MITI 8-K
Mitesco, Inc. (MITI)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported):
(Exact Name of Registrant as Specified in Charter)
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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:
| | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
| | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Securities registered pursuant to Section 12(b) of the Act: None
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
| | N/A | N/A |
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. |
Restructuring plans and elimination of obligations
The Company has begun a restructuring of its obligations including all debts, notes, accounts payable and certain of its previously issued preferred shares.
Since September 28, 2024, the Company has entered into Obligation Exchange Agreements pursuant to which it has converted $8,122,857 of its obligations, including accounts payable, notes and certain of its previously issued preferred shares into restricted common stock using a price per share of $4.00, resulting in the aggregate issuance of 2,030,714 shares of restricted common stock.
The Company also intends to enter into separate Share Exchange Agreements whereby it expects to convert approximately $12.5 million of its previously issued Series D and Series F Preferred stock into a newly created Series A Amortizing Convertible Preferred Stock (the “Series A Shares” or “Series A Preferred Stock”) whose stated value is $25 per share, which should result in the issuance of roughly 500,000 Series A shares. The Series A Shares may be converted into shares of common stock by dividing the stated value by $4.00 (the “Conversion Price”). The Series A Shares may be converted at the option of the holder at any time, or mandatorily by the Company if certain conditions set forth in the certificate of designation (defined below and described more completely in Exhibit 3.2 to this filing) are met. As stipulated in the certificate of designation, unless converted, shares of Series A Preferred Stock will be redeemed by the Company, using common stock, or cash, 1/36th of the remaining amounts monthly beginning in January 2025. The cash redemption shall be at 105% of the original price of the Series A Preferred Stock (as adjusted) and common stock redemption shall be at a 10% discount to the average of the five lowest closing prices over a 30 trading day period. The Company intends to accrue the redemption shares monthly and issue any shares to be used thereunder quarterly to reduce its expense. Following this exchange, we believe that there will be no outstanding shares of Series D or Series F Preferred shares. It expects this exchange to be effective during the fourth quarter of FY2024.
As a result of its terms, timeframe and other factors including regulatory and market factors outside of the control of the Company, the risk to the holders of Series A Preferred Stock is deemed to be significant, and as such its issuance is limited to only accredited institutional entities.
Furthermore, all participants in its restructuring activities have agreed to the cancelation of their warrants.
Lastly, the Company has agreed to use its commercially reasonable efforts to file a registration statement to register the resale of common stock issued in exchange for its obligations and the shares which may be issued in the conversion or redemption of Series A Preferred stock, within 120 days from the date of execution of the agreements. Further, the Company shall use its commercially reasonable efforts to cause the registration statement to be declared effective as promptly as practicable following the filing of the same. There can be no assurance that the regulatory process will be completed timely, or that the shares will ultimately become registered. Nor can there be any assurance that there will be a market for the common stock of price or volume sufficient to meet the needs of the holders for liquidity in the markets.
The Company expects to recognize a substantial gain upon extinguishment of the outstanding debt described in this Form 8-K (accounts payable and promissory notes) upon its conversion into common stock, which treatment will be subject to final review by our auditors.
A copy of the forms of the Obligation Exchange Agreement and Share Exchange Agreement is filed as Exhibit 10.1 and 10.2 respectively to this Current Report on Form 8-K and a letter that accompanied the exchange agreements as Exhibit 99.1, each incorporated herein by reference.
Financing Agreements
On October 23, 2024, the Company entered into a lending agreement with two (2) of its historical institutional investors, Cavalry Fund and Mercer Street Capital. On October 28, 2024, the Company entered into a lending agreement with another historical institutional investor, AJB. The identical notes provided $33,000 of proceeds each, are for a 12-month period, and earn interest at ten percent (10%) per year. The Lenders and the Company have agreed that the use of the proceeds is intended to fund compliance related costs such as SEC reporting, audit, legal and accounting related. The Company expects to enter into similar agreements with other investors to meet its continuing costs for compliance. A copy of the form of notes is included as Exhibit 10.3 in this filing.
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Item 3.02 |
Unregistered Sales of Equity Securities. |
The disclosure made under Item 1.01 above is incorporated herein by reference. The Company completed the issuance of shares of common stock to a combination of accredited and non-accredited investors in a transaction not involving a public offering pursuant to section 4(a)(2) of the United States Securities Act of 1933, as amended.
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Item 5.03 |
Amendments to Articles of Incorporation or Bylaws; Change in Fiscal Year. |
On October 28, 2023, the Company filed a Certificate of Designation, Preferences and Rights of Series A Amortizing Convertible Preferred Stock with the Nevada Secretary of State (the “Certificate of Designation”). The Company authorized 3,000,000 shares of Series A Preferred Stock, par value $0.01 per share and each share of Series A Preferred Stock has a stated value equal to $25.
As indicated above, the Series A Preferred Stock may be converted or redeemed into common stock of the Company.
Holders of shares of the Series A Preferred Stock are not entitled to receive any dividends and the security bears no interest.
The Series A Preferred Stock will rank, with respect to rights to the payment of dividends and the distribution of assets in the event of any liquidation, dissolution or winding up of the Company, (i) senior to all classes or series of the Company’s Common Stock, and to all other equity securities issued by the Company; and (ii) effectively junior to all existing and future indebtedness (including indebtedness convertible into our Common Stock or preferred stock) of the Company and to any indebtedness and other liabilities of (as well as any preferred equity interest held by others in) existing subsidiaries of the Company.
In addition to any other rights provided by law, except where the vote or written consent of the holders of a greater number of shares is required by law or by another provision of the Certificate of Incorporation, without first obtaining the affirmative vote at a meeting duly called for such purpose or the written consent without a meeting of the majority of the outstanding Series A Preferred Stock, voting together as a single class, the Company shall not: (a) amend or repeal any provision of, or add any provision to, its Certificate of Incorporation or bylaws, or file any certificate of designations or certificate of amendment, if such action would adversely alter or change in any respect the preferences, rights, privileges or powers, or restrictions provided for the benefit, of the Series A Preferred Stock, regardless of whether any such action shall be by means of amendment to the Certificate of Incorporation or by merger, consolidation or otherwise; or (b) without limiting the provisions of the Certificate of Designation, circumvent a right of the Series A Preferred Stock.
The foregoing description of the Certificate of Designation does not purport to be complete and is qualified in its entirety by reference to the Certificate of Designation, a copy which is filed as Exhibit 3.1, to this Current Report on Form 8-K and is incorporated herein by reference.
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Item 8.01 |
Other Events. |
The Company is in discussions with various of its institutional investors regarding its restructuring plans and expects to make further progress over the next few weeks and months. The goal is to have substantially all of its payables, notes and other obligations extinguished by the end of the fiscal year, December 31, 2024. While it has received positive and supportive feedback from those with whom it has discussed the plans, there can be no assurance that the restructuring will be successful, or that the current business activities will grow to a level that can support the costs associated with being a public company.
On October 29, 2024 the Company issued a press release updating shareholders on its restructuring, appointments to its Advisory Board and other business events. A copy can is filed as Exhibit 99.1 to this Current Report on Form 8-K and incorporated herein by reference.
Forward-Looking Statements
This Form 8-K contains forward-looking statements. You can identify forward-looking statements by terminology such as “may,” “will,” “should,” “expects,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “potential,” “proposed,” “intended,” or “continue” or the negative of these terms or other comparable terminology. You should read statements that contain these words carefully, because they discuss our expectations about our future events or state other “forward-looking” information. There may be events in the future that we are not able to accurately predict or control. The forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from those reflected in such forward-looking statements. We cannot give any guarantee that these plans, intentions, or expectations will be achieved. All forward-looking statements involve risks and uncertainties, and actual results may differ materially from those discussed in the forward-looking statements as a result of various factors.
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Item 9.01 |
Financial Statements and Exhibits. |
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Exhibits |
Description |
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3.1 |
Certificate of Designation for Series A Amortizing Convertible Preferred stock |
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10.1 |
Form of obligation exchange agreement for restricted common stock |
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10.2 |
Form of share exchange agreement for Series A Convertible Preferred stock |
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10.3 |
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99.1 |
Form of letter accompanying the obligation exchange agreement |
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99.2 |
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104 |
Cover Page Interactive Data File (formatted as Inline XBRL) |
SIGNATURE
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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Dated: October 29, 2024 |
MITESCO, INC. |
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By: |
/s/ Mack Leath |
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Mack Leath |
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Chairman and CEO |
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Exhibit 3.1
CERTIFICATE OF DESIGNATIONS, PREFERENCES AND RIGHTS
OF THE SERIES “A”AMORTIZING
CONVERTIBLE PREFERRED STOCK OF
MITESCO, INC.
I, Mack Leath hereby certify that I am the CEO and President of Mitesco, Inc. (the “Company”) or (the “Corporation,”) a corporation organized and existing under the Nevada Revised Statutes (the “NRS”), and further do hereby certify:
That pursuant to the authority expressly conferred upon the Board of Directors of the Company (the “Board”) and by the Company’s Certificate of Incorporation, as amended (the “Certificate of Incorporation”), the Board on _________ __, 2024 adopted the following resolutions creating a series of 3,000,000 (three million) shares of Series A Preferred Stock designated as “Series A Amortizing Convertible Preferred Stock” (“Series A Preferred Stock”), none of which shares have been issued:
RESOLVED, that the Board designates the Series A Preferred Stock and the number of shares constituting such series, and fixes the rights, powers, preferences, privileges and restrictions relating to such series in addition to any set forth in the Certificate of Incorporation as follows:
TERMS OF SERIES A AMORTIZING CONVERTIBLE PREFERRED STOCK
1. Designation and Number of Shares. There shall hereby be created and established a series of preferred stock of the Company designated as “Series A Amortizing Convertible Preferred Stock” (the “Series A Preferred Stock”). The authorized number of Series A Preferred Stock shall be three million (3,000,000) shares. Each Preferred Share shall have a par value of $0.01. Capitalized terms not defined herein shall have the meaning as set forth below. The shares of Series A Preferred Stock shall have a stated value of $25.00 per share (the “Stated Value”).
2. Ranking. The Series A Preferred Stock will rank, with respect to rights to the payment of dividends and the distribution of assets in the event of any liquidation, dissolution or winding up of the Corporation, (i) senior to all classes or series of the Corporation’s Common Stock, par value $0.01 per share (“Common Stock”), and to all other equity securities issued by the Corporation ; and (ii) effectively junior to all existing and future indebtedness (including indebtedness convertible into our Common Stock or preferred stock) of the Corporation and to any indebtedness and other liabilities of (as well as any preferred equity interest held by others in) existing subsidiaries of the Corporation.
3. Conversion.
(a) Optional Conversion. Each share of Series A Preferred Stock shall be convertible at the option of the Holder into that number of shares of Common Stock calculated by dividing the sum of the Stated Value of each share of Series A Preferred Stock being converted plus any accrued but unpaid dividends and any other amounts payable hereunder with respect thereto, by the Conversion Price. The initial “Conversion Price” shall be $4.00 which shall be subject to adjustment as provided herein.
(b) Mandatory Conversion. If at any time from and after the date hereof, (i) the closing price of the Common Stock on the Trading Market equals or exceeds $6.00 (which amount shall be proportionately and appropriately adjusted for certain capital events, such as stock splits, as set forth herein) for 20 consecutive Trading Days (the “Mandatory Conversion Measuring Period”) and (ii) the daily dollar trading volume for the Corporation’s Common Stock on the Trading Market exceeds $2,000,000 per
Trading Day for the Mandatory Conversion Measuring Period and (iii) the Equity Conditions are satisfied on each Trading Day of the Mandatory Conversion Measuring Period, then the Corporation shall have the right to require the Holder to mandatorily convert all or any portion of the Series A Preferred Stock, including any accrued but unpaid dividends and any other amounts payable hereunder with respect thereto, as designated in the Mandatory Conversion Notice on the Mandatory Conversion Date (each as defined below) into fully paid, validly issued and nonassessable shares of Common Stock at the Conversion Price as of the Mandatory Conversion Date (as defined below) (a “Mandatory Conversion”). The Corporation may exercise its right to require conversion under this Section by delivering within not more than fifteen (15) Trading Days following the end of such Mandatory Conversion Measuring Period a written notice thereof by electronic mail (or by overnight currier if the Corporation does not have valid electronic mail address of the Holder) to the Holder (the “Mandatory Conversion Notice” and the date that the Holder received such notice is referred to as the “Mandatory Conversion Notice Date”). The Mandatory Conversion Notice shall be irrevocable. The Mandatory Conversion Notice shall state (I) the Trading Day on which the Mandatory Conversion shall occur, which shall be the second (2nd) Trading Day following the Mandatory Conversion Notice Date (the “Mandatory Conversion Date”) and (II) the aggregate number of Series A Preferred Stock which the Corporation has elected to be subject to such Mandatory Conversion from the Holder (the “Mandatory Conversion Amount”) pursuant to this Section 3. If the Equity Conditions cease to be satisfied during Mandatory Conversion Measuring Period, then, at the option of the Holder, the Mandatory Conversion shall be deemed withdrawn and void ab initio. For clarity, the Holder shall be entitled to convert the Series A Preferred Stock at any time and from time during the Mandatory Conversion Measuring Period pursuant to Section 3.
(c) Mechanics of Conversion. To convert shares of Series A Preferred Stock into shares of Common Stock on any date (a “Conversion Date”), a Holder shall deliver (whether via electronic mail or otherwise), for receipt on or prior to 5:00 p.m., New York, New York time, on such date, a copy of an executed notice of conversion of the share(s) of Series A Preferred Stock subject to such conversion in the form attached hereto as Exhibit I (the “Conversion Notice”) to the Corporation. If required, within two (2) Trading Days following a conversion of any such Series A Preferred Stock as aforesaid, such Holder shall surrender to a nationally recognized overnight delivery service for delivery to the Corporation the original certificates, if any, representing the shares of Series A Preferred Stock (the “Series A Preferred Stock Certificates”) so converted as aforesaid (or an indemnification undertaking with respect to the shares of Series A Preferred Stock in the case of its loss, theft or destruction). On or before the first (1st) Trading Day following the date of receipt of a Conversion Notice, the Corporation shall transmit by electronic mail (or by overnight currier if the Corporation does not have valid electronic mail address of the Holder) an acknowledgment of confirmation 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, in the form attached hereto as Exhibit II, of receipt of such Conversion Notice to such Holder and the Corporation’s transfer agent (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 each date on which the Corporation has received a Conversion Notice (or such earlier date as required pursuant to the Exchange 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) (the “Share Delivery Deadline”), the Corporation 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 such Holder shall be entitled pursuant to such conversion to such 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 such Holder, issue and deliver (via reputable overnight courier) to the address as specified in such Conversion Notice, a certificate, registered in the name of such Holder or its designee, for the number of shares of Common Stock to which such Holder shall be entitled. If the number of Series A Preferred Stock represented by the Series A Preferred Stock Certificate(s) submitted for conversion is
greater than the number of shares of Series A Preferred Stock being converted, then the Corporation shall, as soon as practicable and in no event later than two (2) Trading Days after receipt of the Series A Preferred Stock Certificate(s) and at its own expense, issue and deliver to such Holder (or its designee) a new Series A Preferred Stock Certificate or a new book-entry representing the number of shares of Series A Preferred Stock not converted. The Person or Persons entitled to receive the shares of Common Stock issuable upon a conversion of shares of Series A Preferred Stock shall be treated for all purposes as the record holder or holders of such shares of Common Stock on the Conversion Date. If the Corporation shall fail, for any reason or for no reason, on or prior to the applicable Share Delivery Deadline, if the Transfer Agent is not participating in FAST, to issue and deliver to such Holder (or its designee) a certificate for the number of shares of Common Stock to which such Holder is entitled and register such shares of Common Stock on the Corporation’s share register or, if the Transfer Agent is participating in FAST, to credit such Holder’s or its designee’s balance account with DTC for such number of shares of Common Stock to which such Holder is entitled upon such Holder’s conversion of any shares being converted hereunder (as the case may be) (a “Conversion Failure”), then, in addition to all other remedies available to such Holder, (X) the Corporation shall pay in cash from funds legally available therefor to such Holder on each day after the Share Delivery Deadline that the issuance of such shares of Common Stock is not timely effected an amount equal to 1% of the product of (A) the sum of the number of shares of Common Stock not issued to such Holder on or prior to the Share Delivery Deadline and to which such Holder is entitled, multiplied by (B) the highest trading price of the Common Stock at any time during the period beginning on the applicable Conversion Date and ending on the applicable Share Delivery Deadline, and (Y) such Holder, upon written notice to the Corporation, may void its Conversion Notice with respect to, and retain or have returned, as the case may be, all, or any portion, of such shares of Series A Preferred Stock that has not been converted pursuant to such Conversion Notice; provided that the voiding of an Conversion Notice shall not affect the Corporation’s obligations to make any payments which have accrued prior to the date of such notice pursuant to this Section 3 or otherwise. In addition to the foregoing, if on or prior to the Share Delivery Deadline the Transfer Agent is not participating in FAST, the Corporation shall fail to issue and deliver to such Holder (or its designee) a certificate and register such shares of Common Stock on the Corporation’s share register or, if the Transfer Agent is participating in FAST, the Transfer Agent shall fail to 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 such Holder is entitled upon such Holder’s conversion hereunder or pursuant to the Corporation’s obligation hereunder, and if on or after such Share Delivery Deadline such Holder acquires (in an open market transaction, stock loan 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 such Holder is entitled to receive from the Corporation and has not received from the Corporation in connection with such Conversion Failure, then, in addition to all other remedies available to such Holder, the Corporation shall, within two (2) Business Days after receipt of such Holder’s request and in such Holder’s discretion, either: (I) pay cash from funds legally available therefor to such Holder in an amount equal to such Holder’s total purchase price (including brokerage commission, stock loan costs and other out-of-pocket expenses, if any) for the shares of Common Stock so acquired (including, without limitation, by any other Person in respect, or on behalf, of such Holder) (the “Buy-In Price”), at which point the Corporation’s obligation to so issue and deliver such certificate (and to issue such shares of Common Stock) or credit to 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 such Holder is entitled upon such 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 such 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 such Holder is entitled upon such Holder’s conversion hereunder (as the case may be) and pay cash from funds legally available therefor to such 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). 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 certificates representing shares of Common Stock (or to electronically deliver such shares of Common Stock) upon the conversion of the Series A Preferred Stock as required pursuant to the terms hereof.
(d) Registration; Book-Entry. At the time of issuance of any shares of Series A Preferred Stock hereunder, the applicable Holder may, by written request (including by electronic-mail) to the Corporation, elect to receive such shares of Series A Preferred Stock in the form of one or more Series A Preferred Stock Certificates or in book-entry form. The Corporation (or the Transfer Agent, as registrar and transfer agent for the Series A Preferred Stock) shall maintain a register (the “Register”) for the recordation of the names and addresses of the Holders of each share of Series A Preferred Stock and the Stated Value of the Series A Preferred Stock and whether the shares of Series A Preferred Stock are held by such Holder in Series A Preferred Stock Certificates or in book-entry form. The entries in the Register shall be conclusive and binding for all purposes absent manifest error. The Corporation and each Holder of the Series A Preferred Stock shall treat each Person whose name is recorded in the Register as the owner of a share of Series A Preferred Stock for all purposes (including, without limitation, the right to receive payments and Dividends hereunder) notwithstanding notice to the contrary. The Series A Preferred Stock may be assigned, transferred or sold only by registration of such assignment or sale on the Register. Upon its receipt of a written request to assign, transfer or sell one or more Series A Preferred Stock by such Holder thereof, the Corporation shall record the information contained therein in the Register and issue one or more new shares of Series A Preferred Stock in the same aggregate Stated Value as the Stated Value of the surrendered shares of Series A Preferred Stock to the designated assignee or transferee, provided that if the Corporation does not so record an assignment, transfer or sale (as the case may be) of such Series A Preferred Stock 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 set forth in this Section 6, following conversion of any Series A Preferred Stock in accordance with the terms hereof, the applicable Holder shall not be required to physically surrender such shares of Series A Preferred Stock held in the form of a Series A Preferred Stock Certificate to the Corporation unless (A) the full or remaining number of shares of Series A Preferred Stock represented by the applicable Series A Preferred Stock Certificate are being converted (in which event such certificate(s) shall be delivered to the Corporation as contemplated by this Section 6(e)) or (B) such Holder has provided the Corporation with prior written notice (which notice may be included in a Conversion Notice) requesting reissuance of the shares of Series A Preferred Stock upon physical surrender of the applicable Series A Preferred Stock Certificate. Each Holder and the Corporation shall maintain records showing the Stated Value, dividends and other amounts 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 such Holder and the Corporation, so as not to require physical surrender of a Series A Preferred Stock Certificate upon conversion. If the Corporation does not update the Register to record such Stated Value, dividends and other amounts 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. In the event of any dispute or discrepancy, such records of such Holder establishing the number of shares of Series A Preferred Stock to which the Holder is entitled shall be controlling and determinative in the absence of manifest error evidenced in writing. A Holder and any transferee or assignee, by acceptance of a certificate, acknowledge and agree that, by reason of the provisions of this paragraph, following conversion of any shares of Series A Preferred Stock, the number of shares of Series A Preferred Stock represented by such certificate may be less than the number of shares of Series A Preferred Stock stated on the face thereof. Each Series A Preferred Stock Certificate shall bear the following legend:
ANY TRANSFEREE OR ASSIGNEE OF THIS CERTIFICATE SHOULD CAREFULLY REVIEW THE TERMS OF THE CORPORATION’S CERTIFICATE OF DESIGNATION RELATING TO THE SHARES OF SERIES A CONVERTIBLE PREFERRED STOCK REPRESENTED BY THIS CERTIFICATE. THE NUMBER OF SHARES OF SERIES A CONVERTIBLE PREFERRED STOCK REPRESENTED BY THIS CERTIFICATE MAY BE LESS THAN THE NUMBER OF SHARES OF PREFERRED STOCK STATED ON THE FACE HEREOF PURSUANT TO THE CERTIFICATE OF DESIGNATION RELATING TO THE SHARES OF SERIES A CONVERTIBLE PREFERRED STOCK REPRESENTED BY THIS CERTIFICATE.
4. Dividends.
(a) Holders of shares of the Series A Preferred Stock Preferred Stock shall not have any rights to receive any dividends unless otherwise declared by a vote of the majority of the Board of Directors of the Company. As such any dividends are at the option of the Company and are not subject to prior approval of either the shareholders, or the holders of the Series A Preferred shares.
5. Redemption.
(a) Mandatory Redemption. On January 1, 2025, (the “Initial Redemption Date”) the Company shall begin the redemption of the Series A Preferred Stock as set forth herein (the “Mandatory Redemption”). The Corporation shall redeem 1/36th of the Series A Preferred Stock (the “Mandatory Redemption Amount”) during each month beginning on the Initial Redemption Date. If the Mandatory Redemption Amount is to be paid in cash, the price for such redemption shall be 105% multiplied by the sum of an amount equal to the total number of Series A Preferred Stock held by the Holder multiplied by the then current Stated Value as adjusted pursuant to the terms hereof (including, but not limited to, the addition of any accrued unpaid dividends, if applicable). If the Mandatory Redemption Amount is paid in Common Stock, the number of shares to be issued will be at a 10% discount to average of the five lowest closing prices for the Corporation’s Common Stock during the 30 Trading Days prior to the applicable Mandatory Redemption Date. The option to choose between cash or stock Mandatory Redemption shall be at the Company’s sole discretion; provided, that if the Company elects to pay a Mandatory Redemption Amount in Common Stock, and if such shares of Common Stock to be so issued are not then registered with the Securities and Exchange Commission pursuant to an effective and available registration statement under the Securities Act of 1933, as amended, then the Company will bear all reasonable costs and expenses incurred by the Holder so registering such shares of Common Stock or of complying with the requirements of Rule 144 applicable to the Holder in connection with any proposed resale of such shares of Common Stock by the Holder pursuant to Rule 144, and will promptly (with 14 calendar days of receipt of notice from Holder of same) reimburse the Holder for any such costs and expenses actually incurred by the Holder, provided that the Company shall not bear the cost of more than one counsel for all the Holders if the shares are to be registered. The issuance of Common Stock under a Mandatory Redemption shall be made within two Trading Days of each Mandatory Redemption and, the Mandatory Redemption Amount in cash shall be made within five Trading Days of the Mandatory Redemption.
(b) Optional Redemption. At any time after the Initial Redemption Date, the Corporation at its option may redeem any and all outstanding shares of Series A Preferred Stock in cash (the “Optional Redemption Amount).” The Optional Redemption Amount and price shall be the same price as the Mandatory Redemption Amount provided, however, such Optional Redemption payments shall reduce the last of the remaining mandatory payments to be made to redeem the outstanding Series A Preferred Stock.
(c) Redemption Notice. The Corporation shall send written notice (a “Redemption Event Notice”) to each holder of record of Series A Preferred Stock not less than 10 days but not more than 30 days prior to the date fixed for redemption. The Redemption Event Notice shall state (i) the Redemption Date; (ii) the number of shares of Series A Preferred Stock to be redeemed; (iii) the applicable Redemption Price; (iv) the place or places where any certificates issued for Series A Preferred Stock were to be surrendered for payment at the applicable Redemption Price; and (v) any other information required by law or the applicable exchange upon which the Series A Preferred Stock may be listed or permitted for trading. If fewer than all outstanding shares of Series A Preferred Stock are to be redeemed a notice to each holder shall also specify the number of shares of Series A Preferred Stock to be redeemed from each such holder. The avoidance of doubt, holders of shares of Series A Preferred Stock shall have the right to convert all or a portion of the Series A Preferred Stock at any time following the applicable Redemption Event Notice prior to the applicable Redemption Date in accordance with the provisions of this Agreement at the address shown on the share transfer books of the Corporation.
(d) On or after the date fixed for redemption pursuant to either Section 5(a) or Section 5(b) hereof, each Holder of shares of Series A Preferred Stock that holds a certificate must present and surrender each certificate representing his or her Series A Preferred Stock to the Corporation at the place designated in the applicable notice and thereupon the redemption price of such shares will be paid to or on the order of the person whose name appears on such certificate representing the Series A Preferred Stock as the owner thereof.
6. Taxes. The Company shall pay any and all documentary, stamp, transfer (but only in respect of the registered holder thereof), transfer agent fees, issuance and other similar taxes that may be payable with respect to the issuance and delivery of shares of Common Stock upon the conversion of Series A Preferred Stock.
7. Limitation on Beneficial Ownership. Notwithstanding anything to the contrary contained in this Certificate of Designations, the Series A Preferred Stock held by a Holder shall not be convertible by such Holder, and the Company shall not effect any conversion of any Series A Preferred Stock held by such Holder, to the extent (but only to the extent) that such Holder or any of its affiliates would beneficially own in excess of 4.99% (the “Maximum Percentage”) of the Common Stock. To the extent the above limitation applies, the determination of whether the Series A Preferred Stock held by such Holder shall be convertible (vis-à-vis other convertible, exercisable or exchangeable securities owned by such Holder or any of its affiliates) and of which such securities shall be convertible, exercisable or exchangeable (as among all such securities owned by such Holder and its affiliates) shall, subject to such Maximum Percentage limitation, be determined on the basis of the first submission to the Company for conversion, exercise or exchange (as the case may be). No prior inability of a Holder to convert Series A Preferred Stock, or of the Company to issue shares of Common Stock to such Holder, pursuant to Section 7 shall have any effect on the applicability of the provisions of Section 7 with respect to any subsequent determination of convertibility or issuance (as the case may be). For purposes of this Section 7, beneficial ownership and all determinations and calculations (including, without limitation, with respect to calculations of percentage ownership) shall be determined in accordance with Section 13(d) of the 1934 Act and the rules and regulations promulgated thereunder. The provisions of this Section 7 shall be implemented in a manner otherwise than in strict conformity with the terms of this Section 7 (or any portion hereof) which may be defective or inconsistent with the intended Maximum Percentage beneficial ownership limitation herein contained or to make changes or supplements necessary or desirable to properly give effect to such Maximum Percentage. The limitations contained in this Section 7 shall apply to a successor holder of Series A Preferred Stock. For any reason at any time, upon the written or oral request of a Holder, the Company shall within one Business Day confirm orally and in writing to such Holder the number of shares of Common Stock then outstanding, including by virtue of any prior conversion or exercise of convertible or exercisable securities into Common Stock, including, without limitation, pursuant to this Certificate of Designations or securities issued
pursuant to the other Transaction Documents. By written notice to the Company, any Holder may increase or decrease the Maximum Percentage to any other percentage not in excess of 9.99% specified in such notice; provided that (i) any such increase will not be effective until the 61st day after such notice is delivered to the Company, and (ii) any such increase or decrease will apply only to such Holder sending such notice and not to any other Holder.
8. Stock Dividends and Stock Splits.
If the Corporation, at any time while any shares of Series A Preferred Stock are outstanding: (i) pays a stock dividend or otherwise makes a distribution or distributions payable in shares of Common Stock on shares of Common Stock or any Common Stock Equivalents, (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 adjusted proportionately. Any adjustment made pursuant to this Section 8 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.
9. Adjustments to Conversion Price for Diluting Issues.
(a) For purposes of this Section, the following definitions shall apply:
(i) “Additional Shares of Common Stock” shall mean all shares of Common Stock issued (or, pursuant to this Section, deemed to be issued) by the Corporation after the Original Issuance Date, other than (1) the following shares of Common Stock and (2) shares of Common Stock deemed issued pursuant to the following Options and Convertible Securities:
(1) shares of Common Stock, Options or Convertible Securities issued in an Exempt Issuance;
(2) as to any series of preferred stock, shares of Common Stock, Options or Convertible Securities issued as a dividend or distribution on such series of preferred stock; and
(3) shares of Common Stock, Options or Convertible Securities issued by reason of a dividend, stock split, split-up or other distribution on shares of Common Stock that is covered by Section 8.
(ii) “Convertible Securities” shall mean any evidence of indebtedness, shares or other securities directly or indirectly convertible into or exchangeable for Common Stock but excluding Options.
(iii) “Option” shall mean rights, options or warrants to subscribe for, purchase or otherwise acquire Common Stock or Convertible Securities.
(b) If and whenever on or after the Original Issuance Date but not after two years from the Original Issuance Date, the Corporation issues or sells, or in accordance with this Section 9 is deemed to have issued or sold, Additional Shares of Common Stock (including the issuance or sale of shares of Common Stock owned or held by or for the account of the Corporation, issued or sold or deemed to have been issued or sold) other than an Exempt Issuance, for a consideration per share (the “Base Share Price”) less than a price equal to the Conversion Price in effect immediately prior to such issuance or sale or deemed issuance or sale (such Conversion Price then in effect is referred to herein as the “Applicable Price”) (the foregoing a “Dilutive Issuance”), then immediately after such Dilutive Issuance, the Conversion Price then
in effect shall be reduced to an amount equal to the Base Share Price. For all purposes of the foregoing (including, without limitation, determining the adjusted Conversion Price and the Base Share Price under this Section 9(b)), the following shall be applicable:
(i) If the Corporation in any manner grants or sells any Options and the lowest price per share for which one share of Common Stock is at any time issuable upon the exercise of any such Option or upon conversion, exercise or exchange of any Convertible Securities issuable upon exercise of any such Option or otherwise pursuant to the terms thereof is less than the Applicable Price, then such share of Common Stock shall be deemed to be outstanding and to have been issued and sold by the Corporation at the time of the granting or sale of such Option for such price per share. For purposes of this Section 9, the “lowest price per share for which one share of Common Stock is issuable upon the exercise of any such Options or upon conversion, exercise or exchange of any Convertible Securities issuable upon exercise of any such Option or otherwise pursuant to the terms thereof’ shall be equal to (1) the lower of (x) the sum of the lowest amounts of consideration (if any) received or receivable by the Corporation with respect to any one share of Common Stock upon the granting or sale of such Option, upon exercise of such Option and upon conversion, exercise or exchange of any Convertible Security issuable upon exercise of such Option or otherwise pursuant to the terms thereof and (y) the lowest exercise price set forth in such Option for which one share of Common Stock is issuable upon the exercise of any such Options or upon conversion, exercise or exchange of any Convertible Securities issuable upon exercise of any such Option or otherwise pursuant to the terms thereof securities are issued to the owners of the non-surviving entity in connection with any merger in which the Corporation is the surviving entity, the amount of consideration therefor will be deemed to be the fair value of such portion of the net assets and business of the non-surviving entity as is attributable to such shares of Common Stock, Options or Convertible Securities. The fair value of any consideration other than cash or publicly traded securities will be determined jointly by the Corporation and the Holders of the majority of the outstanding shares of Series A Preferred Stock, which determination shall be binding on all Holders of Series A Preferred Stock. If such parties are unable to reach agreement within 10 days after the occurrence of an event requiring valuation (the “Valuation Event”), the fair value of such consideration will be determined within five Trading Days after the 10th day following such Valuation Event by an independent, reputable appraiser jointly selected by the Corporation and the Holders of the majority of the outstanding shares of Series A Preferred Stock. The determination of such appraiser shall be final and binding upon all parties absent manifest error. If such appraiser’s valuation differs by less than 5% from the Corporation’s proposed valuation, the fees and expenses of such appraiser shall be borne by the dissenting Holder(s) pro rata in accordance with their respective shares of Series A Preferred Stock, and if such appraiser’s valuation differs by more than 5% from the Corporation’s proposed valuation, the fees and expenses of such appraiser shall be borne by the Corporation.
(ii) No adjustment pursuant to this Section 9 shall be made if such adjustment would result in an increase of the Conversion Price, then in effect.
(c) No adjustment in the Conversion Price shall be made as the result of the issuance or deemed issuance of Additional Shares of Common Stock (i) in an Exempt Issuance, or (ii) if the Corporation receives written notice from the Holders of a majority of the then-outstanding shares of Series A Convertible Series A Preferred Stock agreeing that no such adjustment shall be made as the result of the issuance or deemed issuance of such Additional Shares of Common Stock.
Any adjustment pursuant to this Section 9 shall become effective immediately after the effective date of such subdivision or combination. If any event requiring an adjustment under this Section 9 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.
(d) Rights Upon Fundamental Transactions. The Company shall not enter into or be party to a Fundamental Transaction unless: (i) the Successor Entity assumes in writing all of the obligations of the Company under this Certificate of Designations and the other Transaction Documents in accordance with the provisions of this Section 9 pursuant to written agreements in form and substance reasonably satisfactory to the Required Holders and approved by the Required Holders prior to such Fundamental Transaction, including agreements to deliver to each holder of Series A Preferred Stock in exchange for such Series A Preferred Stock a security of the Successor Entity evidenced by a written instrument substantially similar in form and substance to this Certificate of Designations, including, without limitation, having a stated value and dividend rate equal to the stated value and dividend rate of the Series A Preferred Stock held by the Holders and having similar ranking to the Series A Preferred Stock, and reasonably satisfactory to the Required Holders. 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 Certificate of Designations 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 Certificate of Designations and the other Transaction Documents with the same effect as if such Successor Entity had been named as the Company herein and therein. In addition to the foregoing, upon consummation of a Fundamental Transaction, the Successor Entity shall deliver to each Holder confirmation that there shall be issued upon conversion of the Series A Preferred Stock 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 Section 5, which shall continue to be receivable thereafter)) issuable upon the conversion of the Series A Preferred Stock prior to such Fundamental Transaction, such shares of publicly traded common stock (or their equivalent) of the Successor Entity (including its Parent Entity) that each Holder would have been entitled to receive upon the happening of such Fundamental Transaction had all the Series A Preferred Stock held by each Holder been converted immediately prior to such Fundamental Transaction (without regard to any limitations on the conversion of the Series A Preferred Stock contained in this Certificate of Designations), as adjusted in accordance with the provisions of this Certificate of Designations. The provisions of this Section 9 shall apply similarly and equally to successive Fundamental Transactions and shall be applied without regard to any limitations on the conversion of the Series A Preferred Stock. Notwithstanding anything to the contrary herein or in the Transaction Documents, the foregoing shall not apply to any Exempt Issuance as defined in the Exchange Agreement.
(e) For so long as Series A Preferred Stock are outstanding, the Company will not amend the terms of any securities or Common Stock Equivalents or of any agreement outstanding or in effect as of the date of this Certificate of Designations pursuant to which same were or may be acquired without the consent of the Holder, if the result of such amendment would be at an effective price per share of Common Stock less than the Conversion Price in effect at the time of such amendment. The restrictions and limitations in this Section 9 are in addition to any other rights of the Holder. If, at any time while the Series A Preferred Stock are outstanding, Company or any Subsidiary, as applicable, sells or grants any Option to purchase or sells or grants any right to reprice, or otherwise disposes of or issues (or announces any sale, grant or any Option to purchase or other disposition), any Common Stock or Common Stock Equivalents entitling any Person to acquire shares of Common Stock at an effective price per share that is lower than the then Conversion Price in effect (such lower price, the “Base Conversion Price” and such issuances, collectively, a “Dilutive Issuance”) (if the holder of the Common Stock or Common Stock Equivalents so issued shall at any time, whether by operation of purchase price adjustments, reset provisions, floating conversion, exercise or exchange prices or otherwise, or due to warrants, options or rights per share which are issued in connection with such issuance, be entitled to receive shares of Common Stock at an effective price per share that is lower than the Conversion Price, such issuance shall be deemed to have occurred for less than the Conversion Price on such date of the Dilutive Issuance), then the Conversion Price shall be reduced to equal the Base Conversion Price. Such adjustment shall be made whenever such Common Stock or
Common Stock Equivalents are issued. The repricing of any existing convertible note shall also be a Dilutive Issuance. Notwithstanding the foregoing, no adjustment will be made under this Section 9 in respect to any currently outstanding warrants issued by the Company that are exercised pursuant to the terms of such warrant in effect as of the issue date of the Series A Preferred Stock. For purposes of clarification, whether or not Company provides a notice of a Dilutive Issuance pursuant to this Section 9, upon the occurrence of any Dilutive Issuance, the Holder is entitled to receive a number of shares of Common Stock upon conversion based upon the Base Conversion Price on or after the date of such Dilutive Issuance, regardless of whether the Holder accurately refers to the Base Conversion Price in the Notice of Conversion. “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. For purposes of determining the total consideration for a convertible instrument (including a right to purchase equity of the Company) issued, subject to an original issue or similar discount or which principal amount is directly or indirectly increased after issuance, the consideration will be deemed to be the actual cash amount received by the Company in consideration of the original issuance of such convertible instrument. Notwithstanding anything to the contrary herein or in the Transaction Documents, the foregoing shall not apply to any Exempt Issuance as defined in the Exchange Agreement.
10. Authorized Shares.
(a) Reservation. The Company shall initially reserve out of its authorized and unissued Common Stock a number of shares of Common Stock equal to 150% of the Conversion Rate) with respect to the conversion amount of each Preferred Share as of the Initial Issuance Date (assuming for purposes hereof, that all the Series A Preferred Stock issuable pursuant to the Exchange Agreement have been issued, such Series A Preferred Stock are convertible at the conversion price and without taking into account any limitations on the conversion of such Series A Preferred Stock set forth in herein). So long as any of the Series A Preferred Stock are outstanding, the Company shall take all action necessary to reserve and keep available out of its authorized and unissued shares of Common Stock, solely for the purpose of effecting the conversion of the Series A Preferred Stock, as of any given date, 100% of the number of shares of Common Stock as shall from time to time be necessary to effect the conversion of all of the Series A Preferred Stock issued or issuable pursuant to the Exchange Agreement, assuming for purposes hereof, that all the Series A Preferred Stock issuable pursuant to the Exchange Agreement have been issued and without taking into account any limitations on the issuance of securities set forth herein), provided that at no time shall the number of shares of Common Stock so available be less than the number of shares required to be reserved by the previous sentence (without regard to any limitations on conversions contained in this Certificate of Designations) (the “Required Amount”). The initial number of shares of Common Stock reserved for conversions of the Series A Preferred Stock and each increase in the number of shares so reserved shall be allocated pro rata among the Holders based on the number of Series A Preferred Stock held by each Holder on the Initial Issuance Date or increase in the number of reserved shares (as the case may be) (the “Authorized Share Allocation”). In the event a Holder shall sell or otherwise transfer any of such Holder’s Series A Preferred Stock, 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 Series A Preferred Stock shall be allocated to the remaining Holders of Series A Preferred Stock, pro rata based on the number of Series A Preferred Stock then held by such Holders.
(b) Insufficient Authorized Shares. If, notwithstanding Section 10(a) and not in limitation thereof, at any time while any of the Series A Preferred Stock remain outstanding the Company does not have a sufficient number of authorized and unissued shares of Common Stock to satisfy its obligation to have available for issuance upon conversion of the Series A Preferred Stock at least a number of shares of Common Stock and Warrant Shares equal to the Required Amount (an “Authorized Share Failure”), then
the Company shall immediately take all reasonable action necessary to increase the Company’s authorized shares of Common Stock to an amount sufficient to allow the Company to reserve and have available the Required Amount for all of the Series A Preferred Stock 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 sixty (60) days after the occurrence of such Authorized Share Failure, the Company shall hold a meeting of its stockholders for the approval of an increase in the number of authorized shares of Common Stock. In connection with such meeting, the Company shall provide each stockholder with a proxy statement to the extent required and shall use its best efforts to solicit its stockholders’ approval of such increase in authorized shares of Common Stock and to cause its Board to recommend to the stockholders of the Company that they approve such proposal. Nothing contained in this Section 10 shall limit any obligations of the Company under any provision of the Exchange Agreement.
11. Voting Rights. Holders of the Series A Preferred Stock shall have no voting rights, except as required by law (including without limitation, the NRS) and as expressly provided in this Certificate of Designations. Subject to Section 11, to the extent that under the NRS holders of the Series A Preferred Stock are entitled to vote on a matter with holders of shares of Common Stock, voting together as one class, each Preferred Share shall entitle the holder thereof to cast that number of votes per share as is equal to the number of shares of Common Stock into which it is then convertible (subject to the ownership limitations specified in Section 7 hereof) using the record date for determining the stockholders of the Company eligible to vote on such matters as the date as of which the Conversion Price is calculated. Holders of the Series A Preferred Stock shall be entitled to written notice of all stockholder meetings or written consents (and copies of proxy materials and other information sent to stockholders) with respect to which they would be entitled by vote, which notice would be provided pursuant to the Company’s bylaws and the NRS.
12. Liquidation, Dissolution, Winding-Up. In the event of a Liquidation Event, the Holders shall be entitled to receive in cash out of the assets of the Company, whether from capital or from earnings available for distribution to its stockholders (the “Liquidation Funds”), before any amount shall be paid to the holders of any of shares of junior stock, an amount per Preferred Share equal to the amount per share such Holder would receive if such Holder converted such Series A Preferred Stock into Common Stock immediately prior to the date of such payment, provided that if the Liquidation Funds are insufficient to pay the full amount due to the Holders and holders of shares of parity stock, then each Holder and each holder of parity stock shall receive a percentage of the Liquidation Funds equal to the full amount of Liquidation Funds payable to such Holder and such holder of parity stock as a liquidation preference, in accordance with their respective certificate of designations (or equivalent), as a percentage of the full amount of Liquidation Funds payable to all holders of Series A Preferred Stock and all holders of shares of parity stock. To the extent necessary, the Company shall cause such actions to be taken by each of its Subsidiaries so as to enable, to the maximum extent permitted by law, the proceeds of a Liquidation Event to be distributed to the Holders in accordance with this Section 12. All the preferential amounts to be paid to the Holders under this Section 12 shall be paid or set apart for payment before the payment or setting apart for payment of any amount for, or the distribution of any Liquidation Funds of the Company to the holders of shares of junior stock in connection with a Liquidation Event as to which this Section 12 applies.
13. Vote to Change the Terms of or Issue Series A Preferred Stock. In addition to any other rights provided by law, except where the vote or written consent of the holders of a greater number of shares is required by law or by another provision of the Certificate of Incorporation, without first obtaining the affirmative vote at a meeting duly called for such purpose or the written consent without a meeting of the Required Holders, voting together as a single class, the Company shall not: (a) amend or repeal any provision of, or add any provision to, its Certificate of Incorporation or bylaws, or file any certificate of designations or certificate of amendment, if such action would adversely alter or change in any respect the preferences, rights, privileges or powers, or restrictions provided for the benefit, of the Series A Preferred Stock, regardless of whether any such action shall be by means of amendment to the Certificate of
Incorporation or by merger, consolidation or otherwise; or (b) without limiting any provisions of Section 12, whether or not prohibited by the terms of the Series A Preferred Stock, circumvent a right of the Series A Preferred Stock.
14. Lost or Stolen Certificates. Upon receipt by the Company of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of any certificates representing Series A Preferred Stock (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 an indemnification undertaking by the applicable Holder to the Company in customary and reasonable form and, in the case of mutilation, upon surrender and cancellation of the certificate(s), the Company shall execute and deliver new certificate(s) of like tenor and date.
15. Remedies, Characterizations, Other Obligations, Breaches and Injunctive Relief. The remedies provided in this Certificate of Designations shall be cumulative and in addition to all other remedies available under this Certificate of Designations and any of the other Transaction Documents, at law or in equity (including a decree of specific performance and/or other injunctive relief), and no remedy contained herein shall be deemed a waiver of compliance with the provisions giving rise to such remedy. Nothing herein shall limit any Holder’s right to pursue actual and consequential damages for any failure by the Company to comply with the terms of this Certificate of Designations. The Company covenants to each 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 a 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 Holders 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, each Holder shall be entitled, in addition to all other available remedies, to an injunction restraining any such breach or any such threatened breach, without the necessity of showing economic loss and without any bond or other security being required, to the extent permitted by applicable law. The Company shall provide all information and documentation to a Holder that is requested by such Holder to enable such Holder to confirm the Company’s compliance with the terms and conditions of this Certificate of Designations.
16. Non-circumvention. The Company hereby covenants and agrees that the Company will not, by amendment of its Certificate of Incorporation, bylaws 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 Certificate of Designations, and will at all times in good faith carry out all the provisions of this Certificate of Designations and take all action as may be required to protect the rights of the Holders. Without limiting the generality of the foregoing or any other provision of this Certificate of Designations, the Company (i) shall not increase the par value of any shares of Common Stock receivable upon the conversion of any Series A Preferred Stock above the Conversion Price then in effect, (ii) shall take all such actions as may be necessary or appropriate in order that the Company may validly and legally issue fully paid and non-assessable shares of Common Stock upon the conversion of Series A Preferred Stock and (iii) shall, so long as any Series A Preferred Stock are outstanding, take all action necessary to reserve and keep available out of its authorized and unissued shares of Common Stock, solely for the purpose of effecting the conversion of the Series A Preferred Stock, the maximum number of shares of Common Stock as shall from time to time be necessary to effect the conversion of the Series A Preferred Stock then outstanding (without regard to any limitations on conversion contained herein).
17. Failure or Indulgence Not Waiver. No failure or delay on the part of a 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. This Certificate of Designations shall be deemed to be jointly drafted by the Company and all Holders and shall not be construed against any Person as the drafter hereof.
18. Notices. All notices, demands, requests, consents, approvals, and other communications required or permitted hereunder shall be in writing and, unless otherwise specified herein, shall be (i) personally served, (ii) deposited in the mail, registered or certified, return receipt requested, postage prepaid, (iii) delivered by reputable air courier service with charges prepaid, or (iv) transmitted by hand delivery, telegram, or facsimile, addressed as set forth below or to such other address as such party shall have specified most recently by written notice. Any notice or other communication required or permitted to be given hereunder shall be deemed effective (a) upon hand delivery or delivery by facsimile, with accurate confirmation generated by the transmitting facsimile machine, at the address or number designated below (if delivered on a Trading Day during normal business hours where such notice is to be received), or the first Trading Day following such delivery (if delivered other than on a Trading Day during normal business hours w here such notice is to be received) or (b) on the second Trading Day following the date of mailing by express courier service, fully prepaid, addressed to such address, or upon actual receipt of such mailing, whichever shall first occur.
The addresses for such communications shall be:
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(i) if to the Company, to: |
Mitesco, Inc., , Suite , ________, FL ____ Attn: Email:
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with a copy by fax or email only to |
Joel D. Mayersohn, Esq.
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and (ii) if to the Purchasers to: |
Addresses and fax numbers indicated on signature pages to Exchange Agreement, with an additional copy by fax only to:
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with an additional copy by fax only to: |
19. Stockholder Matters; Amendment.
(a) Stockholder Matters. Any stockholder action, approval or consent required, desired or otherwise sought by the Company pursuant to the NRS, the Certificate of Incorporation, this Certificate of Designations or otherwise with respect to the issuance of Series A Preferred Stock may be effected by written consent of the Company’s stockholders or at a duly called meeting of the Company’s stockholders,
all in accordance with the applicable rules and regulations of the NRS. This provision is intended to comply with the applicable Sections of the NRS permitting stockholder action, approval and consent affected by written consent in lieu of a meeting.
(b) Amendment. This Certificate of Designations or any provision hereof may be amended by obtaining the affirmative vote at a meeting duly called for such purpose, or written consent without a meeting in accordance with the NRS, of the Required Holders, voting separate as a single class, and with such other stockholder approval, if any, as may then be required pursuant to the NRS and the Certificate of Incorporation.
20. Certain Defined Terms. For purposes of this Certificate of Designations, the following terms shall have the following meanings:
(a) “1934 Act” means the Securities Exchange Act of 1934, as amended.
(b) “Bloomberg” means Bloomberg, L.P.
(c) “Business Day” means any day other than Saturday, Sunday or other day on which commercial banks in New York, New York are authorized or required by law to remain closed.
(d) “Closing Sale Price” means, for any security as of any date, the 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 trade price (as the case may be) then the last trade price of such security prior to 4:00:00 p.m., New York, 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 trade price 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 trade price of such security in the over-the-counter market on the electronic bulletin board for such security as reported by Bloomberg, or, if no last trade price 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 OTC Pink Market operated by OTC Markets Group Inc. If the Closing Sale Price cannot be calculated for a security on a particular date on any of the foregoing bases, the Closing Sale Price of such security on such date shall be the fair market value as mutually determined by the Company and the applicable Holder. If the Company and such 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 the Purchase Agreement. All such determinations shall be appropriately adjusted for any stock dividend, stock split, stock combination or other similar transaction during such period.
(e) “Common Stock” means (i) the Company’s shares of common stock, $0.0001 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.
(f) “Eligible Market” means The New York Stock Exchange, the NYSE MKT, the Nasdaq Global Select Market, the Nasdaq Global Market or the Principal Market.
(g) “Equity Conditions” means, during the period in question, (i) the Common Stock is trading on a Eligible Market and all of the shares of Common Stock issued or issuable are listed or quoted for trading on such Eligible Market (and the Corporation believes, in good faith, that trading of the Common Stock on an Eligible Market will continue uninterrupted for the foreseeable future) pursuant to an effective registration statement under the Securities Act of 1933, as amended, (ii) there is a sufficient number of authorized, but unissued and otherwise unreserved, shares of Common Stock for the issuance of all of the
shares of Common Stock then issuable pursuant to the Certificate of Designation, (iii) the applicable Holder is not in possession of any information provided by the Corporation, any of its Subsidiaries, or any of their officers, directors, employees, agents or affiliates, that constitutes, or may constitute, material non-public information, (iv) the Corporation shall have met all of its obligations under this Certificate of Designation, the Exchange Agreement and any other agreement entered into with the applicable Holder, and (v) the Company is current in its filings with the Securities and Exchange Commission.
(h) “Exempt Issuance” means (i) any conventional bank loans that are not convertible into common stock or common stock equivalents and do not involve any issuance of any common stock or common stock equivalents or other security of the Company in connection therewith; (ii) common stock or options issued to employees, officers or directors of the Company pursuant to the Company’s equity incentive plans or pursuant to the compensation agreements authorized by the Board of Directors; (iii) securities issued upon the exercise or exchange of or conversion of any Securities issued hereunder and/or other securities exercisable or exchangeable for or convertible into common stock issued and outstanding on the date of this Agreement, provided that such securities have not been amended since the date of this Agreement to increase the number of such securities or to decrease the exercise price, exchange price or conversion price of such securities (other than in connection with share splits or combinations) or to extend the term of such securities; and (iv) securities issued pursuant to acquisitions or strategic transactions (whether by merger, consolidation, purchase of equity, purchase of assets, reorganization or otherwise business of the Company and shall provide to the Company additional benefits , 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.
(i) “Fundamental Transaction” shall in no event include any [Exempt Issuance] as defined in the Exchange Agreement and otherwise means that (i) the Company or any of its Subsidiaries shall, directly or indirectly, in one or more related transactions, (A) consolidate or merge with or into (whether or not the Company or any of its Subsidiaries is the surviving corporation) any other Person, or (B) sell, lease, license, assign, transfer, convey or otherwise dispose of all or substantially all of its respective properties or assets to any other Person, or (C) allow any other Person to make a purchase, tender or exchange offer that is accepted by the holders of more than 50% of the outstanding shares of voting stock of the Company (not including any shares of voting stock of the Company held by the Person or Persons making or party to, or associated or affiliated with the Persons making or party to, such purchase, tender or exchange offer), or (D) consummate a stock or share purchase agreement or other business combination (including, without limitation, a reorganization, recapitalization, spin-off or scheme of arrangement) with any other Person whereby such other Person acquires more than 50% of the outstanding shares of voting stock of the Company (not including any shares of voting stock of the Company held by the other Person or other Persons making or party to, or associated or affiliated with the other Persons making or party to, such stock or share purchase agreement or other business combination), or (E) reorganize, recapitalize or reclassify the Common Stock, or (ii) any “person” or “group” (as these terms are used for purposes of Sections 13(d) and 14(d) of the 1934 Act and the rules and regulations promulgated thereunder) is or shall become the “beneficial owner” (as defined in Rule 13d-3 under the 1934 Act), directly or indirectly, of 50% of the aggregate ordinary voting power represented by issued and outstanding voting stock of the Company.
(j) “Initial Issuance Date” means the date Series A Preferred Stock is first issued pursuant to the Exchange Agreement.
(k) “Liquidation Event” means, whether in a single transaction or series of transactions, the voluntary or involuntary liquidation, dissolution or winding up of the Company or such Subsidiaries the assets of which constitute all or substantially all of the assets of the business of the Company and its Subsidiaries, taken as a whole.
(l) “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.
(m) “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.
(n) “Principal Market” means the OTC Bulletin Board, the OTCPink, OTCQB, or the OTCQX (or any successor of the foregoing).
(o) “Exchange Agreement” means that certain Exchange Agreement by and among the Company and the Purchaser with respect to the Series A Preferred Stock.
(p) “Required Holders” means holder of at least 50% of the outstanding Series A Preferred Stock.
(q) “Subsidiary” means any Person in which the Company, directly or indirectly, (i) owns a majority of the outstanding capital stock or holds a majority of 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.
(r) “Successor Entity” means the Person (or, if so elected by the Required Holders, the Parent Entity) formed by, resulting from or surviving any Fundamental Transaction or the Person (or, if so elected by the Required Holders, the Parent Entity) with which such Fundamental Transaction shall have been entered into.
(s) “Trading Day” means 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 Required Holders.
(t) “Transaction Documents” means this Certificate of Designations, the Exchange Agreement, and each of the other agreements and instruments entered into or delivered by the Company or any of the Holders in connection with the transactions contemplated thereby, all as may be amended from time to time in accordance with the terms hereof or thereof.
[Signature Page Follows]
IN WITNESS WHEREOF, the Corporation has caused this Certificate of Designations of Series A Amortizing Convertible Series A Preferred Stock of Mitesco, Inc. to be signed by its Chief Executive Officer on this 29th Day of October, 2024.
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MITESCO, INC.
/s/ Mack Leath |
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Name: Mack Leath Title: Chief Executive Officer |
EXHIBIT I
MITESCO, INC.
CONVERSION NOTICE
Reference is made to the Certificate of Designations, Preferences and Rights of the Series A Convertible Series A Amortizing Convertible Preferred Stock of Mitesco, Inc. (the “Certificate of Designations”). In accordance with and pursuant to the Certificate of Designations, the undersigned hereby elects to convert the number of shares of Series A Convertible Series A Preferred Stock, $0.01 par value per share (the “Series A Preferred Stock”), of Mitesco, Inc., a Nevada corporation (the “Company”), indicated below into shares of common stock, $0.01 value per share (the “Common Stock”), of the Company, as of the date specified below.
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Date of Conversion: |
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Number of Series A Preferred Stock to be converted: |
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Share certificate no(s). of Series A Preferred Stock to be converted: |
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Tax ID Number (If applicable): |
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Conversion Price: |
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Number of shares of Common Stock to be issued: |
Please issue the shares of Common Stock into which the Series A Preferred Stock are being converted in the following name and to the following address:
Issue to:
Address:
Telephone Number:
Facsimile Number:
Holder:
By:
Exhibit I-1
Title:
Dated:
Account Number (if electronic book entry transfer):
Transaction Code Number (if electronic book entry transfer):
Exhibit I-2
EXHIBIT II
ACKNOWLEDGEMENT
The Company hereby acknowledges this Conversion Notice and hereby directs __________ to issue the above indicated number of shares of Common Stock in accordance with the Irrevocable Transfer Agent Instructions dated __________, 20____ from the Company and acknowledged and agreed to by _____________.
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MITESCO, INC. |
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By: |
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Name: |
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Title: |
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Exhibit II-1
Exhibit 10.1
OBLIGATION EXCHANGE AGREEMENT
This Obligation Exchange Agreement (this “Agreement”) is entered into as of September 28, 2024, by and among ________________, a (“Creditor”), and Mitesco, Inc., a Nevada corporation (the “Company”).
Whereas, Company has incurred certain obligations towards the Creditor in the form of account payable (the “Obligation”);
Whereas, both parties agree that the total unaudited amounts owed to the Creditor were $_________ as of September 28, 2024;
Whereas, both parties agree that in order to settle this matter the new amount owed in full resolution of all amounts incurred shall be $_________;
Whereas both parties agree that any previously issued warrants shall be cancelled as a part of this agreement;
Whereas, the parties agree to fully resolve and settle all amounts owed as set forth herein (the “Exchange”); and,
Whereas, both parties have agreed, subject to the terms, amendments, conditions and understandings expressed in this Agreement, to enter into this Exchange.
NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties agree as follows:
1. Recitals. Each of the parties hereto acknowledges and agrees that the recitals set forth above in this Agreement are true and accurate and are hereby incorporated into and made a part of this Agreement.
2. Exchange. The parties hereby agree to an exchange of the Obligation for the issuance of ________ shares of restricted common stock of the Company, $0.01 par value per share (the “Common Stock”), at an exchange price of $4.00 per share (the “Exchange Price”).
3. Representations and Warranties of the Company. In order to induce Creditor to enter into this Agreement, Company, for itself, and for its affiliates, successors and assigns, hereby acknowledges, represents, warrants and agrees as follows:
(a) Company has full power and authority to enter into this Agreement and to incur and perform all obligations and covenants contained herein, all of which have been duly authorized by all proper and necessary action. Assuming due execution and delivery of this Agreement by the Creditor and the Company, this Agreement constitutes the valid and legally binding obligation of the Company, enforceable against the Company in accordance with its terms and conditions, 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 creditor’s rights and remedies.
(b) No consent, approval, filing or registration with or notice to any governmental authority is required as a condition to the validity of this Agreement or the performance of any of the obligations of Company hereunder.
(c) There is no fact known to Company or which should be known to Company which Company has not disclosed to Creditor on or prior to the date of this Agreement which would or could materially and adversely affect the understanding of Creditor expressed in this Agreement or any representation, warranty, or recital contained in this Agreement.
4. Representations and Covenants of the Creditor.
The Creditor represents and warrants to the Company that:
(a) The Creditor has the authority to enter into this Agreement. This Agreement has been duly and validly authorized, executed and delivered by the Creditor and shall constitute the legal, valid and binding obligations of the Creditor enforceable against the Creditor in accordance with its 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 creditor’s rights and remedies.
(b) The Creditor has no defenses, affirmative or otherwise, rights of setoff, rights of recoupment, claims, counterclaims, actions or causes of action of any kind or nature whatsoever against the Company, directly or indirectly, arising out of, based upon, or in any manner connected with [the transactions between the Creditor and the Company pursuant to its business relationship] / [the Promissory Note], whether known or unknown, which occurred, existed, was taken, permitted, or begun prior to the execution of this Agreement. To the extent any such defenses, affirmative or otherwise, rights of setoff, rights of recoupment, claims, counterclaims, actions or causes of action exist or existed, such defenses, rights, claims, counterclaims, actions and causes of action are hereby waived, discharged and released. Parties hereby acknowledge and agree that the execution of this Agreement shall not constitute an acknowledgment of or admission by either party of the existence of any claims or of liability for any matter or precedent upon which any claim or liability may be asserted.
(c) The Creditor, by reason of its business and financial experience, has the capacity to protect his, her, or its own interests in connection with the transactions contemplated by this Agreement and has had the opportunity to consult counsel or other advisors with respect thereto. Creditor acknowledges that the Exchange Price is at a significant premium to the current market price of the Common Stock. Creditor further acknowledges that the Company does not guarantee that the Exchange Price will be the fair market value of the Common Stock at the time of sale and agrees that the terms of this Agreement are the result of negotiations between the parties. Based upon Creditor’s independent analysis, Creditor has reached his own business decision to enter into this Agreement.
(d) The Creditor represents that he, she or it is not an “accredited investor” as such term is defined in Rule 501 of Regulation D promulgated under the Securities Act. The Creditor has been provided with the list of documents identified in Exhibit A of the Agreement to review and conduct diligence of the Company. Further, the Creditor has reviewed the risks involved in the sale of Common Stock set forth in Exhibit B of this Agreement. The Creditor has had the opportunity to review the documents indicated thereunder and has had the opportunity to ask questions to the Company, and to independently investigate and evaluate the value of the Common Stock and the financial condition and affairs of the Company.
(e) The Creditor acknowledges that the offer of Common Stock pursuant to this Agreement has not been reviewed or approved by the United States Securities and Exchange Commission (“SEC”) and is sold pursuant to an exemption from registration available under section 4(a)(2) of the Securities Act and/or Regulation D promulgated thereunder. The Creditor represents that the Common Stock is being acquired for his, her or its own account, for investment and not for distribution or resale to others. The Creditor agrees that he, she or it will not sell or otherwise transfer the Common Stock unless it is registered under the Securities Act or unless an exemption from such registration is available and, upon the Company’s request, the Creditor receives an opinion of counsel reasonably satisfactory to the Company confirming that an exemption from such registration is available for such sale or transfer.
(f) The Creditor understands that the shares of Common Stock have not been registered under the Securities Act by reason of a claimed exemption under the provisions of the Securities Act which depends, in part, upon his, her or its investment intention. The Company realizes that, in the view of the SEC, a purchase now with the intention to distribute would represent a purchase with an intention inconsistent with his, her or its representation to the Company, and the SEC might regard such a distribution as a deferred sale to which such exemption is not available.
(g) The Creditor acknowledges that the Common Stock will remain restricted until such time that the shares are registered for resale by the Company or an exemption becomes available. The capital markets are complex, movements in share price can be erratic, particularly for small cap securities with low trading volume. The Creditor further acknowledges that there can be no assurance that (1) an active trading market will be developed or sustained, (2) the liquidity of such market will increase, (3) the undersigned will be able sell his, her, or its shares of Common Stock, or (4) the price that the undersigned may obtain for his, her, or its Common Stock will be greater than the Exchange Price. Further, the Creditor understands that there is no assurance that the Company will effect a financing event or any public listing of its securities.
(h) The Creditor acknowledges and consents to the placement of one or more legends on any certificate or other document evidencing his, her or its shares of Common Stock issuable, stating that they have not been registered under the Securities Act, substantially in the form as set forth below and setting forth or referring to the restrictions on the transferability and sale thereof:
THESE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY.
(i) The Creditor agrees to indemnify and hold harmless the Company and its officers, directors, employees and affiliates and each other person, if any, who controls any of the foregoing, against any loss, liability, claim, damage and expense whatsoever (including, but not limited to, any and all expenses whatsoever reasonably incurred in investigating, preparing or defending against any litigation commenced or threatened or any claim whatsoever) arising out of or based upon any false representation or warranty by the Creditor, or the Creditor’s breach of, or failure to comply with, any covenant or agreement made by the Creditor herein or in any other document furnished by the Creditor to the Company or its respective officers, directors, employees or affiliates or each other person, if any, who controls any of the foregoing in connection with this transaction.
(j) The Company agrees to indemnify and hold harmless the Creditor and its heirs, executors, assigns, officers, directors, employees and affiliates and each other person, if any, who controls any of the foregoing, against any loss, liability, claim, damage and expense whatsoever (including, but not limited to, any and all expenses whatsoever reasonably incurred in investigating, preparing or defending against any litigation commenced or threatened or any claim whatsoever) arising out of or based upon any false representation or warranty by the Company, or the Company’s breach of, or failure to comply with, any covenant or agreement made by the Company herein.
5. Registration Rights. The Creditor shall be afforded the following registration rights with respect to the shares of Common Stock:
(a) Within one hundred and twenty (120) days of the execution of this agreement, [provided the Company has secured such agreements from substantially all of its Creditors], the Company will use its commercially reasonable efforts to file a Registration Statement on Form S-3 (or Form S-1 if Form S-3 is unavailable to be used) with the SEC (the “Resale Registration”) to register the resale by the Creditors of all shares of Common Stock (collectively the “Registrable Securities”). The Company shall use its commercially reasonable efforts to cause the Resale Registration to be declared effective as promptly as practicable following the filing of the Resale Registration.
(b) The Company will use its commercially reasonable efforts to keep the Resale Registration continuously effective (including by filing a post-effective amendment to the Resale Registration or a new Registration Statement if the Resale Registration expires) for a period of three (3) years after the date of effectiveness of the Resale Registration or for such shorter period as such securities no longer constitute Registrable Securities hereunder; provided, however, that the Company shall not be obligated to effect any such registration, qualification or compliance pursuant to this Section 5, or keep such registration effective pursuant to the terms hereunder, in any particular jurisdiction in which the Company would be required to qualify to do business as a foreign corporation or as a dealer in securities under the securities laws of such jurisdiction or to execute a general consent to service of process in effecting such registration, qualification or compliance, in each case where it has not already done so; and provided further that the Company will not be in breach of this Section 5 if the Company engages in a transaction approved by the Board of the Company and (if applicable) the stockholders of the Company, the result of which is that the Company’s reporting obligations under the Exchange Act are terminated.
(c) Notwithstanding any other provision of this Section 5, if the SEC sets forth a limitation on the number of shares of Common Stock permitted to be registered on the Resale Registration as a secondary offering, the Company shall register the maximum number of Registrable Securities that it is permitted to register, and will, following effectiveness of the Resale Registration, file a new registration statement registering the resale of any remaining unregistered portion of the Registrable Securities as soon as is practicable in light of the requirements of applicable laws, rules, regulations and guidance of the SEC.
6. Certain Acknowledgments. Each of the parties acknowledges and agrees that no property or cash consideration of any kind whatsoever has been or shall be given by the Company to the Creditor in connection with the Exchange. The parties intend that this Agreement will qualify for tacking of the holding period of the restricted common stock pursuant to Rule 144(d) under the Securities Act of 1933, and each party agrees not to take a position to the contrary.
7. Exchange. The Creditor shall cancel all Obligations of the Company, and the Company will in turn issue the restricted Common Stock to the Creditor pursuant to this Agreement. If there is a conflict between the terms of any prior agreement and the terms of this Agreement, this Agreement shall control. No forbearance or waiver may be implied by this Agreement. Except as expressly set forth herein, the execution, delivery, and performance of this Agreement shall not operate as a waiver of, or as an amendment to, any right, power, or remedy of Creditor under the Obligation, as in effect prior to the date hereof. For the avoidance of doubt, this Agreement shall be subject to the governing law, venue, and exclusive jurisdiction provisions, as set forth in the Obligation.
8. No Reliance. Creditor acknowledges and agrees that neither Company nor any of its officers, directors, members, managers, equity holders, representatives or agents has made any representations or warranties to the Creditor or any of its agents, representatives, officers, directors, or employees except as expressly set forth in this Agreement and, in making its decision to enter into the transactions contemplated by this Agreement, Creditor is not relying on any representation, warranty, covenant or promise of Company or its officers, directors, members, managers, equity holders, agents or representatives other than as set forth in this Agreement.
9. Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be deemed an original, but all of which together shall constitute one instrument. The parties hereto confirm that any electronic copy of another party’s executed counterpart of this Agreement (or such party’s signature page thereof) will be deemed to be an executed original thereof.
10. 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 the 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.
[Remainder of page intentionally left blank; Signature page follows]
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the date set forth above.
CREDITOR:
By:
Name:
Title:
COMPANY:
MITESCO, INC.
By:
Title: Chief Executive Officer
Exhibit A
Investment Documents
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Company’s annual report on Form 10-K for the fiscal years ended December 31, 2023 and December 31, 2022; HERE: https://www.sec.gov/ix?doc=/Archives/edgar/data/0000802257/000118518524000401/mitesco20231231_10k.htm |
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2. |
Quarterly reports on Form 10-Q; HERE: https://www.sec.gov/ix?doc=/Archives/edgar/data/0000802257/000118518524000820/mitesco20240630_10q.htm |
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3. |
Form 8-Ks filed with the SEC on August 27, 2024 and September 10, 2024, including the associated exhibits; HERE: https://www.sec.gov/ix?doc=/Archives/edgar/data/0000802257/000118518524000853/mitesco20240827_8k.htm AND https://www.sec.gov/ix?doc=/Archives/edgar/data/0000802257/000118518524000876/mitesco20240910_8k.htm |
ALL SEC FILINGS FOR MITESCO, INC ARE HERE:
https://www.sec.gov/edgar/browse/?CIK=802257&owner=exclude
Exhibit B
Risk Factors
We are in the initial stages of our present business plan and have a limited historical performance for you to base an investment decision upon, and we may never become profitable.
We have a new business plan and no operating history upon which an evaluation of our prospects and future performance can be made. Our planned operations are subject to all business risks associated with new companies. The likelihood of our success must be considered considering the problems, expenses, difficulties, complications, and delays frequently encountered in connection with the establishment of a new business, operation in a competitive industry. There is a possibility that we could sustain losses in the future. There can be no assurances that we will ever operate profitably. If we are not successful in implementing our strategy as anticipated, continue to incur losses, and fail to raise additional capital, we may need to consider alternative options and in an extreme scenario, shut down operations.
You will forfeit any right to receive cash entirely and may lose all your investment in the Preferred Stock.
By entering into the Obligation Exchange Agreement, you will forfeit your ability to receive any cash and will have no claims for recovery under the [contract] / [promissory note] with the Company. Furthermore, investment in stock is inherently risky and if the Company’s business is not viable or the stock does not perform as expected, or at all, you may lose all your investment.
The Exchange Price may not accurately reflect the value of your investment.
The Exchange Price of your Common Stock is derived, in substantial part, from a good faith estimate of the future value of Common Stock of the Company, which may never appreciate at our predicted levels, or worse, may plummet compared to the current stock price. The Exchange Price may not accurately reflect the value of our Common Stock and may not be realized upon any subsequent disposition of the same.
Liquidity risks associated with our Common Stock.
Common Stock will remain restricted until such time that the shares are registered for resale by the Company or an exemption becomes available. The capital markets are complex, movements in share price can be erratic, particularly for small cap securities with low trading volume. There can be no assurance that (1) an active trading market will be developed or sustained, (2) the liquidity of such market will increase, (3) the Creditor will be able sell his, her, or its shares of Preferred Stock, or (4) the price that the Creditor may obtain for his, her, or its Common Stock (upon conversion or redemption into Common Stock) will be equal to our greater than the Exchange Price. Further, there is no assurance that the Company will effect a financing event or any public listing of its securities.
Investment in Common Stock is risky.
Common Stock involves a high degree of risk in that (i) it does not have a market and is thinly traded; (ii) the Exchange Price defined in the Certificate of Designation may not be the fair market value of the Company; (iii) an investment in the Company is highly speculative and only meant for investors who can afford the loss of their entire investment; (iv) an investor may not be able to liquidate his, her or its investment in the Common Stock until they are registered for resale or an exemption from registration available; (v) an investor could sustain the loss of his, her or its entire investment; and (vi) the Company is and will be subject to numerous other risks and uncertainties, including without limitation, significant and material risks relating to the Company’s business and operations, and the industries, markets and geographic regions in which the Company competes, as well as risks associated with the Common Stock, all as more fully set forth in the annual report on Form 10-K filed with the SEC.
We will need additional capital to implement and fund our operations.
The extent of our capital needs will depend on numerous factors, including (i) the availability and terms of any financing available to us; (ii) the opening of new data centers and acquisition of new resources, including human capital; (iii) the level of our investment in research and development; (iv) the amount of our capital expenditures; and (v) regulations applicable to our operations. We cannot assure you that we will be able to obtain capital in the future to meet our needs. Even if we do find a source of additional capital, we may not be able to negotiate terms and conditions for receiving the additional capital that are acceptable to us. Any future capital investments could dilute or otherwise materially and adversely affect the holdings or rights of our existing stockholders. We cannot give you any assurance that any additional financing will be available to us, or if available, will be on terms favorable to us.
There are several market risks that remain outside of our control.
The market values of securities or other assets will fluctuate, sometimes sharply and unpredictably, due to changes in general market conditions, overall economic trends or events, governmental actions or intervention, actions taken by the U.S. Federal Reserve or foreign central banks, market disruptions caused by trade disputes or other factors, political developments, investor sentiment, and other factors that may or may not be related to the issuer of the security or other asset. Economies and financial markets throughout the world are increasingly interconnected. Economic, financial or political events, trading and tariff arrangements, public health events, terrorism, natural disasters and other circumstances in one country or region could have profound impacts on global economies or markets.
Exhibit 10.2
SHARE EXCHANGE AGREEMENT
This Share Exchange Agreement (this “Agreement”) is entered into as of _, 2024, by and among (“Shareholder”) on the one hand and Mitesco, Inc., a Nevada corporation (the “Company”) on the other.
Whereas, in order to simplify the capitalization structure of the Company, the Board of Directors (the “Board”) deem it advisable and in the best interest of the Company that the [Series D / Series F Preferred Stock] be exchanged for Series A Preferred Stock, par value $0.01 per share (“Preferred Stock” or “Exchange Shares”);
Whereas, the Shareholder currently owns [●] shares of [Series D / Series F] Preferred Stock of the Company (the “Existing Shares”);
Whereas, the Board has determined that the current fair market value of the Existing Shares is $1,000.00 per share (“Existing Share Price”);
Whereas, the Board has determined that the current stated value of the Preferred Stock is $25.00 per share (“Exchange Price”);
Whereas, based on the ratio between the Existing Share Price and Exchange Price 40:1, the Shareholder is entitled to receive [●] Exchange Shares (the “Exchange”);
Whereas, the parties agree that as a part of this agreement all previously issued warrants shall be cancelled;
Whereas, both parties have agreed, subject to the terms, amendments, conditions and understandings expressed in this Agreement, to enter into this Exchange.
NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties agree as follows:
1. Recitals. Each of the parties hereto acknowledges and agrees that the recitals set forth above in this Agreement are true and accurate and are hereby incorporated into and made a part of this Agreement.
2. Exchange. The parties hereby agree to an exchange of the Existing Shares for the issuance of [●] Exchange Shares. The Preferred Stock may either be (i) converted into Common Stock at the Conversion Price (defined in the Certificate of Designation), or (ii) redeemed for cash or Common Stock, each pursuant to the terms of the “Certificate of Designation, Preferences and Rights of the Series “A” Amortizing Convertible Preferred Stock” (the “Certificate of Designation”), a copy of which is provided to the Shareholder as Exhibit A.
3. Representations and Warranties of the Company. In order to induce Shareholder to enter into this Agreement, Company, for itself, and for its affiliates, successors and assigns, hereby acknowledges, represents, warrants and agrees as follows:
(a) Company has full power and authority to enter into this Agreement and to incur and perform all obligations and covenants contained herein, all of which have been duly authorized by all proper and necessary action. Assuming due execution and delivery of this Agreement by the Shareholder and the Company, this Agreement constitutes the valid and legally binding obligation of the Company, enforceable against the Company in accordance with its terms and conditions, 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 creditor’s rights and remedies.
(b) No consent, approval, filing or registration with or notice to any governmental authority is required as a condition to the validity of this Agreement or the performance of any of the obligations of Company hereunder.
(c) There is no fact known to Company or which should be known to Company which Company has not disclosed to Shareholder on or prior to the date of this Agreement which would or could materially and adversely affect the understanding of Shareholder expressed in this Agreement or any representation, warranty, or recital contained in this Agreement.
4. Representations and Covenants of the Shareholder.
The Shareholder represents and warrants to the Company that:
(a) The Shareholder has the authority to enter into this Agreement. This Agreement has been duly and validly authorized, executed and delivered by the Shareholder and shall constitute the legal, valid and binding obligations of the Shareholder enforceable against the Shareholder in accordance with its 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 creditor’s rights and remedies.
(b) The Shareholder has no defenses, affirmative or otherwise, rights of setoff, rights of recoupment, claims, counterclaims, actions or causes of action of any kind or nature whatsoever against the Company, directly or indirectly, arising out of, based upon, or in any manner connected with the Existing Shares, whether known or unknown, which occurred, existed, was taken, permitted, or begun prior to the execution of this Agreement. To the extent any such defenses, affirmative or otherwise, rights of setoff, rights of recoupment, claims, counterclaims, actions or causes of action exist or existed, such defenses, rights, claims, counterclaims, actions and causes of action are hereby waived, discharged and released. Parties hereby acknowledge and agree that the execution of this Agreement shall not constitute an acknowledgment of or admission by either party of the existence of any claims or of liability for any matter or precedent upon which any claim or liability may be asserted.
(c) The Shareholder, by reason of its business and financial experience, has the capacity to protect his, her, or its own interests in connection with the transactions contemplated by this Agreement and has had the opportunity to consult counsel or other advisors with respect thereto. [Shareholder acknowledges that the Conversion Price (defined in the Certificate of Designation) is at a significant premium to the current market price of the Common Stock. Shareholder further acknowledges that the Company does not guarantee that the Conversion Price will be equal or greater than the then fair market value of the Common Stock and agrees that the terms of this Agreement are the result of negotiations between the parties]. The Shareholder has had the opportunity to review the risks involved in the sale of Preferred Stock as set forth in Exhibit B of this Agreement, the Company’s filings with the United States Securities and Exchange Commission (“SEC”), including its annual report on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K, among others, on EDGAR database (available publicly on www.sec.gov), has had the opportunity to ask questions to the Company, and to independently investigate and evaluate the value of the Preferred Stock and the financial condition and affairs of the Company. Based upon Shareholder’s independent analysis, Shareholder has reached his own business decision to enter into this Agreement.
(d) The Shareholder represents that he, she or it is an “accredited investor” as such term is defined in Rule 501 of Regulation D promulgated under the Securities Act, and that he, she or it is able to bear the economic risk of an investment in the Company. The Shareholder has adequate means of providing for such Shareholder’s current financial needs and foreseeable contingencies and has no need for liquidity of his, her, or its investment in the Preferred Stock for an indefinite period of time.
(e) The Shareholder acknowledges that the offer of Preferred Stock pursuant to this Agreement has not been reviewed or approved by the SEC and is sold pursuant to an exemption from registration available under section 4(a)(2) of the Securities Act and/or Regulation D promulgated thereunder. The Shareholder represents that the Preferred Stock is being acquired for his, her or its own account, for investment and not for distribution or resale to others. The Shareholder agrees that he, she or it will not sell or otherwise transfer the Preferred Stock unless it is registered under the Securities Act or unless an exemption from such registration is available and, upon the Company’s request, the Shareholder receives an opinion of counsel reasonably satisfactory to the Company confirming that an exemption from such registration is available for such sale or transfer.
(f) The Shareholder understands that the shares of Preferred Stock have not been registered under the Securities Act by reason of a claimed exemption under the provisions of the Securities Act which depends, in part, upon his, her or its investment intention. The Company realizes that, in the view of the SEC, a purchase now with the intention to distribute would represent a purchase with an intention inconsistent with his, her or its representation to the Company, and the SEC might regard such a distribution as a deferred sale to which such exemption is not available.
(g) The Shareholder acknowledges and consents to the placement of one or more legends on any certificate or other document evidencing his, her or its shares of Preferred Stock issuable, stating that they have not been registered under the Securities Act, substantially in the form as set forth below and setting forth or referring to the restrictions on the transferability and sale thereof:
THESE SECURITIES REPRESENTED HEREBY OR THE SECURITIES ISSUABLE UPON THE EXERCISE HEREOF HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY.
(h) The Shareholder agrees to indemnify and hold harmless the Company and its officers, directors, employees and affiliates and each other person, if any, who controls any of the foregoing, against any loss, liability, claim, damage and expense whatsoever (including, but not limited to, any and all expenses whatsoever reasonably incurred in investigating, preparing or defending against any litigation commenced or threatened or any claim whatsoever) arising out of or based upon any false representation or warranty by the Shareholder, or the Shareholder’s breach of, or failure to comply with, any covenant or agreement made by the Shareholder herein or in any other document furnished by the Shareholder to the Company or its respective officers, directors, employees or affiliates or each other person, if any, who controls any of the foregoing in connection with this transaction.
(i) The Company agrees to indemnify and hold harmless the Shareholder and its heirs, executors, assigns, officers, directors, employees and affiliates and each other person, if any, who controls any of the foregoing, against any loss, liability, claim, damage and expense whatsoever (including, but not limited to, any and all expenses whatsoever reasonably incurred in investigating, preparing or defending against any litigation commenced or threatened or any claim whatsoever) arising out of or based upon any false representation or warranty by the Company, or the Company’s breach of, or failure to comply with, any covenant or agreement made by the Company herein.
5. Registration Rights. The Shareholder shall be afforded the following registration rights with respect to the shares of Common Stock in the event of a conversion event under the Certificate of Designation:
(a) Within ninety (90) days of the execution of this agreement, the Company will use its commercially reasonable efforts to file a Registration Statement on Form S-3 (or Form S-1 if Form S-3 is unavailable to be used) with the SEC (the “Resale Registration”) to register the resale by the Shareholders of all shares of Common Stock issuable in connection with a Mandatory Conversion or Mandatory Redemption as those terms are defined in the Certificate of Designation (collectively the “Registrable Securities”). The Company shall use its commercially reasonable efforts to cause the Resale Registration to be declared effective as promptly as practicable upon filing of the Resale Registration.
(b) The Company will use its commercially reasonable efforts to keep the Resale Registration continuously effective (including by filing a post-effective amendment to the Resale Registration or a new Registration Statement if the Resale Registration expires) for a period of three (3) years after the date of effectiveness of the Resale Registration or for such shorter period as such securities no longer constitute Registrable Securities hereunder; provided, however, that the Company shall not be obligated to effect any such registration, qualification or compliance pursuant to this Section 5, or keep such registration effective pursuant to the terms hereunder, in any particular jurisdiction in which the Company would be required to qualify to do business as a foreign corporation or as a dealer in securities under the securities laws of such jurisdiction or to execute a general consent to service of process in effecting such registration, qualification or compliance, in each case where it has not already done so; and provided further that the Company will not be in breach of this Section 5 if the Company engages in a Fundamental Transaction (as defined in the Certificate of Designation) approved by the Board of Directors of the Company and (if applicable) the stockholders of the Company, the result of which is that the Company’s reporting obligations under the Exchange Act are terminated.
(c) Notwithstanding any other provision of this Section 5, if the SEC sets forth a limitation on the number of shares of Common Stock permitted to be registered on the Resale Registration as a secondary offering, the Company shall register the maximum number of Registrable Securities that it is permitted to register, and will, following effectiveness of the Resale Registration, file a new registration statement registering the resale of any remaining unregistered portion of the Registrable Securities as soon as is practicable in light of the requirements of applicable laws, rules, regulations and guidance of the SEC.
6. Certain Acknowledgments. Each of the parties acknowledges and agrees that no property or cash consideration of any kind whatsoever has been or shall be given by the Company to the Shareholder in connection with the Exchange. The parties intend that this Agreement will qualify for tacking of the holding period of the restricted Preferred Stock pursuant to Rule 144(d) under the Securities Act of 1933, and each party agrees not to take a position to the contrary.
7. Exchange. The Existing Shares will be cancelled by Company and the Company will in turn issue the Exchange Shares to the Shareholder pursuant to this Agreement. If there is a conflict between the terms of any prior agreement and the terms of this Agreement, this Agreement and the Certificate of Designation shall control. No forbearance or waiver may be implied by this Agreement. The interpretation and construction of this Agreement, and all matters relating hereto, will be governed by the laws of the State of Delaware applicable to contracts made and to be performed entirely within the State of Delaware without giving effect to any conflict of law provisions thereof.
8. No Reliance. Shareholder acknowledges and agrees that neither Company nor any of its officers, directors, members, managers, equity holders, representatives or agents has made any representations or warranties to the Shareholder or any of its agents, representatives, officers, directors, or employees except as expressly set forth in this Agreement and, in making its decision to enter into the transactions contemplated by this Agreement, Shareholder is not relying on any representation, warranty, covenant or promise of Company or its officers, directors, members, managers, equity holders, agents or representatives other than as set forth in this Agreement.
9. Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be deemed an original, but all of which together shall constitute one instrument. The parties hereto confirm that any electronic copy of another party’s executed counterpart of this Agreement (or such party’s signature page thereof) will be deemed to be an executed original thereof.
10. 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 the 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.
[Remainder of page intentionally left blank; Signature page follows]
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the date set forth above.
SHAREHOLDER:
By:
Name:
Title:
COMPANY:
MITESCO, INC.
By:
Name: Mack Leath
Title: Chief Executive Officer
Exhibit A
CERTIFICATE OF DESIGNATIONS, PREFERENCES AND RIGHTS OF THE
SERIES “A”AMORTIZING CONVERTIBLE PREFERRED STOCK OF
MITESCO, INC.
[Insert]
Exhibit B
Risk Factors
We are in the initial stages of our present business plan and have a limited historical performance for you to base an investment decision upon, and we may never become profitable.
We have a new business plan and no operating history upon which an evaluation of our prospects and future performance can be made. Our planned operations are subject to all business risks associated with new companies. The likelihood of our success must be considered considering the problems, expenses, difficulties, complications, and delays frequently encountered in connection with the establishment of a new business, operation in a competitive industry. There is a possibility that we could sustain losses in the future. There can be no assurances that we will ever operate profitably. If we are not successful in implementing our strategy as anticipated, continue to incur losses, and fail to raise additional capital, we may need to consider alternative options and in an extreme scenario, shut down operations.
[Risks arising from difference between Preferred and Common Stock].
The Exchange Price may not accurately reflect the value of your investment.
The Exchange Price of your Preferred Stock and the Conversion Price under the Certificate of Designation is derived, in substantial part, from a good faith estimate of the future value of Common Stock of the Company, which may never appreciate at our predicted levels, or worse, may plummet compared to the current stock price. The Conversion Price may not accurately reflect the value of our Common Stock and may not be realized upon any subsequent disposition of the same.
Liquidity risks associated with our Common Stock.
Preferred Stock will remain restricted until such time that the shares are converted to Common Stock and are registered for resale by the Company or an exemption becomes available. The capital markets are complex, movements in share price can be erratic, particularly for small cap securities with low trading volume. There can be no assurance that (1) an active trading market will be developed or sustained, (2) the liquidity of such market will increase, (3) the undersigned will be able sell his, her, or its shares of Preferred Stock, or (4) the price that the Shareholder may obtain for his, her, or its Common Stock (upon conversion or redemption into Common Stock) will be equal to our greater than the Conversion Price or the Mandatory Redemption Amount as defined in the Certificate of Designation. Further, there is no assurance that the Company will effect a financing event or any public listing of its securities.
Investment in Preferred Stock is risky.
Preferred Stock involves a high degree of risk in that (i) it does not have a market and is not currently traded; (ii) the Conversion Price defined in the Certificate of Designation may not be the fair market value of the Company; (iii) it may not get redeemed in cash as contemplated in the Certificate of Designation; (iv) an investment in the Company is highly speculative and only meant for investors who can afford the loss of their entire investment; (v) an investor may not be able to liquidate his, her or its investment in the Preferred Stock until they are converted to Common Stock and the Common Stock is registered for sale or an exemption from registration available; (vi) an investor could sustain the loss of his, her or its entire investment; and (vii) the Company is and will be subject to numerous other risks and uncertainties, including without limitation, significant and material risks relating to the Company’s business and operations, and the industries, markets and geographic regions in which the Company competes, as well as risks associated with the Preferred Stock, all as more fully set forth in the annual report on Form 10-K filed with the SEC.
We will need additional capital to implement and fund our operations.
The extent of our capital needs will depend on numerous factors, including (i) the availability and terms of any financing available to us; (ii) the opening of new data centers and acquisition of new resources, including human capital; (iii) the level of our investment in research and development; (iv) the amount of our capital expenditures; and (v) regulations applicable to our operations. We cannot assure you that we will be able to obtain capital in the future to meet our needs. Even if we do find a source of additional capital, we may not be able to negotiate terms and conditions for receiving the additional capital that are acceptable to us. Any future capital investments could dilute or otherwise materially and adversely affect the holdings or rights of our existing stockholders. We cannot give you any assurance that any additional financing will be available to us, or if available, will be on terms favorable to us.
There are several market risks that remain outside of our control.
The market values of securities or other assets will fluctuate, sometimes sharply and unpredictably, due to changes in general market conditions, overall economic trends or events, governmental actions or intervention, actions taken by the U.S. Federal Reserve or foreign central banks, market disruptions caused by trade disputes or other factors, political developments, investor sentiment, and other factors that may or may not be related to the issuer of the security or other asset. Economies and financial markets throughout the world are increasingly interconnected. Economic, financial or political events, trading and tariff arrangements, public health events, terrorism, natural disasters and other circumstances in one country or region could have profound impacts on global economies or markets.
Exhibit 10.3
THIS SECURITY HAS NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY. THIS SECURITY MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN SECURED BY SUCH SECURITIES.
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Dated as of: , 2024 |
Purchase Price: |
$ |
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Maturity Date: , 2025 |
Interest Rate: |
10% |
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Principal Amount: $ ,000 |
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PROMISSORY NOTE
THIS PROMISSORY NOTE is one of a series of duly authorized and validly issued Promissory Notes of Mitesco, Inc., a Nevada corporation (the “Company”), having its principal place of business at 505 Beachland Blvd., Suite 1377, Vero Beach, Florida 32963, designated as its Promissory Notes (this Note, the “Note” and, collectively with the other Notes of such series, the “Notes”).
FOR VALUE RECEIVED, the Company hereby promises to pay to the order [INSERT LENDER NAME] or its registered assigns or successors-in-interest (the “Holder”), or shall have paid pursuant to the terms hereunder, the principal amount set forth above on February 27, 2025 (the “Maturity Date”) or such earlier date as this Note is required or permitted to be repaid as provided hereunder, and to pay interest to the Holder on the then outstanding principal amount of this Note in accordance with the provisions hereof.
This Note is subject to the following additional provisions:
1. Definitions. For the purposes hereof, in addition to the terms defined elsewhere in this Note, the following terms shall have the following meanings:
“Bankruptcy Event” means any of the following events: (a) the Company or any Significant Subsidiary (as such term is defined in Rule 1-02(w) of Regulation S-X) thereof commences a case or other proceeding under any bankruptcy, reorganization, arrangement, adjustment of debt, relief of debtors, dissolution, insolvency or liquidation or similar law of any jurisdiction relating to the Company or any Significant Subsidiary thereof, (b) there is commenced against the Company or any Significant Subsidiary thereof any such case or proceeding that is not dismissed within 60 days after commencement, (c) the Company or any Significant Subsidiary thereof is adjudicated insolvent or bankrupt or any order of relief or other order approving any such case or proceeding is entered, (d) the Company or any Significant Subsidiary thereof suffers any appointment of any custodian or the like for it or any substantial part of its property that is not discharged or stayed within 60 days after such appointment, (e) the Company or any Significant Subsidiary thereof makes a general assignment for the benefit of creditors, (f) the Company or any Significant Subsidiary thereof calls a meeting of its creditors with a view to arranging a composition, adjustment or restructuring of its debts or (g) the Company or any Significant Subsidiary thereof, by any act or failure to act, expressly indicates its consent to, approval of or acquiescence in any of the foregoing or takes any corporate or other action for the purpose of effecting any of the foregoing.
“Business Day” means any day other than a Saturday, a Sunday or a day on which banking institutions in the State of New York are authorized or obligated by law or executive order to close.
“Change of Control Transaction” means the occurrence after the date hereof of any of (a) an acquisition after the date hereof by an individual or legal entity or “group” (as described in Rule 13d-5(b)(1) promulgated under the Exchange Act) of effective control (whether through legal or beneficial ownership of capital stock of the Company, by contract or otherwise) of in excess of 50% of the voting securities of the Company (other than by means of conversion or exercise of the Notes and the Securities issued together with the Notes), (b) the Company merges into or consolidates with any other Person, or any Person merges into or consolidates with the Company and, after giving effect to such transaction, the stockholders of the Company immediately prior to such transaction own less than 66% of the aggregate voting power of the Company or the successor entity of such transaction, (c) the Company sells or transfers all or substantially all of its assets to another Person and the stockholders of the Company immediately prior to such transaction own less than 66% of the aggregate voting power of the acquiring entity immediately after the transaction, or (d) the execution by the Company of an agreement to which the Company is a party or by which it is bound, providing for any of the events set forth in clauses (a) through (c) above.
“Common Stock” means the common stock, par value $0.01 per share, of the Company and any other class of securities into which such securities may hereafter be reclassified or changed.
“Event of Default” shall have the meaning set forth in Section 6(a).
“Exchange Act” means the Securities Exchange Act of 1934, and the rules and regulations promulgated thereunder.
“Late Fees” shall have the meaning set forth in Section 2(c).
“Mandatory Default Amount” means the payment of 120% of the outstanding principal amount of this Note and accrued and unpaid interest hereon, in addition to the payment of all other amounts, costs, expenses and liquidated damages due in respect of this Note.
“Florida Courts” shall have the meaning set forth in Section 7(d).
“Note Register” shall have the meaning set forth in Section 2(b).
“Original Issue Date” means the date of the first issuance of this Note, regardless of any transfers of any Note and regardless of the number of instruments which may be issued to evidence such Notes.
“Securities Act” means the Securities Act of 1933, and the rules and regulations promulgated thereunder.
“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 Company’s 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, the OTCQB, the OTCQX, or the OTC Pink Marketplace (or any successors to any of the foregoing).
2. Interest and Prepayments.
(a) Payment of Interest in Cash. The Company shall pay interest to the Holder on the aggregate then outstanding principal amount of this Note at the rate of 10% per annum. All interest payments hereunder will be payable in cash. Accrued and unpaid interest shall be due on payable on the Maturity Date, or as otherwise set forth herein.
(b) Interest Calculations. Interest shall be calculated on the basis of a 360-day year, consisting of twelve 30 calendar day periods, and shall accrue daily commencing on the Original Issue Date until payment in full of the outstanding principal, together with all accrued and unpaid interest, liquidated damages and other amounts which may become due hereunder, has been made. Interest hereunder will be paid to the Person in whose name this Note is registered on the records of the Company regarding registration and transfers of this Note (the “Note Register”).
(c) Late Fee. All overdue accrued and unpaid interest to be paid hereunder shall entail a late fee at an interest rate equal to the lesser of 12% per annum or the maximum rate permitted by applicable law (the “Late Fees”) which shall accrue daily from the date such interest is due hereunder through and including the date of actual payment in full.
(d) Prepayment. This Note may be prepaid by the Company in whole or in part at any time or from time to time without penalty or premium upon at least five days prior written notice to the Holder, which notice period may be waived by the Holder.
(e) Prepayment Upon Qualified Financing. If the Company completes a Qualified Financing (as defined below), the Company shall repay in full the then-outstanding principal amount of this Note and any accrued but unpaid interest. Such repayment shall be due within one Trading Day of the closing of the Qualified Financing. The Company shall give written notice to Holder as soon as practicable, but in no event less than 10 days before the anticipated closing date of such Qualified Financing. The term “Qualified Financing” shall mean that the Company issues and sells shares of its equity securities to investors on or before the Maturity Date in an equity financing with total gross proceeds to the Company of not less than $5,000,000 (excluding the conversion of the notes or other convertible securities issued for capital raising purposes).
3. Registration of Transfers and Exchanges.
(a) Different Denominations. This Note is exchangeable for an equal aggregate principal amount of Notes of different authorized denominations, as requested by the Holder surrendering the same. No service charge will be payable for such registration of transfer or exchange.
(b) Investment Representations. This Note may be transferred or exchanged only in compliance with applicable federal and state securities laws and regulations.
(c) Reliance on Note Register. Prior to due presentment for transfer to the Company of this Note, the Company and any agent of the Company may treat the Person in whose name this Note is duly registered on the Note Register as the owner hereof for the purpose of receiving payment as herein provided and for all other purposes, whether or not this Note is overdue, and neither the Company nor any such agent shall be affected by notice to the contrary.
4. [RESERVED]
5. Rollover Rights. If at any time while this Note is outstanding, the Company completes any single public offering or private placement of its equity, equity-linked or debt securities (each, a “Future Transaction”), the Holder may, in its sole discretion, elect to apply all, or any portion, of the then outstanding principal amount of this Note and any accrued but unpaid interest, as purchase consideration for such Future Transaction (the “Rollover Rights”). The Company shall give written notice to Holder as soon as practicable, but in no event less than 15 days before the anticipated closing date of such Future Transaction. The Holder may exercise its Rollover Rights by providing the Company written notice of such exercise within five Business Days before the closing of the Future Transaction. In the event Holder exercises its Rollover Rights, then such elected portion of the outstanding principal amount of this Note and accrued but unpaid interest shall automatically convert into the corresponding securities issued in such Future Transaction under the terms of such Future Transaction (except as provided in the next sentence), such that the Holder will receive all securities (including, without limitation, any warrants) issuable under the Future Transaction. The conversion price applicable to such conversion shall equal 80% of the cash purchase price paid per share, unit or other security denomination for the Company securities issued in the Future Transaction to other investors in the Future Transaction. Notwithstanding the foregoing provisions of this Section 5, the Holder shall not be permitted to exercise the Rollover Rights in a public offering involving the offering of equity securities that will be listed on a national securities exchange unless the Holder executes and delivers to the Company at the closing of such public offering an industry-standard “lock up” letter with respect to such equity securities for a period not to exceed 90 days.
6. Events of Default.
(a) “Event of Default” means, wherever used herein, any of the following events (whatever the reason for such event and whether such event shall be voluntary or involuntary or effected by operation of law or pursuant to any judgment, decree or order of any court, or any order, rule or regulation of any administrative or governmental body):
i. any default in the payment of (A) the principal amount of any Note or (B) interest, liquidated damages and other amounts owing to a Holder on any Note, as and when the same shall become due and payable (whether on the Maturity Date or by acceleration or otherwise) which default, solely in the case of an interest payment or other default under clause (B) above, is not cured within three Trading Days;
ii. the Company shall materially fail to observe or perform any other covenant or agreement contained in the Notes which failure is not cured, if possible to cure, within the earlier to occur of (A) five Trading Days after notice of such failure sent by the Holder or by any other Holder to the Company and (B) 10 Trading Days after the Company has become or should have become aware of such failure;
iii. the issuance by the Company of any indebtedness for money borrowed without the prior written consent of the holders of a majority in aggregate principal amount of the outstanding Notes;
iv. any representation or warranty made in this Note, any written statement pursuant hereto or thereto or any other report, financial statement or certificate made or delivered to the Holder shall be untrue or incorrect in any material respect as of the date when made or deemed made;
v. the Company or any Significant Subsidiary (as such term is defined in Rule 1-02(w) of Regulation S-X) shall be subject to a Bankruptcy Event;
vii. the Common Stock shall not be eligible for listing or quotation for trading on a Trading Market and shall not be eligible to resume listing or quotation for trading thereon within twenty-one Trading Days or the transfer of shares of Common Stock through the Depository Trust Company System is no longer available for 10 Trading Days;
viii. the Company shall be a party to any Change of Control Transaction or shall agree to sell or dispose of all or in excess of 50% of its assets in one transaction or a series of related transactions (whether or not such sale would constitute a Change of Control Transaction);
ix. the Company fails to file with the Securities and Exchange Commission any required reports under Section 13 or 15(d) of the Exchange Act such that it is not in compliance with Rule 144(c)(1) (or Rule 144(i)(2), if applicable);
x. if the Company or any Significant Subsidiary shall: (i) apply for or consent to the appointment of a receiver, trustee, custodian or liquidator of it or any of its properties, (ii) make a general assignment for the benefit of creditors, (iii) be adjudicated a bankrupt or insolvent or be the subject of an order for relief under Title 11 of the United States Code or any bankruptcy, reorganization, insolvency, readjustment of debt, dissolution or liquidation law or statute of any other jurisdiction or foreign country, or (iv) file a voluntary petition in bankruptcy, or a petition or an answer seeking reorganization or an arrangement with creditors or to take advantage or any bankruptcy, reorganization, insolvency, readjustment of debt, dissolution or liquidation law or statute, or an answer admitting the material allegations of a petition filed against it in any proceeding under any such law, or (v) take or permit to be taken any action in furtherance of or for the purpose of effecting any of the foregoing;
xi. if any order, judgment or decree shall be entered, without the application, approval or consent of the Company or any Significant Subsidiary, by any court of competent jurisdiction, approving a petition seeking liquidation or reorganization of the Company or any Subsidiary, or appointing a receiver, trustee, custodian or liquidator of the Company or any Subsidiary, or of all or any substantial part of its assets, and such order, judgment or decree shall continue unstayed and in effect for any period of sixty (60) days;
xii. the occurrence of any levy upon or seizure or attachment of, or any uninsured loss of or damage to, any property of the Company or any Subsidiary having an aggregate fair value or repair cost (as the case may be) in excess of $100,000 individually or in the aggregate, and any such levy, seizure or attachment shall not be set aside, bonded or discharged within 30 days after the date thereof;
xiii. the Company or any subsidiary shall default on any of its obligations under any mortgage, credit agreement or other facility, indenture agreement, factoring agreement or other instrument under which there may be issued, or by which there may be secured or evidenced, any indebtedness for borrowed money or money due under any long term leasing or factoring arrangement that (a) involves an obligation greater than $100,000, whether such indebtedness now exists or shall hereafter be created, and (b) results in such indebtedness becoming or being declared due and payable prior to the date on which it would otherwise become due and payable; or
xiv. any monetary judgement, writ or similar final process shall be entered or filed after the date hereof against the Company, any subsidiary or any of their respective property or assets for more than $100,000, and such judgement, writ or similar process shall remain unvacated, unbonded or unstayed for a period of 45 calendar days.
(b) Remedies Upon Event of Default. If any Event of Default occurs, then the outstanding principal amount of this Note, plus accrued but unpaid interest, liquidated damages and other amounts owing in respect thereof through the date of acceleration, shall become, at the Holder’s election, immediately due and payable in cash at the Mandatory Default Amount. After the occurrence of any Event of Default that results in the eventual acceleration of this Note, the interest rate on this Note shall accrue at an additional interest rate equal to the lesser of 2% per month (24% per annum) or the maximum rate permitted under applicable law. Upon the payment in full of the Note, the Holder shall promptly surrender this Note to or as directed by the Company. In connection with such acceleration described herein, the Holder need not provide, and the Company hereby waives, any presentment, demand, protest or other notice of any kind, and the Holder may immediately and without expiration of any grace period enforce any and all of its rights and remedies hereunder and all other remedies available to it under applicable law. Such acceleration may be rescinded and annulled by Holder at any time prior to payment hereunder and the Holder shall have all rights as a holder of the Note until such time, if any, as the Holder receives full payment pursuant to this Section 6(b). No such rescission or annulment shall affect any subsequent Event of Default or impair any right consequent thereon.
7. Miscellaneous.
(a) Notices. Any and all notices or other communications or deliveries to be provided by the Holder hereunder shall be in writing and delivered personally, by email, or sent by a nationally recognized overnight courier service, addressed to the Company, at the address set forth above, or such other email or other address as the Company may specify for such purposes by notice to the Holder delivered in accordance with this Section 7(a). Any and all notices or other communications or deliveries to be provided by the Company hereunder shall be in writing and delivered personally, by email or sent by a nationally recognized overnight courier service addressed to each Holder at the email or other address of the Holder appearing on the books of the Company, or if no such facsimile number, email or other address appears on the books of the Company, at the principal place of business of such Holder, as set forth in the Purchase Agreement. Any notice or other communication or deliveries hereunder shall be deemed given and effective on the earliest of (i) the date of transmission, if such notice or communication is delivered via email at the email set forth on the signature pages attached hereto prior to 12:00 p.m. (New York City time) on any date, (ii) the next Trading Day after the date of transmission, if such notice or communication is delivered via email at the email set forth on the signature pages attached hereto on a day that is not a Trading Day or later than 12:00 p.m. (New York City time) on any Trading Day, (iii) the second Trading Day following the date of mailing, if sent by U.S. nationally recognized overnight courier service or (iv) upon actual receipt by the party to whom such notice is required to be given.
(b) Absolute Obligation. Except as expressly provided herein, no provision of this Note shall alter or impair the obligation of the Company, which is absolute and unconditional, to pay the principal of, liquidated damages and accrued interest, as applicable, on this Note at the time, place, and rate, and in the coin or currency, herein prescribed. This Note is a direct debt obligation of the Company.
(c) Lost or Mutilated Note. If this Note shall be mutilated, lost, stolen or destroyed, the Company shall execute and deliver, in exchange and substitution for and upon cancellation of a mutilated Note, or in lieu of or in substitution for a lost, stolen or destroyed Note, a new Note for the principal amount of this Note so mutilated, lost, stolen or destroyed, but only upon receipt of evidence of such loss, theft or destruction of such Note, and of the ownership hereof, reasonably satisfactory to the Company.
(d) Governing Law. All questions concerning the construction, validity, enforcement and interpretation of this Note shall be governed by and construed and enforced in accordance with the internal laws of the State of Nevada, without regard to the principles of conflict of laws thereof. Each party agrees that all legal proceedings concerning the interpretation, enforcement and defense of the transactions contemplated herein (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 Collier County, State of Florida (the “Florida Courts”). Each party hereto hereby irrevocably submits to the exclusive jurisdiction of the Florida Courts 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 such Florida Courts, or such Florida Courts are improper or inconvenient venue for such proceeding. Each party hereby irrevocably waives personal service of process and consents to process being served in any such suit, action or proceeding by mailing a copy thereof via registered or certified mail or overnight delivery (with evidence of delivery) to such party at the address in effect for notices to it under this Note and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any other manner permitted by applicable law. Each party hereto hereby irrevocably waives, to the fullest extent permitted by applicable law, any and all right to trial by jury in any legal proceeding arising out of or relating to this Note or the transactions contemplated hereby. If any party shall commence an action or proceeding to enforce any provisions of this Note, then the prevailing party in such action or proceeding shall be reimbursed by the other party for its attorney’s fees and other costs and expenses incurred in the investigation, preparation and prosecution of such action or proceeding.
(e) Waiver. Any waiver by the Company or the Holder of a breach of any provision of this Note shall not operate as or be construed to be a waiver of any other breach of such provision or of any breach of any other provision of this Note. The failure of the Company or the Holder to insist upon strict adherence to any term of this Note on one or more occasions shall not be considered a waiver or deprive that party of the right thereafter to insist upon strict adherence to that term or any other term of this Note on any other occasion. Any waiver by the Company or the Holder must be in writing.
(f) Severability. If any provision of this Note is invalid, illegal or unenforceable, the balance of this Note shall remain in effect, and if any provision is inapplicable to any Person or circumstance, it shall nevertheless remain applicable to all other Persons and circumstances. If it shall be found that any interest or other amount deemed interest due hereunder violates the applicable law governing usury, the applicable rate of interest due hereunder shall automatically be lowered to equal the maximum rate of interest permitted under applicable law. The Company covenants (to the extent that it may lawfully do so) that it shall not at any time insist upon, plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay, extension or usury law or other law which would prohibit or forgive the Company from paying all or any portion of the principal of or interest on this Note as contemplated herein, wherever enacted, now or at any time hereafter in force, or which may affect the covenants or the performance of this Note, and the Company (to the extent it may lawfully do so) hereby expressly waives all benefits or advantage of any such law, and covenants that it will not, by resort to any such law, hinder, delay or impede the execution of any power herein granted to the Holder, but will suffer and permit the execution of every such as though no such law has been enacted.
(g) Remedies, Characterizations, Other Obligations, Breaches and Injunctive Relief. The remedies provided in this Note shall be cumulative and in addition to all other remedies available under this Note nothing herein shall limit the Holder’s right to pursue actual and consequential damages for any failure by the Company to comply with the terms of this Note. The Company covenants to the Holder that there shall be no characterization concerning this instrument other than as expressly provided herein. Amounts set forth or provided for herein with respect to payments be the amounts to be received by the Holder and shall not, except as expressly provided herein, be subject to any other obligation of the Company (or the performance thereof). The Company acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to the Holder and that the remedy at law for any such breach may be inadequate. The Company therefore agrees that, in the event of any such breach or threatened breach, the Holder shall be entitled, in addition to all other available remedies, to an injunction restraining any such breach or any such threatened breach, without the necessity of showing economic loss and without any bond or other security being required. The Company shall provide all information and documentation to the Holder that is requested by the Holder to enable the Holder to confirm the Company’s compliance with the terms and conditions of this Note.
(h) Next Business Day. Whenever any payment or other obligation hereunder shall be due on a day other than a Business Day, such payment shall be made on the next succeeding Business Day.
(i) Headings. The headings contained herein are for convenience only, do not constitute a part of this Note and shall not be deemed to limit or affect any of the provisions hereof.
*********************
(Signature Pages Follow)
IN WITNESS WHEREOF, the Company has caused this Note to be duly executed by a duly authorized officer as of the date first above indicated.
MITESCO, INC.
By:
Name: Mack Leath
Title: Chief Executive Officer
Email address for delivery of Notices:
Exhibit 99.1
The “Mitesco Restructuring Plan” and how you can participate.
We are contacting you today to execute a restructuring plan for Mitesco, Inc., and its subsidiaries (“the Company”) which involves the issuance of common stock in exchange for the cancellation of notes, accounts payable and other obligations. This will allow the Company to move forward with a much-improved balance sheet, and what management believes to be a reasonable capital table. The issuance uses an exchange rate of $4.00 per share price for the Company’s common stock. The current management is participating in this conversion on the same terms as those being granted to all other equity and debt holders. The exchange agreement also includes an undertaking for the Company to file a registration statement and to use its reasonable best efforts to make the shares tradable within 120 days. Any previously issued warrants are cancelled in this exchange, as they are all well out of the money. The details about your exchange issuance are below, and a “DocuSign” approval is provided for the execution of the documents.
The Current Business Situation
The Company has completely refocused its business model. Its new activities are centered on data center operations, and the software and systems that can create revenue from operations in “cloud computing” within data center. Management believes the market is poised for growth, the need is being communicated daily into the investment marketplace by business media, and that a competitive suite of products and services can be sold in scale. We have adopted a dual path strategy. First, we will provide clients with “generic” data processing, running software that belongs to a business. We will, however, be competing with many larger players including Amazon Web Services (AWS), Microsoft, Google and others. Our services can be as simple as data storage and backup, or complicated solutions like those using Oracle, SAP or other larger scale applications.
Secondly, we are soliciting software vendors to run their cloud applications on our data center for the benefit of their clients, with an emphasis on infrastructure related applications such as mapping, engineering, design, and operations of facilities. This aspect will take longer to build than the generic business, but we believe it should provide very long-term client use, since the projects take years to complete. This market segment also has fewer competitors than the “generic” data processing segment.
In both these situations the data storage aspect is clearly the most profitable, so to the extent that we invest in software solutions we are looking for situations where there are large storage and retrieval needs, such as image files, video and large format documents it is likely our return may be increased.
Status of the Common Stock and Debt Conversion
Our common stock is not very liquid at this time, and therefore management believes it cannot really be used to measure the true value of the business. We are effectively a private company, so any valuation needs to reflect more of a startup than a public company with a history. Before we can expect the stock to return to a liquid level of trading, if at all, we must first eliminate our previously incurred debts and prove our new business is viable.
We have an agreement from our institutional investors to provide nominal funding using simple 12-month notes. Thanks to their willingness to invest we have become current with our reporting requirements, accounting and audit, and started our refocus of operations.
Holders of a significant portion of our obligations, including the Board of Directors, have agreed to exchange all remaining notes and accounts payable for common stock using a $4.00 price per share. While this is a premium to the Company’s recent trading history, it is not unlike the valuation a similar private company start-up might find, and that new business would not be strapped with the debt from the previous business activities.
We could use the courts to reduce and convert the debts of the Company, and if we took that approach the shares issued would be for a fraction of the valuation using the $4 approach, and would create significant expense for the holders, and the Company.
For the shares we issue, we intend to undertake to file a registration statement within 120 days to make the stock tradable in the market without the cost, and wait time needed using Rule 144, the only alternative to a registration statement.
We do have a Series A Preferred Stock in process that can be used for the institutional accredited investors. It bears no interest and requires redemption over three (3) years using restricted common stock. Due to the complexity, and risk, of this security it cannot be used with those who are not either institutional and accredited investors, and that is most of the individuals involved. With the debt exchange for common stock proposed, the holders will have the potential to be out in months, assuming the market will see the value of the new business, and the regulatory bodies will approve the registration. Further, with a clean, “fresh start” balance sheet it is more likely the Company will be able to fund its needs for growth capital, and on terms more favorable to its shareholders.
What do you need to do next?
In your case we will issue _______ shares, at $4.00 per share, in exchange for the cancellation of the obligations on the books currently showing approximately $__________.
Management believes that this is the best approach for all involved. There is no chance that the Company will have positive cash flow sufficient to fund debt repayment for years to come, and it has been made clear by potential institutional investors that no financing of size will be available until the balance sheet is clean, and the business prospects proven.
Attached is a DocuSign agreement for your execution. Upon receipt of the executed documents we will ask that you share your information for the issuance with the transfer agent, and request that the issuance be processed immediately, at the Company’s expense.
Exhibit 99.2
Mitesco Provides Shareholder Update on Restructuring, Expansion of Its Advisory Board, and Introduction of A.I.-Based Application Software for Sales Automation
VERO BEACH, FL - (NewMediaWire) – October 29, 2024 - Mitesco, Inc. (OTC:MITI, “the Company”) today announced it has finalized over $8 million in the restructuring of its debt and senior equity, with a goal to extinguish virtually all obligations by December 31, 2024. It also announced it has added two (2) additional professionals to its recently formed Advisory Board. Lastly, its Vero Technology Ventures arm has begun evaluation of both existing cloud computing solutions providers, and its own A.I. based application aimed at sales automation.
Restructuring and Expansion Plans for FY2025
“We are working aggressively to eliminate all of our legacy liabilities before year-end to reduce our costs and position the company for meaningful expansion in 2025,” said Mitesco CEO Mack Leath “Already, holders of over $8 million in debt and senior securities have converted into common stock at $4 per share, and we expect a majority of the remaining liabilities to follow over the next few weeks. For our accredited institutional investors, we are creating a new Series A Amortizing Preferred stock which bears no interest and provides for redemption with cash or restricted common stock, or conversion, over the next 36 months. These same investors have provided the funding during FY2024 for our rebuilding process, and their continued support will help to strengthen our business plans going forward.”
Regarding Mitesco’s Centore data services division (www.centcoreusa.com) and the newly-formed Vero Technology Ventures subsidiary, Mr. Leath explained, “Our data center business is making progress establishing itself in the market, and with our two (2) newly appointed directors we expect to accelerate gains in key accounts, and in the data center operations as well. Our Vero Technology Ventures arm is actively reviewing potential early stage cloud computing solution vendors and is developing its own artificial intelligence (A.I.) based application set. The new “Robo” application utilizes A.I. to promote more efficient sales and marketing within certain markets, and with highly targeted market research. Our initial implementation is aimed at residential real estate sales and marketing, with longer-term applications in both direct-to-consumer and B2B markets.”
Advisory Board Expansion
The current board comprises individuals with specific expertise to assist Mitesco in finding and evaluating qualified companies and businesses for integration into the public holding company. The Advisory Board is a non-executive board, and its participants shall not be subject to any of the regulations under Section 16 of the Securities Act. Each member of the Advisory Board has been issued 75,000 shares of restricted common stock in consideration of their contributions for a 12-month term.
The latest appointments to the Advisory Board are executives whose careers have focused on data center business development and data center systems software, as noted here:
Gabriel Crawford has over 20 years’ experience in data center development from site selection, design/ build/ engineering services, and, most recently, hyperscale and AI co-location leasing.
Most recently, Mr. Crawford was at Dallas-based Center Square DC, which specializes in delivering a comprehensive suite of colocation and data center services with more than 50 data centers owned and operated. Prior to that engagement, he was with Chirisa Investments creating long-term value for customers in digital infrastructure, communications and real estate. While at Digital Fortress, a privately-held data center colocation company based in Seattle, Washington, he managed more than 1,500 clients who entrusted their applications and servers to their mission-critical facilities and network with data centers in Seattle, WA, Tukwila, WA, Lynwood, WA, Denver, CO and Chicago, IL. Earlier in his career, Mr. Crawford held positions at both early stage and mature data center operators, in addition to offering consulting services. His educational background includes a bachelor’s degree from the University of Maine. He is based in Vero Beach, Florida.
Jim Clifton is a senior sales and marketing executive focused on systems software, data analytics and innovative implementation to improve productivity across corporations and workforces worldwide.
Most recently, Mr. Clifton drove sales at Alteryx, an intuitive, code-free platform for data preparation, blending, analytics, and automation. Prior to that he was with VMware, developing both cloud and on-prem business to expand the utilization of systems across disparate users. While at Cumberland Group he headed a practice aimed at IoT productivity using real-time dashboards and other online tools. At Star Mobile he focused on mobile application implementation of corporate cloud-based applications. Other professional sales and management positions included Citrix, Symantec and Verisign, where he oversaw implementation of new technologies for key corporate clients. Jim’s education includes a bachelor’s degree from the University of Georgia and a master’s degree from Mercer University. He is based in St. Simons, Georgia.
About Mitesco, Inc. and Centcore, LLC
Mitesco (www.mitescoinc.com & www.centcoreusa.com) are seeking to build a growth-oriented company, providing products, services and technology to make accessible, higher quality and more affordable solutions to corporate clients. Its newly-formed Vero Technology Ventures arm is focused on development and acquisition of cloud-based applications for both direct to consumer and B2B markets. The Mitesco team is experienced in both start-ups and turnarounds and plans to employ both organic and acquisition strategies for growth.
Contact:
Mitesco Investor Relations
Jimmy Caplan
512.329.9505
Mitesco Media Relations
Rick Eisenberg
917-691-8934
Forward-Looking Statements
This press release contains forward-looking statements, including, but not limited to, statements related to the expected foreclosure of several of our clinics. Words such as "expects," "anticipates," "aims," "projects," "intends," "plans," "believes," "estimates," "seeks," "assumes," "may," "should," "could," "would," "foresees," "forecasts," "predicts," "targets," "commitments," and variations of such words and similar expressions are intended to identify such forward-looking statements. We caution you that the foregoing may not include all the forward-looking statements made in this press release.
These forward-looking statements are based on the Company's current plans, assumptions, beliefs, and expectations. Forward-looking statements are subject to the occurrence of many events outside of the Company's control. Actual results and the timing of events may differ materially from those contemplated by such forward-looking statements due to numerous factors that involve substantial known and unknown risks and uncertainties. These risks and uncertainties include, among other things, the ability to obtain additional financing; the risk that commenced and threatened litigation may result in material judgments against the Company; and other risks and uncertainties included in the Company's reports on Forms 10-K, 10-Q, and 8-K and in other filings the Company makes with the Securities and Exchange Commission from time to time, available at www.sec.gov.