TESI 8-K
Titan Environmental Solutions Inc. (TESI)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
CURRENT REPORT
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Item 1.01 Entry into a Material Definitive Agreement.
Series B Preferred Stock Offering
As previously reported, on April 5, 2024, Titan Environmental Solutions Inc. (the “Company”) entered into a Securities Purchase Agreement dated March 29, 2024 (the “SPA”) with an accredited investor, pursuant to which, on such date and at later closings of the transactions contemplated by the SPA (each an “SPA Closing”), such investor and the additional investors who sign the SPA (collectively, the “Purchasers”) agreed or will agree to purchase shares of the Company’s Series B Convertible Preferred Stock (“Series B Preferred Stock”). In addition, in connection with the issuance of the Series B Preferred Stock, the Purchasers will receive five-year warrants (the “Warrants”) to purchase shares of the Company’s common stock, $0.0001 par value per share (“Common Stock”). The Warrants will be exercisable at an exercise price of $0.06 per share of Common Stock, subject to certain adjustments as set forth in the Warrants. The holders may exercise the Warrants on a cashless basis if the shares of Common Stock underlying the Warrants are not then registered under the Securities Act of 1933, as amended (the “Securities Act”), pursuant to an effective registration statement. The obligations of the Company and the Purchasers to consummate the transactions contemplated by the SPA were subject to the satisfaction on or prior to the applicable SPA Closing of customary closing conditions.
On May 30, 2024, the Company consummated an SPA Closing at which 48 Purchasers, each of which was an accredited investor, purchased an aggregate of 427,260 shares of Series B Preferred Stock and received Warrants to purchase an aggregate of 40,126,500 shares of Common Stock for an aggregate purchase price of $4,272,600. In connection with such SPA Closing, the Company issued warrants to purchase an aggregate of 4,012,650 shares of Common Stock (the “PA Warrants”) to Network 1 Financial Securities, Inc. and Alexander Capital, L.P., as placement agents. The PA Warrants are identical to the Warrants, except that they have a term of seven years.
The Company used the proceeds from the SPA Closings to provide capital for the Closing of the MIPA (as defined below) and intends to use any additional proceeds from the SPA Closings for general working capital purposes.
In connection with each SPA Closing, the Company and the Purchasers entered into a Registration Rights Agreement whereby the Company agreed to file a registration statement registering the resale of the shares of Common Stock issuable upon conversion of the Series B Preferred Stock and upon exercise of the Warrants within 20 calendar days of the earlier of (i) the date of the consummation of the listing of the Common Stock on any of the NYSE American, the Nasdaq Capital Market, the Nasdaq Global Market, the Nasdaq Global Select Market, the New York Stock Exchange, the Cboe or their respective successors and (ii) the six-month anniversary of the Registration Rights Agreement (the “Trigger Date”). The Company agreed to use its best efforts to have the registration statement declared “effective” within 60 calendar days from the Trigger Date.
This Current Report on Form 8-K shall not constitute an offer to sell or the solicitation of an offer to buy any securities of the Company, nor shall such securities be offered or sold in the United States absent registration or an applicable exemption from the registration requirements and certificates evidencing such shares contain a legend stating the same.
The information set forth in “Item 5.03 Amendments to Articles of Incorporation or Bylaws; Change in Fiscal Year” in the Current Report on Form 8-K filed by the Company on April 4, 2024, relating to the Series B Preferred Stock is incorporated by reference herein in its entirety. The foregoing description of the Series B Preferred Stock, the Certificate of Designation, the Warrants, the SPA, and the Registration Rights Agreement does not purport to be a complete description of the rights and obligations of the parties thereunder and is qualified in its entirety by reference to the full text of such agreements, copies of which are attached hereto as Exhibits 3.2, 4.1, 10.1, and 10.2 to this Current Report on Form 8-K, respectively.
Amendments to MIPA
As previously reported, on January 12, 2024, the Company, through its wholly-owned subsidiary, Titan Trucking, LLC, a Michigan limited liability company (the “Buyer”), entered into a Membership Interest Purchase Agreement (as amended, the “MIPA”) with Dominic Campo and Sharon Campo (each a “Seller” and collectively, the “Sellers”), and Standard Waste Services, LLC, a Michigan limited liability company (“Standard”), pursuant to which, and subject to the terms, provisions, and conditions set forth therein, at the closing of the transactions contemplated by the MIPA (the “Closing”), the Sellers would sell, transfer, convey, and assign to the Buyer, and the Buyer would purchase, receive, and assume from the Sellers, 100% of the outstanding membership interests of Standard (the “Membership Interests”). In connection with the MIPA, Buyer paid to Sellers a cash deposit in the amount of $652,500 (the “Closing Deposit”) which was not refundable, but would reduce the Cash Consideration (as defined below) at the Closing.
On May 20, 2024, the Buyer, the Sellers and Standard entered into a Second Amendment to Membership Interest Purchase Agreement (the “Second Amendment”), and on May 30, 2024, the Buyer, the Sellers and Standard entered into a Third Amendment to Membership Interest Purchase Agreement (the “Third Amendment,” and together with the Second Amendment, the “Amendments”).
Pursuant to the Amendments, the purchase price payable by the Buyer (the “Purchase Price”) was revised to the following: (a) $10,440,000 in cash (the “Cash Consideration”), less the Closing Deposit and less the amount of the Seller Note (defined below) and the amount of the Short Term Note (defined below); (b) $2,359,898.24 payable in the form of secured promissory note issued by the Buyer to the Sellers (the “Seller Note”); (c) $500,000 payable in the form of a short term promissory note issued by the Buyer to the Sellers (the “Short Term Note”); (d) an amount equal to the aggregate amount paid by Standard for purchases of new trucks and trailers for the period from June 7, 2023 through the date of the Closing in an amount not to exceed $533,000; (e) an amount of shares of the Company’s Series A Preferred Stock, par value $0.0001 per share (the “Series A Preferred Stock”), equal to $2,610,000, to be represented by 522,000 shares of Series A Preferred Stock (the “Investment Shares”); provided, that, at the Closing, the issuance of $300,000 in Investment Shares would be deferred until the indemnification obligations of the Sellers under the MIPA terminates, which shares could be used by the Sellers to satisfy their indemnification obligations under the MIPA; and (f) an additional 90,000 Investment Shares because the Closing did not occur on or prior to February 2, 2024. In addition, the Purchase Price would be reduced by: (i) the amount of indebtedness of Standard as of the date of the Closing, and (ii) the amount of any fees and expenses of Standard or the Sellers related to the negotiation and entry into the MIPA that are not paid prior to the Closing. The Purchase Price is also subject to adjustment post-Closing based on the amount of working capital of Standard at the Closing and other adjustments as described in the MIPA.
In addition, the Amendments eliminated the employment agreement that was anticipated between the Buyer and Dominic Campo, and instead, the Buyer and Mr. Campo agreed to enter into a consulting agreement at the Closing under which Mr. Campo shall provide consulting services for the procurement of new commercial business for Standard, maintaining the customer base of Standard, and identifying and pursuing new acquisitions for the Buyer (the “Consulting Agreement”).
The Amendments also revised the MIPA so that the representations and warranties of the parties, except for customary fundamental representations, will remain in effect for twelve months following the Closing Date.
The above description of the Amendments is a summary only and is qualified in its entirety by the text of the Amendments, which are included as Exhibits 2.2 and 2.3 to this Current Report on Form 8-K and are incorporated herein by reference.
Closing of the MIPA
On May 31, 2024 (the “Closing Date”), the closing of the transactions contemplated by the MIPA occurred. As contemplated by the MIPA:
| ● | On May 20, 2024, the Company filed an Amended and Restated Certificate of Designation of the Preferences of Series A Convertible Preferred Stock (as amended, the “Series A COD”) with the Secretary of State of the State of Nevada, pursuant to which the number of shares designated as Series A Convertible Preferred Stock (“Series A Preferred Stock”) were increased from 630,900 shares to 1,242,900 shares. The rights related to the Series A Preferred Stock remain virtually identical to the rights related to the Company’s Common Stock, except that each share of Series A Preferred Stock is convertible into 100 shares of Common Stock and the shares of Series A Preferred Stock vote together with the Common Stock on all matters submitted for a vote to the Company’s common shareholders on an as-converted basis. | |
| ● | On the Closing Date, the Buyer paid $4,000,000 in cash to the Sellers as the Cash Consideration, including $533,000 in cash equal to the aggregate amount paid by Standard for purchases of new trucks and trailers for the period from June 7, 2023 through the Closing Date. | |
| ● | On the Closing Date, the Company issued 552,000 shares of Series A Preferred Stock to the Sellers as a portion of the Purchase Price, with the remaining 60,000 shares of Series A Preferred Stock to be held in escrow for the benefit of the Buyer to satisfy indemnification obligations of the Sellers. |
| ● | On the Closing Date, the Buyer issued the Seller Note to the Sellers in the principal amount of $2,359,898.24. The Seller Note provides for a maturity date of May 15, 2027, with 35 monthly installments of accrued interest each on the 15th day of every calendar month, starting June 15, 2024, and a final balloon payment of all outstanding principal and accrued interest on May 15, 2027. The Seller Note bears an interest rate of (i) 13.75% per annum (based on a 365-day year) (the “Initial Rate”) for the first year, (ii) the Initial Rate plus one percent (1.0%) per annum for the second year; and (iii) the Initial Rate plus two percent (2.0%) per annum for the third year, in each case, compounded annually from the date of issuance. The Seller Note may be increased or decreased, as applicable, upon final determination of the Closing Date Purchase Price (as defined in the MIPA), as detailed in the MIPA, and/or determination that the Sellers are obligated to Buyer pursuant to the indemnification provisions of the MIPA. The Seller Note may be prepaid, in full or in part, any time without prepayment penalty, premium, or other fee. The Buyer’s obligations under the Seller Note are secured by a security interest in all of the assets of Standard. | |
| ● | On the Closing Date, the Buyer issued the Short Term Note to the Sellers in the principal amount of $500,000. The Short Term Note provides for a maturity date of July 14, 2024. The Short Term Note accrues interest at a rate of 13.75% per annum up to and including the maturity date, and accrues interest at a rate of 18% per annum after the maturity date. The Short Term Note may be prepaid, in full or in part, any time without prepayment penalty, premium, or other fee. The Buyer’s obligations under the Short Term Note are secured by a security interest in all of the assets of Standard. | |
| ● | On the Closing Date, Jeffrey Rizzo, the Company’s chief operating officer, and Charles Rizzo, a consultant to the Company, personally guaranteed the payment of the Seller Note and the Short Term Note (the “Personal Guaranty”). In consideration for Charles Rizzo entering into the Personal Guaranty, the Company entered into a guaranty fee agreement with Charles Rizzo (the “Guaranty Fee Agreement”), pursuant to which the Company agreed to issue to Charles Rizzo, or his assignee, an aggregate of 21,500,000 shares of Common Stock (the “Guaranty Fee Shares”). | |
| ● | On the Closing Date, the Buyer and Dominic Campo entered into the Consulting Agreement under which Mr. Campo will provide services for new commercial business procurement, maintaining customer base of the business, and identifying and pursuing new acquisitions for the Buyer. The Consulting Agreement has a term of five years, and Standard may only terminate the Consulting Agreement early for Cause (as defined in the Consulting Agreement). As compensation under the Consulting Agreement, Mr. Campo is entitled to receive a monthly retainer payment in the amount of $23,333.33 (or $280,000 annually). Mr. Campo will also be entitled to be paid an annual bonus and/or receive equity of the Company, each at the discretion of the Company. During the term of the Consulting Agreement and for 12 months thereafter, Mr. Campo will be restricted from engaging in, assisting others in, or owning an interest in any company that engages in, the waste management business. | |
| ● | On the Closing Date, the Sellers sold, contributed, assigned, and conveyed to the Buyer 100% of the outstanding membership interests of Standard. |
Standard was founded in 2017 to provide contracted commercial roll-off and front-load waste services, including dumpster compactor rentals, to customers principally in the Southeast Michigan market. Standard currently operates approximately 20 waste collection vehicles servicing over 750 commercial and industrial customers. These customers, combined with the Company’s existing customer base, represented approximately $17 million of revenue in 2023.
The foregoing description of the MIPA, the Series A COD, the Seller Note, the Short Term Note, the Guaranty Fee Agreement, and the Consulting Agreement does not purport to be a complete description of the rights and obligations of the parties thereunder and is qualified in its entirety by reference to the full text of such agreements, copies of which are attached hereto as Exhibits 2.1, 3.1, 10.3, 10.4, 10.5, and 10.6 to this Current Report on Form 8-K, respectively.
Item 2.01. Completion of Acquisition or Disposition of Assets.
The information set forth in the “Item 1.01 Entry into a Material Definitive Agreement” above is incorporated into this Item 2.01 by reference. The Closing of the MIPA was completed on May 31, 2024.
Item 3.02. Unregistered Sales of Equity Securities.
The information set forth in “Item 1.01 Entry into a Material Definitive Agreement” relating to the issuance of the shares of Series A Preferred Stock pursuant to the MIPA, the Guaranty Fee Shares pursuant to the Guaranty Fee Agreement, and the shares of Series B Preferred Stock, the Warrants, and the PA Warrants pursuant to the SPA is incorporated by reference herein in its entirety. The Company issued the Series A Preferred Stock, the Guaranty Fee Shares, the Series B Preferred Stock, the Warrants, and the PA Warrants in reliance upon the exemption from registration provided by Section 4(a)(2) of the Securities Act and/or Rule 506(b) of Regulation D promulgated thereunder. Charles Rizzo and each of the Purchasers and the Sellers are “accredited investors” as such term is defined in Regulation D promulgated under the Securities Act.
Item 5.03. Amendments to Articles of Incorporation or Bylaws; Change in Fiscal Year.
The information set forth in “Item 1.01 Entry into a Material Definitive Agreement” above relating to the Series A COD is incorporated by reference herein in its entirety.
Forward-Looking Statements
The information included herein and in any oral statements made in connection herewith include “forward-looking statements” within the meaning of Section 27A of the Securities Act and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). All statements, other than statements of present or historical fact included herein, regarding the transactions described herein (the “Transactions”), the benefits of the Transactions, the Company’s future financial performance following the Transactions, as well as the Company’s strategy, future operations, financial position, estimated revenues and losses, projected costs, prospects, plans and objectives of management are forward-looking statements. When used herein, including any oral statements made in connection herewith, the words “could,” “should,” “will,” “may,” “believe,” “anticipate,” “intend,” “estimate,” “expect,” “project,” the negative of such terms and other similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain such identifying words. These forward-looking statements are based on the Company’s current expectations and assumptions about future events and are based on currently available information as to the outcome and timing of future events. Except as otherwise required by applicable law, the Company disclaims any duty to update any forward-looking statements, all of which are expressly qualified by the statements in this section, to reflect events or circumstances after the date hereof. The Company cautions you that these forward-looking statements are subject to risks and uncertainties, most of which are difficult to predict and many of which are beyond the control of the Company. These risks include, but are not limited to, general economic, financial, legal, political and business conditions and changes in domestic and foreign markets; the risks related to the growth of the Company’s business and the timing of expected business milestones; and the effects of competition on the Company’s future business. Should one or more of the risks or uncertainties described herein and in any oral statements made in connection therewith occur, or should underlying assumptions prove incorrect, actual results and plans could differ materially from those expressed in any forward-looking statements. There may be additional risks that the Company neither presently knows nor currently believes are material that could cause actual results to differ from those contained in the forward-looking statements. Additional information concerning these and other factors that may impact the Company’s expectations can be found in the Company’s periodic filings with the Securities and Exchange Commission (“SEC”), including the Company’s Annual Report on Form 10-K filed with the SEC on April 15, 2024 and any subsequently filed Quarterly Report on Form 10-Q. The Company’s SEC filings are available publicly on the SEC’s website at www.sec.gov.
Item 8.01 Other Events.
On June 3, 2024, the Company issued a press release announcing the Closing of the transactions contemplated by the MIPA. A copy of the press release is filed as Exhibit 99.1 to this Current Report on Form 8-K and is incorporated herein by reference.
Item 9.01 Financial Statements and Exhibits.
(a) Financial statements of businesses acquired.
The financial statements required by Item 9.01 with respect to the acquisition described in Item 2.01 are not being filed herewith but will be filed by amendment to this Current Report on Form 8-K no later than 71 calendar days after the date on which this Current Report on Form 8-K was required to be filed pursuant to Item 2.01.
(b) Pro forma financial information.
The pro forma financial information required by Item 9.01 with respect to the acquisition described in Item 2.01 above is not being furnished herewith but will be furnished by amendment to this Current Report on Form 8-K no later than 71 calendar days after the date on which this Current Report on Form 8-K was required to be filed pursuant to Item 2.01.
(d) Exhibits.
* Schedules, exhibits and similar supporting attachments to this exhibit are omitted pursuant to Item 601(b)(2) of Regulation S-K. In addition, certain portions of this exhibit have been omitted pursuant to Regulation S-K Item 601(a)(6) promulgated under the Exchange Act. The Company agrees to furnish a supplemental copy of any omitted schedule or similar attachment to the Securities and Exchange Commission upon request.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| Date: June 4, 2024 | TITAN ENVIRONMENTAL SOLUTIONS INC. | |
| By: | /s/ Glen Miller | |
| Glen Miller | ||
| Chief Executive Officer | ||
Exhibit 2.2
EXECUTION VERSION
SECOND AMENDMENT TO MEMBERSHIP INTEREST PURCHASE AGREEMENT
BY AND AMONG
DOMINIC CAMPO AND SHARON CAMPO, AS THE MEMBERS,
STANDARD WASTE SERVICES, LLC, AS THE COMPANY
AND
TITAN TRUCKING, LLC, AS BUYER
DATED MAY 20, 2024
SECOND AMENDMENT TO MEMBERSHIP INTEREST PURCHASE AGREEMENT
THIS SECOND AMENDMENT TO MEMBERSHIP INTEREST PURCHASE AGREEMENT (the “Amendment”), dated as of May 20, 2024, is entered into by and among DOMINIC CAMPO and SHARON CAMPO (each a “Member” and “Seller” and collectively, the “Members” and “Sellers”), STANDARD WASTE SERVICES, LLC, a Michigan limited liability company (the “Company”), and TITAN TRUCKING, LLC, a Michigan limited liability company (“Buyer”).
RECITALS
WHEREAS, the Sellers and Buyer entered into a certain Membership Interest Purchase Agreement dated January 12, 2024, as amended by an Amendment to Membership Interest Purchase Agreement, dated February 21, 2024 (collectively, the “Agreement”) for the sale and purchase all of the issued and outstanding membership interests of the Company (the “Membership Interests”);
WHEREAS, the Sellers and Buyer desire to amend the Agreement as provided in this Amendment.
NOW THEREFORE, in consideration of the foregoing and the respective representations, warranties, 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:
| 1. | The capitalized terms in this Amendment not defined herein shall be defined as provided in the Agreement. The following defined terms are amended or added as follows: |
“Adjusted Purchase Price” means: (a) the Cash Consideration; (B) plus the Investment Shares; (c) plus the CapEx Amount, as determined pursuant to Section 2.4; (D) less the sum of (i) the amount of the Indebtedness, (ii) the amount of the Company Expenses, (iii) the amount of the Closing Deposit, and (iv) the Note Amount, in each case, as determined pursuant to Section 2.4; and (E) either plus the Working Capital Overage, if any, or less the Working Capital Underage, if any, in each case, as determined pursuant to Section 2.4.
“Cash Consideration” means $10,440,000.
“Consulting Agreement” means that certain agreement, attached hereto as Exhibit B, by and between Buyer and Dominic Campo, under which Dominic Campo shall provide services for new commercial business procurement, maintaining customer base of the Business, and identifying and pursuing new acquisitions for the Company. The agreement will include health insurance benefits and participation in TESI’s employee stock pool as determined in the sole discretion of TESI.
“Extension Consideration” means the increase in Purchase Price by $450,000 in the form of Investment Shares.
“Indemnification Amount” means $300,000 worth of Investment Shares.
“Investment Shares” means $2,610,000 worth of TESI Preferred Stock to be represented by 522,000 shares of the TESI Preferred Stock, and 90,000 shares of the TESI Preferred Stock for the Extension Consideration. The number of shares of the TESI Preferred Stock shall be subject to adjustment for stock splits, stock combinations, conversion ratios and the like. The parties agree that the additional Preferred Stock shall satisfy the Extension Consideration referenced in the Agreement. For avoidance of doubt, 522,000 shares of TESI Preferred Stock shall convert into 52,200,000 shares of TESI Common Stock and 90,000 shares of TESI Preferred Stock shall convert into 9,000,000 shares of TESI Common Stock.
“Note Amount” means $2,359,898.24, the principal amount of the Promissory Note.
“Preliminary Purchase Price” means: (a) the Cash Consideration; (b) plus the CapEx Amount, as estimated by the Seller Parties pursuant to Section 2.2(b); (c) less the sum of (i) the amount of the Indebtedness, (ii) the amount of the Company Expenses, (iii) the amount of the Closing Deposit, and (iv) the Note Amount, in each case, as estimated by the Seller Parties pursuant to Section 2.2(b); and (d) either plus the Working Capital Overage, if any, or less the Working Capital Underage, if any, in each case, as estimated by the Seller Parties pursuant to Section 2.2(b).
“Promissory Note” means that certain promissory note to be issued at the Closing from Buyer to Sellers.
“Security Agreement” means that certain security agreement from Buyer to Sellers securing Buyer’s obligations to Sellers under the Promissory Note.
“TESI Preferred Stock” means preferred stock of TESI designated as Series “A” Convertible Preferred Stock which shall be convertible into shares of TESI common stock on a 100 to 1 basis and have one vote per share.
The definitions of “Employment Agreement” “Escrow Agent” and “Escrow Agreement” are hereby deleted. In addition, the definition of “Indemnification Escrow Amount” is replaced each time it occurs with the definition of “Indemnification Amount” above.
| 2. | Section 2.2(a) is amended and restated in its entirety as follows: |
| 2.2 | Purchase Price. |
(a) The purchase price payable by Buyer to Sellers for the Membership Interests (the “Purchase Price”) shall be the Investment Shares (including the Investment Shares representing the Extension Consideration) and an amount equal to:
(i) the Cash Consideration;
(ii) plus the CapEx Amount;
(iii) less the sum of:
(A) the amount of the Indebtedness (with long term debt to be such amounts as confirmed with the applicable lenders or creditors as provided in Section 3.2(i) below); and
(B) the amount of the Company Expenses; and
(C) the amount of the Closing Deposit; and
(D) the Note Amount;
(iv) either plus the Working Capital Overage, if any, or less the Working Capital Underage, if any.
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| 3. | Section 2.3(a) is amended and restated in its entirety as follows: |
Buyer shall pay to Sellers by wire transfer of immediately available funds to a bank account designated in writing by Sellers, and by delivery of the Promissory Note, the Preliminary Purchase Price, less the Indemnification Amount.
| 4. | Section 2.3(c) is hereby deleted in its entirety. | |
| 5. | Section 2.4(d)(i)(B) is amended and restated in its entirety as follows: |
The Promissory note shall immediately and without any action on the part of either Buyer or Sellers, be increased by the Seller’s Adjustment Amount.
| 6. | Section 2.4(d)(ii)(B) is amended and restated in its entirety as follows: |
The Promissory Note shall immediately and without any action on the part of either Buyer or Sellers, be decreased by the Buyer Adjustment Amount.
| 7. | Section 3.2 is amended to add the Security Agreement and the Consulting Agreement as Seller closing deliverables and to delete the Escrow Agreement as a Seller closing deliverable. Section 3.3 is amended to add the Promissory Note, the Security Agreement and the Consulting Agreement as Buyer closing deliverables and to delete the Escrow Agreement as a Buyer closing deliverable. | |
| 8. | Any place in which Employment Agreement is referenced shall be replaced by Consulting Agreement. | |
| 9. | Section 9.8 is amended and restated in its entirety as follows: “Indemnification Amount. If any Buyer Indemnitee is entitled to indemnification in accordance with this Article 9, such indemnification shall be satisfied (a) first, from the Indemnification Amount, and (b), thereafter, from the Seller Parties. After the eighteenth (18th) month anniversary of the Closing Date, Buyer will issue to Seller any then remaining Indemnification Amount, less the aggregate amount of claims timely made by Buyer Indemnitees pursuant to Article 9 that remain pending on such date.” | |
| 10. | Section 9.9 is amended and restated in its entirety as follows: |
9.9 Setoff. If any Buyer Indemnitee is entitled to indemnification in accordance with this Article 9 in an amount in excess of the then-remaining Indemnification Escrow Amount available for distribution, then Buyer shall be required to recover any such amounts due from the Seller Parties under this Agreement by setting off such amounts first solely against the Promissory Note, and then the Consulting Agreement however without prejudice to any other legal remedies Buyer may have under the Agreement. Buyer shall provide notice of the exercise of such right of set off to the Seller Parties. The exercise of such right of set off by Buyer will not constitute a breach of this Agreement. Neither the exercise nor the failure to exercise such right of set off will constitute an election of remedies or limit Buyer in any manner in the enforcement of any other remedies that may be available to it.
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| 11. | Buyer shall retain the brand for the waste hauling business as Standard Waste Services in the Metro Detroit market after the closing. |
| 12. | This Amendment and the Agreement (including the Disclosure Schedules and the Exhibits attached hereto, which are deemed for all purposes to be part of this Agreement), the other documents delivered pursuant to this Amendment, the Agreement, and the Confidentiality Agreement, contain all of the terms, conditions and representations and warranties agreed upon or made by the Parties relating to the subject matter of this Agreement and the businesses and operations of the Company and supersede all prior and contemporaneous agreements, negotiations, correspondence, undertakings and communications of the Parties or their respective Representatives, whether oral or written, respecting such subject matter. Upon the Closing, the Confidentiality Agreement shall hereby automatically terminate without any further action by the Parties and shall be of no further force or effect. |
| 13. | This Amendment may be executed in counterparts, each of which will be deemed an original, but all of which together will be deemed to be one and the same agreement. Counterparts may be delivered via facsimile, electronic mail (including PDF or any electronic signature complying with the U.S. federal ESIGN Act of 2000, e.g., www.docusign.com) or other transmission method, and any counterpart so delivered will be deemed to have been duly and validly delivered and be valid and effective for all purposes. |
| 14. | This Amendment and any claim or controversy hereunder shall be governed by and construed in accordance with the Laws of the State of Michigan without giving effect to the principles of conflict of laws thereof. |
| 15. | The Parties have participated jointly in the negotiation and drafting of this Amendment. In the event of an ambiguity or question of intent or interpretation arises, this Amendment shall be construed as if drafted jointly by the Parties, and no presumption or burden of proof shall arise favoring or disfavoring any Party by virtue of the authorship of any of the provisions of this Amendment. |
[SIGNATURE PAGES FOLLOW]
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IN WITNESS WHEREOF, the Parties hereto have executed and delivered this Agreement as of the date first above written.
| COMPANY: | ||
| STANDARD WASTE SERVICES, LLC, | ||
| a Michigan limited liability company | ||
| By: | /s/ Dominic Campo | |
| Name: | Dominic Campo | |
| Title: | Member | |
| By: | /s/ Sharon Campo | |
| Name: | Sharon Campo | |
| Title: | Member | |
[Signature Page to Second Amendment to Membership Interest Purchase Agreement]
| MEMBER: | |
| /s/ Dominic Campo | |
| DOMINIC CAMPO | |
| /s/ Sharon Campo | |
| SHARON CAMPO |
[Signature Page to Second Amendment to Membership Interest Purchase Agreement]
| BUYER: | ||
| TITAN TRUCKING, LLC, | ||
| a Michigan limited liability company | ||
| By: | /s/ Glen Miller | |
| Name: | Glen Miller | |
| Title: | Chief Executive Officer | |
[Signature Page to Second Amendment to Membership Interest Purchase Agreement]
Exhibit 2.3
EXECUTION VERSION
THIRD AMENDMENT TO MEMBERSHIP INTEREST PURCHASE AGREEMENT
BY AND AMONG
DOMINIC CAMPO AND SHARON CAMPO, AS THE MEMBERS,
STANDARD WASTE SERVICES, LLC, AS THE COMPANY
AND
TITAN TRUCKING, LLC, AS BUYER
DATED MAY 30, 2024
THIRD AMENDMENT TO MEMBERSHIP INTEREST PURCHASE AGREEMENT
THIS THIRD AMENDMENT TO MEMBERSHIP INTEREST PURCHASE AGREEMENT (the “Amendment”), dated as of May 30, 2024, is entered into by and among DOMINIC CAMPO and SHARON CAMPO (each a “Member” and “Seller” and collectively, the “Members” and “Sellers”), STANDARD WASTE SERVICES, LLC, a Michigan limited liability company (the “Company”), and TITAN TRUCKING, LLC, a Michigan limited liability company (“Buyer”).
RECITALS
WHEREAS, the Sellers and Buyer entered into a certain Membership Interest Purchase Agreement dated January 12, 2024, as amended by an Amendment to Membership Interest Purchase Agreement, dated February 21, 2024 as further amended by a Second Amendment to Membership Interest Purchase Agreement dated May 20, 2024 (collectively, the “Agreement”) for the sale and purchase all of the issued and outstanding membership interests of the Company (the “Membership Interests”);
WHEREAS, the Sellers and Buyer desire to amend the Agreement as provided in this Amendment.
NOW THEREFORE, in consideration of the foregoing and the respective representations, warranties, 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:
| 1. | The capitalized terms in this Amendment not defined herein shall be defined as provided in the Agreement. The following defined terms are amended or added as follows: |
“Adjusted Purchase Price” means: (A) the Cash Consideration; (B) plus the Investment Shares; (C) plus the CapEx Amount, as determined pursuant to Section 2.4; (D) less the sum of (i) the amount of the Indebtedness, (ii) the amount of the Company Expenses, (iii) the amount of the Closing Deposit, (iv) the Note Amount and the Short Term Note Amount, in each case, as determined pursuant to Section 2.4; and (E) either plus the Working Capital Overage, if any, or less the Working Capital Underage, if any, in each case, as determined pursuant to Section 2.4.
“Note Amount” means $2,359,898.24, the principal amount of the Promissory Note.
“Preliminary Purchase Price” means: (A) the Cash Consideration; (B) plus the CapEx Amount, as estimated by the Seller Parties pursuant to Section 2.2(b); (C) less the sum of (i) the amount of the Indebtedness, (ii) the amount of the Company Expenses, (iii) the amount of the Closing Deposit, (iv) the Note Amount and the Short Term Note Amount, in each case, as estimated by the Seller Parties pursuant to Section 2.2(b), and (D) either plus the Working Capital Overage, if any, or less the Working Capital Underage, if any, in each case, as estimated by the Seller Parties pursuant to Section 2.2(b).
“Promissory Note” means that certain promissory note to be issued at the Closing from Buyer to Sellers.
“Security Agreement” means that certain security agreement from Buyer to Sellers securing Buyer’s obligations to Sellers under the Promissory Note and the Short Term Promissory Note.
“Short Term Promissory Note” means that certain promissory note to be issued at the Closing from Buyer to Sellers in the principal amount of $500,000.
“Working Capital” means, as of the Reference Time, collectible accounts receivable, inventory and prepaid items minus accounts payable and accrued expenses, in each case determined without giving effect to the transactions contemplated hereby.
| 2. | Section 2.2(a) is amended and restated in its entirety as follows: |
| 2.2 | Purchase Price. |
(a) The purchase price payable by Buyer to Sellers for the Membership Interests (the “Purchase Price”) shall be the Investment Shares (including the Investment Shares representing the Extension Consideration) and an amount equal to:
(i) the Cash Consideration;
(ii) plus the CapEx Amount;
(iii) less the sum of:
(A) the amount of the Indebtedness (with long term debt to be such amounts as confirmed with the applicable lenders or creditors as provided in Section 3.2(i) below); and
(B) the amount of the Company Expenses; and
(C) the amount of the Closing Deposit; and
(D) the Note Amount; and
(E) the amount of the Short Term Promissory Note;
(iv) either plus the Working Capital Overage, if any, or less the Working Capital Underage, if any.
| 3. | Section 2.3(a) is amended and restated in its entirety as follows: |
Buyer shall pay to Sellers by wire transfer of immediately available funds to a bank account designated in writing by Sellers, and by delivery of the Promissory Note, the Short Term Promissory Note, the Preliminary Purchase Price, less the Indemnification Amount.
| 4. | Section 3.2 is amended to add the Short Term Promissory Note as Buyer closing deliverables | |
| 5. | References to eighteen (18) months in Section 9.3 shall be twelve (12) months. | |
| 6. | Company Expenses shall exclude $25,000 each of legal expenses and accounting expenses incurred by the Company since January 12, 2024 not to exceed a cumulative amount of $50,000. | |
| 7. | Section 9.8 is amended and restated in its entirety as follows: “Indemnification Amount. If any Buyer Indemnitee is entitled to indemnification in accordance with this Article 9, such indemnification shall be satisfied (a) first, from the Indemnification Amount, and (b), thereafter, from the Seller Parties. After the twelve (12th) month anniversary of the Closing Date, Buyer will issue to Seller any then remaining Indemnification Amount, less the aggregate amount of claims timely made by Buyer Indemnitees pursuant to Article 9 that remain pending on such date.” |
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| 8. | Any place in which May 20, 2024 is referenced in the Agreement and any and all documents executed and delivered thereunder shall by May 30, 2024. | |
| 9. | This Amendment and the Agreement (including the Disclosure Schedules and the Exhibits attached hereto, which are deemed for all purposes to be part of this Agreement), the other documents delivered pursuant to this Amendment, the Agreement, and the Confidentiality Agreement, contain all of the terms, conditions and representations and warranties agreed upon or made by the Parties relating to the subject matter of this Agreement and the businesses and operations of the Company and supersede all prior and contemporaneous agreements, negotiations, correspondence, undertakings and communications of the Parties or their respective Representatives, whether oral or written, respecting such subject matter. Upon the Closing, the Confidentiality Agreement shall hereby automatically terminate without any further action by the Parties and shall be of no further force or effect. | |
| 10. | This Amendment may be executed in counterparts, each of which will be deemed an original, but all of which together will be deemed to be one and the same agreement. Counterparts may be delivered via facsimile, electronic mail (including PDF or any electronic signature complying with the U.S. federal ESIGN Act of 2000, e.g., www.docusign.com) or other transmission method, and any counterpart so delivered will be deemed to have been duly and validly delivered and be valid and effective for all purposes. | |
| 11. | This Amendment and any claim or controversy hereunder shall be governed by and construed in accordance with the Laws of the State of Michigan without giving effect to the principles of conflict of laws thereof. | |
| 12. | The Parties have participated jointly in the negotiation and drafting of this Amendment. In the event of an ambiguity or question of intent or interpretation arises, this Amendment shall be construed as if drafted jointly by the Parties, and no presumption or burden of proof shall arise favoring or disfavoring any Party by virtue of the authorship of any of the provisions of this Amendment. |
[SIGNATURE PAGES FOLLOW]
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IN WITNESS WHEREOF, the Parties hereto have executed and delivered this Agreement as of the date first above written.
| COMPANY: | ||
| STANDARD WASTE SERVICES, LLC, | ||
| a Michigan limited liability company | ||
| By: | /s/ Dominic Campo | |
| Name: | Dominic Campo | |
| Title: | Member | |
| By: | /s/ Sharon Campo | |
| Name: | Sharon Campo | |
| Title: | Member | |
[Signature Page to Third Amendment to Membership Interest Purchase Agreement]
| MEMBER: | |
| /s/ Dominic Campo | |
| DOMINIC CAMPO | |
| /s/ Sharon Campo | |
| SHARON CAMPO |
[Signature Page to Third Amendment to Membership Interest Purchase Agreement]
| BUYER: | ||
| TITAN TRUCKING, LLC, | ||
| a Michigan limited liability company | ||
| By: | /s/ Jeffrey J. Rizzo | |
| Name: | Jeffrey J. Rizzo | |
| Title: | Chief Operating Officer | |
[Signature Page to Third Amendment to Membership Interest Purchase Agreement]
Exhibit 3.1
Exhibit 4.1
Form of Warrant
Neither the issuance and sale of the securities represented by this certificate nor the securities into which these securities are exercisable have been registered under the securities act of 1933, as amended, or applicable state securities laws. The securities may not be offered for sale, sold, transferred or assigned (i) in the absence of (a) an effective registration statement for the securities under the securities act of 1933, as amended, or (b) an opinion of counsel to the holder (if requested by the company), in a form reasonably acceptable to the company, that registration is not required under said act or (ii) unless sold or eligible to be sold pursuant to rule 144 or rule 144a under said act. Notwithstanding the foregoing, the securities may be pledged in connection with a bona fide margin account or other loan or financing arrangement secured by the securities. The number of shares of common stock issuable upon exercise of this warrant may be less than the amounts set forth on the face hereof pursuant to section 1(a) of this warrant.
Titan Environmental Solutions Inc.
Warrant to Purchase Common Stock
Warrant No.:
Date of Issuance: [●], 2024 (“Issuance Date”)
Titan Environmental Solutions Inc., a Nevada corporation (the “Company”), hereby certifies that, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, _________________, the registered holder hereof or its permitted assigns (the “Holder”), is entitled, subject to the terms set forth below, to purchase from the Company, at the Exercise Price (as defined below) then in effect, upon exercise of this Warrant to Purchase Common Stock (including any Warrants to Purchase Common Stock issued in exchange, transfer or replacement hereof, the “Warrant”), at any time or times on or after the Issuance Date, but not after 11:59 p.m., New York time, on the Expiration Date (as defined below), _________________ (subject to adjustment as provided herein) fully paid and non-assessable shares of Common Stock (the “Warrant Shares”, and such number of Warrant Shares, the “Warrant Number”). Except as otherwise defined herein, capitalized terms in this Warrant shall have the meanings set forth in Section 19. This Warrant is one of the Warrants to Purchase Common Stock (the “Warrants”) issued pursuant to Section 1 of that certain Securities Purchase Agreement, dated as of March 29, 2024, by and among the Company and the purchasers (the “Purchasers”) referred to therein, as amended from time to time (the “Securities Purchase Agreement”).
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| 1. | Exercise of Warrant. |
(a) Mechanics of Exercise. Subject to the terms and conditions hereof (including, without limitation, the limitations set forth in Section 1(f)), this Warrant may be exercised by the Holder on any day on or after the Issuance Date (an “Exercise Date”), in whole or in part, by delivery (whether via electronic mail or otherwise) of a written notice, in the form attached hereto as Exhibit A (the “Exercise Notice”), of the Holder’s election to exercise this Warrant. Within one (1) Trading Day following an exercise of this Warrant as aforesaid, the Holder shall deliver payment to the Company of an amount equal to the Exercise Price in effect on the date of such exercise multiplied by the number of Warrant Shares as to which this Warrant was so exercised (the “Aggregate Exercise Price”) in cash or via wire transfer of immediately available funds if the Holder did not notify the Company in such Exercise Notice that such exercise was made pursuant to a Cashless Exercise (as defined in Section 1(d)). The Holder shall not be required to deliver the original of this Warrant in order to effect an exercise hereunder. Execution and delivery of an Exercise Notice with respect to less than all of the Warrant Shares shall have the same effect as cancellation of the original of this Warrant and issuance of a new Warrant evidencing the right to purchase the remaining number of Warrant Shares. Execution and delivery of an Exercise Notice for all of the then-remaining Warrant Shares shall have the same effect as cancellation of the original of this Warrant after delivery of the Warrant Shares in accordance with the terms hereof. On or before the first (1st) Trading Day following the date on which the Company has received an Exercise Notice, the Company shall transmit by electronic mail an acknowledgment of confirmation of receipt of such Exercise Notice, in the form attached hereto as Exhibit B, to the Holder and the Company’s transfer agent (the “Transfer Agent”), which confirmation shall constitute an instruction to the Transfer Agent to process such Exercise Notice in accordance with the terms herein. On or before the second (2nd) Trading Day following the date on which the Company has received such Exercise Notice (or such earlier date as required pursuant to the Exchange Act or other applicable law, rule or regulation for the settlement of a trade of such Warrant Shares initiated on the applicable Exercise Date), the Company shall (X) provided that the Transfer Agent is participating in The Depository Trust Company (“DTC”) Fast Automated Securities Transfer Program (“FAST”), upon the request of the Holder, credit such aggregate number of shares of Common Stock to which the Holder is entitled pursuant to such exercise to the Holder’s or its designee’s balance account with DTC through its Deposit/Withdrawal at Custodian system, or (Y) if the Transfer Agent is not participating in the DTC FAST, upon the request of the Holder, issue and deliver (via reputable overnight courier) to the address as specified in the Exercise Notice, a certificate, registered in the name of the Holder or its designee, for the number of shares of Common Stock to which the Holder shall be entitled pursuant to such exercise. Upon delivery of an Exercise Notice, the Holder shall be deemed for all corporate purposes to have become the holder of record of the Warrant Shares with respect to which this Warrant has been exercised, irrespective of the date such Warrant Shares are credited to the Holder’s DTC account or the date of delivery of the certificates evidencing such Warrant Shares (as the case may be). If this Warrant is submitted in connection with any exercise pursuant to this Section 1(a) and the number of Warrant Shares represented by this Warrant submitted for exercise is greater than the number of Warrant Shares being acquired upon an exercise and upon surrender of this Warrant to the Company by the Holder, then, at the request of the Holder, the Company shall as soon as practicable and in no event later than two (2) Business Days after any exercise and at its own expense, issue and deliver to the Holder (or its designee) a new Warrant (in accordance with Section 7(d)) representing the right to purchase the number of Warrant Shares purchasable immediately prior to such exercise under this Warrant, less the number of Warrant Shares with respect to which this Warrant is exercised. No fractional shares of Common Stock are to be issued upon the exercise of this Warrant, but rather the number of shares of Common Stock to be issued shall be rounded up to the nearest whole number. The Company shall pay any and all transfer, stamp, issuance and similar taxes, costs and expenses (including, without limitation, fees and expenses of the Transfer Agent) that may be payable with respect to the issuance and delivery of Warrant Shares upon exercise of this Warrant. Notwithstanding the foregoing, except in the case where an exercise of this Warrant is validly made pursuant to a Cashless Exercise, the Company’s failure to deliver Warrant Shares to the Holder on or prior to the later of (i) two (2) Trading Days after receipt of the applicable Exercise Notice (or such earlier date as required pursuant to the Exchange Act or other applicable law, rule or regulation for the settlement of a trade of such Warrant Shares initiated on the applicable Exercise Date) and (ii) one (1) Trading Day after the Company’s receipt of the Aggregate Exercise Price (or valid notice of a Cashless Exercise if permissible) (such later date, the “Share Delivery Date”) shall not be deemed to be a breach of this Warrant. Notwithstanding anything to the contrary contained in this Warrant or the Registration Rights Agreement, after the effective date of the Registration Statement (as defined in the Registration Rights Agreement) and prior to the Holder’s receipt of the notice of a Grace Period (as defined in the Registration Rights Agreement), the Company shall cause the Transfer Agent to deliver unlegended shares of Common Stock to the Holder (or its designee) in connection with any sale of Registrable Securities (as defined in the Registration Rights Agreement) with respect to which the Holder has entered into a contract for sale, and delivered a copy of the prospectus included as part of the particular Registration Statement to the extent applicable, and for which the Holder has not yet settled. From the Issuance Date through and including the Expiration Date, the Company shall maintain a transfer agent that participates in FAST.
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(b) Exercise Price. For purposes of this Warrant, “Exercise Price” means $0.06, subject to adjustment as provided herein.
(c) Company’s Failure to Timely Deliver Securities. If the Company shall fail, for any reason or for no reason, on or prior to the Share Delivery Date, either (I) if the Transfer Agent is not participating in FAST, to issue and deliver to the Holder (or its designee) a certificate for the number of Warrant Shares to which the Holder is entitled and register such Warrant Shares on the Company’s share register or, if the Transfer Agent is participating in FAST, to credit the balance account of the Holder or the Holder’s designee with DTC for such number of Warrant Shares to which the Holder is entitled upon the Holder’s exercise of this Warrant (as the case may be) or (II) if a Registration Statement covering the resale of the Warrant Shares that are the subject of the Exercise Notice (the “Unavailable Warrant Shares”) is not available for the resale of such Unavailable Warrant Shares and the Company fails to promptly, but in no event later than as required pursuant to the Registration Rights Agreement (x) so notify the Holder and (y) deliver the Warrant Shares electronically without any restrictive legend by crediting such aggregate number of Warrant Shares to which the Holder is entitled pursuant to such exercise to the Holder’s or its designee’s balance account with DTC through its Deposit/Withdrawal At Custodian system (the event described in the immediately foregoing clause (II) is hereinafter referred as a “Notice Failure” and together with the event described in clause (I) above, a “Delivery Failure”), then, in addition to all other remedies available to the Holder, (X) the Company shall pay in cash to the Holder on each day after the Share Delivery Date and during such Delivery Failure an amount equal to 1% of the product of (A) the sum of the number of shares of Common Stock not issued to the Holder on or prior to the Share Delivery Date and to which the Holder is entitled, multiplied by (B) any trading price of the Common Stock selected by the Holder in writing as in effect at any time during the period beginning on the applicable Exercise Date and ending on the applicable Share Delivery Date, and (Y) the Holder, upon written notice to the Company, may void its Exercise Notice with respect to, and retain or have returned, as the case may be, any portion of this Warrant that has not been exercised pursuant to such Exercise Notice; provided that the voiding of an Exercise Notice shall not affect the Company’s obligations to make any payments which have accrued prior to the date of such notice pursuant to this Section 1(c) or otherwise. In addition to the foregoing, if on or prior to the Share Delivery Date either (I) the Transfer Agent is not participating in the DTC FAST, the Company shall fail to issue and deliver to the Holder (or its designee) a certificate and register such shares of Common Stock on the Company’s share register or, if the Transfer Agent is participating in the DTC FAST, the Transfer Agent shall fail to credit the balance account of the Holder or the Holder’s designee with DTC for the number of shares of Common Stock to which the Holder is entitled upon the Holder’s exercise hereunder or pursuant to the Company’s obligation pursuant to clause (ii) below or (II) a Notice Failure occurs, and if on or after such Share Delivery Date 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 of Common Stock issuable upon such exercise that the Holder is entitled to receive from the Company and has not received from the Company in connection with such Delivery Failure or Notice Failure, as applicable (a “Buy-In”), then, in addition to all other remedies available to the Holder, the Company shall, within two (2) Business Days after the Holder’s request and in the Holder’s discretion, either (i) pay cash to the Holder in an amount equal to the Holder’s total purchase price (including brokerage commissions, stock loan costs and other out-of-pocket expenses, if any) for the shares of Common Stock so acquired (including, without limitation, by any other Person in respect, or on behalf, of the Holder) (the “Buy-In Price”), at which point the Company’s obligation to so issue and deliver such certificate (and to issue such shares of Common Stock) or credit the balance account of such Holder or such Holder’s designee, as applicable, with DTC for the number of Warrant Shares to which the Holder is entitled upon the Holder’s exercise hereunder (as the case may be) (and to issue such Warrant Shares) shall terminate, or (ii) promptly honor its obligation to so issue and deliver to the Holder a certificate or certificates representing such Warrant Shares or credit the balance account of such Holder or such Holder’s designee, as applicable, with DTC for the number of Warrant Shares to which the Holder is entitled upon the Holder’s exercise hereunder (as the case may be) and pay cash to the Holder in an amount equal to the excess (if any) of the Buy-In Price over the product of (A) such number of Warrant Shares 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 applicable Exercise Notice and ending on the date of such issuance and payment under this clause (ii) (the “Buy-In Payment Amount”). Nothing shall limit the Holder’s right to pursue any other remedies available to it hereunder, at law or in equity, including, without limitation, a decree of specific performance and/or injunctive relief with respect to the Company’s failure to timely deliver certificates representing shares of Common Stock (or to electronically deliver such shares of Common Stock) upon the exercise of this Warrant as required pursuant to the terms hereof. While this Warrant is outstanding, the Company shall cause its transfer agent to participate in FAST. In addition to the foregoing rights, (i) if the Company fails to deliver the applicable number of Warrant Shares upon an exercise pursuant to Section 1 by the applicable Share Delivery Date, then the Holder shall have the right to rescind such exercise in whole or in part and retain and/or have the Company return, as the case may be, any portion of this Warrant that has not been exercised pursuant to such Exercise Notice; provided that the rescission of an exercise shall not affect the Company’s obligation to make any payments that have accrued prior to the date of such notice pursuant to this Section 1(c) or otherwise, and (ii) if a registration statement (which may be the Registration Statement) covering the issuance or resale of the Warrant Shares that are subject to an Exercise Notice is not available for the issuance or resale, as applicable, of such Warrant Shares, as required by and in accordance with the terms of the Registration Rights Agreement, and the Holder has submitted an Exercise Notice prior to receiving notice of the non-availability of such registration statement and the Company has not already delivered the Warrant Shares underlying such Exercise Notice electronically without any restrictive legend by crediting such aggregate number of Warrant Shares to which the Holder is entitled pursuant to such exercise to the Holder’s or its designee’s balance account with DTC through its Deposit / Withdrawal At Custodian system, the Holder shall have the option, by delivery of notice to the Company, to (x) rescind such Exercise Notice in whole or in part and retain or have returned, as the case may be, any portion of this Warrant that has not been exercised pursuant to such Exercise Notice; provided that the rescission of an Exercise Notice shall not affect the Company’s obligation to make any payments that have accrued prior to the date of such notice pursuant to this Section 1(c) or otherwise, and/or (y) switch some or all of such Exercise Notice from a cash exercise to a Cashless Exercise.
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(d) Cashless Exercise. Notwithstanding anything contained herein to the contrary (other than Section 1(f) below), if at the time of exercise hereof a Registration Statement (as defined in the Registration Rights Agreement) is not effective (or the prospectus contained therein is not available for use) for the resale by the Holder of all of the Warrant Shares at prevailing market prices (not a fixed price), then the Holder may, in its sole discretion, exercise this Warrant in whole or in part and, in lieu of making the cash payment otherwise contemplated to be made to the Company upon such exercise in payment of the Aggregate Exercise Price, elect instead to receive upon such exercise the “Net Number” of Warrant Shares determined according to the following formula (a “Cashless Exercise”):
Net Number = (A x B) - (A x C)
B
For purposes of the foregoing formula:
| A | = | the total number of shares with respect to which this Warrant is then being exercised. | |
| B | = | as elected by the Holder: (i) the VWAP of the Common Stock on the Trading Day immediately preceding the date of the applicable Exercise Notice if such Exercise Notice is (1) both executed and delivered pursuant to Section 1(a) hereof on a day that is not a Trading Day or (2) both executed and delivered pursuant to Section 1(a) hereof on a Trading Day prior to the opening of “regular trading hours” (as defined in Rule 600(b)(64) of Regulation NMS promulgated under the federal securities laws) on such Trading Day, or (ii) the Closing Sale Price of the Common Stock on the date of the applicable Exercise Notice if the date of such Exercise Notice is a Trading Day and such Exercise Notice is both executed and delivered pursuant to Section 1(a) hereof after the close of “regular trading hours” on such Trading Day. | |
| C | = | the Exercise Price then in effect for the applicable Warrant Shares at the time of such exercise. |
If the Warrant Shares are issued in a Cashless Exercise, the parties acknowledge and agree that in accordance with Section 3(a)(9) of the Securities Act, the Warrant Shares take on the registered characteristics of the Warrants being exercised. For purposes of Rule 144(d) promulgated under the Securities Act, as in effect on the Subscription Date, it is intended that the Warrant Shares issued in a Cashless Exercise shall be deemed to have been acquired by the Holder, and the holding period for the Warrant Shares shall be deemed to have commenced, on the date this Warrant was originally issued pursuant to the Securities Purchase Agreement.
(e) Disputes. In the case of a dispute as to the determination of the Exercise Price or the arithmetic calculation of the number of Warrant Shares to be issued pursuant to the terms hereof, the Company shall promptly issue to the Holder the number of Warrant Shares that are not disputed and resolve such dispute in accordance with Section 15.
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(f) Limitation on Exercises. The Company shall not effect the exercise of any portion of this Warrant, and the Holder shall not have the right to exercise any portion of this Warrant, pursuant to the terms and conditions of this Warrant and any such exercise shall be null and void and treated as if never made, to the extent that after giving effect to such exercise, the Holder together with the other Attribution Parties collectively would beneficially own in excess of 4.99% (the “Maximum Percentage”) of the Common Stock outstanding immediately after giving effect to such exercise. For purposes of the foregoing sentence, the aggregate number of shares of Common Stock beneficially owned by the Holder and the other Attribution Parties shall include the number of shares of Common Stock held by the Holder and all other Attribution Parties plus the number of shares of Common Stock issuable upon exercise of this Warrant with respect to which the determination of such sentence is being made, but shall exclude shares of Common Stock which would be issuable upon (A) exercise of the remaining, unexercised portion of this Warrant beneficially owned by the Holder or any of the other Attribution Parties and (B) exercise or conversion of the unexercised or unconverted portion of any other securities of the Company (including, without limitation, any convertible notes or convertible preferred stock or warrants, including other Warrants) beneficially owned by the Holder or any other Attribution Party subject to a limitation on conversion or exercise analogous to the limitation contained in this Section 1(f)(i). For purposes of this Section 1(f)(i), beneficial ownership shall be calculated in accordance with Section 13(d) of the Exchange Act. 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 determining the number of outstanding shares of Common Stock the Holder may acquire upon the exercise of this Warrant without exceeding the Maximum Percentage, the Holder may rely on the number of outstanding shares of Common Stock as reflected in (x) the Company’s most recent Annual Report on Form 10-K, Quarterly Report on Form 10-Q, Current Report on Form 8-K or other public filing with the Commission, as the case may be, (y) a more recent public announcement by the Company or (z) any other written notice by the Company or the Transfer Agent, if any, setting forth the number of shares of Common Stock outstanding (the “Reported Outstanding Share Number”). If the Company receives an Exercise Notice from the Holder at a time when the actual number of outstanding shares of Common Stock is less than the Reported Outstanding Share Number, the Company shall (i) notify the Holder in writing of the number of shares of Common Stock then outstanding and, to the extent that such Exercise Notice would otherwise cause the Holder’s beneficial ownership, as determined pursuant to this Section 1(f)(i), to exceed the Maximum Percentage, the Holder must notify the Company of a reduced number of Warrant Shares to be acquired pursuant to such Exercise Notice (the number of shares by which such purchase is reduced, the “Reduction Shares”) and (ii) as soon as reasonably practicable, the Company shall return to the Holder any exercise price paid by the Holder for the Reduction Shares. For any reason at any time, upon the written or oral request of the Holder, the Company shall within one (1) Business Day confirm orally and in writing or by electronic mail to the Holder the number of shares of Common Stock then outstanding. In any case, the number of outstanding shares of Common Stock shall be determined after giving effect to the conversion or exercise of securities of the Company, including this Warrant, by the Holder and any other Attribution Party since the date as of which the Reported Outstanding Share Number was reported. In the event that the issuance of shares of Common Stock to the Holder upon exercise of this Warrant results in the Holder and the other Attribution Parties being deemed to beneficially own, in the aggregate, more than the Maximum Percentage of the number of outstanding shares of Common Stock (as determined under Section 13(d) of the Exchange Act), the number of shares so issued by which the Holder’s and the other Attribution Parties’ aggregate beneficial ownership exceeds the Maximum Percentage (the “Excess Shares”) shall be deemed null and void and shall be cancelled ab initio, and the Holder shall not have the power to vote or to transfer the Excess Shares. As soon as reasonably practicable after the issuance of the Excess Shares has been deemed null and void, the Company shall return to the Holder the exercise price paid by the Holder for the Excess Shares. Upon delivery of a written notice to the Company, the Holder may from time to time increase (with such increase not effective until the sixty-first (61st) day after delivery of such notice) or decrease the Maximum Percentage to any other percentage not in excess of 9.99% as specified in such notice; provided that (i) any such increase in the Maximum Percentage will not be effective until the sixty-first (61st) day after such notice is delivered to the Company and (ii) any such increase or decrease will apply only to the Holder and the other Attribution Parties and not to any other holder of Warrants that is not an Attribution Party of the Holder. For purposes of clarity, the shares of Common Stock issuable pursuant to the terms of this Warrant in excess of the Maximum Percentage shall not be deemed to be beneficially owned by the Holder for any purpose including for purposes of Section 13(d) or Rule 16a-1(a)(1) of the Exchange Act. No prior inability to exercise this Warrant pursuant to this paragraph shall have any effect on the applicability of the provisions of this paragraph with respect to any subsequent determination of exercisability. The provisions of this paragraph shall be construed and implemented in a manner otherwise than in strict conformity with the terms of this Section 1(f)(i) to the extent necessary to correct this paragraph or any portion of this paragraph which may be defective or inconsistent with the intended beneficial ownership limitation contained in this Section 1(f)(i) or to make changes or supplements necessary or desirable to properly give effect to such limitation. The limitation contained in this paragraph may not be waived and shall apply to a successor holder of this Warrant.
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(g) Reservation of Shares.
(i) Required Reserve Amount. So long as this Warrant remains outstanding, the Company shall at all times following the Uplisting keep reserved for issuance under this Warrant a number of shares of Common Stock at least equal to 125% of the maximum number of shares of Common Stock as shall be necessary to satisfy the Company’s obligation to issue shares of Common Stock under the Warrants then outstanding (without regard to any limitations on exercise) (the “Required Reserve Amount”); provided that at no time shall the number of shares of Common Stock reserved pursuant to this Section 1(g)(i) be reduced other than proportionally in connection with any exercise or redemption of Warrants or such other event covered by Section 2(a) below. The Required Reserve Amount (including, without limitation, each increase in the number of shares so reserved) shall be allocated pro rata among the holders of the Warrants based on the number of shares of Common Stock issuable upon exercise of Warrants held by each holder on the Closing Date (without regard to any limitations on exercise) or increase in the number of reserved shares, as the case may be (the “Authorized Share Allocation”). In the event that a holder shall sell or otherwise transfer any of such holder’s Warrants, each transferee shall be allocated a pro rata portion of such holder’s Authorized Share Allocation. Any shares of Common Stock reserved and allocated to any Person which ceases to hold any Warrants shall be allocated to the remaining holders of Warrants, pro rata based on the number of shares of Common Stock issuable upon exercise of the Warrants then held by such holders (without regard to any limitations on exercise).
(ii) Insufficient Authorized Shares. If, notwithstanding Section 1(g)(i) above, and not in limitation thereof, at any time following the Uplisting while any of the Warrants remain outstanding, the Company does not have a sufficient number of authorized and unreserved shares of Common Stock to satisfy its obligation to reserve the Required Reserve Amount (an “Authorized Share Failure”), then the Company shall use its best efforts to take all action necessary to increase the Company’s authorized shares of Common Stock to an amount sufficient to allow the Company to reserve the Required Reserve Amount for all the Warrants then outstanding. Without limiting the generality of the foregoing sentence, as soon as practicable after the date of the occurrence of an Authorized Share Failure, but in no event later than sixty (60) days after the occurrence of such Authorized Share Failure, the Company shall hold a meeting of its stockholders for the approval of an increase in the number of authorized shares of Common Stock. In connection with such meeting, the Company shall provide each stockholder with a proxy statement and shall use its best efforts to solicit its stockholders’ approval of such increase in authorized shares of Common Stock and to cause its board of directors to recommend to the stockholders that they approve such proposal. Notwithstanding the foregoing, if at any such time of an Authorized Share Failure, the Company is able to obtain the written consent of a majority of the shares of its issued and outstanding shares of Common Stock to approve the increase in the number of authorized shares of Common Stock, the Company may satisfy this obligation by obtaining such consent and submitting for filing with the Commission an Information Statement on Schedule 14C. In the event that the Company is prohibited from issuing shares of Common Stock upon an exercise of this Warrant due to the failure by the Company to have sufficient shares of Common Stock available out of the authorized but unissued shares of Common Stock (such unavailable number of shares of Common Stock, the “Authorization Failure Shares”), in lieu of delivering such Authorization Failure Shares to the Holder, the Company shall pay cash in exchange for the cancellation of such portion of this Warrant exercisable into such Authorization Failure Shares at a price equal to the sum of (i) the product of (x) such number of Authorization Failure Shares and (y) the greatest Closing Sale Price of the Common Stock on any Trading Day during the period commencing on the date the Holder delivers the applicable Exercise Notice with respect to such Authorization Failure Shares to the Company and ending on the date of such issuance and payment under this Section 1(g); and (ii) to the extent the Holder purchases (in an open market transaction or otherwise) shares of Common Stock to deliver in satisfaction of a sale by the Holder of Authorization Failure Shares, any Buy-In Payment Amount, brokerage commissions and other out-of-pocket expenses, if any, of the Holder incurred in connection therewith. Nothing contained in this Section 1(g) shall limit any obligations of the Company under any provision of the Securities Purchase Agreement.
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| 2. | Adjustment of Exercise Price and Number of Warrant Shares. |
The Exercise Price and number of Warrant Shares issuable upon exercise of this Warrant are subject to adjustment from time to time as set forth in this Section 2.
(a) Stock Dividends and Splits. Without limiting any provision of Section 2(b), Section 3 or Section 4, if the Company, at any time on or after the Subscription Date, (i) pays a stock dividend on one or more classes of its then outstanding shares of Common Stock or otherwise makes a distribution on any class of capital stock that is payable in shares of Common Stock, other than an Exempt Issuance, (ii) subdivides (by any stock split, stock dividend, recapitalization or otherwise) one or more classes of its then outstanding shares of Common Stock into a larger number of shares or (iii) combines (by combination, reverse stock split or otherwise) one or more classes of its then outstanding shares of Common Stock into a smaller number of shares then in each such case the Exercise Price shall be multiplied by a fraction of which the numerator shall be the number of shares of Common Stock outstanding immediately before such event and of which the denominator shall be the number of shares of Common Stock outstanding immediately after such event. Any adjustment made pursuant to clause (i) of this paragraph shall become effective immediately after the record date for the determination of stockholders entitled to receive such dividend or distribution, and any adjustment pursuant to clause (ii) or (iii) of this paragraph shall become effective immediately after the effective date of such subdivision or combination. If any event requiring an adjustment under this paragraph occurs during the period that an Exercise Price is calculated hereunder, then the calculation of such Exercise Price shall be adjusted appropriately to reflect such event.
(b) Adjustment Upon Issuance of Shares of Common Stock. If and whenever on or after the Subscription Date, the Company grants, issues or sells (or enters into any agreement or publicly announces its intention to grant, issue or sell), or in accordance with this Section 2 is deemed to have granted, issued or sold, any shares of Common Stock (including the issuance or sale of shares of Common Stock owned or held by or for the account of the Company, but excluding any Exempt Issuance granted issued or sold or deemed to have been granted issued or sold) for a consideration per share (the “New Issuance Price”) less than a price equal to the Exercise Price in effect immediately prior to such granting, issuance or sale or deemed granting, issuance or sale (such Exercise Price then in effect is referred to herein as the “Applicable Price”) (the foregoing a “Dilutive Issuance”), then immediately after such Dilutive Issuance, the Exercise Price then in effect shall be reduced to an amount equal to the New Issuance Price. For all purposes of the foregoing (including, without limitation, determining the adjusted Exercise Price and the New Issuance Price under this Section 2(b)), the following shall be applicable:
(i) Issuance of Options. If, except in the case of an Exempt Issuance, the Company in any manner grants, issues or sells (or enters into any agreement to grant, issue or sell) any Options and the lowest price per share for which one share of Common Stock is at any time issuable upon the exercise of any such Option or upon conversion, exercise or exchange of any Convertible Securities issuable upon exercise of any such Option or otherwise pursuant to the terms thereof is less than the Applicable Price, then such share of Common Stock shall be deemed to be outstanding and to have been issued and sold by the Company at the time of the granting, issuance or sale (or the time of execution of such agreement to grant, issue or sell, as applicable) of such Option for such price per share. For purposes of this Section 2(b)(i), the “lowest price per share for which one share of Common Stock is at any time issuable upon the exercise of any such Options or upon conversion, exercise or exchange of any Convertible Securities issuable upon exercise of any such Option or otherwise pursuant to the terms thereof” shall be equal to (1) the lower of (x) the sum of the lowest amounts of consideration (if any) received or receivable by the Company with respect to any one share of Common Stock upon the granting, issuance or sale (or pursuant to the agreement to grant, issue or sell, as applicable) of such Option, upon exercise of such Option and upon conversion, exercise or exchange of any Convertible Security issuable upon exercise of such Option or otherwise pursuant to the terms thereof and (y) the lowest exercise price set forth in such Option for which one share of Common Stock is issuable (or may become issuable assuming all possible market conditions) upon the exercise of any such Options or upon conversion, exercise or exchange of any Convertible Securities issuable upon exercise of any such Option or otherwise pursuant to the terms thereof minus (2) the sum of all amounts paid or payable to the holder of such Option (or any other Person) upon the granting, issuance or sale (or the agreement to grant, issue or sell, as applicable) of such Option, upon exercise of such Option and upon conversion, exercise or exchange of any Convertible Security issuable upon exercise of such Option or otherwise pursuant to the terms thereof plus the value of any other consideration received or receivable by, or benefit conferred on, the holder of such Option (or any other Person). Except as contemplated below, no further adjustment of the Exercise Price shall be made upon the actual issuance of such shares of Common Stock or of such Convertible Securities upon the exercise of such Options or otherwise pursuant to the terms of or upon the actual issuance of such shares of Common Stock upon conversion, exercise or exchange of such Convertible Securities.
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(ii) Issuance of Convertible Securities. If, except in the case of an Exempt Issuance, the Company in any manner issues or sells (or enters into any agreement to issue or sell) any Convertible Securities and the lowest price per share for which one share of Common Stock is at any time issuable upon the conversion, exercise or exchange thereof or otherwise pursuant to the terms thereof is less than the Applicable Price, then such share of Common Stock shall be deemed to be outstanding and to have been issued and sold by the Company at the time of the issuance or sale (or the time of execution of such agreement to issue or sell, as applicable) of such Convertible Securities for such price per share. For the purposes of this Section 2(b)(ii), the “lowest price per share for which one share of Common Stock is at any time issuable upon the conversion, exercise or exchange thereof or otherwise pursuant to the terms thereof” shall be equal to (1) the lower of (x) the sum of the lowest amounts of consideration (if any) received or receivable by the Company with respect to one share of Common Stock upon the issuance or sale (or pursuant to the agreement to issue or sell, as applicable) of the Convertible Security and upon conversion, exercise or exchange of such Convertible Security or otherwise pursuant to the terms thereof and (y) the lowest conversion price set forth in such Convertible Security for which one share of Common Stock is issuable (or may become issuable assuming all possible market conditions) upon conversion, exercise or exchange thereof or otherwise pursuant to the terms thereof minus (2) the sum of all amounts paid or payable to the holder of such Convertible Security (or any other Person) upon the issuance or sale (or the agreement to issue or sell, as applicable) of such Convertible Security plus the value of any other consideration received or receivable by, or benefit conferred on, the holder of such Convertible Security (or any other Person). Except as contemplated below, no further adjustment of the Exercise Price shall be made upon the actual issuance of such shares of Common Stock upon conversion, exercise or exchange of such Convertible Securities or otherwise pursuant to the terms thereof, and if any such issuance or sale of such Convertible Securities is made upon exercise of any Options for which adjustment of this Warrant has been or is to be made pursuant to other provisions of this Section 2(b), except as contemplated below, no further adjustment of the Exercise Price shall be made by reason of such issuance or sale.
(iii) Change in Option Price or Rate of Conversion. If the purchase or exercise price provided for in any Options, the additional consideration, if any, payable upon the issue, conversion, exercise or exchange of any Convertible Securities, or the rate at which any Convertible Securities are convertible into or exercisable or exchangeable for shares of Common Stock increases or decreases at any time (other than proportional changes in conversion or exercise prices, as applicable, in connection with an event referred to in Section 2(a)), the Exercise Price in effect at the time of such increase or decrease shall be adjusted to the Exercise Price which would have been in effect at such time had such Options or Convertible Securities provided for such increased or decreased purchase price, additional consideration or increased or decreased conversion rate, as the case may be, at the time initially granted, issued or sold. For purposes of this Section 2(b)(iii), if the terms of any Option or Convertible Security (including, without limitation, any Option or Convertible Security that was outstanding as of the Subscription Date) are increased or decreased in the manner described in the immediately preceding sentence, then such Option or Convertible Security and the shares of Common Stock deemed issuable upon exercise, conversion or exchange thereof shall be deemed to have been issued as of the date of such increase or decrease. No adjustment pursuant to this Section 2(b) shall be made if such adjustment would result in an increase of the Exercise Price then in effect.
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(iv) Calculation of Consideration Received. If any Option and/or Convertible Security and/or Adjustment Right is issued in connection with the issuance or sale or deemed issuance or sale of any other securities of the Company (as determined by the Holder, the “Primary Security”, and such Option and/or Convertible Security and/or Adjustment Right, the “Secondary Securities” and together with the Primary Security, each a “Unit”), together comprising one integrated transaction, the aggregate consideration per share of Common Stock with respect to such Primary Security shall be deemed to be the lower of (x) the purchase price of such Unit, (y) if such Primary Security is an Option and/or Convertible Security, the lowest price per share for which one share of Common Stock is at any time issuable upon the exercise or conversion of the Primary Security in accordance with Sections 2(b)(i) or 2(b)(ii) above and (z) the lowest VWAP of the shares of Common Stock on any Trading Day during the five (5) Trading Day period (the “Adjustment Period”) immediately following the public announcement of such Dilutive Issuance (for the avoidance of doubt, if such public announcement is released prior to the opening of the Principal Market on a Trading Day, such Trading Day shall be the first Trading Day in such five Trading Day period and if this Warrant is exercised, on any given Exercise Date during any such Adjustment Period, solely with respect to such portion of this Warrant exercised on such applicable Exercise Date, such applicable Adjustment Period shall be deemed to have ended on, and included, the Trading Day immediately prior to such Exercise Date). If any shares of Common Stock, Options or Convertible Securities are issued or sold or deemed to have been issued or sold for cash, the consideration received therefor will be deemed to be the net amount of consideration received by the Company therefor. If any shares of Common Stock, Options or Convertible Securities are issued or sold for a consideration other than cash, the amount of such consideration received by the Company will be the fair value of such consideration, except where such consideration consists of publicly traded securities, in which case the amount of consideration received by the Company for such securities will be the arithmetic average of the VWAPs of such security for each of the five (5) Trading Days immediately preceding the date of receipt. If any shares of Common Stock, Options or Convertible Securities are issued to the owners of the non-surviving entity in connection with any merger in which the Company is the surviving entity, the amount of consideration therefor will be deemed to be the fair value of such portion of the net assets and business of the non-surviving entity as is attributable to such shares of Common Stock, Options or Convertible Securities (as the case may be). The fair value of any consideration other than cash or publicly traded securities will be determined jointly by the Company and the Holder. If such parties are unable to reach agreement within ten (10) days after the occurrence of an event requiring valuation (the “Valuation Event”), the fair value of such consideration will be determined within five (5) Trading Days after the tenth (10th) day following such Valuation Event by an independent, reputable appraiser jointly selected by the Company and the Holder. The determination of such appraiser shall be final and binding upon all parties absent manifest error and the fees and expenses of such appraiser shall be borne by the Company.
(v) Record Date. If the Company takes a record of the holders of shares of Common Stock for the purpose of entitling them (A) to receive a dividend or other distribution payable in shares of Common Stock, Options or in Convertible Securities or (B) to subscribe for or purchase shares of Common Stock, Options or Convertible Securities, then such record date will be deemed to be the date of the issuance or sale of the shares of Common Stock deemed to have been issued or sold upon the declaration of such dividend or the making of such other distribution or the date of the granting of such right of subscription or purchase (as the case may be).
(c) Reserved.
(d) Reserved.
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(e) Stock Combination Event Adjustment. If at any time and from time to time on or after the Uplist Date there occurs any stock split, stock dividend, stock combination, reverse stock split, recapitalization or other similar transaction involving the outstanding Common Stock (each, a “Stock Combination Event”, and such date thereof, the “Stock Combination Event Date”) and the Event Market Price is less than the Exercise Price then in effect (after giving effect to the adjustment in clause 2(a) above), then on the sixteenth (16th) Trading Day immediately following such Stock Combination Event, the Exercise Price then in effect on such sixteenth (16th) Trading Day (after giving effect to the adjustment in clause 2(a) above) shall be reduced (but in no event increased) to the Event Market Price. For the avoidance of doubt, if the adjustment in the immediately preceding sentence would otherwise result in an increase in the Exercise Price hereunder, no adjustment shall be made.
(f) Other Events. In the event that the Company (or any Subsidiary) shall take any action to which the provisions hereof are not strictly applicable, or, if applicable, would not operate to protect the Holder from dilution or if any event occurs of the type contemplated by the provisions of this Section 2 but not expressly provided for by such provisions (including, without limitation, the granting of stock appreciation rights, phantom stock rights or other rights with equity features), then the Company’s board of directors shall in good faith determine and implement an appropriate adjustment in the Exercise Price and the number of Warrant Shares (if applicable) so as to protect the rights of the Holder, provided that no such adjustment pursuant to this Section 2(f) will increase the Exercise Price or decrease the number of Warrant Shares as otherwise determined pursuant to this Section 2, provided further that if the Holder does not accept such adjustments as appropriately protecting its interests hereunder against such dilution, then the Company’s board of directors and the Holder shall agree, in good faith, upon an independent investment bank of nationally recognized standing to make such appropriate adjustments, whose determination shall be final and binding absent manifest error and whose fees and expenses shall be borne by the Company.
(g) Calculations. All calculations under this Section 2 shall be made by rounding to the nearest cent or the nearest 1/100th of a share, as applicable. The number of shares of Common Stock outstanding at any given time shall not include shares owned or held by or for the account of the Company, and the disposition of any such shares shall be considered an issuance or sale of shares of Common Stock.
(h) Voluntary Adjustment By Company. Subject to the rules and regulations of the Principal Market, the Company may at any time during the term of this Warrant, with the prior written consent of the Holders holding at least a majority in interest of the Warrants then outstanding, reduce the then current Exercise Price to any amount and for any period of time deemed appropriate by the board of directors of the Company.
(i) Floor Price. No adjustment pursuant to this Section 2 shall cause the Exercise Price to be less than $0.03 (as adjusted for any stock dividend, stock split, stock combination, reclassification or similar transaction occurring after the date of the Securities Purchase Agreement) (the “Floor Price”).
| 3. | Rights Upon Distribution of Assets. |
In addition to any adjustments pursuant to Section 2 above or Section 4(a) below, if the Company shall declare or make any dividend or other distribution of its assets (or rights to acquire its assets) to holders of shares of Common Stock, by way of return of capital or otherwise (including, without limitation, any distribution of cash, stock or other securities, property, options, evidence of indebtedness or any other assets by way of a dividend, spin off, reclassification, corporate rearrangement, scheme of arrangement or other similar transaction) (a “Distribution”), at any time after the issuance of this Warrant, then, in each such case, the Holder shall be entitled to participate in such Distribution to the same extent that the Holder would have participated therein if the Holder had held the number of shares of Common Stock acquirable upon complete exercise of this Warrant (without regard to any limitations or restrictions on exercise of this Warrant, including without limitation, the Maximum Percentage) immediately before the date on which a record is taken for such Distribution, or, if no such record is taken, the date as of which the record holders of shares of Common Stock are to be determined for the participation in such Distribution (provided, however, that to the extent that the Holder’s right to participate in any such Distribution would result in the Holder and the other Attribution Parties exceeding the Maximum Percentage, then the Holder shall not be entitled to participate in such Distribution to the extent of the Maximum Percentage (and shall not be entitled to beneficial ownership of such shares of Common Stock as a result of such Distribution (and beneficial ownership) to the extent of any such excess) and the portion of such Distribution shall be held in abeyance for the benefit of the Holder until such time or times, if ever, as its right thereto would not result in the Holder and the other Attribution Parties exceeding the Maximum Percentage, at which time or times the Holder shall be granted such Distribution (and any Distributions declared or made on such initial Distribution or on any subsequent Distribution held similarly in abeyance) to the same extent as if there had been no such limitation).
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| 4. | Purchase Rights; Fundamental Transactions. |
(a) Purchase Rights. In addition to any adjustments pursuant to Sections 2 or 3 above, if at any time the Company grants, issues or sells any Options, Convertible Securities or rights to purchase stock, warrants, securities or other property pro rata to the record holders of any class of Common Stock (the “Purchase Rights”), then the Holder will be entitled to acquire, upon the terms applicable to such Purchase Rights, the aggregate Purchase Rights which the Holder could have acquired if the Holder had held the number of shares of Common Stock acquirable upon complete exercise of this Warrant (without regard to any limitations or restrictions on exercise of this Warrant, including without limitation, the Maximum Percentage) immediately before the date on which a record is taken for the grant, issuance or sale of such Purchase Rights, or, if no such record is taken, the date as of which the record holders of shares of Common Stock are to be determined for the grant, issuance or sale of such Purchase Rights (provided, however, that to the extent that the Holder’s right to participate in any such Purchase Right would result in the Holder and the other Attribution Parties exceeding the Maximum Percentage, then the Holder shall not be entitled to participate in such Purchase Right to the extent of the Maximum Percentage (and shall not be entitled to beneficial ownership of such shares of Common Stock as a result of such Purchase Right (and beneficial ownership) to the extent of any such excess) and such Purchase Right to such extent shall be held in abeyance for the benefit of the Holder until such time or times, if ever, as its right thereto would not result in the Holder and the other Attribution Parties exceeding the Maximum Percentage, at which time or times the Holder shall be granted such right (and any Purchase Right granted, issued or sold on such initial Purchase Right or on any subsequent Purchase Right held similarly in abeyance) to the same extent as if there had been no such limitation).
(b) Fundamental Transactions. The Company shall not enter into or be party to a Fundamental Transaction unless (i) the Successor Entity assumes in writing all of the obligations of the Company under this Warrant and the other Transaction Documents in accordance with the provisions of this Section 4(b) 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 this Warrant a security of the Successor Entity evidenced by a written instrument substantially similar in form and substance to this Warrant, including, without limitation, which is exercisable for a corresponding number of shares of capital stock equivalent to the shares of Common Stock acquirable and receivable upon exercise of this Warrant (without regard to any limitations on the exercise of this Warrant) prior to such Fundamental Transaction, and with an exercise price which applies the exercise price hereunder to such shares of capital stock (but taking into account the relative value of the shares of Common Stock pursuant to such Fundamental Transaction and the value of such shares of capital stock, such adjustments to the number of shares of capital stock and such exercise price being for the purpose of protecting the economic value of this Warrant immediately prior to the consummation of such Fundamental Transaction) 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 an Eligible Market. Upon the consummation of each Fundamental Transaction, the Successor Entity shall succeed to, and be substituted for (so that from and after the date of the applicable Fundamental Transaction, the provisions of this Warrant and the other Transaction Documents referring to the “Company” shall refer instead to the Successor Entity), and may exercise every right and power of the Company and shall assume all of the obligations of the Company under this Warrant and the other Transaction Documents with the same effect as if such Successor Entity had been named as the Company herein. Upon consummation of each Fundamental Transaction, the Successor Entity shall deliver to the Holder confirmation that there shall be issued upon exercise of this Warrant at any time after the consummation of the applicable Fundamental Transaction, in lieu of the shares of Common Stock (or other securities, cash, assets or other property (except such items still issuable under Sections 3 and 4(a) above, which shall continue to be receivable thereafter)) issuable upon the exercise of this Warrant prior to the applicable Fundamental Transaction, such shares of publicly traded common stock (or its equivalent) of the Successor Entity (including its Parent Entity) which the Holder would have been entitled to receive upon the happening of the applicable Fundamental Transaction had this Warrant been exercised immediately prior to the applicable Fundamental Transaction (without regard to any limitations on the exercise of this Warrant), as adjusted in accordance with the provisions of this Warrant. Notwithstanding the foregoing, and without limiting Section 1(f) hereof, the Holder may elect, at its sole option, by delivery of written notice to the Company to waive this Section 4(b) to permit the Fundamental Transaction without the assumption of this Warrant. In addition to and not in substitution for any other rights hereunder, prior to the consummation of each 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 insure that the Holder will thereafter have the right to receive upon an exercise of this Warrant at any time after the consummation of the applicable Fundamental Transaction but prior to the Expiration Date, in lieu of the shares of the Common Stock (or other securities, cash, assets or other property (except such items still issuable under Sections 3 and 4(a) above, which shall continue to be receivable thereafter)) issuable upon the exercise of the Warrant prior to such Fundamental Transaction, such shares of stock, securities, cash, assets or any other property whatsoever (including warrants or other purchase or subscription rights) which the Holder would have been entitled to receive upon the happening of the applicable Fundamental Transaction had this Warrant been exercised immediately prior to the applicable Fundamental Transaction (without regard to any limitations on the exercise of this Warrant). Provision made pursuant to the preceding sentence shall be in a form and substance reasonably satisfactory to the Holder.
(c) Application. The provisions of this Section 4 shall apply similarly and equally to successive Fundamental Transactions and Corporate Events and shall be applied as if this Warrant (and any such subsequent warrants) were fully exercisable and without regard to any limitations on the exercise of this Warrant (provided that the Holder shall continue to be entitled to the benefit of the Maximum Percentage, applied however with respect to shares of capital stock registered under the Exchange Act and thereafter receivable upon exercise of this Warrant (or any such other warrant)).
| 5. | Non-circumvention. |
The Company hereby covenants and agrees that the Company will not, by amendment of its Certificate of Incorporation, its Bylaws or through any reorganization, transfer of assets, consolidation, merger, scheme of arrangement, dissolution, issuance or sale of securities, or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Warrant, and will at all times in good faith carry out all the provisions of this Warrant and take all action as may be required to protect the rights of the Holder. Without limiting the generality of the foregoing, the Company (a) shall not increase the par value of any shares of Common Stock receivable upon the exercise of this Warrant above the Exercise Price then in effect, and (b) shall take all such actions as may be necessary or appropriate in order that the Company may validly and legally issue fully paid and non-assessable shares of Common Stock upon the exercise of this Warrant. Notwithstanding anything herein to the contrary, if after the sixty (60) calendar day anniversary of the Uplist Date, the Holder is not permitted to exercise this Warrant in full for any reason (other than pursuant to restrictions set forth in Section 1(f) hereof), the Company shall use its best efforts to promptly remedy such failure, including, without limitation, obtaining such consents or approvals as necessary to permit such exercise into shares of Common Stock.
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| 6. | Warrant Holder Not Deemed a Stockholder. |
Except as otherwise specifically provided herein, the Holder, solely in its capacity as a holder of this Warrant, shall not be entitled to vote or receive dividends or be deemed the holder of capital stock of the Company for any purpose, nor shall anything contained in this Warrant be construed to confer upon the Holder, solely in its capacity as the Holder of this Warrant, any of the rights of a stockholder of the Company or any right to vote, give or withhold consent to any corporate action (whether any reorganization, issue of stock, reclassification of stock, consolidation, merger, conveyance or otherwise), receive notice of meetings, receive dividends or subscription rights, or otherwise, prior to the issuance to the Holder of the Warrant Shares which it is then entitled to receive upon the due exercise of this Warrant. In addition, nothing contained in this Warrant shall be construed as imposing any liabilities on the Holder to purchase any securities (upon exercise of this Warrant or otherwise) or as a stockholder of the Company, whether such liabilities are asserted by the Company or by creditors of the Company. Notwithstanding this Section 6, the Company shall provide the Holder with copies of the same notices and other information given to the stockholders of the Company generally, contemporaneously with the giving thereof to the stockholders; provided that the Company shall have no such obligation to the extent such information is filed with the Commission through EDGAR and are available to the public through the EDGAR system.
| 7. | Reissuance of Warrants. |
(a) Transfer of Warrant. If this Warrant is to be transferred, the Holder shall surrender this Warrant to the Company, whereupon the Company will forthwith issue and deliver upon the order of the Holder a new Warrant (in accordance with Section 7(d)), registered as the Holder may request, representing the right to purchase the number of Warrant Shares being transferred by the Holder and, if less than the total number of Warrant Shares then underlying this Warrant is being transferred, a new Warrant (in accordance with Section 7(d)) to the Holder representing the right to purchase the number of Warrant Shares not being transferred.
(b) Lost, Stolen or Mutilated Warrant. Upon receipt by the Company of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of this Warrant (as to which a written certification and the indemnification contemplated below shall suffice as such evidence), and, in the case of loss, theft or destruction, of any indemnification undertaking by the Holder to the Company in customary and reasonable form and, in the case of mutilation, upon surrender and cancellation of this Warrant, the Company shall execute and deliver to the Holder a new Warrant (in accordance with Section 7(d)) representing the right to purchase the Warrant Shares then underlying this Warrant.
(c) Exchangeable for Multiple Warrants. This Warrant is exchangeable, upon the surrender hereof by the Holder at the principal office of the Company, for a new Warrant or Warrants (in accordance with Section 7(d)) representing in the aggregate the right to purchase the number of Warrant Shares then underlying this Warrant, and each such new Warrant will represent the right to purchase such portion of such Warrant Shares as is designated by the Holder at the time of such surrender; provided, however, no warrants for fractional shares of Common Stock shall be given.
(d) Issuance of New Warrants. Whenever the Company is required to issue a new Warrant pursuant to the terms of this Warrant, such new Warrant (i) shall be of like tenor with this Warrant, (ii) shall represent, as indicated on the face of such new Warrant, the right to purchase the Warrant Shares then underlying this Warrant (or in the case of a new Warrant being issued pursuant to Section 7(a) or Section 7(c), the Warrant Shares designated by the Holder which, when added to the number of shares of Common Stock underlying the other new Warrants issued in connection with such issuance, does not exceed the number of Warrant Shares then underlying this Warrant), (iii) shall have an issuance date, as indicated on the face of such new Warrant which is the same as the Issuance Date, and (iv) shall have the same rights and conditions as this Warrant.
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(e) Representation by the Holder. The Holder, by the acceptance hereof, represents and warrants that it is acquiring this Warrant and, upon any exercise hereof, will acquire the Warrant Shares issuable upon such exercise, for its own account and not with a view to or for distributing or reselling such Warrant Shares or any part thereof in violation of the Securities Act or any applicable state securities law, except pursuant to sales registered or exempted under the Securities Act.
| 8. | Notices. |
Whenever notice is required to be given under this Warrant, unless otherwise provided herein, such notice shall be given in accordance with Section 5.4 of the Securities Purchase Agreement. The Company shall provide the Holder with prompt written notice of all actions taken pursuant to this Warrant (other than the issuance of shares of Common Stock upon exercise in accordance with the terms hereof), including in reasonable detail a description of such action and the reason therefor. Without limiting the generality of the foregoing, the Company will give written notice to the Holder (i) immediately upon each adjustment of the Exercise Price and the number of Warrant Shares, setting forth in reasonable detail, and certifying, the calculation of such adjustment(s), (ii) at least fifteen (15) days prior to the date on which the Company closes its books or takes a record (A) with respect to any dividend or distribution upon the Common Stock, (B) with respect to any grants, issuances or sales of any Options, Convertible Securities or rights to purchase stock, warrants, securities or other property to holders of Common Stock, other than an Exempt Issuance, or (C) for determining rights to vote with respect to any Fundamental Transaction, dissolution or liquidation, provided in each case that such information shall be made known to the public prior to or in conjunction with such notice being provided to the Holder, and (iii) at least ten (10) Trading Days prior to the consummation of any Fundamental Transaction. To the extent that any notice provided hereunder constitutes, or contains, material, non-public information regarding the Company or any of its Subsidiaries, the Company shall simultaneously file such notice with the Securities and Exchange Commission (the “Commission”) pursuant to a Current Report on Form 8-K. If the Company or any of its Subsidiaries provides material non-public information to the Holder that is not simultaneously filed in a Current Report on Form 8-K and the Holder has not agreed to receive such material non-public information, the Company hereby covenants and agrees that the Holder shall not have any duty of confidentiality to the Company, any of its Subsidiaries or any of their respective officers, directors, employees, affiliates or agents with respect to, or a duty to any of the foregoing not to trade on the basis of, such material non-public information. It is expressly understood and agreed that the time of execution specified by the Holder in each Exercise Notice shall be definitive and may not be disputed or challenged by the Company.
| 9. | Absence of Trading and Disclosure Restrictions. |
The Company acknowledges and agrees that the Holder is not a fiduciary or agent of the Company and that the Holder shall have no obligation to (a) maintain the confidentiality of any information provided by the Company or (b) refrain from trading any securities while in possession of such information in the absence of a written non-disclosure agreement signed by an officer of the Holder that explicitly provides for such confidentiality and trading restrictions. In the absence of such an executed, written non-disclosure agreement, the Company acknowledges that the Holder may freely trade in any securities issued by the Company, may possess and use any information provided by the Company in connection with such trading activity, and may disclose any such information to any third party.
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| 10. | Amendment and Waiver. |
No provision of this Warrant may be waived, modified, supplemented or amended except in a written instrument signed, in the case of an amendment, by the Company and the Holders holding at least a majority in interest of the Warrants then outstanding or, in the case of a waiver, by the party against whom enforcement of any such waived provision is sought. Any amendment or waiver approved by a majority of the Holders holding at least a majority in interest in the Warrants then outstanding shall be applied to all Warrants. No waiver of any default with respect to any provision, condition or requirement of this Warrant 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.
| 11. | Severability. |
If any provision of this Warrant 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 Warrant so long as this Warrant 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).
| 12. | Governing Law. |
All questions concerning the construction, validity, enforcement and interpretation of this Warrant shall be determined in accordance with the provisions of the Securities Purchase Agreement. THE COMPANY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE TO, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION WITH OR ARISING OUT OF THIS WARRANT OR ANY TRANSACTION CONTEMPLATED HEREBY.
| 13. | Construction; Headings. |
This Warrant shall be deemed to be jointly drafted by the Company and the Holder and shall not be construed against any Person as the drafter hereof. The headings of this Warrant are for convenience of reference and shall not form part of, or affect the interpretation of, this Warrant. Terms used in this Warrant but defined in the other Transaction Documents shall have the meanings ascribed to such terms on the Closing Date (in such other Transaction Documents.
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| 14. | Remedies, Characterization, Other Obligations, Breaches and Injunctive Relief. |
The remedies provided in this Warrant shall be cumulative and in addition to all other remedies available under this Warrant and the other Transaction Documents, at law or in equity (including a decree of specific performance and/or other injunctive relief), and nothing herein shall limit the right of the Holder to pursue actual and consequential damages for any failure by the Company to comply with the terms of this Warrant. The Company covenants to the Holder that there shall be no characterization concerning this instrument other than as expressly provided herein. Amounts set forth or provided for herein with respect to payments, exercises and the like (and the computation thereof) shall be the amounts to be received by the Holder and shall not, except as expressly provided herein, be subject to any other obligation of the Company (or the performance thereof). The Company acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to the Holder and that the remedy at law for any such breach may be inadequate. The Company therefore agrees that, in the event of any such breach or threatened breach, the holder of this Warrant shall be entitled, in addition to all other available remedies, to specific performance and/or temporary, preliminary and permanent injunctive or other equitable relief from any court of competent jurisdiction in any such case without the necessity of proving actual damages and without posting a bond or other security. The Company shall provide all information and documentation to the Holder that is requested by the Holder to enable the Holder to confirm the Company’s compliance with the terms and conditions of this Warrant (including, without limitation, compliance with Section 2 hereof). The issuance of shares and certificates for shares as contemplated hereby upon the exercise of this Warrant shall be made without charge to the Holder or such shares for any issuance tax or other costs in respect thereof, provided that the Company shall not be required to pay any tax which may be payable in respect of any transfer involved in the issuance and delivery of any certificate in a name other than the Holder or its agent on its behalf.
| 15. | Payment of Collection, Enforcement and Other Costs. |
If (a) this Warrant is placed in the hands of an attorney for collection or enforcement or is collected or enforced through any legal proceeding or the holder otherwise takes action to collect amounts due under this Warrant or to enforce the provisions of this Warrant or (b) there occurs any bankruptcy, reorganization, receivership of the company or other proceedings affecting company creditors’ rights and involving a claim under this Warrant, then the Company shall pay the costs incurred by the Holder for such collection, enforcement or action or in connection with such bankruptcy, reorganization, receivership or other proceeding, including, without limitation, attorneys’ fees and disbursements.
| 16. | Transfer. |
This Warrant may be offered for sale, sold, transferred or assigned without the consent of the Company, except as may otherwise be required by applicable securities laws.
| 17. | Certain Definitions. |
In addition to the terms defined elsewhere in this Warrant, capitalized terms that are not otherwise defined herein have the meanings given to such terms in the Securities Purchase Agreement (as defined herein). Additionally, for purposes of this Warrant, the following terms shall have the following meanings:
(a) “Adjustment Right” means any right granted with respect to any securities issued in connection with, or with respect to, any issuance or sale (or deemed issuance or sale in accordance with Section 2) of Common Stock (other than rights of the type described in Section 3 and 4 hereof) that could result in a decrease in the net consideration received by the Company in connection with, or with respect to, such securities (including, without limitation, any cash settlement rights, cash adjustment or other similar rights).
(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 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) “Bid Price” means, for any security as of the particular time of determination, the bid price for such security on the Principal Market as reported by Bloomberg as of such time of determination, or, if the Principal Market is not the principal securities exchange or trading market for such security, the bid price of such security on the principal securities exchange or trading market where such security is listed or traded as reported by Bloomberg as of such time of determination, or if the foregoing does not apply, the bid price of such security in the over-the-counter market on the electronic bulletin board for such security as reported by Bloomberg as of such time of determination, or, if no bid price is reported for such security by Bloomberg as of such time of determination, the average of the bid prices of any market makers for such security as reported in The Pink Open Market (or a similar organization or agency succeeding to its functions of reporting prices) as of such time of determination. If the Bid Price cannot be calculated for a security as of the particular time of determination on any of the foregoing bases, the Bid Price of such security as of such time of determination shall be the fair market value as mutually determined by the Company and the Holder. If the Company and the Holder are unable to agree upon the fair market value of such security, then such dispute shall be resolved in accordance with the procedures in Section 15. All such determinations shall be appropriately adjusted for any stock dividend, stock split, stock combination or other similar transaction during such period.
(d) “Bloomberg” means Bloomberg, L.P.
(e) “Closing Sale Price” means, for any security as of any date, the last closing trade price for such security on the Principal Market, as reported by Bloomberg, or, if the Principal Market begins to operate on an extended hours basis and does not designate the closing trade price, then the last trade price of such security prior to 4:00:00 p.m., New York time, as reported by Bloomberg, or, if the Principal Market is not the principal securities exchange or trading market for such security, the last trade price of such security on the principal securities exchange or trading market where such security is listed or traded as reported by Bloomberg, or if the foregoing does not apply, the last trade price of such security in the over-the-counter market on the electronic bulletin board for such security as reported by Bloomberg, or, if no last trade price is reported for such security by Bloomberg, the average of the ask prices of any market makers for such security as reported in The Pink Open Market (or a similar organization or agency succeeding to its functions of reporting prices). If the Closing Sale Price cannot be calculated for a security on a particular date on any of the foregoing bases, the Closing Sale Price of such security on such date shall be the fair market value as mutually determined by the Company and the Holder. If the Company and the Holder are unable to agree upon the fair market value of such security, then such dispute shall be resolved in accordance with the procedures in Section 15. All such determinations shall be appropriately adjusted for any stock dividend, stock split, stock combination or other similar transaction during such period.
(f) “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 Common Stock.
(g) “Eligible Market” means The New York Stock Exchange, the NYSE American, the Nasdaq Global Select Market, the Nasdaq Global Market, the Nasdaq Capital Market or the Principal Market.
(h) “Event Market Price” means, with respect to any Stock Combination Event Date, the quotient determined by dividing (x) the sum of the VWAP of the Common Stock for each of the five (5) lowest Trading Days during the twenty (20) consecutive Trading Day period ending and including the Trading Day immediately preceding the sixteenth (16th) Trading Day after such Stock Combination Event Date, divided by (y) five (5). All such determinations shall be appropriately adjusted for any stock dividend, stock split, stock combination, recapitalization or other similar transaction during such period.
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(i) “Expiration Date” means the date that is the fifth (5th) anniversary of the Issuance Date or, if such date falls on a day other than a Trading Day or on which trading does not take place on the Principal Market (a “Holiday”), the next date that is not a Holiday.
(j) “Fundamental Transaction” means (A) that the Company shall, directly or indirectly, including through subsidiaries, Affiliates or otherwise, in one or more related transactions, (i) consolidate or merge with or into (whether or not the Company is the surviving corporation) another Subject Entity, or (ii) sell, assign, transfer, convey or otherwise dispose of all or substantially all of the properties or assets of the Company or any of its “significant subsidiaries” (as defined in Rule 1-02 of Regulation S-X) to one or more Subject Entities, or (iii) make, or allow one or more Subject Entities to make, or allow the Company to be subject to or have its Common Stock be subject to or party to one or more Subject Entities making, a purchase, tender or exchange offer that is accepted by the holders of at least either (x) 50% of the outstanding shares of Common Stock, (y) 50% of the outstanding shares of Common Stock calculated as if any shares of Common Stock held by all Subject Entities making or party to, or Affiliated with any Subject Entities making or party to, such purchase, tender or exchange offer were not outstanding; or (z) such number of shares of Common Stock such that all Subject Entities making or party to, or Affiliated with any Subject Entity making or party to, such purchase, tender or exchange offer, become collectively the beneficial owners (as defined in Rule 13d-3 under the 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 Subject Entities whereby all such Subject Entities, individually or in the aggregate, acquire, either (x) at least 50% of the outstanding shares of Common Stock, (y) at least 50% of the outstanding shares of Common Stock calculated as if any shares of Common Stock held by all the Subject Entities making or party to, or Affiliated with any Subject Entity making or party to, such stock purchase agreement or other business combination were not outstanding; or (z) such number of shares of Common Stock such that the Subject Entities become collectively the beneficial owners (as defined in Rule 13d-3 under the 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 Subject Entity individually or the Subject Entities in the aggregate to be or become the “beneficial owner” (as defined in Rule 13d-3 under the 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 shares of Common Stock, (y) at least 50% of the aggregate ordinary voting power represented by issued and outstanding shares of Common Stock not held by all such Subject Entities as of the date of this Warrant calculated as if any shares of Common Stock held by all such Subject Entities were not outstanding, or (z) a percentage of the aggregate ordinary voting power represented by issued and outstanding shares of Common Stock or other equity securities of the Company sufficient to allow such Subject Entities to effect a statutory short form merger or other transaction requiring other stockholders of the Company to surrender their shares of Common Stock without approval of the stockholders 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.
(k) “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.
(l) “Options” means any rights, warrants or options to subscribe for or purchase shares of Common Stock or Convertible Securities.
(m) “Parent Entity” of a Person means an entity that, directly or indirectly, controls the applicable Person and whose common stock or equivalent equity security is quoted or listed on an Eligible Market, or, if there is more than one such Person or Parent Entity, the Person or Parent Entity with the largest public market capitalization as of the date of consummation of the Fundamental Transaction.
(n) “Principal Market” means the OTCQB market operated by OTC Markets Group Inc.
(o) “Subject Entity” means any Person, Persons or Group or any Affiliate or associate of any such Person, Persons or Group.
(p) “Successor Entity” means the Person (or, if so elected by the Holder, the Parent Entity) formed by, resulting from or surviving any Fundamental Transaction or the Person (or, if so elected by the Holder, the Parent Entity) with which such Fundamental Transaction shall have been entered into.
[Signature page follows.]
| 17 |
In Witness Whereof, the Company has caused this Warrant to Purchase Common Stock to be duly executed as of the Issuance Date set out above.
| TITAN ENVIRONMENTAL SOLUTIONS INC. | ||
| By: | ||
| Name: | ||
| Title: | ||
| 18 |
Exhibit A
Exercise Notice
To
Be Executed By The Registered Holder To Exercise This
Warrant To Purchase Common Stock
Titan Environmental Solutions Inc.
The undersigned holder hereby elects to exercise the Warrant to Purchase Common Stock No. _______ (the “Warrant”) of TITAN ENVIRONMENTAL SOLUTIONS INC., a Nevada corporation (the “Company”), as specified below. Capitalized terms used herein and not otherwise defined shall have the respective meanings set forth in the Warrant.
1. Form of Exercise Price. The Holder intends that payment of the Aggregate Exercise Price shall be made as:
☐ a “Cash Exercise” with respect to _________________ Warrant Shares; and/or
☐ a “Cashless Exercise” with respect to _______________ Warrant Shares.
In the event that the Holder has elected a Cashless Exercise with respect to some or all of the Warrant Shares to be issued pursuant hereto, the Holder hereby represents and warrants that (i) this Exercise Notice was executed by the Holder at __________ [a.m.][p.m.] on the date set forth below and (ii) if applicable, the Bid Price as of such time of execution of this Exercise Notice was $________.
2. Payment of Exercise Price. In the event that the Holder has elected a Cash Exercise with respect to some or all of the Warrant Shares to be issued pursuant hereto, the Holder shall pay the Aggregate Exercise Price in the sum of $___________________ to the Company in accordance with the terms of the Warrant.
3. Delivery of Warrant Shares. The Company shall deliver to Holder, or its designee or agent as specified below, __________ shares of Common Stock in accordance with the terms of the Warrant. Delivery shall be made to Holder, or for its benefit, as follows:
☐ Check here if requesting delivery as a certificate to the following name and to the following address:
| Issue to: | |
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☐ Check here if requesting delivery by Deposit/Withdrawal at Custodian as follows:
| DTC Participant: | |
| DTC Number: | |
| Account Number: |
Date: _____________ __,
Name of Registered Holder
| By: | ||
| Name: | ||
| Title: | ||
| Tax ID:____________________________ | ||
| Facsimile:__________________________ | ||
| E-mail Address:_____________________ |
| 20 |
Exhibit B
ACKNOWLEDGMENT
The Company hereby acknowledges this Exercise Notice and hereby directs ______________ to issue the above indicated number of shares of Common Stock in accordance with the Transfer Agent Instructions dated _________, 202_, from the Company and acknowledged and agreed to by _______________.
| TITAN ENVIRONMENTAL SOLUTIONS INC. | ||
| By: | ||
| Name: | ||
| Title: | ||
| 21 |
Exhibit 10.1
SECURITIES PURCHASE AGREEMENT
This Securities Purchase Agreement (this “Agreement”) is dated as of March 29, 2024, between Titan Environmental Solutions Inc., 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, subject to the terms and conditions set forth in this Agreement and pursuant to Section 4(a)(2) of the Securities Act (as defined below), and Rule 506 promulgated thereunder, the Company desires to issue and sell to each Purchaser, and each Purchaser, severally and not jointly, desires to purchase from the Company, securities of the Company as more fully described in this 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 each Purchaser 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 Certificate of Designation (as defined herein), and (b) the following terms have the meanings set forth in this Section 1.1:
“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.
“Beneficial Ownership Limitation” shall have the meaning given thereto in the Warrant, applied in the manner described in the Warrant.
“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 The City of New York are authorized or required by law to remain closed; provided, however, for clarification, commercial banks shall not be deemed to be authorized or required by law to remain closed due to “stay at home”, “shelter-in-place”, “non-essential employee” or any other similar orders or restrictions or the closure of any physical branch locations at the direction of any governmental authority so long as the electronic funds transfer systems (including for wire transfers) of commercial banks in The City of New York are generally are open for use by customers on such day.
“Certificate of Designation” means the Series B Certificate of Designation.
“Closing” means the Initial Closing and the Second Closing, as applicable.
“Closing Date” means the Initial Closing Date and the Second Closing, as applicable.
“Commission” means the United States Securities and Exchange Commission and includes the staff thereof acting on its behalf.
“Common Stock” means the common stock of the Company, par value $0.0001 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 or the Subsidiaries which would entitle the holder thereof to acquire at any time Common Stock, including, without limitation, any debt, preferred stock, right, option, warrant or other instrument that is at any time convertible into or exercisable or exchangeable for, or otherwise entitles the holder thereof to receive, Common Stock.
“Company Counsel” means Pryor Cashman LLP, with offices located at 7 Times Square, New York, NY 10036, Attn: Eric M. Hellige, Esq., email: [email protected].
“Conversion Price” shall have the meaning ascribed to such term in the Certificate of Designation.
“Conversion Shares” shall have the meaning ascribed to such term in the Certificate of Designation.
“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 City time) and before midnight (New York City time) on any Trading Day, 9:01 a.m. (New York City time) on the Trading Day immediately following the date hereof, and (ii) if this Agreement is signed between midnight (New York City time) and 9:00 a.m. (New York City time) on any Trading Day, no later than 9:01 a.m. (New York City time) on the date hereof.
“Effective Date” means the earliest of the date that (a) the initial Registration Statement has been declared effective by the Commission, (b) all of the Underlying Shares have been sold pursuant to Rule 144 or may be sold pursuant to Rule 144 without the requirement for the Company to be in compliance with the current public information required under Rule 144 and without volume or manner-of-sale restrictions, (c) following the one year anniversary of the Initial Closing Date provided that a holder of Underlying Shares is not an Affiliate of the Company, or (d) all of the Underlying Shares may be sold pursuant to an exemption from registration under Section 4(a)(1) of the Securities Act without volume or manner-of-sale restrictions and Company Counsel has delivered to such holders a standing written unqualified opinion that resales may then be made by such holders of the Underlying Shares pursuant to such exemption which opinion shall be in form and substance reasonably acceptable to such holders.
“Evaluation Date” shall have the meaning ascribed to such term in Section 3.1(s).
“Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.
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“Exempt Issuance” means the issuance of (a) shares of Common Stock or Common Stock Equivalents to employees, officers or directors of the Company or any of its Subsidiaries pursuant to an equity award plan duly adopted for such purpose, by a majority of the non-employee members of the Board of Directors or a majority of the members of a committee of non-employee directors established for such purpose for services rendered to the Company or any of its Subsidiaries or pursuant to employee stock purchase plans in existence on the date of this Agreement and described in an SEC Report, (b) the Securities and warrants to the Placement Agents or their designees in connection with the transactions pursuant to this Agreement and any securities issuable upon exercise of warrants issued to the Placement Agents or their designees and any securities upon the exercise or exchange of or conversion of any Securities issued hereunder or such warrants or in connection with the transactions pursuant to this Agreement, (c) securities exercisable or exchangeable for or convertible into shares of Common Stock issued and outstanding on the date of this Agreement, provided that such securities have not been amended since the date of this Agreement to increase the number of such securities or to decrease the exercise price, exchange price or conversion price of such securities (other than as a result of any stock split, reverse stock split, stock dividend or other reclassification or combination of the Common Stock occurring after the date hereof), (d) shares of Common Stock or Common Stock Equivalents to consultants or advisors (or their designees) in lieu of compensation in the aggregate amount of up to $250,000 per calendar year for the first calendar year after the Second Closing only and up to $100,000 per calendar year thereafter (not to exceed 2,500,000 shares of Common Stock or Common Stock Equivalents in the aggregate per calendar year for the first calendar year after the Second Closing only and 1,000,000 shares in the aggregate per calendar year thereafter (appropriately adjusted for any other stock split, reverse stock split, stock dividend or other reclassification or combination of the Common Stock occurring after the date hereof)), for bona fide services provided to the Company or a Subsidiary not in connection with financing transactions; provided that such securities are issued as “restricted securities” (as defined in Rule 144) and carry no registration rights that require or permit the filing of any registration statement in connection therewith during the prohibition period in Section 4.12(a) herein), (e) shares of Common Stock or Common Stock Equivalents to vendors, or landlords not to exceed 500,000 shares of Common Stock or Common Stock Equivalents in the aggregate per calendar year (appropriately adjusted for any other stock split, reverse stock split, stock dividend or other reclassification or combination of the Common Stock occurring after the date hereof), (f) shares issued in connection with that certain proposed transaction with the Target and its members, (g) securities issued pursuant to acquisitions or strategic transactions approved by a majority of the disinterested directors of the Company, 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 sooner than one year after the Effective Date, and 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, (h) securities issued in connection with the Capital Increase, and (i) securities issued in connection with the public offering of the Company’s securities in connection with the Uplisting.
“Exercise Price” means the price, from time to time, at which a share of Common Stock may be acquired upon exercise of a Warrant.
“FCPA” means the Foreign Corrupt Practices Act of 1977, as amended.
“GAAP” shall have the meaning ascribed to such term in Section 3.1(h).
“Indebtedness” shall have the meaning ascribed to such term in Section 3.1(bb).
“Initial Closing” shall have the meaning ascribed to such term in Section 2.1(a).
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“Initial Closing Date” means the Trading Day on which all of the Transaction Documents have been executed and delivered by the applicable parties thereto, and all conditions precedent to (i) the Purchasers’ obligations to pay the Initial Offering Amount and (ii) the Company’s obligations to deliver the Securities purchased at the Initial Closing, in each case, have been satisfied or waived, but in no event later than the second Trading Day following the date hereof.
“Initial Offering Amount” shall have the meaning ascribed to such term in Section 2.1(a).
“Intellectual Property Rights” shall have the meaning ascribed to such term in Section 3.1(o).
“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.
“Lower Price Issuance” shall have the meaning assigned to such term in Section 4.12(c).
“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 Offering Amount” means $9,000,000.
“Maximum Rate” shall have the meaning ascribed to such term in Section 5.17.
“Offering Termination Date” shall have the meaning ascribed to such term in Section 2.1(b).
“Participation Maximum” shall have the meaning ascribed to such term in Section 4.19.
“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.
“Placement Agents” means, collectively, Network 1 Financial Securities, Inc. and Alexander Capital, L.P.
“Preferred Stock” means up to 900,000 shares of Series B Preferred Stock issued hereunder having the rights, preferences and privileges set forth in the Series B Certificate of Designation.
“Proceeding” means an action, claim, suit, investigation or proceeding (including, without limitation, an informal investigation or partial proceeding, such as a deposition), whether commenced or threatened.
“Public Information Failure” shall have the meaning ascribed to such term in Section 4.3(b).
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“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.
“Registration Rights Agreement” means the Registration Rights Agreement, dated on or about the date hereof, among the Company and the Purchasers, in the form of Exhibit B attached hereto.
“Registration Statement” means a registration statement meeting the requirements set forth in the Registration Rights Agreement and covering the resale of the Underlying Shares by each Purchaser as provided for in the Registration Rights Agreement.
“Required Approvals” shall have the meaning ascribed to such term in Section 3.1(e).
“Required Minimum” means, as of any date, the maximum aggregate number of shares of Common Stock then potentially issuable in the future at the Conversion Price and Exercise Prices in effect on such date pursuant to the Transaction Documents, including any Underlying Shares issuable upon exercise in full of all Warrants or conversion in full of all shares of Preferred Stock at the Conversion Price and Exercise Prices in effect on such date, ignoring any conversion or exercise limits set forth therein.
“Rule 144” means Rule 144 promulgated by the Commission pursuant to the Securities Act, as such Rule may be amended and 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.
“Second Closing” shall have the meaning ascribed to such term in Section 2.1(b).
“Second Closing Date” means the Trading Day on which all of the Transaction Documents have been executed and delivered by the applicable parties thereto, and all conditions precedent to (i) the Purchasers’ obligations to pay the Second Offering Amount and (ii) the Company’s obligations to deliver the Securities purchased at the Second Closing, in each case, have been satisfied or waived, but in no event later than the Offering Termination Date.
“Second Offering Amount” shall have the meaning ascribed to such term in Section 2.1(b).
“SEC Reports” shall have the meaning ascribed to such term in Section 3.1(h).
“Securities” means the Preferred Stock, the Warrants, the Warrant Shares and the Underlying Shares.
“Securities Act” means the Securities Act of 1933, and the rules and regulations promulgated thereunder.
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“Series B Certificate of Designation” means the Certificate of Designation of Preferences, Rights and Limitations of Series B Convertible Preferred Stock to be filed prior to the Initial Closing by the Company with the Secretary of State of Nevada, in the form of Exhibit A attached hereto.
“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 to be paid for the Preferred Stock and Warrants purchased hereunder as specified below such Purchaser’s name on the signature page of this Agreement and next to the heading “Subscription Amount,” in United States dollars and in immediately available funds.
“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.
“Subsequent Financing” shall have the meaning ascribed to such term in Section 4.19(a).
“Subsequent Financing Notice” shall have the meaning ascribed to such term in Section 4.19(b).
“Target” means the entity listed on Schedule A hereto.
“Trading Day” means a day on which the principal Trading Market is open for trading.
“Trading Hours” means 9:30 a.m. to 4:00 p.m. on any Trading Day.
“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, the OTCQB Market quotation system of the OTC Market Group (“OTCQB”) or OTCQX (or any successors to any of the foregoing). As of the date of this Agreement, the OTCQB is the principal trading market for the Common Stock.
“Transaction Documents” means this Agreement, the Certificate of Designation, the Warrants, the Registration Rights Agreement, all exhibits and schedules hereto and thereto and any other agreements executed in connection with the transactions contemplated hereunder.
“Transfer Agent” means Equity Stock Transfer, LLC. Equity Stock Transfer, LLC’s address is 237 West 37th Street, Suite 602, New York, NY 10018 and its telephone number is (212) 575-5757.
“Underlying Shares” means the shares of Common Stock issued and issuable upon conversion or redemption of the Preferred Stock and upon exercise of the Warrants.
“Uplisting” means the listing of the Common Stock on an Uplisting Market.
“Uplisting Effective Date” means the Trading Day on which the Common Stock commences trading on an Uplisting Market.
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“Uplisting Market” means any of the NYSE American, the Nasdaq Capital Market, the Nasdaq Global Market, the Nasdaq Global Select Market or the New York Stock Exchange, the Cboe or their respective successors.
“Variable Rate Transaction” shall have the meaning ascribed to such term in Section 4.12(b).
“VWAP” means, for any date, the price determined by the first of the following clauses that applies: (a) if the Common Stock is then listed or quoted on a Trading Market, the daily volume weighted average price of the Common Stock for such date (or the nearest preceding date) on the Trading Market on which the Common Stock is then listed or quoted as reported by Bloomberg L.P. (based on a Trading Day from 9:30 a.m. (New York City time) to 4:02 p.m. (New York City time)), (b) if OTCQB or OTCQX is the Trading Market, the volume weighted average price of the Common Stock for such date (or the nearest preceding date) on OTCQB or OTCQX as applicable, (c) if the Common Stock is not then listed or quoted for trading on any Trading Market and if prices for the Common Stock are then reported on the Pink Open Market (or a similar organization or agency succeeding to its functions of reporting prices), the most recent bid price per share of the Common Stock so reported, or (d) in all other cases, the fair market value of a share of Common Stock as determined by an independent appraiser selected in good faith by the Purchasers of a majority in interest of the Preferred Stock then outstanding and reasonably acceptable to the Company, the fees and expenses of which shall be paid by the Company.
“Warrants” means Common Stock purchase warrants delivered to the Purchasers at a Closing in accordance with Section 2.2(a) hereof, in the form of Exhibit C attached hereto, which Warrants shall be exercisable immediately and have a term of exercise equal of five years.
“Warrant Shares” means the shares of Common Stock issuable upon exercise of the Warrants.
ARTICLE II.
PURCHASE AND SALE
2.1 Closings.
(a) 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 as of the Initial Closing Date, the Company agrees to sell, and the Purchasers, severally and not jointly, agree to purchase, not more than the Maximum Offering Amount of shares of Preferred Stock with an aggregate Stated Value for each Purchaser equal to such Purchaser’s Subscription Amount as set forth on the signature page hereto executed by such Purchaser, and Warrants as determined pursuant to Section 2.2(a) (the “Initial Closing Amount”). Each Purchaser shall deliver to the Company, via wire transfer, immediately available funds equal to such Purchaser’s Subscription Amount and the Company shall deliver to each Purchaser its respective shares of Preferred Stock and Warrants as determined pursuant to Section 2.2(a), and the Company and each Purchaser shall deliver the other items set forth in Section 2.2 deliverable at the Initial Closing (as defined below). Upon satisfaction of the covenants and conditions set forth in Sections 2.2 and 2.3, the closing of the Initial Closing Amount (the “Initial Closing”) shall occur at the offices of Company Counsel or such other location as the parties shall mutually agree on the Initial Closing Date.
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(b) In the event that shares of Preferred Stock with an aggregate Stated Value equal to the Maximum Offering Amount are not sold on the Initial Closing Date, the Company shall have the right to conduct the Second Closing at any time on or prior to 5:00 p.m. (New York time) on May 15, 2024 (the “Offering Termination Date”) pursuant to which the Company may sell, and one or more investors who become “Purchasers” after the date hereof may, severally and not jointly, agree to purchase, shares of Preferred Stock with an aggregate Stated Value for each Purchaser equal to such Purchaser’s Subscription Amount as set forth on the signature page hereto executed by such Purchaser, and Warrants as determined pursuant to Section 2.2(a) in an aggregate amount up to the difference between the Maximum Offering Amount and the Initial Closing Amount (the “Second Closing Amount”). Each Purchaser shall deliver to the Company, via wire transfer, immediately available funds equal to such Purchaser’s Subscription Amount and the Company shall deliver to each Purchaser its respective shares of Preferred Stock and Warrants as determined pursuant to Section 2.2(a), and the Company and each Purchaser shall deliver the other items set forth in Section 2.2 deliverable at the Second Closing (as defined below). Upon satisfaction of the covenants and conditions set forth in Sections 2.2 and 2.3, the closing of the Second Closing Amount (the “Second Closing”) shall occur at the offices of Company Counsel or such other location as the parties shall mutually agree on the Second Closing Date. From and after the Offering Termination Date, the Company shall not have the right to sell any additional shares of Preferred Stock pursuant to this Agreement.
2.2 Deliveries.
(a) On or prior to the 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 the Initial Closing, copies of lock-up/leak-out agreements in a form acceptable to the Placement Agents from each executive officer or director of the Company, each 10% stockholder of the Company and each of Cavalry Fund I LP, Eleven 11 Management LLC and Keystone Capital Partners LLC (and any of their respective affiliates that own capital stock of the Company);
(iii) reserved;
(iv) as to each Closing, book entry evidence from the Transfer Agent of the issuance of the number of shares of Preferred Stock equal to such Purchaser’s Subscription Amount divided by the Stated Value, registered in the name of such Purchaser and, as to the Initial closing, evidence of the filing and acceptance of the Certificate of Designation from the Secretary of State of Nevada;
(v) as to each Closing, a Warrant registered in the name of such Purchaser exercisable for a number of shares of Common Stock equal to 50% of such Purchaser’s Conversion Shares, with an Exercise Price equal to $0.06 per share, subject to adjustment as specified therein;
(vi) as to the Initial Closing, the Registration Rights Agreement duly executed by the Company;
(ix) as to the Initial Closing, a certificate executed on behalf of the Company by its Principal Executive Officer or Chief Executive Officer (each as defined in the Exchange Act) of the Company, dated as of the Initial Closing Date, in which such officer shall certify that the conditions set forth in Section 2.3(b) have been fulfilled; and
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(x) as to the Initial Closing, a certificate executed on behalf of the Company by its Secretary’s certificate containing (i) copies of the text of the resolutions by which the corporate action on the part of the Company necessary to approve this Agreement and the other Transaction Documents and the transactions and actions contemplated hereby and thereby, which shall be accompanied by a certificate of the corporate secretary or assistant corporate secretary of Company dated as of the Initial Closing Date certifying to the Purchasers that such resolutions were duly adopted and have not been amended or rescinded, (ii) an incumbency certificate dated as of the Initial Closing Date executed on behalf of Company by its corporate secretary or one of its assistant corporate secretaries certifying the office of each officer of Company executing this Agreement, or any other agreement, certificate or other instrument executed pursuant hereto, and (iii) copies of (A) the Company’s Certificate of Incorporation and bylaws in effect on the Initial Closing Date, and (B) the certificate evidencing the good standing of Company as of a day within five Business Days prior to the Initial Closing Date.
(b) On or prior to each 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) to the Company, such Purchaser’s Subscription Amount by wire transfer;
(iii) the Registration Rights Agreement duly executed by such Purchaser; and
(iv) a completed Investor Questionnaire duly executed by each 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) on the applicable 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 applicable Closing Date shall have been performed without regard to materiality which for purposes of this Section 2.3(a)(ii) shall mean an impact of $25,000 or more; 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 the Purchasers 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 the applicable Closing Date shall have been performed without regard to materiality which for purposes of this Section 2.3(b)(ii) shall mean an impact of $25,000 or more;
(iii) the delivery by the Company of the items set forth in Section 2.2(a) of this Agreement;
(iv) there shall have been no Material Adverse Effect with respect to the Company since the date hereof; and
(v) from the date hereof to the applicable Closing Date, trading in the Common Stock shall not have been suspended by the Commission or the Company’s principal Trading Market and, at any time from the date hereof 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 wide-spread national public health emergency 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 the applicable Closing.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES
3.1 Representations and Warranties of the Company. Except as set forth in the Disclosure Schedules, which Disclosure Schedules 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:
(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, except as set forth on Schedule 3.1(o), 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 each of the Subsidiaries is an entity duly incorporated or otherwise organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation or organization, with the requisite power and authority to own and use its properties and assets and to carry on its business as currently conducted. Neither the Company nor any Subsidiary is in violation nor default of any of the provisions of its respective certificate or articles of incorporation, bylaws or other organizational or charter documents. Each of the Company and the Subsidiaries is duly qualified to conduct business and is in good standing as a foreign corporation or other entity in each jurisdiction in which the nature of the business conducted or property owned by it makes such qualification necessary, except where the failure to be so qualified or in good standing, as the case may be, could not have or reasonably be expected to result in: (i) a material adverse effect on the legality, validity or enforceability of any Transaction Document, (ii) a material adverse effect on the results of operations, assets, business, prospects or condition (financial or otherwise) of the Company and the Subsidiaries, taken as a whole, 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 Proceeding 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 has 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 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 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 or any Subsidiary’s certificate or articles of incorporation, bylaws or other organizational or charter documents, or (ii) conflict with, or constitute a default (or an event that with notice or lapse of time or both would become a default) under, result in the creation of any Lien upon any of the properties or assets of the Company or any Subsidiary, or give to others any rights of termination, amendment, 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 or Subsidiary debt or otherwise) or other understanding to which the Company or any Subsidiary is a party or by which any property or asset of the Company or any Subsidiary is bound or affected, or (iii) subject to the accuracy of the representations and warranties of the Purchasers, conflict with or result in a violation of any law, rule, regulation, order, judgment, injunction, decree or other restriction of any court or governmental authority to which the Company or a Subsidiary is subject (including federal and state securities laws and regulations), or by which any property or asset of the Company or a Subsidiary is bound or affected; except in the case of each of clauses (ii) and (iii), such as could not have or reasonably be expected to result in a Material Adverse Effect.
(e) Filings, Consents and Approvals. Assuming the accuracy of the representations and warranties of the Purchasers, 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 of this Agreement, (ii) filings with the Commission pursuant to the Registration Rights Agreement, (iii) the notice and/or application(s) to each applicable Trading Market for the issuance and sale of the Securities and the listing of the Underlying Shares for trading thereon in the time and manner required thereby, and (iv) the filing of Form D with the Commission and such filings as are required to be made under applicable state securities laws (collectively, the “Required Approvals”).
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(f) Issuance of the Securities. The Preferred Stock and 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 arising under applicable securities laws. The Company has reserved from its duly authorized capital stock a number of shares of Common Stock for issuance of the Underlying Shares at least equal to the Required Minimum on the date hereof.
(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, to the extent known to the Company, the number of shares of Common Stock owned beneficially, and of record, by Affiliates of the Company and beneficial holders of more than 5% of the Company’s Common Stock as of the date hereof. Except as set forth on Schedule 3.1(g), the Company has not issued any capital stock since its most recently filed periodic report under the Exchange Act, other than pursuant to the Company’s equity award 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 disclosed in 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 the capital stock of any Subsidiary, or, except as described on Schedule 3.1(g), contracts, commitments, understandings or arrangements by which the Company or any Subsidiary is or may become bound to issue additional shares of Common Stock or Common Stock Equivalents or capital stock of any Subsidiary. The issuance and sale of the Securities will not obligate the Company or any Subsidiary to issue shares of Common Stock or other securities to any Person (other than the Purchasers and the Placement Agents and their respective related parties). There are no outstanding securities or instruments of the Company or any Subsidiary 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 or any Subsidiary, other than customary adjustments in the event of any stock split, reverse stock split, stock dividend or other reclassification or combination of the Common Stock occurring after the date hereof. There are no outstanding securities or instruments of the Company or any Subsidiary that contain any redemption or similar provisions, and there are no contracts, commitments, understandings or arrangements by which the Company or any Subsidiary is or may become bound to redeem a security of the Company or such Subsidiary. 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 further approval or authorization of any stockholder, the Board of Directors or others is required for the issuance and sale of the Securities. Except as provided in the Transaction Documents, 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.
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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, for the two years preceding the date hereof (or such shorter period as the Company was required by law or regulation to file such material) (the foregoing materials, including the exhibits thereto and documents incorporated by reference therein, being collectively referred to herein as the “SEC Reports”) on a timely basis or has received a valid extension of such time of filing and has filed any such SEC Reports prior to the expiration of any such extension. Except as amended prior to the date hereof, 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 except as amended prior to the date hereof 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 Company has previously been an issuer defined in Rule 144(i)(1) under the Securities Act. The Company is no longer an issuer defined in Rule 144(i)(1) under the Securities Act and has not been such an issuer at any time during the past two years. The financial statements of the Company included in the SEC Reports as amended prior to the date hereof comply in all material respects with applicable accounting requirements and the rules and regulations of the Commission with respect thereto as in effect at the time of filing as subsequently amended. 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.
(i) Material Changes; Undisclosed Events, Liabilities or Developments. Since the date of the latest audited financial statements included within the SEC Reports, except as set forth on Schedule 3.1(i), (i) there has been no event, occurrence or development that has had or that could 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 Commission, (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 equity award plans. The Company does not have pending before the Commission any request for confidential treatment of information. Except for the issuance of the Securities contemplated by this Agreement and the consummation of the other transactions contemplated hereby and by the other Transaction Documents or as set forth 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 set forth on Schedule 3.1(j), there is no action, suit, inquiry, notice of violation, proceeding or investigation pending or, to the knowledge of the Company, threatened against or affecting the Company, any Subsidiary or any of their respective properties before or by any court, arbitrator, governmental or administrative agency or regulatory authority (federal, state, county, local or foreign) (collectively, an “Action”). None of the Actions set forth on Schedule 3.1(j), (i) adversely affects or challenges the legality, validity or enforceability of any of the Transaction Documents or the Securities or (ii) could, if there were an unfavorable decision, have or reasonably be expected to result in a Material Adverse Effect. Neither the Company nor any Subsidiary, nor any director or officer thereof, is or has been the subject of any Action involving a claim of violation of or liability under federal or state securities laws or a claim of breach of fiduciary duty. There has not been, nor is there any pending or contemplated, any investigation or inquiry by the Commission involving the Company or any current or, to the Company’s knowledge, former director or officer of the Company. The Commission has not issued any stop order or other order suspending the effectiveness of any registration statement filed by the Company or any Subsidiary under the Exchange Act or the Securities Act.
(k) Labor Relations. No labor dispute exists or, to the knowledge of the Company, is imminent with respect to any of the employees of the Company, which could reasonably be expected to result in a Material Adverse Effect. None of the Company’s or its Subsidiaries’ employees is a member of a union that relates to such employee’s relationship with the Company or such Subsidiary, and neither the Company nor any of its Subsidiaries is a party to a collective bargaining agreement, and the Company and its Subsidiaries believe that their relationships with their employees are good. To the knowledge of the Company, no executive officer of the Company or any Subsidiary, 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 or any of its Subsidiaries to any liability with respect to any of the foregoing matters. The Company and its Subsidiaries are in compliance with all 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 could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. There is no workmen’s compensation liability matter, employment-related charge, complaint, grievance, investigation, inquiry or obligation of any kind pending, or to the Company’s knowledge, threatened, relating to an alleged violation or breach by the Company or its Subsidiaries of any law, regulation or contract that could, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. The Company has no reason to believe that any individual may commence an Action or file a claim with any governmental authority against the Company alleging sexual harassment or any type of discrimination or violation of any Laws.
(l) Compliance. Neither the Company nor any Subsidiary: (i) is 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 or any Subsidiary under), nor has the Company or any Subsidiary 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 has not had and could not reasonably be expected to result in a Material Adverse Effect.
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(m) Environmental Laws. The Company and its Subsidiaries (i) are 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 could be reasonably expected to have, individually or in the aggregate, a Material Adverse Effect.
(n) Regulatory Permits. The Company and the Subsidiaries possess all certificates, authorizations and permits issued by the appropriate federal, state, local or foreign regulatory authorities necessary to conduct their respective businesses as described in the SEC Reports, except where the failure to possess such certificates, authorizations or permits (individually or in the aggregate) could not reasonably be expected to result in a Material Adverse Effect (“Material Permits”), and neither the Company nor any Subsidiary has received any notice of proceedings relating to the revocation or modification of any Material Permit. There is no agreement, commitment, judgment, injunction, order or decree binding upon the Company or any of its Subsidiaries or to which the Company or any of its Subsidiaries is a party which has or would reasonably be expected to have the effect of prohibiting or materially impairing any business practice of the Company or any of its Subsidiaries, any acquisition of property by the Company or any of its Subsidiaries or the conduct of business by the Company or any of its Subsidiaries as currently conducted other than such effects, individually or in the aggregate, which have not had and would not reasonably be expected to have a Material Adverse Effect on the Company or any of its Subsidiaries.
(o) Title to Assets. Except as described in the SEC Reports, the Company and the Subsidiaries have 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 them that is material to the business of the Company and the Subsidiaries, 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 and the Subsidiaries, (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, or (iii) Liens set forth on Schedule 3.1(o). Any real property and facilities held under lease by the Company and the Subsidiaries are held by them under valid, subsisting and enforceable leases with which the Company and the Subsidiaries are in compliance in all material respects.
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(p) Intellectual Property. The Company and the Subsidiaries have, or have 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 could reasonably be expected to have a Material Adverse Effect (collectively, the “Intellectual Property Rights”). Neither the Company nor any Subsidiary has 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 (2) years from the date of this Agreement. Neither the Company nor any Subsidiary has 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 has not had and could not reasonably be expected to 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 that has had or could reasonably be expected to have a Material Adverse Effect. The Company and its Subsidiaries have taken security measures the Company deems to be reasonable, to protect the secrecy, confidentiality and value of all of their intellectual properties, except where failure to do so could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.
(q) Insurance. The Company and the Subsidiaries are insured by insurers of recognized financial responsibility against such losses and risks and in such amounts as the Company reasonably believes are prudent and customary in the businesses in which the Company and the Subsidiaries are engaged, including, but not limited to, directors and officers insurance coverage. Neither the Company nor any Subsidiary has any reason to believe that it will not be able to renew its existing insurance coverage as and when such coverage expires or to obtain similar coverage from similar insurers as may be necessary to continue its business without a significant increase in cost.
(r) Transactions with Affiliates and Employees. Except as set forth on Schedule 3.1(r), none of the officers or directors of the Company or any Subsidiary and, to the knowledge of the Company, none of the employees of the Company or any Subsidiary is presently a party to any transaction with the Company or any Subsidiary (other than for services as employees, officers and directors), including any contract, agreement or other arrangement providing for the furnishing of services to or by, providing for rental of real or personal property to or from, 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 award agreements under any equity award plan of the Company.
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(s) Sarbanes-Oxley; Internal Accounting Controls. The Company and the Subsidiaries are in compliance in all material respects 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 Commission thereunder that are effective as of the date hereof and as of the Initial 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 Commission’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. No brokerage or finder’s fees or commissions are or will be payable by the Company or any Subsidiary 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 except to the Placement Agents. The Purchasers shall have no obligation with respect to any fees or with respect to any claims made by or on behalf of other Persons for fees of a type contemplated in this Section that may be due in connection with the transactions contemplated by the Transaction Documents as a result of any action by the Company or any of its Subsidiaries.
(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. Except as described on Schedule 3.1(w), other than each of the Purchasers, no Person has any right to cause the Company or any Subsidiary to effect the registration under the Securities Act of any securities of the Company or any Subsidiary.
(x) Listing and Maintenance Requirements. The Common Stock is registered pursuant to Section 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 Commission is contemplating terminating such registration. Except as set forth on Schedule 3.1(x), 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 has 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 could 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 issued and sold to them by the Company.
(z) Disclosure. Except with respect to the material terms and conditions of the transactions contemplated by the Transaction Documents or information provided under a non-disclosure and confidentiality agreement between the Company and a Purchaser or an affiliate of a Purchaser, 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 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 the Purchasers’ 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 quoted.
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(bb) Solvency. Based on the consolidated financial condition of the Company as of the Initial Closing Date, after giving effect to the receipt by the Company of the proceeds from the sale of the Securities hereunder at the Initial Closing, (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 Initial Closing Date. The Company’s balance sheet as of September 30, 2023, included in the SEC Reports (as updated by Schedule 3.1(bb)) sets forth as of the date hereof all outstanding secured and unsecured Indebtedness of the Company or any Subsidiary, or for which the Company or any Subsidiary has commitments. For the purposes of this Agreement, “Indebtedness” means (x) any liabilities for borrowed money or amounts owed in excess of $50,000 (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 in excess of $50,000 due under leases required to be capitalized in accordance with GAAP. Neither the Company nor any Subsidiary is in default with respect to any Indebtedness.
(cc) Tax Status. Except for matters that have not had and would not, individually or in the aggregate, 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, except for such amounts as are in dispute and for which the Company and its Subsidiaries have established adequate reserved therefor in accordance with GAAP, 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, except in each case for such amounts as are in dispute and for which the Company and its Subsidiaries have established adequate reserved therefor in accordance with GAAP.
(dd) 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.
(ee) 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.
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(ff) Accountants. The Company’s accounting firm is set forth on Schedule 3.1(ff) of the Disclosure Schedules. To the knowledge and belief of the Company, such accounting firm (i) is a registered public accounting firm as required by the Exchange Act and (ii) has expressed its opinion with respect to the financial statements included in the Company’s Annual Report for the fiscal year ending December 31, 2023.
(gg) Seniority. The Company has not authorized or issued any shares of capital stock that are senior to or pari passu with the Preferred Stock in right of payment, whether with respect to dividends or upon liquidation or dissolution, or otherwise.
(hh) 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 could affect the Company’s ability to perform any of its obligations under any of the Transaction Documents.
(ii) 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.
(jj) Acknowledgment Regarding Purchaser’s Trading Activity. Anything in this Agreement or elsewhere herein to the contrary notwithstanding (except for Sections 3.2(g) and 4.15 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, may presently 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) could 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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(kk) 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, other than, in the case of clauses (ii) and (iii), except as set forth on Schedule 3.1(t).
(ll) Form S-3 Eligibility. The Company is not eligible to register the resale of the Underlying Shares for resale by the Purchasers on Form S-3 promulgated under the Securities Act.
(mm) Stock Option Plans. Each stock option granted by the Company under the Company’s stock option plan was granted (i) in accordance with the terms of the Company’s stock option plan and (ii) except as described on Schedule 3.1(mm), with an exercise price at least equal to the fair market value of the Common Stock on the date such stock option would be considered granted under GAAP and applicable law. No stock option granted under the Company’s stock option plan has been backdated. The Company has not knowingly granted, and there is no and has been no Company policy or practice to knowingly grant, stock options prior to, or otherwise knowingly coordinate the grant of stock options with, the release or other public announcement of material information regarding the Company or its Subsidiaries or their financial results or prospects.
(nn) Office of Foreign Assets Control. Neither the Company nor any Subsidiary nor, to the Company’s knowledge, any director, officer, employee 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”).
(oo) 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.
(pp) Bank Holding Company Act. Neither the Company nor any of its Subsidiaries is subject to the Bank Holding Company Act of 1956, as amended (the “BHCA”) and to regulation by the Board of Governors of the Federal Reserve System (the “Federal Reserve”). Neither the Company nor any of its Subsidiaries 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 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.
(qq) 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 or Proceeding by or before any court or governmental agency, authority or body or any arbitrator involving the Company or any Subsidiary with respect to the Money Laundering Laws is pending or, to the knowledge of the Company or any Subsidiary, threatened.
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(rr) 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, any of its predecessors, any affiliated issuer, any director, executive officer, other officer 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 the Purchasers a copy of any disclosures provided thereunder.
(ss) Other Covered Persons. Other than as set forth on Schedule 3.1(t), 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.
(tt) Notice of Disqualification Events. The Company will notify the Purchasers and the Placement Agents in writing, prior to the applicable 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.
(uu) Shell Status. As of the date of this Agreement and the applicable Closing Date, the Company is not a “shell company” (as defined in Rule 405 of the Securities Act).
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 applicable 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 the 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.
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(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 any shares of Preferred Stock, 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 is not required to be registered as a broker-dealer under Section 15 of the Exchange Act. Such Purchaser has the authority and is duly and legally qualified to purchase and own the Securities. Such Purchaser is able to bear the risk of such investment for an indefinite period and to afford a complete loss thereof. Such Purchaser has provided the information in the Accredited Investor Questionnaire attached hereto as Exhibit D (the “Investor Questionnaire”). The information set forth on the signature pages hereto and the Investor Questionnaire regarding such Purchaser is true and complete in all respects. Except as disclosed in the Investor Questionnaire, such Purchaser has had no position, office or other material relationship within the past three years with the Company or Persons (as defined below) known to such Purchaser to be affiliates of the Company, and is not a member of the Financial Industry Regulatory Authority or an “associated person” (as such term is defined under the FINRA Membership and Registration Rules Section 1011).
(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. In connection with the issuance of the Securities to such Purchaser, neither of the Placement Agent nor any of their respective Affiliates has acted as a financial advisor or fiduciary to such Purchaser.
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(g) Certain Transactions and Confidentiality. Other than consummating the transactions contemplated hereunder, such Purchaser has not, nor has any Person acting on behalf of or pursuant to any understanding with such Purchaser, directly or indirectly executed any purchases or sales, including Short Sales, of the securities of the Company during the period commencing as of the time that such Purchaser first received a term sheet (written or oral) from the Company or any other Person representing the Company setting forth the material terms of the transactions contemplated hereunder and ending immediately prior to the execution hereof. 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 representation 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. Other than to other Persons party to this Agreement or to such Purchaser’s representatives, including, without limitation, its officers, directors, partners, legal and other advisors, employees, agents and Affiliates, such Purchaser has maintained the confidentiality of all disclosures made to it in connection with this transaction (including the existence and terms of this transaction). Notwithstanding the foregoing, for the avoidance of doubt, nothing contained herein shall constitute a representation or warranty, or preclude any actions, with respect to locating or borrowing shares in order to effect Short Sales or similar transactions in the future.
(h) Purchasers in the Second Closing. The Purchaser, if and to the extent that it purchases Securities in the Second Closing, represents that it (i)(A) has a substantive, pre-existing relationship with the Company or (B) had direct contact by the Company or a Placement Agent outside of the offering of the Securities contemplated by this Agreement, and (ii) did not contact the Company or a Placement Agent or become interested in the offering of the Securities contemplated by this Agreement as a result of reading or otherwise being aware of any press release or any other public disclosure disclosing the terms of this offering.
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. Notwithstanding the foregoing, for the avoidance of doubt, nothing contained herein shall constitute a representation or warranty, or preclude any actions, with respect to locating or borrowing shares in order to effect Short Sales or similar transactions in the future.
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, Rule 144, to the Company, 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 the Registration Rights Agreement and shall have the rights and obligations of a Purchaser under this Agreement and the Registration Rights Agreement with respect to the transferred Securities.
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(b) Each Purchaser agrees to the imprinting, so long as is required by this Section 4.1, of a legend on any of its Securities in the following form:
[NEITHER] THIS SECURITY [NOR THE SECURITIES INTO WHICH THIS SECURITY IS [EXERCISABLE] [CONVERTIBLE]] HAS [NOT] BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS. THIS SECURITY [AND THE SECURITIES ISSUABLE UPON [EXERCISE] [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 pledge or 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 pursuant to the Registration Rights Agreement, 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 to appropriately amend the list of Selling Stockholders (as defined in the Registration Rights Agreement) thereunder.
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(c) Book entry receipts evidencing the Underlying Shares shall not contain any legend (including the legend set forth in Section 4.1(b) hereof): (i) while a registration statement (including the Registration Statement) covering the resale of such security is effective under the Securities Act, (ii) following any sale of such Underlying Shares pursuant to Rule 144, (iii) if such Underlying Shares are eligible for sale under Rule 144, or (iv) following any sale of Underlying Shares of a Purchaser, after such Purchaser has provided the Company with a legal opinion of counsel reasonably acceptable to Company that such sale is exempt from the registration requirements of the Securities Act. The Company shall cause its counsel, at the Company’s expense, to issue a legal opinion to the Transfer Agent promptly after the Effective Date, and on each date a registration statement is declared effective by the Commission, if required by the Transfer Agent to effect the removal of the legend hereunder, or if such legal opinion is requested by a Purchaser for itself, to the Purchaser upon payment of such counsel’s reasonable and customary fee therefor. If all or any shares of Preferred Stock are converted or any portion of a Warrant is exercised (i) at a time when there is an effective registration statement to cover the resale of the Underlying Shares, (ii) if such Underlying Shares may be sold under Rule 144 and the Company is then in compliance with the current public information required under Rule 144, (iii) if the Underlying Shares may be sold under Rule 144 without the requirement for the Company to be in compliance with the current public information requirement under Rule 144 as to such Underlying Shares and without volume or manner-of-sale restrictions, or (iv) if the Underlying Shares of a Purchaser may be sold pursuant to an exemption from the registration requirements of the Securities Act by such Purchaser, after such Purchaser has provided the Company with a legal opinion of counsel reasonably acceptable to Company that such sale is exempt from the registration requirements of the Securities Act, then such Underlying Shares shall be issued free of all legends. The Company agrees that following such time as such legend is no longer required under this Section 4.1(c) with respect to Underlying Shares of a particular Purchaser, it will, no later than the earlier of (i) two (2) Trading Days and (ii) the number of Trading Days comprising the Standard Settlement Period (as defined below) following the delivery by such Purchaser to the Transfer Agent of a request for the issuance of Underlying Shares without a restrictive legend (such date, the “Legend Removal Date”), deliver or cause to be delivered to such Purchaser a shares that do not bear any restrictive or other legends. 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. Underlying Shares subject to legend removal hereunder shall be transmitted by the Transfer Agent to the Purchaser by crediting the account of the Purchaser’s prime broker with the Depository Trust Company System as directed by such Purchaser. As used herein, “Standard Settlement Period” means the standard settlement period, expressed in a number of Trading Days, on the Company’s primary Trading Market with respect to the Common Stock as in effect on the date of delivery of a certificate representing Underlying Shares, as applicable, issued with a restrictive legend.
(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 higher of the VWAP of the Common Stock on the date such Securities are submitted to the Transfer Agent and the Stated Value of the Preferred Stock which was converted to cause the issuance of such Underlying Shares) 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 (5) 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 and (ii) if the Company fails to (a) issue and deliver (or cause to be delivered) to a Purchaser by the Legend Removal Date Underlying Shares that are 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 reasonable out-of-pocket expenses, if any) (the “Buy-In Price”) over the product of (x) such number of Underlying Shares that the Company was required to deliver to such Purchaser by the Legend Removal Date 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 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 only (i) pursuant to an effective registration statement which it then available for sales of such Securities and in accordance with the plan of distribution contained therein and in accordance with any applicable prospectus delivery requirements, or an exemption from such delivery requirements, (ii) in compliance with the requirements of Rule 144 or (iii) pursuant to another exemption from registration as evidenced by an opinion of counsel selected by the Purchaser 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. Each Purchaser 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 agreement and that the Company’s counsel shall be entitled to rely on this agreement in providing the opinion specified in Section 4.1(c).
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 later of the time that (i) no Purchaser owns any Securities or (ii) the Warrants have expired, 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; provided, however, that the provisions of this Section 4.3(a) shall cease to be effective upon the consummation of a Fundamental Transaction which results in the Company no longer being required to file such reports.
(b) At any time during the period commencing from the six month anniversary of the Initial Closing Date and ending at such time that all of the Securities have either been sold by the Purchasers or may be sold by the Purchasers without the requirement for the Company to be in compliance with Rule 144(c)(1) and otherwise without restriction or limitation pursuant to Rule 144, if the Company (i) shall fail for any reason to satisfy the current public information requirement under Rule 144(c) or (ii) becomes an issuer described in Rule 144(i)(1)(i), and the Company shall fail to satisfy any condition set forth in Rule 144(i)(2) (a “Public Information Failure”) then, in addition to such Purchaser’s other available remedies, the Company shall pay to a Purchaser, in cash, as partial liquidated damages and not as a penalty, by reason of any such delay in or reduction of its ability to sell the Securities, an amount in cash equal to one percent (1.0%) of the aggregate Subscription Amount of such Purchaser’s Securities on the day of a Public Information Failure and on every thirtieth (30th) day (pro rated for periods totaling less than thirty days) thereafter until the earlier of (a) the date such Public Information Failure is cured and (b) such time that such public information is no longer required for the Purchasers to transfer the Underlying Shares pursuant to Rule 144. The payments to which a Purchaser shall be entitled pursuant to this Section 4.3(b) are referred to herein as “Public Information Failure Payments.” Public Information Failure Payments shall be paid on the earlier of (i) the last day of the calendar month during which such Public Information Failure Payments are incurred and (ii) the third (3rd) Business Day after the event or failure giving rise to the Public Information Failure Payments is cured. In the event the Company fails to make Public Information Failure Payments in a timely manner, such Public Information Failure Payments shall bear interest at the rate of 1.5% per month (prorated for partial months) until paid in full. Nothing herein shall limit such Purchaser’s right to pursue actual damages for the Public Information Failure, and such Purchaser shall have the right to pursue all remedies available to it at law or in equity including, without limitation, a decree of specific performance and/or injunctive relief.
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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 to the Purchasers by the Company or that would be integrated with the offer or sale of the Securities by the Company 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 and Exercise Procedures. Each of the form of Notice of Exercise included in the Warrants and the form of Notice of Conversion included in the Certificate of Designation set forth the totality of the procedures required of the Purchasers in order to exercise the Warrants or convert the Preferred Stock. Without limiting the preceding sentences, no ink-original Notice of Exercise or Notice of Conversion shall be required, nor shall any medallion guarantee (or other type of guarantee or notarization) of any Notice of Exercise or Notice of Conversion form be required in order to exercise the Warrants or convert the Preferred Stock. No additional legal opinion, other information or instructions shall be required of the Purchasers to exercise their Warrants or convert their Preferred Stock. The Company shall honor exercises of the Warrants and conversions of the Preferred Stock 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 Commission within the time required by the Exchange Act. From and after the issuance of such press release, the Company represents to the Purchasers that it 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 Commission 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 (i) any registration statement contemplated by the Registration Rights Agreement and (ii) the filing of final Transaction Documents with the Commission 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 not less than two Business Days prior notice of such disclosure permitted under this clause (b). 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, within one Business Day of giving such notice to a Purchaser (or alternatively, upon receipt of such notice by a Purchaser including a notice of breach or default), file such notice with the Commission or make such information publicly available in a Current Report on Form 8-K. For each Business Day that the Company fails to file such Form 8-K, the Company shall be required to pay the applicable Purchaser(s) the liquidated damages provided for under Section 4.8. 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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4.7 Shareholder 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 could 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 provided its written consent, substantially in the form of Exhibit E hereto, 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, directors, agents, employees or Affiliates delivers any material, non-public information to a Purchaser without such Purchaser’s consent to hold such information in a confidential manner, 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. 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 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, not to trade on the basis of, such material, non-public information, provided that the Purchaser shall remain subject to applicable law. In addition to any other remedies provided by this Agreement or other Transaction Documents, if the Company provides any material, non-public information to the Purchasers without their prior written consent, and it fails to immediately (no later than the next Trading Day) file a Form 8-K disclosing this material, non-public information, it shall pay each Purchaser as partial liquidated damages and not as a penalty a sum equal to $1,000 per day for each $100,000 of each Purchaser’s Subscription Amount beginning with the day the information is disclosed to the Purchaser and ending and including the day the Form 8-K disclosing this information is filed; provided that no such liquidated damages shall be owed to any Purchaser not then holding Securities.
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4.9 Use of Proceeds. For the Initial Closing, the Company shall use the net proceeds from the sale of the Securities hereunder for working capital purposes and for the acquisition of the Target and shall not use such proceeds: (a) for the satisfaction of any portion of the Company’s debt (other than payment of trade payables or current debt service on the Company’s Indebtedness in the ordinary course of the Company’s business and prior practices), (b) for the redemption of any Common Stock or Common Stock Equivalents, (c) for the settlement of any outstanding litigation or (d) in violation of FCPA or OFAC regulations. For the Second Closing, the Company shall use the net proceeds from the sale of the Securities for the acquisition of the Target and for working capital purposes.
4.10 Indemnification of Purchasers. Subject to the provisions of this Section 4.10, the Company will indemnify and hold each Purchaser and its directors, officers, shareholders, 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, shareholders, 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 (a) any breach of any of the representations, warranties, covenants or agreements made by the Company in this Agreement or in the other Transaction Documents or (b) any action instituted against the Purchaser Parties in any capacity, or any of them or their respective Affiliates, by any stockholder of the Company who is not an Affiliate of such Purchaser Party, 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, The Company will indemnify each Purchaser Party, to the fullest extent permitted by applicable law, from and against any and all losses, claims, damages, liabilities, costs (including, without limitation, reasonable attorneys’ fees) and expenses, as incurred, arising out of or relating to (i) any untrue or alleged untrue statement of a material fact contained in such Registration Statement, Prospectus Supplement, any prospectus or any form of 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 the light of the circumstances under which they were made) not misleading, except to the extent, but only to the extent, that such untrue statements or omissions are based solely upon information regarding such Purchaser Party furnished in writing to the Company by such Purchaser Party expressly for use therein, or (ii) 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 therewith). 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 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) Promptly following the Uplisting, the Company shall reserve and thereafter maintain a reserve at least equal to the Required Minimum from its duly authorized shares of Common Stock for issuance pursuant to the Transaction Documents.
(b) If, on any date after the earlier of (i) the date of the Uplisting or (ii) September 30, 2024, the number of authorized but unissued (and otherwise unreserved) shares of Common Stock is less than 200% of the Required Minimum on such date, then the Board of Directors shall use its best efforts to amend the Company’s Articles of Incorporation to increase the number of authorized but unissued shares of Common Stock to at least the Required Minimum (the “Capital Increase”) at such time and reserve, if necessary, any additional Common Stock necessary to satisfy the Required Minimum, as soon as possible and in any event not later than the 60th day after such date, provided that the Company will not be required at any time to authorize a number of shares of Common Stock greater than the maximum remaining number of shares of Common Stock that could possibly be issued after such time pursuant to the Transaction Documents. In order to effectuate the approval of the Capital Increase, the Company shall issue a share of preferred stock with super voting rights to the Company’s then Chief Executive Officer. The Board of Directors shall cause the Chief Executive Officer to vote in favor of the Capital Increase.
(c) The Company shall, if applicable: (i) in the time and manner required by the principal Trading Market, prepare and file with such Trading Market an additional shares listing application covering a number of shares of Common Stock at least equal to the Required Minimum on the date of such application, (ii) take all steps necessary to cause such shares of Common Stock to be approved for listing or quotation on such Trading Market as soon as possible thereafter, (iii) provide to the Purchasers evidence of such listing or quotation and (iv) maintain the listing or quotation of such Common Stock on any date at least equal to the Required Minimum on such date on such Trading Market or another Trading Market. The Company agrees to maintain the eligibility of the Common Stock for electronic transfer through the Depository Trust Company or another established clearing corporation, including, without limitation, by timely payment of fees to the Depository Trust Company or such other established clearing corporation in connection with such electronic transfer. In the event the aforedescribed listing is not continuously maintained for so long as Preferred Stock or Warrants are outstanding (a “Listing Default”), then in addition to any other rights the Purchasers may have hereunder or under Applicable Law, on the first day of a Listing Default and on each monthly anniversary of each such Listing Default date (if the applicable Listing Default shall not have been cured by such date) until the applicable Listing Default is cured, the Company shall pay to each Purchaser an amount in cash, as partial liquidated damages and not as a penalty, equal to 2% of the aggregate conversion price of Conversion Shares and purchase price of Warrant Shares held by such Purchaser or which may be acquired upon exercise of Warrants on the day of a Listing Default and on every thirtieth day (pro-rated for periods less than thirty days) thereafter until the date such Listing Default is cured or otherwise ended: provided, however that the aggregate amount of such liquidated damages shall not exceed an aggregate of 12% of the aggregate conversion price of Conversion Shares and purchase price of Warrant Shares held by such Purchaser or which may be acquired upon exercise of Warrants. If the Company fails to pay any liquidated damages pursuant to this Section in a timely manner, the Company will pay interest thereon at a rate of 1.5% per month (pro-rated for partial months) to the Purchaser. Notwithstanding the foregoing, a Listing Default shall not be deemed to have occurred and any existing Listing Default shall be deemed to have ended upon the consummation of a Fundamental Transaction which results in the Common Stock no longer being listed or quoted on a Trading Market.
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4.12 Subsequent Equity Sales.
(a) From the date hereof until one hundred and 180 days after the Initial Closing Date except for an Exempt Issuance, neither the Company nor any Subsidiary shall (i) issue, enter into any agreement to issue or announce the issuance or proposed issuance of any shares of Common Stock or Common Stock Equivalents or equity of the Company or any Subsidiary (except for the issuance by a Subsidiary to the Company or another 100% owned Subsidiary), or (ii) file any registration statement or any amendment or supplement thereto on behalf of the Company, any Subsidiary or holder of Common Stock or Common Stock Equivalent, in each case other than as permitted pursuant to the Registration Rights Agreement. With respect to clause (ii) above, the aforedescribed 180-day period shall be extended day for day and reinstated for and during the pendency of any default by the Company to file, obtain the effectiveness or maintain the effectiveness of any Registration Statement as required pursuant to the Registration Rights Agreement, notwithstanding the accrual or payment of liquidated or other damages.
(b) From the date hereof and for so long as 25% or more of the shares of Series B Preferred Stock is outstanding, the Company shall be prohibited from effecting or entering into an agreement to effect any issuance by the Company or any of its Subsidiaries of Common Stock or Common Stock Equivalents (or a combination of units thereof) involving a 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, including, but not limited to, an equity line of credit, whereby the Company may issue securities at a future determined price. Any Purchaser shall be entitled to obtain injunctive relief against the Company to preclude any such issuance, which remedy shall be in addition to any right to collect damages.
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(c) For a period ending on the 24-month anniversary of the Initial Closing Date, except for an Exempt Issuance, the Company shall not issue any Common Stock or Common Stock Equivalents with an effective price per share of Common Stock that is or may become lower than the then in effect Conversion Price of the Series B Preferred Stock (adjusted for reverse and forward stock splits, combinations and recapitalizations following the date of this Agreement), (a “Lower Price Issuance”), in any case without the consent of the Purchasers holding not less than 65% of the outstanding shares of Series B Preferred Stock. The determination of the effective price referred to above shall be made by the Placement Agents. Notwithstanding that the Company’s solicitation of consent by a holder of Series B Preferred Stock to a Lower Price Issuance, such request may contain material non-public information relevant to the Lower Price Issuance. The Company must provide such information to all holders of Series B Preferred Stock contemporaneously. The holders of Series B Preferred Stock acknowledge that the request for consent to a Lower Price Issuance may contain material non-public information, that it will keep such information confidential, and that it will not trade in any securities of the Company while in possession of such information. Upon request by a Series B Preferred Stock holder, the Company shall either confirm in writing to such holder that the transaction with respect to the Lower Price Issuance has been abandoned or shall publicly disclose its intention to issue the securities in the Lower Price Issuance, in either case in such a manner such that such holder will not be in possession of any material, non-public information, by the 7th Trading Day following delivery of the solicitation for consent to such holder. If by such 7th Trading Day, no public disclosure regarding a transaction with respect to the Lower Price Issuance has been made, and no notice regarding the abandonment of such transaction has been received by such holder, such transaction shall be deemed to have been abandoned and such holder shall not be deemed to be in possession of any material, non-public information with respect to the Company or any of its Subsidiaries.
4.13 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 the Transaction Documents. 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. For the avoidance of doubt, the compliance by the Company or any Purchaser with the provisions of Section 4.19 shall not be deemed to breach or violate the provisions of this Section 4.13.
4.14 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 as of the time that such Purchaser first received a written term sheet from the Company or any other Person representing the Company setting forth the material terms of the transactions contemplated hereunder 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 or its Subsidiaries 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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4.15 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 in order to obtain an exemption for, or to qualify the Securities for, sale to the Purchasers at the applicable 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.
4.16 Capital Changes. Until the one year anniversary of the Effective Date, the Company shall not undertake a reverse or forward stock split or reclassification of the Common Stock without the prior written consent of the holders of a majority of the then-outstanding Series B Preferred Stock. Notwithstanding the preceding, this Section 4.16 shall not apply to a reverse stock split effectuated in connection with an Uplisting.
4.17 No Secured Indebtedness. For a period ending on the 18-month anniversary of the Initial Closing Date, the Company shall not, without the prior written consent of the Purchasers holding a majority of the outstanding shares of Series B Preferred Stock issued pursuant to this Agreement, assume or issue secured Indebtedness, except (i) secured Indebtedness to refinance outstanding secured Indebtedness on terms, taken in the aggregate, that are no less favorable to the Company than the outstanding Indebtedness being refinanced, or (ii) any purchase equipment financing or capital leasing arrangement in the ordinary course of the Company’s business; provided, however, that nothing in this Section 4.17 shall prohibit the Company, or a newly-formed subsidiary of the Company formed for such purpose, from acquiring an entity or business that has secured Indebtedness so long as the Company does not assume or guarantee any such secured Indebtedness.
4.18 Participation in Future Financing.
(a) For a period ending on the 18-month anniversary of the Initial Closing Date, upon any proposed issuance by the Company or any of its Subsidiaries of Common Stock, Common Stock Equivalents for cash consideration, debt, or a combination thereof, other than (i) a rights offering to all holders of Common Stock (which includes extending such rights offering to holders of Preferred Stock), or (ii) an Exempt Issuance (each a “Subsequent Financing”), the Purchasers shall have the right to participate in up to an amount of the Subsequent Financing equal to 25% of the gross proceeds to be received by the Company at the closing of the Subsequent Financing (the “Participation Maximum”) pro rata to each other in proportion to their Subscription Amounts on the same terms, conditions and price provided for in the Subsequent Financing, unless the Subsequent Financing is an underwritten public offering, in which case the Company shall notify each Purchaser of such public offering when it is lawful for the Company to do so, but no Purchaser shall be entitled to purchase any particular amount of such public offering without the approval of the lead underwriter of such underwritten public offering or if the Purchaser’s participation or level of participation would violate the rules of any Trading Market on which the Common Stock is then listed or quoted or would require stockholder approval under such rules and the Company has not otherwise agreed to seek stockholder approval for any aspect of such Subsequent Financing.
(b) At least five Trading Days prior to the anticipated closing of the Subsequent Financing, the Company shall deliver to each Purchaser a written notice of its intention to effect a Subsequent Financing (“Pre-Notice”), which Pre-Notice shall ask such Purchaser if it wants to review the details of such financing (such additional notice, a “Subsequent Financing Notice”). Upon the request of a Purchaser, and only upon a request by such Purchaser, for a Subsequent Financing Notice, the Company shall promptly, but no later than one Trading Day after such request, deliver a Subsequent Financing Notice to such Purchaser. The requesting Purchaser shall be deemed to have acknowledged that the Subsequent Financing Notice may contain material non-public information, that it will keep such information confidential and that it will not trade in any securities of the Company while in possession of such information. The Subsequent Financing Notice shall describe in reasonable detail the proposed terms of such Subsequent Financing, the amount of proceeds intended to be raised thereunder and the Person or Persons through or with whom such Subsequent Financing is proposed to be effected and if available in connection with such Subsequent Financing, shall include a term sheet or similar document relating thereto as an attachment. If a Purchaser advises the Company that it does not want to review the details of such financing or does not respond to the Company’s Pre-Notice prior to 5:30 p.m. (New York City time) on the second Trading Day after its receipt of the Pre-Notice, such Purchaser shall be deemed to have notified the Company that it does not elect to participate in such Subsequent Financing.
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(c) Any Purchaser desiring to participate in such Subsequent Financing must provide written notice to the Company by not later than 5:30 p.m. (New York City time) on the second Trading Day after its receipt of the Subsequent Financing Notice that the Purchaser is willing to participate in the Subsequent Financing, the amount of such Purchaser’s participation, and representing and warranting that such Purchaser has such funds ready, willing, and available for investment on the terms summarized in the Subsequent Financing Notice. If the Company receives no such notice from a Purchaser by 5:30 p.m. (New York City time) on the second Trading Day after its receipt of the Subsequent Financing Notice, such Purchaser shall be deemed to have notified the Company that it does not elect to participate in such Subsequent Financing.
(d) If by 5:30 p.m. (New York City time) on the second Trading Day after their receipt of the Subsequent Financing Notice, notifications by the Purchasers of their willingness to participate in the Subsequent Financing are, in the aggregate, less than the Participation Maximum, then the Company may affect the remaining portion of such Subsequent Financing on the terms and with the Persons set forth in the Subsequent Financing Notice and the Purchasers shall simultaneously affect their portion of such Subsequent Financing as set forth in their notifications to the Company consistent with the terms set forth in the Subsequent Financing Notice.
(e) If by 5:30 p.m. (New York City time) on the second Trading Day after their receipt of the Subsequent Financing Notice, the Company receives responses to a Subsequent Financing Notice from Purchasers seeking to purchase more than the aggregate amount of the Participation Maximum, each such Purchaser shall have the right to purchase its Pro Rata Portion (as defined below) of the Participation Maximum. “Pro Rata Portion” means the ratio of (x) the Preferred Stock purchased hereunder by a Purchaser participating under this Section 4.18 and (y) the sum of the aggregate Preferred Stock purchased hereunder by all Purchasers participating under this Section 4.18.
(f) The Company must provide the Purchasers with a second Subsequent Financing Notice, and the Purchasers will again have the right of participation set forth above in this Section 4.18, if the Subsequent Financing subject to the initial Subsequent Financing Notice is not consummated for any reason within sixty (60) Trading Days after the date of the initial Subsequent Financing Notice.
(g) The Company and each Purchaser agree that if any Purchaser elects to participate in the Subsequent Financing, the transaction documents related to the Subsequent Financing shall not include any term or provision whereby such Purchaser shall be required to agree to any restrictions on trading as to any of the Securities purchased hereunder (for avoidance of doubt, the securities purchased in the Subsequent Financing shall not be considered securities purchased hereunder) or be required to consent to any amendment to or termination of, or grant any waiver, release or the like under or in connection with, this Agreement, without the prior written consent of such Purchaser.
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(h) Notwithstanding anything to the contrary in this Section 4.18 and unless otherwise agreed to by such Purchaser, the Company shall either confirm in writing to such Purchaser that the transaction with respect to the Subsequent Financing has been abandoned or shall publicly disclose its intention to issue the securities in the Subsequent Financing, in either case in such a manner such that such Purchaser will not be in possession of any material, non-public information, by the seventh Trading Day following delivery of the Subsequent Financing Notice. If by such seventh Trading Day, no public disclosure regarding a transaction with respect to the Subsequent Financing has been made, and no notice regarding the abandonment of such transaction has been received by such Purchaser, such transaction shall be deemed to have been abandoned and such Purchaser shall not be deemed to be in possession of any material, non-public information with respect to the Company or any of its Subsidiaries.
(i) Purchaser’s Exercise Limitations. The Company shall not effect exercise of the rights granted in Section 4.18 of this Agreement, and a Purchaser shall not have the right to exercise any portion of such rights granted in Section 4.18 only to the extent that after giving effect to such exercise, the Purchaser would beneficially own in excess of the Beneficial Ownership Limitation. In such event, the right of such Purchaser to benefit from such rights or receive shares in excess of the Beneficial Ownership Limitation shall be held in abeyance until such times, not later than 12 months after such rights are triggered, as receipt of such excess shares shall not exceed the Beneficial Ownership Limitation, provided the Purchaser complies with all obligations of an investor in the Subsequent Financing, including the delivery of subscription payments thereunder at such time or times as the other investors in such Subsequent Financing deliver such payments.
4.19 Most Favored Nation Provision. Until such time as there is less than 75% of the Series B Preferred Stock outstanding, in the event that the Company engages in a Subsequent Transaction, if a Purchaser then holding outstanding Series B Preferred Stock reasonably believes that any of the terms and conditions of such Subsequent Financing is more favorable to any investor in the Subsequent Financing than are the terms and conditions granted to the Purchaser under the Transaction Documents, upon notice to the Company by such Purchaser within five Trading Days after disclosure of such Subsequent Financing in any pre-Notice or if requested, a Subsequent Financing Notice, whichever is later, then the Company shall amend the terms of this transaction as to such Purchaser only so as to give such Purchaser the benefit of such more favorable terms or conditions. This Section 4.19 shall not apply with respect to an Exempt Issuance. For the avoidance of doubt, no Purchaser shall have the right to combine the rights provided in this Section 4.19 with those provided in Section 4.20.
4.20 Additional Financing. For a period commencing on the Initial Closing Date and ending on the two-year anniversary of the Initial Closing Date, in the event that the Company proposes to conduct a Subsequent Financing, a Purchaser still holding Series B Preferred Stock shall have the right to participate in such Subsequent Financing up to the Participation Maximum by exchanging some or all of such Purchaser’s Series B Preferred Stock having a Stated Value equal to such Purchaser’s subscription amount in the Subsequent Financing as payment for its subscription in the Subsequent Financing. The provisions of this Section 4.20 are subject in all respects to the provisions of Section 4.18. For the avoidance of doubt, no Purchaser shall have the right to combine the rights provided in this Section 4.20 with those provided in Section 4.19.
4.21 Burn Rate. In each of the four consecutive calendar months commencing on April 1, 2024, the Company shall not have a net cash deficit of more than an average of $200,000 per month for such months, including cash used for daily operating expenses, current debt service and current payments to professionals for services provided for acquisitions, public filings, securities exchange listing expenses and audits. In addition to such net cash deficit for such purposes, the Company shall not require more than $300,000 to pay for capital expenditures associated with organic growth of its existing business. In negotiating such cash expenditure limits, the Company and the Purchasers anticipate a closing of the acquisition of the Target by April 30, 2024 and the integration of the operations of the Target and the Company’s existing business operations by July 31, 2024, which the Company believes will eliminate its monthly net cash deficit.
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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, by written notice to the other parties, if the Initial Closing has not been consummated on or before the fifth Trading Day following the date hereof; provided, however, that no such termination will affect the right of any party to sue for any breach by any other party (or parties).
5.2 Fees and Expenses. At the Initial Closing, the Company has agreed to reimburse the Placement Agents the non-accountable sum of $15,000 for its legal fees and expenses for the preparation of the Transaction Documents. The Placement Agents may withhold these legal fees and expenses from the proceeds payable to the Company in connection with the Initial Closing. 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. The Company shall pay all Transfer Agent fees (including, without limitation, any fees required for same-day processing of any instruction letter delivered by the Company and any conversion or exercise notice delivered by a Purchaser), stamp taxes and other taxes and duties levied in connection with the delivery of the Preferred Stock, Warrants and Underlying Shares to the Purchasers.
5.3 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.
5.4 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 e-mail address as set forth on the signature pages attached hereto at or prior to 5:30 p.m. (New York City time) on a Trading Day, (b) the next Trading Day after the time of transmission, if such notice or communication is delivered via facsimile or email attachment at the facsimile number or e-mail 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 City 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.
5.5 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 holders of at least a majority (50.1%) of the outstanding shares of Series B Preferred Stock (the “Required Holders”), 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 amendment effected in accordance with this Section 5.5 shall be binding upon each Purchaser and holder of Securities and the Company.
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5.6 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.
5.7 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 each Purchaser (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 in compliance with the terms of this Agreement, 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.”
5.8 No Third-Party Beneficiaries. The Placement Agents shall be the third-party beneficiaries of the representations and warranties of the Company in Section 3.1 hereof and with respect to the representations and warranties of the Purchasers in Section 3.2 hereof. 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 5.8.
5.9 Governing Law/Exclusive Jurisdiction. All questions concerning the construction, validity, enforcement and interpretation of the Transaction Documents except the Certificate of Designation shall be governed by and construed and enforced in accordance with the internal laws of the State of New York, without regard to the principles of conflicts of law thereof. Each party agrees that all legal Proceedings concerning the interpretations, enforcement and defense of the transactions contemplated by this Agreement and all 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 sitting in the City of New York. Each party hereby irrevocably submits to the exclusive jurisdiction of the state and federal courts sitting in the City of New York, Borough of Manhattan for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein (including with respect to the enforcement of any of the Transaction Documents), and hereby irrevocably waives, and agrees not to assert in any Action or Proceeding, any claim that it is not personally subject to the jurisdiction of any such court, that such Action or Proceeding is improper or is an inconvenient venue for such Proceeding. Each party hereby irrevocably waives personal service of process and consents to process being served in any such Action or Proceeding by mailing a copy thereof via registered or certified mail or overnight delivery (with evidence of delivery) to such party at the address in effect for notices to it under this 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 or Proceeding 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 or Proceeding 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 or Proceeding.
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5.10 Survival. The representations and warranties contained herein shall survive the applicable Closing and the delivery of the Securities on such Closing Date.
5.11 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. In the event that 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.
5.12 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.
5.13 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 the Preferred Stock or exercise of a Warrant, the applicable Purchaser shall be required to return any shares of Common Stock subject to any such rescinded conversion or exercise notice concurrently with the return to such Purchaser of the aggregate Exercise Price paid to the Company for such shares and the restoration of such Purchaser’s right to acquire such shares pursuant to such Purchaser’s Preferred Stock and Warrant (including, issuance of a replacement Preferred Stock certificate and warrant certificate evidencing such restored right). In the event of recission, Purchaser shall be entitled to receive all accrued liquidated damages.
5.14 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.
5.15 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.
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5.16 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.
5.17 Usury. To the extent it may lawfully do so, the Company hereby agrees not to insist upon or plead or in any manner whatsoever claim, and will resist any and all efforts to be compelled to take the benefit or advantage of, usury laws wherever enacted, now or at any time hereafter in force, in connection with any Action or Proceeding that may be brought by 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.
5.18 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. Each Purchaser shall be entitled to independently protect and enforce its rights, including, without limitation, the rights arising out of this Agreement or out of the other Transaction Documents, and it shall not be necessary for any other Purchaser to be joined as an additional party in any Proceeding for such purpose. Each Purchaser has been represented by its own separate legal counsel in its review and negotiation of the Transaction Documents. The Company has elected to provide all Purchasers with the same terms and Transaction Documents for the convenience of the Company and not because it was required or requested to do so by any of the Purchasers. It is expressly understood and agreed that each provision contained in this Agreement and in each other Transaction Document is between the Company and a Purchaser, solely, and not between the Company and the Purchasers collectively and not between and among the Purchasers.
5.19 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 the fact 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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5.20 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.
5.21 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, unless the context otherwise indicates, 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.
5.22 Election of Rights. In the event more than one Transaction Document confers rights or benefits on the Purchaser or obligations on the Company or any Subsidiary and such rights or benefits are not identical, the Purchaser shall be permitted, for itself, to elect which Transaction Document or part thereof shall be applicable with respect to each such right, benefit and obligation.
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.
5.24 Equitable Adjustment. The Conversion Price, Warrant Exercise Prices, trading volume amounts, price/volume amounts, amounts of equity issuable subsequent to the applicable Closing and similar figures in the Transaction Documents shall be equitably adjusted (but without duplication) to offset the effect of stock splits, stock dividends, similar events and as otherwise described in the Transaction Documents.
(Signature Pages Follow)
| 41 |
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.
| Titan Environmental Solutions Inc. | Address for Notice: |
1420 SE 36th Street\Suite 100 Bellevue, WA 98006 |
| By: | Email: | ||
| Name: | Glen Miller | ||
| Title: | Chief Executive Officer |
| With a copy to (which shall not constitute notice): | Pryor Cashman LLP 7 Times Square, New York, NY 10036 Attn: Eric M. Hellige, Esq., Email: ehellige.com |
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE PAGE FOR PURCHASER FOLLOWS]
| 42 |
[PURCHASER SIGNATURE PAGES TO
Titan Environmental Solutions Inc. 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):
Subscription Amount: $____________
Shares of Series B Preferred Stock: ____________
Warrant Shares: ________________
EIN Number: _______________________
[SIGNATURE PAGES CONTINUE]
| 43 |
LIST OF EXHIBITS AND SCHEDULES
| Exhibit A | Series B Certificate of Designation |
| Exhibit B | Form of Registration Rights Agreement |
| Exhibit C | Form of Warrant |
| Exhibit D | Form Accredited Investor Questionnaire |
| Exhibit E | Form of Consent |
| 44 |
EXHIBIT A
CERTIFICATE OF DESIGNATION
OF
THE PREFERENCES OF PREFERRED STOCK
OF
TITAN ENVIRONMENTAL SOLUTIONS INC.
EXHIBIT B
REGISTRATION RIGHTS AGREEMENT
EXHIBIT C
Form of Warrant
EXHIBIT D
ACCREDITED INVESTOR QUESTIONNAIRE
IN CONNECTION WITH INVESTMENT IN PREFERRED STOCK AND WARRANTS OF TITAN ENVIRONMENTAL SOLUTIONS INC., A NEVADA CORPORATION
PURSUANT TO SECURITIES PURCHASE AGREEMENT DATED JANUARY ___, 2024
| TO: | Titan Environmental Solutions Inc. |
| EMAIL: |
INSTRUCTIONS
PLEASE ANSWER ALL QUESTIONS. If the appropriate answer is “None” or “Not Applicable”, so state. Please print or type your answers to all questions. Attach additional sheets if necessary to complete your answers to any item.
Your answers will be kept strictly confidential at all times. However, Titan Environmental Solutions Inc. (the “Company”) may present this Questionnaire to such parties as it deems appropriate in order to assure itself that the offer and sale of securities of the Company will not result in a violation of the registration provisions of the Securities Act of 1933, or a violation of the securities laws of any state.
1. Please provide the following information:
| Name: |
| Name of additional purchaser: |
(Please complete information in Question 5)
Date of birth, or if other than an individual, year of organization or incorporation:
2. Residence address, or if other than an individual, principal office address:
| Telephone number: |
| Social Security Number: |
| Taxpayer Identification Number: |
| 3. Business address: |
| Business telephone number: |
| 4. Send mail to: | Residence | Business |
| Ex D-1 |
5. With respect to tenants in common, joint tenants and tenants by the entirety, complete only if information differs from that above:
| Residence address: | |
| Telephone number: | |
| Social Security Number: |
| Taxpayer Identification Number: | |
| Business address: | |
| Business telephone number: | |
| Send Mail to: | Residence | Business |
6. Please describe your present or most recent business or occupation and indicate such information as the nature of your employment, how long you have been employed there, the principal business of your employer, the principal activities under your management or supervision and the scope (e.g. dollar volume, industry rank, etc.) of such activities:
7. Please state whether you (i) are associated with or affiliated with a member of the Financial Industry Regulatory Association, Inc. (“FINRA”), (ii) are an owner of stock or other securities of FINRA member (other than stock or other securities purchased on the open market), or (iii) have made a subordinated loan to any FINRA member:
| Yes | No |
(a) If you answered yes to any of (i) – (iii) above, please indicate the applicable answer and briefly describe the facts below:
8A. Applicable to Individuals ONLY. Please answer the following questions concerning your financial condition as an “accredited investor” (within the meaning of Rule 501 of Regulation D). If the purchaser is more than one individual, each individual must initial an answer where the question indicates a “yes” or “no” response and must answer any other question fully, indicating to which individual such answer applies. If the purchaser is purchasing jointly with his or her spouse, one answer may be indicated for the couple as a whole:
8.1 Does your net worth* (or joint net worth with your spouse or spousal equivalent) exceed $1,000,000?
| Yes | No |
8.2 Did you have an individual income** in excess of $200,000 or joint income together with your spouse or spousal equivalent in excess of $300,000 in each of the two most recent years and do you reasonably expect to reach the same income level in the current year?
| Yes | No |
8.3 Are you an executive officer of the Company?
| Yes | No |
* For purposes hereof, net worth shall be deemed to include ALL of your assets, liquid or illiquid MINUS any liabilities.
** For purposes hereof, the term “income” is not limited to “adjusted gross income” as that term is defined for federal income tax purposes, but rather includes certain items of income which are deducted in computing “adjusted gross income”. For investors who are salaried employees, the gross salary of such investor, minus any significant expenses personally incurred by such investor in connection with earning the salary, plus any income from any other source including unearned income, is a fair measure of “income” for purposes hereof. For investors who are self-employed, “income” is generally construed to mean total revenues received during the calendar year minus significant expenses incurred in connection with earning such revenues.
| Ex D-2 |
8.B Applicable to Corporations, Partnerships, Trusts, Limited Liability Companies and other Entities ONLY:
The purchaser is an accredited investor because the purchaser falls within at least one of the following categories (Check all appropriate lines):
| ___ | (i) a bank as defined in Section 3(a)(2) of the Act or any savings and loan association or other institution as defined in Section 3(a)(5)(A) of the Act whether acting in its individual or fiduciary capacity; | |
| ___ | (ii) a broker-dealer registered pursuant to Section 15 of the Securities Exchange Act of 1934, as amended; | |
| ___ | (iii) an investment adviser registered pursuant to Section 203 of the Investment Advisers Act of 1940 or registered pursuant to the laws of a state; | |
| ___ | (iv) an investment adviser relying on the exemption from registering with the Commission under Section 203(l) or (m) of the Investment Advisers Act of 1940; | |
| ___ | (v) an insurance company as defined in Section 2(13) of the Act; | |
| ___ | (vi) an investment company registered under the Investment Company Act of 1940, as amended (the “Investment Act”) or a business development company as defined in Section 2(a)(48) of the Investment Act; | |
| ___ | (vii) a Small Business Investment Company licensed by the U.S. Small Business Administration under Section 301(c) or (d) of the Small Business Investment Act of 1958, as amended; | |
| ___ | (viii) a Rural Business Investment Company as defined in Section 384A of the Consolidated Farm and Rural Development Act; | |
| ___ | (ix) a plan established and maintained by a state, its political subdivisions, or any agency or instrumentality of a state or its political subdivisions, for the benefit of its employees, where such plan has total assets in excess of $5,000,000; | |
|
___ | (x) an employee benefit plan within the meaning of Title 1 of the Employee Retirement Income Security Act of 1974, as amended (the “Employee Act”), where the investment decision is made by a plan fiduciary, as defined in Section 3(21) of the Employee Act, which is either a bank, savings and loan association, insurance company, or registered investment adviser, or an employee benefit plan that has total assets in excess of $5,000,000, or a self-directed plan the investment decisions of which are made solely by persons that are accredited investors; |
| ___ | (xi) a private business development company, as defined in Section 202(a)(22) of the Investment Advisers Act of 1940, as amended; | |
| ___ | (xii) an organization described in Section 501(c)(3) of the Internal Revenue Code, a corporation, a Massachusetts or similar business trust, or a partnership, or limited liability company, not formed for the specific purpose of acquiring the securities offered, with total assets in excess of $5,000,000; | |
| ___ | (xiii) a director, executive officer, or general partner of the issuer of the securities being offered or sold, or any director, executive officer, or general partner of a general partner of that issuer; | |
| ___ | (xiv) a natural person whose individual net worth, or joint net worth with that person’s spouse or spousal equivalent exceeds $1,000,000; | |
| ___ | (xv) a natural person who had an individual income in excess of $200,000 in each of the two most recent years or joint income with that person’s spouse or spousal equivalent in excess of $300,000 in each of those years and has a reasonable expectation of reaching the same income level in the current year; |
| Ex D-3 |
| ___ | (xvi) a trust, with total assets in excess of $5,000,000, not formed for the specific purpose of acquiring the securities offered, whose purchase is directed by a “sophisticated” person, as described in Rule 506(b)(2)(ii) promulgated under the Act, who has such knowledge and experience in financial and business matters that he or she is capable of evaluating the merits and risks of the prospective investment; | |
| ___ | (xvii) a natural person holding in good standing one or more professional certifications or designations or credentials from an accredited educational institution that the Commission has designated as qualifying an individual for accredited investor status; | |
| ___ | (xviii) a natural person who is a “knowledgeable employee” as defined in Rule 3c5(a)(4) under the Investment Company Act of 1940 (17 CFR 270.3c-5(a)(41)), of the issuer of the securities being offered or sold where the issuer would be an investment company, as defined in Section 3 of such act, but for the exclusion provided by either Section 3(c)(1) or Section 3(c)(7) of such Act; | |
| ___ | (xix) a “family office”, as defined in Rule 202(a)(11)(G)-1 under the Investment Advisers Act of 1940 (17CFR 275.202(a)(11)(G)-1) (the “Family Office Rule”), with assets under management in excess of $5,000,000, that is not formed for the specific purpose of acquiring the securities offered, and whose prospective investment is directed by a person who has such knowledge and experience in financial and business matters that such family office is capable of evaluating the merits and risks of the prospective investment; | |
| ___ | (xx) a “family client” as defined in the Family Office Rule, of a family office that satisfies the above requirements and whose investments are directed by that family office; | |
| ___ | (xxi) an individual that holds professional certification or designation or credentials in good standing from an accredited institution that the SEC has designated as sufficient to demonstrate his or her investment knowledge, which initially consists of Series 7, 65 or 82 exam, but may be expanded in the future to encompass other exams or certifications as sufficient by order if the designations satisfy specified criteria; | |
| ___ | (xxii) an entity not otherwise specified in the accredited investor definition and not formed for the specific purpose of acquiring the securities offered that owns more than $5,000,000 in “investments” as defined in Rule 2a51-1(b); | |
| ___ | (xxiii) an investment adviser registered under the Investment Advisers Act of 1940, as amended or a person exempt from registration as a private fund adviser or a venture capital adviser; | |
| ___ | (xxiv) an entity in which all of the equity investors are persons or entities described above (“accredited investors”). ALL EQUITY OWNERS MUST COMPLETE “EXHIBIT A” ATTACHED HERETO. |
9.A Do you have sufficient knowledge and experience in financial and business matters so as to be capable of evaluating the merits and risks associated with investing in the Company?
| Yes | No |
ANSWER QUESTION 9B ONLY IF THE ANSWER TO QUESTION 9A WAS “NO.”
9.B If the answer to Question 9A was “NO,” do you have a financial or investment adviser (a) that is acting in the capacity as a purchaser representative and (b) who has sufficient knowledge and experience in financial and business matters so as to be capable of evaluating the merits and risks associated with investing in the Company?
| Yes | No |
| Ex D-4 |
If you have a financial or investment adviser(s), please identify each such person and indicate his or her business address and telephone number in the space below. (Each such person must complete, and you must review and acknowledge, a separate Purchaser Representative Questionnaire which will be supplied at your request).
10. You have the right, will be afforded an opportunity, and are encouraged to investigate the Company and review relevant factors and documents pertaining to the officers of the Company, and the Company and its business and to ask questions of a qualified representative of the Company regarding this investment and the properties, operations, and methods of doing business of the Company.
Have you or has your purchaser representative, if any, conducted any such investigation, sought such documents or asked questions of a qualified representative of the Company regarding this investment and the properties, operations, and methods of doing business of the Company?
| Yes | No |
| If so, briefly describe: |
If so, have you completed your investigation and/or received satisfactory answers to your questions?
| Yes | No |
11. Do you understand the nature of an investment in the Company and the risks associated with such an investment?
| Yes | No |
12. Do you understand that there is no guarantee of any financial return on this investment and that you will be exposed to the risk of losing your entire investment?
| Yes | No |
13. Do you understand that this investment is not liquid?
| Yes | No |
14. Do you have adequate means of providing for your current needs and personal contingencies in view of the fact that this is not a liquid investment?
| Yes | No |
15. Are you aware of the Company’s business affairs and financial condition, and have you acquired all such information about the Company as you deem necessary and appropriate to enable you to reach an informed and knowledgeable decision to acquire the Interests?
| Yes | No |
16. Do you have a “pre-existing relationship” with the Company or any of the officers of the Company?
| Yes | No |
(For purposes hereof, “pre-existing relationship” means any relationship consisting of personal or business contacts of a nature and duration such as would enable a reasonably prudent investor to be aware of the character, business acumen, and general business and financial circumstances of the person with whom such relationship exists.)
If so, please name the individual or other person with whom you have a pre-existing relationship and describe the relationship:
17. Exceptions to the representations and warranties made in Section 3.2 of the Securities Purchase Agreement (if no exceptions, write “none” – if left blank, the response will be deemed to be “none”): ___________________________________________________________________________
Dated: __________________, 2023
If purchaser is one or more individuals (all individuals must sign):
| (Type or print name of prospective purchaser) |
| Signature of prospective purchaser |
| Social Security Number |
| (Type or print name of additional purchaser) |
| Signature of spouse, joint tenant, tenant in common or other signature, if required |
| Social Security Number |
| Ex D-5 |
Annex A
Definition of Accredited Investor
The securities will only be sold to investors who represent in writing in the Securities Purchase Agreement that they are accredited investors, as defined in Regulation D, Rule 501 under the Act which definition is set forth below:
1. A natural person whose net worth, or joint net worth with spouse or spousal equivalent, at the time of purchase exceeds $1 million (excluding home); or
2. A natural person whose individual gross income exceeded $200,000 or whose joint income with that person’s spouse or spousal equivalent exceeded $300,000 in each of the last two years, and who reasonably expects to exceed such income level in the current year; or
3. A trust with total assets in excess of $5 million, not formed for the specific purpose of acquiring the securities offered, whose purchase is directed by a sophisticated person as described in Section 230.506(b)(2)(ii); or
4. A director or executive officer of the Company; or
5. The investor is an entity, all of the owners of which are accredited investors; or
6. (a) a bank as defined in Section 3(a)(2) of the Act or any savings and loan association or other institution as defined in Section 3(a)(5)(A) of the Act whether acting in its individual or fiduciary capacity;
(b) any broker or dealer registered pursuant to Section 15 of the Securities Exchange Act of 1934, as amended;
(c) an investment adviser registered pursuant to Section 203 of the Investment Advisers Act of 1940 or registered pursuant to the laws of a state;
(d) any investment adviser relying on the exemption from registering with the Commission under Section 203(l) or (m) of the Investment Advisers Act of 1940 or registered pursuant to Section 203 of the Investment Advisers Act of 1940;
(e) an insurance company as defined in Section 2(13) of the Act;
(f) an investment company registered under the Investment Company Act of 1940, as amended (the “Investment Act”) or a business development company as defined in Section 2(a)(48) of the Investment Act;
(g) a Small Business Investment Company licensed by the U.S. Small Business Administration under Section 301(c) or (d) of the Small Business Investment Act of 1958, as amended;
(h) a Rural Business Investment Company as defined in Section 384A of the Consolidated Farm and Rural Development Act;
(i) an employee benefit plan established and maintained by a state, its political subdivisions, or any agency or instrumentality of a state or its political subdivisions, for the benefit of its employees, where such plan has total assets in excess of $5,000,000;
(j) an employee benefit plan within the meaning of Title 1 of the Employee Retirement Income Security Act of 1974, as amended (the “Employee Act”), where the investment decision is made by a plan fiduciary, as defined in Section 3(21) of the Employee Act, which is either a bank, savings and loan association, insurance company, or registered investment adviser, or an employee benefit plan that has total assets in excess of $5,000,000, or a self-directed plan the investment decisions of which are made solely by persons that are accredited investors;
| Ex D-6 |
(k) a private business development company, as defined in Section 202(a)(22) of the Investment Advisers Act of 1940, as amended;
(l) an organization described in Section 501(c)(3) of the Internal Revenue Code, a corporation, a Massachusetts or similar business trust, or a partnership, or limited liability company, not formed for the specific purpose of acquiring the securities offered, with total assets in excess of $5,000,000;
(m) any natural person holding in good standing one or more professional certifications or designations or credentials from an accredited educational institution that the Commission has designated as qualifying an individual for accredited investor status, which in determining whether to designate a professional certification or designation or credential from an accredited educational institution for purposes of this paragraph, the Commission will consider, among others, the following attributes:
(i), the certification, designation, or credential arises out of an examination or series of examinations administered by a self-regulatory organization or other industry body or is issued by an accredited educational institution,
(ii) the examination or series of examinations is designed to reliably and validly demonstrate an individual’s comprehension and sophistication in the areas of securities and investing,
(iii) persons obtaining such certification, designation, or credential can reasonably be expected to have sufficient knowledge and experience in financial and business matters to evaluate the merits and risks of a prospective investment, and
(iv) an indication that an individual holds the certification or designation is either made publicly available by the relevant self-regulatory organization or other industry body or is otherwise independently verifiable;
(n) a natural person who is a “knowledgeable employee” as defined in Rule 3c5(a)(4) under the Investment Company Act of 1940 (17 CFR 270.3c-5(a)(41)), of the issuer of the securities being offered or sold where the issuer would be an investment company, as defined in Section 3 of such act, but for the exclusion provided by either Section 3(c)(1) or Section 3(c)(7) of such Act;
(o) any “family office”, as defined in Rule 202(a)(11)(G)-1 under the Investment Advisers Act of 1940 (17CFR 275.202(a)(11)(G)-1) (the “Family Office Rule”), with assets under management in excess of $5,000,000, that is not formed for the specific purpose of acquiring the securities offered, and whose prospective investment is directed by a person who has such knowledge and experience in financial and business matters that such family office is capable of evaluating the merits and risks of the prospective investment;
(p) any “family client” as defined in the Family Office Rule, of a family office that satisfies the above requirements and whose investments are directed by that family office;
(q) an entity not otherwise specified in the accredited investor definition and not formed for the specific purpose of acquiring the securities offered that owns more than $5,000,000 in “investments” as defined in Rule 2a51-1(b); or
(r) an investment adviser registered under the Investment Advisers Act of 1940, as amended or a person exempt from registration as a private fund adviser or a venture capital adviser.
| Ex D-7 |
IDENTIFICATION & DOCUMENTATION AND SOURCE OF FUNDS:
| 1. | Please submit a copy of non-expired identification for the authorized signatory(ies) on the investment documents, showing name, date of birth, address and signature. The address shown on the identification document MUST match the Investor’s address shown on the Investor Signature Page. |
| Current Driver’s License | or | Valid Passport | or | Identity Card |
(Circle one or more)
| 2. | If the Investor is a corporation, limited liability company, trust or other type of entity, please submit the following requisite documents: (i) Articles of Incorporation, By-Laws, Certificate of Formation, Operating Agreement, Trust or other similar documents for the type of entity; and (ii) Corporate Resolution or power of attorney or other similar document granting authority to signatory(ies) and designating that they are permitted to make the proposed investment. |
| 3. | Please advise where the funds were derived from to make the proposed investment: |
| Investments | Savings | Proceeds of Sale | Other |
(Circle one or more)
THE SECURITIES OFFERED ARE SPECULATIVE AND INVOLVE A HIGH DEGREE OF RISK. NO INVESTMENT IN THE SECURITIES SHOULD BE MADE BY ANY PERSON WHO CANNOT AFFORD THE LOSS OF THEIR ENTIRE AMOUNT OF SUCH INVESTMENT. PROSPECTIVE INVESTORS SHOULD CONSIDER CAREFULLY THE INFORMATION SET FORTH IN THE DOCUMENTS BEFORE PURCHASING SUCH SECURITIES.
| Ex D-8 |
EXHIBIT “A” TO ACCREDITED INVESTOR QUESTIONNAIRE
ACCREDITED CORPORATIONS, PARTNERSHIPS, LIMITED LIABILITY COMPANIES, TRUSTS OR OTHER ENTITIES INITIALING QUESTION 8B(xi) MUST PROVIDE THE FOLLOWING INFORMATION.
I hereby certify that set forth below is a complete list of all equity owners in __________________ [NAME OF ENTITY], a [TYPE OF ENTITY] formed pursuant to the laws of the State of . I also certify that EACH SUCH OWNER HAS INITIALED THE SPACE OPPOSITE HIS OR HER NAME and that each such owner understands that by initialing that space he or she is representing that he or she is an accredited individual investor satisfying the test for accredited individual investors indicated under “Type of Accredited Investor.”
| signature of authorized corporate officer, general partner or trustee |
| Name of Equity Owner | Type of Accredited Investor1 | ||
| 1. | |||
| 2. | |||
| 3. | |||
| 4. | |||
| 5. | |||
| 6. | |||
| 7. | |||
| 8. | |||
| 9. | |||
| 10. | |||
1 Indicate which Subparagraph of 8.1 - 8.3 the equity owner satisfies.
BANK SECRECY ACT (BSA) REQUIREMENT (for entities only)
Identify and complete for each of the 25% or more beneficial owner(s) of the entity as defined below:*
| Name: | Percent of Ownership: | |
| Home Address (No PO Box): | ||
| Phone Number: | Email Address: | |
| Title (if applicable): | ||
| Social Security Number: | Date of Birth: |
| * | Please provide documents to verify the identity of the beneficial owner(s), including a current valid issued government id for each beneficial owner identified above. |
| * | Beneficial Owner: each individual, if any, who directly or indirectly, through any contract, arrangement, understanding, relationship or otherwise owns 25% or more of the equity interests of a legal entity investor: (A) a single individual with significant responsibility to control, manage or direct a legal entity investor, including, (i) an executive officer or senior manager (e.g. Chief Executive Officer, Chief Financial Officer, Chief Operating Officer, Managing Member, General Partner, President, Vice President or Treasurer) or (ii) any other individual who regularly performs similar functions or (B) if a trust owns directly or indirectly, through any contract, arrangement, understanding, relationship or otherwise, 25% or more of the equity interests of a legal entity investor, the beneficial owner shall mean the trustee. It is the ultimate beneficial owner(s) that must be identified and not nominees. |
| Ex D-9 |
ANNEX A
FORM OF INFORMATION CONSENT
Titan Environmental Solutions Inc. (the “Corporation”) has information or notice of a proposed event (collectively, the “Information”) that it is either required to provide you pursuant to that certain Securities Purchase Agreement dated ______ ___, 2024 (“Agreement”) between you and the Corporation or believes that you would be interested in obtaining.
You acknowledge that receipt of the Information may restrict you from trading in the Corporation’s securities until the Information is made public in accordance with the Agreement.
Please respond in writing if you do or do not want to be provided with the Information. If the Corporation does not receive your response within three business days, we will have the right to assume that you have chosen not to receive the Information and, if applicable, waived your right to any subsequent offering rights and any other rights provided for under the Agreements that require notice, for which this Information (including notice) is being given.
Please sign below and check the appropriate box below.
| Sincerely, | ||
TITAN ENVIRONMENTAL SOLUTIONS INC. | ||
By: |
||
| Name: | Glen Miller | |
| Title: | Chief Executive Officer | |
___ Yes. Please provide we with the Information
___ No. Do not provide me with the Information
__________________________
__________________________
| Ex D-10 |
Exhibit 10.2
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (this “Agreement”) is made and entered into as of __, 2024 between Titan Environmental Solutions Inc. a Nevada corporation (the “Company”), and each of the several purchasers that is a signatory to the Purchase Agreement (each such purchaser, a “Purchaser” and, collectively, the “Purchasers”).
WHEREAS, the Company and the Purchasers are parties to that certain Securities Purchase Agreement, dated as of the date of this Agreement (the “Purchase Agreement”), pursuant to which the Purchasers are purchasing shares of Series B Preferred Stock (“Series B”) and Warrants of the Company; and
WHEREAS, in connection with the consummation of the transactions contemplated by the Purchase Agreement, and pursuant to the terms of the Purchase Agreement, the parties desire to enter into this Agreement in order to grant certain registration rights to the Purchasers as set forth below.
NOW, THEREFORE, in consideration of the foregoing and the mutual and dependent covenants hereinafter set forth, the parties agree as follows:
1. Defined Terms. Capitalized terms used and not defined herein have the meaning set forth in the Securities 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(d).
“Agreement” shall have the meaning set forth in the Preamble.
“CDI 612.09” means Section 612.09 of the Commission’s Compliance and Disclosure Interpretations.
“Closing” means the closing of the purchase and sale of the Series B and Warrants pursuant to the Purchase Agreement.
“Commission” means the Securities and Exchange Commission.
“Company” shall have the meaning set forth in the Preamble.
“Effectiveness Date” means, with respect to the Initial Registration Statement required to be filed hereunder or any other Registration Statement, sixty (60) days following the Trigger Date; provided, however, that in the event the Company is notified by the Commission that one or more of the 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 date otherwise required above.
“Effectiveness Period” shall have the meaning set forth in Section 2(a).
“Event” shall have the meaning set forth in Section 2(b).
“Event Date” shall have the meaning set forth in Section 2(b).
“Exchange Act” means the Securities Exchange Act of 1934.
| 1 |
“Filing Date” means, with respect to the Initial Registration Statement required hereunder, twenty (20) days following the Trigger Date, and with respect to any additional Registration Statements which may be required pursuant to this Agreement, the earliest practical date on which the Company is permitted by SEC Guidance to file such additional Registration Statements related to the Registrable Securities.
“Holder” or “Holders” means the holder or holders, as the case may be, from time to time 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).
“Person” means an individual, corporation, partnership, joint venture, limited liability company, governmental authority, unincorporated organization, trust, association or other entity.
“Plan of Distribution” shall have the meaning set forth in Section 2(a).
“Proceeding” means any action, claim, suit, investigation or legal proceeding (including, without limitation, an informal investigation or partial proceeding, such as a deposition), whether commenced or threatened.
“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.
“Purchasers” shall have the meaning set forth in the Preamble.
“Purchase Agreement” shall have the meaning set forth in the Recitals.
“Registrable Securities” means (a) all of the shares of Common Stock issuable under the Series B and the Warrants issued pursuant to the Purchase Agreement and (b) any securities issued or issuable upon any stock split, dividend or other distribution, recapitalization or similar event with respect to the foregoing.
“Registration Statement” means any registration statement required to be filed hereunder pursuant to Section 2(a) and any additional registration statements contemplated by Section 3(b), 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.
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“Rule 144” means Rule 144 promulgated by the Commission 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 Commission having substantially the same effect as such Rule.
“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.
“SEC Guidance” means (i) any publicly-available written or oral guidance (including CDI 612.09), comments, requirements or requests of the Commission staff and (ii) the Securities Act.
“Selling Stockholder Questionnaire” shall have the meaning set forth in Section 3(a).
“Trigger Date” means the earlier of (i) the date of consummation of the Uplisting or (ii) the six-month anniversary of the date of this Agreement.
“Warrants” means, collectively, the Common Stock purchase warrants delivered to the Purchasers in accordance with the Purchase Agreement.
2. Registration Statement.
(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 that are not then registered on an effective Registration Statement for an offering to be made on a continuous basis pursuant to Rule 415. Each Registration Statement filed hereunder shall be on Form S-1 (or Form S-3 if eligible) and shall contain a description of the Holders planned distribution substantially in the form of “Plan of Distribution” attached hereto as Annex A. The Company shall use its best efforts to respond to any comments from the staff of the Commission within seven days of the receipt of such comments. In the event the amount of Registrable Securities which may be included in the Registration Statement is limited due to SEC Guidance (provided that, the Company shall use diligent efforts to advocate with the Commission for the registration of all of the Registrable Securities in accordance with the SEC Guidance, including without limitation, the CDI 612.09) the Company shall use its best efforts to register such maximum portion of the Registrable Securities as permitted by SEC Guidance. Subject to the terms of this Agreement, the Company shall use its best efforts to cause a Registration Statement to be declared effective under the Securities Act as promptly as possible after the filing thereof, but in any event prior to the applicable Effectiveness Date, and shall use its best efforts to keep such Registration Statement continuously effective under the Securities Act until all Registrable Securities covered by such Registration Statement have been sold, or may be sold pursuant to Rule 144 without the volume or other limitations of such rule, or not required to be registered in reliance upon the exemption in Section 4(a)(1) or 4(a)(7) under the Securities Act, in either case as determined by the counsel to the Company pursuant to a written opinion letter to such effect, addressed and acceptable to the Transfer Agent and the affected Holders (the “Effectiveness Period”). Provided, however, during any period of time that the Company’s financial statements contained in a prospectus do not meet the requirements of Securities Act Section 10(a)(3) and the remaining period until the date its Form 10-K is required to be filed (excluding any extended period of time permitted by rule of the SEC) does not exceed 60 days, the Company shall be excused from amending or supplementing its prospectus for the remaining period until the date its Form 10-K is required to be filed (including any extended period of time permitted by rule of the SEC). 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 Holders 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 file a final Prospectus with the Commission as required by Rule 424. Notwithstanding any other provision of this Agreement, if any SEC Guidance sets forth a limitation on the number of Registrable Securities permitted to be registered on a particular Registration Statement (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 a Holder as to its Registrable Securities, the number of Registrable Securities to be registered on such Registration Statement will be reduced on a pro rata basis based on the total number of unregistered Registrable Securities purchased by the Purchasers pursuant to the Purchase Agreement with the Warrant Shares being cutback prior to any Conversion Shares. In the event of a cut back hereunder, the Company shall give the Holder at least five Trading Days prior written notice along with the calculations as to such Holder’s allotment.
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(b) If a Registration Statement registering for resale all of the Registrable Securities (i) is not declared effective by the Commission by the Effectiveness Date of the Initial Registration Statement or any other Registration Statement (unless the sole reason for such non-registration of all or any portion of the Registrable Securities is solely as a result of SEC Guidance under Rule 415 or similar rule and CDI 612.09 which limits the number of Registrable Securities which may be included in a registration statement with respect to the Holders), or (ii) after the effective date of a Registration Statement, such Registration Statement ceases for any reason to remain continuously effective as to all Registrable Securities included in such Registration Statement, or the Holders are otherwise not permitted to utilize the Prospectus therein to resell such Registrable Securities, for more than 30 calendar days during any 12-month period (any such failure or breach being referred to as an “Event”, and the date on which such Event occurs, being referred to as “Event Date”), then, in addition to any other rights the Holders may have hereunder or under applicable law, on each such Event Date and on each monthly anniversary of each such Event Date (if the applicable Event shall not have been cured by such date) until the applicable Event is cured, the Company shall pay to each Holder an amount in cash , as partial liquidated damages and not as a penalty, equal to 1% of the purchase price paid by such Holder pursuant to the Purchase Agreement, during which such Event continues uncured. The partial liquidated damages pursuant to the terms hereof shall apply on a daily pro rata basis for any portion of a month prior to the cure of an Event. Provided, however, the foregoing liquidated damages shall not accrue or be otherwise charged during any period in which the Holder is eligible to sell the Registrable Securities on any given day under Rule 144 without the volume or other limitations of such rule, or in reliance upon the exemption in Section 4(a)(1) under the Securities Act, or after such Holder has publicly sold its Registrable Securities.
3. Registration Procedures.
In connection with the Company’s registration obligations hereunder, the Company shall:
(a) Not less than five Trading Days prior to the filing of each Registration Statement and not less than one 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 Holders copies of all such documents proposed to be filed (provided that, the Company may excise any information contained therein which would constitute material non-public information as to any Holder which has not executed a confidentiality agreement with the Company), which documents (other than those incorporated or deemed to be incorporated by reference) will be subject to the review of the Holders or counsel for the Holders, and (ii) cause its officers and directors, counsel and independent registered public accountants to respond to such inquiries as shall be necessary 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 Holders 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 Trading Days after the Holders have been so furnished copies of a Registration Statement or two Trading Days after the Holders have been so furnished copies of any related Prospectus or amendments or supplements thereto. Each Holder agrees to furnish to the Company a completed questionnaire in the form attached to this Agreement as Annex B (a “Selling Stockholder Questionnaire”) on a date that is not less than two Trading Days prior to the Filing Date or by the end of the fourth Trading Day following the date on which such Holder receives draft materials in accordance with this Section.
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(b) The Company shall:
(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,
(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 to any comments received from the Commission with respect to a Registration Statement or any amendment thereto within seven days of the receipt of such comments, and provide as promptly as reasonably possible to the Holders true and complete copies of all correspondence from and to the Commission relating to a Registration Statement (provided that, the Company may excise any information contained therein which would constitute material non-public information as to any Holder which has not executed a confidentiality agreement with the Company), and
(iv) comply with the 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 Holders thereof set forth in such Registration Statement as so amended or in such Prospectus as so supplemented.
(c) The Company shall notify the Holders 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 Trading Day prior to such filing) and (if requested by any such Person) confirm such notice in writing no later than one 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, (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 and (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, provided that, any and all of such information shall remain confidential to each Holder until such information otherwise becomes public, unless disclosure by a Holder is required by law; provided, further, that notwithstanding each Holder’s acknowledgement to keep such information confidential, each such Holder makes no acknowledgement that any such information is material, non-public information.
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(d) The Company shall use its best 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.
(e) The Company shall furnish to each Holder, without charge, at least one conformed copy of each such 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 need not be furnished in physical form, and such number of copies of the current Prospectus as each Holder may reasonably request.
(f) Subject to the terms of this Agreement, the Company hereby consents to the use of such Prospectus and each amendment or supplement thereto by each of the selling Holders 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 0.
(g) The Company shall cooperate with any broker-dealer through which a Holder proposes to resell its Registrable Securities in effecting a filing with the FINRA Corporate Financing Department pursuant to FINRA Rule 5110 and 5190 and NASD Rule 2710, as requested by any such Holder, and the Company shall pay the filing fee required by such filing within two Trading Days of request therefor.
(h) Prior to any resale of Registrable Securities by a Holder, the Company shall use its commercially reasonable efforts to register or qualify or cooperate with the selling Holders 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 any 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.
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(i) If requested by a Holder, the Company shall cooperate with such Holders 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, of all restrictive legends, and to enable such Registrable Securities to be in such denominations and registered in such names as any such Holder may request.
(j) If the Company notifies the Holders in accordance with clauses (iii) through (vi) of Section 0 above to suspend the use of any Prospectus until the requisite changes to such Prospectus have been made, then the Holders shall suspend use of such Prospectus. The Company will use its best efforts to ensure that the use of the Prospectus may be resumed as promptly as is practicable.
(k) The Company shall comply with all applicable rules and regulations of the Commission.
(l) The Company may require each selling Holder to furnish to the Company a certified statement as to the number of shares of Common Stock beneficially owned by such Holder and, if required by the Commission, the natural persons thereof that have voting and dispositive control over the shares. The Company shall not be liable for any damages during any periods that the Company is unable to meet its obligations hereunder with respect to the registration of the Registrable Securities solely because any Holder fails to furnish such information within three Trading Days of the Company’s request.
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, independent registered public accountants and transfer agent) (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 Common Stock is then listed for trading, (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) and (D) if not previously paid by the Company in connection with an issuer filing, with respect to any filing that may be required to be made by any broker-dealer through which a Holder intends to make sales of Registrable Securities pursuant to FINRA Rule 5110 and 5190 and NASD Rule 2710, so long as the broker-dealer is receiving no more than a customary brokerage commission in connection with such sale, (ii) printing expenses (including, without limitation, expenses of printing certificates for Registrable Securities), and (iii) messenger, telephone and delivery expenses, (iv) fees and disbursements of counsel for the Company. 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 Trading Market as required hereunder. In no event shall the Company be responsible for any broker-dealer or similar commissions of any Holder or, except to the extent provided for in the Transaction Documents, any legal fees or other costs of the Holders.
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5. Indemnification.
(a) Indemnification by the Company. The Company shall, notwithstanding any termination of this Agreement, indemnify and hold harmless each Holder, the officers, directors, members, 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 of them, each Person who controls any such Holder (within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act) and the officers, directors, members, stockholders, 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, to the fullest extent permitted by applicable law, from and against any and all losses, claims, damages, liabilities, costs (including, without limitation, reasonable attorneys’ fees and costs of investigation and preparation) and expenses (collectively, “Losses”), as incurred, arising out of or relating to (1) 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 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 or (2) 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 that (i) such untrue statements or omissions are based solely upon information regarding such Holder furnished in writing to the Company by such Holder expressly for use therein, or to the extent that such information relates to such Holder or such Holder’s proposed method of distribution of Registrable Securities and was reviewed and expressly approved in writing by such Holder expressly for use in a Registration Statement, such Prospectus or in any amendment or supplement thereto (it being understood that the Holder has approved Annex A hereto for this purpose) or (ii) in the case of an occurrence of an event of the type specified in Section 3(c)(iii)-(vi), the use by such Holder of an outdated or defective Prospectus after the Company has notified such Holder in writing that the Prospectus is outdated or defective and prior to the receipt by such Holder of the Advice contemplated in Section 6(d). The Company shall notify the Holders 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.
(b) Indemnification by Holders. Each Holder shall, severally and not jointly, indemnify and hold harmless the Company, each director of the Company, each officer of the Company who shall sign such Registration Statement, each underwriter, broker or other Person acting on behalf of the holders of Registrable Securities and each Person who controls any of the foregoing Persons within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act, to the fullest extent permitted by applicable law, from and against all Losses, as incurred, to the extent arising out of or based solely upon: (x) such Holder’s failure to comply with the prospectus delivery requirements of the Securities Act or (y) 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 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 such Holder to the Company specifically for inclusion in such Registration Statement or such Prospectus or (ii) to the extent that such information relates to such Holder’s proposed method of distribution of Registrable Securities and was reviewed and expressly approved in writing by such Holder expressly for use in a Registration Statement (it being understood that the Holder has approved Annex A hereto for this purpose), 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(c)(iii)-(vi), the use by such Holder of an outdated or defective Prospectus after the Company has notified such Holder in writing that the Prospectus is outdated or defective and prior to the receipt by such Holder of the Advice contemplated in Section 6(d). In no event shall the liability of any selling Holder hereunder be greater in amount than the dollar amount of the net proceeds (after underwriting fees, commissions, or discounts) actually received by such Holder upon the sale of the Registrable Securities giving rise to such indemnification obligation.
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(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 one law firm reasonably satisfactory to the Indemnified Party and the payment of all fees and expenses incurred in connection with defense thereof except as otherwise provided in this Section 5(c); 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 prejudiced the Indemnifying Party.
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.
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 10 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 judicially determined 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.
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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. Notwithstanding the provisions of this Section 5(d), no Holder shall be required to contribute, in the aggregate, any amount in excess of the amount by which the net proceeds actually received by such Holder from the sale of the Registrable Securities subject to the Proceeding exceeds the amount of any damages that such Holder has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission.
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.
6. Miscellaneous.
(a) Remedies. In the event of a breach by the Company or by a Holder of any of their respective obligations under this Agreement, each 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. The Company and each Holder agree 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.
(b) Prohibition on Filing Other Registration Statements. Neither the Company nor any of its security holders (other than the Holders in such capacity pursuant hereto) may include securities of the Company in any Registration Statements other than the Registrable Securities and shares issued in connection with the Form S-1 previously filed on October 23, 2023 solely to cause the Company’s securities to be listed on an Uplisting Market. The Company shall not file any other registration statements until all Registrable Securities are registered pursuant to a Registration Statement that is declared effective by the Commission, provided that this Section 6(b) shall not prohibit the Company from filing amendments to registration statements filed prior to the date of this Agreement (including the Company’s reregistration statement submitted to the Commission on a confidential basis in connection with the Uplisting). In the event that, under SEC Guidance, there is a limitation on the number of Registrable Securities that may be included in a Registration Statement, securities of the Company that have been registered on an effective registration statement of the Company as of the date of this Agreement shall be registered prior to any of the Registrable Securities. Thereafter, the Holders shall have priority over any other security holders with outstanding registration rights. Any reduction pursuant to this Section 6(b) in the number of Registrable Securities registered shall be done on a pro rata basis in accordance with the Holders’ investment made pursuant to the Purchase Agreement.
(c) Compliance. Each Holder covenants and agrees that it will comply with the prospectus delivery requirements of the Securities Act as applicable to it in connection with sales of Registrable Securities pursuant to a Registration Statement.
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(d) Discontinued Disposition. By its acquisition of Registrable Securities, each Holder agrees that, upon receipt of a notice from the Company of the occurrence of any event of the kind described in Section 3(c)(iii) through (vi), such Holder will immediately 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 its best efforts to ensure that the use of the Prospectus may be resumed as promptly as is practicable.
(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 Holders of more than 50% of the Registrable Securities. 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 number of Registrable Securities to be registered for each Holder shall be reduced pro rata among all Holders and each 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 a Holder or some Holders and that does not directly or indirectly affect the rights of other Holders may be given by such Holder or Holders 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 0.
(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 each Holder. The Company may not assign (except by merger) its rights or obligations hereunder without the prior written consent of all of the Holders of the then outstanding Registrable Securities. Each Holder may assign their respective rights hereunder in the manner and to the Persons as permitted under the Purchase Agreement.
(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 Holders 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.
(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, 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.
(j) Governing Law. All questions concerning the choice of law and venue, construction, validity, enforcement and interpretation of this Agreement shall be determined in accordance with the provisions of the Purchase Agreement.
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(k) Cumulative Remedies. The remedies provided herein are cumulative and not exclusive of any other remedies provided by law.
(l) 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.
(m) 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.
(n) Independent Nature of Holders’ Obligations and Rights. The obligations of each Holder hereunder are several and not joint with the obligations of any other Holder hereunder, and no Holder shall be responsible in any way for the performance of the obligations of any other Holder hereunder. Nothing contained herein or in any other agreement or document delivered at any closing, and no action taken by any Holder pursuant hereto or thereto, shall be deemed to constitute the Holders as a partnership, an association, a joint venture or any other kind of entity, or create a presumption that the Holders are in any way acting in concert with respect to such obligations or the transactions contemplated by this Agreement. Each Holder shall be entitled to protect and enforce its rights, including without limitation the rights arising out of this Agreement, and it shall not be necessary for any other Holder to be joined as an additional party in any proceeding for such purpose.
[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.
| TITAN ENVIRONMENTAL SOLUTIONS INC. | ||
| By: | ||
| Name: | Glen Miller | |
| Title: | Chief Executive Officer | |
[Signature Page to the Titan Environmental Solutions Inc. Registration Rights Agreement]
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Name of Holder: __________________________
Signature of Authorized Signatory of Holder: __________________________
Name of Authorized Signatory: _________________________
Title of Authorized Signatory: __________________________
[Signature Page to the Titan Environmental Solutions Inc. Registration Rights Agreement]
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Annex A
Plan of Distribution
Each Selling Stockholder (the “Selling Stockholders”) of the Common Stock and any of their pledgees, assignees and successors-in-interest may, from time to time, sell any or all of their shares of Common Stock on [the OTC Markets] or any other stock exchange, market or trading facility on which the shares are traded or in private transactions. These sales may be at fixed or negotiated prices. A Selling Stockholder may use any one or more of the following methods when selling shares:
| ● | ordinary brokerage transactions and transactions in which the broker-dealer solicits purchasers; |
| ● | block trades in which the broker-dealer will attempt to sell the shares as agent but may position and resell a portion of the block as principal to facilitate the transaction; |
| ● | purchases by a broker-dealer as principal and resale by the broker-dealer for its account; |
| ● | an exchange distribution in accordance with the rules of the applicable exchange; |
| ● | privately negotiated transactions; |
| ● | settlement of short sales entered into after the effective date of the registration statement of which this prospectus is a part; |
| ● | broker-dealers may agree with the Selling Stockholders to sell a specified number of such shares at a stipulated price per share; |
| ● | through the writing or settlement of options or other hedging transactions, whether through an options exchange or otherwise; |
| ● | a combination of any such methods of sale; or |
| ● | any other method permitted pursuant to applicable law. |
The Selling Stockholders may also sell shares under Rule 144 under the Securities Act of 1933, as amended (the “Securities Act”), if available, rather than under this prospectus.
Broker-dealers engaged by the Selling Stockholders may arrange for other brokers or dealers to participate in sales. Broker-dealers may receive commissions or discounts from the Selling Stockholders (or, if any broker-dealer acts as agent for the purchaser of shares, from the purchaser) in amounts to be negotiated, but, except as set forth in a supplement to this Prospectus, in the case of an agency transaction not in excess of a customary brokerage commission in compliance with FINRA Rule 2121 or NASD Rule 2440; and in the case of a principal transaction a markup or markdown in compliance with NASD IM-2440.
In connection with the sale of the Common Stock or interests therein, the Selling Stockholders may enter into hedging transactions with broker-dealers or other financial institutions, which may in turn engage in short sales of the Common Stock in the course of hedging the positions they assume. The Selling Stockholders may also sell shares of the Common Stock short and deliver these securities to close out their short positions, or loan or pledge the Common Stock to broker-dealers that in turn may sell these securities. The Selling Stockholders may also enter into option or other transactions with broker-dealers or other financial institutions or the creation of one or more derivative securities which require the delivery to such broker-dealer or other financial institution of shares offered by this prospectus, which shares such broker-dealer or other financial institution may resell pursuant to this prospectus (as supplemented or amended to reflect such transaction).
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The Selling Stockholders and any broker-dealers or agents that are involved in selling the shares may be deemed to be “underwriters” within the meaning of the Securities Act in connection with such sales. In such event, any commissions received by such broker-dealers or agents and any profit on the resale of the shares purchased by them may be deemed to be underwriting commissions or discounts under the Securities Act. Each Selling Stockholder has informed the Company that it does not have any written or oral agreement or understanding, directly or indirectly, with any person to distribute the Common Stock. In no event shall any broker-dealer receive fees, commissions and markups which, in the aggregate, would exceed eight percent.
The Company is required to pay certain fees and expenses incurred by the Company incident to the registration of the shares. The Company has agreed to indemnify the Selling Stockholders against certain losses, claims, damages and liabilities, including liabilities under the Securities Act.
Because Selling Stockholders may be deemed to be “underwriters” within the meaning of the Securities Act, they will be subject to the prospectus delivery requirements of the Securities Act including Rule 172 thereunder. In addition, any securities covered by this prospectus which qualify for sale pursuant to Rule 144 under the Securities Act may be sold under Rule 144 rather than under this prospectus. There is no underwriter or coordinating broker acting in connection with the proposed sale of the resale shares by the Selling Stockholders.
The shares will be sold only through registered or licensed brokers or dealers if required under applicable state securities laws. In addition, in certain states, the shares may not be sold unless they have been registered or qualified for sale in the applicable state or an exemption from the registration or qualification requirement is available and is complied with.
Under applicable rules and regulations under the Exchange Act, any person engaged in the distribution of the shares may not simultaneously engage in market making activities with respect to the Common Stock for the applicable restricted period, as defined in Regulation M, prior to the commencement of the distribution. In addition, the Selling Stockholders will be subject to applicable provisions of the Exchange Act and the rules and regulations thereunder, including Regulation M, which may limit the timing of purchases and sales of shares of the Common Stock by the Selling Stockholders or any other person. We will make copies of this prospectus available to the Selling Stockholders and have informed them of the need to deliver a copy of this prospectus to each purchaser at or prior to the time of the sale (including by compliance with Rule 172 under the Securities Act).
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Annex B
Selling Stockholder Notice and Questionnaire
The undersigned beneficial owner of Common Stock (the “Registrable Securities”) of Titan Environmental Solutions Inc., a Nevada corporation (the “Company”), understands that the Company has filed or intends to file with the Securities and Exchange Commission (the “Commission”) a registration statement (the “Registration Statement”) for the registration and resale under Rule 415 of the Securities Act of 1933 (the “Securities Act”), of the Registrable Securities, in accordance with the terms of the Registration Rights Agreement (the “Registration Rights Agreement”) to which this document is annexed. A copy of the Registration Rights Agreement is available from the Company upon request at the address set forth below. All capitalized terms not otherwise defined herein shall have the meanings ascribed thereto in the Registration Rights Agreement.
Certain legal consequences arise from being named as a selling stockholder in the Registration Statement and the related prospectus. Accordingly, holders and beneficial owners of Registrable Securities are advised to consult their own securities law counsel regarding the consequences of being named or not being named as a selling stockholder in the Registration Statement and the related prospectus.
NOTICE
The undersigned beneficial owner (the “Selling Stockholder”) of Registrable Securities hereby elects to include the Registrable Securities owned by it in the Registration Statement.
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The undersigned hereby provides the following information to the Company and represents and warrants that such information is accurate:
QUESTIONNAIRE
| 1. | Name. |
| (a) | Full Legal Name of Selling Stockholder | |
| (b) | Full Legal Name of Registered Holder (if not the same as (a) above) through which Registrable Securities are held: | |
| (c) | Full Legal Name of Natural Control Person (which means a natural person who directly or indirectly alone or with others has power to vote or dispose of the securities covered by this Questionnaire): | |
| 2. | Address for Notices to Selling Stockholder: |
Telephone:_______________________________________________________________________________________
Fax:____________________________________________________________________________________________
Contact Person:___________________________________________________________________________________
| 3. | Broker-Dealer Status: |
| (a) | Are you a broker-dealer? |
Yes ☐ No ☐
| (b) | If “yes” to Section 3(a), did you receive your Registrable Securities as compensation for investment banking services to the Company? |
Yes ☐ No ☐
| Note: | If “no” to Section 3(b), the Commission’s staff has indicated that you should be identified as an underwriter in the Registration Statement. |
| (c) | Are you an affiliate of a broker-dealer? |
Yes ☐ No ☐
| (d) | If you are an affiliate of a broker-dealer, do you certify that you purchased the Registrable Securities in the ordinary course of business, and at the time of the purchase of the Registrable Securities to be resold, you had no agreements or understandings, directly or indirectly, with any person to distribute the Registrable Securities? |
Yes ☐ No ☐
| Note: | If “no” to Section 3(d), the Commission’s staff has indicated that you should be identified as an underwriter in the Registration Statement. |
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| 4. | Beneficial Ownership of Securities of the Company Owned by the Selling Stockholder. |
Except as set forth below in this Item 4, the undersigned is not the beneficial or registered owner of any securities of the Company other than the securities issuable pursuant to the Purchase Agreement.
| (a) | Type and Amount of other securities beneficially owned by the Selling Stockholder: | |
| 5. | Relationships with the Company: |
| Except as set forth below, neither the undersigned nor any of its affiliates, officers, directors or principal equity holders (owners of 5% of more of the equity securities of the undersigned) has held any position or office or has had any other material relationship with the Company (or its predecessors or affiliates) during the past three years. | |
| State any exceptions here: | |
The undersigned agrees to promptly notify the Company of any inaccuracies or changes in the information provided herein that may occur subsequent to the date hereof at any time while the Registration Statement remains effective.
By signing below, the undersigned consents to the disclosure of the information contained herein in its answers to Items 1 through 5 and the inclusion of such information in the Registration Statement and the related prospectus and any amendments or supplements thereto. The undersigned understands that such information will be relied upon by the Company in connection with the preparation or amendment of the Registration Statement and the related prospectus.
IN WITNESS WHEREOF the undersigned, by authority duly given, has caused this Notice and Questionnaire to be executed and delivered either in person or by its duly authorized agent.
| Date: | Beneficial Owner: |
| By: | ||
| Name: | ||
| Title: |
PLEASE EMAIL A COPY OF THE COMPLETED AND EXECUTED NOTICE AND QUESTIONNAIRE TO:
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Exhibit 10.3
PROMISSORY NOTE
Dated: May 31, 2024
Detroit, Michigan
For value received, Titan Trucking, LLC, a Michigan limited liability company (“Payor”), promises to pay to the order of Dominic Campo and Sharon Campo, as JTWROS (“Payee”), the principal amount of Two Million Three Hundred Fifty-Nine Thousand Eight Hundred Ninety-Eight and 24/100 Dollars ($2,359,898.24), together with interest at the rate of (i) thirteen and three quarters percent (13.75%) per annum (based on a 365-day year) (the “Initial Rate”) for the first year (ii) the Initial Rate plus one percent (1.0%) per annum for the second year; and (iii) the Initial Rate plus two percent (2.0%) per annum for the third year, in each case, compounded annually from the date hereof.
1. Payment of Principal and Interest. The principal and accrued interest on this promissory note (this “Note”) shall be paid as follows: (a) thirty-five (35) monthly installments of accrued interest each on the fifteenth (15th) day of every calendar month, starting June 15, 2024; and (b) a final balloon payment of all outstanding principal and accrued interest on May 15, 2027. If the 15th day of the month falls on a non-business banking day, payment will be made on the following business banking day. If the principal of this Note is reduced at any time, interest from and after the date of such reduction will be calculated based on the reduced principal amount.
2. Automatic Adjustment to Note. This Note is given pursuant to that certain Membership Interest Purchase Agreement dated January 12, 2024, as amended, between Payor, Standard Waste Services, LLC, a Michigan limited liability company (“Company”), and Payee (the “Purchase Agreement”) whereby Payor has purchased all of Payee’s membership interests of Company. This Note will be automatically, and without any action on the part of Payor or Payee, increased or decreased, as applicable, upon (i) final determination of the Closing Date Purchase Price (as defined in the Purchase Agreement), as detailed in the Purchase Agreement; and/or (ii) determination that Payee is obligated to Payor pursuant to the indemnification provisions of the Purchase Agreement.
3. Legal Tender. All payments to be made by the Payor to the Payee under or pursuant to this Note shall be in immediately available funds in United States dollars.
4. Expenses. Payor agrees to pay or reimburse Payee or any other holder or owner of this Note, on demand, for all costs and expenses of the Payee (including, without limitation, reasonable attorneys’ fees) actually incurred by Payee in connection with collecting or attempting to collect, protecting or enforcing this Note, or in connection with any other matter or proceeding relating to this Note.
5. Prepayments. This Note may be prepaid, in full or in part, at any time, without any prepayment penalty, premium or other fee. Any prepayment hereunder shall also be accompanied by the payment of all accrued and unpaid interest on the amount prepaid. In addition, if there is any equity financing as part of the current on-going fund raise from and after the date of this Note in which Payor or Company receives cash funds, 70% of those funds will go towards prepayment of this Note.
6. Default and Acceleration. Each of the following shall be an event of default (each, an “Event of Default”) under this Note:
| (a) | Any default in the terms, conditions or covenants contained in this Note, including, without limitation, in the payment of any installment of principal or interest hereunder as and when the same shall be or become due and payable. | |
| (b) | The Payor becomes the subject of a voluntary or involuntary proceeding in bankruptcy, or a reorganization, arrangement or creditor composition proceeding. | |
| (c) | The dissolution of the Payor or the consolidation of the Payor into an unrelated third party. | |
| (d) | There is filed or issued a levy or writ of attachment or garnishment or other like judicial process upon the Payor, or in respect of any of the respective assets of the Payor. |
Upon the failure of the Payor to make any payment of principal or interest to the Payee when due, or upon the occurrence of any other Event of Default which remains uncured for ten (10) calendar days following written notice thereof, all or any part of the indebtedness evidenced hereby shall, at the option of Payee, become immediately due and payable.
7. Due on Sale. If there is a sale of all or substantially all of the assets of Payor, to a non-affiliated third party, a stock sale of controlling interest of Payor to a non-affiliated third party, or a merger with a non-affiliated third party in which the controlling interest is held by a non-affiliated third party, this Note will automatically become due and payable in full (principal plus all accrued and unpaid interest) on the closing date of any such transaction.
8. Security. This Note is secured by a Security Agreement between Payor and Payee.
9. Application of Payments. Regularly scheduled payments upon this Note shall be applied first to any expenses (including expenses of collection) then due and payable to Payee hereunder, then to any unpaid interest hereunder, and then to the unpaid principal balance. Prepayments upon this Note shall be applied first to any expenses (including expenses of collection) then due and payable to the Payee hereunder, then to any unpaid interest hereunder, and then to installments of principal in the inverse order of their maturities.
10. Remedies. Payee shall have all rights and remedies provided by law, subject to the provisions of Paragraph 6.
11. No Waiver. No delay or failure of the Payee in exercising any right, power or privilege under this Note shall affect such right, power or privilege, nor shall any single or partial exercise thereof preclude any further exercise thereof, or the exercise of any other power, right or privilege. The rights of the Payee under this Note are cumulative and not exclusive of any right or remedies which the Payee would otherwise have, whether by other instruments or at law.
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12. Binding Effect. The provisions of this Note shall be binding upon, and shall inure to the benefit of, the successors and assigns of the parties.
13. Amendments; Waivers; Invalidity. Except as specified in Section 2 above, this Note may not be amended except in a writing signed by the parties. Any waiver by either party of any provision of this Note must be in writing signed by such party and shall not be construed as a waiver of any other provision of this Note, nor shall such waiver be construed as a waiver of such provision with respect to any other event or circumstance, whether past, present or future. If any provision of this Note is determined to be invalid or unenforceable, such determination shall not affect the validity or enforceability of the other provisions of this Note.
14. Time. Time is of the essence with respect to the Payor’s obligations under this Note.
15. Applicable Law; Jurisdiction. This Note shall be governed in all respects by, and construed in accordance with, the laws of the state of Michigan, without regard to its conflicts of laws provisions. Payor hereby irrevocably and unconditionally: (i) submits to the jurisdiction of any United States federal court or Michigan state court sitting Detroit, Michigan (and any appellate court thereof) in any action or proceeding arising out of or relating to this Note; (ii) agrees that all claims in respect of such action or proceeding may be heard and determined in any such court; (iii) waives any objection to the laying of venue of any such suit or proceeding in any such court, and (iv) consents to the service of any and all process in any such action or proceeding brought in any court in or of the State of Michigan by the delivery of copies of such process to the Payor at its address specified in the Purchase Agreement in accordance with the notice provisions set forth in the Purchase Agreement. Nothing in this paragraph shall limit or otherwise affect the right of the Payee to serve process by any other manner permitted by law or to bring any such action or proceeding against the Payor or any of their property in any court of any other jurisdiction.
16. Waiver. Payor waives presentment, demand, protest, notice of dishonor, notice of demand or intent to demand, notice of acceleration, intent to accelerate, and all other notices, and agrees that no extension or indulgence to the Payor or release, substitution or non-enforcement, whether with or without notice, shall affect the obligations of the Payor under this Note.
17. Entire Agreement; Headings. This Note together with the Purchase Agreement, and all the ancillary documents executed in connection herewith and therewith constitute the entire agreement and understanding between the parties, and supersede any and all prior agreements, understandings, and arrangements, oral or written, between the parties with respect to the subject matter hereof and thereof. The headings contained in this Note are solely for the purpose of reference, are not part of the agreement of the parties, and shall not in any way affect the meaning or interpretation of this Note.
[Signature page follows]
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IN WITNESS WHEREOF, this Note is executed and delivered by Payor to Payee effective as of the date first set forth above.
| PAYOR: | ||
| Titan Trucking, LLC, | ||
| a Michigan limited liability company | ||
| By: | /s/ Glen Miller | |
| Glen Miller | ||
| Its: | Chief Executive Officer | |
[Signature Page to Promissory Note]
Exhibit 10.4
SHORT TERM PROMISSORY NOTE
Dated: May 31, 2024
Detroit, Michigan
For value received, Titan Trucking, LLC, a Michigan limited liability company (“Payor”), promises to pay to the order of Dominic Campo and Sharon Campo, as JTWROS (“Payee”), the principal amount of Five Hundred Thousand and 00/100 Dollars ($500,000.00), together with interest at the rate of (i) thirteen and three quarters percent (13.75%) per annum (based on a 365-day year) (the “Initial Rate”) up to and including the Maturity Date, and (ii) eighteen (18%) percent after the Maturity Date.
1. Payment of Principal and Interest. The principal and accrued interest on this promissory note (this “Note”) shall be paid in full with accrued interest on the forty-fifth (45th) day after the date of this Note (“Maturity Date”).
2. Legal Tender. All payments to be made by the Payor to the Payee under or pursuant to this Note shall be in immediately available funds in United States dollars.
3. Expenses. Payor agrees to pay or reimburse Payee or any other holder or owner of this Note, on demand, for all costs and expenses of the Payee (including, without limitation, reasonable attorneys’ fees) actually incurred by Payee in connection with collecting or attempting to collect, protecting or enforcing this Note, or in connection with any other matter or proceeding relating to this Note.
4. Prepayments. This Note may be prepaid, in full or in part, at any time, without any prepayment penalty, premium or other fee. Any prepayment hereunder shall also be accompanied by the payment of all accrued and unpaid interest on the amount prepaid.
5. Default and Acceleration. Each of the following shall be an event of default (each, an “Event of Default”) under this Note:
(a) Any default in the terms, conditions or covenants contained in this Note, including, without limitation, in the payment of any installment of principal or interest hereunder as and when the same shall be or become due and payable.
(b) The Payor becomes the subject of a voluntary or involuntary proceeding in bankruptcy, or a reorganization, arrangement or creditor composition proceeding.
(c) The dissolution of the Payor or the consolidation of the Payor into an unrelated third party.
(d) There is filed or issued a levy or writ of attachment or garnishment or other like judicial process upon the Payor, or in respect of any of the respective assets of the Payor.
Upon the failure of the Payor to make any payment of principal or interest to the Payee when due, or upon the occurrence of any other Event of Default which remains uncured for fifteen (15) calendar days following upon occurrence of the failure to make any payment or any other Event of Default (“Cure Period”), all or any part of the indebtedness evidenced hereby shall, at the option of Payee, become immediately due and payable. Furthermore, upon expiration of the Cure Period, if any amounts remain outstanding, then Payee shall receive $100,000 in the of either, at Payee’s discretion, cash or Series “A” Convertible Preferred Stock which shall be 200,000 shares of Series “A” Convertible Preferred Stock.
6. Due on Sale. If there is a sale of all or substantially all of the assets of Payor, to a non-affiliated third party, a stock sale of controlling interest of Payor to a non-affiliated third party, or a merger with a non-affiliated third party in which the controlling interest is held by a non-affiliated third party, this Note will automatically become due and payable in full (principal plus all accrued and unpaid interest) on the closing date of any such transaction.
7. Security. This Note is secured by a Security Agreement between Payor and Payee.
8. Application of Payments. Regularly scheduled payments upon this Note shall be applied first to any expenses (including expenses of collection) then due and payable to Payee hereunder, then to any unpaid interest hereunder, and then to the unpaid principal balance. Prepayments upon this Note shall be applied first to any expenses (including expenses of collection) then due and payable to the Payee hereunder, then to any unpaid interest hereunder, and then to installments of principal in the inverse order of their maturities.
9. Remedies. Payee shall have all rights and remedies provided by law, subject to the provisions of Paragraph 6.
10. No Waiver. No delay or failure of the Payee in exercising any right, power or privilege under this Note shall affect such right, power or privilege, nor shall any single or partial exercise thereof preclude any further exercise thereof, or the exercise of any other power, right or privilege. The rights of the Payee under this Note are cumulative and not exclusive of any right or remedies which the Payee would otherwise have, whether by other instruments or at law.
11. Binding Effect. The provisions of this Note shall be binding upon, and shall inure to the benefit of, the successors and assigns of the parties.
12. Amendments; Waivers; Invalidity. Except as specified in Section 2 above, this Note may not be amended except in a writing signed by the parties. Any waiver by either party of any provision of this Note must be in writing signed by such party and shall not be construed as a waiver of any other provision of this Note, nor shall such waiver be construed as a waiver of such provision with respect to any other event or circumstance, whether past, present or future. If any provision of this Note is determined to be invalid or unenforceable, such determination shall not affect the validity or enforceability of the other provisions of this Note.
13. Time. Time is of the essence with respect to the Payor’s obligations under this Note.
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14. Applicable Law; Jurisdiction. This Note shall be governed in all respects by, and construed in accordance with, the laws of the state of Michigan, without regard to its conflicts of laws provisions. Payor hereby irrevocably and unconditionally: (i) submits to the jurisdiction of any United States federal court or Michigan state court sitting Detroit, Michigan (and any appellate court thereof) in any action or proceeding arising out of or relating to this Note; (ii) agrees that all claims in respect of such action or proceeding may be heard and determined in any such court; (iii) waives any objection to the laying of venue of any such suit or proceeding in any such court, and (iv) consents to the service of any and all process in any such action or proceeding brought in any court in or of the State of Michigan by the delivery of copies of such process to the Payor at its address specified in the Purchase Agreement in accordance with the notice provisions set forth in the Purchase Agreement. Nothing in this paragraph shall limit or otherwise affect the right of the Payee to serve process by any other manner permitted by law or to bring any such action or proceeding against the Payor or any of their property in any court of any other jurisdiction.
15. Waiver. Payor waives presentment, demand, protest, notice of dishonor, notice of demand or intent to demand, notice of acceleration, intent to accelerate, and all other notices, and agrees that no extension or indulgence to the Payor or release, substitution or non-enforcement, whether with or without notice, shall affect the obligations of the Payor under this Note.
16. Entire Agreement; Headings. This Note together with the Purchase Agreement, and all the ancillary documents executed in connection herewith and therewith constitute the entire agreement and understanding between the parties, and supersede any and all prior agreements, understandings, and arrangements, oral or written, between the parties with respect to the subject matter hereof and thereof. The headings contained in this Note are solely for the purpose of reference, are not part of the agreement of the parties, and shall not in any way affect the meaning or interpretation of this Note.
[Signature page follows]
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IN WITNESS WHEREOF, this Note is executed and delivered by Payor to Payee effective as of the date first set forth above.
| PAYOR: | ||
| Titan Trucking, LLC, | ||
| a Michigan limited liability company | ||
| By: | /s/ Jeffrey J. Rizzo | |
| Jeffrey J. Rizzo | ||
| Its: | Chief Operating Officer | |
Exhibit 10.5
EXECUTION VERSION
GUARANTY FEE AGREEMENT
This Guaranty Fee Agreement (“Agreement”) is made and effective as of May 31, 2024 by and between Titan Trucking, LLC, a Michigan limited liability company (“Titan”), Titan Environmental Solutions, Inc., (“TESI”), and Charles B. Rizzo (“Rizzo”), each sometimes referred to as a “Party” or collectively, the “Parties”.
Recitals
A. Titan is entering into a Membership Interest Purchase Agreement dated January 12, 2024 as amended on February 21, 2024 and May 20, 2024 (“MIPA”) for the acquisition of Standard Disposal, LLC, a Michigan limited liability company (“Standard”).
B. Pursuant to the MIPA, certain indebtedness of Standard will remain outstanding which is personally guaranteed by the owners of Standard. Pursuant to the MIPA, Rizzo will personally guarantee the obligations of Standard and its owner under the personal guarantees (“Rizzo Personal Guarantee”).
C. In connection with the MIPA, Rizzo guaranteed the Deposit of $652,500 pursuant to a Guaranty made as of January 5, 2024 (“Rizzo Deposit Guaranty”).
D. As a condition of the Rizzo Personal Guarantee and the Rizzo Deposit Guaranty, TESI shall provide compensation in the form of shares of stock of TESI out of the Company’s Employee Stock Option Plan once effective and approved by the Company’s Board of Directors, and the Company receives any other approvals necessary based on the Company’s by-laws or other governing documents including any debt or equity issuances.
NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which is acknowledged, the parties agree as follows:
1. Guaranty of Rizzo. Rizzo has agreed to absolutely, unconditionally, and irrevocably guaranty payment of any indebtedness incurred by the Standard owners under the personal guarantees of the Standard indebtedness estimated to be up to $4,700,000 as of the date of this Agreement pursuant to a Guaranty Agreement between Rizzo and the owners of Standard dated as of the date of the MIPA (the “Guaranty”).
2. Rizzo Guaranty Fee. As consideration for the Guaranty, Titan agrees to issue Rizzo or his assignee, 15,000,000 shares of TESI’s common stock out of the Company’s Employee Stock Option Plan (or equivalent) or the number of Series A Convertible Preferred Stock which would convert to 15,000,000 common shares of TESI’s common shares at Rizzo’s discretion (the “Rizzo Guaranty Fee”). Furthermore, after the two year anniversary of this Agreement, to the extent and for the period of time that the Guaranty applies to any outstanding amounts due under the Standard indebtedness, Titan will pay to Rizzo an annual fee equal to 2.5% of the outstanding indebtedness amount to which the Guaranty is subject to as of the applicable anniversary date, such amount to be paid in 12 equal monthly installments regardless of the reduction to the balances for the then following 12 month period.
3. Rizzo Deposit Guaranty Fee. As consideration for the Rizzo Deposit Guaranty, Titan agrees to issue Rizzo or his assignee 6,500,000 shares of TESI’s common stock out of the Company’s Employee Stock Option Plan (or equivalent) or the number of Series A Convertible Preferred Stock which would convert to 6,500,000 common shares of TESI’s common shares at Rizzo’s discretion (“Rizzo Deposit Guarantee Fee”).
4. Term. This Agreement will continue in full force and effect until the Standard indebtedness personally guaranteed by the Standard owners is paid in full. During the Term, Rizzo shall be granted access upon notice to the Company to its operating and administrative facilities. Company shall provide Rizzo with written notice of any defaults on payment obligations exceeding $50,000.00 within 48 hours of receipt of such.
5. Lock Up. Upon issuance of the Rizzo Guarantee Fee and Rizzo Deposit Guarantee Fee, Rizzo or his assignee shall execute a “Lock Up Agreement” on the same terms as those executed by the Company’s directors and officers in conjunction with the TESI’s Series B Preferred Stock offering a copy of which is attached hereto.
6. Invalidity. If any term, provision, covenant or condition of this Agreement is held by a court of competent jurisdiction to be invalid, void or unenforceable, the remainder of this Agreement will remain in full force and effect and will in no way be affected, impaired or invalidated.
7. Governing Law. This Agreement will be considered to have been made in the State of Delaware and will be governed by and interpreted according to Delaware law.
8. Assignment. This Agreement shall be binding upon and shall inure to the benefit of the parties and their respective successors and permitted assigns. No Party may assign this Agreement (whether by operation of law or otherwise) nor any of its rights, interests or obligations hereunder without the prior written consent of the other parties. No assignment shall relieve the assigning Party of any of its obligations hereunder.
9. Specific Performance. Each of the parties acknowledges and agrees that the other Party would be irreparably damaged in the event that any of the terms or provisions of this Agreement are not performed in accordance with their specific terms or otherwise are breached. Therefore, each of the parties hereby agrees that the other Party shall be entitled to an injunction or injunctions to prevent breaches of any of the terms or provisions of this Agreement, and to enforce specifically the performance by such first Party under this Agreement, and each Party hereby agrees to waive the defense in any such suit that the other Party has an adequate remedy at law, and hereby agrees to waive any requirement to post any bond in connection with obtaining such relief. The equitable remedies described in this Section 7 shall be in addition to, and not in lieu of, any other remedies that the parties may be permitted to pursue under the terms of this Agreement.
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10. Default. In the event of a Default on the Standard indebtedness covered by the Guarantee, which results in Rizzo’s payment of any or all of the outstanding indebtedness as defined in the MIPA, TESI acknowledges that an amount up to all of the collateral and security interests included in the MIPA signed May 31, 2024 and associated notes, guarantees and documents hereto, shall be assumed by Rizzo without condition or additional consideration. The amount of Collateral assigned shall be equal to the actual payment or damages incurred by Rizzo because of the default. As additional consideration, in the event of a default that results in the payment by Rizzo of $200,000 or more of the indebtedness under the Guaranty, TESI agrees to transfer the phone number for Standard Waste Services, Inc. to Rizzo. If the Rizzo Guaranty Fee and the Rizzo Deposit Guaranty Fee is not satisfied by the issuance of shares on or before July 31, 2024, then the number of shares shall be 125% of the number of shares described herein. If the Rizzo Guaranty Fee and the Rizzo Deposit Guaranty Fee is not satisfied by the issuance of shares on or before August 31, 2024, then the number of shares shall be 150% of the number of shares described herein
11. Interpretation. The headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. The Parties have participated jointly in negotiating and drafting this Agreement. If an ambiguity or a question of intent or interpretation arises, this Agreement shall be construed as if drafted jointly by the Parties, 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.
12. Entire Agreement. This Agreement when executed and delivered, and any other certificate, instrument or document delivered in connection herewith or therewith, constitute the sole and entire agreement among the Parties with respect to the subject matter hereof and thereof and supersede any and all prior and contemporaneous understandings, agreements and representations by or among the Parties, both written and oral, in each case. The parties acknowledge that satisfaction of the Rizzo Guarantee Fee and Rizzo Deposit Guarantee Fee represents payment in full to Rizzo for all Guarantees issued by Rizzo on behalf of TESI or any of its affiliates or subsidiaries.
13. Severability. If any provision of this Agreement is construed to be invalid, illegal or unenforceable, such invalidity, illegality or unenforceability shall not affect the remainder of the provisions of this Agreement, which shall be given full effect, without regard to the invalid or unenforceable portions. Furthermore, if the scope of any provision contained in this Agreement is found to be too broad to permit enforcement of such provision to its full extent, then such provision shall be enforced to the maximum extent permitted by law, and the Parties hereby consent and agree that such scope shall be judicially modified accordingly in any proceeding brought to enforce such provision.
14. Amendment; Waiver. This Agreement may not be amended, except by an instrument in writing signed on behalf of all of the Parties. Unless otherwise specifically agreed in writing to the contrary: (a) the failure or delay of any Party at any time to require performance by the other of any provision of this Agreement will not affect such Party’s right thereafter to enforce the same; (b) no waiver by any Party of any default by any other Party will be valid unless in writing and acknowledged by an authorized representative of the non-defaulting Party, and no such waiver will be taken or held to be a waiver by such Party of any other preceding or subsequent default; and (c) no extension of time granted by any Party for the performance of any obligation or act by any other Party will be deemed to be an extension of time for the performance of any other obligation or act hereunder.
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15. Notices. All notices and other communications hereunder shall be in writing. Notices will be deemed delivered five (5) Business Days after being mailed by certified or registered United States mail, postage prepaid, return receipt requested, or on the first (1st) Business Day after being sent, prepaid, by nationally recognized overnight courier that issues a receipt or other confirmation of delivery. Notices sent via electronic mail will be deemed delivered upon transmission. Notices sent by personal service will be deemed delivered when actually received by the recipient. Any Party may change the address to which notices under this Agreement are to be sent to it by giving written notice of a change of address in the manner provided in this Agreement for giving notice. Notices shall be made to the Parties at the following addresses (or at such other address for a Party as shall be specified by like notice):
(a) if to Titan or TESI:
c/o Glen Miller
1931 Austin Drive
Troy, Michigan 48083
Email: [email protected]
(b) if to Rizzo or to the Titan Shareholder Group:
Charles B. Rizzo
3279 Baron Dr.
Bloomfield Township, Michigan 48302
Email: [email protected]
16. Counterparts. This Agreement may be executed in counterparts, which together shall constitute one and the same Agreement. The Parties may execute more than one copy of the Agreement, each of which shall constitute an original and each of which alone and all of which together shall constitute one and the same instrument. This Agreement may be executed by facsimile signatures or other electronic signatures (including the delivery of signed documents in PDF format or by means of DocuSign or other electronic signature platforms).
17. Board Meeting. The parties agree that the effectiveness of this Agreement is subject to the approval of the Board of Directors of TESI. TESI will call a meeting of the board by 11:59pm on Wednesday, June 5, 2024 to approve this Agreement effective as of June 3, 2024.
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IN WITNESS WHEREOF, the Parties have executed this Agreement as of the date first written above.
| TITAN ENVIRONMENTAL SOLUTIONS INC., | |||
| a Nevada corporation | |||
| /s/ Jeffrey J. Rizzo | /s/ Charles B. Rizzo | ||
| By: | Jeffrey J. Rizzo | Charles B. Rizzo | |
| Its: | COO | ||
| TITAN TRUCKING, LLC, | |||
| a Michigan limited liability company | |||
| /s/ Jeffrey J. Rizzo | |||
| By: | Jeffrey J. Rizzo | ||
| Its: | COO | ||
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Exhibit 10.6
EXECUTION VERSION
CONSULTING AGREEMENT
THIS CONSULTING AGREEMENT (the “Agreement”) is made as of May 31, 2024 (the “Effective Date”) by and between, Dominic Campo or an entity to be formed by him (the “Consultant”) and Titan Trucking, LLC, a Michigan limited liability company (the “Company”).
| 1. | Scope |
The Company intends to engage Consultant to provide the services as described on Schedule A (the “Services”). If additional services are needed by Consultant, this will be requested in writing and if agreed, then the contract will be amended.
| 2. | Authority |
As a consultant, Consultant shall not have the authority to contract on behalf of the Company and shall not have the authority to commit the Company in any manner. All commitments (contractual or otherwise) shall require the action of the authorized representatives of the Company. Consultant shall make recommendations to the Company and to the Company’s leadership. Consultant shall report to the Company’s parent company Chief Executive Officer as the legal representative of the member of the Company (“CEO”) or CEO’s designee, whom the Company has represented have the authority over all of the Company’s operations and growth initiatives.
| 3. | Confidentiality |
The Company has maintained, and continues to maintain Confidential Information, which may specifically include, but is not limited to information as to and regarding Company’s customers, pricing information, contract terms, recruiting information for contract employees, staffing information, contracts, financial data, processes and procedures, and trade secrets (collectively, “Confidential Information”), which is proprietary and necessary to Company’s business success. Consultant is engaged by the Company in a capacity in which it will become acquainted with all or part of this Confidential Information. To safeguard the legitimate interests of the Company with respect to maintaining the confidence of Company’s Confidential Information, Consultant covenants that it will not communicate with any person, firm, corporation, company, partnership, or other business entity, any Confidential Information or trade secrets which it may from time to time acquire with respect to the business of Company, during the Term of his this Agreement and following the termination of this Agreement. Confidential Information does not include any information which (i) is available to the general public or is generally available within the relevant business or industry other than as a result of Consultant’s action or (ii) is or becomes available to Consultant after termination of this Agreement on a non-confidential basis from a third-party source provided that such third-party source is not bound by a confidentiality agreement or any other obligation of confidentiality.
| 4. | Term and Termination |
The term of this Agreement shall be five (5) years, commencing as of the Effective Date and ending on the fifth anniversary of the Effective Date, unless sooner terminated as provided for in this Agreement (the “Term”). Regardless of the expiration or termination of this Agreement, any and all amounts earned by Consultant under this Agreement shall remain due and payable.
The Company may terminate this Agreement for Cause at any time during the Term. For purposes of this Section, the Company shall have “Cause” (i) if during the term of this Agreement Consultant, or a member thereof, is convicted (or pleads guilty or no contest) of a felony, involving theft, fraud, dishonesty or moral turpitude; (ii) if Consultant,, willfully disregards any lawful and reasonable written directive of the Company’s Chief Executive Officer, or his designee, which directives were clearly communicated to Consultant; (iii) upon the occurrence of any act(s) or omission(s) by Consultant, which are willful and deliberate act(s) or omission(s) taken with Consultant’s knowledge that such act(s) or omission(s) are reasonably likely to cause harm or injury to the business, operations or financial condition of the Company; (iv) upon the occurrence of a breach by Consultant,, of any provision of this Agreement provided that if such breach is capable of remedy the Consultant shall have fourteen (14) days from written notification of the breach, with reasonable detail of the facts and circumstances claimed as the basis for the breach, in which to remedy such breach; (v) upon the commission by Consultant,, of an act in deliberate disregard of the rules or policies of the Company which results in a material loss, damage or injury to Company; or (vi) upon the occurrence of any other act(s) or omission(s) that materially adversely affects the business activities, financial condition, prospects, reputation, goodwill or image of the Company (unless done in furtherance of a business plan). In the event Company terminates this Agreement for Cause, then all payments to Consultant shall immediately cease.
| 5. | Compensation |
A. Retainer
Consultant shall receive a monthly retainer payment in advance on or before the first day of each calendar month during the Term as described on Schedule B (“Retainer”). The Retainer shall be earned upon receipt.
B. Bonus
Company may in its sole discretion pay Consultant an annual bonus.
C. Equity Incentive Plans
Consultant shall be granted common stock through the Company’s Equity Incentive Plans for achieving objectives as agreed upon and approved by the Board.
D. Health Insurance Coverage
Company will provide Consultant and his spouse with health care coverage consistent with all applicable laws once eligible coverage under Consultant’s insurance in effect immediately prior to the Effective Date expires. Company and Consultant shall work on a date in which coverage by the Company would commence.
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| 6. | Consultant’s Deliverables/Work Product/Instruments of Service |
Consultant shall upon request provide reports to the CEO, or CEO’s designee, which will include updates on identifying tasks Consultant is hired to perform.
Consultant shall devote sufficient time and effort not to exceed thirty-five (35) hours per week on average during each calendar year (whether partial or full); provided, if the Consultant is requested to work on any special project he shall be compensated for such responsibilities on a basis mutually agreed to in writing between Consultant and the Company.
| 7. | Indemnification |
Each party shall indemnify, defend and hold the other party harmless from and against any and all damages incurred by such other party as a result of such party’s (a) breach of any of the terms or conditions of this Agreement, (b) the negligent, reckless or intentional acts or omissions.
| 8. | Restrictive Covenants |
A. During the Term of this Agreement and for a period of twelve (12) months thereafter, commencing on the termination of this Agreement (the “Restricted Period”), Consultant shall not, directly or indirectly, (i) engage in or assist others in engaging in the waste management business; (ii) have an interest in any entity that engages directly or indirectly in the waste management business in any capacity, including as a partner, shareholder, member, employee, principal, agent, trustee or consultant; (iii) cause, induce or encourage any employee of the Company to terminate such employee’s employment with the Company, or in any way interfere with the relationship between the Company and any employee of the Company; or (iv) cause, induce or encourage any actual or prospective client, customer, service provider or licensor of Company, or any other entity who has a material business relationship with Company, to terminate or modify any such actual or prospective relationship; provided, however, that the foregoing restrictions shall not apply to the services Consultant performs for Company pursuant to this Agreement. However, Section 8 does not apply to any refuse equipment rental business or waste brokerage business that Consultant shall engage in, own and operate during the term of this Agreement and any time thereafter outside of the markets in which the Company conducts business prior to the time in which the Company conducts business in such markets, and such engagement by Consultant in such businesses described herein shall not be a breach of any provision of this Agreement. Engaging in any refuse equipment rental business or waste brokerage business by Consultant within the markets in which the Company currently conducts business or has been authorized to conduct business without the prior written consent of the Company after full disclosure by Consultant of the intended activities to be engaged in by Consultant shall be in violation of this Section.
B. Consultant acknowledges that a breach of Section 8A would give rise to irreparable harm to Company, for which monetary damages would not be an adequate remedy, and hereby agrees that in the event of a breach or a threatened breach by Consultant of any such obligations, Company shall, in addition to any and all other rights and remedies that may be available to it in respect of such breach, be entitled to equitable relief, including a temporary restraining order, an injunction, specific performance and any other relief that may be available from a court of competent jurisdiction (without any requirement to post bond).
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C. Consultant acknowledges that the restrictions contained in Section 8A are reasonable and necessary to protect the legitimate interests of Company and constitute a material inducement to Company to enter into this Agreement and consummate the transactions contemplated by this Agreement. In the event that any covenant contained in Section 8A should ever be adjudicated to exceed the time, geographic, product or service or other limitations permitted by applicable law. The covenants contained in Section 8A and each provision hereof are severable and distinct covenants and provisions. The invalidity or unenforceability of any such covenant or provision as written shall not invalidate or render unenforceable the remaining covenants or provisions hereof, and any such invalidity or unenforceability in any jurisdiction shall not invalidate or render unenforceable such covenant or provision in any other jurisdiction.
| 9. | Termination and Suspension |
If the Company fails to make payments to Consultant in accordance with this Agreement, such failure shall be considered substantial nonperformance and shall constitute at the sole option of Consultant (a) breach of this Agreement and a default by Company entitling Consultant to liquidated damages equal to 100% of the past due Retainer amount and 25% of the unpaid future Retainer amounts for the unfulfilled Term as the sole remedy for Consultant after having first provided the Company with ten (10) days advance written notice of nonpayment and the Company not curing such breach and payment default within such ten (10) day period, or (b) cause for suspension of performance of Services by and obligations of Consultant under this Agreement after having first provided the Company with ten (10) days advance written notice of nonpayment and the Company not curing such payment default within such ten (10) day period. In the event of a suspension of Services, Consultant shall have no liability to the Company for delay or damage caused because of such suspension of Services. Before resuming Services, the Company shall pay Consultant all sums due prior to suspension and any expenses incurred in the interruption and resumption of Consultant’s Services.
| 10. | Independent Contractor |
A. Except as otherwise specifically set forth in this Agreement, Consultant shall pay for all expenses, costs and amounts incurred in the performance of the Services, including all withholding of federal, state and local income taxes, the payment and withholding of social security and other payroll taxes, all workers’ compensation, liability, and other insurance premiums in connection with the performance of the Services. Consultant represents and warrants to the Company that Consultant has adopted the status of an independent Consultant for all purposes, including without limitation for purposes of withholding of federal, state and local income taxes and the payment and withholding of social security and other payroll taxes. Consultant represents and warrants to the Company that all federal, state and local tax returns, including informational returns, required to be filed by the Consultant during the term of this Agreement, will be filed by the Consultant during the term of this Agreement and will be filed by the Consultant at Consultant’s sole cost and expense reflecting the Consultant’s self-employed independent Consultant status. Company will issue to Consultant Form 1099-NEC each year in which fees are paid on or before the applicable required date.
B. Consultant acknowledges that it will at all times act and perform as an independent Consultant and will not, for any purposes, be deemed an employee of the Company. Consultant will have no authority to act for, or on behalf of, or to bind the Company in any manner whatsoever. The Company retains the right to utilize other businesses or individuals to perform the Services or any other services.
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C. Consultant further warrants that the Services will be performed in a professional and workmanlike manner that complies with any contracts known to Consultant, statutes, regulations, or ordinances applicable to the Services and will be performed in accordance with customary business and trade practices. Consultant warrants to provide the Company with all documents produced in the performance of the Services and shall transfer ownership of all such documents and works to the Company in the performance of the Services.
| 11. | Other Provisions |
A. Terms. Nouns and pronouns will be deemed to refer to the masculine, feminine, neuter, singular and plural, as the identity of the person or persons, firm or corporation may in the context require.
B. Counterparts. This Agreement may be executed in several counterparts, each of which will be deemed an original but all of which will constitute one and the same agreement.
C. Entire Agreement. This Agreement constitutes the entire agreement among the parties hereto and contains all of the agreements among said parties with respect to the subject matter hereof. This Agreement supersedes any and all other agreements, either oral or written, between said parties with respect to the subject matter hereof.
D. Severability. The invalidity or unenforceability of any particular provision of this Agreement shall not affect the other provisions hereof, and this Agreement shall be construed in all respects as if such invalid or unenforceable provisions were omitted.
E. Amendment. This Agreement may be amended or revoked at any time by a written agreement executed by the parties to this Agreement. Any change or modification to this Agreement shall be valid only if in writing and signed by all required parties.
F. Notices. Any notice permitted or required under this Agreement shall be effective: (a) upon hand delivery thereof, (b) upon receipt of confirmation of facsimile transmission, (c) one (1) day after being sent by recognized “overnight” delivery service, or (d) five (5) days after certified mailing and proof of return receipt sent by U.S. mail to the addresses stated herein or to such other addresses to which either party shall have previously notified the other parties in writing. Any such notice not sent as contemplated above shall be effective upon receipt.
G. Waiver. Any failure on the part of a party hereto to comply with any of such Party’s obligations, agreements or conditions hereunder may be waived by the other Party to whom such compliance is owed. No waiver of any provision of this Agreement shall be deemed or shall constitute a waiver of any other provision, whether or not similar, nor shall any waiver constitute a continuing waiver.
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H. Arbitration. Any dispute hereunder shall be settled by final and binding arbitration in Oakland County, Michigan in accordance with the rules of the American Arbitration Association then in effect and the award rendered by the arbitrators shall be binding as between the parties and judgment on such award may be entered in any court having jurisdiction thereof. The fact of the arbitration, the arbitration proceedings and the resolution or disposition of the arbitration, including any arbitration award shall be kept confidential, subject only to acts taken to enforce the terms of the resolution or disposition of the arbitration or the arbitration award.
I. Governing Law. This Agreement shall be governed by, construed and enforced in accordance with the laws of the State of Michigan.
J. Assignment. This Agreement has been entered into by the Company in reliance upon the individual identified as Consultant who has been designated as the person who will provide the Services contemplated by this Agreement, and this Agreement has been entered into by Consultant in reliance upon the ownership of the Company. As such, neither party may assign this Agreement without the prior written consent of the other party; provided, however, Consultant may assign this Agreement to an entity wholly owned and controlled by him and shall remain wholly owned and controlled by him throughout the Term of this Agreement.
K. Binding Effect. Subject to the provisions of this Agreement relating to transferability, this Agreement will be binding upon and shall inure to the benefit of the parties, and their respective personal representatives, agents, distributees, heirs, successors and assigns.
L. Creditors. None of the provisions of this Agreement shall be for the benefit of or enforceable by any creditors of the Company.
(Signature page follows)
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WHEREFORE, the parties have executed this Agreement by their duly authorized representatives as of the Effective Date.
| CONSULTANT | TITAN TRUCKING, LLC, a Michigan limited liability company | |||
| By: | /s/ Dominic Campo | By: | /s/ Glen Miller | |
| Name: | Dominic Campo | Name: | Glen Miller | |
| Title: | Chief Executive Officer | |||
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SCHEDULE A
The Consultant will assist the Company with the CEO’s direction or through the CEOs designee.
(a) the Consultant will work to assist the business known as “Standard Waste Services, LLC” to provide its services in a manner that is consistent with those it provided prior to the closing assisting in it retaining its customer base, providing guidance specific to integration with Titan’s operations with the CFO and working with COO on operational transition needs. Consultant will update as requested the CEO or the CEOs designee.
(b) Consultant will work to provide NEW SALES GROWTH opportunities by assisting in signing up new customers in Michigan or providing guidance specific to new sales growth opportunities to the Company’s sales consultants, customer service representatives, or others at the Company.
(c) Consultant will work on any acquisition targets agreed-upon between Consultant and CEO or CEO’s designee.
(d) Consultant is engaged to seek out, transfer station opportunities for the company, either by way of contracts, through private, municipal, or opportunities for an outright purchase of existing permitted transfer stations.
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SCHEDULE B
Consultant shall receive a monthly retainer payment in advance on or before the first day of each calendar month during the Term in the amount of $23,333.33 commencing on June 1, 2024 (“Retainer”) however should the Consultant meet his demise during the Term, the Retainer shall be 50% ($11,666.67).
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Exhibit 99.1
Titan Environmental Solutions Inc. Announces the Purchase of Standard Waste Services, LLC
Bloomfield Hills, MI—June 3, 2024 –Titan Environmental Solutions Inc. (“Titan” or the “Company”) (OTCQB: TESI) announced today that the Company successfully closed on its acquisition of Standard Waste Services, LLC (“Standard”), a waste management company based in Detroit, Michigan that provides commercial and industrial waste and recycling services throughout the greater Detroit metro area.
Standard was founded in 2017 to provide contracted commercial roll-off and front-load waste services, including dumpster compactor rentals, to customers principally in the Southeast Michigan market. Standard currently operates approximately 20 waste collection vehicles servicing over 750 profitable, commercial and industrial customers. These customers, combined with Titan’s existing customer base, represents approximately $17M of top line revenue for 2023.
“We are excited to have completed the Standard acquisition and look forward to integrating the business and team with our current Titan operations in the Greater Detroit market. We will offer our commercial and roll off services under the Standard Waste name,” said Glen Miller, CEO of Titan Environmental Solutions. “This acquisition provides us with additional scale in the marketplace providing what we believe to be significant operating synergies. We look forward to evaluating additional growth opportunities as we continue to scale our business.”
FOR MORE INFORMATION
Glen Miller
Chief Executive Officer
About Titan Environmental Solutions Inc.
Titan Environmental Solutions Inc., based in Bloomfield Hills, MI, is a technology-enabled environmental services company with an emphasis on improving environmental efficiency while relying on brick and mortar, cash flow generating traditional waste management and recycling targets. In additional to Titan’s waste technology efforts, the Company will focus on being a consolidator of environmental service companies with a focus on acquiring well established, cash flow generating assets in the environmental industry, vertically integrating its operations and integrating future acquisitions into its technology-based solutions to waste management. Titan’s goal is to continue to grow as an entrepreneurial driven, service oriented, waste and recycling solutions company with a comprehensive waste solution platform to meet customer demands, including, collections, hauling, recycling, and technology-based waste reduction solutions. The Company’s vertically aligned services provide customers with convenience and increased revenues by lowering waste disposal costs. Please visit www.TitanCares.com for more information on the services Titan offers or call 248-775-7400.
Forward-Looking Statements
This press release includes “forward-looking statements” within the meaning of the safe harbor provisions of the United States Private Securities Litigation Reform Act of 1995. Titan’s actual results may differ from its expectations, estimates and projections and consequently, you should not rely on these forward-looking statements as predictions of future events. Words such as “expect,” “estimate,” “project,” “budget,” “forecast,” “anticipate,” “intend,” “plan,” “may,” “will,” “could,” “should,” “believes,” “predicts,” “potential,” “continue,” and similar expressions are intended to identify such forward-looking statements. These forward-looking statements involve significant risks and uncertainties that could cause the actual results to differ materially from the expected results. Most of these factors are outside Titan’s control and are difficult to predict. Factors that may cause such differences include, but are not limited to, those described under the heading “Risk Factors” in the Company’s Annual Report filed with the Securities and Exchange Commission (“SEC”) on Form 10-K, the Company’s Quarterly Reports on Form 10-Q and the Company’s Current Reports on Form 8-K.
Titan cautions that the foregoing list of factors is not exclusive. Additional information concerning these and other risk factors is contained in Titan’s most recent filings with the SEC. All subsequent written and oral forward-looking statements concerning Titan or other matters and attributable to Titan or any person acting on its behalf, are expressly qualified in their entirety by the cautionary statements above. Titan cautions readers not to place undue reliance upon any forward-looking statements, which speak only as of the date made. Titan does not undertake or accept any obligation or undertaking to release publicly any updates or revisions to any forward-looking statements to reflect any change in its expectations or any change in events, conditions or circumstances on which any such statement is based.