NXXT 8-K
Nextnrg, Inc. (NXXT)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C., 20549
FORM
CURRENT REPORT
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Item 1.01. Entry into a Material Definitive Agreement.
Leviston SPA
On April 1, 2026, NextNRG, Inc. (the “Company”) and Leviston Resources, LLC (“Leviston”) entered into a Securities Purchase Agreement dated as of April 1, 2026 (the “Leviston SPA”), pursuant to which the Company agreed to sell, and Leviston agreed to purchase, a senior secured convertible promissory note in the principal amount of $1,724,444 (the “Leviston Note”) for a purchase price of $1,552,000. The Leviston Note carries an original issue discount of $172,444. Pursuant to the terms of the Leviston SPA, the Company agreed to issue 243,300 shares of the Company’s common stock to Leviston as additional consideration for the Leviston Note. Such shares were issued on April 1, 2026.
Leviston has rollover rights and piggyback registration rights pursuant to the terms of the Leviston SPA. In addition, until the later of (i) October 1, 2027 or (ii) the date that the balance due under the Leviston Note is paid in full, Leviston has a right of participation in, and a right of first refusal regarding, any financing transaction. The Company has also granted Leviston “most favored nation” rights for so long as any obligations remain outstanding under the transaction documents.
The Leviston SPA contains customary representations, warranties and covenants for a transaction of this type.
The transactions that were the subject of the Leviston SPA closed on April 1, 2026.
The foregoing description of the Leviston SPA does not purport to be complete and is qualified in its entirety by reference to the full text of the Leviston SPA, a copy of which is filed herewith as Exhibit 10.1.
Leviston Note
The Leviston Note bears interest at a rate of 10% and matures on October 1, 2026. Interest is guaranteed for the entirety of the six-month term of the Leviston Note, regardless of any reduction of the principal amount, conversion or prepayment. The Leviston Note is a senior secured obligation of the Company, with first priority over all current and future indebtedness; provided, however, that the Company may close equipment financing, with such financing secured by first priority lien(s) against the equipment being financed and second priority lien(s) (behind Leviston’s security interest) against the Company’s other assets. The Company’s obligations under the Leviston Note are secured pursuant to the terms of the Pledge and Security Agreement, dated as of April 1, 2026, by and between the Company and Leviston (the “Leviston Security Agreement”).
The Leviston Note is convertible into shares of the Company’s common stock only upon and following an Event of Default (as defined in the Leviston Note), at the option of Leviston. Upon an Event of Default, Leviston may convert any portion of the outstanding principal, accrued interest, default interest, and a fixed conversion fee of $1,950 per conversion into common stock. The conversion price will be equal to 80% of the average of the three lowest daily volume-weighted average prices (VWAP) of the common stock during the 15 trading days immediately preceding the conversion date, subject to a floor price of $0.10 per share.
The Leviston Note contains an equity blocker that prohibits Leviston from converting the Leviston Note if such conversion would result in Leviston and its affiliates beneficially owning more than 4.99% of the Company’s outstanding common stock; provided, however, that Leviston may elect to increase this limitation to 9.99% upon 61 days’ prior notice to the Company, or immediately if Leviston is not subject to the reporting requirements of Section 13 of the Securities Exchange Act of 1934, as amended.
In addition, the Leviston Note contains a hard cap on the number of shares issuable to Leviston at 19.99% of the outstanding shares. Pursuant to the terms of the Leviston Note, the parties agreed that, notwithstanding any other conversion, adjustment or other provision, the Company may not issue a cumulative number of shares of common stock to Leviston and its affiliates pursuant to the Leviston Note and the other transaction documents that would exceed the 19.99% limitation set forth in the Nasdaq Stock Market’s (“Nasdaq”) Listing Rule 5635(d), unless the Company obtains stockholder approval to exceed such threshold in accordance with Nasdaq rules.
The Company may prepay the Leviston Note at any time prior to October 1, 2026; provided, however, that (i) if the prepayment date occurs within 60 days of April 1, 2026, the Company must pay Leviston the outstanding principal amount, all guaranteed interest for the full six-month term (regardless of how much of the term has elapsed as of the prepayment date), and any other amounts due under the Leviston Note, with no prepayment premium; and (ii) if the prepayment date occurs after 60 days from April 1, 2026, the Company must pay Leviston 110% multiplied by the sum of (a) the outstanding principal amount, (b) all guaranteed interest for the full six-month term (regardless of how much of the term has elapsed as of the prepayment date), and (c) any other amounts due under the Leviston Note.
The Leviston Note contains customary Events of Default, the occurrence of which grant Leviston, among other things, the right to accelerate the entire unpaid balance of the Leviston Note. Upon the occurrence of an Event of Default, the Leviston Note provides that, among other things, all outstanding obligations under the Leviston Note and related transaction documents, including principal, accrued interest, monitoring fees, and legal expenses, will automatically increase to 150% of the then-outstanding balance. Additionally, all outstanding obligations will accrue interest at a default rate equal to the lesser of 18% per annum or the maximum rate permitted by law.
On April 1, 2026, the Company issued the Leviston Note in favor of Leviston pursuant to the terms of the Leviston SPA.
The foregoing description of the Leviston Note is subject to and qualified in its entirety by reference to the full text of the Leviston Note, a copy of which is filed herewith as Exhibit 10.2.
Leviston Security Agreement
On April 1, 2026, in connection with the issuance of the Leviston Note, the Company and Leviston entered into the Leviston Security Agreement. dated as of April 1, 2026 (the “Leviston SPA”). Pursuant to the terms of the Leviston Security Agreement, the Company granted to Leviston a continuing, first-priority security interest in substantially all of its assets to secure the prompt payment and performance of its obligations under the Leviston Note and related transaction documents. The collateral includes, but is not limited to, the Company’s accounts, inventory, equipment, general intangibles, deposit accounts, and 100% of the equity interests in the Company’s directly owned subsidiaries (the “Pledged Equity”). The Company is subject to negative covenants that, subject to certain exceptions, prohibit the sale, lease, or encumbrance of the collateral without Leviston’s prior written consent. Upon the occurrence and during the continuance of an Event of Default, Leviston may, among other remedies: (i) accelerate all obligations and take possession of the collateral; (ii) exercise all voting and consensual rights pertaining to the Pledged Equity; (iii) appoint a receiver over the Company’s assets; and/or (iv) sell the collateral at public or private sales to satisfy the outstanding debt.
The security interest will terminate only upon the full satisfaction or termination of the Company’s obligations under the Leviston Note.
The Leviston Security Agreement contains customary representations, warranties and covenants for a transaction of this type.
The foregoing description of the Leviston Security Agreement does not purport to be complete and is qualified in its entirety by reference to the full text of the Leviston Security Agreement, a copy of which is filed herewith as Exhibit 10.3.
Cashera Business Loan and Security Agreement
On April 7, 2026, the Company and Cashera Private Credit Inc. (“Cashera”) entered into a Business Loan and Security Agreement (the “Cashera Loan Agreement”), dated as of April 1, 2026, pursuant to which Cashera provided a term loan to the Company in the principal amount of $750,000 (the “Cashera Loan”). The Company received net disbursement proceeds of $712,500 after deduction of a $37,500 origination fee. The Cashera Loan carries a total interest expense of $300,000, resulting in a total repayment obligation of $1,050,000. The Cashera Loan is scheduled to be repaid in 24 weekly installments of $43,750, beginning immediately following disbursement, with a maturity date of October 1, 2026. The annual percentage rate for the Cashera Loan is approximately 173.06%.
The Cashera Loan is secured by a first-priority security interest in substantially all of the Company’s assets, including accounts, inventory, equipment, deposit accounts and intellectual property. Additionally, the Cashera Loan is personally guaranteed by Michael D. Farkas, the Company’s Chief Executive Officer, Chairman of the Board and substantial stockholder, and cross-guaranteed by NextNRG Ops LLC, a wholly owned subsidiary of the Company.
The Cashera Loan Agreement contains various restrictive covenants, including a prohibition on taking additional debt without Cashera’s prior written consent and a notification requirement if its bank account balances fall below 33% of the balance represented at the time of funding. If the Company takes additional debt without prior written consent, the Company will incur a $75,000 stacking fee for each occurrence.
Upon an event of default, Cashera may, among other things, (i) accelerate the entire unpaid balance, (ii) charge a default fee equal to 25% of the outstanding balance, (iii) take possession of and sell the collateral, and/or (iv) file a confession of judgment in the State of Utah, allowing for the summary entry of a legal judgment without trial.
The Cashera Loan Agreement contains representations, warranties and covenants as set forth therein.
The foregoing description of the Cashera Loan Agreement does not purport to be complete and is qualified in its entirety by reference to the full text of the Cashera Loan Agreement, a copy of which is filed herewith as Exhibit 10.4.
Item 2.03. Creation of a Direct Financial Obligation or an Obligation Under an Off-Balance Sheet Arrangement of a Registrant.
The information contained in Item 1.01 is incorporated herein by reference.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits
| Exhibit No. | Description | |
| 10.1 | Securities Purchase Agreement, dated as of Apri 1, 2026, between the registrant and Leviston Resources, LLC. | |
| 10.2* | Senior Secured Convertible Promissory Note, dated April 1, 2026, issued by the registrant in favor of Leviston Resources, LLC. | |
| 10.3 | Pledge and Security Agreement, dated April 1, 2026, between the registrant and Leviston Resources, LLC. | |
| 10.4* | Business Loan and Security Agreement, entered into on April 7, 2026 and dated as of April 7, 2026, between the registrant and Cashera Private Credit Inc. | |
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document) |
* Certain identified information has been excluded from this exhibit because it both (i) is not material and (ii) is the type that the Company treats as private or confidential.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| NextNRG, Inc. | ||
| Date: April 10, 2026 | By: | /s/ Michael Farkas |
| Name: | Michael Farkas | |
| Title: | Chief Executive Officer | |
Exhibit 10.1
SECURITIES PURCHASE AGREEMENT
This SECURITIES PURCHASE AGREEMENT (the “Agreement”) is made as of April 1, 2026, by and among NextNRG, Inc., a corporation organized under the laws of the State of Delaware (the “Company”), and Leviston Resources, LLC, a limited liability company organized under the laws of the State of Delaware (the “Purchaser”).
Recital
A. The Company and the Purchaser are executing and delivering this Agreement in reliance upon the exemption from securities registration afforded by Section 4(a)(2) of the Securities Act of 1933, as amended (the “Securities Act”), and Rule 506(b) promulgated by the United States Securities and Exchange Commission (the “SEC”) under the Securities Act;
B. The Purchaser desires to purchase from the Company, and the Company desires to issue and sell to the Purchaser, upon the terms and conditions set forth in this Agreement, a Senior Secured Convertible Promissory Note of the Company, in the principal amount of One Million, Seven Hundred Twenty Four Thousand, Four Hundred Forty Four Dollars ($1,724,444) (the “Principal Amount,”) and together with any note(s) issued in replacement thereof, thereon or otherwise with respect thereto in accordance with the terms thereof, in the form attached hereto as Exhibit A (the “Note” and collectively with this Agreement, and the other related ancillary documents and agreements executed in connection thereto, the “Transaction Documents”), upon the terms and subject to the limitations and conditions set forth in such Note;
C. The Note carries an original issue discount of One Hundred Seventy Two Thousand, Four Hundred Forty Four Dollars ($172,444) (the “OID”), which is included in the principal balance of the Note. Thus, the purchase price of the Note shall be One Million, Five Hundred Fifty Two Thousand Dollars ($1,552,000), computed by subtracting the OID from the Principal Amount.
D. Company wishes to issue to the Purchaser, as additional consideration for the purchase of the Note, Two Hundred Forty Three Thousand, Three Hundred (243,300) shares of the Company’s Common Stock (the “Equity Interest”).
Agreement
Now, Therefore, in consideration of the foregoing, and the representations, warranties, covenants and conditions set forth below, the Company and the Purchaser, intending to be legally bound, hereby agree as follows:
| 1. | Closing |
1.1 Closing Date. Subject to the satisfaction (or written waiver) of the conditions thereto set forth in Section 6 and Section 7 below, the date and time of the issuance and sale of the Note and the Equity Interest, pursuant to this Agreement (the “Closing Date”) shall be 4:00 PM, Eastern Time on the date first written above, or such other mutually agreed upon time.
1.2 Closing. The closing of the transactions contemplated by this Agreement (the “Closing”) shall occur on the Closing Date at such location as may be agreed to by the parties (including via exchange of electronic signatures).
1.3 Delivery. At the Closing, the Company and the Purchaser shall execute and deliver the Note and the other Transaction Documents contemplated by this Agreement. Subject to the satisfaction or written waiver of the conditions set forth in Sections 6 and 7, the Purchaser shall, promptly following the Closing, deliver to the Company the purchase price for the Note, in immediately available funds, in the amount set forth in the Note (the “Consideration”).
| 2. | Representations and Warranties of the Company |
Except as set forth in the corresponding section of the Disclosure Schedule delivered to the Purchaser concurrently herewith and attached hereto as Schedule I (the “Disclosure Schedule”) or as disclosed in the Disclosure Materials (as defined below), the Company, its Subsidiaries, Officers, Directors, and Affiliates, hereby makes the following representations and warranties as of the date hereof and as of the Closing Date to the Purchaser:
2.1 Organization, Good Standing and Qualification. The Company and each of its Subsidiaries (as defined below) is a corporation or limited liability company duly organized, validly existing and in good standing under the laws of its jurisdiction of incorporation or organization. Each of the Company and its Subsidiaries has the requisite corporate power to own and operate its properties and assets and to carry on its business as now conducted and as proposed to be conducted. The Company and each of its Subsidiaries is duly qualified and is authorized to do business and is in good standing as a foreign corporation in all jurisdictions in which the nature of its activities and of its properties (both owned and leased) makes such qualification necessary, except where the failure to be so qualified or in good standing, as the case may be, would not have or reasonably be expected to result in (i) a material adverse effect on the legality, validity or enforceability of any Transaction Document, (ii) a material adverse effect on the results of operations, assets, business or financial condition of Company and the Subsidiaries, taken as a whole, or (iii) adversely impair the Company’s ability to perform in any material respect on a timely basis its obligations under any Transaction Document (any of (i), (ii) or (iii), a “Material Adverse Effect”).
2.2 Corporate Power. The Company has all requisite corporate power to execute and deliver this Agreement, and to issue the Note and the Equity Interest, and to enter into the security and pledge agreement of even date herewith (the “Security and Pledge Agreement”) attached hereto as Exhibit B, and to enter into the other Transaction Documents and to carry out and perform its obligations under the terms of the Transaction Documents.
2.3 Subsidiaries and Affiliates. Section 3.3 of the Disclosure Schedule sets forth a true and correct description of all of the Company’s Subsidiaries and Affiliates and the capitalization (including options, warrants and other such equity), pro forma as of the date hereof reflecting all pending acquisitions. For purposes of this Agreement, the term “Subsidiary” means, with respect to the Company, any corporation or other entity of which at least a majority of the outstanding shares of stock or other ownership interests having by the terms thereof ordinary voting power to elect a majority of the board of directors (or persons performing similar functions) of such corporation or entity (regardless of whether or not at the time, in the case of a corporation, stock of any other class or classes of such corporation shall have or might have voting power by reason of the happening of any contingency) is at the time directly or indirectly owned or controlled by the Company or one or more of its Affiliates and the term “Affiliate” means, as to any person (the “Subject Person”), any other person that directly or indirectly through one or more intermediaries controls or is controlled by, or is under direct or indirect common control with, the Subject Person. For the purposes of this definition, “control” when used with respect to any person means the power to direct the management and policies of such person, directly or indirectly, whether through the ownership of voting securities, through representation on such person’s board of directors or other management committee or group, by contract or otherwise. All references contained herein to the terms Subsidiary or Affiliate, shall be applicable to all Subsidiaries and Affiliates whether they existed as of the date hereof or were created, acquired, or otherwise came to be included in the foregoing terms subsequent to the date hereof.
2.4 Authorization. All corporate action on the part of the Company, its directors and its stockholders necessary for the authorization of the Transaction Documents and the execution, delivery and performance of all obligations of the Company under the Transaction Documents, including, but not limited to, the issuance and delivery of the Note and the Equity Interest, the issuance and delivery of the Common Shares issuable upon conversion of the Note, and the reservation of the equity securities issuable upon conversion of the Note has been taken or will be taken prior to the issuance of such securities. The Common Shares issuable upon conversion of the Note and the shares of Common Stock reserved for issuance upon conversion of the Note (the “Reserved Amount”) are collectively referred to herein as the “Underlying Securities.” The Note, the Equity Interest, and the Underlying Securities are collectively referred to herein as the “Securities.” The Transaction Documents, when executed and delivered by the Company, shall constitute valid and binding obligations of the Company enforceable in accordance with their terms, subject to laws of general application relating to bankruptcy, insolvency, the relief of debtors and, with respect to rights to indemnity, subject to federal and state securities laws. The Underlying Securities, when issued in compliance with the provisions of the Transaction Documents, will be, validly issued, fully paid and non-assessable and free of any liens, encumbrances, security interests or other adverse claim (a “Lien”) and issued in compliance with all applicable federal and securities laws.
2.5 Governmental Consents. Neither Company nor any Subsidiary is required to obtain any consent, waiver, authorization or order of, give any notice to, or make any filing or registration with, any court or other foreign, federal, state, local or other governmental authority or other person in connection with the execution, delivery and performance by the Company of the Transaction Documents, other than (a) applicable Blue Sky filings, (b) such as have already been obtained or such exemptive filings as are required to be made under applicable securities laws, (c) such other filings that have been made pursuant to applicable state securities laws and post-sale filings pursuant to applicable state and federal securities laws which the Company undertakes to file within the applicable time periods. Subject to the accuracy of the representations and warranties of the Purchaser set forth herein, the Company has taken all action necessary to exempt: (i) the issuance and sale of the Note, (ii) the issuance of the Equity Interest, (iii) the issuance of the Underlying Securities upon due conversion of the Note, and (iv) the other transactions contemplated by the Transaction Documents from the provisions of any preemptive rights, stockholder rights plan or other “poison pill” arrangement, any anti-takeover, business combination or control share law or statute binding on the Company or to which the Company or any of its assets and properties may be subject and any provision of the Company’s Articles of Incorporation or Bylaws, or other organizational documentation, as the case may be, that is or could reasonably be expected to become applicable to the Purchaser as a result of the transactions contemplated hereby, including without limitation, the issuance of the Securities and the ownership, disposition or voting of the Securities by the Purchaser or the exercise of any right granted to the Purchaser pursuant to this Agreement or the other Transaction Documents.
2.6 Compliance with Laws. Neither Company nor any Subsidiary is in violation of any applicable statute, rule, regulation, order or restriction of any domestic or foreign government or any instrumentality or agency thereof in respect of the conduct of its business or the ownership of its properties, which violation would materially and adversely affect the business, assets, liabilities, financial condition or operations of Company and its Subsidiaries.
2.7 Compliance with Other Instruments. Neither Company nor any of its Subsidiaries is in violation or default of any term of its organizational documents, or of any provision of any mortgage, indenture or contract to which it is a party and by which it is bound or of any judgment, decree, order or writ, other than such violations that would not individually or in the aggregate have a Material Adverse Effect on the Company. Except as set forth in Section 3.7 of the Disclosure Schedule or disclosed in SEC Reports (as defined herein), the execution, delivery and performance of the Transaction Documents, and the consummation of the transactions contemplated by the Transaction Documents will not result in any such violation or be in conflict with, or constitute, with or without the passage of time and giving of notice, either a default under any such provision, instrument, judgment, decree, order or writ or an event that results in the creation of any Lien upon any assets of the Company or the suspension, revocation, impairment, forfeiture, or nonrenewal of any material permit, license, authorization or approval applicable to the Company or any of its Subsidiaries, its business or operations or any of its assets or properties. The sale of the Note and the subsequent issuance of the Underlying Securities are not and will not be subject to any preemptive rights or rights of first refusal that have not been properly waived or complied with.
2.8 Offering. Assuming the accuracy of the representations and warranties of the Purchaser contained in Section 4 hereof, the offer, issue, and sale of Securities are and will be exempt from the registration and prospectus delivery requirements of the Securities Act, and have been registered or qualified (or are exempt from registration and qualification) under the registration, permit, or qualification requirements of all applicable state securities laws. No “bad actor” disqualifying event described in Rule 506(d)(1)(i)-(viii) of the Securities Act (a “Disqualification Event”) is applicable to the Company or, to the Company’s knowledge, any person listed in the first paragraph of Rule 506(d)(1) of the Securities Act, except for a Disqualification Event as to which Rule 506(d)(2)(ii–iv) or (d)(3), is applicable.
2.9 Capitalization. Company has authorized shares as set forth in Section 3.9 of the Disclosure Schedule. All outstanding shares of capital stock are duly authorized, validly issued, fully paid and non-assessable and have been issued in compliance with all applicable securities laws. Except for the Equity Interests and the Underlying Securities or as otherwise listed in Section 3.9 of the Disclosure Schedule, there are no outstanding options, warrants, script rights to subscribe to, calls or commitments of any character whatsoever relating to, or securities, rights or obligations convertible into or exercisable or exchangeable for, or giving any person any right to subscribe for or acquire, any shares of common stock, or contracts, commitments, understandings or arrangements by which Company or any Subsidiary is or may become bound to issue additional shares of common stock, or securities or rights convertible or exchangeable into shares of common stock. Except as set forth in Section 3.9 of the Disclosure Schedule, there are no price based anti-dilution or price adjustment provisions contained in any security issued by Company (or in any agreement providing rights to security holders) and the issue and sale of the Securities will not obligate Company to issue shares of common stock or other securities to any person (other than the Purchaser) and will not result in a right of any holder of Company’s securities to adjust the exercise, conversion, exchange or reset price under such securities. Except as set forth in Section 3.9 of the Disclosure Schedule, neither the Company nor any Subsidiary is party to any outstanding agreement providing for issuance of equity or convertible securities at prices that vary with market price or are subject to reset/repricing (including equity lines or similar arrangements). Except as set forth in Section 3.9 of the Disclosure Schedule, Company owns, directly or indirectly, all of the capital stock of each Subsidiary free and clear of any Liens, and all the issued and outstanding shares of capital stock of each Subsidiary are validly issued and are fully paid, non-assessable and free of preemptive and similar rights.
2.10 Regulatory Reports; Financial Statements. Except as set forth in Section 3.10 of the Disclosure Schedule, the Company has filed all reports and registration statements required to be filed by it under the Securities Act and the Exchange Act of 1934, as amended (the “Exchange Act”), including pursuant to Section 13(a) or 15(d) of the Exchange Act, for the two years preceding the date hereof (or such shorter period as the Company was required by law to file such material) (the foregoing materials, including the exhibits thereto, being collectively referred to herein as the “SEC Reports” and, together with the Disclosure Schedule to this Agreement, the “Disclosure Materials”). As of their respective dates, the Disclosure Materials complied in all material respects with the requirements of the Securities Act and the Exchange Act and the rules and regulations of the Commission promulgated thereunder, and none of the Disclosure Materials, when filed, contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. Except as indicated in Section 3.10 of the Disclosure Schedule or disclosed in SEC Reports (as defined herein), the financial statements of the Company included in the SEC Reports comply in all material respects with applicable accounting requirements and the rules and regulations of the Commission with respect thereto as in effect at the time of filing. Such financial statements have been prepared in accordance with generally accepted accounting principles applied on a consistent basis during the periods involved (“GAAP”), except as may be otherwise specified in such financial statements or the notes thereto and except that unaudited financial statements may not contain all footnotes required by GAAP, and fairly present in all material respects the financial position of the Company and its consolidated subsidiaries as of and for the dates thereof and the results of operations and cash flows for the periods then ended, subject, in the case of unaudited statements, to normal, immaterial, year-end audit adjustments.
2.11 Material Changes. Since the date of the latest financial statements, (i) there has been no event, occurrence or development that, individually or in the aggregate, has had or that could result in a Material Adverse Effect, (ii) the Company has not incurred any liabilities (contingent or otherwise) other than (A) trade payables and accrued expenses incurred in the ordinary course of business consistent with past practice and (B) liabilities not required to be reflected in the Company’s financial statements pursuant to GAAP or required to be disclosed in filings made with the Commission, (iii) the Company has not altered its method of accounting or the identity of its auditors, (iv) the Company has not declared or made any dividend or distribution of cash or other property to its stockholders or purchased, redeemed or made any agreements to purchase or redeem any shares of its capital stock, and (v) the Company has not issued any equity securities to any officer, director or affiliate, except pursuant to existing Company stock-based plans or agreements.
2.12 Litigation. Except as set forth in Section 3.12 of the Disclosure Schedule, there is no action, suit, inquiry, notice of violation, proceeding or investigation pending or, to the knowledge of the Company, threatened against or affecting the Company, any Subsidiary, or any Executive or Officer of the company, or any of their respective properties before or by any court, arbitrator, governmental or administrative agency or regulatory authority (federal, state, county, local or foreign) (collectively, an “Action”) which: (i) adversely affects or challenges the legality, validity or enforceability of any of the Transaction Documents or the Securities or (ii) could, if there were an unfavorable decision, have or reasonably be expected to result in a Material Adverse Effect. Neither the Company nor any Subsidiary, nor any director or officer thereof, is or has been the subject of any Action involving a claim of violation of or liability under federal or state securities laws or a claim of breach of fiduciary duty. There has not been, and to the knowledge of the Company, there is not pending or contemplated, any investigation by governmental authority, or any litigation civil or otherwise, involving the Company or any current or former director or officer of the Company or its Subsidiaries.
2.13 Labor Relations. Neither Company nor any Subsidiary is a party to or bound by any collective bargaining agreements or other agreements with labor organizations. Neither Company nor any Subsidiary has violated in any material respect any laws, regulations, orders or contract terms, affecting the collective bargaining rights of employees, labor organizations or any laws, regulations or orders affecting employment discrimination, equal opportunity employment, or employees’ health, safety, welfare, wages and hours. No material labor dispute exists or, to the knowledge of the Company, is imminent with respect to any of the employees of the Company which could reasonably be expected to result in a Material Adverse Effect.
2.14 Regulatory Permits. Company and the Subsidiaries possess all certificates, authorizations and permits issued by the appropriate federal, state, local or foreign regulatory authorities necessary to conduct their respective businesses, except where the failure to possess such permits would not have or reasonably be expected to result in a Material Adverse Effect (“Material Permits”), and neither Company nor any Subsidiary has received any notice of proceedings relating to the revocation or modification of any Material Permit.
2.15 Title to Assets. Except as set forth in Section 3.15 of the Disclosure Schedule, Company and the Subsidiaries have good and marketable title in fee simple to all real property owned by them that is material to the business of Company and the Subsidiaries and good and marketable title in all personal property owned by them that is material to the business of Company and the Subsidiaries, in each case free and clear of all Liens, except for Liens as do not materially affect the value of such property and do not materially interfere with the use made and proposed to be made of such property by Company and the Subsidiaries and Permitted Liens (as defined in the Security and Pledge Agreement). Any real property and facilities held under lease by Company and the Subsidiaries are held by them under valid, subsisting and enforceable leases of which Company and the Subsidiaries are in compliance.
2.16 Taxes.
(a) Except as otherwise itemized in Section 3.16 of the Disclosure Schedule, Company and its Subsidiaries have timely and properly filed all tax returns required to be filed by them for all years and periods (and portions thereof) for which any such tax returns were due, except where the failure to so file would not have a Material Adverse Effect; all such filed tax returns are accurate in all material respects; the Company has timely paid all taxes due and payable (whether or not shown on filed tax returns), except where the failure to so pay would not have a Material Adverse Effect; there are no pending assessments, asserted deficiencies or claims for additional taxes that have not been paid; the reserves for taxes, if any, reflected in the financial statements are adequate, and there are no Liens for taxes on any property or assets of the Company and any of its Subsidiaries (other than Liens for taxes not yet due and payable); there have been no audits or examinations of any tax returns by any (a) nation, state, commonwealth, province, territory, county, municipality, district or other jurisdiction of any nature; (b) federal, state, local, municipal, foreign or other government; or (c) governmental or quasi-governmental authority of any nature (including any governmental or administrative division, department, agency, commission, instrumentality, official, organization, unit, body or entity) and any court or other tribunal (a “Governmental Body”), and the Company or its Subsidiaries have not received any notice that such audit or examination is pending or contemplated; no claim has been made by any Governmental Body in a jurisdiction where the Company or any of its Subsidiaries does not file tax returns that it is or may be subject to taxation by that jurisdiction; to the knowledge of the Company, no state of facts exists or has existed which would constitute grounds for the assessment of any penalty or any further tax liability beyond that shown on the respective tax returns; and there are no outstanding agreements or waivers extending the statutory period of limitation for the assessment or collection of any tax.
(b) Neither the Company nor any of its Subsidiaries is a party to any tax-sharing agreement or similar arrangement with any other Person.
(c) The Company has made all necessary disclosures required by Treasury Regulation Section 1.6011-4. The Company has not been a participant in a “reportable transaction” within the meaning of Treasury Regulation Section 1.6011-4(b).
(d) No payment or benefit paid or provided, or to be paid or provided, to current or former employees, directors or other service providers of the Company will fail to be deductible for federal income tax purposes under Section 280G of the Internal Revenue Code of 1986, as amended (the “Code”).
2.17 Patents and Trademarks. Company and the Subsidiaries have, or have rights to use, all patents, patent applications, trademarks, trademark applications, service marks, trade names, copyrights, licenses and other similar rights that are necessary or material for use in connection with their respective businesses and which the failure to so have could have or reasonably be expected to result in a Material Adverse Effect (collectively, the “Intellectual Property Rights”). To the extent the Company or any Subsidiary owns any Intellectual Property Rights, such Intellectual Property Rights are owned free and clear of all Liens other than Permitted Liens. To the Company’s knowledge, the Intellectual Property Rights used by Company or any Subsidiary do not infringe, misappropriate, or otherwise violate the intellectual property rights of any third party. Neither Company nor any Subsidiary has received a written notice that the Intellectual Property Rights used by Company or any Subsidiary violates or infringes upon the rights of any Person, and there is no pending or, to the Company’s knowledge, threatened claim, action, or proceeding challenging the ownership, validity, or enforceability of any material Intellectual Property Rights owned by the Company or any of its Subsidiaries. All such Intellectual Property Rights are enforceable. Company and its Subsidiaries have taken reasonable steps to protect Company’s and its Subsidiaries’ rights in their Intellectual Property Rights and confidential information (the “Confidential Information”). Each employee, consultant and contractor who has had access to Confidential Information which is necessary for the conduct of Company’s and each of its Subsidiaries’ respective businesses as currently conducted or as currently proposed to be conducted has executed an agreement to maintain the confidentiality of such Confidential Information and has executed appropriate agreements that are substantially consistent with the Company’s standard forms thereof. Except under confidentiality obligations, there has been no material disclosure of any of Company’s or its Subsidiaries’ Confidential Information to any third party.
2.18 Environmental Matters. Neither Company nor any Subsidiary is in violation of any statute, rule, regulation, decision or order of any Governmental Body relating to the use, disposal or release of hazardous or toxic substances or relating to the protection or restoration of the environment or human exposure to hazardous or toxic substances (collectively, “Environmental Laws”), owns or operates any real property contaminated with any substance that is subject to any Environmental Laws, is liable for any off-site disposal or contamination pursuant to any Environmental Laws, or is subject to any claim relating to any Environmental Laws, which violation, contamination, liability or claim has had or could reasonably be expected to have a Material Adverse Effect, individually or in the aggregate; and there is no pending or, to the Company’s knowledge, threatened investigation that might lead to such a claim.
2.19 Insurance. Company and the Subsidiaries are insured by insurers of recognized financial responsibility against such losses and risks and in such amounts as are prudent and customary in the businesses in which Company and the Subsidiaries are engaged. Neither Company nor any Subsidiary has any reason to believe that it will not be able to renew its existing insurance coverage as and when such coverage expires or to obtain similar coverage from similar insurers as may be necessary to continue its business without a significant increase in cost.
2.20 Transactions with Affiliates and Employees. Except as disclosed in the Company’s financial statements or the Disclosure Materials, (i) none of the officers or directors of the Company and, to the knowledge of the Company, none of the employees of the Company is presently a party to any transaction with Company or any Subsidiary (other than for services as employees, officers and directors), including any contract, agreement or other arrangement providing for the furnishing of services to or by, providing for rental of real or personal property to or from, or otherwise requiring payments to or from any officer, director or such employee or, to the knowledge of the Company, any entity in which any officer, director, or any such employee has a substantial interest or is an officer, director, trustee or partner, other than (a) for payment of salary or consulting fees for services rendered, (b) reimbursement for expenses incurred on behalf of the Company and (c) for other employee benefits, including stock option agreements under any stock option plan of Company; (ii) there are no agreements or arrangements with officers, directors, Affiliates, or other related parties (including loans, guarantees, repayment or priority rights); and (iii) there are no side letters or other agreements modifying or supplementing the economic terms, priority, conversion mechanics, or repayment provisions of any outstanding debt or equity.
2.21 Brokers and Finders. Except as otherwise itemized in Section 3.21 of the Disclosure Schedule, no person will have, as a result of the transactions contemplated by the Transaction Documents, any valid right, interest or claim against or upon Company, any Subsidiary or the Purchaser for any commission, fee or other compensation pursuant to any agreement, arrangement or understanding entered into by or on behalf of the Company.
2.22 Questionable Payments. Neither Company nor any of its Subsidiaries nor, to the Company’s knowledge, any of their respective current or former stockholders, directors, officers, employees, agents or other persons acting on behalf of Company or any Subsidiary, has on behalf of Company or any Subsidiary or in connection with their respective businesses: (a) used any corporate funds for unlawful contributions, gifts, entertainment or other unlawful expenses relating to political activity; (b) made any direct or indirect unlawful payments to any governmental officials or employees from corporate funds; (c) established or maintained any unlawful or unrecorded fund of corporate monies or other assets; (d) made any false or fictitious entries on the books and records of Company or any Subsidiary; or (e) made any unlawful bribe, rebate, payoff, influence payment, kickback or other unlawful payment of any nature.
2.23 Solvency. Neither Company nor any of its Subsidiaries have (a) made a general assignment for the benefit of creditors; (b) filed any voluntary petition in bankruptcy or suffered the filing of any involuntary petition by its creditors; (c) suffered the appointment of a receiver to take possession of all, or substantially all, of its assets; (d) suffered the attachment or other judicial seizure of all, or substantially all, of its assets; (e) admitted in writing its inability to pay its debts as they come due; or (f) made an offer of settlement, extension or composition to its creditors generally. The Company is solvent and, immediately after giving effect to the transactions contemplated by the Transaction Documents, will be able to pay its debts as they become due and will have capital sufficient to carry on its business as presently conducted.
2.24 Foreign Corrupt Practices Act; Anti-Money Laundering; Sanctions. None of Company or any of its Subsidiaries, nor to the knowledge of the Company, any agent or other person acting on behalf of the Company or any of its Subsidiaries, has, directly or indirectly: (a) used any funds, or will use any proceeds from the sale of the Securities, for unlawful contributions, gifts, entertainment or other unlawful expenses related to foreign or domestic political activity, (b) made any unlawful payment to foreign or domestic government officials or employees or to any foreign or domestic political parties or campaigns from corporate funds, (c) failed to disclose fully any contribution made by Company or any of its Subsidiaries (or made by any person acting on their behalf of which the Company is aware) or any members of their respective management which is in violation of any legal requirement, or (d) has violated in any material respect any provision of the Foreign Corrupt Practices Act of 1977, as amended, and the rules and regulations thereunder which was applicable to Company or any of its Subsidiaries. The Company and its Subsidiaries are in compliance in all material respects with applicable anti-money laundering laws, including the USA PATRIOT Act, and applicable economic sanctions laws administered by the U.S. Department of the Treasury’s Office of Foreign Assets Control (“OFAC”). Neither the Company nor any Subsidiary is a person or entity that is, or is owned or controlled by persons or entities that are: (i) the subject of any sanctions administered or enforced by OFAC, the U.S. Department of State, or any other applicable sanctions authority (collectively, “Sanctioned Persons”), nor, to the Company’s knowledge, is any director or executive officer of the Company or any Subsidiary a Sanctioned Person, and neither the Company nor any Subsidiary conducts business with or in any country or territory that is the subject of comprehensive sanctions administered by OFAC or other applicable sanctions authority (including, as of the date hereof, Cuba, Iran, North Korea, Syria, and the Crimea, Donetsk, and Luhansk regions of Ukraine) (collectively, “Sanctioned Countries”).
2.25 Disclosures. Neither the Company nor any person acting on its behalf has provided the Purchaser or its agents or counsel with any information that constitutes or might constitute material, non-public information, other than the terms of the transactions contemplated hereby. The written materials delivered to the Purchaser in connection with the transactions contemplated by the Transaction Documents do not contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements contained therein, in light of the circumstances under which they were made, not misleading.
2.26 Transfer Agent. Company represents and warrants that it will not replace its transfer agents without Purchaser’s permission so long as the Note is outstanding. Company acknowledges that this is extremely material to the Note and the investment is made based on the assumption that this will not occur.
2.27 Shell Company Status. Set forth in Schedule 3.27 of the Disclosure Schedule is the Company’s representation as to its “Shell Company” status under Rule 144.
2.28 Notice of Material Changes. The Company agrees and acknowledges that so long as any obligations of the Company under any of the Transaction Documents shall exist, it shall be obligated to provide Notice to the Purchaser in the event of a material change to any representation or disclosure in any of the Transaction Documents, including but not limited to, the disclosures on the Disclosure Schedule, and failure to provide such notice shall be a breach of this Agreement and an Event of Default under Section 4.3 of the Note.
| 3. | Representations and Warranties of the Purchaser |
3.1 Purchase for Own Account. The Purchaser represents that it is acquiring the Note for its own account.
3.2 Information and Sophistication. Without lessening or obviating the representations and warranties of the Company set forth in Section 3, the Purchaser hereby: (a) acknowledges that it has received all the information it has requested from the Company and it considers necessary or appropriate for deciding whether to acquire the Note, (b) represents that it has had an opportunity to ask questions and receive answers from the Company regarding the terms and conditions of the offering of the Note and to obtain any additional information necessary to verify the accuracy of the information given the Purchaser and (c) further represents that it has such knowledge and experience in financial and business matters that it is capable of evaluating the merits and risk of this investment.
3.3 Ability to Bear Economic Risk. The Purchaser acknowledges that investment in the Note involves a high degree of risk, and represents that it is able, without materially impairing its financial condition, to hold the Note for an indefinite period of time and to suffer a complete loss of its investment.
3.4 Accredited Investor Status. The Purchaser is an “accredited investor” as such term is defined in Rule 501 under the Act.
3.5 Existence; Authorization. The Purchaser is a limited liability company duly organized, validly existing and in good standing under the laws of the state of its organization, having full power and authority to own its properties and to carry on its business as conducted. The Purchaser has the requisite power and authority to deliver this Agreement, perform its obligations set forth herein, and consummate the transactions contemplated hereby. The Purchaser has duly executed and delivered this Agreement and has obtained the necessary authorization to execute and deliver this Agreement and to perform his, her or its obligations herein and to consummate the transactions contemplated hereby. This Agreement, assuming the due execution and delivery hereof by the Company, is a legal, valid and binding obligation of the Purchaser enforceable against the Purchaser in accordance with its terms.
3.6 No Regulatory Approval. The Purchaser understands that no state or federal authority has scrutinized this Agreement or the Note offered pursuant hereto, has made any finding or determination relating to the fairness for investment in the Note, or has recommended or endorsed the Note, and that the Note has not been registered or qualified under the Act or any state securities laws, in reliance upon exemptions from registration thereunder. The Note may not, in whole or in part, be resold, transferred, assigned or otherwise disposed of unless it is registered under the Act or an exemption from registration is available, and unless the proposed disposition is in compliance with the restrictions on transferability under federal and state securities laws.
3.7 Purchaser Received Independent Advice. The Purchaser confirms that the Purchaser has been advised to consult with the Purchaser’s independent attorney regarding legal matters concerning the Company and to consult with independent tax advisers regarding the tax consequences of investing in the Company. The Purchaser acknowledges that Purchaser understands that any anticipated United States federal or state income tax benefits may not be available and, further, may be adversely affected through adoption of new laws or regulations or amendments to existing laws or regulations. The Purchaser acknowledges and agrees that the Company is providing no warranty or assurance regarding the ultimate availability of any tax benefits to the Purchaser by reason of the subscription.
3.8 Legends. The Purchaser understands that until such time as the Note, the Equity Interest, and the Underlying Securities have been registered under the Securities Act or may be sold pursuant to Rule 144, Rule 144A under the Securities Act or Regulation S without any restriction as to the number of securities as of a particular date that can then be immediately sold, the Securities may bear a restrictive legend in substantially the following form (and a stop- transfer order may be placed against transfer of the certificates for such Securities):
NEITHER THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE CONVERTIBLE OR EXERCISABLE HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL (WHICH COUNSEL SHALL BE SELECTED BY THE PURCHASER), IN A GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT TO RULE 144, RULE 144A OR REGULATION S UNDER SAID ACT. NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES.
| 4. | Further Agreements; Post-Closing Covenants |
4.1 Equity Interest. Upon the advance of the Consideration, Company shall issue to the Purchaser the Equity Interest.
4.2 Intentionally Omitted.
4.3 Use of Proceeds. Company agrees to use the proceeds of the transaction contemplated hereby solely as described in the Note.
4.4 Form D; Blue Sky Laws. Company agrees to file a Form D with respect to the Securities as required under Regulation D and to provide a copy thereof to the Purchaser promptly after such filing. Company shall take such action as Company shall reasonably determine is necessary to qualify the Securities for sale to the Purchaser at the applicable closing pursuant to this Agreement under applicable securities or “blue sky” laws of the states of the United States (or to obtain an exemption from such qualification), and shall provide evidence of any such action so taken to the Purchaser on or prior to the initial closing.
4.5 Usury. To the extent it may lawfully do so, the Company hereby agrees not to insist upon or plead or in any manner whatsoever claim, and will resist any and all efforts to be compelled to take the benefit or advantage of, usury laws wherever enacted, now or at any time hereafter in force, in connection with any action or proceeding that may be brought by the Purchaser in order to enforce any right or remedy under the Note. Notwithstanding any provision to the contrary contained in the Note, it is expressly agreed and provided that the total liability of the Company under the Note for payments which under Delaware law are in the nature of interest shall not exceed the maximum lawful rate authorized under applicable law (the “Maximum Rate”), and, without limiting the foregoing, in no event shall any rate of interest or default interest, or both of them, when aggregated with any other sums which under Delaware law in the nature of interest that the Company may be obligated to pay under the Note exceed such Maximum Rate. It is agreed that if the maximum contract rate of interest allowed by Delaware law and applicable to the Note is increased or decreased by statute or any official governmental action subsequent to the date hereof, the new maximum contract rate of interest allowed by law will be the Maximum Rate applicable to the Note from the effective date thereof forward, unless such application is precluded by applicable law. If under any circumstances whatsoever, interest in excess of the Maximum Rate is paid by the Company to the Purchaser with respect to indebtedness evidenced by the Note, such excess shall be applied by the Purchaser to the unpaid principal balance of any such indebtedness or be refunded to the Company, the manner of handling such excess to be at the Purchaser’s election.
4.6 Legal Counsel Opinions. Upon the request of the Purchaser from to time to time, Company shall be responsible (at its cost) for promptly supplying to Company’s transfer agent and the Purchaser a customary legal opinion letter of its counsel (the “Legal Counsel Opinion”) to the effect that (i) the resale of the Equity Interest and the Underlying Securities by the Purchaser or its affiliates, successors and assigns is exempt from the registration requirements of the 1933 Act pursuant to Rule 144 (provided the requirements of Rule 144 are satisfied and provided the Equity Interest and the Underlying Securities are not then registered under the 1933 Act for resale pursuant to an effective registration statement), or (ii) the Equity Interest and the Underlying Securities have been registered under the 1933 Act pursuant to an effective registration statement and may be freely resold by the Purchaser or its affiliates, successors and assigns. Should Company’s legal counsel fail for any reason to issue the Legal Counsel Opinion, the Purchaser may (at Company’s cost) secure another legal counsel to issue the Legal Counsel Opinion, and Company will instruct its transfer agent to accept such opinion. Company shall not impede the removal by its stock transfer agent of the restricted legend from any common stock certificate upon receipt by the transfer agent of a Rule 144 Opinion Letter.
4.7 Listing. The Company will, so long as the Purchaser owns any of the Securities, maintain the listing, quoting, and trading of the Company’s Common Shares on the Nasdaq Global Market, the Nasdaq Capital Market, the New York Stock Exchange, or the NYSE MKT, and will comply in all respects with Company’s reporting, filing and other obligations under the bylaws or rules of the Financial Industry Regulatory Authority, or FINRA, and such exchanges, as applicable, as well as with the SEC, and will timely file (or obtain extensions in respect thereof and file within the applicable grace period) all reports required to be filed by Company pursuant to the Exchange Act. Company shall promptly provide to the Purchaser copies of any notices it receives from any exchanges or electronic quotation systems on which the common stock is then traded regarding the continued eligibility of the common stock for listing on such exchanges and quotation systems.
4.8 Information and Observer Rights. Company covenants to timely file (or obtain extensions in respect thereof and file within the applicable grace period) all reports required to be filed by Company pursuant to the Exchange Act. If Company is not required to file reports pursuant to such laws, it will prepare and furnish to the Purchaser and simultaneously make publicly available in accordance with Rule 144(c) such information as is required for the Purchaser to sell the Securities under Rule 144. Company further covenants that it will take such further action as any holder of Securities may reasonably request, all to the extent required from time to time to enable the Purchaser to sell the Securities without registration under the Securities Act within the limitation of the exemptions provided by Rule 144. If the Company fails to remain a fully reporting company subject to the reporting requirements of the Exchange Act, or the Company fails to remain current in its reporting obligations or to provide currently publicly available information in accordance with Rule 144(c) and such failure extends for a period of more than fifteen Trading Days (the date which such fifteen Trading Day-period is exceeded, being referred to as “Event Date”), then in addition to any other rights the Purchaser may have hereunder or under applicable law, on each such Event Date and on each monthly anniversary of each such Event Date (if the applicable Event shall not have been cured by such date) until the information failure is cured, Company shall pay to the Purchaser an amount in cash, as partial liquidated damages and not as a penalty, equal to one percent (1%) of purchase price paid for the Securities held by the Purchaser at the Event Date. The partial liquidated damages pursuant to the terms hereof shall apply on a daily pro-rata basis for any portion of a month prior to the cure of an information failure (except in the case of the first Event Date).
4.9 Confidentiality. The Purchaser agrees that the it will keep confidential and will not disclose, divulge, or use for any purpose (other than to monitor its investment in the Company) the terms and conditions of this Agreement or any confidential information obtained from the Company or from any agent, representative, broker, advisor or other person acting on behalf of the Company pursuant to the terms of this Agreement (including notice of Company’s intention to file a registration statement), unless such confidential information (a) is known or becomes known to the public in general (other than as a result of a breach of this Section by the Purchaser), (b) is or has been independently developed or conceived by the Purchaser without use of the Company’s confidential information, or (c) is or has been made known or disclosed to the Purchaser by a third party not acting on behalf of the Company without a breach of any obligation of confidentiality such third party may have to the Company; provided, however, that the Purchaser may disclose confidential information (i) to its attorneys, accountants, consultants, and other professionals to the extent necessary to obtain their services in connection with monitoring its investment in the Company; (ii) to any prospective purchaser of any Securities from the Purchaser, if such prospective purchaser agrees to be bound by the provisions of this Section 5.10; (iii) to any existing or prospective affiliate, partner, member, stockholder, or wholly owned subsidiary of the Purchaser in the ordinary course of business, provided that the Purchaser informs such person that such information is confidential and directs such person to maintain the confidentiality of such information; or (iv) as may otherwise be required by law, provided that the Purchaser notifies the Company within three (3) business days of such disclosure and takes reasonable steps to minimize the extent of any such required disclosure. The Company shall use commercially reasonable efforts to avoid providing the Purchaser with material non-public information, whether directly or indirectly through any agent, representative, broker, advisor or other person acting on behalf of the Company. In the event the Purchaser believes it has received material non-public information from the Company that would restrict the Purchaser’s ability to sell or otherwise transfer the Securities, the Purchaser may notify the Company in writing of such information (the “MNPI Notice”). Upon receipt of an MNPI Notice, the Company shall, within three (3) business days, either (x) publicly disclose such information in a manner that would cause such information to no longer constitute material non-public information, or (y) provide written notice to the Purchaser that the Company disputes that such information constitutes material non-public information and authorize the Purchaser to trade in the Securities notwithstanding possession of such information. If the Company fails to take either action within such three (3) business day period, the Purchaser shall have the right (but not the obligation) to publicly disclose such information, and the Company shall not assert any claim against the Purchaser arising from such disclosure.
4.10 Right of Participation. During the period beginning on the Closing Date, and ending on the later of (i) eighteen (18) months following the Closing Date or (ii) the date that the balance due under the Note is paid in full, in the event that the Company or any Subsidiary proposes to offer and sell its securities, whether in the form of debt, Equity Financing (defined below), or any other financing transaction (each a “Future Offering”), the Purchaser shall have the right, but not the obligation, to participate in the purchase of the securities being offered in such Future Offering up to an amount equal to one hundred percent (100%) of the maximum Principal Amount of the Note. For the avoidance of doubt, an “Equity Financing” shall mean Company’s or its Subsidiary’s sale of its common stock or any securities conferring the right to purchase Company’s or Subsidiary’s common stock or securities convertible into, or exchangeable for (with or without additional consideration), shares of the Company’s or Subsidiary’s common stock. In connection with each Participation Right, the Company shall provide written notice to the Purchaser of the terms and conditions of the Future Financing at least ten business days prior to the anticipated first closing of such Future Financing (the “FF Notice”). If the Purchaser shall elect to exercise its Participation Right, it shall notify Company, in writing, of such election at least five business days prior to the anticipated closing date set forth in the FF Notice (the “Participation Notice”). In the event the Purchaser does not return a Participation Notice to the Company within such five-business day period, then with respect to such FF Notice, the Participation Right granted hereunder shall terminate and be of no further force and effect; provided, however, that such Participation Right shall be reinstated if the anticipated closing referenced in the FF Notice does not occur within thirty business days of the anticipated first closing date specified in such FF notice.
4.11 Right of First Refusal. During the period beginning on the Closing Date, and ending on the later of (i) eighteen (18) months following the Closing Date or (ii) the date that the balance due under the Note is paid in full, in the event the Company or any Subsidiary has a bona fide offer of capital or financing from any third party that the Company or any Subsidiary intends to act upon, then the Company must first offer such opportunity to the Purchaser in writing, to provide such capital or financing to the Company or Subsidiary on the same terms as each respective third party’s terms. Should the Purchaser be unwilling or unable to provide such capital or financing to the Company or Subsidiary within 10 Trading Days from Purchaser’s receipt of written notice of the offer (the “Offer Notice”) from the Company, then the Company or Subsidiary may obtain such capital or financing from that respective third party upon the exact same terms and conditions offered by the Company to the Purchaser, which transaction must be completed within 60 days after the date of the Offer Notice. If the Company or Subsidiary does not receive the capital or financing from the respective 3rd party within 60 days after the date of the respective Offer Notice, then the Company must again offer the capital or financing opportunity to the Purchaser as described above, and the process detailed above shall be repeated.
4.12 Terms of Future Financings. So long as any obligations of the Company under the Transaction Documents are outstanding, upon any issuance of (or announcement of intent to effect an issuance of) any security, or amendment to (or announcement of intent to effect an amendment to) any security that was originally issued before the Issue Date, by the Company or any Subsidiary, with any term that the Purchaser reasonably believes is more favorable to the Purchaser of such security than to the Purchaser in the Transaction Documents, or with a term in favor of the Purchaser of such security that the Purchaser reasonably believes was not similarly provided to the Purchaser in the Transaction Documents, then (i) the Company shall notify the Purchaser of such additional or more favorable term within three (3) business days of the issuance and/or amendment (as applicable) of the respective security, and (ii) such term, at Purchaser’s option, shall become a part of the transaction documents with the Purchaser (regardless of whether the Company complied with the notification provision of this Section). The types of terms contained in another security that may be more favorable to the Purchaser of such security include, but are not limited to, terms addressing conversion price, conversion price discounts and adjustments, prepayment rate, conversion lookback periods, interest rates, original issue discounts, stock sale price, private placement price per share, commitment shares, warrant coverage, and warrant exercise price. If Purchaser elects to have the term become a part of the transaction documents with the Purchaser, then the Company shall immediately deliver acknowledgment of such adjustment in form and substance reasonably satisfactory to the Purchaser (the “Acknowledgment”) within three (3) business days of Company’s receipt of request from Purchaser (the “Adjustment Deadline”), provided that Company’s failure to timely provide the Acknowledgement shall not affect the automatic amendments contemplated hereby.
4.13 Rollover Rights. So long as the Note is outstanding, if the Company completes any single public offering or private placement of its equity, equity-linked or debt securities, including but not limited to a “Reg-A Offering” (each, a “Future Transaction”), the Purchaser may, in its sole discretion, elect to apply as purchase consideration for such Future Transaction: (i) all, or any portion, of the then outstanding principal amount of the Note and any accrued but unpaid interest, including any amounts that would be added to the principal outstanding in the event that any redemption right or prepayment right is exercised by either the Purchaser or the Company, and (ii) any securities of the Company then held by the Purchaser, at their fair value (the “Rollover Rights”). The Company shall give written notice to Purchaser as soon as practicable, but in no event less than fifteen (15) days before the anticipated closing date of such Future Transaction. The Purchaser 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 Purchaser exercises its Rollover Rights, then such elected portion with respect to (i) and (ii) above, shall automatically convert into the corresponding securities issued in such Future Transaction under the terms of such Future Transaction, such that the Purchaser will receive all securities (including, without limitation, any warrants) issuable under the Future Transaction.
4.14 Piggyback Registration Rights. If the Company or any Subsidiary proposes to register any of its Common Shares (other than pursuant to a Registration on Form S-4 or S-8 or any successor form), it will give prompt written notice to the Purchaser of its intention to effect such registration (the “Incidental Registration”). Within twenty (20) business days of receiving such written notice of an Incidental Registration, the Purchaser may make a written request (the “Piggy-Back Request”) that the Company include in the proposed Incidental Registration all, or a portion, of the Underlying Securities owned by the Purchaser. As used herein, Underlying Securities shall mean the shares issuable upon Conversion of the Note, and the Reserved Amount. The Company will use its commercially reasonable efforts to include in any Incidental Registration all Underlying Securities which the Company has been requested to register pursuant to any timely Piggy-Back Request to the extent required to permit the disposition (in accordance with the intended methods thereof as aforesaid) of the Registrable Securities so to be registered. In the event the Company breaches any obligation under this Section 4.14, then: (i) the outstanding principal balance due under the Note shall automatically increase by One Hundred Seventy Two Thousand, Four Hundred Forty Four Dollars ($172,444) (the “LD Amount”), effective as of the date of such breach, without any further action required by either party; and (ii) such breach shall constitute an Event of Default under the Note. The parties acknowledge and agree that the LD Amount is not an exclusive remedy and shall not limit, replace, or otherwise affect any right, remedy, or recourse available to the Purchaser under the Note or any other Transaction Document, all of which shall remain in full force and effect and may be exercised concurrently with, and in addition to, the LD Amount. For the avoidance of doubt, upon a breach of this Section 4.14, the Purchaser shall be entitled to both the increase in the outstanding balance pursuant to clause (i) above and the full exercise of all rights and remedies available under the Note and the other Transaction Documents, including without limitation all default remedies, conversion rights, and interest accrual at the default rate.
4.15 Transfer Agent Instructions. Concurrently with the execution of an agreement to engage the services of a transfer agent, Company shall issue irrevocable instructions to Company’s transfer agent to issue certificates, registered in the name of the Purchaser or its nominee, upon issuance of Underlying Securities, in such amounts as specified from time to time by the Purchaser to Company in accordance with the terms thereof (the “Irrevocable Transfer Agent Instructions”). In the event that Company proposes to replace its transfer agent, Company shall provide, prior to the effective date of such replacement, a fully executed Irrevocable Transfer Agent Instructions in a form as initially delivered pursuant to this Agreement (including but not limited to the provision to irrevocably reserved shares of common stock in the Reserved Amount) signed by the successor transfer agent to Company and Company. Prior to registration of the Securities under the Securities Act or the date on which the Securities may be sold pursuant to Rule 144 without any restriction as to the number of Securities as of a particular date that can then be immediately sold, all such certificates shall bear the restrictive legend specified in Section 4.8 of this Agreement. Company warrants that: (i) no instruction other than the Irrevocable Transfer Agent Instructions referred to in this Section will be given by Company to its transfer agent and that the Securities shall otherwise be freely transferable on the books and records of Company as and to the extent provided in this Agreement and the Note; (ii) it will not direct its transfer agent not to transfer or delay, impair, and/or hinder its transfer agent in transferring (or issuing) (electronically or in certificated form) any certificate for Securities to be issued to the Purchaser upon conversion of or otherwise pursuant to the Note as and when required by the Note and this Agreement; (iii) it will not fail to remove (or directs its transfer agent not to remove or impairs, delays, and/or hinders its transfer agent from removing) any restrictive legend (or to withdraw any stop transfer instructions in respect thereof) on any certificate for any Securities issued to the Purchaser upon conversion of or otherwise pursuant to the Note as and when required by the Note and this Agreement and (iv) it will provide any required corporate resolutions and issuance approvals to its transfer agent within one (1) business day of each conversion of the Note or issuance of the Equity Interest. If the Purchaser provides Company, at the cost of Company, with reasonable assurances that a public sale or transfer of such Securities may be made without registration under the Securities Act or that the Securities can be sold pursuant to Rule 144, Company shall permit the transfer, and, in the case of the Securities, promptly instruct its transfer agent to issue one or more certificates, free from restrictive legend, in such name and in such denominations as specified by the Purchaser. Company acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to the Purchaser, by vitiating the intent and purpose of the transactions contemplated hereby. Accordingly, Company acknowledges that the remedy at law for a breach of its obligations under this Section may be inadequate and agrees, in the event of a breach or threatened breach by Company of the provisions of this Section, that the Purchaser shall be entitled, in addition to all other available remedies, to an injunction restraining any breach and requiring immediate transfer, without the necessity of showing economic loss and without any bond or other security being required.
4.16 Further Assurances. The Purchaser agrees and covenants that at any time and from time to time it will execute and deliver to the Company such further instruments and documents and take such further action as the Company may reasonably require within three (3) business days of any such request in order to carry out the full intent and purpose of this Agreement and to comply with state or federal securities laws or other regulatory approvals.
4.17 Exchange Act Reporting. It shall be an event of default under the Note and this Agreement if the Company fails to remain fully compliant with the SEC reporting requirements under the Exchange Act (including but not limited to becoming delinquent in its filings).
| 5. | Conditions to the Company’s Obligation to Sell |
The obligation of the Company hereunder to issue and sell the Note to the Purchaser at the Closing is subject to the satisfaction, at or before the Closing Date, of each of the following conditions thereto, provided that these conditions are for the Company’s sole benefit and may be waived by the Company at any time in its sole discretion:
(a) The Purchaser shall have executed this Agreement and delivered the same to the Company.
(b) The Purchaser shall have delivered the Consideration in accordance with Section 1.3 above.
(c) The representations and warranties of the Purchaser shall be true and correct in all material respects as of the date when made and as of the Closing Date, as though made at that time (except for representations and warranties that speak as of a specific date), and the Purchaser shall have performed, satisfied and complied in all material respects with the covenants, agreements and conditions required by this Agreement to be performed, satisfied or complied with by the Purchaser at or prior to the Closing Date.
(d) No litigation, statute, rule, regulation, executive order, decree, ruling or injunction shall have been enacted, entered, promulgated or endorsed by or in any court or governmental authority of competent jurisdiction or any self-regulatory organization having authority over the matters contemplated hereby which prohibits the consummation of any of the transactions contemplated by this Agreement.
| 6. | Conditions to The Purchaser’s Obligation to Purchase |
The obligation of the Purchaser hereunder to purchase the Note, on the Closing Date, is subject to the satisfaction, at or before the Closing Date, of each of the following conditions, provided that these conditions are for the Purchaser’s sole benefit and may be waived by the Purchaser at any time in its sole discretion:
(a) The Company shall have executed this Agreement and delivered the same to the Purchaser.
(b) The Company shall have delivered to the Purchaser the duly executed Note in such denominations as the Purchaser shall request and in accordance with Section 1.3 above.
(c) Company shall have delivered to the Purchaser the Equity Interest.
(d) Company shall have delivered executed Transaction Documents, or such other instruments as contemplated by this Agreement.
(e) Company shall have provided to Purchaser the necessary documents to enable Purchaser to perfect its first priority security interest in all collateral as contemplated by the Security and Pledge Agreement, including but not limited to any equity interests and shares owned by the Company, contemporaneously with the date of this Agreement.
(f) The Company has provided the Purchaser with a current schedule of liabilities and the results of a current certified UCC.
(g) The representations and warranties of the Company shall be true and correct in all material respects as of the date when made and as of Closing Date, as though made at such time (except for representations and warranties that speak as of a specific date) and the Company shall have performed, satisfied and complied in all material respects with the covenants, agreements and conditions required by this Agreement to be performed, satisfied or complied with by the Company at or prior to the Closing Date.
(h) No litigation, statute, rule, regulation, executive order, decree, ruling or injunction shall have been enacted, entered, promulgated or endorsed by or in any court or governmental authority of competent jurisdiction or any self-regulatory organization having authority over the matters contemplated hereby which prohibits the consummation of any of the transactions contemplated by this Agreement.
(i) No event shall have occurred which could reasonably be expected to have a Material Adverse Effect on the Company including but not limited to a change in the Exchange Act reporting status of the Company or the failure of the Company to be timely in its Exchange Act reporting obligations.
(j) Company shall have delivered to the Purchaser (i) a certificate evidencing the formation and good standing of Company and each of its Subsidiaries in such entity’s jurisdiction of formation issued by the Secretary of State (or comparable office) of such jurisdiction, as of a date within ten (10) days of the Closing Date; (ii) resolutions adopted by the Company’s Board of Directors at a duly called meeting or by unanimous written consent authorizing this Agreement and all other documents, instruments and transactions contemplated hereby; and (iii) lien searches for Company dated within ten (10) days of the Closing Date and again as of the Closing Date.
(k) Company shall have delivered to the Purchaser executed subordination agreements from all other secured creditors of the Company and its Subsidiaries, in form and substance reasonably satisfactory to the Purchaser.
| 7. | Miscellaneous |
7.1 Events of Default. The Company acknowledges and agrees that (i) any breach by the Company of any covenant, agreement, or obligation set forth in this Agreement, or (ii) any representation or warranty made by the Company in this Agreement that is false, incorrect, or misleading in any material respect when made or at any time thereafter, shall constitute an Event of Default under this Agreement and under Section 4.3 of the Note, entitling the Purchaser to exercise all rights and remedies available under the Transaction Documents and applicable law.
7.2 Binding Agreement. The terms and conditions of this Agreement shall inure to the benefit of and be binding upon the respective successors and assigns of the parties. Nothing in this Agreement, expressed or implied, is intended to confer upon any third party any rights, remedies, obligations, or liabilities under or by reason of this Agreement, except as expressly provided in this Agreement.
7.3 Governing Law; Consent to Jurisdiction; Dispute Resolution. This Agreement shall be governed by and construed under the laws of the State of Delaware, without giving effect to conflicts of laws principles. Notwithstanding anything to the contrary contained herein, the parties expressly acknowledge and agree that Section 5.6 of the Note governs exclusively any dispute, claim or controversy arising out of or relating to this Agreement or any of the Transaction Documents, including without limitation arbitration, forum selection, jurisdiction, service of process, waiver of jury trial, remedies, and the availability of equitable relief, and such Section 5.6 is hereby incorporated by reference as if set forth herein in its entirety.
7.4 Counterparts. This Agreement may be executed in two (2) or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. Counterparts may be delivered via facsimile, electronic mail (including pdf or any electronic signature) or other transmission method and any counterpart so delivered shall be deemed to have been duly and validly delivered and be valid and effective for all purposes.
7.5 Titles and Subtitles. The titles and subtitles used in this Agreement are used for convenience only and are not to be considered in construing or interpreting this Agreement.
7.6 Notices. Notwithstanding anything to the contrary contained herein, all notices, demands, requests, consents, approvals and other communications under this Agreement or any of the Transaction Documents shall be governed exclusively by Section 5.2 of the Note, which is hereby incorporated by reference as if set forth herein in full, including with respect to permitted methods of delivery, timing, effectiveness, addresses, and electronic service. In the event of any inconsistency, the Note shall control.
7.7 Modification; Waiver. No modification or waiver of any provision of this Agreement or consent to departure therefrom shall be effective only upon the written consent of the Company and the Purchaser. Any provision of the Note may be amended or waived by the written consent of the Company and the Purchaser.
7.8 Expenses. The Company and the Purchaser shall each bear its respective expenses and legal fees incurred with respect to this Agreement and the transactions contemplated herein; unless otherwise specified in the Agreement or the Note.
7.9 Delays or Omissions. It is agreed that no delay or omission to exercise any right, power or remedy accruing to the Purchaser, upon any breach or default of the Company under the Transaction Documents shall impair any such right, power or remedy, nor shall it be construed to be a waiver of any such breach or default, or any acquiescence therein, or of or in any similar breach or default thereafter occurring; nor shall any waiver of any single breach or default be deemed a waiver of any other breach or default theretofore or thereafter occurring. It is further agreed that any waiver, permit, consent or approval of any kind or character by Purchaser of any breach or default under this Agreement, or any waiver by any Purchaser of any provisions or conditions of this Agreement must be in writing and shall be effective only to the extent specifically set forth in writing and that all remedies, either under this Agreement, or by law or otherwise afforded to the Purchaser, shall be cumulative and not alternative.
7.10 Entire Agreement. This Agreement and the Exhibits hereto constitute the full and entire understanding and agreement between the parties with regard to the subjects hereof and no party shall be liable or bound to any other party in any manner by any representations, warranties, covenants and agreements except as specifically set forth herein.
7.11 Severability. Any part, provision, representation or warranty of this Agreement which is prohibited or unenforceable or is held to be void or unenforceable in any jurisdiction shall be ineffective, as to such jurisdiction, to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. To the extent permitted by applicable law, the parties hereto waive any provision of law which prohibits or renders void or unenforceable any provision hereof. If the invalidity of any part, provision, representation or warranty of this Agreement shall deprive any party of the economic benefit intended to be conferred by this Agreement, the parties shall negotiate, in good-faith, to develop a structure the economic effect of which is as close as possible to the economic effect of this Agreement without regard to such invalidity.
[Signature
page follows]
In Witness Whereof, the parties have executed this Securities Purchase Agreement as of the date first written above.
COMPANY: |
||
| NextNRG, Inc. | ||
| By: | /s/ Michael D. Farkas | |
| Name: | Michael D. Farkas | |
| Title: | Chief Executive Officer | |
| PURCHASER: | ||
| Leviston Resources, LLC | ||
| By: | /s/ Roman Rogol | |
| Name: | Roman Rogol | |
| Title: | CFO | |
[Securities Purchase Agreement – Signature page]
Exhibit 10.2
Note: Certain identified information has been excluded from this Exhibit 10.1 because it both (i) is not material and (ii) is the type that the Company treats as private or confidential. Such information has been identified with “[***]” herein.
THIS NOTE HAS BEEN ISSUED WITH “ORIGINAL ISSUE DISCOUNT” FOR U.S. FEDERAL INCOME TAX PURPOSES. THE ISSUER WILL MAKE AVAILABLE TO ANY HOLDER OF THIS NOTE: (1) THE ISSUE PRICE AND ISSUE DATE OF THE NOTE, (2) THE AMOUNT OF ORIGINAL ISSUE DISCOUNT ON THE NOTE, (3) THE YIELD TO MATURITY OF THE NOTE, AND (4) ANY OTHER INFORMATION REQUIRED TO BE MADE AVAILABLE BY U.S. TREASURY REGULATIONS UPON RECEIVING A WRITTEN REQUEST FOR SUCH INFORMATION AT THE FOLLOWING ADDRESS: 407 LINCOLN ROAD, STE 9F, MIAMI BEACH FL 33139.
NEITHER THE ISSUANCE NOR SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE CONVERTIBLE HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL (WHICH COUNSEL SHALL BE SELECTED BY THE HOLDER AND ACCEPTABLE BY THE BORROWER), IN A GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID ACT. NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES.
| Principal Amount: USD $1,724,444 | Issue Date: April 1, 2026 | |
| Purchase Price: USD $1,552,000 | ||
| Original Issue Discount: USD $172,444 |
SENIOR SECURED CONVERTIBLE PROMISSORY NOTE
For value received, NextNRG, Inc., a corporation organized under the laws of the State of Delaware (the “Borrower”), hereby promises to pay to the order of Leviston Resources, LLC, a limited liability company organized under the laws of the State of Delaware, or registered assigns (the “Holder”) the principal sum of up to One Million, Seven Hundred Twenty Four Thousand, Four Hundred Forty Four Dollars ($1,724,444) (the “Principal Amount”), together with interest on the Principal Amount, on the dates set forth below or upon acceleration or otherwise, as set forth herein (or as may be amended, extended, renewed and refinanced, collectively, this “Note”). The “Interest Rate” shall reset daily and accrue at a rate equal to ten percent (10%). In no event shall the Interest Rate exceed the maximum rate allowed by law; any interest payment which would for any reason be unlawful under applicable law shall be applied to principal.
The consideration to the Borrower for this Note is up to One Million, Five Hundred Fifty Two Thousand Dollars ($1,552,000) (the “Consideration”) to be paid to be paid on or after the execution hereof (the “Closing”). At the Closing, Fifteen Thousand Dollars ($15,000) of the Consideration shall be withheld by the Holder and applied directly to the payment of the Holder’s legal fees in connection with the preparation and negotiation of this Note and the related transaction documents.
The maturity date (“Maturity Date”) shall be six (6) months after the Issue Date. The principal sum, as well as interest and other fees shall be due and payable in accordance with the payment terms set forth in Article I herein. Notwithstanding the foregoing, the Maturity Date for this Note, shall be no later than the date upon which the Borrower. Subject to Section 1.5 below, this Note may not be prepaid in whole or in part except as otherwise explicitly set forth herein.
This Note carries an original issue discount of Two Hundred Twenty Eight Thousand Dollars ($172,444) (the “OID”), which is included in the principal balance of this Note. Thus, the purchase price of this Note shall be One Million, Five Hundred Fifty Two Thousand Dollars ($1,552,000), computed as follows: the Principal Amount minus the OID.
It is further acknowledged and agreed that the Principal Amount owed by Borrower under this Note shall be increased by the amount of all reasonable expenses incurred by the Holder in connection with the collection of amounts due, or enforcement of any terms pursuant to, this Note. All such expenses shall be deemed added to the Principal Amount hereunder to the extent such expenses are paid or incurred by the Holder.
This Note is issued by the Borrower to the Holder pursuant to the terms of that certain Securities Purchase Agreement even date herewith (the “Purchase Agreement”), terms of which are incorporated by reference and made part of this Note. Each capitalized term used herein, and not otherwise defined, shall have the meaning ascribed thereto in the Purchase Agreement. As used herein, the term “Trading Day” means any day that the Common Shares are listed for trading or quotation on any US based exchange or electronic quotation systems on which the Common Shares are then traded.
This Note shall be a senior secured obligation of the Borrower, with first priority over all current and future Indebtedness (as defined below) of the Borrower and any subsidiaries, whether such subsidiaries exist on the Issue Date or are created or acquired thereafter (each a “Subsidiary” and collectively, the “Subsidiaries”). The obligations of the Borrower under this Note are secured pursuant to the terms of the security and pledge agreement, of even date herewith, by and between the Borrower and the Holder (the “Security and Pledge Agreement” and collectively with the Purchase Agreement, and other related ancillary documents and agreements executed in connection thereto, the “Transaction Documents”), a copy of which is attached hereto as Exhibit C. The terms of the Transaction Documents are incorporated by reference and made part of this Note. With respect to any Subsidiary created or acquired subsequent to the Issue Date, Borrower agrees to cause such Subsidiary to execute any documents or agreements that would bind the Subsidiary to the terms herein and in the other Transaction Documents.
This Note is free from all taxes, liens, claims and encumbrances with respect to the issue thereof and shall not be subject to preemptive rights or other similar rights of shareholders or members, as applicable, of Borrower, and will not impose personal liability upon the holder thereof.
In addition to the terms above, the following terms shall also apply to this Note:
ARTICLE I. PAYMENTS
1.1 Principal Payments. The Principal Amount shall be due and payable on the Maturity Date.
1.2 Interest Payments. Interest on this Note (i) is charged on a monthly basis (that is, on each monthly anniversary of the Issue Date (the “Interest Date”), the amount of accrued interest is computed on the basis of a 360 day year and the actual number of days elapsed, and shall accrue on the sum of the principal amount plus, if applicable, any accrued and previously due but unpaid interest); (ii) is payable at maturity; and (iii) is guaranteed to the Holder for the entirety of the six (6) month term of this Note, without regard to an acceleration of the Maturity Date, based on the total Principal Amount, without regard to a reduction of the Principal Amount resulting from, without limitation, any conversion or, subject to Section 1.5 below, prepayment by Borrower.
1.3 Other Payment Obligations. All payments, fees, penalties, and other charges, if any, due under this Note shall be payable pursuant to the terms contained herein, but in any case, shall be payable no later than the Maturity Date.
1.4 Gross up. If any taxes are levied or imposed on payments, fees, penalties, and other charges, if any, due under this Note or the other Transaction Documents, Borrower agrees to pay the full amount of such taxes and such additional amounts as may be necessary so that every payment of all amounts due under the Note or the other Transaction Documents, including any amount paid pursuant to this Section 1.4 after withholding or deduction for or on account of any taxes, will not be less than the amount provided for under this Note or the other Transaction Documents.
1.5 Prepayment. Borrower shall have the right at any time prior to the Maturity Date, upon five (5) days’ prior written notice to the Holder (the “Prepayment Notice”), to prepay this Note as follows: (a) if the Prepayment Date (as defined below) occurs within sixty (60) days of the Issue Date, Borrower may prepay this Note by making a payment to Holder equal to the sum of (i) the outstanding Principal Amount, (ii) all Guaranteed Interest for the full six (6) month term (regardless of how much of the term has elapsed as of the Prepayment Date), and (iii) any other amounts due under this Note, with no prepayment premium; and (b) if the Prepayment Date occurs after sixty (60) days from the Issue Date, Borrower may prepay this Note by making a payment to Holder equal to 110% multiplied by the sum of (i) the outstanding Principal Amount, (ii) all Guaranteed Interest for the full six (6) month term (regardless of how much of the term has elapsed as of the Prepayment Date), and (iii) any other amounts due under this Note (the amount payable under either clause (a) or (b), as applicable, the “Prepayment Amount”). The Prepayment Notice must be received by Holder no later than five (5) days prior to the date that Borrower proposes to remit the Prepayment Amount (the “Prepayment Date”). Holder may convert any or all of this Note into shares of Common Stock prior to the Prepayment Date. If Borrower does not remit the Prepayment Amount on or before the Prepayment Date, then (i) the Prepayment Notice and the Prepayment right granted hereunder shall be canceled, (ii) Borrower shall thereafter not be permitted to prepay this Note, and (iii) Holder’s right to convert any or all of this Note into shares of Common Stock shall be reinstated.
1.6 If any payment (other than a payment due at maturity or upon default) is not made on or before its due date, the Holder may at its discretion collect a delinquency charge equal to the greater of One Hundred Dollars ($100.00) or five (5%) percent of the unpaid amount. The unpaid balances on all obligations payable by Borrower and due to Holder pursuant to the terms of this Note, shall in addition to other remedies contained herein, bear interest after default or maturity at an annual rate equal to the Default Interest rate.
1.7 All payments of principal and interest due hereunder (to the extent not converted into Borrower’s common stock (the “Common Stock” or “Common Shares”)) shall be paid by wire transfer or ACH (automated clearing house) transfer to the account specified in wire instructions provided by the Holder to the Borrower in writing. Payments will be applied to amounts due under this Note in such order as the Holder shall determine in its sole discretion. Whenever any amount expressed to be due by the terms of this Note is due on any day which is not a business day, the same shall instead be due on the preceding day which is a business day. As used in this Note, the term “business day” shall mean any day other than a Saturday, Sunday or a day on which commercial banks in the city of New York, New York are authorized or required by law or executive order to remain closed.
ARTICLE II. CONVERSION RIGHTS
2.1 Conversion Right. Upon and following the occurrence of an Event of Default (as defined in Article IV), the Holder shall have the right, at the Holder’s option, to convert all or any part of the outstanding and unpaid principal amount and accrued and unpaid interest of this Note into fully paid and non-assessable Common Shares of Borrower or other securities into which such Common Shares shall hereafter be changed or reclassified (each, a “Conversion Share”) at the conversion price (the “Conversion Price”) determined as provided herein (a “Conversion”); provided, however, that in no event shall the Holder be entitled to convert any portion of this Note in excess of that portion of this Note upon conversion of which the sum of (1) the number of Common Shares beneficially owned by the Holder and its affiliates (other than Common Shares which may be deemed beneficially owned through the ownership of the unconverted portion of the Note or the unexercised or unconverted portion of any other security of Borrower subject to a limitation on conversion or exercise analogous to the limitations contained herein, and, if applicable, net of any shares that may be deemed to be owned by any person not affiliated with the Holder who has purchased a portion of the Note from the Holder) and (2) the number of Common Shares issuable upon the conversion of the portion of this Note with respect to which the determination of this proviso is being made, would result in beneficial ownership by the Holder and its affiliates of more than 4.99% of the outstanding Common Shares. For purposes of the proviso to the immediately preceding sentence, beneficial ownership shall be determined in accordance with Section 13(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and Regulations 13D-G thereunder, except as otherwise provided in clause (1) of such proviso, provided, further, however, that the limitations on conversion may be waived (up to a maximum of 9.99%) by the Holder upon, at the election of the Holder, not less than 61 days’ prior notice to Borrower (the “Waiver Notice”), and the provisions of the conversion limitation in effect prior to the waiver, shall continue to apply until such 61st day (or such later date, as determined by the Holder, as may be specified in such Waiver Notice). Notwithstanding the foregoing requirements with respect to the Waiver Notice, if the Holder is not subject to the reporting requirements under Section 13 of the Exchange Act with respect to the securities of the Borrower, then the Holder may elect to waive the limitations (up to a maximum of 9.99%) immediately upon providing a Waiver Notice to the Borrower, and the provisions of the conversion limitation in effect prior to the waiver, shall continue to apply only as determined by the Holder, as may be specified in such Waiver Notice. The beneficial ownership limitation described in this Section 2.1 shall be referred to hereinafter as the “Beneficial Ownership Limitation.” The number of Common Shares to be issued upon each conversion of this Note shall be determined by dividing the Conversion Amount (as defined below) by the applicable Conversion Price then in effect on the date specified in the notice of conversion, in the form attached hereto as Exhibit A (the “Notice of Conversion”), delivered to Borrower by the Holder in accordance with Section 2.4 below; provided that the Notice of Conversion is submitted by facsimile or e-mail (or by other means resulting in, or reasonably expected to result in, notice) to Borrower before 8:00 p.m., New York, New York time on such conversion date (the “Conversion Date”). The term “Conversion Amount” means, with respect to any conversion of this Note, the sum of: (1) the principal amount of this Note to be converted in such conversion; plus (2) at the Holder’s option, accrued and unpaid interest; provided, however, that at the option of Holder, the accrued and unpaid interest can be converted prior to any other amounts under the Note, if any, on such principal amount at the interest rates provided in this Note to the Conversion Date; plus (3) at the Holder’s option, Default Interest, if any, on the amounts referred to in the immediately preceding clauses (1) and/or (2); plus (4) a fixed conversion fee of One Thousand Nine Hundred Fifty Dollars ($1,950) per conversion, which shall be included in each Conversion Amount regardless of actual expenses incurred; plus (5) at the Holder’s option, any amounts owed to the Holder pursuant to Sections 2.3 and 2.4(g) hereof; plus (6) at the Holder’s option, any other amounts due and owing to the Holder under this Note or any Transaction Document. The Holder shall have the right, in its sole discretion, to designate which amounts due under this Note are included in any Conversion Amount and the order in which such components are applied.
2.2 Conversion Price.
(a) Calculation of Conversion Price. The Conversion Price shall be equal to 80% of the average of the three (3) lowest daily VWAPs of the Common Shares during the fifteen (15) Trading Day period ending on the Trading Day immediately preceding the applicable Conversion Date, with a floor of $0.10; provided that if the Conversion Notice is delivered after the close of regular trading hours on the Conversion Date, such period shall instead end on the Conversion Date. As used herein, “VWAP” means, for any Trading Day, the volume weighted average price of the Common Shares as reported by Bloomberg L.P. (or a comparable, reliable reporting service selected by the Holder in good faith) for trades executed during regular trading hours on the principal Trading Market for such Trading Day.
(b) Conversion Price Adjustments.
(1) Intentionally Omitted.
(2) Common Share Distributions and Splits. If Borrower, at any time while this Note is outstanding: (i) pays a distribution on its Common Shares or otherwise makes a distribution or distributions payable in Common Shares on its Common Shares; (ii) subdivides outstanding Common Shares into a larger (or smaller) number of shares; or (iii) issues, in the event of a reclassification of shares of Common Shares, any Common Shares of Borrower, then the Conversion Price shall be multiplied by a fraction of which the numerator shall be the number of Common Shares (excluding any treasury shares of Borrower) outstanding immediately before such event and of which the denominator shall be the number of Common Shares outstanding immediately after such event.
(3) Fundamental Transaction. If, at any time while this Note is outstanding, (i) Borrower effects any merger or consolidation of Borrower with or into another person, (ii) Borrower effects any sale of all or substantially all of its assets in one transaction or a series of related transactions, (iii) any tender offer or exchange offer (whether by Borrower or another person) is completed pursuant to which holders of Common Shares are permitted to tender or exchange their shares for other securities, cash or property, or (iv) Borrower effects any reclassification of the Common Shares or any compulsory share exchange pursuant to which the Common Shares are effectively converted into or exchanged for other securities, cash or property (in any such case, a “Fundamental Transaction”), then, upon any subsequent conversion of this Note, the Holder shall have the right to receive, for each Conversion Share that would have been issuable upon such conversion immediately prior to the occurrence of such Fundamental Transaction, the same kind and amount of securities, cash or property as it would have been entitled to receive upon the occurrence of such Fundamental Transaction if it had been, immediately prior to such Fundamental Transaction, the holder of 1 Common Share (the “Alternate Consideration”). For purposes of any such conversion, the determination of the Conversion Price shall be appropriately adjusted to apply to such Alternate Consideration based on the amount of Alternate Consideration issuable in respect of 1 Common Share in such Fundamental Transaction, and Borrower shall apportion the Conversion Price among the Alternate Consideration in a reasonable manner reflecting the relative value of any different components of the Alternate Consideration.
(4) Anti-dilution Adjustment. If at any time while this Note is outstanding, Borrower sells, grants, or otherwise makes a disposition of Common Shares, or sells, grants, or otherwise makes a disposition of other securities (or in the case of securities existing on the Issue Date, amends such securities) convertible into, exercisable for, or that would otherwise entitle any person or entity the right to acquire Common Shares, or announces its intention, or files any document with the SEC or other regulatory body that reflects its intention to do of any of the foregoing, at an effective price per share that is lower than the then Conversion Price (such lower price, the “Base Conversion Price” and such issuances, collectively, a “Dilutive Issuance”) (it being agreed that if the holder of the Common Shares or other securities 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 Common Shares 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, and the Base Conversion Price shall then be adjusted to equal the lowest of such issuance price), then the Conversion Price shall be reduced to a price equal the Base Conversion Price as it may be adjusted as provided for above. Such adjustment shall be made whenever such Common Shares or other securities are issued. Notwithstanding the foregoing, no adjustment will be made under this Section 2.2(b)(4) in respect of an Exempt Issuance. For purposes of this Section 2.2(b)(4) an “Exempt Issuance” means an issuance of Common Shares or other securities convertible into or exercisable or exchangeable for Common Shares (i) to employees or directors of, or consultants or advisors to, Borrower or any of its Subsidiaries pursuant to a plan, agreement or arrangement approved by the Board of Directors of Borrower, (ii) to banks, equipment lessors or other financial institutions, or to real property lessors, pursuant to a debt financing, equipment leasing or real property leasing transaction approved by the Board of Directors of Borrower, (iii) to suppliers or third party service providers in connection with the provision of goods or services pursuant to transactions approved by the Board of Directors of Borrower, (iv) pursuant to the acquisition of another corporation or other entity by Borrower by merger, purchase of substantially all of the assets or other reorganization or pursuant to a joint venture agreement, provided that such issuances are approved by the Board of Directors of Borrower, (v) to third parties in connection with collaboration, technology license, development, marketing or other similar agreements or strategic partnerships approved by the Board of Directors of Borrower, or (vi) shares with respect to which the Holder waives its anti-dilution rights granted hereby; provided, however, that any such issuance described in (iii) through (v) shall only be to a person (or to the equity holders of a person) which is, itself or through its Subsidiaries, an operating business, or an owner of an asset that is used in a business, that is synergistic with the business of Borrower and shall provide to Borrower additional benefits in addition to the investment of funds, and provided however, that none of (i) through (v) above shall include a transaction in which Borrower is issuing securities primarily for the purpose of raising capital or to an entity whose primary business is investing in securities. In the event of an issuance of securities involving multiple tranches or closings, any adjustment pursuant to this Section 2.2(b)(4) shall be calculated as if all such securities were issued upon distribution of the initial tranche. For the avoidance of doubt, in the event the Conversion Price has been adjusted pursuant to this Section 2.2(b)(4) and the Dilutive Issuance that triggered such adjustment does not occur, is not consummated, is unwound or is cancelled after the facts for any reason whatsoever, in no event shall the Conversion Price be readjusted to the Conversion Price that would have been in effect if such Dilutive Issuance had not occurred or been consummated.
(5) Notice to the Holder. Whenever the Conversion Price is adjusted pursuant to any provision of this Section 2.2(b), Borrower shall within two (2) business days deliver to the Holder a notice setting forth the Conversion Price after such adjustment and setting forth a brief statement of the facts requiring such adjustment, provided that Borrower’s failure to timely provide the notice shall not affect the automatic adjustments contemplated hereby.
2.3 Authorized Shares. Borrower covenants that during the period the conversion right exists, Borrower will reserve from its authorized and unissued Common Shares a sufficient number of shares, free from preemptive rights, to provide for the issuance of Common Shares upon the full conversion of this Note. Borrower is required at all times to have authorized and reserved seven (7) times the number of shares that is actually issuable upon full conversion of the Note (based on the Conversion Price of the Note in effect from time to time, which, if cannot be determined shall be estimated in good faith by Borrower) it being acknowledged and agreed by the parties that for the initial issuance of the Note, 41,666,667 shares of Common Shares is sufficient (the “Reserved Amount”). The Reserved Amount shall be increased from time to time in accordance with Borrower’s obligations hereunder. Borrower represents that upon issuance, such shares will be duly and validly issued, fully paid and non-assessable. In addition, if Borrower shall issue any securities or make any change to its capital structure which would change the number of Common Shares into which the Note shall be convertible at the then current Conversion Price, Borrower shall at the same time make proper provision so that thereafter there shall be a sufficient number of Common Shares authorized and reserved, free from preemptive rights, for conversion of the outstanding Note, including but not limited to authorizing additional shares or effectuating a reverse split. Borrower (i) acknowledges that it has irrevocably instructed its transfer agent by letter, a copy of which is attached hereto as Exhibit B to issue certificates for the Common Shares issuable upon conversion of this Note, and (ii) agrees that its issuance of this Note shall constitute full authority to its officers and agents who are charged with the duty of executing Common Share certificates to execute and issue the necessary certificates for Common Shares in accordance with the terms and conditions of this Note. Borrower further covenants that so long as any obligation under this Note remains outstanding, Borrower will not establish a reserve of its Common Shares for the benefit of any party other than the Holder, without prior approval in writing by Holder. Failure by Borrower to maintain the Reserved Amount, or the failure by Borrower to be engaged with a transfer agent and subject to the terms of an irrevocable instruction letter according to the terms herein, or the establishment of a reserve without prior approval as required above, will be considered an Event of Default under Section 4.1.2 of the Note.
2.4 Method of Conversion.
(a) Mechanics of Conversion. Subject to Section 2.1, this Note may be converted by the Holder in whole or in part, by (A) submitting to Borrower or its transfer agent, a Notice of Conversion (by facsimile, e-mail or other reasonable means of communication dispatched on the Conversion Date prior to 8:00 p.m., New York, New York time) and (B) subject to Section 2.4(b), surrendering this Note at the principal office of Borrower.
(b) Surrender of Note Upon Conversion. Notwithstanding anything to the contrary set forth herein, upon conversion of this Note in accordance with the terms hereof, the Holder shall not be required to physically surrender this Note to Borrower unless the entire unpaid principal amount of this Note is so converted. The Holder and Borrower shall maintain records showing the principal amount so converted and the dates of such conversions or shall use such other method, reasonably satisfactory to the Holder and Borrower, so as not to require physical surrender of this Note upon each such conversion. In the event of any dispute or discrepancy, such records of Borrower shall, prima facie, be controlling and determinative in the absence of manifest error. The Holder and any assignee, by acceptance of this Note, acknowledge and agree that, by reason of the provisions of this paragraph, following conversion of a portion of this Note, the unpaid and unconverted principal amount of this Note represented by this Note may be less than the amount stated on the face hereof.
(c) Payment of Taxes. Borrower shall not be required to pay any tax which may be payable in respect of any transfer involved in the issue and delivery of Common Shares or other securities or property on conversion of this Note in a name other than that of the Holder (or in street name), and Borrower shall not be required to issue or deliver any such shares or other securities or property unless and until the person or persons (other than the Holder or the custodian in whose street name such shares are to be held for the Holder’s account) requesting the issuance thereof shall have paid to Borrower the amount of any such tax or shall have established to the satisfaction of Borrower that such tax has been paid.
(d) Delivery of Common Shares Upon Conversion. Upon receipt by Borrower from the Holder of a facsimile transmission or e-mail (or other reasonable means of communication) of a Notice of Conversion meeting the requirements for conversion as provided in this Section 2.4, Borrower shall issue and deliver to or cause to be issued and delivered to or upon the order of the Holder certificates for Common Shares issuable upon such conversion by the end of the second business day after such receipt (the “Deadline”) (and, solely in the case of conversion of the entire unpaid principal amount hereof, surrender of this Note) in accordance with the terms hereof. Failure to issue and deliver shares or cause to be issued and delivered shares by the Deadline as described above, will be considered an Event of Default under Section 4.1.2 of the Note.
(e) Obligation of Borrower to Deliver Common Shares. Upon receipt by Borrower of a Notice of Conversion, the Holder shall be deemed to be the holder of record of the Common Shares issuable upon such conversion, the outstanding principal amount and the amount of accrued and unpaid interest on this Note shall be reduced to reflect such conversion, and, unless Borrower defaults on its obligations under this Article II, all rights with respect to the portion of this Note being so converted shall forthwith terminate except the right to receive the Common Shares or other securities, cash or other assets, as herein provided, on such conversion. If the Holder shall have given a Notice of Conversion as provided herein, Borrower’s obligation to issue and deliver the certificates for Common Shares shall be absolute and unconditional, irrespective of the absence of any action by the Holder to enforce the same, any waiver or consent with respect to any provision thereof, the recovery of any judgment against any person or any action to enforce the same, any failure or delay in the enforcement of any other obligation of Borrower to the holder of record, or any setoff, counterclaim, recoupment, limitation or termination, or any breach or alleged breach by the Holder of any obligation to Borrower, and irrespective of any other circumstance which might otherwise limit such obligation of Borrower to the Holder in connection with such conversion. The Conversion Date specified in the Notice of Conversion shall be the Conversion Date so long as the Notice of Conversion is received by Borrower before 8:00 p.m., New York, New York time, on such date.
(f) Delivery of Common Shares by Electronic Transfer. In lieu of delivering physical certificates representing the Common Shares issuable upon conversion, provided Borrower is participating in the Depository Trust Company (“DTC”) Fast Automated Securities Transfer (“FAST”) program, upon request of the Holder and its compliance with the provisions contained in Section 2.1 and in this Section 2.4, Borrower shall use its best efforts to cause its transfer agent to electronically transmit the Common Shares issuable upon conversion to the Holder by crediting the account of Holder’s Prime Broker with DTC through its Deposit Withdrawal Agent Commission (“DWAC”) system. If the Borrower is not registered with DTC as of the Issue Date, the Borrower shall be required to register with DTC within thirty (30) days of the Issue Date, and the provisions of this paragraph shall apply after such registration. Failure to become DTC registered or maintain DTC eligibility as provided herein shall be an Event of Default under Section 4.1.22 of this Note.
(g) Failure to Deliver Common Shares Prior to Deadline. Without in any way limiting the Holder’s right to pursue other remedies, including actual damages and/or equitable relief, or other remedies provided to Holder herein, the parties agree that if Borrower causes the Common Shares issuable upon conversion of this Note to not be delivered by the Deadline (such undelivered shares referred to herein as the “Undelivered Shares”), Borrower shall pay to the Holder in cash, as liquidated damages and not as a penalty, the sum of: (i) the greater of (x) $1,000 per day for each day beyond the Deadline that Borrower fails to deliver such Common Shares, or (y) for each $1,000 of Undelivered Shares subject to such Conversion (valued based on the VWAP of the Common Stock on the date of the applicable Conversion Notice), $25 per Trading Day (increasing to $35 per Trading Day on the fifth Trading Day after such liquidated damages begin to accrue) for each Trading Day after Deadline until such Undelivered Shares are delivered or Holder rescinds such Conversion, and (ii) the product of the number of Undelivered Shares multiplied by the difference between the highest trade price and the lowest trade price during the period beginning on the date that such conversion was submitted, and the date on which the Shares are delivered to Holder’s Prime Broker and are available to be sold. Such cash amount shall, at the option of the Holder, either (A) be due and payable in cash within five (5) days after written notice from the Holder demanding payment, or (B) be automatically added to the principal amount of this Note, in which event interest shall accrue thereon in accordance with the terms of this Note and such additional principal amount shall be convertible into Common Shares in accordance with the terms of this Note. Borrower agrees that the right to convert is a valuable right to the Holder, and as such, Borrower will not take any actions to hamper, delay or prevent any Holder conversion of the Note. The damages resulting from such failure to deliver Undelivered Shares, or an attempt to frustrate or interference with Holder’s Conversion Right, are difficult if not impossible to qualify. Accordingly, the Borrower and the Holder acknowledge and agree that (i) the amount of loss or damages likely to be incurred as a result of a failure to deliver Undelivered Shares is incapable or is difficult to precisely estimate, (ii) the amounts specified in this Section 2.4(g) bear a reasonable relationship to, and are not plainly or grossly disproportionate to, the probable loss likely to be incurred in connection with such failure, and (iii) the Parties acknowledge that the liquidated damages provision contained in this Section 2.4(g) are justified.
(h) Right to Amend Notice of Conversion. On or before the 1st Trading Day following the date of receipt of a Notice of Conversion, with respect to a conversion, if the applicable Conversion Price is less than the “conversion price” specified on such Notice of Conversion, the Holder may deliver an updated Notice of Conversion to the Company correcting the Conversion Price (and the aggregate Conversion Amount) as specified in such Notice of Conversion (provided, that if such updated Notice of Conversion is not delivered to the Company on or prior to 12:00 p.m. (local time in New York, NY) on the Trading Day immediately following the applicable Conversion Date, the Deadline shall be extended by one (1) Trading Day).
(i) Adjustment Due to Market Price. If at any time the Market Price, as determined on the date of each conversion, is less than the Conversion Price, then the outstanding principal amount of this Note shall be automatically increased immediately following each such conversion by the result of the Conversion Price minus the Market Price multiplied by the amount of shares of common stock being issued with respect to such conversion , and interest shall accrue thereon in accordance with the terms of this Note. “Market Price” shall mean the lowest trading price for the Common Stock during ten (10) Trading Days prior to the applicable date of conversion. For example, the Conversion Price is $0.50 and if the Market Price is $0.40 and the number of shares issued upon conversion is 10,000 shares, then the outstanding principal amount of this Note shall be increased by $1,000.00 ($0.50 - $0.40 = $0.10 multiplied by 10,000 = 1,000.00) immediately following such conversion. For the avoidance of doubt, the adjustment provided for in this Section 2.4(i) is intended to ensure that the Holder is made whole with respect to any conversion where the number of shares issued is determined by reference to a price per share that is higher than the Conversion Price to which the Holder would otherwise be entitled, by increasing the outstanding principal amount of this Note by an amount equal to the economic difference between such higher price and the applicable Conversion Price multiplied by the number of shares issued.
(j) Issuance Restrictions. Notwithstanding anything to the contrary contained in this Note or the other Transaction Documents, the Company and Holder agree that the total cumulative number of shares of Common Stock that may be issued to Holder and its Affiliates hereunder and under the other Transaction Documents may not exceed the requirements of Nasdaq Listing Rule 5635(d) (“Nasdaq 19.99% Cap”), except that such limitation will not apply following Shareholder Approval, as defined in the Purchase Agreement. If the Company has not obtained Shareholder Approval for the issuance of shares of Common Stock issuable upon the conversion of this Note in excess of the Nasdaq 19.99% Cap in accordance with the requirements of Nasdaq Listing Rule 5635(d), and such Shareholder Approval is required pursuant to the rules of the principal Trading Market, then the Company may not issue any shares of Common Stock in excess of the amount permitted under the rules of the principal Trading Market. For avoidance of doubt, unless and until any required Shareholder Approval is obtained and effective, notes issued to any registered broker-dealer as a fee in connection with the Securities issued pursuant to the Purchase Agreement shall provide that such notes shall not be converted unless and until such Shareholder Approval is obtained and effective.
2.5 Concerning the Common Shares. The Common Shares issuable upon conversion of this Note may not be sold or transferred unless (i) such shares are sold pursuant to an effective registration statement under the Act or (ii) Borrower or its transfer agent shall have been furnished with an opinion of counsel (which opinion shall be in form, substance and scope customary for opinions of counsel in comparable transactions) to the effect that the shares to be sold or transferred may be sold or transferred pursuant to an exemption from such registration or (iii) such shares are sold or transferred pursuant to Rule 144 under the Act (or a successor rule) (“Rule 144”) or (iv) such shares are transferred to an “affiliate” (as defined in Rule 144) of Borrower who agrees to sell or otherwise transfer the shares only in accordance with this Section 2.5 and who is an Accredited Investor. Except as otherwise provided (and subject to the removal provisions set forth below), until such time as the Common Shares issuable upon conversion of this Note have been registered under the Act or otherwise may be sold pursuant to Rule 144 without any restriction as to the number of securities as of a particular date that can then be immediately sold, each certificate for Common Shares issuable upon conversion of this Note that has not been so included in an effective registration statement or that has not been sold pursuant to an effective registration statement or an exemption that permits removal of the legend, shall bear a legend substantially in the following form, as appropriate:
NEITHER THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE EXERCISABLE HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL (WHICH COUNSEL SHALL BE SELECTED BY THE HOLDER AND ACCEPTABLE TO THE COMPANY), IN A GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID ACT. NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES.
The legend set forth above shall be removed and Borrower shall issue to the Holder a new certificate therefore free of any transfer legend if (i) Borrower or its transfer agent shall have received an opinion of counsel, in form, substance and scope customary for opinions of counsel in comparable transactions, to the effect that a public sale or transfer of such Common Shares may be made without registration under the Act, which opinion shall be accepted by Borrower (which acceptance shall be subject to and conditioned on any requirements, if any, of the its transfer agent, the exchange on which Borrower is then trading or other applicable laws, rules or regulations) so that the sale or transfer is effected or (ii) in the case of the Common Shares issuable upon conversion of this Note, such security is registered for sale by the Holder under an effective registration statement filed under the Act or otherwise may be sold pursuant to Rule 144 without any restriction as to the number of securities as of a particular date that can then be immediately sold. In the event that Borrower does not accept the opinion of counsel provided by the Holder with respect to the transfer of Securities pursuant to an exemption from registration, such as Rule 144 or Regulation S, at the Deadline, it will be considered an Event of Default pursuant to Section 4.1.2 of the Note; provided that notwithstanding the foregoing, if Borrower is legally unable to accept such opinion as a result of any of Borrower’s transfer agent requirements, the requirements of the exchange on which Borrower is then traded, or other applicable laws, rules or regulations, Borrower’s non-acceptance shall be an Event of Default pursuant to Section 4.1.25.
2.6 Status as Shareholder. Upon submission of a Notice of Conversion by a Holder, (i) the shares covered thereby (other than the shares, if any, which cannot be issued because their issuance would exceed such Holder’s allocated portion of the Reserved Amount or Maximum Share Amount) shall be deemed converted into Common Shares and (ii) the Holder’s rights as a Holder of such converted portion of this Note shall cease and terminate, excepting only the right to receive certificates for such Common Shares and to any remedies provided herein or otherwise available at law or in equity to such Holder because of a failure by Borrower to comply with the terms of this Note. Notwithstanding the foregoing, if a Holder has not received certificates for all Common Shares prior to the tenth (10th) business day after the expiration of the Deadline with respect to a conversion of any portion of this Note for any reason, then (unless the Holder otherwise elects to retain its status as a holder of Common Shares by so notifying Borrower) the Holder shall regain the rights of a Holder of this Note with respect to such unconverted portions of this Note and Borrower shall, as soon as practicable, return such unconverted Note to the Holder or, if the Note has not been surrendered, adjust its records to reflect that such portion of this Note has not been converted. In all cases, the Holder shall retain all of its rights and remedies (including, without limitation, (i) the right to receive Conversion Default Payments pursuant to Section 2.4 to the extent required thereby for such Conversion Default and any subsequent Conversion Default and (ii) the right to have the Conversion Price with respect to subsequent conversions adjusted upon an Event of Default (if applicable), for Borrower’s failure to convert this Note.
ARTICLE III. RANKING, CERTAIN COVENANTS, AND POST CLOSING OBLIGATIONS
3.1 Distributions on Common Shares. So long as the Borrower shall have any obligation under this Note, the Borrower shall not without the Holder’s written consent (a) pay, declare or set apart for such payment, any dividend or other distribution (whether in cash, property or other securities) on the Common Shares (or other capital securities of the Borrower) other than dividends on Common Shares solely in the form of additional Common Shares or (b) directly or indirectly or through any Subsidiary make any other payment or distribution in respect of Common Shares (or other securities representing its capital) except for distributions that comply with Section 3.7 below.
3.2 Restrictions on Variable Rate Transactions. Unless approved by the Holder, while any Note is outstanding, Borrower and each Subsidiary shall not enter into an agreement or amend an existing agreement to effect any sale of securities involving, or convert any securities previously issued under, a Variable Rate Transaction. The term “Variable Rate Transaction” means a transaction in which Borrower or any Subsidiary (i) issues or sells any convertible securities either (A) at a conversion, exercise or exchange rate or other price that is based upon and/or varies with the trading prices of, or quotations for, the Common Shares at any time after the initial issuance of such convertible securities, or (B) with a conversion, exercise or exchange price that is subject to being reset at some future date after the initial issuance of such convertible securities or upon the occurrence of specified or contingent events directly or indirectly related to the business of Borrower or the Subsidiary, as the case may be, or the market for the Common Shares, or (ii) enters into any agreement (including, without limitation, an “equity line of credit” or an “at-the-market offering”) whereby Borrower or any Subsidiary may sell securities at a future determined price (other than standard and customary “preemptive” or “participation” rights). The Holder shall be entitled to obtain injunctive relief against Borrower and its Subsidiaries to preclude any such issuance, which remedy shall be in addition to any right to collect damages.
3.3 Restrictions on Certain Transactions. So long as the Borrower shall have any obligation under this Note and unless approved in writing by the Holder (which such approval not to be unreasonably withheld), the Borrower shall not directly or indirectly enter into a transaction structured in accordance with, based upon, or related or pursuant to, in whole or in part, Section 3(a)(10) of the Securities Act (“3(a)(10) Transaction”).
3.4 Restriction on Common Share Repurchases. So long as the Borrower shall have any obligation under this Note, Borrower shall not without the Holder’s written consent redeem, repurchase or otherwise acquire (whether for cash or in exchange for property or other securities or otherwise) in any one transaction or series of related transactions any Common Shares (or other securities representing its capital) of Borrower or any warrants, rights or options to purchase or acquire any such shares; except for the repurchase of shares at a nominal price in connection with rights under an agreement with an employee or consultant of the Borrower whose shares have been forfeited as a result of such employee or consultant’s ceasing to provide services to the Borrower.
3.5 Payments from Future Funding Sources. The Borrower shall pay to the Holder on an accelerated basis, any outstanding Principal Amount of the Note, along with all unpaid interest, and fees and penalties, if any (including but not limited to any prepayment premium under Section 1.5), from the sources of capital below, at the Holder’s discretion, it being acknowledged and agreed by Holder that Borrower shall have the right to make Bona Fide payments to vendors with Common Shares:
3.5.1 Future Financing Proceeds. One hundred percent (100%) of the net proceeds of any future financings by Borrower or any Subsidiary, whether debt or equity, or any other financing proceeds such as cash advances, royalties or earn-out payments; provided, however, that this provision shall not apply to a transaction with a specific use of proceeds requirement that the proceeds generated in such transaction are to be used exclusively to purchase the assets or equity of an unaffiliated business in an arm’s length transaction, or such proceeds are to be used exclusively to develop the existing assets of the Borrower, and the proceeds are used accordingly.
3.5.2 Other Future Receipts. One hundred percent (100%) of the net proceeds to the Borrower or Subsidiary resulting from the sale of any assets or securities, of Borrower or any of its Subsidiaries, including but not limited to, the sale of any Subsidiary, the receipt in cash by Borrower or any of its Subsidiaries of any tax refunds, the sale of any tax credits, collections by Borrower or any of its Subsidiaries pursuant to any settlement or judgement, but not including sales of inventory of the Borrower or its Subsidiaries in the ordinary course of business.
3.6 Use of Proceeds. Borrower agrees to use the proceeds advanced by the Holder hereunder exclusively to pursue a registered offering of the company’s common stock, acquisitions, and general working capital.
3.7 Ranking and Security. The obligations of the Borrower under this Note shall constitute a first priority security interest and rank senior with respect to any and all Indebtedness existing prior to or incurred as of or following the initial Issue Date. The obligations of the Borrower under this Note are secured pursuant to the Security and Pledge Agreement attached hereto. So long as the Borrower shall have any obligation under this Note, the Borrower shall not (directly or indirectly through any Subsidiary or affiliate) (i) pay down any existing Indebtedness without the Holder’s prior written consent, or (ii) incur or suffer to exist or guarantee any Indebtedness that is senior to or pari passu with (in priority of payment and performance) the Borrower’s obligations hereunder, provided, however, that notwithstanding the foregoing, one or more Senior Secured Convertible Promissory Notes issued by the Borrower and dated within ten (10) Business Days of the Issue Date, having an aggregate principal amount not to exceed Five Hundred Fifty-Five Thousand, Five Hundred Fifty-Six Dollars ($555,556) in the aggregate (the “Permitted Pari Passu Notes”), shall constitute permitted pari passu obligations hereunder and shall not be subject to the restrictions of this Section 3.7(ii). As used herein, the term “Indebtedness” means (a) all indebtedness of the Borrower for borrowed money or for the deferred purchase price of property or services, including any type of letters of credit, but not including deferred purchase price obligations in place as of the Issue Date or obligations to trade creditors incurred in the ordinary course of business, (b) all obligations of the Borrower evidenced by notes, bonds, debentures or other similar instruments, (c) purchase money indebtedness hereafter incurred by the Borrower to finance the purchase of fixed or capital assets, including all capital lease obligations of the Borrower which do not exceed the purchase price of the assets funded, (d) all guarantee obligations of the Borrower in respect of obligations of the kind referred to in clauses (a) through (c) above that the Borrower would not be permitted to incur or enter into, and (e) all obligations of the kind referred to in clauses (a) through (d) above that the Borrower is not permitted to incur or enter into that are secured by (or for which the holder of such obligation has an existing right, contingent or otherwise, to be secured and/or unsecured by) any lien or encumbrance on property (including accounts and contract rights) owned by the Borrower, whether or not the Borrower has assumed or become liable for the payment of such obligation. With respect to any Indebtedness that is a senior secured obligation of the Borrower, Borrower agrees to cause the holders of such Indebtedness to execute subordination agreements with respect to the Borrower’s obligations under this Note, and to deliver such subordination agreements to the Holder on or prior to the Issue Date. Notwithstanding the foregoing, the Borrower shall be permitted to pursue and close equipment financing, with such financing secured by first priority lien(s) against the equipment being financed and second priority lien(s) (behind the Holder’s security interest) against the Borrower’s other assets.
3.8 Regulatory Reporting.
3.8.1 Borrower shall be required to be in compliance with the requirements of the Exchange Act, and be required to remain a fully reporting company under the SEC reporting requirements and remain subject to and fully compliant with, the annual and periodic reporting requirements of the Exchange Act (including but not limited to becoming current in its filings). Failure to remain a fully reporting company and subject to and compliant with the Exchange Act as described herein, (including but not limited to becoming delinquent in its filings), shall be an Event of Default (as defined below).
3.8.2 If the Borrower fails to remain current in its reporting obligations under the Exchange Act or to provide currently publicly available information in accordance with Rule 144(c) and such failure extends for a period of more than ten (10) Trading Days (the date on which such ten (10) Trading Day period is exceeded being referred to as the “Information Failure Event Date”), then in addition to any other rights the Holder may have hereunder or under applicable law, on each such Information Failure Event Date and on each monthly anniversary of each such Information Failure Event Date (if the applicable event shall not have been cured by such date) until the information failure is cured, Borrower shall pay to the Holder an amount in cash, as partial liquidated damages and not as a penalty, equal to one percent (1%) of the Consideration paid for this Note. The partial liquidated damages pursuant to the terms hereof shall apply on a daily pro-rata basis for any portion of a month prior to the cure of an information failure (except in the case of the first Information Failure Event Date).
3.9 Opinion Letter.
3.9.1 Borrower shall be responsible for supplying an opinion letter from a duly admitted attorney, in a form acceptable to the Holder, the Borrower’s transfer agent, specific to the fact that Common Shares issued pursuant the Note, including the shares issued upon conversion of the Note, are either exempt from the registration requirements of the Securities Act pursuant to Rule 144 (so long as the requirements of Rule 144 are satisfied) or have been duly registered and permitted to be sold and transferred without restriction (so long as the shares have been duly registered and permitted to be sold and transferred without restriction). Failure to provide an opinion letter as described herein shall be an event of default pursuant to Section 4.1.2 of the Note.
3.9.2 Borrower shall be responsible for supplying an opinion letter from a duly admitted attorney, in a form acceptable to the Holder, that the transaction contemplated herein, as well as the execution of the Transaction Documents, have been duly authorized by the Borrower in accordance with its governing documents.
ARTICLE IV. EVENTS OF DEFAULT
4.1 It shall be considered an event of default if any of the following events listed in this Article IV (each, an “Event of Default”) shall occur:
4.1.1 Failure to Pay Principal or Interest. The Borrower fails to pay the principal hereof or interest thereon when due on this Note, whether at maturity, upon acceleration or otherwise.
4.1.2 Failure to Reserve or Deliver Shares. (a) Borrower fails to reserve a sufficient amount of Common Shares as required under the terms of this Note (including the requirements of Section 2.3 of this Note), fails to issue Common Shares to the Holder (or announces or threatens in writing that it will not honor its obligation to do so) upon exercise by the Holder of the conversion rights of the Holder in accordance with the terms of this Note, fails to transfer or cause its transfer agent to transfer (issue) (electronically or in certificated form) Common Shares issued to the Holder upon conversion of or otherwise pursuant to this Note as and when required by this Note, Borrower directs its transfer agent not to transfer or delays, impairs, and/or hinders its transfer agent in transferring (or issuing) (electronically or in certificated form) Common Shares to be issued to the Holder upon conversion of or otherwise pursuant to this Note as and when required by this Note, or fails to remove (or directs its transfer agent not to remove or impairs, delays, and/or hinders its transfer agent from removing) any restrictive legend (or to withdraw any stop transfer instructions in respect thereof) on any Common Shares issued to the Holder upon conversion of or otherwise pursuant to this Note as and when required by this Note subject to regulations (or makes any written announcement, statement or threat that it does not intend to honor the obligations described in this paragraph), or fails to supply an opinion letter specific to the fact that Common Stock issued pursuant to conversion of the Note are exempt from Registration Requirements pursuant to Rule 144, and any such failure shall continue uncured (or any written announcement, statement or threat not to honor its obligations shall not be rescinded in writing) for one (1) business days after the Holder shall have delivered a Notice of Conversion. It is an obligation of Borrower to remain current in its obligations to its transfer agent. It shall be an event of default of this Note, if a conversion of this Note is delayed, hindered or frustrated due to a balance owed by Borrower to its transfer agent. If, at the option of the Holder, the Holder advances any funds to Borrower’s transfer agent in order to process a conversion, such advanced funds shall be paid by Borrower to the Holder, at the sole discretion of the Holder, either (A) in cash within five (5) business days after written notice from the Holder demanding payment, or (B) automatically added to the outstanding Principal Amount of the Note, in which event interest shall accrue thereon in accordance with the terms of this Note. (b) Borrower establishes a reserve of its Common Shares for the benefit of a party other than the Holder, without obtaining prior approval in writing by the Holder.
4.1.3 Breach of Covenants. Borrower, or the relevant related party, as the case may be, breaches any material covenant, post-closing obligation or other material term or condition contained in any of the Transaction Documents and breach continues for a period of thirty (30) days.
4.1.4 Breach of Representations and Warranties. Any representation or warranty of the Borrower made herein or in any of the other Transaction Documents, or in any statement or certificate given pursuant hereto or in connection herewith, shall be false or misleading in any material respect when made and the breach of which has (or with the passage of time will have) an adverse effect on the rights of the Holder with respect to this Note and the other Transaction Documents.
4.1.5 Judgments or Settlements. (i) Any money judgment, writ or similar process shall be entered or filed against Borrower or any subsidiary of Borrower or any of its property or other assets for more than $100,000, and shall remain unvacated, unbonded or unstayed for a period of thirty (30) days unless otherwise consented to by the Holder; or (ii) the settlement of any claim or litigation, creating an obligation on the Borrower in amount over $100,000 or where value of the underlying claim or dispute was at least $100,000.
4.1.6 Receiver or Trustee. Borrower or any subsidiary of Borrower shall make an assignment for the benefit of creditors, or apply for or consent to the appointment of a receiver or trustee for it or for a substantial part of its property or business, or such a receiver or trustee shall otherwise be appointed.
4.1.7 Bankruptcy. Bankruptcy, insolvency, reorganization or liquidation proceedings or other proceedings, voluntary or involuntary, for relief under any bankruptcy law or any law for the relief of debtors shall be instituted by or against Borrower or any subsidiary of Borrower. With respect to any such proceedings that are involuntary, Borrower shall have a 60 day cure period in which to have such involuntary proceedings dismissed.
4.1.8 Change of Control or Liquidation. Any Change of Control of the Borrower, or the dissolution, liquidation, or winding up of Borrower or any substantial portion of its business. As used herein, a “Change of Control” shall be deemed to occur upon the consummation of any of the following events: (a) any person or persons acting together which would constitute a “group” for purposes of Section 13(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), (other than the Borrower or any subsidiary of the Borrower) shall beneficially own (as defined in Rule 13d-3 of the Exchange Act), directly or indirectly, at least 50% of the total voting power of all classes of capital stock of the Borrower entitled to vote generally in the election of the Board; (b) Current Directors (as herein defined) shall cease for any reason to constitute at least a majority of the members of the Board (for this purpose, a “Current Director” shall mean any member of the Board as of the date hereof and any successor of a Current Director whose election, or nomination for election by the Borrower’s shareholders, was approved by at least a majority of the Current Directors then on the Board); (c) (i) the complete liquidation of the Borrower or (ii) the merger or consolidation of the Borrower, other than a merger or consolidation in which (x) the holders of the Common Shares of the Borrower immediately prior to the consolidation or merger have, directly or indirectly, at least a majority of the Common Shares of the continuing or surviving corporation immediately after such consolidation or merger or (y) the Board immediately prior to the merger or consolidation would, immediately after the merger or consolidation, constitute a majority of the board of directors of the continuing or surviving corporation, which liquidation, merger or consolidation has been approved by the shareholders of the Borrower; (d) the sale or other disposition (in one transaction or a series of transactions) of all or substantially all of the assets of the Borrower pursuant to an agreement (or agreements) which has (have) been approved by the shareholders of the Borrower; or (e) the appointment of a new chief executive officer.
4.1.9 Cessation of Operations. Any cessation of operations by the Borrower or the Borrower admits it is otherwise generally unable to pay its debts as such debts become due, provided, however, that any disclosure of the Borrower’s ability to continue as a “going concern” shall not be an admission that the Borrower cannot pay its debts as they become due.
4.1.10 Maintenance of Assets. The failure by Borrower to maintain any intellectual property rights, personal, real property or other assets which are necessary to conduct its business (whether now or in the future), to the extent that such failure would result in a material adverse condition or material adverse change in or affecting the business operations, properties or financial condition of Borrower or any of its subsidiaries (a “Material Adverse Effect”).
4.1.11 Financial Statement Restatement. Borrower restates any financial statements for any date or period from two years prior to the Issue Date of this Note and until this Note is no longer outstanding, if the result of such restatement would, by comparison to the original financial statement, have constituted a material adverse effect on the rights of the Holder with respect to this Note.
4.1.12 Delisting of Common Shares. If at any time on or after the date hereof, the Borrower shall fail to maintain the listing or quotation of the Common Shares on a national securities exchange.
4.1.13 Failure to Comply with Regulatory Reporting Requirements. Borrower fails to be fully compliant with, or ceases to be subject to, the reporting requirements of the Exchange Act (including but not limited to becoming delinquent in its filings).
4.1.14 DTC “Chill”. The DTC places a “chill” (i.e. a restriction placed by DTC on one or more of DTC’s services, such as limiting a DTC participant’s ability to make a deposit or withdrawal of the security at DTC) on any of the Borrower’s securities and such restriction is not remedied within two (2) weeks.
4.1.15 DWAC Eligibility. In addition to the Event of Default in Section 4.1.21, the Common Stock is otherwise not eligible for trading through the DTC’s Fast Automated Securities Transfer or Deposit/Withdrawal at Custodian programs, or if the Borrower is not registered with DTC on the Issue Date, Borrower fails to become DTC registered within thirty (30) days of the Issue Date.
4.1.16 Bid Price. The Borrower shall lose the “bid” price for its Common Stock ($0.0001 on the “Ask” with zero market makers on the “Bid” per Level 2) and/or a market (including the OTC Pink, OTCQB or an equivalent replacement marketplace or exchange) on any three (3) trading days while the Note is outstanding.
4.1.17 Inside Information. Any attempt by the Borrower or its officers, directors, and/or affiliates to transmit, convey, disclose, or any actual transmittal, conveyance, or disclosure by the Borrower or its officers, directors, and/or affiliates of, material non-public information concerning the Borrower, to the Holder or its successors and assigns, which is not immediately cured by Borrower’s filing of a Form 8-K pursuant to Regulation FD on that same date.
4.1.18 Reverse Splits. The Borrower effectuates a reverse split of its Common Shares without twenty (20) days prior written notice to the Holder.
4.1.19 Replacement of Transfer Agent. In the event that the Borrower proposes to replace its transfer agent, the Borrower fails to provide, prior to the effective date of such replacement, a fully executed Irrevocable Transfer Agent Instructions in a form as initially delivered pursuant to the Purchase Agreement (including but not limited to the provision to irrevocably reserve shares of Common Stock in the Reserved Amount) signed by the successor transfer agent to Borrower and the Borrower.
4.1.20 Certain Transactions. Borrower enters into certain transactions prohibited by this Agreement, including but not limited to Sections 3.1, 3.2, 3.3, and 3.4 of this Agreement.
4.1.21 Executive or Officer Conduct. Any Executive or Officer of the Borrower is arrested for violating any law, rule, regulation, or cease-and-desist order, or is convicted of a criminal offense in a state of federal court (but not including traffic violations or similar offenses).
4.1.22 Failure to Execute Transaction Documents or Complete the Transaction. The failure of the Borrower to execute any of the Transaction Documents.
4.1.23 Failure of Security Interest. (a) Any material provision of the Security and Pledge Agreement shall at any time for any reason (other than pursuant to the express terms thereof) cease to be valid and binding on or enforceable against the Borrower or any Subsidiary intended to be a party thereto, or the validity or enforceability thereof shall be contested by any party thereto, or a proceeding shall be commenced by the Borrower or any Subsidiary or any governmental authority having jurisdiction over any of them, seeking to establish the invalidity or unenforceability thereof, or the Borrower or any Subsidiary shall deny in writing that it has any liability or obligation purported to be created under the Security and Pledge Agreement; (b) the Security and Pledge Agreement, after delivery thereof pursuant hereto, shall for any reason fail or cease to create a valid and perfected and, except to the extent permitted by the terms hereof or thereof, first priority Lien in favor of the Holder on any collateral purported to be covered thereby.
4.1.24 Illegality. Any court of competent jurisdiction issues an order declaring this Note, any of the other Transaction Documents or any provision hereunder or thereunder to be illegal, as long as such declaration was not the result of an act of negligence by the Holder, exclusive of the execution of the Transaction Documents or the transactions and acts contemplated herein.
4.1.25 Cross-Default. Notwithstanding anything to the contrary contained in this Note or the other related or companion documents, a breach or default by the Borrower of any covenant or other term or condition contained in any of the other financial instrument, including but not limited to all promissory notes, currently issued, or hereafter issued, by the Borrower, to the Holder or any other third party (the “Other Agreements”), after the passage of all applicable notice and cure or grace periods, that results in a Material Adverse Effect shall, at the option of the Holder, be considered a default under this Note, in which event the Holder shall be entitled to apply all rights and remedies of the Holder under the terms of this Note by reason of a default under said Other Agreement or hereunder.
4.2 Remedies Upon Default. Upon the occurrence and continuation of any Event of Default (after the expiration of any applicable cure period), the Holder may exercise any one or more of the following rights and remedies, in addition to any other rights and remedies available at law, in equity, or under any Transaction Document:
4.2.1 Acceleration. The entire unpaid balance of this Note and all other Obligations shall, at the option of the Holder, become immediately due and payable without presentment, demand, protest or notice of any kind, all of which are hereby expressly waived by the Borrower.
4.2.2 Default Premium. From and after the occurrence of an Event of Default, all amounts owing by the Borrower to the Holder under or in connection with this Note or any other Transaction Document (collectively, the “Obligations”) shall be increased to an amount equal to one hundred fifty percent (150%) of the Obligations outstanding at the time such amount is determined, it being agreed that the Obligations include, without limitation, the outstanding Principal Amount, accrued and unpaid interest, Monitoring Fees (as defined below), enforcement costs, legal fees, expenses, indemnities, and any other fees, charges or amounts payable hereunder or thereunder, whether accruing before or after the occurrence of an Event of Default. The Borrower acknowledges and agrees that the default premium provided for herein constitutes liquidated damages and not a penalty, that the actual damages resulting from an Event of Default are difficult or impossible to ascertain with precision, and that such default premium represents a reasonable estimate of the damages likely to be incurred by the Holder as a result of such Event of Default.
4.2.3 Default Interest. From and after the occurrence of an Event of Default, all outstanding Obligations, whether or not accelerated, shall accrue interest at the rate equal to the lesser of eighteen percent (18%) per annum or the maximum legal amount permitted by law (the “Default Interest Rate”), until the same is paid in full, including following the entry of a judgment in favor of Holder.
4.2.4 Monitoring Fee. Upon the occurrence of an Event of Default, Borrower shall incur a monthly monitoring fee (“Monitoring Fee”) in the amount of Five Thousand Dollars ($5,000) per month commencing on the date in which the Event of Default occurs and continuing until the Event of Default is cured. The Monitoring Fee is intended to compensate the Holder for internal costs, administrative burdens, and other non-legal expenses associated with monitoring the Borrower and managing the Holder’s rights and interests during the pendency of such Event of Default. For the avoidance of doubt, the Monitoring Fee shall not be deemed to include, or in any way limit or preclude, the Holder’s right to separately recover reasonable attorneys’ fees and legal costs pursuant to the terms of this Note or applicable law.
4.2.5 Inspection Rights. Upon the occurrence of an Event of Default (after the expiration of any applicable cure period), Holder to have right to inspect the books and records of the Borrower, at reasonable business hours, at Holder’s sole discretion.
4.3 Payment Notice. Notwithstanding anything to the contrary contained in this Note, upon the occurrence of an Event of Default specified in Article 4 of this Note (after the expiration of any applicable cure period), Borrower may not repay in cash any amount outstanding under this Note without the five (5) days written notice to the Holder.
4.4 Notice of Default. Borrower shall be required to provide written Notice to the Holder immediately upon becoming aware of the occurrence of any event that is either reasonably likely to have a Material Adverse Effect or that would reasonably be deemed an Event of Default (without regard to Borrower’s ability to cure such Event of Default, if applicable), provided however, that Borrower’s failure to timely provide such notice shall not prevent this Note being deemed in default.
ARTICLE V. MISCELLANEOUS
5.1 Failure or Indulgence Not Waiver. No failure or delay on the part of the Holder in the exercise of any power, right or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such power, right or privilege preclude other or further exercise thereof or of any other right, power or privileges. All rights and remedies existing hereunder are cumulative to, and not exclusive of, any rights or remedies otherwise available.
5.2 Notices. All notices, demands, requests, consents, approvals, and other communications required or permitted hereunder shall be in writing and shall be transmitted exclusively by electronic mail to the email addresses set forth below or to such other email address as such party shall have specified most recently by written notice in accordance with this Section. No notice delivered by mail, courier, overnight delivery service or any other method shall constitute effective notice hereunder. Any notice or other communication required or permitted to be given hereunder shall be deemed effective upon electronic mail delivery at the designated email address below (if delivered on a Business Day during normal business hours where such notice is to be received), or the first Business Day following such delivery (if delivered other than on a Business Day during normal business hours where such notice is to be received). The physical addresses set forth below are provided for identification purposes only.
If to the Borrower, to:
NextNRG, Inc.
407 Lincoln Road, Ste 9F
Miami Beach FL 33139
Attn: Michael D. Farkas
e-mail: [***]
If to the Holder:
Leviston Resources, LLC
1225 Juan Ponce de Leon PH
San Juan, PR 00907 USA
Attn: Roman Rogol, CFO
e-mail: [***]
cc (which shall not constitute notice): [***]
5.3 Amendments. This Note and any provision hereof may only be amended by an instrument in writing signed by the Borrower and the Holder. The term “Note” and all reference thereto, as used throughout this instrument, shall mean this instrument as originally executed, or if later amended or supplemented, then as so amended or supplemented.
5.4 Assignability. This Note shall be binding upon the Borrower and its successors and assigns, and shall inure to be the benefit of the Holder and its successors and assigns. This Note may be transferred or assigned by the Holder, in whole or in part, at any time and from time to time, without the consent of the Borrower, by endorsement and delivery of this Note or by other means of assignment. Each transferee of this Note must be an “accredited investor” (as defined in Rule 501(a) of the 1933 Act).
5.5 Cost of Collection. If default is made in the payment of this Note, the Borrower shall pay the Holder hereof costs of collection, including attorneys’ fees. Such amounts spent by Holder shall be added to the Principal Amount of the Note at the time of such expenditure.
5.6 Governing Law & Agreement to Confidential Arbitration. This Note shall be governed by and construed in accordance with the laws of the State of Delaware without regard to principles of conflicts of laws. Notwithstanding anything to the contrary herein or any other document executed in connection herewith, any dispute, claim or controversy arising out of or relating to this Note, or the other Transaction Documents, or the breach, termination, enforcement, interpretation or validity thereof, including the determination of the scope or applicability of this Note to arbitrate, shall be determined by arbitration administered by Mediation and Civil Arbitration, Inc. d/b/a RapidRuling (www.rapidruling.com) in accordance with its Commercial Arbitration Rules effective at the time a claim is made, and judgment on the award rendered by the arbitrator(s) may be entered in any court having jurisdiction thereof. Arbitrators shall be appointed by RapidRuling and any hearing shall be held via video or telephone conference. The parties agree that no objection shall be taken to the decision, order or award of the tribunal following any such hearing on the basis that the hearing was held by video or telephone conference. In the event of any legal action (including arbitration) to enforce or interpret this Note, the non-prevailing Party shall pay (x) the attorneys’ fees and other costs and expenses (including expert witness fees) of the prevailing Party in such amount as may be determined, plus (y) reasonable attorneys’ fees incurred by the prevailing Party in enforcing, or on appeal from, a judgment in favor of the prevailing Party. In any arbitration, the arbitrator shall include any such award in the arbitration award. EACH PARTY HEREBY WAIVES ITS RIGHT TO A TRIAL BY JURY. Each party hereby irrevocably waives personal service of process and consents to process being served in any suit, action or proceeding in connection with this Note or any other Transaction Documents either by (i) 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 or by (ii) electronic service at the email addresses provided in the section 5.2 (or such other address as may be designated by notice in accordance with 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 law. No claimed breach of contract or violation of law by Holder or any of its affiliates shall operate to extinguish the Borrower’s obligations under this Section.
Notwithstanding the foregoing, the request by any Party for specific performance and temporary, preliminary or permanent injunctive relief, whether prohibitive or mandatory, the appointment of a receiver, and the enforcement of security interests and other remedies with respect to the Collateral under the Security and Pledge Agreement or other Transaction Documents, shall not be subject to arbitration and shall be adjudicated only by the state and/or federal courts residing in Wilmington, Delaware, and each Party irrevocably submits to the exclusive jurisdiction of such courts for such purposes, and waives and agrees not to assert in any such proceeding a claim that he or it is not personally subject to the courts referred to above, that the suit or action was brought in an inconvenient forum or that the venue of the suit or action is improper. The Borrower further acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to the Holder, by vitiating the intent and purpose of the transaction contemplated hereby. Accordingly, the Borrower acknowledges that the remedy at law for a breach of its obligations under this Note may be inadequate and agrees, in the event of a breach or threatened breach by the Borrower of the provisions of this Note, that the Holder shall be entitled, in addition to all other available remedies at law or in equity, and in addition to the penalties assessable herein, to seek equitable relief, including without limitation temporary restraining orders, temporary and permanent injunctions, and specific performance, and such equitable relief may be sought without the necessity of showing economic loss and without the necessity of posting a bond or other security.
The Holder and the Borrower acknowledge and agree that the rights of Holder under this Note are of a specialized and unique character and that immediate and irreparable damage will result to Holder if the Borrower fails or refuses to perform his or its obligations under this Note or otherwise breaches this Note and, notwithstanding an election by Holder to seek a remedy at law, Holder may, in addition to the remedies at law described above, seek equitable relief, including without limitation temporary restraining orders, temporary and permanent injunctions, and specific performance, and such equitable relief may be sought without the necessity of posting a bond or other security. No claimed breach of contract or violation of law by Holder or any of its affiliates shall operate to extinguish the Borrower’s obligations under Section 5.6 hereof.
For the avoidance of doubt, the notice and service provisions of this Section 5.6 shall control with respect to the commencement and conduct of any arbitration or legal proceeding, notwithstanding Section 5.2 or any other notice provision in this Note or any Transaction Document.
5.7 Certain Amounts. Whenever pursuant to this Note the Borrower is required to pay an amount in excess of the outstanding principal amount (or the portion thereof required to be paid at that time) plus accrued and unpaid interest plus Default Interest on such interest, the Borrower and the Holder agree that the actual damages to the Holder from the receipt of cash payment on this Note may be difficult to determine and the amount to be so paid by the Borrower represents stipulated damages and not a penalty.
5.8 Remedies. The Borrower acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to the Holder, by vitiating the intent and purpose of the transaction contemplated hereby. Accordingly, the Borrower acknowledges that the remedy at law for a breach of its obligations under this Note will be inadequate and agrees, in the event of a breach or threatened breach by the Borrower of the provisions of this Note, that the Holder shall be entitled, in addition to all other available remedies at law or in equity, and in addition to the penalties assessable herein, to an injunction or injunctions restraining, preventing or curing any breach of this Note and to enforce specifically the terms and provisions thereof, without the necessity of showing economic loss and without any bond or other security being required.
5.9 Usury. To the extent it may lawfully do so, the Borrower hereby agrees not to insist upon or plead or in any manner whatsoever claim, and will resist any and all efforts to be compelled to take the benefit or advantage of, usury laws wherever enacted, now or at any time hereafter in force, in connection with any action or proceeding that may be brought by the Holder in order to enforce any right or remedy under this Note. Notwithstanding any provision to the contrary contained in this Note, it is expressly agreed and provided that the total liability of the Borrower under this Note for payments which under Delaware law are in the nature of interest shall not exceed the maximum lawful rate authorized under applicable law (the “Maximum Rate”), and, without limiting the foregoing, in no event shall any rate of interest or default interest, or both of them, when aggregated with any other sums which under Delaware law in the nature of interest that the Borrower may be obligated to pay under this Note exceed such Maximum Rate. It is agreed that if the maximum contract rate of interest allowed by Delaware law and applicable to this Note is increased or decreased by statute or any official governmental action subsequent to the date hereof, the new maximum contract rate of interest allowed by law will be the Maximum Rate applicable to this Note from the effective date thereof forward, unless such application is precluded by applicable law. If under any circumstances whatsoever, interest in excess of the Maximum Rate is paid by the Borrower to the Holder with respect to indebtedness evidenced by this Note, such excess shall be applied by the Holder to the unpaid principal balance of any such indebtedness or be refunded to the Borrower, the manner of handling such excess to be at the Holder’s election.
5.10 No Broker-Dealer Acknowledgement. Absent a final adjudication from a court of competent jurisdiction stating otherwise, so long as any obligation of Borrower under this Note or the other Transaction Documents is outstanding, the Borrower shall not state, claim, allege, or in any way assert to any person, institution, or entity, that Holder is currently, or ever has been, a broker-dealer under the Securities Exchange Act of 1934.
5.11 Opportunity to Consult with Counsel. The Borrower represents and acknowledges that it has been provided with the opportunity to discuss and review the terms of this Note and the other Transaction Documents with its counsel before signing it and that it is freely and voluntarily signing the Transaction Documents in exchange for the benefits provided herein. In light of this, the Borrower will not contest the validity of Transaction Documents and the transactions contemplated therein. The Borrower further represents and acknowledges that it has been provided a reasonable period of time within which to review the terms of the Transaction Documents.
5.12 Integration. This Note, along with the other Transaction Documents, constitute the entire agreement between the Parties and supersedes all prior negotiations, discussions, representations, or proposals, whether oral or written, unless expressly incorporated herein, related to the subject matter of the Agreement. Unless expressly provided otherwise herein, this Note may not be modified unless in writing signed by the duly authorized representatives of the Borrower and the Holder. If any provision or part thereof is found to be invalid, the remaining provisions will remain in full force and effect. Additionally, Borrower agrees acknowledges that each of the Transaction Documents are integral to the Note, and their execution by Borrower and the agreement by Borrower to be bound by the terms therein are a material condition to the Holders agreement to enter into the transaction contemplated under the Transaction Documents.
5.13 Adjustment for Stock Split. Notwithstanding anything herein to the contrary, all references in this Note to numbers of shares of securities of the Borrower and the prices thereof, shall be appropriately adjusted to reflect any stock split, reverse stock split or stock dividend or other similar change in such securities which may be made by the Borrower after the date of this Agreement.
5.14 Nasdaq Compliance.
5.14.1 Stockholder Approval Limitation. Notwithstanding anything to the contrary contained in this Note or any other Transaction Document, the Holder shall not be permitted to convert this Note or otherwise receive shares of Common Stock to the extent (but only to the extent) that such conversion or issuance would require stockholder approval pursuant to the rules or regulations of the applicable Trading Market, including Nasdaq Listing Rule 5635(d) (or any successor provision), unless and until such stockholder approval is obtained. Any purported conversion or issuance in excess of such limitation shall be deemed null and void ab initio and of no force or effect.
5.14.2 Deferred Conversion. To the extent any conversion of this Note is prohibited by the foregoing limitation, the Holder shall be entitled to convert the remaining portion of this Note promptly upon the receipt of the requisite stockholder approval, without any further action, consent, or agreement of the Borrower.
5.14.3 Obligation to Seek Approval; Event of Default. If stockholder approval is required pursuant to the foregoing provisions, the Borrower shall, at its sole cost and expense, obtain such stockholder approval within thirty (30) days following the date on which such approval is first required. The failure of the Borrower to obtain such stockholder approval within such thirty (30) day period shall constitute an Event of Default under this Note, without the requirement of any further notice or cure period.
[signature
page to follow]
IN WITNESS WHEREOF, Borrower has caused this Note to be signed in its name by its duly authorized officer this April 1, 2026.
| BORROWER | ||
| NextNRG, Inc. | ||
| By: | /s/ Michael D. Farkas | |
| Name: | Michael D. Farkas | |
| Title: | Chief Executive Officer | |
[Signature page to Note]
Exhibit 10.3
PLEDGE AND SECURITY AGREEMENT
This PLEDGE AND SECURITY AGREEMENT (the “Agreement”) is made and entered into on April 1, 2026, by and between NextNRG, Inc., a corporation organized under the laws of the State of Delaware (the “Debtor”) and Leviston Resources, LLC, a limited liability company organized under the laws of the State of Delaware, and its permitted endorsees, transferees and assigns (the “Secured Party”).
RECITALS
A. Concurrently herewith, Debtor and the Secured Party have entered into a Securities Purchase Agreement (the “Securities Purchase Agreement”) and certain other agreements, pursuant to which the Debtor issued that certain senior secured convertible promissory note (the “Note”) in the principal amount of up to One Million, Seven Hundred Twenty Four Thousand, Four Hundred Forty Four Dollars ($1,724,444) to the Secured Party.
B. The Debtor now enters into this Agreement with the Secured Party as security for Debtor’s Obligations (as defined below).
AGREEMENT
NOW, THEREFORE, in consideration of their respective promises contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereby agree as follows:
1. Definitions. Terms used but not otherwise defined in this Agreement that are defined in Article 9 of the Uniform Commercial Code as adopted in the state of Delaware (the “UCC”) (such as “account,” “adverse claim,” “chattel paper,” “deposit account,” “document,” “equipment,” “fixtures,” “general intangibles,” “goods,” “instruments,” “inventory,” “investment property,” “proceeds,” and “supporting obligations”) shall have the respective meanings given such terms in Article 9 of the UCC. Capitalized terms used in this Agreement and not defined elsewhere herein or in the Securities Purchase Agreement shall have the meanings set forth below:
“Collateral” means all of the collateral identified on Exhibit A hereto.
“Debtor’s Books” means and includes all of Debtor’s books and records in any medium or form, including, but not limited to, all records, ledgers and computer programs, disk or tape files, thumb drives, material stored in the “cloud,” printouts and other information indicating, summarizing or evidencing the Collateral.
“Equity Interests” means, with respect to any person, all of the shares of capital stock of (or other ownership or profit interests in) such person, all of the warrants, options or other rights for the purchase or acquisition from such person of shares of capital stock of (or other ownership or profit interests in) such person, all of the securities convertible into or exchangeable for shares of capital stock of (or other ownership or profit interests in) such person or warrants, rights or options for the purchase or acquisition from such person of such shares (or such other interests), and all of the other ownership or profit interests in such person (including partnership, member or trust interests therein), whether voting or nonvoting, and whether or not such shares, warrants, options, rights or other interests are outstanding on any date of determination.
“Event of Default” has the meaning specified in Section 6 of this Agreement.
“Negotiable Collateral” means and includes all of Debtor’s presently existing and hereafter acquired or arising letters of credit, advices of credit, promissory notes, drafts, instruments, documents, Equity Interests in any entity, leases of personal property and chattel paper, as well as Debtor’s Books relating to any of the foregoing.
“Obligations” means and includes any and all present or future indebtedness or obligations of Debtor owing to the Secured Party under the Note and the other Transaction Documents, as defined herein, including, without limitation, (i) all interest and other payments required thereunder that are not paid when due, and (ii) all of the Secured Party Expenses which Debtor is required to pay or reimburse by this Agreement, by law, or otherwise.
“Permitted Liens” means (i) statutory liens of landlords and liens of carriers, warehousemen, bailees, mechanics, materialmen and other like liens imposed by law, created in the ordinary course of business and securing amounts not yet due (or which are being contested in good faith, by appropriate proceedings or other appropriate actions which are sufficient to prevent imminent foreclosure of such liens), and with respect to which adequate reserves or other appropriate provisions are being maintained by Debtor in accordance with generally accepted accounting principles (“GAAP”) , (ii) deposits made (and the liens thereon) in the ordinary course of business of Debtor (including, without limitation, security deposits for leases, indemnity bonds, surety bonds and appeal bonds) in connection with workers’ compensation, unemployment insurance and other types of social security benefits or to secure the performance of tenders, bids, contracts (other than for the repayment or guarantee of borrowed money or purchase money obligations), statutory obligations and other similar obligations arising as a result of progress payments under government contracts, (iii) liens for taxes not yet due and payable or which are being contested in good faith and with respect to which adequate reserves are being maintained by Debtor in accordance with GAAP, (iv) purchase money liens relating to the acquisition of equipment, machinery or other goods of Debtor approved in writing by the Secured Party (which approval shall not be unreasonably withheld, conditioned or delayed) and (v) liens in favor of the Secured Party under the Transaction Documents.
“Pledged Equity” means, with respect to Debtor, 100% of the issued and outstanding Equity Interests of any subsidiary that is directly owned by Debtor, whether now owned or hereafter acquired, in each case together with the certificates (or other agreements or instruments), if any, representing such shares, and all options and other rights, contractual or otherwise, with respect thereto, including, but not limited to, the following:
(1) all Equity Interests representing a dividend thereon, or representing a distribution or return of capital upon or in respect thereof, or resulting from a stock split, revision, reclassification or other exchange therefor, and any subscriptions, warrants, rights or options issued to the holder thereof, or otherwise in respect thereof; and
(2) in the event of any consolidation or merger involving the issuer thereof and in which such issuer is not the surviving person, all shares of each class of the Equity Interests of the successor person formed by or resulting from such consolidation or merger, to the extent that such successor person is a direct subsidiary of an Debtor.
The term “Pledged Equity” specifically includes, but is not limited to, all rights of Debtor embodied in or arising out of the Debtor’s status as a shareholder or member, consisting of: (a) all economic rights, including without limitation, all rights to share in the profits and losses and all rights to receive distributions of the assets; and (b) all governance rights, including without limitation, all rights to vote, consent to action and otherwise participate in the management.
“Secured Party Expenses” means and includes (i) all costs or expenses required to be paid by Debtor under this Agreement that are instead paid or advanced by the Secured Party, including without limitation, all taxes, insurance, satisfaction of liens, securities interests, encumbrances or other claims at any time levied or placed on the Collateral, (ii) all reasonable costs and expenses incurred to correct any default or enforce any provision of this Agreement, or in gaining possession of, maintaining, disabling, handling, preserving, storing, shipping, selling, preparing for sale or advertising to sell all or any part of the Collateral, irrespective of whether a sale is consummated, and (iii) all reasonable costs and expenses (including reasonable attorney’s fees) incurred by the Secured Party in enforcing or defending this Agreement, irrespective of whether suit is brought.
“Transaction Documents” means and includes the Note, Securities Purchase Agreement and all related documents executed in connection therewith, including, without limitation, any amendments to any of the foregoing.
2. Construction. Unless the context of this Agreement clearly requires otherwise, references to the plural include the singular and vice versa, to the part include the whole, “including” is not limiting, and “or” has the inclusive meaning represented by the phrase “and/or.” The words “hereof,” “herein,” “hereby,” “hereunder,” and similar terms in this Agreement refer to this Agreement as a whole and not to any particular provision of this Agreement. Section references are to this Agreement, unless otherwise specified.
3. Creation of Security Interest. In order to secure Debtor’s timely payment of the Obligations and timely performance of each and all of its covenants and obligations under this Agreement, the Transaction Documents, and any other document, instrument or agreement executed by Debtor or delivered by Debtor to the Secured Party in connection with the Obligations, Debtor hereby unconditionally and irrevocably grants, pledges and hypothecates to the Secured Party a continuing security interest in and to, a lien upon, assignment of, and right of set-off against, all presently existing and hereafter acquired or arising Collateral. Such security interest shall be a first priority security interest. Such security interest shall attach to all Collateral without further act on the part of the Secured Party or Debtor.
4. Filings; Further Assurances.
(a) General. The Secured Party is authorized to file a UCC-1 Financing Statement (or its equivalent) with the Secretary of State of the State of Delaware and in any other jurisdictions where the Secured Party chooses to file, with respect to the Debtor. Debtor also authorizes the filing by the Secured Party of such other UCC financing statements, continuation financing statements, fixture filings, filing appropriate notices in international or federal registries including the United States Patent and Trademark Office, security agreements, mortgages, deeds of trust, chattel mortgages, assignments, assignments of rents, motor vehicle lien acknowledgments and other documents as the Secured Party may reasonably require in order to perfect, maintain, protect or enforce its security interest in the Collateral or any portion thereof and in order to fully consummate all of the transactions contemplated under this Agreement. Subject to the foregoing, if so requested by the Secured Party at any time hereafter, Debtor shall promptly execute and deliver to the Secured Party such fixture filings, agreements, security agreements, mortgages, deeds of trust, chattel mortgages, assignments, motor vehicle lien acknowledgments and other documents as the Secured Party may reasonably require from such Debtor in order to perfect, maintain, protect or enforce its rights under this Agreement. Debtor shall promptly deliver to the Secured Party any and all certificates and instruments constituting the Pledged Equity in suitable form for transfer by delivery and accompanied by duly executed instruments of transfer or assignment in blank. Debtor hereby irrevocably makes, constitutes and appoints the Secured Party as such Debtor’s true and lawful attorney with power, upon Debtor’s failure or refusal to promptly comply with its obligations in this Section 4(a), to sign the name of Debtor on any of the above-described documents or on any other similar documents which need to be executed, recorded or filed in order to perfect, maintain, protect or enforce the Secured Party’s security interest in the Collateral. Debtor further agrees to enter into such control agreements with the Secured Party and such third parties as may be necessary to obtain a first priority security interest in the Collateral, including deposit accounts and Pledged Equity, and agrees to use best efforts to obtain the assent of the third parties to said agreements.
(b) Mortgage. Debtor hereby authorizes Secured Party to obtain a mortgage on any and all of its real estate. Debtor covenants and agrees that it will execute any documents, provide any information and take such other action as is requested by Secured Party to effectuate such mortgage.
(c) Additional Matters. Without limiting the generality of Section 4(a), Debtor will at the reasonable written request of the Secured Party, appear in and defend any action or proceeding which is reasonably expected to have a material and adverse effect with respect to such Debtor’s title to, or the security interest of the Secured Party in, the Collateral.
5. Representations, Warranties and Agreements. Debtor represents, warrants and agrees as follows:
(a) No Other Encumbrances. Except as disclosed in the Disclosure Schedule to the Securities Purchase Agreement, Debtor has good and marketable title to its Collateral, free and clear of any liens, claims, encumbrances and rights of any kind, except the Liens scheduled pursuant to the Securities Purchase Agreement or as otherwise approved in writing by the Secured Party, and has the right to pledge, sell, assign or transfer the Collateral.
(b) Authorization of Pledged Equity. All Pledged Equity is duly authorized and validly issued, is fully paid and, to the extent applicable, nonassessable and is not subject to the preemptive rights of any person.
(c) Security Interest/Priority. This Agreement creates a valid security interest in favor of the Secured party in the Collateral of Debtor and, when properly perfected by filing shall constitute a valid and perfected first priority security interest in such Collateral (including all uncertificated Pledged Equity consisting of partnership or limited liability company interests that do not constitute securities), to the extent such security interest can be perfected by filing under the UCC, free and clear of all liens except for liens permitted by the Securities Purchase Agreement. The taking possession by the Secured Party of the certificated securities (if any) evidencing the Pledged Equity and all other Instruments constituting Collateral will perfect and establish the first priority of the Secured Party’s security interest in all the Pledged Equity evidenced by such certificated securities and such instruments. With respect to any Collateral consisting of a deposit account, investment property, securities entitlement or held in a securities account, upon execution and delivery by the Debtor, the applicable depository bank or securities intermediary and the Secured Party of an agreement granting control to the Secured Party over such Collateral, the Secured Party shall have a valid and perfected first priority security interest in such Collateral.
(d) Consents; Etc. There are no restrictions in any organizational document governing any Pledged Equity or any other document related thereto which would limit or restrict (i) the grant of a security interest pursuant to this Agreement in such Pledged Equity, (ii) the perfection of such security interest or (iii) the exercise of remedies in respect of such perfected security interest in the Pledged Equity as contemplated by this Agreement. Except for (i) the filing or recording of UCC financing statements, (ii) the filing of appropriate notices with the United States Patent and Trademark Office, the United States Copyright Office; with other applicable international registries, federal registries; and with local registries regarding assignments of rents and fixture filings, (iii) obtaining control to perfect the security interests created by this Agreement (to the extent required under Section 4 hereof), (iv) such actions as may be required by laws affecting the offering and sale of securities, and (v) consents, authorizations, filings or other actions which have been obtained or made, no consent or authorization of, filing with, or other act by or in respect of, any arbitrator or governmental authority and no consent of any other person (including, without limitation, any stockholder, member or creditor of Debtor), is required for (A) the grant by Debtor of the security interest in the Collateral granted hereby or for the execution, delivery or performance of this Agreement by Debtor, (B) the perfection of such security interest (to the extent such security interest can be perfected by filing under the UCC, the granting of control (to the extent required, or as provided in Section 4(a) hereof) or by filing an appropriate notice with the United States Patent and Trademark Office, the United States Copyright Office or other applicable registry) or (C) the exercise by the Secured party of the rights and remedies provided for in this Agreement.
(e) Location of Place(s) of Business. All places of business of Debtor, including the identification of the principal place of business of Debtor, and the address(es) at which the Collateral is (are) located, are indicated on Schedule 5(e) hereto. Debtor shall not, without at least thirty (30) days prior written notice to the Secured Party, relocate such principal place of business or the Collateral, with no relocation being permitted outside the United States in any event.
(f) Right to Inspect the Collateral. The Secured Party shall have the right, during usual business hours of the Debtor and upon reasonable advance notice, to inspect and examine the Collateral. Debtor agrees that any reasonable expenses incurred by the Secured Party in connection with this Section 5(f) during the continuance of an Event of Default shall constitute Secured Party Expenses.
(g) Negative Covenants. Except for sale of inventory in the ordinary course of business, Debtor shall not (i) sell, lease or otherwise dispose of, relocate or transfer, any of the Collateral, except dispositions of Collateral that is worn out, obsolete or no longer necessary in the business of Debtor, (ii) allow any liens on or grant security interests in the Collateral except the Permitted Liens or (iii) change the Debtor’s name or add any new fictitious name without the written consent of the Secured Party.
(h) Further Information. Debtor shall promptly supply the Secured Party with such information concerning Debtor and Debtor’s business as the Secured Party may reasonably request from time-to-time hereafter, and shall within five (5) business days of obtaining knowledge thereof, notify the Secured Party of any event which constitutes an Event of Default.
(i) Solvency. Debtor is now and shall be at all times hereafter able to pay its debts (including trade debts) as they mature.
(j) Secured Party Expenses. Debtor shall, within fifteen (15) business days of written demand from the Secured Party accompanied by adequate documentation of such expenses, reimburse the Secured Party for all sums expended by it which constitute Secured Party Expenses and, in the event that Debtor does not pay any Secured Party Expenses payable to a third party within fifteen (15) business days after notice thereof, then the Secured Party may immediately and without further notice pay such Secured Party Expenses on Debtor’s behalf. All such expenses shall become a part of the Obligations and, at the Secured Party’s option, will (i) be payable on demand or (ii) be added to the balance of the Note and be payable proportionately with any installment payments that become due during the remaining term of the Note or, (iii) at Secured Party’s option, may be treated as a balloon payment which will be due and payable at the maturity of the Note. This Agreement shall also secure payment of those amounts.
(k) Commercial Tort Claims. Debtor has no pending commercial tort claim (as a plaintiff) against any individual or entity (a “Commercial Claim”). Debtor shall promptly deliver to the Secured Party notice of any Commercial Claim that a Debtor may bring against any individual or entity, together with such information with respect thereto as the Secured Party may reasonably request. Within ten (10) days after a written request by the Secured Party, Debtor shall grant the Secured Party a security interest in any pending Commercial Claim to the extent such security interest is permitted by applicable law.
(l) Reliance by the Secured Party; Representations Cumulative. Each representation, warranty and agreement contained in this Agreement shall be conclusively presumed to have been relied on by the Secured Party regardless of any investigation made or information possessed by the Secured Party. The representations, warranties and agreements set forth herein shall be cumulative and in addition to any and all other representations, warranties and agreements set forth in the Transaction Documents or any other documents created after the Closing Date and signed by Debtor.
6. Events of Default. The occurrence of any of the following shall constitute an “Event of Default” by Debtor under this Agreement: (a) the occurrence of any Event of Default under the Note or any other Transaction Document, after the expiration of any applicable grace or cure period; (b) any breach by Debtor of any covenant, agreement, or obligation contained in this Agreement that continues unremedied for ten (10) days after such breach occurs (or, if earlier, five (5) days after written notice from Secured Party); (c) any representation or warranty made by Debtor in this Agreement proves to have been false or misleading in any material respect when made; or (d) the security interest granted hereunder shall at any time fail to constitute a valid and perfected first priority security interest in any material portion of the Collateral, except as permitted by the terms hereof.
7. Rights and Remedies.
(a) Rights and Remedies of the Secured Party.
(i) Upon the occurrence and during the continuance of an Event of Default, without notice of election and without demand, the Secured Party may cause any one or more of the following to occur, all of which are authorized by Debtor:
(A) The Secured Party may make such payments and do such acts as it reasonably considers necessary to protect its security interest in the Collateral. Debtor agrees to promptly assemble and make available the Collateral if the Secured Party so requires. Debtor authorizes the Secured Party to enter the premises where any of the Collateral is located, take and maintain possession of the Collateral, or any part thereof, and pay, purchase, contest or compromise any encumbrance, claim, right or lien which, in the reasonable opinion of the Secured Party, appears to be prior or superior to its security interest in violation of this Agreement, and to pay all reasonable expenses incurred in connection therewith.
(B) The Secured Party shall be automatically deemed to be granted a license or other appropriate right to use, without charge or representation or warranty, Debtor’s labels, patents, copyrights, rights of use of any name, trade secrets, trade names, trademarks and advertising matter, and any other property of a similar nature, as it pertains to the Collateral, in completing production of, advertising for sale and selling any Collateral.
(C) The Secured Party may ship, reclaim, recover, store, finish, maintain, repair, prepare for sale, advertise for sale and sell (in the manner provided for herein) the Collateral.
(D) The Secured Party may sell the Collateral at either a public or private sale, or both (which in the case of a private sale of Pledged Equity, shall be to a restricted group of purchasers who will be obligated to agree, among other things, to acquire such securities for their own accounts, for investment and not with a view to the distribution or resale thereof), by way of one or more contracts or transactions, for cash or on terms, in such manner and at such places (including Debtor’s premises) as is commercially reasonable (it not being necessary that the Collateral be present at any such sale) for the purposes of satisfying the Obligations. In the case of a sale of Pledged Equity, the Secured Party shall have no obligation to delay sale of any such securities for the period of time necessary to permit the issuer of such securities to register such securities for public sale under the Securities Act of 1933. Debtor further acknowledges and agrees that any offer to sell any Pledged Equity which has been (i) publicly advertised on a bona fide basis in a newspaper or other publication of general circulation in the financial community of New York, New York (to the extent that such offer may be advertised without prior registration under the Securities Act of 1933), or (ii) made privately in the manner described above shall be deemed to involve a “public sale” under the UCC, notwithstanding that such sale may not constitute a “public offering” under the Securities Act of 1933, and the Secured Party may, in such event, bid for the purchase of such securities.
(E) The Secured Party shall be entitled to give notice of the disposition of the Collateral as follows: (1) the Secured Party shall give Debtor a notice in writing of the time and place of public sale, or, if the sale is a private sale or some other disposition other than a public sale is to be made of the Collateral, the time on or after which the private sale or other disposition is to be made, (2) the notice shall be personally delivered or mailed, postage prepaid, to Debtor at least ten (10) days before the date fixed for the sale, or at least ten (10) days before the date on or after which the private sale or other disposition is to be made, unless the Collateral is perishable or threatens to decline speedily in value, in which case the Secured Party shall use commercially reasonable efforts to provide such notice to Debtor as far in advance of such disposition as is practicable.
(F) The Secured Party may purchase all or any portion of the Collateral at any public sale by credit bid or other appropriate payment therefor.
(G) The Secured Party shall have the following rights and remedies regarding the appointment of a receiver: (1) the Secured Party may have a receiver appointed as a matter of right, (2) the receiver may be an employee of the Secured Party and may serve without bond, and (3) all fees of the receiver and his or her attorney shall be Secured Party Expenses and become part of the Obligations and shall be payable on demand, with interest at the Rate specified in the Note from the date of expenditure until repaid. The Debtor acknowledges and agrees that the Secured Party shall have the rights with respect to the appointment of a receiver as described herein, even if such right is not statutorily provided under applicable law. Notwithstanding anything to the contrary herein or in the Note or in any other Transaction Documents, Debtor acknowledges and agrees that the Secured Party shall have the right with respect to the appointment of a receiver as described herein, in any jurisdiction at the sole discretion of the Secured Party.
(H) The Secured Party, either itself or through a receiver, may collect the payments, rents, income, dividends, distributions and revenues (together, “Revenue”) from the Collateral. The Secured Party may at any time, in its reasonable discretion, transfer any Collateral into its own name or that of its nominee(s) and receive the Revenue therefrom and hold the same as security for the Obligations or apply it to payment of the Obligations in such order of preference as the Secured Party may determine. Insofar as the Collateral consists of accounts, general intangibles, loans receivable, insurance policies, instruments, chattel paper, choses in action, or similar property, the Secured Party may demand, collect, issue receipts for, settle, compromise, adjust, sue for, foreclose, or otherwise realize on the Collateral as the Secured Party may determine (in its reasonable discretion), whether or not the Obligations are then due. For these purposes, the Secured Party may, on behalf of and in the name of Debtor, (1) receive, open, and dispose of mail addressed to Debtor; (2) change any address to which mail and payments are to be sent; and (3) endorse notes, checks, drafts, money orders, documents of title, instruments and items pertaining to the payment, shipment, or storage of any Collateral. To facilitate collection, the Secured Party may notify account debtors and Debtor on any Collateral to make payments directly to the Secured Party.
(ii) The Secured Party may deduct from the proceeds of any sale of the Collateral all Secured Party Expenses incurred in connection with the enforcement and exercise of any of the rights and remedies of the Secured Party provided for herein, irrespective of whether suit is commenced. If such deduction does not occur (in the Secured Party’s reasonable discretion), upon demand, Debtor shall pay all of such Secured Party Expenses. Any deficiency which exists after disposition of the Collateral as provided herein will be paid immediately by Debtor, and any excess that exists will be returned, without interest and subject to the rights of third parties, to Debtor by the Secured Party; provided, however, that if any excess exists at a time when any of the Obligations remain outstanding, such excess shall instead remain as part of the Collateral and continue to be subject to the security interest in Section 3(a) above until such time as all of the Obligations have been fully satisfied or otherwise terminated.
(iii) Voting and payment Rights in Respect of the Pledged Equity.
(A) So long as no Event of Default shall exist, Debtor may (1) exercise any and all voting and other rights pertaining to the Pledged Equity of such Debtor or any part thereof for any purpose not inconsistent with the terms of this Agreement or the Securities Purchase Agreement and (2) receive and retain any and all dividends (other than stock dividends and other dividends constituting Collateral which are addressed hereinabove), principal or interest paid in respect of the Pledged Equity to the extent they are allowed under the Securities Purchase Agreement; and
(B) During the continuance of an Event of Default, (1) all rights of an Debtor to exercise the voting and other consensual rights which it would otherwise be entitled to exercise pursuant to clause (A)(1) above shall cease and all such rights shall thereupon become vested in the Secured Party which shall then have the sole right to exercise such voting and other consensual rights, (2) all rights of an Debtor to receive the dividends, principal and interest payments which it would otherwise be authorized to receive and retain pursuant to clause (A)(2) above shall cease and all such rights shall thereupon be vested in the Secured Party which shall then have the sole right to receive and hold as Collateral such dividends, principal and interest payments, and (3) all dividends, principal and interest payments which are received by a Debtor contrary to the provisions of clause (B)(2) above shall be received in trust for the benefit of the Secured Party, shall be segregated from other property or funds of such Debtor, and shall be forthwith paid over to the Secured Party as Collateral in the exact form received, to be held by the Secured Party as Collateral and as further collateral security for the Secured Obligations.
(b) Rights and Remedies Cumulative. The rights and remedies of the Secured Party under this Agreement and any other agreements and documents delivered or executed in connection with the Obligations shall be cumulative. The Secured Party shall also have all other rights and remedies not inconsistent herewith as are provided under applicable law, or in equity. No exercise by the Secured Party of any one right or remedy shall be deemed an election.
8. Additional Waivers. The Secured Party shall not in any way or manner be liable or responsible for (i) the safekeeping of the Collateral, (ii) any loss or damage thereto occurring or arising in any manner or fashion from any cause, (iii) any diminution in the value thereof or (iv) any act or default of any carrier, warehouseman, bailee, forwarding agency or other person whomsoever, except to the extent that such loss, damage, liability, cost or expense has resulted from the gross negligence or willful misconduct of the Secured Party or its affiliates. If the Secured Party at any time has possession of any Collateral, whether before or after an Event of Default, the Secured Party shall be deemed to have exercised reasonable care in the custody and preservation of the Collateral if the Secured Party takes such action for that purpose as Debtor shall request or as the Secured Party, in its reasonable discretion, shall deem appropriate under the circumstances, but failure to honor any request by Debtor shall not of itself be deemed to be a failure to exercise reasonable care. The Secured Party shall not be required to take any steps necessary to preserve any rights in the Collateral against prior parties, nor to protect, preserve, or maintain any security interest given to secure the Obligations.
9. Notices. All notices or demands by any party relating to this Agreement or any of the Transaction Documents shall be as provided in Section 5.2 of the Note.
10. Choice of Law; Consent to Jurisdiction; Dispute Resolution. The validity of this Agreement, its construction, interpretation and enforcement, and the rights of the parties hereunder and concerning the Collateral, shall be determined under, governed by, and construed in accordance with the laws of the state of Delaware as applied to contracts made and to be fully performed in such state, without regard to the conflicts of laws provisions thereof, except to the extent that the validity, perfection or enforcement of a security interest hereunder in respect of any Collateral is governed by the laws of some other jurisdiction, in which case such laws shall govern. Notwithstanding anything to the contrary contained herein, the parties expressly acknowledge and agree that Section 5.6 of the Note governs exclusively any dispute, claim or controversy arising out of or relating to this Agreement or any of the Transaction Documents, including without limitation arbitration, forum selection, jurisdiction, service of process, waiver of jury trial, remedies, and the availability of equitable relief, and such Section 5.6 is hereby incorporated by reference as if set forth herein in its entirety.
11. General Provisions.
(a) Effectiveness. This Agreement shall be binding and deemed effective against Debtor when executed by Debtor and the Secured Party.
(b) Successors and Assigns. This Agreement shall bind and inure to the benefit of the successors and permitted endorsees, transferees and assigns of the Secured Party. Debtor shall not assign this Agreement or any rights or obligations hereunder, and any such assignment shall be absolutely void.
(c) Section Headings. Section headings are for convenience only.
(d) Interpretation. No uncertainty or ambiguity herein shall be construed or resolved against the Secured Party or Debtor, whether under any rule of construction or otherwise. This Agreement shall be construed and interpreted according to the ordinary meaning of the words used so as to fairly accomplish the purposes and intentions of the parties.
(e) Severability of Provisions. Each provision of this Agreement shall be severable from every other provision of this Agreement for the purpose of determining the legal enforceability of any specific provision.
(f) Entire Agreement; Amendments. This Agreement and the agreements and documents referenced herein contain the entire understanding of the parties with respect to the subject matter covered herein and supersede all prior agreements, negotiations and understandings, written or oral, with respect to such subject matter. No provision of this Agreement shall be waived or amended other than by an instrument in writing signed by Debtor and the Secured Party.
(g) Good Faith. The parties intend and agree that their respective rights, duties, powers, liabilities and obligations shall be performed, carried out, discharged and exercised reasonably and in good faith.
(h) Waiver and Consent. No delay or omission on the part of the Secured Party in exercising any right shall operate as a waiver of such right or any other right. A waiver by the Secured Party of a provision of this Agreement or any other agreement between or among the parties shall not prejudice or constitute a waiver of the Secured Party’s right otherwise to demand strict compliance with that provision or any other provision of this Agreement. No prior waiver by the Secured Party, nor any course of dealing between the Secured Party and Debtor, shall constitute a waiver of any of the Secured Party’s rights or of any of Debtor’s obligations as to any future transactions. Whenever the consent of the Secured Party is required under this Agreement, the granting of such consent by the Secured Party in any instance shall not constitute continuing consent to subsequent instances where such consent is required, and in all cases such consent may be granted or withheld in the reasonable discretion of the Secured Party.
(i) Counterparts. This Agreement may be executed in any number of counterparts, each of which, when executed and delivered, shall be deemed to be an original, and all of which, when taken together, shall constitute but one and the same agreement.
(j) Termination. Upon full satisfaction or other termination of the Obligations (i) the Secured Party shall release and return to Debtor all of the Collateral and any and all certificates and other documentation representing or relating to the Collateral and (ii) the security interests provided for under this Agreement shall be terminated and of no further force and effect. At Debtor’s expense, the Secured Party shall take all actions reasonably requested by Debtor in connection with the foregoing.
(k) Consent of Debtor as Issuers of Pledged Equity. Debtor/issuer of Pledged Equity party to this Agreement hereby acknowledges, consents and agrees to the grant of the security interests in such Pledged Equity pursuant to this Agreement, together with all rights accompanying such security interest as provided by this Agreement and applicable law, notwithstanding any anti-assignment provisions in any operating agreement, limited partnership agreement or similar organizational or governance documents of such issuer.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective authorized persons on the date first written above.
| DEBTOR | ||
| NextNRG, Inc., Inc. | ||
| By: | /s/ Michael D. Farkas | |
| Name: | ||
| Title: | ||
| PURCHASER: | ||
| Leviston Resources, LLC, | ||
| By: | /s/ Roman Rogol | |
| Name: | Roman Rogol | |
| Title: | CFO | |
[signature page to Security Agreement]
Exhibit 10.4
Note: Certain identified information has been excluded from this Exhibit 10.1 because it both (i) is not material and (ii) is the type that the Company treats as private or confidential. Such information has been identified with “[***]” herein.
OFFER SUMMARY - Sales-Based Financing
Funding Provided |
$750,000.00 |
This is how much funding CASHERA PRIVATE CREDIT will provide to EZFILL HOLDINGS INC under the terms of the Agreement. | ||
Amount Financed |
$712,500.00 |
This is the total amount of funds disbursed to EZFILL HOLDINGS INC under the terms of the Agreement, as a result of any fees deducted or withheld at disbursement, any amount paid to CASHERA PRIVATE CREDIT to satisfy a prior balance, and any amount paid to a third party on behalf of EZFILL HOLDINGS INC. | ||
| Finance Charge | $337,500.00 | This is the total amount to be paid to CASHERA PRIVATE CREDIT under the terms of the Agreement. | ||
| Total Cost of Transaction |
$712,500.00 |
This is the total cost of the commercial financing transaction, calculated by the difference between the Funding Provided and the Finance Charge. | ||
|
Payment Schedule |
$43,750.00 / weekly |
This is the manner, frequency and amount of each payment. weekly ACH withdrawals of the $43,750.00 will be made from the bank account you provided to us for this purpose. The Estimated Payment is based on our estimate of 0% of your (EZFILL HOLDINGS INC’s) daily revenue, based upon your average monthly revenue income of $7,627,381.19 for the last four months. | ||
Prepayment |
If you pay off the financing faster than required, you still must pay all or a portion of the finance charge, up to $337,500.00 based upon our estimates. If you pay off the financing faster than required, you will not be required to pay additional fees.
For more details on your rights, see Agreement_Provision of your revenue purchase agreement concerning prepayment costs and fees. | |||
Applicable law requires this information to be provided to you to help you make an informed decision. By signing below, you are confirming that you received this information.
/s/ Michael D. Farkas |
04/01/2026 | |
| Recipient Signature | Date |
By checking this box, you are confirming that you have read and understand the Offer Summary provided to you.
Business Loan and Security Agreement
| BORROWER AND GUARANTOR INFORMATION | ||||
| Seller Legal Name(s) | NextNRG Inc F/K/A EZFILL HOLDINGS INC | |||
| DBA | EZFILL HOLDINGS | |||
| Entity Type | Corporation | EIN | [***] | |
| Seller Address | 57 NORTHWEST 183RD STREET, MIAMI, FL 33169 |
Where organized | FL | |
Owner(s) |
Name: MICHAEL DAVID FARKAS | Title: Owner | ||
| Address: [***] | ||||
| Email: [***] | Phone: [***] | |||
Additional Guarantor(s) |
MICHAEL DAVID FARKAS | SSN: | ||
| NEXTNRG INC | EIN: [***] | |||
| NEXTNRG OPS LLC | EIN: | |||
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This Business Loan and Security Agreement (as amended, restated, supplemented, or otherwise modified, this “Agreement”), together with all exhibits and other attachments hereto, governs the business loan (the “Loan”) made by Lender to Borrower as of the Effective Date (defined below). In this Agreement, the words “Borrower”, “you”, “your” and similar each mean the Person identified as “Borrower” on the signature page of this Agreement. Each Person identified on the signature page of this Agreement as a “Guarantor”, shall be referred to herein individually and collectively (as the context requires) as “Guarantor”. The words “Lender”, “we”, “us”, “our” and similar mean CASHERA PRIVATE CREDIT INC, a Utah corporation with a mailing address of PMB 1216, 2795 E. Cottonwood Parkway, Suite 300, Salt Lake City, UT 84121, and its successors and assigns. “Person” means an individual, corporation, association, partnership, an estate, a trust and any other entity or organization.
| Owner / Guarantor Initial: |  | _________ | _________ | |
| 1 |
| YOUR LOAN DETAILS | |
| Loan Amount: | $750,000.00 |
Origination Fee: (Deducted at time of disbursement) |
$37,500.00 |
| Previous Balance | $0.00 |
Disbursement Amount: (Loan Amount less Origination Fee) Note that the Disbursement Amount may not be the amount deposited to your Designated Checking Account. The amount that will be deposited to your Designated Checking Account will be reduced by costs, fees and expenses owed to Lender, any amounts owed to Lender from any prior Disbursement, indebtedness, or loan, and any amounts used to pay off obligations owed by Borrower to a third-party creditor. |
$712,500.00 |
| Maturity Date: | 10/01/2026 |
| Payment Amount: | $43,750.00 a week |
Payment Schedule: The term “Business Day” means any Monday through Friday, except for Federal Reserve holidays or state holidays on which Lender is closed. |
24 payments of $43,750.00 due Weekly (Thursday) immediately following the date of disbursement of the Advance Amount from the lender. |
Total Interest Expense: (Does not include any costs, expenses or fees, or default fees or default interest) |
$300,000.00 |
Total Repayment Amount: (Disbursement Amount plus Total Interest Expense) |
$1,050,000.00 |
| Owner / Guarantor Initial: | | _________ | _________ | |
| 2 |
| INTEREST, FORGIVENESS AND OTHER FEES | |||
| Interest Forgiveness: | Unpaid interest on this Loan may be forgiven by Lender in Lender’s sole discretion if: (a) Borrower is current on its scheduled payments with respect to this Loan (including payment of any fees or expenses), and (b) while this Loan is outstanding, Borrower enters into a business loan and security agreement for a new qualifying term loan with Lender, a portion of the proceeds of which are used to repay the remaining portion of the Loan Amount in whole. | ||
Other Fees: (with the Origination Fee collectively the “Fees”) |
Type of Fee | Amount of Fee | Other Comments |
| Underwriting Fee | |||
| Processing Fee | $37,750.00 | ||
| Returned Payment Fee1 | $35.00 | ||
| Monthly Maintenance Fee | |||
| Default Fee | 25% | Twenty Five Percent of Outstanding Balance at Date of Default | |
| UCC Filing Fee | $150.00 | ||
| Late Fee | $35.00 | ||
| Stacking Fee | $75,000.00 | - Equaling ten (10) percent of the Loan Amount for each incidence of stacking. | |
| CERTAIN DISCLOSURES | |
| Loan Pricing Disclosure | Lender uses a system of risk-based pricing to determine interest charges and fees. Risk-based pricing is a system that evaluates the risk factors of your application and adjusts the interest rate up or down based on this risk evaluation. This Loan may be a higher-cost loan than loans that may be available through other lenders. Borrower understands that Lender may make loans to other Persons on other terms, at other amounts and interest rates, and with other fees in its sole discretion, subject only to applicable law. |
| Loan For Specific Purposes Only | The proceeds of the requested Loan may solely be used for commercial purposes, as set forth and certified and affirmed by Borrower in the Commercial Purpose Affidavit and Waiver of Federal and State Truth-in-Lending Disclosures attached hereto as Exhibit A (the “Commercial Purpose Affidavit”). IN ADDITION, THE LOAN WILL NOT BE USED FOR PERSONAL, FAMILY OR HOUSEHOLD PURPOSES. Borrower understands that Borrower’s agreement not to use the Loan proceeds for personal, family or household purposes means that certain important duties imposed upon entities making loans for personal, family or household purposes, and certain important rights conferred upon Persons obtaining such loans, pursuant to federal or state law will not apply to the Loan or the Agreement. |
| 1To be paid automatically if any electronic payment processed on Borrower’s Loan is returned unpaid or dishonored for any reason, including insufficient funds or stop payment on account. | |
| Owner / Guarantor Initial: | | _________ | _________ | |
| 3 |
| The calculations below involve certain key assumptions about the Loan, including that the Loan is paid off in its entirety according to the agreed Payment Schedule and that no payments are missed. These calculations are provided as a convenience only, and Lender’s records will, absent manifest error, be conclusively presumed to be correct and accurate and constitute an account stated between Borrower and Lender. To the extent Lender’s records differ from the below metric calculations and metric explanations, Lender’s records shall control. The amounts below may vary from the actual amounts. | |||
| Loan Amount | Disbursement Amount (minus Fees and other expenses withheld)2 |
Repayment Amount | Maturity Date |
| $750,000.00 | $712,500.00 | $1,050,000.00 | 10/01/2026 or such earlier date on which (i) the Loan is accelerated pursuant to the terms of this Agreement or otherwise, or (ii) the term of the Loan terminates or expires. |
| METRIC | METRIC CALCULATION | METRIC EXPLANATION | |
| Total Cost of Capital | Interest Expense: | $300,000.00 | This is the total amount that you will pay in interest and certain required fees incurred in connection with the making of the Loan, but this amount does not include fees and other charges you can avoid, such as late payment fees, returned Total Cost of Capital payment fees, and Default Fees. |
| Loan Fee: | |||
| Origination Fee: | $37,500.00 | ||
| Other Fees: | |||
| Total Cost of Capital | $337,500.00 | ||
Annual Percentage Rate (APR) |
Your Loan will have 24 payments paid on a weekly basis of: |
$43,750.00 |
This is the cost of the Loan, including total interest, Fees, and other fees, expressed as a yearly rate. APR takes into account the amount and timing of capital you receive, fees you pay, and the periodic payments you make. This is provided as a convenience only. While APR can be used for comparison purposes, it is not an interest rate and is not used to calculate the Total Interest Expense. |
| APR | 173.06% | ||
| Average Monthly | Repayment Amount: | $1,050,000.00 | This is the average monthly repayment amount of the Loan, which does not include fees and other charges you can avoid, such as late payment fees, returned payment fees and the default fee.2 The actual repayment frequency for the Loan will be weekly This is an estimate for comparison purposes only. |
| Term (in months): | ÷ 6 Months | ||
| Average Monthly Payment: | $262,500.00 | ||
Cents on the Dollar (excluding fees) |
Interest Expense or Loan Fee: |
$300,000.00 |
This is the total amount of interest or Loan Fee paid per dollar borrowed. This amount is exclusive of fees. This is provided as a convenience only. |
| Loan Amount: | ÷ $750,000.00 | ||
Cents on the Dollar: (excluding fees) |
$0.40 | ||
| Prepayment | Does prepayment of this Loan result in any new fees or charges? | Yes (see “Prepayment” below) | |
| Does prepayment of this Loan decrease the total interest or Loan Fees owed? |
Prepayment within the following times are calculated at the following factor rates:
(see “Prepayment” above for the interest or fee reduction amount) | ||
2 The Disbursement Amount is the amount of capital that Borrower receives and may be different from the Loan Amount. The Disbursement Amount is net of Fees and other expenses withheld from the Loan Amount. A portion of the Disbursement Amount may be used to pay Fees and other expenses owed to Lender, any amounts owed to Lender from any prior Disbursement, indebtedness, or loan, and any amounts used to pay off obligations owed by Borrower to a third-party creditor APR should be considered in conjunction with the Total Cost of Capital. APR may be most useful when comparing financing solutions of similar expected duration. APR is calculated here according to the principles of 12 C.F.R. § 1026 (“Regulation Z”), using 52 payment periods of equal length and 52 payment dates per year for weekly pay products, and 252 payment dates per year for daily pay products. Neither the inclusion of APR nor reference to Regulation Z herein subjects this Agreement or the Loan thereto, but such reference is provided as a courtesy only. | |||
| Owner / Guarantor Initial: | | _________ | _________ | |
| 4 |
| 1. | EFFECTIVE DATE. This Agreement begins on the date that corresponds with Lender’s signature on the signature page of the Agreement (the “Effective Date”). Borrower understands and agrees that Lender may postpone, without penalty, the disbursement of amounts to Borrower until all required security interests have attached and been validly perfected and Lender has received all required personal guarantees or other documentation reasonably required by Lender. |
| 2. | AUTHORIZATION. Borrower agrees that the Loan made by Lender to Borrower shall be conclusively deemed to have been authorized by Borrower and to have been made pursuant to a duly authorized request on its behalf. |
| 3. | LOAN FOR SPECIFIC PURPOSES ONLY. The proceeds of the requested Loan may solely be used for specific commercial purposes, and not for any other purposes. In addition, as set forth and certified and affirmed by Borrower in the Commercial Purpose Affidavit, the Loan will not be used for personal, family or household purposes, and Borrower and Guarantor are forever estopped from taking the position that such Loan (including Advances/Disbursements) are or were used for such personal, family or household purposes. Borrower understands that Borrower’s agreement not to use the Loan proceeds for personal, family or household purposes means that certain important duties imposed upon entities making loans for personal, family or household purposes, and certain important rights conferred upon Persons obtaining such loans, pursuant to federal or state law will not apply to the Loan or the Agreement. Borrower also understands that Lender will be unable to confirm whether Borrower’s use or intended use of the Loan has or will have a commercial or business purpose. Borrower agrees that a breach by Borrower of the provisions of this section will not affect Lender’s right to (i) enforce Borrower’s promise to pay to Lender all amounts owed thereto under this Agreement, regardless of the purpose for which the Loan is in fact obtained or (ii) exercise any right, remedy, privilege, or power set forth in this Agreement or otherwise available to Lender at law or in equity, even if such right, remedy, privilege, or power would not have been available had the Loan been obtained for personal, family or household purposes. |
| 4. | DISBURSEMENT OF LOAN PROCEEDS AND MAINTENANCE OF BORROWER’S BANK ACCOUNT. Borrower’s Loan will be disbursed as provided in the Authorization Agreement for Direct Deposit (ACH Credit) and Direct Payments (ACH Debits) attached as Exhibit B attached to this Agreement (the “ACH Authorization Form”). Borrower agrees to maintain Direct Payments (ACH Debits) in the account that was reviewed in conjunction with the underwriting and approval of this Loan (including keeping such account open until the Total Repayment Amount has been indefeasibly repaid in full). |
| 5. | PROMISE TO PAY. Borrower agrees to pay Lender the Total Repayment Amount in lawful money of the United States of America in payment, in accordance with the Payment Schedule shown in the table entitled “Your Loan Details” in this Agreement. Borrower authorizes Lender to collect required payments in the manner provided in the ACH Authorization Form. |
| 6. | ALTERNATIVE PAYMENT METHODS. If Borrower knows that for any reason Lender will be unable to process a payment under the Automatic Payment Plan, or if Lender is unable to process a payment under the Automatic Payment Plan, then Borrower must either restore sufficient funds such that the missed payment can be collected as provided in the ACH Authorization Form or other recoupment method as directed by Lender. If Borrower elects to send payments to Lender by postal mail, then Borrower agrees to send such payments via certified mail, return receipt requested, to PMB 1216, 2795 E. Cottonwood Parkway, Suite 300, Salt Lake City, UT 84121. All alternative payments must be made by check, money order, wire transfer, automatic transfer from an account at an institution offering such service, or other instrument in lawful money of the United States of America constituting legal tender in payment of all debts and dues, public and private. If Borrower makes a payment on Borrower’s Loan by any means other than the Automatic Payment Plan that Lender makes available, Lender may treat such payment as an additional payment and continue to process Borrower’s scheduled payments made through the Automatic Payment Plan or may reduce any scheduled payment to be made through the Automatic Payment Plan by the amount of any such payment received through alternative means. Failure by Lender to process a payment under the Automatic Payment Plan does not relieve Borrower from making any such payment, and each payment shall still be due and payable in accordance with the terms of this Agreement, including any additional interest, cost or fees due because of such missed or late payment. |
| 7. | APPLICATION OF PAYMENTS. Subject to applicable law, Lender reserves the right to allocate and apply payments received on Borrower’s Loan between principal, interest and fees in any manner Lender chooses in Lender’s sole discretion, it being understood and agreed that any fees and interest may be paid during the earlier portion of the term of the Loan. Lender’s books and records of payments shall be conclusive proof of the same absent manifest error. |
| Owner / Guarantor Initial: | | _________ | _________ | |
| 5 |
| 8. | POSTDATED CHECKS, RESTRICTED ENDORSEMENT CHECKS AND OTHER DISPUTED OR QUALIFIED PAYMENTS. Lender can accept late, postdated or partial payments without losing any of Lender’s rights under this Agreement, it being understood by Borrower that a postdated check is a check dated later than the day it was presented for payment. Lender is under no obligation to hold a postdated check, and Lender reserves the right to process every item presented as if dated the same date that such item was received by Lender or Lender’s check processor. Borrower may not hold Lender liable for depositing any postdated check. Borrower agrees not to send Lender partial payments marked “paid in full”, “without recourse”, or similar language. If Borrower sends such a payment, Lender may accept it without losing any of Lender’s rights under this Agreement, including (without limitation) Lender’s right to full repayment of the Total Repayment Amount. All notices and written communications concerning postdated checks, restricted endorsement checks (including any check or other payment instrument that indicates that the payment constitutes “payment in full” of the amount owed or that is tendered with other conditions or limitations or as full satisfaction of a disputed amount) or any other disputed, nonconforming or qualified payments, must be mailed or delivered to PMB 1216, 2795 E. Cottonwood Parkway, Suite 300, Salt Lake City, UT 84121. |
| 9. | PREPAYMENT. Borrower may prepay Borrower’s Loan in whole on any Business Day prior to the Maturity Date by paying Lender the sum total of the Total Repayment Amount, any Returned Payment Fees, any Late Fees, and all other due and unpaid Fees, in each case as described in the table entitled “Interest Forgiveness and Other Fees” in this Agreement or otherwise due under this Agreement, less (i) the amount of any Loan payments made prior to such prepayment and (ii) the aggregate amount of unpaid interest remaining on Borrower’s Loan as of such date as determined by Lender’s records in accordance with Section 7. |
| 10. | SECURITY INTEREST. Borrower and Guarantor hereby grant to Lender a security interest in and to any and all Collateral (as hereinafter defined) to secure the prompt and indefeasible payment and performance in full when due of all debts, liabilities and obligations of Borrower and Guarantor to Lender hereunder, including (without limitation) the Loan and all amounts, fees, and expenses due hereunder and under any and all renewals, extensions or substitutions for this Agreement, and also any and all other debts, liabilities and obligations of Borrower and Guarantor to Lender or any affiliate of Lender of every kind and nature, direct or indirect, absolute or contingent, primary or secondary, due or to become due, now existing or hereafter arising, including, without limitation, all indebtedness, interest, leases, debts and liabilities arising under or in connection with any note, guaranty (including the Guaranty, as hereinafter defined), surety agreement, or any other document, agreement, or instrument creating indebtedness, obligations, or liabilities owed by Borrower or Guarantor to Lender or any affiliate of Lender (including principal, interest, late charges, collection costs, attorney fees and the like) (collectively, the “Obligations”). The “Collateral” means all of Borrower’s, and all of each Secured Guarantor’s assets and personal property, whether now owned by or owing to, or hereafter acquired by or arising in favor of Borrower and each Secured Guarantor, and whether owned or consigned by or to, or leased from or to Borrower and each Secured Guarantor, regardless of where located, which shall include, without limitation: (a) any and all amounts owing to Borrower now or in the future from any merchant processor(s) processing charges made by customers of Borrower via credit card or debit card transactions; (b) cash and cash equivalents, (c) inventory, (d) equipment, (e) investment property, including certificated and uncertificated securities, securities accounts, security entitlements, commodity contracts and commodity accounts, (f) instruments, including promissory notes, (g) chattel paper, including tangible chattel paper and electronic chattel paper, (h) documents, (i) letter of credit rights, (j) accounts, including health-care insurance receivables, (k) deposit accounts with any bank or other financial institution, (l) commercial tort claims, (m) general intangibles, including payment intangibles and software, (n) copyrights, patents and trademarks and all other intellectual property, (o) fixtures, (p) goods, (q) letters of credit, letter-of-credit rights, and supporting obligations, and (r) and any other collateral specified in Schedule C. The preceding terms used in defining the term “Collateral” not otherwise defined in this Agreement shall have the meaning as such terms may from time to time be defined in the Uniform Commercial Code in effect in the State of Utah (“UCC”). The security interest Borrower and each Secured Guarantor grants herein includes all accessions to, substitutions for and replacements, proceeds (including stock rights), insurance proceeds and products of the foregoing subsections (a) through (r), together with all books and records, customers lists, credit files, computer files, programs, printouts, and other computer materials and records related thereto and any general intangibles (as defined in the UCC) at any time evidencing or relating to any of the foregoing. Lender disclaims any security interest in household goods in which Lender is forbidden by applicable law from taking a security interest. |
| Owner / Guarantor Initial: | | _________ | _________ | |
| 6 |
| 11. | PROTECTING THE SECURITY INTEREST. Borrower and Guarantor agree that Lender or Lender’s Representative may, or upon Lender’s request, file any financing statement, lien entry form, springing DACA (which may be attached hereto as an Exhibit) or other document, agreement, or instrument Lender or Lender’s Representative requires in order to perfect, maintain the perfection of, amend, or continue Lender’s security interest in the Collateral, and Borrower and Guarantor agree to cooperate with Lender and Lender’s Representative as may be necessary to accomplish said filing and to do whatever Lender and Lender’s Representative deem necessary to protect Lender’s security interest in the Collateral. Borrower and Guarantor, at its sole expense, shall protect and defend Lender’s first-priority security interest in the Collateral against all claims and demands whatsoever except for Permitted Liens (as hereinafter defined). Borrower and Guarantor each agree that, if Guarantor is a corporate entity, then Lender or Lender’s Representative may file any financing statement, lien entry form or other document against Guarantor or its property that Lender and/or Lender’s Representative requires in order to perfect, amend or continue Lender’s security interest in the Collateral. Guarantor agrees to cooperate with Lender and Lender’s Representative as may be necessary to accomplish said filing and to do whatever Lender or Lender’s Representative deems necessary to protect Lender’s security interest in the Collateral. “Lender’s Representative” means any Person that is or Persons that are designated by Lender to act on its behalf in any authorized capacity. BORROWER AND EACH GUARANTOR EACH EXPRESSLY ACKNOWLEDGE AND AGREE BY SIGNING THIS AGREEMENT THAT, LENDER’S COLLATERAL AS DESCRIBED IN SECTION 10 INCLUDES ALL OF BORROWER’S AND EACH SECURED GUARANTOR’S PERSONAL PROPERTY AND ASSETS. Upon the occurrence and during the continuance of an Event of Default (as defined below), Borrower hereby irrevocably constitutes and appoints Lender, or designated agent, with full power of substitution, as its true and lawful attorney-in-fact with full irrevocable power and authority in place and stead of Borrower, for the purpose of carrying out the terms of this Agreement, to take any and all appropriate action and to execute any and all documents and instruments that may be necessary to accomplish the purposes of this Agreement and, without limiting the generality of the foregoing, hereby gives said attorney the power and right, on behalf of Borrower without notice to or assent by Borrower, to, upon the occurrence and during the continuance of an Event of Default, (a) endorse Borrower’s name on any checks, notes, drafts or other forms of payment or security that may come into the possession of Lender or any affiliate of Lender, to sign Borrower’s name on invoices or bills-of-lading, drafts against customers, notices of assignment, verifications and schedules, (b) sell, transfer, pledge, make any arrangement with respect to or otherwise dispose of or deal with any of the Collateral consistent with the UCC and (c) do acts and things which Lender reasonably deems necessary to protect, preserve or realize upon the Collateral and Lender’s security interest therein. The powers granted herein, being coupled with an interest, are irrevocable until the date this Agreement and the Obligations evidenced hereby is repaid in full in accordance with its terms. The powers conferred on Lender hereunder are solely to protect its interests in the Collateral and shall not impose any duty upon it to exercise any such powers. Neither Lender nor any other attorney-in-fact shall be liable for any act or omission, error in judgment or mistake of law. |
| 12. | LOCATION OF COLLATERAL; TRANSACTIONS INVOLVING COLLATERAL. Unless Lender has agreed otherwise in writing, Borrower and Guarantor represent, warrant, and covenant, as appliable, that (i) all Collateral (or records of the Collateral in the case of accounts, chattel paper, and general intangibles) shall at all times be located at Borrower’s and Guarantor’s respective address as shown on the first page of this Agreement or, if not shown thereon, then as set forth elsewhere in this Agreement; (ii) except for inventory sold or accounts collected in the ordinary course of Borrower’s or Guarantor’s business, Borrower and Guarantor shall not sell, offer to sell, or otherwise transfer or dispose of the Collateral or any portion thereof; (iii) no one else has any interest in or claim to or against the Collateral that Borrower or Guarantor has not disclosed to Lender in writing, and that Lender has not approved of in writing, prior to the date hereof; (iv) Borrower and Guarantor shall not, after the date hereof, pledge, collaterally assign, convey in trust, mortgage, encumber or otherwise permit the Collateral to be subject to any lien, security interest, encumbrance or charge, other than the security interest provided for in this Agreement and Permitted Liens; (v) Borrower and Guarantor shall not (a) dissolve, cease operations, liquidate, merge, consolidate or divide with or into any other Person, (b) turn over the management or operation of all or substantially all of its property, assets or business to any other Person, or (c) engage in any business activities substantially different than those in which Borrower or Guarantor is presently engaged; (vi) Borrower and Guarantor shall defend Lender’s rights in the Collateral against the claims and demands of all other Persons, as may be directed by Lender; (vii) Borrower and Guarantor shall make no alterations, additions, subtractions, upgrades or improvements to the Collateral or any portion thereof, provided that any such alterations, additions, subtractions, upgrades or improvements shall automatically become a part of the Collateral whether or not made with Lender’s prior written consent; and (viii) Borrower and Guarantor shall not use or move the Collateral or any portion thereof outside of the United States of America. All proceeds from any unauthorized disposition of the Collateral shall be held in trust for Lender, shall not be commingled with any other funds and shall immediately be delivered to Lender. This requirement, however, does not constitute consent by Lender to any such disposition. |
| 13. | TAXES, ASSESSMENTS AND LIENS. Borrower and Guarantor will complete and timely file all necessary federal, state and local tax returns and will pay and perform in full when due all taxes, assessments, levies and liens upon the Collateral and provide evidence of such upon Lender’s request. |
| 14. | INSURANCE. Borrower and each Secured Guarantor shall procure and maintain such insurance as Lender may require with respect to the Collateral, with commercially reasonable provisions acceptable to Lender, and naming Lender as loss payee. If such insurance is not maintained, Lender may obtain such insurance as Lender deems appropriate at Borrower’s sole expense. |
| 15. | DAMAGE OR LOSS; REPAIRS AND MAINTENANCE. Borrower and Guarantor bear the entire risk of loss, theft, damage or destruction of Collateral in whole or in part from any reason whatsoever. Borrower and Guarantor agree to keep and maintain, and cause others to keep and maintain, the Collateral in good order, repair and condition at all times (normal wear and tear excepted). Borrower and Guarantor further agree to pay in full when due all claims for work done on, or services rendered or material furnished in connection with, the Collateral so that no lien or encumbrance may ever attach to or be filed against the Collateral, and any such lien or encumbrance shall be immediately discharged. |
| Owner / Guarantor Initial: | | _________ | _________ | |
| 7 |
| 16. | INSPECTION OF COLLATERAL AND PLACE OF BUSINESS; USE OF PHOTOGRAPHS AND TESTIMONIALS . Lender and Lender’s Representative shall have the right to examine the Collateral wherever located and the interior and exterior of Borrower’s and Guarantor’s place of business, upon reasonable notice. |
| 17. | LENDER’S EXPENDITURES. If any action or proceeding is commenced that materially affects, or that creates a reasonable expectation that such action or proceeding would materially affect as determined by Lender, Lender’s interest in the Collateral, or if Borrower or Guarantor fails to comply with any provision of this Agreement or any related documents, including but not limited to Borrower’s or Guarantor’s failure to properly grant or perfect Lender’s security interest in the Collateral or to indefeasibly discharge or pay in full when due any amounts Borrower or Guarantor is required to discharge or pay under this Agreement or any related documents, including, without limitation, the Obligations, Lender on Borrower’s or Guarantor’s behalf may (but shall not be obligated to) take any action that Lender deems appropriate, including but not limited to discharging or paying all taxes, liens, security interests, encumbrances and other claims, at any time levied or placed on the Collateral and paying all costs for insuring, maintaining and preserving the Collateral. To the extent permitted by applicable law, all such expenses will become a part of the Obligations. |
| 18. | BORROWER’S AND GUARANTOR’S REPRESENTATIONS, WARRANTIES, AND COVENANTS. Borrower and Guarantor, each for itself, represent, warrant, and covenant that: (i) Borrower and Guarantor are in compliance with and will continue to comply with all laws, statutes, regulations and ordinances pertaining to Borrower’s or Guarantor’s ownership, use, and operation of the Collateral and the conduct of Borrower’s or Guarantor’s business, and Borrower and Guarantor promise to hold Lender harmless from any damages, liabilities, costs, expenses (including attorneys’ fees) or other harm arising out of any violation thereof; (ii) Borrower’s and Guarantor’s principal place of business and the office where Borrower and Guarantor keep its records concerning its accounts, contract rights and other property, is the address provided for Borrower and Guarantor in this Agreement; (iii) each of Borrower and Guarantor is duly organized, licensed, validly existing, and each of Borrower and Guarantor is and shall hereafter remain duly licensed and in good standing under, if Borrower or Guarantor is an individual, the laws of the state of its domicile, or, if Borrower or Guarantor is a legal entity, the laws of the state of its formation, organization, or incorporation, as applicable, and each of Borrower and Guarantor is duly qualified, licensed and in good standing in every other state in which it is doing business and in which the failure to qualify or become licensed could have a material adverse effect on the financial condition, business or operations of Borrower and Guarantor; (iv) the true and correct legal name of each of Borrower and Guarantor is set forth in this Agreement; (v) the aggregate ownership percentage of the Signatories is greater than or equal to fifty percent (50%) of Borrower; (vi) Borrower and Guarantor shall notify Lender in writing at least thirty (30) days before, and obtain Lender’s written consent prior to, any of the following actions: (a) change in the location of Borrower’s or Guarantor’s principal place of business, (b) change in Borrower’s or Guarantor’s name, (c) change in Borrower’s or Guarantor’s type of organization, (d) change in Borrower’s or Guarantor’s jurisdiction of organization, and (e) change in Borrower’s or Guarantor’s corporate structure or ownership structure; (vii) each of Borrower and Guarantor is and will continue to be (or with respect to after-acquired property, will be when acquired) the legal and beneficial owner of the Collateral; (viii) Lender’s security interest in all the Collateral is or can be perfected by properly filing a UCC financing statement in the applicable office except for Collateral that cannot be perfected by filing a UCC financing statement as set forth in the UCC; (ix) the execution, delivery and performance of this Agreement, and any other document, agreement, and instrument executed in connection herewith, are within Borrower’s and Guarantor’s powers, have been duly authorized, and are not in contravention of applicable law or the terms of Borrower’s or Guarantor’s governing documents or of any indenture, agreement or undertaking to which Borrower or Guarantor is a party; (x) Borrower shall not make any loan or advance to or any investment in, whether of cash or property, any other Person, nor shall Borrower or Guarantor incur any obligation as surety or guarantor, nor become liable for any other contingent obligations, other than in the ordinary course of business; (xi) all governing or organizational documents and all amendments thereto of Borrower and Guarantor have been duly filed and are in proper order and any capital stock issued by Borrower and Guarantor and outstanding was and is properly issued and all books and records of Borrower and Guarantor are accurate and up to date and will be so maintained; (xii) each of Borrower and Guarantor (a) is subject to no governing document, agreement, or other legal restriction, or any judgment, award, decree, order, governmental rule or regulation or contractual restriction that could have a material adverse effect on its financial condition, business or prospects, and (b) is in compliance with all governing documents, all contractual requirements by which it may be bound, and all applicable laws, rules and regulations other than laws, rules or regulations the validity or applicability of which Borrower or Guarantor is contesting in good faith, or provisions of any of the foregoing the failure to comply with which cannot create a reasonable expectation of materially adversely affecting Borrower’s or Guarantor’s financial condition, business or prospects or the value of the Collateral; (xiii) there is no action, suit, proceeding or investigation pending or, to Borrower’s or Guarantor’s knowledge, threatened, against or affecting Borrower or Guarantor or any of their assets before or by any court or other governmental authority which, if determined adversely to it, would have a material adverse effect on Borrower’s or Guarantor’s financial condition, business or prospects or the value of the Collateral; (xiv) all information provided by Borrower and Guarantor as part of the application process for the Loan was true and complete, and Borrower and Guarantor shall notify Lender in writing within thirty (30) days after any such information has changed and whether such change is reasonably expected to have a material adverse effect on Borrower’s or Guarantor’s financial condition, business or prospects or the value of the Collateral; (xv) neither Borrower nor Guarantor intends to file, nor has any notice or reason to believe that another Person intends to file against Borrower or Guarantor, for reorganization or liquidation under the bankruptcy or reorganization laws of any jurisdiction within six (6) months after the date hereof, and Borrower and Guarantor shall notify Lender in writing (a) at least ten (10) days before filing for such reorganization or liquidation or (b) immediately if another Person has filed for such reorganization or liquidation against Borrower or Guarantor; and (xvi) neither Borrower nor Guarantor is presently, nor has any reasonable expectation that it will become, insolvent or bankrupt within the meaning of, as applicable, the UCC as well as the Bankruptcy Code (as hereinafter defined). |
| Owner / Guarantor Initial: | | _________ | _________ | |
| 8 |
| 19. | INTEREST AND FEES. Borrower agrees to pay in full the interest and fees set forth in the table entitled “The Loan Details” and “Interest, Forgiveness and Other Fees” in this Agreement. |
| 20. | FINANCIAL INFORMATION AND REEVALUATION OF CREDIT. Borrower and Guarantor authorize Lender to obtain business and personal credit bureau reports in Borrower’s and Guarantor’s name, respectively, from time to time for purposes of deciding whether to approve the requested Loan or for any update, renewal, extension of credit or other lawful purpose. Upon Borrower’s or Guarantor’s request, Lender will advise Borrower or Guarantor if Lender obtained a credit report, and identify the credit bureau. Borrower and Guarantor agree to submit current financial information, a new credit application, or both, in Borrower’s name and in the name of Guarantor, respectively, at any time promptly upon Lender’s request. Borrower authorizes Lender to act as Borrower’s agent for purposes of accessing and retrieving transaction history information regarding Borrower from Borrower’s designated merchant processor(s). Lender may report Lender’s credit experiences with Borrower and Guarantor of Borrower’s Loan to third parties as permitted by law, including with respect to any natural-Person Guarantor to consumer credit reporting agencies. Borrower and Guarantor also agree that Lender may release information to comply with governmental reporting or legal process that Lender believes may be required, whether or not such is in fact required, or when necessary or helpful in completing a transaction, or when investigating a loss or potential loss. Borrower and Guarantor are hereby notified that a negative credit report reflecting on Borrower’s or Guarantor’s credit record may be submitted to a credit reporting agency (including with respect to Guarantor to consumer credit reporting agencies) if Borrower or Guarantor fails to fulfill the terms of their respective credit obligations hereunder. Guarantor acknowledges that any credit reporting on the Loan shall be at the sole discretion of Lender (subject to applicable law) and that Lender has the right to report the Loan to Guarantor’s personal credit file should Guarantor not pay any Obligation pursuant to the guaranty set forth in this Agreement. Borrower shall give access via Plaid or the like for Lender to access Borrower’s bank accounts as requested by Lender. |
| 21. | ATTORNEYS’ FEES AND COLLECTION COSTS. Upon discretion of Lender, and to the extent not prohibited by applicable law, Borrower shall pay to Lender on demand any and all expenses, including, but not limited to, collection costs, all attorneys’ fees and expenses, and all other expenses of like or unlike nature which may be expended by Lender to obtain or enforce payment of Obligations either as against Borrower or Guarantor or surety of Borrower, including, without limitation, Guarantor, or in the prosecution or defense of any action or concerning any matter arising out of or connected with the subject matter of this Agreement, the Obligations or the Collateral or any of Lender’s rights or interests therein or thereto, including, without limiting the generality of the foregoing, any counsel fees or expenses incurred in connection with any amendment, restatement, supplement, or modification hereof or in any bankruptcy or insolvency proceedings and all costs and expenses (including search fees) incurred or paid by Lender in connection with the administration, supervision, protection or realization on any security held by Lender for the Obligations, whether such security was granted by Borrower, Guarantor, or any other Person primarily or secondarily liable (with or without recourse) with respect to the Obligations, and all costs and expenses incurred by Lender in connection with the defense, settlement or satisfaction of any action, claim or demand asserted against Lender in connection therewith, which amounts shall be considered advances to protect Lender’s security, and shall be secured hereby. To the extent permitted by applicable law, all such expenses will become a part of the Obligations. Such right shall be in addition to all other rights and remedies to which Lender may be entitled upon an Event of Default. |
| 22. | BORROWER’S REPORTS. Promptly upon Lender’s written request, Borrower and Guarantor agree to provide Lender with such information about the financial condition and operations of Borrower or Guarantor as Lender may, from time to time, reasonably request. Borrower also agrees promptly upon becoming aware of any Event of Default, or the occurrence or existence of any event or circumstance which, with the passage of time or the giving of notice or both, would constitute an Event of Default hereunder, to promptly provide notice thereof to Lender in writing. Borrower and Guarantor agree to furnish a quarterly report of their financial condition, including balance sheet, income statement, and statement of cash flows, as well as a Compliance Certificate, a form of which may be attached as an Exhibit, every 90 days from the date of execution of this Agreement. Borrower and Guarantor agree to inform Lender, within five days of any material change in financial condition, ownership, or management, or the bank accounts of the Borrower or Guarantor fall below thirty three percent of the balance represented by financial statements provided at funding. |
| Owner / Guarantor Initial: | | _________ | _________ | |
| 9 |
| 23. | TELEPHONE COMMUNICATIONS. Borrower and Guarantor hereby expressly consent to receiving calls and messages, including autodialed and pre-recorded message calls, SMS messages (including text messages), and other forms of electronic communication from Lender, its affiliates, marketing partners, agents and other Persons calling at Lender’s request or on behalf, at any telephone numbers that Borrower and Guarantor have provided or may provide in the future or that are otherwise in Lender’s or such other Persons’ possession (including any cellular or mobile telephone numbers). Borrower and Guarantor agree that such communications may be initiated using an automated telephone dialing system. |
| 24. | INDEMNIFICATION. Borrower and Guarantor assume all risk and liability for, and shall defend, indemnify and keep Lender harmless on an after-tax basis from, any and all liabilities, obligations, losses, damages, penalties, claims, actions, suits, costs and expenses, including reasonable attorney fees and expenses, of whatsoever kind and nature imposed on, incurred by or asserted against Lender, in any way relating to or in respect to the Collateral or any part thereof, or relating to or arising out of Lender’s security interest in the Collateral or the priority or perfection of such security interest, enforcing the Obligations, or in the prosecution or defense of any action or proceeding concerning any matter arising out of or in connection with this Agreement or any other document, agreement, or instrument between Borrower and Lender. Neither Borrower nor Guarantor shall be obligated to indemnify Lender under this Section for loss or liability caused directly and solely by the gross negligence or willful misconduct of Lender, as determined by a court of competent jurisdiction. In this Section 24, “Lender” also includes any of Lender’s Representatives and any director, officer, employee, agent, successor or assign of Lender. Borrower’s and Guarantor’s obligations under this Section 24 shall survive the expiration, cancellation or termination of this Agreement. |
| 25. | MERGERS, CONSOLIDATIONS OR SALES. Borrower and Guarantor represent and agree that Borrower will not (i) merge or consolidate with or into any other business entity nor sell all or substantially all of its assets, or (ii) enter into any joint venture or partnership with any Person. Borrower further agrees not to alter its ownership without prior written permission from Lender. |
| 26. | DEFAULT. The occurrence of any one or more of the following events (each, an “Event of Default”) shall constitute, without notice or demand, a default and an Event of Default under this Agreement and all other documents, agreements, instruments, and papers between Lender and Borrower and instruments and papers given Lender by Borrower, whether such documents, agreements, instruments, or papers now exist or hereafter arise: |
| (i) | Lender is unable to collect any payment through the Automatic Payment Plan, or Borrower fails to timely pay any Obligations when due; | |
| (ii) | Borrower or Guarantor, fails to fully comply with or promptly, punctually and faithfully perform or observe any term, covenant, condition, agreement, or promise within this Agreement, or does not notify Lender within reasonable time upon knowledge of a failure; | |
| (iii) | any representation or warranty heretofore, now or hereafter made by Borrower or Guarantor to Lender herein or in any other document, instrument, agreement, application or paper proves to have been untrue or misleading when given in any material respect (except for representations or warranties qualified by materiality, then in any respect), as determined by Lender in its sole discretion; | |
| (iv) | the occurrence of any event or circumstance creating a reasonable expectation that: |
| (a) | any obligation or indebtedness of Borrower to a creditor or lender other than Lender (including a landlord or lessor) could be accelerated, or | |
| (b) | a creditor or lender other than Lender (including a landlord or lessor) has reason to enforce its security interest in or foreclose or collect upon the Collateral, notwithstanding that such acceleration or enforcement, foreclosure, or collection has not taken place; |
| (v) | the occurrence of any event or circumstance that would cause a lien creditor, as that term is defined in Chapter 9a-102 of the UCC (other than Lender), to take priority over Lender’s security interest in the Collateral securing the Loan or any other Obligation; | |
| (vi) | a filing against or relating to Borrower or Guarantor (unless consented to in writing by Lender) of |
| (a) | a federal tax lien in favor of the United States of America or any political subdivision of the United States of America, or | |
| (b) | a state tax lien in favor of any state of the United States of America or any political subdivision of any such state; |
| (vii) | the occurrence of any event of default or event or circumstances that would, with the passage of time or the giving of notice or both, give rise to an event of default under any other document, agreement, or instrument between Lender and Borrower or instrument or paper given Lender by Borrower, whether such document, agreement, instrument, or paper now exists or hereafter arises (notwithstanding that Lender may not have exercised its rights upon default under any such other document, agreement, instrument or paper); | |
| (viii) | any act by, against, or relating to Borrower or Guarantor, or either of their property or assets, which act constitutes the application for, consent to, or sufferance of the appointment of a receiver, trustee or other person, pursuant to court action or otherwise, over all, or any part of Borrower’s or Guarantor’s property; | |
| (ix) | the granting of any deed of trust, mortgage, or execution of an assignment for the benefit of the creditors of Borrower or Guarantor, or the occurrence of any other voluntary or involuntary liquidation for Borrower or Guarantor or extension of debt agreement for Borrower; |
| Owner / Guarantor Initial: | | _________ | _________ | |
| 10 |
| (x) | Borrower or Guarantor becomes insolvent or bankrupt, or admits its inability to pay its debts as they mature, or makes an assignment for the benefit of creditors, or applies for, institutes or consents to the appointment of a receiver, trustee or similar official for it or any substantial part of its property or any such official is appointed without its consent, or applies for, institutes or consents to any bankruptcy, or similar proceeding relating to it or any substantial part of its property under the laws of any jurisdiction or any such proceeding is instituted against it without stay or dismissal for more than sixty (60) days, or it commences any act amounting to a business failure or a winding up of its affairs, or it ceases to do business as a going concern; | |
| (xi) | Borrower or Guarantor fails to pay any final judgment for the payment of money in an amount equal to or in excess of USD 25,000.00 unless and to the extent such is being appealed and Borrower or Guarantor, as applicable, has set aside adequate reserves as required by Lender; | |
| (xii) | any levy or execution upon, or judicial seizure of, any portion of any item of Collateral, or any part or portion of the Collateral is seized or taken by a governmental body; | |
| (xiii) | the filing of any complaint, application or petition by or against Borrower or Guarantor initiating any matter in which Borrower or Guarantor is or may be granted any relief from the debts of Borrower or Guarantor, as applicable, pursuant to the Bankruptcy Code or any other insolvency statute or procedure; | |
| (xiv) | the offering by or entering into by Borrower or Guarantor of any composition, extension or any other arrangement seeking relief or extension for the debts of Borrower or Guarantor, or the initiation of any other judicial or non-judicial proceeding or agreement by, against or including Borrower or Guarantor that seeks or intends to accomplish a reorganization or arrangement with creditors; | |
| (xv) | the institution of any legal action or proceedings to enforce any Lien upon any portion of the Collateral that is not dismissed within fifteen (15) days after Borrower or Guarantor becomes aware thereof; | |
| (xvi) | the occurrence of any event or circumstance with respect to Borrower or Guarantor such that Lender shall believe in good faith that the prospect of payment of all or any part of the Obligations or the performance by Borrower or Guarantor under this Agreement or any other document, agreement, or instrument between Lender and Borrower is impaired or there shall occur any material adverse change in the business or financial condition of Borrower or Guarantor (such event specifically includes, but is not limited to, taking additional financing from a credit card advance, cash advance company or an additional working capital loan without the prior written consent of Lender); | |
| (xvii) | the entry of any court order that enjoins, restrains or in any way prevents Borrower from conducting all or any part of its business affairs in the ordinary course of business; | |
| (xviii) | the occurrence of any uninsured loss, theft, damage or destruction to any Collateral that, individually or in the aggregate, has a fair market value in excess of USD 10,000.00, as determined by Lender in its reasonable discretion; | |
| (xix) | any act by, against, or relating to Borrower or Guarantor or either of their assets pursuant to which any creditor of Borrower or Guarantor seeks to reclaim or repossess or reclaims or repossesses all or a portion of Borrower’s or Guarantor’s assets; | |
| (xx) | the termination of existence, dissolution or liquidation of Borrower or Guarantor or the ceasing to carry on actively any substantial part of Borrower’s or Guarantor’s current business; | |
| (xxi) | this Agreement shall, at any time after its execution and delivery and for any reason, cease to be in full force and effect or shall be declared null and void, or the validity or enforceability hereof shall be contested by Borrower or Guarantor denies it has any further liability, indebtedness, or obligation hereunder prior to such time that the Obligations are indefeasibly paid and performed in full; | |
| (xxii) | Guarantor or any other Person signing a guaranty or support agreement in favor of Lender shall repudiate, purport to revoke or fail to perform its, his, or her obligations under such guaranty or support agreement in favor of Lender, or any non-natural Person Guarantor shall cease to exist; | |
| (xxiii) | any material change occurs in Borrower’s ownership or organizational structure (acknowledging that any change in ownership will be deemed material when ownership is closely held); | |
| (xxiv) | if Borrower is: |
| (a) | a sole proprietorship, the owner dies, | |
| (b) | a trust, a trustor dies, | |
| (c) | a partnership, any general or managing partner dies, | |
| (d) | a corporation, any principal officer or 10% or greater shareholder dies, | |
| (e) | a limited liability company, any manager or managing member dies, | |
| (f) | any other form of business entity, any person(s) directly or indirectly controlling 10% or more of the ownership interests of such entity dies, unless Borrower or Guarantor provide a replacement for any such decedent who is satisfactory to Lender, in Lender’s sole discretion, within thirty (30) days after the date on which such Person died, provided, however, that Borrower and Guarantor shall not have such thirty (30)-day period if such death has had or is reasonably expected to have a material adverse effect on Borrower’s business, financial condition, results of operations, or prospects; |
| (xxv) | Borrower fails to provide financial statements or bank access (via Plaid or the like) to Lender within 72 hours of request by Lender. |
| Owner / Guarantor Initial: | | _________ | _________ | |
| 11 |
| 27. | RIGHTS AND REMEDIES UPON DEFAULT. Subject to applicable law, if an Event of Default occurs under this Agreement, at any time thereafter, Lender may exercise any one or more of the following rights and remedies: |
| A. | Refrain from Disbursing Loan Proceeds: Lender may refrain from disbursing Borrower’s Loan proceeds to Borrower’s Designated Checking Account. |
| B. | Debit Amounts Due From Borrower’s Designated Checking Account: Lender may debit through the Automatic Payment Plan from Borrower’s Designated Checking Account all payments that Lender was unable to collect and/or the amount of any other Obligations that Borrower failed to pay. |
| C. | Accelerate Indebtedness: Lender may declare the entire Obligations immediately due and payable, without notice to or consent from Borrower of any kind. |
| D. | Assemble Collateral: Lender may require Borrower and/or Guarantor to deliver to Lender all or any portion of the Collateral and any and all certificates of title and other documents relating to the Collateral. Lender may require Borrower and/or Guarantor to assemble the Collateral and make it available to Lender at a place to be designated by Lender. Lender also shall have full power to enter upon the property of Borrower and/or Guarantor to take possession of and remove the Collateral, all in accordance with applicable law, including (without limitation) the UCC. If the Collateral contains other goods not covered by this Agreement at the time of repossession, Borrower and Guarantor agree Lender may take such other goods, provided that Lender makes reasonable efforts to return them to Borrower and Guarantor after repossession. |
| E. | Sell the Collateral: Lender shall have full power to sell, lease, transfer, or otherwise deal with the Collateral or proceeds thereof in Lender’s own name or that of Borrower or Guarantor. Lender may sell the Collateral at public auction or private sale. Unless the Collateral threatens to decline speedily in value or is of a type customarily sold on a recognized market, Lender will give Borrower, Guarantor and other Persons as required by law, reasonable notice of the time and place of any public sale, or the time after which any private sale or any other disposition of the Collateral is to be made. Lender, Borrower, and Guarantor agree that ten (10) calendar days’ prior notice is reasonable notice. However, no notice need be provided to any Person who, after an Event of Default occurs, enters into and authenticates an agreement waiving that Person’s right to notification of sale. All expenses relating to the disposition of the Collateral, including without limitation the expenses of retaking, holding, insuring, preparing for sale and selling the Collateral, shall become a part of the Obligations secured by this Agreement. To the extent permitted by applicable law, all such expenses will become a part of the Obligations. |
| F. | Appoint Receiver: Lender shall have the right to have a receiver appointed to take possession of all or any part of the Collateral, with the power to protect and preserve the Collateral, to operate the Collateral preceding foreclosure or sale, and to collect the rents from the Collateral and apply the proceeds, over and above the cost of the receivership, against the Obligations. The receiver may serve without bond if permitted by law. Lender’s right to the appointment of a receiver shall exist whether or not the apparent value of the Collateral exceeds the Obligations by a substantial amount. Employment by Lender shall not disqualify a Person from serving as a receiver. |
| G. | Collect Revenues, Apply Accounts: Lender, either itself or through a receiver, may collect the payments, rents, income, and revenues from the Collateral. Lender may at any time in Lender’s discretion transfer any Collateral into Lender’s own name or that of Lender’s nominee and receive the payments, rents, income and revenues therefrom and hold the same as security for the Obligations or apply it to payment of the Obligations in such order of preference as Lender may determine. Insofar as the Collateral consists of accounts, general intangibles, insurance policies, instruments, chattel paper, choses in action, or similar property, Lender may demand, collect, receipt for, settle, compromise, adjust, sue for, foreclose or realize on the Collateral as Lender may determine, whether or not any amount included within the Obligations is then due, as permitted by law. For these purposes, Lender may, on behalf of and in the name of Borrower and Guarantor, receive, open and dispose of mail addressed to Borrower or Guarantor; change any address to which mail and payments are to be sent; and endorse notes, checks, drafts, money orders, documents of title, instruments and items pertaining to payment, shipment or storage of any Collateral. To facilitate collections, Lender may notify account debtors and obligors on any Collateral to make payments directly to Lender. |
| H. | Obtain Deficiency: If Lender chooses to sell any or all of the Collateral, Lender may obtain a judgment against Borrower and/or Guarantor for any deficiency remaining on the Obligations due to Lender after application of all amounts received from the exercise of the rights provided in this Agreement. Borrower and Guarantor shall be liable for a deficiency even if the transaction described in this subsection is a sale of accounts or chattel paper. |
| Owner / Guarantor Initial: | | _________ | _________ | |
| 12 |
| I. | Confession of Judgment: Notwithstanding any other provision set forth in this Agreement, Lender may fill out and file a confession of judgment against Borrower substantially in form and substance attached hereto as Exhibit D (the “Confession of Judgment Form”). Borrower hereby agrees, and shall not make any claim to the contrary, that this remedy is permitted pursuant to applicable laws of the State of Utah. |
| J. | Other Rights and Remedies: Lender shall have all the rights and remedies of a secured creditor under the provisions of the UCC. In addition, Lender shall have and may exercise any or all other rights and remedies it may have available at law, in equity or otherwise. |
| K. | Election of Remedies: Except as may be prohibited by applicable law, all of Lender’s rights and remedies shall be cumulative and may be exercised singularly or concurrently. Election by Lender to pursue any remedy shall not exclude pursuit of any other remedy, and an election to make expenditures or to take action to perform an obligation of Borrower under the Agreement, after Borrower’s failure to perform, shall not affect Lender’s right to declare a default and exercise its remedies. |
| 28. | CONSENT TO JURISDICTION AND VENUE. Borrower, Guarantor and Lender agree that any action or proceeding to enforce or arising out of this Agreement may be brought in the Third Judicial District Court, State of Utah or in the federal United States District Court for the District of Utah, and Borrower and Guarantor waive personal service of process. Borrower, Guarantor and Lender agree that venue is proper in such courts. |
| 29. | JURY TRIAL WAIVER. To the extent not prohibited by applicable law, Borrower, Guarantor, and Lender waive their right to a trial by jury of any claim or cause of action based upon, arising out of or related to this Agreement. |
| 30. | NO WAIVER BY LENDER. No delay or omission on the part of Lender in exercising any rights, remedies, privileges, or powers under this Agreement, shall be, or be construed or operate as, a waiver of same. Waiver of any right, remedy, privilege, or power on any one occasion shall not be construed as a waiver of the same. All Lender’s rights and remedies shall be cumulative and may be exercised singularly or concurrently. |
| 31. | ASSIGNMENT. This Agreement shall bind and inure to the benefit of the respective successors and assigns of each of the parties hereto; provided, however, neither Borrower nor Guarantor may assign this Agreement or any rights or duties hereunder without Lender’s prior written consent and any assignment attempted to be made without such consent shall be absolutely null and void. Lender may assign this Agreement and its rights and duties hereunder and no consent or approval by Borrower or Guarantor is required in connection with any such assignment. Lender reserves the right to sell, assign, transfer, negotiate or grant participations in all or any part of, or any interest in, Lender’s rights and benefits hereunder. In connection with any assignment or participation, Lender may disclose all documents and information that Lender now or hereafter may have relating to Borrower or Guarantor. To the extent that Lender assigns its rights and obligations hereunder to another party, Lender thereupon shall be released from such assigned obligations and such assignment shall affect a novation between Borrower and Guarantor and such other party. Lender, in its capacity as servicer, or a successor servicer (if any), shall, acting solely for this purpose as a non-fiduciary agent of Borrower, maintain at one of its offices in the United States a copy of each assignment agreement delivered to it with respect to this Loan and a register for the recordation of the name of each assignee of this Loan, and principal and interest amount of this Loan owing to, such assignee pursuant to the terms hereof. The entries in such register shall be conclusive, and Borrower, Guarantor, Lender and each such assignee may treat each Person whose name is recorded therein pursuant to the terms hereof as a “Lender” hereunder for all purposes of this Agreement, notwithstanding notice to the contrary. The register maintained for this Loan shall be available for inspection by Borrower and any such assignee of this Loan, at any reasonable time upon reasonable prior notice to Lender, in its capacity as servicer, or the applicable successor servicer (if any). This Section 31 shall be construed so that this Loan is at all times maintained in “registered form” within the meaning of Sections 163(f), 871(h)(2) and 881(c)(2) of the Internal Revenue Code and any related Treasury regulations (or any other relevant or successor provisions of the Internal Revenue Code or of such Treasury regulations). |
| 32. | INTERPRETATION. Paragraph and section headings used in this Agreement are for convenience only, and shall not affect the construction of this Agreement. Neither this Agreement nor any uncertainty or ambiguity herein shall be construed or resolved against Lender or Borrower, whether under any rule of construction or otherwise. This Agreement has been reviewed by all parties, having had the opportunity to consult legal counsel and, shall be construed and interpreted according to the ordinary meaning of the words used so as to fairly accomplish the purposes and intentions of all parties hereto. |
| 33. | SEVERABILITY. If one or more provisions of this Agreement or the application thereof is determined invalid, illegal or unenforceable in any respect in any jurisdiction, the same shall not invalidate or render illegal or unenforceable such provision or its application in any other jurisdiction nor any other provision of this Agreement or its application in any jurisdiction. If at any time usury laws would render any amounts due under this Agreement usurious under applicable law, then it is the Parties express intention that the Borrower and Guarantor not be required to pay any interest at a rate in excess of the maximum lawful rate, that the excess be deemed a payment of principal, and the provisions hereof shall immediately be reformed and the amounts thereafter decreased or if Obligations paid in full refunded to Borrower, so as to comply with the then applicable usury law, but so as to permit the recovery of the fullest amount otherwise due under this Note. |
| Owner / Guarantor Initial: | | _________ | _________ | |
| 13 |
| 34. | NOTICES / SERVICE OF PROCESS. Except as otherwise provided in this Agreement, all communications, requests, and notices required by or permitted under this Agreement must be in writing. Notice will be deemed given, and service of summons and complaint or other required legal documents will be deemed served: (i) when deposited, if sent in U.S. first-class mail, postage prepaid; (ii) when delivered, if delivered in person; (iii) when sent, if sent by registered mail, certified mail, by nationally recognized overnight courier, or electronic mail. Notice delivered hereunder to Borrower and Guarantor shall be sent to Borrower’s or Guarantor’s address or electronic mail address listed on the Signature Page of this Agreement that corresponds with such Person’s signature, or to any other address as updated by Borrower or Guarantor, as applicable, in writing in accordance with this Section. Notice to Lender shall be sent to: PMB 1216, 2795 E. Cottonwood Parkway, Suite 300, Salt Lake City, UT 84121. Lender, Borrower, and Guarantor irrevocably consent to service of process in the manner provided above, which may differ from any manner expressly required or permitted by the Utah Rules of Civil Procedure, in addition to service, in accordance with Utah Rules of Civil Procedure. It shall be sufficient for Lender’s counsel to file affirmation of service attesting to service in accordance with this Section. |
| 35. | RECORDKEEPING AND AUDIT REQUIREMENTS. Lender shall have no obligation to maintain any electronic records or any documents, or any other paper delivered to Lender by Borrower or Guarantor in connection with this Agreement other than as required by law. Borrower and Guarantor shall at all times keep accurate and complete records of Borrower’s financial statements and accounts and the Collateral. At Lender’s request, Borrower shall deliver to Lender: (i) current, complete, and accurate financial statements and schedules of accounts and general intangibles; and (ii) such other information regarding the Collateral as Lender may request. Lender, or any of Lender’s Representatives, shall have the right to call any telephone numbers that Borrower has provided or may provide in the future or otherwise in Lender’s possession (including any cellular or mobile telephone numbers) at intervals to be determined by Lender, and without hindrance or delay, to inspect, audit, check, and make extracts from any copies of the books, records, journals, orders, receipts, correspondence that relate to Borrower’s financial statements and accounts and Collateral or other transactions between the parties thereto and the general financial condition of Borrower. |
| 36. | GOVERNING LAW. This Agreement and any claim, dispute or controversy (whether in contract, tort, or otherwise) at any time arising from or relating to this Agreement is governed by, and this Agreement will be construed in accordance with, applicable federal law and (to the extent not preempted by federal law) Utah law without regard to internal principles of conflict of laws. The legality, enforceability and interpretation of this Agreement and the amounts contracted for, charged and reserved under this Agreement will be governed by such laws. |
| 37. | WAIVER OF NOTICES AND OTHER TERMS. Except for any notices provided for in this Agreement, Borrower, Guarantor, and any other Person who has obligations pursuant to this Agreement, to the extent not prohibited by applicable law, hereby waive demand, notice of nonpayment, notice of intention to accelerate, notice of acceleration, presentment, protest, notice of dishonor and notice of protest. To the fullest extent permitted by applicable law, Borrower, Guarantor, and any other Person who has obligations pursuant to this Agreement also agrees: Lender is not required to file suit, show diligence in or evidence of enforcement or collection against Borrower, Guarantor, or any other Person who has obligations pursuant to this Agreement, or proceed against any Collateral; Lender may, but shall not be obligated to, substitute, exchange or release any Collateral; Lender may release any Collateral, or fail to realize upon or perfect Lender’s security interest in any Collateral; Lender may, but shall not be obligated to, sue one or more Persons without joining or suing others; all, in each case of the foregoing, without impairing or losing Lender’s security interest in the Collateral and without impairing, losing, forfeiting, or waiving any of Lender’s other rights, remedies, privileges, or powers under this Agreement, under any other document, agreement, or instrument between Lender and Borrower or Guarantor, at law or in equity, or otherwise. |
| 38. | MONITORING, RECORDING AND ELECTRONIC COMMUNICATIONS. In order to ensure a high quality of service for Lender’s customers, Lender may monitor and record telephone calls between Borrower or Guarantor, on the one hand, and Lender’s employees or agents, on the other hand. Borrower and Guarantor acknowledge that Lender may do so and agree in advance to any such monitoring or recording of telephone calls. Borrower and Guarantor also agree that Lender may communicate with Borrower and Guarantor electronically by e-mail. |
| 39. | CONFIDENTIALITY. Neither Borrower nor Guarantor shall make, publish or otherwise disseminate in any manner a copy of this Agreement or any public statement or description of the terms of this Agreement, except to its employees, advisors and similar Persons who have a legitimate need to know its contents. |
| Owner / Guarantor Initial: | | _________ | _________ | |
| 14 |
| 40. | ENTIRE AGREEMENT. Any application Borrower signed or otherwise submitted in connection with the Loan and all exhibits and other attachments to this Agreement, any other documents, agreements, and instruments required by Lender now or in the future in connection with this Agreement and Borrower’s Loan are hereby incorporated into and made a part of this Agreement. This Agreement is the entire agreement of Borrower, Guarantor, and Lender with respect to the subject matter hereof and supersedes any prior written or verbal communications or instruments relating thereto. |
| 41. | COUNTERPARTS; ELECTRONIC SIGNATURES. This Agreement may be executed in one or more counterparts, each of which counterparts shall be deemed to be an original, and all such counterparts shall constitute one and the same instrument. For purposes of the execution of this Agreement, signatures delivered by electronic or fax transmission shall be treated in all respects as original signatures. |
| 42. | CUSTOMER SERVICE CONTACT INFORMATION. If you have questions or comments about your Loan, you may contact us by (i) email at [email protected] or (ii) mail sent to PMB 1216, 2795 E. Cottonwood Parkway, Suite 300, Salt Lake City, UT 84121. |
| 43. | PERSONAL GUARANTY. Guarantor, jointly and severally (if more than one), absolutely and unconditionally guarantee the indefeasible, full, and prompt payment to Lender, including its successors and assignees, of (i) any and all Obligations incurred by Borrower pursuant to this Agreement, (ii) the full and prompt payment and performance when due of any and all additional obligations of Borrower to Lender under this Agreement, together with any replacements, supplements, renewals, modifications, consolidations, restatements and extensions thereof, and (iii) the full and prompt payment and performance of any and all other obligations of Borrower to Lender under any other agreements, documents or instruments now or hereafter evidencing, securing or otherwise relating to the Obligations (this “Guaranty”). Guarantor further agrees to repay the Obligations on demand, without requiring Lender first to enforce or collect or exercise any rights, remedies, privileges, or powers against Borrower. This is a guarantee of payment and performance, and not of collection. This is an absolute, unconditional, primary, and continuing obligation and will remain in full force and effect until all of the Obligations have been indefeasibly paid in full and Lender has terminated this Guaranty. This Guaranty shall be construed in accordance with the laws of the State of Utah, and shall inure to the benefit of Lender and its successors and assigns. To the extent not prohibited by applicable law, Guarantor waives its right to a trial by jury of any claim or cause of action based upon, arising out of or related to this Guaranty, this Agreement and all other documentation evidencing the Obligations, in any legal action or proceeding. For each Guarantor that resides in a community property state, including, without limitation Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington and Wisconsin, or as otherwise requested by Lender, the spouse of such Guarantor shall execute, at any time upon demand, and agree to a Spousal Consent to Loan form. So long as any of the Obligations hereby guaranteed remain indefeasibly unpaid or undischarged (other than indemnification obligations which by their terms survive the indefeasible payment of the Obligations and the release of any Collateral) or Lender has any obligation to make the Loan, (i) Guarantor will not, by paying any sum recoverable hereunder (whether or not demanded by Lender) or by any means or on any other ground, claim any set off or counterclaim against Borrower in respect of any liability of Guarantor to Borrower, or (ii) in proceedings under federal bankruptcy law or insolvency proceedings of any nature, prove in competition with Lender in respect of any payment hereunder, or be entitled to have the benefit of, any counterclaim or proof of claim or dividend or payment by or on behalf of Borrower or the benefit of any other security for any of the Obligations which, now or hereafter, Lender may hold or in which it may have any share. Guarantor hereby expressly waives any right of contribution or reimbursement from or indemnity against Borrower or any other guarantor, whether at law or in equity, arising from any payments made by Guarantor, and Guarantor acknowledges that Guarantor has no right whatsoever to proceed against Borrower or any other guarantor for reimbursement of any such payments for so long as any of the Obligations remain indefeasibly unpaid or undischarged (other than indemnification obligations which by their terms survive the indefeasible payment of the Obligations and the release of any Collateral). |
| 44. | TRANSFERS TO TRUSTS. Neither Borrower nor Guarantor shall transfer any assets into a trust, including any actual or purported spendthrift trust, asset protection trust or any other trust intended by its terms or purpose (or having the effect) to protect assets from creditors or to limit the rights of existing or future creditors, without the prior written consent of Lender, and any such transfer (i) shall constitute an Event of Default under this Agreement, (ii) shall have the effect of, and shall be deemed as a matter of law, regardless of that settlor’s solvency, of having been made by that settlor with the actual intent of hindering and delaying and defrauding Lender as that settlor’s creditor, and (iii) shall constitute a fraudulent transfer that is unenforceable and void (not merely voidable) as against Lender. |
| 45. | CLASS ACTION WAIVER. THE PARTIES HERETO WAIVE ANY RIGHT TO ASSERT ANY CLAIMS AGAINST THE OTHER PARTY AS A REPRESENTATIVE OR MEMBER IN ANY CLASS OR REPRESENTATITVE ACTION, EXCEPT WHERE SUCH WAIVER IS PROHIBITED BY LAW AS AGAINST PUBLIC POLICY. TO THE EXTENT EITHER PARTY IS PERMITTED BY LAW OR COURT OF LAW TO PROCEED WITH A CLASS OR REPRESENTATIVE ACTION AGAINST THE OTHER, THE PARTIES HEREBY AGREE THAT: (1) THE PREVAILING PARTY SHALL NOT BE ENTITLED TO RECOVER ATTORNEYS’ FEES OR COSTS ASSOCIATED WITH PURSUING THE CLASS OR REPRESENTATIVE ACTION (NOT WITHSTANDING ANY OTHER PROVISION IN THIS AGREEMENT); AND (2) THE PARTY WHO INITIATES OR PARTICIPATES AS A MEMBER OF THE CLASS WILL NOT SUBMIT A CLAIM OR OTHERWISE PARTICIPATE IN ANY RECOVERY SECURED THROUGH THE CLASS OR REPRESENTATIVE ACTION. |
| Owner / Guarantor Initial: | | _________ | _________ | |
| 15 |
| 46. | CERTIFICATION AND SIGNATURES. By executing this Agreement or authorizing the applicable Signatory below to execute on its behalf, Borrower and Guarantor independently certify that Borrower and Guarantor have received a copy of this Agreement and that Borrower and Guarantor have read, understood and agreed to be bound by its terms. Each Signatory below certifies that it is signing on behalf of Borrower or Guarantor, as applicable, in the capacity indicated below such Signatory’s (and if Borrower or Guarantor is a sole proprietorship, in the capacity of the owner of such sole proprietorship) and that such Signatory is authorized to execute this Agreement on behalf of or in the stated relation to Borrower or Guarantor. |
| 47. | USA PATRIOT ACT NOTIFICATION. The following notification is provided to Borrower and Guarantor pursuant to Section 326 of the USA Patriot Act of 2001, 31 U.S.C. Section 5318: |
IMPORTANT INFORMATION ABOUT PROCEDURES FOR OPENING A NEW ACCOUNT. To help the government fight the funding of terrorism and money laundering activities, Federal law requires all financial institutions to obtain, verify, and record information that identifies each person or entity that opens an account, including any deposit account, treasury management account, loan, other extension of credit, or other financial services product. What this means for Borrower and Guarantor: When Borrower and Guarantor open an account, if Borrower or Guarantor is an individual, Lender will ask for Borrower’s or Guarantor’s name, taxpayer identification number, residential address, date of birth, and other information that will allow Lender to identify Borrower or Guarantor, and if Borrower or Guarantor is not an individual, Lender will ask for Borrower’s or Guarantor’s name, taxpayer identification number, business address, and other information that will allow Lender to identify Borrower or Guarantor. Lender may also ask, if Borrower or Guarantor is an individual, to see Borrower’s or Guarantor’s driver’s license or other identifying documents, and if Borrower or Guarantor is not an individual, to see Borrower’s or Guarantor’s legal organizational documents or other identifying documents.
[Signatures Begin on Next Page]
| Owner / Guarantor Initial: | | _________ | _________ | |
| 16 |
Signature Page
I, as a duly authorized agent of Borrower, and/or in my capacity as Guarantor, hereby affirm that I have read and understand the terms, covenants, conditions, agreements, and promises of, consent to, and agree to be bound by, this Agreement (inclusive of the Guaranty set forth therein) and the exhibits and attachments thereto.
| Borrower: NextNRG Inc. F/K/A EZFILL HOLDINGS INC | |||
| Name: | MICHAEL DAVID FARKAS | Signature: | /s/ Michael D. Farkas |
| Title: | Owner | Date: | 04/01/2026 |
| Guarantor | |||
| Name: | MICHAEL DAVID FARKAS | Signature: | /s/ Michael D. Farkas |
| Title: | Individually, and on behalf of all Additional Guarantor Entities | Date: | 04/01/2026 |
| Additional Affiliated Entity Guarantor | |||
| Name: | NEXTNRG OPS LLC | Signature: | /s/ Michael D. Farkas |
| Title: | Owner | Date: | 04/01/2026 |
| Owner / Guarantor Initial: | | _________ | _________ | |
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| For Lender’s Use Only: This Agreement has been received and accepted by Lender. | ||
| CASHERA PRIVATE CREDIT INC, | ||
| a Utah corporation | ||
| SIGNATURE | /s/ Mark Allayev | |
| Name | Mark Allayev |
|
| Title | CEO |
|
| Date | 04/07/26 | |
| Owner / Guarantor Initial: | | _________ | _________ | |
| 18 |