES THAT ALL WAIVERS OF THE AFORESAID RIGHTS OF BORROWER HAVE BEEN MADE KNOWINGLY, INTENTIONALLY, AND WILLINGLY BY BORROWER AS PART OF A BARGAINED FOR LOAN TRANSACTION; AND (5) AGREES THAT BORROWER’S RIGHTS TO NOTICE SHALL BE LIMITED TO THOSE RIGHTS TO NOTICE PROVIDED BY THIS SECURITY INSTRUMENT AND NO OTHER.
INITIAL: ________________________
Section 10.13 Security Deed Not a Mortgage. This Security Deed is a deed passing title pursuant to the laws of the State of Georgia governing loans or security deeds and is not a mortgage. The words “lien” or “lien of this Security Deed “ or words of similar import shall mean the lien, security title, and security interest created and conveyed by this Security Deed as a security deed.
Section 10.14 Headings; Time of the Essence. The headings of the various articles, sections, and subsections in this Security Deed are for reference only and shall not define, expand, or limit any of the terms or provision thereof. Time is of the essence with respect to all of Grantor’s Obligations under this Security Deed and the other Loan Documents.
[signature page follows]
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IN WITNESS WHEREOF, Grantor has executed this Security Deed under seal as of the date set forth above.
| FOXX TROT TANGO, LLC | ||
| By: | Frederick Kalei Cutcher | |
| Title: | Authorized Agent | |
Signed, sealed, and delivered in the presence of:
_____________________
Unofficial Witness Print Name: _____________________
_____________________
Notary Public Print Name: _____________________
Commission Expiration Date: |
|
| [NOTARIAL SEAL] |
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EXHIBIT A
[LEGAL DESCRIPTION]
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Exhibit 10.9
SECURITY AGREEMENT AND PLEDGE OF MEMBERSHIP INTEREST
THIS SECURITY AGREEMENT AND PLEDGE OF MEMBERSHIP INTEREST (the “Agreement” or “Pledge”) is made as of July 25, 2023, by and between Global Technologies, Ltd, a Delaware corporation (the “Pledgor”), and TXC Services, LLC, a Delaware limited liability company (“Pledgee”).
WITNESSETH:
WHEREAS, on the date of this Agreement, Pledgor and Pledgee entered in that certain Amended and Restated Membership Interest Purchase Agreement and other Transaction Documents (defined in the MIPA) whereby Pledgor purchased 100% of the interests in and too Common Membership Units (“Interest” or “Interests”) in Foxx Trot Tango, LLC, a Wyoming limited liability company (“Company”) in exchange for certain consideration from and liabilities and obligations of the Pledgor under the MIPA and Transaction Documents (collectively the “Transaction Documents”). A copy of the Transaction Documents are attached hereto as Exhibit A;
WHEREAS, on the date of this Agreement, Pledgor entered into a third amended and restated limited liability company agreement (“Operating Agreement”);
WHEREAS, Pledgor has agreed to grant to Pledgee a security interest (the “Security Interest”) in and to all of its right, title and ownership interest in and to the Interests whether derived under the Certificate of Formation, the Operating Agreement, or otherwise, including, the Pledgor’s status as a Member, and the Pledgor’s right to participate in the management of the business and affairs of the Company (“Collateral”) to secure all liabilities and obligations of Pledgor under the Transaction Documents; and
To induce Pledgee to enter into the Transaction Documents, Pledgor has agreed to pledge to Pledgee its Member’s Interests.
NOW, THEREFORE, to induce the Pledgee to enter into the Transaction Documents and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, Pledgor hereby agrees as follows:
1. Grant of Security Interest. To secure the complete and timely satisfaction of all liabilities, indebtedness and obligations of Pledgor to Pledgee under the Transaction Documents (collectively, the “Obligations”), the Pledgor herewith pledges, delivers, and assigns to the Pledgee and grants a first lien and security interest in favor of the Pledgee in and to the Interest (including Pledgor Total Rights in the Company). Provided there is not an Event of Default (as defined below), the aforesaid pledge shall be released within five (5) days after the date when the Pledgor and Company) have performed all Obligations under the Transaction Documents.
2. The Pledgor does hereby appoint Pledgee or its assignee, as Pledgor’s true and lawful attorney and in its name, place and stead, upon the occurrence of an Event of Default (as defined below) to cause the Interests to be transferred on the books of Company to the name of Pledgee or to such other party as is designated by Pledgee. In furtherance of the preceding, Pledgor has delivered to Pledgee the Assignment of Member’s Interests, attached hereto as Exhibit B, which instrument Pledgee shall hold in escrow and shall be entitled to (but not obligated to) release from escrow upon the occurrence of an Event of Default under any of the Transaction Documents.
3. The Pledgor hereby agrees, represents and warrants:
(a) That Pledgor has not sold, assigned, transferred, pledged, granted any security interest in or otherwise hypothecated the Interests in any manner whatsoever and that the Interests are pledged herewith free and clear of any and all liens, encumbrances, pledges, restrictions, security interests and agreements.
(b) That Pledgor has full power and authority to execute and deliver this Agreement and to pledge the Interests hereunder, that this Agreement constitutes the valid and binding obligation of Pledgor enforceable in accordance with its terms, and that the pledge of the Interests contained herein is not in violation of any agreement, undertaking or obligation of Pledgor.
(c) That the Interests pledged herein constitute all of the issued and outstanding interests and rights of the Pledgor in and to the Company.
(d) That all of the Interests have been duly and validly issued and are fully paid and nonassessable.
(e) That Pledgor shall not permit or consent to the issuance of any additional ownership interests in or to the Pledgor or options or securities convertible into ownership interests in or to the Pledgor; or sell, assign, transfer, or permit or grant any lien, right or security interest in the Interests except as set forth in this Pledge.
(f) That Pledgor shall not permit or consent to the amendment, restatement or other modification to the Operating Agreement or other organizational document of the Company in effect as of the date of this Pledge, without the express written consent of Pledgee. Pledgor certifies that the Operating Agreement and organizational documents in effect as of the date of this Pledge are attached hereto as Exhibit C.
(g) Pledgor shall indemnify Pledgee against all costs, expenses, claims and liabilities which may be asserted against the Pledgee by reason of the pledge of the Interests or of the transfer of the Interests by Pledgee.
(h) Pledgor’s accountant shall certify to Pledgee within fifteen (15) days after request from Pledgee but no more frequently than twice each year that the Pledgor and Company have paid in full all taxes of any kind imposed by any governmental authority upon the Pledgor and Company or their business including but not limited to income (federal, state and local), franchise, stock, business privilege, withholding, unemployment, business privilege, sales, school and use and occupancy.
(i) Pledgor hereby authorizes Pledgee to file UCC-1 Financing Statements (and any appropriate continuations, modifications, or amendments) to reflect the grant of a security interest in and to the Interests.
4. So long as no Event of Default exists, Pledgee shall not be entitled to collect dividends or distributions related to the Interests, shall not be obligated to make capital contributions or to make loans to the Company, shall not be deemed to have ownership of the Interests for tax or other purposes, and the Pledgor shall have the right to cast any vote of the same at meetings of Company not inconsistent with this Agreement and the Transaction Documents.
5. Upon the occurrence of an event of default, under any of the Transaction Documents (each being an “Event of Default”), upon written notice by Pledgee to Pledgor of his election to succeed to Member’s Interests, whether or not the Interests shall have been transferred on the books of the Company to the name of the Pledgee or its assignee, the Pledgee or its assignee shall have Member’s total rights in and to the Interests free and clear of all rights of redemption or other rights or claims of Pledgor, all of which are hereby waived. Pledgee shall have no duty to exercise any of the aforesaid rights or privileges, nor shall Pledgee be in any way liable for Pledgee’s delay or failure in doing so.
6. Further, upon the occurrence of an Event of Default, Pledgee is hereby granted, in addition to all of the rights as herein recited, all of the rights and remedies accorded a secured party under the Uniform Commercial Code (the “UCC”).
7. An Event of Default under this Pledge shall include:
(a) The non-compliance or non-performance of the Company or Pledgor, under or of any term or condition when compliance or performance would otherwise be due under any Transaction Document.
(b) The adjudication of Pledgor or the Company as bankrupt or insolvent, or entry of any order, remaining unstayed by appeal or otherwise for ten (10) days, appointing a receiver or trustee for the Pledgor or the Company or for all or any of Pledgor’s or the Company’s assets, or the filing by or against the Pledgor or the Company of a petition seeking any of the foregoing or consenting thereto, or the filing of a petition to take advantage of any debtors’ act, or making a general assignment for the benefit of creditors or admitting in writing inability to pay debts as they mature.
(c) The dissolution of the Pledgor and the failure of the successor owner of such Pledgor’s Interests to execute a joinder to this Pledge with five (5) business days after transfer of such Interests to such successor.
8. No delay, indulgence or failure to exercise its remedies hereunder shall be deemed a waiver by Pledgee of any of its rights under this Pledge nor shall a waiver on one occasion constitute a bar to the exercise of any right or remedy in the event of a default on another occasion. Pledgee may exercise its remedies singly or concurrently and such exercise shall not exclude the exercise of any other rights or remedies afforded at law or in equity.
9. The authorizations contained in this Pledge are irrevocable and shall be deemed to be powers coupled with an interest.
10. Notice. Except as otherwise provided herein, all notices, requests and demands to or upon a party hereto to be effective shall be in writing and shall be personally delivered, mailed by certified or registered mail, return receipt requested, sent prepaid by reliable overnight courier or sent by facsimile transmission. Unless otherwise expressly provided herein, notices shall be deemed to have been validly given when delivered, or, in the case of mailing, two (2) business days after deposit in the mail in the continental United States, postage prepaid; or, in the case of reliable overnight courier, on the business day after the courier accepts delivery of such item for next business day delivery; or, in the case of facsimile transmission, when sent against confirmation of receipt prior to 5:00 p.m. local time at the recipient’s office, in each case addressed as follows:
Pledgor
Global Technologies, Ltd.
8 Campus Dr.
Suite 105
Parsippany, NJ 07054
Pledgee
30725 US Highway 19 North
Suite 335
Palm Harbor, FL 34684
or to such other address or telecopy number as each party may designate for itself by like notice given in accordance with this Section.
11. This is the entire Agreement between the parties hereto and may be changed only by a written instrument signed by the party against whom any such change is sought to be enforced.
12. This Agreement is made in and shall be governed by and construed in accordance with the laws of the State of Wyoming.
13. This Agreement shall be binding upon and inure to the benefit of the parties hereto, their respective heirs, personal representatives, successors and assigns.
14. The provisions of this Agreement are severable, and if any clause or provision shall be held invalid and unenforceable in whole or in part in any jurisdiction, then such invalidity or unenforceability shall affect only such clause or provision, or part thereof, in such jurisdiction, and shall not in any manner affect such clause or provision in any other jurisdiction, or any other clause or provision of this Agreement in any jurisdiction.
15. All of Pledgee’s rights and remedies, whether established hereby or by the Transaction Documents, shall be cumulative and may be exercised singularly or concurrently.
16. This Agreement is subject to modification only by a writing signed by all of the parties.
17. The benefits and burdens of this Agreement shall inure to the benefit of and be binding upon the respective successors and assigns of the parties.
[signatures on following page]
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and year first above written.
| PLEDGOR | ||
| Global Technologies, Inc. | ||
| By: | Frederick Kalei Cutcher | |
| Title: | CEO | |
| PLEDGEE | ||
| TXC SERVICES, LLC | ||
| Christopher Ferguson | ||
| Title: | Manager | |
EXHIBIT A
MIPA / Transaction Documents
EXHIBIT B
Assignment of Member’s Interests
ASSIGNMENT OF MEMBER’S INTERESTS
THIS ASSIGNMENT OF MEMBER’S INTERESTS (“Assignment”) is made as of July 25, 2023 by and between Global Technologies Ltd (“Assignor”) and TXC Services, LLC, or his assignee (“Assignee”).
Background:
WHEREAS, Assignor has rights, title and interest in Foxx Trot Tango, LLC (“the Company”), whether derived under the Certificate of Formation, the Operating Agreement, or otherwise, including without limitation the Assignor’s 100% interests in and too the Common Membership Units of the Company, the Assignor’s status as a member, and the Assignor’s right to participate in the management of the business and affairs of the Company (the “Interests”).
WHEREAS, Assignor desires to transfer to Assignee, and Assignee desires to accept such transfer from Assignor the Interests.
Assignment:
In consideration of the mutual promises made herein and intending to be legally bound, each of the undersigned agrees as follows:
1. Conditional Assignment. This Assignment is conditioned upon an event of default by Assignor of any Transaction Document in connection with a Security Agreement and Pledge of Membership Interest dated July 25, 2023 (“Pledge”). In the event of a default under the Pledge, upon notice by Assignee to Assignee, Assignee or his nominee, shall own and possess Interests unconditionally and free and clear of any rights of redemption.
2. Representations of Assignor. Assignor hereby represents and warrants that Assignor is the sole owner of the Interest and has the power and authority to assign same to Assignee.
3. Assumption. Assignee hereby accepts the foregoing assignment.
4. Further Assurances. The parties hereto agree that they will cooperate with each other and will execute and deliver, or cause to be delivered, all such other instruments, and will take all such other actions, as any party hereto may reasonably request from time to time in order to effectuate the provisions and purposes hereof.
5. Complete Agreement. This Assignment constitutes the complete and exclusive statement of the agreement among the parties with respect to the subject matters set forth herein. It supersedes all prior written and oral statements and no representation, statement, condition or warranty not contained in this Assignment shall be binding on the parties or have any force or effect whatsoever.
6. Binding Agreement. This Assignment shall be binding upon and shall inure to the benefit of the parties and their respective successors, assigns, heirs and legal representatives.
7. Counterparts and Facsimile. This Assignment may be executed in counterparts, each of which shall be an original and all of which, when taken together, shall constitute one and the same instrument, binding on the undersigned, and the signature of any party to any counterpart shall be deemed a signature to, and may be appended to, any other counterpart. A facsimile copy of this Assignment shall be deemed to be an original for all purposes.
8. Governing Law. This Assignment shall be construed and enforced in accordance with the laws of the State of Wyoming.
[SIGNATURE PAGE TO FOLLOW]
IN WITNESS WHEREOF, the parties hereto have executed this Assignment as of the day and year first above written.
| ASSIGNOR | ||
| Global Technologies, Inc. | ||
| By: | Frederick Kalei Cutcher | |
| Title: | CEO | |
| ACCEPTED BY: | ||
| ASSIGNEE | ||
| TXC SERVICES, LLC | ||
| By: | Christopher Ferguson | |
| Title: | Manager | |
EXHIBIT C
Operating Agreement and Organizational Documents
Exhibit 10.10
Privileged & Confidential
Foxx
Trot Tango, LLC
A Wyoming Limited Liability Company
THIRD AMENDED AND RESTATED
LIMITED LIABILITY COMPANY AGREEMENT
Dated as of July 25, 2023
THE MEMBERSHIP INTERESTS REPRESENTED BY THIS LIMITED LIABILITY COMPANY AGREEMENT HAVE NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED, OR UNDER ANY OTHER APPLICABLE SECURITIES LAWS. SUCH INTERESTS MAY NOT BE OFFERED, SOLD, ASSIGNED, PLEDGED OR OTHERWISE DISPOSED OF AT ANY TIME WITHOUT EFFECTIVE REGISTRATION UNDER SUCH ACT AND LAWS OR EXEMPTION THEREFROM, AND COMPLIANCE WITH THE OTHER RESTRICTIONS ON TRANSFERABILITY SET FORTH HEREIN.
THIRD AMENDED AND RESTATED
LIMITED
LIABILITY COMPANY AGREEMENT
OF FOXX TROT TANGO, LLC
This Third Amended and Restated Limited Liability Company Agreement (this “Agreement”) of Foxx Trot Tango, LLC (the “Company”), dated as of July 25, 2023 (the “Effective Date”), is adopted by, and executed and agreed to, for good and valuable consideration, by the undersigned Member(s) in order to set forth their agreement as to the operation and governance of the Company and any previous agreements, oral or written, regarding the content hereof is superseded by this Agreement.
RECITALS
WHEREAS, the original Members formed the Company on February 3, 2022 pursuant to the execution and filing of the Articles of Organization with the office of the Secretary of State of the State of Wyoming;
WHEREAS, the original liability company agreement was entered into and became effective as of February 3, 2022 (“Original Agreement”);
WHEREAS, in accordance with that certain Membership Interest Purchase Agreement, Assignment May 17, 2022 and other transaction documents an amended and restated limited liability company agreement became effective as of May 17, 2022 (“Amended Agreement”);
WHEREAS, in accordance with that certain Membership Interest Purchase Agreement, Assignment dated January 1, 2023 and other transaction documents, a second amended and restated limited liability company agreement became effective as of January 1, 2023 (“ “Second Amended Agreement”).
WHEREAS, in accordance with that certain Amended and Restated Membership Interest Purchase Agreement, Assignment dated as of the date as of July 25, 2023 and other transaction documents (“MIPA”), this third amended and restated limited liability company agreement became effective as of July 25, 2023 (this “Agreement” or “Third Amended Agreement”). A copy of the MIPA is attached hereto as Exhibit A;
WHEREAS, this Agreement supersedes the Original Agreement, Amended Agreement and Second Amended Agreement;
WHEREAS, as of the date of the MIPA and this Agreement, the sole Member Global Technologies, Ltd (“GTLL”) owns One Hundred Percent (100%) of the outstanding common membership units in the Company; and
WHEREAS, the Member desires to set forth the rights, powers, interests and obligations of the Member and Manager(s) on terms set forth herein.);
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NOW, THEREFORE, the Member hereto agrees as follows:
Article
I
DEFINITIONS
1.1 Definitions. As used in this Agreement, the following terms have the following meanings:
“Act” means the Wyoming Limited Liability Company Act and any successor statute, as amended from time to time.
“Affiliate” means, as to any Person, any other Person that, directly or indirectly, (i) owns ten percent (10%) or more of the legal, beneficial or economic interests in such Person; (ii) is in control of, controls, is controlled by, or is under common control with, such Person; (iii) is a director or officer of such Person or of an Affiliate of such Person; or (iv) is the spouse, child or parent of such Person or of an Affiliate of such Person. For this purpose, “control” (including, with its correlative meanings, “controlled by” and “under common control with”) shall mean the possession, directly or indirectly, of the power to direct or cause the direction of management or policies of a Person, whether through the ownership of securities or partnership or other ownership interests, by contract or otherwise.
“Agreement” has the meaning given that term in the introductory paragraph.
“Articles” has the meaning set forth in Section 2.1.
“Available Cash” means cash available to the Company after taking into account such funds or reserves as a majority of the Board of Managers (“Majority”) deems reasonably necessary with respect to the reasonable anticipated business needs of the Company, which shall include (but not by way of limitation) the payment or the making of provision for current operating expenses, the payment when due of Company obligations, capital expenditures or improvements and any other expenses or obligations.
“Board” has the meaning set forth in Section 5.1.”Capital Account” has the meaning set forth in Section 3.9.1.
“Capital Contribution” means the aggregate contribution by a Member to the capital of the Company.
“Capital Transaction” means any transaction not in the ordinary course of business which results in the Company’s receipt of cash or other consideration other than Capital Contributions, including without limitation, proceeds of sales or exchanges or other dispositions of property not in the ordinary course of business, Sale of the Company, exclusive licensing of technology, financing, refinancing, condemnations, recoveries of damage awards, and insurance proceeds.
“Cash Available for Distribution” means, at any given time, Available Cash less the Required Debt Payment.
“Code” means the Internal Revenue Code of 1986 and any successor statute, as amended from time to time.
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“Security Agreement and Pledge of Membership Interests including the Assignment of Member’s Interests (referred to collectively as the “Collateral Assignment”) means that certain Security Agreement and Pledge of Membership Interests including the Assignment of Member’s Interests among GTLL and and TXC, attached to the MIPA as Exhibit H.
“Common Units” means any unit designated as such on Schedule A attached hereto.
“Company” means Foxx Trot Tango, LLC, a Wyoming limited liability company.
“Company Election Period” has the meaning set forth in Section 10.3.1.
“Company Minimum Gain” has the same meaning as the term “partnership minimum gain” set forth in Treasury Regulations Sections 1.704-2(b)(2) and 1.704-2(d).
“Company Notice” has the meaning set forth in Section 10.3.2.
“Confidential Information” has the meaning set forth in Article VI.
“Distribution” means a distribution made by the Company to a Member, whether in cash, property or securities of the Company and whether by liquidating distribution or otherwise; provided that none of the following shall be a Distribution: (i) any redemption or repurchase by the Company of any Units, (ii) any recapitalization or exchange of Units of the Company, (iii) any subdivision (by Unit split or otherwise) or any combination (by reverse Unit split or otherwise) of any outstanding Units, or (iv) any fees or remuneration paid to any Member in such Member’s capacity as an employee, officer, consultant or other provider of services to the Company.
“Effective Date” has the meaning given that term in the introductory paragraph. “Fair Market Value” means, with respect to any asset, its fair market value determined according to Article XII.
“Fiscal Year” of the Company means the calendar year.
“Gross Asset Value” means, with respect to any asset, the asset’s adjusted basis for federal income tax purposes, except as follows:
(i) the Gross Asset Value of any asset contributed by a Member to the Company is the gross fair market value of such asset as determined at the time of contribution;
(ii) the Gross Asset Value of all Company assets shall be adjusted to equal their respective gross fair market values, as determined by the Board, as of the following times: (a) the acquisition of any additional interest in the Company by any new or existing Member in exchange for more than a de minimis capital contribution; (b) the distribution by the Company to a Member of more than a de minimis amount of property as consideration for an interest in the Company; (c) the grant of an interest in the Company (other than a de minimis interest) as consideration for the provision of services to or for the benefit of the Company by an existing Member acting in a Member capacity, or by a new Member acting in a Member capacity or in anticipation of becoming a Member; (d) the liquidation of the Company within the meaning of Treasury Regulations Section 1.704-1(b)(2)(ii)(g); and (e) such other times determined by the Board in its sole and absolute discretion; provided that the adjustments pursuant to clauses (a), (b), (c) and (e) above shall be made only if the Board determines that such adjustments are necessary or appropriate to reflect the relative economic interests of the Members in the Company; and
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(iii) the Gross Asset Value of any Company asset distributed to any Member shall be adjusted to equal the gross fair market value of such asset on the date of distribution as determined by the Board.
“Incapacity” or “Incapacitated” means (i) with respect to a natural person, an Insolvency Event or the death, incompetency or insanity of such person, and (ii) with respect to any other Person, an Insolvency Event with respect to, or the liquidation, dissolution or termination of, such Person.
“Indemnifying Member” has the meaning set forth in Section 13.12.
“Insolvency Event” means, with respect to any Person, having an order for relief entered with respect to such Person under the federal bankruptcy laws as now or hereafter in effect, making a general assignment for the benefit of creditors, becoming unable generally to pay debts as such debts become due, admitting in writing that such Person is generally unable to pay its debts as they become due, filing any debtor proceedings, filing or becoming the subject of any proceeding of any kind under any provisions of any applicable bankruptcy or insolvency law seeking any readjustment, rearrangement, composition, postponement, or reduction of debts, liabilities or obligations (in the case of an involuntary proceeding, which continues undismissed or unstayed for a period of sixty (60) consecutive days).
“Involuntary Transfer” means any Transfer, whether pursuant to the Pledge Agreement, by operation of law, under court order, foreclosure of a security interest, execution of a judgment or other legal process, or otherwise, including a purported transfer to or from a trustee pursuant to an Insolvency Event.
“Liability” means with respect to any Person, any liability or obligation of such Person of any kind, character or description, whether known or unknown, absolute or contingent, accrued or unaccrued, disputed or undisputed, liquidated or unliquidated, secured or unsecured, joint or several, due or to become due, vested or unvested, executory, determined, determinable or otherwise, and whether or not the same is required to be accrued on the financial statements of such Person.
“Manager” has the meaning set forth in Section 5.1.
“Member” means any Person executing this Agreement as of the date of this Agreement as a member or hereafter admitted to the Company as a member as provided in this Agreement, but does not include any Person who has ceased to be a member of the Company. The Members are listed on Schedule A attached hereto.
“Member Election Period” has the meaning set forth in Section 10.3.2.
“Member Nonrecourse Debt” has the same meaning as the term “partner nonrecourse debt” set forth in Treasury Regulations Section 1.704-2(b)(4).
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“Member Nonrecourse Debt Minimum Gain” means an amount, with respect to each Member Nonrecourse Debt, equal to the Company Minimum Gain that would result if the Member Nonrecourse Debt were treated as a Nonrecourse Liability, determined in accordance with Treasury Regulations Section 1.704-2(i)(3).
“Member Nonrecourse Deductions” has the same meaning as the term “partner nonrecourse deductions” in Treasury Regulations Section 1.704-2(i)(2).
“Members’ Notices” has the meaning set forth in Section 10.3.2.
“Net Capital Proceeds” means the gross capital proceeds received by the Company from a Capital Transaction less the expenses related to such Capital Transaction and less such funds or reserves as the Board deems reasonably necessary with respect to the reasonable anticipated business needs of the Company, which shall include (but not by way of limitation) the payment or the making of provision for the payment when due of Company obligations, including the payment of any management or administrative fees and expenses or any other obligations.
“Net Income” and “Net Loss” mean, for each Fiscal Year or other period, an amount equal to the Company’s taxable income or loss for such Fiscal Year or period, determined in accordance with Section 703(a) of the Code (for this purpose, all items of income, gain, loss or deduction required to be stated separately pursuant to Section 703(a)(1) of the Code shall be included in taxable income or loss) with the following adjustments (without duplication):
(i) any income of the Company that is exempt from federal income tax and not otherwise taken into account in computing Net Income or Net Loss pursuant to this paragraph, shall be added to such income or loss;
(ii) any expenditures of the Company described in Code Section 705(a)(2)(B) or treated as Code Section 705(a)(2)(B) expenditures pursuant to Treasury Regulations Section 1.704-1(b)(2)(iv)(i), and not otherwise taken into account in computing Net Income or Net Loss pursuant to this paragraph, shall be subtracted from such taxable income or loss;
(iii) if the Gross Asset Value of any Company asset is adjusted pursuant to clauses (ii) or (iii) of the definition of “Gross Asset Value” herein, the amount of such adjustment shall be taken into account as gain or loss from the disposition of such asset for purposes of computing Net Income or Net Loss;
(iv) gain or loss resulting from any disposition of Company property with respect to which gain or loss is recognized for federal income tax purposes shall be computed by reference to the Gross Asset Value of the property disposed of, notwithstanding that the adjusted tax basis of such property differs from its Gross Asset Value;
(v) in lieu of depreciation, amortization, and other cost recovery deductions taken into account in computing such taxable income or loss, such amounts shall instead be determined in accordance with the requirements of Treasury Regulations Section 1.704-1(b)(2)(iv)(g); and
(vi) any items which are specially allocated pursuant to the provisions of Section 4.6 shall not be taken into account in computing Net Income or Net Loss.
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“Nonrecourse Deductions” has the meaning set forth in Treasury Regulations Sections 1.704-2(b)(1) and 1.704-2(c).
“Nonrecourse Liability” has the meaning set forth in Treasury Regulations Section 1.704-2(b)(3).
“Offeree Member” has the meaning set forth in Section 10.3.2.
“Offer Notice” has the meaning set forth in Section 10.3.1.
“Partnership Representative” has the meaning set forth in Section 8.2.1.
“Partnership Tax Audit Rules” means the partnership tax audit rules contained in Subchapter C of Chapter 63 of the Code (Sections 6221 et seq.) as enacted by the Bipartisan Budget Act of 2015, as amended from time to time, and any Regulations and other guidance promulgated thereunder, and any similar state or local legislation, regulations or guidance.
“Percentage Interest” means, with respect to a Member at any time and from time to time, a percentage equal to a fraction, the numerator of which is the number of Units owned by such Member and the denominator of which is the aggregate number of Units owned by all Members.
“Person” means a natural person, partnership (whether general or limited), limited liability company, trust, estate, association, corporation, custodian, nominee or any other individual or entity in its own or any representative capacity.
“Proceeding” has the meaning set forth in Section 7.2.
“Property” means the Land, building and equipment collectively, owned by the Company as defined in the MIPA.
“Repurchase Right” has the meaning set forth in Section 10.4.
“Required Debt Payment” means the payment that is required to be made by the Company to service its outstanding debt obligations.
“Safe Harbor Election” has the meaning set forth in Section 3.7.
“Sale of the Company” means (i) the sale of the Company to an independent third party or group of independent third parties pursuant to which such party or parties acquire Units of the Company possessing a majority of the voting power of the Units (whether by merger, consolidation, sale or transfer of the Company’s equity interests), or (ii) the sale, lease, transfer, exclusive license or other disposition of the Company’s assets in one transaction or series of related transactions determined on a consolidated basis.
“Securities Act” means the United States Securities Act of 1933, as amended, and applicable rules and regulations thereunder, and any successor to such statutes, rules or regulations. Any reference herein to a specific section, rule or regulation under the Securities Act shall be deemed to include any corresponding provisions of future law.
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“Taxable Year” means the Company’s taxable year ending December 31 (or part thereof, in the case of the Company’s last taxable year), or such other year as is determined by the Board in compliance with Section 706 of the Code.
“Transfer” means any transfer, sale, assignment, pledge, hypothecation, encumbrance or other disposition of Units or other interests in the Company (or of a direct or indirect interest in a Member holding Units) to another party, whether voluntary or involuntary, including a pledge of or granting of another form of security interest in any such interest.
“Treasury Regulations” means the temporary and final regulations promulgated by the U.S. Department of the Treasury under the Code.
“Units” means the units held by each Member representing a fractional part of the interest of the Member in the Distributions and the income, profits, gains, losses, deductions, and expenses of the Company, and shall initially include only Common Units. When the term “Units” is used herein without distinction as to class, the term means Units of all classes.
“Unreturned Capital Contribution” means, with respect to any Member, the total Capital Contributions made by such Member less the total Distributions made to such Member pursuant to Section 4.2.2(a).
Other terms defined in this Agreement have the meanings so given them.
1.2 Construction . Whenever the context requires, the gender of all words used in this Agreement includes the masculine, feminine and neuter. All references to Articles and Sections refer to articles and sections of this Agreement, and all references to Schedules or Exhibits are to Schedules or Exhibits attached hereto, each of which is made a part hereof for all purposes.
Article
II
ORGANIZATION
2.1 Formation. The Company has been organized as a Wyoming limited liability company by the filing of the Articles of Organization (the “Articles”) under and pursuant to the Act.
2.2 Name. The name of the Company is “Foxx Trot Tango, LLC”, and all Company business shall be conducted in that name or such other names that comply with applicable law as the Board may select from time to time.
2.3 Registered Office; Registered Agent; Principal Office; Other Offices. The registered office of the Company required by the Act to be maintained in the State of Wyoming shall be the office of the initial registered agent named in the Articles or such other office (which need not be a place of business of the Company) as the Board may designate from time to time in the manner provided by law. The registered agent of the Company in the State of Wyoming shall be the initial registered agent named in the Articles or such other Person or Persons as the Board may designate from time to time in the manner provided by law. The principal office of the Company shall be at such place as the Board may designate from time to time, which need not be in the State of Wyoming, and the Company shall maintain records there. The Company may have such other offices as the Board may designate from time to time.
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2.4 Purposes. The purpose of the Company shall be to engage in any lawful business under the Act. The Company may exercise all powers reasonably connected with such activities and businesses that may be legally exercised by limited liability companies under the Act, and the Company may engage in all activities necessary, customary, convenient, or incident to any of the foregoing.
2.5 Term. The term of the Company commenced on the date the Articles was filed with the office of the Secretary of State of the State of Wyoming and shall continue in existence until termination and dissolution thereof as determined under Article XI of this Agreement.
2.6 No State Law Partnership. The Members intend that the Company not be a partnership (including, without limitation, a limited partnership) or joint venture, and that no Member or Manager be a partner or joint venturer of any other Member or Manager, for any purposes other than federal and, if applicable, state tax purposes, and this Agreement shall not be construed to suggest otherwise.
Article
III
MEMBERSHIP; UNITS; CONTRIBUTED CAPITAL; CAPITAL ACCOUNTS
3.1 Members.
3.1.1. The Member(s) of the Company is set forth on Schedule A attached hereto, which shall be updated from time to time to conform to the books and records of the Company.
3.1.2. No Member, as such, shall be required to lend any funds to the Company or to make any additional contribution of capital to the Company, except as otherwise required by applicable law or this Agreement. Any Member may, with the unanimous approval of the Members, make loans to the Company, and any loan by a Member to the Company shall be a loan and not be considered to be a Capital Contribution.
3.1.3. Each Member shall execute a counterpart of this Agreement, and when a Person is admitted as a Member in accordance with this Agreement, such Person shall execute a counterpart of this Agreement.
3.2 Liability of Members.
3.2.1. Except as otherwise required by applicable law or as explicitly set forth in this Agreement, no Member shall have any personal liability in his, her or its capacity as a Member, whether to the Company, to any of the other Members, to the creditors of the Company or to any other third party, for the debts, liabilities, commitments or any other obligations of the Company or for any losses of the Company, and therefore, a Member shall be liable only to the extent of his, her or its Capital Contribution to the Company.
3.2.2. In accordance with the Act and the laws of the State of Wyoming, a member of a limited liability company may, under certain circumstances, be required to return amounts previously distributed to such member. A Member who receives a distribution made by the Company in violation of this Agreement or the Act is liable to the Company for the amount of such distribution if the Company makes a claim for such amount within three (3) years of the distribution date.
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3.3 Lack of Authority. Except as otherwise specifically provided in this Agreement, no Member (other than a Member in his or her capacity as a Manager or an officer of the Company) has the authority or power to act for or on behalf of the Company, to do any act that would be binding on the Company or to make any expenditures on behalf of the Company.
3.4 Units. The Company shall initially have Common Units. The Units issued hereunder shall not be certificated unless otherwise determined by the Board. Each Member’s interest in the Company, including such Member’s interest in income, gains, losses, deductions and expenses of the Company and the right to vote on certain matters as provided in this Agreement, shall be represented by the Common Units owned by such Member. The ownership of Units shall entitle each Member to allocations of profit and loss and other items and distributions of cash and other property as set forth in Article IV hereof. Each Common Unit shall entitle the Member owning such Unit to one vote on any matter voted on by Members as provided in this Agreement or as required by applicable law. The number and class of Units held by each Member is set forth on Schedule A attached hereto.
3.5 Issuance of Additional Units Generally. Subject to Section 5.2.1 and Section 10.8, the Board shall have the right to cause the Company to issue or sell to Members, Affiliates of Members or other Persons: (i) additional Units or other interests in the Company, (ii) obligations, evidences of indebtedness or other securities or interests convertible or exchangeable into Units or other interests in the Company, and (iii) warrants, options or other rights to purchase or otherwise acquire Units or other interests in the Company. Upon the acquisition of any Units or other interests in the Company by a Person who is not a Member, to the extent permitted hereunder such Person shall execute and deliver a counterpart of this Agreement and shall become a Member hereunder.
3.6 No Withdrawal. So long as a Member continues to hold any Units, such Member shall not have the ability to withdraw or resign as a Member prior to the dissolution and winding up of the Company and such withdrawal or resignation or attempted withdrawal or resignation by a Member prior to the dissolution or winding up of the Company shall be null and void. As soon as any Person who is a Member ceases to hold any Units, such Person shall no longer be a Member.
3.7 [RESERVED]
3.8 Capital Contributions. Upon the execution of this Agreement, each Member shall contribute, or have previously contributed, to the capital of the Company the amount of capital in exchange for the number of Units set forth adjacent to such Member’s name on Schedule A attached hereto. Unless the Members unanimously approve otherwise, no Member shall be required to contribute additional capital to the Company beyond the Capital Contributions described in this Section 3.8.
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3.9 Capital Accounts.
3.9.1. A separate capital account (“Capital Account”) shall be maintained for each Member. Each Member’s Capital Account shall consist of the amount of the Member’s Capital Contribution. Each Member’s Capital Account shall be increased by the amount of any additional money contributed by the Member to the Company; the net fair market value of any assets contributed by the Member to the Company; and allocations to the Member of any profits. Each Member’s Capital Account shall be decreased by the amount of any money distributed to the Member by the Company; the net fair market value of any assets distributed to the Member by the Company; allocations to the Member of any Company expenditures not deductible in computing Company taxable income and not properly chargeable to capital account; and allocations to the Member of any losses.
3.9.2. Capital Accounts shall be maintained and adjusted in accordance with the additional rules set forth in § 1.704-1(b)(2)(iv) of the Income Tax Regulations (the “Regulations”) adopted under the Code.
3.9.3. The “net fair market value” of an asset for purposes of this Section 3.9 shall be the fair market value of the asset net of any liabilities respecting the asset assumed by the Company (upon a contribution) or by the Members (upon a distribution), as the case may be, and any liabilities to which any such contributed or distributed assets are subject.
Article
IV
DISTRIBUTIONS; ALLOCATIONS OF
PROFITS AND LOSSES
4.1 Generally. Subject to the provisions of the Act and Sections 4.2, 4.4, 4.5, and 5.2.1 of this Agreement, the Board shall have sole discretion regarding the amounts and timing of distributions to Members out of Cash Available for Distribution.
4.2 Distributions.
4.2.1. Operating Distributions. Distributions from Cash Available for Distribution shall be made in such amounts and at such times as declared by the Board, to the Members holding Units, pro rata in proportion to their relative number of such Units owned.
4.2.2. Capital Transaction Distributions. Distributions from Net Capital Proceeds shall be made when and as declared by the Board to the Members in the following order of priority:
(a) First, to all Members in proportion to their Unreturned Capital Contributions until the Unreturned Capital Contributions of all Members have been reduced to zero ($0); and
(b) Thereafter, to members of all classes pro rata in proportion to their ownership of units.
4.2.3. Liquidating Distributions. Distributions upon dissolution and liquidation of the Company shall be made to the Members in accordance with Section 11.2(g).
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4.2.4. Closing Accounts Receivable. The Closing Accounts Receivable shall be $0.00. Pursuant to the MIPA, Excluded Assets (as defined in the MIPA) shall be assigned to TXC or its nominee or assigns.
4.3 Allocation of Profits and Losses. Except as explicitly provided elsewhere in this Agreement, the items of income, gain, loss or deduction of the Company comprising Net Income or Net Loss for a Fiscal Year shall be allocated to the Members in proportion to the number of Units owned by each Member.
4.4 Amounts Withheld. All amounts withheld pursuant to Section 13.12 from any distribution to a Member shall be treated as amounts distributed to such Member pursuant to this Article IV for all purposes under this Agreement.
4.5 Tax Distributions. The Company shall distribute to the Members, with respect to each Fiscal Year of the Company, an amount of cash that in the good faith judgment of the Board equals (a) the amount of taxable income, if any, allocable to the Members in respect of such Fiscal Year, multiplied by (b) the highest combined maximum federal, state and local income tax rate applicable to any Member to be applied with respect to such taxable income, with such distribution to be made to the Members in the same proportions that taxable income was allocated to the Members during such Fiscal Year. Any distributions made to a Member under this Section 4.5 shall be treated as an advance against any distributions to be made under Article 4.3.
4.6 Tax Allocations: Code Section 704(c)
4.6.1. The income, gains, losses, deductions and expenses of the Company shall be allocated, for federal, state and local income tax purposes, among the Members in accordance with the allocation of such income, gains, losses, deductions and expenses among the Members, except that if any such allocation is not permitted by the Code or other applicable law, the Company’s subsequent income, gains, losses, deductions and expenses shall be allocated among the Members so as to reflect as nearly as possible the allocation set forth herein.
4.6.2. In accordance with Code Section 704(c) and the Treasury Regulations thereunder, income, gain, loss, deduction and expense with respect to any property contributed to the capital of the Company shall, solely for tax purposes, be allocated among the Members so as to take account of any variation between the adjusted basis of such property to the Company for federal income tax purposes and its fair market value at the time of contribution.
4.6.3. Any elections or other decisions relating to such allocations shall be made by the Board in any manner that reasonably reflects the purpose and intent of this Agreement. Allocations pursuant to this Section 4.6 are solely for purposes of federal, state and local taxes and shall not affect, or in any way be taken into account in computing, share of profits, losses, other items or Distributions pursuant to any provisions of this Agreement.
4.7 Compliance with Treasury Regulations. Allocations of income and losses among the Members shall be made in a manner so that such allocations have substantial economic effect in accordance with the tests therefor set forth in the Treasury Regulations promulgated under Section 704(b) of the Code. Accordingly, allocations not specifically provided for in this Agreement shall be made in such a manner as shall conform to the allocation rules and principals as set forth in such Treasury Regulations. The Board may amend the provisions of this Agreement if such amendment would not have a materially adverse effect on the Members and if, in the opinion of counsel for the Company, such amendment is advisable for purposes of complying with Section 1.704-1(b) or Section 1.704-2 of the Treasury Regulations, as may be amended or supplemented from time to time.
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Article
V
MANAGEMENT
5.1 Management by the Board of Managers. Except for situations in which the approval of the Members is required by this Agreement or by nonwaivable provisions of applicable law, and subject to the provisions of Section 5.2, (a) the powers of the Company shall be exercised by or under the authority of, and the business and affairs of the Company shall be managed under the direction of, the Board of Managers (the “Board”), and (b) the Board may make all decisions and take all actions for the Company not otherwise provided for in this Agreement; provided, however, that no Manager, solely in his or her capacity as such, shall have any power to act for, sign for or do any act that would bind the Company, unless the Board shall provide otherwise. Actions Requiring Certain Member Approval; Delegation of Authority and Duties; Manager Duties.
5.1.1. Notwithstanding anything in this Agreement to the contrary, without the unanimous consent of the Members, and subject to Section 10.8 the Board shall not cause the Company to, and the Company shall not:
(a) amend, alter or repeal the Articles, this Agreement, or any other organizational or governance documents of the Company;
(b) change the principal business or lines of business of the Company;
(c) change the name of the Company;
(d) create any new class of Units or change the rights or preferences of any of the Company’s existing Units;
(e) issue, or cause to be issued, any additional Units;
(f) redeem the Units of any Member;
(g) admit any other Person as an additional member;
(h) approve any Transfers of Units except as otherwise permitted in Article X of this Agreement;
(i) effect any merger, consolidation or reorganization with any other Person;
(j) dissolve, liquidate or wind-up the Company;
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(k) amend any material accounting policy of the Company;
(l) initiate or settle litigation on behalf of the Company, undertake any course of defense in connection with any litigation, dispute or other proceeding brought against the Company, or settle any litigation, dispute or other proceeding concerning the Company;
(m) enter into any transaction or agreement between the Company and a Member of the Company or any Affiliate of the Company;
(n) make any capital expenditure that exceeds (i) on an individual basis, $1.00 any month, or (ii) on an aggregate basis during any three month period, $1.00;
(o) make any loan in excess of $1.00;
(p) incur, assume, refinance, extend, modify, or otherwise become liable with respect to any obligation for borrowed money in an aggregate amount that exceeds $1.00;
(q) incur any indebtedness arising from a loan by a Member, whether secured or unsecured;
(r) make or revoke any election to treat the Company as, or take any action that would cause the Company to be treated as, an entity other than a partnership for tax purposes;
(s) issue any guarantee of, or pledge any assets of, the Company;
(t) sell, transfer, license, lease or dispose of, or pledge or otherwise encumber, any assets of the Company having an aggregate book value that exceeds $1.00, whether in one transaction or a series of related transactions, but excluding all transactions occurring in the ordinary course of business;
(u) merge, convert or consolidate the Company or any subsidiary with or into another Person;
(v) acquire any equity securities of any entity;
(w) acquire any real property excluding inventory;
(x) acquire non-real property assets of any other Person for a purchase price that exceeds $1.00;
(y) establish a subsidiary or form or enter into a joint venture, partnership or similar relationship with any Person;
(z) effect any voluntary filing of a petition for bankruptcy or reorganization in respect of the Company, or any similar action under applicable laws and regulations;
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(aa) execute, amend or terminate any agreement to transfer or license any intellectual property to or by the Company;
(bb) approve any operating budget, business plan or any other similar budget or business or strategic plan;
(cc) enter into any commitment to take any of the actions described in this Section 5.1.1;
(dd) determine the Cash Available for Distribution by the Company or declare or effect any dividend or distribution; or
(ee) execute, amend or terminate any agreement that contemplates payments by or to the Company in an aggregate amount that exceeds $1.00.
5.1.2. In the event of any deadlock with respect to any of the Company actions set forth in Section 5.2.1 that is not resolved after reasonable opportunities to discuss and consider in good faith, the Company shall continue to operate pursuant to the last-approved budget or business plan in the ordinary course of its business.
5.2 Term of Office. Each Manager on the Board shall serve until his or her resignation, death or removal pursuant to this Section 5.3. A Manager may be removed from the Board at any time, with or without cause, by the Members.
5.3 Vacancy; Resignation. In the event a Manager ceases to serve as a Manager, the resulting vacancy shall be filled by the Member who designated such Manager, and the vacancy shall remain vacant until the relevant Member elects to fill such vacancy. Any Manager may resign at any time. Such resignation shall be made in writing and shall take effect at the time specified therein, or if no time is specified, at the time of its receipt by the Members. The acceptance of a resignation shall not be necessary to make it effective, unless expressly so provided in the resignation.
5.4 Board Approval; Voting; Quorum; Approval or Ratification of Acts or Contracts by Members. Subject to Section 5.2.1, all actions of the Board shall require the affirmative vote of a majority of votes cast by all of the Managers. Regular meetings of the Board shall be held at least annually. A Manager may waive notice of any meeting, before or after the date and time of the meeting as stated in the notice, by delivering a signed waiver to the Company. A Manager’s presence at any meeting waives objection to lack of notice or defective notice of the meeting, unless the Manager at the beginning of the meeting objects to holding the meeting or transacting business at the meeting. Any or all Managers may participate in any meeting by, or through the use of, any means of communication by which all Managers participating may simultaneously hear each other during the meeting, and any Manager so participating is deemed to be present in person at the meeting. The presence of all Managers is necessary for a quorum. Any action required or permitted to be taken at a meeting of the Board may be taken without a meeting, without prior notice and without a vote, if the action is consented to in writing and is signed by all of the Managers. Subject to the Member approval requirements set forth in Section 5.2.1, any Manager in its discretion may submit any act or contract for approval or ratification by the Board, and any act or contract that shall be approved or ratified by the Board, assuming that such act or contract has been approved by the Members if required by Section 5.2.1, shall be as valid and as binding upon the Company and upon all the Members as if it shall have been approved or ratified by every Member of the Company.
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5.5 Reimbursement. The members of the Board shall be entitled to be reimbursed for reasonable out of pocket costs and expenses incurred in the course of its service hereunder.
5.6 Officers.
5.6.1. The Board may, from time to time, designate one or more persons to be officers of the Company. Any officers so designated shall have such authority and perform such duties as the Board may, from time to time, delegate to them. The Board may assign titles to particular officers. As of the date hereof, the Board has not designated any officers or directors. Unless the Board otherwise decides, if the title is one commonly used for officers of a business corporation, the assignment of such title shall constitute the delegation to such officer of the authority and duties that are normally associated with that office, notwithstanding anything to contrary in this Agreement and subject to any specific delegation or restriction of authority and duties made to such officer by the Board. Each officer shall hold office until his or her successor shall be duly designated by the Board or until his or her death or until he or she shall resign or shall have been removed in the manner hereinafter provided. Any number of offices may be held by the same individual. The salaries or other compensation, if any, of the officers and agents of the Company shall be fixed from time to time by the Board. For the avoidance of doubt, to the extent any salary is paid to a Member, each Member will receive the same salary.
5.6.2. Any officer may resign as such at any time. Such resignation shall be made in writing and shall take effect at the time specified therein, or if no time be specified, at the time of its receipt by the Board. The acceptance of a resignation shall not be necessary to make it effective, unless expressly so provided in the resignation. Any officer may be removed as such, either with or without cause, by the Board whenever in its judgment the best interests of the Company shall be served thereby; provided, however, that such removal shall be without prejudice to the contract rights, if any, of the individual so removed. Designation of an officer shall not of itself create contract rights. Any vacancy occurring in any office of the Company may be filled by the Board.
Article
VI
CONFIDENTIALITY
Each Member recognizes and acknowledges that he, she or it has and may in the future receive certain confidential and proprietary information and trade secrets of the Company and its Subsidiaries, including but not limited to confidential information of the Company and its Subsidiaries regarding identifiable, specific and discrete business opportunities being pursued by the Company or its subsidiaries (the “Confidential Information”). Each Member (on his, her or its behalf and, to the extent that such Member would be responsible for the acts of the following persons under principles of agency law: its directors, officers, shareholders, partners, employees, agents and members) agrees that it will not, during or after the term of this Agreement, whether directly or indirectly through an Affiliate or otherwise, take commercial or proprietary advantage of or profit from any Confidential Information or disclose Confidential Information to any Person for any reason or purpose whatsoever, except (i) to authorized directors, officers, representatives, agents and employees of the Company or its subsidiaries and as otherwise may be proper in the course of performing such Member’s obligations, or enforcing such Member’s rights, under this Agreement and the agreements expressly contemplated hereby; (ii) to such Member’s auditors, attorneys or other agents; (iii) to any bona fide prospective purchaser of the equity or assets of such Member or its Affiliates or the Units held by such Member, or prospective merger partner of such Member or its Affiliates with the prior consent of the Board; or (iv) as is required to be disclosed by order of a court of competent jurisdiction, administrative body or governmental body, or by subpoena, summons or legal process, or by law, rule or regulation; provided that, in the event that any Member reasonably believes after consultation with counsel that it is required by law to disclose any confidential information described in this Article VI, such Member will (a) provide the Board with prompt notice before such disclosure so that the Board may attempt to obtain a protective order or other assurance that confidential treatment will be accorded such confidential information and (b) cooperate with the Board or its designee in attempting to obtain such order or assurance. For purposes of this Article VI, “Confidential Information” shall not include any information which (w) such Person learns from a source other than the Company or its subsidiaries, who is not bound by a confidentiality obligation, (x) is generally available to the public other than as a result of a disclosure by a Member in violation of this Agreement, or (y) is or has been independently developed or conceived by a Member without use of Confidential Information.
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Article
VII
EXCULPATION AND INDEMNIFICATION
7.1 Exculpation. No Manager shall be liable to the Company or to any Member for any loss suffered by the Company unless such loss is caused by a Manager’s willful misconduct, violation of law or material breach of this Agreement. No Manager shall be liable for errors in judgment or for any acts or omissions that do not constitute willful misconduct, violation of law or material breach of this Agreement. The Board may consult with counsel and accountants and any member, officer, employee or committee of the Company or other professional expert in respect of Company affairs, and provided each Manager acts in good faith reliance upon the advice or opinion of such counsel or accountants or other persons, such Manager shall not be liable for any loss suffered by the Company in reliance thereon.
7.2 Right to Indemnification for each Manager and Officers. Subject to the limitations and conditions as provided in this Article VII, each Person who was or is made a party or is threatened to be made a party to or is involved in any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative, arbitrative (hereinafter a “Proceeding”), or any appeal in such a Proceeding or any inquiry or investigation that could lead to such a Proceeding, by reason of the fact that he or she, or a Person of whom he or she is the legal representative, is or was a Manager or officer of the Company or, while a Manager or officer of the Company, is or was serving at the request of the Company as a Manager, director, officer, partner, venturer, proprietor, trustee, employee, agent or similar functionary of another foreign or domestic limited liability company, corporation, partnership, joint venture, sole proprietorship, trust, employee benefit plan or other enterprise shall be indemnified by the Company, upon Board approval, to the fullest extent permitted by the Act, as the same exists or may hereafter be amended (but, in the case of any such amendment, only to the extent that such amendment permits the Company to provide broader indemnification rights than said law permitted the Company to provide prior to such amendment) against judgments, penalties (including excise and similar taxes and punitive damages), fines, settlements and reasonable expenses (including, without limitation, attorneys’ fees) actually incurred by such Person in connection with such Proceeding, and indemnification under this Article VII shall continue as to a Person who has ceased to serve in the capacity which initially entitled such Person to indemnity hereunder. The rights granted pursuant to this Article VII shall be deemed contract rights, and no amendment, modification or repeal of this Article VII shall have the effect of limiting or denying any such rights with respect to actions taken or Proceedings arising prior to any amendment, modification or repeal. It is expressly acknowledged that the indemnification provided in this Article VII could involve indemnification for negligence or under theories of strict liability.
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7.3 Advance Payment. The right to indemnification conferred in this Article VII shall include the right to be paid or reimbursed by the Company, upon Board approval, the reasonable expenses incurred by a Person of the type entitled to be indemnified under Section 7.2 who was, is or is threatened to be made a named defendant or respondent in a Proceeding in advance of the final disposition of the Proceeding and without any determination as to the Person’s ultimate entitlement to indemnification; provided, however, that the payment of such expenses incurred by any such Person in advance of the final disposition of a Proceeding shall be made (after Board approval has been obtained) only upon delivery to the Company of a written affirmation by such Person of his or her good faith belief that he or she has met the standard of conduct necessary for indemnification under Article VII and a written undertaking, by or on behalf of such Person, to repay all amounts so advanced if it shall ultimately be determined that such indemnified Person is not entitled to be indemnified under this Article VII or otherwise.
7.4 Indemnification of Members, Employees and Agents. The Company, by adoption of a resolution of the Board, may indemnify and advance expenses to a Member, employee, or agent of the Company to the same extent and subject to the same conditions under which it may indemnify and advance expenses to each of the Managers or officers of the Company under this Article VII.
7.5 Nonexclusivity of Rights. The right to indemnification and the advancement and payment of expenses conferred in this Article VII shall not be exclusive of any other right which a Manager, officer or other Person indemnified pursuant to Section 7.4 may have or hereafter acquire under any law (common or statutory), provision of the Articles or this Agreement, agreement, vote of Members or the disinterested Managers or otherwise.
7.6 Insurance. The Company may purchase and maintain insurance, at its expense, to protect itself and any Person who is or was serving as a Manager, officer or agent of the Company or is or was serving at the request of the Company as a Manager, director, officer, partner, venturer, proprietor, trustee, employee, agent or similar functionary of another foreign or domestic limited ability company, corporation, partnership, joint venture, sole proprietorship, trust, employee benefit plan or other enterprise against any expense, liability or loss, whether or not the Company would have the power to indemnify such Person against such expense, liability or loss under this Article VII.
7.7 Savings Clause. If this Article VII or any portion hereof shall be invalidated on any ground by any court of competent jurisdiction, then the Company shall nevertheless indemnify and hold harmless any Manager or any other Person indemnified pursuant to this Article VII as to costs, charges and expenses (including attorneys’ fees), judgments, fines and amounts paid in settlement with respect to any action, suit or proceeding, whether civil, criminal, administrative or investigative to the fullest extent permitted by any applicable portion of this Article VII that shall not have been invalidated and to the fullest extent permitted by applicable law.
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Article
VIII
TAXES
8.1 Tax Returns. The Board shall cause to be prepared and filed all necessary federal and state income tax returns for the Company, including making any elections the Board may deem appropriate and in the best interests of the Members. Each Member shall furnish to the Board all pertinent information in its possession relating to Company operations that is necessary to enable the Company’s income tax returns to be prepared and filed.
8.2 Partnership Representative.
8.2.1. Frederick Kalei Cutcher shall be designated the “partnership representative” within the meaning of Section 6223(a) of the Code (the “Partnership Representative”) and shall be authorized to take any actions necessary under Treasury Regulations or other guidance to cause such designation (including the designation of any individual to act on behalf of any entity Partnership Representative as may be required under the Partnership Tax Audit Rules). The Company and each Member agrees that they shall be bound by the actions taken by the Partnership Representative, as described in Section 6223(b) of the Code; the Members consent to the election set forth in Section 6226(a) of the Code and agree to take any action, and furnish the Partnership Representative with any information necessary, to give effect to such election if the Partnership Representative decides to make such election; and any imputed underpayment imposed on the Company pursuant to Section 6232 of the Code (and any related interest, penalties or other additions to tax) that the Partnership Representative reasonably determines is attributable to one or more Members shall be promptly paid by such Members to the Company (pro rata in proportion to their respective shares of such underpayment) within fifteen (15) days following the Partnership Representative’s request for payment (and any failure to pay such amount shall result in a subsequent reduction in distributions otherwise payable to such Member plus interest on such amount calculated at the prime rate published in the Wall Street Journal at the determinative time plus two percent (2%)). The Partnership Representative shall keep each Member reasonably and promptly informed of any audits or administrative or judicial proceedings affecting or relating to the tax items of the Company, consult with the Members regarding the conduct of such audits or proceedings, and be required to obtain the prior written consent of the Required Member prior to entering into any agreement or settlement or making an election in relation to such audits or proceedings. For the avoidance of doubt, (i) the costs of any action taken by or on behalf of the Partnership Representative, the Company or their respective Affiliates pursuant to this paragraph shall be borne by the Member benefitting from any such action (together with the other Members similarly benefitting from such action as determined by the Partnership Representative in its reasonable discretion), (ii) the Partnership Representative will be entitled to rely conclusively on the advice of the Company’s independent accountant or other tax advisor in making any determination in respect of the Partnership Tax Audit Rules, and (iii) the Partnership Representative shall not be required to indemnify any Member or the Company with respect to any taxes incurred under the Partnership Tax Audit Rules.
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8.2.2. Each Member shall provide to the Company upon request such information, forms or representations which the Partnership Representative may reasonably request with respect to the Company’s compliance with applicable tax laws, including, any information, forms or representations requested by the Partnership Representative to assist in obtaining any exemption, reduction or refund of any withholding or other taxes imposed by any taxing authority or other governmental agency upon the Company or amounts paid to the Company.
8.2.3. Notwithstanding any provision of this Agreement to the contrary, the provisions of this Section 8.2 shall survive the termination or liquidation of the Company or the termination of any Member’s interest in the Company and shall remain binding on the Members following each such Member’s termination of its interest in the Company.
8.3 Tax Reports. The Company shall provide to each Member as promptly as practical after the end of each Taxable Year, the Company’s tax return and Form K-1 for such Taxable Year, and such other information as may be necessary for the preparation of each such Member’s United States federal and state income tax returns.
8.4 Income Tax Status. It is the intent of this Company and the Members that this Company shall be treated as a partnership for U.S., federal, state and local income tax purposes. Each Member and the Company shall file all tax returns and shall otherwise take all tax and financial reporting positions in a manner consistent with such treatment. Neither the Company nor any Member shall make an election for the Company to be classified as other than a partnership pursuant to Treasury Regulations Section 301.7701-3.
Article
IX
BOOKS, REPORTS AND COMPANY FUNDS
9.1 Maintenance of Books. The Company shall use commercially reasonable efforts to keep books and records of accounts as may be required. The Fiscal Year shall be the accounting year of the Company.
9.2 Informational Rights. The Board shall keep the Members reasonably informed on a timely basis of any material fact, information, litigation, employee relations or other matter that could reasonably be expected to have a material impact on the operations or financial position of the Company, including, but not limited to, any modification of any loan or other financing to the Company.
Article
X
TRANSFERS
10.1 Assignment by Members. No Member shall be permitted to Transfer all or a portion of such Member’s Units except subject to, and in compliance with, this Article X. Each Member hereby acknowledges the reasonableness of this prohibition in view of the purposes of the Company and the relationship of the Members. In connection with the Transfer of any Units, the Member holding such Units shall deliver written notice to the Company describing in reasonable detail the Transfer or proposed Transfer and the Board may, but is not obligated to, require prior to approving any Transfer, an opinion of counsel, which (to the Board’s reasonable satisfaction) is knowledgeable in securities law matters, to the effect that such Transfer of Units may be effected without registration of such Units under the Securities Act. A Member shall not Transfer any Units until the proposed transferee has agreed in writing to be bound by the conditions set forth in this Section 10.1, and a transferee shall be admitted to the Company as a Member only following the approval of the Board and upon execution of a counterpart signature page to this Agreement. Any Transfer by any Member of any Units or other interests in the Company in contravention of this Agreement shall be invalid, null, void and ineffectual and shall not bind or be recognized by the Company or any other party.
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10.2 Permitted Transfers. A Transfer by any Member of all or any portion of such Member’s Units to a holding company that is wholly owned by one or more Members of the Company is a Permitted Transfer exempt from the requirements of Sections 10.3-10.4. Otherwise, no Transfer by any Member of all or any portion of such Member’s Units shall be permitted except as otherwise provided for in this Article X.
10.3 Right of First Refusal
10.3.1. Prior to any proposed Transfer of Units to any Person, the transferring Member shall deliver to the Company and the other Members a written notice (the “Offer Notice”) specifying in reasonable detail the number of Units to be transferred, the identity of the transferee(s), the price (which shall be payable solely in cash) and the other terms and conditions of the proposed Transfer. The Company may elect to purchase all or any portion of the Units proposed to be Transferred upon the terms and conditions specified in the Offer Notice by delivering to the transferring Member a written notice of such election within the ten (10) day period following the Company’s receipt of the Offer Notice (the “Company Election Period”). The purchase of such Units by the Company shall be consummated within thirty (30) days following expiration of the Company Election Period.
10.3.2. In the event that the Company does not elect to purchase all of the Units described in the Offer Notice, it shall give written notice of the same (the “Company Notice”) on or prior to the expiration of the Company Election Period to Members holding Units and other than the Member proposing to Transfer Units (“Offeree Members”), and the Company shall deliver a copy of such notice to the transferring Member. The Offeree Members may then elect to purchase collectively all or any portion of such Units pro rata among themselves based on their respective holdings of Units, upon the terms and conditions specified in the Offer Notice. On or before the tenth (10th) day following receipt of the Company Notice (the “Member Election Period”), each Offeree Member may submit to the transferring Member such Member’s election to purchase Units described in the Offer Notice and the number of such Units that such Member wishes to purchase (collectively, the “Members’ Notices”). Following the Member Election Period and receipt of the Members’ Notices (if any), if the Members’ Notices collectively evidence elections by the other Members to purchase at least the number of Units described in the Offer Notice, then such Units shall be allocated among such Offeree Members that deliver Members’ Notices, as nearly as practicable, as follows: to each such Member a number of Units equal to the lesser of (a) the number of Units described in such Member’s Members’ Notice and (b) a number of Units equal to the number of Units described in the Offer Notice multiplied by a fraction, the numerator of which is the aggregate number of Units owned by such electing Member and the denominator of which is the sum of Units owned by all electing Members that provide Members’ Notices. The purchase by electing Offeree Members pursuant to this Section 10.3.2 shall be consummated within thirty (30) days following expiration of the Member Election Period.
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10.3.3. In the event that neither the Company nor the Offeree Members elect to purchase all of the Units described in the Offer Notice in accordance with this Section 10.3.3, the transferring Member may Transfer all of the Units covered by the Offer Notice to the transferee(s) specified in the Offer Notice on terms no more favorable to such transferee(s) than those specified in the Offer Notice; provided that, in connection with any such Transfer, each transferee shall agree in writing to be bound by the provisions of this Agreement. Any unsold Units not transferred within such sixty (60) day period shall again be subject to Section 10.2 in connection with any proposed Transfer thereof.
10.4 Right of Repurchase Upon Involuntary Transfer. In the event of any Involuntary Transfer by a Member, the Company shall have the right, but not the obligation, to purchase all, but not less than all, of the affected Member’s Units at Fair Market Value (the “Repurchase Right”). For a period of sixty (60) days after an Involuntary Transfer, the Company may exercise its Repurchase Right by delivering written notice to the affected Member, who shall be obligated to Transfer the Units. The Company shall thereafter purchase all of the affected Member’s Units by delivering in cash the purchase price consideration in the amount of the Fair Market Value of the affected Member’s Units within fifteen (15) days of the Company’s exercise of the Repurchase Right.
10.5 Substituted Member.
10.5.1. An assignee of any Units or other interests in the Company of a Member, or any portion thereof, shall become a substituted Member entitled to all the rights of a Member if and only if the assignor gives the assignee such right and the Board has granted its prior written consent to such assignment and substitution, which consent may be withheld in the sole discretion of the Board.
10.5.2. The Company and the Board shall be entitled to treat the record owner of any Units or other interest in the Company as the absolute owner thereof and shall incur no liability for distributions of cash or other property made in good faith to such owner until such time as a written assignment of such Units or other interest in the Company, which assignment is permitted pursuant to the terms and conditions of Section 10.1 hereof, has been received and accepted by the Board and recorded on the books of the Company.
10.5.3. Upon the admission of a substituted Member, the records of the Company shall be amended to reflect the name, address and Units and other interests in the Company of such substituted Member and to eliminate the name and address of and other information relating to the assigning Member with regard to the assigned Units and other interests in the Company.
10.6 Effect of Assignment.
10.6.1. Any Member who shall assign any Units or other interest in the Company shall cease to be a Member of the Company with respect to such Units or other interest and shall no longer have any rights or privileges of a Member with respect to such Units or other interest, including the ability to appoint any Managers it previously may have had.
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10.6.2. Any Person who acquires in any manner whatsoever any Units or other interest in the Company, irrespective of whether such Person has accepted and adopted in writing the terms and provisions of this Agreement, shall be deemed by the acceptance of the benefits of the acquisition thereof to have agreed to be subject to and bound by all the terms and conditions of this Agreement that any predecessor in such Units or other interest in the Company of such Person was subject to or by which such predecessor was bound.
10.7 Effect of Incapacity. Except as otherwise provided herein, the Incapacity of a Member shall not dissolve or terminate the Company. In the event of such Incapacity, the executor, administrator, guardian, trustee or other personal representative of the Incapacitated Member shall be deemed to be the assignee of such Member’s Units or other interests in the Company and may, subject to Section 10.1, become a substituted Member upon the terms and conditions set forth in Section 10.6.
10.8 Nonpermitted Transfers. Notwithstanding anything to the contrary in this Article X, the Member shall not Transfer (as defined herein) any of its membership units, other than to TXC, or its assignee, pursuant to the Collateral Assignment (attached to the MIPA as Exhibit H), nor amend this Agreement, until the Company and its Member has satisfied all conditions and obligations under the MIPA and other Transaction Documents, including, but not limited to, the full payment and satisfaction of the TK Secured Note and Seller Secured Note (as defined in the MIPA).
Article
XI
DISSOLUTION, LIQUIDATION AND TERMINATION
11.1 Dissolution. The Company shall be dissolved and its affairs shall be wound up on the first to occur of the following:
(a) the unanimous written consent of the Board to dissolve the Company; or
(b) the entry of a decree of judicial dissolution of the Company under the Act;
The death, retirement, resignation, expulsion, bankruptcy or dissolution of a Member, or the occurrence of any other event that terminates the continued membership of a Member in the Company, shall not cause a dissolution of the Company.
11.2 Liquidation and Termination. On dissolution of the Company, the Board shall act as the liquidator or may appoint one or more Members as liquidator. The liquidator shall proceed diligently to wind up the affairs of the Company and make final distributions as provided herein and in the Act. The costs of liquidation shall be borne as a Company expense. Until final distribution, the liquidator shall continue to operate the Company properties with all of the power and authority of the Board. The steps to be accomplished by the liquidator are as follows:
(a) as promptly as possible after dissolution and again after final liquidation, the liquidator shall cause a proper accounting to be made by a recognized firm of certified public accountants of the Company’s assets, liabilities and operations through the last day of the calendar month in which the dissolution occurs or the final liquidation is completed, as applicable;
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(b) the liquidator shall cause the notice described in the Act to be mailed to each known creditor of and claimant against the Company in the manner described thereunder;
(c) the liquidator shall pay, satisfy or discharge from Company funds all of the debts, liabilities and obligations of the Company (including, without limitation, all expenses incurred in liquidation and all amounts owed to Members of the Company) or otherwise make adequate provision for payment and discharge thereof;
(d) the liquidator shall make reasonable provision to pay all contingent, conditional or unmatured contractual claims known to the Company;
(e) the liquidator shall make such provision as will be reasonably likely to be sufficient to provide compensation for any claim against the Company, which is the subject of a pending action, suit or proceeding to which the Company is a party;
(f) the liquidator shall make such provision as will be reasonably likely to be sufficient for claims that have not been made known to the Company or that have not arisen but that, based on facts known to the Company, are likely to arise or to become known to the Company after the date of dissolution; and
(g) all remaining assets of the Company shall be distributed to the Members in the following order of priority:
(i) First, to all Members in proportion to their Unreturned Capital Contributions until the Unreturned Capital Contributions of all Members have been reduced to zero ($0);
(ii) Second, to all of the Members in proportion to their positive Capital Account balances, until all positive Capital Account balances have been reduced to zero ($0); and
(iii) Third, any remaining assets of the Company shall be distributed to the Members in proportion to the number of Units held by each.
All distributions in kind to the Members shall be made subject to the liability of each distrubutee for costs, expenses and liabilities theretofore incurred or for which the Company has committed prior to the date of termination, and those costs, expenses and liabilities shall be allocated to the distributee pursuant to this Section 11.2. The distribution of cash and/or property to a Member in accordance with the provisions of this Section 11.2 constitutes a complete return to the Member of its Capital Contributions and a complete distribution to the Member of its interest in the Company and all of the Company’s property and constitutes a compromise to which all Members have consented within the meaning of the Act. To the extent that a Member returns funds to the Company, it has no claim against any other Member for those funds.
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11.3 Cancellation of Articles. On completion of the distribution of Company assets as provided herein, the Company shall be terminated, and any Manager (or such other Person or Persons as the Act may require or permit) shall file a certificate of cancellation with the Secretary of State of the State of Wyoming, and take such other actions as may be necessary to terminate the Company.
Article
XII
VALUATION
The “Fair Market Value” of any Unit or other securities issued by the Company or any non-cash assets shall mean the purchase price that a willing buyer having all relevant knowledge would pay a willing seller for such Unit or other securities issued by the Company or any non-cash assets in an arm’s length transaction, determined as of the applicable reference date in good faith by the Board, taking into consideration all factors it deems relevant; provided that the “Fair Market Value” of any Units shall not be subject to any lack of liquidity, minority interest or other similar discounts as might otherwise be applicable under generally accepted appraisal and valuation standards and will be determined based on the amount such Units would be entitled to receive pursuant to Section 11.2(g) if proceeds were distributed by the Company in an amount equal to the then-current Fair Market Value of the Company. In the event that the Board, acting in good faith, cannot agree on the Fair Market Value of any Unit, the Board shall unanimously select an independent third-party Person to conduct a valuation of the respective Unit with such valuation, except such valuation shall not be subject to any lack of liquidity, minority interest, or other similar discount using generally accepted appraisal and valuation standards.
Article
XIII
GENERAL PROVISIONS
13.1 MIPA Obligations. All obligations of the Company and restrictions set forth in the MIPA, and other Transaction Documents, including, but not limited to, terms and conditions set forth in Section 2.4 titled Lease of the Property, are incorporated by reference into this Agreement.
13.2 Offset. Whenever the Company is to pay any sum to any Member, any amounts that such Member owes to the Company may be deducted from that sum before payment.
13.3 Notices. Except as expressly set forth to the contrary in this Agreement, all notices, requests, or consents provided for or permitted to be given under this Agreement must be in writing and must be given either by depositing that writing in the United States mail, addressed to the recipient, postage paid, and registered or certified with return receipt requested or by delivering that writing to the recipient in person, by courier, by email or by facsimile transmission; and a notice, request, or consent given under this Agreement is effective on receipt by the Person to receive it. All notices, requests, and consents to be sent to a Member must be sent to or made at the address given for that Member on such Member’s signature page to this Agreement, or such other address as that Member may specify by notice to the other Members. Any notice, request, or consent to the Company or the Board must be given to the Board at the following address:
Global Technologies LTD
8 Campus Drive, Suite 105
Parsippany, NJ 07054
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Whenever any notice is required to be given by law, the Articles or this Agreement, a written waiver thereof, signed by the Person entitled to notice, whether before or after the time stated therein, shall be deemed equivalent to the giving of such notice.
13.4 Entire Agreement. This Agreement constitutes the entire agreement of the Members relating to the Company and supersedes all prior contracts or agreements with respect to the Company, whether oral or written.
13.5 Effect of Waiver or Consent. A waiver or consent, express or implied, to or of any breach or default by any Person in the performance by that Person of its obligations with respect to the Company is not a consent or waiver to or of any other breach or default in the performance by that Person of the same or any other obligations of that Person with respect to the Company. Failure on the part of a Person to complain of any act of any Person or to declare any Person in default with respect to the Company, irrespective of how long that failure continues, does not constitute a waiver by that Person of its rights with respect to that default until the applicable statute-of-limitations period has run. The failure of any party to enforce any provision of this Agreement shall not be construed as a waiver of such provision and shall not affect the right of such party thereafter to enforce each provision of this Agreement in accordance with its terms.
13.6 Amendment or Modification. Except as otherwise provided herein, and subject to Section 10.8 of this Agreement, this Agreement may be amended or modified from time to time by a written instrument adopted by the Board. Any amendment or waiver that is required or approved in accordance with this Section 13.5 shall be binding upon all existing and future holders of Units. Notwithstanding anything herein to the contrary, this Agreement may be amended without the consent of any of the Members to (i) update Schedule A to reflect any changes in the ownership of Units or (ii) remove or correct any scrivener’s error contained in this Agreement.
13.7 Binding Effect. Subject to the restrictions on Transfers set forth in this Agreement, this Agreement is binding on and shall inure to the benefit of the Members and their respective heirs, legal representatives, successors and assigns.
13.8 Governing Law; Severability. THIS AGREEMENT IS GOVERNED BY AND SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAW OF THE STATE OF WYOMING, EXCLUDING ANY CONFLICT OF LAWS RULE OR PRINCIPLE THAT MIGHT REFER THE GOVERNANCE OR THE CONSTRUCTION OF THIS AGREEMENT TO THE LAW OF ANOTHER JURISDICTION. In the event of a direct conflict between the provisions of this Agreement and any provision of the Articles or any mandatory provision of the Act, the applicable provision of the Articles or the Act shall control. If any provision of this Agreement or the application thereof to any Person or circumstance is held invalid or unenforceable to any extent, the remainder of this Agreement and the application of that provision to other Persons or circumstances is not affected thereby and that provision shall be enforced to the greatest extent permitted by law.
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13.9 Submission to Jurisdiction; Venue. The parties (a) unconditionally consent to the exclusive jurisdiction of the state and federal courts having jurisdiction in Wyoming, over any legal proceeding arising out of or relating to this Agreement, (b) stipulate that a proper and convenient venue for any legal proceeding arising out of or relating to this Agreement is Wyoming, for a state court proceeding, or for a federal court proceeding, and (c) waive any defense, whether asserted by motion or pleading, that Wyoming, is an improper or inconvenient venue.
13.10 Further Assurances. In connection with this Agreement and the transactions contemplated hereby, each Member shall execute and deliver any additional documents and instruments and perform any additional acts that may be necessary or appropriate to effectuate and perform the provisions of this Agreement and the transactions contemplated hereby.
13.11 Waiver of Certain Rights. Each Member irrevocably waives any right it may have to maintain any action for dissolution of the Company or for partition of the property of the Company or for any rights to information from the Company provided under the Act.
13.12 Power of Attorney. Each of the undersigned Members does hereby constitute and appoint each of the Managers and the liquidator with full power to act without the others (subject to the provisions of Article V hereof), as such Member’s true and lawful representative and attorney-in-fact, in such Member’s name, place and stead, to make, execute, sign, acknowledge and deliver or file in such form and substance as is approved by the Board and the Required Member, as applicable, in accordance with this Agreement (a) all instruments, documents and certificates which may from time to time be required by any law to effectuate, implement and continue the valid and subsisting existence of the Company, or to qualify or continue the qualification of the Company in the State of Wyoming and in all jurisdictions in which the Company may conduct business or own property, and any amendment to, modification to, restatement of or cancellation of any such instrument, document or certificate, and (b) all conveyances and other instruments, documents and certificates which may be required to effectuate the dissolution and termination of the Company approved in accordance with the terms of this Agreement. The powers of attorney granted herein shall be deemed to be coupled with an interest, shall be irrevocable, and shall survive the death, disability, incompetency, bankruptcy, insolvency or termination of any Member and the Transfer of all or any portion of such Member’s Units, and shall extend to such Member’s heirs, successors, assigns, and personal representatives.
13.13 Indemnification and Reimbursement for Payments on Behalf of a Member. If the Company is obligated to pay any amount to a governmental agency (or otherwise makes a payment) because of a Member’s status or otherwise specifically attributable to a Member (including, without limitation, federal withholding taxes with respect to foreign Persons, state personal property taxes, state unincorporated business taxes, etc.), then such Member (the “Indemnifying Member”) shall indemnify the Company in full for the entire amount paid (including, without limitation, any interest, penalties and expenses associated with such payments). The amount to be indemnified shall be charged against the Indemnifying Member, and, at the option of the Board, either:
(a) promptly upon notification of an obligation to indemnify the Company, the Indemnifying Member shall make a cash payment to the Company equal to the full amount to be indemnified (and the amount paid shall not be treated as a Capital Contribution), or
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(b) the Company shall reduce distributions which would otherwise be made to the Indemnifying Member, until the Company has recovered the amount to be indemnified (and, the amount withheld shall not be treated as a Capital Contribution).
13.14 Notice to Members of Provisions. By executing this Agreement, each Member acknowledges that it has actual notice of (i) all of the provisions hereof (including, without limitation, the restrictions on Transfer set forth in Article X) and (ii) all of the provisions of the Articles.
13.15 Counterparts. This Agreement may be executed in multiple counterparts (including by means of PDF or telecopied signature page) with the same effect as if all signing parties had signed the same document. All counterparts shall be construed together and constitute the same instrument.
13.16 Attorneys’ Fees. In the event that any party hereto institutes any legal suit, action or proceeding, including arbitration, against another party in respect of a matter arising out of or relating to this Agreement, the prevailing party in the suit, action or proceeding shall be entitled to receive, in addition to all other damages to which it may be entitled, the costs incurred by such party in conducting the suit, action or proceeding, including reasonable attorneys’ fees and expenses and court costs.
* * * *
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IN WITNESS WHEREOF, the undersigned Members have executed this Agreement as of the date first set forth above.
| MEMBER: | ||
| Global Technologies, LTD | ||
| By: | Frederick Kalei Cutcher, CEO | |
Schedule A
| Member | Units | Percentage
Interest Capital Contribution | ||
| Global Technologies, Ltd | 2,500,000 Common Units | 100%; TBD As of the date of this Agreement |
EXHIBIT A
MIPA