Onar Holding Corp 8-K, filed Sep 29, 2026
Onar Holding Corp (ONAR)
About this 8-K
Onar Holding Corp filed this 8-K on September 29, 2026, reporting on events of September 28, 2026.
Items reported
- Item 1.01: Entered into a material agreement
- Item 2.03: New debt or off-balance-sheet obligation
- Item 3.02: Unregistered sale of equity
- Item 7.01: Regulation FD disclosure
- Item 9.01: Financial statements and exhibits
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
CURRENT REPORT
Pursuant to Section 13 OR 15(d) of The Securities Exchange Act of 1934
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Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
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Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Item 1.01. Entry into a Material Definitive Agreement.
On September 28, 2026, ONAR Holding Corporation, a Nevada corporation, (the “Company”) entered into a Securities Purchase Agreement (the “Purchase Agreement”) with the purchasers party thereto (the “Purchasers”), pursuant to which the Company agreed to issue secured convertible promissory notes (the “Notes”) in an aggregate principal amount of up to $15,000,000 and secured convertible promissory notes issued in exchange transactions pursuant to separate Exchange Agreements (the “Exchange Notes”). The Notes are issued with a 10% original issue discount, bear interest at a rate of 8.0% per annum and mature eighteen months following issuance. The Company may conduct one or more additional closings during the ninety-day period following the initial closing, subject to the terms and conditions of the Purchase Agreement. At the initial closing, the Company issued Notes having an aggregate principal amount of $3,944,444.44 in exchange for aggregate subscription proceeds of $3,550,000.
Concurrently with the execution of the Purchase Agreement, the Company entered into Exchange Agreements with certain holders of existing indebtedness. Pursuant to the Exchange Agreements, the Company issued Exchange Notes having an aggregate principal amount of $7,089,317.25 in exchange for existing indebtedness having an aggregate exchange value of $6,380,385.52. The Exchange Notes are issued with a 10% original issue discount against the value of the securities exchanged therefor, bear interest at a rate of 8.0% per annum (but do not have their first six months of interest guaranteed) and mature eighteen months following issuance. The Exchange Agreements provide that existing indebtedness is exchanged on the basis of outstanding principal, accrued and unpaid interest, other amounts due and owing and a 10% exchange premium. The parties intend that the exchange transactions qualify for the exemption provided by Section 3(a)(9) of the Securities Act of 1933, as amended (the “Securities Act”).
The Purchase Agreement and the related transaction documents provide that, upon the occurrence of a Nasdaq uplisting, the outstanding Notes, Senior Notes (as defined below) and Exchange Notes will automatically exchange into shares of the Company’s new Series 1 Convertible Preferred Stock (the “Series 1 Preferred Stock”) to be designated after the closing. The conversion price is fixed at $0.038576 per share, which was determined based upon a $25,000,000 fully diluted equity valuation of the Company and a fully diluted share count of 648,070,547 shares. The conversion price will be subject to customary adjustments for stock splits, stock dividends, recapitalizations and similar events or other events as may be contemplated in the applicable certificate of designation. Accrued and unpaid interest will be paid in cash upon such exchange solely for the Notes and Senior Notes (as defined below). The Company further intends, subject to the execution and delivery of definitive exchange agreements with holders of the securities thereto and the filing of the certificate of designations for the Series 1 Preferred Stock, to exchange shares of the Company’s existing series of preferred stock for shares of Series 1 Preferred Stock.
In connection with the Purchase Agreement, the Company also agreed to issue warrants (the “Warrants”) exercisable for shares of common stock of the Company, par value $0.001 per share (the “Common Stock”). The Warrants have a five-year term and an initial exercise price of $0.0482 per share, which equals 125% of the conversion price. The Warrants provide for a one-time exercise price reset on the twelve-month anniversary of issuance based on market price, subject to a floor price and other customary adjustment provisions. The Company also agreed to issue shares of Common Stock upon the occurrence of a Nasdaq uplisting to holders designated by the Company in consultation with its Nasdaq advisors for the purpose of satisfying Nasdaq public float, unrestricted publicly held shares and round-lot holder requirements (the “Nasdaq Incentive Shares”), which Nasdaq Incentive Shares shall reduce the shares underlying the Warrants (the “Warrant Shares”) by one Warrant Share for every two Nasdaq Incentive Shares issued.
On September 28, 2026, the Company also entered into a separate Securities Purchase Agreement (the “Senior Purchase Agreement”) with the purchasers party thereto (the “Senior Purchasers”), pursuant to which the Company agreed to issue senior secured convertible promissory notes (the “Senior Notes”) in an aggregate principal amount of up to $5,000,000. The Senior Notes are issued with a 10% original issue discount, bear interest at 12.0% per annum and mature on September 28, 2027. At closing of the Senior Purchase Agreement, the Company issued Senior Notes having an aggregate principal amount of $3,944,444.44 in exchange for aggregate subscription proceeds of $3,550,000. In addition, the Senior Purchasers received an aggregate of 9,202,613 shares of Common Stock as incentive shares in accordance with the Senior Purchase Agreement. So long as the Company has not sold the full amount of Notes under the Purchase Agreement, each Senior Purchaser shall have the right to tender its Senior Note (with all accrued interest thereon) as the purchase price under the Purchase Agreement and such Senior Purchaser shall become a “Purchaser” under the Purchase Agreement. An additional Senior Note in the principal amount of $213,630.11 in exchange for existing indebtedness having an exchange value $192,267.10 was issued to one investor, no shares of Common Stock were issued as incentive shares to such investor as part of that separate exchange.
Certain of the Purchasers, Senior Purchasers and holders party to the Exchange Agreements, including the Lead Investors (as defined in the Purchase Agreement) and the Collateral Agent (as defined below), are existing lenders to the Company or affiliates of existing lenders, whose notes and other obligations have been previously described in the Company's reports filed with the SEC, and one such investor is the holder of the Company's previously disclosed related-party secured convertible promissory note. Except as described in this Current Report and in the Company’s prior Securities and Exchange Commission (“SEC”) reports, there are no material relationships between the Company or its affiliates and any of the parties to the agreements described herein.
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The Company also entered into a Registration Rights Agreement pursuant to which it agreed to register for resale shares of Common Stock issuable upon conversion of the Series 1 Preferred Stock, Warrant Shares, Nasdaq Incentive Shares and related securities. The Company agreed to file a registration statement within 30 days following the Nasdaq uplisting and to use commercially reasonable efforts to cause such registration statement to become effective within 90 days following the Nasdaq uplisting, subject to extension in the event of Securities Exchange Commission review and the other terms and conditions of the Registration Rights Agreement. The Registration Rights Agreement also contains liquidated damages provisions, subject to an aggregate cap equal to 6% of the applicable subscription amount.
The Company also entered into a Pledge and Security Agreement (the “Security Agreement”) with ADI Funding LLC., as collateral agent for the benefit of the holders of the Senior Notes, Notes and Exchange Notes (the “Collateral Agent”). Pursuant to the Security Agreement, the Company granted a security interest in substantially all of its assets, including accounts, deposit accounts, securities accounts, inventory, equipment, intellectual property, investment property, pledged equity interests and proceeds thereof. The Security Agreement provides that the Senior Notes are senior in right of payment and lien priority to the Notes and Exchange Notes and that enforcement of collateral rights will be administered through the Collateral Agent in accordance with the transaction documents.
The Company also entered into Leak-Out Agreements restricting sales of Common Stock following a Nasdaq uplisting. Generally, holders may not transfer more than 5% of the trailing ten-trading-day average daily trading volume during the 180-day period following commencement of Nasdaq trading, subject to specified exceptions and termination provisions.
The foregoing descriptions do not purport to be complete and are qualified in their entirety by reference to the applicable agreements filed as exhibits to this Current Report on Form 8-K.
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.
The Company issued Senior Notes in an aggregate principal amount of $3,944,444.44. The Senior Notes bear interest at 12.0% per annum and mature on September 28, 2027. Following an Event of Default, interest may increase to the lesser of 18.0% per annum and the maximum rate permitted by law. The Senior Notes are secured pursuant to the Security Agreement and may become subject to acceleration in the circumstances specified therein. An additional Senior Note in the principal amount of $213,630.11 in exchange for existing indebtedness having an exchange value $192,267.10 was issued to one investor, no shares of Common Stock were issued as incentive shares to such investor as part of that separate exchange.
The Company also issued Notes in an aggregate principal amount of $3,944,444.44 and Exchange Notes in an aggregate principal amount of $7,089,317.25. The Notes and Exchange Notes bear interest at 8.0% per annum and are secured pursuant to the Security Agreement. Upon the Nasdaq uplisting, the principal amount of the Notes and Exchange Notes will automatically exchange into Series 1 Preferred Stock, while accrued and unpaid interest will be paid in cash solely for the Notes and Senior Notes, and the entire outstanding balance of the Exchange Notes will automatically exchange into Series 1 Preferred Stock.
Item 3.02. Unregistered Sales of Equity Securities.
The information set forth in Item 1.01 and Item 2.03 is incorporated herein by reference.
Pursuant to the Senior Purchase Agreement, the Company issued Senior Notes having an aggregate principal amount of $3,944,444.44 to the Senior Purchasers in exchange for aggregate subscription proceeds of $3,550,000. In connection therewith, the Company issued an aggregate of 9,202,613 shares of Common Stock as incentive shares.
An additional Senior Note in the principal amount of $213,630.11 in exchange for existing indebtedness having an exchange value $192,267.10 was issued to one investor, no shares of Common Stock were issued as incentive shares to such investor as part of that separate exchange.
Pursuant to the Purchase Agreement, the Company issued Notes having an aggregate principal amount of $3,944,444.44 in exchange for aggregate subscription proceeds of $3,550,000.
Pursuant to the Exchange Agreements, the Company issued Exchange Notes having an aggregate principal amount of $7,089,317.25 in exchange for existing indebtedness having an aggregate exchange value of $6,380,385.52. The exchange value reflected outstanding principal, accrued and unpaid interest, other amounts due and owing and a 10% exchange premium.
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Upon the Nasdaq uplisting, the outstanding Notes and Exchange Notes will automatically exchange into shares of Series 1 Preferred Stock. In addition, certain purchasers may receive Nasdaq Incentive Shares in connection with satisfaction of Nasdaq public float and related listing requirements in accordance with the transaction documents.
The Company also issued Warrants exercisable to purchase up to 102,251,256 shares of Common Stock.
The securities described herein were offered and sold in private transactions in reliance upon Section 4(a)(2) of the Securities Act and Rule 506 thereunder. The exchange transactions were intended to qualify for the exemption provided by Section 3(a)(9) of the Securities Act.
Item 7.01. Regulation FD Disclosure.
On September 29, 2026, the Company issued a press release announcing the financing transactions described in this Current Report on Form 8-K. A copy of the press release is furnished as Exhibit 99.1 to this Current Report on Form 8-K.
The information contained in this Item 7.01, including Exhibit 99.1, is furnished and shall not be deemed filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”).
Cautionary Statements Regarding Forward-Looking Statements
This Current Report on Form 8-K contains statements that the Company believes to be “forward-looking statements” within the meaning of Section 27A of the Securities Act, Section 21E of the Exchange Act, and the Private Securities Litigation Reform Act of 1995. All statements other than statements of historical fact, including statements regarding the Company’s future financial condition, results of operations, business operations and business prospects, the anticipated benefits of the financing, any potential conversion of securities, any potential uplisting, and any other potential acquisitions, financings, and debt restructurings, are forward-looking statements. Words such as “anticipate,” “estimate,” “expect,” “project,” “intend,” “plan,” “predict,” “believe,” and similar words and expressions are intended to identify forward-looking statements. These statements reflect the Company’s current expectations, are not guarantees of future performance, and involve known and unknown risks and uncertainties, including the substantial doubt about the Company’s ability to continue as a going concern described in its SEC filings, the Company’s working capital deficit and increased indebtedness, integration risks, the risk that expected benefits of the acquisition are not realized, the need for additional financing, market conditions, competition, client retention, and regulatory changes, any of which could cause actual results to differ materially. Detailed risk factors are included in the Company’s filings with the SEC, including its Annual Report on Form 10-K and its Quarterly Report on Form 10-Q. These forward-looking statements speak only as of the date hereof. The Company assumes no obligation to update these statements except as required by law.
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Item 9.01. Financial Statements and Exhibits.
(d) Exhibits.
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* Certain schedules and exhibits to the exhibits have been omitted pursuant to Item 601(a)(5) of Regulation S-K. The Company agrees to furnish supplementally a copy of any omitted schedule or exhibit to the Securities and Exchange Commission upon request. |
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| ONAR Holding Corporation | ||
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Date: September 29, 2026 | By: | /s/ Claude Zdanow | |
| Name: | Claude Zdanow |
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| Title: | Chief Executive Officer |
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EXHIBIT 4.1
THIS SECURITY AND THE SECURITIES FOR WHICH THIS SECURITY IS EXCERCISABLE HAVE NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AND HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF. NO SUCH SALE OR DISTRIBUTION MAY BE EFFECTED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL IN A FORM SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT OF 1933.
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| September 28, 2026 |
WARRANT TO PURCHASE
COMMON STOCK
OF
ONAR HOLDING CORPORATION
| Company: | ONAR Holding Corporation, a Nevada corporation |
| Number of shares: | [●] |
| Class or Series: | Common Stock |
| Issue Date: | September 28, 2026 |
| Expiration Date: | Five years after the Issue Date, or September 28, 2031 |
Warrant No. 2026-[●]
THIS CERTIFIES THAT, for good and valuable consideration, the Purchaser identified on the applicable signature page to the Purchase Agreement, or its permitted assigns (the “Holder”), at any time and from time to time prior to the Expiration Date as stated above, is entitled to purchase from ONAR Holding Corporation, a Nevada corporation (the “Company”) fully paid and non-assessable Exercise Shares (subject to adjustment as provided herein) at the Exercise Price, subject to the terms and conditions set forth in this Warrant.
1. DEFINITIONS.As used herein, the following terms shall have the following respective meanings:
(a) “Board” shall mean the Company’s board of directors.
(b) “COI” means the Certificate of Incorporation of the Company, as such may be amended, modified or restated from time to time.
(c) “Conversion Price” means the Conversion Price as defined in the Purchase Agreement.
(d) “Convertible Securities” means any stock or other security (other than Options) that is at any time and under any circumstances, directly or indirectly, convertible into, exercisable or exchangeable for, or which otherwise entitles the holder thereof to acquire, any shares of Common Stock.
(e) “Exchange Act” means the Securities Exchange Act of 1934, as amended.
(f) “Exchange Agreements” means the agreements pursuant to which existing indebtedness may be exchanged or rolled into Exchange Notes (as defined in the Purchase Agreement) issued pursuant to the financing contemplated by the Purchase Agreement.
(g) “Exempt Issuance” shall have the meaning set forth in the Purchase Agreement.
(h) “Exercise Price” means 125% of the Conversion Price, as determined pursuant to the Purchase Agreement. On the twelve (12) month anniversary of the Issue Date, the Exercise Price shall automatically reset to 125% of the Market Price then in effect, provided that in no event shall the Exercise Price be reduced below the Floor Price.
(i) “Exercise Shares” shall mean [425,495,424] shares of Common Stock issuable upon exercise of this Warrant. The number of Exercise Shares shall be reduced by one (1) Exercise Share for every two (2) Incentive Shares issued to the Holder pursuant to the Transaction Documents. The number of Exercise Shares shall be subject only to adjustment pursuant to Section 3.1 (Share Reorganization), Section 3.2 (Capital Reorganization), the Incentive Share adjustment set forth herein and other customary adjustments for stock splits, stock dividends, combinations, recapitalizations and similar transactions.
(j) “Fair Market Value” of one Exercise Share shall be equal to the amount to which one share of Common Stock is entitled in such sale of the Company, giving effect to the Exercise Shares as if this Warrant had been exercised prior to such sale of the Company.
(k) “Floor Price” shall mean, notwithstanding anything to the contrary contained in this Warrant, in no event shall the Exercise Price be adjusted (subject to adjustment for any forward or reverse stock splits, stock dividends, combinations, recapitalizations and similar events) below (i) the Minimum Price as of the execution date of this Warrant, unless an alternative exception applies, and (ii) the minimum bid price per share required for the Common Stock to achieve initial listing on the Nasdaq Capital Market as set forth in Nasdaq Rule 5505(a)(1)(A), and to maintain such listing on the Nasdaq Capital Market as set forth in Nasdaq Rule 5550(a)(2).
(l) “Incentive Shares” shall have the meaning set forth in the Purchase Agreement.
(m) “Lead Investors” means ADI Funding Corp., Yield Point NY LLC and M2B Funding Corp.; provided that any approval, consent, waiver, amendment, direction or other action of the Lead Investors under any Transaction Document shall require the written consent of all three Lead Investors.
(n) “Market Price” shall have the meaning set forth in the Purchase Agreement.
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(o) “Minimum Price” (as defined by Nasdaq Listing Rule 5635(d)(1)(A)) is the lower of (i) the Official Closing Price (as reflected on Nasdaq.com) immediately preceding the execution of this Warrant, or (ii) the average Official Closing Price of the Common Stock for the five (5) Trading Days immediately preceding the execution of this Warrant (or, in the event the Common Stock is not yet listed on the Nasdaq Capital Market as of the date hereof, the lower of (x) the last reported closing bid price on the OTC market on the Trading Day immediately preceding the date of this Warrant, and (y) the average of the last reported closing bid prices on the OTC market for the five (5) Trading Days immediately preceding the date of this Warrant).
(p) “Nasdaq Uplist” means once the Company has received Nasdaq’s approval of the Company’s application to list its Common Stock on The Nasdaq Capital Market, The Nasdaq Global Market or The Nasdaq Global Select Market (collectively, “Nasdaq”) and the date on which the Company’s Common Stock commences trading on the Nasdaq. At the Company’s election, “Nasdaq” could mean for purposes of this Agreement and the other Transaction Documents, a comparable national securities exchange, such as the NYSE American LLC.
(q) “Notes” means the senior secured convertible notes due eighteen (18) months from issuance issued by the Company pursuant to the Purchase Agreement, including any notes issued in connection with additional closings and any notes issued pursuant to the Exchange Agreements.
(r) “Options” means any rights, warrants or options to subscribe for or purchase share of Common Stock or Convertible Securities.
(s) “Person” means an individual, a corporation, a partnership, an association, a trust or any other entity or organization, including a governmental or political subdivision, agency or instrumentality.
(t) “Principal Market” means the principal Trading Market on which the Common Stock is then listed or quoted.
(u) “Purchase Agreement” means the Securities Purchase Agreement dated September 28, 2026 among the Company and the Purchasers party thereto.
(v) “Purchasers” means the purchasers party to the Purchase Agreement.
(w) “Registration Rights Agreement” means that certain Registration Rights Agreement dated as of September 28, 2026 by and among the Company and the Purchasers party thereto.
(x) “Securities Act” the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.
(y) “Trading Day” means a day on which the principal Trading Market is open for trading.
(z) “Trading Market” means any of the following markets or exchanges on which the Common Stock is listed or quoted for trading on the date in question: the NYSE American, the Nasdaq Capital Market, the Nasdaq Global Market, the Nasdaq Global Select Market, the New York Stock Exchange, OTCQX or OTCQB (or any successors to any of the foregoing).
(aa) “Transaction Documents” shall have the meaning set forth in the Purchase Agreement.
(bb) “Warrant” means this Warrant to Purchase shares of Common Stock of the Company.
(cc) “Warrant Coverage” shall have the meaning set forth in the Purchase Agreement.
(dd) “Warrant Shares” means the share of Common Stock issuable upon exercise of this Warrant.
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2.EXERCISE OF WARRANT AND EXPIRATION
2.1 Exercise. The rights represented by this Warrant may be immediately exercised in whole or in part at any time prior to the Expiration Date, by delivering to the Company the following:
(a) an executed Notice of Exercise in the form attached hereto; and
(b) payment of the Exercise Price in cash or by check, or by wire transfer of immediately available funds to an account designated by the Company; or Cashless Exercise in the event the shares of Common Stock are not registered (pursuant to Section 2.2 below).
The Person in whose name any Exercise Shares are to be issued shall be deemed to become the holder of record of such Exercise Shares on the date which this Warrant is surrendered and payment of the Exercise Price is received.
The Holder and any assignee, by acceptance of this Warrant, acknowledge and agree that, by reason of the provisions of this paragraph, following the purchase of a portion of the Warrant Shares hereunder, the number of Warrant Shares available for purchase hereunder at any given time may be less than the amount stated on the face hereof.
2.2 Cashless Exercise. If the shares of Common Stock are not registered, the Holder may elect to exercise this Warrant on a cashless basis, by canceling a portion of this Warrant in payment of the Exercise Price payable in respect of the number of Exercise Shares purchased upon such exercise (such exercise, a “Cashless Exercise”). In the event of an exercise pursuant to this Section 2.2, the number of Exercise Shares issued to the Holder shall be determined according to the following formula:
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| Where: | X = the number of Exercise Shares that shall be issued to the Holder; |
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| Y = the number of Exercise Shares for which this Warrant is being exercised (which shall include both the number of Exercise Shares issued to the Holder and the number of Exercise Shares subject to the portion of the Warrant being cancelled in payment of the Exercise Price); |
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| A = the Fair Market Value of one Exercise Share; and |
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| B = the Exercise Price. |
2.3 Delivery of Certificate. Within one (1) Trading Day after Holder exercises this Warrant in the manner set forth in Section 2.1 or 2.2 above, if Exercise Shares are then certificated by the Company, the Company shall deliver to Holder a certificate representing the Exercise Shares issued to Holder upon such exercise. If the Exercise Shares are not then certificated by the Company, the Company will deliver to Holder such evidence of the issuance of such Exercise Shares to Holder as required or permitted under the COI or, if there be none, such evidence as Holder may reasonably request.
2.4 Expiration. This Warrant expires, and shall become null and void, upon the Expiration Date. To the extent that the Holder has not exercised this Warrant (in whole or in part) on or before the Expiration Date, the Warrant shall be automatically exercised on a cashless basis.
2.5 Registration Rights. The Exercise Shares shall constitute “Registrable Securities” under the Registration Rights Agreement and shall be entitled to all rights and benefits afforded thereby, subject to the limitations and conditions contained therein.
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3. ADJUSTMENTS.
3.1 Share Reorganization. If the Company shall subdivide its outstanding shares into a greater number of shares or consolidate its outstanding shares into a smaller number of shares (any such event being herein called a “Share Reorganization”), then the number of Exercise Shares shall be adjusted, effective immediately after the effective date of such Share Reorganization, to a number determined by multiplying the number of Exercise Shares immediately prior to such effective date by a fraction, the numerator of which shall be the Common Stock outstanding on such effective date after giving effect to such Share Reorganization and the denominator of which shall be the number of shares of Common Stock outstanding before giving effect to such Share Reorganization.
3.2 Capital Reorganization. If there shall be any consolidation or merger to which the Company is a party, other than a consolidation or a merger of which the Company is the continuing entity and which does not result in any reclassification of, or change (other than a Share Reorganization) in, outstanding shares, or any sale or conveyance of the property of the Company as an entirety or substantially as an entirety, or any recapitalization of the Company (any such event being called a “Capital Reorganization”), then, effective upon the effective date of such Capital Reorganization, the Holder shall no longer have the right to purchase shares, but shall have instead the right to purchase, upon exercise of this Warrant, the kind and amount of securities and property (including cash) which the Holder would have owned or have been entitled to receive pursuant to such Capital Reorganization if the Warrant had been exercised immediately prior to the effective date of such Capital Reorganization.
3.3 Notice of Adjustment. The Company shall notify the Holder in writing, within a reasonable time following any action which requires or might require an adjustment or readjustment to the Exercise Shares pursuant to Section 3.1 or Section 3.2, describing the event in reasonable detail and specifying the effective date and the required adjustment and computation thereof.
3.4 Exercise Price Reset. On the twelve (12) month anniversary of the Issue Date, the Exercise Price shall automatically adjust to 125% of the Market Price then in effect; provided, however, that in no event shall the Exercise Price be reduced below the Floor Price.
3.5 Equity Classification. The provisions of this Warrant shall be interpreted and implemented in a manner intended to preserve equity classification of this Warrant under applicable accounting principles to the maximum extent permitted by law and accounting guidance. If any provision of this Warrant would reasonably be expected to result in liability classification, the Company and the Lead Investors shall cooperate in good faith to amend such provision while preserving the economic intent of the parties.
3.6 Incentive Share Adjustment. Upon the issuance of any Incentive Shares to the Holder pursuant to the Transaction Documents, the number of Exercise Shares issuable under this Warrant shall automatically be reduced by one (1) Exercise Share for every two (2) Incentive Shares issued to such Holder. The Company shall provide the Holder with written notice of any such adjustment promptly following the issuance of the applicable Incentive Shares, setting forth in reasonable detail the calculation of the revised number of Exercise Shares. Except for the adjustment expressly provided in this Section and the adjustments contemplated by Sections 3.1 and 3.2, the number of Exercise Shares shall not be adjusted for any issuance of Incentive Shares or other securities of the Company.
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4.REPRESENTATIONS OF HOLDER
4.1 Acquisition of Warrant for Personal Account. The Holder represents and warrants that it is acquiring this Warrant and the Exercise Shares solely for its account for investment and not with a view to or for sale or distribution of this Warrant or the Exercise Shares or any part thereof. The Holder also represents that the entire legal and beneficial interests of this Warrant and the Exercise Shares the Holder is acquiring is being acquired for, and will be held for, its account only.
4.2 Securities Not Registered.
(a) The Holder understands that this Warrant and the Exercise Shares have not been registered under the Securities Act. The Holder understands and acknowledges that the basis for an exemption to such registration may not be present if, notwithstanding its representations, the Holder has a present intention of acquiring this Warrant or the Exercise Shares for a fixed or determinable period in the future (other than the term of this Warrant), selling (in connection with a distribution or otherwise), granting any participation in, or otherwise distributing this Warrant and the Exercise Shares. The Holder has no such present intention.
(b) The Holder understands and acknowledges that this Warrant and the Exercise Shares must be held indefinitely unless they are subsequently registered under the Securities Act or an exemption from such registration is available.
(c) The Holder is aware that neither this Warrant nor the Exercise Shares may be sold pursuant to Rule 144 adopted under the Securities Act unless certain conditions are met, including, among other things, the existence of a public market for such securities, the availability of certain current public information about the Company, the resale following the required holding period under Rule 144 and the number of such securities being sold during any three month period not exceeding specified limitations. The Holder is aware that the conditions for resale set forth in Rule 144 have not been satisfied and that the Company presently has no plans to satisfy these conditions in the foreseeable future.
4.3 Disclosure of Information. Holder is aware of the Company’s business affairs and financial condition and has received or has had full access to all the information it considers necessary or appropriate to make an informed investment decision with respect to the acquisition of this Warrant and its underlying securities. Holder further has had an opportunity to ask questions and receive answers from the Company regarding the terms and conditions of the offering of this Warrant and its underlying securities and to obtain additional information (to the extent the Company possessed such information or could acquire it without unreasonable effort or expense) necessary to verify any information furnished to Holder or to which Holder has access.
4.4 Disposition of Warrant and Exercise Shares.
(a) Subject to the additional requirements in Section 7, the Holder further agrees not to make any disposition of all or any part of this Warrant or Exercise Shares in any event unless and until:
(i) There is then in effect a registration statement under the Securities Act covering such proposed disposition and such disposition is made in accordance with such effective registration statement; or
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(ii) The Holder shall have notified the Company of the proposed disposition and shall have furnished the Company with a detailed statement of the circumstances surrounding the proposed disposition, and if reasonably requested by the Company, the Holder shall have furnished the Company with an opinion of counsel, reasonably satisfactory to the Company, for the Holder to the effect that such disposition will not require registration of this Warrant or such Exercise Shares under the Securities Act or any applicable state securities laws.
(iii) The Holder understands and agrees that all certificates, if any, evidencing the Exercise Shares to be issued to the Holder shall bear the following legend:
| THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”). THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THE SECURITIES UNDER THE SECURITIES ACT OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED. |
4.5 Accredited Investor Status. The Holder is an “accredited investor” as defined in Regulation D promulgated under the Securities Act.
4.6 Beneficial Ownership Limitation. The Company shall not effect any exercise of this Warrant, and a Holder shall not have the right to exercise any portion of this Warrant, to the extent that after giving effect to the exercise set forth on the applicable Notice of Exercise, the Holder (together with the Holder’s Affiliates, and any Persons acting as a group together with the Holder or any of the Holder’s Affiliates) would beneficially own in excess of the Beneficial Ownership Limitation (as defined below) (the “Maximum Percentage”). For purposes of the foregoing sentence, the number of shares of Common Stock beneficially owned by the Holder and its Affiliates shall include the number of shares of Common Stock issuable upon exercise of this Warrant with respect to which such determination is being made, but shall exclude the number of shares of Common Stock which are issuable upon (i) exercise of the remaining, unconverted principal amount of this Warrant beneficially owned by the Holder or any of its Affiliates and (ii) exercise or conversion of the unexercised or unconverted portion of any other securities of the Company subject to a limitation on conversion or exercise analogous to the limitation contained herein (including, without limitation, any other notes) beneficially owned by the Holder or any of its Affiliates. Except as set forth in the preceding sentence, for purposes of this Section 4.6, beneficial ownership shall be calculated in accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder. To the extent that the limitation contained in this Section 4.6 applies, the determination of whether this Warrant is exercisable (in relation to other securities owned by the Holder together with any Affiliates) and of which principal amount of this Warrant is exercisable shall be in the sole discretion of the Holder, and the submission of a Notice of Exercise shall be deemed to be the Holder’s determination of whether this Warrant may be exercised (in relation to other securities owned by the Holder together with any Affiliates) and which principal amount of this Warrant is exercisable, in each case subject to the Beneficial Ownership Limitation. To ensure compliance with this restriction, the Holder will be deemed to represent to the Company each time it delivers a Notice of Exercise that such Notice of Exercise has not violated the restrictions set forth in this paragraph and the Company shall have no obligation to verify or confirm the accuracy of such determination. In addition, a determination as to any group status as contemplated above shall be determined in accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder. For purposes of this Section 4.6, in determining the number of outstanding shares of Common Stock, the Holder may rely on the number of outstanding shares of Common Stock as stated in the most recent of the following: (i) the Company’s most recent periodic or annual report filed with the Commission, as the case may be, (ii) a more recent public announcement by the Company, or (iii) a more recent written notice by the Company or the Company’s transfer agent setting forth the number of shares of Common Stock outstanding. Upon the written or oral request of a Holder, the Company shall within two Trading Days confirm orally and in writing to the Holder the number of shares of Common Stock then outstanding. In any case, the number of outstanding shares of Common Stock shall be determined after giving effect to the conversion or exercise of securities of the Company, including this Warrant, by the Holder or its Affiliates since the date as of which such number of outstanding shares of Common Stock was reported. The “Beneficial Ownership Limitation” shall be 4.99% of the number of shares of the Common Stock outstanding immediately after giving effect to the issuance of shares of Common Stock issuable upon exercise of this Warrant held by the Holder. The Holder, upon not less than 61 days’ prior notice to the Company, may increase or decrease the Beneficial Ownership Limitation provisions of this Section 4.6, provided that the Beneficial Ownership Limitation in no event exceeds 9.99% of the number of shares of the Common Stock outstanding immediately after giving effect to the issuance of shares of Common Stock upon exercise of this Warrant held by the Holder and the Beneficial Ownership Limitation provisions of this Section 4.6 shall continue to apply. Any such increase will not be effective until the 61st day after such notice is delivered to the Company. The Beneficial Ownership Limitation provisions of this paragraph shall be construed and implemented in a manner otherwise than in strict conformity with the terms of this Section 4.6 to correct this paragraph (or any portion hereof) which may be defective or inconsistent with the intended Beneficial Ownership Limitation contained herein or to make changes or supplements necessary or desirable to properly give effect to such limitation. The limitations contained in this paragraph shall apply to a successor holder of this Warrant.
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5. REPRESENTATION OF COMPANY. The Company represents and warrants that all securities that may be issued upon the exercise of this Warrant shall upon issuance, be duly authorized, validly issued, fully paid and non-assessable, and free of any liens and encumbrances except as stated under applicable federal and state securities laws. Nothing contained herein shall require the Company to protect the Exercise Shares or the Holder from dilution resulting from any issuance of securities by the Company following the Issue Date, except for the adjustments expressly provided for in this Warrant.
6. LEAK-OUT RESTRICTION. The Holder acknowledges and agrees that all Exercise Shares issued pursuant to this Warrant shall be subject to the Leak-Out Agreement to the extent required under the Transaction Documents.
7. NO SHAREHOLDER RIGHTS. This Warrant in and of itself shall not entitle the Holder to any voting rights or other rights as a shareholder of the Company.
8. TRANSFER OF WARRANT.Certificates evidencing the shares of Common Stock shall not contain any legend (including the legend set forth in Section 4.4(a)(iii) hereof): (i) while a resale registration statement covering the resale of such security is effective under the Securities Act, (ii) if such shares of Common Stock are eligible to be sold, assigned, or transferred pursuant to Rule 144, when available, which, for the avoidance of doubt, shall be available only in the event that a resale registration statement covering the resale of shares of Common Stock is not available) (provided that the Holder provides the Company with reasonable assurances that the shares of Common Stock are eligible for sale, assignment or transfer under Rule 144 which shall not include an opinion of the Holder’s counsel), or (iii) if such legend is not required under applicable requirements of the Securities Act (including judicial interpretations and pronouncements issued by the staff of the SEC). For the avoidance of doubt the Company shall pay all costs associated with such opinions and counsel to the Company shall provide all opinions with respect to any resales pursuant to Rule 144 or otherwise at the sole cost of the Company, and the Company shall provide confirmation to the transfer agent that all such opinions are acceptable. If all or any portion of the Note is converted or Warrant is exercised at a time when there is an effective resale registration statement to cover the resale of the shares of Common Stock, or if such shares of Common Stock may be sold under Rule 144 without the requirement for the Company to be in compliance with the current public information requirements of Rule 144(c) and without volume or manner of sale restrictions or if such legend is not otherwise required under applicable requirements of the Securities Act (including Sections 4(a)(1) or 4(a)(7), judicial interpretations and pronouncements issued by the staff of the SEC including what is known as Section 4(a)(11/2)) then such shares of Common Stock shall be issued free of all legends. The Company agrees that after the requisite holding period to comply with Rule 144 and upon effectiveness of a resale registration statement, any legend on shares of Common Stock will be removed under Rule 144 of the Securities Act, assuming the Holder satisfies the requirements of Rule 144. The Company agrees that at such time as such legend is no longer required, it will, no later than two Trading Days following the delivery by the Holder to the Company or the transfer agent of a certificate (or stock power if issued in book entry form) representing shares of Common Stock issued with a restrictive legend (such date, the “Legend Removal Date”), deliver or cause to be delivered to the Holder a certificate representing such shares that is free from all restrictive and other legends (or provide evidence of issuance in book entry form). Certificates for shares of Common Stock subject to legend removal shall be transmitted by the transfer agent to the Holder by crediting the account of the Holder’s prime broker with the Depository Trust Company System as directed by the Holder. Certificates for the shares of Common Stock subject to legend removal hereunder shall be transmitted by the transfer agent to the Holder by crediting the account of the Holder’s prime broker with the Depository Trust Company System as directed by the Holder.
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9. LOST, STOLEN, MUTILATED OR DESTROYED WARRANT. If this Warrant is lost, stolen, mutilated or destroyed, the Company may, on such terms as to indemnity or otherwise as it may reasonably impose (which shall, in the case of a mutilated Warrant, include the surrender thereof), issue a new Warrant of like denomination and tenor as the Warrant so lost, stolen, mutilated or destroyed. Any such new Warrant shall constitute an original contractual obligation of the Company, whether or not the allegedly lost, stolen, mutilated or destroyed Warrant shall be at any time enforceable by anyone.
10. Nasdaq Uplist EXERCISE Restrictions.
10.1 Floor Price. Notwithstanding any other provision of this Warrant, in no event shall the Exercise Price be reduced below the Floor Price. Any adjustment to the Exercise Price that would otherwise reduce the Exercise Price below the Floor Price shall instead reduce the Exercise Price to the Floor Price. Under no circumstances shall the Exercise Price be adjusted (subject to adjustment for any forward or reverse stock splits, stock dividends, combinations, recapitalizations and similar events) below (i) the Minimum Price as of the execution date of this Warrant, unless an alternative exception applies, and (ii) the minimum bid price per share required for the Common Stock to achieve initial listing on the Nasdaq Capital Market as set forth in Nasdaq Rule 5505(a)(1)(A), and to maintain such listing on the Nasdaq Capital Market as set forth in Nasdaq Rule 5550(a)(2).
10.2 Exchange Cap. The Company intends to comply with the shareholder approval requirements of Nasdaq Listing Rule 5635(d) (and, to the extent applicable, Nasdaq Listing Rule 5635(b)), and, as such, the Company shall not issue any Warrant Shares that would exceed 19.99% of the total number of shares of Common Stock outstanding immediately prior to the execution of this Warrant (as adjusted for any forward or reverse stock splits, stock dividends, combinations, recapitalizations and similar events) and, to the extent applicable in the case of Nasdaq Listing Rule 5635(b)), no holder may exercise any Warrant to the extent that such exercise would also result in such holder (individually or as part of a group) holding the largest voting interest in the Company (the “Exchange Cap”), unless and until the Company has obtained Nasdaq Shareholder Approval.
10.3 Allocation of Cap.Until the Nasdaq Shareholder Approval is obtained, the Warrant Shares shall be issued to the Holders pro rata up to the Exchange Cap limit. If any exercise of the Warrants would result in an issuance exceeding the Exchange Cap, the portion of the transaction exceeding such cap shall be held in abeyance and deferred, until official Nasdaq Shareholder Approval is secured.
10.4 Nasdaq Shareholder Approval. If shareholder approval is required pursuant to Nasdaq Listing Rule 5635 or any other applicable Nasdaq rule in connection with the issuance, exercise, exchange or exercise of any securities contemplated by this Warrant, the Company shall use commercially reasonable efforts to obtain such shareholder approval as promptly as practicable and as described in the Purchase Agreement.
11. AMENDMENT.Any term of this Warrant may be amended, modified or waived only with the written consent of the Company and the Lead Investors; provided that any amendment that disproportionately and adversely affects the Holder relative to other holders shall also require the consent of such Holder.
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12. NOTICES, ETC.All notices required or permitted hereunder shall be in writing and shall be deemed effectively given: (a) upon personal delivery to the party to be notified, (b) when sent by electronic mail or confirmed facsimile if sent during normal business hours of the recipient, or if not, then on the next business day, (c) five (5) days after having been sent by registered or certified mail, return receipt requested, postage prepaid, or (d) one (1) day after deposit with a nationally recognized overnight courier, specifying next day delivery, with written verification of receipt. All communications shall be sent to the Company or the Holder, as applicable, at the addresses listed below, or at such other address as the Company or Holder may designate by ten (10) days advance written notice to the other parties hereto.
| If to the Company: ONAR Holding Corporation 990 Biscayne Blvd, 5th Floor Miami, FL 33132 E-mail: c@onar.com
With a copy to: Baker & Hostetler LLP 1900 Avenue of the Starts, Suite 2700 Los Angeles, CA 90067 Attention: JR Lanis E-mail: JRLanis@bakerlaw.com | If to the Holder: [●] [●] [●] Attention: [●]
With a copy to: Seward & Kissel LLP. One Battery Park Plaza New York, New York 10004 Attention: Keith J. Billotti Email: billotti@sewkis.com.com |
13. ACCEPTANCE.Receipt of this Warrant by the Holder shall constitute acceptance of and agreement to all of the terms and conditions contained herein.
14. GOVERNING LAW; VENUE AND WAIVER OF JURY TRIAL.This Warrant and all rights, obligations and liabilities hereunder shall be governed by and construed under the laws of the State of Nevada as applied to agreements among Nevada residents, made and to be performed entirely within the State of Nevada without giving effect to conflicts of laws principles.
15. JURY TRIAL.WAIVER TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, THE COMPANY AND HOLDER EACH WAIVE THEIR RIGHT TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION ARISING OUT OF OR BASED UPON THIS WARRANT, THE LOAN AGREEMENT OR ANY CONTEMPLATED TRANSACTION, INCLUDING CONTRACT, TORT, BREACH OF DUTY RELATING TO THE SUBJECT MATTER OF THIS WARRANT. THE SCOPE OF THIS WAIVER IS INTENDED TO BE ALL-ENCOMPASSING OF ANY AND ALL DISPUTES THAT MAY BE FILED IN ANY COURT AND THAT RELATE TO THE SUBJECT MATTER OF THIS WARRANT. THIS WAIVER IS A MATERIAL INDUCEMENT FOR THE PARTIES’ AGREEMENT TO THIS WARRANT. EACH PARTY HAS REVIEWED THIS WAIVER WITH ITS COUNSEL.
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IN WITNESS WHEREOF, the Company has caused this Warrant to be executed by its duly authorized representative as of the date first set forth above.
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| Name: | Claude Zdanow |
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| Title: | Chief Executive Officer |
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| FORM OF NOTICE OF EXERCISE |
__________, 20__
To: ONAR Holding Corporation
Reference is made to the Warrant dated September 28, 2026. Terms defined therein are used herein as therein defined.
The undersigned, pursuant to the provisions set forth in the Warrant, hereby irrevocably elects and agrees to purchase [__] shares of Common Stock of the Company, and makes payment herewith in full there for at the Exercise Price determined pursuant to the Warrant in the following form:
___________________.
[If the number of shares as to which the Warrant is being exercised is less than all of the shares purchasable thereunder, the undersigned hereby requests that a new Warrant representing the remaining balance of the shares be registered in the name of [__], whose address is: [__]
The undersigned hereby represents that it is exercising the Warrant for its own account or the account of an Affiliate for investment purposes and not with the view to any sale or distribution and that the Warrant Holder will not offer, sell or otherwise dispose of the Warrant or any underlying Exercise Shares in violation of applicable securities laws.
[NAME OF WARRANT HOLDER]
By:
Title:
[ADDRESS OF WARRANT HOLDER]
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EXHIBIT 10.1
SECURITIES PURCHASE AGREEMENT
This Securities Purchase Agreement (this “Agreement”) is dated as of September 28, 2026, between ONAR Holding Corporation, a Nevada corporation (the “Company”), and each purchaser identified on the signature pages hereto (each, including its successors and assigns, a “Purchaser” and collectively, the “Purchasers”).
WHEREAS, the Company and the Purchasers are executing and delivering this Agreement in reliance upon an exemption from registration afforded by Section 4(a)(2) of the Securities Act of 1933, as amended (the “Securities Act”), and/or Regulation D promulgated thereunder;
WHEREAS, the Company desires to issue and sell to the Purchasers, and the Purchasers desire to purchase from the Company, notes (the “Notes”) in exchange for new cash proceeds, provided that the Initial Closing shall not occur unless the Minimum Financing Condition has been satisfied, and in addition thereto the Company may issue securities pursuant to the Exchange Agreements in connection with the exchange of existing indebtedness, which exchanged indebtedness shall not count toward satisfaction of the Minimum Financing Condition and shall be in addition to such financing for new cash proceeds;
WHEREAS, the Notes shall be issued with a 10% original issue discount, bear interest at 8.0% per annum, and be secured by substantially all assets of the Company pursuant to the Security Documents;
WHEREAS, in connection with the purchase of the Notes, the Company shall issue to the Purchasers common stock purchase warrants (the “Warrants”) exercisable for shares of the Company’s common stock, par value $0.001 per share (the “Common Stock”), with an initial exercise price of $0.0482 per share, which is equal to 125% of the applicable Conversion Price, subject to the adjustment provisions contained therein;
WHEREAS, the Warrants shall provide for a one-time exercise price reset on the twelve (12) month anniversary of issuance, pursuant to which the exercise price shall be adjusted to 125% of the Market Price then in effect, provided that in no event shall the Exercise Price be reduced below the Floor Price;
WHEREAS, the Company and certain existing lenders intend to exchange and roll outstanding indebtedness into the financing vehicle contemplated hereby, with such rolled indebtedness receiving a one-time premium as set forth in the applicable Exchange Agreements;
WHEREAS, pursuant to the terms of the Notes, the Notes shall be automatically exchanged into Preferred Shares upon the occurrence of the Nasdaq Uplist at a valuation and with a conversion price determined in accordance with the terms set forth in the Note and the Certificate of Designations;
WHEREAS, the Company has agreed to grant the Purchasers certain registration rights with respect to the Conversion Shares, Warrant Shares, Incentive Shares and other shares issuable pursuant to the Transaction Documents pursuant to that certain Registration Rights Agreement entered into contemporaneously herewith;
WHEREAS, the Purchasers identified on Schedule I desire to purchase the Notes and related Securities on the terms set forth herein;
WHEREAS, the parties acknowledge that there may be multiple Purchasers participating in the financing and desire that all collateral and enforcement rights be administered through a Collateral Agent acting for the benefit of all Purchasers pursuant to the Security Agreement;
WHEREAS, the Company intends to use the proceeds of the offering primarily to finance the acquisition of Advertise Purple and related transaction expenses, working capital, growth initiatives and the Nasdaq Uplist.
NOW, THEREFORE, in consideration of the mutual covenants and agreements contained herein, and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the parties agree as follows:
ARTICLE I.
DEFINITIONS
1.1 Definitions. In addition to the terms defined elsewhere in this Agreement: (a) capitalized terms that are not otherwise defined herein have the meanings given to such terms in the Notes or the Warrants (each as defined herein), and (b) the following terms have the meanings set forth in this Section 1.1:
“Additional Closing” means any Closing occurring after the Initial Closing pursuant to which the Company issues Notes and related Securities, provided that the aggregate principal amount of Notes issued in all Closings shall not exceed $15,000,000 unless otherwise approved by the Lead Investors, and any securities issued pursuant to Exchange Agreements shall not be included in such limitation.
“Additional Closing Date” means the date on which an Additional Closing occurs pursuant to this Agreement.
“Advertise Purple” means Advertise Purple, Inc., together with its subsidiaries and affiliated entities, and any successor thereto acquired by the Company pursuant to the acquisition transaction contemplated by the Transaction Documents.
“Advertise Purple Acquisition” means the acquisition by the Company, directly or indirectly, of Advertise Purple pursuant to the acquisition agreements provided to the Purchasers prior to Closing, together with any amendments thereto approved by the Board of Directors.
“Acquiring Person” shall have the meaning ascribed to such term in Section 4.7.
“Action” shall have the meaning ascribed to such term in Section 3.1(j).
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“Affiliate” means any Person that, directly or indirectly through one or more intermediaries, controls or is controlled by or is under common control with a Person, as such terms are used in and construed under Rule 405 under the Securities Act.
“Board of Directors” means the board of directors of the Company.
“Business Day” means any day other than Saturday, Sunday or other day on which commercial banks in New York, NY are authorized or required by law to remain closed; provided, however, for clarification, commercial banks shall not be deemed to be authorized or required by law to remain closed due to “stay at home”, “shelter-in-place”, “non-essential employee” or any other similar orders or restrictions or the closure of any physical branch locations at the direction of any governmental authority so long as the electronic funds transfer systems (including for wire transfers) of commercial banks in New York, NY are generally are open for use by customers on such day.
“Certificate of Designations” means the Certificate of Designation of Series 1 Convertible Preferred Stock of ONAR Holding Corporation, a form of which is attached hereto as Exhibit H.
“Closing” means the Initial Closing or any Additional Closing, as applicable.
“Closing Date” means each of the Initial Closing Date or any Additional Closing Date, as applicable.
“Collateral Agent” means ADI Funding LLC., in its capacity as collateral agent for the benefit of the Purchasers and their successors and assigns, together with any successor collateral agent.
“Common Stock” means the common stock of the Company, par value $0.001 per share, and any other class of securities into which such securities may hereafter be reclassified or changed.
“Common Stock Equivalents” means any securities of the Company which would entitle the holder thereof to acquire at any time Common Stock, including, without limitation, any debt, preferred stock, right, option, warrant or other instrument that is at any time convertible into or exercisable or exchangeable for, or otherwise entitles the holder thereof to receive, Common Stock.
“Conversion Floor Price” shall have the meaning ascribed to such term in Section 4.35.
“Conversion Price” means $0.038576 per share, which is the fixed per-share price established on the Initial Closing Date equal to (i) $25,000,000 divided by (ii) the Fully Diluted Share Count. The Conversion Price shall not be reset, repriced or adjusted following Closing except for stock splits, stock dividends, recapitalizations and similar events.
“Conversion Shares” shall have the meaning ascribed to such term in the Notes.
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“Covered Securities” means Common Stock and any rights, options, or warrants to purchase or securities or Indebtedness convertible into or exercisable or exchangeable for Common Stock, other than Excluded Issuances.
“Disclosure Schedules” shall have the meaning ascribed to such term in Section 3.1.
“Disclosure Time” means, (i) if this Agreement is signed on a day that is not a Trading Day or after 9:00 a.m. (New York, N.Y. time) and before midnight (New York, N.Y. time) on any Trading Day, 9:01 a.m. (New York, N.Y. time) on the Trading Day immediately following the date hereof, and (ii) if this Agreement is signed between midnight (New York, N.Y. time) and 9:00 a.m. (New York, N.Y. time) on any Trading Day, no later than 9:01 a.m. (New York, N.Y. time) on the date hereof.
“Escrow Agent” means Grushko & Mittman, P.C.
“Escrow Agreement” means the escrow agreement among the Company, the Purchasers and the Escrow Agent.
“Equity Conditions” shall have the meaning set forth in the Notes.
“Evaluation Date” shall have the meaning ascribed to such term in Section 3.1(s).
“Event of Default” shall have the meaning set forth in the Notes.
“Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.
“Exchange Agreements” means the agreements pursuant to which existing indebtedness may be exchanged or rolled into Exchange Notes issued concurrently with this financing, in the form attached hereto as Exhibit F.
“Exempt Issuance” means the issuance of (a) shares of Common Stock or options not exceeding, in the aggregate, 10% of the shares of Common Stock outstanding as of the initial Closing Date issued to employees, officers or directors of the Company pursuant to any stock or option plan duly adopted for such purpose, authorized and consented to by a majority of the Board of Directors, (b) securities upon the exercise or exchange of or conversion of (i) any Securities issued hereunder, and/or (ii) other securities exercisable or exchangeable for or convertible into shares of Common Stock issued and outstanding on the date of this Agreement (without regard to any vesting requirements), provided that such securities have not been amended since the date of this Agreement to increase the number of such securities or to decrease the exercise price, exchange price or conversion price of such securities (other than in connection with stock splits or combinations or to extend the term of such securities), or (c) securities issued pursuant to acquisitions or strategic transactions approved by a majority of the disinterested directors of the Company and in consultation with the Lead Investors, provided that such securities are issued as “restricted securities” (as defined in Rule 144) and carry no registration rights that require or permit the filing of any registration statement in connection therewith during the prohibition period in Section 4.11(a) herein, provided that any such issuance shall only be to a Person (or to the equityholders of a Person) which is, itself or through its subsidiaries, an operating company or an owner of an asset in a business synergistic with the business of the Company and shall provide to the Company additional benefits in addition to the investment of funds, but shall not include a transaction in which the Company is issuing securities primarily for the purpose of raising capital or to an entity whose primary business is investing in securities.
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“Exchange Notes” means the secured convertible notes due eighteen (18) months from issuance, issued by the Company to the Purchasers pursuant to the Exchange Agreement, substantially in the form attached hereto as Exhibit G.
“Exercise Price” shall have the meaning set forth in the Warrants.
“FCPA” means the Foreign Corrupt Practices Act of 1977, as amended.
“Financial Monitor” means ADI Funding Corp.
“Floor Price” shall have the meaning ascribed to such term in Section 4.35.
“Flow of Funds Memorandum” shall have the meaning set forth in Section 2.2(a)(xx).
“Fully Diluted Share Count” means 648,070,547 shares of Common Stock, which shall include the total number of shares of Common Stock outstanding immediately prior to the Closing, assuming conversion of all outstanding preferred stock in accordance with its contractual conversion terms, but excluding all Notes, Preferred Shares, Warrants, Incentive Shares and securities issuable pursuant thereto.
“GAAP” shall have the meaning ascribed to such term in Section 3.1(h).
“Governance Rights Period” means, so long as permitted under the Nasdaq rules, the period during which the Lead Investors and their Affiliates beneficially own, or would beneficially own upon conversion or exercise of all Notes, Preferred Shares, Warrants and other securities held by them (without giving effect to any beneficial ownership limitations in any Transaction Document), securities representing at least thirty percent (30%) of the aggregate Common Stock on an as-converted and as-exercised basis, with all Lead Investors and Affiliates being aggregated as a single group for purposes of such determination.
“Incentive Shares” means shares of Common Stock issued upon the Nasdaq Uplist at the Conversion Price to holders designated by the Company in consultation with its Nasdaq advisors for the purpose of satisfying Nasdaq public float, unrestricted publicly held shares and round-lot holder requirements. Incentive Shares shall be subject to the beneficial ownership limitation of the Note, the Registration Rights Agreement, the Leak-Out Agreement and the Warrant Coverage provisions of the Transaction Documents.
“Indebtedness” shall have the meaning ascribed to such term in Section 3.1(bb).
“Initial Closing” means the first closing under this Agreement.
“Initial Closing Date” means the date on which the Initial Closing occurs.
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“Intellectual Property Rights” shall have the meaning ascribed to such term in Section 3.1(p).
“Irrevocable Transfer Agent Instructions” means irrevocable instructions to the Transfer Agent that, among other things, reserves each Purchaser’s pro rata portion of the Required Minimum for the benefit of such Purchaser and instructs the Transfer Agent to deliver on an expedited basis via The Depository Trust Company Deposit or Withdrawal at Custodian system the number of Underlying Shares to be issued to such Purchaser upon any conversion of such Purchaser’s Note in accordance with the terms thereof, in the form of Exhibit D attached hereto.
“Lead Investors” means ADI Funding Corp., Yield Point NY LLC and M2B Funding Corp.; provided that any approval, consent, waiver, amendment, direction or other action of the Lead Investors under any Transaction Document shall require the written consent of all three Lead Investors.
“Legend Removal Date” shall have the meaning ascribed to such term in Section 4.1(c).
“Liens” means a lien, charge, pledge, security interest, encumbrance, right of first refusal, preemptive right or other restriction.
“Market Price” means the average of the daily VWAP of the Common Stock during the ten (10) Trading Days immediately preceding the applicable determination date. For the avoidance of doubt:
(i) the Exercise Price reset contemplated by the Warrants shall be based on such average and not the lowest daily VWAP during such period;
(ii) the reset may only decrease the Exercise Price and shall never result in an increase to above the Exercise Price in effect immediately prior to such reset;
(iii) following any reset, the Exercise Price shall remain equal to one hundred twenty-five percent (125%) of the Market Price; and
(iv) in no event shall the Exercise Price be less than the Floor Price.
“Material Adverse Effect” shall have the meaning assigned to such term in Section 3.1(b).
“Material Permits” shall have the meaning ascribed to such term in Section 3.1(n).
“Maximum Rate” shall have the meaning ascribed to such term in Section 5.18.
“Minimum Financing Condition” means the Company shall have received, on or prior to Closing, either (i) aggregate gross proceeds of not less than $13,000,000 from the sale of Securities pursuant to this Agreement, or (ii) at least $10,000,000 of proceeds from the sale of Securities pursuant to this Agreement together with at least $3,000,000 of funded senior secured debt from one or more senior lenders.
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“Nasdaq Shareholder Approval” means any approval of the Company’s stockholders required pursuant to Nasdaq Listing Rule 5635 or any other applicable Nasdaq rule in connection with the transactions contemplated by this Agreement and the other Transaction Documents.
“Nasdaq Uplist” means once the Company has received Nasdaq’s approval of the Company’s application to list its Common Stock on The Nasdaq Capital Market, The Nasdaq Global Market or The Nasdaq Global Select Market (collectively, “Nasdaq”) and the date on which the Company’s Common Stock commences trading on the Nasdaq. At the Company’s election, “Nasdaq” could mean for purposes of this Agreement and the other Transaction Documents, a comparable national securities exchange, such as the NYSE American LLC.
“New Securities” shall mean any capital stock of the Company whether now authorized or not, and rights, convertible securities, options or warrants to purchase such capital stock, and securities of any type whatsoever, including debt, that are, or may become, exercisable or convertible into capital stock; provided that the term New Securities does not include:
(i) securities issued in connection with any stock dividend, stock split, split-up or other distribution on shares of Common Stock;
(ii) securities issued upon the conversion or exercise of any outstanding convertible or exercisable securities as of the date of this Agreement;
(iii) securities issued upon exercise or grant of options or other equity awards with respect to shares of Common Stock, subject in either case to appropriate adjustment in the event of any stock dividend, stock split, combination or other similar recapitalization affecting such shares, issued or issuable to employees or directors of, or consultants to, the Company pursuant to an equity plan of the Company or other arrangement approved by the Board of Directors of the Company;
(iv) securities issued or issuable pursuant to the bona fide acquisition of another corporation by the Company by merger, purchase of substantially all of the assets or other reorganization, which acquisition is approved by a majority vote of the Board of Directors of the Company as contemplated in this Agreement; and
(v) securities issued pursuant to the terms of this Agreement.
“Notes” means the secured convertible notes due eighteen (18) months from issuance, issued by the Company to the Purchasers pursuant to this Agreement, substantially in the form attached hereto as Exhibit A, including any notes issued in connection with Additional Closings and any Exchange Notes issued pursuant to the Exchange Agreements, except where those certain provisions of the Exchange Notes, substantially in the form attached hereto as Exhibit G, would otherwise apply instead of those certain provisions of the secured convertible notes substantially in the form attached hereto as Exhibit A.
“Other Investor” shall have the meaning ascribed to such term in Section 4.26.
“Outside Date” means October 2, 2026, or such later date as may be agreed in writing by the Company and the Lead Investors.
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“Permitted Senior Debt” means one or more senior secured credit facilities, term loans, acquisition facilities or similar financing arrangements incurred by the Company and its Subsidiaries in an aggregate principal amount up to $3,000,000 or such higher amount needed to equal $15,000,000 when combined with the aggregate principal amount of Notes sold pursuant to this Agreement, or such larger amount as agreed in writing by the Company and the Lead Investors. For the avoidance of doubt, the senior convertible notes financing pursuant to the securities purchase agreement dated the date hereof is considered Permitted Senior Debt.
“Person” means an individual or corporation, partnership, trust, incorporated or unincorporated association, joint venture, limited liability company, joint stock company, government (or an agency or subdivision thereof) or other entity of any kind.
“Preferred Shares” means the shares of Series 1 preferred stock of the Company issued in exchange for the Notes upon the successful occurrence of the Nasdaq Uplist, having the rights, preferences, privileges and restrictions set forth in the Certificate of Designations and convertible into Common Stock in accordance with the terms of the Certificate of Designations, together with any securities issued in substitution therefor or in respect thereof as a result of any stock split, stock dividend, recapitalization, reclassification or similar transaction.
“Principal Amount” means, as to each Purchaser, the amounts set forth below such Purchaser’s signature block on the signature pages hereto next to the heading “Principal Amount,” in United States dollars.
“Principal Market” means the OTC Pink Tier of the OTC Markets.
“Public Information Failure” shall have the meaning ascribed to such term in Section 4.3(b).
“Public Information Failure Payments” shall mean any amounts payable by the Company pursuant to Section 4.3(b) as liquidated damages arising from a Public Information Failure.
“Purchaser Party” shall have the meaning ascribed to such term in Section 4.10(a).
“Registration Rights Agreement” means the Registration Rights Agreement dated as of the date hereof by and among the Company and the Purchasers.
“Required Approvals” shall have the meaning ascribed to such term in Section 3.1(e).
“Required Minimum” shall have the meaning ascribed to such term in Section 4.11(a).
“Rule 144” means Rule 144 promulgated by the SEC pursuant to the Securities Act, as such Rule may be amended from time to time, or any similar rule or regulation hereafter adopted by the SEC having substantially the same effect as such Rule.
“Rule 424” means Rule 424 promulgated by the SEC pursuant to the Securities Act, as such Rule may be amended or interpreted from time to time, or any similar rule or regulation hereafter adopted by the SEC having substantially the same purpose and effect as such Rule.
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“SEC” means the United States Securities and Exchange Commission.
“SEC Reports” shall have the meaning ascribed to such term in Section 3.1(h).
“Securities” means the Notes, the Conversion Shares, the Warrant Shares, the Underlying Shares, Incentive Shares and any shares issuable pursuant to stock-payment amortization installments made in accordance with the Equity Conditions.
“Securities Act” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.
“Security Agreement” means the Pledge and Security Agreement between, inter alios, the Company and the Collateral Agent, dated the date hereof.
“Security Documents” means the Security Agreement, all UCC financing statements, control agreements, mortgages (if any), collateral assignments and all other agreements, instruments and documents executed in connection with the creation, perfection, maintenance or enforcement of the liens securing the Notes, in each case as amended, restated, amended and restated, supplemented or otherwise modified from time to time.
“Short Sales” means all “short sales” as defined in Rule 200 of Regulation SHO under the Exchange Act (but shall not be deemed to include locating and/or borrowing shares of Common Stock).
“Subscription Amount” means, as to each Purchaser, the aggregate amount paid by such Purchaser for the Notes and Warrants purchased hereunder, as set forth on such Purchaser’s signature page, in United States dollars and immediately available funds.
“Subsequent Financing” means any issuance, offer, sale or grant by the Company or any Subsidiary after the Closing Date of any equity security, debt security, Common Stock Equivalent or other financing instrument for capital raising purposes, whether in a public or private transaction, other than:
(i) securities issued pursuant to the Transaction Documents;
(ii) securities issued pursuant to the Exchange Agreements;
(iii) Incentive Shares;
(iv) securities issued in connection with the Nasdaq Uplist or any related offering;
(v) Exempt Issuances; and
(vi) Permitted Senior Debt.
“Subsidiary” means any subsidiary of the Company as set forth on Schedule 3.1(a) and shall, where applicable, also include any direct or indirect subsidiary of the Company formed or acquired after the date hereof.
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“Trading Day” means a day on which the principal Trading Market is open for trading.
“Trading Market” means any of the following markets or exchanges on which the Common Stock is listed or quoted for trading on the date in question: the NYSE American, the Nasdaq Capital Market, the Nasdaq Global Market, the Nasdaq Global Select Market, the New York Stock Exchange, OTCQX, OTCQB or OTC Pink (or any successors to any of the foregoing).
“Transaction Documents” means this Agreement, the Notes, the Warrants, the Registration Rights Agreement, the Security Agreement, the Exchange Agreements, all exhibits and schedules hereto and thereto, and all other documents executed in connection with the transactions contemplated hereby.
“Transfer Agent” means Vinyl Equity and any successor transfer agent of the Company, as applicable”.
“Underlying Shares” means the shares of Common Stock issuable upon conversion of the Preferred Shares.
“Variable Rate Transaction” shall have the meaning ascribed to such term in Section 4.13(a).
“VWAP” means, for any date, the price determined by the first of the following clauses that applies: (a) if the Common Stock is then listed or quoted on a Trading Market, the daily volume weighted average price of the Common Stock for such date (or the nearest preceding date) on the Trading Market on which the Common Stock is then listed or quoted as reported by Bloomberg L.P. (based on a Trading Day from 9:30 a.m. (New York, N.Y. time) to 4:02 p.m. (New York, N.Y. time)), (b) if OTCQB, OTCQX or OTC Pink is not a Trading Market, the volume weighted average price of the Common Stock for such date (or the nearest preceding date) on OTCQB, OTCQX or OTC Pink as applicable, (c) if the Common Stock is not then listed or quoted for trading on OTCQB or OTCQX and if prices for the Common Stock are then reported on the OTC Pink Open Market (or a similar organization or agency succeeding to its functions of reporting prices), the most recent bid price per share of the Common Stock so reported, or (d) in all other cases, the fair market value of a share of Common Stock as determined by an independent appraiser selected in good faith by the Purchasers of a majority in interest of the Securities then outstanding and reasonably acceptable to the Company, the fees and expenses of which shall be paid by the Company.
“Warrants” means the Common Stock purchase warrants delivered to the Purchaser at the Closing in accordance with Section 2.2(a) hereof, which Warrants shall have a term of exercise of five (5) years after the initial exercise date, in the form of Exhibit B attached hereto.
“Warrant Coverage” means Warrant Shares equal to one hundred percent (100%) of the shares of Common Stock issuable upon conversion of the Notes, excluding the Exchange Notes, issued at Closing, subject to reduction by one (1) Warrant Share for every two (2) Incentive Shares issued.
“Warrant Shares” means the Common Stock issuable upon exercise of the Warrants.
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ARTICLE II.
PURCHASE AND SALE
2.1 Closing.
(a) Initial Closing. On the Initial Closing Date, upon the terms and subject to the conditions set forth herein, substantially concurrent with the execution and delivery of this Agreement by the parties hereto, the Company hereby agrees to sell, and the Purchasers, severally and not jointly, hereby agree to purchase, Notes in an aggregate principal amount sufficient to satisfy the Minimum Financing Condition, plus such additional securities as may be issued pursuant to Exchange Agreements in exchange for existing indebtedness. Notes issued pursuant to Exchange Agreements shall not reduce, offset or otherwise count toward satisfaction of the Minimum Financing Condition. Purchaser shall deliver to the Escrow Agent, via wire transfer of immediately available funds, its Subscription Amount, and the Company shall deliver to each Purchaser its respective Note, Warrant and the other Transaction Documents required to be delivered at Closing. The Initial Closing shall occur electronically on the date designated by the Company and the Lead Investors, but in no event later than five (5) Trading Days following satisfaction or waiver of the conditions set forth herein.
(b) Additional Closing. The Company may conduct one or more Additional Closings until the earlier of (i) ninety (90) days following the Initial Closing or (ii) the sale of $15,000,000 in aggregate principal amount of Notes (each, an “Additional Closing Date”). Each Additional Closing shall occur on substantially identical terms and conditions as the Initial Closing. The aggregate principal amount of Notes sold pursuant to this Agreement shall not exceed $15,000,000. Exchange Notes issued pursuant to Exchange Agreements shall not be included in such calculation. Each Purchaser participating in an Additional Closing shall receive securities on the same economic terms as the Purchasers participating in the Initial Closing (subject only to differences in Closing Date and accrued interest adjustments, if any).
(i) Each Purchaser shall deliver its Subscription Amount to the Escrow Agent pursuant to the Escrow Agreement. All Subscription Amounts shall be held in escrow pending satisfaction or waiver of the applicable Closing Conditions set forth herein.
(ii) Upon satisfaction or waiver of all applicable Closing Conditions, including satisfaction of the Minimum Financing Condition, the Escrow Agent shall release the escrowed funds to the Company in accordance with the Flow of Funds Memorandum (as defined below).
(iii) The escrowed funds shall not be released to the Company unless and until the Minimum Financing Condition has been satisfied.
(iv) If the Minimum Financing Condition has not been satisfied on or before the Outside Date, this Agreement shall automatically terminate (unless otherwise agreed by the Company and the Lead Investors), and the Escrow Agent shall promptly return all escrowed Subscription Amounts to the applicable Purchasers, without deduction or offset.
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2.2 Deliveries.
(a) On or prior to each applicable Closing Date, the Company shall deliver or cause to be delivered to each Purchaser the following:
(i) as to the Initial Closing, this Agreement duly executed by the Company;
(ii) as to each Closing, a legal opinion of Company’s legal counsel, dated as of the applicable Closing Date, in a form and substance acceptable to the Purchasers;
(iii) as to each Closing, a Note, substantially in the form attached hereto as Exhibit A and/or Exhibit G, as applicable, registered in the name of such Purchaser with the Principal Amount reflected on to such Purchaser’s signature page;
(iv) a Warrant, substantially in the form attached hereto as Exhibit B, registered in the name of the applicable Purchaser exercisable for a number of shares equal to the applicable Warrant Coverage, with an initial exercise price equal to one hundred twenty-five percent (125%) of the Conversion Price and a five-year term. On the twelve-month anniversary of issuance, the exercise price shall automatically adjust to one hundred twenty-five percent (125%) of the average of the daily VWAP during the ten Trading Days immediately preceding such anniversary, subject to the Floor Price and provided that the result shall be structured to preserve equity classification under applicable accounting principles.
(v) as to the Initial Closing, the Registration Rights Agreement covering all Conversion Shares, Warrant Shares, Incentive Shares and shares issuable in payment of interest or amortization obligations;
(vi) as to the Initial Closing, executed Exchange Agreements for each lender participating in the rollover or exchange contemplated by such agreement;
(vii) as to each Closing, the Company shall have provided each Purchaser with the Escrow Agent’s wire instructions;
(viii) as to the Initial Closing, separate Irrevocable Transfer Agent Instructions, signed by the Company and the Transfer Agent, for each Purchaser with respect to the Underlying Shares to be issued to such Purchaser upon any conversion of such Purchaser’s Note or exercise of the Warrant to be issued upon the Initial Closing Date;
(ix) as to the Additional Closing, separate Irrevocable Transfer Agent Instructions, signed by the Company and the Transfer Agent, for each Purchaser with respect to the Underlying Shares to be issued to such Purchaser upon any conversion of such Purchaser’s Note to be issued upon the Additional Closing Date;
(x) as to the Initial Closing, a Security Agreement, substantially in the Form attached as Exhibit C, duly executed by the Company;
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(xi) as to the Initial Closing, UCC financing statements in form suitable for filing;
(xii) as to the Initial Closing, copies of resolutions duly adopted by the Board of Directors approving the transactions contemplated by the Transaction Documents and the related corporate actions;
(xiii) as to each Closing, an officer’s certificate certifying that the representations and warranties of the Company in this Agreement are true and correct as of the applicable Closing Date as though originally made at that time (except for representations and warranties that speak as of a specific date, which shall be true and correct as of such specific date) and the Company shall have performed, satisfied, and complied in all material respects with the covenants, agreements and conditions required to be performed, satisfied or complied with by the Company at or prior to the applicable Closing Date and no Event of Default has occurred;
(xiv) evidence within sixty (60) days of the Initial Closing that sufficient authorized but unissued Common Stock has been reserved for issuance of all Conversion Shares, Warrant Shares, Incentive Shares and shares issuable pursuant to amortization payments made in Common Stock under the Notes;
(xv) as to each Closing, a certificate evidencing the formation and good standing of the Company issued by the Secretary of State of Nevada (or comparable office), as of a date within 10 days of the Initial Closing;
(xvi) as to each Closing, a certificate evidencing the Company’s good standing issued by the Secretary of State of each jurisdiction in which the Company conducts business and is required to so qualify, as of a date within 10 days of the applicable Closing Date;
(xvii) as to each Closing, a certified copy of the Articles of Incorporation (or such equivalent organizational document) of the Company, dated within 30 days of the applicable Closing Date;
(xviii) as to each Closing, an officer’s certificate, in the form reasonably acceptable to the Purchasers, executed by an officer of the Company and dated as of the applicable Closing Date, as to (i) the resolutions adopted by the Company’s board of directors authorizing the transactions contemplated hereby in a form reasonably acceptable to the Purchasers, and (ii) the Articles of Incorporation of the Company as in effect at the applicable Closing;
(xix) as to each Closing, a letter from the Transfer Agent certifying the number of Common Stock outstanding on the applicable Closing Date immediately prior to the applicable Closing;
(xx) as to each Closing, a flow of funds memorandum in form and substance mutually agreed to by the Company and the Purchasers (a “Flow of Funds Memorandum”) duly executed by the Company; and
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(xxi) as to each Closing, such other documents, instruments, or certificates relating to the transactions contemplated by this Agreement as each Purchaser or its counsel may reasonably request.
(xxii) as to each Closing, the Escrow Agreement, duly executed by the Company and the Escrow Agent.
(b) On or prior to the applicable Closing Date, each Purchaser shall deliver or cause to be delivered to the Company, the following:
(i) as to the Initial Closing, this Agreement duly executed by such Purchaser;
(ii) as to each Closing, such Purchaser’s Subscription Amount by wire transfer to the Escrow Agent;
(iii) as to each Closing, a Flow of Funds Memorandum duly executed by such Purchaser;
(iv) as to each Closing, Escrow Agreement, duly executed by such Purchaser; and
(v) as to the Initial Closing, a Leak-Out Agreement duly executed by such Purchaser.
2.3 Closing Conditions.
(a) The obligations of the Company hereunder in connection with each Closing are subject to the following conditions being met:
(i) the accuracy in all material respects (or, to the extent representations or warranties are qualified by materiality or Material Adverse Effect, in all respects) when made and on each Closing Date of the representations and warranties of the Purchasers contained herein (unless as of a specific date therein in which case they shall be accurate as of such date);
(ii) all obligations, covenants and agreements of each Purchaser required to be performed at or prior to each Closing Date shall have been performed in all material respects; and
(iii) the delivery by each Purchaser of the items set forth in Section 2.2(b) of this Agreement.
(b) The respective obligations of each Purchaser hereunder in connection with each Closing are subject to the following conditions being met:
(i) the accuracy in all material respects (or, to the extent representations or warranties are qualified by materiality or Material Adverse Effect, in all respects) when made and on each Closing Date of the representations and warranties of the Company contained herein (unless as of a specific date therein in which case they shall be accurate as of such date);
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(ii) all obligations, covenants and agreements of the Company required to be performed at or prior to each Closing Date shall have been performed in all material respects;
(iii) the delivery by the Company of the items set forth in Section 2.2(a) of this Agreement;
(iv) the Company shall have delivered to the Transfer Agent separate Irrevocable Transfer Agent Instructions, signed by the Company and the Transfer Agent, for each Purchaser with respect to the Underlying Shares to be issued to such Purchaser upon any conversion of such Purchaser’s Note to be issued upon each Closing Date;
(v) the Company shall have delivered an officer’s certificate, dated as of the Closing Date, certifying that, to the knowledge of the Company, all material non-public information previously provided by the Company to the Purchasers in connection with the transactions contemplated by this Agreement and the Transaction Documents has either been publicly disclosed or otherwise disclosed to the Purchasers, and that no Purchaser is in possession of undisclosed material non-public information supplied by the Company as of the Closing.
(vi) there shall have been no Material Adverse Effect with respect to the Company since the date hereof;
(vii) from the date hereof to each Closing Date, as applicable, trading in the Common Stock shall not have been suspended by the SEC or the Company’s principal Trading Market and, at any time prior to the applicable Closing Date, trading in securities generally as reported by Bloomberg L.P. shall not have been suspended or limited, or minimum prices shall not have been established on securities whose trades are reported by such service, or on any Trading Market, nor shall a banking moratorium have been declared either by the United States or New York State authorities nor shall there have occurred any material outbreak or escalation of hostilities or other national or international calamity of such magnitude in its effect on, or any material adverse change in, any financial market which, in each case, in the reasonable judgment of such Purchaser, makes it impracticable or inadvisable to purchase the Securities at each applicable Closing;
(viii) no statute, rule, regulation, executive order, decree, ruling, or injunction shall have been enacted, entered, promulgated, or endorsed by any court or governmental entity of competent jurisdiction that prohibits the consummation of any of the transactions contemplated hereby;
(ix) the Company shall have provided evidence reasonably satisfactory to the Purchasers that the transactions contemplated hereby will not prevent the Company from pursuing the Nasdaq Uplist and that the Company shall have provided evidence reasonably satisfactory to the Lead Investors that the transactions contemplated hereby are reasonably expected to permit the Company to pursue compliance with Nasdaq quantitative listing standards, including stockholders’ equity, shareholder approval and public float requirements;
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(x) any Permitted Senior Debt shall not exceed $3,000,000, or such higher amount needed to equal $15,000,000 when combined with the aggregate principal amount of Notes sold pursuant to this Agreement, in principal amount unless approved by the Lead Investors;
(xi) the Registration Rights Agreement shall have been duly executed and delivered;
(xii) the Security Agreement and UCC filings shall have been executed and delivered;
(xiii) all Exchange Agreements shall have become effective or shall become effective simultaneously with the Closing;
(xiv) the Minimum Financing Condition shall have been satisfied;
(xv) the Lead Investors shall have the right to designate two (2) members of the Board of Directors (with each director so designated to be independent as defined in Nasdaq Listing Rule 5605), effective upon the Nasdaq Uplist and only to the extent permitted by applicable Nasdaq rules, including Nasdaq Listing Rule 5640;
(xvi) the Company shall have appointed, with the consent of the Lead Investors, a financial monitor reasonably acceptable to the Lead Investors. The Monitor shall have the right to meet with the Chief Executive Officer and the Chief Financial Officer on a monthly basis, participate in financial review meetings, receive monthly and quarterly financial statements, budgets, forecasts and variance reports, and discuss the Company’s financial condition, liquidity, cash management and operating results directly with management; and
(xvii) the Escrow Agreement shall have become effective and the Escrow Agent shall have confirmed receipt of the Subscription Amounts required to satisfy the Minimum Financing Condition.
2.4 Incentive Shares.
(a) Upon the Nasdaq Uplist, the Company shall issue Incentive Shares only to the extent reasonably necessary to satisfy Nasdaq initial listing requirements relating to unrestricted publicly held shares, public float and round-lot holders, including the requirement that the Company maintain at least $15,000,000 of unrestricted publicly held market value (or such other amount then required by Nasdaq).
(b) The issuance of Incentive Shares shall occur in advance (in an amount of time reasonably determined by the Company based on consultation and discussions with the relevant representatives from the Nasdaq Listing Department) of the Nasdaq Uplist in order to provide Nasdaq sufficient time to review and approve the application submitted by the Company in connection with the Nasdaq Uplist and prior to the commencement of trading of the Common Stock on Nasdaq.
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(c) Promptly following determination of the final number of Incentive Shares issued, the number of Warrant Shares issuable pursuant to the Warrants shall automatically be reduced by one (1) Warrant Share for every two (2) Incentive Shares issued. Any resulting fractional Warrant Share shall be rounded down to the nearest whole share.
(d) The Company shall deliver to each holder a written calculation of the Incentive Shares issued and the corresponding reduction in Warrant Shares, and the Warrants shall thereafter be deemed amended automatically to reflect such reduction without further action by any party.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES
3.1 Representations and Warranties of the Company. Except as set forth in the Disclosure Schedules provided with this agreement (the “Disclosure Schedules”), which shall be deemed a part hereof and shall qualify any representation or otherwise made herein to the extent of the disclosure contained in the corresponding section of the Disclosure Schedules, the Company hereby makes the following representations and warranties to each Purchaser which representations shall be true and correct on each respective Closing Date:
(a) Subsidiaries. All of the direct and indirect subsidiaries of the Company are set forth on Schedule 3.1(a). The Company owns, directly or indirectly, all of the capital stock or other equity interests of each Subsidiary free and clear of any Liens, and all of 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 to subscribe for or purchase securities. If the Company has no subsidiaries, all other references to the Subsidiaries or any of them in the Transaction Documents shall be disregarded.
(b) Organization and Qualification. The Company and its subsidiaries are entities duly incorporated or otherwise organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation or organization, with the requisite power and authority to own and use their properties and assets and to carry on their business as currently conducted. Neither the Company and its subsidiaries are in violation nor default of any of the provisions of their respective certificate or articles of incorporation, bylaws or other organizational or charter documents. The Company and its subsidiaries are duly qualified to conduct business and are in good standing as foreign corporations or other entities in each jurisdiction in which the nature of the business conducted or property owned by them 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 operations, assets, business, or financial condition of the Company, or (iii) a material adverse effect on 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”) and no Action has been instituted in any such jurisdiction revoking, limiting or curtailing or seeking to revoke, limit or curtail such power and authority or qualification.
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(c) Authorization; Enforcement. The Company and its subsidiaries have the requisite corporate power and authority to enter into and to consummate the transactions contemplated by this Agreement and each of the other Transaction Documents and otherwise to carry out its obligations hereunder and thereunder. The execution and delivery of this Agreement and each of the other Transaction Documents by the Company and the consummation by it of the transactions contemplated hereby and thereby have been duly authorized by all necessary action on the part of the Company and no further action is required by the Company, the Board of Directors, or the Company’s stockholders in connection herewith or therewith other than in connection with the Required Approvals. This Agreement and each other Transaction Document to which it is a party has been (or upon delivery will have been) duly executed by the Company, assuming due authorization by the other parties thereto, and, when delivered in accordance with the terms hereof and thereof, will constitute the valid and binding obligation of the Company enforceable against the Company in accordance with its terms, except (i) as limited by general equitable principles and applicable bankruptcy, insolvency, reorganization, moratorium and other laws of general application affecting enforcement of creditors’ rights generally, (ii) as limited by laws relating to the availability of specific performance, injunctive relief or other equitable remedies, and (iii) insofar as indemnification and contribution provisions may be limited by applicable law.
(d) No Conflicts. The execution, delivery, and performance by the Company and its subsidiaries of this Agreement and the other Transaction Documents to which it is a party, the issuance and sale of the Securities and the consummation by it of the transactions contemplated hereby and thereby do not and will not (i) conflict with or violate any provision of the Company’s certificate or articles of incorporation, bylaws or other organizational or charter documents, or (ii) conflict with, or constitute a default (or an event that with notice or lapse of time or both would become a default) under, result in the creation of any Lien upon any of the properties or assets of the Company, or give to others any rights of termination, amendment, anti-dilution or similar adjustments, acceleration or cancellation (with or without notice, lapse of time or both) of, any agreement, credit facility, debt or other instrument (evidencing a Company debt or otherwise) or other understanding to which the Company is a party or by which any property or asset of the Company is bound or affected, or (iii) subject to the Required Approvals, conflict with or result in a violation of any law, rule, regulation, order, judgment, injunction, decree or other restriction of any court or governmental authority to which the Company is subject (including federal and state securities laws and regulations), or by which any property or asset of the Company is bound or affected; except in the case of each of clauses (ii) and (iii), such as would not have or reasonably be expected to result in a Material Adverse Effect.
(e) Filings, Consents and Approvals. The Company is not 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 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: (i) the filings required pursuant to Section 4.6 and Section 4.18 of this Agreement, (ii) the filing of Form D with the SEC and such filings as are required to be made under applicable state securities laws, (iii) those certain consents and waivers that are set forth in Schedule 3.1(e) and (iv) the Nasdaq Shareholder Approval (collectively, the “Required Approvals”).
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(f) Issuance of the Securities. The Securities are duly authorized and, when issued and paid for in accordance with the applicable Transaction Documents, will be duly and validly issued, fully paid, and nonassessable, free and clear of all Liens imposed by the Company other than restrictions on transfer provided for in the Transaction Documents or by law. The Underlying Shares, when issued in accordance with the terms of the Transaction Documents, will be validly issued, fully paid, and nonassessable, free and clear of all Liens imposed by the Company other than restrictions on transfer provided for in the Transaction Documents or by law. The Company has reserved, and shall continue to reserve, a sufficient number of authorized but unissued shares of Common Stock to permit the issuance of all Conversion Shares, Warrant Shares, Incentive Shares and any shares issuable pursuant to stock-payment amortization elections made in accordance with the Equity Conditions and the Notes.
(g) Capitalization. The capitalization of the Company as of the date hereof is as set forth on Schedule 3.1(g), which Schedule 3.1(g) shall also include the number of shares of Common Stock owned beneficially, and of record, by Affiliates of the Company as of the date hereof. The Company has not issued any capital stock since its most recently filed periodic report under the Exchange Act, other than pursuant to the exercise of employee stock options under the Company’s stock option plans, the issuance of shares of Common Stock to employees pursuant to the Company’s employee stock purchase plans and pursuant to the conversion and/or exercise of Common Stock Equivalents outstanding as of the date of the most recently filed periodic report under the Exchange Act. No Person has any right of first refusal, preemptive right, right of participation, or any similar right to participate in the transactions contemplated by the Transaction Documents. Except as a result of the purchase and sale of the Securities or as set forth on Schedule 3.1(g), there are no outstanding options, warrants, scrip 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 the Company is or may become bound to issue additional shares of Common Stock. The issuance and sale of the Securities will not obligate the Company to issue shares of Common Stock or other securities to any Person (other than the Purchasers). There are no outstanding securities or instruments of the Company with any provision that adjusts the exercise, conversion, exchange or reset price of such security or instrument upon an issuance of securities by the Company, except those that are being cured, refinanced, exchanged or otherwise addressed substantially concurrently with the Closing. There are no outstanding securities or instruments of the Company that contain any redemption or similar provisions, and there are no contracts, commitments, understandings or arrangements by which the Company is or may become bound to redeem a security of the Company, except those that are being cured, refinanced, exchanged or otherwise addressed substantially concurrently with the Closing. The Company does not have any stock appreciation rights or “phantom stock” plans or agreements or any similar plan or agreement. All of the outstanding shares of capital stock of the Company are duly authorized, validly issued, fully paid and nonassessable, have been issued in compliance with all federal and state securities laws, and none of such outstanding shares was issued in violation of any preemptive rights or similar rights to subscribe for or purchase securities. No approval or authorization of any stockholder, the Board of Directors or others is required for the issuance and sale of the Securities. There are no stockholders agreements, voting agreements, or other similar agreements with respect to the Company’s capital stock to which the Company is a party or, to the knowledge of the Company, between or among any of the Company’s stockholders other than as disclosed in the SEC Reports or on Schedule 3.1(g). The SEC Reports and Schedule 3.1(g) additionally identify all outstanding preferred stock, warrants, options, convertible securities, exchange rights and other Common Stock Equivalents of the Company and its Subsidiaries. Except as disclosed in the SEC Reports or on Schedule 3.1(g), there are no agreements providing for the adjustment, reset, repricing or modification of any exercise price, conversion price or exchange rate of any outstanding security of the Company.
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(h) SEC Reports; Financial Statements. The Company has filed all reports, schedules, forms, statements, and other documents required to be filed by the Company under the Securities Act and the Exchange Act, including pursuant to Section 13(a) or 15(d) thereof since January 1, 2023 (the foregoing materials, including the exhibits thereto and documents incorporated by reference therein, being collectively referred to herein as the “SEC Reports”). As of their respective dates, the SEC Reports complied in all material respects with the requirements of the Securities Act and the Exchange Act, as applicable, and none of the SEC Reports, 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 the light of the circumstances under which they were made, not misleading. 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 SEC with respect thereto as in effect at the time of filing. Such financial statements have been prepared in accordance with United States 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. The Company is current in its reporting obligations under the Exchange Act and is eligible to file all reports required thereunder.
(i) Material Changes; Undisclosed Events, Liabilities or Developments. Since the date of the latest audited financial statements included within the SEC Reports, except as disclosed in the SEC Reports or on Schedule 3.1(i), (i) there has been no event, occurrence or development that has had or that would reasonably be expected to 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 disclosed in filings made with the SEC, (iii) the Company has not altered its method of accounting, (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 option plans. The Company does not have pending before the SEC any request for confidential treatment of information. Except for the transactions contemplated by this Agreement and the other Transaction Documents or as set forth in the SEC Reports or on Schedule 3.1(i), no event, liability, fact, circumstance, occurrence, or development has occurred or exists or is reasonably expected to occur or exist with respect to the Company or its Subsidiaries or their respective businesses, prospects, properties, operations, assets, or financial condition, that would be required to be disclosed by the Company under applicable securities laws at the time this representation is made or deemed made that has not been publicly disclosed at least one (1) Trading Day prior to the date that this representation is made.
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(j) Litigation. Except as disclosed in the SEC Reports, there is no action, suit, inquiry, notice of violation, proceeding or investigation (however any governmental or administrative agency may define the matter) pending or threatened against or affecting 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) (any, an “Action“) that would be reasonably expected to have a Material Adverse Effect. None of the Actions set forth in the SEC Reports, (i) adversely affects or challenges the legality, validity or enforceability of any of the Transaction Documents or the Securities or (ii) would, if there were an unfavorable decision, have or reasonably be expected to result in a Material Adverse Effect. Neither the Company, 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 the SEC involving the Company or any current or former director or officer of the Company. The SEC has not issued any stop order or other order suspending the effectiveness of any registration statement filed by the Company under the Exchange Act or the Securities Act.
(k) Labor Relations. No labor dispute exists or is imminent with respect to any of the employees of the Company, which would reasonably be expected to result in a Material Adverse Effect. None of the Company’s employees is a member of a union that relates to such employee’s relationship with the Company, and either the Company is a party to a collective bargaining agreement, and the Company believes that its relationship with its employees are good. To the knowledge of the Company, no executive officer of the Company, is, or is now expected to be, in violation of any material term of any employment contract, confidentiality, disclosure, or proprietary information agreement or non-competition agreement, or any other contract or agreement or any restrictive covenant in favor of any third party, and the continued employment of each such executive officer does not subject the Company to any liability with respect to any of the foregoing matters. The Company is in compliance with all U.S. federal, state, local and foreign laws and regulations relating to employment and employment practices, terms and conditions of employment and wages and hours, except where the failure to be in compliance would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.
(l) Compliance. The Company: (i) is not in default under or in violation of (and no event has occurred that has not been waived that, with notice or lapse of time or both, would result in a default by the Company under), nor has the Company received notice of a claim that it is in default under or that it is in violation of, any indenture, loan or credit agreement or any other agreement or instrument to which it is a party or by which it or any of its properties is bound (whether or not such default or violation has been waived), (ii) is in violation of any judgment, decree or order of any court, arbitrator or other governmental authority, or (iii) is or has been in violation of any statute, rule, ordinance or regulation of any governmental authority, including without limitation all foreign, federal, state and local laws relating to taxes, environmental protection, occupational health and safety, product quality and safety and employment and labor matters, except in each case as would not have or reasonably be expected to result in a Material Adverse Effect.
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(m) Environmental Laws. The Company (i) is in compliance with all federal, state, local and foreign laws relating to pollution or protection of human health or the environment (including ambient air, surface water, groundwater, land surface or subsurface strata), including laws relating to emissions, discharges, releases or threatened releases of chemicals, pollutants, contaminants, or toxic or hazardous substances or wastes (collectively, “Hazardous Materials“) into the environment, or otherwise relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of Hazardous Materials, as well as all authorizations, codes, decrees, demands, or demand letters, injunctions, judgments, licenses, notices or notice letters, orders, permits, plans or regulations, issued, entered, promulgated or approved thereunder (“Environmental Laws”); (ii) have received all permits licenses or other approvals required of them under applicable Environmental Laws to conduct their respective businesses; and (iii) are in compliance with all terms and conditions of any such permit, license or approval where in each clause (i), (ii) and (iii), the failure to so comply would be reasonably expected to have, individually or in the aggregate, a Material Adverse Effect.
(n) Regulatory Permits. The Company possess all certificates, authorizations and permits issued by the appropriate federal, state, local or foreign regulatory authorities necessary to conduct their respective businesses as described in the SEC Reports, except where the failure to possess such permits would not reasonably be expected to result in a Material Adverse Effect (“Material Permits”), and the Company has not received any notice of proceedings relating to the revocation or modification of any Material Permit.
(o) Title to Assets. The Company has good and marketable title in fee simple to all real property owned by them and good and marketable title in all personal property owned by it that is material to the business of the Company, in each case free and clear of all Liens, except for (i) 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 the Company, (ii) Liens for the payment of federal, state or other taxes, for which appropriate reserves have been made therefor in accordance with GAAP and the payment of which is neither delinquent nor subject to penalties. Any real property and facilities held under lease by the Company is held by it under valid, subsisting and enforceable leases with which the Company is in compliance, and (iii) Liens disclosed to the Collateral Agent in writing on or prior to the Effective Date.
(p) Intellectual Property. The Company has, or has rights to use, all patents, patent applications, trademarks, trademark applications, service marks, trade names, trade secrets, inventions, copyrights, licenses and other intellectual property rights and similar rights necessary or required for use in connection with their respective businesses as described in the SEC Reports and which the failure to so have would have a Material Adverse Effect (collectively, the “Intellectual Property Rights”). The Company has not received a notice (written or otherwise) that any of, the Intellectual Property Rights has expired, terminated or been abandoned, or is expected to expire or terminate or be abandoned, within two years from the date of this Agreement. The Company has not received, since the date of the latest audited financial statements included within the SEC Reports, a written notice of a claim or otherwise has any knowledge that the Intellectual Property Rights violate or infringe upon the rights of any Person, except as would not have or reasonably be expected to not have a Material Adverse Effect. To the knowledge of the Company, all such Intellectual Property Rights are enforceable and there is no existing infringement by another Person of any of the Intellectual Property Rights. The Company has taken reasonable security measures to protect the secrecy, confidentiality, and value of all of it intellectual properties, except where failure to do so would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.
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(q) Nasdaq Matters.
(i) The Company has provided the Purchasers with all reasonable material information in its possession regarding the Nasdaq Uplist; provided, the Company is permitted to provide such information by Nasdaq and provided further that providing any such information would not cause competitive harm to the Company. The Company has no knowledge of any fact or circumstance that would reasonably be expected to materially impair its ability to pursue the Nasdaq Uplist, other than matters disclosed in the SEC Reports or the Disclosure Schedules and has not received any written notice from Nasdaq indicating that the Company would be ineligible to apply for listing.
(ii) To the Company’s knowledge, no corporate action approved by the Board of Directors and contemplated by the Transaction Documents would cause the Company to be unable to pursue compliance with applicable initial listing requirements on the Nasdaq Capital Market, such as stockholders’ equity or the market value of unrestricted publicly held shares requirements.
(r) Transactions with Affiliates and Employees. Except as disclosed in the SEC Reports or on Schedule 3.1(r),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 the Company (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, providing for the borrowing of money from or lending of money to, 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, stockholder, member or partner, in each case in excess of $120,000 other than for (i) payment of salary or consulting fees for services rendered, (ii) reimbursement for expenses incurred on behalf of the Company and (iii) other employee benefits, including stock option agreements under any stock option plan of the Company.
(s) Sarbanes-Oxley; Internal Accounting Controls. Except as disclosed in the SEC Reports or on Schedule 3.1(s), the Company and the Subsidiaries are in compliance with any and all applicable requirements of the Sarbanes-Oxley Act of 2002 that are effective as of the date hereof, and any and all applicable rules and regulations promulgated by the SEC thereunder that are effective as of the date hereof and as of each Closing Date. The Company and the Subsidiaries maintain a system of internal accounting controls sufficient to provide reasonable assurance that: (i) transactions are executed in accordance with management’s general or specific authorizations, (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with GAAP and to maintain asset accountability, (iii) access to assets is permitted only in accordance with management’s general or specific authorization, and (iv) the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences. The Company and the Subsidiaries have established disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the Company and the Subsidiaries and designed such disclosure controls and procedures to ensure that information required to be disclosed by the Company in the reports it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. The Company’s certifying officers have evaluated the effectiveness of the disclosure controls and procedures of the Company and the Subsidiaries as of the end of the period covered by the most recently filed periodic report under the Exchange Act (such date, the “Evaluation Date”). The Company presented in its most recently filed periodic report under the Exchange Act the conclusions of the certifying officers about the effectiveness of the disclosure controls and procedures based on their evaluations as of the Evaluation Date. Since the Evaluation Date, there have been no changes in the internal control over financial reporting (as such term is defined in the Exchange Act) of the Company and its Subsidiaries that have materially affected, or is reasonably likely to materially affect, the internal control over financial reporting of the Company and its Subsidiaries.
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(t) Certain Fees. Other than as contemplated herein, no brokerage or finder’s fees or commissions are or will be payable by the Company or any Subsidiaries to any broker, financial advisor or consultant, finder, placement agent, investment banker, bank, or other Person with respect to the transactions contemplated by the Transaction Documents.
(u) Private Placement. Assuming the accuracy of the Purchasers’ representations and warranties set forth in Section 3.2, no registration under the Securities Act is required for the offer and sale of the Securities by the Company to the Purchasers as contemplated hereby. The issuance and sale of the Securities hereunder does not contravene the rules and regulations of the Trading Market.
(v) Investment Company. The Company is not, and is not an Affiliate of, and immediately after receipt of payment for the Securities, will not be or be an Affiliate of, an “investment company” within the meaning of the Investment Company Act of 1940, as amended. The Company shall conduct its business in a manner so that it will not become an “investment company” subject to registration under the Investment Company Act of 1940, as amended.
(w) Registration Rights. The Company has the requisite corporate authority to enter into the Registration Rights Agreement and perform its obligations thereunder. No approvals other than the Required Approvals are required for the filing and effectiveness of the registration statements contemplated thereby.
(x) Listing and Maintenance Requirements. The Common Stock is registered pursuant to Section 12(b) or 12(g) of the Exchange Act, and the Company has taken no action designed to, or which to its knowledge is likely to have the effect of, terminating the registration of the Common Stock under the Exchange Act nor has the Company received any notification that the SEC is contemplating terminating such registration. The Company has not, in the 12 months preceding the date hereof, received notice from any Trading Market on which the Common Stock is or has been listed or quoted to the effect that the Company is not in compliance with the listing or maintenance requirements of such Trading Market. The Company is and has no reason to believe that it will not in the foreseeable future continue to be, in compliance with all such listing and maintenance requirements. The Common Stock is currently eligible for electronic transfer through the Depository Trust Company or another established clearing corporation and the Company is current in payment of the fees to the Depository Trust Company (or such other established clearing corporation) in connection with such electronic transfer.
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(y) Application of Takeover Protections. The Company and the Board of Directors have taken all necessary action, if any, in order to render inapplicable any control share acquisition, business combination, poison pill (including any distribution under a rights agreement) or other similar anti-takeover provision under the Company’s certificate of incorporation (or similar charter documents) or the laws of its state of incorporation that is or would become applicable to the Purchasers as a result of the Purchasers and the Company fulfilling their obligations or exercising their rights under the Transaction Documents, including without limitation as a result of the Company’s issuance of the Securities and the Purchasers’ ownership of the Securities.
(z) Disclosure. Except with respect to the material terms and conditions of the transactions contemplated by the Transaction Documents, the Company confirms that neither it nor any other Person acting on its behalf has provided any of the Purchasers or their agents or counsel with any information that it believes constitutes or might constitute material, non-public information. The Company understands and confirms that the Purchasers will rely on the foregoing representation in effecting transactions in securities of the Company. All of the disclosure furnished by or on behalf of the Company to the Purchasers regarding the Company and its Subsidiaries, their respective businesses and the transactions contemplated hereby, including the SEC Reports and the Disclosure Schedules to this Agreement, is true and correct in all material respects and does not contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements made therein, in the light of the circumstances under which they were made, not misleading. The press releases disseminated by the Company during the twelve months preceding the date of this Agreement taken as a whole do not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made and when made, not misleading. The Company acknowledges and agrees that no Purchaser makes or has made any representations or warranties with respect to the transactions contemplated hereby other than those specifically set forth in Section 3.2 hereof.
(aa) No Integrated Offering. Assuming the accuracy of each Purchaser’s representations and warranties set forth in Section 3.2, neither the Company, nor any of its Affiliates, nor any Person acting on its or their behalf has, directly or indirectly, made any offers or sales of any security or solicited any offers to buy any security, under circumstances that would cause this offering of the Securities to be integrated with prior offerings by the Company for purposes of (i) the Securities Act which would require the registration of any such securities under the Securities Act, or (ii) any applicable stockholder approval provisions of any Trading Market on which any of the securities of the Company are listed or designated.
(bb) Solvency. Based on the consolidated financial condition of the Company as of each Closing Date, after giving effect to the receipt by the Company of the proceeds from the sale of the Securities hereunder, (i) the fair saleable value of the Company’s assets exceeds the amount that will be required to be paid on or in respect of the Company’s existing debts and other liabilities (including known contingent liabilities) as they mature, (ii) the Company’s assets do not constitute unreasonably small capital to carry on its business as now conducted and as proposed to be conducted including its capital needs taking into account the particular capital requirements of the business conducted by the Company, consolidated and projected capital requirements and capital availability thereof, and (iii) the current cash flow of the Company, together with the proceeds the Company would receive, were it to liquidate all of its assets, after taking into account all anticipated uses of the cash, would be sufficient to pay all amounts on or in respect of its liabilities when such amounts are required to be paid. The Company does not intend to incur debts beyond its ability to pay such debts as they mature (taking into account the timing and amounts of cash to be payable on or in respect of its debt). The Company has no knowledge of any facts or circumstances which lead it to believe that it will file for reorganization or liquidation under the bankruptcy or reorganization laws of any jurisdiction within one year from each Closing Date. Schedule 3.1(bb) sets forth as of the date hereof all outstanding secured and unsecured Indebtedness of the Company, or for which the Company has commitments. For the purposes of this Agreement, “Indebtedness” means (x) any liabilities for borrowed money or amounts owed (other than trade accounts payable incurred in the ordinary course of business), (y) all guaranties, endorsements and other contingent obligations in respect of indebtedness of others, whether or not the same are or should be reflected in the Company’s consolidated balance sheet (or the notes thereto), except guaranties by endorsement of negotiable instruments for deposit or collection or similar transactions in the ordinary course of business; and (z) the present value of any lease payments due under leases required to be capitalized in accordance with GAAP. The Company is not in default with respect to any Indebtedness other than any defaults disclosed in the SEC Reports or on Schedule 3.1(bb) that are being cured, refinanced, exchanged or otherwise addressed substantially concurrently with the Closing.
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(cc) No Materially Adverse Contracts, Etc. Neither the Company nor any of its Subsidiaries is subject to any charter, corporate or other legal restriction, or any judgment, decree, order, rule or regulation which in the judgment of the Company’s officers has or is expected in the future to have a Material Adverse Effect. Neither the Company nor any of its Subsidiaries is a party to any contract or agreement which in the judgment of the Company’s officers has or is expected to have a Material Adverse Effect.
(dd) Tax Status. Except as disclosed in the SEC Reports or except for matters that would not, individually or in the aggregate, have or reasonably be expected to result in a Material Adverse Effect, the Company and its Subsidiaries each (i) has made or filed all United States federal, state and local income and all foreign income and franchise tax returns, reports and declarations required by any jurisdiction to which it is subject, (ii) has paid all taxes and other governmental assessments and charges that are material in amount, shown or determined to be due on such returns, reports and declarations and (iii) has set aside on its books provision reasonably adequate for the payment of all material taxes for periods subsequent to the periods to which such returns, reports or declarations apply. There are no unpaid taxes in any material amount claimed to be due by the taxing authority of any jurisdiction, and the officers of the Company or of any Subsidiary know of no basis for any such claim.
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(ee) No General Solicitation. Neither the Company nor any Person acting on behalf of the Company has offered or sold any of the Securities by any form of general solicitation or general advertising. The Company has offered the Securities for sale only to the Purchasers and certain other “accredited investors” within the meaning of Rule 501 under the Securities Act.
(ff) Foreign Corrupt Practices. Neither the Company nor any Subsidiary, nor to the knowledge of the Company or any Subsidiary, any agent or other person acting on behalf of the Company or any Subsidiary, has (i) directly or indirectly, used any funds for unlawful contributions, gifts, entertainment or other unlawful expenses related to foreign or domestic political activity, (ii) 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, (iii) failed to disclose fully any contribution made by the Company or any Subsidiary (or made by any person acting on its behalf of which the Company is aware) which is in violation of law, or (iv) violated in any material respect any provision of FCPA.
(gg) Accountants. The Company’s accounting firm is set forth in the SEC Reports and such accounting firm (i) is a registered public accounting firm as required by the Exchange Act and (ii) shall express its opinion with respect to the financial statements to be included in the Company’s Annual Report for the fiscal year ending December 31, 2026.
(hh) Seniority. Except for Permitted Senior Debt and obligations expressly permitted under the Transaction Documents, no Indebtedness or other claim against the Company is senior to the Notes in right of payment or priority of lien.
(ii) No Disagreements with Accountants and Lawyers. There are no disagreements of any kind presently existing, or reasonably anticipated by the Company to arise, between the Company and the accountants and lawyers formerly or presently employed by the Company and the Company is current with respect to any fees owed to its accountants and lawyers which would affect the Company’s ability to perform any of its obligations under any of the Transaction Documents.
(jj) Acknowledgment Regarding Purchasers’ Purchase of Securities. The Company acknowledges and agrees that each of the Purchasers is acting solely in the capacity of an arm’s length purchaser with respect to the Transaction Documents and the transactions contemplated thereby. The Company further acknowledges that no Purchaser is acting as a financial advisor or fiduciary of the Company (or in any similar capacity) with respect to the Transaction Documents and the transactions contemplated thereby and any advice given by any Purchaser or any of their respective representatives or agents in connection with the Transaction Documents and the transactions contemplated thereby is merely incidental to the Purchasers’ purchase of the Securities. The Company further represents to each Purchaser that the Company’s decision to enter into this Agreement and the other Transaction Documents has been based solely on the independent evaluation of the transactions contemplated hereby by the Company and its representatives.
(kk) Acknowledgment Regarding Purchaser’s Trading Activity. Anything in this Agreement or elsewhere herein to the contrary notwithstanding (except for Section 4.14 hereof), it is understood and acknowledged by the Company that: (i) none of the Purchasers has been asked by the Company to agree, nor has any Purchaser agreed, to desist from purchasing or selling, long and/or short, securities of the Company, or “derivative” securities based on securities issued by the Company or to hold the Securities for any specified term, (ii) past or future open market or other transactions by any Purchaser, specifically including, without limitation, Short Sales or “derivative” transactions, before or after the closing of this or future private placement transactions, may negatively impact the market price of the Company’s publicly-traded securities, (iii) any Purchaser, and counter-parties in “derivative” transactions to which any such Purchaser is a party, directly or indirectly, presently may have a “short” position in the Common Stock, and (iv) each Purchaser shall not be deemed to have any affiliation with or control over any arm’s length counter-party in any “derivative” transaction. The Company further understands and acknowledges that (y) one or more Purchasers may engage in hedging activities at various times during the period that the Securities are outstanding, including, without limitation, during the periods that the value of the Underlying Shares deliverable with respect to Securities are being determined, and (z) such hedging activities (if any) would reduce the value of the existing stockholders’ equity interests in the Company at and after the time that the hedging activities are being conducted. The Company acknowledges that such aforementioned hedging activities do not constitute a breach of any of the Transaction Documents.
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(ll) Regulation M Compliance. The Company has not, and to its knowledge no one acting on its behalf has, (i) taken, directly or indirectly, any action designed to cause or to result in the stabilization or manipulation of the price of any security of the Company to facilitate the sale or resale of any of the Securities, (ii) sold, bid for, purchased, or paid any compensation for soliciting purchases of, any of the Securities, or (iii) paid or agreed to pay to any Person any compensation for soliciting another to purchase any other securities of the Company.
(mm) Exchange Agreements. Each lender whose indebtedness is being exchanged, rolled, amended or otherwise incorporated into the financing contemplated by this Agreement has executed, or shall execute simultaneously with the applicable Closing, an Exchange Agreement in form and substance reasonably satisfactory to the Lead Investors. Upon effectiveness of such Exchange Agreements, the indebtedness subject thereto shall be exchanged, cancelled, amended or otherwise governed in accordance with the terms thereof and shall not retain any conversion, redemption, anti-dilution, default or other rights inconsistent with the Transaction Documents.
(nn) Cybersecurity. (i)(x) There has been no security breach or other compromise of or relating to any of the Company’s or any Subsidiary’s information technology and computer systems, networks, hardware, software, data (including the data of its respective customers, employees, suppliers, vendors and any third party data maintained by or on behalf of it), equipment or technology (collectively, “IT Systems and Data”) and (y) the Company and the Subsidiaries have not been notified of, and has no knowledge of any event or condition that would reasonably be expected to result in, any security breach or other compromise to its IT Systems and Data; (ii) the Company and the Subsidiaries are presently in compliance with all applicable laws or statutes and all judgments, orders, rules and regulations of any court or arbitrator or governmental or regulatory authority, internal policies and contractual obligations relating to the privacy and security of IT Systems and Data and to the protection of such IT Systems and Data from unauthorized use, access, misappropriation or modification, except as would not, individually or in the aggregate, have a Material Adverse Effect; (iii) the Company and the Subsidiaries have implemented and maintained commercially reasonable safeguards to maintain and protect its material confidential information and the integrity, continuous operation, redundancy and security of all IT Systems and Data; and (iv) the Company and the Subsidiaries have implemented backup and disaster recovery technology consistent with industry standards and practices.
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(oo) Office of Foreign Assets Control. Neither the Company nor any Subsidiary nor, to the Company’s knowledge, any director, officer, agent, employee or affiliate of the Company or any Subsidiary is currently subject to any U.S. sanctions administered by the Office of Foreign Assets Control of the U.S. Treasury Department (“OFAC”).
(pp) U.S. Real Property Holding Corporation. The Company is not and has never been a U.S. real property holding corporation within the meaning of Section 897 of the Internal Revenue Code of 1986, as amended, and the Company shall so certify upon Purchaser’s request.
(qq) Bank Holding Company Act. Neither the Company nor any of its Subsidiaries or Affiliates is subject to the Bank Holding Company Act of 1956, as amended (the “BHCA”) and to regulation by the Board of Governors of the Federal Reserve System (the “Federal Reserve”). Neither the Company nor any of its Subsidiaries or Affiliates owns or controls, directly or indirectly, five percent (5%) or more of the outstanding shares of any class of voting securities or twenty-five percent or more of the total equity of a bank or any entity that is subject to the BHCA and to regulation by the Federal Reserve. Neither the Company nor any of its Subsidiaries or Affiliates exercises a controlling influence over the management or policies of a bank or any entity that is subject to the BHCA and to regulation by the Federal Reserve.
(rr) Money Laundering. The operations of the Company and its Subsidiaries are and have been conducted at all times in compliance with applicable financial record-keeping and reporting requirements of the Currency and Foreign Transactions Reporting Act of 1970, as amended, applicable money laundering statutes and applicable rules and regulations thereunder (collectively, the “Money Laundering Laws”), and no Action by or before any court or governmental agency, authority or body or any arbitrator involving the Company with respect to the Money Laundering Laws is pending or, to the knowledge of the Company, threatened.
(ss) No Off Balance Sheet Arrangements. There is no transaction, arrangement, or other relationship between the Company or any of its Subsidiaries and an unconsolidated or other off balance sheet entity that is required to be disclosed by the Company in its SEC Reports and is not so disclosed or that otherwise would be reasonably likely to have a Material Adverse Effect.
(tt) No Disqualification Events. With respect to the Securities to be offered and sold hereunder in reliance on Rule 506 under the Securities Act, none of the Company, nor to the knowledge of the Company after due inquiry, any of the Company’s predecessors, affiliated issuers, directors, executive officers, other officers of the Company participating in the offering hereunder, any beneficial owner of 20% or more of the Company’s outstanding voting equity securities, calculated on the basis of voting power, nor any promoter (as that term is defined in Rule 405 under the Securities Act) connected with the Company in any capacity at the time of sale (each, an “Issuer Covered Person” and, together, “Issuer Covered Persons”) is subject to any of the “Bad Actor” disqualifications described in Rule 506(d)(1)(i) to (viii) under the Securities Act (a “Disqualification Event”), except for a Disqualification Event covered by Rule 506(d)(2) or (d)(3). The Company has exercised reasonable care to determine whether any Issuer Covered Person is subject to a Disqualification Event. The Company has complied, to the extent applicable, with its disclosure obligations under Rule 506(e), and has furnished to each Purchaser a copy of any disclosures provided thereunder.
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(uu) Other Covered Persons. The Company is not aware of any person (other than any Issuer Covered Person) that has been or will be paid (directly or indirectly) remuneration for solicitation of purchasers in connection with the sale of any Securities.
(vv) Anti-Dilution. Except as disclosed in the SEC Reports or on Schedule 3.1(g), there are no outstanding securities or instruments containing anti-dilution, reset, repricing, ratchet, most-favored-nation or similar provisions that would be triggered by the transactions contemplated by this Agreement. Except as disclosed in the SEC Reports or on Schedule 3.1(g), there are no outstanding securities that would require stockholder approval under Nasdaq Rule 5635 upon issuance, conversion, exchange, repricing or adjustment, and no holder of any security is entitled to receive additional securities, economic rights or adjustments as a result of this financing.
(ww) Notice of Disqualification Events. The Company will notify each Purchaser in writing, prior to each Closing Date of (i) any Disqualification Event relating to any Issuer Covered Person and (ii) any event that would, with the passage of time, become a Disqualification Event relating to any Issuer Covered Person.
(xx) Advertise Purple Acquisition. To the Company’s knowledge, all material approvals, consents and third-party authorizations required for the consummation of the Advertise Purple Acquisition either have been obtained or are capable of being obtained in the ordinary course, and the Company is not aware of any event or circumstance that would reasonably be expected to prevent or materially delay the consummation of such acquisition.
(yy) Share Reserve. The Company has reserved, and shall continue to reserve, a sufficient number of authorized but unissued shares of Common Stock to permit the issuance of all Conversion Shares, Warrant Shares, Incentive Shares and any shares issuable pursuant to stock-payment amortization elections made in accordance with the Equity Conditions and the Notes.
(zz) No Material Non-Public Information. As of each Closing Date, the closing of the Exchange Agreements and the Nasdaq Uplist, neither the Company nor any of its Subsidiaries has provided any Purchaser with material non-public information that has not been publicly disclosed or otherwise made available to all Purchasers. On or prior to each Closing Date, the closing of the Exchange Agreements and the Nasdaq Uplist, the Company shall publicly disclose all material non-public information that may have been provided to the Purchasers and is required to be disclosed under applicable securities laws such that no Purchaser is in possession of undisclosed material non-public information on such dates.
(aaa) Section 3(a)(9) Exchange Transactions. The Company acknowledges and agrees that the exchange transactions contemplated by the Exchange Agreements, including (i) the exchange of existing indebtedness for Exchange Notes and (ii) the subsequent automatic exchange of such Exchange Notes for Preferred Shares upon the Nasdaq Uplist, are intended by the parties thereto to constitute a single integrated exchange transaction and to qualify for the exemption from registration provided by Section 3(a)(9) of the Securities Act. The Company has not paid and will not pay any commission, fee or other remuneration, directly or indirectly, for soliciting or facilitating such exchange transactions.
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3.2 Representations and Warranties of the Purchasers. Each Purchaser, for itself and for no other Purchaser, hereby represents and warrants as of the date hereof and as of each Closing Date to the Company as follows (unless as of a specific date therein, in which case they shall be accurate as of such date):
(a) Organization; Authority. Such Purchaser is either an individual or an entity duly incorporated or formed, validly existing and in good standing under the laws of the jurisdiction of its incorporation or formation with full right, corporate, partnership, limited liability company or similar power and authority to enter into and to consummate the transactions contemplated by the Transaction Documents and otherwise to carry out its obligations hereunder and thereunder. The execution and delivery of the Transaction Documents and performance by such Purchaser of the transactions contemplated by the Transaction Documents have been duly authorized by all necessary corporate, partnership, limited liability company or similar action, as applicable, on the part of such Purchaser. Each Transaction Document to which it is a party has been duly executed by such Purchaser, and when delivered by such Purchaser in accordance with the terms hereof, will constitute the valid and legally binding obligation of such Purchaser, enforceable against it in accordance with its terms, except (i) as limited by general equitable principles and applicable bankruptcy, insolvency, reorganization, moratorium and other laws of general application affecting enforcement of creditors’ rights generally, (ii) as limited by laws relating to the availability of specific performance, injunctive relief or other equitable remedies, and (iii) insofar as indemnification and contribution provisions may be limited by applicable law.
(b) Own Account. Such Purchaser understands that the Securities are “restricted securities” and have not been registered under the Securities Act or any applicable state securities law and is acquiring the Securities as principal for its own account and not with a view to or for distributing or reselling such Securities or any part thereof in violation of the Securities Act or any applicable state securities law, has no present intention of distributing any of such Securities in violation of the Securities Act or any applicable state securities law and has no direct or indirect arrangement or understandings with any other persons to distribute or regarding the distribution of such Securities in violation of the Securities Act or any applicable state securities law (this representation and warranty not limiting such Purchaser’s right to sell the Securities pursuant to a resale registration statement or otherwise in compliance with applicable federal and state securities laws). Such Purchaser is acquiring the Securities hereunder in the ordinary course of its business.
(c) Purchaser Status. At the time such Purchaser was offered the Securities, it was, and as of the date hereof it is, and on each date on which it exercises any Warrants or converts its Note it will be either: (i) an “accredited investor” as defined in Rule 501(a)(1), (a)(2), (a)(3), (a)(7), (a)(8), (a)(9), (a)(12), or (a)(13) under the Securities Act or (ii) a “qualified institutional buyer” as defined in Rule 144A(a) under the Securities Act. Such Purchaser has full power and authority to make the investment contemplated hereby and to execute and deliver the Transaction Documents to which it is a party.
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(d) Experience of Such Purchaser. Such Purchaser, either alone or together with its representatives, has such knowledge, sophistication, and experience in business and financial matters so as to be capable of evaluating the merits and risks of the prospective investment in the Securities, and has so evaluated the merits and risks of such investment. Such Purchaser is able to bear the economic risk of an investment in the Securities and, at the present time, is able to afford a complete loss of such investment.
(e) General Solicitation. Such Purchaser is not, to such Purchaser’s knowledge, purchasing the Securities as a result of any advertisement, article, notice or other communication regarding the Securities published in any newspaper, magazine or similar media or broadcast over television or radio or presented at any seminar or, to the knowledge of such Purchaser, any other general solicitation or general advertisement.
(f) Access to Information. Such Purchaser acknowledges that it has had the opportunity to review the Transaction Documents (including all exhibits and schedules thereto) and the SEC Reports and has been afforded (i) the opportunity to ask such questions as it has deemed necessary of, and to receive answers from, representatives of the Company concerning the terms and conditions of the offering of the Securities and the merits and risks of investing in the Securities; (ii) access to information about the Company and its financial condition, results of operations, business, properties, management and prospects sufficient to enable it to evaluate its investment; and (iii) the opportunity to obtain such additional information that the Company possesses or can acquire without unreasonable effort or expense that is necessary to make an informed investment decision with respect to the investment.
(g) Independent Investigation. Such Purchaser has conducted its own independent review, investigation and analysis of the Company and the transactions contemplated hereby and acknowledges that it has been provided access to such information as it has deemed necessary to make its investment decision. Except for the representations and warranties expressly set forth in the Transaction Documents, such Purchaser is not relying upon any other statement or representation of the Company or any of its representatives.
(h) Collateral Agent. Such Purchaser acknowledges and agrees that enforcement of remedies, administration of collateral and actions with respect to Events of Default shall be governed by the Security Agreement and that such Purchaser’s rights with respect thereto are subject to the terms of the Security Agreement and the provisions of this Agreement relating to Lead Investors.
The Company acknowledges and agrees that the representations contained in this Section 3.2 shall not modify, amend, or affect such Purchaser’s right to rely on the Company’s representations and warranties contained in this Agreement or any representations and warranties contained in any other Transaction Document or any other document or instrument executed and/or delivered in connection with this Agreement or the consummation of the transactions contemplated hereby.
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ARTICLE IV.
OTHER AGREEMENTS OF THE PARTIES
4.1 Transfer Restrictions.
(a) The Securities may only be disposed of in compliance with state and federal securities laws. In connection with any transfer of Securities other than pursuant to an effective registration statement or Rule 144, to the Company or to an Affiliate of a Purchaser or in connection with a pledge as contemplated in Section 4.1(b), the Company may require the transferor thereof to provide to the Company an opinion of counsel selected by the transferor and reasonably acceptable to the Company, the form and substance of which opinion shall be reasonably satisfactory to the Company, to the effect that such transfer does not require registration of such transferred Securities under the Securities Act. As a condition of transfer, any such transferee shall agree in writing to be bound by the terms of this Agreement and shall have the rights and obligations of a Purchaser under this Agreement. As set forth in further detail below, the Company agrees that any Securities, Underlying Shares, Warrant Shares, Incentive Shares or any other securities issued pursuant to the Transaction Documents shall be issued without a restrictive legend, or any existing restrictive legend shall be removed, if such securities are eligible for resale pursuant to Rule 144 without restriction (including compliance with applicable holding period requirements), covered by an effective registration statement or if a restrictive legend is otherwise not required under applicable securities laws.
(b) The Purchasers agree to the imprinting, so long as is required by this Section 4.1, of a legend on any of the Securities in the following form:
NEITHER THIS SECURITY NOR THE SECURITIES INTO WHICH THIS SECURITY IS CONVERTIBLE HAS BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS. THIS SECURITY AND THE SECURITIES ISSUABLE UPON CONVERSION OF THIS SECURITY MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT WITH A REGISTERED BROKER-DEALER OR OTHER LOAN WITH A FINANCIAL INSTITUTION THAT IS AN “ACCREDITED INVESTOR” AS DEFINED IN RULE 501(a) UNDER THE SECURITIES ACT OR OTHER LOAN SECURED BY SUCH SECURITIES.
The Company acknowledges and agrees that a Purchaser may from time-to-time pledge pursuant to a bona fide margin agreement with a registered broker-dealer or grant a security interest in some or all of the Securities to a financial institution that is an “accredited investor” as defined in Rule 501(a) under the Securities Act and, if required under the terms of such arrangement, such Purchaser may transfer pledged or secured Securities to the pledgees or secured parties. Such a transfer would not be subject to approval of the Company and no legal opinion of legal counsel of the pledgee, secured party or pledgor shall be required in connection therewith. Further, no notice shall be required of such pledge. At the appropriate Purchaser’s expense, the Company will execute and deliver such reasonable documentation as a pledgee or secured party of Securities may reasonably request in connection with a pledge or transfer of the Securities, including, if the Securities are subject to registration, the preparation and filing of any required prospectus supplement under Rule 424(b)(3) under the Securities Act or other applicable provision of the Securities Act.
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(c) Certificates evidencing the Underlying Shares shall not contain any legend (including the legend set forth in Section 4.1(b) hereof): (i) while a resale registration statement covering the resale of such security is effective under the Securities Act, (ii) if such Underlying Shares are eligible to be sold, assigned, or transferred pursuant to Rule 144, when available (provided that a Purchaser provides the Company with reasonable assurances that such Securities are eligible for sale, assignment or transfer under Rule 144 which shall not include an opinion of such Purchaser’s counsel), or (iii) if such legend is not required under applicable requirements of the Securities Act (including judicial interpretations and pronouncements issued by the staff of the SEC). For the avoidance of doubt the Company shall pay all costs associated with such opinions and counsel to the Company shall provide all opinions with respect to any resales pursuant to Rule 144 or otherwise at the sole cost of the Company, and the Company shall provide confirmation to the Transfer Agent that all such opinions are acceptable. If all or any portion of a Note is converted or Warrant is exercised at a time when there is an effective resale registration statement to cover the resale of the Underlying Shares, or if such Underlying Shares may be sold under Rule 144 without the requirement for the Company to be in compliance with the current public information requirements of Rule 144(c) and without volume or manner of sale restrictions or if such legend is not otherwise required under applicable requirements of the Securities Act (including Sections 4(a)(1) or 4(a)(7), judicial interpretations and pronouncements issued by the staff of the SEC including what is known as Section 4(a)(11/2)) then such Underlying Shares shall be issued free of all legends. For avoidance of doubt, the Company agrees that after the requisite holding period to comply with Rule 144, the legend may be removed under Rule 144 of the Securities Act, assuming the holder satisfies the requirements of Rule 144. The Company agrees that at such time as such legend is no longer required under this Section 4.1(c), it will, no later than two Trading Days following the delivery by any Purchaser to the Company or the Transfer Agent of a certificate (or stock power if issued in book entry form) representing Underlying Shares issued without a restrictive legend (such date, the “Legend Removal Date”), deliver or cause to be delivered to such Purchaser a certificate representing such shares that is free from all restrictive and other legends (or provide evidence of issuance in book entry form). The Company may not make any notation on its records or give instructions to the Transfer Agent that enlarge the restrictions on transfer set forth in this Section 4.1. Certificates for Underlying Shares subject to legend removal hereunder shall be transmitted by the Transfer Agent to such Purchaser by crediting the account of the Purchaser’s prime broker with the Depository Trust Company System as directed by the Purchaser..
(d) In addition to such Purchaser’s other available remedies, the Company shall pay to a Purchaser, in cash, (i) as partial liquidated damages and not as a penalty, for each $1,000 of Underlying Shares (based on the VWAP of the Common Stock on the date such Securities are submitted to the Transfer Agent) delivered for removal of the restrictive legend and subject to Section 4.1(c), $10 per Trading Day (increasing to $20 per Trading Day five Trading Days after such damages have begun to accrue) for each Trading Day after the Legend Removal Date until such certificate is delivered without a legend; provided that such Purchaser, in good faith, cooperates reasonably with, and takes such customary actions as may be reasonably requested by the Company in connection with the delivery of such certificate without a legend, and (ii) if the Company fails to (a) issue and deliver (or cause to be delivered) to a Purchaser by the Legend Removal Date a certificate representing the Securities so delivered to the Company by such Purchaser that is free from all restrictive and other legends and (b) if after the Legend Removal Date such Purchaser purchases (in an open market transaction or otherwise) shares of Common Stock to deliver in satisfaction of a sale by such Purchaser of all or any portion of the number of shares of Common Stock, or a sale of a number of shares of Common Stock equal to all or any portion of the number of shares of Common Stock that such Purchaser anticipated receiving from the Company without any restrictive legend, then, an amount equal to the excess of such Purchaser’s total purchase price (including brokerage commissions and other out-of-pocket expenses, if any) for the shares of Common Stock so purchased (including brokerage commissions and other out-of-pocket expenses, if any) (the “Buy-In Price”) over the product of (A) such number of Underlying Shares that the Company was required to deliver to such Purchaser by the Legend Removal Date multiplied by (B) the lowest closing sale price of the Common Stock on any Trading Day during the period commencing on the date of the delivery by such Purchaser to the Company of the applicable Underlying Shares (as the case may be) and ending on the date of such delivery and payment under this clause (ii).
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(e) Each Purchaser, severally and not jointly with the other Purchasers, agrees with the Company that such Purchaser will sell any Securities pursuant to either the registration requirements of the Securities Act, including any applicable prospectus delivery requirements, or an exemption therefrom, and that if Securities are sold pursuant to a resale registration statement, they will be sold in compliance with the plan of distribution set forth therein, and acknowledges that the removal of the restrictive legend from certificates representing Securities as set forth in this Section 4.1 is predicated upon the Company’s reliance upon this understanding.
4.2 Acknowledgment of Dilution. The Company acknowledges that the issuance of the Securities may result in dilution of the outstanding shares of Common Stock, which dilution may be substantial under certain market conditions. The Company further acknowledges that its obligations under the Transaction Documents, including, without limitation, its obligation to issue the Underlying Shares pursuant to the Transaction Documents, are unconditional and absolute and not subject to any right of set off, counterclaim, delay or reduction, regardless of the effect of any such dilution or any claim the Company may have against any Purchaser and regardless of the dilutive effect that such issuance may have on the ownership of the other stockholders of the Company.
4.3 Furnishing of Information; Public Information.
(a) Until the earliest of the time that no Notes and if applicable no Preferred Shares remain outstanding, the Company covenants to maintain the registration of the Common Stock under Section 12(b) or 12(g) of the Exchange Act and to timely file (or obtain extensions in respect thereof and file within the applicable grace period) all reports required to be filed by the Company after the date hereof pursuant to the Exchange Act even if the Company is not then subject to the reporting requirements of the Exchange Act.
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(b) At any time during the period commencing from the six-month anniversary of the date hereof (and also from the six-month anniversary following any Additional Closing Date), and ending at such time as all Registrable Securities held by such Holder may be sold pursuant to Rule 144 without restriction or limitation and without the requirement that the Company be in compliance with Rule 144(c)(1), if the Company (i) fails to satisfy the current public information requirements of Rule 144(c), or (ii) if applicable, fails to satisfy the requirements of Rule 144(i)(2), a “Public Information Failure” shall be deemed to have occurred. In the event of a Public Information Failure, the Company shall pay to the applicable Holder, as liquidated damages and not as a penalty, an amount equal to two percent (2.0%) of such Holder's Subscription Amount for the first thirty (30) day period during which the Public Information Failure continues, and an additional two percent (2.0%) of such Holder's Subscription Amount for each subsequent thirty (30) day period (pro-rated for partial periods) during which the Public Information Failure continues. Notwithstanding the foregoing:
(i) the aggregate amount of Public Information Failure Payments payable to any Holder shall not exceed six percent (6%) of such Holder's Subscription Amount;
(ii) no Public Information Failure Payments shall accrue for delays resulting from SEC review, SEC comment processes, Rule 415 limitations, holder delays, or other circumstances outside the reasonable control of the Company;
(iii) no Public Information Failure Payments shall be payable to the extent the applicable failure is otherwise compensated pursuant to the Registration Rights Agreement, and the parties acknowledge that no Holder shall be entitled to duplicative recovery for the same underlying event, circumstance or failure; and
(iv) Public Information Failure Payments shall terminate immediately upon cure of the applicable Public Information Failure. Any Public Information Failure Payments due hereunder shall be paid within ten (10) Business Days following the end of the applicable period for which such amounts accrued. Any unpaid amount shall accrue interest at the rate of twelve percent (12%) per annum, or the maximum rate permitted by applicable law, whichever is less, from the date due until paid in full.
4.4 Integration. The Company shall not sell, offer for sale or solicit offers to buy or otherwise negotiate in respect of any security (as defined in Section 2 of the Securities Act) that would be integrated with the offer or sale of the Securities in a manner that would require the registration under the Securities Act of the sale of the Securities or that would be integrated with the offer or sale of the Securities for purposes of the rules and regulations of any Trading Market such that it would require stockholder approval prior to the closing of such other transaction unless stockholder approval is obtained before the closing of such subsequent transaction.
4.5 Conversion Procedures. The form of Notice of Conversion included in the Notes set forth the totality of the procedures required of the Purchasers in order to convert the Notes. Without limiting the preceding sentences, no ink-original Notice of Conversion shall be required, nor shall any medallion guarantee (or other type of guarantee or notarization) of any Notice of Conversion form be required in order to convert the Notes. No additional legal opinion, other information or instructions shall be required of the Purchasers to convert their Notes. The Company shall honor conversions of the Notes that are converted in accordance with the terms set forth in the Transaction Documents and shall deliver Underlying Shares in accordance with the terms, conditions, and time periods set forth in the Transaction Documents.
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4.6 Securities Laws Disclosure; Publicity. The Company shall (a) by the Disclosure Time, issue a press release disclosing the material terms of the transactions contemplated hereby, and (b) file a Current Report on Form 8-K, including the Transaction Documents as exhibits thereto, with the SEC within the time required by the Exchange Act. From and after the issuance of such press release, the Company shall have publicly disclosed all material, non-public information delivered to any of the Purchasers by the Company or any of its Subsidiaries, or any of their respective officers, directors, employees, or agents in connection with the transactions contemplated by the Transaction Documents. In addition, effective upon the issuance of such press release, the Company acknowledges and agrees that any and all confidentiality or similar obligations under any agreement, whether written or oral, between the Company, any of its Subsidiaries or any of their respective officers, directors, agents, employees or Affiliates on the one hand, and any of the Purchasers or any of their Affiliates on the other hand, shall terminate. The Company and each Purchaser shall consult with each other in issuing any other press releases with respect to the transactions contemplated hereby, and neither the Company nor any Purchaser shall issue any such press release nor otherwise make any such public statement without the prior consent of the Company, with respect to any press release of any Purchaser, or without the prior consent of each Purchaser, with respect to any press release of the Company, which consent shall not unreasonably be withheld or delayed, except if such disclosure is required by law, in which case the disclosing party shall promptly provide the other party with prior notice of such public statement or communication. Notwithstanding the foregoing, the Company shall not publicly disclose the name of any Purchaser, or include the name of any Purchaser in any filing with the SEC or any regulatory agency or Trading Market, without the prior written consent of such Purchaser, except (a) as required by federal securities law in connection with the filing of final Transaction Documents with the SEC and (b) to the extent such disclosure is required by law or Trading Market regulations, in which case the Company shall provide the Purchasers with prior notice of such disclosure permitted under this clause (b). As of each Closing Date, the closing of the Exchange Agreements and the Nasdaq Uplist, neither the Company nor any of its Subsidiaries has provided any Purchaser with material non-public information that has not been publicly disclosed or otherwise made available to all Purchasers. On or prior to each Closing Date, the closing of the Exchange Agreements and the Nasdaq Uplist, the Company shall publicly disclose all material non-public information that may have been provided to the Purchasers and is required to be disclosed under applicable securities laws such that no Purchaser is in possession of undisclosed material non-public information on such dates.
4.7 Stockholder Rights Plan. No claim will be made or enforced by the Company or, with the consent of the Company, any other Person, that any Purchaser is an “Acquiring Person” under any control share acquisition, business combination, poison pill (including any distribution under a rights agreement) or similar anti-takeover plan or arrangement in effect or hereafter adopted by the Company, or that any Purchaser would be deemed to trigger the provisions of any such plan or arrangement, by virtue of receiving Securities under the Transaction Documents or under any other agreement between the Company and the Purchasers.
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4.8 Non-Public Information. Except with respect to the material terms and conditions of the transactions contemplated by the Transaction Documents, which shall be disclosed pursuant to Section 4.6, the Company covenants and agrees that neither it, nor any other Person acting on its behalf will provide any Purchaser or its agents or counsel with any information that constitutes, or the Company reasonably believes constitutes, material non-public information, unless prior thereto such Purchaser shall have consented in writing to the receipt of such information and agreed with the Company to keep such information confidential. The Company understands and confirms that each Purchaser shall be relying on the foregoing covenant in effecting transactions in securities of the Company. To the extent that the Company, any of its Subsidiaries, or any of their respective officers, director, agents, employees or Affiliates delivers any material, non-public information to a Purchaser without such Purchaser’s consent, the Company hereby covenants and agrees that such Purchaser shall not have any duty of confidentiality to the Company, any of its Subsidiaries, or any of their respective officers, directors, agents, employees or Affiliates, or a duty to the Company, any of its Subsidiaries or any of their respective officers, directors, agents, employees or Affiliates not to trade on the basis of, such material, non-public information, provided that the Purchaser shall remain subject to applicable law. To the extent that any notice provided pursuant to any Transaction Document constitutes, or contains, material, non-public information regarding the Company or any Subsidiaries, the Company shall simultaneously file such notice with the SEC pursuant to a Current Report on Form 8-K. The Company understands and confirms that each Purchaser shall be relying on the foregoing covenant in effecting transactions in securities of the Company.
4.9 Use of Proceeds. The Company shall use the net proceeds from the sale of the Securities primarily to fund the Advertise Purple Acquisition, pay transaction expenses, satisfy obligations under the Exchange Agreements, support the Nasdaq Uplist, and for general corporate and working capital purposes.
4.10 Indemnification of Purchasers.
(a) Subject to the provisions of this Section 4.10, the Company will indemnify and hold each Purchaser and its directors, officers, stockholders, members, partners, employees and agents (and any other Persons with a functionally equivalent role of a Person holding such titles notwithstanding a lack of such title or any other title), each Person who controls such Purchaser (within the meaning of Section 15 of the Securities Act and Section 20 of the Exchange Act), and the directors, officers, stockholders, agents, members, partners or employees (and any other Persons with a functionally equivalent role of a Person holding such titles notwithstanding a lack of such title or any other title) of such controlling persons (each, a “Purchaser Party”) harmless from any and all losses, liabilities, obligations, claims, contingencies, damages, costs and expenses, including all judgments, amounts paid in settlements, court costs and reasonable attorneys’ fees and costs of investigation that any such Purchaser Party may suffer or incur as a result of or relating to (i) any breach of any of the representations, warranties, covenants or agreements made by the Company in this Agreement or in the other Transaction Documents, (ii) any cause of action, Action, proceeding or claim (any, a “Claim”) instituted by the Company or its Affiliates or representatives or agents against the Purchaser Parties in any capacity, or any of them or their respective Affiliates, with respect to any of the transactions contemplated by the Transaction Documents (unless such action is solely based upon a material breach of such Purchaser Party’s representations, warranties or covenants under the Transaction Documents or any agreements or understandings such Purchaser Party may have with any such stockholder or any violations by such Purchaser Party of state or federal securities laws or any conduct by such Purchaser Party which is finally judicially determined to constitute fraud, gross negligence or willful misconduct) or (iii) any Claim brought or made against a Purchaser Party by a third party (including for these purposes a derivative action brought on behalf of the Company) or which otherwise involves such Purchaser Party that arises out of or results from (A) the execution, delivery, performance or enforcement of any of the Transaction Documents, (B) any transaction financed or to be financed in whole or in part, directly or indirectly, with the proceeds of the issuance of the Securities, or (C) the status of a Purchaser or holder of the Securities either as an investor in the Company pursuant to the transactions contemplated by the Transaction Documents or as a party to this Agreement (including, without limitation, as a party in interest or otherwise in any Action for injunctive or other equitable relief).
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(b) The Company shall indemnify, defend and hold harmless each Purchaser and its affiliates, officers, directors, members, managers, partners, employees, agents and representatives from and against any and all losses, claims, damages, liabilities, judgments, costs and expenses (including reasonable attorneys' fees and expenses) arising out of or based upon any untrue statement or alleged untrue statement of a material fact contained in any registration statement, prospectus, free writing prospectus or amendment or supplement thereto filed by or on behalf of the Company in connection with the transactions contemplated by this Agreement, or arising out of or based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, except to the extent such untrue statement or omission was made in reliance upon and in conformity with written information furnished by such Purchaser expressly for inclusion therein.
(c) If any Action shall be brought against any Purchaser Party in respect of which indemnity may be sought pursuant to this Agreement, such Purchaser Party shall promptly notify the Company in writing, and the Company shall have the right to assume the defense thereof with counsel of its own choosing reasonably acceptable to the Purchaser Party. Any Purchaser Party shall have the right to employ separate counsel in any such Action and participate in the defense thereof, but the fees and expenses of such counsel shall be at the expense of such Purchaser Party except to the extent that (i) the employment thereof has been specifically authorized by the Company in writing, (ii) the Company has failed after a reasonable period of time to assume such defense and to employ counsel or (iii) in such Action there is, in the reasonable opinion of counsel, a material conflict on any material issue between the position of the Company and the position of such Purchaser Party, in which case the Company shall be responsible for the reasonable fees and expenses of no more than one such separate counsel. The Company will not be liable to any Purchaser Party under this Agreement (y) for any settlement by a Purchaser Party effected without the Company’s prior written consent, which shall not be unreasonably withheld or delayed; or (z) to the extent, but only to the extent that a loss, claim, damage or liability is attributable to any Purchaser Party’s breach of any of the representations, warranties, covenants or agreements made by such Purchaser Party in this Agreement or in the other Transaction Documents. The indemnification required by this Section 4.10(c) shall be made by periodic payments of the amount thereof during the course of the investigation or defense, as and when bills are received or are incurred. The indemnity agreements contained herein shall be in addition to any cause of Action or similar right of any Purchaser Party against the Company or others and any liabilities the Company may be subject to pursuant to law.
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4.11 Reservation and Listing of Securities.
(a) Reservation of Shares. While any Notes remain outstanding, the Company shall reserve from its authorized and unissued shares of Common Stock a number of shares sufficient to satisfy its obligations under the Transaction Documents, including the issuance of Conversion Shares, Warrant Shares, Incentive Shares and any shares issuable pursuant to amortization payments permitted under the Notes (the “Required Minimum”). The Required Minimum shall be calculated using an assumed Conversion Price of $0.03 per share (subject to adjustment for stock splits, stock dividends, combinations and similar recapitalization events), unless a different reserve methodology is approved by the Lead Investors. The Company shall review the Required Minimum no less frequently than once each calendar quarter and shall maintain at all times a sufficient reserve of authorized and unissued shares to satisfy its obligations under the Transaction Documents.
(b) Authorized Share Deficiency. If at any time the Company does not have sufficient authorized and available shares of Common Stock to satisfy the Required Minimum (an “Authorized Share Deficiency”), the Company shall promptly take all actions necessary to cure such deficiency, including: (i) obtaining board approval; (ii) seeking stockholder approval if required; and (iii) filing any charter amendment necessary to increase the Company's authorized capital. The Company shall use commercially reasonable efforts to cure any Authorized Share Deficiency as promptly as practicable.
(c) Listing. The Company shall use commercially reasonable efforts to maintain the authorization, approval and listing of all shares reserved for issuance under the Transaction Documents on the applicable Trading Market and shall take all actions reasonably necessary to permit the issuance and trading thereof.
(d) Nasdaq Uplist Termination. Upon the Nasdaq Uplist, the reserve requirements set forth in this Section 4.11 shall automatically terminate and be of no further force or effect, and the Company shall thereafter have no obligation to reserve shares pursuant to this Agreement or the Notes.
4.12 Change in Transfer Agent. If the Company’s agency relationship the Transfer Agent should be terminated for any reason while all or any portion of the Notes remain outstanding, the Company shall immediately appoint a successor transfer agent acceptable to the Purchasers and shall require that the successor Transfer Agent execute and agree to be bound by the terms of the Irrevocable Transfer Agent Instructions with respect to each Purchaser. Failure to adhere to this covenant shall automatically be deemed a material breach of this Agreement and an Event of Default under the Note.
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4.13 Subsequent Equity Sales.
(a) From the date hereof until such time as no Purchaser holds any of the Notes, without the prior written consent of the Lead Investors, the Company shall not enter into any Variable Rate Transaction. “Variable Rate Transaction” means a transaction in which the Company (i) issues or sells any debt or equity securities that are convertible into, exchangeable or exercisable for, or include the right to receive, additional shares of Common Stock either (A) at a conversion price, exercise price or exchange rate or other price that is based upon, and/or varies with, the trading prices of or quotations for the shares of Common Stock at any time after the initial issuance of such debt or equity 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 debt or equity security or upon the occurrence of specified or contingent events directly or indirectly related to the business of the Company or the market for the Common Stock or (ii) enters into, or effects a transaction under, any agreement whereby the Company may issue securities at a future determined price. For avoidance of doubt, the foregoing restriction shall not apply to an equity line of credit entered into between the Company and an entity designated by the Lead Investors.
(b) While any Notes are outstanding, the Company shall not issue any equity option, warrant or similar instrument (except for securities issued in Exempt Issuances) which contains an “alternative cashless exercise” provision that provides for the exercise of such security without payment of the exercise price in cash and does not require the security to be “in the money,” and in the event of any such issuance in violation of this Section 4.13(b), in addition to the other rights and remedies provided under the Transaction Documents including without limitation the right to receive damages in connection therewith, any Purchaser shall be entitled to obtain injunctive relief against the Company to preclude or nullify any such issuance.
4.14 Equal Treatment of Purchasers. No consideration (including any modification of any Transaction Document) shall be offered or paid to any Person to amend or consent to a waiver or modification of any provision of the Transaction Documents unless the same consideration is also offered to all of the parties to such Transaction Documents. Further, the Company shall not make any payment of principal or interest on the Notes in amounts which are disproportionate to the respective principal amounts outstanding on the Notes at any applicable time. For clarification purposes, this provision constitutes a separate right granted to each Purchaser by the Company and negotiated separately by each Purchaser and is intended for the Company to treat the Purchasers as a class and shall not in any way be construed as the Purchasers acting in concert or as a group with respect to the purchase, disposition or voting of Securities or otherwise.
4.15 Certain Transactions and Confidentiality. Each Purchaser, severally and not jointly with the other Purchasers, covenants that neither it, nor any Affiliate acting on its behalf or pursuant to any understanding with it will execute any purchases or sales, including Short Sales, of any of the Company’s securities during the period commencing with the execution of this Agreement and ending at such time that the transactions contemplated by this Agreement are first publicly announced pursuant to the initial press release as described in Section 4.6. Each Purchaser, severally and not jointly with the other Purchasers, covenants that until such time as the transactions contemplated by this Agreement are publicly disclosed by the Company pursuant to the initial press release as described in Section 4.6, such Purchaser will maintain the confidentiality of the existence and terms of this transaction and the information included in the Disclosure Schedules. Notwithstanding the foregoing and notwithstanding anything contained in this Agreement to the contrary, the Company expressly acknowledges and agrees that (i) no Purchaser makes any representation, warranty or covenant hereby that it will not engage in effecting transactions in any securities of the Company after the time that the transactions contemplated by this Agreement are first publicly announced pursuant to the initial press release as described in Section 4.6, (ii) no Purchaser shall be restricted or prohibited from effecting any transactions in any securities of the Company in accordance with applicable securities laws from and after the time that the transactions contemplated by this Agreement are first publicly announced pursuant to the initial press release as described in Section 4.6 and (iii) no Purchaser shall have any duty of confidentiality or duty not to trade in the securities of the Company to the Company after the issuance of the initial press release as described in Section 4.6. Notwithstanding the foregoing, in the case of a Purchaser that is a multi-managed investment vehicle whereby separate portfolio managers manage separate portions of such Purchaser’s assets and the portfolio managers have no direct knowledge of the investment decisions made by the portfolio managers managing other portions of such Purchaser’s assets, the covenant set forth above shall only apply with respect to the portion of assets managed by the portfolio manager that made the investment decision to purchase the Securities covered by this Agreement.
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4.16 Form D; Blue Sky Filings. The Company agrees to timely file a Form D with respect to the Securities as required under Regulation D and to provide a copy thereof, promptly upon request of any Purchaser. The Company shall take such action as the Company shall reasonably determine is necessary to obtain an exemption for, or to qualify the Securities for, sale to the Purchasers at each Closing under applicable securities or “Blue Sky” laws of the states of the United States and shall provide evidence of such actions promptly upon request of any Purchaser.
4.17 Capital Changes. From the date hereof until such time as no Purchaser holds any of the Notes, the Company shall not undertake a reverse or forward stock split or reclassification of the Common Stock without the prior written consent of the Lead Investors. Notwithstanding the foregoing, Company may effect, in its sole discretion, a reverse stock split reasonably necessary to satisfy Nasdaq initial listing requirements without the consent of any third party, including any consent of Lead Investors.
4.18 Security Documents.
(a) The Company shall enter into the Security Agreement.
(b) The Company shall authorize the filing of all UCC financing statements required by the Security Agreement.
4.19 Warrant Agreement. The Company agrees to enter into the form of warrant agreement between the Company and the Purchasers as set forth in Exhibit B.
4.20 [Reserved].
4.21 Further Assurances. The Company hereby agrees that, from time to time upon the written request of the Collateral Agent or the Lead Investors, it will execute and deliver such further documents and do such other acts and things as the Purchaser may reasonably request in order fully to comply will all of the Company’s obligations under the Transaction Documents, including without limitation in respect of Sections 4.18 and 4.19 above.
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4.22 [Reserved].
4.23 Restriction on Activities. From the date hereof until such time as no Purchaser holds any of the Notes, the Company shall not, directly or indirectly, without the Purchasers’ prior written consent, which consent shall not be unreasonably withheld: (a) materially change the nature of its business; or (b) sell, divest, or change the structure of any material assets other than in the ordinary course of business.
4.24 Corporate Existence. The Company shall, while any Notes remain outstanding, maintain its corporate existence and shall not sell all or substantially all of the Company’s assets, except in the event of a merger or consolidation or sale of all or substantially all of the Company’s assets, where the surviving or successor entity in such transaction (i) assumes the Company’s obligations hereunder and under the Transaction Documents and (ii) is a publicly traded corporation whose common stock is listed for trading or quotation on the Principal Market, any national securities exchange, including, but not limited to, any tier of the Nasdaq Stock Market, the New York Stock Exchange or the NYSE MKT.
4.25 Other Notes or Indebtedness. The Company shall not incur Indebtedness other than: (i) Permitted Senior Debt, including liens securing such debt; (ii) Indebtedness disclosed on Schedule 3.1(bb); (iii) purchase money indebtedness; (iv) capital leases; (v) seller notes and earnouts; and (vi) trade payables incurred in the ordinary course; and (vii) other indebtedness approved by the Lead Investors.
4.26 Most Favored Nation. At any time from the date hereof until such time as no Purchaser holds any of the Notes, the Company shall not enter into any Subsequent Financing with any individual or entity (an “Other Investor”) that has the effect of establishing rights or otherwise benefiting such Other Investor in a manner more favorable in any material respect to such Other Investor (even if the Other Investor does not receive the benefit of such more favorable term until a default occurs under such other security) than the rights and benefits established in favor of the Purchasers by this Agreement or the Note unless, in any such case, each Purchaser has been provided with such rights and benefits pursuant to a definitive written agreement or agreements between the Company and such Purchaser. For the avoidance of doubt, issuances in connection with the Nasdaq Uplist, Exchange Agreements, preferred exchange transactions, employee compensation arrangements and Exempt Issuances shall not constitute Subsequent Financings for purposes of this Section.
4.27 No Broker-Dealer Acknowledgement. Absent a final adjudication from a court of competent jurisdiction stating otherwise, the Company shall not, to any person, institution, governmental or other entity, state, claim, allege, or in any way assert, that any Purchaser is currently, or ever has been, a broker-dealer under the Exchange Act.
4.28 Collateral Agent. Notwithstanding anything contained herein or in any other Transaction Document to the contrary, all collateral administration, accelerations, waivers, amendments, consents, enforcement actions and remedies relating to the Notes and collateral shall be exercised exclusively by the Collateral Agent acting at the direction of the Lead Investors. No Purchaser acting individually shall have the right to declare an Event of Default, accelerate any Note, foreclose upon collateral or otherwise exercise creditor remedies except as expressly provided in the Security Agreement.
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4.29 Financial Monitor. For so long as any Notes remain outstanding, the Company shall:
(a) meet with the Financial Monitor not less than once each calendar month and at such other times as may be reasonably requested by the Financial Monitor or the Lead Investors.
(b) provide the Financial Monitor and its representatives reasonable access, during normal business hours and upon reasonable advance notice, to the Company’s books and records, financial information, management, employees, advisors and facilities as reasonably necessary for the Financial Monitor to perform its duties;
(c) promptly provide such financial and operating information as the Financial Monitor may reasonably request;
(d) cooperate in good faith with the Financial Monitor and give due consideration to the Financial Monitor’s recommendations; and
(e) use its reasonable best efforts to comply with and implement the Financial Monitor’s reasonable requests, recommendations and suggestions, except to the extent the Company determines in good faith that compliance would violate applicable law or fiduciary duties.
4.30 Nasdaq Uplist Termination. Notwithstanding anything contained in this Agreement, the Notes, the Security Documents or any other Transaction Document to the contrary, upon the occurrence of the Nasdaq Uplist and the automatic exchange of the Notes into Preferred Shares:
(a) all Notes, including the Exchange Notes, shall be deemed cancelled, surrendered, extinguished and satisfied in full;.
(b) all liens and security interests granted pursuant to the Security Documents shall automatically terminate and be released;
(c) all affirmative covenants and negative covenants contained in this Agreement and the Notes shall automatically terminate;
(d) all participation rights, rights of first offer, issuance restrictions, reserve requirements and similar debt-related protections contained in this Agreement and the Notes shall automatically terminate;
(e) all Events of Default and remedies under the Notes shall automatically terminate;
(f) the relationship among the parties shall thereafter be governed solely by the Certificate of Designations, the Registration Rights Agreement, the Leak-Out Agreement and Warrant Agreement; and
(g) no provision of this Agreement shall survive the Nasdaq Uplist and the issuance of the Preferred Shares, except those expressly stated to survive by their terms.
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4.31 Leak-Out Restrictions.
(a) For the period beginning on the date that the Common Stock commences trading on Nasdaq and ending on the date that is one hundred eighty (180) days thereafter, each Purchaser and each holder of securities issued pursuant to the Exchange Agreements shall agree that the aggregate number of shares sold by such holder on any Trading Day shall not exceed five percent (5%) of the trailing ten (10) Trading Day average daily trading volume of the Common Stock.
(b) For purposes of this Section, all shares held by such holder and its Affiliates, including shares acquired upon conversion of Preferred Shares, exercise of Warrants, issuance of Incentive Shares or otherwise pursuant to the Transaction Documents, shall be aggregated.
(c) The restrictions contained in this Section shall automatically terminate if, for twenty (20) consecutive Trading Days, the Common Stock trades with average daily trading value in excess of $1,000,000 and at a price at least twenty percent (20%) greater than the Conversion Price.
(d) The Company shall cause compliance with this Section to be a condition to the issuance of any Preferred Shares, Incentive Shares or other securities issued pursuant to the Transaction Documents.
(e) Each Purchaser agrees to execute and be bound by the Leak-Out Agreement attached hereto as Exhibit E.
4.32 Appointment of Chief Financial Officer. Following the Closing and during the Governance Rights Period, the Company shall maintain a Chief Financial Officer reasonably acceptable to the Lead Investors and the Board of Directors, with the Board retaining final hiring authority. If no such Chief Financial Officer is in place as of the Closing, the Company shall use commercially reasonable efforts to appoint a Chief Financial Officer within thirty (30) days following the Closing (or such later date as may be mutually agreed by the Company and the Lead Investors). The Company shall not terminate, replace or materially modify the duties of such Chief Financial Officer without prior written notice to and consultation with the Lead Investors; provided, however, that the Board, which may consult with the Company’s Chief Executive Officer, shall retain final authority with respect to any such termination, replacement or material modification of the duties of such Chief Financial Officer.
4.33 Maximum Issuance Limits. The Purchasers fully understand that, when applicable, including upon the Nasdaq Uplist, the Company intends to comply with the shareholder approval requirements of Nasdaq Listing Rule 5635(d) (and, to the extent applicable, Nasdaq Listing Rule 5635(b)), and, as such, the Company shall not issue any shares of Common Stock, or any underlying shares of Common Stock, including the Conversion Shares, Warrant Shares, Incentive Shares, shares issuable upon conversion of the Preferred Shares and other shares of Common Stock issuable pursuant to this Agreement and the other Transaction Documents (the “Underlying Shares”), which would exceed 19.99% of the total number of shares of Common Stock outstanding immediately prior to the execution of this Agreement (as adjusted for any forward or reverse stock splits, stock dividends, combinations, recapitalizations and similar events), and, to the extent applicable in the case of Nasdaq Listing Rule 5635(b)), no holder may convert or exercise any Underlying Shares to the extent that such conversion or exercise would also result in such holder (individually or as part of a group) holding the largest voting interest in the Company (the “Exchange Cap”), unless and until the Company has obtained Nasdaq Shareholder Approval.
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4.34 Allocation of Cap. Until Nasdaq Shareholder Approval is obtained, the Underlying Shares shall be issued to the Purchasers pro rata up to the Exchange Cap limit. If any conversion of Notes, exercise of Warrants or conversion of the Preferred Shares would result in an issuance exceeding the Exchange Cap, the portion of the transaction exceeding such cap shall be held in abeyance and deferred, until official Nasdaq Shareholder Approval is secured.
4.35 Floor Price. Under no circumstances shall the Conversion Price of the Notes or Exercise Price of the Warrants (the “Floor Price”), or the Conversion Price of the Preferred Shares (the “Conversion Floor Price”) or any other securities issued pursuant to this Agreement be adjusted (subject to adjustment for any forward or reverse stock splits, stock dividends, combinations, recapitalizations and similar events) below (i) the Minimum Price as of the execution date of this Agreement, unless an alternative exception applies, and (ii) the minimum bid price per share required for the Common Stock to achieve initial listing on the Nasdaq Capital Market as set forth in Nasdaq Rule 5505(a)(1)(A), and to maintain such listing on the Nasdaq Capital Market as set forth in Nasdaq Rule 5550(a)(2).
The “Minimum Price” (as defined by Nasdaq Listing Rule 5635(d)(1)(A)) is the lower of (i) the Official Closing Price (as reflected on Nasdaq.com) immediately preceding the execution of this Agreement, or (ii) the average Official Closing Price of the Common Stock for the five (5) Trading Days immediately preceding the execution of this Agreement (or, in the event the Common Stock is not yet listed on the Nasdaq Capital Market as of the date hereof, the lower of (x) the last reported closing bid price on the OTC market on the Trading Day immediately preceding the date of this Agreement, and (y) the average of the last reported closing bid prices on the OTC market for the five (5) Trading Days immediately preceding the date of this Agreement);
4.36 Nasdaq Shareholder Approval. If shareholder approval is required pursuant to Nasdaq Listing Rule 5635 or any other applicable Nasdaq rule in connection with the issuance, conversion, exchange or exercise of any securities contemplated by this Agreement or any of the other Transaction Documents, the Company shall use commercially reasonable efforts to obtain such shareholder approval as promptly as practicable and as described in more detail in Section 4.37 below. The Company shall prepare and file all necessary documentation required to obtain the Nasdaq Shareholder Approval, including, but not limited to, preliminary and definitive information statements (and if required, proxy materials, to call and hold all required shareholder meetings) and otherwise take all actions reasonably necessary to obtain such approval. Until such approval is obtained, the Company shall not issue, convert, exchange or permit the exercise of any securities to the extent doing so would violate applicable Nasdaq rules. Section 78.320 of the Nevada Revised Statutes (“NRS”) provides, in part, that any action required or permitted to be taken at a meeting of the stockholders may be taken without a meeting if, before or after the action, a written consent thereto is signed by stockholders holding at least a majority of the voting power, except that if a different proportion of voting power is required for such an action at a meeting, then that proportion of written consents is required. As of the date of this Agreement, the Company is eligible to utilize Section 78.320 of the NRS due to the fact that the Company’s Chief Executive Officer holds over a majority of the Company’s voting power.
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4.37 Timeline for Nasdaq Shareholder Approval. The Company agrees to prepare and file with the SEC, as soon as reasonably practicable but in no event later than 30 calendar days following the Closing Date, a preliminary information statement (or if necessary, a preliminary proxy statement) to notify shareholders that corporate actions described in this Agreement and the other Transaction Documents have been authorized, including, but not limited to: (i) authorization of the issuance of all underlying shares of Common Stock, including the Conversion Shares, Warrant Shares, Incentive Shares and other shares issuable pursuant to the Transaction Documents in excess of the 19.99% Exchange Cap limit; and (ii) authorization of an adjustment of the established Floor Price or Conversion Floor Price, as the case may be, if required in compliance with the rules and regulations of The Nasdaq Stock Market LLC.
4.38 Nasdaq Uplist Protections
(a) Company Discretion Over Uplist. The Company shall have sole and absolute discretion over the timing, manner, structure and execution of the Nasdaq Uplist, including the selection of advisors, the form of listing application, the determination of compliance strategies, and the structuring of any related transactions. No Purchaser shall have any right to direct, approve or veto any aspect of the Company’s Nasdaq Uplist strategy or application, except as expressly set forth in this Agreement.
(b) Commercially Reasonable Efforts Standard. The Company shall use commercially reasonable efforts to pursue the Nasdaq Uplist following the Initial Closing. The parties acknowledge that the Nasdaq Uplist is subject to Nasdaq’s review and approval process and that the Company’s obligation is one of commercially reasonable efforts, not a guarantee of result. No failure to achieve the Nasdaq Uplist shall constitute a breach of this Agreement or an Event of Default under the Notes, provided the Company has used commercially reasonable efforts to pursue the same.
(c) Purchaser Cooperation. Each Purchaser shall, and shall cause its Affiliates to, reasonably cooperate with the Company in connection with the Nasdaq Uplist, including: (i) executing and delivering such documents and instruments as the Company may reasonably request in connection with the Nasdaq listing application; (ii) providing to the Company, on a timely basis, such information regarding such Purchaser as may be required by Nasdaq or the SEC in connection with the listing application; (iii) complying with any round-lot holder, public float or unrestricted share requirements applicable to the Nasdaq Uplist; and (iv) not taking any action that such Purchaser knows or reasonably should know would materially impair, delay or prevent the Nasdaq Uplist.
(d) Conversion and Exercise Restrictions Pending Uplist. Notwithstanding anything to the contrary in this Agreement or the other Transaction Documents, if the Company determines in good faith that any conversion of Notes or the Preferred Stock or exercise of Warrants would reasonably be expected to cause the Company to fail to satisfy any Nasdaq listing standard (including minimum bid price, public float, stockholders’ equity or round-lot holder requirements), the Company may defer such conversion or exercise for a period not to exceed thirty (30) days by delivering written notice to the applicable Purchaser specifying the basis for such deferral. Any such deferral shall not constitute an Event of Default under the Notes or a breach of this Agreement, and no interest, penalties or liquidated damages shall accrue during any such deferral period.
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(e) Nasdaq Compliance Actions. The Company may, without the consent of the Purchasers, take such corporate actions as are reasonably necessary to satisfy Nasdaq’s initial listing requirements, including: (i) adopting corporate governance policies and committee charters required by Nasdaq; (ii) appointing independent directors to satisfy Nasdaq independence requirements; (iii) amending its charter or bylaws to the extent required by Nasdaq listing rules; and (iv) implementing internal controls and procedures required by Nasdaq. No such action shall be deemed a breach of this Agreement or any Transaction Document or give rise to any consent, approval or waiver right of the Purchasers, provided that such action does not materially and adversely affect the economic rights of the Purchasers under the Notes, the Warrants or Preferred Shares.
ARTICLE V.
MISCELLANEOUS
5.1 Termination. This Agreement may be terminated by any Purchaser, as to such Purchaser’s obligations hereunder only and without any effect whatsoever on the obligations between the Company and the other Purchasers, or by the Company, by written notice to the other parties, if the Initial Closing has not been consummated on or before the Outside Date, provided, however, that no such termination will affect the right of any party to sue for any breach by any other party (or parties). Notwithstanding the foregoing, if the Minimum Financing Condition has not been satisfied on or before the Outside Date, this Agreement shall automatically terminate and all funds held by the Escrow Agent shall be returned to the applicable Purchasers in accordance with the Escrow Agreement.
5.2 Right to Participate. At any time after the date of this Agreement, the Purchaser shall have the right to purchase up to its then pro rata share of New Securities which the Company may propose to sell and issue. In the event the Company proposes to undertake an issuance of New Securities during such period, it shall give the Purchaser written notice of its intention, describing the type of New Securities, their price, the number of New Securities to be offered, and the general terms upon which the Company proposes to issue the same. The Purchaser shall have ten (10) calendar days after any such notice is delivered to agree to purchase at the same price (which shall be the public purchase price, if applicable) and upon the same terms, including closing date, such New Securities in an amount up to the Purchaser’s pro rata share of such New Securities. Notwithstanding the foregoing, the participation rights set forth herein shall not apply to Exempt Issuances, securities issued pursuant to the Exchange Agreements, securities issued in connection with the Nasdaq Uplist, Incentive Shares, acquisitions, strategic transactions, Permitted Senior Debt or employee equity compensation plans approved by the Board of Directors. The participation rights set forth herein shall terminate automatically upon the earlier of (i) repayment of all Notes or (ii) the Nasdaq Uplist. The participation right shall not apply to: (i) the Nasdaq Uplist or related financing transactions; (ii) Incentive Shares; (iii) securities issued pursuant to Exchange Agreements; (iv) acquisition transactions; (v) strategic transactions; (vi) employee benefit plans; (vii) post-listing at-the-market programs; (viii) Permitted Senior Debt; and (ix) Exempt Issuances.
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5.3 Fees and Expenses. At the Initial Closing, the Company shall reimburse the Purchasers $50,000 for its legal fees and expenses. Except as expressly set forth in the Transaction Documents to the contrary, each party shall pay the fees and expenses of its advisers, counsel, accountants, and other experts, if any, and all other expenses incurred by such party incident to the negotiation, preparation, execution, delivery and performance of this Agreement.
5.4 Entire Agreement. The Transaction Documents, together with the exhibits and schedules thereto, contain the entire understanding of the parties with respect to the subject matter hereof and thereof and supersede all prior agreements and understandings, oral or written, with respect to such matters, which the parties acknowledge have been merged into such documents, exhibits and schedules.
5.5 Notices. Any and all notices or other communications or deliveries required or permitted to be provided hereunder shall be in writing and shall be deemed given and effective on the earliest of: (a) the time of transmission, if such notice or communication is delivered via facsimile at the facsimile number or email attachment at the email address as set forth on the signature pages attached hereto at or prior to 5:30 p.m. (New York, N.Y. time) on a Trading Day, (b) the next Trading Day after the time of transmission, if such notice or communication is delivered via facsimile at the facsimile number or email attachment at the email address as set forth on the signature pages attached hereto on a day that is not a Trading Day or later than 5:30 p.m. (New York, N.Y. time) on any Trading Day, (c) the second Trading Day following the date of mailing, if sent by U.S. nationally recognized overnight courier service or (d) upon actual receipt by the party to whom such notice is required to be given. The address for such notices and communications shall be as set forth on the signature pages attached hereto.
5.6 Amendments; Waivers. No provision of this Agreement may be waived, modified, supplemented, or amended except in a written instrument signed, in the case of an amendment, by the Company and the Lead Investors or, in the case of a waiver, by the party against whom enforcement of any such waived provision is sought provided that if any amendment, modification or waiver disproportionately and adversely impacts a Purchaser (or group of Purchasers), the consent of such disproportionately impacted Purchaser (or group of Purchasers) shall also be required. No waiver of any default with respect to any provision, condition, or requirement of this Agreement shall be deemed to be a continuing waiver in the future or a waiver of any subsequent default or a waiver of any other provision, condition, or requirement hereof, nor shall any delay or omission of any party to exercise any right hereunder in any manner impair the exercise of any such right. Any proposed amendment or waiver that disproportionately, materially, and adversely affects the rights and obligations of any Purchaser relative to the comparable rights and obligations of the other Purchasers shall require the prior written consent of such adversely affected Purchaser. Any amendment effected in accordance with this Section 5.6 shall be binding upon each Purchaser and holder of Securities and the Company. Such amendment provision shall not be construed to mean that the beneficial ownership limitation of the Note may be increased.
5.7 Headings. The headings herein are for convenience only, do not constitute a part of this Agreement and shall not be deemed to limit or affect any of the provisions hereof.
5.8 Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the parties and their successors and permitted assigns. The Company may not assign this Agreement or any rights or obligations hereunder without the prior written consent of the Lead Investors (other than by merger). Any Purchaser may assign any or all of its rights under this Agreement to any Person to whom such Purchaser assigns or transfers any Securities, provided that such transferee agrees in writing to be bound, with respect to the transferred Securities, by the provisions of the Transaction Documents that apply to the Purchasers.
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5.9 No Third-Party Beneficiaries. This Agreement is intended for the benefit of the parties hereto and their respective successors and permitted assigns and is not for the benefit of, nor may any provision hereof be enforced by, any other Person, except as otherwise set forth in Section 4.10 and this Section 5.9.
5.10 Governing Law. All questions concerning the construction, validity, enforcement, and interpretation of the Transaction Documents shall be governed by and construed and enforced in accordance with the internal laws of the State of Nevada, without regard to the principles of conflicts of law thereof. Each party agrees that all legal Actions concerning the interpretations, enforcement and defense of the transactions contemplated by this Agreement and any other Transaction Documents (whether brought against a party hereto or its respective affiliates, directors, officers, shareholders, partners, members, employees, or agents) shall be commenced exclusively in the state and federal courts located in the State of Nevada. Each party hereby irrevocably submits to the exclusive jurisdiction of such state and federal courts for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein (including with respect to the enforcement of any of the Transaction Documents), and hereby irrevocably waives, and agrees not to assert in any Action, any claim that it is not personally subject to the jurisdiction of any such court, that such Action is improper or is an inconvenient venue for such Action. Each party hereby irrevocably waives personal service of process and consents to process being served in any such Action by mailing a copy thereof via registered or certified mail or overnight delivery (with evidence of delivery) to such party at the address in effect for notices to it under this Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any other manner permitted by law. If any party shall commence an Action to enforce any provisions of the Transaction Documents, then, in addition to the obligations of the Company under Section 4.10, the prevailing party in such Action shall be reimbursed by the non-prevailing party for its reasonable attorneys’ fees and other costs and expenses incurred with the investigation, preparation and prosecution of such Action.
5.11 Survival. The representations and warranties contained herein shall survive each Closing and the delivery of the Securities.
5.12 Execution. This Agreement may be executed in two or more counterparts, all of which when taken together shall be considered one and the same agreement and shall become effective when counterparts have been signed by each party and delivered to each other party, it being understood that the parties need not sign the same counterpart. If any signature is delivered by facsimile transmission or by e-mail delivery of a “.pdf” format data file, such signature shall create a valid and binding obligation of the party executing (or on whose behalf such signature is executed) with the same force and effect as if such facsimile or “.pdf” signature page were an original thereof.
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5.13 Severability. If any term, provision, covenant, or restriction of this Agreement is held by a court of competent jurisdiction to be invalid, illegal, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions set forth herein shall remain in full force and effect and shall in no way be affected, impaired or invalidated, and the parties hereto shall use their commercially reasonable efforts to find and employ an alternative means to achieve the same or substantially the same result as that contemplated by such term, provision, covenant, or restriction. It is hereby stipulated and declared to be the intention of the parties that they would have executed the remaining terms, provisions, covenants, and restrictions without including any of such that may be hereafter declared invalid, illegal, void, or unenforceable.
5.14 Rescission and Withdrawal Right. Notwithstanding anything to the contrary contained in (and without limiting any similar provisions of) any of the other Transaction Documents, whenever any Purchaser exercises a right, election, demand or option under a Transaction Document and the Company does not timely perform its related obligations within the periods therein provided, then such Purchaser may rescind or withdraw, in its sole discretion from time to time upon written notice to the Company, any relevant notice, demand or election in whole or in part without prejudice to its future actions and rights; provided, however, that, in the case of a rescission of a conversion of a Note, the applicable Purchaser shall be required to return any shares of Common Stock subject to any such rescinded conversion notice concurrently with the restoration of such Purchaser’s right to acquire such shares pursuant to such Note (including issuance of a replacement Note evidencing such restored right).
5.15 Replacement of Securities. If any certificate or instrument evidencing any Securities is mutilated, lost, stolen, or destroyed, the Company shall issue or cause to be issued in exchange and substitution for and upon cancellation thereof (in the case of mutilation), or in lieu of and substitution therefor, a new certificate or instrument, but only upon receipt of evidence reasonably satisfactory to the Company of such loss, theft, or destruction. The applicant for a new certificate or instrument under such circumstances shall also pay any reasonable third-party costs (including customary indemnity) associated with the issuance of such replacement Securities.
5.16 Remedies. In addition to being entitled to exercise all rights provided herein or granted by law, including recovery of damages, each of the Purchasers and the Company will be entitled to specific performance under the Transaction Documents. The parties agree that monetary damages may not be adequate compensation for any loss incurred by reason of any breach of obligations contained in the Transaction Documents and hereby agree to waive and not to assert in any Action for specific performance of any such obligation the defense that a remedy at law would be adequate.
5.17 Payment Set Aside. To the extent that the Company makes a payment or payments to any Purchaser pursuant to any Transaction Document or a Purchaser enforces or exercises its rights thereunder, and such payment or payments or the proceeds of such enforcement or exercise or any part thereof are subsequently invalidated, declared to be fraudulent or preferential, set aside, recovered from, disgorged by or are required to be refunded, repaid or otherwise restored to the Company, a trustee, receiver or any other Person under any law (including, without limitation, any bankruptcy law, state or federal law, common law or equitable cause of action), then to the extent of any such restoration the obligation or part thereof originally intended to be satisfied shall be revived and continued in full force and effect as if such payment had not been made or such enforcement or setoff had not occurred.
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5.18 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 that may be brought by any Purchaser in order to enforce any right or remedy under any Transaction Document. Notwithstanding any provision to the contrary contained in any Transaction Document, it is expressly agreed and provided that the total liability of the Company under the Transaction Documents for payments 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 in the nature of interest that the Company may be obligated to pay under the Transaction Documents exceed such Maximum Rate. It is agreed that if the maximum contract rate of interest allowed by law and applicable to the Transaction Documents 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 Transaction Documents 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 any Purchaser with respect to indebtedness evidenced by the Transaction Documents, such excess shall be applied by such 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 such Purchaser’s election.
5.19 Independent Nature of Purchasers’ Obligations and Rights. The obligations of each Purchaser under any Transaction Document are several and not joint with the obligations of any other Purchaser, and no Purchaser shall be responsible in any way for the performance or non-performance of the obligations of any other Purchaser under any Transaction Document. Nothing contained herein or in any other Transaction Document, and no action taken by any Purchaser pursuant hereto or thereto, shall be deemed to constitute the Purchasers as a partnership, an association, a joint venture or any other kind of entity, or create a presumption that the Purchasers are in any way acting in concert or as a group with respect to such obligations or the transactions contemplated by the Transaction Documents. Notwithstanding the foregoing, all collateral administration, amendments, waivers, accelerations, enforcement actions and remedies relating to the Notes, Security Documents and collateral shall be exercised exclusively by the Collateral Agent acting at the direction of the Lead Investors in accordance with the Security Agreement. No Purchaser acting individually shall have the right to declare an Event of Default, accelerate any Note, foreclose upon collateral or otherwise exercise creditor remedies except as expressly provided in the Security Agreement.
5.20 Liquidated Damages. The Company’s obligations to pay any partial liquidated damages or other amounts owing under the Transaction Documents is a continuing obligation of the Company and shall not terminate until all unpaid partial liquidated damages and other amounts have been paid notwithstanding that the instrument or security pursuant to which such partial liquidated damages or other amounts are due and payable shall have been canceled.
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5.21 Saturdays, Sundays, Holidays, etc. If the last or appointed day for the taking of any Action or the expiration of any right required or granted herein shall not be a Business Day, then such Action may be taken, or such right may be exercised on the next succeeding Business Day.
5.22 Construction. The parties agree that each of them and/or their respective counsel have reviewed and had an opportunity to revise the Transaction Documents and, therefore, the normal rule of construction to the effect that any ambiguities are to be resolved against the drafting party shall not be employed in the interpretation of the Transaction Documents or any amendments thereto. In addition, each and every reference to share prices and shares of Common Stock in any Transaction Document shall be subject to adjustment for reverse and forward stock splits, stock dividends, stock combinations and other similar transactions of the Common Stock that occur after the date of this Agreement.
5.23 WAIVER OF JURY TRIAL. IN ANY ACTION, SUIT, OR PROCEEDING IN ANY JURISDICTION BROUGHT BY ANY PARTY AGAINST ANY OTHER PARTY, THE PARTIES EACH KNOWINGLY AND INTENTIONALLY, TO THE GREATEST EXTENT PERMITTED BY APPLICABLE LAW, HEREBY ABSOLUTELY, UNCONDITIONALLY, IRREVOCABLY AND EXPRESSLY WAIVES FOREVER TRIAL BY JURY.
(Signature Pages Follow)
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IN WITNESS WHEREOF, the parties hereto have caused this Securities Purchase Agreement to be duly executed by their respective authorized signatories as of the date first indicated above.
| ONAR HOLDING CORPORATION |
| Address for Notice:
990 Biscayne Blvd, 5th Floor, Miami, FL 33132 | |
| By: |
|
| Email: c@onar.com |
|
| Name: Claude Zdanow Title: Chief Executive Officer |
|
|
With a copy to (which shall not constitute notice):
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE PAGE FOR PURCHASER FOLLOWS]
| [Signature Page to Securities Purchase Agreement] |
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[PURCHASER SIGNATURE PAGE TO SECURITIES PURCHASE AGREEMENT]
IN WITNESS WHEREOF, the undersigned have caused this Securities Purchase Agreement to be duly executed by their respective authorized signatories as of the date first indicated above.
Name of Purchaser:
Signature of Authorized Signatory of Purchaser:
Name of Authorized Signatory:
Title of Authorized Signatory:
Email Address of Authorized Signatory:
Address for Notice to Purchaser: __________________________________________
Address for Delivery of Securities to Purchaser (if not same as address for notice):
Principal Amount for each of Initial and Additional: $
Subscription Amount for each of Initial and Additional: $
Initial Warrant Shares: ____________________________________
Additional Warrant Shares: _____________
EIN Number: _________________________
Wire Instructions to Purchaser for Interest Payments or Note Repayment:
Bank Name: ____________
Routing No. ____________
Account No: ___________
SWIFT ________________
Bank Address: ________________
Phone Number: _______________
| [Signature Page to Securities Purchase Agreement] |
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EXHIBIT A
Form of Note
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EXHIBIT B
Form of Warrant
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EXHIBIT C
Form of Security Agreement
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EXHIBIT D
Form of Irrevocable Transfer Agent Instructions
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EXHIBIT E
Form of Leak-Out Agreement
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EXHIBIT F
Form of Exchange Agreement
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EXHIBIT G
Exchange Notes
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EXHIBIT H
Form of Certificate of Designations
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SCHEDULE I
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SCHEDULE 3.1(a)
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SCHEDULE 3.1(e)
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SCHEDULE 3.1(g)
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SCHEDULE 3.1(i)
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SCHEDULE 3.1(r)
| 71 |
SCHEDULE 3.1(s)
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SCHEDULE 3.1(bb)
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EXHIBIT 10.2
SECURITIES PURCHASE AGREEMENT
This Securities Purchase Agreement (this “Agreement”) is dated as of September 28, 2026, between ONAR Holding Corporation, a Nevada corporation (the “Company”), and each purchaser identified on the signature pages hereto (each, including its successors and assigns, a “Purchaser” and collectively, the “Purchasers”).
WHEREAS, the Company and the Purchasers are executing and delivering this Agreement in reliance upon an exemption from registration afforded by Section 4(a)(2) of the Securities Act of 1933, as amended (the “Securities Act”), and/or Regulation D promulgated thereunder;
WHEREAS, the Company desires to issue and sell to the Purchasers, and the Purchasers desire to purchase from the Company, notes (the “Notes”) and shares of the Company’s common stock, par value $0.001 per share (the “Common Stock”) in exchange for new cash proceeds;
WHEREAS, the Notes shall be issued with a 10% original issue discount, bear interest at 12.0% per annum, and be secured by substantially all assets of the Company pursuant to the Security Documents;
WHEREAS, contemporaneously herewith the Company is entering into a securities purchase agreement (the “Preferred SPA”) to sell up to $15,000,000 in notes (the “Junior Notes”) convertible into Series 1 Convertible Preferred Stock as set forth therein;
WHEREAS, the parties acknowledge that there may be multiple Purchasers participating in the financing and desire that all collateral and enforcement rights be administered through a Collateral Agent acting for the benefit of all Purchasers pursuant to the Security Agreement;
NOW, THEREFORE, in consideration of the mutual covenants and agreements contained herein, and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the parties agree as follows:
ARTICLE I.
DEFINITIONS
1.1 Definitions. In addition to the terms defined elsewhere in this Agreement: (a) capitalized terms that are not otherwise defined herein have the meanings given to such terms in the Notes (each as defined herein), and (b) the following terms have the meanings set forth in this Section 1.1:
“Advertise Purple” means Advertise Purple, Inc., together with its subsidiaries and affiliated entities, and any successor thereto acquired by the Company pursuant to the acquisition transaction contemplated by the Transaction Documents.
“Advertise Purple Acquisition” means the acquisition by the Company, directly or indirectly, of Advertise Purple pursuant to the acquisition agreements provided to the Purchasers prior to Closing, together with any amendments thereto approved by the Board of Directors.
“Acquiring Person” shall have the meaning ascribed to such term in Section 4.7.
“Action” shall have the meaning ascribed to such term in Section 3.1(j).
“Affiliate” means any Person that, directly or indirectly through one or more intermediaries, controls or is controlled by or is under common control with a Person, as such terms are used in and construed under Rule 405 under the Securities Act.
“Board of Directors” means the board of directors of the Company.
“Business Day” means any day other than Saturday, Sunday or other day on which commercial banks in New York, NY are authorized or required by law to remain closed; provided, however, for clarification, commercial banks shall not be deemed to be authorized or required by law to remain closed due to “stay at home”, “shelter-in-place”, “non-essential employee” or any other similar orders or restrictions or the closure of any physical branch locations at the direction of any governmental authority so long as the electronic funds transfer systems (including for wire transfers) of commercial banks in New York, NY are generally are open for use by customers on such day.
“Certificate of Designations” means the Certificate of Designation of Series 1 Convertible Preferred Stock of ONAR Holding Corporation, a form of which is attached hereto as Exhibit H.
“Closing” means the Initial Closing or any Additional Closing, as applicable.
“Closing Date” means the date the Closing occurs.
“Collateral Agent” means ADI Funding LLC., in its capacity as collateral agent for the benefit of the Purchasers and their successors and assigns, together with any successor collateral agent.
“Common Stock” means the common stock of the Company, par value $0.001 per share, and any other class of securities into which such securities may hereafter be reclassified or changed.
“Common Stock Equivalents” means any securities of the Company which would entitle the holder thereof to acquire at any time Common Stock, including, without limitation, any debt, preferred stock, right, option, warrant or other instrument that is at any time convertible into or exercisable or exchangeable for, or otherwise entitles the holder thereof to receive, Common Stock.
“Conversion Price” means $0.038576 per share. The Conversion Price shall not be reset, repriced or adjusted following Closing except for stock splits, stock dividends, recapitalizations and similar events.
“Conversion Shares” shall have the meaning ascribed to such term in the Notes.
“Covered Securities” means Common Stock and any rights, options, or warrants to purchase or securities or Indebtedness convertible into or exercisable or exchangeable for Common Stock, other than Excluded Issuances.
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“Disclosure Schedules” shall have the meaning ascribed to such term in Section 3.1.
“Disclosure Time” means, (i) if this Agreement is signed on a day that is not a Trading Day or after 9:00 a.m. (New York, N.Y. time) and before midnight (New York, N.Y. time) on any Trading Day, 9:01 a.m. (New York, N.Y. time) on the Trading Day immediately following the date hereof, and (ii) if this Agreement is signed between midnight (New York, N.Y. time) and 9:00 a.m. (New York, N.Y. time) on any Trading Day, no later than 9:01 a.m. (New York, N.Y. time) on the date hereof.
“Equity Conditions” shall have the meaning set forth in the Notes.
“Evaluation Date” shall have the meaning ascribed to such term in Section 3.1(s).
“Event of Default” shall have the meaning set forth in the Notes.
“Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.
“Exempt Issuance” means the issuance of (a) shares of Common Stock or options not to exceed 10% of the shares of Common Stock outstanding at any given time to employees, officers or directors of the Company pursuant to any stock or option plan duly adopted for such purpose, authorized and consented to by a majority of the Board of Directors, (b) securities upon the exercise or exchange of or conversion of (i) any Securities issued hereunder, and/or (ii) other securities exercisable or exchangeable for or convertible into shares of Common Stock issued and outstanding on the date of this Agreement (without regard to any vesting requirements), provided that such securities have not been amended since the date of this Agreement to increase the number of such securities or to decrease the exercise price, exchange price or conversion price of such securities (other than in connection with stock splits or combinations or to extend the term of such securities), or (c) securities issued pursuant to acquisitions or strategic transactions approved by a majority of the disinterested directors of the Company and in consultation with the Lead Investors, provided that such securities are issued as “restricted securities” (as defined in Rule 144) and carry no registration rights that require or permit the filing of any registration statement in connection therewith during the prohibition period in Section 4.11(a) herein,, provided that any such issuance shall only be to a Person (or to the equity holders of a Person) which is, itself or through its subsidiaries, an operating company or an owner of an asset in a business synergistic with the business of the Company and shall provide to the Company additional benefits in addition to the investment of funds, but shall not include a transaction in which the Company is issuing securities primarily for the purpose of raising capital or to an entity whose primary business is investing in securities.
“FCPA” means the Foreign Corrupt Practices Act of 1977, as amended.
“Floor Price” means the Conversion Price established on the Closing Date, subject only to equitable adjustment for stock splits, stock dividends, combinations, recapitalizations and similar events.
“Flow of Funds Memorandum” shall have the meaning set forth in Section 2.2(a)(xv).
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“Fully Diluted Share Count” means the total number of shares of Common Stock outstanding immediately prior to the Closing, assuming conversion of all outstanding preferred stock in accordance with its contractual conversion terms, but excluding all Notes, Preferred Shares, Warrants, Incentive Shares and securities issuable pursuant thereto.
“GAAP” shall have the meaning ascribed to such term in Section 3.1(h).
“Incentive Shares” means a number of shares of Common Stock equal to 10.0% of each Purchaser’s Subscription Amount issuable to each Purchaser at the Closing.
“Indebtedness” shall have the meaning ascribed to such term in Section 3.1(bb).
“Intellectual Property Rights” shall have the meaning ascribed to such term in Section 3.1(p).
“Irrevocable Transfer Agent Instructions” means irrevocable instructions to the Transfer Agent that, among other things, reserves each Purchaser’s pro rata portion of the Required Minimum for the benefit of such Purchaser and instructs the Transfer Agent to deliver on an expedited basis via The Depository Trust Company Deposit or Withdrawal at Custodian system the number of Underlying Shares to be issued to such Purchaser upon any conversion of such Purchaser’s Note in accordance with the terms thereof, in the form of Exhibit D attached hereto.
“Lead Investors” means ADI Funding Corp., Yield Point NY LLC and M2B Funding Corp.; provided that any approval, consent, waiver, amendment, direction or other action of the Lead Investors under any Transaction Document shall require the written consent of all three Lead Investors.
“Legend Removal Date” shall have the meaning ascribed to such term in Section 4.1(c).
“Liens” means a lien, charge, pledge, security interest, encumbrance, right of first refusal, preemptive right or other restriction.
“Market Price” means the average of the daily VWAP of the Common Stock during the ten (10) Trading Days immediately preceding the applicable determination date. For the avoidance of doubt:
(i) the Exercise Price reset contemplated by the Warrants shall be based on such average and not the lowest daily VWAP during such period;
(ii) the reset may only decrease the Exercise Price and shall never result in an increase to above the Exercise Price in effect immediately prior to such reset;
(iii) following any reset, the Exercise Price shall remain equal to one hundred twenty-five percent (125%) of the Market Price; and
(iv) in no event shall the Exercise Price be less than the Floor Price.
“Material Adverse Effect” shall have the meaning assigned to such term in Section 3.1(b).
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“Material Permits” shall have the meaning ascribed to such term in Section 3.1(n).
“Maximum Rate” shall have the meaning ascribed to such term in Section 5.18.
“New Securities” shall mean any capital stock of the Company whether now authorized or not, and rights, convertible securities, options or warrants to purchase such capital stock, and securities of any type whatsoever, including debt, that are, or may become, exercisable or convertible into capital stock; provided that the term New Securities does not include:
(i) securities issued in connection with any stock dividend, stock split, split-up or other distribution on shares of Common Stock;
(ii) securities issued upon the conversion or exercise of any outstanding convertible or exercisable securities as of the date of this Agreement;
(iii) securities issued upon exercise or grant of options or other equity awards with respect to shares of Common Stock, subject in either case to appropriate adjustment in the event of any stock dividend, stock split, combination or other similar recapitalization affecting such shares, issued or issuable to employees or directors of, or consultants to, the Company pursuant to an equity plan of the Company or other arrangement approved by the Board of Directors of the Company;
(iv) securities issued or issuable pursuant to the bona fide acquisition of another corporation by the Company by merger, purchase of substantially all of the assets or other reorganization, which acquisition is approved by a majority vote of the Board of Directors of the Company as contemplated in this Agreement; and
(v) securities issued pursuant to the terms of this Agreement.
“Nasdaq Shareholder Approval” means any approval of the Company's stockholders required pursuant to Nasdaq Listing Rule 5635 or any other applicable Nasdaq rule in connection with the transactions contemplated by this Agreement and the other Transaction Documents.
“Nasdaq Uplist” means the date on which the Company receives Nasdaq’s approval of the Company’s application to list its Common Stock on The Nasdaq Capital Market, The Nasdaq Global Market or The Nasdaq Global Select Market (collectively, “Nasdaq”) .
“Notes” means the senior secured convertible notes due twelve (12) months from issuance, issued by the Company to the Purchasers pursuant to this Agreement, substantially in the form attached hereto as Exhibit A.
“Other Investor” shall have the meaning ascribed to such term in Section 4.23.
“Outside Date” means October 2, 2026, or such later date as may be agreed in writing by the Company and the Lead Investors.
“Permitted Senior Debt” means one or more senior secured credit facilities, term loans, acquisition facilities or similar financing arrangements incurred by the Company and its Subsidiaries in an aggregate principal amount up to $3,000,000, or such higher amount as needed to equal $15,000,000 when combined with the aggregate principal amount of notes sold pursuant to the Preferred SPA, or such larger amount as agreed in writing by the Company and the Lead Investors.
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“Person” means an individual or corporation, partnership, trust, incorporated or unincorporated association, joint venture, limited liability company, joint stock company, government (or an agency or subdivision thereof) or other entity of any kind.
“Preferred Shares” means the shares of Series 1 preferred stock of the Company issued in exchange for the Notes having the rights, preferences, privileges and restrictions set forth in the Certificate of Designations and convertible into Common Stock in accordance with the terms of the Certificate of Designations, together with any securities issued in substitution therefor or in respect thereof as a result of any stock split, stock dividend, recapitalization, reclassification or similar transaction.
“Principal Amount” means, as to each Purchaser, the amounts set forth below such Purchaser’s signature block on the signature pages hereto next to the heading “Principal Amount,” in United States dollars.
“Principal Market” means the OTC Pink Tier of the OTC Markets.
“Public Information Failure” shall have the meaning ascribed to such term in Section 4.3(b).
“Public Information Failure Payments” shall have the meaning ascribed to such term in Section 4.3(b).
“Purchaser Party” shall have the meaning ascribed to such term in Section 4.10(a).
“Required Approvals” shall have the meaning ascribed to such term in Section 3.1(e).
“Required Minimum” shall have the meaning ascribed to such term in Section 4.11(a).
“Reserve Depletion Date” shall have the meaning ascribed to such term in Section 4.10(a).
“Rule 144” means Rule 144 promulgated by the SEC pursuant to the Securities Act, as such Rule may be amended from time to time, or any similar rule or regulation hereafter adopted by the SEC having substantially the same effect as such Rule.
“Rule 424” means Rule 424 promulgated by the SEC pursuant to the Securities Act, as such Rule may be amended or interpreted from time to time, or any similar rule or regulation hereafter adopted by the SEC having substantially the same purpose and effect as such Rule.
“SEC” means the United States Securities and Exchange Commission.
“SEC Reports” shall have the meaning ascribed to such term in Section 3.1(h).
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“Securities” means the Notes, the Conversion Shares, Incentive Shares and any shares issuable pursuant to stock-payment amortization installments made in accordance with the Equity Conditions.
“Securities Act” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.
“Security Agreement” means the Pledge and Security Agreement between, inter alios, the Company and the Collateral Agent, dated the date hereof.
“Security Documents” means the Security Agreement, all UCC financing statements, control agreements, mortgages (if any), collateral assignments and all other agreements, instruments and documents executed in connection with the creation, perfection, maintenance or enforcement of the liens securing the Notes, in each case as amended, restated, amended and restated, supplemented or otherwise modified from time to time.
“Short Sales” means all “short sales” as defined in Rule 200 of Regulation SHO under the Exchange Act (but shall not be deemed to include locating and/or borrowing shares of Common Stock).
“Subscription Amount” means, as to each Purchaser, the aggregate amount paid by such Purchaser for the Notes and Incentive Shares purchased hereunder, as set forth on such Purchaser’s signature page, in United States dollars and immediately available funds.
“Subsequent Financing” means any issuance, offer, sale or grant by the Company or any Subsidiary after the Closing Date of any equity security, debt security, Common Stock Equivalent or other financing instrument for capital raising purposes, whether in a public or private transaction, other than:
(i) securities issued pursuant to the Transaction Documents;
(iv) securities issued in connection with the Nasdaq Uplist or any related offering;
(v) Exempt Issuances;
(vi) securities issued in connection with acquisitions, mergers, strategic transactions or joint ventures approved by the Board of Directors and the Lead Investors;
(vii) securities issued pursuant to employee, officer, director or consultant compensation plans approved by the Board of Directors pursuant to an Exempt Issuance;
(viii) securities issued upon conversion, exchange or exercise of securities outstanding on the Closing Date; and
(ix) Permitted Senior Debt.
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“Subsidiary” means any subsidiary of the Company as set forth on Schedule 3.1(a) and shall, where applicable, also include any direct or indirect subsidiary of the Company formed or acquired after the date hereof.
“Trading Day” means a day on which the principal Trading Market is open for trading.
“Trading Market” means any of the following markets or exchanges on which the Common Stock is listed or quoted for trading on the date in question: the NYSE American, the Nasdaq Capital Market, the Nasdaq Global Market, the Nasdaq Global Select Market, the New York Stock Exchange, OTCQX, OTCQB or OTC Pink (or any successors to any of the foregoing).
“Transaction Documents” means this Agreement, the Notes, the Security Agreement, all exhibits and schedules hereto and thereto, and all other documents executed in connection with the transactions contemplated hereby.
“Transfer Agent” means Vinyl Equity and any successor transfer agent of the Company, as applicable”.
“Underlying Shares” means the shares of Common Stock issuable upon the conversion of the Preferred Shares.
“Variable Rate Transaction” shall have the meaning ascribed to such term in Section 4.12(a).
“VWAP” means, for any date, the price determined by the first of the following clauses that applies: (a) if the Common Stock is then listed or quoted on a Trading Market, the daily volume weighted average price of the Common Stock for such date (or the nearest preceding date) on the Trading Market on which the Common Stock is then listed or quoted as reported by Bloomberg L.P. (based on a Trading Day from 9:30 a.m. (New York, N.Y. time) to 4:02 p.m. (New York, N.Y. time)), (b) if OTCQB, OTCQX or OTC Pink is not a Trading Market, the volume weighted average price of the Common Stock for such date (or the nearest preceding date) on OTCQB, OTCQX or OTC Pink as applicable, (c) if the Common Stock is not then listed or quoted for trading on OTCQB or OTCQX and if prices for the Common Stock are then reported on the OTC Pink Open Market (or a similar organization or agency succeeding to its functions of reporting prices), the most recent bid price per share of the Common Stock so reported, or (d) in all other cases, the fair market value of a share of Common Stock as determined by an independent appraiser selected in good faith by the Purchasers of a majority in interest of the Securities then outstanding and reasonably acceptable to the Company, the fees and expenses of which shall be paid by the Company.
ARTICLE II.
PURCHASE AND SALE
2.1 Closing.
(a) Closing. On the Closing Date, upon the terms and subject to the conditions set forth herein, substantially concurrent with the execution and delivery of this Agreement by the parties hereto, the Company hereby agrees to sell, and the Purchasers, severally and not jointly, hereby agree to purchase, up to $5,000,000 in Subscription Amount of Notes. Purchaser shall deliver to the Company, via wire transfer of immediately available funds, its Subscription Amount, and the Company shall deliver to each Purchaser its respective Note, Incentive Shares and the other Transaction Documents required to be delivered at Closing. The Closing shall occur electronically on the date designated by the Company and the Lead Investors, but in no event later than five (5) Trading Days following satisfaction or waiver of the conditions set forth herein.
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(i) Each Purchaser shall deliver its Subscription Amount to the Company. All Subscription Amounts shall be held in escrow pending satisfaction or waiver of the applicable Closing Conditions set forth herein.
(ii) Upon satisfaction or waiver of all applicable Closing Conditions, the Company shall release the Subscription Amount in accordance with the Flow of Funds Memorandum (as defined below).
2.2 Deliveries.
(a) On or prior to the Closing Date, the Company shall deliver or cause to be delivered to each Purchaser the following:
(i) this Agreement duly executed by the Company;
(ii) as to the Closing, a legal opinion of Company’s legal counsel, dated as of the applicable Closing Date, in a form and substance acceptable to the Purchasers;
(iii) as to the Closing, a Note, registered in the name of such Purchaser with the Principal Amount reflected on to such Purchaser’s signature page;
(iv) as to the Closing, the Company shall have provided each Purchaser with the Company’s wire instructions;
(v) separate Irrevocable Transfer Agent Instructions, signed by the Company and the Transfer Agent, for each Purchaser with respect to the Underlying Shares to be issued to such Purchaser upon any conversion of such Purchaser’s Note and Incentive Shares to be issued upon the Closing Date;
(vi) a Security Agreement, substantially in the Form attached as Exhibit C, duly executed by the Company;
(vii) UCC financing statements in form suitable for filing;
(viii) as to the Closing, an officer’s certificate certifying that the representations and warranties of the Company in this Agreement are true and correct as of the applicable Closing Date as though originally made at that time (except for representations and warranties that speak as of a specific date, which shall be true and correct as of such specific date) and the Company shall have performed, satisfied, and complied in all material respects with the covenants, agreements and conditions required to be performed, satisfied or complied with by the Company at or prior to the applicable Closing Date and no Event of Default has occurred;
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(ix) evidence within sixty (60) days of the Closing that sufficient authorized but unissued Common Stock has been reserved for issuance of all Conversion Shares, Incentive Shares and shares issuable pursuant to amortization payments made in Common Stock under the Notes.
(x) as to the Closing, a certificate evidencing the formation and good standing of the Company issued by the Secretary of State of Nevada (or comparable office), as of a date within 10 days of the applicable Closing Date;
(xi) as to the Closing, a certificate evidencing the Company’s good standing issued by the Secretary of State of each jurisdiction in which the Company conducts business and is required to so qualify, as of a date within 10 days of the applicable Closing Date;
(xii) as to the Closing, a certified copy of the Articles of Incorporation (or such equivalent organizational document) of the Company, dated within 30 days of the applicable Closing Date;
(xiii) as to the Closing, an officer’s certificate, in the form reasonably acceptable to the Purchasers, executed by an officer of the Company and dated as of the applicable Closing Date, as to (i) the resolutions adopted by the Company’s board of directors authorizing the transactions contemplated hereby in a form reasonably acceptable to the Purchasers, and (ii) the Articles of Incorporation of the Company as in effect at the applicable Closing;
(xiv) as to the Closing, a letter from the Transfer Agent certifying the number of Common Stock outstanding on the applicable Closing Date immediately prior to the applicable Closing;
(xv) as to the Closing, a flow of funds memorandum in form and substance mutually agreed to by the Company and the Purchasers (a “Flow of Funds Memorandum”) duly executed by the Company; and
(xvi) as to the Closing, such other documents, instruments, or certificates relating to the transactions contemplated by this Agreement as each Purchaser or its counsel may reasonably request.
(b) On or prior to the applicable Closing Date, each Purchaser shall deliver or cause to be delivered to the Company, the following:
(i) this Agreement duly executed by such Purchaser;
(ii) such Purchaser’s Subscription Amount by wire transfer to the Company; and
(iii) a Flow of Funds Memorandum duly executed by such Purchaser.
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2.3 Closing Conditions.
(a) The obligations of the Company hereunder in connection with the Closing are subject to the following conditions being met:
(i) the accuracy in all material respects (or, to the extent representations or warranties are qualified by materiality or Material Adverse Effect, in all respects) when made and on the Closing Date of the representations and warranties of the Purchasers contained herein (unless as of a specific date therein in which case they shall be accurate as of such date);
(ii) all obligations, covenants and agreements of each Purchaser required to be performed at or prior to the Closing Date shall have been performed in all material respects; and
(iii) the delivery by each Purchaser of the items set forth in Section 2.2(b) of this Agreement.
(b) The respective obligations of each Purchaser hereunder in connection with the Closing are subject to the following conditions being met:
(i) the accuracy in all material respects (or, to the extent representations or warranties are qualified by materiality or Material Adverse Effect, in all respects) when made and on the Closing Date of the representations and warranties of the Company contained herein (unless as of a specific date therein in which case they shall be accurate as of such date);
(ii) all obligations, covenants and agreements of the Company required to be performed at or prior to the Closing Date shall have been performed in all material respects;
(iii) the delivery by the Company of the items set forth in Section 2.2(a) of this Agreement;
(iv) the Company shall have delivered to the Transfer Agent separate Irrevocable Transfer Agent Instructions, signed by the Company and the Transfer Agent, for each Purchaser with respect to the Underlying Shares to be issued to such Purchaser upon any conversion of such Purchaser’s Note to be issued upon the Closing Date;
(v) the Company shall have delivered an officer’s certificate, dated as of the Closing Date, certifying that, to the knowledge of the Company, all material non-public information previously provided by the Company to the Purchasers in connection with the transactions contemplated by this Agreement and the Transaction Documents has either been publicly disclosed or otherwise disclosed to the Purchasers, and that no Purchaser is in possession of undisclosed material non-public information supplied by the Company as of the Closing.
(vi) there shall have been no Material Adverse Effect with respect to the Company since the date hereof;
(vii) from the date hereof to the Closing Date, as applicable, trading in the Common Stock shall not have been suspended by the SEC or the Company’s principal Trading Market and, at any time prior to the applicable Closing Date, trading in securities generally as reported by Bloomberg L.P. shall not have been suspended or limited, or minimum prices shall not have been established on securities whose trades are reported by such service, or on any Trading Market, nor shall a banking moratorium have been declared either by the United States or New York State authorities nor shall there have occurred any material outbreak or escalation of hostilities or other national or international calamity of such magnitude in its effect on, or any material adverse change in, any financial market which, in each case, in the reasonable judgment of such Purchaser, makes it impracticable or inadvisable to purchase the Securities at each applicable Closing;
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(viii) no statute, rule, regulation, executive order, decree, ruling, or injunction shall have been enacted, entered, promulgated, or endorsed by any court or governmental entity of competent jurisdiction that prohibits the consummation of any of the transactions contemplated hereby;
(ix) the Company shall have provided evidence reasonably satisfactory to the Purchasers that the transactions contemplated hereby will not prevent the Company from pursuing the Nasdaq Uplist and that the Company shall have provided evidence reasonably satisfactory to the Lead Investors that the transactions contemplated hereby are reasonably expected to permit the Company to pursue compliance with Nasdaq quantitative listing standards, including stockholders’ equity, shareholder approval and public float requirements; and
(x) the Security Agreement and UCC filings shall have been executed and delivered.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES
3.1 Representations and Warranties of the Company. Except as set forth in the Disclosure Schedules provided with this agreement (the “Disclosure Schedules”), which shall be deemed a part hereof and shall qualify any representation or otherwise made herein to the extent of the disclosure contained in the corresponding section of the Disclosure Schedules, the Company hereby makes the following representations and warranties to each Purchaser which representations shall be true and correct on each respective Closing Date:
(a) Subsidiaries. All of the direct and indirect subsidiaries of the Company are set forth on Schedule 3.1(a). The Company owns, directly or indirectly, all of the capital stock or other equity interests of each Subsidiary free and clear of any Liens, and all of 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 to subscribe for or purchase securities. If the Company has no subsidiaries, all other references to the Subsidiaries or any of them in the Transaction Documents shall be disregarded.
(b) Organization and Qualification. The Company and its subsidiaries are entities duly incorporated or otherwise organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation or organization, with the requisite power and authority to own and use their properties and assets and to carry on their business as currently conducted. Neither the Company and its subsidiaries are in violation nor default of any of the provisions of their respective certificate or articles of incorporation, bylaws or other organizational or charter documents. The Company and its subsidiaries are duly qualified to conduct business and are in good standing as foreign corporations or other entities in each jurisdiction in which the nature of the business conducted or property owned by them 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 operations, assets, business, or financial condition of the Company, or (iii) a material adverse effect on 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”) and no Action has been instituted in any such jurisdiction revoking, limiting or curtailing or seeking to revoke, limit or curtail such power and authority or qualification.
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(c) Authorization; Enforcement. The Company and its subsidiaries have the requisite corporate power and authority to enter into and to consummate the transactions contemplated by this Agreement and each of the other Transaction Documents and otherwise to carry out its obligations hereunder and thereunder. The execution and delivery of this Agreement and each of the other Transaction Documents by the Company and the consummation by it of the transactions contemplated hereby and thereby have been duly authorized by all necessary action on the part of the Company and no further action is required by the Company, the Board of Directors, or the Company’s stockholders in connection herewith or therewith other than in connection with the Required Approvals. This Agreement and each other Transaction Document to which it is a party has been (or upon delivery will have been) duly executed by the Company, assuming due authorization by the other parties thereto, and, when delivered in accordance with the terms hereof and thereof, will constitute the valid and binding obligation of the Company enforceable against the Company in accordance with its terms, except (i) as limited by general equitable principles and applicable bankruptcy, insolvency, reorganization, moratorium and other laws of general application affecting enforcement of creditors’ rights generally, (ii) as limited by laws relating to the availability of specific performance, injunctive relief or other equitable remedies, and (iii) insofar as indemnification and contribution provisions may be limited by applicable law.
(d) No Conflicts. The execution, delivery, and performance by the Company and its subsidiaries of this Agreement and the other Transaction Documents to which it is a party, the issuance and sale of the Securities and the consummation by it of the transactions contemplated hereby and thereby do not and will not (i) conflict with or violate any provision of the Company’s certificate or articles of incorporation, bylaws or other organizational or charter documents, or (ii) conflict with, or constitute a default (or an event that with notice or lapse of time or both would become a default) under, result in the creation of any Lien upon any of the properties or assets of the Company, or give to others any rights of termination, amendment, anti-dilution or similar adjustments, acceleration or cancellation (with or without notice, lapse of time or both) of, any agreement, credit facility, debt or other instrument (evidencing a Company debt or otherwise) or other understanding to which the Company is a party or by which any property or asset of the Company is bound or affected, or (iii) subject to the Required Approvals, conflict with or result in a violation of any law, rule, regulation, order, judgment, injunction, decree or other restriction of any court or governmental authority to which the Company is subject (including federal and state securities laws and regulations), or by which any property or asset of the Company is bound or affected; except in the case of each of clauses (ii) and (iii), such as would not have or reasonably be expected to result in a Material Adverse Effect.
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(e) Filings, Consents and Approvals. The Company is not 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 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: (i) the filings required pursuant to this Agreement, (ii) the filing of Form D with the SEC and such filings as are required to be made under applicable state securities laws, (iii) those certain consents and waivers that are set forth in Schedule 3.1(e) and (iv) the Nasdaq Shareholder Approval (collectively, the “Required Approvals”).
(f) Issuance of the Securities. The Securities are duly authorized and, when issued and paid for in accordance with the applicable Transaction Documents, will be duly and validly issued, fully paid, and nonassessable, free and clear of all Liens imposed by the Company other than restrictions on transfer provided for in the Transaction Documents or by law. The Underlying Shares, when issued in accordance with the terms of the Transaction Documents, will be validly issued, fully paid, and nonassessable, free and clear of all Liens imposed by the Company other than restrictions on transfer provided for in the Transaction Documents or by law. The Company has reserved, and shall continue to reserve, a sufficient number of authorized but unissued shares of Common Stock to permit the issuance of all Conversion Shares, Incentive Shares and any shares issuable pursuant to stock-payment amortization elections made in accordance with the Equity Conditions and the Notes.
(g) Capitalization. The capitalization of the Company as of the date hereof is as set forth on Schedule 3.1(g), which Schedule 3.1(g) shall also include the number of shares of Common Stock owned beneficially, and of record, by Affiliates of the Company as of the date hereof. The Company has not issued any capital stock since its most recently filed periodic report under the Exchange Act, other than pursuant to the exercise of employee stock options under the Company’s stock option plans, the issuance of shares of Common Stock to employees pursuant to the Company’s employee stock purchase plans and pursuant to the conversion and/or exercise of Common Stock Equivalents outstanding as of the date of the most recently filed periodic report under the Exchange Act. No Person has any right of first refusal, preemptive right, right of participation, or any similar right to participate in the transactions contemplated by the Transaction Documents. Except as a result of the purchase and sale of the Securities or as set forth on Schedule 3.1(g), there are no outstanding options, warrants, scrip 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 the Company is or may become bound to issue additional shares of Common Stock. The issuance and sale of the Securities will not obligate the Company to issue shares of Common Stock or other securities to any Person (other than the Purchasers). There are no outstanding securities or instruments of the Company with any provision that adjusts the exercise, conversion, exchange or reset price of such security or instrument upon an issuance of securities by the Company, except those that are being cured, refinanced, exchanged or otherwise addressed substantially concurrently with the Closing. There are no outstanding securities or instruments of the Company that contain any redemption or similar provisions, and there are no contracts, commitments, understandings or arrangements by which the Company is or may become bound to redeem a security of the Company, except those that are being cured, refinanced, exchanged or otherwise addressed substantially concurrently with the Closing. The Company does not have any stock appreciation rights or “phantom stock” plans or agreements or any similar plan or agreement. All of the outstanding shares of capital stock of the Company are duly authorized, validly issued, fully paid and nonassessable, have been issued in compliance with all federal and state securities laws, and none of such outstanding shares was issued in violation of any preemptive rights or similar rights to subscribe for or purchase securities. No approval or authorization of any stockholder, the Board of Directors or others is required for the issuance and sale of the Securities. There are no stockholders agreements, voting agreements, or other similar agreements with respect to the Company’s capital stock to which the Company is a party or, to the knowledge of the Company, between or among any of the Company’s stockholders other than as disclosed in the SEC Reports or on Schedule 3.1(g). The SEC Reports and Schedule 3.1(g) additionally identify all outstanding preferred stock, warrants, options, convertible securities, exchange rights and other Common Stock Equivalents of the Company and its Subsidiaries. Except as disclosed in the SEC Reports or on Schedule 3.1(g), there are no agreements providing for the adjustment, reset, repricing or modification of any exercise price, conversion price or exchange rate of any outstanding security of the Company.
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(h) SEC Reports; Financial Statements. The Company has filed all reports, schedules, forms, statements, and other documents required to be filed by the Company under the Securities Act and the Exchange Act, including pursuant to Section 13(a) or 15(d) thereof since January 1, 2023 (the foregoing materials, including the exhibits thereto and documents incorporated by reference therein, being collectively referred to herein as the “SEC Reports”). As of their respective dates, the SEC Reports complied in all material respects with the requirements of the Securities Act and the Exchange Act, as applicable, and none of the SEC Reports, 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 the light of the circumstances under which they were made, not misleading. 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 SEC with respect thereto as in effect at the time of filing. Such financial statements have been prepared in accordance with United States 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. The Company is current in its reporting obligations under the Exchange Act and is eligible to file all reports required thereunder.
(i) Material Changes; Undisclosed Events, Liabilities or Developments. Since the date of the latest audited financial statements included within the SEC Reports, except as disclosed in the SEC Reports or on Schedule 3.1(i), (i) there has been no event, occurrence or development that has had or that would reasonably be expected to 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 disclosed in filings made with the SEC, (iii) the Company has not altered its method of accounting, (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 option plans. The Company does not have pending before the SEC any request for confidential treatment of information. Except for the transactions contemplated by this Agreement and the other Transaction Documents or as set forth in the SEC Reports or on Schedule 3.1(i), no event, liability, fact, circumstance, occurrence, or development has occurred or exists or is reasonably expected to occur or exist with respect to the Company or its Subsidiaries or their respective businesses, prospects, properties, operations, assets, or financial condition, that would be required to be disclosed by the Company under applicable securities laws at the time this representation is made or deemed made that has not been publicly disclosed at least one (1) Trading Day prior to the date that this representation is made.
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(j) Litigation. Except as disclosed in the SEC Reports, there is no action, suit, inquiry, notice of violation, proceeding or investigation (however any governmental or administrative agency may define the matter) pending or threatened against or affecting 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) (any, an “Action“) that would be reasonably expected to have a Material Adverse Effect. None of the Actions set forth in the SEC Reports, (i) adversely affects or challenges the legality, validity or enforceability of any of the Transaction Documents or the Securities or (ii) would, if there were an unfavorable decision, have or reasonably be expected to result in a Material Adverse Effect. Neither the Company, 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 the SEC involving the Company or any current or former director or officer of the Company. The SEC has not issued any stop order or other order suspending the effectiveness of any registration statement filed by the Company under the Exchange Act or the Securities Act.
(k) Labor Relations. No labor dispute exists or is imminent with respect to any of the employees of the Company, which would reasonably be expected to result in a Material Adverse Effect. None of the Company’s employees is a member of a union that relates to such employee’s relationship with the Company, and either the Company is a party to a collective bargaining agreement, and the Company believes that its relationship with its employees are good. To the knowledge of the Company, no executive officer of the Company, is, or is now expected to be, in violation of any material term of any employment contract, confidentiality, disclosure, or proprietary information agreement or non-competition agreement, or any other contract or agreement or any restrictive covenant in favor of any third party, and the continued employment of each such executive officer does not subject the Company to any liability with respect to any of the foregoing matters. The Company is in compliance with all U.S. federal, state, local and foreign laws and regulations relating to employment and employment practices, terms and conditions of employment and wages and hours, except where the failure to be in compliance would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.
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(l) Compliance. The Company: (i) is not in default under or in violation of (and no event has occurred that has not been waived that, with notice or lapse of time or both, would result in a default by the Company under), nor has the Company received notice of a claim that it is in default under or that it is in violation of, any indenture, loan or credit agreement or any other agreement or instrument to which it is a party or by which it or any of its properties is bound (whether or not such default or violation has been waived), (ii) is in violation of any judgment, decree or order of any court, arbitrator or other governmental authority, or (iii) is or has been in violation of any statute, rule, ordinance or regulation of any governmental authority, including without limitation all foreign, federal, state and local laws relating to taxes, environmental protection, occupational health and safety, product quality and safety and employment and labor matters, except in each case as would not have or reasonably be expected to result in a Material Adverse Effect.
(m) Environmental Laws. The Company (i) is in compliance with all federal, state, local and foreign laws relating to pollution or protection of human health or the environment (including ambient air, surface water, groundwater, land surface or subsurface strata), including laws relating to emissions, discharges, releases or threatened releases of chemicals, pollutants, contaminants, or toxic or hazardous substances or wastes (collectively, “Hazardous Materials“) into the environment, or otherwise relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of Hazardous Materials, as well as all authorizations, codes, decrees, demands, or demand letters, injunctions, judgments, licenses, notices or notice letters, orders, permits, plans or regulations, issued, entered, promulgated or approved thereunder (“Environmental Laws”); (ii) have received all permits licenses or other approvals required of them under applicable Environmental Laws to conduct their respective businesses; and (iii) are in compliance with all terms and conditions of any such permit, license or approval where in each clause (i), (ii) and (iii), the failure to so comply would be reasonably expected to have, individually or in the aggregate, a Material Adverse Effect.
(n) Regulatory Permits. The Company possess all certificates, authorizations and permits issued by the appropriate federal, state, local or foreign regulatory authorities necessary to conduct their respective businesses as described in the SEC Reports, except where the failure to possess such permits would not reasonably be expected to result in a Material Adverse Effect (“Material Permits”), and the Company has not received any notice of proceedings relating to the revocation or modification of any Material Permit.
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(o) Title to Assets. The Company has good and marketable title in fee simple to all real property owned by them and good and marketable title in all personal property owned by it that is material to the business of the Company, in each case free and clear of all Liens, except for (i) 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 the Company, (ii) Liens for the payment of federal, state or other taxes, for which appropriate reserves have been made therefor in accordance with GAAP and the payment of which is neither delinquent nor subject to penalties. Any real property and facilities held under lease by the Company is held by it under valid, subsisting and enforceable leases with which the Company is in compliance, and (iii) Liens disclosed to the Collateral Agent in writing on or prior to the Effective Date.
(p) Intellectual Property. The Company has, or has rights to use, all patents, patent applications, trademarks, trademark applications, service marks, trade names, trade secrets, inventions, copyrights, licenses and other intellectual property rights and similar rights necessary or required for use in connection with their respective businesses as described in the SEC Reports and which the failure to so have would have a Material Adverse Effect (collectively, the “Intellectual Property Rights”). The Company has not received a notice (written or otherwise) that any of, the Intellectual Property Rights has expired, terminated or been abandoned, or is expected to expire or terminate or be abandoned, within two years from the date of this Agreement. The Company has not received, since the date of the latest audited financial statements included within the SEC Reports, a written notice of a claim or otherwise has any knowledge that the Intellectual Property Rights violate or infringe upon the rights of any Person, except as would not have or reasonably be expected to not have a Material Adverse Effect. To the knowledge of the Company, all such Intellectual Property Rights are enforceable and there is no existing infringement by another Person of any of the Intellectual Property Rights. The Company has taken reasonable security measures to protect the secrecy, confidentiality, and value of all of it intellectual properties, except where failure to do so would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.
(q) Nasdaq Matters.
(i) The Company has provided the Purchasers with all reasonable material information in its possession regarding the Nasdaq Uplist; provided, the Company is permitted to provide such information by Nasdaq and provided further that providing any such information would not cause competitive harm to the Company. The Company has no knowledge of any fact or circumstance that would reasonably be expected to materially impair its ability to pursue the Nasdaq Uplist, other than matters disclosed in the SEC Reports or the Disclosure Schedules and has not received any written notice from Nasdaq indicating that the Company would be ineligible to apply for listing.
(ii) To the Company’s knowledge, no corporate action approved by the Board of Directors and contemplated by the Transaction Documents would cause the Company to be unable to pursue compliance with applicable initial listing requirements on the Nasdaq Capital Market, such as stockholders’ equity, the market value of unrestricted publicly held shares requirements.
(r) Transactions with Affiliates and Employees. Except as disclosed in the SEC Reports or on Schedule 3.1(r),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 the Company (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, providing for the borrowing of money from or lending of money to, 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, stockholder, member or partner, in each case in excess of $120,000 other than for (i) payment of salary or consulting fees for services rendered, (ii) reimbursement for expenses incurred on behalf of the Company and (iii) other employee benefits, including stock option agreements under any stock option plan of the Company.
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(s) Sarbanes-Oxley; Internal Accounting Controls. Except as disclosed in the SEC Reports or on Schedule 3.1(s), the Company and the Subsidiaries are in compliance with any and all applicable requirements of the Sarbanes-Oxley Act of 2002 that are effective as of the date hereof, and any and all applicable rules and regulations promulgated by the SEC thereunder that are effective as of the date hereof and as of the Closing Date. The Company and the Subsidiaries maintain a system of internal accounting controls sufficient to provide reasonable assurance that: (i) transactions are executed in accordance with management’s general or specific authorizations, (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with GAAP and to maintain asset accountability, (iii) access to assets is permitted only in accordance with management’s general or specific authorization, and (iv) the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences. The Company and the Subsidiaries have established disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the Company and the Subsidiaries and designed such disclosure controls and procedures to ensure that information required to be disclosed by the Company in the reports it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. The Company’s certifying officers have evaluated the effectiveness of the disclosure controls and procedures of the Company and the Subsidiaries as of the end of the period covered by the most recently filed periodic report under the Exchange Act (such date, the “Evaluation Date”). The Company presented in its most recently filed periodic report under the Exchange Act the conclusions of the certifying officers about the effectiveness of the disclosure controls and procedures based on their evaluations as of the Evaluation Date. Since the Evaluation Date, there have been no changes in the internal control over financial reporting (as such term is defined in the Exchange Act) of the Company and its Subsidiaries that have materially affected, or is reasonably likely to materially affect, the internal control over financial reporting of the Company and its Subsidiaries.
(t) Certain Fees. Other than as contemplated herein, no brokerage or finder’s fees or commissions are or will be payable by the Company or any Subsidiaries to any broker, financial advisor or consultant, finder, placement agent, investment banker, bank, or other Person with respect to the transactions contemplated by the Transaction Documents.
(u) Private Placement. Assuming the accuracy of the Purchasers’ representations and warranties set forth in Section 3.2, no registration under the Securities Act is required for the offer and sale of the Securities by the Company to the Purchasers as contemplated hereby. The issuance and sale of the Securities hereunder does not contravene the rules and regulations of the Trading Market.
(v) Investment Company. The Company is not, and is not an Affiliate of, and immediately after receipt of payment for the Securities, will not be or be an Affiliate of, an “investment company” within the meaning of the Investment Company Act of 1940, as amended. The Company shall conduct its business in a manner so that it will not become an “investment company” subject to registration under the Investment Company Act of 1940, as amended.
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(w) Reserved.
(x) Listing and Maintenance Requirements. The Common Stock is registered pursuant to Section 12(b) or 12(g) of the Exchange Act, and the Company has taken no action designed to, or which to its knowledge is likely to have the effect of, terminating the registration of the Common Stock under the Exchange Act nor has the Company received any notification that the SEC is contemplating terminating such registration. The Company has not, in the 12 months preceding the date hereof, received notice from any Trading Market on which the Common Stock is or has been listed or quoted to the effect that the Company is not in compliance with the listing or maintenance requirements of such Trading Market. The Company is and has no reason to believe that it will not in the foreseeable future continue to be, in compliance with all such listing and maintenance requirements. The Common Stock is currently eligible for electronic transfer through the Depository Trust Company or another established clearing corporation and the Company is current in payment of the fees to the Depository Trust Company (or such other established clearing corporation) in connection with such electronic transfer.
(y) Application of Takeover Protections. The Company and the Board of Directors have taken all necessary action, if any, in order to render inapplicable any control share acquisition, business combination, poison pill (including any distribution under a rights agreement) or other similar anti-takeover provision under the Company’s certificate of incorporation (or similar charter documents) or the laws of its state of incorporation that is or would become applicable to the Purchasers as a result of the Purchasers and the Company fulfilling their obligations or exercising their rights under the Transaction Documents, including without limitation as a result of the Company’s issuance of the Securities and the Purchasers’ ownership of the Securities.
(z) Disclosure. Except with respect to the material terms and conditions of the transactions contemplated by the Transaction Documents, the Company confirms that neither it nor any other Person acting on its behalf has provided any of the Purchasers or their agents or counsel with any information that it believes constitutes or might constitute material, non-public information. The Company understands and confirms that the Purchasers will rely on the foregoing representation in effecting transactions in securities of the Company. All of the disclosure furnished by or on behalf of the Company to the Purchasers regarding the Company and its Subsidiaries, their respective businesses and the transactions contemplated hereby, including the SEC Reports and the Disclosure Schedules to this Agreement, is true and correct in all material respects and does not contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements made therein, in the light of the circumstances under which they were made, not misleading. The press releases disseminated by the Company during the twelve months preceding the date of this Agreement taken as a whole do not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made and when made, not misleading. The Company acknowledges and agrees that no Purchaser makes or has made any representations or warranties with respect to the transactions contemplated hereby other than those specifically set forth in Section 3.2 hereof.
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(aa) No Integrated Offering. Assuming the accuracy of each Purchaser’s representations and warranties set forth in Section 3.2, neither the Company, nor any of its Affiliates, nor any Person acting on its or their behalf has, directly or indirectly, made any offers or sales of any security or solicited any offers to buy any security, under circumstances that would cause this offering of the Securities to be integrated with prior offerings by the Company for purposes of (i) the Securities Act which would require the registration of any such securities under the Securities Act, or (ii) any applicable stockholder approval provisions of any Trading Market on which any of the securities of the Company are listed or designated.
(bb) Solvency. Based on the consolidated financial condition of the Company as of the Closing Date, after giving effect to the receipt by the Company of the proceeds from the sale of the Securities hereunder, (i) the fair saleable value of the Company’s assets exceeds the amount that will be required to be paid on or in respect of the Company’s existing debts and other liabilities (including known contingent liabilities) as they mature, (ii) the Company’s assets do not constitute unreasonably small capital to carry on its business as now conducted and as proposed to be conducted including its capital needs taking into account the particular capital requirements of the business conducted by the Company, consolidated and projected capital requirements and capital availability thereof, and (iii) the current cash flow of the Company, together with the proceeds the Company would receive, were it to liquidate all of its assets, after taking into account all anticipated uses of the cash, would be sufficient to pay all amounts on or in respect of its liabilities when such amounts are required to be paid. The Company does not intend to incur debts beyond its ability to pay such debts as they mature (taking into account the timing and amounts of cash to be payable on or in respect of its debt). The Company has no knowledge of any facts or circumstances which lead it to believe that it will file for reorganization or liquidation under the bankruptcy or reorganization laws of any jurisdiction within one year from the Closing Date. Schedule 3.1(bb) sets forth as of the date hereof all outstanding secured and unsecured Indebtedness of the Company, or for which the Company has commitments. For the purposes of this Agreement, “Indebtedness” means (x) any liabilities for borrowed money or amounts owed (other than trade accounts payable incurred in the ordinary course of business), (y) all guaranties, endorsements and other contingent obligations in respect of indebtedness of others, whether or not the same are or should be reflected in the Company’s consolidated balance sheet (or the notes thereto), except guaranties by endorsement of negotiable instruments for deposit or collection or similar transactions in the ordinary course of business; and (z) the present value of any lease payments due under leases required to be capitalized in accordance with GAAP. The Company is not in default with respect to any Indebtedness other than any defaults disclosed in the SEC Reports or on Schedule 3.1(bb) that are being cured, refinanced, exchanged or otherwise addressed substantially concurrently with the Closing.
(cc) No Materially Adverse Contracts, Etc. Neither the Company nor any of its Subsidiaries is subject to any charter, corporate or other legal restriction, or any judgment, decree, order, rule or regulation which in the judgment of the Company’s officers has or is expected in the future to have a Material Adverse Effect. Neither the Company nor any of its Subsidiaries is a party to any contract or agreement which in the judgment of the Company’s officers has or is expected to have a Material Adverse Effect.
(dd) Tax Status. Except as disclosed in the SEC Reports or except for matters that would not, individually or in the aggregate, have or reasonably be expected to result in a Material Adverse Effect, the Company and its Subsidiaries each (i) has made or filed all United States federal, state and local income and all foreign income and franchise tax returns, reports and declarations required by any jurisdiction to which it is subject, (ii) has paid all taxes and other governmental assessments and charges that are material in amount, shown or determined to be due on such returns, reports and declarations and (iii) has set aside on its books provision reasonably adequate for the payment of all material taxes for periods subsequent to the periods to which such returns, reports or declarations apply. There are no unpaid taxes in any material amount claimed to be due by the taxing authority of any jurisdiction, and the officers of the Company or of any Subsidiary know of no basis for any such claim.
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(ee) No General Solicitation. Neither the Company nor any Person acting on behalf of the Company has offered or sold any of the Securities by any form of general solicitation or general advertising. The Company has offered the Securities for sale only to the Purchasers and certain other “accredited investors” within the meaning of Rule 501 under the Securities Act.
(ff) Foreign Corrupt Practices. Neither the Company nor any Subsidiary, nor to the knowledge of the Company or any Subsidiary, any agent or other person acting on behalf of the Company or any Subsidiary, has (i) directly or indirectly, used any funds for unlawful contributions, gifts, entertainment or other unlawful expenses related to foreign or domestic political activity, (ii) 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, (iii) failed to disclose fully any contribution made by the Company or any Subsidiary (or made by any person acting on its behalf of which the Company is aware) which is in violation of law, or (iv) violated in any material respect any provision of FCPA.
(gg) Accountants. The Company’s accounting firm is set forth in the SEC Reports and such accounting firm (i) is a registered public accounting firm as required by the Exchange Act and (ii) shall express its opinion with respect to the financial statements to be included in the Company’s Annual Report for the fiscal year ending December 31, 2026.
(hh) Seniority. Except for Permitted Senior Debt and obligations expressly permitted under the Transaction Documents, no Indebtedness or other claim against the Company is senior to the Notes in right of payment or priority of lien. Specifically the Junior Notes shall be subordinate to the Notes in payment and priority of security interest.
(ii) No Disagreements with Accountants and Lawyers. There are no disagreements of any kind presently existing, or reasonably anticipated by the Company to arise, between the Company and the accountants and lawyers formerly or presently employed by the Company and the Company is current with respect to any fees owed to its accountants and lawyers which would affect the Company’s ability to perform any of its obligations under any of the Transaction Documents.
(jj) Acknowledgment Regarding Purchasers’ Purchase of Securities. The Company acknowledges and agrees that each of the Purchasers is acting solely in the capacity of an arm’s length purchaser with respect to the Transaction Documents and the transactions contemplated thereby. The Company further acknowledges that no Purchaser is acting as a financial advisor or fiduciary of the Company (or in any similar capacity) with respect to the Transaction Documents and the transactions contemplated thereby and any advice given by any Purchaser or any of their respective representatives or agents in connection with the Transaction Documents and the transactions contemplated thereby is merely incidental to the Purchasers’ purchase of the Securities. The Company further represents to each Purchaser that the Company’s decision to enter into this Agreement and the other Transaction Documents has been based solely on the independent evaluation of the transactions contemplated hereby by the Company and its representatives.
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(kk) Acknowledgment Regarding Purchaser’s Trading Activity. Anything in this Agreement or elsewhere herein to the contrary notwithstanding (except for Section 4.14 hereof), it is understood and acknowledged by the Company that: (i) none of the Purchasers has been asked by the Company to agree, nor has any Purchaser agreed, to desist from purchasing or selling, long and/or short, securities of the Company, or “derivative” securities based on securities issued by the Company or to hold the Securities for any specified term, (ii) past or future open market or other transactions by any Purchaser, specifically including, without limitation, Short Sales or “derivative” transactions, before or after the closing of this or future private placement transactions, may negatively impact the market price of the Company’s publicly-traded securities, (iii) any Purchaser, and counter-parties in “derivative” transactions to which any such Purchaser is a party, directly or indirectly, presently may have a “short” position in the Common Stock, and (iv) each Purchaser shall not be deemed to have any affiliation with or control over any arm’s length counter-party in any “derivative” transaction. The Company further understands and acknowledges that (y) one or more Purchasers may engage in hedging activities at various times during the period that the Securities are outstanding, including, without limitation, during the periods that the value of the Underlying Shares deliverable with respect to Securities are being determined, and (z) such hedging activities (if any) would reduce the value of the existing stockholders’ equity interests in the Company at and after the time that the hedging activities are being conducted. The Company acknowledges that such aforementioned hedging activities do not constitute a breach of any of the Transaction Documents.
(ll) Regulation M Compliance. The Company has not, and to its knowledge no one acting on its behalf has, (i) taken, directly or indirectly, any action designed to cause or to result in the stabilization or manipulation of the price of any security of the Company to facilitate the sale or resale of any of the Securities, (ii) sold, bid for, purchased, or paid any compensation for soliciting purchases of, any of the Securities, or (iii) paid or agreed to pay to any Person any compensation for soliciting another to purchase any other securities of the Company.
(mm) Reserved.
(nn) Cybersecurity. (i)(x) There has been no security breach or other compromise of or relating to any of the Company’s or any Subsidiary’s information technology and computer systems, networks, hardware, software, data (including the data of its respective customers, employees, suppliers, vendors and any third party data maintained by or on behalf of it), equipment or technology (collectively, “IT Systems and Data”) and (y) the Company and the Subsidiaries have not been notified of, and has no knowledge of any event or condition that would reasonably be expected to result in, any security breach or other compromise to its IT Systems and Data; (ii) the Company and the Subsidiaries are presently in compliance with all applicable laws or statutes and all judgments, orders, rules and regulations of any court or arbitrator or governmental or regulatory authority, internal policies and contractual obligations relating to the privacy and security of IT Systems and Data and to the protection of such IT Systems and Data from unauthorized use, access, misappropriation or modification, except as would not, individually or in the aggregate, have a Material Adverse Effect; (iii) the Company and the Subsidiaries have implemented and maintained commercially reasonable safeguards to maintain and protect its material confidential information and the integrity, continuous operation, redundancy and security of all IT Systems and Data; and (iv) the Company and the Subsidiaries have implemented backup and disaster recovery technology consistent with industry standards and practices.
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(oo) Office of Foreign Assets Control. Neither the Company nor any Subsidiary nor, to the Company’s knowledge, any director, officer, agent, employee or affiliate of the Company or any Subsidiary is currently subject to any U.S. sanctions administered by the Office of Foreign Assets Control of the U.S. Treasury Department (“OFAC”).
(pp) U.S. Real Property Holding Corporation. The Company is not and has never been a U.S. real property holding corporation within the meaning of Section 897 of the Internal Revenue Code of 1986, as amended, and the Company shall so certify upon Purchaser’s request.
(qq) Bank Holding Company Act. Neither the Company nor any of its Subsidiaries or Affiliates is subject to the Bank Holding Company Act of 1956, as amended (the “BHCA”) and to regulation by the Board of Governors of the Federal Reserve System (the “Federal Reserve”). Neither the Company nor any of its Subsidiaries or Affiliates owns or controls, directly or indirectly, five percent (5%) or more of the outstanding shares of any class of voting securities or twenty-five percent or more of the total equity of a bank or any entity that is subject to the BHCA and to regulation by the Federal Reserve. Neither the Company nor any of its Subsidiaries or Affiliates exercises a controlling influence over the management or policies of a bank or any entity that is subject to the BHCA and to regulation by the Federal Reserve.
(rr) Money Laundering. The operations of the Company and its Subsidiaries are and have been conducted at all times in compliance with applicable financial record-keeping and reporting requirements of the Currency and Foreign Transactions Reporting Act of 1970, as amended, applicable money laundering statutes and applicable rules and regulations thereunder (collectively, the “Money Laundering Laws”), and no Action by or before any court or governmental agency, authority or body or any arbitrator involving the Company with respect to the Money Laundering Laws is pending or, to the knowledge of the Company, threatened.
(ss) No Off Balance Sheet Arrangements. There is no transaction, arrangement, or other relationship between the Company or any of its Subsidiaries and an unconsolidated or other off balance sheet entity that is required to be disclosed by the Company in its SEC Reports and is not so disclosed or that otherwise would be reasonably likely to have a Material Adverse Effect.
(tt) No Disqualification Events. With respect to the Securities to be offered and sold hereunder in reliance on Rule 506 under the Securities Act, none of the Company, nor to the knowledge of the Company after due inquiry, any of the Company’s predecessors, affiliated issuers, directors, executive officers, other officers of the Company participating in the offering hereunder, any beneficial owner of 20% or more of the Company’s outstanding voting equity securities, calculated on the basis of voting power, nor any promoter (as that term is defined in Rule 405 under the Securities Act) connected with the Company in any capacity at the time of sale (each, an “Issuer Covered Person” and, together, “Issuer Covered Persons”) is subject to any of the “Bad Actor” disqualifications described in Rule 506(d)(1)(i) to (viii) under the Securities Act (a “Disqualification Event”), except for a Disqualification Event covered by Rule 506(d)(2) or (d)(3). The Company has exercised reasonable care to determine whether any Issuer Covered Person is subject to a Disqualification Event. The Company has complied, to the extent applicable, with its disclosure obligations under Rule 506(e), and has furnished to each Purchaser a copy of any disclosures provided thereunder.
(uu) Other Covered Persons. The Company is not aware of any person (other than any Issuer Covered Person) that has been or will be paid (directly or indirectly) remuneration for solicitation of purchasers in connection with the sale of any Securities.
(vv) Anti-Dilution. Except as disclosed in the SEC Reports or on Schedule 3.1(g), there are no outstanding securities or instruments containing anti-dilution, reset, repricing, ratchet, most-favored-nation or similar provisions that would be triggered by the transactions contemplated by this Agreement. Except as disclosed in the SEC Reports or on Schedule 3.1(g), there are no outstanding securities that would require stockholder approval under Nasdaq Rule 5635 upon issuance, conversion, exchange, repricing or adjustment, and no holder of any security is entitled to receive additional securities, economic rights or adjustments as a result of this financing.
(ww) Notice of Disqualification Events. The Company will notify each Purchaser in writing, prior to the Closing Date of (i) any Disqualification Event relating to any Issuer Covered Person and (ii) any event that would, with the passage of time, become a Disqualification Event relating to any Issuer Covered Person.
(xx) Advertise Purple Acquisition. To the Company’s knowledge, all material approvals, consents and third-party authorizations required for the consummation of the Advertise Purple Acquisition either have been obtained or are capable of being obtained in the ordinary course, and the Company is not aware of any event or circumstance that would reasonably be expected to prevent or materially delay the consummation of such acquisition.
(yy) Share Reserve. The Company has reserved, and shall continue to reserve, a sufficient number of authorized but unissued shares of Common Stock to permit the issuance of all Conversion Shares, Incentive Shares and any shares issuable pursuant to stock-payment amortization elections made in accordance with the Equity Conditions and the Notes.
(zz) No Material Non-Public Information. As of the Closing Date, neither the Company nor any of its Subsidiaries has provided any Purchaser with material non-public information that has not been publicly disclosed or otherwise made available to all Purchasers. On or prior to the Closing Date, the Company shall publicly disclose all material non-public information that may have been provided to the Purchasers and is required to be disclosed under applicable securities laws such that no Purchaser is in possession of undisclosed material non-public information on such dates.
3.2 Representations and Warranties of the Purchasers. Each Purchaser, for itself and for no other Purchaser, hereby represents and warrants as of the date hereof and as of the Closing Date to the Company as follows (unless as of a specific date therein, in which case they shall be accurate as of such date):
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(a) Organization; Authority. Such Purchaser is either an individual or an entity duly incorporated or formed, validly existing and in good standing under the laws of the jurisdiction of its incorporation or formation with full right, corporate, partnership, limited liability company or similar power and authority to enter into and to consummate the transactions contemplated by the Transaction Documents and otherwise to carry out its obligations hereunder and thereunder. The execution and delivery of the Transaction Documents and performance by such Purchaser of the transactions contemplated by the Transaction Documents have been duly authorized by all necessary corporate, partnership, limited liability company or similar action, as applicable, on the part of such Purchaser. Each Transaction Document to which it is a party has been duly executed by such Purchaser, and when delivered by such Purchaser in accordance with the terms hereof, will constitute the valid and legally binding obligation of such Purchaser, enforceable against it in accordance with its terms, except (i) as limited by general equitable principles and applicable bankruptcy, insolvency, reorganization, moratorium and other laws of general application affecting enforcement of creditors’ rights generally, (ii) as limited by laws relating to the availability of specific performance, injunctive relief or other equitable remedies, and (iii) insofar as indemnification and contribution provisions may be limited by applicable law.
(b) Own Account. Such Purchaser understands that the Securities are “restricted securities” and have not been registered under the Securities Act or any applicable state securities law and is acquiring the Securities as principal for its own account and not with a view to or for distributing or reselling such Securities or any part thereof in violation of the Securities Act or any applicable state securities law, has no present intention of distributing any of such Securities in violation of the Securities Act or any applicable state securities law and has no direct or indirect arrangement or understandings with any other persons to distribute or regarding the distribution of such Securities in violation of the Securities Act or any applicable state securities law (this representation and warranty not limiting such Purchaser’s right to sell the Securities pursuant to a resale registration statement or otherwise in compliance with applicable federal and state securities laws). Such Purchaser is acquiring the Securities hereunder in the ordinary course of its business.
(c) Purchaser Status. At the time such Purchaser was offered the Securities, it was, and as of the date hereof it is, and on each date on which it converts its Note it will be either: (i) an “accredited investor” as defined in Rule 501(a)(1), (a)(2), (a)(3), (a)(7), (a)(8), (a)(9), (a)(12), or (a)(13) under the Securities Act or (ii) a “qualified institutional buyer” as defined in Rule 144A(a) under the Securities Act. Such Purchaser has full power and authority to make the investment contemplated hereby and to execute and deliver the Transaction Documents to which it is a party.
(d) Experience of Such Purchaser. Such Purchaser, either alone or together with its representatives, has such knowledge, sophistication, and experience in business and financial matters so as to be capable of evaluating the merits and risks of the prospective investment in the Securities, and has so evaluated the merits and risks of such investment. Such Purchaser is able to bear the economic risk of an investment in the Securities and, at the present time, is able to afford a complete loss of such investment.
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(e) General Solicitation. Such Purchaser is not, to such Purchaser’s knowledge, purchasing the Securities as a result of any advertisement, article, notice or other communication regarding the Securities published in any newspaper, magazine or similar media or broadcast over television or radio or presented at any seminar or, to the knowledge of such Purchaser, any other general solicitation or general advertisement.
(f) Access to Information. Such Purchaser acknowledges that it has had the opportunity to review the Transaction Documents (including all exhibits and schedules thereto) and the SEC Reports and has been afforded (i) the opportunity to ask such questions as it has deemed necessary of, and to receive answers from, representatives of the Company concerning the terms and conditions of the offering of the Securities and the merits and risks of investing in the Securities; (ii) access to information about the Company and its financial condition, results of operations, business, properties, management and prospects sufficient to enable it to evaluate its investment; and (iii) the opportunity to obtain such additional information that the Company possesses or can acquire without unreasonable effort or expense that is necessary to make an informed investment decision with respect to the investment.
(g) Independent Investigation. Such Purchaser has conducted its own independent review, investigation and analysis of the Company and the transactions contemplated hereby and acknowledges that it has been provided access to such information as it has deemed necessary to make its investment decision. Except for the representations and warranties expressly set forth in the Transaction Documents, such Purchaser is not relying upon any other statement or representation of the Company or any of its representatives.
(h) Collateral Agent. Such Purchaser acknowledges and agrees that enforcement of remedies, administration of collateral and actions with respect to Events of Default shall be governed by the Security Agreement and that such Purchaser’s rights with respect thereto are subject to the terms of the Security Agreement and the provisions of this Agreement relating to Lead Investors.
The Company acknowledges and agrees that the representations contained in this Section 3.2 shall not modify, amend, or affect such Purchaser’s right to rely on the Company’s representations and warranties contained in this Agreement or any representations and warranties contained in any other Transaction Document or any other document or instrument executed and/or delivered in connection with this Agreement or the consummation of the transactions contemplated hereby.
ARTICLE IV.
OTHER AGREEMENTS OF THE PARTIES
4.1 Transfer Restrictions.
(a) The Securities may only be disposed of in compliance with state and federal securities laws. In connection with any transfer of Securities other than pursuant to an effective registration statement or Rule 144, to the Company or to an Affiliate of a Purchaser or in connection with a pledge as contemplated in Section 4.1(b), the Company may require the transferor thereof to provide to the Company an opinion of counsel selected by the transferor and reasonably acceptable to the Company, the form and substance of which opinion shall be reasonably satisfactory to the Company, to the effect that such transfer does not require registration of such transferred Securities under the Securities Act. As a condition of transfer, any such transferee shall agree in writing to be bound by the terms of this Agreement and shall have the rights and obligations of a Purchaser under this Agreement. As set forth in further detail below, the Company agrees that any Securities, Underlying Shares, or any other securities issued pursuant to the Transaction Documents shall be issued without a restrictive legend, or any existing restrictive legend shall be removed, if such securities are eligible for resale pursuant to Rule 144 without restriction (including compliance with applicable holding period requirements), covered by an effective registration statement or if a restrictive legend is otherwise not required under applicable securities laws.
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(b) The Purchasers agree to the imprinting, so long as is required by this Section 4.1, of a legend on any of the Securities in the following form:
NEITHER THIS SECURITY NOR THE SECURITIES INTO WHICH THIS SECURITY IS CONVERTIBLE HAS BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS. THIS SECURITY AND THE SECURITIES ISSUABLE UPON CONVERSION OF THIS SECURITY MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT WITH A REGISTERED BROKER-DEALER OR OTHER LOAN WITH A FINANCIAL INSTITUTION THAT IS AN “ACCREDITED INVESTOR” AS DEFINED IN RULE 501(a) UNDER THE SECURITIES ACT OR OTHER LOAN SECURED BY SUCH SECURITIES.
The Company acknowledges and agrees that a Purchaser may from time-to-time pledge pursuant to a bona fide margin agreement with a registered broker-dealer or grant a security interest in some or all of the Securities to a financial institution that is an “accredited investor” as defined in Rule 501(a) under the Securities Act and, if required under the terms of such arrangement, such Purchaser may transfer pledged or secured Securities to the pledgees or secured parties. Such a transfer would not be subject to approval of the Company and no legal opinion of legal counsel of the pledgee, secured party or pledgor shall be required in connection therewith. Further, no notice shall be required of such pledge. At the appropriate Purchaser’s expense, the Company will execute and deliver such reasonable documentation as a pledgee or secured party of Securities may reasonably request in connection with a pledge or transfer of the Securities, including, if the Securities are subject to registration, the preparation and filing of any required prospectus supplement under Rule 424(b)(3) under the Securities Act or other applicable provision of the Securities Act.
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(c) Certificates evidencing the Underlying Shares shall not contain any legend (including the legend set forth in Section 4.1(b) hereof): (i) while a resale registration statement covering the resale of such security is effective under the Securities Act, (ii) if such Underlying Shares are eligible to be sold, assigned, or transferred pursuant to Rule 144, when available (provided that a Purchaser provides the Company with reasonable assurances that such Securities are eligible for sale, assignment or transfer under Rule 144 which shall not include an opinion of such Purchaser’s counsel), or (iii) if such legend is not required under applicable requirements of the Securities Act (including judicial interpretations and pronouncements issued by the staff of the SEC). For the avoidance of doubt the Company shall pay all costs associated with such opinions and counsel to the Company shall provide all opinions with respect to any resales pursuant to Rule 144 or otherwise at the sole cost of the Company, and the Company shall provide confirmation to the Transfer Agent that all such opinions are acceptable. If all or any portion of a Note is converted at a time when there is an effective resale registration statement to cover the resale of the Underlying Shares, or if such Underlying Shares may be sold under Rule 144 without the requirement for the Company to be in compliance with the current public information requirements of Rule 144(c) and without volume or manner of sale restrictions or if such legend is not otherwise required under applicable requirements of the Securities Act (including Sections 4(a)(1) or 4(a)(7), judicial interpretations and pronouncements issued by the staff of the SEC including what is known as Section 4(a)(11/2)) then such Underlying Shares shall be issued free of all legends. For avoidance of doubt, the Company agrees that after the requisite holding period to comply with Rule 144, the legend may be removed under Rule 144 of the Securities Act, assuming the holder satisfies the requirements of Rule 144. The Company agrees that at such time as such legend is no longer required under this Section 4.1(c), it will, no later than two Trading Days following the delivery by any Purchaser to the Company or the Transfer Agent of a certificate (or stock power if issued in book entry form) representing Underlying Shares issued without a restrictive legend (such date, the “Legend Removal Date”), deliver or cause to be delivered to such Purchaser a certificate representing such shares that is free from all restrictive and other legends (or provide evidence of issuance in book entry form). The Company may not make any notation on its records or give instructions to the Transfer Agent that enlarge the restrictions on transfer set forth in this Section 4.1. Certificates for Underlying Shares subject to legend removal hereunder shall be transmitted by the Transfer Agent to such Purchaser by crediting the account of the Purchaser’s prime broker with the Depository Trust Company System as directed by the Purchaser..
(d) In addition to such Purchaser’s other available remedies, the Company shall pay to a Purchaser, in cash, (i) as partial liquidated damages and not as a penalty, for each $1,000 of Underlying Shares (based on the VWAP of the Common Stock on the date such Securities are submitted to the Transfer Agent) delivered for removal of the restrictive legend and subject to Section 4.1(c), $10 per Trading Day (increasing to $20 per Trading Day five Trading Days after such damages have begun to accrue) for each Trading Day after the Legend Removal Date until such certificate is delivered without a legend; provided that such Purchaser, in good faith, cooperates reasonably with, and takes such customary actions as may be reasonably requested by the Company in connection with the delivery of such certificate without a legend, and (ii) if the Company fails to (a) issue and deliver (or cause to be delivered) to a Purchaser by the Legend Removal Date a certificate representing the Securities so delivered to the Company by such Purchaser that is free from all restrictive and other legends and (b) if after the Legend Removal Date such Purchaser purchases (in an open market transaction or otherwise) shares of Common Stock to deliver in satisfaction of a sale by such Purchaser of all or any portion of the number of shares of Common Stock, or a sale of a number of shares of Common Stock equal to all or any portion of the number of shares of Common Stock that such Purchaser anticipated receiving from the Company without any restrictive legend, then, an amount equal to the excess of such Purchaser’s total purchase price (including brokerage commissions and other out-of-pocket expenses, if any) for the shares of Common Stock so purchased (including brokerage commissions and other out-of-pocket expenses, if any) (the “Buy-In Price”) over the product of (A) such number of Underlying Shares that the Company was required to deliver to such Purchaser by the Legend Removal Date multiplied by (B) the lowest closing sale price of the Common Stock on any Trading Day during the period commencing on the date of the delivery by such Purchaser to the Company of the applicable Underlying Shares (as the case may be) and ending on the date of such delivery and payment under this clause (ii).
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(e) Each Purchaser, severally and not jointly with the other Purchasers, agrees with the Company that such Purchaser will sell any Securities pursuant to either the registration requirements of the Securities Act, including any applicable prospectus delivery requirements, or an exemption therefrom, and that if Securities are sold pursuant to a resale registration statement, they will be sold in compliance with the plan of distribution set forth therein, and acknowledges that the removal of the restrictive legend from certificates representing Securities as set forth in this Section 4.1 is predicated upon the Company’s reliance upon this understanding.
4.2 Acknowledgment of Dilution. The Company acknowledges that the issuance of the Securities may result in dilution of the outstanding shares of Common Stock, which dilution may be substantial under certain market conditions. The Company further acknowledges that its obligations under the Transaction Documents, including, without limitation, its obligation to issue the Underlying Shares pursuant to the Transaction Documents, are unconditional and absolute and not subject to any right of set off, counterclaim, delay or reduction, regardless of the effect of any such dilution or any claim the Company may have against any Purchaser and regardless of the dilutive effect that such issuance may have on the ownership of the other stockholders of the Company.
4.3 Furnishing of Information; Public Information.
(a) Until the earliest of the time that no Notes and if applicable no Preferred Shares remain outstanding, the Company covenants to maintain the registration of the Common Stock under Section 12(b) or 12(g) of the Exchange Act and to timely file (or obtain extensions in respect thereof and file within the applicable grace period) all reports required to be filed by the Company after the date hereof pursuant to the Exchange Act even if the Company is not then subject to the reporting requirements of the Exchange Act.
(b) At any time during the period commencing from the six-month anniversary of the date hereof, and ending at such time as all Registrable Securities held by such Holder may be sold pursuant to Rule 144 without restriction or limitation and without the requirement that the Company be in compliance with Rule 144(c)(1), if the Company (i) fails to satisfy the current public information requirements of Rule 144(c), or (ii) if applicable, fails to satisfy the requirements of Rule 144(i)(2), a “Public Information Failure” shall be deemed to have occurred. In the event of a Public Information Failure, the Company shall pay to the applicable Holder, as liquidated damages and not as a penalty, an amount equal to two percent (2.0%) of such Holder's Subscription Amount for the first thirty (30) day period during which the Public Information Failure continues, and an additional two percent (2.0%) of such Holder's Subscription Amount for each subsequent thirty (30) day period (pro-rated for partial periods) during which the Public Information Failure continues. Notwithstanding the foregoing:
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(i) the aggregate amount of Public Information Failure Payments payable to any Holder shall not exceed six percent (6%) of such Holder's Subscription Amount;
(ii) no Public Information Failure Payments shall accrue for delays resulting from SEC review, SEC comment processes, Rule 415 limitations, holder delays, or other circumstances outside the reasonable control of the Company; and
(iv) Public Information Failure Payments shall terminate immediately upon cure of the applicable Public Information Failure. Any Public Information Failure Payments due hereunder shall be paid within ten (10) Business Days following the end of the applicable period for which such amounts accrued. Any unpaid amount shall accrue interest at the rate of twelve percent (12%) per annum, or the maximum rate permitted by applicable law, whichever is less, from the date due until paid in full.
4.4 Integration. The Company shall not sell, offer for sale or solicit offers to buy or otherwise negotiate in respect of any security (as defined in Section 2 of the Securities Act) that would be integrated with the offer or sale of the Securities in a manner that would require the registration under the Securities Act of the sale of the Securities or that would be integrated with the offer or sale of the Securities for purposes of the rules and regulations of any Trading Market such that it would require stockholder approval prior to the closing of such other transaction unless stockholder approval is obtained before the closing of such subsequent transaction.
4.5 Conversion Procedures. The form of Notice of Conversion included in the Notes set forth the totality of the procedures required of the Purchasers in order to convert the Notes. Without limiting the preceding sentences, no ink-original Notice of Conversion shall be required, nor shall any medallion guarantee (or other type of guarantee or notarization) of any Notice of Conversion form be required in order to convert the Notes. No additional legal opinion, other information or instructions shall be required of the Purchasers to convert their Notes. The Company shall honor conversions of the Notes that are converted in accordance with the terms set forth in the Transaction Documents and shall deliver Underlying Shares in accordance with the terms, conditions, and time periods set forth in the Transaction Documents.
4.6 Securities Laws Disclosure; Publicity. The Company shall (a) by the Disclosure Time, issue a press release disclosing the material terms of the transactions contemplated hereby, and (b) file a Current Report on Form 8-K, including the Transaction Documents as exhibits thereto, with the SEC within the time required by the Exchange Act. From and after the issuance of such press release, the Company shall have publicly disclosed all material, non-public information delivered to any of the Purchasers by the Company or any of its Subsidiaries, or any of their respective officers, directors, employees, or agents in connection with the transactions contemplated by the Transaction Documents. In addition, effective upon the issuance of such press release, the Company acknowledges and agrees that any and all confidentiality or similar obligations under any agreement, whether written or oral, between the Company, any of its Subsidiaries or any of their respective officers, directors, agents, employees or Affiliates on the one hand, and any of the Purchasers or any of their Affiliates on the other hand, shall terminate. The Company and each Purchaser shall consult with each other in issuing any other press releases with respect to the transactions contemplated hereby, and neither the Company nor any Purchaser shall issue any such press release nor otherwise make any such public statement without the prior consent of the Company, with respect to any press release of any Purchaser, or without the prior consent of each Purchaser, with respect to any press release of the Company, which consent shall not unreasonably be withheld or delayed, except if such disclosure is required by law, in which case the disclosing party shall promptly provide the other party with prior notice of such public statement or communication. Notwithstanding the foregoing, the Company shall not publicly disclose the name of any Purchaser, or include the name of any Purchaser in any filing with the SEC or any regulatory agency or Trading Market, without the prior written consent of such Purchaser, except (a) as required by federal securities law in connection with the filing of final Transaction Documents with the SEC and (b) to the extent such disclosure is required by law or Trading Market regulations, in which case the Company shall provide the Purchasers with prior notice of such disclosure permitted under this clause (b). On or prior to the Closing Date, the Company shall publicly disclose all material non-public information that may have been provided to the Purchasers and is required to be disclosed under applicable securities laws such that no Purchaser is in possession of undisclosed material non-public information on such dates.
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4.7 Stockholder Rights Plan. No claim will be made or enforced by the Company or, with the consent of the Company, any other Person, that any Purchaser is an “Acquiring Person” under any control share acquisition, business combination, poison pill (including any distribution under a rights agreement) or similar anti-takeover plan or arrangement in effect or hereafter adopted by the Company, or that any Purchaser would be deemed to trigger the provisions of any such plan or arrangement, by virtue of receiving Securities under the Transaction Documents or under any other agreement between the Company and the Purchasers.
4.8 Non-Public Information. Except with respect to the material terms and conditions of the transactions contemplated by the Transaction Documents, which shall be disclosed pursuant to Section 4.6, the Company covenants and agrees that neither it, nor any other Person acting on its behalf will provide any Purchaser or its agents or counsel with any information that constitutes, or the Company reasonably believes constitutes, material non-public information, unless prior thereto such Purchaser shall have consented in writing to the receipt of such information and agreed with the Company to keep such information confidential. The Company understands and confirms that each Purchaser shall be relying on the foregoing covenant in effecting transactions in securities of the Company. To the extent that the Company, any of its Subsidiaries, or any of their respective officers, director, agents, employees or Affiliates delivers any material, non-public information to a Purchaser without such Purchaser’s consent, the Company hereby covenants and agrees that such Purchaser shall not have any duty of confidentiality to the Company, any of its Subsidiaries, or any of their respective officers, directors, agents, employees or Affiliates, or a duty to the Company, any of its Subsidiaries or any of their respective officers, directors, agents, employees or Affiliates not to trade on the basis of, such material, non-public information, provided that the Purchaser shall remain subject to applicable law. To the extent that any notice provided pursuant to any Transaction Document constitutes, or contains, material, non-public information regarding the Company or any Subsidiaries, the Company shall simultaneously file such notice with the SEC pursuant to a Current Report on Form 8-K. The Company understands and confirms that each Purchaser shall be relying on the foregoing covenant in effecting transactions in securities of the Company.
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4.9 Use of Proceeds. The Company shall use the net proceeds from the sale of the Securities primarily to fund the Advertise Purple Acquisition, pay transaction expenses, support the Nasdaq Uplist, and for general corporate and working capital purposes.
4.10 Indemnification of Purchasers.
(a) Subject to the provisions of this Section 4.10, the Company will indemnify and hold each Purchaser and its directors, officers, stockholders, members, partners, employees and agents (and any other Persons with a functionally equivalent role of a Person holding such titles notwithstanding a lack of such title or any other title), each Person who controls such Purchaser (within the meaning of Section 15 of the Securities Act and Section 20 of the Exchange Act), and the directors, officers, stockholders, agents, members, partners or employees (and any other Persons with a functionally equivalent role of a Person holding such titles notwithstanding a lack of such title or any other title) of such controlling persons (each, a “Purchaser Party”) harmless from any and all losses, liabilities, obligations, claims, contingencies, damages, costs and expenses, including all judgments, amounts paid in settlements, court costs and reasonable attorneys’ fees and costs of investigation that any such Purchaser Party may suffer or incur as a result of or relating to (i) any breach of any of the representations, warranties, covenants or agreements made by the Company in this Agreement or in the other Transaction Documents, (ii) any cause of action, Action, proceeding or claim (any, a “Claim”) instituted by the Company or its Affiliates or representatives or agents against the Purchaser Parties in any capacity, or any of them or their respective Affiliates, with respect to any of the transactions contemplated by the Transaction Documents (unless such action is solely based upon a material breach of such Purchaser Party’s representations, warranties or covenants under the Transaction Documents or any agreements or understandings such Purchaser Party may have with any such stockholder or any violations by such Purchaser Party of state or federal securities laws or any conduct by such Purchaser Party which is finally judicially determined to constitute fraud, gross negligence or willful misconduct) or (iii) any Claim brought or made against a Purchaser Party by a third party (including for these purposes a derivative action brought on behalf of the Company) or which otherwise involves such Purchaser Party that arises out of or results from (A) the execution, delivery, performance or enforcement of any of the Transaction Documents, (B) any transaction financed or to be financed in whole or in part, directly or indirectly, with the proceeds of the issuance of the Securities, or (C) the status of a Purchaser or holder of the Securities either as an investor in the Company pursuant to the transactions contemplated by the Transaction Documents or as a party to this Agreement (including, without limitation, as a party in interest or otherwise in any Action for injunctive or other equitable relief).
(b) The Company shall indemnify, defend and hold harmless each Purchaser and its affiliates, officers, directors, members, managers, partners, employees, agents and representatives from and against any and all losses, claims, damages, liabilities, judgments, costs and expenses (including reasonable attorneys' fees and expenses) arising out of or based upon any untrue statement or alleged untrue statement of a material fact contained in any registration statement, prospectus, free writing prospectus or amendment or supplement thereto filed by or on behalf of the Company in connection with the transactions contemplated by this Agreement, or arising out of or based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, except to the extent such untrue statement or omission was made in reliance upon and in conformity with written information furnished by such Purchaser expressly for inclusion therein.
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(c) If any Action shall be brought against any Purchaser Party in respect of which indemnity may be sought pursuant to this Agreement, such Purchaser Party shall promptly notify the Company in writing, and the Company shall have the right to assume the defense thereof with counsel of its own choosing reasonably acceptable to the Purchaser Party. Any Purchaser Party shall have the right to employ separate counsel in any such Action and participate in the defense thereof, but the fees and expenses of such counsel shall be at the expense of such Purchaser Party except to the extent that (i) the employment thereof has been specifically authorized by the Company in writing, (ii) the Company has failed after a reasonable period of time to assume such defense and to employ counsel or (iii) in such Action there is, in the reasonable opinion of counsel, a material conflict on any material issue between the position of the Company and the position of such Purchaser Party, in which case the Company shall be responsible for the reasonable fees and expenses of no more than one such separate counsel. The Company will not be liable to any Purchaser Party under this Agreement (y) for any settlement by a Purchaser Party effected without the Company’s prior written consent, which shall not be unreasonably withheld or delayed; or (z) to the extent, but only to the extent that a loss, claim, damage or liability is attributable to any Purchaser Party’s breach of any of the representations, warranties, covenants or agreements made by such Purchaser Party in this Agreement or in the other Transaction Documents. The indemnification required by this Section 4.10(c) shall be made by periodic payments of the amount thereof during the course of the investigation or defense, as and when bills are received or are incurred. The indemnity agreements contained herein shall be in addition to any cause of Action or similar right of any Purchaser Party against the Company or others and any liabilities the Company may be subject to pursuant to law.
4.11 Reservation and Listing of Securities.
(a) Reservation of Shares. While any Notes remain outstanding, the Company shall reserve from its authorized and unissued shares of Common Stock a number of shares sufficient to satisfy its obligations under the Transaction Documents, including the issuance of Conversion Shares, Incentive Shares and any shares issuable pursuant to amortization payments permitted under the Notes (the “Required Minimum”). The Required Minimum shall be calculated using an assumed Conversion Price of $0.03 per share (subject to adjustment for stock splits, stock dividends, combinations and similar recapitalization events), unless a different reserve methodology is approved by the Lead Investors. The Company shall review the Required Minimum no less frequently than once each calendar quarter and shall maintain at all times a sufficient reserve of authorized and unissued shares to satisfy its obligations under the Transaction Documents.
(b) Authorized Share Deficiency. If at any time the Company does not have sufficient authorized and available shares of Common Stock to satisfy the Required Minimum (an “Authorized Share Deficiency”), the Company shall promptly take all actions necessary to cure such deficiency, including: (i) obtaining board approval; (ii) seeking stockholder approval if required; and (iii) filing any charter amendment necessary to increase the Company's authorized capital. The Company shall use commercially reasonable efforts to cure any Authorized Share Deficiency as promptly as practicable.
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(c) Listing. The Company shall use commercially reasonable efforts to maintain the authorization, approval and listing of all shares reserved for issuance under the Transaction Documents on the applicable Trading Market and shall take all actions reasonably necessary to permit the issuance and trading thereof.
4.12 Change in Transfer Agent. If the Company’s agency relationship the Transfer Agent should be terminated for any reason while all or any portion of the Notes remain outstanding, the Company shall immediately appoint a successor transfer agent acceptable to the Purchasers and shall require that the successor Transfer Agent execute and agree to be bound by the terms of the Irrevocable Transfer Agent Instructions with respect to each Purchaser. Failure to adhere to this covenant shall automatically be deemed a material breach of this Agreement and an Event of Default under the Note.
4.13 Subsequent Equity Sales.
(a) From the date hereof until such time as no Purchaser holds any of the Notes, without the prior written consent of the Lead Investors, the Company shall not enter into any Variable Rate Transaction. “Variable Rate Transaction” means a transaction in which the Company (i) issues or sells any debt or equity securities that are convertible into, exchangeable or exercisable for, or include the right to receive, additional shares of Common Stock either (A) at a conversion price, exercise price or exchange rate or other price that is based upon, and/or varies with, the trading prices of or quotations for the shares of Common Stock at any time after the initial issuance of such debt or equity 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 debt or equity security or upon the occurrence of specified or contingent events directly or indirectly related to the business of the Company or the market for the Common Stock or (ii) enters into, or effects a transaction under, any agreement whereby the Company may issue securities at a future determined price.
(b) While any Notes are outstanding, the Company shall not issue any equity option, warrant or similar instrument (except for securities issued in Exempt Issuances) which contains an “alternative cashless exercise” provision that provides for the exercise of such security without payment of the exercise price in cash and does not require the security to be “in the money,” and in the event of any such issuance in violation of this Section 4.13(b), in addition to the other rights and remedies provided under the Transaction Documents including without limitation the right to receive damages in connection therewith, any Purchaser shall be entitled to obtain injunctive relief against the Company to preclude or nullify any such issuance.
4.14 Equal Treatment of Purchasers. No consideration (including any modification of any Transaction Document) shall be offered or paid to any Person to amend or consent to a waiver or modification of any provision of the Transaction Documents unless the same consideration is also offered to all of the parties to such Transaction Documents. Further, the Company shall not make any payment of principal or interest on the Notes in amounts which are disproportionate to the respective principal amounts outstanding on the Notes at any applicable time. For clarification purposes, this provision constitutes a separate right granted to each Purchaser by the Company and negotiated separately by each Purchaser and is intended for the Company to treat the Purchasers as a class and shall not in any way be construed as the Purchasers acting in concert or as a group with respect to the purchase, disposition or voting of Securities or otherwise.
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4.15 Certain Transactions and Confidentiality. Each Purchaser, severally and not jointly with the other Purchasers, covenants that neither it, nor any Affiliate acting on its behalf or pursuant to any understanding with it will execute any purchases or sales, including Short Sales, of any of the Company’s securities during the period commencing with the execution of this Agreement and ending at such time that the transactions contemplated by this Agreement are first publicly announced pursuant to the initial press release as described in Section 4.6. Each Purchaser, severally and not jointly with the other Purchasers, covenants that until such time as the transactions contemplated by this Agreement are publicly disclosed by the Company pursuant to the initial press release as described in Section 4.6, such Purchaser will maintain the confidentiality of the existence and terms of this transaction and the information included in the Disclosure Schedules. Notwithstanding the foregoing and notwithstanding anything contained in this Agreement to the contrary, the Company expressly acknowledges and agrees that (i) no Purchaser makes any representation, warranty or covenant hereby that it will not engage in effecting transactions in any securities of the Company after the time that the transactions contemplated by this Agreement are first publicly announced pursuant to the initial press release as described in Section 4.6, (ii) no Purchaser shall be restricted or prohibited from effecting any transactions in any securities of the Company in accordance with applicable securities laws from and after the time that the transactions contemplated by this Agreement are first publicly announced pursuant to the initial press release as described in Section 4.6 and (iii) no Purchaser shall have any duty of confidentiality or duty not to trade in the securities of the Company to the Company after the issuance of the initial press release as described in Section 4.6. Notwithstanding the foregoing, in the case of a Purchaser that is a multi-managed investment vehicle whereby separate portfolio managers manage separate portions of such Purchaser’s assets and the portfolio managers have no direct knowledge of the investment decisions made by the portfolio managers managing other portions of such Purchaser’s assets, the covenant set forth above shall only apply with respect to the portion of assets managed by the portfolio manager that made the investment decision to purchase the Securities covered by this Agreement.
4.16 Form D; Blue Sky Filings. The Company agrees to timely file a Form D with respect to the Securities as required under Regulation D and to provide a copy thereof, promptly upon request of any Purchaser. The Company shall take such action as the Company shall reasonably determine is necessary to obtain an exemption for, or to qualify the Securities for, sale to the Purchasers at the Closing under applicable securities or “Blue Sky” laws of the states of the United States and shall provide evidence of such actions promptly upon request of any Purchaser.
4.17 Capital Changes. From the date hereof until such time as no Purchaser holds any of the Notes, the Company shall not undertake a reverse or forward stock split or reclassification of the Common Stock without the prior written consent of the Lead Investors. Notwithstanding the foregoing, Company may effect, in its sole discretion, a reverse stock split reasonably necessary to satisfy Nasdaq initial listing requirements without the consent of any third party, including any consent of Lead Investors.
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4.18 Security Documents.
(a) The Company shall enter into the Security Agreement.
(b) The Company shall authorize the filing of all UCC financing statements required by the Security Agreement.
4.19 Further Assurances. The Company hereby agrees that, from time to time upon the written request of the Collateral Agent or the Lead Investors, it will execute and deliver such further documents and do such other acts and things as the Purchaser may reasonably request in order fully to comply will all of the Company’s obligations under the Transaction Documents.
4.20 Restriction on Activities. From the date hereof until such time as no Purchaser holds any of the Notes, the Company shall not, directly or indirectly, without the Purchasers’ prior written consent, which consent shall not be unreasonably withheld: (a) materially change the nature of its business; or (b) sell, divest, or change the structure of any material assets other than in the ordinary course of business.
4.21 Corporate Existence. The Company shall, while any Notes remain outstanding, maintain its corporate existence and shall not sell all or substantially all of the Company’s assets, except in the event of a merger or consolidation or sale of all or substantially all of the Company’s assets, where the surviving or successor entity in such transaction (i) assumes the Company’s obligations hereunder and under the Transaction Documents and (ii) is a publicly traded corporation whose common stock is listed for trading or quotation on the Principal Market, any national securities exchange, including, but not limited to, any tier of the Nasdaq Stock Market, the New York Stock Exchange or the NYSE MKT.
4.22 Other Notes or Indebtedness. The Company shall not incur Indebtedness other than: (i) Permitted Senior Debt, including liens securing such debt; (ii) Indebtedness disclosed on Schedule 3.1(bb); (iii) purchase money indebtedness; (iv) capital leases; (v) seller notes and earnouts; and (vi) trade payables incurred in the ordinary course; and (vii) other indebtedness approved by the Lead Investors.
4.23 Most Favored Nation. At any time from the date hereof until such time as no Purchaser holds any of the Notes, the Company shall not enter into any Subsequent Financing with any individual or entity (an “Other Investor”) that has the effect of establishing rights or otherwise benefiting such Other Investor in a manner more favorable in any material respect to such Other Investor (even if the Other Investor does not receive the benefit of such more favorable term until a default occurs under such other security) than the rights and benefits established in favor of the Purchasers by this Agreement or the Note unless, in any such case, each Purchaser has been provided with such rights and benefits pursuant to a definitive written agreement or agreements between the Company and such Purchaser. For the avoidance of doubt, issuances in connection with the Nasdaq Uplist, preferred exchange transactions, employee compensation arrangements and Exempt Issuances shall not constitute Subsequent Financings for purposes of this Section 4.23.
4.24 No Broker-Dealer Acknowledgement. Absent a final adjudication from a court of competent jurisdiction stating otherwise, the Company shall not, to any person, institution, governmental or other entity, state, claim, allege, or in any way assert, that any Purchaser is currently, or ever has been, a broker-dealer under the Exchange Act.
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4.25 Collateral Agent. Notwithstanding anything contained herein or in any other Transaction Document to the contrary, all collateral administration, accelerations, waivers, amendments, consents, enforcement actions and remedies relating to the Notes and collateral shall be exercised exclusively by the Collateral Agent acting at the direction of the Lead Investors. No Purchaser acting individually shall have the right to declare an Event of Default, accelerate any Note, foreclose upon collateral or otherwise exercise creditor remedies except as expressly provided in the Security Agreement.
4.26 Preferred SPA. So long as the Company has not sold the full amount of Junior Notes issuable under the Preferred SPA, each Purchaser shall have the right to tender its Note hereunder (with all accrued interest thereon) as the purchase price under the Preferred SPA and such Purchaser shall become a “Purchaser” under the Preferred SPA.
ARTICLE V.
MISCELLANEOUS
5.1 Termination. This Agreement may be terminated by any Purchaser, as to such Purchaser’s obligations hereunder only and without any effect whatsoever on the obligations between the Company and the other Purchasers, or by the Company, by written notice to the other parties, if the Closing has not been consummated on or before the Outside Date, provided, however, that no such termination will affect the right of any party to sue for any breach by any other party (or parties). Notwithstanding the foregoing, if the Closing has not occurred on or before the Outside Date, this Agreement shall automatically terminate and all funds held by the Company shall be returned to the applicable Purchasers.
5.2 Right to Participate. At any time after the date of this Agreement, the Purchaser shall have the right to purchase up to its then pro rata share of New Securities which the Company may propose to sell and issue. In the event the Company proposes to undertake an issuance of New Securities during such period, it shall give the Purchaser written notice of its intention, describing the type of New Securities, their price, the number of New Securities to be offered, and the general terms upon which the Company proposes to issue the same. The Purchaser shall have ten (10) calendar days after any such notice is delivered to agree to purchase at the same price (which shall be the public purchase price, if applicable) and upon the same terms, including closing date, such New Securities in an amount up to the Purchaser’s pro rata share of such New Securities. Notwithstanding the foregoing, the participation rights set forth herein shall not apply to Exempt Issuances, securities issued in connection with the Nasdaq Uplist, Incentive Shares, acquisitions, strategic transactions, Permitted Senior Debt or employee equity compensation plans approved by the Board of Directors. The participation rights set forth herein shall terminate automatically upon the earlier of (i) repayment of all Notes or (ii) the Nasdaq Uplist. The participation right shall not apply to: (i) the Nasdaq Uplist or related financing transactions; (ii) Incentive Shares; reserved; (iv) acquisition transactions; (v) strategic transactions; (vi) employee benefit plans; (vii) post-listing at-the-market programs; (viii) Permitted Senior Debt; and (ix) Exempt Issuances.
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5.3 Fees and Expenses. At the Closing, the Company shall reimburse the Purchasers $50,000 for its legal fees and expenses. Except as expressly set forth in the Transaction Documents to the contrary, each party shall pay the fees and expenses of its advisers, counsel, accountants, and other experts, if any, and all other expenses incurred by such party incident to the negotiation, preparation, execution, delivery and performance of this Agreement.
5.4 Entire Agreement. The Transaction Documents, together with the exhibits and schedules thereto, contain the entire understanding of the parties with respect to the subject matter hereof and thereof and supersede all prior agreements and understandings, oral or written, with respect to such matters, which the parties acknowledge have been merged into such documents, exhibits and schedules.
5.5 Notices. Any and all notices or other communications or deliveries required or permitted to be provided hereunder shall be in writing and shall be deemed given and effective on the earliest of: (a) the time of transmission, if such notice or communication is delivered via facsimile at the facsimile number or email attachment at the email address as set forth on the signature pages attached hereto at or prior to 5:30 p.m. (New York, N.Y. time) on a Trading Day, (b) the next Trading Day after the time of transmission, if such notice or communication is delivered via facsimile at the facsimile number or email attachment at the email address as set forth on the signature pages attached hereto on a day that is not a Trading Day or later than 5:30 p.m. (New York, N.Y. time) on any Trading Day, (c) the second Trading Day following the date of mailing, if sent by U.S. nationally recognized overnight courier service or (d) upon actual receipt by the party to whom such notice is required to be given. The address for such notices and communications shall be as set forth on the signature pages attached hereto.
5.6 Amendments; Waivers. No provision of this Agreement may be waived, modified, supplemented, or amended except in a written instrument signed, in the case of an amendment, by the Company and the Lead Investors or, in the case of a waiver, by the party against whom enforcement of any such waived provision is sought provided that if any amendment, modification or waiver disproportionately and adversely impacts a Purchaser (or group of Purchasers), the consent of such disproportionately impacted Purchaser (or group of Purchasers) shall also be required. No waiver of any default with respect to any provision, condition, or requirement of this Agreement shall be deemed to be a continuing waiver in the future or a waiver of any subsequent default or a waiver of any other provision, condition, or requirement hereof, nor shall any delay or omission of any party to exercise any right hereunder in any manner impair the exercise of any such right. Any proposed amendment or waiver that disproportionately, materially, and adversely affects the rights and obligations of any Purchaser relative to the comparable rights and obligations of the other Purchasers shall require the prior written consent of such adversely affected Purchaser. Any amendment effected in accordance with this Section 5.6 shall be binding upon each Purchaser and holder of Securities and the Company. Such amendment provision shall not be construed to mean that the beneficial ownership limitation of the Note may be increased.
5.7 Headings. The headings herein are for convenience only, do not constitute a part of this Agreement and shall not be deemed to limit or affect any of the provisions hereof.
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5.8 Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the parties and their successors and permitted assigns. The Company may not assign this Agreement or any rights or obligations hereunder without the prior written consent of the Lead Investors (other than by merger). Any Purchaser may assign any or all of its rights under this Agreement to any Person to whom such Purchaser assigns or transfers any Securities, provided that such transferee agrees in writing to be bound, with respect to the transferred Securities, by the provisions of the Transaction Documents that apply to the Purchasers.
5.9 No Third-Party Beneficiaries. This Agreement is intended for the benefit of the parties hereto and their respective successors and permitted assigns and is not for the benefit of, nor may any provision hereof be enforced by, any other Person, except as otherwise set forth in Section 4.10 and this Section 5.9.
5.10 Governing Law. All questions concerning the construction, validity, enforcement, and interpretation of the Transaction Documents shall be governed by and construed and enforced in accordance with the internal laws of the State of Nevada, without regard to the principles of conflicts of law thereof. Each party agrees that all legal Actions concerning the interpretations, enforcement and defense of the transactions contemplated by this Agreement and any other Transaction Documents (whether brought against a party hereto or its respective affiliates, directors, officers, shareholders, partners, members, employees, or agents) shall be commenced exclusively in the state and federal courts located in the State of Nevada. Each party hereby irrevocably submits to the exclusive jurisdiction of such state and federal courts for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein (including with respect to the enforcement of any of the Transaction Documents), and hereby irrevocably waives, and agrees not to assert in any Action, any claim that it is not personally subject to the jurisdiction of any such court, that such Action is improper or is an inconvenient venue for such Action. Each party hereby irrevocably waives personal service of process and consents to process being served in any such Action by mailing a copy thereof via registered or certified mail or overnight delivery (with evidence of delivery) to such party at the address in effect for notices to it under this Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any other manner permitted by law. If any party shall commence an Action to enforce any provisions of the Transaction Documents, then, in addition to the obligations of the Company under Section 4.10, the prevailing party in such Action shall be reimbursed by the non-prevailing party for its reasonable attorneys’ fees and other costs and expenses incurred with the investigation, preparation and prosecution of such Action.
5.11 Survival. The representations and warranties contained herein shall survive the Closing and the delivery of the Securities.
5.12 Execution. This Agreement may be executed in two or more counterparts, all of which when taken together shall be considered one and the same agreement and shall become effective when counterparts have been signed by each party and delivered to each other party, it being understood that the parties need not sign the same counterpart. If any signature is delivered by facsimile transmission or by e-mail delivery of a “.pdf” format data file, such signature shall create a valid and binding obligation of the party executing (or on whose behalf such signature is executed) with the same force and effect as if such facsimile or “.pdf” signature page were an original thereof.
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5.13 Severability. If any term, provision, covenant, or restriction of this Agreement is held by a court of competent jurisdiction to be invalid, illegal, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions set forth herein shall remain in full force and effect and shall in no way be affected, impaired or invalidated, and the parties hereto shall use their commercially reasonable efforts to find and employ an alternative means to achieve the same or substantially the same result as that contemplated by such term, provision, covenant, or restriction. It is hereby stipulated and declared to be the intention of the parties that they would have executed the remaining terms, provisions, covenants, and restrictions without including any of such that may be hereafter declared invalid, illegal, void, or unenforceable.
5.14 Rescission and Withdrawal Right. Notwithstanding anything to the contrary contained in (and without limiting any similar provisions of) any of the other Transaction Documents, whenever any Purchaser exercises a right, election, demand or option under a Transaction Document and the Company does not timely perform its related obligations within the periods therein provided, then such Purchaser may rescind or withdraw, in its sole discretion from time to time upon written notice to the Company, any relevant notice, demand or election in whole or in part without prejudice to its future actions and rights; provided, however, that, in the case of a rescission of a conversion of a Note, the applicable Purchaser shall be required to return any shares of Common Stock subject to any such rescinded conversion notice concurrently with the restoration of such Purchaser’s right to acquire such shares pursuant to such Note (including issuance of a replacement Note evidencing such restored right).
5.15 Replacement of Securities. If any certificate or instrument evidencing any Securities is mutilated, lost, stolen, or destroyed, the Company shall issue or cause to be issued in exchange and substitution for and upon cancellation thereof (in the case of mutilation), or in lieu of and substitution therefor, a new certificate or instrument, but only upon receipt of evidence reasonably satisfactory to the Company of such loss, theft, or destruction. The applicant for a new certificate or instrument under such circumstances shall also pay any reasonable third-party costs (including customary indemnity) associated with the issuance of such replacement Securities.
5.16 Remedies. In addition to being entitled to exercise all rights provided herein or granted by law, including recovery of damages, each of the Purchasers and the Company will be entitled to specific performance under the Transaction Documents. The parties agree that monetary damages may not be adequate compensation for any loss incurred by reason of any breach of obligations contained in the Transaction Documents and hereby agree to waive and not to assert in any Action for specific performance of any such obligation the defense that a remedy at law would be adequate.
5.17 Payment Set Aside. To the extent that the Company makes a payment or payments to any Purchaser pursuant to any Transaction Document or a Purchaser enforces or exercises its rights thereunder, and such payment or payments or the proceeds of such enforcement or exercise or any part thereof are subsequently invalidated, declared to be fraudulent or preferential, set aside, recovered from, disgorged by or are required to be refunded, repaid or otherwise restored to the Company, a trustee, receiver or any other Person under any law (including, without limitation, any bankruptcy law, state or federal law, common law or equitable cause of action), then to the extent of any such restoration the obligation or part thereof originally intended to be satisfied shall be revived and continued in full force and effect as if such payment had not been made or such enforcement or setoff had not occurred.
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5.18 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 that may be brought by any Purchaser in order to enforce any right or remedy under any Transaction Document. Notwithstanding any provision to the contrary contained in any Transaction Document, it is expressly agreed and provided that the total liability of the Company under the Transaction Documents for payments 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 in the nature of interest that the Company may be obligated to pay under the Transaction Documents exceed such Maximum Rate. It is agreed that if the maximum contract rate of interest allowed by law and applicable to the Transaction Documents 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 Transaction Documents 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 any Purchaser with respect to indebtedness evidenced by the Transaction Documents, such excess shall be applied by such 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 such Purchaser’s election.
5.19 Independent Nature of Purchasers’ Obligations and Rights. The obligations of each Purchaser under any Transaction Document are several and not joint with the obligations of any other Purchaser, and no Purchaser shall be responsible in any way for the performance or non-performance of the obligations of any other Purchaser under any Transaction Document. Nothing contained herein or in any other Transaction Document, and no action taken by any Purchaser pursuant hereto or thereto, shall be deemed to constitute the Purchasers as a partnership, an association, a joint venture or any other kind of entity, or create a presumption that the Purchasers are in any way acting in concert or as a group with respect to such obligations or the transactions contemplated by the Transaction Documents. Notwithstanding the foregoing, all collateral administration, amendments, waivers, accelerations, enforcement actions and remedies relating to the Notes, Security Documents and collateral shall be exercised exclusively by the Collateral Agent acting at the direction of the Lead Investors in accordance with the Security Agreement. No Purchaser acting individually shall have the right to declare an Event of Default, accelerate any Note, foreclose upon collateral or otherwise exercise creditor remedies except as expressly provided in the Security Agreement.
5.20 Liquidated Damages. The Company’s obligations to pay any partial liquidated damages or other amounts owing under the Transaction Documents is a continuing obligation of the Company and shall not terminate until all unpaid partial liquidated damages and other amounts have been paid notwithstanding that the instrument or security pursuant to which such partial liquidated damages or other amounts are due and payable shall have been canceled.
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5.21 Saturdays, Sundays, Holidays, etc. If the last or appointed day for the taking of any Action or the expiration of any right required or granted herein shall not be a Business Day, then such Action may be taken, or such right may be exercised on the next succeeding Business Day.
5.22 Construction. The parties agree that each of them and/or their respective counsel have reviewed and had an opportunity to revise the Transaction Documents and, therefore, the normal rule of construction to the effect that any ambiguities are to be resolved against the drafting party shall not be employed in the interpretation of the Transaction Documents or any amendments thereto. In addition, each and every reference to share prices and shares of Common Stock in any Transaction Document shall be subject to adjustment for reverse and forward stock splits, stock dividends, stock combinations and other similar transactions of the Common Stock that occur after the date of this Agreement.
5.23 WAIVER OF JURY TRIAL. IN ANY ACTION, SUIT, OR PROCEEDING IN ANY JURISDICTION BROUGHT BY ANY PARTY AGAINST ANY OTHER PARTY, THE PARTIES EACH KNOWINGLY AND INTENTIONALLY, TO THE GREATEST EXTENT PERMITTED BY APPLICABLE LAW, HEREBY ABSOLUTELY, UNCONDITIONALLY, IRREVOCABLY AND EXPRESSLY WAIVES FOREVER TRIAL BY JURY.
(Signature Pages Follow)
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IN WITNESS WHEREOF, the parties hereto have caused this Securities Purchase Agreement to be duly executed by their respective authorized signatories as of the date first indicated above.
| ONAR HOLDING CORPORATION
|
| Address for Notice:
990 Biscayne Blvd, 5th Floor, Miami, FL 33132 | |
| By: |
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| Email: c@onar.com |
|
| Name: Claude Zdanow Title: Chief Executive Officer |
|
|
With a copy to (which shall not constitute notice):
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE PAGE FOR PURCHASER FOLLOWS]
| Signature Page to Securities Purchase Agreement |
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[PURCHASER SIGNATURE PAGE TO SECURITIES PURCHASE AGREEMENT]
IN WITNESS WHEREOF, the undersigned have caused this Securities Purchase Agreement to be duly executed by their respective authorized signatories as of the date first indicated above.
Name of Purchaser:
Signature of Authorized Signatory of Purchaser:
Name of Authorized Signatory:
Title of Authorized Signatory:
Email Address of Authorized Signatory:
Address for Notice to Purchaser:
Address for Delivery of Securities to Purchaser (if not same as address for notice):
Principal Amount: $
Subscription Amount: $
Incentive Shares:
EIN Number: _________________________
Wire Instructions to Purchaser for Interest Payments or Note Repayment:
Bank Name:
Routing No. ____________
Account No:
SWIFT
Bank Address:
Phone Number:
| Signature Page to Securities Purchase Agreement |
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EXHIBIT A
Form of Note
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EXHIBIT C
Form of Security Agreement
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EXHIBIT D
Form of Irrevocable Transfer Agent Instructions
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SCHEDULE I
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SCHEDULE II
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SCHEDULE 3.1(a)
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SCHEDULE 3.1(g)
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SCHEDULE 3.1(i)
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SCHEDULE 3.1(j)
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SCHEDULE 3.1(r)
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SCHEDULE 3.1(s)
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SCHEDULE 3.1(bb)
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EXHIBIT 10.3
THIS NOTE AND THE SECURITIES ISSUABLE UPON CONVERSION HEREOF HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS. THIS NOTE AND THE SECURITIES ISSUABLE UPON CONVERSION OF THIS NOTE MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT WITH A REGISTERED BROKER-DEALER OR OTHER LOAN WITH A FINANCIAL INSTITUTION THAT IS AN “ACCREDITED INVESTOR” AS DEFINED IN RULE 501(a) UNDER THE SECURITIES ACT OR OTHER LOAN SECURED BY SUCH SECURITIES. ANY TRANSFEREE OF THIS NOTE SHOULD CAREFULLY REVIEW THE TERMS OF THIS NOTE. THE PRINCIPAL AMOUNT REPRESENTED BY THIS NOTE AND, ACCORDINGLY, THE SECURITIES ISSUABLE UPON CONVERSION HEREOF, MAY BE LESS THAN THE AMOUNTS SET FORTH ON THE FACE HEREOF, PURSUANT TO THE TERMS OF THIS NOTE.
ONAR HOLDING CORPORATION
Senior Secured Convertible Promissory Note
| Original Issuance Date: September 28, 2026 |
|
| Principal (inclusive of a 10% OID): $[●] |
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| Maturity Date: September 28, 2027 |
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FOR VALUE RECEIVED, pursuant to that certain Securities Purchase Agreement, dated as of September 28, 2026 (the “Purchase Agreement”), by and between ONAR Holding Corporation, a Nevada corporation (the “Maker” or the “Company”), and _________________ or its registered assigns (the “Holder”), the Maker hereby promises to pay to the Holder the principal sum of $[●] (the “Principal”) pursuant to the terms of this Senior Secured Convertible Promissory Note (this “Note”).
This Note is one of a series of Notes issued pursuant to that certain Securities Purchase Agreement, dated as of September 28, 2026, by and among the Company and the holders party thereto (the “Purchase Agreement”), under which the Company may issue up to $5,000,000 aggregate principal amount of Notes pursuant to the Purchase Agreement.
ARTICLE 1
Section 1.1 Purchase Agreement. This Note is subject to, and entitled to the benefits of, the Purchase Agreement, the Security Agreement, and the other Transaction Documents. The provisions of the Purchase Agreement are hereby incorporated herein by reference as though fully set forth herein.
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Section 1.2 Interest.
(a) Interest shall accrue on the outstanding Principal, commencing on the Original Issuance Date, at a rate of twelve percent (12%) per annum (the “Interest”) and shall be computed on the basis of a 360-day year consisting of twelve 30-day months; provided, however, that the Interest for the first six (6) months on the Principal shall accrue immediately and be deemed earned in full, regardless of any repayment or conversion of this Note. Interest shall be payable in cash on the first Trading Day of each month and on the Maturity Date (each, an “Interest Payment Date”).
(b) From and after the occurrence and during the continuance of any Event of Default, the Interest shall be increased upon the election of the Collateral Agent in writing to the Company to the lower of (i) 18% per annum or (ii) the highest amount permitted by applicable law (such interest upon an Event of Default shall be referred to as “Interest” or “Default Interest”). Default Interest shall accrue on the outstanding Principal from the date of such Event of Default until the date such Event of Default is cured or waived by the Holder and shall be payable upon conversion, mandatory repayment, payment following a Change of Control, repayment or maturity of this Note.
Section 1.3 Prepayment. Upon five (5) Business Days prior written notice, and subject to the Maker paying at least six (6) months’ worth of interest, Maker shall have the right to voluntarily prepay, redeem or otherwise satisfy this Note prior to the Maturity Date without the written consent of the Holder.
Section 1.4 Secured Obligation. The obligations of the Maker under this Note are secured pursuant to the Security Agreement and the other Transaction Documents. The Collateral Agent shall hold all collateral securing this Note for the benefit of the holders of the Notes in accordance with the terms of the Security Agreement. Except as otherwise expressly provided in the Transaction Documents, the liens securing this Note shall be senior to all other liens and security interests other than Permitted Senior Debt and other liens expressly permitted under the Transaction Documents.
Section 1.5 Payment on Non-Trading Days. Whenever any payment to be made on this Note shall be due on a day which is not a Trading Day, such payment may be due on the next succeeding Trading Day.
Section 1.6 Replacement. Upon receipt of a duly executed Affidavit of Loss and Indemnity Agreement in customary form from the Holder with respect to the loss, theft or destruction of this Note (or any replacement hereof), or, in the case of a mutilation of this Note, upon surrender and cancellation of such Note, the Maker shall issue a new Note, of like tenor and amount, in lieu of such lost, stolen, destroyed or mutilated Note. The Holder shall not be required to post a bond or other security.
ARTICLE 2
Section 2.1 Events of Default. An “Event of Default” under this Note shall mean the occurrence and continuance of the following (unless the Event of Default is waived in writing by the Collateral Agent acting at the direction of the Lead Investors in accordance with the Security Agreement):
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(a) any default in the payment of the Principal, Interest, or other sums due under this Note issued to the Holder when due (whether on the Maturity Date, an Interest Payment Date or by acceleration or otherwise);
(b) the Maker shall fail to observe or perform any other covenant, condition or agreement contained in this Note or any Transaction Document, including without limitation, (i) other than as expressly permitted under this Note, the Purchase Agreement or the other Transaction Documents, the issuance of any securities of the Maker or its Subsidiaries other than an Exempt Issuance, the incurrence of any Indebtedness or the imposition of a Lien upon any of the assets of the Maker or its Subsidiaries, except for Permitted Indebtedness or Permitted Liens, respectively, (ii) failure to deliver the Conversion Shares on the Share Delivery Date; (iii) any other material breach of its covenants and obligations under the Purchase Agreement and other Transaction Documents entered into by and between the Maker and the Holder dated the Original Issuance Date; or (iv) the incurrence of Indebtedness other than Permitted Senior Debt or other indebtedness expressly permitted under this Note, the Purchase Agreement or the other Transaction Documents; provided, however, that with respect to any breach under this Section 2.1(b) that is capable of being cured, such breach shall not constitute an Event of Default unless such breach remains uncured for twenty (20) Business Days after written notice thereof from the Collateral Agent or the Lead Investors; provided, further, that no cure period shall apply to any Event of Default under Section 2.1(a) or to any breach that by its nature is incapable of cure;
(c) the Maker or any of its Subsidiaries shall (A) default in any payment of any amount or amounts of principal of or interest (if any) on $250,000 or more of any Indebtedness or (B) default in the observance or performance of any other agreement or condition relating to any such Indebtedness or contained in any instrument or agreement evidencing, securing, or relating thereto, or any other event shall occur or condition exist, the effect of which default or other event or condition is to cause, or to permit the holder or holders of such Indebtedness to cause, with the giving of notice if required, such Indebtedness to become due prior to its stated maturity;
(d) the Maker’s notice to the Holder, including by way of public announcement at any time of its inability to comply (including for any of the reasons described in Section 3.6(a) hereof) or its intention not to comply with proper requests for conversion of this Note into Preferred Shares;
(e) subject to compliance with applicable law, if the Holder has sold shares of Common Stock pursuant to Rule 144, when available, but only to the extent of the number of shares sold, the failure of the Maker to instruct its Transfer Agent (as hereinafter defined) to remove any legends from the Common Stock and issue such unlegended certificates to the Holder within the Standard Settlement Period; as used herein, “Standard Settlement Period” means the standard settlement period, expressed in a number of Trading Days, applicable to trades of the Common Stock on the Trading Market as in effect on the applicable date of issuance, transfer or legend removal. For avoidance of doubt, as of the Original Issuance Date the Standard Settlement Period is one Trading Day;
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(f) the Maker shall fail to timely deliver the Preferred Shares as and when required in Section 3.2;
(g) at any time the Maker shall fail to have the Required Minimum authorized, reserved and available for issuance to satisfy the potential conversion in full (disregarding for this purpose any and all limitations of any kind on such conversion) of this Note;
(h) any representation or warranty made by the Maker or any of its Subsidiaries in the Purchase Agreement, this Note, or any other Transaction Document shall prove to have been false or misleading or breached in a material respect on the date as of which made;
(i) the Maker or any of its Subsidiaries shall: (i) apply for or consent to the appointment of, or the taking of possession by, a receiver, custodian, trustee or liquidator of itself or of all or a substantial part of its property or assets; (ii) make a general assignment for the benefit of its creditors; (iii) commence a voluntary case under the United States Bankruptcy Code (as now or hereafter in effect) or under the comparable laws of any jurisdiction (foreign or domestic); (iv) file a petition seeking to take advantage of any bankruptcy, insolvency, moratorium, reorganization or other similar law affecting the enforcement of creditors’ rights generally; (v) acquiesce in writing to any petition filed against it in an involuntary case under United States Bankruptcy Code (as now or hereafter in effect) or under the comparable laws of any jurisdiction (foreign or domestic); (vi) issue a notice of bankruptcy or winding down of its operations or issue a press release regarding same; or (vii) take any action under the laws of any jurisdiction (foreign or domestic) analogous to any of the foregoing;
(j) a proceeding or case shall be commenced in respect of the Maker or any of its Subsidiaries, without its application or consent, in any court of competent jurisdiction, seeking: (i) the liquidation, reorganization, moratorium, dissolution, winding up, or composition or readjustment of its debts; (ii) the appointment of a trustee, receiver, custodian, liquidator or the like of it or of all or any substantial part of its assets in connection with the liquidation or dissolution of the Maker or any of its Subsidiaries; or (iii) similar relief in respect of it under any law providing for the relief of debtors, and such proceeding or case described in clause (i), (ii) or (iii) shall continue undismissed, or unstayed and in effect, for a period of 60 days or any order for relief shall be entered in an involuntary case under United States Bankruptcy Code (as now or hereafter in effect) or under the comparable laws of any jurisdiction (foreign or domestic) against the Maker or any of its Subsidiaries or action under the laws of any jurisdiction (foreign or domestic) analogous to any of the foregoing shall be taken with respect to the Maker or any of its Subsidiaries and shall continue undismissed, or unstayed and in effect for a period of 30 days;
(k) one or more final judgments or orders for the payment of money aggregating in excess of $250,000 (or its equivalent in the relevant currency of payment) are rendered against one or more of the Company and/or any of its Subsidiaries, that is not dismissed or stayed within 30 days;
(l) the Company fails to comply in any material respect with the reporting requirements of the Exchange Act (including but not limited to becoming delinquent in the filing of any report required to be filed under the Exchange Act which shall not be considered delinquent if an extension permitted by Rule 12b-25 under the Exchange Act has been timely filed and such filing is timely made within the applicable grace period) or ceases to be subject to the reporting requirements of the Exchange Act;
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(m) a final determination, not subject to appeal, has been made by the relevant exchange or market listed in this paragraph, that the Maker’s Common Stock ceases to be listed or quoted (after the Common Stock has been approved for listing or quotation and has in fact traded on such exchange or market) on the Trading Market, OTCQB, OTCQX, OTC Pink, The Nasdaq Capital Market, the NYSE American LLC, The Nasdaq Global Select Market, The Nasdaq Global Market or The New York Stock Exchange, Inc., or another national securities exchange or nationally recognized trading market;
(n) the Maker initiates a “going private” transaction and as a result its Common Stock may no longer registered under Section 12(b) of the Exchange Act;
(o) there shall be any SEC stop order with respect to any resale registration statement, a trading suspension by the SEC or the Trading Market of the Common Stock, or any restriction in place with the Transfer Agent for the Common Stock restricting the trading of such Common Stock which continues for two (2) Trading Days;
(p) the electronic transfer by the Company of shares of Common Stock through the Depository Trust Company or another established clearing corporation is no longer available or is subject to a “chill” which continues for two (2) Trading Days;
(q) if the Company replaces its Transfer Agent, the Company fails to instruct the new Transfer Agent to provide prior to the effective date of such replacement, a fully executed irrevocable transfer agent instructions (including but not limited to the provision to irrevocably reserve the Required Minimum) signed by the successor Transfer Agent and the Company;
(r) the Company’s Common Stock is not DWAC Eligible;
(s) the Company fails to be in compliance with the Securities Act and the Exchange Act in any material respect;
(t) any Change of Control; or
(u) any provision of any Transaction Document shall at any time for any reason (other than pursuant to the express terms thereof) cease to be valid and binding on or enforceable against the parties thereto, or the validity or enforceability thereof shall be contested by any party thereto, or a proceeding shall be commenced by the Company or any Governmental Authority having jurisdiction over any of them, seeking to establish the invalidity or unenforceability thereof, or the Company shall deny in writing that it has any liability or obligation purported to be created under any Transaction Document.
Section 2.2 Remedies Upon an Event of Default.
(a) Upon the occurrence and continuation of an Event of Default, the Holder may declare the Mandatory Default Amount immediately due and payable.
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(b) Notwithstanding anything contained herein to the contrary, all collateral administration, amendments, waivers, accelerations, foreclosures, enforcement actions and remedies relating to this Note, the Security Documents and the collateral securing this Note shall be exercised exclusively by the Collateral Agent acting at the direction of the Lead Investors in accordance with the Security Agreement.
ARTICLE 3
Section 3.1 Conversion.
(a) Voluntary Conversion. At any time after the Original Issue Date until this Note is no longer outstanding, this Note including interest accrued hereon shall be convertible, in whole or in part, into a Junior Note pursuant to Section 4.26 of the Purchase Agreement or Preferred Shares at the option of the Holder, at any time and from time to time (subject to the conversion limitations set forth in Section 3.2(e) hereof). The Holder shall effect conversions by delivering to Maker a Notice of Conversion, the form of which is attached hereto as Annex A (each, a “Notice of Conversion”), specifying therein the principal amount of this Note and accrued interest, if any, to be converted and the date on which such conversion shall be effected (such date, the “Conversion Date”). If no Conversion Date is specified in a Notice of Conversion, the Conversion Date shall be the date that such Notice of Conversion is deemed delivered hereunder. To effect conversions hereunder, the Holder shall not be required to physically surrender this Note to Maker unless the entire principal amount of this Note has been so converted. Conversions hereunder shall have the effect of lowering the outstanding principal amount of this Note in an amount equal to the applicable conversion. The Holder and Maker shall maintain records showing the principal amount(s) converted and the date of such conversion(s). Maker may deliver an objection to any Notice of Conversion within one (1) Business Day of delivery of such Notice of Conversion. In the event of any dispute or discrepancy, the records of the Holder shall be controlling and determinative in the absence of manifest error. The Holder, and any assignee by acceptance of this Note, acknowledges and agrees 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 may be less than the amount stated on the face hereof.
(b) Conversion Price. The “Conversion Price” shall be the Stated Value of the Preferred Shares as set forth in the Certificate of Designation.
Section 3.2 Delivery of Conversion Shares.
(a) As soon as practicable after any conversion or payment of any amount due hereunder in the form of Preferred Shares in accordance with this Note, and in any event within the Standard Settlement Period thereafter (such date, the “Share Delivery Date”), the Maker shall, at its expense, cause to be issued in the name of and delivered to the Holder, or as the Holder may direct, a certificate or certificates evidencing the number of shares of fully paid and non-assessable Preferred Shares to which the Holder shall be entitled on such conversion or payment (the “Conversion Shares”), as applicable, in the applicable denominations based on the applicable conversion or payment, which certificate or certificates shall be free of restrictive and trading legends (except for any such legends as may be required under the Securities Act). In lieu of delivering physical certificates for the Preferred Shares issuable upon any conversion of this Note, provided the Company’s transfer agent (the “Transfer Agent”) is participating in the Depository Trust Company (“DTC”) DTC Fast Automated Securities Transfer Program (“FAST”) or a similar program, upon request of the Holder, the Company shall cause the Transfer Agent to electronically transmit such Conversion Shares issuable upon conversion of this Note to the Holder (or its designee), by crediting the account of the Holder’s (or such designee’s) broker with DTC through its Deposit Withdrawal At Custodian system (provided that the same time periods herein as for stock certificates shall apply) as instructed by the Holder (or its designee).
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(b) Obligation Absolute; Partial Liquidated Damages. Maker’s obligations to issue and deliver the Conversion Shares upon conversion of this Note in accordance with the terms hereof are absolute and unconditional, irrespective of any action or inaction by the Holder to enforce the same, any waiver or consent with respect to any provision hereof, the recovery of any judgment against any Person or any action to enforce the same, or any setoff, counterclaim, recoupment, limitation or termination, or any breach or alleged breach by the Holder or any other Person of any obligation to Maker or any violation or alleged violation of law by the Holder or any other Person, and irrespective of any other circumstance which might otherwise limit such obligation of Maker to the Holder in connection with the issuance of such securities; provided, however, that such delivery shall not operate as a waiver by Maker of any such action Maker may have against the Holder. In the event the Holder of this Note shall elect to convert any or all of the outstanding principal amount hereof, Maker may not refuse conversion based on any claim that the Holder or anyone associated or affiliated with the Holder has been engaged in any violation of law, agreement or for any other reason, unless an injunction from a court, on notice to Holder, restraining and or enjoining conversion of all or part of this Note shall have been sought and obtained, and Maker posts a surety bond for the benefit of the Holder in the amount of 150% of the outstanding principal amount of this Note, which is subject to the injunction, which bond shall remain in effect until the completion of arbitration/litigation of the underlying dispute and the proceeds of which shall be payable to the Holder to the extent it obtains judgment. In the absence of such injunction, Maker shall issue Conversion Shares or, if applicable, cash, upon a properly noticed conversion. If Maker fails for any reason to deliver to the Holder such certificate or certificates pursuant to Section 4(c)(ii) by the Share Delivery Date, Maker shall pay to the Holder, in cash, as liquidated damages and not as a penalty, for each $1,000 of principal amount being converted, $10 per Trading Day (increasing to $20 per Trading Day on the fifth (5th) Trading Day after such liquidated damages being to accrue) for each Trading Day after such Share Delivery Date until such certificates are delivered or Holder rescinds such conversion. Nothing herein shall limit a Holder’s right to pursue actual damages or declare an Event of Default pursuant to Section 8 hereof for Maker’s failure to deliver Conversion Shares within the period specified herein and the Holder shall have the right to pursue all remedies available to it hereunder, at law or in equity including, without limitation, a decree of specific performance and/or injunctive relief. The exercise of any such rights shall not prohibit the Holder from seeking to enforce damages pursuant to any other Section hereof or under applicable law.
(c) Compensation for Buy-In on Failure to Timely Deliver Certificates Upon Conversion. In addition to any other rights available to the Holder, if Maker fails for any reason to deliver to the Holder such certificate or certificates by the Share Delivery Date pursuant to Section 4(c)(ii), and if after such Share Delivery Date the Holder is required by its brokerage firm to purchase (in an open market transaction or otherwise), or the Holder or Holder’s brokerage firm otherwise purchases, shares of Common Stock to deliver in satisfaction of a sale by the Holder of the Common Stock issuable upon conversion of the Preferred Shares which the Holder was entitled to receive upon the conversion relating to such Share Delivery Date (a “Buy-In”), then Maker shall (A) pay in cash to the Holder (in addition to any other remedies available to or elected by the Holder) the amount, if any, by which (x) the Holder’s total purchase price (including any brokerage commissions) for the Common Stock so purchased exceeds (y) the product of (1) the aggregate number of shares of Common Stock that the Holder was entitled to receive from the conversion at issue multiplied by (2) the actual sale price at which the sell order giving rise to such purchase obligation was executed (including any brokerage commissions) and (B) at the option of the Holder, either reissue (if surrendered) this Note in a principal amount equal to the principal amount of the attempted conversion (in which case such conversion shall be deemed rescinded) or deliver to the Holder the number of shares of Common Stock that would have been issued if Maker had timely complied with its delivery requirements under Section 4(c)(ii). For example, if the Holder purchases Common Stock having a total purchase price of $11,000 to cover a Buy-In with respect to an attempted conversion of this Note with respect to which the actual sale price of the Conversion Shares (including any brokerage commissions) giving rise to such purchase obligation was a total of $10,000 under clause (A) of the immediately preceding sentence, Maker shall be required to pay the Holder $1,000. The Holder shall provide Maker written notice indicating the amounts payable to the Holder in respect of the Buy-In and, upon request of Maker, evidence of the amount of such loss. Nothing herein shall limit a Holder’s right to pursue any other remedies available to it hereunder, at law or in equity including, without limitation, a decree of specific performance and/or injunctive relief with respect to Maker’s failure to timely deliver certificates representing shares of Common Stock upon conversion of this Note as required pursuant to the terms hereof.
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(d) [Reserved].
(e) Beneficial Ownership Limitation. The Company shall not effect any conversion of this Note, and a Holder shall not have the right to convert any portion of this Note, to the extent that after giving effect to the conversion set forth on the applicable Notice of Conversion, the Holder (together with the Holder’s Affiliates, and any Persons acting as a group together with the Holder or any of the Holder’s Affiliates) would beneficially own in excess of the Beneficial Ownership Limitation (as defined below) (the “Maximum Percentage”). For purposes of the foregoing sentence, the number of shares of Common Stock beneficially owned by the Holder and its Affiliates shall include the number of shares of Common Stock issuable upon conversion of Conversion Shares with respect to which such determination is being made, but shall exclude the number of shares of Common Stock which are issuable upon (i) conversion of the remaining, unconverted principal amount of this Note or related Conversion Shares beneficially owned by the Holder or any of its Affiliates and (ii) exercise or conversion of the unexercised or unconverted portion of any other securities of the Company subject to a limitation on conversion or exercise analogous to the limitation contained herein (including, without limitation, any other notes) beneficially owned by the Holder or any of its Affiliates. Except as set forth in the preceding sentence, for purposes of this Section 3.2(e), beneficial ownership shall be calculated in accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder. To the extent that the limitation contained in this Section 3.2(e) applies, the determination of whether this Note is convertible (in relation to other securities owned by the Holder together with any Affiliates) and of which principal amount of this Note is convertible shall be in the sole discretion of the Holder, and the submission of a Notice of Conversion shall be deemed to be the Holder’s determination of whether this Note may be converted (in relation to other securities owned by the Holder together with any Affiliates) and which principal amount of this Note is convertible, in each case subject to the Beneficial Ownership Limitation. To ensure compliance with this restriction, the Holder will be deemed to represent to the Company each time it delivers a Notice of Conversion that such Notice of Conversion has not violated the restrictions set forth in this paragraph and the Company shall have no obligation to verify or confirm the accuracy of such determination. In addition, a determination as to any group status as contemplated above shall be determined in accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder. For purposes of this Section 3.2(e), in determining the number of outstanding shares of Common Stock, the Holder may rely on the number of outstanding shares of Common Stock as stated in the most recent of the following: (i) the Company’s most recent periodic or annual report filed with the Commission, as the case may be, (ii) a more recent public announcement by the Company, or (iii) a more recent written notice by the Company or the Company’s transfer agent setting forth the number of shares of Common Stock outstanding. Upon the written or oral request of a Holder, the Company shall within two Trading Days confirm orally and in writing to the Holder the number of shares of Common Stock then outstanding. In any case, the number of outstanding shares of Common Stock shall be determined after giving effect to the conversion or exercise of securities of the Company, including this Note, by the Holder or its Affiliates since the date as of which such number of outstanding shares of Common Stock was reported. The “Beneficial Ownership Limitation” shall be 4.99% of the number of shares of the Common Stock outstanding immediately after giving effect to the issuance of shares of Common Stock issuable upon conversion of this Note or Conversion Shares held by the Holder. The Holder, upon not less than 61 days’ prior notice to the Company, may increase or decrease the Beneficial Ownership Limitation provisions of this Section 3.2(e), provided that the Beneficial Ownership Limitation in no event exceeds 9.99% of the number of shares of the Common Stock outstanding immediately after giving effect to the issuance of shares of Common Stock upon conversion of this Note or conversion of Conversion Shares held by the Holder and the Beneficial Ownership Limitation provisions of this Section 3.2(e) shall continue to apply. Any such increase will not be effective until the 61st day after such notice is delivered to the Company. The Beneficial Ownership Limitation provisions of this paragraph shall be construed and implemented in a manner otherwise than in strict conformity with the terms of this Section 3.2(e) to correct this paragraph (or any portion hereof) which may be defective or inconsistent with the intended Beneficial Ownership Limitation contained herein or to make changes or supplements necessary or desirable to properly give effect to such limitation. The limitations contained in this paragraph shall apply to a successor holder of this Note.
(f) Fractional Shares. The Company shall not issue any fraction of a Preferred Share upon any conversion. If the issuance would result in the issuance of a fraction of a Preferred Share, the Company shall round such fraction of a Preferred Share up to the nearest whole share.
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(g) No Impairment. The Maker shall not, by amendment of its Articles of Incorporation or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms to be observed or performed hereunder by the Maker, but will at all times in good faith assist in the carrying out of all the provisions of this Section 3.2 and in the taking of all such action as may be necessary or appropriate in order to protect the conversion rights of the Holder against impairment.
(h) Issuance Taxes. The Maker shall pay any and all issuance and other taxes, excluding federal, state, or local income taxes, that may be payable in respect of any issue or delivery of Preferred Shares on conversion of this Note pursuant thereto; provided, however, that the Maker shall not be obligated to pay any transfer taxes resulting from any transfer requested by the Holder in connection with any such conversion.
(i) Reservation of Common Stock. The Maker shall, at all times while any Note remains outstanding, reserve and keep available out of its authorized but unissued Common Stock a number of shares equal to 200% of the maximum number of shares that may be issuable pursuant to the Notes based upon an assumed conversion price of the Preferred Shares of $0.03 per share. If at any time the reserve becomes insufficient, the Company shall promptly take all actions necessary to increase its authorized capital and restore compliance with this Section.
(j) Regulatory Compliance. If any Common Stock to be reserved for the purpose of conversion of this Note requires registration or listing with or approval of any Governmental Authority, national securities exchange or other regulatory body under any federal or state law or regulation or otherwise before such shares may be validly issued or delivered upon conversion, the Maker shall, at its sole cost and expense, in good faith and as expeditiously as possible, secure such registration, listing or approval, as the case may be.
Section 3.3 Certain Adjustments. The Conversion Price and number and kind of shares or other securities to be issued upon conversion shall be subject to adjustment from time to time upon the happening of certain events while this conversion right remains outstanding, as follows:
(a) Merger, Sale of Assets, etc. If the Maker or any of its Subsidiaries at any time shall consolidate with or merge into or sell or convey all or substantially all its assets to any other entity, this Note, as to the unpaid principal portion thereof and accrued interest thereon, shall thereafter be deemed to evidence the right to convert into such number and kind of shares or other securities and property as would have been issuable or distributable on account of such consolidation, merger, sale or conveyance, upon or with respect to the securities subject to the conversion right immediately prior to such consolidation, merger, sale, or conveyance as determined in good faith by the Board of Directors and reasonably acceptable to the Collateral Agent. The foregoing provision shall similarly apply to successive transactions of a similar nature by any such successor or purchaser. Without limiting the generality of the foregoing, the anti-dilution provisions of this Section 3.3(a) shall apply to such securities of such successor or purchaser after any such consolidation, merger, sale, or conveyance.
(b) Reclassification, etc. If the Maker at any time shall, by reclassification or otherwise, change the Preferred Shares into the same or a different number of securities of any class or classes, this Note, as to the unpaid principal portion thereof and accrued interest thereon, shall thereafter be deemed to evidence the right to convert into an adjusted number of such securities and kind of securities as would have been issuable as the result of such change with respect to the Preferred Shares immediately prior to such reclassification or other change.
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(c) Stock Splits, Combinations and Dividends. If the shares of Common Stock are subdivided or combined into a greater or smaller number of shares of Common Stock, or if a dividend is paid on the Common Stock in shares of Common Stock, all references to Common Stock shall be proportionately reduced in case of subdivision of shares or stock dividend or proportionately increased in the case of combination of shares, in each such case by the ratio which the total number of shares of Common Stock outstanding immediately after such event bears to the total number of shares of Common Stock outstanding immediately prior to such event.
(d) Round-Down Adjustment. If the Company issues or sells any Common Stock, Preferred Shares, convertible security or other equity security at an effective price per share less than the Conversion Price then in effect, the Conversion Price shall automatically be adjusted to such lower price. For the avoidance of doubt, this anti-dilution protection shall survive the exchange of this Note into Preferred Shares and shall be reflected in the Certificate of Designation applicable to the Preferred Shares. Customary exclusions shall apply for equity incentive plans approved by the Board, strategic partnerships, acquisitions, and other Exempt Issuances. This adjustment shall not apply to Exempt Issuances. If any outstanding warrant, option, convertible security, preferred stock or other instrument is exercised, exchanged, converted, repriced, reset or amended, or otherwise results in the issuance of Common Stock at an effective price per share lower than the Conversion Price then in effect, the Conversion Price shall automatically be reduced to such lower effective price. Any such adjustment shall occur automatically without further action by the Holder. For the purposes of this Section 3.3(d), Conversion Price is as defined in the Purchase Agreement.
Section 3.4 [Reserved].
Section 3.5 Rights Upon Fundamental Transaction.
(a) Assumption. The Company shall not enter into or be party to a Fundamental Transaction without the consent of the Lead Investors and unless (i) the Person (which may be the Company) formed by, resulting from or surviving any Fundamental Transaction or the Person with which such Fundamental Transaction shall have been entered into (the “Successor Entity”) assumes in writing all of the obligations of the Company under this Note and the other Transaction Documents in accordance with the provisions of this Section 3.5(a) pursuant to written agreements in form and substance satisfactory to the Holder and approved by the Holder prior to such Fundamental Transaction, including agreements to deliver to the Holder in exchange for the Note a security of the Successor Entity evidenced by a written instrument substantially similar in form and substance to the Note, including, without limitation, having Principal and Interest equal to the Principal then outstanding and any accrued and unpaid Interest thereon (if any) of the Note held by the Holder, having similar conversion rights as the Note and having similar ranking and security to the Note, and satisfactory to the Holder and (ii) the Successor Entity (including its parent entity) is a publicly traded corporation whose common stock is quoted on or listed for trading on any eligible market, including The Nasdaq Capital Market, the NYSE American LLC, The Nasdaq Global Select Market, The Nasdaq Global Market or The New York Stock Exchange, Inc. Upon the occurrence of any Fundamental Transaction, the Successor Entity shall succeed to, and be substituted for (so that from and after the date of such Fundamental Transaction, the provisions of this Note and the other Transaction Documents referring to the “Company” or the “Maker” shall refer instead to the Successor Entity), and may exercise every right and power of the Company and shall assume all of the obligations of the Company under this Note and the other Transaction Documents with the same effect as if such Successor Entity had been named as the Company herein. Upon consummation of a Fundamental Transaction, the Successor Entity shall deliver to the Holder confirmation that there shall be issued upon conversion of this Note at any time after the consummation of such Fundamental Transaction, in lieu of the shares of Preferred Shares issuable upon the conversion of the Note prior to such Fundamental Transaction, such shares of the publicly traded common stock (or their equivalent) of the Successor Entity (including its parent entity) which the Holder would have been entitled to receive upon the happening of such Fundamental Transaction had this Note been converted immediately prior to such Fundamental Transaction (without regard to any limitations on the conversion of this Note), as adjusted in accordance with the provisions of this Note. Notwithstanding the foregoing, the Holder may elect, at its sole option, by delivery of written notice to the Company, to waive this Section 3.5(a) to permit the Fundamental Transaction without the assumption of this Note. The provisions of this Section 3.5(a) shall apply similarly and equally to successive Fundamental Transactions and shall be applied without regard to any limitations on the conversion of this Note.
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(b) Other Corporate Events. In addition to and not in substitution for any other rights hereunder, prior to the consummation of any Fundamental Transaction pursuant to which holders of shares of Common Stock are entitled to receive securities or other assets with respect to or in exchange for shares of Common Stock (a “Corporate Event”), the Company shall make appropriate provision to ensure that the Holder will thereafter have the right to receive upon a conversion of this Note, at the Holder’s option, (i) in addition to the shares of Common Stock receivable upon such conversion, such securities or other assets to which the Holder would have been entitled with respect to such shares of Common Stock had such shares of Common Stock been held by the Holder upon the consummation of such Corporate Event (without taking into account any limitations or restrictions on the convertibility of this Note) or (ii) in lieu of the shares of Common Stock otherwise receivable upon such conversion, such securities or other assets received by the holders of shares of Common Stock in connection with the consummation of such Corporate Event in such amounts as the Holder would have been entitled to receive had this Note initially been issued with conversion rights for the form of such consideration (as opposed to shares of Common Stock) at a conversion price for such consideration commensurate with the Conversion Price (as defined in the Purchase Agreement). Provision made pursuant to the preceding sentence shall be in a form and substance satisfactory to the Holder. The provisions of this Section 3.5(b) shall apply similarly and equally to successive Corporate Events and shall be applied without regard to any limitations on the conversion of this Note.
ARTICLE 4
Section 4.1 Covenants. For so long as there is any Outstanding Balance of this Note, unless otherwise approved by the Lead Investors in accordance with the Transaction Documents, the Company shall be bound by the following covenants
(a) Further Assurances. The Maker hereby agrees that, from time to time upon the written request of the Holder, it will execute and deliver such further documents and do such other acts and things as the Holder may reasonably request in order fully to comply will all of the Makers obligations under this Note, including without limitation in respect of Section 2.2(d).
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(b) Incurrence of Indebtedness. The Company shall not without the prior written consent of the Lead Investors, incur or guarantee or assume any Indebtedness (other than (i) the Note, (ii) Permitted Indebtedness, and (iii) Permitted Senior Debt, including liens securing such debt).
(c) Existence of Liens. Without the prior written consent of the Lead Investors, the Company shall not, and the Company shall cause each of its Subsidiaries to not, directly or indirectly, allow or suffer to exist any mortgage, lien, pledge, charge, security interest, deed of trust, or other encumbrance upon or in any property or assets (including accounts and contract rights) owned by the Company or any of its Subsidiaries (collectively, “Liens”) other than Permitted Liens.
(d) Restricted Payments. The Company shall not, and the Company shall cause each of its Subsidiaries to not, directly or indirectly, prepay, defease, repurchase, repay or make any payments in respect of, by the payment of cash or cash equivalents (in whole or in part, whether by way of open market purchases, tender offers, private transactions or otherwise), all or any portion of any Indebtedness (other than the Note whether by way of payment in respect of principal of (or premium, if any) or Interest on, such Indebtedness or fund any other obligation or otherwise make any other payments subject to Section 4.5(b). Notwithstanding the foregoing, the Company may make: (i) scheduled payments of principal and interest on Indebtedness on Schedule 3.1(bb) of the Purchase Agreement; (ii) payments pursuant to the Exchange Agreements; (iii) payments on Permitted Senior Debt; (iv) settlement payments relating to disclosed litigation; (v) payments relating to the Nasdaq Uplist; (vi) those settlement payments regarding matters previously disclosed in the SEC Reports; and (vii) other payments not exceeding $500,000 in the aggregate in any fiscal year.
(e) Restriction on Prepayment and Cash Dividends. The Company shall not, and the Company shall cause each of its Subsidiaries to not, directly or indirectly, prepay, repurchase or declare or pay any cash dividend or other distribution on any of its capital stock excluding any intercompany transfers.
(f) Restriction on Transfer of Assets. The Company shall not, and the Company shall cause each of its Subsidiaries to not, directly or indirectly, sell, lease, license, assign, transfer, spin-off, split-off, convey or otherwise dispose of any assets or rights of the Company or any Subsidiary owned or hereafter acquired whether in a single transaction or a series of related transactions, other than (i) sales, leases, licenses, assignments, transfers, conveyances, and other dispositions of such assets or rights by the Company and its Subsidiaries in the ordinary course of business consistent with its past practice, (ii) sales of inventory and products in the ordinary course of business, and (iii) sales of unwanted or obsolete assets or other assets that are not material to the business of the Company and its Subsidiaries.
(g) Preservation of Existence, Etc. The Company shall maintain and preserve, and cause each of its Subsidiaries to maintain and preserve, its existence, rights, and privileges, and become or remain, and cause each of its material Subsidiaries to become or remain, duly qualified and in good standing in each jurisdiction in which the character of the properties owned or leased by it or in which the transaction of its business makes such qualification necessary.
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(h) Maintenance of Properties, Etc. The Company shall maintain and preserve, and cause each of its material Subsidiaries to maintain and preserve, all of its properties which are necessary or useful in the proper conduct of its business in good working order and condition, ordinary wear and tear excepted, and comply, and cause each of its material Subsidiaries to comply, at all times with the provisions of all leases to which it is a party as lessee or under which it occupies property, so as to prevent any loss or forfeiture thereof or thereunder.
(i) Maintenance of Intellectual Property. The Company will, and will cause each of its material Subsidiaries to, take all reasonable action necessary or advisable to maintain all of the rights or licenses to use all trademarks, trade names, service marks, service mark registrations, service names, original works of authorship, patents, patent rights, copyrights, inventions, licenses, approvals, governmental authorizations, trade secrets, and other intellectual property rights and all applications and registrations therefor of the Company and/or any of its Subsidiaries, in each case that are necessary or material to the conduct of its business in full force and effect.
(j) Maintenance of Insurance. The Company shall maintain, and cause each of its Subsidiaries to maintain, insurance with responsible and reputable insurance companies or associations (including, without limitation, comprehensive general liability, hazard, rent and business interruption insurance) with respect to its properties (including all real properties leased or owned by it) and business, in such amounts and covering such risks as is required by any Governmental Authority having jurisdiction with respect thereto or as is carried generally by companies in similar businesses similarly situated. Within 30 days of the Original Issuance Date, the Company shall have in effect a directors and officers liability insurance policy in an amount at least equal to $2,000,000 and maintain such insurance policy at all times while any Note remains outstanding.
(k) Transactions with Affiliates. The Company shall not, nor shall it permit any of its Subsidiaries to, enter into, renew, extend or be a party to, any transaction or series of related transactions (including, without limitation, the purchase, sale, lease, transfer or exchange of property or assets of any kind or the rendering of services of any kind) with any Affiliate, except in the ordinary course of business or consistent with past practice and necessary or desirable for the prudent operation of its business, for fair consideration and on terms no less favorable to it or its Subsidiaries than would be obtainable in a comparable arm’s length transaction with a Person that is not an Affiliate thereof.
(l) Use of Proceeds. The Maker shall use the proceeds of this Note as set forth in the Purchase Agreement.
(m) Operation of Business. The Company and/or any of its Subsidiaries shall operate its business in the ordinary course consistent with past practices.
(n) Compliance with Transaction Documents. The Maker shall, and shall cause its Subsidiaries to, comply with its obligations under this Note and the other Transaction Documents.
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(o) Payment of Taxes, Etc. The Maker shall, and shall cause each of its Subsidiaries to, promptly pay and discharge, or cause to be paid and discharged, when due and payable, all lawful taxes, assessments and governmental charges or levies imposed upon the income, profits, property or business of the Maker and the Subsidiaries, except for such failures to pay that, individually or in the aggregate, have not had and would not reasonably be expected to have a Material Adverse Effect; provided, however, that any such tax, assessment, charge, or levy need not be paid if the validity thereof shall currently be contested in good faith by appropriate proceedings and if the Maker or such Subsidiaries shall have set aside on its books adequate reserves with respect thereto, and provided, further, that the Maker and such Subsidiaries will pay all such taxes, assessments, charges, or levies forthwith upon the commencement of proceedings to foreclose any lien which may have attached as security therefor.
Section 4.2 Option of the Holder. In connection with the number of Trading Days referred to in this Note, the Holder shall have the option to add the number of Trading Days for which a temporary “chill” has been in effect as specified in the Purchase Agreement. This Section 4.2 and any election by the Holder shall not be deemed to modify the Events of Default.
Section 4.3 Notice of Event of Default. Upon the occurrence of any Event of Default, the Maker shall immediately notify all Holders. If the Event of Default remains uncured beyond the applicable cure period set forth in Section 2.2(a), the Maker shall deliver written notice thereof to all Holders within two (2) Business Days following the expiration of such cure period, describing the nature of the Event of Default and the actions being taken to cure such Event of Default.
Section 4.4 General Provisions Regarding Payments.
(a) All payments by the Maker of principal, interest, fees and other obligations shall be made in U.S. Dollars in immediately available funds, without defense, recoupment, setoff or counterclaim, free of any restriction or condition, and delivered to the applicable Holder, not later than 4:00 p.m. to the Holder’s designated payment account on the date due or specified, without presentation or surrender of any Note or the making of any notation thereon, except upon the written request of the Maker made concurrently with or reasonably promptly after payment or prepayment in full of any Note, the Holder shall surrender such Note for cancellation, reasonably promptly after such request, to the Maker; funds received by the Holder after that time on such due date shall be deemed to have been paid by the Maker on the next Trading Day.
(b) All payments in respect of the principal amount of any Note shall be accompanied by payment of accrued interest on the principal amount being repaid and all other amounts payable with respect to the principal amount being repaid or prepaid.
(c) Whenever any payment to be made hereunder shall be stated to be due on a day that is not a Trading Day, such payment shall be made on the next succeeding Trading Day and such extension of time shall be included in the computation of the payment of interest hereunder or of the commitment fees hereunder.
(d) All payments or proceeds received by the Holder hereunder or under any Transaction Document in respect of any of the obligations, including, but not limited to all proceeds received by the Holder in respect of any sale, any collection from, or other realization upon all or any part of the Collateral (as defined in the Security Agreement), shall be applied in full or in part as follows:
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(i) first, ratably to pay the obligations in respect of any fees and indemnities then due and payable to the Holder until paid in full;
(ii) second, ratably to pay accrued interest in respect of the Note until paid in full; and
(iii) third, ratably to pay principal of the Note until paid in full.
ARTICLE 5
Section 5.1 Notices. Any and all notices or other communications or deliveries required or permitted to be provided hereunder shall be in writing and shall be deemed given and effective on the earliest of (a) the date of transmission, if such notice or communication is delivered via email at the email address specified in this Section 5.1 prior to 5:00 p.m. (New York, N.Y. time) on a Trading Day, (b) the next Trading Day after the date of transmission, if such notice or communication is delivered via email at the email address specified in this Section 5.1 on a day that is not a Trading Day or later than 5:00 p.m. (New York, N.Y. time) on any date and earlier than 11:59 p.m. (New York, N.Y. time) on such date, (c) the Trading Day following the date of delivery to a carrier , if sent by U.S. nationally recognized overnight courier service next Trading Day delivery, or (d) upon actual receipt by the party to whom such notice is required to be given. The addresses for notice shall be as set forth in the Purchase Agreement.
Section 5.2 Governing Law. This Note shall be governed by and construed in accordance with the Purchase Agreement. This Note shall not be interpreted or construed with any presumption against the party causing this Note to be drafted.
Section 5.3 Headings. Article and section headings in this Note are included herein for purposes of convenience of reference only and shall not constitute a part of this Note for any other purpose.
Section 5.4 Remedies, Characterizations, Other Obligations, Breaches and Injunctive Relief. The remedies provided in this Note shall be cumulative and in addition to all other remedies available under this Note, at law or in equity (including, without limitation, a decree of specific performance and/or other injunctive relief), no remedy contained herein shall be deemed a waiver of compliance with the provisions giving rise to such remedy and nothing herein shall limit the Holder’s right to pursue actual damages for any failure by the Maker to comply with the terms of this Note. Amounts set forth or provided for herein with respect to payments, conversion, and the like (and the computation thereof) shall be the amounts to be received by the Holder and shall not, except as expressly provided herein, be subject to any other obligation of the Maker (or the performance thereof). The Maker acknowledges that a breach by it of its obligations hereunder will cause irreparable and material harm to the Holder and that the remedy at law for any such breach would be inadequate. Therefore, the Maker agrees that, in the event of any such breach or threatened breach, the Holder shall be entitled, in addition to all other available rights and remedies, at law or in equity, to seek equitable relief, including but not limited to an injunction restraining any such breach or threatened breach, without the necessity of pleading and proving irreparable harm or lack of an adequate remedy at law and without any bond or other security being required.
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Section 5.5 Enforcement Expenses. The Maker agrees to pay all costs and expenses of the Holder in enforcing or exercising its rights under this Note, including, without limitation, reasonable attorneys’ fees and expenses and the fees and expenses of any expert witnesses.
Section 5.6 Binding Effect. The obligations of the Maker set forth herein shall be binding upon its successors and assigns, whether or not such successors or assigns are permitted by the terms herein.
Section 5.7 Transfers. Holder may transfer or assign this Note in accordance with applicable securities laws without Company consent to any affiliate, fund, financing source or permitted transferee.
Section 5.8 Amendments; Waivers. No provision of this Note may be amended, modified or waived except by the Company and the Lead Investors; provided that any amendment disproportionately and adversely affecting a Holder shall also require the consent of such Holder. No waiver of any default with respect to any provision, condition, or requirement of this Note shall be deemed to be a continuing waiver in the future or a waiver of any subsequent default or a waiver of any other provision, condition, or requirement hereof, nor shall any delay or omission of the Holder to exercise any right hereunder in any manner impair the exercise of any such right.
Section 5.9 Compliance with Securities Laws. The Holder of this Note acknowledges that this Note is being acquired solely for the Holder’s own account and not as a nominee for any other party, and for investment, and that the Holder shall not offer, sell, or otherwise dispose of this Note in violation of applicable securities laws. This Note and any Note issued in substitution or replacement therefor shall be stamped or imprinted with a legend in substantially the form as the legend on the face of this Note.
Section 5.10 Exclusive Jurisdiction; Venue. Any action, proceeding or claim arising out of, or relating in any way to, this Agreement shall be brought and enforced as provided in the Purchase Agreement.
Section 5.11 Failure or Indulgence Not Waiver. No failure or delay on the part of the Holder in the exercise of any power, right, or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such power, right, or privilege preclude other or further exercise thereof or of any other right, power, or privilege.
Section 5.12 Maker Waivers. Except as otherwise specifically provided herein, the Maker and all others that may become liable for all or any part of the obligations evidenced by this Note, hereby waive presentment, demand, notice of nonpayment, protest, and all other demands and notices in connection with the delivery, acceptance, performance, and enforcement of this Note, and do hereby consent to any number of renewals of extensions of the time or payment hereof and agree that any such renewals or extensions may be made without notice to any such persons and without affecting their liability herein and do further consent to the release of any person liable hereon, all without affecting the liability of the other persons, firms or Maker liable for the payment of this Note, and do hereby waive the right to a trial by jury.
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Section 5.13 Definitions. Capitalized terms used herein and not defined shall have the meanings set forth in the Purchase Agreement. For the purposes hereof, the following terms shall have the following meanings.
(a) “Affiliate” means, with respect to any Person, any other Person that directly or indirectly controls, is controlled by, or is under common control with, such Person, it being understood for purposes of this definition that “control” of a Person means the power directly or indirectly either to vote 10% or more of the stock having ordinary voting power for the election of directors of such Person or direct or cause the direction of the management and policies of such Person whether by contract or otherwise.
(b) “Attribution Parties” means, collectively, the following Persons and entities: (i) any investment vehicle, including, any funds, feeder funds or managed accounts, currently, or from time to time after the Original Issuance Date, directly or indirectly managed or advised by the Holder’s investment manager or any of its Affiliates or principals, (ii) any direct or indirect Affiliates of the Holder or any of the foregoing, (iii) any Person acting or who could be deemed to be acting as a Group together with the Holder or any of the foregoing and (iv) any other Persons whose beneficial ownership of the Company’s Common Stock would or could be aggregated with the Holder’s and the other Attribution Parties for purposes of Section 13(d) of the Exchange Act. For clarity, the purpose of the foregoing is to subject collectively the Holder and all other Attribution Parties to the Maximum Percentage.
(c) “Buy-In” has the meaning contained in Section 3.2(c).
(d) “Buy-In Price” has the meaning contained in Section 3.2(c).
(e) “Buy-In Payment Amount” has the meaning contained in Section 3.2(c).
(f) (a) “Certificate of Designation” means the Certificate of Designation of Series 1 Convertible Preferred Shares of ONAR Holding Corporation.
(g) “Change of Control” means any Fundamental Transaction other than (i) any merger of the Company or any of its, direct or indirect, wholly-owned Subsidiaries with or into any of the foregoing Persons, (ii) any reorganization, recapitalization or reclassification of the shares of Common Stock in which holders of the Company’s voting power immediately prior to such reorganization, recapitalization or reclassification continue after such reorganization, recapitalization or reclassification to hold publicly traded securities and, directly or indirectly, are, in all material respects, the holders of the voting power of the surviving entity (or entities with the authority or voting power to elect the members of the board of directors (or their equivalent if other than a corporation) of such entity or entities) after such reorganization, recapitalization or reclassification, or (iii) pursuant to a migratory merger effected solely for the purpose of changing the jurisdiction of incorporation of the Company or any of its Subsidiaries.
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(h) “COC Repayment Price” has the meaning contained in Section 3.5(c).
(i) “Collateral Agent” shall have the meaning as defined in the Purchase Agreement.
(j) “Common Stock” shall have the meaning as defined in the Purchase Agreement.
(k) “Company” has the meaning contained on page 1 of this Note.
(l) “Conversion Failure” has the meaning contained in Section 3.2(c).
(m) “Conversion Price” has the meaning contained in Section 3.1(b).
(n) “Conversion Shares” has the meaning contained in Section 3.2(a).
(o) “Convertible Securities” has the meaning contained in Section 3.4.
(p) “Corporate Event” has the meaning contained in Section 3.5(b).
(q) “Default Interest” has the meaning contained in Section 1.2.
(r) “DTC” has the meaning contained in Section 3.2(a).
(s) “Event of Default” has the meaning contained in Section 2.1.
(t) “Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.
(u) “Exempt Issuance” shall have the meaning contained in the Purchase Agreement.
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(v) “Fundamental Transaction” means (A) that the Company shall, directly or indirectly, including through Subsidiaries, Affiliates or otherwise, in one or more related transactions, (i) consolidate or merge with or into (whether or not the Company is the surviving corporation) another Person, or (ii) sell, assign, transfer, convey or otherwise dispose of all or substantially all of the properties or assets of the Company or any of its “significant subsidiaries” (as defined in Rule 1-02 of Regulation S-X) to one or more Persons, or (iii) make, or allow one or more Persons to make, or allow the Company to be subject to or have its Common Stock be subject to or party to one or more Persons making, a purchase, tender or exchange offer that is accepted by the holders of at least either (x) 50% of the outstanding shares of Common Stock, (y) 50% of the outstanding shares of Common Stock calculated as if any shares of Common Stock held by all Persons making or party to, or Affiliated with any Person or group of Persons making or party to, such purchase, tender or exchange offer were not outstanding; or (z) such number of shares of Common Stock such that all Persons making or party to, or Affiliated with any Person making or party to, such purchase, tender or exchange offer, become collectively the beneficial owners (as defined in Rule 13d-3 under the Exchange Act) of at least 50% of the outstanding shares of Common Stock, or (iv) consummate a stock or share purchase agreement or other business combination (including, without limitation, a reorganization, recapitalization, spin-off or scheme of arrangement) with one or more Persons whereby all such Persons, individually or in the aggregate, acquire, either (x) at least 50% of the outstanding shares of Common Stock, (y) at least 50% of the outstanding shares of Common Stock calculated as if any shares of Common Stock held by all the Persons making or party to, or Affiliated with any Person making or party to, such stock purchase agreement or other business combination were not outstanding; or (z) such number of shares of Common Stock such that the Persons become collectively the beneficial owners (as defined in Rule 13d-3 under the Exchange Act) of at least 50% of the outstanding shares of Common Stock, or (v) reorganize, recapitalize or reclassify its Common Stock, (B) that the Company shall, directly or indirectly, including through Subsidiaries, Affiliates or otherwise, in one or more related transactions, allow any Person individually or the Persons in the aggregate to be or become the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, whether through acquisition, purchase, assignment, conveyance, tender, tender offer, exchange, reduction in outstanding shares of Common Stock, merger, consolidation, business combination, reorganization, recapitalization, spin-off, scheme of arrangement, reorganization, recapitalization or reclassification or otherwise in any manner whatsoever, of either (x) at least 50% of the aggregate ordinary voting power represented by issued and outstanding Common Stock, (y) at least 50% of the aggregate ordinary voting power represented by issued and outstanding Common Stock not held by all such Persons as of the date of this Note calculated as if any shares of Common Stock held by all such Persons were not outstanding, or (z) a percentage of the aggregate ordinary voting power represented by issued and outstanding shares of Common Stock or other equity securities of the Company sufficient to allow such Persons to effect a statutory short form merger or other transaction requiring other shareholders of the Company to surrender their shares of Common Stock without approval of the shareholders of the Company or (C) directly or indirectly, including through Subsidiaries, Affiliates or otherwise, in one or more related transactions, the issuance of or the entering into any other instrument or transaction structured in a manner to circumvent, or that circumvents, the intent of this definition in which case this definition shall be construed and implemented in a manner otherwise than in strict conformity with the terms of this definition to the extent necessary to correct this definition or any portion of this definition which may be defective or inconsistent with the intended treatment of such instrument or transaction.
(w) “Governmental Authority” means the government of the United States, or any political subdivision thereof, whether state or local, and any agency, authority, instrumentality, regulatory body, court, central bank, or other entity exercising executive, legislative, judicial, taxing, regulatory, or administrative powers or functions of or pertaining to government.
(x) “Group” means a “group” as that term is used in Section 13(d) of the Exchange Act and as defined in Rule 13d-5 thereunder.
(y) “Holder” has the meaning contained on page 1 of this Note.
(z) “Indebtedness” means: (a) all obligations for borrowed money; (b) all obligations evidenced by bonds, debentures, notes, or other similar instruments and all reimbursement or other obligations in respect of letters of credit, bankers acceptances, current swap agreements, interest rate hedging agreements, interest rate swaps, or other financial products; (c) all obligations or liabilities secured by a lien or encumbrance on any asset of the Maker, irrespective of whether such obligation or liability is assumed; and (d) any obligation guaranteeing or intended to guarantee (whether directly or indirectly guaranteed, endorsed, co-made, discounted or sold with recourse) any of the foregoing obligations of any other person.
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(aa) “Interest” has the meaning contained in Section 1.2.
(bb) “Lead Investors” shall have the meaning set forth in the Purchase Agreement.
(cc) “Liens” has the meaning contained in Section 4.1(c).
(dd) “Maker” has the meaning contained on page 1 of this Note.
(ee) “Mandatory Default Amount” means an amount equal to 105% of the sum of (x) the outstanding Principal of this Note on the date on which the first Event of Default has occurred hereunder and (y) any accrued and unpaid Interest thereon, if any.
(ff) “Material Adverse Effect” shall have the meaning set forth in the Purchase Agreement.
(gg) “Maturity Date” has the meaning contained on page 1 of this Note.
(hh) “Maximum Percentage” has the meaning contained in Section 3.2(e).
(ii) “Note” has the meaning contained on page 1 of this Note.
(jj) “Outstanding Balance” has the meaning contained in Section 1.2.
(kk) “Permitted Indebtedness” means (i) the Indebtedness evidenced by the Note, (ii) indebtedness existing as of the date hereof, (iii) Indebtedness under the Transaction Documents, and (iv) other unsecured Indebtedness of the Company and its Subsidiaries in an aggregate outstanding principal amount not to exceed $500,000 at any time.
(ll) “Permitted Liens” means (i) Liens under the Transaction Documents, (ii) any lien for taxes not yet due or delinquent or being contested in good faith by appropriate proceedings for which adequate reserves have been established in accordance with GAAP, (iii) any statutory Lien arising in the ordinary course of business by operation of law with respect to a liability that is not yet due or delinquent, (iv) any Lien created by operation of law, such as materialmen’s Liens, mechanics’ Liens and other similar Liens, arising in the ordinary course of business with respect to a liability that is not yet due or delinquent or that are being contested in good faith by appropriate proceedings, (v) Liens arising from judgments, decrees or attachments in circumstances not constituting an Event of Default under this Note, or Liens securing Permitted Senior Debt, provided that such Liens secure only Permitted Senior Debt and are subject to intercreditor arrangements reasonably acceptable to the Collateral Agent and (vi) Liens disclosed to the Holder on or prior to the date hereof.
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(mm) “Permitted Senior Debt” means (i) one or more senior secured credit facilities, term loans, acquisition facilities or similar financing arrangements incurred by the Company and its Subsidiaries in an aggregate principal amount not exceeding $3,000,000, or such higher amount needed to equal $15,000,000 when combined with the aggregate principal amount of Notes as described in the Preferred SPA outstanding at any time, (ii) trade payables, purchase money indebtedness and capital lease obligations incurred in the ordinary course of business, (iii) seller notes, earnout obligations and deferred purchase price obligations incurred in connection with acquisitions permitted under the Purchase Agreement, (iv) refinancing indebtedness that refinances Permitted Senior Debt and does not increase the principal amount thereof except for customary fees, expenses and accrued interest, and (v) other indebtedness approved in writing by the Lead Investors.
(nn) “Preferred Shares” means the shares of Series 1 convertible preferred stock issued upon the Nasdaq Uplist in exchange for the Notes pursuant to the Transaction Documents.
(oo) “Principal” has the meaning contained on page 1 of this Note.
(pp) “Purchase Agreement” has the meaning on Page 1 of this Note.
(qq) “Required Minimum” shall have the meaning contained in the Purchase Agreement.
(rr) “Reverse Stock Split” means a reverse stock split of the Common Stock effected by the Company in order to satisfy the initial listing requirements of Nasdaq in connection with the Nasdaq Uplist.
(ss) “SEC” means the United States Securities and Exchange Commission or the successor thereto.
(tt) “Securities Act” means the Securities Act of 1933, as amended, and the rules and regulations thereunder.
(uu) “Security Agreement” shall have the meaning as defined in the Purchase agreement.
(vv) “Share Delivery Date” has the meaning contained in Section 3.2(a).
(ww) “Standard Settlement Period” has the meaning contained in Section 2.1(e).
(xx) “Stated Value” shall have the meaning set forth in the Certificate of Designation.
(yy) “Subsidiary” shall have the meaning contained in the Purchase Agreement.
(zz) “Successor Entity” has the meaning contained in Section 3.5(a).
(aaa) “Trading Day” means a day on which the principal Trading Market is open for trading.
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(bbb) “Trading Market” has the meaning contained in the Purchase Agreement.
(ccc) “Transaction Documents” has the meaning contained in the Purchase Agreement.
(ddd) “Transfer Agent” has the meaning contained in Section 3.2(a).
(eee) “Underlying Shares” has the meaning contained in the Purchase Agreement.
(fff) “VWAP” means, for any date, the price determined by the first of the following clauses that applies: (a) if the Common Stock is then listed or quoted on the Trading Market, the daily volume weighted average price of the Common Stock for such date (or the nearest preceding date) on the Trading Market on which the Common Stock is then listed or quoted as reported by Bloomberg L.P. (based on a Trading Day from 9:30 a.m. (New York, N.Y. time) to 4:00 p.m. (New York, N.Y. time)), (b) if the Common Stock is traded on OTCQB, OTCQX or OTC Pink, the volume weighted average sales price of the Common Stock for such date (or the nearest preceding date) on OTCQB, OTCQX or OTC Pink as applicable, (c) if the Common Stock is not then listed or quoted for trading on OTCQB or OTCQX and if prices for the Common Stock is then reported in OTC Pink or successor operated by OTC Markets Group, Inc. (or a similar organization or agency succeeding to its functions of reporting prices), the most recent bid price per share of the Common Stock so reported, or (d) in all other cases, the fair market value of a share of Common Stock as determined by an independent broker-dealer selected in good faith by the Holder and reasonably acceptable to the Company, the fees and expenses of which shall be paid by the Company.
[Signature Page Follows]
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IN WITNESS WHEREOF, the Maker has caused this Note to be duly executed by its duly authorized officer as of the date first above indicated.
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| ONAR HOLDING CORPORATION |
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| By: |
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| Name: | Claude Zdanow |
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| Title: | Chief Executive Officer |
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EXHIBIT 10.4
THIS NOTE AND THE SECURITIES ISSUABLE UPON CONVERSION HEREOF HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS. THIS NOTE AND THE SECURITIES ISSUABLE UPON CONVERSION OF THIS NOTE MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT WITH A REGISTERED BROKER-DEALER OR OTHER LOAN WITH A FINANCIAL INSTITUTION THAT IS AN “ACCREDITED INVESTOR” AS DEFINED IN RULE 501(a) UNDER THE SECURITIES ACT OR OTHER LOAN SECURED BY SUCH SECURITIES. ANY TRANSFEREE OF THIS NOTE SHOULD CAREFULLY REVIEW THE TERMS OF THIS NOTE. THE PRINCIPAL AMOUNT REPRESENTED BY THIS NOTE AND, ACCORDINGLY, THE SECURITIES ISSUABLE UPON CONVERSION HEREOF, MAY BE LESS THAN THE AMOUNTS SET FORTH ON THE FACE HEREOF, PURSUANT TO THE TERMS OF THIS NOTE.
ONAR HOLDING CORPORATION
Secured Convertible Promissory Note
| Original Issuance Date: September 28, 2026 | Principal: $[●] |
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| Maturity Date: March 28, 2028 | Loan Amount: $[●] |
FOR VALUE RECEIVED, ONAR Holding Corporation, a Nevada corporation (the “Maker” or the “Company”), hereby promises to pay to the holder listed in Schedule I hereto or its registered assigns (the “Holder”) the principal sum of $[●] (the “Principal”) pursuant to the terms of this Secured Convertible Promissory Note (this “Note”). In exchange for delivery of this Note on the Original Issuance Date referred to above, the Holder shall lend the Maker an aggregate of $[●] as set forth in Schedule I in United States dollars net of an original issuance discount of ten percent (10%), or $[●].
This Note is one of a series of Notes issued pursuant to that certain Securities Purchase Agreement dated as of September 28, 2026, by and among the Company and the holders party thereto (the “Purchase Agreement”), under which the Company may issue up to $15,000,000 aggregate principal amount of Notes, including Notes issued in exchange for existing indebtedness pursuant to Exchange Agreements.
ARTICLE 1
Section 1.1 Purchase Agreement. This Note has been executed and delivered pursuant to, and is issued pursuant to, the Purchase Agreement, dated as of the Original Issuance Date, by and between the Maker and the Holder, and is subject to, and incorporates, the provisions of the Purchase Agreement. This Note is one of a series of Notes issued pursuant to the Purchase Agreement and is subject to, and entitled to the benefits of, the Purchase Agreement, the Security Agreement, the Registration Rights Agreement, the Exchange Agreement and the other Transaction Documents. The provisions of the Purchase Agreement are hereby incorporated by reference herein as if fully set forth herein.
Section 1.2 Interest; Monthly Payments.
(a) Interest shall accrue on the Outstanding Balance (as defined below), commencing on the Original Issuance Date, at a rate of eight percent (8%) per annum (the “Interest”) and shall be computed on the basis of a 360-day year consisting of twelve 30-day months; provided, however, that the Interest for the first six (6) months on the Principal shall accrue immediately and be deemed earned in full, regardless of any repayment or conversion of this Note. Interest shall be payable in cash on the first Trading Day of each month and on the Maturity Date (each, an “Interest Payment Date”); provided that any accrued and unpaid Interest outstanding as of the Nasdaq Uplist shall be paid in cash simultaneously with the exchange or conversion of this Note and shall not convert into Preferred Shares, Common Stock or any other equity security. Interest may not be paid in Common Stock or any other equity security. “Outstanding Balance” means the Principal, as reduced or increased pursuant to the terms hereof, for conversion or payment, together with all accrued but unpaid Interest, collection and enforcement costs, and any other fees, expenses or charges due under this Note.
(b) The Outstanding Balance shall amortize in six (6) equal monthly installments commencing on the date that is twelve (12) months following the Original Issuance Date and continuing on each monthly anniversary thereafter until paid in full. All amortization payments shall be payable solely in cash. The Outstanding Balance shall be payable upon the earliest of (i) conversion pursuant to Article 3, (ii) redemption pursuant to Section 1.3, or (iii) the Maturity Date. All amortization payments, interest payments and other amounts payable under this Note shall be payable solely in cash until the exchange or conversion of this Note pursuant to Article 3.
(c) From and after the occurrence and during the continuance of any Event of Default, the Interest shall be increased upon the election of the Collateral Agent in writing to the Company to the lower of (i) 12% per annum or (ii) the highest amount permitted by applicable law (such interest upon an Event of Default shall be referred to as “Interest” or “Default Interest”). Default Interest shall accrue on the Outstanding Balance from the date of such Event of Default until the date such Event of Default is cured or waived by the Collateral Agent in accordance with the Transaction Documents and shall be payable upon conversion, mandatory repayment, payment following a Change of Control, repayment or maturity of this Note. If such Event of Default is subsequently cured and no other Event of Default then exists (including, without limitation, for the Company’s failure to pay such Default Interest on the applicable Default Interest Payment Date), the Default Interest shall cease to accrue hereunder as of the day immediately following the date of such cure; provided that the Interest as calculated and unpaid at such increased rate during the continuance of such Event of Default shall continue to apply to the extent relating to the days after the occurrence of such Event of Default through and including the date of such cure of such Event of Default.
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Section 1.3 Prepayment. Other than as expressly contemplated in the Exchange Agreements, Maker shall have no right to voluntarily prepay, redeem or otherwise satisfy this Note prior to the Maturity Date except with prior written consent of the Holder.
Section 1.4 Secured Obligation. The obligations of the Maker under this Note are secured pursuant to the Security Agreement and the other Transaction Documents. The Collateral Agent shall hold all collateral securing this Note for the benefit of the holders of the Notes in accordance with the terms of the Security Agreement. Except as otherwise expressly provided in the Transaction Documents, the liens securing this Note shall be senior to all other liens and security interests other than Permitted Senior Debt and other liens expressly permitted under the Transaction Documents.
Section 1.5 Payment on Non-Trading Days. Whenever any payment to be made on this Note shall be due on a day which is not a Trading Day, such payment may be due on the next succeeding Trading Day.
Section 1.6 Replacement. Upon receipt of a duly executed Affidavit of Loss and Indemnity Agreement in customary form from the Holder with respect to the loss, theft or destruction of this Note (or any replacement hereof), or, in the case of a mutilation of this Note, upon surrender and cancellation of such Note, the Maker shall issue a new Note, of like tenor and amount, in lieu of such lost, stolen, destroyed or mutilated Note. The Holder shall not be required to post a bond or other security.
ARTICLE 2
Section 2.1 Events of Default. An “Event of Default” under this Note shall mean the occurrence and continuance of the following (unless the Event of Default is waived in writing by the Collateral Agent acting at the direction of the Lead Investors in accordance with the Security Agreement):
(a) any default in the payment of the Principal, Interest, or other sums due under this Note issued to the Holder when due (whether on the Maturity Date, an Interest Payment Date or by acceleration or otherwise);
(b) the Maker shall fail to observe or perform any other covenant, condition or agreement contained in this Note or any Transaction Document, including without limitation, (i) other than as expressly permitted under this Note, the Purchase Agreement or the other Transaction Documents, the issuance of any securities of the Maker or its Subsidiaries other than an Exempt Issuance, the incurrence of any Indebtedness or the imposition of a Lien upon any of the assets of the Maker or its Subsidiaries, except for Permitted Indebtedness or Permitted Liens, respectively, (ii) failure to deliver the Conversion Shares on the Share Delivery Date; (iii) any other material breach of its covenants and obligations under the Purchase Agreement and other Transaction Documents entered into by and between the Maker and the Holder dated the Original Issuance Date; or (iv) the incurrence of Indebtedness other than Permitted Senior Debt or other indebtedness expressly permitted under this Note, the Purchase Agreement or the other Transaction Documents; provided, however, that with respect to any breach under this Section 2.1(b) that is capable of being cured, such breach shall not constitute an Event of Default unless such breach remains uncured for twenty (20) Business Days after written notice thereof from the Collateral Agent or the Lead Investors; provided, further, that no cure period shall apply to any Event of Default under Section 2.1(a) or to any breach that by its nature is incapable of cure;
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(c) the Maker or any of its Subsidiaries shall (A) default in any payment of any amount or amounts of principal of or interest (if any) on $250,000 or more of any Indebtedness or (B) default in the observance or performance of any other agreement or condition relating to any such Indebtedness or contained in any instrument or agreement evidencing, securing, or relating thereto, or any other event shall occur or condition exist, the effect of which default or other event or condition is to cause, or to permit the holder or holders of such Indebtedness to cause, with the giving of notice if required, such Indebtedness to become due prior to its stated maturity;
(d) the Maker’s notice to the Holder, including by way of public announcement at any time of its inability to comply (including for any of the reasons described in Section 3.6(a) hereof) or its intention not to comply with proper requests for conversion of this Note into Preferred Shares;
(e) subject to compliance with applicable law, if the Holder has sold shares of Common Stock pursuant to Rule 144, when available, but only to the extent of the number of shares sold, the failure of the Maker to instruct its Transfer Agent (as hereinafter defined) to remove any legends from the Common Stock and issue such unlegended certificates to the Holder within the Standard Settlement Period; as used herein, “Standard Settlement Period” means the standard settlement period, expressed in a number of Trading Days, applicable to trades of the Common Stock on the Trading Market as in effect on the applicable date of issuance, transfer or legend removal. For avoidance of doubt, as of the Original Issuance Date the Standard Settlement Period is one Trading Day;
(f) the Maker shall fail to timely deliver the Preferred Shares as and when required in Section 3.2;
(g) at any time the Maker shall fail to have the Required Minimum authorized, reserved and available for issuance to satisfy the potential conversion in full (disregarding for this purpose any and all limitations of any kind on such conversion) of this Note;
(h) any representation or warranty made by the Maker or any of its Subsidiaries in the Purchase Agreement, this Note, or any other Transaction Document shall prove to have been false or misleading or breached in a material respect on the date as of which made;
(i) the Maker or any of its Subsidiaries shall: (i) apply for or consent to the appointment of, or the taking of possession by, a receiver, custodian, trustee or liquidator of itself or of all or a substantial part of its property or assets; (ii) make a general assignment for the benefit of its creditors; (iii) commence a voluntary case under the United States Bankruptcy Code (as now or hereafter in effect) or under the comparable laws of any jurisdiction (foreign or domestic); (iv) file a petition seeking to take advantage of any bankruptcy, insolvency, moratorium, reorganization or other similar law affecting the enforcement of creditors’ rights generally; (v) acquiesce in writing to any petition filed against it in an involuntary case under United States Bankruptcy Code (as now or hereafter in effect) or under the comparable laws of any jurisdiction (foreign or domestic); (vi) issue a notice of bankruptcy or winding down of its operations or issue a press release regarding same; or (vii) take any action under the laws of any jurisdiction (foreign or domestic) analogous to any of the foregoing;
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(j) a proceeding or case shall be commenced in respect of the Maker or any of its Subsidiaries, without its application or consent, in any court of competent jurisdiction, seeking: (i) the liquidation, reorganization, moratorium, dissolution, winding up, or composition or readjustment of its debts; (ii) the appointment of a trustee, receiver, custodian, liquidator or the like of it or of all or any substantial part of its assets in connection with the liquidation or dissolution of the Maker or any of its Subsidiaries; or (iii) similar relief in respect of it under any law providing for the relief of debtors, and such proceeding or case described in clause (i), (ii) or (iii) shall continue undismissed, or unstayed and in effect, for a period of 60 days or any order for relief shall be entered in an involuntary case under United States Bankruptcy Code (as now or hereafter in effect) or under the comparable laws of any jurisdiction (foreign or domestic) against the Maker or any of its Subsidiaries or action under the laws of any jurisdiction (foreign or domestic) analogous to any of the foregoing shall be taken with respect to the Maker or any of its Subsidiaries and shall continue undismissed, or unstayed and in effect for a period of 30 days;
(k) one or more final judgments or orders for the payment of money aggregating in excess of $250,000 (or its equivalent in the relevant currency of payment) are rendered against one or more of the Company and/or any of its Subsidiaries, that is not dismissed or stayed within 30 days;
(l) the Company fails to comply in any material respect with the reporting requirements of the Exchange Act (including but not limited to becoming delinquent in the filing of any report required to be filed under the Exchange Act which shall not be considered delinquent if an extension permitted by Rule 12b-25 under the Exchange Act has been timely filed and such filing is timely made within the applicable grace period) or ceases to be subject to the reporting requirements of the Exchange Act;
(m) [Reserved].
(n) a final determination, not subject to appeal, has been made by the relevant exchange or market listed in this paragraph, that the Maker’s Common Stock ceases to be listed or quoted (after the Common Stock has been approved for listing or quotation and has in fact traded on such exchange or market) on the Trading Market, OTCQB, OTCQX, OTC Pink, The Nasdaq Capital Market, the NYSE American LLC, The Nasdaq Global Select Market, The Nasdaq Global Market or The New York Stock Exchange, Inc., or another national securities exchange or nationally recognized trading market;
(o) [Reserved].
(p) the Maker initiates a “going private” transaction and as a result its Common Stock may no longer registered under Section 12(b) of the Exchange Act;
(q) there shall be any SEC stop order with respect to any resale registration statement, a trading suspension by the SEC or the Trading Market of the Common Stock, or any restriction in place with the Transfer Agent for the Common Stock restricting the trading of such Common Stock which continues for two (2) Trading Days;
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(r) the electronic transfer by the Company of shares of Common Stock through the Depository Trust Company or another established clearing corporation is no longer available or is subject to a “chill” which continues for two (2) Trading Days;
(s) if the Company replaces its Transfer Agent, the Company fails to instruct the new Transfer Agent to provide prior to the effective date of such replacement, a fully executed irrevocable transfer agent instructions (including but not limited to the provision to irrevocably reserve the Required Minimum) signed by the successor Transfer Agent and the Company;
(t) the Company’s Common Stock is not DWAC Eligible;
(u) the Company fails to be in compliance with the Securities Act and the Exchange Act in any material respect; or
(v) any provision of any Transaction Document shall at any time for any reason (other than pursuant to the express terms thereof) cease to be valid and binding on or enforceable against the parties thereto, or the validity or enforceability thereof shall be contested by any party thereto, or a proceeding shall be commenced by the Company or any Governmental Authority having jurisdiction over any of them, seeking to establish the invalidity or unenforceability thereof, or the Company shall deny in writing that it has any liability or obligation purported to be created under any Transaction Document.
Section 2.2 Remedies Upon an Event of Default.
(a) Notwithstanding anything contained herein to the contrary: (i) a payment default under Section 2.1(a) shall not constitute an Event of Default unless such failure remains uncured for five (5) Business Days after written notice thereof is received by the Company; and (ii) any Event of Default arising under Section 2.1(b) that is capable of cure shall not constitute an Event of Default unless such default remains uncured for twenty (20) days after written notice thereof. Upon the occurrence and continuation of an Event of Default, the Collateral Agent acting at the direction of the Lead Investors may declare the Mandatory Default Amount immediately due and payable. The Mandatory Default Amount shall be immediately due and payable to the Holder in immediately available funds free and clear of all Liens; provided that upon the occurrence of an Event of Default described in Section 2.1(i) or (j) above, the Mandatory Default Amount shall become immediately due and payable without any declaration or other act on the part of the Holder; provided further, immediately upon the occurrence of any Event of Default described in Section 2.1 (i) or (j) above, or upon failure to pay this Note in full on the Maturity Date, the Holder, without any notice to the Maker, which notice is expressly waived by the Maker, may proceed to protect, enforce, exercise and pursue any and all rights and remedies available to the Maker under this Note and any other agreement or instrument, and any and all rights and remedies available to the Holder at law or in equity.
(b) Subject to the applicable cure period in Section 2.2(a), upon the occurrence of any Event of Default, the Holder may at any time at its option declare, the Mandatory Default Amount due and payable, and thereupon, the same shall be accelerated and so due and payable immediately or if such Event of Default may be cured or remedied within the cure period specified in Section 2.2(a), at the end of such cure period. Upon the failure of the Maker to cure an Event of Default within the time permitted by this Note, or if the Event of Default is not capable of being cured, the remedies provided in this Note.
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(c) The provisions of Section 3.2(b) and (c) shall also apply upon any Events of Default relating to Conversion Shares in addition to the remedies under this Section 2.2.
(d) Any Event of Default may be waived by the Company and the Collateral Agent acting at the direction of the Lead Investors.
(e) Notwithstanding anything contained herein to the contrary, all collateral administration, amendments, waivers, accelerations, foreclosures, enforcement actions and remedies relating to this Note, the Security Documents and the collateral securing this Note shall be exercised exclusively by the Collateral Agent acting at the direction of the Lead Investors in accordance with the Security Agreement.
ARTICLE 3
Section 3.1 Conversion.
(a) Exchange. This Note shall become subject to exchange only upon the occurrence of the Nasdaq Uplist and in accordance with the terms set forth herein and the other Transaction Documents. Upon the Nasdaq Uplist, the Outstanding Balance of this Note, excluding accrued and unpaid Interest, which shall be paid in cash simultaneously with such exchange, shall automatically exchange into Preferred Shares in accordance with the Transaction Documents. Such exchange shall occur automatically and simultaneously with the exchange of all other Notes then outstanding pursuant to the Transaction Documents. Following such exchange, this Note shall be deemed cancelled in full, and all rights of the Holder shall thereafter be represented solely by the Preferred Shares issued in exchange for this Note and governed by the applicable Certificate of Designation and the Transaction Documents. No exchange notice, surrender of this Note or other action by the Holder shall be required to effect the Uplist Conversion. Notwithstanding anything herein to the contrary, no automatic exchange of this Note into Preferred Shares shall occur while an Event of Default exists and remains uncured. If an Event of Default has occurred prior to the Nasdaq Uplist, the Company shall not be entitled to require or effect the exchange of this Note unless and until such Event of Default has been fully cured or expressly waived by the applicable Holder.
(b) Conversion Price. The “Conversion Price” shall be the Stated Value of the Preferred Shares as set forth in the Certificate of Designation.
(c) Nasdaq Uplist Conversion. Upon the Nasdaq Uplist, all outstanding Principal and all accrued but unpaid Interest under this Note shall automatically convert on a dollar-for-dollar basis into Preferred Shares having an aggregate stated value equal to such Principal and accrued but unpaid Interest. Such conversion shall occur automatically and without any action, election, notice, consent, demand or instruction by the Holder. Following such conversion, this Note shall be deemed cancelled in full and all rights of the Holder shall thereafter be represented solely by the Preferred Shares issued pursuant to this Section and governed by the applicable Certificate of Designation and the Transaction Documents.
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(d) Incentive Shares. Upon the Nasdaq Uplist and in connection with the conversion of this Note, the Holder shall be entitled to receive Incentive Shares in accordance with the Purchase Agreement, the Registration Rights Agreement and the other Transaction Documents. The issuance, delivery and transfer mechanics for such Incentive Shares shall be governed by the Purchase Agreement and the other Transaction Documents. Such Incentive Shares shall be issued in addition to, and not in lieu of, the Conversion Shares otherwise issuable upon conversion of this Note. In no event shall the aggregate value of the Incentive Shares issuable to the Holder be less than twenty percent (20%) of such Holder's invested principal amount under this Note, calculated using the Conversion Price (as defined in the Purchase Agreement).
Section 3.2 Delivery of Conversion Shares.
(a) As soon as practicable after any conversion or payment of any amount due hereunder in the form of Preferred Shares in accordance with this Note, and in any event within the Standard Settlement Period thereafter (such date, the “Share Delivery Date”), the Maker shall, at its expense, cause to be issued in the name of and delivered to the Holder, or as the Holder may direct, a certificate or certificates evidencing the number of shares of fully paid and non-assessable Preferred Shares to which the Holder shall be entitled on such conversion or payment (the “Conversion Shares”), as applicable, in the applicable denominations based on the applicable conversion or payment, which certificate or certificates shall be free of restrictive and trading legends (except for any such legends as may be required under the Securities Act). In lieu of delivering physical certificates for the Preferred Shares issuable upon any conversion of this Note, provided the Company’s transfer agent (the “Transfer Agent”) is participating in the Depository Trust Company (“DTC”) DTC Fast Automated Securities Transfer Program (“FAST”) or a similar program, upon request of the Holder, the Company shall cause the Transfer Agent to electronically transmit such Conversion Shares issuable upon conversion of this Note to the Holder (or its designee), by crediting the account of the Holder’s (or such designee’s) broker with DTC through its Deposit Withdrawal At Custodian system (provided that the same time periods herein as for stock certificates shall apply) as instructed by the Holder (or its designee).
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(b) Obligation Absolute. The Company’s obligations to issue and deliver the Conversion Shares and any Preferred Shares issued pursuant to the Uplist Conversion in accordance with the terms hereof are absolute and unconditional, irrespective of any action or inaction by the Holder to enforce the same, any waiver or consent with respect to any provision hereof, the recovery of any judgment against any Person or any action to enforce the same, or any setoff, counterclaim, recoupment, limitation or termination, or any breach or alleged breach by the Holder or any other Person of any obligation to the Company or any violation or alleged violation of law by the Holder or any other Person, and irrespective of any other circumstance which might otherwise limit such obligation of the Company to the Holder in connection with the issuance of such securities; provided, however, that such delivery shall not operate as a waiver by the Company of any such action the Company may have against the Holder. Upon the Nasdaq Uplist and the automatic Uplist Conversion contemplated by this Article 3, the Company may not refuse or delay such conversion based on any claim that the Holder or anyone associated or affiliated with the Holder has engaged in any violation of law, violation of any agreement to which the Holder or the Company is a party, or for any other reason, unless (i) an injunction issued by a court of competent jurisdiction, on notice to the Holder, restraining or enjoining the conversion of all or part of this Note shall have been sought and obtained, and (ii) the Company posts a surety bond for the benefit of the Holder in an amount equal to 100% of the Outstanding Balance subject to such injunction, which bond shall remain in effect until the completion of the underlying litigation and the proceeds thereof shall be payable to the Holder to the extent awarded by a final judgment. In the absence of such injunction, the Company shall timely complete the Uplist Conversion and issue the applicable Preferred Shares, Conversion Shares and any other securities required to be issued pursuant to this Note and the Transaction Documents.
(c) The Company’s Failure to Timely Convert. If the Company shall fail for any reason or for no reason, on or prior to the applicable Share Delivery Date, to issue and deliver the Preferred Shares, Conversion Shares or other securities required to be issued pursuant to the automatic Uplist Conversion contemplated by Article 3 (a “Conversion Failure”), then, in addition to all other remedies available to the Holder, the Holder may, by written notice to the Company, require the Company to redeem, in cash, the portion of the Outstanding Balance affected by such Conversion Failure at a redemption price equal to the Mandatory Default Amount applicable thereto. In addition to the foregoing, if on or prior to the Share Delivery Date, the Company shall fail to issue and deliver any securities required to be issued pursuant to the automatic Uplist Conversion and, as a result of such failure, the Holder acquires (in an open market transaction, stock loan or otherwise) shares of Common Stock corresponding to all or any portion of the number of shares that the Holder was entitled to receive from the Company pursuant to such conversion (a “Buy-In”), then, in addition to all other remedies available to the Holder, the Company shall, within five (5) Trading Days after receipt of the Holder's request, at the Holder's election: (i) pay cash to the Holder in an amount equal to the Holder's total purchase price (including brokerage commissions, stock loan costs and other out-of-pocket expenses, if any) for the shares of Common Stock so acquired (the “Buy-In Price”), at which time the Company's obligation to issue such shares shall terminate; or (ii) promptly honor its obligation to issue the applicable securities and pay cash to the Holder in an amount equal to the excess, if any, of the Buy-In Price over the product of (x) the number of shares required to be issued multiplied by (y) the lowest closing sale price of the Common Stock on any Trading Day during the period commencing on the date of the Nasdaq Uplist and ending on the date of such issuance and payment (the “Buy-In Payment Amount”). Nothing herein shall limit the Holder's right to pursue any other remedies available at law or in equity, including specific performance and injunctive relief, with respect to the Company's failure to timely complete the automatic Uplist Conversion or issue the securities required pursuant to Article 3.
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(d) [Reserved].
(e) Beneficial Ownership Limitation. The Company shall not effect any conversion of this Note, and a Holder shall not have the right to convert any portion of this Note, to the extent that after giving effect to the conversion set forth on the applicable Notice of Conversion, the Holder (together with the Holder’s Affiliates, and any Persons acting as a group together with the Holder or any of the Holder’s Affiliates) would beneficially own in excess of the Beneficial Ownership Limitation (as defined below) (the “Maximum Percentage”). For purposes of the foregoing sentence, the number of shares of Common Stock beneficially owned by the Holder and its Affiliates shall include the number of shares of Common Stock issuable upon conversion of this Note or conversion of Conversion Shares with respect to which such determination is being made, but shall exclude the number of shares of Common Stock which are issuable upon (i) conversion of the remaining, unconverted principal amount of this Note or related Conversion Shares beneficially owned by the Holder or any of its Affiliates and (ii) exercise or conversion of the unexercised or unconverted portion of any other securities of the Company subject to a limitation on conversion or exercise analogous to the limitation contained herein (including, without limitation, any other notes) beneficially owned by the Holder or any of its Affiliates. Except as set forth in the preceding sentence, for purposes of this Section 3.2(e), beneficial ownership shall be calculated in accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder. To the extent that the limitation contained in this Section 3.2(e) applies, the determination of whether this Note is convertible (in relation to other securities owned by the Holder together with any Affiliates) and of which principal amount of this Note is convertible shall be in the sole discretion of the Holder, and the submission of a Notice of Conversion shall be deemed to be the Holder’s determination of whether this Note may be converted (in relation to other securities owned by the Holder together with any Affiliates) and which principal amount of this Note is convertible, in each case subject to the Beneficial Ownership Limitation. To ensure compliance with this restriction, the Holder will be deemed to represent to the Company each time it delivers a Notice of Conversion that such Notice of Conversion has not violated the restrictions set forth in this paragraph and the Company shall have no obligation to verify or confirm the accuracy of such determination. In addition, a determination as to any group status as contemplated above shall be determined in accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder. For purposes of this Section 3.2(e), in determining the number of outstanding shares of Common Stock, the Holder may rely on the number of outstanding shares of Common Stock as stated in the most recent of the following: (i) the Company’s most recent periodic or annual report filed with the Commission, as the case may be, (ii) a more recent public announcement by the Company, or (iii) a more recent written notice by the Company or the Company’s transfer agent setting forth the number of shares of Common Stock outstanding. Upon the written or oral request of a Holder, the Company shall within two Trading Days confirm orally and in writing to the Holder the number of shares of Common Stock then outstanding. In any case, the number of outstanding shares of Common Stock shall be determined after giving effect to the conversion or exercise of securities of the Company, including this Note, by the Holder or its Affiliates since the date as of which such number of outstanding shares of Common Stock was reported. The “Beneficial Ownership Limitation” shall be 4.99% of the number of shares of the Common Stock outstanding immediately after giving effect to the issuance of shares of Common Stock issuable upon conversion of this Note or Conversion Shares held by the Holder. The Holder, upon not less than 61 days’ prior notice to the Company, may increase or decrease the Beneficial Ownership Limitation provisions of this Section 3.2(e), provided that the Beneficial Ownership Limitation in no event exceeds 9.99% of the number of shares of the Common Stock outstanding immediately after giving effect to the issuance of shares of Common Stock upon conversion of this Note or conversion of Conversion Shares held by the Holder and the Beneficial Ownership Limitation provisions of this Section 3.2(e) shall continue to apply. Any such increase will not be effective until the 61st day after such notice is delivered to the Company. The Beneficial Ownership Limitation provisions of this paragraph shall be construed and implemented in a manner otherwise than in strict conformity with the terms of this Section 3.2(e) to correct this paragraph (or any portion hereof) which may be defective or inconsistent with the intended Beneficial Ownership Limitation contained herein or to make changes or supplements necessary or desirable to properly give effect to such limitation. The limitations contained in this paragraph shall apply to a successor holder of this Note.
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(f) Fractional Shares. The Company shall not issue any fraction of a Preferred Share upon any conversion. If the issuance would result in the issuance of a fraction of a Preferred Share, the Company shall round such fraction of a Preferred Share up to the nearest whole share.
(g) No Impairment. The Maker shall not, by amendment of its Articles of Incorporation or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms to be observed or performed hereunder by the Maker, but will at all times in good faith assist in the carrying out of all the provisions of this Section 3.2 and in the taking of all such action as may be necessary or appropriate in order to protect the conversion rights of the Holder against impairment.
(h) Issuance Taxes. The Maker shall pay any and all issuance and other taxes, excluding federal, state, or local income taxes, that may be payable in respect of any issue or delivery of Preferred Shares on conversion of this Note pursuant thereto; provided, however, that the Maker shall not be obligated to pay any transfer taxes resulting from any transfer requested by the Holder in connection with any such conversion.
(i) Reservation of Common Stock. The Maker shall, at all times while any Note remains outstanding, reserve and keep available out of its authorized but unissued Common Stock a number of shares equal to 200% of the maximum number of shares that may be issuable pursuant to the Notes, Warrants and Incentive Shares based upon an assumed conversion price of the Preferred Shares of $0.03 per share. If at any time the reserve becomes insufficient, the Company shall promptly take all actions necessary to increase its authorized capital and restore compliance with this Section. The reserve obligations set forth herein shall automatically terminate upon the Uplist Conversion.
(j) Regulatory Compliance. If any Common Stock to be reserved for the purpose of conversion of this Note requires registration or listing with or approval of any Governmental Authority, national securities exchange or other regulatory body under any federal or state law or regulation or otherwise before such shares may be validly issued or delivered upon conversion, the Maker shall, at its sole cost and expense, in good faith and as expeditiously as possible, secure such registration, listing or approval, as the case may be.
Section 3.3 Certain Adjustments. The Conversion Price and number and kind of shares or other securities to be issued upon conversion shall be subject to adjustment from time to time upon the happening of certain events while this conversion right remains outstanding, as follows:
(a) Merger, Sale of Assets, etc. If the Maker or any of its Subsidiaries at any time shall consolidate with or merge into or sell or convey all or substantially all its assets to any other entity, this Note, as to the unpaid principal portion thereof and accrued interest thereon, shall thereafter be deemed to evidence the right to convert into such number and kind of shares or other securities and property as would have been issuable or distributable on account of such consolidation, merger, sale or conveyance, upon or with respect to the securities subject to the conversion right immediately prior to such consolidation, merger, sale, or conveyance as determined in good faith by the Board of Directors and reasonably acceptable to the Collateral Agent. The foregoing provision shall similarly apply to successive transactions of a similar nature by any such successor or purchaser. Without limiting the generality of the foregoing, the anti-dilution provisions of this Section 3.3(a) shall apply to such securities of such successor or purchaser after any such consolidation, merger, sale, or conveyance.
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(b) Reclassification, etc. If the Maker at any time shall, by reclassification or otherwise, change the Preferred Shares into the same or a different number of securities of any class or classes, this Note, as to the unpaid principal portion thereof and accrued interest thereon, shall thereafter be deemed to evidence the right to convert into an adjusted number of such securities and kind of securities as would have been issuable as the result of such change with respect to the Preferred Shares immediately prior to such reclassification or other change.
(c) Stock Splits, Combinations and Dividends. If the shares of Common Stock are subdivided or combined into a greater or smaller number of shares of Common Stock, or if a dividend is paid on the Common Stock in shares of Common Stock, all references to Common Stock shall be proportionately reduced in case of subdivision of shares or stock dividend or proportionately increased in the case of combination of shares, in each such case by the ratio which the total number of shares of Common Stock outstanding immediately after such event bears to the total number of shares of Common Stock outstanding immediately prior to such event.
(d) Round-Down Adjustment. If at any time prior to the Nasdaq Uplist, the Company issues or sells any Common Stock, Preferred Shares, convertible security or other equity security at an effective price per share less than the Conversion Price then in effect, the Conversion Price shall automatically be adjusted to such lower price. For the avoidance of doubt, this anti-dilution protection shall survive the exchange of this Note into Preferred Shares and shall be reflected in the Certificate of Designation applicable to the Preferred Shares. Customary exclusions shall apply for equity incentive plans approved by the Board, strategic partnerships, acquisitions, and other Exempt Issuances. If any outstanding warrant, option, convertible security, preferred stock or other instrument is exercised, exchanged, converted, repriced, reset or amended, or otherwise results in the issuance of Common Stock at an effective price per share lower than the Conversion Price then in effect, the Conversion Price shall automatically be reduced to such lower effective price. Any such adjustment shall occur automatically without further action by the Holder. For the purposes of this Section 3.3(d), Conversion Price is as defined in the Purchase Agreement.
Section 3.4 [Reserved].
Section 3.5 Rights Upon Fundamental Transaction.
(a) Assumption. The Company shall not enter into or be party to a Fundamental Transaction without the consent of the Lead Investors and unless (i) the Person (which may be the Company) formed by, resulting from or surviving any Fundamental Transaction or the Person with which such Fundamental Transaction shall have been entered into (the “Successor Entity”) assumes in writing all of the obligations of the Company under this Note and the other Transaction Documents in accordance with the provisions of this Section 3.5(a) pursuant to written agreements in form and substance satisfactory to the Holder and approved by the Holder prior to such Fundamental Transaction, including agreements to deliver to the Holder in exchange for the Note a security of the Successor Entity evidenced by a written instrument substantially similar in form and substance to the Note, including, without limitation, having Principal and Interest equal to the Principal then outstanding and any accrued and unpaid Interest thereon (if any) of the Note held by the Holder, having similar conversion rights as the Note and having similar ranking and security to the Note, and satisfactory to the Holder and (ii) the Successor Entity (including its parent entity) is a publicly traded corporation whose common stock is quoted on or listed for trading on any eligible market, including The Nasdaq Capital Market, the NYSE American LLC, The Nasdaq Global Select Market, The Nasdaq Global Market or The New York Stock Exchange, Inc. Upon the occurrence of any Fundamental Transaction, the Successor Entity shall succeed to, and be substituted for (so that from and after the date of such Fundamental Transaction, the provisions of this Note and the other Transaction Documents referring to the “Company” or the “Maker” shall refer instead to the Successor Entity), and may exercise every right and power of the Company and shall assume all of the obligations of the Company under this Note and the other Transaction Documents with the same effect as if such Successor Entity had been named as the Company herein. Upon consummation of a Fundamental Transaction, the Successor Entity shall deliver to the Holder confirmation that there shall be issued upon conversion of this Note at any time after the consummation of such Fundamental Transaction, in lieu of the shares of Preferred Shares issuable upon the conversion of the Note prior to such Fundamental Transaction, such shares of the publicly traded common stock (or their equivalent) of the Successor Entity (including its parent entity) which the Holder would have been entitled to receive upon the happening of such Fundamental Transaction had this Note been converted immediately prior to such Fundamental Transaction (without regard to any limitations on the conversion of this Note), as adjusted in accordance with the provisions of this Note. Notwithstanding the foregoing, the Holder may elect, at its sole option, by delivery of written notice to the Company, to waive this Section 3.5(a) to permit the Fundamental Transaction without the assumption of this Note. The provisions of this Section 3.5(a) shall apply similarly and equally to successive Fundamental Transactions and shall be applied without regard to any limitations on the conversion of this Note.
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(b) Other Corporate Events. In addition to and not in substitution for any other rights hereunder, prior to the consummation of any Fundamental Transaction pursuant to which holders of shares of Common Stock are entitled to receive securities or other assets with respect to or in exchange for shares of Common Stock (a “Corporate Event”), the Company shall make appropriate provision to ensure that the Holder will thereafter have the right to receive upon a conversion of this Note, at the Holder’s option, (i) in addition to the shares of Common Stock receivable upon such conversion, such securities or other assets to which the Holder would have been entitled with respect to such shares of Common Stock had such shares of Common Stock been held by the Holder upon the consummation of such Corporate Event (without taking into account any limitations or restrictions on the convertibility of this Note) or (ii) in lieu of the shares of Common Stock otherwise receivable upon such conversion, such securities or other assets received by the holders of shares of Common Stock in connection with the consummation of such Corporate Event in such amounts as the Holder would have been entitled to receive had this Note initially been issued with conversion rights for the form of such consideration (as opposed to shares of Common Stock) at a conversion price for such consideration commensurate with the Conversion Price (as defined in the Purchase Agreement). Provision made pursuant to the preceding sentence shall be in a form and substance satisfactory to the Holder. The provisions of this Section 3.5(b) shall apply similarly and equally to successive Corporate Events and shall be applied without regard to any limitations on the conversion of this Note.
(c) Prepayment Following a Change of Control. No later than 15 days following the entry by the Company into an agreement for a Change of Control but in no event prior to the public announcement of such Change of Control, the Maker shall deliver written notice describing the entry into such agreement (“Notice of Change of Control”) to the Holder. Within 30 days after receipt of a Notice of Change of Control, the Holder may require the Maker to prepay, effective immediately prior to the consummation of such Change of Control, an amount equal to 120% of the then Outstanding Balance (the “COC Repayment Price”), by delivering written notice thereof (“Notice of Prepayment at Option of Holder Upon Change of Control”) to the Maker.
(d) Payment of COC Repayment Price. Upon the Maker’s receipt of a Notice(s) of Prepayment at Option of Holder Upon Change of Control from the Holder, the Maker shall deliver the COC Repayment Price to the Holder immediately prior to the consummation of the Change of Control; provided, that the Holder’s original Note shall have been so delivered to the Maker.
ARTICLE 4
Section 4.1 Covenants. For so long as there is any Outstanding Balance of this Note, unless otherwise approved by the Lead Investors in accordance with the Transaction Documents, the Company shall be bound by the following covenants
(a) Further Assurances. The Maker hereby agrees that, from time to time upon the written request of the Holder, it will execute and deliver such further documents and do such other acts and things as the Holder may reasonably request in order fully to comply will all of the Makers obligations under this Note, including without limitation in respect of Section 2.2(d).
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(b) Incurrence of Indebtedness. The Company shall not without the prior written consent of the Lead Investors, incur or guarantee or assume any Indebtedness (other than (i) the Note, (ii) Permitted Indebtedness, and (iii) Permitted Senior Debt, including liens securing such debt).
(c) Existence of Liens. Without the prior written consent of the Lead Investors, the Company shall not, and the Company shall cause each of its Subsidiaries to not, directly or indirectly, allow or suffer to exist any mortgage, lien, pledge, charge, security interest, deed of trust, or other encumbrance upon or in any property or assets (including accounts and contract rights) owned by the Company or any of its Subsidiaries (collectively, “Liens”) other than Permitted Liens.
(d) Restricted Payments. The Company shall not, and the Company shall cause each of its Subsidiaries to not, directly or indirectly, prepay, defease, repurchase, repay or make any payments in respect of, by the payment of cash or cash equivalents (in whole or in part, whether by way of open market purchases, tender offers, private transactions or otherwise), all or any portion of any Indebtedness (other than the Note whether by way of payment in respect of principal of (or premium, if any) or Interest on, such Indebtedness or fund any other obligation or otherwise make any other payments subject to Section 4.5(b). Notwithstanding the foregoing, the Company may make: (i) scheduled payments of principal and interest on Indebtedness on Schedule 3.1(bb) of the Purchase Agreement; (ii) payments pursuant to the Exchange Agreements; (iii) payments on Permitted Senior Debt; (iv) settlement payments relating to disclosed litigation; (v) payments relating to the Nasdaq Uplist; (vi) those settlement payments regarding matters previously disclosed in the SEC Reports; and (vii) other payments not exceeding $500,000 in the aggregate in any fiscal year.
(e) Restriction on Prepayment and Cash Dividends. The Company shall not, and the Company shall cause each of its Subsidiaries to not, directly or indirectly, prepay, repurchase or declare or pay any cash dividend or other distribution on any of its capital stock excluding any intercompany transfers.
(f) Restriction on Transfer of Assets. The Company shall not, and the Company shall cause each of its Subsidiaries to not, directly or indirectly, sell, lease, license, assign, transfer, spin-off, split-off, convey or otherwise dispose of any assets or rights of the Company or any Subsidiary owned or hereafter acquired whether in a single transaction or a series of related transactions, other than (i) sales, leases, licenses, assignments, transfers, conveyances, and other dispositions of such assets or rights by the Company and its Subsidiaries in the ordinary course of business consistent with its past practice, (ii) sales of inventory and products in the ordinary course of business, and (iii) sales of unwanted or obsolete assets or other assets that are not material to the business of the Company and its Subsidiaries.
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(g) Preservation of Existence, Etc. The Company shall maintain and preserve, and cause each of its Subsidiaries to maintain and preserve, its existence, rights, and privileges, and become or remain, and cause each of its material Subsidiaries to become or remain, duly qualified and in good standing in each jurisdiction in which the character of the properties owned or leased by it or in which the transaction of its business makes such qualification necessary.
(h) Maintenance of Properties, Etc. The Company shall maintain and preserve, and cause each of its material Subsidiaries to maintain and preserve, all of its properties which are necessary or useful in the proper conduct of its business in good working order and condition, ordinary wear and tear excepted, and comply, and cause each of its material Subsidiaries to comply, at all times with the provisions of all leases to which it is a party as lessee or under which it occupies property, so as to prevent any loss or forfeiture thereof or thereunder.
(i) Maintenance of Intellectual Property. The Company will, and will cause each of its material Subsidiaries to, take all reasonable action necessary or advisable to maintain all of the rights or licenses to use all trademarks, trade names, service marks, service mark registrations, service names, original works of authorship, patents, patent rights, copyrights, inventions, licenses, approvals, governmental authorizations, trade secrets, and other intellectual property rights and all applications and registrations therefor of the Company and/or any of its Subsidiaries, in each case that are necessary or material to the conduct of its business in full force and effect.
(j) Maintenance of Insurance. The Company shall maintain, and cause each of its Subsidiaries to maintain, insurance with responsible and reputable insurance companies or associations (including, without limitation, comprehensive general liability, hazard, rent and business interruption insurance) with respect to its properties (including all real properties leased or owned by it) and business, in such amounts and covering such risks as is required by any Governmental Authority having jurisdiction with respect thereto or as is carried generally by companies in similar businesses similarly situated. Within 30 days of the Original Issuance Date, the Company shall have in effect a directors and officers liability insurance policy in an amount at least equal to $2,000,000 and maintain such insurance policy at all times while any Note remains outstanding.
(k) Transactions with Affiliates. The Company shall not, nor shall it permit any of its Subsidiaries to, enter into, renew, extend or be a party to, any transaction or series of related transactions (including, without limitation, the purchase, sale, lease, transfer or exchange of property or assets of any kind or the rendering of services of any kind) with any Affiliate, except in the ordinary course of business or consistent with past practice and necessary or desirable for the prudent operation of its business, for fair consideration and on terms no less favorable to it or its Subsidiaries than would be obtainable in a comparable arm’s length transaction with a Person that is not an Affiliate thereof.
(l) Use of Proceeds. The Maker shall use the proceeds of this Note as set forth in the Purchase Agreement.
(m) Operation of Business. The Company and/or any of its Subsidiaries shall operate its business in the ordinary course consistent with past practices.
(n) Compliance with Transaction Documents. The Maker shall, and shall cause its Subsidiaries to, comply with its obligations under this Note and the other Transaction Documents.
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(o) Payment of Taxes, Etc. The Maker shall, and shall cause each of its Subsidiaries to, promptly pay and discharge, or cause to be paid and discharged, when due and payable, all lawful taxes, assessments and governmental charges or levies imposed upon the income, profits, property or business of the Maker and the Subsidiaries, except for such failures to pay that, individually or in the aggregate, have not had and would not reasonably be expected to have a Material Adverse Effect; provided, however, that any such tax, assessment, charge, or levy need not be paid if the validity thereof shall currently be contested in good faith by appropriate proceedings and if the Maker or such Subsidiaries shall have set aside on its books adequate reserves with respect thereto, and provided, further, that the Maker and such Subsidiaries will pay all such taxes, assessments, charges, or levies forthwith upon the commencement of proceedings to foreclose any lien which may have attached as security therefor.
(p) Nasdaq Uplist Termination. Upon the Nasdaq Uplist and immediately following the issuance of the Preferred Shares: (i) all covenants contained in this Note; (ii) all Events of Default; (iii) all reserve requirements; (iv) all restrictions on issuances and payments; (v) all liens and security interests securing this Note; and (vi) all other debt-related rights and obligations contained herein, shall automatically terminate and be of no further force or effect. Thereafter the rights of the parties shall be governed solely by the Certificate of Designation, the Registration Rights Agreement, the Leak-Out Agreement and the Securities Purchase Agreement to the extent applicable following the Nasdaq Uplist; provided, however, that the termination of this Note shall not affect any claim, cause of action, right to payment, damages claim, indemnification right or other remedy arising from any breach, Event of Default or other violation of this Note occurring prior to the Nasdaq Uplist. Any such claim must be asserted within six (6) months following the Nasdaq Uplist and shall survive until finally resolved.
Section 4.2 (q) Conversion Floor Price. Notwithstanding anything to the contrary contained in this Note, in no event shall the Conversion Price (the “Floor Price”) be adjusted (subject to adjustment for any forward or reverse stock splits, stock dividends, combinations, recapitalizations and similar events) below (i) the Minimum Price (as defined in Section 4.33 of the Purchase Agreement) as of the execution date of this Note, unless an alternative exception applies, and (ii) the minimum bid price per share required for the Common Stock to achieve initial listing on the Nasdaq Capital Market as set forth in Nasdaq Rule 5505(a)(1)(A), and to maintain such listing on the Nasdaq Capital Market as set forth in Nasdaq Rule 5550(a)(2). Option of the Holder. In connection with the number of Trading Days referred to in this Note, the Holder shall have the option to add the number of Trading Days for which a temporary “chill” has been in effect as specified in the Purchase Agreement. This Section 4.2 and any election by the Holder shall not be deemed to modify the Events of Default.
Section 4.3 Notice of Event of Default. Upon the occurrence of any Event of Default, the Maker shall immediately notify all Holders. If the Event of Default remains uncured beyond the applicable cure period set forth in Section 2.2(a), the Maker shall deliver written notice thereof to all Holders within two (2) Business Days following the expiration of such cure period, describing the nature of the Event of Default and the actions being taken to cure such Event of Default.
Section 4.4 General Provisions Regarding Payments.
(a) All payments by the Maker of principal, interest, fees and other obligations shall be made in U.S. Dollars in immediately available funds, without defense, recoupment, setoff or counterclaim, free of any restriction or condition, and delivered to the applicable Holder, not later than 4:00 p.m. to the Holder’s designated payment account on the date due or specified, without presentation or surrender of any Note or the making of any notation thereon, except upon the written request of the Maker made concurrently with or reasonably promptly after payment or prepayment in full of any Note, the Holder shall surrender such Note for cancellation, reasonably promptly after such request, to the Maker; funds received by the Holder after that time on such due date shall be deemed to have been paid by the Maker on the next Trading Day.
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(b) All payments in respect of the principal amount of any Note shall be accompanied by payment of accrued interest on the principal amount being repaid and all other amounts payable with respect to the principal amount being repaid or prepaid.
(c) Whenever any payment to be made hereunder shall be stated to be due on a day that is not a Trading Day, such payment shall be made on the next succeeding Trading Day and such extension of time shall be included in the computation of the payment of interest hereunder or of the commitment fees hereunder.
(d) All payments or proceeds received by the Holder hereunder or under any Transaction Document in respect of any of the obligations, including, but not limited to all proceeds received by the Holder in respect of any sale, any collection from, or other realization upon all or any part of the Collateral (as defined in the Security Agreement), shall be applied in full or in part as follows:
(i) first, ratably to pay the obligations in respect of any fees and indemnities then due and payable to the Holder until paid in full;
(ii) second, ratably to pay accrued interest in respect of the Note as set forth in the payments in Schedule II until paid in full; and
(iii) third, ratably to pay principal of the Note as set forth in the payments in Schedule II until paid in full.
ARTICLE 5
Section 5.1 Notices. Any and all notices or other communications or deliveries required or permitted to be provided hereunder shall be in writing and shall be deemed given and effective on the earliest of (a) the date of transmission, if such notice or communication is delivered via email at the email address specified in this Section 5.1 prior to 5:00 p.m. (New York, N.Y. time) on a Trading Day, (b) the next Trading Day after the date of transmission, if such notice or communication is delivered via email at the email address specified in this Section 5.1 on a day that is not a Trading Day or later than 5:00 p.m. (New York, N.Y. time) on any date and earlier than 11:59 p.m. (New York, N.Y. time) on such date, (c) the Trading Day following the date of delivery to a carrier , if sent by U.S. nationally recognized overnight courier service next Trading Day delivery, or (d) upon actual receipt by the party to whom such notice is required to be given. The addresses for notice shall be as set forth in the Purchase Agreement.
Section 5.2 Governing Law. This Note shall be governed by and construed in accordance with the Purchase Agreement. This Note shall not be interpreted or construed with any presumption against the party causing this Note to be drafted.
Section 5.3 Headings. Article and section headings in this Note are included herein for purposes of convenience of reference only and shall not constitute a part of this Note for any other purpose.
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Section 5.4 Remedies, Characterizations, Other Obligations, Breaches and Injunctive Relief. The remedies provided in this Note shall be cumulative and in addition to all other remedies available under this Note, at law or in equity (including, without limitation, a decree of specific performance and/or other injunctive relief), no remedy contained herein shall be deemed a waiver of compliance with the provisions giving rise to such remedy and nothing herein shall limit the Holder’s right to pursue actual damages for any failure by the Maker to comply with the terms of this Note. Amounts set forth or provided for herein with respect to payments, conversion, and the like (and the computation thereof) shall be the amounts to be received by the Holder and shall not, except as expressly provided herein, be subject to any other obligation of the Maker (or the performance thereof). The Maker acknowledges that a breach by it of its obligations hereunder will cause irreparable and material harm to the Holder and that the remedy at law for any such breach would be inadequate. Therefore, the Maker agrees that, in the event of any such breach or threatened breach, the Holder shall be entitled, in addition to all other available rights and remedies, at law or in equity, to seek equitable relief, including but not limited to an injunction restraining any such breach or threatened breach, without the necessity of pleading and proving irreparable harm or lack of an adequate remedy at law and without any bond or other security being required.
Section 5.5 Enforcement Expenses. The Maker agrees to pay all costs and expenses of the Holder in enforcing or exercising its rights under this Note, including, without limitation, reasonable attorneys’ fees and expenses and the fees and expenses of any expert witnesses.
Section 5.6 Binding Effect. The obligations of the Maker set forth herein shall be binding upon its successors and assigns, whether or not such successors or assigns are permitted by the terms herein.
Section 5.7 Transfers. Holder may transfer or assign this Note in accordance with applicable securities laws without Company consent to any affiliate, fund, financing source or permitted transferee.
Section 5.8 Amendments; Waivers. No provision of this Note may be amended, modified or waived except by the Company and the Lead Investors; provided that any amendment disproportionately and adversely affecting a Holder shall also require the consent of such Holder. No waiver of any default with respect to any provision, condition, or requirement of this Note shall be deemed to be a continuing waiver in the future or a waiver of any subsequent default or a waiver of any other provision, condition, or requirement hereof, nor shall any delay or omission of the Holder to exercise any right hereunder in any manner impair the exercise of any such right.
Section 5.9 Compliance with Securities Laws. The Holder of this Note acknowledges that this Note is being acquired solely for the Holder’s own account and not as a nominee for any other party, and for investment, and that the Holder shall not offer, sell, or otherwise dispose of this Note in violation of applicable securities laws. This Note and any Note issued in substitution or replacement therefor shall be stamped or imprinted with a legend in substantially the form as the legend on the face of this Note.
Section 5.10 Exclusive Jurisdiction; Venue. Any action, proceeding or claim arising out of, or relating in any way to, this Agreement shall be brought and enforced as provided in the Purchase Agreement.
Section 5.11 Failure or Indulgence Not Waiver. No failure or delay on the part of the Holder in the exercise of any power, right, or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such power, right, or privilege preclude other or further exercise thereof or of any other right, power, or privilege.
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Section 5.12 Maker Waivers. Except as otherwise specifically provided herein, the Maker and all others that may become liable for all or any part of the obligations evidenced by this Note, hereby waive presentment, demand, notice of nonpayment, protest, and all other demands and notices in connection with the delivery, acceptance, performance, and enforcement of this Note, and do hereby consent to any number of renewals of extensions of the time or payment hereof and agree that any such renewals or extensions may be made without notice to any such persons and without affecting their liability herein and do further consent to the release of any person liable hereon, all without affecting the liability of the other persons, firms or Maker liable for the payment of this Note, and do hereby waive the right to a trial by jury.
Section 5.13 Definitions. Capitalized terms used herein and not defined shall have the meanings set forth in the Purchase Agreement. For the purposes hereof, the following terms shall have the following meanings.
(a) “Affiliate” means, with respect to any Person, any other Person that directly or indirectly controls, is controlled by, or is under common control with, such Person, it being understood for purposes of this definition that “control” of a Person means the power directly or indirectly either to vote 10% or more of the stock having ordinary voting power for the election of directors of such Person or direct or cause the direction of the management and policies of such Person whether by contract or otherwise.
(b) “Attribution Parties” means, collectively, the following Persons and entities: (i) any investment vehicle, including, any funds, feeder funds or managed accounts, currently, or from time to time after the Original Issuance Date, directly or indirectly managed or advised by the Holder’s investment manager or any of its Affiliates or principals, (ii) any direct or indirect Affiliates of the Holder or any of the foregoing, (iii) any Person acting or who could be deemed to be acting as a Group together with the Holder or any of the foregoing and (iv) any other Persons whose beneficial ownership of the Company’s Common Stock would or could be aggregated with the Holder’s and the other Attribution Parties for purposes of Section 13(d) of the Exchange Act. For clarity, the purpose of the foregoing is to subject collectively the Holder and all other Attribution Parties to the Maximum Percentage.
(c) “Buy-In” has the meaning contained in Section 3.2(c).
(d) “Buy-In Price” has the meaning contained in Section 3.2(c).
(e) “Buy-In Payment Amount” has the meaning contained in Section 3.2(c).
(f) “Certificate of Designation” means the Certificate of Designation of Series 1 Convertible Preferred Shares of ONAR Holding Corporation.
(g) “Change of Control” means any Fundamental Transaction other than (i) any merger of the Company or any of its, direct or indirect, wholly-owned Subsidiaries with or into any of the foregoing Persons, (ii) any reorganization, recapitalization or reclassification of the shares of Common Stock in which holders of the Company’s voting power immediately prior to such reorganization, recapitalization or reclassification continue after such reorganization, recapitalization or reclassification to hold publicly traded securities and, directly or indirectly, are, in all material respects, the holders of the voting power of the surviving entity (or entities with the authority or voting power to elect the members of the board of directors (or their equivalent if other than a corporation) of such entity or entities) after such reorganization, recapitalization or reclassification, or (iii) pursuant to a migratory merger effected solely for the purpose of changing the jurisdiction of incorporation of the Company or any of its Subsidiaries.
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(h) “COC Repayment Price” has the meaning contained in Section 3.5(c).
(i) “Collateral Agent” shall have the meaning as defined in the Purchase Agreement.
(j) “Common Stock” shall have the meaning as defined in the Purchase Agreement.
(k) “Company” has the meaning contained on page 1 of this Note.
(l) “Conversion Failure” has the meaning contained in Section 3.2(c).
(m) “Conversion Price” has the meaning contained in Section 3.1(b).
(n) “Conversion Shares” has the meaning contained in Section 3.2(a).
(o) “Convertible Securities” has the meaning contained in Section 3.4.
(p) “Corporate Event” has the meaning contained in Section 3.5(b).
(q) “Default Interest” has the meaning contained in Section 1.2.
(r) “DTC” has the meaning contained in Section 3.2(a).
(s) “Event of Default” has the meaning contained in Section 2.1.
(t) “Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.
(u) “Exempt Issuance” shall have the meaning contained in the Purchase Agreement.
(v) “FAST” has the meaning contained in Section 3.2(a).
(w) “Floor Price” has the meaning contained in Section 4.1(q).
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(x) Fully Diluted Share Count” means 648,070,547 shares of Common Stock, including the total number of shares of Common Stock outstanding immediately prior to the Closing, assuming conversion of all outstanding preferred stock in accordance with its contractual conversion terms, but excluding all Notes, Preferred Shares, Warrants, Incentive Shares and securities issuable pursuant thereto.
(y) “Fundamental Transaction” means (A) that the Company shall, directly or indirectly, including through Subsidiaries, Affiliates or otherwise, in one or more related transactions, (i) consolidate or merge with or into (whether or not the Company is the surviving corporation) another Person, or (ii) sell, assign, transfer, convey or otherwise dispose of all or substantially all of the properties or assets of the Company or any of its “significant subsidiaries” (as defined in Rule 1-02 of Regulation S-X) to one or more Persons, or (iii) make, or allow one or more Persons to make, or allow the Company to be subject to or have its Common Stock be subject to or party to one or more Persons making, a purchase, tender or exchange offer that is accepted by the holders of at least either (x) 50% of the outstanding shares of Common Stock, (y) 50% of the outstanding shares of Common Stock calculated as if any shares of Common Stock held by all Persons making or party to, or Affiliated with any Person or group of Persons making or party to, such purchase, tender or exchange offer were not outstanding; or (z) such number of shares of Common Stock such that all Persons making or party to, or Affiliated with any Person making or party to, such purchase, tender or exchange offer, become collectively the beneficial owners (as defined in Rule 13d-3 under the Exchange Act) of at least 50% of the outstanding shares of Common Stock, or (iv) consummate a stock or share purchase agreement or other business combination (including, without limitation, a reorganization, recapitalization, spin-off or scheme of arrangement) with one or more Persons whereby all such Persons, individually or in the aggregate, acquire, either (x) at least 50% of the outstanding shares of Common Stock, (y) at least 50% of the outstanding shares of Common Stock calculated as if any shares of Common Stock held by all the Persons making or party to, or Affiliated with any Person making or party to, such stock purchase agreement or other business combination were not outstanding; or (z) such number of shares of Common Stock such that the Persons become collectively the beneficial owners (as defined in Rule 13d-3 under the Exchange Act) of at least 50% of the outstanding shares of Common Stock, or (v) reorganize, recapitalize or reclassify its Common Stock, (B) that the Company shall, directly or indirectly, including through Subsidiaries, Affiliates or otherwise, in one or more related transactions, allow any Person individually or the Persons in the aggregate to be or become the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, whether through acquisition, purchase, assignment, conveyance, tender, tender offer, exchange, reduction in outstanding shares of Common Stock, merger, consolidation, business combination, reorganization, recapitalization, spin-off, scheme of arrangement, reorganization, recapitalization or reclassification or otherwise in any manner whatsoever, of either (x) at least 50% of the aggregate ordinary voting power represented by issued and outstanding Common Stock, (y) at least 50% of the aggregate ordinary voting power represented by issued and outstanding Common Stock not held by all such Persons as of the date of this Note calculated as if any shares of Common Stock held by all such Persons were not outstanding, or (z) a percentage of the aggregate ordinary voting power represented by issued and outstanding shares of Common Stock or other equity securities of the Company sufficient to allow such Persons to effect a statutory short form merger or other transaction requiring other shareholders of the Company to surrender their shares of Common Stock without approval of the shareholders of the Company or (C) directly or indirectly, including through Subsidiaries, Affiliates or otherwise, in one or more related transactions, the issuance of or the entering into any other instrument or transaction structured in a manner to circumvent, or that circumvents, the intent of this definition in which case this definition shall be construed and implemented in a manner otherwise than in strict conformity with the terms of this definition to the extent necessary to correct this definition or any portion of this definition which may be defective or inconsistent with the intended treatment of such instrument or transaction.
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(z) “Governmental Authority” means the government of the United States, or any political subdivision thereof, whether state or local, and any agency, authority, instrumentality, regulatory body, court, central bank, or other entity exercising executive, legislative, judicial, taxing, regulatory, or administrative powers or functions of or pertaining to government.
(aa) “Group” means a “group” as that term is used in Section 13(d) of the Exchange Act and as defined in Rule 13d-5 thereunder.
(bb) “Holder” has the meaning contained on page 1 of this Note.
(cc) “Incentive Shares” means shares of Common Stock issued or issuable to the Purchasers pursuant to the Transaction Documents in connection with the Nasdaq Uplist, including any shares issued to satisfy Nasdaq public float requirements, holder-count requirements or related listing requirements, whether issued at Closing, upon the Nasdaq Uplist or thereafter.
(dd) “Indebtedness” means: (a) all obligations for borrowed money; (b) all obligations evidenced by bonds, debentures, notes, or other similar instruments and all reimbursement or other obligations in respect of letters of credit, bankers acceptances, current swap agreements, interest rate hedging agreements, interest rate swaps, or other financial products; (c) all obligations or liabilities secured by a lien or encumbrance on any asset of the Maker, irrespective of whether such obligation or liability is assumed; and (d) any obligation guaranteeing or intended to guarantee (whether directly or indirectly guaranteed, endorsed, co-made, discounted or sold with recourse) any of the foregoing obligations of any other person.
(ee) “Interest” has the meaning contained in Section 1.2.
(ff) “Lead Investors” shall have the meaning set forth in the Purchase Agreement.
(gg) “Liens” has the meaning contained in Section 4.1(c).
(hh) “Maker” has the meaning contained on page 1 of this Note.
(ii) “Mandatory Default Amount” means an amount equal to 105% of the sum of (x) the outstanding Principal of this Note on the date on which the first Event of Default has occurred hereunder and (y) any accrued and unpaid Interest thereon, if any.
(jj) “Material Adverse Effect” shall have the meaning set forth in the Purchase Agreement.
(kk) “Maturity Date” has the meaning contained on page 1 of this Note.
(ll) “Maximum Percentage” has the meaning contained in Section 3.2(e).
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(mm) “Nasdaq Uplist” means once the Company has received Nasdaq’s approval of the Company’s application to list its Common Stock on The Nasdaq Capital Market, The Nasdaq Global Market or The Nasdaq Global Select Market (collectively, “Nasdaq”) and the date on which the Company’s Common Stock commences trading on the Nasdaq. At the Company’s election, “Nasdaq” could mean for purposes of this Notes and the other Transaction Documents, a comparable national securities exchange, such as the NYSE American LLC.
(nn) “Note” has the meaning contained on page 1 of this Note.
(oo) “Notice of Change of Control” has the meaning contained in Section 3.5(a).
(pp) “Notice of Prepayment at Option of Holder Upon Change of Control” has the meaning contained in Section 3.5(c).
(qq) “Outstanding Balance” has the meaning contained in Section 1.2.
(rr) “Permitted Indebtedness” means (i) the Indebtedness evidenced by the Note, (ii) indebtedness existing as of the date hereof, (iii) Indebtedness under the Transaction Documents and (iv) other unsecured Indebtedness of the Company and its Subsidiaries in an aggregate outstanding principal amount not to exceed $500,000 at any time.
(ss) “Permitted Liens” means (i) Liens under the Transaction Documents, (ii) any lien for taxes not yet due or delinquent or being contested in good faith by appropriate proceedings for which adequate reserves have been established in accordance with GAAP, (iii) any statutory Lien arising in the ordinary course of business by operation of law with respect to a liability that is not yet due or delinquent, (iv) any Lien created by operation of law, such as materialmen’s Liens, mechanics’ Liens and other similar Liens, arising in the ordinary course of business with respect to a liability that is not yet due or delinquent or that are being contested in good faith by appropriate proceedings, (v) Liens arising from judgments, decrees or attachments in circumstances not constituting an Event of Default under this Note, or Liens securing Permitted Senior Debt, provided that such Liens secure only Permitted Senior Debt and are subject to intercreditor arrangements reasonably acceptable to the Collateral Agent and (vi) Liens disclosed to the Holder on or prior to the date hereof.
(tt) “Permitted Senior Debt” means (i) one or more senior secured credit facilities, term loans, acquisition facilities or similar financing arrangements incurred by the Company and its Subsidiaries in an aggregate principal amount not exceeding $3,000,000, or such higher amount needed to equal $15,000,000 when combined with the aggregate principal amount of Notes sold pursuant to the Purchase Agreement, outstanding at any time, (ii) trade payables, purchase money indebtedness and capital lease obligations incurred in the ordinary course of business, (iii) seller notes, earnout obligations and deferred purchase price obligations incurred in connection with acquisitions permitted under the Purchase Agreement, (iv) refinancing indebtedness that refinances Permitted Senior Debt and does not increase the principal amount thereof except for customary fees, expenses and accrued interest, and (v) other indebtedness approved in writing by the Lead Investors.
(uu) “Preferred Conversion” means the conversion or exchange of the Company’s outstanding Preferred Shares into Common Stock pursuant to the Transaction Documents immediately prior to the conversion of the Notes.
(vv) “Preferred Shares” means the shares of Series 1 convertible preferred stock issued upon the Nasdaq Uplist in exchange for the Notes pursuant to the Transaction Documents.
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(ww) “Pricing Period” means the 10 Trading Days following the cure of an Event of Default as permitted by this Note.
(xx) “Principal” has the meaning contained on page 1 of this Note.
(yy) “Purchase Agreement” has the meaning on Page 1 of this Note.
(zz) “Required Minimum” shall have the meaning contained in the Purchase Agreement.
(aaa) “Reverse Stock Split” means a reverse stock split of the Common Stock effected by the Company in order to satisfy the initial listing requirements of Nasdaq in connection with the Nasdaq Uplist.
(bbb) “SEC” means the United States Securities and Exchange Commission or the successor thereto.
(ccc) “Securities Act” means the Securities Act of 1933, as amended, and the rules and regulations thereunder.
(ddd) “Security Agreement” shall have the meaning as defined in the Purchase agreement.
(eee) “Share Delivery Date” has the meaning contained in Section 3.2(a).
(fff) “Standard Settlement Period” has the meaning contained in Section 2.1(e).
(ggg) “Stated Value” shall have the meaning set forth in the Certificate of Designation.
(hhh) “Subsidiary” shall have the meaning contained in the Purchase Agreement.
(iii) “Successor Entity” has the meaning contained in Section 3.5(a).
(jjj) “Trading Day” means a day on which the principal Trading Market is open for trading.
(kkk) “Trading Market” has the meaning contained in the Purchase Agreement.
(lll) “Transaction Documents” has the meaning contained in the Purchase Agreement.
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(mmm) “Transfer Agent” has the meaning contained in Section 3.2(a).
(nnn) “Underlying Shares” has the meaning contained in the Purchase Agreement.
(ooo) “Uplist Conversion” means the automatic conversion of the Notes into Preferred Shares upon the Nasdaq Uplist pursuant to Article 3 and the Transaction Documents.
(ppp) “Uplist Financing” has the meaning contained in Section 4.1(t).
(qqq) “VWAP” means, for any date, the price determined by the first of the following clauses that applies: (a) if the Common Stock is then listed or quoted on the Trading Market, the daily volume weighted average price of the Common Stock for such date (or the nearest preceding date) on the Trading Market on which the Common Stock is then listed or quoted as reported by Bloomberg L.P. (based on a Trading Day from 9:30 a.m. (New York, N.Y. time) to 4:00 p.m. (New York, N.Y. time)), (b) if the Common Stock is traded on OTCQB, OTCQX or OTC Pink, the volume weighted average sales price of the Common Stock for such date (or the nearest preceding date) on OTCQB, OTCQX or OTC Pink as applicable, (c) if the Common Stock is not then listed or quoted for trading on OTCQB or OTCQX and if prices for the Common Stock is then reported in OTC Pink or successor operated by OTC Markets Group, Inc. (or a similar organization or agency succeeding to its functions of reporting prices), the most recent bid price per share of the Common Stock so reported, or (d) in all other cases, the fair market value of a share of Common Stock as determined by an independent broker-dealer selected in good faith by the Holder and reasonably acceptable to the Company, the fees and expenses of which shall be paid by the Company.
[Signature Page Follows]
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IN WITNESS WHEREOF, the Maker has caused this Note to be duly executed by its duly authorized officer as of the date first above indicated.
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| ONAR HOLDING CORPORATION |
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| By: |
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| Name: | Claude Zdanow |
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| Title: | Chief Executive Officer |
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| [Signature Page to Secured Convertible Promissory Note] |
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SCHEDULE I
HOLDER
| Name of Holder | Amount Loaned |
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SCHEDULE II
PAYMENT SCHEDULE
| Month | Interest | Principal | Total Payment |
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EXHIBIT 10.5
THIS NOTE AND THE SECURITIES ISSUABLE UPON CONVERSION HEREOF HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS. THIS NOTE AND THE SECURITIES ISSUABLE UPON CONVERSION OF THIS NOTE MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT WITH A REGISTERED BROKER-DEALER OR OTHER LOAN WITH A FINANCIAL INSTITUTION THAT IS AN “ACCREDITED INVESTOR” AS DEFINED IN RULE 501(a) UNDER THE SECURITIES ACT OR OTHER LOAN SECURED BY SUCH SECURITIES. ANY TRANSFEREE OF THIS NOTE SHOULD CAREFULLY REVIEW THE TERMS OF THIS NOTE. THE PRINCIPAL AMOUNT REPRESENTED BY THIS NOTE AND, ACCORDINGLY, THE SECURITIES ISSUABLE UPON CONVERSION HEREOF, MAY BE LESS THAN THE AMOUNTS SET FORTH ON THE FACE HEREOF, PURSUANT TO THE TERMS OF THIS NOTE.
ONAR HOLDING CORPORATION
Exchange Secured Convertible Promissory Note
| Original Issuance Date: September 28, 2026 | Exchange Value: $[●] |
| Principal (incl. 10% Original Issue Discount): $[●] | |
| Maturity Date: March 28, 2028 |
FOR VALUE RECEIVED, including the exchange, surrender and cancellation of certain Existing Securities pursuant to that certain Exchange Agreement, dated as of September 28, 2026 (the “Exchange Agreement”), by and between ONAR Holding Corporation, a Nevada corporation (the “Maker” or the “Company”), and the holder listed on Schedule I hereto or its registered assigns (the “Holder”), the Maker hereby promises to pay to the Holder the principal sum of $[●] (the “Principal”) pursuant to the terms of this Exchange Secured Convertible Promissory Note (this “Note”).
The Principal amount of this Note equals the Exchange Value (as defined in the Exchange Agreement) of the Existing Securities exchanged by the Holder pursuant to the Exchange Agreement, increased by an original issue discount of ten percent (10%) of the Principal (the “Original Issue Discount”), such that the Exchange Value of $[●] equals ninety percent (90%) of the Principal of $[●]. No cash consideration has been or will be paid for this Note.
This Note is one of a series of Notes issued pursuant to that certain Securities Purchase Agreement, dated as of September 28, 2026, by and among the Company and the holders party thereto (the “Purchase Agreement”), under which the Company may issue up to $15,000,000 aggregate principal amount of Notes, including Notes issued in exchange for existing indebtedness pursuant to Exchange Agreements. This Note constitutes an “Exchange Note” issued pursuant to the Exchange Agreement and shall be entitled to the benefits of the Purchase Agreement and the other Transaction Documents. This Note shall rank pari passu in right of payment and security with all other Notes issued pursuant to the Purchase Agreement.
The Holder of this Note shall not be entitled to receive any Warrants, participate in any Warrant Coverage calculation, or receive any Incentive Shares in connection with the issuance, ownership, exchange, conversion or repayment of this Note.
ARTICLE 1
Section 1.1 Purchase Agreement. This Note has been executed and delivered pursuant to, and is issued pursuant to, the Purchase Agreement and the Exchange Agreement, and is subject to, and incorporates, the provisions thereof. This Note constitutes an “Exchange Note” issued pursuant to the Exchange Agreement and is one of a series of Notes issued pursuant to the Purchase Agreement. This Note is subject to, and entitled to the benefits of, the Purchase Agreement, the Security Agreement and the Registration Rights Agreement, the Exchange Agreement and the other Transaction Documents. The provisions of the Purchase Agreement and the Exchange Agreement are hereby incorporated herein by reference as though fully set forth herein.
Section 1.2 Interest; Monthly Payments.
(a) Interest shall accrue on the Outstanding Balance (as defined below), commencing on the Original Issuance Date, at a rate of eight percent (8%) per annum (the “Interest”) and shall be computed on the basis of a 360-day year consisting of twelve 30-day months. Interest shall be payable in cash on the first Trading Day of each month and on the Maturity Date (each, an “Interest Payment Date”); provided that any accrued and unpaid Interest outstanding as of the Nasdaq Uplist shall not be paid in cash but shall, together with the Principal, automatically convert into Preferred Shares in accordance with Article 3. Except upon the Nasdaq Uplist as provided in Article 3, Interest may not be paid in Common Stock or any other equity security. “Outstanding Balance” means the Principal, as reduced or increased pursuant to the terms hereof, for conversion or payment, together with all accrued but unpaid Interest, collection and enforcement costs, and any other fees, expenses or charges due under this Note.
(b) The Outstanding Balance shall amortize in six (6) equal monthly installments commencing on the date that is twelve (12) months following the Original Issuance Date and continuing on each monthly anniversary thereafter until paid in full. All amortization payments shall be payable solely in cash. The Outstanding Balance shall be payable upon the earliest of (i) conversion pursuant to Article 3, (ii) redemption pursuant to Section 1.3, or (iii) the Maturity Date. All amortization payments, interest payments and other amounts payable under this Note shall be payable solely in cash until the exchange or conversion of this Note pursuant to Article 3.
(c) From and after the occurrence and during the continuance of any Event of Default, the Interest shall be increased upon the election of the Collateral Agent in writing to the Company to the lower of (i) 12% per annum or (ii) the highest amount permitted by applicable law (such interest upon an Event of Default shall be referred to as “Interest” or “Default Interest”). Default Interest shall accrue on the Outstanding Balance from the date of such Event of Default until the date such Event of Default is cured or waived by the Collateral Agent in accordance with the Transaction Documents and shall be payable upon conversion, mandatory repayment, payment following a Change of Control, repayment or maturity of this Note. If such Event of Default is subsequently cured and no other Event of Default then exists (including, without limitation, for the Company’s failure to pay such Default Interest on the applicable Default Interest Payment Date), the Default Interest shall cease to accrue hereunder as of the day immediately following the date of such cure; provided that the Interest as calculated and unpaid at such increased rate during the continuance of such Event of Default shall continue to apply to the extent relating to the days after the occurrence of such Event of Default through and including the date of such cure of such Event of Default.
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Section 1.3 Prepayment. Other than as expressly contemplated in the Exchange Agreements, Maker shall have no right to voluntarily prepay, redeem or otherwise satisfy this Note prior to the Maturity Date except with prior written consent of the Holder.
Section 1.4 Secured Obligation. The obligations of the Maker under this Note are secured pursuant to the Security Agreement and the other Transaction Documents. The Collateral Agent shall hold all collateral securing this Note for the benefit of the holders of the Notes in accordance with the terms of the Security Agreement. Except as otherwise expressly provided in the Transaction Documents, the liens securing this Note shall be senior to all other liens and security interests other than Permitted Senior Debt and other liens expressly permitted under the Transaction Documents.
Section 1.5 Payment on Non-Trading Days. Whenever any payment to be made on this Note shall be due on a day which is not a Trading Day, such payment may be due on the next succeeding Trading Day.
Section 1.6 Replacement. Upon receipt of a duly executed Affidavit of Loss and Indemnity Agreement in customary form from the Holder with respect to the loss, theft or destruction of this Note (or any replacement hereof), or, in the case of a mutilation of this Note, upon surrender and cancellation of such Note, the Maker shall issue a new Note, of like tenor and amount, in lieu of such lost, stolen, destroyed or mutilated Note. The Holder shall not be required to post a bond or other security.
Section 1.7 Exchange Value. The original Principal amount of this Note represents the Exchange Value determined pursuant to the Exchange Agreement, divided by ninety percent (90%) to reflect the Original Issue Discount, as set forth on the first page of this Note and on Schedule I. The issuance of this Note satisfies and replaces the Existing Securities exchanged pursuant to the Exchange Agreement, and the rights of the Holder with respect to such Existing Securities shall thereafter be governed solely by this Note and the other applicable Transaction Documents, except as otherwise expressly provided in the Exchange Agreement.
ARTICLE 2
Section 2.1 Events of Default. An “Event of Default” under this Note shall mean the occurrence and continuance of the following (unless the Event of Default is waived in writing by the Collateral Agent acting at the direction of the Lead Investors in accordance with the Security Agreement):
(a) any default in the payment of the Principal, Interest, or other sums due under this Note issued to the Holder when due (whether on the Maturity Date, an Interest Payment Date or by acceleration or otherwise);
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(b) the Maker shall fail to observe or perform any other covenant, condition or agreement contained in this Note or any Transaction Document, including without limitation, (i) other than as expressly permitted under this Note, the Purchase Agreement or the other Transaction Documents, the issuance of any securities of the Maker or its Subsidiaries other than an Exempt Issuance, the incurrence of any Indebtedness or the imposition of a Lien upon any of the assets of the Maker or its Subsidiaries, except for Permitted Indebtedness or Permitted Liens, respectively, (ii) failure to deliver the Conversion Shares on the Share Delivery Date; (iii) any other material breach of its covenants and obligations under the Purchase Agreement and other Transaction Documents entered into by and between the Maker and the Holder dated the Original Issuance Date; or (iv) the incurrence of Indebtedness other than Permitted Senior Debt or other indebtedness expressly permitted under this Note, the Purchase Agreement or the other Transaction Documents; provided, however, that with respect to any breach under this Section 2.1(b) that is capable of being cured, such breach shall not constitute an Event of Default unless such breach remains uncured for twenty (20) Business Days after written notice thereof from the Collateral Agent or the Lead Investors; provided, further, that no cure period shall apply to any Event of Default under Section 2.1(a) or to any breach that by its nature is incapable of cure;
(c) the Maker or any of its Subsidiaries shall (A) default in any payment of any amount or amounts of principal of or interest (if any) on $250,000 or more of any Indebtedness or (B) default in the observance or performance of any other agreement or condition relating to any such Indebtedness or contained in any instrument or agreement evidencing, securing, or relating thereto, or any other event shall occur or condition exist, the effect of which default or other event or condition is to cause, or to permit the holder or holders of such Indebtedness to cause, with the giving of notice if required, such Indebtedness to become due prior to its stated maturity;
(d) the Maker’s notice to the Holder, including by way of public announcement at any time of its inability to comply (including for any of the reasons described in Section 3.6(a) hereof) or its intention not to comply with proper requests for conversion of this Note into Preferred Shares;
(e) subject to compliance with applicable law, if the Holder has sold shares of Common Stock pursuant to Rule 144, when available, but only to the extent of the number of shares sold, the failure of the Maker to instruct its Transfer Agent (as hereinafter defined) to remove any legends from the Common Stock and issue such unlegended certificates to the Holder within the Standard Settlement Period; as used herein, “Standard Settlement Period” means the standard settlement period, expressed in a number of Trading Days, applicable to trades of the Common Stock on the Trading Market as in effect on the applicable date of issuance, transfer or legend removal. For avoidance of doubt, as of the Original Issuance Date the Standard Settlement Period is one Trading Day;
(f) the Maker shall fail to timely deliver the Preferred Shares as and when required in Section 3.2;
(g) at any time the Maker shall fail to have the Required Minimum authorized, reserved and available for issuance to satisfy the potential conversion in full (disregarding for this purpose any and all limitations of any kind on such conversion) of this Note;
(h) any representation or warranty made by the Maker or any of its Subsidiaries in the Purchase Agreement, this Note, or any other Transaction Document shall prove to have been false or misleading or breached in a material respect on the date as of which made;
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(i) the Maker or any of its Subsidiaries shall: (i) apply for or consent to the appointment of, or the taking of possession by, a receiver, custodian, trustee or liquidator of itself or of all or a substantial part of its property or assets; (ii) make a general assignment for the benefit of its creditors; (iii) commence a voluntary case under the United States Bankruptcy Code (as now or hereafter in effect) or under the comparable laws of any jurisdiction (foreign or domestic); (iv) file a petition seeking to take advantage of any bankruptcy, insolvency, moratorium, reorganization or other similar law affecting the enforcement of creditors’ rights generally; (v) acquiesce in writing to any petition filed against it in an involuntary case under United States Bankruptcy Code (as now or hereafter in effect) or under the comparable laws of any jurisdiction (foreign or domestic); (vi) issue a notice of bankruptcy or winding down of its operations or issue a press release regarding same; or (vii) take any action under the laws of any jurisdiction (foreign or domestic) analogous to any of the foregoing;
(j) a proceeding or case shall be commenced in respect of the Maker or any of its Subsidiaries, without its application or consent, in any court of competent jurisdiction, seeking: (i) the liquidation, reorganization, moratorium, dissolution, winding up, or composition or readjustment of its debts; (ii) the appointment of a trustee, receiver, custodian, liquidator or the like of it or of all or any substantial part of its assets in connection with the liquidation or dissolution of the Maker or any of its Subsidiaries; or (iii) similar relief in respect of it under any law providing for the relief of debtors, and such proceeding or case described in clause (i), (ii) or (iii) shall continue undismissed, or unstayed and in effect, for a period of 60 days or any order for relief shall be entered in an involuntary case under United States Bankruptcy Code (as now or hereafter in effect) or under the comparable laws of any jurisdiction (foreign or domestic) against the Maker or any of its Subsidiaries or action under the laws of any jurisdiction (foreign or domestic) analogous to any of the foregoing shall be taken with respect to the Maker or any of its Subsidiaries and shall continue undismissed, or unstayed and in effect for a period of 30 days;
(k) one or more final judgments or orders for the payment of money aggregating in excess of $250,000 (or its equivalent in the relevant currency of payment) are rendered against one or more of the Company and/or any of its Subsidiaries, that is not dismissed or stayed within 30 days;
(l) the Company fails to comply in any material respect with the reporting requirements of the Exchange Act (including but not limited to becoming delinquent in the filing of any report required to be filed under the Exchange Act which shall not be considered delinquent if an extension permitted by Rule 12b-25 under the Exchange Act has been timely filed and such filing is timely made within the applicable grace period) or ceases to be subject to the reporting requirements of the Exchange Act;
(m) [Reserved].
(n) a final determination, not subject to appeal, has been made by the relevant exchange or market listed in this paragraph, that the Maker’s Common Stock ceases to be listed or quoted (after the Common Stock has been approved for listing or quotation and has in fact traded on such exchange or market) on the Trading Market, OTCQB, OTCQX, OTC Pink, The Nasdaq Capital Market, the NYSE American LLC, The Nasdaq Global Select Market, The Nasdaq Global Market or The New York Stock Exchange, Inc., or another national securities exchange or nationally recognized trading market;
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(o) [Reserved].
(p) the Maker initiates a “going private” transaction and as a result its Common Stock may no longer registered under Section 12(b) of the Exchange Act;
(q) there shall be any SEC stop order with respect to any resale registration statement, a trading suspension by the SEC or the Trading Market of the Common Stock, or any restriction in place with the Transfer Agent for the Common Stock restricting the trading of such Common Stock which continues for two (2) Trading Days;
(r) the electronic transfer by the Company of shares of Common Stock through the Depository Trust Company or another established clearing corporation is no longer available or is subject to a “chill” which continues for two (2) Trading Days;
(s) if the Company replaces its Transfer Agent, the Company fails to instruct the new Transfer Agent to provide prior to the effective date of such replacement, a fully executed irrevocable transfer agent instructions (including but not limited to the provision to irrevocably reserve the Required Minimum) signed by the successor Transfer Agent and the Company;
(t) the Company’s Common Stock is not DWAC Eligible;
(u) the Company fails to be in compliance with the Securities Act and the Exchange Act in any material respect;
(v) any provision of any Transaction Document shall at any time for any reason (other than pursuant to the express terms thereof) cease to be valid and binding on or enforceable against the parties thereto, or the validity or enforceability thereof shall be contested by any party thereto, or a proceeding shall be commenced by the Company or any Governmental Authority having jurisdiction over any of them, seeking to establish the invalidity or unenforceability thereof, or the Company shall deny in writing that it has any liability or obligation purported to be created under any Transaction Document; or
(w) following the Nasdaq Uplist, the Company fails to timely effect the automatic conversion or exchange of this Note into Preferred Shares as required by Article 3.
Section 2.2 Remedies Upon an Event of Default.
(a) Notwithstanding anything contained herein to the contrary: (i) a payment default under Section 2.1(a) shall not constitute an Event of Default unless such failure remains uncured for five (5) Business Days after written notice thereof is received by the Company; and (ii) any Event of Default arising under Section 2.1(b) that is capable of cure shall not constitute an Event of Default unless such default remains uncured for twenty (20) days after written notice thereof. Upon the occurrence and continuation of an Event of Default, the Collateral Agent acting at the direction of the Lead Investors may declare the Mandatory Default Amount immediately due and payable. The Mandatory Default Amount shall be immediately due and payable to the Holder in immediately available funds free and clear of all Liens; provided that upon the occurrence of an Event of Default described in Section 2.1(i) or (j) above, the Mandatory Default Amount shall become immediately due and payable without any declaration or other act on the part of the Holder; provided further, immediately upon the occurrence of any Event of Default described in Section 2.1 (i) or (j) above, or upon failure to pay this Note in full on the Maturity Date, the Holder, without any notice to the Maker, which notice is expressly waived by the Maker, may proceed to protect, enforce, exercise and pursue any and all rights and remedies available to the Maker under this Note and any other agreement or instrument, and any and all rights and remedies available to the Holder at law or in equity.
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(b) Subject to the applicable cure period in Section 2.2(a), upon the occurrence of any Event of Default, the Holder may at any time at its option declare, the Mandatory Default Amount due and payable, and thereupon, the same shall be accelerated and so due and payable immediately or if such Event of Default may be cured or remedied within the cure period specified in Section 2.2(a), at the end of such cure period. Upon the failure of the Maker to cure an Event of Default within the time permitted by this Note, or if the Event of Default is not capable of being cured, the remedies provided in this Note.
(c) The provisions of Section 3.2(b) and (c) shall also apply upon any Events of Default relating to Conversion Shares in addition to the remedies under this Section 2.2.
(d) Any Event of Default may be waived by the Company and the Collateral Agent acting at the direction of the Lead Investors.
(e) Notwithstanding anything contained herein to the contrary, all collateral administration, amendments, waivers, accelerations, foreclosures, enforcement actions and remedies relating to this Note, the Security Documents and the collateral securing this Note shall be exercised exclusively by the Collateral Agent acting at the direction of the Lead Investors in accordance with the Security Agreement.
ARTICLE 3
Section 3.1 Conversion.
(a) Exchange. This Note shall become subject to exchange only upon the occurrence of the Nasdaq Uplist and in accordance with the terms set forth herein and the other Transaction Documents. Upon the Nasdaq Uplist, the Outstanding Balance of this Note, including all accrued and unpaid Interest, shall automatically exchange on a dollar-for-dollar basis into Preferred Shares having an aggregate stated value equal to such Outstanding Balance, in accordance with the Transaction Documents. Such exchange shall occur automatically and simultaneously with the exchange of all other Notes then outstanding pursuant to the Transaction Documents. Following such exchange, this Note shall be deemed cancelled in full, and all rights of the Holder shall thereafter be represented solely by the Preferred Shares issued in exchange for this Note and governed by the applicable Certificate of Designation and the Transaction Documents. No exchange notice, surrender of this Note or other action by the Holder shall be required to effect the Uplist Conversion. Notwithstanding anything herein to the contrary, no automatic exchange of this Note into Preferred Shares shall occur while an Event of Default exists and remains uncured. If an Event of Default has occurred prior to the Nasdaq Uplist, the Company shall not be entitled to require or effect the exchange of this Note unless and until such Event of Default has been fully cured or expressly waived by the applicable Holder.
(b) Conversion Price. The “Conversion Price” shall be the Stated Value of the Preferred Shares as set forth in the Certificate of Designation.
(c) Nasdaq Uplist Conversion. Upon the Nasdaq Uplist, all outstanding Principal and all accrued but unpaid Interest under this Note shall automatically convert on a dollar-for-dollar basis into Preferred Shares having an aggregate stated value equal to such Principal and accrued but unpaid Interest. Such conversion shall occur automatically and without any action, election, notice, consent, demand or instruction by the Holder. Following such conversion, this Note shall be deemed cancelled in full and all rights of the Holder shall thereafter be represented solely by the Preferred Shares issued pursuant to this Section and governed by the applicable Certificate of Designation and the Transaction Documents.
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Section 3.2 Delivery of Conversion Shares.
(a) As soon as practicable after any conversion or payment of any amount due hereunder in the form of Preferred Shares in accordance with this Note, and in any event within the Standard Settlement Period thereafter (such date, the “Share Delivery Date”), the Maker shall, at its expense, cause to be issued in the name of and delivered to the Holder, or as the Holder may direct, a certificate or certificates evidencing the number of shares of fully paid and non-assessable Preferred Shares to which the Holder shall be entitled on such conversion or payment (the “Conversion Shares”), as applicable, in the applicable denominations based on the applicable conversion or payment, which certificate or certificates shall be free of restrictive and trading legends (except for any such legends as may be required under the Securities Act). In lieu of delivering physical certificates for the Preferred Shares issuable upon any conversion of this Note, provided the Company’s transfer agent (the “Transfer Agent”) is participating in the Depository Trust Company (“DTC”) DTC Fast Automated Securities Transfer Program (“FAST”) or a similar program, upon request of the Holder, the Company shall cause the Transfer Agent to electronically transmit such Conversion Shares issuable upon conversion of this Note to the Holder (or its designee), by crediting the account of the Holder’s (or such designee’s) broker with DTC through its Deposit Withdrawal At Custodian system (provided that the same time periods herein as for stock certificates shall apply) as instructed by the Holder (or its designee).
(b) Obligation Absolute. The Company’s obligations to issue and deliver the Conversion Shares and any Preferred Shares issued pursuant to the Uplist Conversion in accordance with the terms hereof are absolute and unconditional, irrespective of any action or inaction by the Holder to enforce the same, any waiver or consent with respect to any provision hereof, the recovery of any judgment against any Person or any action to enforce the same, or any setoff, counterclaim, recoupment, limitation or termination, or any breach or alleged breach by the Holder or any other Person of any obligation to the Company or any violation or alleged violation of law by the Holder or any other Person, and irrespective of any other circumstance which might otherwise limit such obligation of the Company to the Holder in connection with the issuance of such securities; provided, however, that such delivery shall not operate as a waiver by the Company of any such action the Company may have against the Holder. Upon the Nasdaq Uplist and the automatic Uplist Conversion contemplated by this Article 3, the Company may not refuse or delay such conversion based on any claim that the Holder or anyone associated or affiliated with the Holder has engaged in any violation of law, violation of any agreement to which the Holder or the Company is a party, or for any other reason, unless (i) an injunction issued by a court of competent jurisdiction, on notice to the Holder, restraining or enjoining the conversion of all or part of this Note shall have been sought and obtained, and (ii) the Company posts a surety bond for the benefit of the Holder in an amount equal to 100% of the Outstanding Balance subject to such injunction, which bond shall remain in effect until the completion of the underlying litigation and the proceeds thereof shall be payable to the Holder to the extent awarded by a final judgment. In the absence of such injunction, the Company shall timely complete the Uplist Conversion and issue the applicable Preferred Shares, Conversion Shares and any other securities required to be issued pursuant to this Note and the Transaction Documents.
(c) The Company’s Failure to Timely Convert. If the Company shall fail for any reason or for no reason, on or prior to the applicable Share Delivery Date, to issue and deliver the Preferred Shares, Conversion Shares or other securities required to be issued pursuant to the automatic Uplist Conversion contemplated by Article 3 (a “Conversion Failure”), then, in addition to all other remedies available to the Holder, the Holder may, by written notice to the Company, require the Company to redeem, in cash, the portion of the Outstanding Balance affected by such Conversion Failure at a redemption price equal to the Mandatory Default Amount applicable thereto. In addition to the foregoing, if on or prior to the Share Delivery Date, the Company shall fail to issue and deliver any securities required to be issued pursuant to the automatic Uplist Conversion and, as a result of such failure, the Holder acquires (in an open market transaction, stock loan or otherwise) shares of Common Stock corresponding to all or any portion of the number of shares that the Holder was entitled to receive from the Company pursuant to such conversion (a “Buy-In”), then, in addition to all other remedies available to the Holder, the Company shall, within five (5) Trading Days after receipt of the Holder's request, at the Holder's election: (i) pay cash to the Holder in an amount equal to the Holder's total purchase price (including brokerage commissions, stock loan costs and other out-of-pocket expenses, if any) for the shares of Common Stock so acquired (the “Buy-In Price”), at which time the Company's obligation to issue such shares shall terminate; or (ii) promptly honor its obligation to issue the applicable securities and pay cash to the Holder in an amount equal to the excess, if any, of the Buy-In Price over the product of (x) the number of shares required to be issued multiplied by (y) the lowest closing sale price of the Common Stock on any Trading Day during the period commencing on the date of the Nasdaq Uplist and ending on the date of such issuance and payment (the “Buy-In Payment Amount”). Nothing herein shall limit the Holder's right to pursue any other remedies available at law or in equity, including specific performance and injunctive relief, with respect to the Company's failure to timely complete the automatic Uplist Conversion or issue the securities required pursuant to Article 3.
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(d) [Reserved].
(e) Beneficial Ownership Limitation. The Company shall not effect any conversion of this Note, and a Holder shall not have the right to convert any portion of this Note, to the extent that after giving effect to the conversion set forth on the applicable Notice of Conversion, the Holder (together with the Holder’s Affiliates, and any Persons acting as a group together with the Holder or any of the Holder’s Affiliates) would beneficially own in excess of the Beneficial Ownership Limitation (as defined below) (the “Maximum Percentage”). For purposes of the foregoing sentence, the number of shares of Common Stock beneficially owned by the Holder and its Affiliates shall include the number of shares of Common Stock issuable upon conversion of this Note or conversion of Conversion Shares with respect to which such determination is being made, but shall exclude the number of shares of Common Stock which are issuable upon (i) conversion of the remaining, unconverted principal amount of this Note or related Conversion Shares beneficially owned by the Holder or any of its Affiliates and (ii) exercise or conversion of the unexercised or unconverted portion of any other securities of the Company subject to a limitation on conversion or exercise analogous to the limitation contained herein (including, without limitation, any other notes) beneficially owned by the Holder or any of its Affiliates. Except as set forth in the preceding sentence, for purposes of this Section 3.2(e), beneficial ownership shall be calculated in accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder. To the extent that the limitation contained in this Section 3.2(e) applies, the determination of whether this Note is convertible (in relation to other securities owned by the Holder together with any Affiliates) and of which principal amount of this Note is convertible shall be in the sole discretion of the Holder, and the submission of a Notice of Conversion shall be deemed to be the Holder’s determination of whether this Note may be converted (in relation to other securities owned by the Holder together with any Affiliates) and which principal amount of this Note is convertible, in each case subject to the Beneficial Ownership Limitation. To ensure compliance with this restriction, the Holder will be deemed to represent to the Company each time it delivers a Notice of Conversion that such Notice of Conversion has not violated the restrictions set forth in this paragraph and the Company shall have no obligation to verify or confirm the accuracy of such determination. In addition, a determination as to any group status as contemplated above shall be determined in accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder. For purposes of this Section 3.2(e), in determining the number of outstanding shares of Common Stock, the Holder may rely on the number of outstanding shares of Common Stock as stated in the most recent of the following: (i) the Company’s most recent periodic or annual report filed with the Commission, as the case may be, (ii) a more recent public announcement by the Company, or (iii) a more recent written notice by the Company or the Company’s transfer agent setting forth the number of shares of Common Stock outstanding. Upon the written or oral request of a Holder, the Company shall within two Trading Days confirm orally and in writing to the Holder the number of shares of Common Stock then outstanding. In any case, the number of outstanding shares of Common Stock shall be determined after giving effect to the conversion or exercise of securities of the Company, including this Note, by the Holder or its Affiliates since the date as of which such number of outstanding shares of Common Stock was reported. The “Beneficial Ownership Limitation” shall be 4.99% of the number of shares of the Common Stock outstanding immediately after giving effect to the issuance of shares of Common Stock issuable upon conversion of this Note or Conversion Shares held by the Holder. The Holder, upon not less than 61 days’ prior notice to the Company, may increase or decrease the Beneficial Ownership Limitation provisions of this Section 3.2(e), provided that the Beneficial Ownership Limitation in no event exceeds 9.99% of the number of shares of the Common Stock outstanding immediately after giving effect to the issuance of shares of Common Stock upon conversion of this Note or conversion of Conversion Shares held by the Holder and the Beneficial Ownership Limitation provisions of this Section 3.2(e) shall continue to apply. Any such increase will not be effective until the 61st day after such notice is delivered to the Company. The Beneficial Ownership Limitation provisions of this paragraph shall be construed and implemented in a manner otherwise than in strict conformity with the terms of this Section 3.2(e) to correct this paragraph (or any portion hereof) which may be defective or inconsistent with the intended Beneficial Ownership Limitation contained herein or to make changes or supplements necessary or desirable to properly give effect to such limitation. The limitations contained in this paragraph shall apply to a successor holder of this Note.
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(f) Fractional Shares. The Company shall not issue any fraction of a Preferred Share upon any conversion. If the issuance would result in the issuance of a fraction of a Preferred Share, the Company shall round such fraction of a Preferred Share up to the nearest whole share.
(g) No Impairment. The Maker shall not, by amendment of its Articles of Incorporation or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms to be observed or performed hereunder by the Maker, but will at all times in good faith assist in the carrying out of all the provisions of this Section 3.2 and in the taking of all such action as may be necessary or appropriate in order to protect the conversion rights of the Holder against impairment.
(h) Issuance Taxes. The Maker shall pay any and all issuance and other taxes, excluding federal, state, or local income taxes, that may be payable in respect of any issue or delivery of Preferred Shares on conversion of this Note pursuant thereto; provided, however, that the Maker shall not be obligated to pay any transfer taxes resulting from any transfer requested by the Holder in connection with any such conversion.
(i) Reservation of Common Stock. The Maker shall, at all times while any Note remains outstanding, reserve and keep available out of its authorized but unissued Common Stock a number of shares equal to 200% of the maximum number of shares that may be issuable pursuant to the Notes based upon an assumed conversion price of the Preferred Shares of $0.03 per share. If at any time the reserve becomes insufficient, the Company shall promptly take all actions necessary to increase its authorized capital and restore compliance with this Section. The reserve obligations set forth herein shall automatically terminate upon the Uplist Conversion.
(j) Regulatory Compliance. If any Common Stock to be reserved for the purpose of conversion of this Note requires registration or listing with or approval of any Governmental Authority, national securities exchange or other regulatory body under any federal or state law or regulation or otherwise before such shares may be validly issued or delivered upon conversion, the Maker shall, at its sole cost and expense, in good faith and as expeditiously as possible, secure such registration, listing or approval, as the case may be.
Section 3.3 Certain Adjustments. The Conversion Price and number and kind of shares or other securities to be issued upon conversion shall be subject to adjustment from time to time upon the happening of certain events while this conversion right remains outstanding, as follows:
(a) Merger, Sale of Assets, etc. If the Maker or any of its Subsidiaries at any time shall consolidate with or merge into or sell or convey all or substantially all its assets to any other entity, this Note, as to the unpaid principal portion thereof and accrued interest thereon, shall thereafter be deemed to evidence the right to convert into such number and kind of shares or other securities and property as would have been issuable or distributable on account of such consolidation, merger, sale or conveyance, upon or with respect to the securities subject to the conversion right immediately prior to such consolidation, merger, sale, or conveyance as determined in good faith by the Board of Directors and reasonably acceptable to the Collateral Agent. The foregoing provision shall similarly apply to successive transactions of a similar nature by any such successor or purchaser. Without limiting the generality of the foregoing, the anti-dilution provisions of this Section 3.3(a) shall apply to such securities of such successor or purchaser after any such consolidation, merger, sale, or conveyance.
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(b) Reclassification, etc. If the Maker at any time shall, by reclassification or otherwise, change the Preferred Shares into the same or a different number of securities of any class or classes, this Note, as to the unpaid principal portion thereof and accrued interest thereon, shall thereafter be deemed to evidence the right to convert into an adjusted number of such securities and kind of securities as would have been issuable as the result of such change with respect to the Preferred Shares immediately prior to such reclassification or other change.
(c) Stock Splits, Combinations and Dividends. If the shares of Common Stock are subdivided or combined into a greater or smaller number of shares of Common Stock, or if a dividend is paid on the Common Stock in shares of Common Stock, all references to Common Stock shall be proportionately reduced in case of subdivision of shares or stock dividend or proportionately increased in the case of combination of shares, in each such case by the ratio which the total number of shares of Common Stock outstanding immediately after such event bears to the total number of shares of Common Stock outstanding immediately prior to such event.
(d) Round-Down Adjustment. If at any time prior to the Nasdaq Uplist, the Company issues or sells any Common Stock, Preferred Shares, convertible security or other equity security at an effective price per share less than the Conversion Price then in effect, the Conversion Price shall automatically be adjusted to such lower price. For the avoidance of doubt, this anti-dilution protection shall survive the exchange of this Note into Preferred Shares and shall be reflected in the Certificate of Designation applicable to the Preferred Shares. Customary exclusions shall apply for equity incentive plans approved by the Board, strategic partnerships, acquisitions, and other Exempt Issuances. If any outstanding warrant, option, convertible security, preferred stock or other instrument is exercised, exchanged, converted, repriced, reset or amended, or otherwise results in the issuance of Common Stock at an effective price per share lower than the Conversion Price then in effect, the Conversion Price shall automatically be reduced to such lower effective price. Any such adjustment shall occur automatically without further action by the Holder. For the purposes of this Section 3.3(d), Conversion Price is as defined in the Purchase Agreement.
Section 3.4 [Reserved].
Section 3.5 Rights Upon Fundamental Transaction.
(a) Assumption. The Company shall not enter into or be party to a Fundamental Transaction without the consent of the Lead Investors and unless (i) the Person (which may be the Company) formed by, resulting from or surviving any Fundamental Transaction or the Person with which such Fundamental Transaction shall have been entered into (the “Successor Entity”) assumes in writing all of the obligations of the Company under this Note and the other Transaction Documents in accordance with the provisions of this Section 3.5(a) pursuant to written agreements in form and substance satisfactory to the Holder and approved by the Holder prior to such Fundamental Transaction, including agreements to deliver to the Holder in exchange for the Note a security of the Successor Entity evidenced by a written instrument substantially similar in form and substance to the Note, including, without limitation, having Principal and Interest equal to the Principal then outstanding and any accrued and unpaid Interest thereon (if any) of the Note held by the Holder, having similar conversion rights as the Note and having similar ranking and security to the Note, and satisfactory to the Holder and (ii) the Successor Entity (including its parent entity) is a publicly traded corporation whose common stock is quoted on or listed for trading on any eligible market, including The Nasdaq Capital Market, the NYSE American LLC, The Nasdaq Global Select Market, The Nasdaq Global Market or The New York Stock Exchange, Inc. Upon the occurrence of any Fundamental Transaction, the Successor Entity shall succeed to, and be substituted for (so that from and after the date of such Fundamental Transaction, the provisions of this Note and the other Transaction Documents referring to the “Company” or the “Maker” shall refer instead to the Successor Entity), and may exercise every right and power of the Company and shall assume all of the obligations of the Company under this Note and the other Transaction Documents with the same effect as if such Successor Entity had been named as the Company herein. Upon consummation of a Fundamental Transaction, the Successor Entity shall deliver to the Holder confirmation that there shall be issued upon conversion of this Note at any time after the consummation of such Fundamental Transaction, in lieu of the shares of Preferred Shares issuable upon the conversion of the Note prior to such Fundamental Transaction, such shares of the publicly traded common stock (or their equivalent) of the Successor Entity (including its parent entity) which the Holder would have been entitled to receive upon the happening of such Fundamental Transaction had this Note been converted immediately prior to such Fundamental Transaction (without regard to any limitations on the conversion of this Note), as adjusted in accordance with the provisions of this Note. Notwithstanding the foregoing, the Holder may elect, at its sole option, by delivery of written notice to the Company, to waive this Section 3.5(a) to permit the Fundamental Transaction without the assumption of this Note. The provisions of this Section 3.5(a) shall apply similarly and equally to successive Fundamental Transactions and shall be applied without regard to any limitations on the conversion of this Note.
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(b) Other Corporate Events. In addition to and not in substitution for any other rights hereunder, prior to the consummation of any Fundamental Transaction pursuant to which holders of shares of Common Stock are entitled to receive securities or other assets with respect to or in exchange for shares of Common Stock (a “Corporate Event”), the Company shall make appropriate provision to ensure that the Holder will thereafter have the right to receive upon a conversion of this Note, at the Holder’s option, (i) in addition to the shares of Common Stock receivable upon such conversion, such securities or other assets to which the Holder would have been entitled with respect to such shares of Common Stock had such shares of Common Stock been held by the Holder upon the consummation of such Corporate Event (without taking into account any limitations or restrictions on the convertibility of this Note) or (ii) in lieu of the shares of Common Stock otherwise receivable upon such conversion, such securities or other assets received by the holders of shares of Common Stock in connection with the consummation of such Corporate Event in such amounts as the Holder would have been entitled to receive had this Note initially been issued with conversion rights for the form of such consideration (as opposed to shares of Common Stock) at a conversion price for such consideration commensurate with the Conversion Price (as defined in the Purchase Agreement). Provision made pursuant to the preceding sentence shall be in a form and substance satisfactory to the Holder. The provisions of this Section 3.5(b) shall apply similarly and equally to successive Corporate Events and shall be applied without regard to any limitations on the conversion of this Note.
(c) Prepayment Following a Change of Control. No later than 15 days following the entry by the Company into an agreement for a Change of Control but in no event prior to the public announcement of such Change of Control, the Maker shall deliver written notice describing the entry into such agreement (“Notice of Change of Control”) to the Holder. Within 30 days after receipt of a Notice of Change of Control, the Holder may require the Maker to prepay, effective immediately prior to the consummation of such Change of Control, an amount equal to 120% of the then Outstanding Balance (the “COC Repayment Price”), by delivering written notice thereof (“Notice of Prepayment at Option of Holder Upon Change of Control”) to the Maker.
(d) Payment of COC Repayment Price. Upon the Maker’s receipt of a Notice(s) of Prepayment at Option of Holder Upon Change of Control from the Holder, the Maker shall deliver the COC Repayment Price to the Holder immediately prior to the consummation of the Change of Control; provided, that the Holder’s original Note shall have been so delivered to the Maker.
ARTICLE 4
Section 4.1 Covenants. For so long as there is any Outstanding Balance of this Note, unless otherwise approved by the Lead Investors in accordance with the Transaction Documents, the Company shall be bound by the following covenants
(a) Further Assurances. The Maker hereby agrees that, from time to time upon the written request of the Holder, it will execute and deliver such further documents and do such other acts and things as the Holder may reasonably request in order fully to comply will all of the Makers obligations under this Note, including without limitation in respect of Section 2.2(d).
(b) Incurrence of Indebtedness. The Company shall not without the prior written consent of the Lead Investors, incur or guarantee or assume any Indebtedness (other than (i) the Note, (ii) Permitted Indebtedness, and (iii) Permitted Senior Debt, including liens securing such debt).
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(c) Existence of Liens. Without the prior written consent of the Lead Investors, the Company shall not, and the Company shall cause each of its Subsidiaries to not, directly or indirectly, allow or suffer to exist any mortgage, lien, pledge, charge, security interest, deed of trust, or other encumbrance upon or in any property or assets (including accounts and contract rights) owned by the Company or any of its Subsidiaries (collectively, “Liens”) other than Permitted Liens.
(d) Restricted Payments. The Company shall not, and the Company shall cause each of its Subsidiaries to not, directly or indirectly, prepay, defease, repurchase, repay or make any payments in respect of, by the payment of cash or cash equivalents (in whole or in part, whether by way of open market purchases, tender offers, private transactions or otherwise), all or any portion of any Indebtedness (other than the Note whether by way of payment in respect of principal of (or premium, if any) or Interest on, such Indebtedness or fund any other obligation or otherwise make any other payments subject to Section 4.5(b). Notwithstanding the foregoing, the Company may make: (i) scheduled payments of principal and interest on Indebtedness on Schedule 3.1(bb) of the Purchase Agreement; (ii) payments pursuant to the Exchange Agreements; (iii) payments on Permitted Senior Debt; (iv) settlement payments relating to disclosed litigation; (v) payments relating to the Nasdaq Uplist; (vi) those settlement payments regarding matters previously disclosed in the SEC Reports; and (vii) other payments not exceeding $500,000 in the aggregate in any fiscal year.
(e) Restriction on Prepayment and Cash Dividends. The Company shall not, and the Company shall cause each of its Subsidiaries to not, directly or indirectly, prepay, repurchase or declare or pay any cash dividend or other distribution on any of its capital stock excluding any intercompany transfers.
(f) Restriction on Transfer of Assets. The Company shall not, and the Company shall cause each of its Subsidiaries to not, directly or indirectly, sell, lease, license, assign, transfer, spin-off, split-off, convey or otherwise dispose of any assets or rights of the Company or any Subsidiary owned or hereafter acquired whether in a single transaction or a series of related transactions, other than (i) sales, leases, licenses, assignments, transfers, conveyances, and other dispositions of such assets or rights by the Company and its Subsidiaries in the ordinary course of business consistent with its past practice, (ii) sales of inventory and products in the ordinary course of business, and (iii) sales of unwanted or obsolete assets or other assets that are not material to the business of the Company and its Subsidiaries.
(g) Preservation of Existence, Etc. The Company shall maintain and preserve, and cause each of its Subsidiaries to maintain and preserve, its existence, rights, and privileges, and become or remain, and cause each of its material Subsidiaries to become or remain, duly qualified and in good standing in each jurisdiction in which the character of the properties owned or leased by it or in which the transaction of its business makes such qualification necessary.
(h) Maintenance of Properties, Etc. The Company shall maintain and preserve, and cause each of its material Subsidiaries to maintain and preserve, all of its properties which are necessary or useful in the proper conduct of its business in good working order and condition, ordinary wear and tear excepted, and comply, and cause each of its material Subsidiaries to comply, at all times with the provisions of all leases to which it is a party as lessee or under which it occupies property, so as to prevent any loss or forfeiture thereof or thereunder.
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(i) Maintenance of Intellectual Property. The Company will, and will cause each of its material Subsidiaries to, take all reasonable action necessary or advisable to maintain all of the rights or licenses to use all trademarks, trade names, service marks, service mark registrations, service names, original works of authorship, patents, patent rights, copyrights, inventions, licenses, approvals, governmental authorizations, trade secrets, and other intellectual property rights and all applications and registrations therefor of the Company and/or any of its Subsidiaries, in each case that are necessary or material to the conduct of its business in full force and effect.
(j) Maintenance of Insurance. The Company shall maintain, and cause each of its Subsidiaries to maintain, insurance with responsible and reputable insurance companies or associations (including, without limitation, comprehensive general liability, hazard, rent and business interruption insurance) with respect to its properties (including all real properties leased or owned by it) and business, in such amounts and covering such risks as is required by any Governmental Authority having jurisdiction with respect thereto or as is carried generally by companies in similar businesses similarly situated. Within 30 days of the Original Issuance Date, the Company shall have in effect a directors and officers liability insurance policy in an amount at least equal to $2,000,000 and maintain such insurance policy at all times while any Note remains outstanding.
(k) Transactions with Affiliates. The Company shall not, nor shall it permit any of its Subsidiaries to, enter into, renew, extend or be a party to, any transaction or series of related transactions (including, without limitation, the purchase, sale, lease, transfer or exchange of property or assets of any kind or the rendering of services of any kind) with any Affiliate, except in the ordinary course of business or consistent with past practice and necessary or desirable for the prudent operation of its business, for fair consideration and on terms no less favorable to it or its Subsidiaries than would be obtainable in a comparable arm’s length transaction with a Person that is not an Affiliate thereof.
(l) Use of Proceeds. The Maker shall use the proceeds of this Note as set forth in the Purchase Agreement.
(m) Operation of Business. The Company and/or any of its Subsidiaries shall operate its business in the ordinary course consistent with past practices.
(n) Compliance with Transaction Documents. The Maker shall, and shall cause its Subsidiaries to, comply with its obligations under this Note and the other Transaction Documents.
(o) Payment of Taxes, Etc. The Maker shall, and shall cause each of its Subsidiaries to, promptly pay and discharge, or cause to be paid and discharged, when due and payable, all lawful taxes, assessments and governmental charges or levies imposed upon the income, profits, property or business of the Maker and the Subsidiaries, except for such failures to pay that, individually or in the aggregate, have not had and would not reasonably be expected to have a Material Adverse Effect; provided, however, that any such tax, assessment, charge, or levy need not be paid if the validity thereof shall currently be contested in good faith by appropriate proceedings and if the Maker or such Subsidiaries shall have set aside on its books adequate reserves with respect thereto, and provided, further, that the Maker and such Subsidiaries will pay all such taxes, assessments, charges, or levies forthwith upon the commencement of proceedings to foreclose any lien which may have attached as security therefor.
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(p) Nasdaq Uplist Termination. Upon the Nasdaq Uplist and immediately following the issuance of the Preferred Shares: (i) all covenants contained in this Note; (ii) all Events of Default; (iii) all reserve requirements; (iv) all restrictions on issuances and payments; (v) all liens and security interests securing this Note; and (vi) all other debt-related rights and obligations contained herein, shall automatically terminate and be of no further force or effect. Thereafter the rights of the parties shall be governed solely by the Certificate of Designation, the Registration Rights Agreement, the Leak-Out Agreement and the Securities Purchase Agreement to the extent applicable following the Nasdaq Uplist; provided, however, that the termination of this Note shall not affect any claim, cause of action, right to payment, damages claim, indemnification right or other remedy arising from any breach, Event of Default or other violation of this Note occurring prior to the Nasdaq Uplist. Any such claim must be asserted within six (6) months following the Nasdaq Uplist and shall survive until finally resolved.
(q) Conversion Floor Price. Notwithstanding anything to the contrary contained in this Note, in no event shall the Conversion Price (the “Floor Price”) be adjusted (subject to adjustment for any forward or reverse stock splits, stock dividends, combinations, recapitalizations and similar events) below (i) the Minimum Price (as defined in Section 4.33 of the Purchase Agreement) as of the execution date of this Note, unless an alternative exception applies, and (ii) the minimum bid price per share required for the Common Stock to achieve initial listing on the Nasdaq Capital Market as set forth in Nasdaq Rule 5505(a)(1)(A), and to maintain such listing on the Nasdaq Capital Market as set forth in Nasdaq Rule 5550(a)(2).
Section 4.2 Option of the Holder. In connection with the number of Trading Days referred to in this Note, the Holder shall have the option to add the number of Trading Days for which a temporary “chill” has been in effect as specified in the Purchase Agreement. This Section 4.2 and any election by the Holder shall not be deemed to modify the Events of Default.
Section 4.3 Notice of Event of Default. Upon the occurrence of any Event of Default, the Maker shall immediately notify all Holders. If the Event of Default remains uncured beyond the applicable cure period set forth in Section 2.2(a), the Maker shall deliver written notice thereof to all Holders within two (2) Business Days following the expiration of such cure period, describing the nature of the Event of Default and the actions being taken to cure such Event of Default.
Section 4.4 General Provisions Regarding Payments.
(a) All payments by the Maker of principal, interest, fees and other obligations shall be made in U.S. Dollars in immediately available funds, without defense, recoupment, setoff or counterclaim, free of any restriction or condition, and delivered to the applicable Holder, not later than 4:00 p.m. to the Holder’s designated payment account on the date due or specified, without presentation or surrender of any Note or the making of any notation thereon, except upon the written request of the Maker made concurrently with or reasonably promptly after payment or prepayment in full of any Note, the Holder shall surrender such Note for cancellation, reasonably promptly after such request, to the Maker; funds received by the Holder after that time on such due date shall be deemed to have been paid by the Maker on the next Trading Day.
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(b) All payments in respect of the principal amount of any Note shall be accompanied by payment of accrued interest on the principal amount being repaid and all other amounts payable with respect to the principal amount being repaid or prepaid.
(c) Whenever any payment to be made hereunder shall be stated to be due on a day that is not a Trading Day, such payment shall be made on the next succeeding Trading Day and such extension of time shall be included in the computation of the payment of interest hereunder or of the commitment fees hereunder.
(d) All payments or proceeds received by the Holder hereunder or under any Transaction Document in respect of any of the obligations, including, but not limited to all proceeds received by the Holder in respect of any sale, any collection from, or other realization upon all or any part of the Collateral (as defined in the Security Agreement), shall be applied in full or in part as follows:
(i) first, ratably to pay the obligations in respect of any fees and indemnities then due and payable to the Holder until paid in full;
(ii) second, ratably to pay accrued interest in respect of the Note as set forth in the payments in Schedule II until paid in full; and
(iii) third, ratably to pay principal of the Note as set forth in the payments in Schedule II until paid in full.
ARTICLE 5
Section 5.1 Notices. Any and all notices or other communications or deliveries required or permitted to be provided hereunder shall be in writing and shall be deemed given and effective on the earliest of (a) the date of transmission, if such notice or communication is delivered via email at the email address specified in this Section 5.1 prior to 5:00 p.m. (New York, N.Y. time) on a Trading Day, (b) the next Trading Day after the date of transmission, if such notice or communication is delivered via email at the email address specified in this Section 5.1 on a day that is not a Trading Day or later than 5:00 p.m. (New York, N.Y. time) on any date and earlier than 11:59 p.m. (New York, N.Y. time) on such date, (c) the Trading Day following the date of delivery to a carrier , if sent by U.S. nationally recognized overnight courier service next Trading Day delivery, or (d) upon actual receipt by the party to whom such notice is required to be given. The addresses for notice shall be as set forth in the Purchase Agreement.
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Section 5.2 Governing Law. This Note shall be governed by and construed in accordance with the Purchase Agreement. This Note shall not be interpreted or construed with any presumption against the party causing this Note to be drafted.
Section 5.3 Headings. Article and section headings in this Note are included herein for purposes of convenience of reference only and shall not constitute a part of this Note for any other purpose.
Section 5.4 Remedies, Characterizations, Other Obligations, Breaches and Injunctive Relief. The remedies provided in this Note shall be cumulative and in addition to all other remedies available under this Note, at law or in equity (including, without limitation, a decree of specific performance and/or other injunctive relief), no remedy contained herein shall be deemed a waiver of compliance with the provisions giving rise to such remedy and nothing herein shall limit the Holder’s right to pursue actual damages for any failure by the Maker to comply with the terms of this Note. Amounts set forth or provided for herein with respect to payments, conversion, and the like (and the computation thereof) shall be the amounts to be received by the Holder and shall not, except as expressly provided herein, be subject to any other obligation of the Maker (or the performance thereof). The Maker acknowledges that a breach by it of its obligations hereunder will cause irreparable and material harm to the Holder and that the remedy at law for any such breach would be inadequate. Therefore, the Maker agrees that, in the event of any such breach or threatened breach, the Holder shall be entitled, in addition to all other available rights and remedies, at law or in equity, to seek equitable relief, including but not limited to an injunction restraining any such breach or threatened breach, without the necessity of pleading and proving irreparable harm or lack of an adequate remedy at law and without any bond or other security being required.
Section 5.5 Enforcement Expenses. The Maker agrees to pay all costs and expenses of the Holder in enforcing or exercising its rights under this Note, including, without limitation, reasonable attorneys’ fees and expenses and the fees and expenses of any expert witnesses.
Section 5.6 Binding Effect. The obligations of the Maker set forth herein shall be binding upon its successors and assigns, whether or not such successors or assigns are permitted by the terms herein.
Section 5.7 Transfers. Holder may transfer or assign this Note in accordance with applicable securities laws without Company consent to any affiliate, fund, financing source or permitted transferee.
Section 5.8 Amendments; Waivers. No provision of this Note may be amended, modified or waived except by the Company and the Lead Investors; provided that any amendment disproportionately and adversely affecting a Holder shall also require the consent of such Holder. No waiver of any default with respect to any provision, condition, or requirement of this Note shall be deemed to be a continuing waiver in the future or a waiver of any subsequent default or a waiver of any other provision, condition, or requirement hereof, nor shall any delay or omission of the Holder to exercise any right hereunder in any manner impair the exercise of any such right.
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Section 5.9 Compliance with Securities Laws. The Holder of this Note acknowledges that this Note is being acquired solely for the Holder’s own account and not as a nominee for any other party, and for investment, and that the Holder shall not offer, sell, or otherwise dispose of this Note in violation of applicable securities laws. This Note and any Note issued in substitution or replacement therefor shall be stamped or imprinted with a legend in substantially the form as the legend on the face of this Note.
Section 5.10 Exclusive Jurisdiction; Venue. Any action, proceeding or claim arising out of, or relating in any way to, this Agreement shall be brought and enforced as provided in the Purchase Agreement.
Section 5.11 Failure or Indulgence Not Waiver. No failure or delay on the part of the Holder in the exercise of any power, right, or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such power, right, or privilege preclude other or further exercise thereof or of any other right, power, or privilege.
Section 5.12 Maker Waivers. Except as otherwise specifically provided herein, the Maker and all others that may become liable for all or any part of the obligations evidenced by this Note, hereby waive presentment, demand, notice of nonpayment, protest, and all other demands and notices in connection with the delivery, acceptance, performance, and enforcement of this Note, and do hereby consent to any number of renewals of extensions of the time or payment hereof and agree that any such renewals or extensions may be made without notice to any such persons and without affecting their liability herein and do further consent to the release of any person liable hereon, all without affecting the liability of the other persons, firms or Maker liable for the payment of this Note, and do hereby waive the right to a trial by jury.
Section 5.13 Definitions. Capitalized terms used herein and not defined shall have the meanings set forth in the Purchase Agreement. For the purposes hereof, the following terms shall have the following meanings.
(a) “Affiliate” means, with respect to any Person, any other Person that directly or indirectly controls, is controlled by, or is under common control with, such Person, it being understood for purposes of this definition that “control” of a Person means the power directly or indirectly either to vote 10% or more of the stock having ordinary voting power for the election of directors of such Person or direct or cause the direction of the management and policies of such Person whether by contract or otherwise.
(b) “Attribution Parties” means, collectively, the following Persons and entities: (i) any investment vehicle, including, any funds, feeder funds or managed accounts, currently, or from time to time after the Original Issuance Date, directly or indirectly managed or advised by the Holder’s investment manager or any of its Affiliates or principals, (ii) any direct or indirect Affiliates of the Holder or any of the foregoing, (iii) any Person acting or who could be deemed to be acting as a Group together with the Holder or any of the foregoing and (iv) any other Persons whose beneficial ownership of the Company’s Common Stock would or could be aggregated with the Holder’s and the other Attribution Parties for purposes of Section 13(d) of the Exchange Act. For clarity, the purpose of the foregoing is to subject collectively the Holder and all other Attribution Parties to the Maximum Percentage.
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(c) “Buy-In” has the meaning contained in Section 3.2(c).
(d) “Buy-In Price” has the meaning contained in Section 3.2(c).
(e) “Buy-In Payment Amount” has the meaning contained in Section 3.2(c).
(f) “Certificate of Designation” means the Certificate of Designation of Series 1 Convertible Preferred Shares of ONAR Holding Corporation.
(g) “Change of Control” means any Fundamental Transaction other than (i) any merger of the Company or any of its, direct or indirect, wholly-owned Subsidiaries with or into any of the foregoing Persons, (ii) any reorganization, recapitalization or reclassification of the shares of Common Stock in which holders of the Company’s voting power immediately prior to such reorganization, recapitalization or reclassification continue after such reorganization, recapitalization or reclassification to hold publicly traded securities and, directly or indirectly, are, in all material respects, the holders of the voting power of the surviving entity (or entities with the authority or voting power to elect the members of the board of directors (or their equivalent if other than a corporation) of such entity or entities) after such reorganization, recapitalization or reclassification, or (iii) pursuant to a migratory merger effected solely for the purpose of changing the jurisdiction of incorporation of the Company or any of its Subsidiaries.
(h) “COC Repayment Price” has the meaning contained in Section 3.5(c).
(i) “Collateral Agent” shall have the meaning as defined in the Purchase Agreement.
(j) “Common Stock” shall have the meaning as defined in the Purchase Agreement.
(k) “Company” has the meaning contained on page 1 of this Note.
(l) “Conversion Failure” has the meaning contained in Section 3.2(c).
(m) “Conversion Price” has the meaning contained in Section 3.1(b).
(n) “Conversion Shares” has the meaning contained in Section 3.2(a).
(o) “Convertible Securities” has the meaning contained in Section 3.4.
(p) “Corporate Event” has the meaning contained in Section 3.5(b).
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(q) “Default Interest” has the meaning contained in Section 1.2.
(r) “DTC” has the meaning contained in Section 3.2(a).
(s) “Event of Default” has the meaning contained in Section 2.1.
(t) “Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.
(u) “Exchange Agreement” means that certain Exchange Agreement, dated as of September 28, 2026, by and between the Company and the Holder.
(v) “Exchange Note” means a Note issued pursuant to an Exchange Agreement in exchange for Existing Securities and not for new cash consideration.
(w) “Exchange Value” means the Exchange Value determined pursuant to the Exchange Agreement.
(x) “Exempt Issuance” shall have the meaning contained in the Purchase Agreement.
(y) “Existing Securities” means the notes, debentures, convertible notes, promissory notes and other evidences of indebtedness of the Company identified on Exhibit A to the Exchange Agreement, together with all rights, claims, remedies, accrued and unpaid interest, premiums, fees and other amounts owing thereunder, that are being surrendered, assigned, exchanged, cancelled and extinguished pursuant to the Exchange Agreement in consideration for the issuance of this Note.
(z) “FAST” has the meaning contained in Section 3.2(a).
(aa) “Floor Price” has the meaning contained in Section 4.1(q).
(bb) “Fully Diluted Share Count” means 648,070,547 shares of Common Stock, including the total number of shares of Common Stock outstanding immediately prior to the Closing, assuming conversion of all outstanding preferred stock in accordance with its contractual conversion terms, but excluding all Notes, Preferred Shares and securities issuable pursuant thereto.
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(cc) “Fundamental Transaction” means (A) that the Company shall, directly or indirectly, including through Subsidiaries, Affiliates or otherwise, in one or more related transactions, (i) consolidate or merge with or into (whether or not the Company is the surviving corporation) another Person, or (ii) sell, assign, transfer, convey or otherwise dispose of all or substantially all of the properties or assets of the Company or any of its “significant subsidiaries” (as defined in Rule 1-02 of Regulation S-X) to one or more Persons, or (iii) make, or allow one or more Persons to make, or allow the Company to be subject to or have its Common Stock be subject to or party to one or more Persons making, a purchase, tender or exchange offer that is accepted by the holders of at least either (x) 50% of the outstanding shares of Common Stock, (y) 50% of the outstanding shares of Common Stock calculated as if any shares of Common Stock held by all Persons making or party to, or Affiliated with any Person or group of Persons making or party to, such purchase, tender or exchange offer were not outstanding; or (z) such number of shares of Common Stock such that all Persons making or party to, or Affiliated with any Person making or party to, such purchase, tender or exchange offer, become collectively the beneficial owners (as defined in Rule 13d-3 under the Exchange Act) of at least 50% of the outstanding shares of Common Stock, or (iv) consummate a stock or share purchase agreement or other business combination (including, without limitation, a reorganization, recapitalization, spin-off or scheme of arrangement) with one or more Persons whereby all such Persons, individually or in the aggregate, acquire, either (x) at least 50% of the outstanding shares of Common Stock, (y) at least 50% of the outstanding shares of Common Stock calculated as if any shares of Common Stock held by all the Persons making or party to, or Affiliated with any Person making or party to, such stock purchase agreement or other business combination were not outstanding; or (z) such number of shares of Common Stock such that the Persons become collectively the beneficial owners (as defined in Rule 13d-3 under the Exchange Act) of at least 50% of the outstanding shares of Common Stock, or (v) reorganize, recapitalize or reclassify its Common Stock, (B) that the Company shall, directly or indirectly, including through Subsidiaries, Affiliates or otherwise, in one or more related transactions, allow any Person individually or the Persons in the aggregate to be or become the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, whether through acquisition, purchase, assignment, conveyance, tender, tender offer, exchange, reduction in outstanding shares of Common Stock, merger, consolidation, business combination, reorganization, recapitalization, spin-off, scheme of arrangement, reorganization, recapitalization or reclassification or otherwise in any manner whatsoever, of either (x) at least 50% of the aggregate ordinary voting power represented by issued and outstanding Common Stock, (y) at least 50% of the aggregate ordinary voting power represented by issued and outstanding Common Stock not held by all such Persons as of the date of this Note calculated as if any shares of Common Stock held by all such Persons were not outstanding, or (z) a percentage of the aggregate ordinary voting power represented by issued and outstanding shares of Common Stock or other equity securities of the Company sufficient to allow such Persons to effect a statutory short form merger or other transaction requiring other shareholders of the Company to surrender their shares of Common Stock without approval of the shareholders of the Company or (C) directly or indirectly, including through Subsidiaries, Affiliates or otherwise, in one or more related transactions, the issuance of or the entering into any other instrument or transaction structured in a manner to circumvent, or that circumvents, the intent of this definition in which case this definition shall be construed and implemented in a manner otherwise than in strict conformity with the terms of this definition to the extent necessary to correct this definition or any portion of this definition which may be defective or inconsistent with the intended treatment of such instrument or transaction.
(dd) “Governmental Authority” means the government of the United States, or any political subdivision thereof, whether state or local, and any agency, authority, instrumentality, regulatory body, court, central bank, or other entity exercising executive, legislative, judicial, taxing, regulatory, or administrative powers or functions of or pertaining to government.
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(ee) “Group” means a “group” as that term is used in Section 13(d) of the Exchange Act and as defined in Rule 13d-5 thereunder.
(ff) “Holder” has the meaning contained on page 1 of this Note.
(gg) “Incentive Shares” means shares of Common Stock issued or issuable to the Purchasers pursuant to the Transaction Documents in connection with the Nasdaq Uplist, including any shares issued to satisfy Nasdaq public float requirements, holder-count requirements or related listing requirements, whether issued at Closing, upon the Nasdaq Uplist or thereafter.
(hh) “Indebtedness” means: (a) all obligations for borrowed money; (b) all obligations evidenced by bonds, debentures, notes, or other similar instruments and all reimbursement or other obligations in respect of letters of credit, bankers acceptances, current swap agreements, interest rate hedging agreements, interest rate swaps, or other financial products; (c) all obligations or liabilities secured by a lien or encumbrance on any asset of the Maker, irrespective of whether such obligation or liability is assumed; and (d) any obligation guaranteeing or intended to guarantee (whether directly or indirectly guaranteed, endorsed, co-made, discounted or sold with recourse) any of the foregoing obligations of any other person.
(ii) “Interest” has the meaning contained in Section 1.2.
(jj) “Lead Investors” shall have the meaning set forth in the Purchase Agreement.
(kk) “Liens” has the meaning contained in Section 4.1(c).
(ll) “Maker” has the meaning contained on page 1 of this Note.
(mm) “Mandatory Default Amount” means an amount equal to 105% of the sum of (x) the outstanding Principal of this Note on the date on which the first Event of Default has occurred hereunder and (y) any accrued and unpaid Interest thereon, if any.
(nn) “Material Adverse Effect” shall have the meaning set forth in the Purchase Agreement.
(oo) “Maturity Date” has the meaning contained on page 1 of this Note.
(pp) “Maximum Percentage” has the meaning contained in Section 3.2(e).
(qq) “Nasdaq Uplist” means once the Company has received Nasdaq’s approval of the Company’s application to list its Common Stock on The Nasdaq Capital Market, The Nasdaq Global Market or The Nasdaq Global Select Market (collectively, “Nasdaq”) and the date on which the Company’s Common Stock commences trading on the Nasdaq. At the Company’s election, “Nasdaq” could mean for purposes of this Notes and the other Transaction Documents, a comparable national securities exchange, such as the NYSE American LLC.
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(rr) “Note” has the meaning contained on page 1 of this Note.
(ss) “Notice of Change of Control” has the meaning contained in Section 3.5(a).
(tt) “Notice of Prepayment at Option of Holder Upon Change of Control” has the meaning contained in Section 3.5(c).
(uu) “Outstanding Balance” has the meaning contained in Section 1.2.
(vv) “Permitted Indebtedness” means (i) the Indebtedness evidenced by the Note, (ii) indebtedness existing as of the date hereof, (iii) Indebtedness under the Transaction Documents and (iv) other unsecured Indebtedness of the Company and its Subsidiaries in an aggregate outstanding principal amount not to exceed $500,000 at any time.
(ww) “Permitted Liens” means (i) Liens under the Transaction Documents, (ii) any lien for taxes not yet due or delinquent or being contested in good faith by appropriate proceedings for which adequate reserves have been established in accordance with GAAP, (iii) any statutory Lien arising in the ordinary course of business by operation of law with respect to a liability that is not yet due or delinquent, (iv) any Lien created by operation of law, such as materialmen’s Liens, mechanics’ Liens and other similar Liens, arising in the ordinary course of business with respect to a liability that is not yet due or delinquent or that are being contested in good faith by appropriate proceedings, (v) Liens arising from judgments, decrees or attachments in circumstances not constituting an Event of Default under this Note, or Liens securing Permitted Senior Debt, provided that such Liens secure only Permitted Senior Debt and are subject to intercreditor arrangements reasonably acceptable to the Collateral Agent and (vi) Liens disclosed to the Holder on or prior to the date hereof.
(xx) “Permitted Senior Debt” means (i) one or more senior secured credit facilities, term loans, acquisition facilities or similar financing arrangements incurred by the Company and its Subsidiaries in an aggregate principal amount not exceeding $3,000,000, or such higher amount needed to equal $15,000,000 when combined with the aggregate principal amount of Notes sold pursuant to the Purchase Agreement, outstanding at any time, (ii) trade payables, purchase money indebtedness and capital lease obligations incurred in the ordinary course of business, (iii) seller notes, earnout obligations and deferred purchase price obligations incurred in connection with acquisitions permitted under the Purchase Agreement, (iv) refinancing indebtedness that refinances Permitted Senior Debt and does not increase the principal amount thereof except for customary fees, expenses and accrued interest, and (v) other indebtedness approved in writing by the Lead Investors.
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(yy) “Preferred Conversion” means the conversion or exchange of the Company’s outstanding Preferred Shares into Common Stock pursuant to the Transaction Documents immediately prior to the conversion of the Notes.
(zz) “Preferred Shares” means the shares of Series 1 convertible preferred stock issued upon the Nasdaq Uplist in exchange for the Notes pursuant to the Transaction Documents.
(aaa) “Pricing Period” means the 10 Trading Days following the cure of an Event of Default as permitted by this Note.
(bbb) “Principal” has the meaning contained on page 1 of this Note.
(ccc) “Purchase Agreement” has the meaning on Page 1 of this Note.
(ddd) “Lead Investors” shall have the meaning set forth in the Purchase Agreement.
(eee) “Required Minimum” shall have the meaning contained in the Purchase Agreement.
(fff) “Reverse Stock Split” means a reverse stock split of the Common Stock effected by the Company in order to satisfy the initial listing requirements of Nasdaq in connection with the Nasdaq Uplist.
(ggg) “SEC” means the United States Securities and Exchange Commission or the successor thereto.
(hhh) “Securities Act” means the Securities Act of 1933, as amended, and the rules and regulations thereunder.
(iii) “Security Agreement” shall have the meaning as defined in the Purchase agreement.
(jjj) “Share Delivery Date” has the meaning contained in Section 3.2(a).
(kkk) “Standard Settlement Period” has the meaning contained in Section 2.1(e).
(lll) “Stated Value” shall have the meaning set forth in the Certificate of Designation.
(mmm) “Subsidiary” shall have the meaning contained in the Purchase Agreement.
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(nnn) “Successor Entity” has the meaning contained in Section 3.5(a).
(ooo) “Trading Day” means a day on which the principal Trading Market is open for trading.
(ppp) “Trading Market” has the meaning contained in the Purchase Agreement.
(qqq) “Transaction Documents” has the meaning contained in the Purchase Agreement.
(rrr) “Transfer Agent” has the meaning contained in Section 3.2(a).
(sss) “Underlying Shares” has the meaning contained in the Purchase Agreement.
(ttt) “Uplist Conversion” means the automatic conversion of the Notes into Preferred Shares upon the Nasdaq Uplist pursuant to Article 3 and the Transaction Documents.
(uuu) “Uplist Financing” has the meaning contained in Section 4.1(t).
(vvv) “VWAP” means, for any date, the price determined by the first of the following clauses that applies: (a) if the Common Stock is then listed or quoted on the Trading Market, the daily volume weighted average price of the Common Stock for such date (or the nearest preceding date) on the Trading Market on which the Common Stock is then listed or quoted as reported by Bloomberg L.P. (based on a Trading Day from 9:30 a.m. (New York, N.Y. time) to 4:00 p.m. (New York, N.Y. time)), (b) if the Common Stock is traded on OTCQB, OTCQX or OTC Pink, the volume weighted average sales price of the Common Stock for such date (or the nearest preceding date) on OTCQB, OTCQX or OTC Pink as applicable, (c) if the Common Stock is not then listed or quoted for trading on OTCQB or OTCQX and if prices for the Common Stock is then reported in OTC Pink or successor operated by OTC Markets Group, Inc. (or a similar organization or agency succeeding to its functions of reporting prices), the most recent bid price per share of the Common Stock so reported, or (d) in all other cases, the fair market value of a share of Common Stock as determined by an independent broker-dealer selected in good faith by the Holder and reasonably acceptable to the Company, the fees and expenses of which shall be paid by the Company.
(www) “Warrants” has the meaning contained in the Purchase Agreement.
(xxx) “Warrant Coverage” has the meaning contained in the Purchase Agreement.
[Signature Page Follows]
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IN WITNESS WHEREOF, the Maker has caused this Note to be duly executed by its duly authorized officer as of the date first above indicated.
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| ONAR HOLDING CORPORATION |
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| Name: | Claude Zdanow |
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| Title: | Chief Executive Officer |
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| [Signature Page to Exchange Secured Convertible Promissory Note] |
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SCHEDULE I
HOLDER
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SCHEDULE II
PAYMENT SCHEDULE
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EXHIBIT 10.6
PLEDGE AND SECURITY AGREEMENT
This PLEDGE AND SECURITY AGREEMENT (this “Agreement”), dated as of September 28, 2026 (the “Effective Date”), is made by ONAR HOLDING CORPORATION, a Nevada corporation (the “Company”), in favor of the Holders (as defined below) and ADI Funding LLC., solely in its capacity as collateral agent for the benefit of the Holders (as defined below) (the “Collateral Agent”).
R E C I T A L S:
WHEREAS, the Company and the purchaser parties thereto (the “Senior Holders”) are parties to that certain Securities Purchase Agreement dated as of September 28, 2026 (the “Senior Securities Purchase Agreement”), pursuant to which the Company has issued or may issue senior secured convertible notes in an aggregate original principal amount of up to $5,000,000, together with any accrued interest, fees, premiums and other obligations thereunder (the “Senior Notes”);
WHEREAS, the Company and the purchaser parties thereto (the “Junior Holders” and together with the Senior Holders, the “Holders”)) are parties to that certain Securities Purchase Agreement dated as of September 28, 2026 (the “Junior Securities Purchase Agreement” and together with the Senior Securities Purchase Agreement, the “SPAs”), pursuant to which the Company has issued or may issue senior secured convertible notes in an aggregate original principal amount of up to $15,000,000, together with any accrued interest, fees, premiums and other obligations thereunder (the “Junior Notes” and together with the Senior Notes, the “Notes”);
WHEREAS, the Notes are secured by substantially all assets of the Company pursuant to this Agreement and are administered by the Collateral Agent for the benefit of the Holders pursuant to Section 13 hereof;
WHEREAS, pursuant to the terms of the Junior Notes, the Junior Notes (including, for the avoidance of doubt, the Exchange Notes (as defined in the Junior Securities Purchase Agreement)) shall be automatically exchanged into Preferred Shares upon the occurrence of the Nasdaq Uplist (as defined in the Securities Purchase Agreement) at a valuation and with a conversion price determined in accordance with the terms set forth in the Note and applicable certificate of designations, all as contemplated by the Junior Securities Purchase Agreement;
NOW, THEREFORE, in consideration of the premises and the agreements herein and in order to induce the Holders to purchase and hold the Notes and provide the financing contemplated by the SPAs, the parties hereto desire to enter into this Agreement and agrees as follows:
SECTION 1. Definitions.
(a) All capitalized terms used in this Agreement that are defined in the Notes (including by reference to definitions in other agreements) or in Article 8 or 9 of the Uniform Commercial Code and which are not otherwise defined herein shall have the same meanings herein as set forth therein; provided that terms used herein which are defined in the Uniform Commercial Code as of the Effective Date shall continue to have the same meaning notwithstanding any replacement or amendment of such statute.
(b) The following terms shall have the respective meanings provided for in Article 8 or Article 9, as applicable, of the Uniform Commercial Code: “Accounts”, “Account Debtor”, “Cash Proceeds”, “Certificate of Title”, “Chattel Paper”, “Commercial Tort Claim”, “Commodity Account”, “Commodity Contracts”, “Deposit Account”, “Documents”, “Electronic Chattel Paper”, “Equipment”, “Fixtures”, “General Intangibles”, “Goods”, “Instruments”, “Inventory”, “Investment Property”, “Letter-of-Credit Rights”, “Noncash Proceeds”, “Payment Intangibles”, “Proceeds”, “Promissory Notes”, “Record”, “Security Account”, “Software”, “Supporting Obligations” and “Tangible Chattel Paper”.
(c) As used in this Agreement, the following terms shall have the respective meanings indicated below, such meanings to be applicable equally to both the singular and plural forms of such terms:
“Accession Agreement” means an accession agreement in the form of Exhibit E to this Agreement.
“Additional Collateral” has the meaning specified therefor in Section 4(a)(i) hereof.
“Additional Holder” means each of the purchasers, exchangers, and subsequent holders of Notes (including, for the avoidance of doubt, the Exchange Notes) entitled to the benefits of the Transaction Documents after the Effective Date that becomes a party to this Agreement by executing an Accession Agreement.
“Certificated Entities” has the meaning specified therefor in Section 5(m) hereof.
“Collateral” has the meaning specified therefor in Section 2 hereof.
“Control Agreement” means, with respect to any deposit account, any securities account, commodity account, securities entitlement or commodity contract, an agreement, in form and substance satisfactory to the Collateral Agent, among the Collateral Agent, the financial institution or other Person at which such account is maintained or with which such entitlement or contract is carried and the Company, effective to grant “control” (as defined in the Uniform Commercial Code) over such account to the Collateral Agent.
“Common Stock” means the common stock of the Company, par value $0.001 per share, and any other class of securities into which such securities may hereafter be reclassified or changed.
“Copyright Licenses” means all licenses, contracts or other agreements, whether written or oral, naming the Company as licensee or licensor and providing for the grant of any right to use or sell any works covered by any Copyright.
“Copyrights” means all domestic and foreign copyrights, whether registered or unregistered, including, without limitation, all copyright rights (whether now or hereafter arising) in any and all media (whether now or hereafter developed), in and to all original works of authorship fixed in any tangible medium of expression (including computer software and internet website content) now or hereafter owned, acquired, developed or used by the Company, all applications, registrations and recordings thereof (including, without limitation, applications, registrations and recordings in the United States Copyright Office or in any similar office or agency of the United States or any other country or any political subdivision thereof), and all reissues, divisions, continuations, continuations in part and extensions or renewals thereof.
“Existing Security Agreement” means that certain Pledge and Security Agreement, dated as of September 15, 2025, by and between the Company and ADI Funding LLC, as collateral agent.
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“Governmental Authority” means any nation or government, any foreign, Federal, state, territory, provincial, city, town, municipality, county, local or other political subdivision thereof or thereto and any department, commission, board, bureau, instrumentality, agency or other entity exercising executive, legislative, judicial, taxing, regulatory or administrative powers or functions of or pertaining to government.
“Holder” means each of the Initial Holders and the Additional Holders.
“Incentive Shares” means shares of Common Stock issued or issuable to the Junior Holders pursuant to the Junior Securities Purchase Agreement in connection with the Nasdaq Uplist, including any shares issued to satisfy Nasdaq public float requirements, holder-count requirements or related listing requirements, whether issued at Closing, upon the Nasdaq Uplist or thereafter.
“Initial Holders” means each of the initial holders of Notes identified on the signature page to this Agreement as of the Effective Date.
“Intellectual Property” means all intellectual property, including copyrights, patents, trademarks, internet domain names, software and trade secrets (together with all issued registrations for and pending applications to register any intellectual property, and all goodwill associated therewith).
“Irrevocable Proxy” has the meaning specified therefor in Section 4(a)(i) hereof.
“Junior Debt” means all amounts owed by the Company to the Junior Holders under the Junior Securities Purchase Agreement and the Junior Notes.
“Licenses” means the Copyright Licenses, the Patent Licenses and the Trademark Licenses.
“Obligations” means all of Company’s obligations under this Agreement and the other Transaction Documents in each case, whether now or hereafter existing, voluntary or involuntary, direct or indirect, absolute or contingent, liquidated or unliquidated, whether or not jointly owed with others, and whether or not from time to time decreased or extinguished and later increased, created or incurred, and all or any portion of such obligations or liabilities that are paid, to the extent all or any part of such payment is avoided or recovered directly or indirectly from the Collateral Agent as a preference, fraudulent transfer or otherwise as such obligations may be amended, supplemented, converted, extended or modified from time to time.
“Patent Licenses” means all licenses, contracts or other agreements, whether written or oral, naming the Company as licensee or licensor and providing for the grant of any right to manufacture, use or sell any invention covered by any Patent.
“Patents” means all domestic and foreign letters patent, design patents, utility patents, industrial designs, inventions, trade secrets, ideas, concepts, methods, techniques, processes, proprietary information, technology, know-how, formulae, rights of publicity and other general intangibles of like nature, now existing or hereafter acquired, all applications, registrations and recordings thereof, and all reissues, divisions, continuations, continuations in part and extensions or renewals thereof.
“Perfection Requirements” has the meaning specified therefor in Section 5(j) hereof.
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“Pledge Amendment” has the meaning specified therefor in Section 4(a)(ii) hereof.
“Pledged Debt” means the Indebtedness owned or acquired by the Company described in Schedule VII hereto and all other Indebtedness from time to time owned or acquired by the Company, the Promissory Notes and other Instruments evidencing any or all of such Indebtedness, and all interest, cash, Instruments, Investment Property, financial assets, securities, equity interests, stock options and Commodity Contracts, notes, debentures, bonds, Promissory Notes or other evidences of Indebtedness and all other property from time to time received, receivable or otherwise distributed in respect of or in exchange for any or all of such Indebtedness.
“Pledged Interests” means, collectively, (a) the Pledged Debt, (b) the Pledged Shares and (c) all security entitlements in any and all of the foregoing.
“Pledged Issuers” means, collectively, (a) the issuers of the shares of equity interests described in Schedule VIII hereto and (b) any other issuer of equity interests at any time and from time to time owned or acquired by the Company whose shares of equity interests are required to be pledged as Collateral under this Agreement.
“Pledged Partnership/LLC Agreement” has the meaning specified therefor in Section 6(k)(ii) hereof.
“Pledged Shares” means (a) the shares of equity interests of the Pledged Issuers, whether or not evidenced or represented by any stock certificate, certificated or uncertificated security or other Instrument, (b) any Preferred Stock, Incentive Shares, and any other equity interests issued by or issuable to the Company pursuant to the Transaction Documents, (c) the certificates representing any of the foregoing, (d) all options, warrants, rights (contractual or otherwise) relating thereto, and (e) all dividends, distributions, cash, Instruments, Investment Property, financial assets, securities, equity interests, stock options, warrants, Commodity Contracts, notes, debentures, bonds, Promissory Notes or other evidence of Indebtedness, or other property from time to time received, receivable or otherwise distributed in respect of or in exchange for any of the foregoing, including any substitution, exchange, recapitalization, reclassification, conversion, stock split, stock dividend, merger or similar transaction involving such equity interests. Pledged Shares shall include all equity interests of the Pledged Issuers, any Preferred Stock, any Incentive Shares, and all proceeds, substitutions, exchanges, recapitalizations, conversions and distributions relating thereto.
“Preferred Shares” means the shares of preferred stock of the Company issued in connection with the Nasdaq Uplist, having the rights, preferences, privileges and restrictions set forth in the certificate of designations of such series of preferred stock and convertible into Common Stock in accordance with the terms of the certificate of designations, together with any securities issued in substitution therefor or in respect thereof as a result of any stock split, stock dividend, recapitalization, reclassification or similar transaction.
“Pledgee” has the meaning specified therefor in the Existing Security Agreement.
“Registration Page” has the meaning specified therefor in Section 4(a)(i) hereof.
“Requirements of Law” means, with respect to any Person, collectively, the common law and any and all federal, state, provincial, local, foreign, multinational or international laws, statutes, codes, treaties, standards, rules and regulations, guidelines, ordinances, orders, judgments, writs, injunctions, decrees (including administrative or judicial precedents or authorities), and the interpretation or administration thereof by, and other determinations, directives, requirements or requests of any Governmental Authority, in each case that are applicable to or binding upon such Person or any of its property or to which such Person or any of its property is subject.
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“Senior Debt” means all amounts owed by the Company to the Senior Holders under the Senior Securities Purchase Agreement and the Senior Notes.
“Termination Date” means the date on which all of the Obligations (other than those intended to survive such termination) are paid in full or otherwise terminated.
“Titled Collateral” means all Collateral for which the title to such Collateral is governed by a Certificate of Title or certificate of ownership, including, without limitation, all motor vehicles (including, without limitation, all trucks, trailers, tractors, service vehicles, automobiles and other mobile equipment) for which the title to such motor vehicles is governed by a Certificate of Title or certificate of ownership.
“Trademark Licenses” means all licenses, contracts or other agreements, whether written or oral, naming the Company as licensor or licensee and providing for the grant of any right concerning any Trademark, together with any goodwill connected with and symbolized by any such trademark that is the subject of such licenses, contracts or agreements and the right to prepare for sale or lease and sell or lease any and all Inventory now or hereafter owned by the Company and now or hereafter covered by such licenses.
“Trademarks” means all domestic and foreign trademarks, service marks, collective marks, certification marks, trade names, business names, d/b/a’s, Internet domain names, trade styles, designs, logos and other source or business identifiers and all general intangibles of like nature, now or hereafter owned, adopted, acquired or used by the Company, all applications, registrations and recordings thereof (including, without limitation, applications, registrations and recordings in the United States Patent and Trademark Office or in any similar office or agency of the United States, any state thereof or any other country or any political subdivision thereof), and all reissues, extensions or renewals thereof, together with all goodwill of the business symbolized by such marks and all customer lists, formulae and other Records of the Company relating to the distribution of products and services in connection with which any of such marks are used.
“Transaction Documents” means this Agreement, the Notes (including, for the avoidance of doubt, the Exchange Notes), the Warrants, the Registration Rights Agreement, the SPAs, the Exchange Agreements, all exhibits and schedules hereto and thereto, and all other documents executed in connection with the transactions contemplated hereby.
“Uniform Commercial Code” means the Uniform Commercial Code as in effect from time to time in the State of Nevada.
SECTION 2. Grant of Security Interest. As collateral security for the payment, performance and observance of all of the Obligations, the Company hereby pledges and collaterally assigns to the Collateral Agent, and grants to the Collateral Agent, a continuing security interest in, all personal property and Fixtures of the Company, wherever located and whether now or hereafter existing and whether now owned or hereafter acquired, of every kind and description, tangible or intangible, including, without limitation, the following (all being collectively referred to herein as the “Collateral”):
(a) all Accounts;
(b) all Chattel Paper (whether tangible or electronic);
(c) all Commercial Tort Claims, including, without limitation, the Commercial Tort Claims described in Schedule VI hereto;
(d) all Deposit Accounts and Securities Accounts, all cash, and all other property from time to time deposited therein or otherwise credited thereto;
(e) all Documents;
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(f) all General Intangibles (including, without limitation, all Payment Intangibles, Intellectual Property and Licenses);
(g) all Goods, including, without limitation, all Equipment, Fixtures and Inventory;
(h) all Instruments (including, without limitation, Promissory Notes);
(i) all Investment Property;
(j) all Letter-of-Credit Rights;
(k) all Pledged Interests;
(l) all Supporting Obligations;
(m) all Additional Collateral;
(n) all other tangible and intangible personal property and Fixtures of the Company (whether or not subject to the Uniform Commercial Code), including, without limitation, all bank and other accounts and all cash and all investments therein, all proceeds, products, offspring, accessions, rents, profits, income, benefits, substitutions and replacements of and to any of the property of the Company described in the preceding clauses of this Section 2 hereof (including, without limitation, any proceeds of insurance thereon and all causes of action, claims and warranties now or hereafter held by the Company in respect of any of the items listed above), and all books, correspondence, files and other Records, including, without limitation, all tapes, disks, cards, Software, data and computer programs in the possession or under the control of the Company or any other Person from time to time acting for the Company that at any time evidence or contain information relating to any of the property described in the preceding clauses of this Section 2 hereof or are otherwise necessary or helpful in the collection or realization thereof; and
(o) all Proceeds, including all Cash Proceeds and Noncash Proceeds, and products of any and all of the foregoing Collateral;
in each case, howsoever the Company’s interest therein may arise or appear (whether by ownership, security interest, claim or otherwise).
SECTION 3. Reserved.
SECTION 4. Delivery of the Pledged Interests.
(a) (i) All Promissory Notes currently evidencing the Pledged Debt and all certificates currently representing the Pledged Shares (if certificated) on the Effective Date shall be delivered to the Collateral Agent on or prior to the Effective Date; provided, however, that, to the extent any such Promissory Note, certificate or Instrument is held by the Pledgee under the Existing Security Agreement, the Company shall deliver such item promptly following its return by the Pledgee. All other Promissory Notes, certificates and Instruments constituting Pledged Interests from time to time required to be pledged to the Collateral Agent pursuant to the terms of this Agreement or the other Transaction Documents (the “Additional Collateral”) shall be delivered to the Collateral Agent promptly upon, but in any event within five (5) days of, receipt thereof by or on behalf of any of the Company. All such Pledged Interests delivered to the Collateral Agent pursuant to this Agreement shall be (A) held by or on behalf of the Collateral Agent pursuant hereto, (B) delivered in suitable form for transfer by delivery or shall be accompanied by duly executed instruments of transfer or assignment, as applicable, or undated note or stock powers, as applicable, executed in blank and (C) with respect to any certificated Pledged Shares, accompanied by (1) a duly executed irrevocable proxy coupled with an interest, in substantially the form of Exhibit C hereto (an “Irrevocable Proxy”), and (2) a duly acknowledged equity interest registration page, in blank, from each Pledged Issuer, substantially in the form of Exhibit D hereto, or otherwise in form and substance satisfactory to the Collateral Agent (a “Registration Page”), all in form and substance reasonably satisfactory to the Collateral Agent. If any Pledged Interests consist of uncertificated securities, unless the immediately following sentence is applicable thereto, the Company shall cause (x) the Collateral Agent (or its designated custodian or nominee) to become the registered holder thereof, or (y) each issuer of such securities to agree that it will comply with instructions originated by the Collateral Agent with respect to such securities without further consent by the Company. If any Pledged Interests consist of security entitlements, the Company shall (x) transfer such security entitlements to the Collateral Agent (or its custodian, nominee or other designee), or (y) cause the applicable securities intermediary to agree that it will comply with entitlement orders by the Collateral Agent without further consent by the Company.
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(i) Within three (3) days of the receipt by the Company of any applicable Additional Collateral, a pledge amendment duly executed by the Company, in substantially the form of Exhibit A hereto (a “Pledge Amendment”), shall be delivered to the Collateral Agent, in respect of the Additional Collateral that must be pledged pursuant to this Agreement or the other Transaction Documents. The Pledge Amendment shall from and after delivery thereof constitute part of Schedules VII and VIII hereto. The Company hereby authorizes the Collateral Agent to attach each Pledge Amendment to this Agreement and agrees that all Promissory Notes, certificates or Instruments listed on any Pledge Amendment delivered to the Collateral Agent shall for all purposes hereunder constitute Pledged Interests and the Company shall be deemed upon delivery thereof to have made the applicable representations and warranties set forth in Section 5 hereof with respect to such Additional Collateral.
(b) If the Company shall receive, by virtue of being or having been an owner of any Pledged Interests, any applicable Additional Collateral consisting of any (i) equity interest certificate (including, without limitation, any certificate representing an equity interest dividend or distribution in connection with any increase or reduction of capital, reclassification, merger, consolidation, division, sale of assets, combination of shares, stock split, spin-off or split-off), Promissory Note or other Instrument, (ii) option or right, whether as an addition to, substitution for, or in exchange for, any Pledged Interests, or otherwise, (iii) dividends or distributions payable in cash (except such dividends and/or distributions expressly permitted to be retained by the Company pursuant to Section 7 hereof) or in securities or other property or (iv) dividends, distributions, cash, Instruments, Investment Property and other property in connection with a partial or total liquidation or dissolution or in connection with a reduction of capital, capital surplus or paid-in surplus, the Company shall receive such equity interest certificate, Promissory Note, Instrument, option, right, payment or distribution in trust for the benefit of the Collateral Agent, shall segregate it from the Company’s other property and shall promptly deliver it to the Collateral Agent, in the exact form received, with any necessary indorsement and/or instrument of transfer or assignment duly executed in blank (and, in the case of any Additional Collateral described in clause (b)(i) above, with an Irrevocable Proxy and Registration Page with respect to any such Additional Collateral), all in form and substance satisfactory to the Collateral Agent, to be held by the Collateral Agent as Pledged Interests.
SECTION 5. Representations and Warranties. The Company represents and warrants as follows:
(a) Schedule I hereto sets forth a complete and accurate list as of the Effective Date of (i) the exact legal name of the Company, (ii) the jurisdiction of organization of the Company, (iii) the type of organization of the Company and (iv) the organizational identification number of the Company (or states that no such organizational identification number exists).
(b) As of the Effective Date, all Collateral consisting of Equipment, Fixtures, Inventory and other Goods now existing are, and all Equipment, Fixtures, Inventory and other Goods hereafter existing will be, located at the addresses specified therefor in Schedule III hereto (as amended, supplemented or otherwise modified from time to time in accordance with Section 6(b)). As of the Effective Date, the Company’s chief place of business and chief executive office, the place where the Company keeps its Records concerning Accounts and all originals of all Chattel Paper are located at the addresses specified therefor in Schedule III hereto (as amended, supplemented or otherwise modified from time to time in accordance with the terms hereof). None of the Accounts is evidenced by Promissory Notes or other Instruments except for Promissory Notes evidencing indebtedness of not more than $50,000 individually and $250,000 in the aggregate. Set forth in Schedule IV hereto is a complete and accurate list, as of the Effective Date, of each Deposit Account, Securities Account and Commodities Account of the Company, together with the name and address of each institution at which each such Account is maintained, the account number for each such Account and a description of the purpose of each such Account. Set forth in Schedule II hereto is, as of the Effective Date (i) a complete and correct list of each trade name used by the Company and (ii) the name of, and each trade name used by, each Person from which the Company has acquired any substantial part of the Collateral within five years of the Effective Date (or such date of so supplementing).
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(c) The Company has delivered to the Collateral Agent true, complete and correct copies of each License described in Schedule II hereto, including all schedules and exhibits thereto, which represents all of the Licenses existing as of the Effective Date. Each such License sets forth the entire agreement and understanding of the parties thereto relating to the subject matter thereof, and there are no other agreements, arrangements or understandings, written or oral, relating to the matters covered thereby or the rights of the Company in respect thereof. Each License now existing is, and each other License will be, the legal, valid and binding obligation of the parties thereto, enforceable against such parties in accordance with its terms, except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting creditors’ rights generally or by general principles relating to enforceability. No default under any License by any such party has occurred, nor does any defense, offset, deduction or counterclaim exist thereunder in favor of any such party. No party to any License has given the Company notice of its intention to cancel, terminate or fail to renew any License.
(d) Schedule II hereto sets forth a complete and accurate list of all (i) registered or applied for Trademarks or Copyrights, (ii) Patents or applications for Patents, and (iii) registered domain names, in each case owned by the Company as of the Effective Date. All such Intellectual Property is subsisting and in full force and effect, have not been adjudged invalid or unenforceable, are valid and enforceable and have not been abandoned in whole or in part. No such Intellectual Property is the subject of any licensing or franchising agreement. No Intellectual Property owned or used by the Company conflicts with the rights of others to any Intellectual Property and the Company is not now infringing or in conflict with any such rights of others, and no other Person is now infringing or in conflict with any such properties, assets and rights owned or used by the Company, except in each case for infringements and conflicts that would not reasonably be expected to have, individually or in the aggregate, a material adverse effect. The Company has not received any notice that it is violating or has violated the Intellectual Property rights of any third party.
(e) None of the other Intellectual Property of the Company has been used, divulged, disclosed or appropriated to the detriment of the Company for the benefit of any other Person other than the Company; no employee, independent contractor or agent of the Company has misappropriated any other Intellectual Property of any other Person in the course of the performance of his or her duties as an employee, independent contractor or agent of the Company; and no employee, independent contractor or agent of the Company is in default or breach of any term of any employment agreement, non-disclosure agreement, assignment of inventions agreement or similar agreement, or contract relating in any way to the protection, ownership, development, use or transfer of the Company’s Intellectual Property.
(f) The Pledged Issuers set forth in Schedule VIII are the Company’s only direct subsidiaries as of the Effective Date. The Pledged Shares have been duly authorized and validly issued and are fully paid and nonassessable and the holders thereof are not entitled to any preemptive, first refusal or other similar rights. Except as noted in Schedule VIII hereto, the Pledged Shares constitute 100% of the issued shares of equity interests of the Pledged Issuers as of the Effective Date. All other shares of equity interests constituting Pledged Interests will be duly authorized and validly issued, fully paid and nonassessable.
(g) The Promissory Notes evidencing the Pledged Debt have been, and all other Promissory Notes from time to time evidencing Pledged Debt, when executed and delivered, will have been, duly authorized, executed and delivered by the respective makers thereof, and all such Promissory Notes are or will be, as the case may be, legal, valid and binding obligations of such makers, enforceable against such makers in accordance with their respective terms, except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting creditors’ rights generally.
(h) The Company is and will be at all times the sole and exclusive owner of, or otherwise have and will have adequate rights in, the Collateral free and clear of any Liens except for the Permitted Liens. No effective financing statement or other instrument similar in effect covering all or any part of the Collateral is on file in any recording or filing office except such as may have been filed to perfect or protect any Permitted Lien or financing statements filed in connection with the Existing Security Agreement, which will remain of record solely pending filing of Uniform Commercial Code amendments by the Pledgee on or following the Effective Date, or as otherwise disclosed to the Collateral Agent in writing prior to the Effective Date.
(i) The exercise by the Collateral Agent of any of its rights and remedies hereunder will not contravene any law or Contractual Obligation binding on or otherwise affecting the Company or any of its properties and will not result in, or require the creation of, any Lien (other than any Permitted Lien) upon or with respect to any of its properties.
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(j) No authorization or approval or other action by, and no notice to or filing with, any Governmental Authority or any other Person, is required for (i) the due execution, delivery and performance by the Company of this Agreement, (ii) the grant by the Company of the security interest purported to be created hereby in the Collateral or (iii) the exercise by the Collateral Agent of any of its rights and remedies hereunder, except, in the case of this clause (iii), as may be required in connection with any sale of any Pledged Interests by laws affecting the offering and sale of securities generally. No authorization or approval or other action by, and no notice to or filing with, any Governmental Authority or any other Person, is required for the perfection of the security interest purported to be created hereby in the Collateral, except (A) for the filing pursuant to the Uniform Commercial Code in the office of the Secretary of State (or equivalent filing office) of the relevant State(s) of the respective jurisdictions of organization of the Company described in Schedule V hereto with respect to the portion of Collateral that can be perfected by such filing, all of which financing statements have been duly filed and are in full force and effect, (B) with respect to the perfection of the security interest created hereby in the registered or applied for Trademarks and Copyrights, registered Patents and applications for Patents in the United States owned by the Company, for the recording of the appropriate Assignment for Security, substantially in the form of Exhibit B hereto in the United States Patent and Trademark Office or the United States Copyright Office, as applicable, (C) with respect to the perfection of the security interest created hereby in foreign Intellectual Property and Licenses, for registrations and filings in jurisdictions located outside of the United States and covering rights in such jurisdictions relating to such foreign Intellectual Property and Licenses, (D) with respect to the perfection of the security interest created hereby in Titled Collateral, for the submission of an appropriate application requesting that the Lien of the Collateral Agent be noted on the Certificate of Title or certificate of ownership, completed and authenticated by the Company, together with the Certificate of Title or certificate of ownership, with respect to such Titled Collateral, to the appropriate Governmental Authority, (E) with respect to any action that may be necessary to obtain control of Collateral constituting Deposit Accounts, Electronic Chattel Paper, Investment Property or Letter-of-Credit Rights, the taking of such actions, and (F) the Collateral Agent’s having possession of all Documents, Chattel Paper, Instruments and cash constituting Collateral (subclauses (A) – (F), each, a “Perfection Requirement” and, collectively, the “Perfection Requirements”).
(k) As of the Effective Date, the Company does not hold any Commercial Tort Claims in respect of which a claim has been filed in a court of law or a written notice by an attorney has been given to a potential defendant, except for such claims described in Schedule VI.
(l) This Agreement creates a legal, valid and enforceable security interest in favor of the Collateral Agent, in the Collateral, as security for the Obligations. The Perfection Requirements will result in the perfection of such security interests. Such security interests are, or in the case of Collateral in which the Company obtains rights after the Effective Date, will be, perfected, first priority security interests, subject in priority only to the Permitted Liens, and the recording of such instruments of assignment described above. Such Perfection Requirements and all other action necessary or desirable to perfect and protect such security interest have been duly made or taken, except for (i) the Collateral Agent’s having possession of all Instruments, Documents, Chattel Paper and cash constituting Collateral after the Effective Date, (ii) the Collateral Agent’s having control of all Deposit Accounts, Electronic Chattel Paper, Investment Property or Letter-of-Credit Rights constituting Collateral after the Effective Date, and (iii) the other filings and recordations and actions described in Section 5(j) hereof.
(m) Any Pledged Issuer that is a partnership or a limited liability company with certificated equity interests, has irrevocably opted into Article 8 of the relevant Uniform Commercial Code (collectively, the “Certificated Entities”). Such interests are securities for purposes of Article 8 of the relevant Uniform Commercial Code. With respect to any Pledged Issuer that is not a Certificated Entity, the partnership interests or membership interests of each such Person are not (i) dealt in or traded on securities exchanges or in securities markets, (ii) securities for purposes of Article 8 of any relevant Uniform Commercial Code, (iii) investment company securities within the meaning of Section 8-103 of any relevant Uniform Commercial Code or (iv) evidenced by a certificate.
SECTION 6. Covenants as to the Collateral. During the period from the Effective Date until the Termination Date:
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(a) Further Assurances. The Company will promptly take such action and execute, acknowledge and deliver, at its sole cost and expense, such agreements, instruments or other documents as the Collateral Agent may require from time to time in order (i) to perfect and protect, or maintain the perfection of, the security interest and Lien purported to be created hereby; (ii) to enable the Collateral Agent to exercise and enforce its rights and remedies hereunder in respect of the Collateral; or (iii) otherwise to effect the purposes of this Agreement, including, without limitation: (A) at the request of the Collateral Agent, marking conspicuously all Chattel Paper, Instruments, Licenses and all of its Records pertaining to the Collateral with a legend, in form and substance satisfactory to the Collateral Agent, indicating that such Chattel Paper, Instrument, License or Records is subject to the security interest created hereby, (B) if any Account shall be evidenced by a Promissory Note or other Instrument or Chattel Paper, delivering and pledging to the Collateral Agent such Promissory Note, other Instrument or Chattel Paper, duly endorsed and accompanied by executed instruments of transfer or assignment, all in form and substance satisfactory to the Collateral Agent, (C) executing and filing (to the extent, if any, that the Company’s signature is required thereon) or authenticating the filing of, such financing or continuation statements, or amendments thereto, (D) with respect to United States Intellectual Property hereafter existing and not covered by an appropriate security interest grant, the executing and recording in the United States Patent and Trademark Office or the United States Copyright Office, as applicable, appropriate instruments granting a security interest, as may be necessary or desirable or that the Collateral Agent may request in order to perfect and preserve the security interest purported to be created hereby, (E) delivering to the Collateral Agent Irrevocable Proxies and Registration Pages in respect of the Pledged Interests, (F) furnishing to the Collateral Agent from time to time statements and schedules further identifying and describing the Collateral and such other reports in connection with the Collateral as the Collateral Agent may reasonably request, all in reasonable detail, (G) if at any time after the Effective Date, the Company acquires or holds any Commercial Tort Claim, immediately notifying the Collateral Agent in a writing signed by the Company setting forth a brief description of such Commercial Tort Claim and granting to the Collateral Agent a security interest therein and in the proceeds thereof, which writing shall incorporate the provisions hereof and shall be in form and substance satisfactory to the Collateral Agent, (H) upon the acquisition after the Effective Date by the Company of any Titled Collateral, immediately notifying the Collateral Agent of such acquisition, setting forth a description of the Titled Collateral acquired and a good faith estimate of the current value of such Titled Collateral, and if so requested by the Collateral Agent, immediately causing the Collateral Agent to be listed as the lienholder on such Certificate of Title or certificate of ownership and delivering evidence of the same to the Collateral Agent, and (I) taking all actions required by law in any relevant Uniform Commercial Code jurisdiction, or by other law as applicable in any foreign jurisdiction. The Company shall not take or fail to take any action which could in any manner impair the validity or enforceability of the Collateral Agent’s security interest in and Lien on any Collateral.
(b) Location of Equipment and Inventory. The Company will keep the Equipment and Inventory at the locations specified in Schedule III hereto or, with not less than thirty (30) days’ prior written notice to the Collateral Agent after any change accompanied by a new Schedule III hereto indicating each new location of the Equipment and Inventory, at such other locations in the continental United States as the Company may elect, provided that (i) all action required under this Agreement has been taken (or will be taken, to the extent such action is required or permitted to be taken at a later date) to grant to the Collateral Agent a perfected, first priority security interest in such Equipment and Inventory (subject only to Permitted Liens) in favor of the Collateral Agent, and (ii) the Collateral Agent’s rights in such Equipment and Inventory, including, without limitation, the existence, perfection and priority of the security interest created hereby in such Equipment and Inventory, are not adversely affected thereby.
(c) Condition of Equipment. The Company will maintain and preserve, and cause each of its Subsidiaries to maintain and preserve, all of its Equipment which is necessary or useful in the proper conduct of its business to be maintained and preserved in good working order and condition, ordinary wear and tear and casualty excepted, and with forthwith, or in the case of any loss or damage promptly after the occurrence thereof, make or cause to be made all repairs, replacements and other improvements in connection therewith which are necessary or desirable, consistent with past practice, or which the Collateral Agent may request to such end.
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(d) Provisions Concerning the Accounts and the Licenses.
(i) The Company will, except as otherwise provided in this subsection (d), continue to collect, at its own expense, all amounts due or to become due under the Accounts. In connection with such collections, the Company may (and, at the Collateral Agent’s direction, will) take such action as the Company (or, if applicable, the Collateral Agent) may deem necessary or advisable to enforce collection or performance of the Accounts; provided, however, that the Collateral Agent shall have the right at any time, upon the occurrence and during the continuance of an Event of Default, to notify the Account Debtors or obligors under any Accounts of the assignment of such Accounts to the Collateral Agent and to direct such Account Debtors or obligors to make payment of all amounts due or to become due to the Company thereunder directly to the Collateral Agent or its designated agent and, upon such notification and at the expense of the Company and to the extent permitted by law, to enforce collection of any such Accounts and to adjust, settle or compromise the amount or payment thereof, in the same manner and to the same extent as the Company might have done. After receipt by the Company of a notice from the Collateral Agent that the Collateral Agent has notified, intends to notify, or has enforced or intends to enforce the Company’s rights against the Account Debtors or obligors under any Accounts as referred to in the proviso to the immediately preceding sentence, (A) all amounts and proceeds (including Instruments) received by the Company in respect of the Accounts shall be received in trust for the benefit of the Collateral Agent hereunder, shall be segregated from other funds of the Company and shall be forthwith paid over to the Collateral Agent or its designated agent in the same form as so received (with any necessary endorsement) to be held as cash collateral, and (B) the Company will not adjust, settle or compromise the amount or payment of any Account or release wholly or partly any Account Debtor or obligor thereof or allow any credit or discount thereon. Any such securities, cash, investments and other items so received by the Collateral Agent or its designated agent shall (in the sole and absolute discretion of the Collateral Agent) be held as additional Collateral for the Obligations or distributed in accordance with Section 8 hereof.
(ii) Upon the occurrence and during the continuance of any breach or default under any License by any party thereto other than the Company, (A) the Company will, promptly after obtaining knowledge thereof, give the Collateral Agent written notice of the nature and duration thereof, specifying what action, if any, it has taken and proposes to take with respect thereto, (B) the Company will not, without the prior written consent of the Collateral Agent, declare or waive any such breach or default or affirmatively consent to the cure thereof or exercise any of its remedies in respect thereof, and (C) the Company will, upon written instructions from the Collateral Agent and at the Company’s expense, take such action as the Collateral Agent may deem necessary or advisable in respect thereof.
(iii) The Company will, at its expense, promptly deliver to the Collateral Agent a copy of each notice or other communication received by it by which any other party to any License (A) declares a breach or default by the Company of any material term thereunder, (B) terminates such License or (C) purports to exercise any of its rights or affect any of its obligations thereunder, together with a copy of any reply by the Company.
(iv) The Company will exercise promptly and diligently each and every right which it may have under each License (other than any right of termination) and will duly perform and observe in all respects all of its obligations under each License and will take all action necessary to maintain the Licenses in full force and effect. The Company will not, without the prior written consent of the Collateral Agent, cancel, terminate, amend or otherwise modify in any respect, or waive any provision of, any License.
(e) Notices and Communications; Defense of Title; Amendments; Equity Issuances. The Company will:
(i) at the Company’s expense, promptly deliver to the Collateral Agent a copy of each notice or other communication received by it in respect of the Pledged Interests;
(ii) at the Company’s expense, defend the Collateral Agent’s right, title and security interest in and to the Pledged Interests against the claims of any Person, keep the Pledged Interests free from all Liens (except Permitted Liens), and not sell, exchange, transfer, assign, lease or otherwise dispose of the Pledged Interests or any interest therein;
(iii) not make or consent to any amendment or other modification or waiver with respect to any Pledged Interests or enter into any agreement or permit to exist any restriction with respect to any Pledged Interests; and
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(iv) not permit the issuance of (A) any additional shares of any class of equity interests of any Pledged Issuer, (B) any securities convertible voluntarily by the holder thereof or automatically upon the occurrence or non-occurrence of any event or condition into, or exchangeable for, any such shares of equity interests or (C) any warrants, options, contracts or other commitments entitling any Person to purchase or otherwise acquire any such shares of equity interests.
(f) Intellectual Property.
(i) If applicable, the Company has duly executed and delivered the applicable Assignment for Security in the form attached hereto as Exhibit B for Intellectual Property constituting Collateral that has been registered or applied for with the United States Patent and Trademark Office or United States Copyright Office, as applicable. Except as provided in subsection (ii) below, the Company (either itself or through licensees) will, and will cause each licensee thereof to, take all action necessary to maintain all of the Intellectual Property in full force and effect, including, without limitation, using the proper statutory notices and markings and using the Trademarks on each applicable trademark class of goods in order to so maintain the Trademarks in full force, free from any claim of abandonment for non-use, and the Company will not (nor permit any licensee thereof to) do any act or knowingly omit to do any act whereby any Intellectual Property may become invalidated.
(ii) Notwithstanding the foregoing, so long as no Event of Default has occurred and is continuing, the Company shall not have an obligation to use or to maintain any Intellectual Property (A) that relates solely to any product or work, that has been, or is in the process of being, discontinued, abandoned or terminated, (B) that is being replaced with Intellectual Property substantially similar to the Intellectual Property that may be abandoned or otherwise become invalid, so long as the failure to use or maintain such Intellectual Property does not materially adversely affect the validity of such replacement Intellectual Property and so long as such replacement Intellectual Property is subject to the Lien created by this Agreement or (C) that is substantially the same as any other Intellectual Property that is in full force, so long as the failure to use or maintain such Intellectual Property does not materially adversely affect the validity of such replacement Intellectual Property and so long as such other Intellectual Property is subject to the Lien and security interest created by this Agreement.
(iii) The Company will cause to be taken all necessary steps in any proceeding before the United States Patent and Trademark Office and the United States Copyright Office or any similar office or agency in any other country or political subdivision thereof to maintain each registration of the Intellectual Property (other than the Intellectual Property described in clause (ii) above), including, without limitation, filing of renewals, affidavits of use, affidavits of incontestability and opposition, interference and cancellation proceedings and payment of maintenance fees, filing fees, taxes or other governmental fees. If any Intellectual Property is infringed, misappropriated, diluted or otherwise violated in any material respect by a third party, the Company shall (A) upon obtaining knowledge of such infringement, misappropriation, dilution or other violation, promptly notify the Collateral Agent and (B) to the extent the Company shall deem appropriate under the circumstances, promptly sue for infringement, misappropriation, dilution or other violation, seek injunctive relief where appropriate and recover any and all damages for such infringement, misappropriation, dilution or other violation, or take such other actions as the Company shall deem appropriate under the circumstances to protect such Intellectual Property.
(iv) The Company shall furnish to the Collateral Agent statements and schedules further identifying and describing the Intellectual Property and Licenses and such other reports in connection with the Intellectual Property and Licenses as the Collateral Agent may reasonably request, all in reasonable detail and promptly upon request of the Collateral Agent, following receipt by the Collateral Agent of any such statements, schedules or reports, the Company shall modify this Agreement by amending Schedule II hereto to include any such Intellectual Property and any Licenses, as the case may be, which become part of the Collateral under this Agreement, and shall execute and authenticate such documents and do such acts as shall be necessary or, in the judgment of the Collateral Agent, desirable to subject such Intellectual Property and Licenses to the Lien and security interest created by this Agreement.
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(v) Notwithstanding anything herein to the contrary, upon the occurrence and during the continuance of an Event of Default, the Company may not abandon or otherwise permit any Intellectual Property to become invalid without the prior written consent of the Collateral Agent, and if any Intellectual Property is infringed, misappropriated, diluted or otherwise violated in any material respect by a third party, the Company will take such action as the Collateral Agent shall deem appropriate under the circumstances to protect such Intellectual Property.
(vi) In the event that the Company shall (A) obtain rights to any new Trademarks necessary for the operation of its business, or any reissue, renewal or extension of any existing Trademark necessary for the operation of its business, (B) obtain rights to or develop any new patentable inventions, or become entitled to the benefit of any Patent, or any reissue, division, continuation, renewal, extension or continuation-in-part of any existing Patent or any improvement thereof (whether pursuant to any license or otherwise), (C) obtain rights to or develop any new works protectable by Copyright, or become entitled to the benefit of any rights with respect to any Copyright or any registration or application therefor, or any renewal or extension of any existing Copyright or any registration or application therefor, or (D) obtain rights to or develop new other Intellectual Property, the provisions of Section 2 hereof shall automatically apply thereto and the Company shall give to the Collateral Agent prompt notice thereof. The Company, either itself or through any agent, employee, licensee or designee, shall give the Collateral Agent written notice of each application submitted by it for the registration of any Trademark or Copyright or the issuance of any Patent with the United States Patent and Trademark Office or the United States Copyright Office, as applicable, or in any similar office or agency of the United States or any country or any political subdivision thereof and shall deliver any and all assignments, agreements, instruments, documents and papers as the Collateral Agent may reasonably request to evidence the Collateral Agent’s security interest thereunder in accordance with Section 6(f)(iv).
(vii) The Company shall execute, authenticate and deliver any and all assignments, agreements, instruments, documents and papers as the Collateral Agent may reasonably request to evidence the Collateral Agent’s security interest hereunder in such Intellectual Property and the General Intangibles of the Company relating thereto or represented thereby, and the Company hereby appoints the Collateral Agent its attorney-in-fact to execute and/or authenticate and file all such writings for the foregoing purposes, all acts of such attorney being hereby ratified and confirmed, and such power (being coupled with an interest) shall be irrevocable until the Termination Date.
(g) Deposit, Commodities and Securities Accounts. Within 60 days after the Effective Date (or such longer period as the Collateral Agent may agree to in its sole discretion), the Company shall cause each bank and other financial institution with an account referred to in Schedule IV hereto, in each case, to execute and deliver to the Collateral Agent (or its designee) a Control Agreement, in form and substance reasonably satisfactory to the Collateral Agent, duly executed by the Company and such bank or financial institution, or enter into other arrangements in form and substance reasonably satisfactory to the Collateral Agent, pursuant to which such institution shall irrevocably agree (unless otherwise agreed to by the Collateral Agent), among other things, that, to the extent required to perfect the security interest granted herein in such account (i) it will comply at any time with the instructions originated by the Collateral Agent (or its designee) to such bank or financial institution directing the disposition of cash, Commodity Contracts, securities, Investment Property and other items from time to time credited to such account, without further consent of the Company, which instructions the Collateral Agent (or its designee) will not give to such bank or other financial institution in the absence of a continuing Event of Default, and (ii) all cash, Commodity Contracts, securities, Investment Property and other items of the Company deposited with such institution shall be subject to a perfected, first priority security interest in favor of the Collateral Agent (or its designee).
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(h) Titled Collateral.
(i) The Company shall (a) cause all Collateral, now owned or hereafter acquired by the Company, which under applicable law are required to be registered, to be properly registered in the name of the Company, (b) cause all Titled Collateral, to be properly titled in the name of the Company, and if requested by the Collateral Agent, with the Collateral Agent’s Lien noted thereon and (c) if requested by the Collateral Agent, promptly deliver to the Collateral Agent (or its custodian) originals of all such Certificates of Title or certificates of ownership for such Titled Collateral, with the Collateral Agent’s Lien noted thereon.
(ii) Upon the acquisition after the Effective Date by the Company of any Titled Collateral), the Company shall immediately notify the Collateral Agent of such acquisition, set forth a description of such Titled Collateral acquired and a good faith estimate of the current value of such Titled Collateral and immediately deliver to the Collateral Agent (or its custodian) originals of the Certificates of Title or certificates of ownership for such Titled Collateral, together with the manufacturer’s statement of origin, and an application duly executed by the Company to evidence the Collateral Agent’s Lien thereon.
(iii) The Company hereby appoints the Collateral Agent as its attorney-in-fact, effective the Effective Date and terminating upon the termination of this Agreement, for the purpose of (A) executing on behalf of the Company title or ownership applications for filing with appropriate Governmental Authority to enable Titled Collateral now owned or hereafter acquired by the Company to be amended to reflect the Collateral Agent listed as lienholder thereof, (B) filing such applications with such Governmental Authority, and (C) executing such other documents and instruments on behalf of, and taking such other action in the name of, the Company as the Collateral Agent may deem necessary or advisable to accomplish the purposes of this Section 6(h)) (including, without limitation, for the purpose of creating in favor of the Collateral Agent a perfected Lien on such Titled Collateral and exercising the rights and remedies of the Collateral Agent hereunder). This appointment as attorney-in-fact is coupled with an interest and is irrevocable until the Termination Date.
(iv) With respect to motor vehicles, any Certificates of Title or ownership delivered pursuant to the terms hereof shall be accompanied by odometer statements for each motor vehicle covered thereby.
(v) So long as no Event of Default shall have occurred and be continuing, upon the request of the Company, the Collateral Agent shall execute and deliver to the Company such instruments as the Company shall reasonably request to remove the notation of the Collateral Agent as lienholder on any Certificate of Title or certificate of ownership for any Titled Collateral; provided that any such instruments shall be delivered, and the release shall be effective, only upon receipt by the Collateral Agent of a certificate from the Company, stating that the Titled Collateral, the Lien on which is to be released, is to be sold or has suffered a casualty loss (with title thereto passing to the casualty insurance company therefor in settlement of the claim for such loss), the amount that the Company will receive as sale proceeds or insurance proceeds shall be paid to the Collateral Agent hereunder to be applied to the Obligations.
(i) Control. The Company hereby agrees to take any or all action that may be necessary or desirable or that the Collateral Agent may request in order for the Collateral Agent to obtain control in accordance with Sections 9-104, 9-105, 9-106, and 9-107 of the Uniform Commercial Code with respect to the following Collateral: (i) Deposit Accounts, (ii) Securities Accounts; (iii) Electronic Chattel Paper, (iv) Investment Property and (v) Letter-of-Credit Rights. The Company hereby acknowledges and agrees that any agent or designee of the Collateral Agent shall be deemed to be a “secured party” with respect to the Collateral under the control of such agent or designee for all purposes.
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(j) Records; Inspection and Reporting.
(i) The Company shall keep adequate records concerning the Accounts, Chattel Paper and Pledged Interests.
(ii) The Company shall not, without the prior written consent of the Collateral Agent, amend, modify or otherwise change (A) its name, organizational identification number or FEIN, (B) its jurisdiction of organization as set forth in Schedule I hereto or (C) its chief executive office as set forth in Schedule III hereto. The Company shall immediately notify the Collateral Agent if the Company does not have such organizational identification number.
(k) Partnership and Limited Liability Company Interests.
(i) Except with respect to partnership interests and limited liability company membership interests evidenced by a certificate, which certificate has been pledged and delivered to the Collateral Agent pursuant to Section 4 hereof, no Pledged Issuer that is a partnership or a limited liability company shall permit such Pledged Issuer’s partnership interests or membership interests to (A) be dealt in or traded on securities exchanges or in securities markets, (B) become a security for purposes of Article 8 of any relevant Uniform Commercial Code, (C) become an investment company security within the meaning of Section 8-103 of any relevant Uniform Commercial Code or (D) be evidenced by a certificate. The Company agrees that such partnership interests or membership interests shall constitute General Intangibles.
(ii) The Company covenants and agrees that each limited liability company agreement, operating agreement, membership agreement, partnership agreement or similar agreement to which the Company is a party and relating to any Pledged Interests (as amended, restated, supplemented or otherwise modified from time to time, each a “Pledged Partnership/LLC Agreement”) is hereby amended by this Section 6(k) (A) to permit the Company to the fullest extent permitted by law (1) to pledge all of the Pledged Interests in which the Company has rights, (2) to grant and collaterally assign to the Collateral Agent, a lien on and security interest in such Pledged Interests and (3) to, upon any foreclosure by the Collateral Agent on such Pledged Interests (or any other sale or transfer of such Pledged Interests in lieu of such foreclosure), transfer to the Collateral Agent (or to the purchaser or other transferee of such Pledged Interests in lieu of such foreclosure) its rights and powers to manage and control the affairs of the applicable Pledged Issuer, in each case, without any further consent, approval or action by any other party, including, without limitation, any other party to any Pledged Partnership/LLC Agreement or otherwise, except any consent, approval or action that is necessary in order to comply with applicable securities laws or other Requirements of Law and (B) to provide that (1) the bankruptcy or insolvency of the Company shall not cause the Company to cease to be a holder of such Pledged Interests, (2) upon the occurrence of such an event, the applicable Pledged Issuer shall continue without dissolution and (3) the Company waives any right it might have to agree in writing to dissolve the applicable Pledged Issuer upon the bankruptcy or insolvency of the Company, or the occurrence of an event that causes the Company to cease to be a holder of such Pledged Interests.
(iii) Upon the occurrence and during the continuance of an Event of Default, the Collateral Agent or its designee shall have the right (but not the obligation) to be substituted for the Company as a member, manager or partner under the applicable Pledged Partnership/LLC Agreement, and the Collateral Agent or its designee shall have all rights, powers and benefits of the Company as a member, manager or partner, as applicable, under such Pledged Partnership/LLC Agreement in accordance with the terms of this Section 6(k). For avoidance of doubt, such rights, powers and benefits of a substituted member, manager or partner shall include all voting and other rights and not merely the rights of an economic interest holder.
(iv) During the period from the Effective Date until the Termination Date, no further consent, approval or action by any other party, including, without limitation, any other party to the applicable Pledged Partnership/LLC Agreement or otherwise shall be necessary to permit the Collateral Agent or its designee to be substituted as a member, manager or partner pursuant to this Section 6(k), except for any consent, approval or action that is necessary in order to comply with applicable securities laws or other Requirements of Law. The rights, powers and benefits granted pursuant to this paragraph shall inure to the benefit of the Collateral Agent and each of their respective successors, assigns and designees, as intended third party beneficiaries.
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(v) The Company and each applicable Pledged Issuer agree that during the period from the Effective Date until the Termination Date, no Pledged Partnership/LLC Agreement shall be amended to be inconsistent with the provisions of this Section 6(k) without the prior written consent of the Collateral Agent.
SECTION 7. Voting Rights, Dividends, Etc. in Respect of the Pledged Interests.
(a) So long as no Event of Default shall have occurred and be continuing:
(i) the Company may exercise any and all voting and other consensual rights pertaining to any Pledged Interests for any purpose not inconsistent with the terms of this Agreement or the Note; provided, however, that (A) the Company will not exercise or refrain from exercising any such right, as the case may be, if the Collateral Agent gives the Company notice that, in the Collateral Agent’s judgment, such action (or inaction) could reasonably be expected to violate the terms of this Agreement or the Note or have a material adverse effect and (B) the Company will give the Collateral Agent at least five (5) Business Days’ notice of the manner in which it intends to exercise, or the reasons for refraining from exercising, any such right which could reasonably be expected to adversely affect the value, liquidity or marketability of any Collateral or the creation, perfection and priority of the Collateral Agent’s Lien thereon; and
(ii) the Company may receive and retain any and all dividends, interest or other distributions paid in respect of the Pledged Interests to the extent permitted by the Transaction Documents; provided, however, that any and all (A) dividends and interest paid or payable other than in cash in respect of, and Instruments and other property received, receivable or otherwise distributed in respect of or in exchange for, any Pledged Interests, (B) dividends and other distributions paid or payable in cash in respect of any Pledged Interests in connection with a partial or total liquidation or dissolution or in connection with a reduction of capital, capital surplus or paid-in surplus, and (C) cash paid, payable or otherwise distributed in redemption of, or in exchange for, any Pledged Interests, together with any dividend, interest or other distribution or payment which at the time of such payment was not permitted by the Transaction Documents, shall be, and shall forthwith be delivered to the Collateral Agent to hold as, Pledged Interests and shall, if received by the Company, be received in trust for the benefit of the Collateral Agent, shall be segregated from the other property or funds of the Company, and shall be forthwith delivered to the Collateral Agent in the exact form received with any necessary indorsement and/or appropriate instruments of transfer or assignment or undated stock powers duly executed in blank, to be held by the Collateral Agent as Pledged Interests and as further collateral security for the Obligations.
(b) Upon the occurrence and during the continuance of an Event of Default:
(i) all rights of the Company to exercise the voting and other consensual rights which it would otherwise be entitled to exercise pursuant to Section 7(a)(i) hereof, and to receive the dividends, distributions, interest and other payments that it would otherwise be authorized to receive and retain pursuant to Section 7(a)(ii) hereof, shall cease, and all such rights shall thereupon become vested in the Collateral Agent, which shall thereupon have the sole right to exercise such voting and other consensual rights and to receive and hold as Pledged Interests such dividends, distributions and interest payments, and the Collateral Agent (personally or through an agent) shall thereupon be solely authorized and empowered to transfer and register in the Collateral Agent’s name, or in the name of the Collateral Agent’s nominee, the whole or any part of the Pledged Interests, it being acknowledged by the Collateral Agent that such transfer and registration may be effected by the Collateral Agent by the delivery of a Registration Page to the Company or to the Pledged Issuer, as applicable, reflecting the Collateral Agent or its designee as the holder of such Pledged Interests, or otherwise by the Collateral Agent through its irrevocable appointment as attorney-in-fact pursuant to Section 8 hereof;
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(ii) the Collateral Agent is authorized to notify each debtor with respect to the Pledged Debt to make payment directly to the Collateral Agent (or its designee) and may collect any and all moneys due or to become due to the Company in respect of the Pledged Debt, and the Company hereby authorizes each such debtor to make such payment directly to the Collateral Agent (or its designee) without any duty of inquiry;
(iii) without limiting the generality of the foregoing, the Collateral Agent may, at its option, exercise any and all rights of conversion, exchange, subscription or any other rights, privileges or options pertaining to any of the Pledged Interests as if it were the absolute owner thereof, including, without limitation, the right to exchange, in its discretion, any and all of the Pledged Interests upon the merger, consolidation, division, reorganization, recapitalization or other adjustment of any Pledged Issuer, or upon the exercise by any Pledged Issuer of any right, privilege or option pertaining to any Pledged Interests, and, in connection therewith, to deposit and deliver any and all of the Pledged Interests with any committee, depository, transfer agent, registrar or other designated agent upon such terms and conditions as it may determine; and
(iv) all dividends, distributions, interest and other payments that are received by the Company contrary to the provisions of Section 7(a)(i) hereof shall be received in trust for the benefit of the Collateral Agent, shall be segregated from other funds of the Company, and shall be forthwith paid over to the Collateral Agent as Pledged Interests in the exact form received with any necessary indorsement and/or appropriate instruments of transfer or assignment or undated equity interest powers duly executed in blank, to be held by the Collateral Agent as Pledged Interests and as further collateral security for the Obligations.
SECTION 8. Additional Provisions Concerning the Collateral.
(a) To the maximum extent permitted by applicable law, and for the purpose of taking any action that the Collateral Agent may deem necessary or advisable to accomplish the purposes of this Agreement, the Company hereby (i) authorizes the Collateral Agent to execute any such agreements, instruments or other documents in the Company’s name and to file such agreements, instruments or other documents in the Company’s name and in any appropriate filing office, (ii) authorizes the Collateral Agent at any time and from time to time to file, one or more financing or continuation statements and amendments thereto, relating to the Collateral (including, without limitation, any such financing statements that (A) describe the Collateral as “all assets” or “all personal property” (or words of similar effect) or that describe or identify the Collateral by type or in any other manner as the Collateral Agent may determine, regardless of whether any particular asset of the Company falls within the scope of Article 9 of the Uniform Commercial Code or whether any particular asset of the Company constitutes part of the Collateral, and (B) contain any other information required by Part 5 of Article 9 of the Uniform Commercial Code for the sufficiency or filing office acceptance of any financing statement, continuation statement or amendment, including, without limitation, whether the Company is an organization, the type of organization and any organizational identification number issued to the Company) and (iii) ratifies such authorization to the extent that the Collateral Agent has filed any such financing statements, continuation statements, or amendments thereto, prior to the Effective Date. A photocopy or other reproduction of this Agreement or any financing statement covering the Collateral or any part thereof shall be sufficient as a financing statement where permitted by law.
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(b) The Company hereby irrevocably appoints the Collateral Agent as its attorney-in- fact and proxy, with full authority in the place and stead of the Company and in the name of the Company or otherwise, from time to time in the Collateral Agent’s discretion, to take any action and to execute any instrument that the Collateral Agent may deem necessary or advisable to accomplish the purposes of this Agreement (subject to the rights of the Company under Section 6 hereof and Section 7(a) hereof), including, without limitation, (i) to obtain and adjust insurance required to be paid to the Collateral Agent, (ii) to ask, demand, collect, sue for, recover, compound, receive and give acquittance and receipts for moneys due and to become due under or in respect of any Collateral, (iii) to receive, endorse, and collect any drafts or other Instruments, Documents and Chattel Paper in connection with clause (i) or (ii) above, (iv) to receive, indorse and collect all Instruments made payable to the Company representing any dividend, interest payment or other distribution in respect of any Pledged Interests and to give full discharge for the same, (v) to file any claims or take any action or institute any proceedings which the Collateral Agent may deem necessary or desirable for the collection of any Collateral, (vi) to execute assignments, licenses and other documents to enforce the Collateral Agent’s rights with respect to any Collateral, (vii) to pay or discharge taxes or Liens levied or placed upon or threatened against the Collateral, the legality or validity thereof and the amounts necessary to discharge the same to be determined by the Collateral Agent (in its sole discretion), and such payments made by the Collateral Agent shall constitute additional Obligations of the Company to the Collateral Agent, be due and payable immediately without demand, and shall bear interest from the date payment of said amounts is demanded at the Default Interest rate, and (viii) to sign and endorse any invoices, freight or express bills, bills of lading, storage or warehouse receipts, assignments, verifications and notices in connection with Accounts, Chattel Paper and other documents relating to the Collateral. This power is coupled with an interest and is irrevocable until the Termination Date.
(c) For the purpose of enabling the Collateral Agent to exercise rights and remedies hereunder, at such time as the Collateral Agent shall be lawfully entitled to exercise such rights and remedies, and for no other purpose, the Company hereby (i) grants to the Collateral Agent an irrevocable, non-exclusive license (exercisable without payment of royalty or other compensation to the Company) to use, assign, license or sublicense any Intellectual Property now or hereafter owned by the Company, wherever the same may be located, including in such license reasonable access to all media in which any of the licensed items may be recorded or stored and to all computer programs used for the compilation or printout thereof; and (ii) assigns to the Collateral Agent, to the extent assignable, all of its rights to any Intellectual Property now or hereafter licensed or used by the Company. The Company hereby releases the Collateral Agent from, and indemnifies the Collateral Agent against, any claims, causes of action and demands at any time arising out of or with respect to any actions taken or omitted to be taken by the Collateral Agent under the powers of attorney, proxy or license, granted herein other than actions taken or omitted to be taken through the Collateral Agent’s gross negligence or willful misconduct, as determined by a final determination of a court of competent jurisdiction.
(d) If the Company fails to perform any agreement or obligation contained herein, the Collateral Agent may itself perform, or cause performance of, such agreement or obligation, in the name of the Company or the Collateral Agent, and the fees and expenses of the Collateral Agent incurred in connection therewith shall be jointly and severally payable by the Company pursuant to Section 10 hereof constitute additional Obligations of the Company to the Collateral Agent, be due and payable immediately without demand and bear interest from the date payment of said amounts is demanded at the Default Interest rate.
(e) The powers conferred on the Collateral Agent hereunder are solely to protect its interest in the Collateral and shall not impose any duty upon it to exercise any such powers. Other than the exercise of reasonable care to assure the safe custody of any Collateral in its possession and the accounting for moneys actually received by it hereunder, the Collateral Agent shall have no duty as to any Collateral or as to the taking of any necessary steps to preserve rights against other parties or any other rights pertaining to any Collateral and shall be relieved of all responsibility for any Collateral in its possession upon surrendering it or tendering surrender of it to the Company (or whomsoever shall be lawfully entitled to receive the same or as a court of competent jurisdiction shall direct). The Collateral Agent shall be deemed to have exercised reasonable care in the custody and preservation of any Collateral in its possession if such Collateral is accorded treatment substantially equal to that which the Collateral Agent accords its own property, it being understood that the Collateral Agent shall not have responsibility for ascertaining or taking action with respect to calls, conversions, exchanges, maturities, tenders or other matters relating to any Collateral, whether or not the Collateral Agent has or is deemed to have knowledge of such matters. The Collateral Agent shall not be liable or responsible for any loss or damage to any of the Collateral, or for any diminution in the value thereof, by reason of the act or omission of any warehouseman, carrier, forwarding agency, consignee or other agent or bailee selected by the Collateral Agent in good faith.
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(f) Anything herein to the contrary notwithstanding (i) the Company shall remain liable under the Licenses and otherwise in respect of the Collateral to the extent set forth therein to perform all of its obligations thereunder to the same extent as if this Agreement had not been executed, (ii) the exercise by the Collateral Agent of any of its rights hereunder shall not release the Company from any of its obligations under the Licenses or otherwise in respect of the Collateral, and (iii) the Collateral Agent shall not have any obligation or liability by reason of this Agreement under the Licenses or otherwise in respect of the Collateral, nor shall the Collateral Agent be obligated to perform any of the obligations or duties of the Company thereunder or to take any action to collect or enforce any claim for payment assigned hereunder.
(g) The Collateral Agent may at any time in its discretion (i) without notice to the Company, transfer or register in the name of the Collateral Agent or any of its nominees any or all of the Pledged Interests, subject only to the revocable rights of the Company under Section 7(a) hereof, and (ii) exchange certificates or Instruments constituting Pledged Interests for certificates or Instruments of smaller or larger denominations.
SECTION 9. Remedies Upon Default. If any Event of Default shall have occurred and be continuing:
(a) The Collateral Agent may exercise in respect of the Collateral, in addition to any other rights and remedies provided for herein or otherwise available to it, all of the rights and remedies of a secured party upon default under the Uniform Commercial Code (whether or not the Uniform Commercial Code applies to the affected Collateral), and also may (i) take absolute control of the Collateral, including, without limitation, transfer into the Collateral Agent’s name or into the name of its nominee or nominees (to the extent the Collateral Agent has not theretofore done so) and thereafter receive all payments made thereon, give all consents, waivers and ratifications in respect thereof and otherwise act with respect thereto as though it were the outright owner thereof, (ii) require the Company to, and the Company hereby agrees that it will at its expense and upon request of the Collateral Agent forthwith, assemble all or part of the Collateral as directed by the Collateral Agent and make it available to the Collateral Agent at a place or places to be designated by the Collateral Agent that is reasonably convenient to both parties, and the Collateral Agent may enter into and occupy any premises owned or leased by the Company where the Collateral or any part thereof is located or assembled for a reasonable period in order to effectuate the Collateral Agent’s rights and remedies hereunder or under law, without obligation to the Company in respect of such occupation, and (iii) without notice except as specified below and without any obligation to prepare or process the Collateral for sale, (A) sell the Collateral or any part thereof in one or more parcels at public or private sale, at any of the Collateral Agent’s offices, at any exchange or broker’s board or elsewhere, for cash, on credit or for future delivery, and at such price or prices and upon such other terms as the Collateral Agent may deem commercially reasonable and/or (B) lease, license or otherwise dispose of the Collateral or any part thereof upon such terms as the Collateral Agent may deem commercially reasonable. The Company agrees that, to the extent notice of sale or any other disposition of the Collateral shall be required by law, at least five (5) days’ prior notice to the Company of the time and place of any public sale or the time after which any private sale or other disposition of the Collateral is to be made shall constitute reasonable notification. If the Collateral Agent sells any of the Collateral upon credit, the Company will be credited only with payments actually received by the Collateral Agent from the purchaser thereof, and if such purchaser fails to pay for the Collateral, the Collateral Agent may resell the Collateral and the Company shall be credited with proceeds of the sale. The Collateral Agent shall not be obligated to make any sale or other disposition of Collateral regardless of notice of sale having been given. The Collateral Agent may adjourn any public or private sale from time to time by announcement at the time and place fixed therefor, and such sale may, without further notice, be made at the time and place to which it was so adjourned. The Company hereby waives any claims against the Collateral Agent arising by reason of the fact that the price at which the Collateral may have been sold at a private sale was less than the price which might have been obtained at a public sale or was less than the aggregate amount of the Obligations, even if the Collateral Agent accepts the first offer received and does not offer the Collateral to more than one offeree, and waives all rights that the Company may have to require that all or any part of the Collateral be marshaled upon any sale (public or private) thereof. The Company hereby acknowledges that (A) any such sale of the Collateral by the Collateral Agent shall be made without warranty, (B) the Collateral Agent may specifically disclaim any warranties of title, possession, quiet enjoyment or the like, (C) the Collateral Agent may bid (which bid may be, in whole or in part, in the form of cancellation of indebtedness), if permitted by law, for the purchase, lease, license or other disposition of the Collateral or any portion thereof for the account of the Collateral Agent and (D) such actions set forth in clauses (A), (B) and (C) above shall not adversely affect the commercial reasonableness of any such sale of the Collateral. In addition to the foregoing, (1) upon written notice to the Company from the Collateral Agent, the Company shall cease any use of the Intellectual Property described in such notice; (2) the Collateral Agent may, at any time and from time to time, upon five (5) days’ prior notice to the Company, license, whether general, special or otherwise, and whether on an exclusive or non-exclusive basis, any of the Intellectual Property, throughout the universe for such term or terms, on such conditions, and in such manner, as the Collateral Agent shall in its sole discretion determine; and (3) the Collateral Agent may, at any time, execute and deliver on behalf of the Company, one or more instruments of assignment of the Intellectual Property (or any application or registration thereof), in form suitable for filing, recording or registration in any country.
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(b) In the event that the Collateral Agent determines to exercise its right to sell all or any part of the Pledged Interests pursuant to Section 9(a) hereof, the Company will, at the Company’s expense and upon request by the Collateral Agent: (i) execute and deliver, and cause each issuer of such Pledged Interests and the directors and officers thereof, to execute and deliver, all such instruments and documents, and do or cause to be done all such other acts and things, as may be necessary or, in the opinion of the Collateral Agent, advisable to register such Pledged Interests under the provisions of the Securities Act, and to cause the registration statement relating thereto to become effective and to remain effective for such period as prospectuses are required by law to be furnished, and to make all amendments and supplements thereto and to the related prospectus which, in the opinion of the Collateral Agent, are necessary or advisable, all in conformity with the requirements of the Securities Act and the rules and regulations of the SEC applicable thereto, (ii) cause each issuer of such Pledged Interests to qualify such Pledged Interests under the state securities or “Blue Sky” laws of each jurisdiction, and to obtain all necessary governmental approvals for the sale of the Pledged Interests, as requested by the Collateral Agent, (iii) cause each Pledged Issuer to make available to its security holders, as soon as practicable, an earnings statement which will satisfy the provisions of Section 11(a) of the Securities Act, and (iv) do or cause to be done all such other acts and things as may be necessary to make such sale of such Pledged Interests valid and binding and in compliance with applicable law. The Company acknowledges the impossibility of ascertaining the amount of damages which would be suffered by the Collateral Agent by reason of the failure by the Company to perform any of the covenants contained in this Section 9(b) and, consequently, agrees that, if the Company fails to perform any of such covenants, it shall pay, as liquidated damages and not as a penalty, an amount equal to the value of the Pledged Interests on the date the Collateral Agent demands compliance with this Section 9(b), provided, however, that the payment of such amount shall not release the Company from any of its obligations under the Note.
(c) Notwithstanding the provisions of Section 9(b) hereof, the Company recognizes that the Collateral Agent may deem it impracticable to effect a public sale of all or any part of the Pledged Shares or any other securities constituting Pledged Interests and that the Collateral Agent may, therefore, determine to make one or more private sales of any such securities to a restricted group of purchasers who will be obligated to agree, among other things, to acquire such securities for their own account, for investment and not with a view to the distribution or resale thereof. The Company acknowledges that any such private sale may be at prices and on terms less favorable to the seller than the prices and other terms which might have been obtained at a public sale and, notwithstanding the foregoing, agrees that such private sales shall be deemed to have been made in a commercially reasonable manner and that the Collateral Agent shall have no obligation to delay the 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. The Company further acknowledges and agrees that any offer to sell such securities 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 an offer may be so advertised without prior registration under the Securities Act) or (ii) made privately in the manner described above to not less than fifteen (15) bona fide offerees shall be deemed to involve a “public disposition” for the purposes of Section 9-610(c) of the Uniform Commercial Code (or any successor or similar, applicable statutory provision) as then in effect in the State of Nevada, notwithstanding that such sale may not constitute a “public offering” under the Securities Act, and that the Collateral Agent may, in such event, bid for the purchase of such securities.
(d) Any cash held by the Collateral Agent (or its agent or designee) as Collateral and all Cash Proceeds received by the Collateral Agent (or its agent or designee) in respect of any sale of or collection from, or other realization upon, all or any part of the Collateral, the Collateral Agent may, in the discretion of the Collateral Agent, be held by the Collateral Agent (or its agent or designee) as collateral for, and/or then or at any time thereafter applied (after payment of any amounts payable to the Collateral Agent pursuant to Section 10 hereof) in whole or in part by the Collateral Agent against, all or any part of the Obligations in such order as the Collateral Agent shall elect, consistent with the provisions of the Transaction Documents. Any surplus of such cash or Cash Proceeds held by the Collateral Agent (or its agent or designee) and remaining after the Termination Date shall be paid over to whomsoever shall be lawfully entitled to receive the same or as a court of competent jurisdiction shall direct.
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(e) In the event that the proceeds of any such sale, collection or realization are insufficient to pay all amounts to which the Collateral Agent is legally entitled, the Company shall be liable for the deficiency, together with interest thereon at the highest rate specified in the Notes for interest on overdue principal thereof or such other rate as shall be fixed by applicable law, together with the costs of collection and the reasonable fees, costs, expenses and other client charges of any attorneys employed by the Collateral Agent to collect such deficiency.
(f) The Company hereby acknowledges that if the Collateral Agent complies with any applicable Requirements of Law in connection with a disposition of the Collateral, such compliance will not adversely affect the commercial reasonableness of any sale or other disposition of the Collateral.
(g) The Collateral Agent shall not be required to marshal any present or future collateral security (including, but not limited to, this Agreement and the Collateral) for, or other assurances of payment of, the Obligations or any of them or to resort to such collateral security or other assurances of payment in any particular order, and all of the Collateral Agent’s rights hereunder and in respect of such collateral security and other assurances of payment shall be cumulative and in addition to all other rights, however existing or arising. To the extent that the Company lawfully may, the Company hereby agrees that it will not invoke any law relating to the marshalling of collateral which might cause delay in or impede the enforcement of the Collateral Agent’s rights under this Agreement or under the Notes or any other instrument under which any of the Obligations is outstanding or by which any of the Obligations is secured or payment thereof is otherwise assured, and, to the extent that it lawfully may, the Company hereby irrevocably waives the benefits of all such laws.
(h) The Collateral Agent shall provide Holder with notice of all actions it takes hereunder. Upon the Collateral Agent obtaining any cash, it shall as soon as practical pay such cash to the Holder, pro rata to the notes they hold.
SECTION 10. Indemnity and Expenses.
(a) The Company agrees to defend, protect, indemnify and hold harmless the Collateral Agent from and against all losses, claims, damages and liabilities arising out of or in connection with the performance of its duties under this Agreement; provided that the Company shall not be liable to the extent such losses, claims, damages or liabilities resulted from the Collateral Agent’s gross negligence, bad faith or willful misconduct.
(b) The Company agrees to pay to the Collateral Agent costs and expenses in accordance with the Transaction Documents.
SECTION 11. Notices, Etc. All notices and other communications provided for hereunder shall be given in accordance with the notice provision of the Notes.
SECTION 12. Security Interest Absolute; Joint and Several Obligations.
(a) All rights of the Collateral Agent, all Liens and all obligations of the Company hereunder shall be absolute and unconditional irrespective of (i) any lack of validity or enforceability of the Transaction Documents, (ii) any change in the time, manner or place of payment of, or in any other term in respect of, all or any of the Obligations, or any other amendment or waiver of or consent to any departure from the Transaction Documents, (iii) any exchange or release of, or non- perfection of any Lien on any Collateral, or any release or amendment or waiver of or consent to departure from any guaranty, for all or any of the Obligations, or (iv) any other circumstance that might otherwise constitute a defense available to, or a discharge of, the Company in respect of the Obligations. All authorizations and agencies contained herein with respect to any of the Collateral are irrevocable and powers coupled with an interest.
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(b) The Company hereby waives (i) promptness and diligence, (ii) notice of acceptance and notice of the incurrence of any Obligations, (iii) notice of any actions taken by the Collateral Agent or any other Person under the Note, the SPAs or any other agreement, document or instrument relating thereto, (iv) all other notices, demands and protests, and all other formalities of every kind in connection with the enforcement of the Obligations, the omission of or delay in which, but for the provisions of this subsection (b), might constitute grounds for relieving the Company of any of the Company’s obligations hereunder and (v) any requirement that the Collateral Agent protect, secure, perfect or insure any security interest or other lien on any property subject thereto or exhaust any right or take any action against the Company or any other Person or any collateral.
SECTION 13. Collateral Agent Appointment.
(a) The Holders hereby designate and appoint ADI Funding LLC. to act as its agent and collateral agent to hold the Collateral for the benefit of the Holders and hereby authorizes the Collateral Agent to take such actions on behalf of the Holders and to exercise such powers and perform such duties as are expressly granted to the Collateral Agent under this Agreement and the other Transaction Documents. The Collateral Agent hereby accepts such agency appointment to act as Collateral Agent, until its resignation or removal as Collateral Agent. By entering into, or performing its duties under, this Agreement, the Collateral Agent shall not be deemed to assume any obligations or liabilities of the Company under this Agreement or any other Transaction Documents, and nothing contained herein shall be deemed to release, terminate, discharge, limit, reduce, diminish, modify, amend or otherwise alter in any respect the duties, obligations or liabilities of the Company under this Agreement. For as long as the Senior Debt is outstanding, the Collateral Agent shall take such actions or refrain from taking any action as instructed by Senior Holders holding at least a majority of the then outstanding Senior Debt.
(b) Upon the execution and delivery by any Person of an Accession Agreement, such Person shall become an Additional Holder hereunder with the same force and effect as if originally named as such herein as Holder. The execution and delivery of any Accession Agreement shall not require the consent of any other Holder hereunder. The rights and obligations of each Holder hereunder shall remain in full force and effect notwithstanding the addition of any new Holder as a party to this Agreement.
SECTION 14. Priority/Standstill
(a) Priority.All Junior Debt is hereby subordinated in right of payment to all obligations of Company to Senior Holders under the Senior Debt. Once the Senior Debt is indefeasibly satisfied, the Junior Debt shall be the senior secured debt of the Company.
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(b) Standstill. The Junior Holders will not demand or receive from Company (and Company will not pay to Junior Holders) or from any other person all or any part of the Junior Debt, by way of payment, prepayment, setoff, lawsuit or otherwise, nor will Junior Holders exercise any remedy with respect to any property of Company, and until the Senior Debt has been fully converted, paid in cash and/or as otherwise permitted under the Senior Debt Documents, or until the termination of the Senior Debt Documents. Nothing herein shall prohibit Junior Holders and/or Company (as applicable) from converting all or any part of the Junior Debt into equity securities of Company. In addition, no Junior Holder will accelerate the Junior Debt, or commence, or cause to commence, prosecute or participate in any administrative, legal or equitable action against Company (including, without limitations, any Insolvency Proceedings), until such time as the Senior Debt has been fully discharged. Further no Junior Holder will amend any portion the Junior Debt without the consent of the Senior Holders.
SECTION 15. Miscellaneous.
(a) No amendment of any provision of this Agreement (including any Schedule attached hereto other than as expressly set forth herein) shall be effective unless it is in writing and signed by the Company and the Collateral Agent, and no waiver of any provision of this Agreement, and no consent to any departure by the Company therefrom, shall be effective unless it is in writing and signed by the Collateral Agent, and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given.
(b) No failure on the part of the Collateral Agent to exercise, and no delay in exercising, any right hereunder or under any other Note shall operate as a waiver thereof; nor shall any single or partial exercise of any such right preclude any other or further exercise thereof or the exercise of any other right. The rights and remedies of the Collateral Agent provided herein and in the Notes are cumulative and are in addition to, and not exclusive of, any rights or remedies provided by law. The rights of the Collateral Agent under this Agreement and the Notes are not conditional or contingent on any attempt by such Person to exercise any of its rights under any other this Agreement or the Notes, including but not limited to, the Company.
(c) This Agreement shall create a continuing security interest in the Collateral and shall (i) remain in full force and effect, subject to paragraph (e) below, until the Termination Date and (ii) be binding on the Company in accordance with Section 9-203(d) of the Uniform Commercial Code, and shall inure to the benefit of the Collateral Agent and its respective successors, transferees and assigns. Without limiting the generality of clause (ii) of the immediately preceding sentence, the Collateral Agent may assign or otherwise transfer its respective rights and obligations under this Agreement to any other Person, and such other Person shall thereupon become vested with all of the obligations and benefits in respect thereof granted to the Collateral Agent herein or otherwise. Upon any such assignment or transfer, all references in this Agreement to the Collateral Agent shall mean the assignee of the Collateral Agent. None of the rights or obligations of the Company hereunder may be assigned or otherwise transferred without the prior written consent of the Collateral Agent, and any such assignment or transfer shall be null and void.
(d) After the occurrence of the Termination Date, (i) subject to paragraph (e) below, this Agreement and the security interests and licenses created hereby shall terminate and all rights to the Collateral shall revert to the Company, (ii) the Collateral Agent agrees to file Uniform Commercial Code amendments on or promptly after the Termination Date to evidence the termination of the Liens so released and (iii) the Collateral Agent will, upon the Company’s request and at the Company’s cost and expense, (A) promptly return to the Company (or whomsoever shall be lawfully entitled to receive the same or as a court of competent jurisdiction shall direct) such of the Collateral as shall not have been sold or otherwise disposed of or applied pursuant to the terms hereof, and (B) promptly execute and deliver to the Company such documents and make such other filings as the Company shall reasonably request to evidence such termination, without representation, warranty or recourse of any kind. In addition, upon any sale or disposition of any item of Collateral in a transaction expressly permitted under this Agreement or the other Transaction Documents, the Collateral Agent agrees to execute a release of its security interest in such item of Collateral, and the Collateral Agent shall, upon the reasonable request of the Company and at the Company’s cost and expense, execute and deliver to the Company such documents as the Company shall reasonably request to evidence such release, without representation, warranty or recourse of any kind.
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(e) This Agreement shall remain in full force and effect and continue to be effective should any petition be filed by or against the Company for liquidation or reorganization, should the Company become insolvent or make an assignment for the benefit of any creditor or creditors or should a receiver or trustee be appointed for all or any significant part of the Company’s assets, and shall continue to be effective or be reinstated, as the case may be, if at any time payment or performance of the Obligations, or any part thereof, is, pursuant to applicable law, rescinded or reduced in amount, or must otherwise be restored or returned by any obligee of the Obligations, whether as a “voidable preference,” “fraudulent conveyance”, or otherwise, all as though such payment or performance had not been made. In the event that any payment, or any part thereof, is rescinded, reduced, restored or returned, the Obligations shall be reinstated and deemed reduced only by such amount paid and not so rescinded, reduced, restored or returned.
(f) All questions concerning the construction, validity, enforcement, and interpretation of this Agreement shall be governed by and construed and enforced in accordance with the internal laws of the State of Nevada, without regard to the principles of conflicts of law thereof. Each party agrees that all legal Actions concerning the interpretations, enforcement and defense of the transactions contemplated by this Agreement (whether brought against a party hereto or its respective affiliates, directors, officers, shareholders, partners, members, employees, or agents) shall be commenced exclusively in the state and federal courts located in the State of Nevada. Each party hereby irrevocably submits to the exclusive jurisdiction of such state and federal courts for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein, and hereby irrevocably waives, and agrees not to assert in any Action, any claim that it is not personally subject to the jurisdiction of any such court, that such Action is improper or is an inconvenient venue for such Action. Each party hereby irrevocably waives personal service of process and consents to process being served in any such Action by mailing a copy thereof via registered or certified mail or overnight delivery (with evidence of delivery) to such party at the address in effect for notices to it under this Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any other manner permitted by law. If any party shall commence an Action to enforce any provisions of this Agreement, then the prevailing party in such Action shall be reimbursed by the non-prevailing party for its reasonable attorneys’ fees and other costs and expenses incurred with the investigation, preparation and prosecution of such Action.
(g) The Company irrevocably and unconditionally waives any right it may have to claim or recover in any legal action, suit or proceeding with respect to this Agreement any special, exemplary, punitive or consequential damages.
(h) Any provision of this Agreement which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining portions hereof or affecting the validity or enforceability of such provision in any other jurisdiction.
(i) Section headings herein are included for convenience of reference only and shall not constitute a part of this Agreement for any other purpose.
(j) This Agreement may be executed in any number of counterparts and by the different parties hereto on separate counterparts, each of which shall be deemed an original, but all of such counterparts taken together shall constitute one and the same agreement. Delivery of an executed counterpart of this Agreement by facsimile or electronic mail shall be equally effective as delivery of an original executed counterpart.
(k) For purposes of this Agreement, all references to the Schedules attached hereto shall be deemed to refer to each such Schedule as updated from time to time in accordance with the terms of this Agreement.
[Remainder Of This Page Intentionally Left Blank]
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IN WITNESS WHEREOF, the Company has caused this Agreement to be executed and delivered by its officer thereunto duly authorized, as of the date first above written.
| ONAR HOLDING CORPORATION | |||
| By: | |||
|
|
| Name: Claude Zdanow | |
| Title: Chief Executive Officer | |||
| ADI Funding LLC., as Collateral Agent | |||
| By: | |||
|
|
| Name: [●] | |
| Title: [●] | |||
For purposes of Sections 13, 14 and 15 only
HOLDERS
[●]
By: _________________________
Name:
Title:
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SCHEDULE I
LEGAL NAME; JURISDICTION OF ORGANIZATION; TYPE OF ORGANIZATION;
ORGANIZATIONAL IDENTIFICATION NUMBER
| 26 |
SCHEDULE II
INTELLECTUAL PROPERTY AND LICENSES; TRADE NAMES
| 27 |
SCHEDULE III
LOCATIONS OF THE COMPANY
| 28 |
SCHEDULE IV
DEPOSIT ACCOUNTS, SECURITIES ACCOUNTS AND COMMODITIES ACCOUNTS
| 29 |
SCHEDULE V
UCC FINANCING STATEMENTS
| 30 |
SCHEDULE VI
COMMERCIAL TORT CLAIMS
| 31 |
SCHEDULE VII
PLEDGED DEBT
| 32 |
SCHEDULE VIII
PLEDGED SHARES AND MEMBERSHIP INTERESTS
| 33 |
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EXHIBIT A
PLEDGE AMENDMENT
This Pledge Amendment, dated as of ________ ___ ,___, is delivered pursuant to Section 4 of the Security Agreement referred to below. The undersigned hereby agrees that this Pledge Amendment may be attached to the Pledge and Security Agreement, dated September 28, 2026, (as it may heretofore have been or hereafter may be amended, restated, supplemented, modified or otherwise changed from time to time, the “Security Agreement”; capitalized terms used and not defined herein have the same meanings as set forth in the Security Agreement) by ONAR Holding Corporation (the “Company”) in favor of ADI Funding LLC. (the “Collateral Agent”) and that the Promissory Notes, Instruments or Pledged Shares listed on this Pledge Amendment shall be hereby pledged and assigned to the Collateral Agent and become part of the Pledged Interests referred to in such Security Agreement and shall secure all of the Obligations referred to in such Security Agreement.
| Name of Maker | Description | Original Principal Amount |
|
___________
| ___________ | ___________ |
|
___________
| ___________ | ___________ |
| Name of Pledged Issuer | Number of Shares | Percentage of Outstanding Shares | Class | Certificate Number |
|
___________ |
___________ |
___________ |
___________ |
___________ |
|
___________ |
___________ |
___________ |
___________ |
___________ |
| ONAR Holding Corporation | |||
| By: | |||
|
|
| Name: | |
| Title: | |||
| ADI Funding LLC., as the Collateral Agent | ||
| By: | ||
|
| Name: | |
| Title: | ||
| 34 |
EXHIBIT B
ASSIGNMENT FOR SECURITY - - [TRADEMARKS] [PATENTS] [COPYRIGHTS]
WHEREAS, ONAR Holding Corporation, a Nevada corporation (the “Company”), [holds all right, title and interest in and to, the trademarks and service marks listed on the attached Schedule A, which trademarks and service marks are registered or applied for in the United States Patent and Trademark Office (the “Trademarks”)] [holds all right, title and interest in the letter patents, design patents and utility patents listed on the attached Schedule A, which patents are issued or applied for in the United States Patent and Trademark Office (the “Patents”)] [holds all right, title and interest in the copyrights listed on the attached Schedule A, which copyrights are registered or applied for in the United States Copyright Office (the “Copyrights”)];
WHEREAS, the Company has entered into a Pledge and Security Agreement, dated [●], 2026 (as amended, restated, supplemented, modified or otherwise changed from time to time, the “Security Agreement”), in favor of [ ], a [ ] corporation, in its capacity as collateral agent for the Holder as defined in the Security Agreement (the “Collateral Agent”); and
WHEREAS, pursuant to the Security Agreement, the Company granted to the Collateral Agent a continuing security interest in all right, title and interest of Company in, to and under the [Trademarks, together with, among other things, the good-will of the business symbolized by the Trademarks] [Patents] [Copyrights] and the applications and registrations thereof, and all proceeds thereof, including, without limitation, any and all causes of action which may exist by reason of infringement thereof and any and all damages arising from past, present and future violations thereof (the “IP Collateral”), to secure the payment, performance and observance of the Obligations (as defined in the Security Agreement);
NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Company does hereby grant to the Collateral Agent a continuing security interest in the IP Collateral to secure the prompt payment, performance and observance of the Obligations.
The Company does hereby further acknowledge and affirm that the rights and remedies of the Company with respect to the IP Collateral are more fully set forth in the Security Agreement, the terms and provisions of which are hereby incorporated herein by reference as if fully set forth herein.
IN WITNESS WHEREOF, the Company has caused this agreement to be duly executed by its officer thereunto duly authorized as of the date first written above.
| ONAR Holding Corporation | |||
| By: | |||
|
|
| Name: | |
| Title: | |||
| 35 |
SCHEDULE A TO ASSIGNMENT FOR SECURITY
[Trademarks and Trademark Applications]
[Patent and Patent Applications]
[Copyright and Copyright Applications]
Owned by ____________________________
| 36 |
EXHIBIT C
FORM OF IRREVOCABLE PROXY
, 20 [ ]
(Interests of [ ] (the “Issuer”))
For good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, [______________] a [______________] (the “Company”), hereby irrevocably (to the fullest extent permitted by law) appoints and constitutes ADI Funding LLC., solely in its capacity as collateral agent for the benefit of the Holders (in such capacity, the “Proxy Holder”) the attorney and proxy of the Company with full power of substitution and resubstitution, to the full extent of the Company’s rights with respect to all of the Pledged Interests (as defined in the Security Agreement, defined below) which constitute the equity interests of the Issuer (the “Interests”) owned by the Company. Upon the execution hereof, all prior proxies given by the Company with respect to any of the Interests are hereby revoked, and no subsequent proxies will be given with respect to any of the Interests.
This proxy is irrevocable, is coupled with an interest, and is granted pursuant to that certain Pledge and Security Agreement, dated as of [●], 2026, by ONAR Holding Corporation, in favor of the Collateral Agent (as amended, restated, supplemented or otherwise modified from time to time, the “Security Agreement”) in consideration of the loan provided to the Company pursuant to a secured convertible promissory note date dated [ ], 2026 (the “Note”). Capitalized terms used herein but not otherwise defined in this Irrevocable Proxy have the meanings ascribed to such terms in the Security Agreement.
The Proxy Holder named above will be empowered and may exercise this Irrevocable Proxy to vote the Interests at any and all times after the occurrence and during the continuation of an Event of Default, including, but not limited to, at any meeting of the [members/board] of the Issuer, however called, and at any adjournment thereof, or in any written action by consent of the [members/board] of the Issuer. This Irrevocable Proxy shall remain in effect with respect to the Interests until the Termination Date, and will continue to be effective or automatically reinstated, as the case may be, if at any time payment, in whole or in part, of any of the Obligations is rescinded or must otherwise be restored or returned by Proxy Holder as a preference, fraudulent conveyance, or otherwise under any bankruptcy, insolvency, or similar law, all as though such payment had not been made (provided that in the event payment of all or any part of the Obligations is rescinded or must be restored or returned, all reasonable out-of-pocket costs and expenses (including, without limitation, reasonable attorneys’ fees and disbursements) incurred by Proxy Holder in defending and enforcing such reinstatement shall be deemed to be included as a part of the Obligations), notwithstanding any time limitations set forth in the [operating agreement/by-laws] and other organization documents of the Issuer or the [Limited Liability Company Act/Corporations Act] of the State of [ ].
Any obligation of the Company hereunder shall be binding upon the heirs, successors, and assigns of the Company (including, without limitation, any transferee of any of the Interests).
[Signature Page Follows]
| 37 |
IN WITNESS WHEREOF, the Company has executed this Irrevocable Proxy as of the date first written above.
| [ ] | |||
| By: | |||
|
|
| Print Name: | |
| Title: | |||
| 38 |
EXHIBIT D
FORM OF REGISTRATION PAGE
[Issuer]
[Stock/Membership/Partnership] Ledger as of _________, ___*
| Name | Certificate No. | Number of Interests |
|
|
|
|
| Acknowledged By:
[Issuer] | |||
| By: | |||
|
|
| Print Name: | |
| Title: | |||
___________________________
* To Remain Blank - Not Completed at Closing.
| 39 |
EXHIBIT E
FORM OF ACCESSION AGREEMENT
THIS ACCESSION AGREEMENT dated as of [●] (this “Accession Agreement”) is supplemental to that certain Pledge and Security Agreement dated as of September 28, 2026 (the “Security Agreement”) made by ONAR HOLDING CORPORATION, a Nevada corporation (the “Company”), in favor of ADI Funding LLC. as Collateral Agent. Capitalized terms used herein but not otherwise defined in this Accession Agreement have the meanings ascribed to such terms in the Security Agreement.
WHEREAS, [●], a [●] (the “New Holder”) is a holder of certain Notes and will derive substantial benefits from the Security Agreement.
NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the New Holder agrees as follows:
SECTION 1. For the purposes of Section 13 of the Security Agreement, the New Holder by its signature below becomes a Holder under the Security Agreement with the same force and effect as if originally named therein as a Holder, and the New Holder hereby agrees to all of the terms and provisions of the Security Agreement applicable to it as a Holder thereunder. The New Holder hereby designates and appoints ADI Funding LLC. to act as its agent and collateral agent to hold the Collateral for the benefit of the New Holder and hereby authorizes the Collateral Agent to take such actions on behalf of the New Holder and to exercise such powers and perform such duties as are expressly granted to the Collateral Agent under the Security Agreement and the other Transaction Documents. Each reference to a “Holder” in the Security Agreement shall be deemed to include the New Holder. The Security Agreement is hereby incorporated herein by reference.
SECTION 2. This Accession Agreement shall become effective as to the New Holder upon execution by the New Holder, and thereafter shall be binding upon the New Holder and its permitted successors and assigns, and shall inure to the benefit of the New Holder and its successors and assigns, except that the New Holder shall not have the right to assign or transfer its rights or obligations hereunder or any interest herein (and any such assignment or transfer shall be void) except as expressly provided in this Accession Agreement, the Security Agreement and the other Transaction Documents. Delivery of an executed counterpart of a signature page of this Accession Agreement by facsimile, electronic mail (in .pdf or .tif format) or other electronic imaging shall be effective as delivery of a manually executed counterpart of this Accession Agreement.
SECTION 3. Any provision of this Accession Agreement held to be invalid, illegal or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such invalidity, illegality or unenforceability without affecting the validity, legality and enforceability of the remaining provisions hereof; and the invalidity of a particular provision in a particular jurisdiction shall not invalidate such provision in any other jurisdiction.
SECTION 4. All communications and notices hereunder shall be in writing and given as provided in section 11 of the Security Agreement.
SECTION 5. THIS ACCESSION AGREEMENT IS GOVEREND BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEVADA.
[signature page follows]
| 40 |
IN WITNESS WHEREOF, the New Holder has duly executed this Accession Agreement to the Security Agreement as of the day and year first above written.
| [NAME OF NEW HOLDER] | |||
| By: | |||
|
| Name: | ||
| Title: | |||
| 41 |
EXHIBIT 10.7
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (this “Agreement”) is made and entered into as of September 28, 2026, between ONAR Holding Corporation, a Nevada corporation (the “Company”), and each of the several purchasers signatory hereto (each such purchaser, the “Purchaser”).
This Agreement is made pursuant to the Securities Purchase Agreement, dated as of September 28, 2026, between the Company and the Purchaser (the “Purchase Agreement”).
NOW THEREFORE, in consideration of the mutual covenants contained in this Agreement, and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the Company and the Purchaser hereby agree as follows:
1. Definitions. Capitalized terms used and not otherwise defined herein that are defined in the Purchase Agreement shall have the meanings given such terms in the Purchase Agreement. As used in this Agreement, the following terms shall have the following meanings:
“Advice” shall have the meaning set forth in Section 6(c).
“Commission” means the United States Securities and Exchange Commission.
“Common Stock” means the common stock of the Company, par value $0.001 per share.
“Effectiveness Date” means, with respect to the Initial Registration Statement required to be filed hereunder, the 90th calendar day following the Nasdaq Uplist (or, in the event of a “full review” by the Commission, the 120th calendar day following the Nasdaq Uplist) and with respect to any additional Registration Statements which may be required pursuant to Section 2(c) or Section 3(c), the 60th calendar day following the date on which an additional Registration Statement is required to be filed hereunder (or, in the event of a “full review” by the Commission, the 90th calendar day following such Filing Date); provided, however, that in the event the Company is notified by the Commission that one or more of the above Registration Statements will not be reviewed or is no longer subject to further review and comments, the Effectiveness Date as to such Registration Statement shall be the fifth Trading Day following the date on which the Company is so notified if such date precedes the dates otherwise required above, provided, further, if such Effectiveness Date falls on a day that is not a Trading Day, then the Effectiveness Date shall be the next succeeding Trading Day.
“Effectiveness Period” shall have the meaning set forth in Section 2(a).
“Incentive Shares” means the shares of Common Stock issued or issuable to the Holder pursuant to the Transaction Documents in connection with satisfying Nasdaq public float, market value of unrestricted publicly held shares, round-lot holder or similar listing requirements, together with any securities issued in respect thereof pursuant to any stock split, stock dividend, recapitalization or similar event.
“Event” means:
(i) a failure to file a Registration Statement by the applicable Filing Date;
(ii) a failure to cause a Registration Statement to become effective by the applicable Effectiveness Date;
(iii) a failure to timely respond to Commission comments or requests during the applicable response period; and
(iv) a suspension of the effectiveness or usability of a Registration Statement, beyond the applicable grace period set forth herein; and
For the avoidance of doubt, no Event shall occur to the extent the applicable delay, suspension or deficiency results solely from SEC review, SEC comments, Rule 415 limitations, Holder delays or the Holder’s failure to provide information reasonably requested by the Company.
.
“Event Date” means:
(i) with respect to a failure to file a Registration Statement by the applicable Filing Date, the first day immediately following the applicable Filing Date;
(ii) with respect to a failure to cause a Registration Statement to become effective by the applicable Effectiveness Date, the first day immediately following the applicable Effectiveness Date;
(iii) with respect to a failure to timely respond to Commission comments or requests, the first day immediately following the expiration of the applicable response period;
(iv) with respect to a suspension of the effectiveness or usability of a Registration Statement, the first date on which such Registration Statement ceases to be effective or available for use beyond the applicable grace period set forth herein; and
(v) with respect to any other Event described in Section 2(d), the date on which the applicable Event first occurs and remains uncured following the expiration of any applicable cure or grace period.
For the avoidance of doubt, no Event Date shall occur to the extent the applicable delay, suspension or deficiency results solely from SEC review, SEC comments, Rule 415 limitations, Holder delays or the Holder’s failure to provide information reasonably requested by the Company.
| 2 |
“Exchange Agreements” means the exchange agreements entered into by the Company with holders of existing securities in connection with the Nasdaq Uplist.
“Filing Date” means, with respect to the Initial Registration Statement required hereunder, the 30th calendar day following the Nasdaq Uplist. With respect to any additional Registration Statements which may be required pursuant to Section 2(c) or Section 3(c), “Filing Date” means the earliest practical date on which the Company is permitted by SEC Guidance to file such additional Registration Statement related to the Registrable Securities, provided, further, if such Filing Date falls on a day that is not a Trading Day, then the Filing Date shall be the next succeeding Trading Day.
“Holder” means the holder of Registrable Securities.
“Indemnified Party” shall have the meaning set forth in Section 5(c).
“Indemnifying Party” shall have the meaning set forth in Section 5(c).
“Initial Registration Statement” means the initial Registration Statement filed pursuant to this Agreement.
“Losses” shall have the meaning set forth in Section 5(a).
“Nasdaq Uplist” means the date on which the Company receives Nasdaq’s approval of the Company’s application to list its Common Stock on The Nasdaq Capital Market, The Nasdaq Global Market or The Nasdaq Global Select Market (collectively, “Nasdaq”) and the Company’s Common Stock commences trading on the Nasdaq. At the Company’s election, “Nasdaq” could mean for purposes of this Agreement and the other Transaction Documents, a comparable national securities exchange, such as the NYSE American LLC.
“Preferred Shares” means the shares of preferred stock of the Company issued in connection with the Nasdaq Uplist, having the rights, preferences, privileges and restrictions set forth in the Certificate of Designations of such series of preferred stock and convertible into Common Stock in accordance with the terms of the Certificate of Designations, together with any securities issued in substitution therefor or in respect thereof as a result of any stock split, stock dividend, recapitalization, reclassification or similar transaction.
“Prospectus” means the prospectus included in a Registration Statement (including, without limitation, a prospectus that includes any information previously omitted from a prospectus filed as part of an effective registration statement in reliance upon Rule 430A promulgated by the Commission pursuant to the Securities Act), as amended or supplemented by any prospectus supplement, with respect to the terms of the offering of any portion of the Registrable Securities covered by a Registration Statement, and all other amendments and supplements to the Prospectus, including post-effective amendments, and all material incorporated by reference or deemed to be incorporated by reference in such Prospectus.
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“Registrable Securities” means (a) shares of Common Stock issuable upon conversion of the Preferred Shares issued upon the conversion or exchange of the Notes; (b) Warrant Shares; (c) Incentive Shares; (d) shares of Common Stock issuable upon conversion of Preferred Shares issued pursuant to the Exchange Agreements; and (e) any securities issued as a result of any stock split, stock dividend, recapitalization, reclassification or similar event with respect to the foregoing. For the avoidance of doubt, Registrable Securities shall not include shares of Common Stock acquired by a Holder in open-market transactions or otherwise acquired outside of the transactions contemplated by the Transaction Documents; provided, however, that any such Registrable Securities shall cease to be Registrable Securities (and the Company shall not be required to maintain the effectiveness of any, or file another, Registration Statement hereunder with respect thereto) to the extent (a) a Registration Statement with respect to the sale of such Registrable Securities is declared effective by the Commission under the Securities Act and such Registrable Securities have been disposed of by the Holder in accordance with such effective Registration Statement, (b) such Registrable Securities have been previously sold in accordance with Rule 144, or (c) such securities become eligible for resale without volume or manner-of-sale restrictions and without current public information pursuant to Rule 144 as set forth in a written opinion letter to such effect, addressed, delivered and acceptable to the Company’s transfer agent and the Holder.
“Registration Statement” means any registration statement required to be filed hereunder pursuant to Section 2(a) and any additional registration statements contemplated by Section 2(c) or Section 3(c), including (in each case) the Prospectus, amendments and supplements to any such registration statement or Prospectus, including pre- and post-effective amendments, all exhibits thereto, and all material incorporated by reference or deemed to be incorporated by reference in any such registration statement.
“Rule 415” means Rule 415 promulgated by the Commission pursuant to the Securities Act, as such Rule may be amended or interpreted from time to time, or any similar rule or regulation hereafter adopted by the Commission having substantially the same purpose and effect as such Rule.
“Rule 424” means Rule 424 promulgated by the Commission pursuant to the Securities Act, as such Rule may be amended or interpreted from time to time, or any similar rule or regulation hereafter adopted by the Commission having substantially the same purpose and effect as such Rule.
“Selling Shareholder Questionnaire” shall have the meaning set forth in Section 3(a).
“SEC Guidance” means (i) any publicly-available written or oral guidance of the Commission staff, or any comments, requirements or requests of the Commission staff, (ii) the Securities Act and (iii) any other rules and regulations of the Commission.
“Shares” means the shares of Common Stock constituting Registrable Securities.
| 4 |
“Underlying Shares” shall have the meaning assigned to it in the Purchase Agreement.
“Uplist Conversion” means the automatic conversion or exchange of the Notes into Preferred Shares upon the Nasdaq Uplist pursuant to the Transaction Documents
“Warrant Shares” shall have the meaning assigned to it in the Purchase Agreement.
2. Registration.
(a) On or prior to each Filing Date, the Company shall prepare and file with the Commission a Registration Statement covering the resale of all of the Registrable Securities (including, without limitation, all shares of Common Stock issuable upon conversion of Preferred Shares issued in connection with the Uplist Conversion, all shares of Common Shares issuable upon conversion of Preferred Shares issued pursuant to the Exchange Agreements, all Warrant Shares, all Incentive Shares, and all Preferred Shares issuable upon conversion pursuant to Exchange Agreements) that are not then registered on an effective Registration Statement for an offering to be made on a continuous basis pursuant to Rule 415. The Registration Statement filed hereunder shall be on Form S-1 or such other appropriate form in accordance herewith, subject to the provisions of Section 2(e); provided, however, that the Holder shall not be required to be named as an “underwriter” without the Holder’s express prior written consent. Subject to the terms of this Agreement, the Company shall use commercially reasonable efforts to cause a Registration Statement filed under this Agreement (including, without limitation, under Section 3(c)) to be declared effective under the Securities Act as promptly as possible after the filing thereof, and in any event shall use commercially reasonable efforts to cause such Registration Statement to be declared effective within ninety (90) calendar days following the Nasdaq Uplist, and shall use commercially reasonable efforts to keep such Registration Statement continuously effective under the Securities Act until the date that all Registrable Securities covered by such Registration Statement (i) have been sold thereunder or pursuant to Rule 144, or (ii) may be sold without volume or manner-of-sale restrictions pursuant to Rule 144 and without the requirement for the Company to be in compliance with the current public information requirement under Rule 144, as determined by counsel to the Company pursuant to a written opinion letter to such effect, addressed and acceptable to the Company’s transfer agent and the Holder (the “Effectiveness Period”). The Company shall telephonically request effectiveness of a Registration Statement as of 5:00 p.m. (New York City time) on a Trading Day. The Company shall immediately notify the Holder via facsimile or by e-mail of the effectiveness of a Registration Statement on the same Trading Day that the Company telephonically confirms effectiveness with the Commission, which shall be the date requested for effectiveness of such Registration Statement. The Company shall, by 5:30 p.m. (New York City time) on the Trading Day after the effective date of such Registration Statement, file a final Prospectus with the Commission as required by Rule 424. Failure to so notify the Holder within one (1) Trading Day of such notification of effectiveness or failure to file a final Prospectus as foresaid shall be deemed an Event . If at any time additional Registrable Securities become issuable and are not covered by an effective Registration Statement, the Company shall promptly file one or more additional Registration Statements covering such securities.
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(b) Notwithstanding the registration obligations set forth in Section 2(a), if the Commission informs the Company that all of the Registrable Securities cannot, as a result of the application of Rule 415, be registered for resale as a secondary offering on a single registration statement, the Company agrees to promptly inform the Holder and use its commercially reasonable efforts to file amendments to the Initial Registration Statement as required by the Commission, covering the maximum number of Registrable Securities permitted to be registered by the Commission, on Form S-1 or such other form available to register for resale the Registrable Securities as a secondary offering, subject to the provisions of Section 2(e); provided, however, that prior to filing such amendment, the Company shall be obligated to use diligent efforts to advocate with the Commission for the registration of all of the Registrable Securities in accordance with the SEC Guidance. For the avoidance of doubt, the Company shall use commercially reasonable efforts to ensure that any cutback is applied ratably among categories of Registrable Securities and shall not disproportionately exclude Incentive Shares, conversion shares or Warrant Shares held by the Holder.
(c) Notwithstanding any other provision of this Agreement and subject to the payment of liquidated damages pursuant to Section 2(d), if the Commission or any SEC Guidance sets forth a limitation on the number of Registrable Securities permitted to be registered on a particular Registration Statement as a secondary offering (and notwithstanding that the Company used diligent efforts to advocate with the Commission for the registration of all or a greater portion of Registrable Securities), unless otherwise directed in writing by the Holder as to its Registrable Securities, the Company shall reduce or eliminate any securities to be included other than Registrable Securities. In the event of a cutback hereunder, the Company shall give the Holder at least five (5) Trading Days prior written notice along with the calculations as to the Holder’s allotment. In the event any Registrable Securities cannot be included in a Registration Statement due solely to Rule 415 limitations, SEC Guidance or SEC comments, the Company’s sole obligation shall be to file one or more additional Registration Statements covering such omitted Registrable Securities as promptly as permitted by applicable SEC rules and guidance.
(d) If an Event occurs, then, in addition to any other rights the Holder may have hereunder or under applicable law, the Company shall pay to the Holder liquidated damages and not as a penalty as follows: (i) one percent (1.0%) of such Holder's Subscription Amount on the applicable Event Date; and (ii) an additional one percent (1.0%) of such Holder’s Subscription Amount for each full thirty (30) day period thereafter during which the Event remains uncured, with partial periods prorated.
Notwithstanding the foregoing: (A) the aggregate liquidated damages payable to any Holder under this Agreement shall not exceed six percent (6%) of such Holder's Subscription Amount; (B) no liquidated damages shall accrue except with respect to an Event as defined herein; (C) no Holder shall be entitled to duplicate recovery for the same underlying event, circumstance or failure under this Agreement and any other Transaction Document; and (D) liquidated damages shall cease accruing immediately upon cure of the applicable Event.
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Any liquidated damages due under this Section shall be paid within ten (10) Business Days after becoming due. Any unpaid amount shall accrue interest at a rate of twelve percent (12%) per annum, or the maximum rate permitted by applicable law, whichever is less, from the date due until paid in full.
(e) Since Form S-3 is not available for the registration of the resale of Registrable Securities hereunder, the Company shall (i) register the resale of the Registrable Securities on another appropriate form and (ii) undertake to convert the Initial Registration Statement into a shelf registration statement on Form S-3 or otherwise register the Registrable Securities on Form S-3 as soon as such form is available, provided that the Company shall maintain the effectiveness of and update as required the Registration Statement then in effect until such time as a Registration Statement on Form S-3 covering the Registrable Securities has been declared effective by the Commission.
(f) Notwithstanding anything to the contrary contained herein, in no event shall the Company be permitted to name the Holder or affiliate of the Holder as any Underwriter without the prior written consent of the Holder.
3. Registration Procedures.
In connection with the Company’s registration obligations hereunder, the Company shall:
(a) Not less than five (5) Trading Days prior to the filing of the Registration Statement and not less than one (1) Trading Day prior to the filing of any related Prospectus or any amendment or supplement thereto (including any document that would be incorporated or deemed to be incorporated therein by reference), the Company shall (i) furnish to the Holder copies of all such documents proposed to be filed, which documents (other than those incorporated or deemed to be incorporated by reference) will be subject to the review of the Holder, and (ii) cause its officers and directors, counsel and independent registered public accountants to respond to such inquiries as shall be necessary, in the reasonable opinion of respective counsel to the Holder, to conduct a reasonable investigation within the meaning of the Securities Act. The Company shall not file a Registration Statement or any such Prospectus or any amendments or supplements thereto to which the Holder of a majority of the Registrable Securities shall reasonably object in good faith, provided that, the Company is notified of such objection in writing no later than five (5) Trading Days after the Holder has been so furnished copies of a Registration Statement or one (1) Trading Day after the Holder has been so furnished copies of any related Prospectus or amendments or supplements thereto. The Holder shall also have the right to review and comment upon the disclosure relating to the Notes, the Uplist Conversion, the Preferred Shares, the Warrants and any Incentive Shares proposed to be included in the Registration Statement, and the Company shall consider such comments in good faith.
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(b) (i) Prepare and file with the Commission such amendments, including post-effective amendments, to a Registration Statement and the Prospectus used in connection therewith as may be necessary to keep a Registration Statement continuously effective as to the applicable Registrable Securities for the Effectiveness Period and prepare and file with the Commission such additional Registration Statements in order to register for resale under the Securities Act all of the Registrable Securities, including all shares of Common Stock issuable upon conversion of Preferred Shares issued upon the conversion or exchange of the Notes, all shares issuable upon conversion of Preferred Shares issued in connection with the Uplist Conversion, all Warrant Shares and all Incentive Shares, and all shares issuable upon conversion of Preferred Shares issued pursuant to Exchange Agreements (ii) cause the related Prospectus to be amended or supplemented by any required Prospectus supplement (subject to the terms of this Agreement), and, as so supplemented or amended, to be filed pursuant to Rule 424, (iii) respond as promptly as reasonably possible to any comments received from the Commission with respect to a Registration Statement or any amendment thereto and provide as promptly as reasonably possible to the Holder true and complete copies of all correspondence from and to the Commission relating to a Registration Statement (provided that, the Company shall excise any information contained therein which would constitute material non-public information regarding the Company or any of its Subsidiaries), and (iv) comply in all material respects with the applicable provisions of the Securities Act and the Exchange Act with respect to the disposition of all Registrable Securities covered by a Registration Statement during the applicable period in accordance (subject to the terms of this Agreement) with the intended methods of disposition by the Holder thereof set forth in such Registration Statement as so amended or in such Prospectus as so supplemented. The Company shall use commercially reasonable efforts to ensure that all Registrable Securities are included in an effective Registration Statement no later than the date such securities become issuable.
(c) If during the Effectiveness Period, the number of Registrable Securities at any time exceeds 120% of the number of Shares then registered in a Registration Statement, then the Company shall file as soon as reasonably practicable, but in any case prior to the applicable Filing Date, an additional Registration Statement covering the resale by the Holder of not less than the number of such Registrable Securities. Without limiting the foregoing, the issuance or potential issuance of Incentive Shares, shares underlying Preferred Shares issued in connection with the Uplist Conversion, shares underlying Preferred Shares issued pursuant to Exchange Agreements, or additional Warrant Shares shall be deemed to require an additional Registration Statement if such securities are not then covered by an effective Registration Statement.
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(d) Notify the Holder of Registrable Securities to be sold (which notice shall, pursuant to clauses (iii) through (vi) hereof, be accompanied by an instruction to suspend the use of the Prospectus until the requisite changes have been made) as promptly as reasonably possible (and, in the case of (i)(A) below, not less than one (1) Trading Day prior to such filing) and (if requested by any such Person) confirm such notice in writing no later than one (1) Trading Day following the day (i)(A) when a Prospectus or any Prospectus supplement or post-effective amendment to a Registration Statement is proposed to be filed, (B) when the Commission notifies the Company whether there will be a “review” of such Registration Statement and whenever the Commission comments in writing on such Registration Statement, and (C) with respect to a Registration Statement or any post-effective amendment, when the same has become effective, (ii) of any request by the Commission or any other federal or state governmental authority for amendments or supplements to a Registration Statement or Prospectus or for additional information, (iii) of the issuance by the Commission or any other federal or state governmental authority of any stop order suspending the effectiveness of a Registration Statement covering any or all of the Registrable Securities or the initiation of any Proceedings for that purpose, (iv) of the receipt by the Company of any notification with respect to the suspension of the qualification or exemption from qualification of any of the Registrable Securities for sale in any jurisdiction, or the initiation or threatening of any Proceeding for such purpose, and (v) of the occurrence of any event or passage of time that makes the financial statements included in a Registration Statement ineligible for inclusion therein or any statement made in a Registration Statement or Prospectus or any document incorporated or deemed to be incorporated therein by reference untrue in any material respect or that requires any revisions to a Registration Statement, Prospectus or other documents so that, in the case of a Registration Statement or the Prospectus, as the case may be, it will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading, (vi) of the occurrence or existence of any pending corporate development with respect to the Company that the Company believes may be material and that, in the determination of the Company, makes it not in the best interest of the Company to allow continued availability of a Registration Statement or Prospectus; and (vii) of the occurrence of the Nasdaq Uplist, the issuance of Preferred Shares in connection with the Uplist Conversion, the issuance of Preferred Shares pursuant to Exchange Agreements, or the issuance of any Incentive Shares, to the extent any such event requires a supplement, amendment or additional Registration Statement; provided, however, that in no event shall any such notice contain any information which would constitute material, non-public information regarding the Company or any of its Subsidiaries and the Company agrees that the Holder shall not have any duty of confidentiality to the Company or any of its Subsidiaries and shall not have any duty to the Company or any of its Subsidiaries not to trade on the basis of such information.
(e) Use commercially reasonable efforts to avoid the issuance of, or, if issued, obtain the withdrawal of (i) any order stopping or suspending the effectiveness of a Registration Statement, or (ii) any suspension of the qualification (or exemption from qualification) of any of the Registrable Securities for sale in any jurisdiction, at the earliest practicable moment.
(f) Furnish to the Holder, without charge, at least one conformed copy of the Registration Statement and each amendment thereto, including financial statements and schedules, all documents incorporated or deemed to be incorporated therein by reference to the extent requested by such Person, and all exhibits to the extent requested by such Person (including those previously furnished or incorporated by reference) promptly after the filing of such documents with the Commission, provided that any such item which is available on the EDGAR system (or successor thereto) need not be furnished in physical form.
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(g) Subject to the terms of this Agreement, the Company hereby consents to the use of such Prospectus and each amendment or supplement thereto by the selling Holder in connection with the offering and sale of the Registrable Securities covered by such Prospectus and any amendment or supplement thereto, except after the giving of any notice pursuant to Section 3(d). Such Registrable Securities shall include, without limitation, shares of Common Stock issuable upon conversion of Preferred Shares issued upon the conversion or exchange of the Notes, shares issued upon conversion of Preferred Shares issued in connection with the Uplist Conversion, Incentive Shares and Warrant Shares.
(h) The Company shall cooperate with any broker-dealer through which the Holder proposes to resell its Registrable Securities in effecting a filing with the FINRA Corporate Financing Department pursuant to FINRA Rule 5110, as requested by the Holder..
(i) Prior to any resale of Registrable Securities by the Holder, use its commercially reasonable efforts to register or qualify or cooperate with the selling Holder in connection with the registration or qualification (or exemption from the Registration or qualification) of such Registrable Securities for the resale by the Holder under the securities or Blue Sky laws of such jurisdictions within the United States as the Holder reasonably requests in writing, to keep each registration or qualification (or exemption therefrom) effective during the Effectiveness Period and to do any and all other acts or things reasonably necessary to enable the disposition in such jurisdictions of the Registrable Securities covered by each Registration Statement, provided that the Company shall not be required to qualify generally to do business in any jurisdiction where it is not then so qualified, subject the Company to any material tax in any such jurisdiction where it is not then so subject or file a general consent to service of process in any such jurisdiction.
(j) If requested by the Holder, cooperate with the Holder to facilitate the timely preparation and delivery of certificates representing Registrable Securities to be delivered to a transferee pursuant to a Registration Statement, which certificates shall be free, to the extent permitted by the Purchase Agreement and applicable law, of all restrictive legends, and to enable such Registrable Securities to be in such denominations and registered in such names as the Holder may request. The Company shall use commercially reasonable efforts to cause all Registrable Securities to be issued electronically through DTC and to be freely transferable without restrictive legends to the extent permitted by applicable law and the Registration Statement.
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(k) Upon the occurrence of any event contemplated by Section 3(d), as promptly as reasonably possible under the circumstances taking into account the Company’s good faith assessment of any adverse consequences to the Company and its shareholders of the premature disclosure of such event, prepare a supplement or amendment, including a post-effective amendment, to a Registration Statement or a supplement to the related Prospectus or any document incorporated or deemed to be incorporated therein by reference, and file any other required document so that, as thereafter delivered, neither a Registration Statement nor such Prospectus will contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading, including any amendment required as a result of the issuance of Preferred Shares pursuant to the Uplist Conversion, the issuance of Incentive Shares, or the issuance of additional Warrant Shares. If the Company notifies the Holder in accordance with clauses (iii) through (vi) of Section 3(d) above to suspend the use of any Prospectus until the requisite changes to such Prospectus have been made, then the Holder shall suspend use of such Prospectus. The Company will use commercially reasonable efforts to ensure that the use of the Prospectus may be resumed as promptly as is practicable. The Company shall be entitled to exercise its right under this Section 3(k) to suspend the availability of a Registration Statement and Prospectus, subject to the payment of partial liquidated damages otherwise required pursuant to Section 2(d), for a period not to exceed 60 calendar days (which need not be consecutive days) in any 12-month period. The Company shall use commercially reasonable efforts to minimize any suspension period and to ensure that any shares becoming issuable during such suspension period are added to an effective Registration Statement as promptly as practicable.
(l) Otherwise use commercially reasonable efforts to comply with all applicable rules and regulations of the Commission under the Securities Act and the Exchange Act, including, without limitation, Rule 172 under the Securities Act, file any final Prospectus, including any supplement or amendment thereof, with the Commission pursuant to Rule 424 under the Securities Act, promptly inform the Holder in writing if, at any time during the Effectiveness Period, the Company does not satisfy the conditions specified in Rule 172 and, as a result thereof, the Holder is required to deliver a Prospectus in connection with any disposition of Registrable Securities and take such other actions as may be reasonably necessary to facilitate the registration of the Registrable Securities hereunder.
(m) The Company shall use commercially reasonable efforts to obtain and maintain eligibility for use of Form S-3 (or any successor form thereto) for the registration of the resale of the Registrable Securities. Following the Nasdaq Uplist, the Company shall use commercially reasonable efforts to remain eligible for Form S-3 and other available shelf registration procedures.
(n) The Company may require the selling Holder to furnish to the Company a certified statement as to the number of Shares beneficially owned by the Holder and, if required by the Commission, the natural persons thereof that have voting and dispositive control over the Shares. During any periods that the Company is unable to meet its obligations hereunder with respect to the registration of the Registrable Securities solely because the Holder fails to furnish such information within three Trading Days of the Company’s request, any liquidated damages that are accruing at such time as to the Holder only shall be tolled and any Event that may otherwise occur solely because of such delay shall be suspended as to the Holder only, until such information is delivered to the Company.
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(o) Notwithstanding any other provisions of this Agreement to the contrary, the Company shall cause (i) each Registration Statement (as of the effective date of Registration Statement), any amendment thereof (as of the effective date thereof) or supplement thereto (as of its date), (A) to comply in all material respects with applicable SEC Guidance and (B) not to contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein not misleading, and (ii) any related Prospectus (including any preliminary Prospectus) and any amendment thereof or supplement thereto, as of its date, (A) to comply in all material respects with applicable SEC Guidance and (B) not to contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein, not misleading; provided, however, the Company shall have no such obligations or liabilities with respect to any written information pertaining to the Holder and furnished in writing to the Company by or on behalf of the Holder specifically for inclusion therein. Without limiting the foregoing, the Registration Statement and any related Prospectus shall appropriately cover and describe the resale of all Registrable Securities, including shares of Common Stock issuable upon conversion of Preferred Shares issued upon the conversion or exchange of the Notes, shares issuable upon conversion of Preferred Shares issued in connection with the Uplist Conversion, Incentive Shares and Warrant Shares, and shares issuable upon conversion of Preferred Shares issued pursuant to Exchange Agreements.
(p) The Company covenants that it will file the reports required to be filed by it under the Securities Act and the Exchange Act and the rules and regulations adopted by the Commission thereunder (or, if the Company is not required to file such reports, it will, upon the reasonable request of the Holder, make publicly available such necessary information for so long as necessary to permit sales pursuant to Rules 144, 144A or Regulation S under the Securities Act), and it will take such further action as the Holder may reasonably request, all to the extent required from time to time to enable the Holder, to sell Registrable Securities without registration under the Securities Act within the limitation of the exemptions provided by (i) Rules 144, 144A or Regulation S under the Securities Act, as such rules may be amended from time to time, or (ii) any similar rule or regulation hereafter adopted by the Commission. Upon the reasonable request of the Holder, the Company will deliver to the Holder a written statement as to whether it has complied with such requirements and, if not, the specifics thereof. The Company shall further use commercially reasonable efforts to maintain current public information and satisfy all reporting obligations necessary to permit the resale of Registrable Securities following the Nasdaq Uplist and the Uplist Conversion.
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4. Registration Expenses. All fees and expenses incident to the performance of or compliance with this Agreement by the Company shall be borne by the Company whether or not any Registrable Securities are sold pursuant to a Registration Statement. The fees and expenses referred to in the foregoing sentence shall include, without limitation, (i) all registration and filing fees (including, without limitation, fees and expenses of the Company’s counsel and independent registered public accountants) (A) with respect to filings made with the Commission, (B) with respect to filings required to be made with any Trading Market on which the Shares are then listed for trading, and (C) in compliance with applicable state securities or Blue Sky laws reasonably agreed to by the Company in writing (including, without limitation, fees and disbursements of counsel for the Company in connection with Blue Sky qualifications or exemptions of the Registrable Securities)(ii) printing expenses (including, without limitation, expenses of printing certificates for Registrable Securities), (iii) messenger, telephone and delivery expenses, (iv) fees and disbursements of counsel for the Company, (v) Securities Act liability insurance, if the Company so desires such insurance, and (vi) fees and expenses of all other Persons retained by the Company in connection with the consummation of the transactions contemplated by this Agreement. In addition, the Company shall be responsible for all of its internal expenses incurred in connection with the consummation of the transactions contemplated by this Agreement (including, without limitation, all salaries and expenses of its officers and employees performing legal or accounting duties), the expense of any annual audit and the fees and expenses incurred in connection with the listing of the Registrable Securities on any securities exchange as required hereunder. In no event shall the Company be responsible for any broker or similar commissions of the Holder or, except to the extent provided for in the Transaction Documents, any legal fees or other costs of the Holder.
5. Indemnification.
(a) Indemnification by the Company. The Company shall, notwithstanding any termination of this Agreement, indemnify and hold harmless, to the fullest extent permitted by applicable law, the Holder, the officers, directors, members, partners, agents, brokers (including brokers who offer and sell Registrable Securities as principal as a result of a pledge or any failure to perform under a margin call), investment advisors and employees (and any other Persons with a functionally equivalent role of a Person holding such titles, notwithstanding a lack of such title or any other title) of each of them, each Person who controls any the Holder (within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act) and the officers, directors, members, shareholders, partners, agents and employees (and any other Persons with a functionally equivalent role of a Person holding such titles, notwithstanding a lack of such title or any other title) of each such controlling Person, from and against any and all losses, claims, damages, liabilities, costs (including, without limitation, reasonable attorneys’ fees) and expenses (collectively, “Losses”), as incurred in investigating, preparing or defending against any litigation, commence or threatened, or any claim, arising out of or relating to (1) any failure by the Company to comply with the covenants and agreements contained in this Agreement, (2) any failure to register or qualify Registrable Securities in any state where the Company or its agents have affirmatively undertaken or agreed in writing that the Company (the undertaking of any underwriter being attributed to the Company) will undertake such registration or qualification on behalf of the Holder of such Registrable Securities (provided that in such instance the Company shall not be so liable if it has undertaken commercially reasonable efforts to so register or qualify such Registrable Securities), (3) any untrue or alleged untrue statement of a material fact contained in a Registration Statement, any Prospectus or any form of prospectus or in any amendment or supplement thereto or in any preliminary prospectus, or any omission or alleged omission of a material fact required to be stated therein or necessary to make the statements therein (in the case of any Prospectus or supplement thereto, in light of the circumstances under which they were made) not misleading or (4) any violation or alleged violation by the Company of the Securities Act, the Exchange Act or any state securities law, or any rule or regulation thereunder, in connection with the performance of its obligations under this Agreement, except to the extent, but only to the extent, that (i) such untrue statements or omissions are based solely upon information regarding the Holder furnished in writing to the Company by the Holder expressly for use therein, or to the extent that such information relates to the Holder or the Holder’s proposed method of distribution of Registrable Securities and was reviewed and expressly approved in writing by the Holder expressly for use in a Registration Statement, such Prospectus or in any amendment or supplement thereto or (ii) in the case of an occurrence of an event of the type specified in Section 3(d)(iii)-(vi), the use by the Holder of an outdated, defective or otherwise unavailable Prospectus after the Company has notified the Holder in writing that the Prospectus is outdated, defective or otherwise unavailable for use by the Holder and prior to the receipt by the Holder of the Advice contemplated in Section 6(c). The Company shall notify the Holder promptly of the institution, threat or assertion of any Proceeding arising from or in connection with the transactions contemplated by this Agreement of which the Company is aware. Such indemnity shall remain in full force and effect regardless of any investigation made by or on behalf of such indemnified person and shall survive the transfer of any Registrable Securities by any of the Holder in accordance with Section 6(f).
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(b) Indemnification by the Holder. The Holder shall indemnify and hold harmless, to the fullest extent permitted by applicable law, the Company, its directors, officers, agents and employees, each Person who controls the Company (within the meaning of Section 15 of the Securities Act and Section 20 of the Exchange Act), and the directors, officers, agents or employees of such controlling Persons, from and against all Losses, as incurred, to the extent arising out of or based solely upon: any untrue or alleged untrue statement of a material fact contained in any Registration Statement, any Prospectus, or in any amendment or supplement thereto or in any preliminary prospectus, or arising out of or relating to any omission or alleged omission of a material fact required to be stated therein or necessary to make the statements therein (in the case of any Prospectus or supplement thereto, in light of the circumstances under which they were made) not misleading (i) to the extent, but only to the extent, that such untrue statement or omission is contained in any information so furnished in writing by the Holder to the Company expressly for inclusion in such Registration Statement or such Prospectus, (ii) to the extent, but only to the extent, that such information relates to the Holder’s information provided in the Selling Shareholder Questionnaire or the proposed method of distribution of Registrable Securities and was reviewed and expressly approved in writing by the Holder expressly for use in a Registration Statement, such Prospectus or in any amendment or supplement thereto or (iii) in the case of an occurrence of an event of the type specified in Section 3(d)(iii)-(v), to the extent, but only to the extent, related to the use by such Holder of an outdated, defective or otherwise unavailable Prospectus after the Company has notified such Holder in writing that the Prospectus is outdated, defective or otherwise unavailable and prior to the receipt by such Holder of the Advice contemplated in Section 6(c). In no event shall the liability of the selling Holder be greater in amount than the dollar amount of the proceeds (net of all expenses paid by the Holder in connection with any claim relating to this Section 5 and the amount of any damages the Holder has otherwise been required to pay by reason of such untrue statement or omission) received by the Holder upon the sale of the Registrable Securities included in the Registration Statement giving rise to such indemnification obligation.
(c) Conduct of Indemnification Proceedings. If any Proceeding shall be brought or asserted against any Person entitled to indemnity hereunder (an “Indemnified Party”), such Indemnified Party shall promptly notify the Person from whom indemnity is sought (the “Indemnifying Party”) in writing, and the Indemnifying Party shall have the right to assume the defense thereof, including the employment of counsel reasonably satisfactory to the Indemnified Party and the payment of all fees and expenses incurred in connection with defense thereof, provided that the failure of any Indemnified Party to give such notice shall not relieve the Indemnifying Party of its obligations or liabilities pursuant to this Agreement, except (and only) to the extent that it shall be finally determined by a court of competent jurisdiction (which determination is not subject to appeal or further review) that such failure shall have materially and adversely prejudiced the Indemnifying Party. The Indemnified Party shall provide the Indemnifying Party with regular and timely progress updates with respect to any Proceedings.
An Indemnified Party shall have the right to employ separate counsel in any such Proceeding and to participate in the defense thereof, but the fees and expenses of such counsel shall be at the expense of such Indemnified Party or Parties unless: (1) the Indemnifying Party has agreed in writing to pay such fees and expenses, (2) the Indemnifying Party shall have failed promptly to assume the defense of such Proceeding and to employ counsel reasonably satisfactory to such Indemnified Party in any such Proceeding, or (3) the named parties to any such Proceeding (including any impleaded parties) include both such Indemnified Party and the Indemnifying Party, and counsel to the Indemnified Party shall reasonably believe that a material conflict of interest is likely to exist if the same counsel were to represent such Indemnified Party and the Indemnifying Party (in which case, if such Indemnified Party notifies the Indemnifying Party in writing that it elects to employ separate counsel at the expense of the Indemnifying Party, the Indemnifying Party shall not have the right to assume the defense thereof and the reasonable fees and expenses of no more than one separate counsel shall be at the expense of the Indemnifying Party). The Indemnifying Party shall not be liable for any settlement of any such Proceeding effected without its written consent, which consent shall not be unreasonably withheld or delayed. No Indemnifying Party shall, without the prior written consent of the Indemnified Party, effect any settlement of any pending Proceeding in respect of which any Indemnified Party is a party, unless such settlement includes an unconditional release of such Indemnified Party from all liability on claims that are the subject matter of such Proceeding.
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Subject to the terms of this Agreement, all reasonable fees and expenses of the Indemnified Party (including reasonable fees and expenses to the extent incurred in connection with investigating or preparing to defend such Proceeding in a manner not inconsistent with this Section) shall be paid to the Indemnified Party, as incurred, within ten Trading Days of written notice thereof to the Indemnifying Party, provided that the Indemnified Party shall promptly reimburse the Indemnifying Party for that portion of such fees and expenses applicable to such actions for which such Indemnified Party is finally determined by a court of competent jurisdiction (which determination is not subject to appeal or further review) not to be entitled to indemnification hereunder.
(d) Contribution. If the indemnification under Section 5(a) or 5(b) is unavailable to an Indemnified Party or insufficient to hold an Indemnified Party harmless for any Losses, then each Indemnifying Party shall contribute to the amount paid or payable by such Indemnified Party, in such proportion as is appropriate to reflect the relative fault of the Indemnifying Party and Indemnified Party in connection with the actions, statements or omissions that resulted in such Losses as well as any other relevant equitable considerations. The relative fault of such Indemnifying Party and Indemnified Party shall be determined by reference to, among other things, whether any action in question, including any untrue or alleged untrue statement of a material fact or omission or alleged omission of a material fact, has been taken or made by, or relates to information supplied by, such Indemnifying Party or Indemnified Party, and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such action, statement or omission. The amount paid or payable by a party as a result of any Losses shall be deemed to include, subject to the limitations set forth in this Agreement, any reasonable attorneys’ or other fees or expenses incurred by such party in connection with any Proceeding to the extent such party would have been indemnified for such fees or expenses if the indemnification provided for in this Section was available to such party in accordance with its terms.
The parties hereto agree that it would not be just and equitable if contribution pursuant to this Section 5(d) were determined by pro rata allocation or by any other method of allocation that does not take into account the equitable considerations referred to in the immediately preceding paragraph. In no event shall the contribution obligation of the Holder of Registrable Securities be greater in amount than the dollar amount of the proceeds (net of all expenses paid by the Holder in connection with any claim relating to this Section 5 and the amount of any damages the Holder has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission) received by it upon the sale of the Registrable Securities giving rise to such contribution obligation.
The indemnity and contribution agreements contained in this Section are in addition to any liability that the Indemnifying Parties may have to the Indemnified Parties.
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6. Miscellaneous.
(a) Remedies. In the event of a breach by the Company or by the Holder of any of their respective obligations under this Agreement, the Holder or the Company, as the case may be, in addition to being entitled to exercise all rights granted by law and under this Agreement, including recovery of damages, shall be entitled to specific performance of its rights under this Agreement. Each of the Company and the Holder agrees that monetary damages would not provide adequate compensation for any losses incurred by reason of a breach by it of any of the provisions of this Agreement and hereby further agrees that, in the event of any action for specific performance in respect of such breach, it shall not assert or shall waive the defense that a remedy at law would be adequate. Without limiting the foregoing, the Holder shall be entitled to seek specific performance to require the Company to file, maintain, amend or cause to become effective any Registration Statement required hereunder with respect to the Notes, Preferred Shares, Incentive Shares, Warrant Shares or any other Registrable Securities.
(b) Other Registration Statements. The Company shall not file any registration statement covering securities that would materially impair the registration of the Registrable Securities. Notwithstanding the foregoing, the following registration statements shall be permitted at all times: (i) a primary offering registration statement filed in connection with the Nasdaq Uplist; (ii) any registration statement relating to a public offering associated with the Nasdaq Uplist; (iii) Form S-8 registration statements; (iv) Form S-4 registration statements; (v) registration statements required pursuant to obligations existing as of the date of this Agreement; and (vi) amendments, supplements or replacements relating to any of the foregoing.
(c) Discontinued Disposition. By its acquisition of Registrable Securities, the Holder agrees that, upon receipt of a notice from the Company of the occurrence of any event of the kind described in Section 3(d)(iii) through (vi), the Holder will forthwith discontinue disposition of such Registrable Securities under a Registration Statement until it is advised in writing (the “Advice”) by the Company that the use of the applicable Prospectus (as it may have been supplemented or amended) may be resumed. The Company will use commercially reasonable efforts to ensure that the use of the Prospectus may be resumed as promptly as is practicable. The Company agrees and acknowledges that any periods during which the Holder is required to discontinue the disposition of the Registrable Securities hereunder shall be subject to the provisions of Section 2(e). The Company shall use commercially reasonable efforts to ensure that any suspension period does not adversely affect the resale eligibility of Incentive Shares, shares issued upon the Uplist Conversion or any other Registrable Securities.
(d) Piggy Back Registrations. If, at any time during the Effectiveness Period, there is not an effective Registration Statement covering all of the Registrable Securities and the Company shall determine to prepare and file with the Commission a registration statement relating to an offering for its own account or the account of others under the Securities Act of any of its equity securities, other than on Form S-4 or Form S-8 (each as promulgated under the Securities Act) or their then equivalents relating to equity securities to be issued solely in connection with any acquisition of any entity or business or equity securities issuable in connection with the Company’s stock option or other employee benefit plans, then the Company shall deliver to the Holder a written notice of such determination as soon as practicable, and in no event less than ten (10) days prior to the date of filing of such registration statement, and, if within five (5) days after the date of the delivery of such notice, any the Holder shall so request in writing, the Company shall include in such registration statement all Registrable Securities the Holder requests to be registered; provided, however, that the Company shall not be required to register any Registrable Securities pursuant to this Section 6(d) that are eligible for resale pursuant to Rule 144 (without volume restrictions or current public information requirements) promulgated by the Commission pursuant to the Securities Act or that are the subject of a then effective Registration Statement.
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(e) Amendments and Waivers. The provisions of this Agreement, including the provisions of this sentence, may not be amended, modified or supplemented, and waivers or consents to departures from the provisions hereof may not be given, unless the same shall be in writing and signed by the Company and the Holder of 50.1% or more of the then outstanding Registrable Securities (for purposes of clarification, this includes any Registrable Securities issuable upon exercise or conversion of any Security), provided that, if any amendment, modification or waiver disproportionately and adversely impacts the Holder, the consent of such disproportionately impacted Holder shall be required. If a Registration Statement does not register all of the Registrable Securities pursuant to a waiver or amendment done in compliance with the previous sentence, then the Holder shall have the right to designate which of its Registrable Securities shall be omitted from such Registration Statement. Notwithstanding the foregoing, a waiver or consent to depart from the provisions hereof with respect to a matter that relates exclusively to the rights of the Holder may be given only by the Holder of all of the Registrable Securities to which such waiver or consent relates; provided, however, that the provisions of this sentence may not be amended, modified, or supplemented except in accordance with the provisions of the first sentence of this Section 6(e). No consideration shall be offered or paid to any Person to amend or consent to a waiver or modification of any provision of this Agreement unless the same consideration also is offered to all of the parties to this Agreement.
(f) Notices. Any and all notices or other communications or deliveries required or permitted to be provided hereunder shall be delivered as set forth in the Purchase Agreement.
(g) Successors and Assigns. This Agreement shall inure to the benefit of and be binding upon the successors and permitted assigns of each of the parties and shall inure to the benefit of the Holder. The Company may not assign (except by merger, subject to any successor entity assuming in writing all of the obligations of the Company under this Agreement) its rights or obligations hereunder without the prior written consent of the Holder of the then outstanding Registrable Securities. The Holder may assign their respective rights hereunder in the manner and to the Persons as permitted under Section 5.8 of the Purchase Agreement. Any permitted transferee of Notes, Preferred Shares, Incentive Shares, Warrant Shares or other Registrable Securities shall be entitled to the benefits of this Agreement to the same extent as the transferring Holder.
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(h) No Inconsistent Agreements. Neither the Company nor any of its Subsidiaries has entered, as of the date hereof, nor shall the Company or any of its Subsidiaries, on or after the date of this Agreement, enter into any agreement with respect to its securities, that would have the effect of impairing the rights granted to the Holder in this Agreement or otherwise conflicts with the provisions hereof. Neither the Company nor any of its Subsidiaries has previously entered into any agreement granting any registration rights with respect to any of its securities to any Person that have not been satisfied in full. The Company shall not enter into any agreement or arrangement that would impair or limit the registration, issuance, resale or transferability of Incentive Shares, shares of Common Stock issuable upon conversion of Preferred Shares issued upon the conversion or exchange of the Notes, shares issuable upon conversion of Preferred Shares issued in connection with the Uplist Conversion, Warrant Shares or other Registrable Securities.
(i) Execution and Counterparts. This Agreement may be executed in two or more counterparts, all of which when taken together shall be considered one and the same agreement and shall become effective when counterparts have been signed by each party and delivered to the other party, it being understood that both parties need not sign the same counterpart. In the event that any signature is delivered by facsimile transmission or by e-mail delivery of a “.pdf” format data file or Docusign, such signature shall create a valid and binding obligation of the party executing (or on whose behalf such signature is executed) with the same force and effect as if such facsimile or “.pdf” or Docusign signature page were an original thereof.
(j) Governing Law. All questions concerning the construction, validity, enforcement and interpretation of this Agreement shall be determined in accordance with the provisions of the Purchase Agreement.
(k) Suspension Rights. The Company shall use commercially reasonable efforts to avoid any suspension that would delay the availability of unrestricted shares in connection with the Nasdaq Uplist or the issuance of Incentive Shares.
(l) Cumulative Remedies. The remedies provided herein are cumulative and not exclusive of any other remedies provided by law.
(m) Severability. If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction to be invalid, illegal, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions set forth herein shall remain in full force and effect and shall in no way be affected, impaired or invalidated, and the parties hereto shall use their commercially reasonable efforts to find and employ an alternative means to achieve the same or substantially the same result as that contemplated by such term, provision, covenant or restriction. It is hereby stipulated and declared to be the intention of the parties that they would have executed the remaining terms, provisions, covenants and restrictions without including any of such that may be hereafter declared invalid, illegal, void or unenforceable.
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(n) Headings. The headings in this Agreement are for convenience only, do not constitute a part of the Agreement and shall not be deemed to limit or affect any of the provisions hereof.
(o) Term. This Agreement shall terminate with respect to the Holder, on the earlier of (i) the written consent of the Holder, (ii) the date on which all Registrable Securities may be resold by the Holder without registration under the Securities Act and without regard to any volume or manner-of-sale limitations by reason of Rule 144, without the requirement for the Company to be in compliance with the current public information under Rule 144 under the Securities Act or any other rule of similar effect or (iii) if all of the Registrable Securities held by the Holder have been sold in a registration pursuant to the Securities Act or pursuant to an exemption therefrom.
(p) No Double Recovery. Notwithstanding anything contained herein or in any other Transaction Document to the contrary, no Holder shall be entitled to recover liquidated damages, penalties or similar amounts more than once with respect to the same underlying event, circumstance or breach.
(q) Nasdaq Uplist Coordination. The Company shall use commercially reasonable efforts to coordinate the timing of: (i) the Nasdaq Uplist; (ii) the effectiveness of the Registration Statement; and (iii) the issuance of Incentive Shares, so that shares issued pursuant to the Uplist Conversion and Incentive Shares are capable of being resold without restriction upon or promptly following the Nasdaq Uplist.
(r) Leak-Out Period. With respect to the Registrable Securities, the Holder shall be subject to the restrictions on transfer as described in the Leak-Out Agreement for the duration of the Leak-Out Period (as defined in the Leak-Out Agreement).
(s) Volume Limitations. During the Leak-Out Period, the Holder, together with its Affiliates, shall not, on any Trading Day, Transfer shares of Common Stock in excess of five percent (5%) of the trailing ten (10) Trading Day average daily trading volume of the Common Stock (the “Daily Cap”). For purposes of calculating the Daily Cap, all Registrable Securities beneficially owned by the Holder and its Affiliates shall be aggregated and treated as a single position as described in the Leak-Out Agreement.
[Signature pages follow]
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IN WITNESS WHEREOF, the parties have executed this Registration Rights Agreement as of the date first written above.
| ONAR HOLDING CORPORATION
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| By: |
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| Name: | Claude Zdanow |
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| Title: | Chief Executive Officer |
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[Signature Page of Holder Follows]
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[SIGNATURE PAGE OF the HOLDER TO ONAR HOLDING CORPORATION REGISTRATION RIGHTS AGREEMENT]
Name of Holder: __________________________
Signature of Authorized Signatory of Holder: __________________________
Name of Authorized Signatory: _________________________
Title of Authorized Signatory: __________________________
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EXHIBIT 10.8
LEAK-OUT AGREEMENT
THIS LEAK-OUT AGREEMENT (this “Agreement”) is made and entered into as of September 28, 2026, by and between ONAR HOLDING CORP., a Nevada corporation (the “Company”), and the undersigned holder (the “Holder”). The Company and the Holder are sometimes referred to herein individually as a “Party” and collectively as the “Parties.”
WHEREAS, pursuant to that certain Securities Purchase Agreement, dated September 28, 2026 (the “Securities Purchase Agreement”), and related transaction documents (collectively, the “Transaction Documents”), the Holder has purchased or may purchase from the Company a Secured Convertible Note (the “Note”), together with certain warrants and other securities issuable in connection therewith;
WHEREAS, pursuant to that certain Exchange Agreement, dated September 28, 2026 (the “Exchange Agreement”), , the Holder has exchanged or may exchange the existing indebtedness of the Company with the Company for an Exchange Note (as defined in the Securities Purchase Agreement);
WHEREAS, upon the commencement of trading of the Company’s common stock on Nasdaq (the “Nasdaq Commencement”), the outstanding principal and accrued but unpaid interest under the Note will automatically convert into shares of a newly designated series of convertible preferred stock (the “Preferred Shares”), which Preferred Shares will be convertible into shares of the Company’s common stock, par value $0.0001 per share (the “Common Stock”); and
WHEREAS, the Parties desire to establish certain restrictions on the disposition of shares of Common Stock held by the Holder, including shares issuable upon conversion of the Preferred Stock, any Incentive Shares, and any shares issuable upon exercise of warrants, in order to promote an orderly market in the Common Stock following the Nasdaq Commencement.
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants contained herein, the Parties hereby agree as follows:
1. Leak-Out Commencement. This Agreement shall become effective upon the occurrence of the Nasdaq Commencement and shall remain in effect for a period of one hundred eighty (180) days thereafter (the “Leak-Out Period”). During the Leak-Out Period, the Holder and its Affiliates, shall be subject to the transfer restrictions set forth in this Agreement with respect to all shares of Common Stock held by or issued to the Holder pursuant to the Transaction Documents (the “Leak-Out Securities”). For the avoidance of doubt, any transferee of the Notes, Preferred Shares and warrants issued to the Holder pursuant to the Transaction Documents shall execute a written agreement, in form reasonably satisfactory to the Company, agreeing to be bound by the terms of this Agreement with respect to all shares of Common Stock held by or issued to such transferee upon conversion of such securities.
2. Daily Volume Limitation.
(a) During the Leak-Out Period, the Holder, together with its Affiliates, shall not, on any Trading Day, Transfer shares of Common Stock in excess of five percent (5%) of the trailing ten (10) Trading Day average daily trading volume of the Common Stock (the “Daily Cap”).
For purposes of calculating the Daily Cap, all shares beneficially owned by the Holder and its Affiliates shall be aggregated and treated as a single position, including:
(i) shares of Common Stock issued upon conversion of the Preferred Shares;
(ii) Incentive Shares;
(iii) shares of Common Stock issued upon exercise of warrants issued pursuant to the Transaction Documents; and
(iv) any other shares of Common Stock acquired pursuant to the Transaction Documents.
(b) The Daily Cap shall apply regardless of the method or form of Transfer, including sales effected pursuant to an effective resale registration statement, Rule 144, or any other available exemption under applicable securities laws. The Holder shall not structure, sequence or otherwise coordinate Transfers in a manner intended to circumvent the restrictions set forth in this Agreement. Transfers by the Holder and its Affiliates shall be aggregated for purposes of determining compliance with this Section 2.
(c) Notwithstanding the foregoing, the restrictions contained in this Section 2 shall not apply to bona fide private transfers, assignments or other non-market transactions, provided that the transferee executes a written agreement, in form reasonably satisfactory to the Company, agreeing to be bound by the terms of this Agreement.
(d) For purposes of this Agreement, “Transfer” means (i) any sale, offer to sell, assignment, pledge, hypothecation or other disposition, directly or indirectly, of any securities, (ii) the entry into any swap, hedge or similar arrangement transferring all or any portion of the economic consequences of ownership of such securities, whether settled in securities, cash or otherwise, or (iii) any public announcement of an intention to effect any transaction described in clauses (i) or (ii).
3. Termination of Leak-Out Restrictions. The restrictions set forth in this Agreement shall automatically terminate prior to the expiration of the Leak-Out Period if (a) the Common Stock trades with an average daily trading value in excess of $1,000,000 for each of twenty (20) consecutive Trading Days and (b) the closing price of the Common Stock on each such Trading Day is at least twenty percent (20%) greater than the Conversion Price. Upon the satisfaction of both conditions set forth above, all restrictions contained in this Agreement shall immediately terminate and cease to have any further force or effect, and the Holder shall thereafter be permitted to Transfer its securities without regard to the limitations set forth herein, subject only to applicable securities laws.
4. Coordination with Securities Laws
(a) Notwithstanding anything to the contrary in this Agreement, no Transfer of securities subject to this Agreement may be effected except in compliance with applicable federal and state securities laws, including the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder, including Rule 144, as applicable. Compliance with the limitations set forth in this Agreement shall not be deemed to permit any Transfer that would otherwise be prohibited under applicable securities laws, nor shall compliance with applicable securities laws be deemed to excuse a failure to comply with the contractual restrictions set forth herein.
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(b) If the restrictions imposed by applicable securities laws are more restrictive than the limitations set forth in this Agreement with respect to any proposed Transfer, such securities law restrictions shall control solely with respect to such Transfer. No inability to Transfer securities as a result of applicable securities laws shall be deemed a waiver, modification or termination of the restrictions set forth in this Agreement.
5. Manner of Sale
(a) All Transfers of Leak-Out Securities during the Leak‑Out Period shall be effected in an orderly manner and through bona fide market, or block-trade, transactions consistent with customary trading practices for securities listed on a national securities exchange. The Holder shall not engage in or coordinate any series of transactions, hedging activities, or sales arrangements designed to evade, circumvent, or undermine the volume, timing, or sequencing limitations set forth in this Agreement, whether directly or indirectly through Affiliates or third parties.
(b) The Holder acknowledges that the purpose of the restrictions contained in this Agreement is to promote an orderly and non-disruptive market for the Common Stock following the Nasdaq Commencement and agrees to conduct all Transfers in a manner reasonably designed to minimize market disruption. Any Transfer effected in violation of this Agreement shall constitute a breach of this Agreement and the Company shall be entitled to instruct its transfer agent not to recognize or process any such Transfer to the extent permitted by applicable law.
6. Stop Transfer. The Holder acknowledges and agrees that, for the purpose of enforcing the transfer restrictions set forth in this Agreement, the Company may impose and maintain appropriate stop-transfer instructions with respect to any securities subject to this Agreement during the Leak-Out Period. The Company may instruct its transfer agent not to register or process any Transfer that is not in compliance with this Agreement and may require such additional certifications, representations, opinions of counsel or other documentation as the Company may reasonably request to verify compliance with the terms hereof and applicable securities laws. Any failure by the Company or its transfer agent to enforce the restrictions contained herein shall not constitute a waiver of any rights under this Agreement
7. Representations and Covenants of the Holder.
(a) The Holder represents and warrants to the Company that: (i) the Holder has full power and authority to enter into this Agreement and to perform its obligations hereunder; (ii) the execution and delivery of this Agreement has been duly authorized by all necessary action on the part of the Holder; (iii) as of the date hereof, neither the Holder nor any of its Affiliates holds any short position in, or has engaged in any hedging transaction with respect to, the Common Stock; and (iv) the Holder is acquiring the Leak-Out Securities for its own account and not with a view to any distribution thereof other than in compliance with applicable securities laws and the terms of this Agreement.
(b) The Holder covenants and agrees that, during the Leak-Out Period, the Holder shall: (i) comply in all material respects with all applicable laws, rules and regulations in connection with any Transfer of Leak-Out Securities; (ii) promptly notify the Company in writing of any material change in the information provided in the Holder’s representations set forth herein; and (iii) cooperate with the Company and its transfer agent to facilitate an orderly market in the Common Stock following the Nasdaq Commencement.
8. Prohibited Transactions.
(a) During the Leak-Out Period, the Holder and its Affiliates shall not, directly or indirectly: (i) engage in any Short Sale of the Common Stock; (ii) enter into any put option, put equivalent position, short sale or other arrangement (including any short position, any “put equivalent position” as defined in Rule 16a-1(h) under the Securities Exchange Act of 1934, as amended, or any borrowing or lending of shares) that has the effect of creating or increasing a net short position in the Common Stock; (iii) grant any option to purchase, or otherwise transfer or dispose of, any Leak-Out Securities except in compliance with the transfer restrictions set forth in this Agreement; or (iv) publicly disclose the intent to undertake any of the foregoing activities.
(b) For purposes of this Agreement, “Short Sale” means any sale of shares of Common Stock that the Holder does not own at the time of sale, or any sale that is consummated by the delivery of shares borrowed by, or for the account of, the Holder, including any short sale under Rule 200 of Regulation SHO under the Securities Exchange Act of 1934, as amended, whether or not against the box, and all types of direct and indirect stock pledges (other than pledges in the ordinary course of business as part of prime brokerage arrangements), forward sale contracts, options, puts, calls, swaps and similar arrangements, and sales and other transactions through non-U.S. broker-dealers or foreign regulated brokers.
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9. Pre-Transfer Notice and Compliance Certification. Prior to effecting any Transfer of Leak-Out Securities during the Leak-Out Period, the Holder shall deliver to the Company (or its designated representative) written notice of its intention to effect such Transfer, together with a certification confirming: (a) the number of shares proposed to be Transferred; (b) the method of Transfer; (c) the Holder’s calculation of the applicable Daily Cap for such Trading Day; and (d) that such Transfer, when aggregated with all other Transfers by the Holder and its Affiliates on such Trading Day, will not exceed the Daily Cap. Such notice shall be delivered no later than 9:30 a.m. Eastern Time on the Trading Day on which the proposed Transfer is to be effected (or such shorter period as the Company may agree in writing). The Company shall have the right, but not the obligation, to object to any proposed Transfer that it reasonably believes would violate the terms of this Agreement, and the Holder shall not effect such Transfer unless the Company provides written notice of such objection prior to the proposed Transfer. Any such objection shall specify in reasonable detail the basis for the Company's determination.
10. Remedies for Breach; Clawback.
(a) In the event the Holder Transfers shares of Common Stock in violation of this Agreement (an “Excess Transfer”), the Holder shall, within three (3) Business Days following written notice from the Company specifying such violation: (i) pay to the Company, as liquidated damages and not as a penalty, an amount equal to the gross proceeds attributable solely to the Excess Transfer; or (ii) at the Holder’s election (subject to the Company’s consent, not to be unreasonably withheld), purchase on the open market and deliver to the Company a number of shares of Common Stock equal to the number of shares Transferred in excess of the Daily Cap. The Parties acknowledge and agree that such liquidated damages represent a reasonable estimate of the damages that the Company would suffer as a result of a breach of this Agreement and that actual damages would be difficult or impossible to ascertain.
(b) In addition to the liquidated damages set forth in Section 10(a), the Leak-Out Period shall automatically be extended by one (1) day for each day on which an Excess Transfer occurs, unless the Company waives such extension in writing.
(c) The rights and remedies set forth in this Section 10 are cumulative and in addition to, and not in lieu of, any other rights and remedies available to the Company at law or in equity, including the right to seek specific performance and injunctive relief as set forth in this Agreement. Without limitation, transfers among the Holder, its Affiliates, affiliated funds, managed accounts and financing sources shall be deemed permitted transfers provided the transferee agrees in writing to be bound by this Agreement.
11. Miscellaneous.
(a) Termination. This Agreement shall automatically terminate upon the earliest to occur of: (i) the expiration of the Leak-Out Period, (ii) the termination of all transfer restrictions applicable under this Agreement, and (iii) the satisfaction of the conditions set forth in Section 3 resulting in the early termination of the leak-out restrictions.
(b) Binding Effect; Assignment. This Agreement and all of the provisions hereof shall be binding upon and inure solely to the benefit of the Parties hereto and their respective permitted successors and assigns. Except as otherwise provided in this Agreement, this Agreement shall not be assigned by operation of Law or otherwise without the prior written consent of the Parties. Any assignment without such consent shall be null and void; provided, that no such assignment shall relieve the assigning Party of its obligations hereunder.
(c) Third Parties. Nothing contained in this Agreement or in any instrument or document executed by any party in connection with the transactions contemplated hereby shall create any rights in, or be deemed to have been executed for the benefit of, any person or entity that is not a Party hereto or thereto or a successor or permitted assign of such a Party.
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(d) Governing Law; Jurisdiction. This Agreement shall be governed by and construed in accordance with the Laws of the State of Nevada, without regard to principles of conflicts of laws. The Parties irrevocably submit to the exclusive jurisdiction of the state and federal courts located in Clark County, Nevada with respect to any action or proceeding arising out of or relating to this Agreement and waive any objection based upon improper venue or forum non conveniens.
(e) WAIVER OF JURY TRIAL. EACH PARTY HEREBY WAIVES TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY WITH RESPECT TO ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREIN. EACH PARTY (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THAT FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT AND THE TRANSACTIONS CONTEMPLATED HEREIN, AS APPLICABLE, BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION.
(f) Interpretation. The titles and subtitles used in this Agreement are for convenience only and are not to be considered in construing or interpreting this Agreement. In this Agreement, unless the context otherwise requires: (i) any pronoun used in this Agreement shall include the corresponding masculine, feminine or neuter forms, and the singular form of nouns, pronouns and verbs shall include the plural and vice versa; (ii) “including” (and with correlative meaning “include”) means including without limiting the generality of any description preceding or succeeding such term and shall be deemed in each case to be followed by the words “without limitation”; (iii) the words “herein,” “hereto,” and “hereby” and other words of similar import in this Agreement shall be deemed in each case to refer to this Agreement as a whole and not to any particular section or other subdivision of this Agreement; and (iv) the term “or” means “and/or”. The Parties have participated jointly in the negotiation and drafting of this Agreement. Consequently, in the event an ambiguity or question of intent or interpretation arises, this Agreement shall be construed as if drafted jointly by the Parties hereto, and no presumption or burden of proof shall arise favoring or disfavoring any party by virtue of the authorship of any provision of this Agreement.
(g) Notices. All notices, consents, waivers and other communications hereunder shall be in writing and shall be given (and shall be deemed to have been duly given upon receipt) by delivery (a) in person, (b) by e-mail (without receiving notice of non-receipt or other “bounce-back”), (c) by reputable, nationally recognized overnight courier service or (d) by registered or certified mail, pre-paid and return receipt requested; provided, however, that notice given pursuant to clauses (c) and (d) above shall not be effective unless a duplicate copy of such notice is also given in person or by e-mail (without receiving notice of non-receipt or other “bounce-back”); in each case to the applicable Party at the following addresses (or at such other address for a Party as shall be specified by like notice):
| If to the Company, to:
ONAR Holding Corporation 990 Biscayne Blvd., 5th Floor Miami, FL 33132 Attn: Claude Zdanow Email: c@onar.com
If to the Holder, to:
the address set forth under the Holder’s name on the signature page hereto. | With a copy to (which shall not constitute notice):
Baker & Hostetler LLP 1900 Avenue of the Stars, Suite 2700 Los Angeles Attn: JR Lanis Email: JRLanis@bakerlaw.com
With a copy to (which shall not constitute notice):
Seward & Kissel LLP One Battery Park Plaza New York, NY 10004 Attn: Keith Billotti Email: billotti@sewkis.com |
(h) Amendments and Waivers. This Agreement may be amended, supplemented, modified or waived only by execution of a written instrument signed by the Company and the Holder; provided that any amendment materially affecting all holders of securities issued pursuant to the Transaction Documents shall also require the approval of the Lead Investors. No failure or delay by a Party in exercising any right hereunder shall operate as a waiver thereof. No waivers of or exceptions to any term, condition, or provision of this Agreement, in any one or more instances, shall be deemed to be or construed as a further or continuing waiver of any such term, condition, or provision.
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(i) Severability. In case any provision in this Agreement shall be held invalid, illegal or unenforceable in a jurisdiction, such provision shall be modified or deleted, as to the jurisdiction involved, only to the extent necessary to render the same valid, legal and enforceable, and the validity, legality and enforceability of the remaining provisions hereof shall not in any way be affected or impaired thereby nor shall the validity, legality or enforceability of such provision be affected thereby in any other jurisdiction. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the Parties will substitute for any invalid, illegal or unenforceable provision a suitable and equitable provision that carries out, so far as may be valid, legal and enforceable, the intent and purpose of such invalid, illegal or unenforceable provision.
(j) Specific Performance. The Parties agree that irreparable damage would occur in the event that any of the provisions of this Agreement were not performed in accordance with their specific terms or were otherwise breached. The Parties further agree that each party shall be entitled to seek specific performance of the terms hereof and immediate injunctive relief and other equitable relief to prevent breaches, or threatened breaches, of this Agreement, without the necessity of proving the inadequacy of money damages as a remedy and without bond or other security being required, this being in addition to any other remedy to which they are entitled at law or in equity.
(k) Entire Agreement. This Agreement constitutes the entire agreement among the Parties with respect to the subject matter hereof and supersedes all prior and contemporaneous understandings, agreements and discussions relating thereto. Notwithstanding the foregoing, nothing in this Agreement shall limit or modify the rights and obligations of the Parties under the Securities Purchase Agreement, the Note, the Warrants or any other Transaction Document. In the event of a conflict between this Agreement and any Transaction Document, the provisions of this Agreement shall govern with respect to the leak-out restrictions contained herein.
(l) Further Assurances. From time to time, at another Party’s request and without further consideration (but at the requesting Party’s reasonable cost and expense), each Party shall execute and deliver such additional documents and take all such further action as may be reasonably necessary to consummate the transactions contemplated by this Agreement.
(m) Counterparts; Facsimile. This Agreement may be executed and delivered (including by facsimile, email or other electronic transmission) in one or more counterparts, and by the different Parties in separate counterparts, each of which when executed shall be deemed to be an original but all of which taken together shall constitute one and the same agreement.
12. Defined Terms.
For purposes of this Agreement, the following terms shall have the meanings set forth below:
“Affiliate” means, with respect to any Person, any other Person that directly or indirectly controls, is controlled by, or is under common control with such Person.
“Business Day” means any day that is not a Saturday, Sunday or other day on which commercial banks in New York, New York are authorized or required by Law to remain closed.
“Common Stock” has the meaning set forth in the recitals.
“Conversion Price” shall have the meaning ascribed to such term in the Securities Purchase Agreement.
“Daily Cap” has the meaning set forth in Section 2(a).
“Excess Transfer” has the meaning set forth in Section 10(a).
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“Holder” means the holder party to this Agreement and any permitted transferee that becomes bound by this Agreement.
“Incentive Shares” means shares of Common Stock issued or issuable to the Holder pursuant to the Transaction Documents in connection with the Nasdaq Uplist, including any shares issued to satisfy Nasdaq public float requirements, holder-count requirements or related listing requirements, whether issued at closing, upon the Nasdaq Uplist or thereafter.
“Lead Investors” means ADI Funding Corp., Yield Point NY LLC and M2B Funding Corp.; provided that any approval, consent, waiver, amendment, direction or other action of the Lead Investors under any Transaction Document shall require the written consent of all three Lead Investors.
“Leak-Out Period” has the meaning set forth in Section 1.
“Nasdaq Uplist” means the date on which the Company receives Nasdaq’s approval of the Company’s application to list its Common Stock on The Nasdaq Capital Market, The Nasdaq Global Market or The Nasdaq Global Select Market (collectively, “Nasdaq”) and the Company’s Common Stock commences trading on the Nasdaq. At the Company’s election, “Nasdaq” could mean for purposes of this Agreement and the other Transaction Documents, a comparable national securities exchange, such as the NYSE American LLC.
“Note” has the meaning set forth in the recitals.
“Person” means any individual, corporation, partnership, limited liability company, trust, association, governmental authority or other entity.
“Preferred Shares” has the meaning set forth in the recitals.
“Short Sale” has the meaning set forth in Section 8(b).
“Trading Day” means a day on which the principal Trading Market is open for trading.
“Trading Market” means any of the following markets or exchanges on which the Common Stock is listed or quoted for trading on the date in question: the NYSE American, the Nasdaq Capital Market, the Nasdaq Global Market, the Nasdaq Global Select Market, the New York Stock Exchange, OTCQX or OTCQB (or any successors to any of the foregoing).
“Transaction Documents” has the meaning set forth in the recitals.
“Transfer” means (i) any sale, offer to sell, assignment, pledge, hypothecation or other disposition, directly or indirectly, of any securities, (ii) the entry into any swap, hedge or similar arrangement transferring all or any portion of the economic consequences of ownership of such securities, whether settled in securities, cash or otherwise, or (iii) any public announcement of an intention to effect any transaction described in clauses (i) or (ii).
[Remainder of Page Intentionally Left Blank; Signature Pages Follow]
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IN WITNESS WHEREOF, the Parties have executed this Agreement as of the date first written above.
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| Name: | Claude Zdanow |
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| Title: | Chief Executive Officer |
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[Signature Page to Leak-Out Agreement]
IN WITNESS WHEREOF, the Parties have executed this Agreement as of the date first written above.
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[Signature Page to Leak-Out Agreement]
EXHIBIT 10.9
EXCHANGE AGREEMENT
This Exchange Agreement (this “Agreement”) is made and entered into as of September 28, 2026 (the “Effective Date”), by and among ONAR Holding Corporation, a Nevada corporation (the “Company”), and [Holder Name] (the “Holder”). The Company and the Holder may be referred to herein individually as a “Party” and collectively as the “Parties.”
This Agreement is entered into in connection with the Company’s secured convertible note financing pursuant to that certain Securities Purchase Agreement, dated as of September 28, 2026 (the “Securities Purchase Agreement”), and the related Transaction Documents (as such term is defined in the Securities Purchase Agreement). Capitalized terms not otherwise defined herein shall have the meanings assigned to them in the Securities Purchase Agreement.
RECITALS
WHEREAS, the Holder currently owns the securities identified on Exhibit A hereto (the “Existing Securities”);
WHEREAS, the Parties desire to exchange concurrently with the Closing such Existing Securities for Exchange Notes (as defined in the Securities Purchase Agreement) (the “Note Exchange”);
WHEREAS, upon the Nasdaq Uplist, the Exchange Notes shall automatically be exchanged for shares of Series 1 Convertible Preferred Stock (the “Preferred Stock”) pursuant to the Securities Purchase Agreement, the Exchange Notes, the Certificate of Designation and the other Transaction Documents;
WHEREAS, the Parties acknowledge that the consideration for the exchange consists solely of the issuance of Exchange Notes having an aggregate principal amount equal to the Exchange Value (as defined in Section 1.2) divided by ninety percent (90%), reflecting an original issue discount of ten percent (10%) (the “Original Issue Discount”), which Exchange Notes shall thereafter be exchanged for Preferred Stock upon the Nasdaq Uplist in accordance with the Transaction Documents (the “Preferred Stock Exchange”);
WHEREAS, the Note Exchange and the Preferred Stock Exchange are referred to collectively herein as the “Exchange Transactions”;
WHEREAS, following the Nasdaq Uplist and the automatic exchange of the Exchange Notes for Preferred Stock, the rights of the Holder shall be governed by the Preferred Stock, the Certificate of Designation, the Registration Rights Agreement, the Leak-Out Agreement and the other applicable Transaction Documents;
NOW, THEREFORE, in consideration of the mutual covenants and agreements herein contained, and intending to be legally bound hereby, the Parties agree as follows:
ARTICLE I
Exchange Transactions
Section 1.1 Exchange of Securities.
(a) Note Exchange. On the Closing Date, the Holder shall surrender, assign and exchange the Existing Securities identified on Exhibit A, and, in exchange therefor, the Company shall issue to the Holder Exchange Notes having an aggregate principal amount equal to the Exchange Value divided by ninety percent (90%), reflecting the Original Issue Discount, in each case as set forth on Exhibit A.
(b) Preferred Stock Exchange. The Parties acknowledge and agree that the Exchange Notes issued pursuant to this Agreement shall automatically be exchanged for Preferred Stock upon the Nasdaq Uplist in accordance with the Securities Purchase Agreement, the Exchange Notes and the Certificate of Designation. Upon consummation of the Preferred Stock Exchange, the Exchange Notes shall be deemed cancelled and extinguished and shall be replaced by the Preferred Stock issued in respect thereof.
Section 1.2 Exchange Value. For purposes of this Agreement, the “Exchange Value” shall mean, with respect to the Existing Securities being exchanged hereunder, an amount equal to the sum of: (a) one hundred percent (100%) of the outstanding principal amount of the Existing Securities; (b) all accrued and unpaid interest on the Existing Securities through and including the Closing Date; (c) all other amounts due and owing under the Existing Securities and the related transaction documents as of the Closing Date, including any accrued fees, expenses, premiums or other payment obligations; and (d) an exchange premium equal to ten percent (10%) of the sum of clauses (a), (b) and (c). The Exchange Value shall be calculated by the Company in good faith and set forth on Exhibit A attached hereto, which calculation shall be reasonably satisfactory to the Holder.
Section 1.3 Cancellation of Existing Securities. Upon issuance of the Exchange Notes:
(a) the Existing Securities shall be deemed cancelled, surrendered, extinguished and satisfied in full;
(b) all rights, redemption rights, anti-dilution rights, penalty rights, default-based price adjustments and similar rights contained in the Existing Securities shall terminate with respect to such Existing Securities;
(c) all obligations represented by the Existing Securities shall be fully satisfied and replaced solely by the Exchange Notes and the applicable Transaction Documents; and
(d) except as expressly provided herein, the Holder shall thereafter possess only those rights arising under the Exchange Notes and the applicable Transaction Documents.
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Section 1.4 Exchange of Exchange Notes for Preferred Stock. Upon the Nasdaq Uplist, all Exchange Notes issued pursuant to this Agreement shall automatically be exchange for Preferred Stock in accordance with the terms of the Securities Purchase Agreement, the Exchange Notes and the Certificate of Designation. Upon issuance of such Preferred Stock:
(a) the Exchange Notes shall be deemed cancelled, surrendered, extinguished and satisfied in full;
(b) all rights and obligations evidenced by the Exchange Notes shall terminate and be replaced by the rights and obligations applicable to the Preferred Stock and the other Transaction Documents;
(c) the Holder shall thereafter possess only those rights arising under the Preferred Stock, the Certificate of Designation, the Registration Rights Agreement, the Leak-Out Agreement; provided, however, that any governance rights granted pursuant to Section 1.9 of this Agreement shall survive and remain in full force and effect in accordance with their terms; and
(d) notwithstanding the foregoing, any claim, cause of action, right to payment, indemnification right, damages claim or other remedy arising from any breach, default or other violation occurring prior to such exchange and expressly stated to survive under the applicable Transaction Documents shall continue to survive such conversion; and
(e) Notwithstanding anything herein to the contrary, any anti-dilution protection, down-round protection, conversion price adjustment, economic protection or similar right that is expressly intended to survive the exchange of the Existing Securities into Exchange Notes or the exchange of Exchange Notes for Preferred Stock pursuant to the Transaction Documents shall survive and thereafter apply to the Preferred Stock in accordance with the applicable Transaction Documents.
Section 1.5 No Additional Consideration. The Holder acknowledges and agrees that the consideration for the Exchange Transactions consists solely of the issuance of Exchange Notes in the Note Exchange and the subsequent issuance of Preferred Stock upon the automatic conversion of such Exchange Notes in the Preferred Stock Exchange.
Section 1.6 Waivers. Effective upon the closing of the Exchange Transaction: (a) any mandatory redemption, prepayment or similar rights arising under the Transaction Documents are hereby irrevocably waived; (b) any covenant breach, cross-default or default arising solely from the execution, delivery or performance of the Transaction Documents is hereby waived; and (c) any default-triggered conversion price reduction, reset or adjustment contained in the Existing Securities is hereby permanently waived and extinguished.
Section 1.7 Nasdaq Uplist. “Nasdaq Uplist” means the date on which, following Nasdaq’s approval of the Company’s application to list its Common Stock on The Nasdaq Capital Market, The Nasdaq Global Market or The Nasdaq Global Select Market (collectively, “Nasdaq”), the Common Stock commences trading on Nasdaq, consistent with the definition of such term in the Exchange Notes; at the Company’s election, “Nasdaq” may also mean a comparable national securities exchange, such as the NYSE American LLC. The Parties acknowledge that the exchange contemplated by this Agreement is being undertaken as part of the Company’s Nasdaq Uplist.
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Section 1.8 Failure to Nasdaq Uplist. The Note Exchange shall be consummated on the Closing Date and shall not be subject to rescission, unwinding or reinstatement of the Existing Securities by reason of the Nasdaq Uplist not occurring. If the Nasdaq Uplist has not occurred on or before the date that is one hundred eighty (180) days following the Closing Date (or such later date as the Company and the Holder may agree in writing), the Exchange Notes shall remain outstanding and shall continue to be governed by their terms, including the Maturity Date, Interest and amortization provisions thereof, until paid, converted or exchanged in accordance therewith, and the Existing Securities shall remain cancelled. If this Agreement is terminated in accordance with its terms prior to the Closing, the Parties shall be restored, to the greatest extent possible, to the positions they occupied immediately prior to execution of this Agreement.
Section 1.9 Governance Rights.
(a) Lead Investors. For purposes of this Agreement, “Lead Investors” means ADI Funding Corp., Yield Point NY LLC and M2B Funding Corp.; provided that any approval, consent, waiver, amendment, direction or other action of the Lead Investors under any Transaction Document shall require the written consent of all three Lead Investors.
(b) Board Designation Rights. Effective as of the Closing and until the Nasdaq Uplist, for so long as permitted under the Nasdaq rules and so long as the Lead Investors and their Affiliates continue to beneficially own upon conversion or exercise of all Notes, Preferred Shares, Warrants and other securities held by them (without giving effect to any beneficial ownership limitations in any Transaction Document), securities representing at least thirty percent (30%) of the aggregate Common Stock on an as-converted and as-exercised basis, with all Lead Investors and Affiliates being aggregated as a single group for purposes of such determination (the “Governance Rights Period”), the Lead Investors shall have the right to designate two (2) members of the Company’s Board of Directors. The Company shall take all actions reasonably necessary to appoint and maintain such designees as directors, including increasing the size of the Board of Directors if necessary. Notwithstanding anything in this Exchange Agreement to the contrary, the board designation rights granted under this Section 1.9(b) are expressly conditioned upon, and shall at all times comply with, Nasdaq Listing Rule 5640 (Voting Rights) and any successor rule, policy, or interpretation thereof promulgated by The Nasdaq Stock Market LLC or the Securities and Exchange Commission (collectively, the “Voting Rights Rules”). The Company shall not be obligated to honor any designation, and no Holder shall have the right to elect or appoint a Director or Directors, to the extent such designation, election, or appointment would cause the Company to violate the Voting Rights Rules or result in the disparagement or restriction of the voting rights of existing holders of Common Stock in violation of applicable exchange rules.
(c) Chief Financial Officer. Following the Closing and during the Governance Rights Period, the Company shall maintain a Chief Financial Officer reasonably acceptable to the Lead Investors and the Board of Directors, with the Board of Directors retaining final authority. If no such Chief Financial Officer is in place as of the Closing, the Company shall use commercially reasonable efforts to appoint a Chief Financial Officer within thirty (30) days following the Closing (or such later date as may be mutually agreed by the Company and the Lead Investors). The Company shall not terminate, replace or materially modify the duties of such Chief Financial Officer without prior written notice to and consultation with the Lead Investors; provided, however, that the Board of Directors, which may consult with the Company’s Chief Executive Officer, shall retain final authority with respect to any such termination, replacement or material modification of the duties of such Chief Financial Officer.
(d) Financial Monitor. Effective as of the Closing and during the Governance Rights Period, the Lead Investors shall have the right to appoint one financial monitor (the “Monitor”) mutually agreed to by the Company. The Monitor shall be entitled to receive monthly financial reporting packages, budgets, forecasts, liquidity reports and other financial information customarily provided to senior management and the Board of Directors. The engagement of the Monitor shall be terminable by the Corporation for cause.
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(e) Management Meetings. During the Governance Rights Period, the Company shall cause its Chief Executive Officer and Chief Financial Officer to meet with the Monitor on a monthly basis (or such other frequency as may be agreed by the Monitor and the Company) to review the Company’s financial condition, operating performance, liquidity, budget-to-actual results, forecasts, capital resources and other financial matters reasonably requested by the Monitor.
(f) Access Rights. During the Governance Rights Period, the Monitor shall be afforded reasonable access during normal business hours and upon reasonable notice to the Company’s books and records and shall be permitted to communicate directly with the Company’s Chief Executive Officer, Chief Financial Officer, outside accountants and legal counsel regarding the Company’s financial condition and operational performance, subject to customary confidentiality obligations and preservation of attorney-client privilege.
(g) Cooperation. During the Governance Rights Period, the Company shall use its reasonable best efforts to consult with and give good faith consideration to the Monitor’s reasonable requests, recommendations and suggestions; provided, however, that nothing herein shall require the Company to take any action that would violate applicable law or the fiduciary duties of the Board of Directors.
(h) Protection of Monitor Rights. During the Governance Rights Period, the Company shall not remove, replace, terminate, materially limit the authority of, or materially modify the engagement of the Monitor without the prior written consent of the Lead Investors.
ARTICLE II
Representations, Warranties and Covenants of the Holder
The Holder hereby makes the following representations, warranties and covenants, each of which is true and correct on the date hereof, will be true and correct as of the Effective Date and as of the issuance of the Exchange Notes, and will survive the consummation of the Exchange Transactions.
Section 2.1 Existence and Power.
(a) The Holder has full legal capacity, authority and power to execute and deliver this Agreement, perform the Holder’s obligations hereunder and consummate the transactions contemplated hereby.
(b) The execution and delivery of this Agreement by the Holder and the consummation by the Holder of the transactions contemplated hereby do not and will not constitute or result in a breach, violation or default under any contract, agreement, instrument, judgment, order, decree, statute, law, rule or regulation applicable to the Holder, or cause the acceleration or termination of any obligation or right of the Holder, except for such breaches, violations or defaults that would not, individually or in the aggregate, reasonably be expected to have a material adverse effect on the Holder’s ability to perform its obligations under this Agreement.
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Section 2.2 Valid and Enforceable Agreement; Authorization. This Agreement has been duly executed and delivered by the Holder and constitutes a legal, valid and binding obligation of the Holder, enforceable against the Holder in accordance with its terms, except that such enforcement may be subject to (a) bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting or relating to enforcement of creditors’ rights generally, and (b) general principles of equity.
Section 2.3 Title to Existing Securities; Transferability. The Holder is the beneficial owner of and has good and valid title to the Existing Securities identified on Exhibit A attached hereto and will deliver such Existing Securities to the Company free and clear of any mortgage, lien, pledge, charge, security interest, encumbrance, title retention agreement, option, equity interest or other adverse claim, or other restriction on transfer (except for restrictions or limitations on transfer arising under applicable federal or state securities laws) (collectively, “Claims”). Good and valid title to such Existing Securities, free and clear of all Claims, shall pass to the Company upon consummation of the Exchange Transactions.
Section 2.4 Investment Decision. The Holder is a sophisticated investor experienced in matters relating to the purchase, sale and valuation of securities and is an “accredited investor” within the meaning of Rule 501 of Regulation D under the Securities Act of 1933, as amended (the “Securities Act”). The Holder has had the opportunity to consult with its financial, accounting, tax and legal advisors in order to evaluate the risks involved in the Exchange Transactions, including the exchange of the Existing Securities for the Exchange Notes and the subsequent conversion of Exchange Notes into Preferred Stock pursuant hereto and to make an informed investment decision with respect to such exchange. The Holder has had such opportunity as it has deemed adequate to obtain from representatives of the Company such information as is necessary to permit the Holder to evaluate the merits and risks of the Exchange Transactions. The Holder understands that the Exchange Notes will be issued in connection with the Company’s Nasdaq Uplist and that such Exchange Notes will be governed by the applicable Transaction Documents. The Holder has reached its own independent decision to enter into this Agreement and to acquire the Exchange Notes.
Section 2.5 3(a)(9) Exemption. Neither the Holder nor anyone acting on behalf of the Holder has received any commission or other remuneration directly or indirectly in connection with or in order to solicit or facilitate the Exchange Transactions. The Holder acknowledges that the Parties intend that the Exchange Transactions, including both (i) the Note Exchange pursuant to which Existing Securities are exchanged for Exchange Notes and (ii) the Preferred Stock Exchange pursuant to which the Exchange Notes are automatically exchanged for Preferred Stock, constitute a single integrated exchange transaction and qualify for the exemption provided by Section 3(a)(9) of the Securities Act.
Section 2.6 No Legal, Tax or Investment Advice. The Holder understands that nothing in this Agreement or any other materials presented to the Holder in connection with the Exchange Transactions constitutes legal, tax or investment advice and represents and warrants to the Company that it has consulted such legal, tax and investment advisors as it, in its sole discretion, has deemed necessary or appropriate in connection with the Exchange Transactions.
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Section 2.7 Non-Affiliate Status. The Holder is not an “affiliate” of the Company (as that term is defined in Rule 144(a)(1) of the Securities Act) and not acting in concert with any person for the purpose of avoiding the requirements of Section 3(a)(9) of the Securities Act. The Holder is acquiring the Exchange Notes for its own account and not with a view toward any distribution thereof in violation of applicable securities laws.
ARTICLE III
Representations, Warranties and Covenants of the Company
The Company hereby makes the following representations, warranties and covenants, each of which is true and correct on the date hereof, will be true and correct as of the Effective Date, and will survive the consummation of the Exchange Transactions.
Section 3.1 Existence and Power.
(a) The Company is a corporation duly incorporated, validly existing and in good standing under the laws of the State of Nevada and has the requisite power, authority and capacity to execute and deliver this Agreement, to perform its obligations hereunder, and to consummate the transactions contemplated hereby.
(b) The execution of this Agreement by the Company and the consummation by the Company of the transactions contemplated hereby do not and will not constitute or result in a breach, violation or default under (i) any note, bond, mortgage, deed, indenture, lien, instrument, contract, agreement, lease or license, whether written or oral, express or implied, including the Existing Securities, the Securities Purchase Agreement, the Exchange Agreements and the other Transaction Documents, or (ii) with the Company’s certificate of incorporation, as amended, bylaws, as amended, or other constitutional documents, or (iii) any statute, law, ordinance, decree, order, injunction, rule, directive, judgment or regulation of any court, administrative or regulatory body, governmental authority, arbitrator, mediator or similar body on the part of the Company or on the part of any other party thereto or cause the acceleration or termination of any obligation or right of the Company, except in the case of clauses (i) and (iii) for such breaches, violations or defaults which would not, individually or in the aggregate, reasonably be expected to have a material adverse effect on the ability of the Company to perform its obligations under this Agreement.
Section 3.2 Valid and Enforceable Agreement; Authorization. This Agreement has been duly executed and delivered by the Company and constitutes a legal, valid and binding obligation of the Company, enforceable against the Company in accordance with its terms, except that such enforcement may be subject to (a) bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting or relating to enforcement of creditors’ rights generally, and (b) general principles of equity.
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Section 3.3 Valid Issuance of Preferred Stock; Securities Act Compliance. The Exchange Notes and the Preferred Stock issuable upon exchange of the Exchange Notes have been duly authorized and reserved for issuance by all necessary corporate action of the Company and, when issued and delivered in accordance with the terms of this Agreement and the applicable Certificate of Designation, will be validly issued, fully paid and non-assessable securities of the Company having, in the case of the Exchange Notes, an aggregate principal amount equal to the Exchange Value divided by ninety percent (90%) (reflecting the Original Issue Discount) and, in the case of the Preferred Stock, an aggregate stated value equal to such principal amount. The Company has reserved, or will reserve prior to the Nasdaq Uplist, a sufficient number of authorized shares of Common Stock to permit the full conversion of the Preferred Stock in accordance with their terms. The issuance of the Preferred Stock pursuant to this Agreement shall be subject to the Nasdaq Uplist.
Section 3.4 3(a)(9) Exemption. Assuming the accuracy of the representations and warranties of the Holder set forth in Article II, the Exchange Transactions contemplated by this Agreement, including the issuance of Exchange Notes in exchange for the Existing Securities and the issuance of Preferred Stock upon the automatic exchange of such Exchange Notes, are intended by the Parties to qualify for the exemption from registration provided by Section 3(a)(9) of the Securities Act. The Company has not paid and will not pay any commission, fee or other remuneration, directly or indirectly, for soliciting the Exchange Transactions contemplated by this Agreement. The Parties intend that the Exchange Transactions qualify for the exemption from registration provided by Section 3(a)(9) of the Securities Act.
Section 3.5 [Reserved].
Section 3.6 No Material Events. Since the date of the Company’s most recently filed periodic report under the Exchange Act, there has not occurred any event, circumstance or development that has had or would reasonably be expected to have a material adverse effect on the Company’s ability to perform its obligations under this Agreement. The Company has not received any written notice from Nasdaq indicating that the Company is ineligible to pursue the Nasdaq Uplist.
Section 3.7 No Broker. The Company has not engaged any broker, finder or intermediary and has not incurred any liability for any brokerage or finder’s fees or commissions in connection with the transactions contemplated hereby. The Company has not paid and will not pay any commission, finder’s fee or other remuneration, directly or indirectly, in connection with the Exchange Transactions that would impair the availability of the exemption provided by Section 3(a)(9) of the Securities Act.
ARTICLE IV
Miscellaneous Provisions
Section 4.1 Notice. All notices, requests, demands, claims and other communications hereunder shall be in writing and shall be deemed duly given if delivered personally, sent by nationally recognized overnight courier, or sent by electronic mail (with confirmation of transmission), to the applicable party at the address or email address set forth beneath such party’s signature on this Agreement (or at such other address as shall be specified by such party by like notice).
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Section 4.2 Entire Agreement. This Agreement embodies the entire agreement and understanding of the parties hereto with respect to the subject matter hereof and supersedes all prior and contemporaneous oral or written agreements, representations, warranties, contracts, correspondence, conversations, memoranda and understandings between or among the parties or any of their agents, representatives or affiliates relative to such subject matter, including, without limitation, any term sheets, emails or draft documents. Exhibits A is incorporated herein by reference and made a part of this Agreement. This Agreement, together with the Securities Purchase Agreement, the Registration Rights Agreement, the applicable Certificate of Designation governing the Preferred Stock to be issued upon conversion of the Exchange Notes and the other Transaction Documents, constitutes the entire agreement of the parties with respect to the Exchange Transactions.
Section 4.3 Assignment; Binding Agreement. This Agreement and the various rights and obligations arising hereunder shall inure to the benefit of and be binding upon the parties hereto and their respective successors and assigns. The Holder may assign this Agreement together with the Exchange Notes issued hereunder in accordance with applicable securities laws and the Transaction Documents.
Section 4.4 Counterparts; Electronic Signatures. This Agreement may be executed in counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. Signatures delivered by electronic transmission (including PDF or electronic signature platforms) shall be deemed effective for all purposes.
Section 4.5 Cumulative Remedies. Except as otherwise provided herein, all rights and remedies of the parties under this Agreement are cumulative and without prejudice to any other rights or remedies available at law.
Section 4.6 Governing Law; Jurisdiction. This Agreement shall in all respects be construed in accordance with and governed by the substantive laws of the State of Nevada, without reference to its choice of law rules. Any legal action or proceeding arising under or relating to this Agreement shall be brought exclusively in the state or federal courts located in the State of Nevada, and the Parties hereby irrevocably submit to the jurisdiction of such courts.
Section 4.7 Waiver of Jury Trial. EACH PARTY HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT.
Section 4.8 No Third Party Beneficiaries or Other Rights. Nothing herein shall grant to or create in any person not a party hereto, or any such person’s dependents or heirs, any right to any benefits hereunder, and no such party shall be entitled to sue any party to this Agreement with respect thereto.
Section 4.9 Amendment. This Agreement may not be changed, amended or augmented (other than in accordance with its terms), in whole or in part, except by a writing executed by the parties hereto..
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Section 4.10 Termination. This Agreement may be terminated at any time prior to the Closing:
(a) by the mutual written consent of the Company and the Holder;
(b) automatically upon the termination of the Securities Purchase Agreement in accordance with its terms;
(c) by either Party if the closing of the Exchange Transactions has not occurred on or before a date that is 30 days following the Effective Date;
(d) [Reserved];
(e) by either Party if any shareholder approval required pursuant to Nasdaq Listing Rule 5635 or any other applicable Nasdaq rule in connection with the transactions contemplated by this Agreement and the other Transaction Documents is not obtained;
(f) by either Party upon written notice if the other Party has committed fraud, willful misconduct or a material intentional misrepresentation in connection with this Agreement or the other Transaction Documents; or
(g) by the Holder upon written notice if the Company becomes insolvent, admits in writing its inability to pay its debts as they become due, makes a general assignment for the benefit of creditors, commences a voluntary bankruptcy proceeding or has an involuntary bankruptcy proceeding commenced against it that is not dismissed within sixty (60) days.
Section 4.11 Waiver; Consent. No waiver of any of the provisions or conditions of this Agreement or any of the rights of a party hereto shall be effective or binding unless such waiver shall be in writing and signed by the party claimed to have given or consented thereto. Except to the extent otherwise agreed in writing, no waiver of any term, condition or other provision of this Agreement, or any breach thereof shall be deemed to be a waiver of any other term, condition or provision or any breach thereof, or any subsequent breach of the same term, condition or provision, nor shall any forbearance to seek a remedy for any noncompliance or breach be deemed to be a waiver of a party’s rights and remedies with respect to such noncompliance or breach.
Section 4.12 No Broker. Each party represents to the other that it has not engaged any third party as broker or finder or incurred or become obligated to pay any commission or other remuneration in connection with the transactions contemplated by this Agreement.
Section 4.13 Further Assurances. Holder and the Company shall execute and deliver such additional documents and take such further actions as may be reasonably necessary to effectuate the Exchange Transactions contemplated hereby. Without limiting the foregoing, each Party shall execute such additional documents and take such additional actions as may be reasonably necessary to effect (i) the Note Exchange, (ii) the issuance of the Exchange Notes, (iii) the Preferred Stock Exchange, (iv) the issuance of Preferred Stock, and (v) the consummation of the Nasdaq Uplist contemplated by the Transaction Documents.
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Section 4.14 Costs and Expenses. Holder and the Company shall each pay their own respective costs and expenses incurred in connection with the negotiation, preparation, execution and performance of this Agreement, including, but not limited to, attorneys’ fees.
Section 4.15 Headings. The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof.
Section 4.16 Severability. If any provision of this Agreement is prohibited by law or otherwise determined to be invalid or unenforceable by a court of competent jurisdiction, the provision that would otherwise be prohibited, invalid or unenforceable shall be deemed amended to apply to the broadest extent that it would be valid and enforceable, and the invalidity or unenforceability of such provision shall not affect the validity of the remaining provisions of this Agreement so long as this Agreement as so modified continues to express, without material change, the original intentions of the parties as to the subject matter hereof and the prohibited nature, invalidity or unenforceability of the provision(s) in question does not substantially impair the respective expectations or reciprocal obligations of the parties or the practical realization of the benefits that would otherwise be conferred upon the parties. The parties will endeavor in good faith negotiations to replace the prohibited, invalid or unenforceable provision(s) with a valid provision(s), the effect of which comes as close as possible to that of the prohibited, invalid or unenforceable provision(s).
Section 4.17 Effect of Exchange Transactions. Upon the Exchange Transactions:
(b) all rights and obligations under the exchanged Existing Securities shall terminate, except for (i) accrued but unpaid obligations expressly included in the Exchange Value, (ii) indemnification obligations that survive by their terms, (iii) confidentiality obligations that survive by their terms, (iv) rights arising from any breach occurring prior to the Exchange Transactions, (v) governance rights expressly preserved pursuant to Section 1.9 and Section 4.21, and (vi) any anti-dilution, conversion price adjustment or other economic protections expressly stated in the Transaction Documents to survive the Note Exchange or the Preferred Stock Exchange;
(c) following the Note Exchange and until the Nasdaq Uplist, the rights of the Holder shall be governed by the Exchange Notes and the applicable Transaction Documents; and
(d) upon the Nasdaq Uplist and Preferred Stock Exchange, the Exchange Notes shall be cancelled and thereafter the rights of the Holder shall be governed by the Preferred Stock, the Certificate of Designation, the Registration Rights Agreement, the Leak-Out Agreement..
Section 4.18 Nasdaq Uplist. The parties acknowledge that this Exchange Agreement is being entered into as part of the Company’s Nasdaq Uplist. The Note Exchange, the issuance of the Exchange Notes, the Preferred Stock Exchange and the issuance of the Preferred Stock contemplated hereby are intended to occur in accordance with the Transaction Documents.
Section 4.19 Section 3(a)(9) Intent. The parties intend that the Exchange Transactions qualify for the exemption from registration provided by Section 3(a)(9) of the Securities Act and agree to cooperate in good faith to preserve the availability of such exemption.
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Section 4.20 Legend Removal. Any Notes, Preferred Stock, Common Stock or other securities issued pursuant to this Agreement shall be entitled to the same legend removal rights set forth in Section 4.1(c) of the Securities Purchase Agreement. The Company agrees that any securities issued pursuant to this Agreement shall be issued without restrictive legends, or any existing restrictive legends shall be removed, (i) while a resale registration statement covering the resale of such security is effective under the Securities Act, (ii) if such securities are eligible to be sold, assigned, or transferred pursuant to Rule 144, when available (provided that the Holder provides the Company with reasonable assurances that such securities are eligible for sale, assignment or transfer under Rule 144 which shall not include an opinion of the Holder’s counsel), or (iii) if such legend is not required under applicable requirements of the Securities Act (including judicial interpretations and pronouncements issued by the staff of the SEC), only upon the request of the Holder of such securities. The Company shall cooperate with the Holder and the Transfer Agent and shall promptly deliver any instructions, opinions or other documentation reasonably necessary to facilitate such legend removal. The Company shall bear all costs associated with such legend removal process.
Section 4.21 Governance Rights. The governance rights set forth in Section 1.9, including board designation rights, Chief Financial Officer approval rights, Monitor rights, information rights and related protections, shall survive the conversion of the Exchange Notes into Preferred Stock and shall not be affected by any cancellation, satisfaction or extinguishment of the Exchange Notes contemplated by this Agreement.
[Signature Page Follows]
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IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to be executed as of the date first above written.
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ONAR HOLDING CORPORATION | |||
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| Name: | Claude Zdanow | |
| Title: | Chief Executive Officer | ||
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[Signature Page to Exchange Agreement]
EXHIBIT A
| Holder | Instrument | Principal | Accrued Interest | Total Balance | 110% | Exchange Value | Exchange Note Principal Amount | Preferred Stock Issuable Upon Preferred Stock Exchange |
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EXHIBIT B
Certificate of Designation
EXHIBIT 99.1
FOR IMMEDIATE RELEASE
ONAR Announces Initial Closing of $15 Million Financing at a $25 Million Pre-Money Valuation to Fund the Largest Acquisition in Company History
Implied post-money valuation of approximately $40 million upon full funding and conversion; an additional senior secured facility of up to $5 million, also convertible into preferred equity on the same valuation basis, brings total new financing capacity to up to $20 million; approximately $6.5 million of existing notes exchanged into the financing, aligning the Company’s lenders with its previously announced listing path
Miami, FL, September 29, 2026 (GLOBE NEWSWIRE) -- ONAR Holding Corporation (OTC PINK: ONAR) (“ONAR” or the “Company”), an AI-powered marketing platform, today announced that it has completed the initial closing of its previously announced $15 million financing with a syndicate of institutional investors. The financing will potentially convert into preferred equity at a fixed price based on a $25 million pre-money valuation of the Company, implying a post-money valuation of approximately $40 million upon conversion, and conversion occurs only upon the completion of a Nasdaq listing. In connection with the transactions, the Company also entered into a senior secured facility of up to $5 million, which is likewise convertible into preferred equity on the same valuation basis, bringing the Company’s total new financing capacity to up to $20 million. The proceeds are intended to fund the cash consideration for the Company’s previously announced acquisition of a leading U.S. affiliate marketing agency, the largest acquisition in the Company’s history, together with working capital for the combined business.
As part of the financing, holders of approximately $6.5 million of the Company’s existing notes exchanged those obligations into the new financing, retiring the exchanged notes and the associated warrants. This advances the third priority the Company set out in its July letter to stockholders, converting a portion of outstanding debt into securities that align its long-term lenders with the Company and its stockholders.
The valuation and structure carry a simple message. The investors funding this acquisition priced the Company at $25 million before their money went in, and they receive preferred equity if the Company completes the listing it told stockholders it would pursue. Every instrument in the structure, the notes, the exchange notes, and the senior facility, is convertible on the basis of that same $25 million pre-money valuation.
The complete terms of the financing, including the notes, the exchange agreements, and the related agreements, are set forth in the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on September 29, 2026.
“Getting a deal like this financed is not the story. Getting it financed at a $25 million valuation, by institutions whose preferred equity arrives when we complete our listing, is the story,” said Claude Zdanow, Chief Executive Officer of ONAR. “Our lenders looked at the plan we published in July and exchanged six and a half million dollars of old paper into it. New investors funded the rest. Everyone at the table now gets paid for the same outcome our stockholders want, and that alignment was the whole design.”
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About ONAR Holding Corporation
ONAR Holding Corporation (OTC PINK: ONAR) is an AI-powered marketing platform. ONAR owns and operates a group of specialist marketing agencies serving middle-market and growth-stage brands across performance marketing, creative, and commerce. Its technology division, ONAR Labs, develops and houses the Company’s proprietary technology, including ONAR AI, a marketing intelligence platform deployed across the Company’s agencies to improve productivity; Retina AI, a predictive customer intelligence platform; and Cortex, an offline and online sales attribution platform. ONAR continues to expand the platform through disciplined acquisitions, including JUICE and Scale Partner. Learn more at www.onar.com.
No Offer or Solicitation
This press release is for informational purposes only and shall not constitute an offer to sell or the solicitation of an offer to buy any securities. The securities described above were offered and sold in a private placement to accredited investors, have not been registered under the Securities Act of 1933, as amended, or any state securities laws, and may not be offered or sold in the United States absent registration or an applicable exemption from registration requirements.
Forward-Looking Statements
This press release contains statements that the Company believes to be “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, Section 21E of the Securities Exchange Act of 1934, as amended, and the Private Securities Litigation Reform Act of 1995. All statements other than statements of historical fact, including statements regarding the Company’s future financial condition, results of operations, business operations and business prospects, the acquisition and integration of a leading U.S. affiliate marketing agency, the anticipated benefits of the financing, any potential conversion of securities, any potential uplisting, and any other potential acquisitions, financings, and debt restructurings, are forward-looking statements. Words such as “anticipate,” “estimate,” “expect,” “project,” “intend,” “plan,” “predict,” “believe,” and similar words and expressions are intended to identify forward-looking statements. These statements reflect the Company’s current expectations, are not guarantees of future performance, and involve known and unknown risks and uncertainties, including the substantial doubt about the Company’s ability to continue as a going concern described in its SEC filings, the Company’s working capital deficit and increased indebtedness, integration risks, the risk that expected benefits of the acquisition or financing are not realized, the need for additional financing, market conditions, competition, client retention, and regulatory changes, any of which could cause actual results to differ materially. Detailed risk factors are included in the Company’s filings with the SEC, including its Annual Report on Form 10-K and its Quarterly Report on Form 10-Q. These forward-looking statements speak only as of the date hereof. The Company assumes no obligation to update these statements except as required by law.
Media and Investor Contact
ONAR Holding Corporation
Investor Relations
IR@onar.com
(213) 437-3081
www.onar.com
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