Healthier Choices Management Corp 8-K, filed Sep 25, 2020
Healthier Choices Management Corp. (HCMC)
8-K
2020-09-25
For: 2020-09-25
View Original
Added on
April 06, 2026
About this 8-K
Healthier Choices Management Corp filed this 8-K on September 25, 2020.
Items reported
- Item 1.01: Entered into a material agreement
- Item 3.03: Change to shareholders' rights
- Item 5.03: Charter or bylaw amendment, or fiscal year change
- Item 9.01: Financial statements and exhibits
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): September 25, 2020
HEALTHIER CHOICES MANAGEMENT CORP.
(Exact name of registrant as specified in its charter)
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Delaware
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001-36469
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84-1070932
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(State or Other Jurisdiction
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(Commission
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(I.R.S. Employer
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of Incorporation)
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File Number)
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Identification No.)
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3800 North 28th Way
Hollywood, Florida 33020
(Address of Principal Executive Office) (Zip Code)
(888) 766-5351
(Registrant’s telephone number, including area code)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
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Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
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Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
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Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
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Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
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Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934
(§240.12b-2 of this chapter).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to
Section 13(a) of the Exchange Act. ☐
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ITEM 1.01. Entry into a Material Definitive Agreement
On September 25, 2020, Healthier Choices Management Corp. (the “Company”) entered into agreements (each a “Warrant Exchange Agreement”) with certain holders of its Series B Convertible Preferred Stock (the “Series C
Stock”) to exchange all the Series B Stock for 20,150.1153 shares of Series C Stock. Each share of Series C Stock has a stated value equal to $1,000 and is convertible into Common Stock on a fixed basis at a conversion price of $0.0001 per share.
The foregoing description of the Exchange Agreements does not purport to be complete and is qualified in its entirety by reference to the full text of the agreement. A form of Exchange Agreement is attached as Exhibit
10.1 to this Current Report on Form 8-K and incorporated herein by reference.
ITEM 3.03. Material Modification to Rights of Security Holders.
See Item 5.03 herein for a discussion of the terms of the Series C Stock.
ITEM 5.03. Amendments to Articles of Incorporation or Bylaws; Change in Fiscal Year.
On September 26, 2020, the Company filed a Certificate of Designations of Preferences, Rights and Limitations of Series C Stock (“Certificate of Designation”) with the Secretary of State of the State of Delaware. The
number of shares of Series C Stock designated is 30,000 and each share of Series C Stock has a stated value equal to $1,000. Under the terms of the Series C Stock, the Company cannot issue any shares of Common Stock to any holder of Series C Stock,
and no holder can convert the Series C Stock into Common Stock, to the extent it would result in the holder’s beneficial ownership being in excess of 9.99% of the outstanding Common Stock.
Voting Rights.
Except as otherwise provided herein or as otherwise required by law, the Series C Stock shall have no voting rights. However, as long as any shares of Series C Stock is outstanding, the Company shall not, without the
affirmative vote of the holders of a majority of the then outstanding shares of the Series C Stock, (a) alter or change adversely the powers, preferences or rights given to the Series C Stock or alter or amend the Certificate of Designation, (b)
amend its certificate of incorporation or other charter documents in any manner that adversely affects any rights of the holders of Series C Stock, (c) increase the number of authorized shares of Series C Stock, or (d) enter into any agreement with
respect to any of the foregoing.
Liquidation.
Upon any liquidation, dissolution or winding-up of the Company, whether voluntary or involuntary that is not a Fundamental Transaction (as defined in the Certificate of Designation), the holders of Series C Stock
shall be entitled to receive out of the assets, whether capital or surplus, of the Company an amount equal to $1,000 per share of Series C Stock.
Conversion Price.
The conversion price for the Series C Stock shall equal $0.0001, subject to certain terms as described therein. The rights of the Series C Stock include (1) certain protections in the event of dilutive equity
issuances and (2) a limited conversion price reset following a reverse stock split. This conversion price will reset to 85% of the average of the volume weighted average prices during the 10 trading days immediately following the effective date and
public announcement of a reverse stock split (provided such price is below the then current conversion price).
The foregoing description of the Series C Stock is not complete and is qualified in its entirety by reference to the full text of the Company’s Certificate of Designations of Preferences, Rights and Limitations of Series
C Convertible Preferred Stock, which is filed herewith as Exhibit 2.1 to this Current Report on Form 8-K and is incorporated by reference herein.
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Item 9.01. Financial Statements and Exhibits.
(d) Exhibits.
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Exhibit Number
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Description
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2.1
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Healthier Choices Management Corp. Certificate of Designation of Preferences, Rights And Limitations of Series C Convertible Preferred Stock
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10.1
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Form of Warrant Exchange Agreement, dated as of September 25, 2020, by and between Healthier Choices Management Corp. and the holders of Series B Convertible Preferred Stock
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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 hereunto duly authorized.
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Healthier Choices Management Corp.
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Date: September 26, 2020
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By:
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/s/ Jeffrey E. Holman
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Jeffrey E. Holman
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Chief Executive Officer
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EXHIBIT INDEX
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Exhibit Number
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Description
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2.1
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Healthier Choices Management Corp. Certificate of Designation of Preferences, Rights And Limitations of Series C Convertible Preferred Stock
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10.1
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Form of Warrant Exchange Agreement, dated as of September 25, 2020, by and between Healthier Choices Management Corp. and the holders of Series B Convertible Preferred Stock
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HEALTHIER CHOICES MANAGEMENT CORP.
CERTIFICATE OF DESIGNATION OF PREFERENCES,
RIGHTS AND LIMITATIONS
OF
SERIES C CONVERTIBLE PREFERRED STOCK
PURSUANT TO SECTION 151 OF THE
DELAWARE GENERAL CORPORATION LAW
The undersigned, Jeffrey Holman and Christopher Santi, do hereby certify that:
1. They are the President and Secretary, respectively, of Healthier Choices Management Corp. (the “Corporation”).
2. The Corporation is authorized to issue 1,000,000 shares of preferred stock, 20,150 of which have been issued.
3. The following resolutions were duly adopted by the board of directors of the Corporation (the “Board
of Directors”):
WHEREAS, the certificate of incorporation of the Corporation provides for a class of its authorized stock known as preferred stock,
consisting of 1,000,000 shares, $0.001 par value per share, issuable from time to time in one or more series;
WHEREAS, the Board of Directors is authorized to fix the dividend rights, dividend rate, voting rights, conversion rights, rights and
terms of redemption and liquidation preferences of any wholly unissued series of preferred stock and the number of shares constituting any series and the designation thereof, of any of them; and
WHEREAS, it is the desire of the Board of Directors, pursuant to its authority as aforesaid, to fix the rights, preferences,
restrictions and other matters relating to a series of the preferred stock, which shall consist of, except as otherwise set forth in the Exchange Agreements, up to 30,000 shares of the preferred stock which the Corporation has the authority to issue,
as follows:
NOW, THEREFORE, BE IT RESOLVED, that the Board of Directors does hereby provide for the issuance of a series of preferred stock for cash
or exchange of other securities, rights or property and does hereby fix and determine the rights, preferences, restrictions and other matters relating to such series of preferred stock as follows:
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TERMS OF PREFERRED STOCK
Section 1. Definitions. For the purposes hereof, the following terms shall have the following
meanings:
“Affiliate” means any
Person that, directly or indirectly through one or more intermediaries, controls or is controlled by or is under common control with a Person, as such terms are used in and construed under Rule 405 of the Securities Act.
“Alternate Consideration”
shall have the meaning set forth in Section 7(d).
“Beneficial Ownership Limitation”
shall have the meaning set forth in Section 6(d).
“Business Day” means any
day except any Saturday, any Sunday, any day which is a federal legal holiday in the United States or any day on which banking institutions in the State of New York are authorized or required by law or other governmental action to close.
“Buy-In” shall have the
meaning set forth in Section 6(c)(iv).
“Closing” means the
closing of the exchange Preferred Stock pursuant to Section 2 of the Exchange Agreements.
“Closing Date” means the
Trading Day on which all of the Transaction Documents have been executed and delivered by the applicable parties thereto and all conditions precedent to (i) each Holder’s obligations have been satisfied or waived and (ii) the Corporation’s
obligations to deliver the Securities have been satisfied or waived.
“Commission” means the
United States Securities and Exchange Commission.
“Common Stock” means the
Corporation’s common stock, par value $0.0001 per share, and stock of any other class of securities into which such securities may hereafter be reclassified or changed.
“Common Stock Equivalents”
means any securities of the Corporation or the Subsidiaries which would entitle the holder thereof to acquire at any time Common Stock, including, without limitation, any debt, preferred stock, rights, options, warrants or other instrument that is at
any time convertible into or exercisable or exchangeable for, or otherwise entitles the holder thereof to receive, Common Stock.
“Conversion Amount” means
the sum of the Stated Value at issue.
“Conversion Date” shall
have the meaning set forth in Section 6(a).
“Conversion Price” shall
have the meaning set forth in Section 6(b).
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“Conversion Shares” means,
collectively, the shares of Common Stock issuable upon conversion of the shares of Preferred Stock in accordance with the terms hereof.
“Exchange Act” means the
Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.
“Exchange Agreements”
means the Exchange Agreements, dated on or about the Original Issue Date, among the Corporation and the original Holders, as amended, modified or supplemented from time to time in accordance with its terms.
“Fundamental Transaction”
shall have the meaning set forth in Section 7(e).
“GAAP” means United States
generally accepted accounting principles.
“Holder” shall have the
meaning given such term in Section 2.
“Liquidation” shall have
the meaning set forth in Section 5.
“New York Courts” shall
have the meaning set forth in Section 8(d).
“Notice of Conversion”
shall have the meaning set forth in Section 6(a).
“Original Issue Date”
means the date of the first issuance of any shares of the Preferred Stock regardless of the number of transfers of any particular shares of Preferred Stock and regardless of the number of certificates which may be issued to evidence such Preferred
Stock.
“Person” means an
individual or corporation, partnership, trust, incorporated or unincorporated association, joint venture, limited liability company, joint stock company, government (or an agency or subdivision thereof) or other entity of any kind.
“Preferred Stock” shall
have the meaning set forth in Section 2.
“Reverse Stock Split”
means the reverse split of Common Stock consented to by the Holders pursuant to the Exchange Agreement.
“Securities” means the
Preferred Stock and the Conversion Shares.
“Securities Act” means the
Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.
“Share Delivery Date”
shall have the meaning set forth in Section 6(c).
“Stated Value” shall have
the meaning set forth in Section 2, as the same may be increased pursuant to Section 3.
“Successor Entity” shall
have the meaning set forth in Section 7(e).
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“Trading Day” means a day
on which the principal Trading Market is open for business.
“Trading Market” means any
of the following markets or exchanges on which the Common Stock is listed or quoted for trading on the date in question: the NYSE American, the Nasdaq Capital Market, the Nasdaq Global Market, the Nasdaq Global Select Market, the New York Stock
Exchange, OTCQB or OTCQX (or any successors to any of the foregoing).
“Transaction Documents”
means this Certificate of Designation, the Exchange Agreement, all exhibits and schedules thereto and hereto and any other documents or agreements executed in connection with the transactions contemplated pursuant to the Exchange Agreements.
“Transfer Agent” means
Equity Stock Transfer, the current transfer agent of the Corporation with a mailing address of 237 West 37th Street, Suite 602, New York, NY 10018 and a facsimile number of 347.584.3644, and any successor transfer agent of the Corporation.
“VWAP” means, for any
date, the price determined by the first of the following clauses that applies: (a) if the Common Stock is then listed or quoted on a Trading Market, the daily volume weighted average price of the Common Stock for such date (or the nearest preceding
date) on the Trading Market on which the Common Stock is then listed or quoted as reported by Bloomberg L.P. (based on a Trading Day from 9:30 a.m. (New York City time) to 4:02 p.m. (New York City time)), (b) if OTCQB or OTCQX is not a Trading
Market, the volume weighted average price of the Common Stock for such date (or the nearest preceding date) on OTCQB or OTCQX as applicable, (c) if the Common Stock is not then listed or quoted for trading on OTCQB or OTCQX and if prices for the
Common Stock are then reported on The Pink Open Market (or a similar organization or agency succeeding to its functions of reporting prices), the most recent bid price per share of the Common Stock so reported, or (d) in all other cases, the fair
market value of a share of Common Stock as determined by an independent appraiser selected in good faith by the Purchasers of a majority in interest of the Securities then outstanding and reasonably acceptable to the Corporation, the fees and
expenses of which shall be paid by the Corporation.
Section 2. Designation, Amount and Par Value. The series of preferred stock shall be designated
as its Series C Convertible Preferred Stock (the “Preferred Stock”) and the number of shares so designated shall be up to 30,000 (which shall not be subject
to increase without the written consent of all of the holders of the Preferred Stock (each, a “Holder” and collectively, the “Holders”)). Each share of Preferred Stock shall have a par value of $0.001 per share and a stated value equal to $1,000, subject to increase set forth in Section 3 below (the “Stated Value”).
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Section 3. Dividends. Except for stock dividends or distributions for which adjustments are to
be made pursuant to Section 7, Holders shall be entitled to receive, and the Corporation shall pay, dividends on shares of Preferred Stock equal (on an as-if-converted-to-Common-Stock basis, disregarding for such purpose any conversion limitations
hereunder) to and in the same form as dividends actually paid on shares of the Common Stock when, as and if such dividends are paid on shares of the Common Stock. No other dividends shall be paid on shares of Preferred Stock. The Corporation
shall not pay any dividends on the Common Stock unless the Corporation simultaneously complies with this provision.
Section 4. Voting Rights. Except as otherwise provided herein or as otherwise required by law,
the Preferred Stock shall have no voting rights. However, as long as any shares of Preferred Stock are outstanding, the Corporation shall not, without the affirmative vote of the Holders of a majority of the then outstanding shares of the
Preferred Stock, (a) alter or change adversely the powers, preferences or rights given to the Preferred Stock or alter or amend this Certificate of Designation, (b) amend its certificate of incorporation or other charter documents in any manner
that adversely affects any rights of the Holders, (c) increase the number of authorized shares of Preferred Stock, or (d) enter into any agreement with respect to any of the foregoing.
Section 5. Liquidation. Upon any liquidation, dissolution or winding-up of the Corporation,
whether voluntary or involuntary (a “Liquidation”), the Holders shall be entitled to receive out of the assets, whether capital or surplus, of the
Corporation an amount equal to the Stated Value, plus any accrued and unpaid dividends and any other amounts due and owing under this Certificate of Designation, for each share of Preferred Stock before any distribution or payment shall be made to
the holders of the Common Stock and if the assets of the Corporation shall be insufficient to pay in full such amounts, then the entire assets to be distributed to the Holders shall be ratably distributed among the Holders in accordance with the
respective amounts that would be payable on such shares if all amounts payable thereon were paid in full. The Corporation shall mail written notice of any such Liquidation, not less than 45 days prior to the payment date stated therein, to each
Holder.
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Section 6. Conversion.
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a)
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Conversions at Option of
Holder. Each share of Preferred Stock shall be convertible, at any time and from time to time from and after the Original Issue Date at the option of the Holder thereof, into that number of shares of Common Stock (subject to
the limitations set forth in Section 6(d)) determined by dividing the Stated Value of such share of Preferred Stock by the Conversion Price. Holders shall effect conversions by providing the Corporation with the form of conversion notice
attached hereto as Annex A (a “Notice of Conversion”).
Each Notice of Conversion shall specify the number of shares of Preferred Stock to be converted, the number of shares of Preferred Stock owned prior to the conversion at issue, the number of shares of Preferred Stock owned subsequent to the
conversion at issue and the date on which such conversion is to be effected, which date may not be prior to the date the applicable Holder delivers by facsimile such Notice of Conversion to the Corporation (such date, the “Conversion Date”). If no Conversion Date is specified in a Notice of Conversion, the Conversion Date shall be the date that such Notice of Conversion to
the Corporation is deemed delivered hereunder. No ink-original Notice of Conversion shall be required, nor shall any medallion guarantee (or other type of guarantee or notarization) of any Notice of Conversion form be required. The calculations and entries set forth in the Notice of Conversion shall control in the absence of manifest or mathematical error. To
effect conversions of shares of Preferred Stock, a Holder shall not be required to surrender the certificate(s) representing the shares of Preferred Stock to the Corporation unless all of the shares of Preferred Stock represented thereby are
so converted, in which case such Holder shall deliver the certificate representing such shares of Preferred Stock promptly following the Conversion Date at issue. Shares of Preferred Stock converted into Common Stock or redeemed in
accordance with the terms hereof shall be canceled and shall not be reissued.
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b)
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Conversion Price.
The conversion price for the Preferred Stock shall equal to the lesser of (i) $0.0001, subject to adjustment hereunder and (ii) 85% of the
average of the VWAPs during the 10 Trading Days immediately following the effective date and public announcement of the Reverse Stock Split (the lower of clauses (i) and (ii), the “Conversion Price”).
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c)
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Mechanics of Conversion
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i.
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Delivery of Conversion
Shares Upon Conversion. Not later than the earlier of (i) two (2) Trading Days and (ii) the number of Trading Days comprising the Standard Settlement Period (as defined below) after each Conversion Date (the “Share Delivery Date”), the Corporation shall deliver, or cause to be delivered, to the converting Holder (A) the number of Conversion Shares being acquired
upon the conversion of the Preferred Stock, which Conversion Shares shall be free of restrictive legends and trading restrictions, and (B) a bank check in the amount of accrued and unpaid dividends, if any. The Corporation shall use its best
efforts to deliver the Conversion Shares required to be delivered by the Corporation under this Section 6 electronically through the Depository Trust Company or another established clearing corporation performing similar functions. As used
herein, “Standard Settlement Period” means the standard settlement period, expressed in a number of Trading Days, on the Corporation’s primary Trading
Market with respect to the Common Stock as in effect on the date of delivery of the Notice of Conversion. Notwithstanding the foregoing, with respect to any Notice(s) of Conversion delivered by 12:00 p.m. (New York City time) on the Original
Issue Date, the Corporation agrees to deliver the Conversion Shares subject to such notice(s) by 4:00 p.m. (New York City time) on the Original Issue Date.
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ii.
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Failure to Deliver
Conversion Shares. If, in the case of any Notice of Conversion, such Conversion Shares are not delivered to or as directed by the applicable Holder by the Share Delivery Date, the Holder shall be entitled to elect by written
notice to the Corporation at any time on or before its receipt of such Conversion Shares, to rescind such Conversion, in which event the Corporation shall promptly return to the Holder any original Preferred Stock certificate delivered to the
Corporation and the Holder shall promptly return to the Corporation the Conversion Shares issued to such Holder pursuant to the rescinded Notice of Conversion.
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iii.
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Obligation Absolute;
Partial Liquidated Damages. The Corporation’s obligation to issue and deliver the Conversion Shares upon conversion of Preferred Stock in accordance with the terms hereof are absolute and unconditional, irrespective of any
action or inaction by a Holder to enforce the same, any waiver or consent with respect to any provision hereof, the recovery of any judgment against any Person or any action to enforce the same, or any setoff, counterclaim, recoupment,
limitation or termination, or any breach or alleged breach by such Holder or any other Person of any obligation to the Corporation or any violation or alleged violation of law by such Holder or any other person, and irrespective of any other
circumstance which might otherwise limit such obligation of the Corporation to such Holder in connection with the issuance of such Conversion Shares; provided,
however, that such delivery shall not operate as a waiver by the Corporation of any such action that the Corporation may have against such Holder. In
the event a Holder shall elect to convert any or all of the Stated Value of its Preferred Stock, the Corporation may not refuse conversion based on any claim that such Holder or any one associated or affiliated with such Holder has been
engaged in any violation of law, agreement or for any other reason, unless an injunction from a court, on notice to Holder, restraining and/or enjoining conversion of all or part of the Preferred Stock of such Holder shall have been sought
and obtained, and the Corporation posts a surety bond for the benefit of such Holder in the amount of 150% of the Stated Value of Preferred Stock which is subject to the injunction, which bond shall remain in effect until the completion of
arbitration/litigation of the underlying dispute and the proceeds of which shall be payable to such Holder to the extent it obtains judgment. In the absence of such injunction, the Corporation shall issue Conversion Shares and, if
applicable, cash, upon a properly noticed conversion. If the Corporation fails to deliver to a Holder such Conversion Shares pursuant to Section 6(c)(i) by the Share Delivery Date applicable to such conversion, the Corporation shall pay to
such Holder, in cash, as liquidated damages and not as a penalty, for each $5,000 of Stated Value of Preferred Stock being converted, $50 per Trading Day (increasing to $100 per Trading Day on the third Trading Day and increasing to $200 per
Trading Day on the sixth Trading Day after such damages begin to accrue) for each Trading Day after the Share Delivery Date until such Conversion Shares are delivered or Holder rescinds such conversion. Nothing herein shall limit a Holder’s
right to pursue actual damages for the Corporation’s failure to deliver Conversion Shares within the period specified herein and such Holder shall have the right to pursue all remedies available to it hereunder, at law or in equity including,
without limitation, a decree of specific performance and/or injunctive relief. The exercise of any such rights shall not prohibit a Holder from seeking to enforce damages pursuant to any other Section hereof or under applicable law.
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iv.
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Compensation for Buy-In on
Failure to Timely Deliver Conversion Shares Upon Conversion. In addition to any other rights available to the Holder, if the Corporation fails for any reason to deliver to a Holder the applicable Conversion Shares by the Share
Delivery Date pursuant to Section 6(c)(i), and if after such Share Delivery Date such Holder is required by its brokerage firm to purchase (in an open market transaction or otherwise), or the Holder’s brokerage firm otherwise purchases,
shares of Common Stock to deliver in satisfaction of a sale by such Holder of the Conversion Shares which such Holder was entitled to receive upon the conversion relating to such Share Delivery Date (a “Buy-In”), then the Corporation shall (A) pay in cash to such Holder (in addition to any other remedies available to or elected by such Holder) the amount, if any, by which (x)
such Holder’s total purchase price (including any brokerage commissions) for the Common Stock so purchased exceeds (y) the product of (1) the aggregate number of shares of Common Stock that such Holder was entitled to receive from the
conversion at issue multiplied by (2) the actual sale price at which the sell order giving rise to such purchase obligation was executed (including any brokerage commissions) and (B) at the option of such Holder, either reissue (if
surrendered) the shares of Preferred Stock equal to the number of shares of Preferred Stock submitted for conversion (in which case, such conversion shall be deemed rescinded) or deliver to such Holder the number of shares of Common Stock
that would have been issued if the Corporation had timely complied with its delivery requirements under Section 6(c)(i). For example, if a Holder purchases shares of Common Stock having a total purchase price of $11,000 to cover a Buy-In with
respect to an attempted conversion of shares of Preferred Stock with respect to which the actual sale price of the Conversion Shares (including any brokerage commissions) giving rise to such purchase obligation was a total of $10,000 under
clause (A) of the immediately preceding sentence, the Corporation shall be required to pay such Holder $1,000. The Holder shall provide the Corporation written notice indicating the amounts payable to such Holder in respect of the Buy-In
and, upon request of the Corporation, evidence of the amount of such loss. Nothing herein shall limit a Holder’s right to pursue any other remedies available to it hereunder, at law or in equity including, without limitation, a decree of
specific performance and/or injunctive relief with respect to the Corporation’s failure to timely deliver the Conversion Shares upon conversion of the shares of Preferred Stock as required pursuant to the terms hereof.
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v.
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Reservation of Shares
Issuable Upon Conversion. The Corporation covenants that it will at all times reserve and keep available out of its authorized and unissued shares of Common Stock for the sole purpose of issuance upon conversion of the
Preferred Stock as herein provided, free from preemptive rights or any other actual contingent purchase rights of Persons other than the Holder (and the other holders of the Preferred Stock), not less than such aggregate number of shares of
the Common Stock as shall (subject to the terms and conditions set forth in the Exchange Agreements) be issuable (taking into account the adjustments and restrictions of Section 7) upon the conversion of the then outstanding shares of
Preferred Stock. The Corporation covenants that all shares of Common Stock that shall be so issuable shall, upon issue, be duly authorized, validly issued, fully paid and nonassessable.
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vi.
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Fractional Shares.
No fractional shares or scrip representing fractional shares shall be issued upon the conversion of the Preferred Stock. As to any fraction of a share which the Holder would otherwise be entitled to purchase upon such conversion, the
Corporation shall round up to the next whole share. Notwithstanding anything to the contrary contained herein, but consistent with the provisions of this subsection with respect to fractional Conversion Shares, nothing shall prevent any
Holder from converting fractional shares of Preferred Stock.
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vii.
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Transfer Taxes and Expenses.
The issuance of Conversion Shares on conversion of this Preferred Stock shall be made without charge to any Holder for any documentary stamp or similar taxes that may be payable in respect of the issue or delivery of such Conversion Shares,
provided that the Corporation shall not be required to pay any tax that may be payable in respect of any transfer involved in the issuance and delivery of any such Conversion Shares upon conversion in a name other than that of the Holders of
such shares of Preferred Stock and the Corporation shall not be required to issue or deliver such Conversion Shares unless or until the Person or Persons requesting the issuance thereof shall have paid to the Corporation the amount of such
tax or shall have established to the satisfaction of the Corporation that such tax has been paid. The Corporation shall pay all Transfer Agent fees required for same-day processing of any Notice of Conversion and all fees to the Depository
Trust Company (or another established clearing corporation performing similar functions) required for same-day electronic delivery of the Conversion Shares.
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Section 7. Section 7. Certain Adjustments.
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a)
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Stock Dividends and Stock
Splits. If the Corporation, at any time while this Preferred Stock is outstanding: (i) pays a stock dividend or otherwise makes a distribution or distributions payable in shares of Common Stock on shares of Common Stock or any
other Common Stock Equivalents (which, for avoidance of doubt, shall not include any shares of Common Stock issued by the Corporation upon conversion of, or payment of a dividend on, this Preferred Stock), (ii) subdivides outstanding shares
of Common Stock into a larger number of shares, (iii) combines (including by way of a reverse stock split) outstanding shares of Common Stock into a smaller number of shares, or (iv) issues, in the event of a reclassification of shares of the
Common Stock, any shares of capital stock of the Corporation, then the Conversion Price shall be multiplied by a fraction of which the numerator shall be the number of shares of Common Stock (excluding any treasury shares of the Corporation)
outstanding immediately before such event, and of which the denominator shall be the number of shares of Common Stock outstanding immediately after such event. Any adjustment made pursuant to this Section 7(a) shall become effective
immediately after the record date for the determination of stockholders entitled to receive such dividend or distribution and shall become effective immediately after the effective date in the case of a subdivision, combination or
re-classification.
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b)
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Subsequent Equity Sales. If, at any
time while this Preferred Stock is outstanding, the Corporation or any Subsidiary, as applicable sells or grants any option to purchase or sells or grants any right to reprice, or otherwise disposes of or issues (or announces any sale, grant
or any option to purchase or other disposition), any Common Stock or Common Stock Equivalents entitling any Person to acquire shares of Common Stock at an effective price per share that is lower than the then Conversion Price (such lower
price, the “Base Conversion Price” and such issuances, collectively, a “Dilutive
Issuance”) (if the holder of the Common Stock or Common Stock Equivalents so issued shall at any time, whether by operation of purchase price adjustments, reset provisions, floating conversion, exercise or exchange prices or
otherwise, or due to warrants, options or rights per share which are issued in connection with such issuance, be entitled to receive shares of Common Stock at an effective price per share that is lower than the Conversion Price, such issuance
shall be deemed to have occurred for less than the Conversion Price on such date of the Dilutive Issuance), then simultaneously with the consummation (or, if earlier, the announcement) of each Dilutive Issuance the Conversion Price shall be
reduced to equal the Base Conversion Price. Notwithstanding the foregoing, no adjustment will be made under this Section 7(b) in respect of an Exempt Issuance.
The Corporation shall notify the Holders in writing, no later than the Trading Day following the issuance of any Common Stock or Common Stock Equivalents subject to this Section 7(b), indicating therein the applicable issuance price, or
applicable reset price, exchange price, conversion price and other pricing terms (such notice, the “Dilutive Issuance Notice”). For purposes of
clarification, whether or not the Corporation provides a Dilutive Issuance Notice pursuant to this Section 7(b), upon the occurrence of any Dilutive Issuance, the Holders are entitled to receive a number of Conversion Shares based upon the
Base Conversion Price on or after the date of such Dilutive Issuance, regardless of whether a Holder accurately refers to the Base Conversion Price in the Notice of Conversion.
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c)
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Subsequent Rights Offerings.
In addition to any adjustments pursuant to Section 7(a) above, if at any time the Corporation grants, issues or sells any Common Stock Equivalents or rights to
purchase stock, warrants, securities or other property pro rata to the record holders of any class of shares of Common Stock (the “Purchase Rights”), then the Holder of 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 such Holder’s Preferred Stock (without regard to any limitations on exercise hereof, including without limitation, the Beneficial Ownership
Limitation) immediately before the date on which a record is taken for the grant, issuance or sale of such Purchase Rights, or, if no such record is taken, the date as of which the record holders of shares of Common Stock are to be
determined for the grant, issue or sale of such Purchase Rights (provided, however, to the extent that the Holder’s right to participate in any such Purchase Right would result in the Holder exceeding the Beneficial Ownership Limitation,
then the Holder shall not be entitled to participate in such Purchase Right to such extent (or beneficial ownership of such shares of Common Stock as a result of such Purchase Right to such extent) and such Purchase Right to such extent
shall be held in abeyance for the Holder until such time, if ever, as its right thereto would not result in the Holder exceeding the Beneficial Ownership Limitation).
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d)
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Pro Rata Distributions.
During such time as this Preferred Stock is outstanding, if the Corporation declares or makes any dividend or other distribution of its assets (or rights to acquire its assets) to holders of shares of Common Stock, by way of return of capital
or otherwise (including, without limitation, any distribution of cash, stock or other securities, property or options by way of a dividend, spin off, reclassification, corporate rearrangement, scheme of arrangement or other similar
transaction) (a “Distribution”), at any time after the issuance of this Preferred Stock, then, in each such case, the Holder shall be entitled to
participate in such Distribution to the same extent that the Holder would have participated therein if the Holder had held the number of shares of Common Stock acquirable upon complete conversion of this Preferred Stock (without regard to any
limitations on conversion hereof, including without limitation, the Beneficial Ownership Limitation) immediately before the date of which a record is taken for such Distribution, or, if no such record is taken, the date as of which the record
holders of shares of Common Stock are to be determined for the participation in such Distribution (provided, however, to the extent that the Holder's right to participate in any such Distribution would result in the Holder exceeding the Beneficial Ownership Limitation, then the Holder
shall not be entitled to participate in such Distribution to such extent (or in the beneficial ownership of any shares of Common Stock as a result of such Distribution to such extent) and the portion of such Distribution shall be held in
abeyance for the benefit of the Holder until such time, if ever, as its right thereto would not result in the Holder exceeding the Beneficial Ownership Limitation).
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f)
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Calculations.
All calculations under this Section 7 shall be made to the nearest cent or the nearest 1/100th of a share, as the case may be. For purposes of this Section 7, the number of shares of Common Stock deemed to be issued and outstanding as of a
given date shall be the sum of the number of shares of Common Stock (excluding any treasury shares of the Corporation) issued and outstanding.
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g)
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Notice to the Holders.
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i.
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Adjustment to Conversion
Price. Whenever the Conversion Price is adjusted pursuant to any provision of this Section 7, the Corporation shall promptly deliver to each Holder by facsimile or email a notice setting forth the Conversion Price after such
adjustment and setting forth a brief statement of the facts requiring such adjustment.
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8
Section 8. Section 8. Miscellaneous.
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a)
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Notices. Any
and all notices or other communications or deliveries to be provided by the Holders hereunder including, without limitation, any Notice of Conversion, shall be in writing and delivered personally, by facsimile or e-mail, or sent by a
nationally recognized overnight courier service, addressed to the Corporation, at the address set forth above Attention: John Ollet, Chief
Financial Officer facsimile number 954.272.7773, e-mail address jollet@hcmc1.com, or such other facsimile number, e-mail address or address as the Corporation may specify for such purposes by notice to the Holders delivered in accordance with
this Section 8. Any and all notices or other communications or deliveries to be provided by the Corporation hereunder shall be in writing and delivered personally, by facsimile or e-mail, or sent by a nationally recognized overnight courier
service addressed to each Holder at the facsimile number, e-mail address or address of such Holder appearing on the books of the Corporation, or if no such facsimile number, e-mail address or address appears on the books of the Corporation,
at the principal place of business of such Holder, as set forth in the Exchange Agreements. Any notice or other communication or deliveries hereunder shall be deemed given and effective on the earliest of (i) the date of transmission, if
such notice or communication is delivered via facsimile at the facsimile number or e-mail at the e-mail address set forth in this Section 8 prior to 5:30 p.m. (New York City time) on any date, (ii) the next Trading Day after the date of
transmission, if such notice or communication is delivered via facsimile at the facsimile number or e-mail at the e-mail address set forth in this Section on a day that is not a Trading Day or later than 5:30 p.m. (New York City time) on any
Trading Day, (iii) the second Trading Day following the date of mailing, if sent by U.S. nationally recognized overnight courier service, or (iv) upon actual receipt by the party to whom such notice is required to be given.
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b)
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Absolute Obligation.
Except as expressly provided herein, no provision of this Certificate of Designation shall alter or impair the obligation of the Corporation, which is absolute and unconditional, to pay liquidated damages, and accrued dividends, as
applicable, on the shares of Preferred Stock at the time, place, and rate, and in the coin or currency, herein prescribed.
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c)
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Lost or Mutilated Preferred
Stock Certificate. If a Holder’s Preferred Stock certificate shall be mutilated, lost, stolen or destroyed, the Corporation shall execute and deliver, in exchange and substitution for and upon cancellation of a mutilated
certificate, or in lieu of or in substitution for a lost, stolen or destroyed certificate, a new certificate for the shares of Preferred Stock so mutilated, lost, stolen or destroyed, but only upon receipt of evidence of such loss, theft or
destruction of such certificate, and of the ownership hereof reasonably satisfactory to the Corporation.
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d)
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Governing Law.
All questions concerning the construction, validity, enforcement and interpretation of this Certificate of Designation shall be governed by and construed and enforced in accordance with the internal laws of the State of Delaware, without
regard to the principles of conflict of laws thereof. All legal proceedings concerning the interpretation, enforcement and defense of the transactions contemplated by any of the Transaction Documents (whether brought against a party hereto
or its respective Affiliates, directors, officers, shareholders, employees or agents) shall be commenced in the state and federal courts sitting in the City of New York, Borough of Manhattan (the “New York Courts”). The Corporation and each Holder hereby irrevocably submits to the exclusive jurisdiction of the New York Courts for the adjudication of any dispute hereunder or in
connection herewith or with any transaction contemplated hereby or discussed herein (including with respect to the enforcement of any of the Transaction Documents), and hereby irrevocably waives, and agrees not to assert in any suit, action
or proceeding, any claim that it is not personally subject to the jurisdiction of such New York Courts, or such New York Courts are improper or inconvenient venue for such proceeding. The Corporation and each Holder hereby irrevocably waives
personal service of process and consents to process being served in any such suit, action or proceeding by mailing a copy thereof via registered or certified mail or overnight delivery (with evidence of delivery) to such party at the address
in effect for notices to it under this Certificate of Designation and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right
to serve process in any other manner permitted by applicable law. The Corporation and each Holder hereto hereby irrevocably waives, to the fullest extent permitted by applicable law, any and all right to trial by jury in any legal proceeding
arising out of or relating to this Certificate of Designation or the transactions contemplated hereby. If the Corporation or any Holder shall commence an action or proceeding to enforce any provisions of this Certificate of Designation, then
the prevailing party in such action or proceeding shall be reimbursed by the other party for its attorneys’ fees and other costs and expenses incurred in the investigation, preparation and prosecution of such action or proceeding.
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e)
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Waiver. Any
waiver by the Corporation or a Holder of a breach of any provision of this Certificate of Designation shall not operate as or be construed to be a waiver of any other breach of such provision or of any breach of any other provision of this
Certificate of Designation or a waiver by any other Holders. The failure of the Corporation or a Holder to insist upon strict adherence to any term of this Certificate of Designation on one or more occasions shall not be considered a waiver
or deprive that party (or any other Holder) of the right thereafter to insist upon strict adherence to that term or any other term of this Certificate of Designation on any other occasion. Any waiver by the Corporation or a Holder must be in
writing.
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f)
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Severability.
If any provision of this Certificate of Designation is invalid, illegal or unenforceable, the balance of this Certificate of Designation shall remain in effect, and if any provision is inapplicable to any Person or circumstance, it shall
nevertheless remain applicable to all other Persons and circumstances. If it shall be found that any interest or other amount deemed interest due hereunder violates the applicable law governing usury, the applicable rate of interest due
hereunder shall automatically be lowered to equal the maximum rate of interest permitted under applicable law.
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g)
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Next Business Day.
Whenever any payment or other obligation hereunder shall be due on a day other than a Business Day, such payment shall be made on the next succeeding Business Day.
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h)
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Headings. The
headings contained herein are for convenience only, do not constitute a part of this Certificate of Designation and shall not be deemed to limit or affect any of the provisions hereof.
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i)
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Status of Converted
Preferred Stock; Redemptions. Shares of Preferred Stock may only be issued pursuant to the Exchange Agreements. If any shares of Preferred Stock shall be converted, such shares shall resume the status of authorized but
unissued shares of preferred stock and shall no longer be designated as Series C Convertible Preferred Stock. The Corporation shall not redeem or reacquire any shares of Preferred Stock.
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*********************
9
RESOLVED, FURTHER, that the Chairman, the president or any vice-president, and the secretary or any assistant secretary, of the Corporation be and they
hereby are authorized and directed to prepare and file this Certificate of Designation of Preferences, Rights and Limitations in accordance with the foregoing resolution and the provisions of Delaware law.
IN WITNESS WHEREOF, the undersigned have executed this Certificate this 25th day of September, 2020.
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By: ____/s/ Jeffrey E. Holman _________
Name: Jeffrey E. Holman
Title: Chief Executive Officer
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10
ANNEX A
NOTICE OF CONVERSION
(TO BE EXECUTED BY THE REGISTERED HOLDER IN ORDER TO CONVERT SHARES OF PREFERRED STOCK)
The undersigned hereby elects to convert the number of shares of Series C Convertible Preferred Stock indicated below into shares of common stock, par
value $0.0001 per share (the “Common Stock”), of Healthier Choices Management Corp., a Delaware corporation (the “Corporation”), according to the conditions hereof, as of the date written below. If shares of Common Stock are to be issued in the name of a Person other than the undersigned, the undersigned will
pay all transfer taxes payable with respect thereto and is delivering herewith such certificates and opinions as may be required by the Corporation in accordance with the Exchange Agreements. No fee will be charged to the Holders for any conversion,
except for any such transfer taxes.
Conversion calculations:
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Date to Effect Conversion: _____________________________________________
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Number of shares of Preferred Stock owned prior to Conversion: _______________
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Number of shares of Preferred Stock to be Converted: ________________________
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Stated Value of shares of Preferred Stock to be Converted: ____________________
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Number of shares of Common Stock to be Issued: ___________________________
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Applicable Conversion Price:____________________________________________
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Number of shares of Preferred Stock subsequent to Conversion: ________________
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Address for Delivery: ______________________
or
DWAC Instructions:
Broker no: _________
Account no: ___________
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[HOLDER]
By:___________________________________
Name:
Title:
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11
EXCHANGE AGREEMENT
EXCHANGE AGREEMENT (the “Agreement”) is made as of the 25th day of September 2020, by and between Healthier Choices Management Corp., a Delaware corporation (the “Company”), and the holder signatory to the signature page hereto (the “Holder”).
WHEREAS, the Holder holds the
securities of the Company set forth on Schedule I attached hereto (such securities, the “Exchange Securities”);
WHEREAS, the Company wishes to
conduct a reverse split of its Common Stock “Reverse Stock Split”) which requires the prior consent of the Holder;
WHEREAS, subject to the terms and
conditions set forth in this Agreement and pursuant to Section 3(a)(9) of the Securities Act of 1933, as amended (the “Securities Act”), the Company and the
Holder has agreed to exchange the Exchange Securities for the Company’s Series C Convertible Preferred Stock (the “Preferred Stock”) having the rights,
preferences and privileges set for in the Certificate of Designation to be filed prior to the Closing (as defined below) by the Company with the Secretary of State of Delaware, in the form of Exhibit A attached hereto (the “Certificate of Designation”) and convertible into shares of the Company’s common stock,
par value $0.0001 per share (the “Common Stock”); and
NOW, THEREFORE, for good and
valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and in consideration of the premises and the mutual agreements, representations and warranties, provisions and covenants contained herein, the parties hereto,
intending to be legally bound hereby, agree as follows:
1. Definitions. In addition to the terms defined elsewhere in this Agreement, (a)
capitalized terms that are not otherwise defined herein have the meanings given to such terms in the Certificate of Designation (as defined herein), and (b) the following terms have the meanings set forth in this Section 1:
“Affiliate” means any Person that, directly
or indirectly through one or more intermediaries, controls or is controlled by or is under common control with a Person, as such terms are used in and construed under Rule 405 under the Securities Act.
“Common Stock Equivalents” means any
securities of the Company or the Subsidiaries which would entitle the holder thereof to acquire at any time Common Stock, including, without limitation, any debt, preferred stock, right, option, warrant or other
instrument that is at any time convertible into or exercisable or exchangeable for, or otherwise entitles the holder thereof to receive, Common Stock.
“Liens” means a lien, charge, pledge, security
interest, encumbrance, right of first refusal, preemptive right or other restriction.
“Lock-Up Agreements” means the Lock-Up
Agreements, dated as of the date hereof, by and among the Company and the directors and officers of the Company, in the form of Exhibit B attached hereto.
1
“Rule 144” means Rule 144 promulgated by the
Commission pursuant to the Securities Act, as such Rule may be amended or interpreted from time to time, or any similar rule or regulation hereafter adopted by the Commission having substantially the same purpose and effect as such Rule.
“Trading Day” means a day on which the principal
Trading Market is open for trading.
“Trading Market” means any of the following
markets or exchanges on which the Common Stock is listed or quoted for trading on the date in question: the NYSE American, the Nasdaq Capital Market, the Nasdaq Global Market, the Nasdaq Global Select Market, the New York Stock Exchange, OTCQB or
OTCQX (or any successors to any of the foregoing).
“Transaction Documents” means this Agreement, the
Certificate of Designation, the Lock-Up Agreements, all exhibits and schedules thereto and hereto and any other documents or agreements executed in connection with the transactions contemplated hereunder
2. Exchange. On the Closing Date (as defined below), subject to the terms and conditions
of this Agreement, the Company agrees to issue to the Holder 775.2080 shares of Preferred Stock in exchange for the Exchange Securities held by the Holder as of the date hereof and as set forth on Schedule I attached hereto. Subject to the conditions set forth below, the Exchange shall take place at the offices of Ellenoff Grossman & Schole LLP (“EGS”), on the second Trading Day (as defined above) after the date hereof, or at such other time and place as the Company and the Holder mutually agree (the “Closing” and the “Closing Date”). At the Closing, the following transactions shall occur
(such transactions in this Section 2, the “Exchange”):
2.1 On the Closing Date, in exchange for the Exchange Securities, the Company shall deliver to the Holder a certificate evidencing 775.2080 shares of Preferred Stock. Upon receipt
of such certificate in accordance with this Section 2.1, all of the Holder’s rights under the Exchange Securities shall be extinguished. The Holder shall tender to the Company any certificates it holds representing any of the Exchange Securities
within three Trading Days (as defined above) of the Closing Date.
2.2 On the Closing Date, the Company shall deliver all of the Lock-Up Agreements.
2.3 On the Closing Date, the Company shall deliver to the Holder an opinion of Company counsel in form and substance reasonably satisfactory to the Holder.
2.4 The Company and the Holder shall execute and/or deliver such other documents and agreements as are customary and reasonably necessary to effectuate the Exchange.
2.5 The Company covenants that, if the Holder delivers a Notice of Conversion (as defined in the Certificate of Designation) to convert any Preferred Stock between the date hereof
and the Closing Date, the Company shall deliver the Conversion Shares to the Holder on the Closing Date in connection with such Notice of Conversion.
2
3. Closing Conditions.
3.1 Conditions to Holder’s Obligations. The obligation of the Holder to consummate the
Exchange is subject to the fulfillment, prior to or at the Closing, of each of the following conditions:
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(a)
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Representations and
Warranties. The representations and warranties of the Company contained in this Agreement shall be true and correct in all material respects on the date hereof and on and as of the Closing Date as if made on and as of such
date.
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(b)
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No Actions. No
action, proceeding, investigation, regulation or legislation shall have been instituted, threatened or proposed before any court, governmental agency or authority or legislative body to enjoin, restrain, prohibit or obtain substantial damages
in respect of, this Agreement or the consummation of the transactions contemplated by this Agreement.
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(c)
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Proceedings and Documents.
All proceedings in connection with the transactions contemplated hereby and all documents and instruments incident to such transactions shall be satisfactory in substance and form to the Holder, and the Holder shall have received all such
counterpart originals or certified or other copies of such documents as they may reasonably request.
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(d)
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Certificate of Designation.
The Certificate of Designation shall have been filed and be effective with the State of Delaware.
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(e)
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Listing of Conversion
Shares. The Company shall have secured the listing or designation for quotation (as applicable) of all of the shares of Common Stock issuable upon conversion of the Preferred Stock (the “Conversion Shares”), upon the Trading Market.
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(f)
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Opinion. An
opinion of Company counsel in form and substance reasonably satisfactory to the Holder.
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3.2 Conditions to the Company’s Obligations. The obligation of the Company to consummate
the Exchange is subject to the fulfillment, to the Company’s reasonable satisfaction, prior to or at the Closing, of each of the following conditions:
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(a)
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Representations and
Warranties. The representations and warranties of the Holder contained in this Agreement shall be true and correct in all material respects on the date hereof and on and as of the Closing Date as if made on and as of such date.
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(b)
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No Actions. No
action, proceeding, investigation, regulation or legislation shall have been instituted, threatened or proposed before any court, governmental agency or authority or legislative body to enjoin, restrain, prohibit, or obtain substantial
damages in respect of, this Agreement or the consummation of the transactions contemplated by this Agreement.
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(c)
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Proceedings and Documents.
All proceedings in connection with the transactions contemplated hereby and all documents and instruments incident to such transactions shall be satisfactory in substance and form to the Company and the Company shall have received all such
counterpart originals or certified or other copies of such documents as the Company may reasonably request.
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3
4. Representations and Warranties of the Company. The Company hereby represents and
warrants the Holder that:
4.1 Organization and Qualification. The Company and each of the Subsidiaries is an entity
duly incorporated or otherwise organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation or organization, with the requisite power and authority to own and use its properties and assets and to carry on
its business as currently conducted. Neither the Company nor any Subsidiary is in violation nor default of any of the provisions of its respective certificate or articles of incorporation, bylaws or other organizational or charter documents. Each
of the Company and the Subsidiaries is duly qualified to conduct business and is in good standing as a foreign corporation or other entity in each jurisdiction in which the nature of the business conducted or property owned by it makes such
qualification necessary, except where the failure to be so qualified or in good standing, as the case may be, could not have or reasonably be expected to result in a Material Adverse Effect.
4.2 Authorization; Enforcement. The Company has the requisite corporate power and
authority to enter into and to consummate the transactions contemplated by this Agreement, including but not limited to the Exchange. The execution and delivery of this Agreement and the Preferred Stock by the Company and the consummation by it of
the transactions contemplated hereby and thereby have been duly authorized by all necessary action on the part of the Company and no further action is required by the Company, the Board of Directors or the Company’s stockholders in connection
herewith or therewith. The Transaction Documents have been duly executed by the Company and, when delivered in accordance with the terms hereof and thereof, will constitute the valid and binding obligation of the Company enforceable against the
Company in accordance with its terms, except (i) as limited by general equitable principles and applicable bankruptcy, insolvency, reorganization, moratorium and other laws of general application affecting enforcement of creditors’ rights
generally, (ii) as limited by laws relating to the availability of specific performance, injunctive relief or other equitable remedies and (iii) insofar as indemnification and contribution provisions may be limited by applicable law.
4.3 No Conflicts. The execution, delivery and performance by the Company of this
Agreement, the issuance and sale of the debentures and the consummation by it of the transactions contemplated hereby and thereby do not and will not (i) conflict with or violate any provision of the Company’s or any Subsidiary’s certificate or
articles of incorporation, bylaws or other organizational or charter documents, or (ii) conflict with, or constitute a default (or an event that with notice or lapse of time or both would become a default) under, result in the creation of any Lien
upon any of the properties or assets of the Company or any Subsidiary, or give to others any rights of termination, amendment, acceleration or cancellation (with or without notice, lapse of time or both) of, any agreement, credit facility, debt or
other instrument (evidencing a Company or Subsidiary debt or otherwise) or other understanding to which the Company or any Subsidiary is a party or by which any property or asset of the Company or any Subsidiary is bound or affected, or (iii)
subject to the Required Approvals, conflict with or result in a violation of any law, rule, regulation, order, judgment, injunction, decree or other restriction of any court or governmental authority to which the Company or a Subsidiary is subject
(including federal and state securities laws and regulations), or by which any property or asset of the Company or a Subsidiary is bound or affected; except in the case of each of clauses (ii) and (iii), such as could not have or reasonably be
expected to result in a Material Adverse Effect
4
4.4 Valid Issuance of the Securities. The Preferred Stock and Conversion Shares are duly
authorized and, when issued and paid for in accordance with this Agreement and the Certificate of Designation, will be duly and validly issued, fully paid and nonassessable, free and clear of all Liens imposed by the Company other than restrictions
on transfer provided for in the Transaction Documents. The Conversion Shares, when issued in accordance with the terms of the Certificate of Designation, will be validly issued, fully paid and nonassessable, free and clear of all Liens imposed by
the Company other than restrictions on transfer provided for in the Transaction Documents. The Company has reserved from its duly authorized capital stock a number of shares of Common Stock for issuance of the Conversion Shares at least equal to
the maximum aggregate number of shares of Common Stock then issued or potentially issuable in the future pursuant to the Certificate of Designation, upon conversion in full of all Preferred Stock, ignoring any conversion limits set forth therein.
4.5 Compliance With Laws. The Company has not violated any law or any governmental
regulation or requirement which violation has had or would reasonably be expected to have a material adverse effect on its business, and the Company has not received written notice of any such violation.
4.6 Consents; Waivers. No consent, waiver, approval or authority of any nature, or other
formal action, by any Person, not already obtained, is required in connection with the execution and delivery of this Agreement by the Company or the consummation by the Company of the transactions provided for herein and therein.
4.7 Acknowledgment Regarding Holder’s Exchange of Exchange Securities for Preferred Stock.
The Company acknowledges and agrees that the Holder is acting solely in the capacity of arm’s length Holder with respect to this Agreement and the transactions contemplated hereby and that the Holder is not (i) an officer or director of the
Company, (ii) an “affiliate” of the Company (as defined in Rule 144 promulgated under the Securities Act), or (iii) to the knowledge of the Company, a “beneficial owner” of more than 10% of the shares of Common Stock (as defined for purposes of
Rule 13d-3 of the Securities Exchange Act of 1934, as amended). The Company further acknowledges that the Holder is not acting as a financial advisor or fiduciary of the Company (or in any similar capacity) with respect to this Agreement and the
transactions contemplated hereby, and any advice given by the Holder or any of its representatives or agents in connection with this Agreement and the transactions contemplated hereby is merely incidental to the Holder’s acceptance of the Shares.
The Company further represents to the Holder that the Company’s decision to enter into this Agreement has been based solely on the independent evaluation by the Company and its representatives.
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4.8 Absence of Litigation. There is no action, suit, proceeding, inquiry or investigation
before or by any court, public board, government agency, self-regulatory organization or body pending or, to the knowledge of the Company, threatened against or affecting the Company, the Securities or any of the Company’s officers or directors in
their capacities as such.
4.9 No Group. The Company acknowledges that, to the Company’s knowledge, the Holder is
acting independently in connection with this Agreement and the transactions contemplated hereby, and is not acting as part of a “group” as such term is defined under Section 13(d) of the Securities Act and the rules and regulations promulgated
thereunder.
4.10 Disclosure. The Company confirms that neither it nor any other Person acting on its
behalf has provided the Holder or its agents or counsel with any information that constitutes or could reasonably be expected to constitute material, nonpublic information. The Company understands and confirms that the Holder will rely on the
foregoing representations in effecting transactions herein.
4.11 SEC Reports. The Company has filed all reports, schedules, forms, statements and
other documents required to be filed by the Company under the Securities Act and the Exchange Act, including pursuant to Section 13(a) or 15(d) thereof, for the two years preceding the date hereof (or such shorter period as the Company was required
by law or regulation to file such material) (the foregoing materials, including the exhibits thereto and documents incorporated by reference therein, being collectively referred to herein as the “SEC Reports”) on a timely basis or has received a valid extension of such time of filing and has filed any such SEC Reports prior to the expiration of any such extension.
4.12 No Commission Paid. Neither the Company nor any of its Affiliates nor any person
acting on behalf of or for the benefit of any of the foregoing, has paid or given, or agreed to pay or give, directly or indirectly, any commission or other remuneration (within the meaning of Section 3(a)(9) of the Securities Act and the rules and
regulations of the Commission promulgated thereunder) for soliciting the Exchange.
5. Representations and Warranties of the Holder. The Holder hereby represents, warrants
and covenants that:
5.1 Authorization. The Holder has full power and authority to enter into this Agreement,
to perform its obligations hereunder and to consummate the transactions contemplated hereby and has taken all action necessary to authorize the execution and delivery of this Agreement, the performance of its obligations hereunder and the
consummation of the transactions contemplated hereby.
5.2 Information. The Holder 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 issuance of the Securities which have been requested by the Holder. The Holder has had the opportunity to review the Company's
filings with the Commission. The Holder and its advisors, if any, have been afforded the opportunity to ask questions of the Company. Neither such inquiries nor any other due diligence investigations conducted by the Holder or its advisors, if
any, or its representatives shall modify, amend or affect the Holder’s right to rely on the Company’s representations and warranties contained herein. The Holder understands that its investment in the Preferred Stock involves a high degree of
risk. The Holder 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 Preferred Stock. The Holder is relying solely on its own accounting,
legal and tax advisors, and not on any statements of the Company or any of its agents or representatives, for such accounting, legal and tax advice with respect to its acquisition of the Preferred Stock and the transactions contemplated by the
Transaction Documents.
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5.3 No Governmental Review. The Holder 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 Shares or the fairness or suitability of the investment in the Shares nor have such authorities passed upon or endorsed the merits
of the offering of the Shares.
5.4 Validity; Enforcement; No Conflicts. This Agreement to which the Holder is a party has
been duly and validly authorized, executed and delivered on behalf of the Holder and shall constitute the legal, valid and binding obligations of the Holder enforceable against the Holder 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. The execution, delivery and performance by the Holder of this Agreement to which the Holder is a party and the consummation by the Holder of the transactions contemplated hereby will not (i) result in a violation of the
organizational documents of the Holder 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 the Holder is a party, or (iii) result in a violation of any law, rule, regulation, order, judgment or decree (including federal and state securities or “blue sky” laws) applicable to
the Holder, except in the case of clause (ii) above, for such conflicts, defaults or rights which would not, individually or in the aggregate, reasonably be expected to have a material adverse effect on the ability of the Holder to perform its
obligations hereunder.
5.5 Ownership of the Preferred Stock. The Holder owns and holds, beneficially and of
record, the entire right, title, and interest in and to the Exchange Securities set forth on the signature page hereto free and clear of all rights and Liens. The Holder has full power and authority to transfer and dispose of the Exchange
Securities to the Company free and clear of any right or Lien. Other than the transactions contemplated by this Agreement, there is no outstanding vote, plan, pending proposal, or other right, of any Person to acquire all or any part of the
Exchange Securities or any shares of Common Stock issuable upon conversion or exchange of the Exchange Securities.
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5.6 No Commission Paid. Neither the Holder nor any of its Affiliates nor any person acting
on behalf of or for the benefit of any of the foregoing, has paid or given, or agreed to pay or give, directly or indirectly, any commission or other remuneration (within the meaning of Section 3(a)(9) of the Securities Act and the rules and
regulations of the Commission promulgated thereunder) for soliciting the Exchange.
6. Additional Covenants.
6.1 Disclosure. The Company shall, on or before 9:30 a.m., New York City time, on the
first business day after the date of this Agreement, file a Current Report on Form 8-K (the “8-K Filing”) disclosing all material terms of the transactions
contemplated hereby and including the Transaction Documents as exhibits thereto, with the Commission. From and after the issuance of the 8-K Filing, the Holder shall not be in possession of any material, nonpublic information received from the
Company or any of its respective officers, directors, employees or agents, that is not disclosed in the 8-K Filing. The Company shall not, and shall cause its officers, directors, employees and agents, not to, provide the Holder with any material,
nonpublic information regarding the Company from and after the filing of the 8-K Filing without the express written consent of the Holder. The Company shall not disclose the name of any Holder in any filing, announcement, release or otherwise,
unless such disclosure is required by law or regulation. In addition, effective upon the filing of the 8-K Filing, 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 the Holder or any of its affiliates, on the other hand, shall terminate.
6.2 Listing. The Company shall use its best efforts to maintain the listing or designation
for quotation (as applicable) of all of the Conversion Shares upon the Trading Market on which the Common Stock is currently listed or designated while the Preferred Stock is outstanding. The Company shall pay all fees and expenses in connection
with satisfying its obligations under this Section 6.2.
6.3 Characteristics. The parties acknowledge and agree that in accordance with Section
3(a)(9) of the Securities Act, the Preferred Stock issued in exchange for the Exchange Securities take on the registered characteristics of such Exchange Securities and the Company agrees not to take a position to the contrary.
6.4 Capital Changes. Other than the Reverse Stock Split, which the Holder hereby consents
to provided such Reverse Stock Split is effected on or before June 30, 2021, from the date hereof until the Holder no longer holds any Preferred Stock, the Company shall not undertake a reverse or forward stock split or reclassification of the
Common Stock without the prior written consent of the Holder.
6.5 Blue Sky. The Company shall make all filings and reports relating to the Exchange
required under applicable securities or “Blue Sky” laws of the states of the United States following the date hereof, if any.
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6.6 Fees and Expenses. Each party shall pay the fees and expenses of its advisers,
counsel, accountants and other experts, if any, and all other expenses incurred by such party incident to the negotiation, preparation, execution, delivery and performance of this Agreement.
7. Miscellaneous.
7.1 Successors and Assigns. Except as otherwise provided herein, the terms and conditions
of this Agreement shall inure to the benefit of and be binding upon the parties hereto and the respective successors and assigns of the parties. Nothing in this Agreement, express or implied, is intended to confer upon any party, other than the
parties hereto or their respective successors and assigns, any rights, remedies, obligations or liabilities under or by reason of this Agreement, except as expressly provided in this Agreement.
7.2 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 New York, without giving effect to any choice of law or conflict of law provision or rule (whether of the State of New York or any
other jurisdictions) that would cause the application of the laws of any jurisdictions other than the State of New York. Each party hereby irrevocably submits to the exclusive jurisdiction of the state or federal courts sitting in The City of New
York, Borough of Manhattan, for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein, and hereby irrevocably waives, and agrees not to assert in any 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. EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION WITH OR ARISING
OUT OF THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY.
7.3 Titles and Subtitles. The titles and subtitles used in this Agreement are used for
convenience only and are not to be considered in construing or interpreting this Agreement.
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7.4 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 by electronic mail; or (iii) one Business Day after deposit with an overnight courier service, in each case properly addressed to the
party to receive the same. The addresses, facsimile numbers and email addresses for such communications shall be:
To the Company: John Ollet
Chief Financial Officer
Healthier Choices Management Corp.
3800 N. 28th Way
Suite #1
Hollywood, FL 33020
Email: jholman@hcmc1.com
With a copy to: Cozen O’Connor
Martin Schrier
200 S. Biscayne Blvd.
Suite 3000
Miami, Florida 33131
Email: mschrier@cozen.com
7.5 If to the Holder, to its address, email address set forth on its signature page hereto, or to such other address, facsimile number and/or email address 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. 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 email containing the time, date, recipient facsimile number and 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.
7.6 Finder’s Fees. Each party represents that it neither is nor will be obligated for any
finders’ fee or commission in connection with this transaction.
7.7 Amendments and Waivers. Any term of this Agreement may be amended and the observance
of any term of this Agreement may be waived (either generally or in a particular instance and either retroactively or prospectively), only with the written consent of the Company and the Holder. Any amendment or waiver effected in accordance with
this paragraph shall be binding upon the Holder and the Company, provided that no such amendment shall be binding on a holder that does not consent thereto to the extent such amendment treats such party differently than any party that does consent
thereto.
7.8 Severability. If one or more provisions of this Agreement are held to be unenforceable
under applicable law, such provision shall be excluded from this Agreement and the balance of the Agreement shall be interpreted as if such provision were so excluded and shall be enforceable in accordance with its terms.
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7.9 Entire Agreement. This Agreement represents the entire agreement and understanding
between the parties concerning the Exchange and the other matters described herein and therein and supersedes and replaces any and all prior agreements and understandings solely with respect to the subject matter hereof and thereof.
7.10 Counterparts. This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute one and the same instrument.
7.11 Interpretation. Unless the context of this Agreement clearly requires otherwise, (a)
references to the plural include the singular, the singular the plural, the part the whole, (b) references to any gender include all genders, (c) “including” has the inclusive meaning frequently identified with the phrase “but not limited to” and
(d) references to “hereunder” or “herein” relate to this Agreement.
7.12 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.
7.13 Survival. The representations, warranties and covenants of the Company and the Holder
contained herein shall survive the Closing and delivery of the Securities.
7.14 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.
7.15 No Strict 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.
[SIGNATURES ON THE FOLLOWING PAGES]
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IN WITNESS WHEREOF, the parties
have caused this Agreement to be duly executed and delivered as of the date provided above.
THE COMPANY
HEALTHIER CHOICES MANAGEMENT CORP.
By:
Name:
Title:
Name:
Title:
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[HOLDER SIGNATURE PAGES TO HCMC EXCHANGE AGREEMENT]
IN WITNESS WHEREOF, the parties
have caused this Agreement to be duly executed and delivered as of the date provided above.
HOLDER
Name of Holder: ________________________________________________________
Signature of Authorized Signatory of Holder: __________________________________
Name of Authorized Signatory: ____________________________________________________
Title of Authorized Signatory: _____________________________________________________
Email Address of Authorized Signatory: _____________________________________________
Facsimile Number of Authorized Signatory: __________________________________________
Address for Notice to Holder:
Address for Delivery of Preferred Stock to Holder (if not same as address for notice):
Preferred Stock: ________________
[SIGNATURE PAGES CONTINUE]
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SCHEDULE I
LIST OF EXCHANGE SECURITIES
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