Toppoint Holdings Inc S-1, filed Aug 12, 2024
Toppoint Holdings Inc. (TOPP)
As filed with the Securities and Exchange Commission on August 12, 2024
Registration No. 333-
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-1
REGISTRATION
STATEMENT UNDER
THE SECURITIES ACT OF 1933
Toppoint Holdings Inc.
(Exact name of registrant as specified in its charter)
| Nevada | 4210 | 92-2375560 | ||
| (State or other jurisdiction
of incorporation or organization) |
(Primary Standard Industrial Classification Code Number) |
(I.R.S. Employer Identification Number) |
1250 Kenas Road
North Wales, PA 19454
551-866-1320
(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)
Hok C Chan
Chief Executive Officer
1250 Kenas Road
North Wales, PA 19454
551-866-1320
(Names, address, including zip code, and telephone number, including area code, of agent for service)
Copies to:
| Louis
A. Bevilacqua, Esq. Bevilacqua PLLC 1050 Connecticut Avenue, NW, Suite 500 Washington, DC 20036 (202) 869-0888 |
Lawrence
Venick, Esq. Loeb & Loeb LLP 2206-19 Jardine House 1 Connaught Place Central, Hong Kong SAR 852-3923-1111 |
Approximate date of commencement of proposed sale to the public: As soon as practicable after this Registration Statement becomes effective.
If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. ☒
If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer ☐ | Accelerated filer ☐ | |
| Non-accelerated filer ☒ | Smaller reporting company ☒ | |
| Emerging growth company ☒ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of Securities Act. ☐
The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the registration statement shall become effective on such date as the Commission, acting pursuant to such Section 8(a), may determine.
The information in this prospectus is not complete and may be changed. These securities may not be sold until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and it is not soliciting offers to buy these securities in any state where the offer or sale is not permitted.
| PRELIMINARY PROSPECTUS | SUBJECT TO COMPLETION, DATED AUGUST 12, 2024 |
Toppoint Holdings Inc.
[ ] Shares of Common Stock
This is our initial public offering. We are offering [ ] shares of common stock, par value $0.0001 per share, assuming an initial public offering price of $[ ] per share (which is the midpoint of the estimated range of the initial public offering price shown on the cover page of this prospectus). We currently estimate that the initial public offering price will be between $[ ] and $[ ] per share.
Currently, there is no public market for our common stock. We have applied to list our common stock under the symbol “TOPP” on the Nasdaq Capital Market. The closing of this offering is contingent upon the successful listing of our common stock on the Nasdaq Capital Market.
We are an “emerging growth company” under applicable federal securities laws and as such, we have elected to comply with certain reduced public company reporting requirements for this prospectus and future filings.
Investing in our securities involves a high degree of risk. See the section of this prospectus entitled “Risk Factors” beginning on page 10 for a discussion of information that should be considered in connection with an investment in our securities.
Neither the SEC nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.
| Per Share | Total | |||||||
| Initial public offering price | $ | [ ] | $ | [ ] | ||||
| Underwriting discounts and commissions(1) | $ | [ ] | $ | [ ] | ||||
| Proceeds, before expenses, to Toppoint Holdings Inc. | $ | [ ] | $ | [ ] | ||||
| (1) | Represents underwriting discounts equal to 7.0% per share. Does not include the following additional compensation payable to the underwriters: We have agreed to pay the representative of the underwriters, A.G.P./Alliance Global Partners (the “Representative”), up to $150,000 for out-of-pocket accountable expenses incurred relating to this offering and to reimburse the underwriters for non-accountable expenses not in excess of 1% of the gross proceeds raised in this offering. |
We have granted a 45-day option to the underwriters to purchase up to [ ] additional shares of common stock (equal to 15% of the shares of common stock sold in the offering), solely to cover over-allotments, if any, at the public offering price less the underwriting discounts. If the underwriters exercise the over-allotment option in full, the total underwriting discounts payable will be $[ ] based on an assumed midpoint offering price of $[ ] per share, and the total gross proceeds to us, before underwriting discounts and expenses, will be $[ ].
This offering is being conducted on a firm commitment basis. The Representative is obligated to take and pay for all of the shares of common stock if any such shares are taken. In addition to the underwriting discounts listed above, we have agreed to issue to the Representative or its designated affiliates and to register herein warrants, exercisable for a period of three years following the date of commencement of sales of the offering, to purchase up to 5% of the total number of the shares of common stock sold in this offering (including the over-allotment shares), at an exercise price equal to 120% of the public offering price per share of common stock sold in this offering (the “Representative’s Warrants”). See “Underwriting” for additional information regarding total underwriting compensation.
The underwriters expect to deliver the shares of common stock to the purchasers on or about , 2024
Sole Book-Running Manager
A.G.P.
, 2024
TABLE OF CONTENTS
Through and including , 2024 (the 25th day after the date of this prospectus), all dealers effecting transactions in these securities, whether or not participating in this offering, may be required to deliver a prospectus. This is in addition to a dealer’s obligation to deliver a prospectus when acting as an underwriter and with respect to an unsold allotment or subscription.
Please read this prospectus carefully. It describes our business, financial condition, results of operations and prospects, among other things. We are responsible for the information contained in this prospectus and in any free-writing prospectus we have authorized. Neither we nor the underwriters have authorized anyone to provide you with different information, and neither we nor the underwriters take responsibility for any other information others may give you. Neither we nor the underwriters are making an offer to sell these securities in any jurisdiction where the offer or sale is not permitted. The information contained in this prospectus is accurate only as of the date on the front of this prospectus, regardless of the time of delivery of this prospectus or any sale of securities. You should not assume that the information contained in this prospectus is accurate as of any date other than its date. Our business, financial condition, results of operations, and prospects may have changed since that date. We do not take any responsibility for, nor do we provide any assurance as to the reliability of, any information other than the information in this prospectus and any free writing prospectus prepared by us or on our behalf. Neither the delivery of this prospectus nor the sale of our shares means that information contained in this prospectus is correct after the date of this prospectus.
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TRADEMARKS, TRADE NAMES AND SERVICE MARKS
We use various trademarks, trade names and service marks in our business, including “Toppoint Inc.” and “ToppointTrucking.com”. For convenience, we may not include the SM, ® or ™ symbols, but such omission is not meant to indicate that we would not protect our intellectual property rights to the fullest extent allowed by law. Any other trademarks, trade names or service marks referred to in this prospectus are the property of their respective owners.
INDUSTRY AND MARKET DATA
We are responsible for the information contained in this prospectus and any free writing prospectus we prepare or authorize. This prospectus includes industry data and forecasts that we obtained from industry publications and surveys, as well as public filings and internal company sources. Industry publications, surveys and forecasts generally state that the information contained therein has been obtained from sources believed to be reliable, but there can be no assurance as to the accuracy or completeness of the included information. Statements as to our ranking, market position and market estimates are based on third-party forecasts, management’s estimates and assumptions about our markets and our internal research. We have not independently verified such third-party information, nor have we ascertained the underlying economic assumptions relied upon in those sources, and we cannot assure you of the accuracy or completeness of such information contained in this prospectus. Such data involves risks and uncertainties and is subject to change based on various factors, including those discussed under “Risk Factors” and “Cautionary Statement Regarding Forward-Looking Statements.”
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This summary highlights selected information contained elsewhere in this prospectus. This summary is not complete and does not contain all of the information that you should consider before deciding whether to invest in our securities. You should carefully read the entire prospectus, including the risks associated with an investment in our company discussed in the “Risk Factors” section of this prospectus, before making an investment decision. Some of the statements in this prospectus are forward-looking statements. See the section titled “Cautionary Statement Regarding Forward-Looking Statements.”
In this prospectus, “we,” “us,” “our,” “our company” and similar references refer to Toppoint Holdings Inc. and its subsidiary on a consolidated basis.
Our Company
Overview
We are a truckload services and solutions provider focused on the recycling export supply chain. We have become a key player in the New Jersey and Pennsylvania regional trucking market for waste paper, evidenced by our significant market share where we accounted for approximately 34% of the waste paper export drayage volumes through New Jersey’s ports and approximately 30% through Philadelphia’s ports, according to data sourced from IHS Markit. In addition to waste paper, our portfolio also includes the shipment of scrap metal and wooden logs from large waste companies, recycling centers and commodity traders to the ports of Newark, NJ, and Philadelphia, PA. We continue to expand our footprints domestically and have ventured into the recycling export transport market of Tampa and Miami, FL, and Baltimore, MD in 2023. We intend to explore the international market in Canada, the United Kingdom and Australia in the near future.
Our client base includes largest Fortune 500 waste companies and over 280 recycling centers and commodity traders that operate in nearly 2,300 locations. Our growing client base relies on us as their partner to provide a “white glove service” to ensure their time-sensitive, ultra-high throughput commodities are safely loaded and delivered right to container ships. In addition, capitalizing on our know-how in developing logistics solutions over the years, we are able to propose integrated transportation solutions that cover loading, transport, port drayage and unloading.
Currently, our business is broadly categorized into four verticals, by commodity type and the direction of trade as follows:
| ● | Waste Paper Products. Waste paper products have been our core commodity of export transportation. As a word-of-mouth shipper of choice, we have established a significant market presence in the New Jersey and Pennsylvania region’s recycled paper export transport industry. For the years ended December 31, 2023 and 2022, we completed approximately 4,400 and 3,550 orders, involving 18,022 and 20,124 loads, which amounted to approximately 504,616 and 563,472 tons of waste paper, respectively. For the three months ended March 31, 2024 and 2023, we completed approximately 654 and 820 orders, involving 5,360 and 7,259 loads, which amounted to approximately 114,632 and 162,484 tons of waste paper, respectively. We use Number of Loads Completed, or NLC, as a key performance indicator. For more information, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Other Performance Indicator” on page 38. We are the only trucking company that is a member of the Board of the New Jersey Paper Recycling Association, or NJPRA. NJPRA has approximately 20 members, representing approximately 90% of the paper recycling market in New Jersey. |
| ● | Waste Metal and Forestry. We expanded into scrap metal and wood products export markets to diversify our offerings and supply our growing fleet. Serving additional commodities allows us to keep a strong pipeline of loads for independent contractor drivers to deliver and mitigate risks against commodity price fluctuations that affect demand for export. |
| ● | Import. We hold a minority market share in the import delivery sector for ports of Newark, NJ and Philadelphia, PA, picking up containers from ships and dropping at client locations. |
| ● | Others. From time to time, we offer trucking services for plastic and other commodities and provide logistics brokerage solutions servicing the major ports in California, Georgia, South Carolina, Texas and Illinois, as well as commercial rail lines. |
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We pride ourselves on being an economically viable, socially responsible and environmentally friendly enterprise. We contribute to a sustainable society through our initiatives to reduce costs and enhance recycling logistics efficiency. Our competitive prices, capability to deliver large amounts on time and fast response ability have enabled us to solidify our partnerships with clients year over year. The number of our clients has grown from 10 in 2015 to 303 in 2023 at a CAGR of approximately 53.17%.
We engage with owner-operators, other independent contractor drivers and “outside trucks” in our operations. “Outside trucks” refers to trucks that do not bear our DOT identification number. We occasionally assist clients in hiring outside trucks for loads not handled by trucks owned by our owner-operators. As of June 20, 2024, there are approximately 100 trucks in our fleet. All these trucks are owned by the owner-operators but bear our DOT identification number. Such trucks are under our exclusive direction and supervision pursuant to agreements we enter into with the owner-operators. We work directly with the owner-operators. As of the date of prospectus, we work with approximately 125 independent contractor drivers. These 125 independent contractor drivers consist of (i) all the owner-operators and (ii) drivers that are hired by owner-operators. We help drivers transition to owner-operators and assist owner-operators in recruiting drivers and expanding their fleets of trucks.
Our total revenues for the years ended December 31, 2023 and 2022 were $18,035,532 and $21,485,791, respectively, representing a year-over-year decrease of $3,450,260, or 16%. Our net income for the years ended December 31, 2023 and 2022 was $542,351 and $1,689,219, representing a year-over-year decrease of $1,146,868, or 68%. The revenue decline in 2023 was mainly due to an industry-wide decrease in scrap paper export volume. Despite receiving an increased number of orders, both the average load count per order and the price per load decreased. To maintain activity across our fleet, we accepted a higher volume of smaller orders at lower prices. However, despite the downturn in waste paper exports, our revenues from Waste Metal, Import and Others verticals experienced growth in 2023. We expanded our presence in the metal recycling export market, which resulted in a 55% increase in loads, totaling an additional 476 loads compared to 2022. Our revenues from the “Others” vertical, where we hire outside trucks in markets our fleet does not service such as Illinois and Texas, also increased. Utilizing “outside trucks” allows us to scale our operations and serve our national clients in emerging markets with low risk. Our revenues from Forestry were lower in 2023 compared to 2022, which experienced an unusual surge.
Our revenues for the three months ended March 31, 2024 and 2023 were $3,733,896 and $5,723,313, respectively, representing a year-over-year decrease of $1,989,417, or 35%. Our net income for the three months ended March 31, 2024 and 2023 was $111,090 and $287,825, representing a year-over-year decrease of $176,735, or 61%. For additional information regarding our financial performance, see “Summary Financial Information” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”
Our Corporate History and Structure
We were incorporated in the State of Nevada on August 16, 2022 as a holding company. We started operations in 2014 through Toppoint Inc, a Pennsylvania corporation. As of the date of this prospectus, we have only one subsidiary, Toppoint Inc.
On the date of incorporation, we issued an aggregate of 7,500,000 shares of common stock to four investors at a per share purchase price of $0.0001. On the same date, these four investors entered into a voting agreement with Hok C Chan, our founder, Chairman of our board of directors and Chief Executive Officer, pursuant to which the investors unconditionally and irrevocably appointed Hok C Chan as each investor’s proxy to attend and vote at all shareholder meetings of the Company and on every action or approval by written consent of the shareholders of the Company, until the earlier of (i) the date on which the Company completes its initial public offering, or (ii) the written agreement of all the parties of the agreement to terminate it. A copy of the voting agreement is filed as an exhibit to the registration statement of which this prospectus forms a part.
On September 29, 2022, we entered into a Share Exchange Agreement with Toppoint Inc and Hok C Chan, the sole stockholder of Toppoint Inc, our founder, Chairman of our board of directors and Chief Executive Officer, pursuant to which Hok C Chan exchanged all of his shares in Toppoint Inc for 7,500,000 shares of common stock of our company. As a result, we acquired all of the issued and outstanding shares of capital stock of Toppoint Inc, making Toppoint Inc our wholly-owned subsidiary.
For more information, please see the section titled “Corporate History and Structure” in this prospectus.
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Our Competitive Strengths
We believe our key competitive strengths include:
| ● | A Large Vendor Pool with Approximately 100 Trucks. Our truck owner-operators and other independent contractor drivers, which we refer to as “vendors,” are our bloodline. The core belief in “culture drives success” has helped us grow the fleet to approximately 100 trucks. We provide a high level of care and support to our vendors. We help independent contractor drivers create a timeline to transition to owner-operators and we assist our owner-operators in expanding their own fleets of trucks with driver recruitment assistance, business management training and retention tactics adoption. With a large fleet, we are able to meet our customers’ transport needs with first-to-final-mile-delivery capabilities, avoid delays or cancellations, and help us build a strong brand image and reputation as a reliable, efficient and professional company. |
| ● | Ability to Offer Competitive Pricing. In the relatively lower-profit recycled paper transport industry, maintaining competitive prices is an important factor in our continued market share expansion. We employ proprietary analytics systems to effectively track our operating results and financial position in real time and continuously enhance processes, with a view to helping customers reduce warehouse costs, lower shipping expenses and maintain operational flexibility. In addition, our full truckload shipping offerings meet the needs of companies requiring maximum movement of the commodities they trade with lower transport costs per unit. |
| ● | Capability to Provide Real-Time Visibility into Shipments and Quickly Respond. We have adopted a leading telematics system to allow us and our customers to easily monitor the status and location of the freight. We typically receive and process 250 driver and truck location updates daily. In addition, our sophisticated dispatch system and experienced professionals enable us to quickly pivot when vessels are delayed and minimize empty miles. |
| ● | A Global Team and a Fully Remote Workspace. Our dedicated growing staff are strategically located in the US and overseas, to allow for immediate response to inquiries by our customers and vendors 24/7. We provide a fully remote engaging workspace that encourages a healthy work-life balance and drives a committed, highly responsible and reliable team with minimal employee turnover. |
| ● | Healthy Cash Flows. We have primarily funded our operations through cash generated from operations. Positive cash flows enable us to operate without dependency on factoring companies, improve profit margins, have the ability to invest in new opportunities and expand into new markets, provide resources to help our vendors grow, and strengthen our ability to weather market volatility. |
| ● | Maintaining a Satisfactory DOT Safety Rating, the Highest Awarded by the DOT. A top concern for operating in dense urban areas is ensuring our cargo is delivered as promised, the patrons on the roads we share are free of harm, and independent contractor drivers go home safely nightly. We require Department of Transportation and Federal Motor Carrier Safety Administration (DOT/FMCSA)-compliant drug testing, including pre-employment and quarterly random drug and alcohol testing. New drivers undergo documented training and current drivers undergo refresher training annually. This allows us to maintain a satisfactory DOT safety rating, the highest awarded by the DOT. |
| ● | Innovative and experienced management team with extensive operating expertise. We have an innovative management team able to seize on the opportunities in the recyclable waste transportation industry. Mr. Hok C Chan, our Chief Executive Officer and Chairman of the Board, has a deep understanding of the recycling and trucking sectors. As an innovative and entrepreneurial leader, Mr. Chan has led our company to develop a sizable client base comprising Fortune 500 waste companies and over 280 recycling centers and commodity traders within a short period of eight years and to be a leader in the recycling export supply chain of the New Jersey and Pennsylvania region. Our management team is well versed in trucking services, recycling, heavy equipment, and logistics management. Our experienced management team has also built a solid talent base for our company to drive development and innovation in the long run. |
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Our Growth Strategies
The key elements of our strategy to grow our business include:
| ● | Increasing wallet shares of current clients. Our top clients provide services nationwide and globally. We believe the most effective expansion strategy is to capitalize on existing clientele relationships, our track record and reputation, strategically align with their growth goals, and secure opportunities to service more of their markets. |
| ● | Building storage and warehousing capability. We plan to invest in expanding our storage and warehousing space and upgrading the logistics management system in such space. With enhanced storage and warehousing capability, we will be able to provide additional space for the growing fleet to store equipment and vehicles and acquire new space as we expand geographic coverage of services. Also, upgraded warehouses that can sort and store freight may allow us to enter other segments of the trucking industry. |
| ● | Continuing to improve information technology (IT) Infrastructure. We aim to continue to improve our existing IT-based platforms and systems by remaining alert to new technologies related to the transportation process and strengthen our technology capabilities in order to facilitate, optimize, streamline and ensure the quality of our operations. We intend to make investments to further develop our abilities concerning carrier payments and data analytics, with a view to serving increased market shares, meeting evolving client requirements and cementing client relations. |
| ● | Selectively exploring opportunities of strategic alliance, investments and acquisitions. We have a track record of fostering organic growth. In the future, we may selectively seek strategic alliance, investments and acquisition opportunities to solidify existing market position, accelerate our growth and drive value creation through alliance with strategic partners. As of the date of this prospectus, we have no agreements or letters of intent for any acquisitions, partnerships or ventures. |
| ● | Enhancing our ability to attract, incentivize and retain a talented workforce. Our people are our core assets, and we believe our success greatly depends on our ability to attract, incentivize and retain our employees, truck owner-operators and other independent contractor drivers. We strive to continue to provide competitive compensation to independent contractor drivers, use our resources to support owner-operators’ growth, and maintain the collegial environment for our global staff. Our compensation structure is performance-based and aligned with our strategic objectives. Our culture, which from our inception, was focused on the well-being of independent contractor drivers, helps us recruit and retain drivers. As a leader in our market with underlying core values, we believe that we will continue to be a preferred carrier for both of our clients and independent contractor drivers. |
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Implications of Being an Emerging Growth Company
Upon the completion of this offering, we will qualify as an “emerging growth company” under the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”). As a result, we will be permitted to, and intend to, rely on exemptions from certain disclosure requirements. For so long as we are an emerging growth company, we will not be required to:
| ● | have an auditor report on our internal controls over financial reporting pursuant to Section 404(b) of the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”); |
| ● | comply with any requirement that may be adopted by the Public Company Accounting Oversight Board regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and the financial statements (i.e., an auditor discussion and analysis); |
| ● | submit certain executive compensation matters to shareholder advisory votes, such as “say-on-pay” and “say-on-frequency;” and |
| ● | disclose certain executive compensation related items such as the correlation between executive compensation and performance and comparisons of the chief executive officer’s compensation to median employee compensation. |
In addition, Section 107 of the JOBS Act also provides that an emerging growth company can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act of 1933, as amended (the “Securities Act”) for complying with new or revised accounting standards. In other words, an emerging growth company can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have elected to take advantage of the benefits of this extended transition period. Our financial statements may therefore not be comparable to those of companies that comply with such new or revised accounting standards.
We will remain an emerging growth company for up to five years, or until the earliest of (i) the last day of the first fiscal year in which our total annual gross revenues exceed $1.235 billion, (ii) the date that we become a “large accelerated filer” as defined in Rule 12b-2 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) which would occur if the market value of our securities that is held by non-affiliates exceeds $700 million as of the last business day of our most recently completed second fiscal quarter, or (iii) the date on which we have issued more than $1 billion in non-convertible debt during the preceding three year period.
Corporate Information
Our principal executive offices are located at 1250 Kenas Road, North Wales, PA 19454 and our telephone number is 551-866-1320. We maintain a website at https://toppointtrucking.com/. Information available on our website is not incorporated by reference in and is not deemed a part of this prospectus.
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The Offering
| Common stock offered: | [ ] shares of common stock (or [ ] shares if the underwriters exercise the over-allotment option in full). | |
| Offering price: | We currently estimate that the initial public offering price will be between $[ ] and $[ ] per share. | |
| Shares outstanding immediately before the offering: | 15,000,000 shares of common stock | |
| Shares outstanding immediately after the offering: | [ ] shares of common stock (or [ ] shares if the underwriters exercise the over-allotment option in full), assuming an initial public offering price of $[ ] per share (which is the midpoint of the estimated range of the initial public offering price shown on the cover page of this prospectus). | |
| Over-allotment option: | We have granted to the underwriters a 45-day option to purchase from us up to an additional 15% of the shares of common stock sold in the offering, solely to cover over-allotments, if any, at the initial public offering price, less the underwriting discounts. | |
| Representative’s Warrants: | We have agreed to issue to the Representative warrants to purchase a number of shares of common stock equal in the aggregate to 5.0% of the total number of shares of common stock sold in this offering. The Representative’s Warrants will be exercisable at a per share exercise price equal to 120% of the public offering price per share of common stock in this offering. The Representative’s Warrants are exercisable for a period of three years following the date of commencement of sales of the offering. The registration statement of which this prospectus forms a part also registers the issuance of the shares of common stock issuable upon exercise of the Representative’s Warrants. See “Underwriting” for more information. | |
| Use of proceeds: | We expect to receive net proceeds of approximately $[ ] from this offering, assuming an initial public offering price of $[ ] per share (which is the midpoint of the estimated range of the initial public offering price shown on the cover page of this prospectus) and no exercise of the underwriters’ over-allotment option, and after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us, or approximately $[ ] if the underwriters exercise the over-allotment option in full. We plan to use the net proceeds of this offering for geographic expansions, investments in physical and IT infrastructure, expansion of our sales team and marketing efforts, and general working capital and other corporate purposes. See “Use of Proceeds” for more information on the use of proceeds. | |
| Risk factors: | Investing in our securities involves a high degree of risk. As an investor, you should be able to bear a complete loss of your investment. You should carefully consider the information set forth in the “Risk Factors” section beginning on page 10 before deciding to invest in our common stock. | |
| Lock-up | We, all of our directors and officers and any other holder of 5% or more of our outstanding shares of common stock as of the effective date of this registration statement have agreed with the underwriters, subject to certain exceptions, not to sell, transfer or dispose of, directly or indirectly, any of our common stock or securities convertible into or exercisable or exchangeable for our common stock for, in the case of our company, a period of six (6) months from the closing of this offering, and in the case of our directors, officers and 5% or greater shareholders, a period of six (6) months from the date of this prospectus. See “Underwriting” for more information. | |
| Proposed trading market and symbol | In connection with this offering, we have applied to list our shares of common stock under the symbol “TOPP” on the Nasdaq Capital Market. The closing of this offering is contingent upon the successful listing of our common stock on the Nasdaq Capital Market. |
The number of shares of common stock outstanding immediately following this offering is based on 15,000,000 shares outstanding as of the date of this prospectus and is based on an assumed initial public offering price of $[ ] per share (which is the midpoint of the estimated range of the initial public offering price shown on the cover page of this prospectus). This amount excludes:
| ● | 2,250,000 shares of common stock that are reserved for issuance under our 2022 Equity Incentive Plan; and |
| ● | up to [ ] shares of common stock issuable upon exercise of the Representative’s Warrants issued in connection with this offering, if the underwriters exercise the over-allotment option in full. |
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Summary Financial Information
The following tables summarize certain financial data regarding our business and should be read in conjunction with our financial statements and related notes contained elsewhere in this prospectus and the information under “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”
Our summary financial data as of and for the years ended December 31, 2023 and 2022 are derived from our audited financial statements included elsewhere in this prospectus. Our summary financial data as of and for the three months ended March 31, 2024 and 2023 are derived from our unaudited financial statements included elsewhere in this prospectus. All financial statements included in this prospectus are prepared and presented in accordance with generally accepted accounting principles in the United States (“GAAP”). The summary financial information is only a summary and should be read in conjunction with the historical financial statements and related notes contained elsewhere herein. The financial statements contained elsewhere fully represent our financial condition and operations; however, they are not indicative of our future performance.
| Statements of Operations Data | For the Year Ended December 31, 2023 | For the Year Ended December 31, 2022 | ||||||
| Sales | $ | 18,035,532 | $ | 21,485,791 | ||||
| Costs of revenues and operating expenses | 17,261,216 | 19,034,936 | ||||||
| Income from operations | 774,316 | 2,450,855 | ||||||
| Other income and (expense) | 145,966 | 42,493 | ||||||
| Income before income taxes | 920,282 | 2,493,348 | ||||||
| Current income taxes | 405,544 | 394,203 | ||||||
| Deferred income taxes | (27,613 | ) | 409,926 | |||||
| Net income | $ | 542,351 | $ | 1,689,219 | ||||
| Retained earnings, beginning | 1,683,402 | 371,231 | ||||||
| Distributions | - | (377,048 | ) | |||||
| Retained earnings, ending | $ | 2,225,753 | $ | 1,683,402 | ||||
| Statements of Operations Data | For the Three Months Ended March 31, 2024 | For the Three Months Ended March 31, 2023 | ||||||
| Sales | $ | 3,733,896 | $ | 5,723,313 | ||||
| Costs of revenues and operating expenses | 3,586,001 | 5,484,858 | ||||||
| Income from operations | 147,895 | 238,455 | ||||||
| Other income and (expense) | (1,369 | ) | 152,768 | |||||
| Income before income taxes | 146,526 | 391,223 | ||||||
| Current income taxes | 13,367 | 103,398 | ||||||
| Deferred income taxes | 22,069 | — | ||||||
| Net income | $ | 111,090 | $ | 287,825 | ||||
| Retained earnings, beginning | 2,225,753 | 1,683,402 | ||||||
| Retained earnings, ending | $ | 2,336,843 | $ | 1,971,227 | ||||
| As of March 31, | As of December 31, | |||||||||||
| Balance Sheet Data | 2024 | 2023 | 2022 | |||||||||
| Cash | $ | 1,237,471 | $ | 1,455,976 | $ | 744,853 | ||||||
| Total current assets | 2,862,004 | 2,833,828 | 2,563,466 | |||||||||
| Total assets | 4,930,695 | 4,956,307 | 4,777,432 | |||||||||
| Total current liabilities | 1,468,624 | 1,597,948 | 1,468,193 | |||||||||
| Total liabilities | 2,452,602 | 2,589,304 | 2,952,780 | |||||||||
| Total shareholder’s equity | 2,478,093 | 2,367,003 | 1,824,652 | |||||||||
| Total liabilities and shareholder’s equity | $ | 4,930,695 | $ | 4,956,307 | $ | 4,777,432 | ||||||
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Summary of Risk Factors
An investment in our securities involves a high degree of risk. You should carefully consider the risks summarized below. These risks are discussed more fully in the “Risk Factors” section immediately following this Prospectus Summary. These risks include, but are not limited to, the following:
Operational and Industry Risks
| ● | We operate in the highly competitive and fragmented truckload and transportation industry, and our failure to stay competitive could impair our ability to improve our profitability and materially adversely affect our results of operations. |
| ● | We may not be successful in managing our growth or implementing our business strategies. |
| ● | Our business is subject to general economic, business and regulatory factors affecting the truckload industry that are largely beyond our control, any of which could have a material adverse effect on our results of operations. |
| ● | A substantial portion of our business and revenue derive from our brokerage model, where we support owner-operators to grow their fleets within our umbrella. This business model and the use of owner-operators expose us to different risks that a traditional fleet ownership and management business may not experience. |
| ● | Fluctuations in the price or availability of fuel and surcharge collection may increase our costs of operation, which could materially and adversely affect our margins. |
| ● | A significant portion of our revenue is concentrated in a small number of large customers. Any loss or significant reduction of business with one or more of them could have a material adverse effect on our business, financial condition and results of operations. |
| ● | We have engaged in transactions with related parties, and such transactions present possible conflicts of interest that could have an adverse effect on our business and results of operations. |
| ● | Changes to trade regulation, quotas, duties or tariffs, caused by the changing U.S. and geopolitical environments or otherwise, may materially adversely affect customer demand for our services. |
| ● | We are dependent on systems, networks and other information technology assets (and the data contained therein) and a failure in the foregoing, including those caused by cybersecurity breaches, could cause a significant disruption to our business. |
| ● | If we are unable to recruit, develop and retain our key employees, our business, financial condition and operating results could be adversely affected. |
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Legal and Compliance Risks
| ● | We operate in a highly regulated industry and increased costs of compliance with, or liability for violation of, existing or future federal or state regulations could have a materially adverse effect on our business. |
Risks Related to This Offering and Ownership of Our Common Stock
| ● | There has been no public market for our common stock prior to this offering, and an active market in which investors can resell their shares of our common stock may not develop. |
| ● | The market price of our common stock may fluctuate, and you could lose all or part of your investment. |
| ● | We may experience extreme stock price volatility unrelated to our actual or expected operating performance, financial condition or prospects, making it difficult for prospective investors to assess the rapidly changing value of our common stock. |
| ● | We may not be able to maintain a listing of our common stock on Nasdaq. |
| ● | We have considerable discretion as to the use of the net proceeds from this offering and we may use these proceeds in ways with which you may not agree. |
| ● | You will experience immediate and substantial dilution as a result of this offering. |
| ● | We do not expect to declare or pay dividends in the foreseeable future. |
| ● | Future issuances of our common stock or securities convertible into, or exercisable or exchangeable for, our common stock, or the expiration of lock-up agreements that restrict the issuance of new common stock or the trading of outstanding common stock, could cause the market price of our securities to decline and would result in the dilution of your holdings. |
| ● | Future issuances of debt securities, which would rank senior to our common stock upon our bankruptcy or liquidation, and future issuances of preferred stock, which could rank senior to our common stock for the purposes of dividends and liquidating distributions, may adversely affect the level of return you may be able to achieve from an investment in our common stock. |
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An investment in our securities involves a high degree of risk. You should carefully consider the following risk factors, together with the other information contained in this prospectus, before purchasing our securities. We have listed below (not necessarily in order of importance or probability of occurrence) what we believe to be the most significant risk factors applicable to us, but they do not constitute all of the risks that may be applicable to us. Any of the following factors could harm our business, financial condition, results of operations or prospects, and could result in a partial or complete loss of your investment. Some statements in this prospectus, including statements in the following risk factors, constitute forward-looking statements. Please refer to the section titled “Cautionary Statement Regarding Forward-Looking Statements.”
Operational and Industry Risks
We operate in the highly competitive and fragmented truckload and transportation industry, and our failure to stay competitive could impair our ability to improve our profitability and materially adversely affect our results of operations.
Our business competes with many truckload carriers, logistics, brokerage and other transportation companies. The North American surface transportation market is highly competitive and fragmented. Some of our competitors may have greater access to equipment, a larger fleet, a wider range of services, preferential dedicated customer contracts, greater capital resources or other competitive advantages. Numerous competitive factors could impair our ability to maintain or improve our profitability. These factors include the following:
| ● | the continuing trend toward consolidation in the trucking industry may result in more large carriers with greater financial resources and other competitive advantages, with which we may have difficulty competing; |
| ● | competition from freight brokerage companies may materially adversely affect our customer relationships and freight rates; |
| ● | our competitors may have better safety records than us or a perception of better safety records; |
| ● | our competitors may reduce their freight rates to gain business, especially during times of reduced growth in the economy, which may limit our ability to maintain or increase freight rates or to maintain or expand our business or may require us to reduce our freight rates in order to maintain business and keep our equipment productive; |
| ● | customers may solicit bids from multiple carriers for their shipping needs, which may depress freight rates or result in a loss of business to our competitors; |
| ● | higher fuel prices and higher fuel surcharges to our customers may cause some of our customers to reduce freight volumes; |
| ● | advancements in technology may necessitate that we increase investments in order to remain competitive, and our customers may not be willing to accept higher freight rates to cover the cost of these investments; and |
| ● | we may have difficulty recruiting and retaining drivers if our competitors offer better compensation or working conditions. |
We may not be successful in managing our growth or implement our business strategies.
Many of our business strategies require time, significant management and financial resources and successful implementation. Consequently, we may be unable to effectively and successfully implement our business strategies. We also cannot ensure that our operating results, including our operating margins, will not be materially adversely affected by future changes in and expansion of our business, including the expected geographic expansion of our services in the United States and overseas, or by changes in economic conditions. Our results of operations may be materially adversely affected by a failure to further penetrate our existing customer base, cross-sell our services, secure new customer opportunities and manage the operations and expenses of new or growing services. There is no assurance that we will be successful in achieving any of our business strategies. Even if we are successful in executing our business strategies, we still may not achieve our goals.
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Our business is subject to general economic, business and regulatory factors affecting the truckload industry that are largely beyond our control, any of which could have a material adverse effect on our results of operations.
The truckload industry is highly cyclical, and our business is dependent on a number of factors that may have a negative impact on our results of operations, many of which are beyond our control. We believe that some of the most significant of these factors are economic changes that affect supply and demand in transportation markets, such as:
| ● | general economic conditions, such as economic recession, disruption to the global supply chain, labor shortage, etc.; |
| ● | domestic and global demand for recycled materials; |
| ● | recessionary economic cycles, such as the period from 2007 through 2009; |
| ● | changes in customers’ inventory levels and practices, including shrinking product/package sizes, and in the availability of funding for their working capital; |
| ● | excess truck capacity in comparison with shipping demand; |
| ● | driver shortages and increases in drivers’ compensation; |
| ● | industry compliance with ongoing regulatory requirements; |
| ● | fluctuations in foreign exchange rates; and |
| ● | downturns in customers’ business cycles, including as a result of declines in consumer spending. |
Several of the above factors were evident during the COVID-19 pandemic in the freight environment, which led to labor shortage, inflationary pricing, and severe disruption to the global supply chain. Similar conditions in the future could have a material adverse effect on our business, financial condition and results of operations.
Additionally, economic conditions that decrease shipping demand or increase the supply of available trucks and other equipment can exert downward pressure on rates and equipment utilization, thereby decreasing productivity. The risks associated with these factors are heightened when the U.S. economy is weakened. Some of the principal risks during such times are as follows:
| ● | we may experience low overall freight levels, which may impair the asset utilization of our owner operators; certain of our customers may face credit issues and cash flow problems that may lead to payment delays, increased credit risk, bankruptcies and other financial hardships that could result in even lower freight demand and may require us to increase our allowance for doubtful accounts; |
| ● | freight patterns may change as supply chains are redesigned, resulting in an imbalance between our capacity and our customers’ freight demand; |
| ● | customers may bid out freight or select competitors that offer lower rates in an attempt to lower their costs, and we might be forced to lower our rates or lose freight; |
| ● | we may be forced to accept more loads from freight brokers, where freight rates are typically lower, or may be forced to incur more non-revenue generating miles to obtain loads; and |
| ● | we may need access to sources of credit or capital to meet cash requirements in operations, which would subject us to indebtedness and reduce our profitability. |
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We are also subject to cost increases outside our control that could materially reduce our profitability if we are unable to increase our rates sufficiently. Such cost increases include, but are not limited to, increases in fuel prices, driver and office employee wages, purchased transportation costs, interest rates, taxes, tolls, license and registration fees, insurance, revenue equipment and related maintenance, and healthcare and other benefits for our employees. Further, we may not be able to appropriately adjust our costs to changing market demands. In order to maintain high variability in our business model, it is necessary to adjust staffing levels to changing market demands. In periods of rapid change, it is more difficult to match our staffing level to our business needs.
In addition, events outside our control, such as deterioration of U.S. transportation infrastructure and reduced investment in such infrastructure, strikes or other work stoppages at our facilities or at customer, port, border or other shipping locations, or actual or threatened armed conflicts or terrorist attacks, efforts to combat terrorism, military action against a foreign state or group located in a foreign state or heightened security requirements could lead to wear, tear and damage to our equipment, driver dissatisfaction, reduced economic demand, reduced availability of credit, increased prices for fuel or temporary closing of the shipping locations or U.S. borders. Such events or enhanced security measures in connection with such events could impair our operating efficiency and productivity and result in higher operating costs.
Changing impacts of regulatory measures could impair our operating efficiency and productivity, decrease our revenues and profitability and result in higher operating costs. In addition, declines in the resale value of revenue equipment may affect the cash flows of our owner operators who own and operate the trucks that we draw on to fulfill customer shipping orders. From time to time, various U.S. federal, state or local taxes are also increased, including taxes on fuel. We cannot predict whether, or in what form, any such tax increase applicable to us will be enacted, but such an increase could materially adversely affect our profitability.
A substantial portion of our business and revenue derive from our brokerage model, where we support owner-operators to grow their fleets within our umbrella. Such business model and use of owner-operators expose us to different risks that a traditional fleet ownership and management business may not experience.
We are in the process of developing a scalable brokerage model, specializing in converting drivers into owner-operators by means of training and captured market share. These owner-operators are encouraged and supported by us in order to grow their fleets within our umbrella. We assist with staffing their vehicles and ensuring DOT compliance for all members of our team. For more information on our relationship with owner-operators and our contractual rights to the use of trucks in our fleet, see “Business—Employees and Human Capital—Owner-Operators” on page 57, and “Business—Equipment We Use” on page 53.
We believe we contract with more owner-operators and use more owner-operator trucks than some of our competitors. We are therefore more dependent on owner-operator trucks than some of our competitors. Failure to maintain owner-operator business and relationships and increased industry competition for owner-operators could have a materially adverse effect on our operating results.
During times of increased economic activity, we face heightened competition for owner-operators from other carriers. To the extent our turnover increases, we may be required to increase owner-operator compensation or take other measures to remain an attractive option for owner-operators. If we cannot attract sufficient owner-operators, or it becomes economically difficult for owner-operators to survive, we may not be able to maintain our fleet provided by owner-operators or maintain our delivery schedules.
The owner-operators that we utilize are subject to certain regulation requirements, such as the electronic on-board recording and driver Hours of Service, or HOS, requirements that apply to larger carriers, which may have a more significant impact on their operations, causing them to exit the transportation industry. Aside from when these third parties may use our trailing equipment to fulfill loads, we do not own the vehicles. The inability to obtain and maintain reliable third-party owner-operators will have a material adverse effect on our operating results and business growth.
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If our independent contractor drivers are deemed by regulators or judicial process to be employees, our business, financial condition and results of operations could be materially adversely affected.
Tax and other regulatory authorities, as well as independent contractors themselves, have increasingly asserted that independent contractor drivers in the trucking industry are employees rather than independent contractors, and our classification of independent contractors may become the subject of audits by such authorities. Federal legislation has been introduced in the past that would make it easier for tax and other authorities to reclassify independent contractors as employees, including legislation to increase the recordkeeping requirements for those that engage independent contractor drivers and to increase the penalties for companies who misclassify their employees and are found to have violated employees’ overtime and/or wage requirements. Additionally, federal legislators have sought to abolish the current safe harbor allowing taxpayers meeting certain criteria to treat individuals as independent contractors if they are following a long-standing, recognized practice, to extend the Fair Labor Standards Act (the “FLSA”) to independent contractors and to impose notice requirements based on employment or independent contractor status and fines for failure to comply. Some states have put initiatives in place to increase their revenue from items such as unemployment, workers’ compensation and income taxes, and a reclassification of independent contractors as employees would help states with this initiative. Further, class actions and other lawsuits have been filed against certain members of our industry seeking to reclassify independent contractors as employees for a variety of purposes, including workers’ compensation and health care coverage. Taxing and other regulatory authorities and courts apply a variety of standards in their determination of independent contractor status. The Department of Labor has issued the rule entitled “Employee or Independent Contractor Classification Under the Fair Labor Standards Act,” effective March 11, 2024. This rule addresses how to analyze whether a worker is an employee or an independent contractor under the FLSA. The “economic reality test” under this rule focuses on the economic realities of the worker’s relationship with the potential employer and whether the worker is either economically dependent on the potential employer for work or in business for themself. The economic reality test looks at, in the totality of circumstances, multiple factors, including (1) opportunity for profit or loss depending on managerial skill, (2) investments by the worker and the employer, (3) permanence of the work relationship, (4) nature and degree of control, (5) whether the work performed is integral to the employer’s business, and (6) skill and initiative. Additional relevant factors may also be considered in determining the worker’s status. This new rule makes it more likely that a worker will be classified as an employee. If the independent contractors with whom we or our owner-operators contract are determined to be employees, we and/or our owner-operators would incur additional exposure under federal and state tax, workers’ compensation, unemployment benefits, labor, employment and tort laws, including for prior periods, as well as potential liability for employee benefits and tax withholdings, and our business, financial condition and results of operations could be materially adversely affected.
Fluctuations in the price or availability of fuel and surcharge collection may increase our costs of operation, which could materially and adversely affect our margins.
Recently, various factors such as the geopolitical instability in Ukraine and Gaza and the COVID-19 pandemic have caused great financial instability in the global economy, which result in, among others things, the diesel fuel price to surge to record high in the United States. Cost of diesel fuel represents a significant expense for our owner-operators which we draw on to provide trucking services and solutions to our clients. Diesel fuel prices fluctuate greatly due to factors beyond our control, such as political events, terrorist activities, armed conflicts, depreciation of the dollar against other currencies and weather, such as hurricanes, and other natural or man-made disasters, each of which may lead to an increase in the cost of fuel. Fuel prices also are affected by the rising demand in developing countries, and could be adversely impacted by diminished drilling activity and by the use of crude oil and oil reserves for other purposes. Such events may lead not only to increases in fuel prices, but also to fuel shortages and disruptions in the fuel supply chain. Because our operations are dependent upon diesel fuel, significant diesel fuel cost increases, shortages or supply disruptions could materially and adversely affect our operating results and financial condition.
Increases in fuel costs, to the extent not offset by rate per mile increases or fuel surcharges, have an adverse effect on our operations and profitability. While a portion of our owner-operators’ fuel costs are covered by fuel surcharge fees, increases in fuel costs could still affect our profitability because we need to compensate owner-operators more for such fuel cost increases. We constantly monitor fuel price changes by tracking fuel futures and other market information and we usually are able to implement fuel surcharge recovery no later than changes in fuel prices. However, our owner-operators may not be able to pass all the increased costs in fuel on to our customers, if prices rise more than what we forecast. Further, during periods of low freight volumes, shippers may use their negotiating leverage to depress fuel surcharge fees and reduce recoverability for fuel price increases. In addition, such fuel surcharges may not be maintained indefinitely or may not be sufficiently effective. Any of the above mentioned factors could adversely affect our profitability.
Difficulty in obtaining materials, equipment, goods and services from third-party suppliers could adversely affect our business.
We and our owner-operators are dependent upon third-party suppliers for certain products and materials, including trucks and chassis, and our owner-operators rely on suppliers of trucks, chassis and components to maintain the age of trucks in our vendor pool. If we and our owner-operators fail to maintain favorable relationships with such suppliers, or if such suppliers are unable to provide the products and materials we or our owner-operators need or undergo financial hardship, we and our owner-operators could experience difficulty in obtaining needed goods and services because of production interruptions, limited material availability or other reasons, or we and our owner-operators may not be able to obtain favorable pricing or other terms. As a result, our business and operations could be adversely affected.
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Increased prices for and decreased availability of revenue equipment could materially adversely affect our business, financial condition, results of operations and profitability.
We are subject to risk with respect to higher prices for used tractors. We have experienced an increase in prices for both new and used trucks over the past few years. Prices have increased and may continue to increase, due, in part, to government regulations applicable to newly manufactured tractors and diesel engines, due to the pricing discretion of equipment manufacturers in periods of high demand. More restrictive U.S. Environmental Protection Agency (the “EPA”) and state emissions standards have required vendors to introduce new engines. Compliance with such regulations has increased the cost of new tractors and could impair equipment productivity and result in lower fuel mileage. Although our owner-operators primarily purchase used trucks, the used equipment market is closely related to the new equipment market. Used equipment prices are subject to substantial fluctuations based on freight demand, supply of used tractors, availability of financing, the presence of buyers for export to foreign countries and commodity prices for scrap metal. However, generally when the price of new trucks is high, it can create demand for used trucks as a more affordable alternative. Also, with higher fuel mileage, used trucks currently are in great demand. A decrease in the availability of used trucks and other equipment may materially adversely affect our owner-operators’ ability to purchase a quantity of revenue equipment that is sufficient to sustain our desired growth rate and could have a material adverse effect on our business, financial condition and results of operations.
A significant portion of our revenue is concentrated in a small number of large customers. Any loss or significant reduction of business with, one or more of them could have a material adverse effect on our business, financial condition and results of operations.
A significant portion of our revenue is generated from a small number of major customers, the loss of, or significant reduction of business with, one or more of which could have a material adverse effect on our business. For the fiscal years ended December 31, 2023 and 2022, respectively, our top ten customers, based on revenue, accounted for approximately 49% and 48% of our total revenue. A substantial portion of our freight is from customers in the waste paper products industry. As such, our volumes are largely dependent on a well-functioning supply chain and export demand. In the event of a reduction in or termination of our services by one or more of our major customers, we could be required to replace the volumes elsewhere at uncertain rates and volumes, suffer reduced equipment utilization or lose our owner-operators. Failure to retain our existing customers, or enter into relationships with new customers, each on acceptable terms, could materially impact our business, financial condition, results of operations and ability to meet our current and long-term financial forecasts.
Economic conditions and capital markets may materially adversely affect our customers and their ability to remain solvent. Our customers’ financial difficulties can negatively impact our results of operations and financial condition, especially if they were to delay or default on payments to us. Generally, we do not have contractual relationships that guarantee any minimum volumes with our customers, and we cannot assure you that our customer relationships will continue as presently in effect. There is no assurance any of our customers will continue to utilize our services, renew our existing contracts, if any, or continue at the same volume levels.
In addition, the size and market concentration of some of our customers may allow them to exert increased pressure on the prices, margins and non-monetary terms in our arrangements with them.
We have engaged in transactions with related parties, and such transactions present possible conflicts of interest that could have an adverse effect on our business and results of operations.
We have entered into certain transactions with Mr. Hok C Chan, our Chief Executive Officer and Chairman of the Board, Mr. John Feliciano III, our Chief Financial Officer and a director, or their affiliates. For detailed information, see “Certain Relationships and Related Party Transactions” beginning on page 68. We believe the terms obtained or consideration that we paid or received, as applicable, in connection with these transactions were comparable to terms available or the amounts that would be paid or received, as applicable, in arm’s-length transactions.
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We may in the future enter into additional transactions in which any of our directors, officers or principal shareholders, or any members of their immediate family, have a direct or indirect material interest. Such transactions present potential for conflicts of interest, as the interests of these persons may not align with the interests of the Company and our unaffiliated shareholders with respect to the negotiation of, and certain other matters related to, our services to, leases and other transactions with such entities. Conflicts of interest may also arise in connection with the exercise of contractual remedies under these transactions, such as for events of default.
Our Audit Committee will be responsible for reviewing and approving all material related party transactions after its formation upon the effectiveness of this registration statement. Nevertheless, we may have achieved more favorable terms if such transactions had not been entered into with related parties. These transactions, individually or in aggregate, may have an adverse effect on our business and results of operations or may result in litigation or enforcement actions by the SEC or other agencies.
Our business depends on our strong reputation and the value of the Toppoint brand.
We believe that the Toppoint brand name symbolizes high-quality service, reliability and efficiency, and is one of our most important and valuable assets. The Toppoint brand name and our corporate reputation are significant sales and marketing tools, and we devote substantial resources to promoting and protecting them. Adverse publicity (whether or not justified) relating to activities by our staff, contractors or agents, such as accidents, customer service mishaps or noncompliance with laws, could tarnish our reputation and reduce the value of our brand. With the increased use of social media outlets such as Instagram, YouTube, Facebook and Twitter, adverse publicity can be disseminated quickly and broadly, making it increasingly difficult for us to effectively respond. Damage to our reputation and loss of brand equity could reduce demand for our services and thus have an adverse effect on our financial condition, liquidity and results of operations, as well as require additional resources to rebuild our reputation and restore the value of our brand.
Seasonality and the impact of weather and other catastrophic events affect our operations and profitability.
Our tractor productivity decreases during holiday seasons because drivers go on vacation and major holidays in Asian countries like the lunar new year slow down ports in Asia as well as shipping demand.
In addition, our revenue may be adversely affected by inclement weather as inclement weather may prevent trucks from crossing bridges and otherwise impede driving. During such times, operating expenses could increase as fuel efficiency declines because of engine idling and harsh weather creating higher accident frequency, increased claims and higher equipment repair expenditures. We also may suffer from weather-related or other unforeseen events such as tornadoes, hurricanes, blizzards, ice storms, floods, fires, earthquakes and explosions. These events may disrupt fuel supplies, increase fuel costs, disrupt freight shipments or routes, affect regional economies, damage or destroy our equipment or adversely affect the business or financial condition of our customers, any of which could materially adversely affect our results of operations or make our results of operations more volatile.
From time to time, we contract with third-party carriers where we do not own or control the transportation assets that deliver our customers’ freight, and we do not employ the providers directly involved in delivering the freight. If we are unable to secure the services of these third parties to serve our customers on competitive terms, our relationships with our customers may be materially adversely affected.
We engage services of third-party truckload carriers when we do not have sufficient capacity to meet shipping demand. In such arrangements, we do not own or control the transportation assets that deliver our customers’ freight, and we do not employ the providers directly involved in delivering the freight. These third-party providers may seek other freight opportunities and/or require increased compensation in times of improved freight demand or tight truckload capacity. If we are unable to secure the services of these third parties or if we become subject to increases in the prices we must pay to secure such services, our business, financial condition and results of operations may be materially adversely affected, and we may be unable to serve our customers on competitive terms. In addition, our ability to secure sufficient equipment or other transportation services may be affected by many risks beyond our control, including equipment shortages in the transportation industry, particularly among contracted truckload carriers, interruptions in service due to labor disputes, driver shortage, changes in regulations impacting transportation and changes in transportation rates.
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Changes to trade regulation, quotas, duties or tariffs, caused by the changing U.S. and geopolitical environments or otherwise, may materially adversely affect customer demand for our services.
Many of the tariffs imposed by former President Trump’s administration still remain in place. A substantial portion of the services that we offer are directly or indirectly connected to global trade. The implementation of these tariffs, as well as the imposition of additional tariffs or quotas or changes to certain trade agreements, could, among other things, affect freight demands of our customers, increase the costs of the materials used by suppliers to produce revenue equipment or increase the price of fuel. For instance, it is noted that many countries have defined ferrous scrap as a strategic raw material for steel production rather than a waste product, and largest scrap metal exporters such as the United States are predicted to take measures to increasingly restrict scrap metal exports. If our customers reduce the export of commodities such as waste paper products, scrap metals or wood products that we service due to such trade policies and regulations, their demand for our transport services will decline accordingly and our business, results of operations and cash flows would be materially adversely affected. In addition, cost increases because of changes in trade policies and regulations for our or our owner-operators’ revenue equipment suppliers would likely be passed on to us, and to the extent fuel prices increase, we may not be able to fully recover such increases through rate increases or fuel surcharge fees, either of which could have a material adverse effect on our business.
We are dependent on systems, networks and other information technology assets (and the data contained therein) and a failure in the foregoing, including those caused by cybersecurity breaches, could cause a significant disruption to our business.
Our business depends on the efficient and uninterrupted operation of our systems, networks and other information technology assets (and the data contained therein). Our information and electronic data interchange systems are used for receiving and planning loads, dispatching drivers and other capacity providers, billing customers and load tracking and storing the data related to the foregoing activities. We also maintain information security policies to protect our systems, networks and other information technology assets (and the data contained therein) from cybersecurity breaches and threats, such as hackers, malware and viruses; however, such policies cannot ensure the protection of our systems, networks and other information technology assets (and the data contained therein). Recent, more jurisdictions are enacting data privacy legislation that place higher standards for compliance, such as the GDPR, CCPA, etc. If we are unable to prevent system violations or other unauthorized access to our systems, networks and other information technology assets (and the data contained therein), we could be subject to significant fines and lawsuits and our reputation could be damaged, or our business operations could be interrupted, any of which could have a material adverse effect on our financial performance and business operations.
Our operations, and those of our technology and communications service providers are vulnerable to interruption by fire, natural disasters, power loss, telecommunications failure, network disruptions, cyber-attacks, terrorist attacks, Internet failures, malicious intrusions, computer viruses and other events that may be beyond our control. Although we attempt to reduce the risk of disruption to our business operations through, among other things, using cloud servers to store and manage data, email safe scans to prevent phishing and malware attacks and other anti-virus software, there can be no assurance that such measures will be effective. If any of our critical information technology assets fail or become otherwise unavailable, whether as a result of a cybersecurity breach, upgrade project or otherwise, we would have to perform certain functions manually, which could temporarily impact our ability to manage our fleet efficiently, respond to customers’ requests effectively, maintain billing and other records reliably, and bill for services and prepare financial statements accurately or in a timely manner. Any significant system failure, upgrade complication, security breach or other system disruption could interrupt or delay our operations, damage our reputation, cause us to lose customers or impact our ability to manage our operations and report our financial performance, any of which could have a material adverse effect on our business, financial condition and results of operations.
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If we are unable to recruit, develop and retain our key employees, our business, financial condition and operating results could be adversely affected.
We are highly dependent upon the services of certain key employees, including our executive officers. The loss of any of their services could negatively impact our operations and future profitability. Inadequate succession planning or unexpected departure of key executive officers could cause substantial disruption to our business operations, deplete our institutional knowledge base and erode our competitive advantage. Additionally, we must continue to recruit, develop and retain skilled and experienced personnel if we are to realize our goal of expanding our operations and continuing our growth, including internationally. Failure to recruit, develop and retain a core group of operational personnel could have a materially adverse effect on our business.
Efforts by labor unions could divert management’s attention and could have a materially adverse effect on our operating results.
We face the risk that Congress or one or more states will approve legislation significantly affecting our business and our relationship with our independent contractor drivers, such as the proposed federal legislation referred to as the Protecting the Right to Organize Act of 2021, which would substantially liberalize the procedures for union organization. We also face the risk that our independent contractor drivers may attempt to organize. Currently, our independent contractor drivers are not unionized. Any attempt to organize by such independent contractor drivers could result in increased legal and other associated costs. In addition, if we were to enter into a collective bargaining agreement, the terms could negatively affect our costs, efficiency and ability to generate acceptable returns on the affected operations. Moreover, any labor disputes or work stoppages, whether or not our other personnel unionize, could disrupt our operations and reduce our revenues.
Insurance and claims expenses could significantly reduce our earnings.
Our future insurance and claims expenses might exceed historical levels, which could reduce our earnings. As a trucking company, we are subject to risk of accidents that can lead to property damage, bodily injury, cargo loss or damage, workers’ compensation claims and regulatory fines and penalties. It is essential for companies like us to have adequate insurance coverage and risk management strategies in place to mitigate these risks.
We maintain insurance with licensed insurance carriers and our independent contractor drivers are covered by our insurance. Currently, we hold commercial general liability and auto liability coverages, with an aggregate limit of $2,000,000 for the former and a combined single limit per accident of $1,000,000 for the later, effective for the period of June 21, 2024 to June 21, 2025. We also carry workers compensation and employer’s liability coverage, currently effective for the period of January 24, 2024 to January 24, 2025. However, we self-insure or maintain a high deductible for a portion of our claims exposure resulting from workers’ compensation, auto liability, general liability, cargo and property damage claims.
Although we believe our aggregate insurance limits should be sufficient to cover reasonably expected claims, it is possible that the amount of one or more claims could exceed our aggregate coverage limits. If any claim were to exceed our coverage, we would bear the excess, in addition to our other self-insured amounts. Insurance carriers have raised premiums for many businesses, including transportation companies. As a result, our insurance and claims expense could increase, or we could raise our self-insured retention or deductible when our policies are renewed or replaced. Our operating results and financial condition could be materially and adversely affected if (i) cost per claim, premiums, or the number of claims significantly exceeds our estimates, (ii) we experience a claim in excess of our coverage limits, (iii) our insurance carriers fail to pay on our insurance claims or (iv) we experience a claim for which coverage is not provided.
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Following the completion of this offering, we will incur increased costs as a result of complying with various regulatory and reporting requirements as a public company. Such requirements may strain our resources and distract our management, which could make it difficult to manage our business.
Following the completion of this offering, we will be required to comply with various regulatory and reporting requirements, including those required by the SEC. Complying with these reporting and other regulatory requirements will be time-consuming and will result in increased costs to us and could have a negative effect on our business, financial condition and operating results.
As a public company, we will be subject to the reporting requirements of the Exchange Act, and the requirements of the Sarbanes-Oxley Act. These requirements may place a strain on our systems and resources. The Exchange Act requires that we file annual, quarterly and current reports with respect to our business and financial condition. The Sarbanes-Oxley Act requires that we maintain effective disclosure controls and procedures and internal controls over financial reporting. To maintain and improve the effectiveness of our disclosure controls and procedures, we may need to commit significant resources, hire additional staff and provide additional management oversight. We will be implementing additional procedures and processes for the purpose of addressing the standards and requirements applicable to public companies. Sustaining our growth also will require us to commit additional management, operational and financial resources to identify new professionals to join the company and to maintain appropriate operational and financial systems to adequately support expansion. These activities may divert management’s attention from other business concerns, which could have a material adverse effect on our business, financial condition and operating results.
Our profitability may be materially and adversely impacted if our capital investments do not match customer demand for invested resources or if there is a decline in the availability of funding sources for these investments.
Our operations require significant investments. The amount and timing of capital investments depend on various factors, including anticipated volume levels and the price and availability of assets. If anticipated demand differs materially from actual usage, we may have too much, too little or too advanced capacity with respect to rented premises, IT infrastructure or other aspects of our business that we intend to invest in, including with proceeds from this offering. Moreover, our ability to properly select freight and adapt to changes in customer transportation requirements is important to efficiently deploy resources and make capital investments in equipment or obtain qualified third-party capacity at a reasonable price. Our customers’ financial failures or loss of customer business may also affect us.
Our inability to generate sufficient cash from operations or obtain financing on favorable terms could affect our profitability.
If we were unable to generate sufficient cash from operations, we would need to seek alternative sources of capital, including equity or debt financing, to meet our capital requirements, and maintain our ability to execute our business strategies. In the event that we are unable to generate sufficient cash from operations or obtain financing on favorable terms in the future, our ability to support our owner-operators’ growth and retain such owner-operators may reduce, and our ability to execute our business strategies may be curtailed, any of which could have a materially adverse effect on our business and profitability.
Historically we have not made a significant number of acquisitions and we may not make acquisitions in the future, or if we do, we may not be successful in integrating the acquired company, either of which could have a materially adverse effect on our business.
Historically, acquisitions have not been a significant part of our growth strategy. From inception to date, we did not complete any significant acquisitions. We may not be successful in identifying, negotiating or consummating any future acquisitions. If we decide to acquire other companies to stay competitive, we may not successfully integrate these businesses or achieve the synergies and operating results anticipated in connection with these acquisitions. The continuing trend toward consolidation in the trucking industry may result in the acquisitions of smaller carriers by large carriers that gain market share and other competitive advantages through such acquisitions. If we fail to make or successfully execute future acquisitions, our growth rate could be materially and adversely affected.
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In addition, any acquisitions we undertake could involve numerous risks that could have a materially adverse effect on our business and operating results, including:
| ● | difficulties in integrating the acquired company’s operations and in realizing anticipated economic, operational and other benefits in a timely manner that could result in substantial costs and delays or other operational, technical or financial problems; |
| ● | challenges in achieving anticipated revenue, earnings or cash flows; |
| ● | assumption of liabilities that may exceed our estimates or what was disclosed to us; |
| ● | the diversion of our management’s attention from other business concerns; |
| ● | the potential loss of customers, key associates and drivers of the acquired company; |
| ● | difficulties operating in markets in which we have had no or only limited direct experience; |
| ● | the incurrence of additional indebtedness; and |
| ● | the issuance of additional shares of our common stock, which would dilute your ownership in the company. |
We may need to obtain additional financing which may not be available or, if it is available, may result in a reduction in the percentage ownership of our then-existing shareholders.
We may need to raise additional funds in order to:
| ● | finance unanticipated working capital requirements; |
| ● | develop or enhance our technological infrastructure and our existing services; |
| ● | fund strategic relationships; |
| ● | respond to competitive pressures; and |
| ● | acquire complementary businesses, technologies, products or services. |
Additional financing may not be available on terms favorable to us, or at all. If adequate funds are not available or are not available on acceptable terms, our ability to fund our expansion strategy, take advantage of unanticipated opportunities, develop or enhance technology or services or otherwise respond to competitive pressures could be significantly limited. If we raise additional funds by issuing equity or convertible debt securities, the percentage ownership of our then-existing shareholders may be reduced, and holders of these securities may have rights, preferences or privileges senior to those of our then-existing shareholders.
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Our planned expansions outside the United States subject us to risks inherent in international operations that can harm our business, results of operations, and financial condition.
A key element of our growth strategy is to increase the wallet shares of our existing customers and serve additional domestic and international markets of theirs. Operating internationally requires significant resources and management attention. We cannot be certain that the investment and additional resources required to operate internationally will produce desired levels of revenue or profitability. Further, operating internationally subjects us to various risks, including:
| ● | increased management, travel, infrastructure and legal compliance costs associated with having operations in multiple countries; |
| ● | increased financial accounting and reporting burdens and complexities; |
| ● | variations in adoption and acceptance of our services in different countries, requirements or preferences for domestic service offerings, and difficulties in replacing services offered by more established or known regional competitors; |
| ● | new and different sources of competition; |
| ● | laws and business practices favoring local competitors; |
| ● | differing technical standards, existing or future regulatory and certification requirements; |
| ● | communication and integration problems related to entering and serving new markets with different languages, cultures, and political systems; |
| ● | compliance with foreign privacy and security laws and regulations, including data privacy laws that require personal data to be stored and processed in a designated territory, and the risks and costs of non-compliance; |
| ● | compliance with laws and regulations for foreign operations, including anti-bribery laws (such as the U.S. Foreign Corrupt Practices Act), import and export control laws, tax laws, tariffs, trade barriers, economic sanctions, and other regulatory or contractual limitations on our ability to sell our services in certain foreign markets, and the risks and costs of non-compliance; |
| ● | compliance with foreign laws, regulations and orders related to health and safety; |
| ● | fluctuations in currency exchange rates and related effects on our results of operations; |
| ● | difficulties in repatriating or transferring funds from or converting currencies in certain countries; |
| ● | different pricing environments, longer sales cycles, and longer accounts receivable payment cycles and collections issues; |
| ● | political and economic conditions and uncertainty in the countries or regions in which we operate and around the world; |
| ● | difficulties in recruiting, managing and retaining local partners to support our operations and sales; |
| ● | differing labor standards, including restrictions related to, and the increased cost of, terminating employees or independent contractors in some countries; |
| ● | difficulties in recruiting, hiring and retaining employees and independent contractors in certain countries; |
| ● | difficulties in managing an international workforce and maintaining our corporate culture internationally; |
| ● | the preference for localized software and licensing programs; |
| ● | compliance with the laws of numerous foreign taxing jurisdictions, including withholding obligations, and overlapping of different tax regimes; |
| ● | compliance challenges related to the complexity of multiple, conflicting and changing governmental laws and regulations, including employment, tax, privacy, and data protection laws and regulations; and |
| ● | global pandemics such as the COVID-19 pandemic and travel restrictions and other measures undertaken by governments in response to such pandemics. |
Any of the above risks could adversely affect our planned international operations, including reducing revenue from customers outside of the U.S. or increasing operating costs, each of which could adversely affect our business, results of operations, financial condition, and growth prospects. Even if we are able to successfully manage the risks of international operations, our business may be adversely affected if our business partners are not able to successfully manage these risks.
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The COVID-19 pandemic has adversely affected our business during periods when Asian markets were shut down due to COVID-19 lockdown policies and reduced import demand for recycled paper, metal and other commodities we service.
The COVID-19 pandemic has had a significant impact on the U.S. waste export industry, and the industry may face challenges again if lockdown policies are reimposed and waste import demands decline in Asian countries. Since a lion’s share of our revenue has come from transporting waste paper products to U.S. ports for export, our operations were adversely affected when Asian countries, particularly People’s Republic of China (“China”) which has historically been a top importer of U.S. waste materials, imposed lockdown policies to contain the COVID-19 pandemic and closed or limited access to their ports for approximately three weeks in 2020. During this period, our transport volume dropped to nearly zero. However, with reduced export demand, waste materials that would have been shipped to Asian countries piled up in storage facilities and landfills in the U.S., and waste material export demand quickly rebounded to keep up with the backlog of recycled paper and other waste materials accumulated during the three-week period after Asian countries eased lockdowns and other restrictive COVID-19 measures. As a result, our operating results have not been adversely impacted by the COVID-19 pandemic.
If we fail to implement and maintain an effective system of internal controls to remediate our material weaknesses in financial reporting, our ability to report our results of operations and financial condition could be adversely affected.
Prior to this offering, we have been a private company with limited accounting personnel and other resources with which to address our internal control over financial reporting. In connection with the audit of our consolidated financial statements included in this prospectus, we and our independent registered public accounting firm identified material weaknesses in our internal control over financial reporting. As defined in the standards established by the U.S. Public Company Accounting Oversight Board, a “material weakness” is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the annual or interim financial statements will not be prevented or detected on a timely basis.
The material weaknesses that have been identified relate to our lack of robust and formal financial reporting policies and procedures in place to address complex U.S. GAAP technical accounting and the SEC disclosure requirements. Neither we nor our independent registered public accounting firm undertook a comprehensive assessment of our internal control for purposes of identifying and reporting material weaknesses and other deficiencies in our internal control over financial reporting. Had we performed a formal assessment of our internal control over financial reporting or had our independent registered public accounting firm performed an audit of our internal control over financial reporting, additional deficiencies may have been identified. As of the date of this prospectus, the material weaknesses were deemed to be remediated.
We have engaged external financial consultant with U.S. GAAP experience to help our management in financial reporting processes and are in the process of developing and implementing a comprehensive set of processes and internal controls to timely and appropriately (i) identify transactions that may be subject to complex U.S. GAAP accounting treatment, (ii) analyze the transactions in accordance with the relevant U.S. GAAP, and (iii) review the accounting technical analysis. We plan to establish an audit committee upon our listing and strengthen corporate governance. However, the implementation of these measures may not fully address the material weaknesses and other deficiencies in our internal control over financial reporting. Our failure to correct the material weaknesses and other deficiencies or our failure to discover and address any other deficiencies could result in inaccuracies in our financial statements and impair our ability to comply with applicable financial reporting requirements and related regulatory filings on a timely basis. Moreover, ineffective internal control over financial reporting could significantly hinder our ability to prevent fraud.
Upon completion of this offering, we will become a public company subject to the reporting requirements of the Exchange Act, the Sarbanes-Oxley Act of 2002 and the rules and regulations of the Nasdaq Stock Market. Section 404 of the Sarbanes-Oxley Act, or Section 404, will require us to include a report from management on the effectiveness of our internal control over financial reporting in our annual reports on Form 10-K. In addition, once we cease to be an “emerging growth company” as such term is defined in the JOBS Act, our independent registered public accounting firm must attest to and report on the effectiveness of our internal control over financial reporting unless we qualify as a “non-accelerated filer.” Our management may conclude that our internal control over financial reporting is not effective. Moreover, even if our management concludes that our internal control over financial reporting is effective, our independent registered public accounting firm, after conducting its own independent testing, may issue a report that is qualified, if it is not satisfied with our internal controls or the level at which our controls are documented, designed, operated, or reviewed, or if it interprets the relevant requirements differently from us. In addition, after we become a public company, our reporting obligations may place a significant strain on our management, operational, and financial resources and systems for the foreseeable future. We may be unable to complete our evaluation testing and any required remediation in a timely manner.
Legal and Compliance Risks
We operate in a highly regulated industry and increased costs of compliance with, or liability for violation of, existing or future federal or state regulations could have a materially adverse effect on our business.
We are subject to regulation at the federal level and at the state level. We may incur additional expenses associated with state wage, driver meal and rest break regulation. In addition, we operate in the United States pursuant to federal operating authority granted by the DOT. Our owner-operators and other independent contractor drivers also must comply with the safety and fitness regulations of the DOT, implemented through the FMCSA, including those relating to CSA safety performance and measurements, drug and alcohol testing and Hours of Service. Weight and equipment dimensions also are subject to government regulations. We also may become subject to new or more restrictive regulations relating to exhaust emissions, drivers’ Hours of Service, ergonomics, collective bargaining, security at ports and other matters affecting safety or operating methods. We, as well as our owner-operators and other independent contractor drivers, must comply with enacted governmental regulations regarding safety, equipment, environmental protection and operating methods. Examples include regulation of equipment weight, equipment dimensions, fuel emissions, driver Hours of Service, driver eligibility requirements, on-board reporting of operations and ergonomics. We may also become subject to new or more restrictive regulations related to safety or operating methods, which could adversely affect our owner-operators’ fleets and operations in those jurisdictions.
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If current or future legislation or judicial decisions deem that independent contractors (owner-operators) or contingent workers are equivalent to employees, we would incur more employee-related expenses. We face a complex and increasingly stringent regulatory and statutory scheme relating to wages, classification of employees and alternate work arrangements. Tax, federal and other regulatory authorities and private plaintiffs have argued that owner-operator drivers in the trucking and transportation industries are employees, rather than independent contractors. If any cases are judicially determined in a manner adverse to us or our businesses, there could be an adverse impact on our operations in the effected jurisdictions. Taxing and other regulatory authorities and courts apply a variety of standards in their determination of independent contractor status. If the owner-operator drivers we contract with are deemed employees, we would incur additional exposure under laws for federal and state tax, workers’ compensation, unemployment benefits, labor, employment and tort. The exposure could include prior period compensation, as well as potential liability for employee benefits and tax withholdings.
Changes in U.S. tax laws and regulations may impact our effective tax rate and may adversely affect our business, financial condition and operating results.
Significant reform of the U.S. tax laws, including significant changes related to federal tax rates and the taxation of business entities, could adversely affect us. Recent U.S. tax legislation may materially affect our financial condition, results of operations, and cash flows.
The Tax Cuts and Jobs Act (the “Tax Act”) has significantly changed the U.S. federal income taxation of U.S. businesses, including by reducing the U.S. corporate income tax rate, limiting interest deductions, permitting immediate expensing of certain capital expenditures, modifying, or repealing many business deductions and credits.
The Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) modifies certain provisions of the Tax Act, including increasing the amount of interest expense that may be deducted.
The Tax Act as modified by the CARES Act is unclear in many respects and could be subject to potential amendments and technical corrections, as well as interpretations and implementing regulations by the Treasury and IRS, any of which could lessen or increase certain adverse impacts of the legislation. In addition, it is unclear how these U.S. federal income tax changes will affect state and local taxation, which often uses federal taxable income as a starting point for computing state and local tax liabilities. Our analysis and interpretation of this legislation is preliminary and ongoing and there may be material adverse effects resulting from the legislation that we have not yet identified. While some of the changes made by the tax legislation may adversely affect us, other changes may be beneficial. We continue to work with our tax advisors and auditors to determine the full impact that the recent tax legislation will have on us. We urge our investors to consult with their legal and tax advisors with respect to such legislation and its potential effect on an investment in our common stock.
Our operations are subject to various environmental laws and regulations, the violation of which could result in substantial fines or penalties.
We and our owner-operators are subject to various environmental laws and regulations dealing with waste transport, air emissions from vehicles, engine idling and discharge and retention of storm water. Our operations involve the risks of fuel spillage or seepage, environmental damage and waste disposal, among others. If we are involved in a spill or other accidents, and if soil or groundwater contamination is found at our facilities or results from our operations, or if we are found to be in violation of applicable environmental laws or regulations, we could owe cleanup costs and incur related liabilities, including substantial fines or penalties or civil and criminal liability, any of which could have a materially adverse effect on our business and operating results.
Litigation against us could be costly and time-consuming to defend and could materially and adversely affect our business, financial condition, and results of operations.
We may be from time to time involved in various claims, litigation matters and regulatory proceedings incidental to our business, including claims for damages arising out of the use of our services. The defense of these lawsuits could divert our management’s attention, and we could incur significant expenses in defending these lawsuits. In addition, we could be required to pay damage awards or settlements or become subject to unfavorable equitable remedies. Moreover, any insurance or indemnification rights that we could have may be insufficient or unavailable to protect us against potential loss exposures.
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Risks Related to This Offering and Ownership of Our Common Stock
There has been no public market for our common stock prior to this offering, and an active market in which investors can resell their shares of our common stock may not develop.
Prior to this offering, there has been no public market for our common stock. We have filed an application to list our shares of common stock under the symbol “TOPP” on the Nasdaq Capital Market. The closing of this offering is contingent upon the successful listing of our common stock on the Nasdaq Capital Market. There is no guarantee that Nasdaq, or any other exchange or quotation system, will permit our common stock to be listed and traded.
Even if our common stock is approved for listing on Nasdaq, a liquid public market for our common stock may not develop. The initial public offering price for our common stock has been determined by negotiation between us and the underwriters based upon several factors, including prevailing market conditions, our historical performance, estimates of our business potential and earnings prospects, and the market valuations of similar companies. The price at which our common stock is traded after this offering may decline below the initial public offering price, meaning that you may experience a decrease in the value of your common stock regardless of our operating performance or prospects.
The initial public offering price for our common stock may not be indicative of prices that will prevail in the trading market and such market prices may be volatile.
The initial public offering price for our common stock was determined by negotiations between us and the underwriters and may not bear a direct relationship to our earnings, book value, or any other indicia of value. We cannot assure you that the market price of our common stock will not decline significantly below the initial public offering price following the completion of this offering. The financial markets in the United States and other countries have experienced significant price and volume fluctuations in the last few years. Volatility in the price of our common stock may be caused by factors outside of our control and may be unrelated or disproportionate to changes in our results of operations.
The market price of our common stock may fluctuate, and you could lose all or part of your investment.
After this offering, the market price for our common stock is likely to be volatile, in part because our shares have not been traded publicly. In addition, the market price of our common stock may fluctuate significantly in response to several factors, most of which we cannot control, including:
| ● | actual or anticipated variations in our periodic operating results; |
| ● | increases in market interest rates that lead investors of our common stock to demand a higher investment return; |
| ● | changes in earnings estimates; |
| ● | changes in market valuations of similar companies; |
| ● | actions or announcements by our competitors; |
| ● | adverse market reaction to any increased indebtedness we may incur in the future; |
| ● | additions or departures of key personnel; |
| ● | actions by shareholders; |
| ● | speculation in the media, online forums, or investment community; and |
| ● | our intentions and ability to maintain the listing of our common stock on Nasdaq. |
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The public offering price of our common stock has been determined by negotiations between us and the underwriters based upon many factors and may not be indicative of prices that will prevail following the closing of this offering. Volatility in the market price of our securities may prevent investors from being able to sell their securities at or above the initial public offering price. As a result, you may suffer a loss on your investment.
In the past, shareholders have filed securities class litigation following periods of market volatility. If we were to become involved in securities litigation, it could subject us to substantial costs, divert resources and the attention of management from our business, and adversely affect our business.
We may experience extreme stock price volatility unrelated to our actual or expected operating performance, financial condition or prospects, making it difficult for prospective investors to assess the rapidly changing value of our common stock.
The US stock market has witnessed instances of extreme stock price run-ups followed by rapid price declines in 2022 and such stock price volatility seemed unrelated to the issuers’ performance subsequent to their recent initial public offerings, especially among companies with smaller public floats. After the consummation of this offering, we will have a relatively small public float due to the relatively small size of this offering. As a relatively small-capitalized company with a small public float after this offering, the price of our common stock may experience extreme volatility, lower trading volume and less liquidity than large-capitalized companies. Although the specific cause of such volatility is unclear, our anticipated small public float may amplify the impact the actions taken by a few shareholders have on the price of our common stock, which may cause our stock price to deviate, potentially significantly, from a price that better reflects the underlying performance of our business. The potential extreme volatility may confuse public investors regarding the value of our securities, distort the market perception of our stock price and our company’s financial performance and public image, and negatively affect the long-term liquidity of our common stock, regardless of our actual or expected operating performance. Should our common stock experience run-ups and declines that are seemingly unrelated to our actual or expected operating performance and financial condition or prospects, prospective investors may have difficulty assessing the rapidly changing value of our common stock and our ability to access the capital market may be materially adversely affected. In addition, if the trading volumes of our common stock are low, holders of our common stock may also not be able to readily liquidate their investment or may be forced to sell at depressed prices due to low volume trading. As a result of this volatility, investors may experience losses on their investment in our common stock.
We may not be able to maintain a listing of our common stock on Nasdaq.
Once our common stock is listed on Nasdaq, we must meet certain financial and liquidity criteria to maintain such listing. If we violate Nasdaq’s listing requirements, or if we fail to meet any of Nasdaq’s listing standards, our common stock may be delisted. In addition, our board of directors may determine that the cost of maintaining our listing on a national securities exchange outweighs the benefits of such listing. A delisting of our common stock from Nasdaq may materially impair our shareholders’ ability to buy and sell our common stock and could have an adverse effect on the market price of, and the efficiency of the trading market for, our common stock. The delisting of our common stock could significantly impair our ability to raise capital and the value of your investment.
We have considerable discretion as to the use of the net proceeds from this offering and we may use these proceeds in ways with which you may not agree.
We intend to use the proceeds from this offering for geographic expansions, investments in physical and IT infrastructure, expansion of our sales team and marketing efforts, and general working capital and other corporate purposes. However, we have considerable discretion in the application of the proceeds. Because of the number and variability of factors that will determine our use of our net proceeds from this offering, their ultimate use may vary substantially from their currently intended use. You will not have the opportunity, as part of your investment decision, to assess whether the proceeds are being used appropriately. You must rely on the judgment of our management regarding the application of the net proceeds of this offering. The net proceeds may be used for corporate or other purposes with which you do not agree or that do not improve our profitability or increase our share price. The net proceeds from this offering may also be placed in investments that do not produce income or that lose value. Please see “Use of Proceeds” below for more information.
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You will experience immediate and substantial dilution as a result of this offering.
As of March 31, 2024, our net tangible book value was approximately $1,262,333, or approximately $0.08 per share. Since the effective price per share of our common stock being offered in this offering is substantially higher than the net tangible book value per share of our common stock, you will suffer substantial dilution with respect to the net tangible book value of the common stock that you purchase in this offering. Based on the assumed public offering price of $[ ] per share being sold in this offering, which is the midpoint of the estimated offering range set forth on the cover page of this prospectus, and our net tangible book value per share as of March 31, 2024, you will suffer immediate and substantial dilution of $[ ] per share (or $[ ] per share if the underwriters exercise the over-allotment option in full) with respect to the net tangible book value of the common stock. See the section titled “Dilution” for a more detailed discussion of the dilution you will incur if you purchase common stock in this offering.
We do not expect to declare or pay dividends in the foreseeable future.
We do not expect to declare or pay dividends in the foreseeable future, as we anticipate that we will invest future earnings in the development and growth of our business. Therefore, holders of our common stock being offered in this offering will not receive any return on their investment unless they sell their securities, and holders may be unable to sell their securities on favorable terms or at all.
If securities industry analysts do not publish research reports on us, or publish unfavorable reports on us, then the market price and market trading volume of our securities could be negatively affected.
Any trading market for our common stock may be influenced in part by any research reports that securities industry analysts publish about us. We do not currently have and may never obtain research coverage by securities industry analysts. If no securities industry analysts commence coverage of us, the market price and market trading volume of our securities could be negatively affected. In the event we are covered by analysts, and one or more of such analysts downgrade our securities, or otherwise reports on us unfavorably, or discontinues coverage of us, the market price and market trading volume of our securities could be negatively affected.
Future issuances of our common stock or securities convertible into, or exercisable or exchangeable for, our common stock, or the expiration of lock-up agreements that restrict the issuance of new common stock or the trading of outstanding common stock, could cause the market price of our securities to decline and would result in the dilution of your holdings.
Future issuances of our common stock or securities convertible into, or exercisable or exchangeable for, our common stock, or the expiration of lock-up agreements that restrict the issuance of new common stock or the trading of outstanding common stock, could cause the market price of our common stock to decline. We cannot predict the effect, if any, of future issuances of our securities, or the future expirations of lock-up agreements, on the price of our securities. In all events, future issuances of our securities would result in the dilution of your holdings. In addition, the perception that new issuances of our securities could occur, or the perception that locked-up parties will sell their securities when the lock-ups expire, could adversely affect the market price of our securities. In connection with this offering, we will enter into a lock-up agreement that prevents us, subject to certain exceptions, from offering additional shares of capital stock for up to six (6) months after the closing of this offering, as further described in the section titled “Underwriting.” In addition to any adverse effects that may arise upon the expiration of these lock-up agreements, the lock-up provisions in these agreements may be waived, at any time and without notice. If the restrictions under the lock-up agreements are waived, our securities may become available for resale earlier, subject to applicable law, including without notice, which could reduce the market price for our common stock.
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Future issuances of debt securities, which would rank senior to our common stock upon our bankruptcy or liquidation, and future issuances of preferred stock, which could rank senior to our common stock for the purposes of dividends and liquidating distributions, may adversely affect the level of return you may be able to achieve from an investment in our securities.
In the future, we may attempt to increase our capital resources by offering debt securities. Upon bankruptcy or liquidation, holders of our debt securities, and lenders with respect to other borrowings we may make, would receive distributions of our available assets prior to any distributions being made to holders of our common stock. Moreover, if we issue preferred stock, the holders of such preferred stock could be entitled to preferences over holders of common stock in respect of the payment of dividends and the payment of liquidating distributions. Because our decision to issue debt or preferred stock in any future offering, or borrow money from lenders, will depend in part on market conditions and other factors beyond our control, we cannot predict or estimate the amount, timing or nature of any such future offerings or borrowings. Holders of our common stock must bear the risk that any future offerings we conduct or borrowings we make may adversely affect the level of return, if any, they may be able to achieve from an investment in our common stock.
We are authorized to issue “blank check” preferred stock without stockholder approval, which could adversely impact the rights of holders of our securities.
Our articles of incorporation authorize us to issue up to 50,000,000 shares of blank check preferred stock. Any preferred stock that we issue in the future may rank ahead of our securities in terms of dividend priority or liquidation premiums and may have greater voting rights than our securities. In addition, such preferred stock may contain provisions allowing those shares to be converted into shares of common stock, which could dilute the value of our common stock to current stockholders and could adversely affect the market price, if any, of our common stock. In addition, the preferred stock could be utilized, under certain circumstances, as a method of discouraging, delaying or preventing a change in control of our company. Although we have no present intention to issue any shares of authorized preferred stock, there can be no assurance that we will not do so in the future.
If our securities become subject to the penny stock rules, it would become more difficult to trade our shares.
The Securities and Exchange Commission, or the SEC, has adopted rules that regulate broker-dealer practices in connection with transactions in penny stocks. Penny stocks are generally equity securities with a price of less than $5.00, other than securities registered on certain national securities exchanges or authorized for quotation on certain automated quotation systems, provided that current price and volume information with respect to transactions in such securities is provided by the exchange or system. If we do not retain a listing on Nasdaq or another national securities exchange and if the price of our securities is less than $5.00, our securities could be deemed a penny stock. The penny stock rules require a broker-dealer, before a transaction in a penny stock not otherwise exempt from those rules, to deliver a standardized risk disclosure document containing specified information. In addition, the penny stock rules require that before effecting any transaction in a penny stock not otherwise exempt from those rules, a broker-dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive (i) the purchaser’s written acknowledgment of the receipt of a risk disclosure statement; (ii) a written agreement to transactions involving penny stocks; and (iii) a signed and dated copy of a written suitability statement. These disclosure requirements may have the effect of reducing the trading activity in the secondary market for our securities, and therefore shareholders may have difficulty selling their securities.
We will be subject to ongoing public reporting requirements that are less rigorous than Exchange Act rules for companies that are not emerging growth companies, and our shareholders could receive less information than they might expect to receive from more mature public companies.
Upon the completion of this offering, we will be required to publicly report on an ongoing basis as an “emerging growth company” (as defined in the JOBS Act) under the reporting rules set forth under the Exchange Act. For so long as we remain an emerging growth company, we may take advantage of certain exemptions from various reporting requirements that are applicable to other Exchange Act reporting companies that are not emerging growth companies, including but not limited to:
| ● | not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act; |
| ● | being permitted to comply with reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements; and |
| ● | being exempt from the requirement to hold a non-binding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved. |
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In addition, Section 107 of the JOBS Act also provides that an emerging growth company can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. In other words, an emerging growth company can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have elected to take advantage of the benefits of this extended transition period. Our financial statements may therefore not be comparable to those of companies that comply with such new or revised accounting standards.
We expect to take advantage of these reporting exemptions until we are no longer an emerging growth company. We would remain an emerging growth company for up to five years, although if the market value of our securities that is held by non-affiliates exceeds $700 million as of any June 30 before that time, we would cease to be an emerging growth company as of the following December 31.
Because we will be subject to ongoing public reporting requirements that are less rigorous than Exchange Act rules for companies that are not emerging growth companies, our shareholders could receive less information than they might expect to receive from more mature public companies. We cannot predict if investors will find our securities less attractive if we elect to rely on these exemptions, or if taking advantage of these exemptions would result in less active trading or more volatility in the price of our securities.
Provisions in Nevada law may have an anti-takeover effect.
Nevada corporate statutes contain provisions designed to protect Nevada corporations and employees from the adverse effects of hostile corporate takeovers. These statutory provisions reduce the possibility that a third party could effect a change in control without the support of our incumbent directors and may also strengthen the position of current management by restricting the ability of shareholders to change the composition of the Board, to affect its policies generally and to benefit from actions that are opposed by the Board.
General Risk Factors
We are currently operating in a period of economic uncertainty and capital markets disruption, which has been impacted by geopolitical instability due to the military conflict between Russia and Ukraine and armed conflicts between Israel and Hamas. Our business, financial condition and results of operations may be materially and adversely affected by any negative impact on the global economy and capital markets resulting from the conflict in Ukraine, the Gaza Strip or any other geopolitical tensions.
Global markets have experienced volatility and disruption following the escalation of geopolitical tensions, including the military conflict between Russia and Ukraine and armed conflicts between Israel and Hamas. Although the length and impact of the ongoing military conflict is highly unpredictable, such conflicts could lead to market disruptions, including significant volatility in commodity prices, credit and capital markets, as well as supply chain interruptions. We are continuing to monitor the situation in Ukraine, the Gaza Strip and globally and assessing its potential impact on our business. In addition, sanctions on Russia and hostilities involving Israel could adversely affect the global economy and financial markets and lead to instability and lack of liquidity in capital markets, potentially making it more difficult for us to obtain additional funds.
Any of the above mentioned factors could affect our business, prospects, financial condition, and operating results. The extent and duration of the military actions, sanctions and resulting market disruptions are impossible to predict, but could be substantial. Any such disruptions may also magnify the impact of other risks described in this registration statement.
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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
This prospectus contains forward-looking statements that are based on our management’s beliefs and assumptions and on information currently available to us. All statements other than statements of historical facts are forward-looking statements. The forward-looking statements are contained principally in, but not limited to, the sections entitled “Prospectus Summary,” “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Business.” These statements relate to future events or to our future financial performance and involve known and unknown risks, uncertainties and other factors that may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements. Forward-looking statements include, but are not limited to, statements about:
| ● | our goals and strategies; |
| ● | our future business development, financial condition and results of operations; |
| ● | expected changes in our revenue, costs or expenditures; |
| ● | growth of and competition trends in our industry; |
| ● | our expectations regarding demand for, and market acceptance of, our products; |
| ● | our expectations regarding our relationships with investors and other parties with whom we collaborate; |
| ● | our expectation regarding the use of proceeds from this offering; |
| ● | fluctuations in general economic and business conditions in the markets in which we operate; and |
| ● | relevant government policies and regulations relating to our industry. |
In some cases, you can identify forward-looking statements by terms such as “may,” “could,” “will,” “should,” “would,” “expect,” “plan,” “intend,” “anticipate,” “believe,” “estimate,” “predict,” “potential,” “project” or “continue” or the negative of these terms or other comparable terminology. These statements are only predictions. You should not place undue reliance on forward-looking statements because they involve known and unknown risks, uncertainties and other factors, which are, in some cases, beyond our control and which could materially affect results. Factors that may cause actual results to differ materially from current expectations include, among other things, those listed under the heading “Risk Factors” and elsewhere in this prospectus. If one or more of these risks or uncertainties occur, or if our underlying assumptions prove to be incorrect, actual events or results may vary significantly from those implied or projected by the forward-looking statements. No forward-looking statement is a guarantee of future performance.
The forward-looking statements made in this prospectus relate only to events or information as of the date on which the statements are made in this prospectus. Although we will become a public company after this offering and have ongoing disclosure obligations under United States federal securities laws, we do not intend to update or otherwise revise the forward-looking statements in this prospectus, whether as a result of new information, future events or otherwise.
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After deducting the estimated underwriters’ discounts and commissions and offering expenses payable by us, we expect to receive net proceeds of approximately $[ ] from this offering (or approximately $[ ] if the underwriters exercise the over-allotment option in full), based on an assumed public offering price of $[ ] per share, which is the midpoint of the estimated offering price range set forth on the cover page of this prospectus.
We plan to use the net proceeds of this offering as follows:
| ● | 60% of the net proceeds (approximately $[ ] without the over-allotment option, or approximately $[ ] with the over-allotment option) for our geographic expansions through both organic growth and acquisitions. This will include opening new locations, expanding existing ones, and exploring acquisition opportunities in new regions. We aim to grow our customer base and market share in strategic locations, as well as to diversify our revenue streams through serving additional types of commodities; |
| ● | 20% of the net proceeds (approximately $[ ] without the over-allotment option, or approximately $[ ] with the over-allotment option) for investments in physical and IT infrastructure. This will involve upgrading and expanding our facilities to accommodate our growing operations, as well as investing in the latest IT infrastructure to support our business needs. |
| ● | 10% of the net proceeds (approximately $[ ] without the over-allotment option, or approximately $[ ] with the over-allotment option) for expansion of our sales team and marketing efforts. This will be used to increase brand awareness and attract new customers and drivers through targeted advertising campaigns via social media and other online channels, and other marketing initiatives; and |
| ● | 10% of the net proceeds (approximately $[ ] without the over-allotment option, or approximately $[ ] with the over-allotment option) for general working capital and other corporate purposes. |
The foregoing represents our current intentions to use and allocate the net proceeds of this offering based upon our present plans and business conditions. Our management, however, will have broad discretion in the way that we use the net proceeds of this offering. Pending the final application of the net proceeds of this offering, we intend to invest the net proceeds of this offering in short-term, interest-bearing, investment-grade securities. See “Risk Factors—Risks Related to This Offering and Ownership of Our Common Stock—We have considerable discretion as to the use of the net proceeds from this offering and we may use these proceeds in ways with which you may not agree.”
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We currently intend to retain all available funds and any future earnings for use in the operation of our business and do not anticipate paying any cash dividends on our common stock in the near future.
Our wholly-owned subsidiary, Toppoint, Inc, recorded distributions of $377,048 in aggregate for the period of January 1, 2022 to September 28, 2022 to Hok C Chan, its sole shareholder at the time.
We may also enter into credit agreements or other borrowing arrangements in the future that will restrict our ability to declare or pay cash dividends on our common stock. Any future determination to declare dividends will be made at the discretion of our board of directors and will depend on our financial condition, operating results, capital requirements, contractual restrictions, general business conditions and other factors that our board of directors may deem relevant. See also “Risk Factors—Risks Related to This Offering and Ownership of Our Common Stock—We do not expect to declare or pay dividends in the foreseeable future.”
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The following table sets forth our capitalization as of March 31, 2024:
| ● | on an actual basis; and |
| ● | on a pro forma basis to reflect (i) the sale of [ ] shares by us in this offering at an assumed price to the public of $[ ] per share, which is the midpoint of the estimated offering price range set forth on the cover page of this prospectus, resulting in net proceeds to us of $[ ] after deducting (a) underwriter commissions of $[ ] and (b) our estimated offering expenses of $[ ], including underwriter non-accountable expenses (assuming no exercise of the over-allotment option by the underwriter), and (ii) the $600,000 loan we received from Hok C Chan pursuant to a promissory note issued on July 1, 2024. |
The pro forma information below is illustrative only and our capitalization following the completion of this offering is subject to adjustment based on the initial public offering price of our shares of common stock and other terms of this offering determined at pricing. You should read this table together with our financial statements and the related notes included elsewhere in this prospectus and the information under “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”
| As of March 31, 2024: | ||||||||
| Actual | Pro Forma | |||||||
| Cash and cash equivalents | $ | 1,237,471 | $ | |||||
| Total long-term liabilities | 983,978 | |||||||
| Total liabilities | $ | 2,452,602 | $ | |||||
| Shareholders’ equity: | ||||||||
| Preferred stock, $0.0001 par value, 50,000,000 shares authorized and no shares issued and outstanding on an actual basis (prior to this offering) | - | |||||||
| Common stock, $0.0001 par value, 300,000,000 shares authorized and 15,000,000 shares issued and outstanding on an actual basis (prior to this offering) | 1,500 | |||||||
| Additional paid in capital | 139,750 | |||||||
| Retained Earnings | 2,336,843 | |||||||
| Total shareholders’ equity | 2,478,093 | |||||||
| Total liabilities and shareholders’ equity | $ | 4,930,695 | $ | |||||
Each $1.00 increase or decrease in the assumed offering price per share of $[ ], assuming no change in the number of shares to be sold, would increase or decrease the net proceeds that we receive in this offering and each of total shareholders’ equity and total capitalization by approximately $[ ], after deducting (i) estimated underwriter commissions and (ii) offering expenses, in each case, payable by us.
The table above excludes the following shares:
| ● | 2,250,000 shares of common stock that are reserved for issuance under our 2022 Equity Incentive Plan; and |
| ● | up to [ ] shares of common stock issuable upon exercise of the Representative’s Warrants issued in connection with this offering, if the underwriters exercise the over-allotment option in full. |
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Dilution in net tangible book value per share to new investors in our shares is the amount by which the offering price paid by the purchasers of the shares of our common stock sold in this offering exceeds the pro forma net tangible book value per share of common stock immediately after this offering. Net tangible book value per share is determined at any date by subtracting our total liabilities from the total book value of our tangible assets and dividing the difference by the number of shares of common stock deemed to be outstanding at that date.
The net tangible book value of our common stock as of March 31, 2024 was approximately $1,262,333 or approximately $0.08 per share.
Pro forma net tangible book value dilution per share to new investors represents the difference between the amount per share paid by purchasers in this offering and the pro forma net tangible book value per share of our common stock immediately after completion of this offering. Investors participating in this offering will incur immediate, substantial dilution. After giving effect to our sale of [ ] shares of our common stock in this offering at an assumed initial public offering price of $[ ] per share, which is the midpoint of the estimated offering price range set forth on the cover page of this prospectus, and after deducting the estimated underwriting discounts and commissions and estimated offering expenses, our pro forma net tangible book value as of March 31, 2024 would have been approximately $[ ] or approximately $[ ] per share. This amount represents an immediate increase in pro forma net tangible book value of $[ ] per share to existing shareholders and an immediate dilution in pro forma net tangible book value of $[ ] per share to purchasers of our common stock in this offering, as illustrated in the following table.
| Assumed initial public offering price per share | $ | [ ] | ||
| Net tangible book value per share at March 31, 2024 | $ | 0.08 | ||
| Pro forma net tangible book value per share after this offering | $ | [ ] | ||
| Increase in net tangible book value per share to the existing shareholders | $ | [ ] | ||
| Dilution in net tangible book value per share to new investors in this offering | $ | [ ] |
If the underwriters exercise their over-allotment option in full, the pro forma net tangible book value per share of our common stock, as adjusted to give effect to this offering, would be $[ ] per share, and the dilution in pro forma net tangible book value per share to new investors purchasing shares in this offering would be $[ ] per share.
The following table sets forth, assuming the sale of [ ] shares of our common stock in this offering, the total number of shares of common stock previously issued and sold by us to existing investors, the total consideration paid for the foregoing and the average price per share, before deducting estimated underwriter commissions and offering expenses (assuming no exercise of the over-allotment option to purchase additional shares of common stock and assuming no exercise of the Representative’s Warrants), in each case payable by us. As the table shows, new investors purchasing shares of our common stock in this offering may in certain circumstances pay an average price per share substantially higher than the average price per share paid by our existing shareholders.
| Shares Purchased | Total Consideration | Average Price |
||||||||||||||||||
| Number | Percent | Amount | Percent | Per Share | ||||||||||||||||
| Existing shareholders(1) | 15,000,000 | [ ] |
% | $ | 750 | * | $ | * | ||||||||||||
| New investors | [ ] |
[ ] |
% | $ | [ ] |
100 | % | $ | [ ] | |||||||||||
| Total | [ ] | 100 | % | $ | [ ] | 100 | % | $ | [ ] | |||||||||||
| * | Less than 1%. |
| (1) | On August 16, 2022, we issued 7,500,000 shares of common stock to four investors at a purchase price of $0.0001 per share. On September 29, 2022, we issued an additional 7,500,000 shares of common stock to our founder, Chairman of our board of directors, and Chief Executive Officer, Hok C Chan, in exchange for all of the issued and outstanding shares of capital stock of Toppoint Inc. held by Hok C Chan, as a result of which Toppoint Inc. became our wholly-owned subsidiary. Prior to such share exchange, Hok C Chan held 10 shares of common stock of Toppoint Inc. for which he paid a purchase price of $0.01 per share. For a complete description of these transactions, please see “Corporate History and Structure.” |
The table above excludes the following shares:
| ● | 2,250,000 shares of common stock that are reserved for issuance under our 2022 Equity Incentive Plan; and |
| ● | up to [ ] shares of common stock issuable upon exercise of the Representative’s Warrants issued in connection with this offering, if the underwriters exercise the over-allotment option in full. |
To the extent that new options, restricted stock units or other securities are issued under our stock-based compensation plans, or new shares of preferred stock are issued, or we issue additional shares of common stock in the future, there will be further dilution to investors participating in this offering.
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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis summarizes the significant factors affecting our operating results, financial condition, liquidity and cash flows of our company as of and for the periods presented below. The following discussion and analysis should be read in conjunction with our financial statements and the related notes thereto included elsewhere in this prospectus. The discussion contains forward-looking statements that are based on the beliefs of management, as well as assumptions made by, and information currently available to, our management. Actual results could differ materially from those discussed in or implied by forward-looking statements as a result of various factors, including those discussed below and elsewhere in this prospectus, particularly in the sections titled “Risk Factors” and “Cautionary Statement Regarding Forward-Looking Statements”.
Overview
We are a truckload services and solutions provider focused on the recycling export supply chain. We have become a key player in the New Jersey and Pennsylvania regional trucking market for waste paper, evidenced by our significant market share where we accounted for approximately 34% of the waste paper export drayage volumes through New Jersey’s ports and approximately 30% through Philadelphia’s ports, according to data sourced from IHS Markit. In addition to waste paper, our portfolio also includes the shipment of scrap metal and wooden logs from large waste companies, recycling centers and commodity traders to the ports of Newark, NJ, and Philadelphia, PA. We continue to expand our footprints domestically and have ventured into the recycling export transport market of Tampa and Miami, FL, and Baltimore, MD in 2023. We intend to explore the international market in Canada, the United Kingdom and Australia in the near future.
Our client base includes largest Fortune 500 waste companies and over 280 recycling centers and commodity traders that operate in nearly 2,300 locations. Our growing client base relies on us as their partner to provide a “white glove service” to ensure their time-sensitive, ultra-high throughput commodities are safely loaded and delivered right to container ships. In addition, capitalizing on our know-how in developing logistics solutions over the years, we are able to propose integrated transportation solutions that cover loading, transport, port drayage and unloading.
Currently, our business is broadly categorized into four verticals, by commodity type and the direction of trade as follows:
| ● | Waste Paper Products. Waste paper products have been our core commodity of export transportation. As a word-of-mouth shipper of choice, we have established a significant market presence in the New Jersey and Pennsylvania region’s recycled paper export transport industry. For the years ended December 31, 2023 and 2022, we completed approximately 4,400 and 3,550 orders, involving 18,022 and 20,124 loads, which amounted to approximately 504,616 and 563,472 tons of waste paper, respectively. For the three months ended March 31, 2024 and 2023, we completed approximately 654 and 820 orders, involving 5,360 and 7,259 loads, which amounted to approximately 114,632 and 162,484 tons of waste paper, respectively. We use Number of Loads Completed, or NLC, as a key performance indicator. For more information, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Other Performance Indicator” on page 38. We are the only trucking company that is a member of the Board of the New Jersey Paper Recycling Association, or NJPRA. NJPRA has approximately 20 members, representing approximately 90% of the paper recycling market in New Jersey. |
| ● | Waste Metal and Forestry. We expanded into scrap metal and wood products export markets to diversify our offerings and supply our growing fleet. Serving additional commodities allows us to keep a strong pipeline of loads for independent contractor drivers to deliver and mitigate risks against commodity price fluctuations that affect demand for export. |
| ● | Import. We hold a minority market share in the import delivery sector for ports of Newark, NJ and Philadelphia, PA, picking up containers from ships and dropping at client locations. |
| ● | Others. From time to time, we offer trucking services for plastic and other commodities and provide logistics brokerage solutions servicing the major ports in California, Georgia, South Carolina, Texas and Illinois, as well as commercial rail lines. |
We pride ourselves on being an economically viable, socially responsible and environmentally friendly enterprise. We contribute to a sustainable society through our initiatives to reduce costs and enhance recycling logistics efficiency. Our competitive prices, capability to deliver large amounts on time and fast response ability have enabled us to solidify our partnerships with clients year over year. The number of our clients has grown from 10 in 2015 to 303 in 2023 at a CAGR of approximately 53.17%.
Our total revenues for the years ended December 31, 2023 and 2022 were $18,035,532 and $21,485,791, respectively, representing a year-over-year decrease of $3,450,260, or 16%. Our net income for the years ended December 31, 2023 and 2022 was $542,351 and $1,689,219, representing a year-over-year decrease of $1,146,868, or 68%. Our total revenues for the three months ended March 31, 2024 and 2023 were $3,733,896 and $5,723,313, respectively, representing a year-over-year decrease of $1,989,417, or 35%. Our net income for the three months ended March 31, 2024 and 2023 was $111,090 and $287,825, representing a year-over-year decrease of $176,735, or 61%.
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Principal Factors Affecting Our Financial Performance
Our operating results are primarily affected by the following factors:
| ● | our ability to acquire new customers or retain existing customers; |
| ● | our ability to offer competitive product pricing; |
| ● | our ability to broaden product offerings; |
| ● | industry demand and competition; |
| ● | our ability to leverage technology and use and develop efficient processes; |
| ● | our ability to attract and retain talented employees; and |
| ● | market conditions and our market position. |
Results of Operations
Comparison of the Three Months Ended March 31, 2024 and 2023
| Three Months Ended March 31: | Increase (Decrease) | |||||||||||||||
| 2024 | 2023 | $ | % | |||||||||||||
| Revenues | $ | 3,733,896 | $ | 5,723,313 | (1,989,417 | ) | (35 | )% | ||||||||
| Costs and expenses | ||||||||||||||||
| Costs of revenues | 3,254,946 | 4,172,789 | (917,843 | ) | (22 | )% | ||||||||||
| General and administrative | 331,055 | 1,312,069 | (981,015 | ) | (75 | )% | ||||||||||
| 3,586,001 | 5,484,858 | (1,898,856 | ) | (35 | )% | |||||||||||
| Income from operations | 147,895 | 238,455 | (90,560 | ) | (38 | )% | ||||||||||
| Other income (expense) | (1,369 | ) | 152,768 | (154,136 | ) | (101 | )% | |||||||||
| Net income before income taxes | 146,526 | 391,223 | (244,697 | ) | (63 | )% | ||||||||||
| Provision for income taxes | 35,436 | 103,398 | (67,962 | ) | (66 | )% | ||||||||||
| Net income | $ | 111,090 | $ | 287,825 | (176,735 | ) | (61 | )% | ||||||||
Revenue
Revenue for the three months ended March 31, 2024 and 2023 was $3,733,896 and $5,723,313, respectively, representing a decrease of 35%. The revenue decline in 2024 was mainly due to a continued industry-wide decrease in scrap paper export volume. Despite receiving an increased number of orders, both the average load count per order and the price per load decreased. To maintain activity across our fleet, we accepted a higher volume of smaller orders at lower prices.
Our revenues consisted of the following during the three months ended March 31, 2024 and 2023:
| 2024 | 2023 | |||||||
| Commodity | ||||||||
| Paper | $ | 2,748,818 | $ | 4,503,801 | ||||
| Import | 612,673 | 784,599 | ||||||
| Metal | 211,217 | 209,825 | ||||||
| Log | 76,225 | 165,650 | ||||||
| Plastic | 84,963 | 59,438 | ||||||
| $ | 3,733,896 | $ | 5,723,313 | |||||
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Cost and expenses
Costs of revenues Our cost of revenue includes all directly related costs to deliver our services, which includes independent contractor drivers, insurance, truck maintenance costs, equipment rental and other directly related costs. Our costs of revenue for the three months ended March 31, 2024 and 2023 was $3,254,946 and $4,172,789, respectively, representing a decrease of 22%. Such decrease was in line with our decreased revenue.
Gross profit As a result of the foregoing, our gross profit decreased by $1,071,574, or 69%, to $478,950 for the three months ended March 31, 2024 from $1,550,524 for the three months ended March 31, 2023. As a percentage of revenue, gross profit decreased from 27% for the three months ended March 31, 2023 to 13% for the three months ended March 31, 2024. This decrease was primarily due to a reduction in rates charged to customers in response to the volatility in our business, especially from the paper commodity. In order to keep our fleet busy, a reduction in payment to the independent contractor drivers could not follow a 1:1 reduction ratio.
General and administrative Our general and administrative expenses consist primarily of automobile, office, insurance, payroll and rent expenses. Our general and administrative expenses decreased by $981,015 or 75% to $331,055 for the three months ended March 31, 2024 from $1,312,069 for the three months ended March 31, 2023. This change primarily results from a decrease in rent expense of $708,583 and a decrease in consulting fees of $719,633. Consulting fees decreased due to lower charges incurred during 2024 and rent decreased due to termination charges on the Company’s leased automobiles during 2023.
Income tax expense We recorded income tax expenses of $35,436 for the three months ended March 31, 2024, as compared to $103,398 for the three months ended March 31, 2023, a decrease of $67,962 or 61%. The decrease in the income tax expense mainly resulted from lower taxable income.
Net income
Net income for the three months ended March 31, 2024 and 2023 was $111,090 and $287,825, respectively. The change of net income was due to the decrease in revenue and lower profit margin during 2024.
In 2023, U.S. waste paper exports reached a 19-year low since 2004, driven by multi-year declines in shipments to key overseas markets. This downward trend continued into the first quarter of 2024, with exports declining 19% to 2.98 million metric tons, and the value of those exports dropping nearly 17% to $600 million. Thailand was the largest importer of U.S. recovered paper in the first quarter of 2024, but its purchases were down 27% from the first quarter of 2023. India was the second largest buyer with purchases decreasing by 25% from the first quarter of 2023. The decline in U.S. waste paper exports was partly due to increased domestic mill production of recycled-content paper and board. The fluctuations in the market demand for U.S. waste paper exports have a direct impact on our revenue. As demand decreases, our shipping volumes, rates and associated revenues decline. Conversely, improvements in industry demand can lead to increased shipping activity and revenue growth. Given that domestic paper and board production has its capacity limitations and recycling practices and sorting equipment at recycling facilities are anticipated to continue improving, we believe that the U.S. waste paper exports will remain a mainstream commodity for our trucking services despite short-term volatility. For more information, please see the “Industry—Waste Paper Export” section. However, it is difficult to precisely predict when this downward trend will reverse. If the current trend persists and we are unable to find alternative sources of demand to replace the lost demand for waste paper, our revenues will be materially adversely affected.
Comparison of Years Ended December 31, 2023 and 2022
| Years Ended December 31: | Increase (Decrease) | |||||||||||||||
| 2023 | 2022 | $ | % | |||||||||||||
| Revenues | $ | 18,035,532 | 21,485,791 | (3,450,260 | ) | (16 | )% | |||||||||
| Costs and expenses | ||||||||||||||||
| Costs of revenues | 15,386,379 | 16,459,774 | (1,073,395 | ) | (7 | )% | ||||||||||
| Selling | - | 3,549 | (3,549 | ) | (100 | )% | ||||||||||
| General and administrative | 1,874,837 | 2,571,613 | (696,776 | ) | (27 | )% | ||||||||||
| 17,261,216 | 19,034,936 | (1,773,720 | ) | (09 | )% | |||||||||||
| Income from operations | 774,316 | 2,450,855 | (1,676,539 | ) | (68 | )% | ||||||||||
| Other income (expense) | 145,966 | 42,493 | 103,473 | 244 | % | |||||||||||
| Net income before income taxes | 920,282 | 2,493,348 | (1,573,066 | ) | (63 | )% | ||||||||||
| Provision for income taxes | 377,931 | 804,129 | (426,198 | ) | (53 | )% | ||||||||||
| Net income | $ | 542,351 | 1,689,219 | (1,146,868 | ) | (68 | )% | |||||||||
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Revenue
Revenue for the years ended December 31, 2023 and 2022 was $18,035,532 and $21,485,791, respectively, representing a decrease of 16%. The revenue decline in 2023 was mainly due to an industry-wide decrease in scrap paper export volume. Despite receiving an increased number of orders, both the average load count per order and the price per load decreased. To maintain activity across our fleet, we accepted a higher volume of smaller orders at lower prices.
In 2023, U.S. waste paper exports reached a 19-year low since 2004, driven by multi-year declines in shipments into key overseas markets. India was the largest buyer of U.S. waste paper exports in 2023, while China, which used to be the largest importer, has significantly reduced purchases of U.S. recovered paper, following its ban on imports of unsorted waste paper. The global recovered paper market exhibited a similar trend, with a strong upturn in 2021, a collapse in the second half of 2022 and continued weakness throughout 2023. The decline in U.S. waste paper exports was partly due to increased domestic mill production of recycled-content paper and board. The fluctuations in the market demand for U.S. waste paper exports have a direct impact on our revenue. As demand decreases, our shipping volumes, rates and associated revenues decline. Conversely, improvements in industry demand can lead to increased shipping activity and revenue growth. Given that domestic paper and board production has its capacity limitations and recycling practices and sorting equipment at recycling facilities are anticipated to continue improving, we believe that the U.S. waste paper exports will remain a mainstream commodity for our trucking services despite short-term volatility. For more information, please see the “Industry—Waste Paper Export” section. However, it is difficult to precisely predict when this downward trend will reverse. If the current trend persists and we are unable to find alternative sources of demand to replace the lost demand for waste paper, our revenues will be materially adversely affected.
Despite the downturn in waste paper exports, our revenues from Waste Metal, Import and Others verticals experienced growth in 2023. We expanded our presence in the metal recycling export market, which resulted in a 55% increase in loads, totaling an additional 476 loads compared to 2022. Our revenues growth from Waste Metal, Import and Others verticals was due to our established relationships with a number of waste metal customers and importers by offer to transport small amount of their loads collectively. As paper export volume continued to show weakness, we strategically targeted the existing client companies with the high volume of waste metal export and import containers. Opportunity was discovered from discussions with their leadership by uncovering their prior year volume and the ability for us to provide a higher level of service. The export volume for metal waste is subject to the market rate and countries buying the commodity. Import volume varies by the amount of demand from domestic consumers and economic conditions. Prices on providing logistics services for these verticals are based on the supply of trucks servicing the vertical, their availability to transport large quantities of containers in a short time, and established relationships with the customer. Our revenues growth from Waste Metal, Import and Others verticals was mainly due to increase in the volume of amount of services being sold.
Our revenues from the “Others” vertical, where we hire “outside trucks” in markets our fleet does not service such as Illinois and Texas, also increased. Utilizing “outside trucks” allows us to scale our operations and serve our national clients in emerging markets with low risk. Our revenues from Forestry were lower in 2023 compared to 2022, which experienced an unusual surge.
Our revenues consisted of the following during the year ended December 31, 2023 and 2022:
| 2023 | 2022 | |||||||
| Commodity | ||||||||
| Paper | $ | 13,476,877 | $ | 15,011,459 | ||||
| Import | 2,798,629 | 3,193,701 | ||||||
| Metal | 1,076,718 | 787,031 | ||||||
| Log | 447,995 | 2,341,591 | ||||||
| Plastic | 235,313 | 152,009 | ||||||
| $ | 18,035,532 | $ | 21,485,791 | |||||
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Cost and expenses
Costs of revenues Our cost of revenue includes all directly related costs to deliver our services, which includes independent contractor drivers, insurance, truck maintenance costs, equipment rental and other directly related costs. Our costs of revenue for the years ended December 31, 2023 and 2022 was $15,386,379 and $16,459,774, respectively, representing a decrease of 10%. Such decrease was in line with our decreased revenue.
Gross profit As a result of the foregoing, our gross profit decreased by $2,376,864, or 47%, to $2,649,153 for the year ended December 31, 2023 from $5,026,017 for the year ended December 31, 2022. As a percentage of revenue, gross profit decreased from 23% for the year ended December 31, 2022 to 15% for the year ended December 31, 2023. This decrease was primarily due to a reduction in rates charged to customers in response to the volatility in our business, especially from the paper commodity. In order to keep our fleet busy, a reduction in payment to the indepdnent contractor drivers could not follow a 1:1 reduction ratio.
Selling expenses Our selling expenses consist primarily of advertising costs. Our selling expenses decreased by $3,549 or 100% to $0 for the year ended December 31, 2023 from $3,549 for the year ended December 31, 2022. This decrease was due to no advertising spent during 2023.
General and administrative Our general and administrative expenses consist primarily of automobile, office, insurance, payroll and rent expenses. Our general and administrative expenses decreased by $696,776 or 27% to $1,874,837 for the year ended December 31, 2023 from $2,571,613 for the year ended December 31, 2022. This change primarily results from a decrease in consulting fees of $920,038 offset by an increase in rent expense of $413,173. Consulting fees decreased due to one-time charges incurred during 2022 and rent increased during 2023 due to termination charges on the Company’s leased automobiles.
Income tax expense We recorded income tax expenses of $377,931 for the year ended December 31, 2023, as compared to $804,129 for the year ended December 31, 2022, a decrease of $426,198 or 53%. The decrease in the income tax expense mainly resulted from lower taxable income.
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Net income
Net income for the years ended December 31, 2023 and 2022 was $542,351 and $1,689,219, respectively. The change of net income was due to the decrease in revenue and lower profit margin during 2023.
Other Performance Indicator
We use Number of Loads Completed, or NLC, as a key performance indicator to help us evaluate our business, identify trends affecting our business, formulate business plans, and make strategic decisions. This measure may be used by other companies in our industry who may calculate it differently than we do, limiting its usefulness as a comparative measure. Therefore, NLC may have limitations as an analytical tool.
We define NLC as the total number of loads delivered during a period. As our fleet exclusively offers full truckload shipping, tracking NLC is straightforward. We recognize a completed load when our dispatch team receives the receipt paperwork from the driver at the port or other destination. We simultaneously notify the client of the delivery. We use our proprietary analytics system to record NLC. As we ship both 40-foot and 20-foot shipping containers, the total tonnage transported represents the sum of the weight of the loads included in NLC for the period presented, based on an average weight of 28 tons per load. The average weight of 28 tons per load is an estimate made by the management based on historical data.
The NLC information, including the related estimated total tonnage, included in this prospectus has been prepared by, and is the responsibility of, the Company’s management. TAAD LLP has not audited, reviewed, examined, compiled or applied agreed-upon procedures with respect to such NLC information and, accordingly, TAAD LLP does not express an opinion or any other form of assurance with respect thereto. The TAAD LLP report included in this prospectus relates to the Company’s previously issued financial statements, and it does not extend to the NLC information and should not be read to do so.
The table below shows both the total NLCs and a breakdown of NLCs by business vertical during the fiscal years ended December 31, 2023 and 2022. Our revenue generation directly corresponds to NLC but is also impacted by the rates charged to customers.
| Year ended December 31, 2023 | Year ended December 31, 2022 | |||||||||||||||
| Number of Loads Completed | Percentage in Total NLC | Number of Loads Completed | Percentage in Total NLC | |||||||||||||
| Waste Paper | 18,022 | 74.5 | % | 20,124 | 73.7 | % | ||||||||||
| Waste Metal | 1,336 | 5.5 | % | 860 | 3.1 | % | ||||||||||
| Forestry | 340 | 1.4 | % | 2,183 | 8.0 | % | ||||||||||
| Import | 4,063 | 16.8 | % | 3,975 | 14.6 | % | ||||||||||
| Others | 428 | 1.8 | % | 167 | 0.6 | % | ||||||||||
| Total | 24,189 | 100 | % | 27,309 | 100 | % | ||||||||||
For the year ended December 31, 2023, the NLC for Waste Paper declined by 2,102, or 10.4%, to 18,022, from 20,124 for the year ended December 31, 2022. The decrease was primarily attributed to an industry-wide decrease in scrap paper export volume.
For the year ended December 31, 2023, the NLC for Waste Metal increased by 476, or 55.3%, to 1,336, from 860 for the year ended December 31, 2022. The increase was due to new client acquisitions in the waste metal space.
For the year ended December 31, 2023, the NLC for Forestry decreased by 1,843, or 84.4%, to 340, from 2,183 for the year ended December 31, 2022. The decrease primarily reflected an unusual surge in 2022 and limitations on the volume of trees deforested for logging in the NYS are we service.
For the year ended December 31, 2023, the NLC for Import increased by 88, or 2.2%, to 4,063, from 3,975 for the year ended December 31, 2022. The increase was due to new client acquisition of import customers.
For the year ended December 31, 2023, the NLC for Others increased by 261, or 156.3%, to 428, from 167 for the year ended December 31, 2022. The increase was due to new client acquisition for customers requiring exports in plastics and other materials.
For the year ended December 31, 2023, the total NLC decreased by 3,120, or 11.4%, to 24,189, from 27,309 for the year ended December 31, 2022. The drop in total NLC was primarily due to significant decreases in the NLCs for Waste Paper and Forestry, partially offset by increases in the NLCs for Waste Metal, Import and Others.
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The table below lists the NLCs for the three months ended March 31, 2024 and 2023:
| Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | |||||||||||||||
| Number of Loads Completed | Percentage in Total NLC | Number of Loads Completed | Percentage in Total NLC | |||||||||||||
| Waste Paper | 4,094 | 76.38 | 5,803 | 79.94 | % | |||||||||||
| Waste Metal | 226 | 4.22 | % | 269 | 3.71 | % | ||||||||||
| Forestry | 74 | 1.38 | % | 119 | 1.64 | % | ||||||||||
| Import | 848 | 15.82 | % | 990 | 13.64 | % | ||||||||||
| Others | 118 | 2.20 | % | 78 | 1.07 | % | ||||||||||
| Total | 5,360 | 100 | % | 7,259 | 100 | % | ||||||||||
For the three months ended March 31, 2024, the NLC for Waste Paper decreased by 1,709, or 29%, to 4,094, from 5,803 for the three months ended March 31, 2023. The decrease was attributed to paper export decline.
For the three months ended March 31, 2024, the NLC for Waste Metal decreased by 43, or 16% to 226, from 269 for the three months ended March 31, 2023. The decrease was due to a reduction in exports, however revenue in this vertical increased by $1,392.50, or 0.66%, to $211,217.50 from $209,825.00.
For the three months ended March 31, 2024, the NLC for Forestry decreased by 45 or 38%, to 74, from 119 for the three months ended March 31, 2023. The decrease was due to an expected continued decline and phase out of this vertical based on the limitations on the volume of trees deforested for logging in the New York state area we service.
For the three months ended March 31, 2024, the NLC for Import decreased by 142, or 14%, to 848, from 990 for the three months ended March 31, 2023. The decrease was due to a decline in incoming ship volume based on economic conditions of consumers.
For the three months ended March 31, 2024, the NLC for Others increased by 40, or 51%, to 118, from 78 for the three months ended March 31, 2023. The increase was due to an uptick in the export of commodities like batteries and plastics.
For the three months ended March 31, 2024, the total NLC decreased by 1,899 or 26%, to 5,360, from 7,259 for the three months ended March 31, 2023. The decrease in total NLC was due to the market decline and decrease in purchasing of waste by countries like China, India and Southeast Asian countries as well as the economic decline in consumer spending causing a decrease in inbound ship volume.
Liquidity and Capital Resources
As of March 31, 2024 and December 31, 2023, we had cash of $1,237,471 and $1,455,976, respectively. To date, we have financed our operations primarily through revenue generated from operations.
We believe that our current levels of cash, either with or without the proceeds of this offering, will be sufficient to meet our anticipated cash needs for our operations for at least the next 12 months, including our anticipated costs associated with becoming a public reporting company. We may, however, in the future require additional cash resources due to changing business conditions, implementation of our strategy to expand our business, or other investments or acquisitions we may decide to pursue. If our own financial resources are insufficient to satisfy our capital requirements, we may seek to sell additional equity or debt securities or obtain additional loans. The sale of additional equity securities could result in dilution to our shareholders. The incurrence of indebtedness would result in increased debt service obligations and could require us to agree to operating and financial covenants that would restrict our operations. Financing may not be available in amounts or on terms acceptable to us, if at all. Any failure by us to raise additional funds on terms favorable to us, or at all, could limit our ability to expand our business operations and could harm our overall business prospects.
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Summary of Cash Flow
The following table provides detailed information on our net cash flow for the three months ended March 31, 2024 and 2023.
| Year Ended | ||||||||
| March 31, 2024 | March 31, 2023 | |||||||
| Net cash provided by (used in) operating activities | $ | 15,689 | $ | 1,577,756 | ||||
| Net cash (used in) investing activities | (22,918 | ) | (430,650 | ) | ||||
| Net cash provided by (used in) financing activities | (211,276 | ) | - | |||||
| Net increase (decrease) in cash | (218,505 | ) | 1,147,106 | |||||
| Cash at beginning of period | 1,455,976 | 744,853 | ||||||
| Cash at end of period | $ | 1,237,471 | $ | 1,891,959 | ||||
Operating activities provided net cash of $15,689 during the three months ended March 31, 2024, and $1,577,756 during the three months ended March 31, 2023. Cash provided by operating activities decreased by approximately $1,562,067 primarily due to a decrease in net income of $176,735, decrease in amortization of ROU of $452,064, the recognition of a non-cash rent expense of $433,574 during 2023, deferred taxes of $22,069 during 2024, and an overall decrease of $521,764 from the change in operating assets and liabilities, for the three months ended March 31, 2024 in comparison of the three months ended March 31, 2023.
Investing activities used net cash of $22,918 during the three months ended March 31, 2024, and $430,650 during the three months ended March 31, 2023. Cash used in investing activities decreased by $407,733 from the corresponding period of the prior year. The March 31, 2024 amount is due to $22,918 in advances to stockholder. The March 31, 2023 amount is due to $70,646 from the purchases of property and equipment, $340,000 from the purchases of intangible asset and $20,004 in advances to stockholder
Financing activities used net cash of $211,276 during the three months ended March 31, 2024 which resulted from deferred offering costs.
The following table provides detailed information about our net cash flow for the fiscal years ended December 31, 2023 and 2022:
| Year Ended | ||||||||
| December 31, 2023 | December 31, 2022 | |||||||
| Net cash provided by operating activities | $ | 2,008,219 | $ | 888,839 | ||||
| Net cash (used in) investing activities | (1,091,226 | ) | (65,377 | ) | ||||
| Net cash provided by (used in) financing activities | (205,870 | ) | (518,547 | ) | ||||
| Net increase (decrease) in cash | 711,123 | 304,915 | ||||||
| Cash at beginning of period | 744,853 | 439,938 | ||||||
| Cash at end of period | $ | 1,455,976 | $ | 744,853 | ||||
Operating activities provided net cash of $2,008,219 during the year ended December 31, 2023, and $888,839 during the year ended December 31, 2022. Cash provided by operating activities increased by approximately $1,119,380 primarily due to a decrease in net income of $1,146,868, increase in amortization of ROU of $356,204, the recognition of a non-cash rent expense of $433,574, depreciation of $54,900, a decrease deferred taxes of $437,442, and an overall decrease of $1,306,674 from the change in operating assets and liabilities, for the year ended December 31, 2023 in comparison of the year ended December 31, 2022.
Investing activities used net cash of $1,091,226 during the year ended December 31, 2023, and $65,377 during the year ended December 31, 2022. Cash used in investing activities decreased by $1,025,849 from the corresponding period of the prior year. The December 31, 2023 amount is due to $85,596 from the purchases of property and equipment, $798,614 from the purchases of intangible asset and $207,016 in advances to stockholder. The December 31, 2022 amount is due to $65,377 from the purchases of property and equipment.
Financing activities used net cash of $205,870 during the year ended December 31, 2023, and $518,547 during the year ended December 31, 2022. Cash used in financing activities decreased by $312,677. The December 31, 2023 amount is due to $205,870 of deferred financing costs. The December 31, 2022 amount is due to $377,048 of distributions and $141,499 in the repayment of loan payable.
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Material Cash Requirements from Known Contractual and Other Obligations
The following table summarizes our contractual obligations as of March 31, 2024 and as for the 12 months thereafter:
| Contractual Obligations | As of March 31, 2024 | For the twelve months ended March 31, 2025 | ||||||
| Operating lease obligations | $ | 539,799 | $ | 432,940 | ||||
| Total Contractual Obligations | $ | 539,799 | $ | 432,940 | ||||
We intend to fund our contractual obligations with working capital.
Off-Balance Sheet Arrangements
We have no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.
Critical Accounting Policies and Estimates
The following discussion relates to critical accounting policies for our company. The preparation of financial statements in conformity with GAAP requires our management to make assumptions, estimates and judgments that affect the amounts reported, including the notes thereto, and related disclosures of commitments and contingencies, if any. We have identified certain accounting policies that are significant to the preparation of our financial statements. These accounting policies are important for an understanding of our financial condition and results of operations. Critical accounting policies are those that are most important to the portrayal of our financial condition and results of operations and require management’s difficult, subjective, or complex judgment, often as a result of the need to make estimates about the effect of matters that are inherently uncertain and may change in subsequent periods. Certain accounting estimates are particularly sensitive because of their significance to financial statements and because of the possibility that future events affecting the estimate may differ significantly from management’s current judgments. We believe the following critical accounting policies involve the most significant estimates and judgments used in the preparation of our financial statements:
Revenue Recognition
The Company’s revenue recognition policy is based on the revenue recognition criteria established under the Financial Accounting Standards Board (“FASB”) – Accounting Standards Codification 606 “Revenue From Contracts With Customers” which has established a five-step process to govern contract revenue and satisfy each element is as follows: (1) identify the contract(s) with a customer; (2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to the performance obligations in the contract; and (5) recognize revenue when or as you satisfy a performance obligation. The Company records the revenue once all the above steps are completed and services are performed.
The Company’s contracts with customers only include one performance obligation, which is to provide truckload services. Revenue is recognized in the gross amount at a point in time when the service is completed and the benefit of our services has been transferred to the customer. Revenue is measured as the amount of consideration the Company expects to be entitled to in exchange for those services. Because revenue is recognized at the point in time services are sold to customers, there are no contract liability balances, however there may be contract asset balances for any services provided that were not billed.
Income Taxes
Historically and through December 31, 2021, the Company elected, by consent of its stockholders, to be taxed under the provisions of Subchapter S of the Internal Revenue Code and applicable state statutes. The Company made a qualified Subchapter S subsidiary election with the Internal Revenue Service and accordingly the Company’s income is to be included in the Parent’s income tax return for Federal tax purposes. The Company has also elected S Corporation status for Pennsylvania State tax purposes. The Company revoked its Subchapter S election with the Internal Revenue Service and Pennsylvania as of January 1, 2022.
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As of January 1 2022, the Company accounts for income taxes utilizing the asset and liability approach. Under this approach, deferred taxes represent the future tax consequences expected to occur when the reported amounts of assets and liabilities are recovered or paid. The provision for income taxes generally represents income taxes paid or payable for the current year plus the change in deferred taxes during the year. Deferred taxes result from the differences between the financial and tax bases of the Company’s assets and liabilities and are adjusted for changes in tax rates and tax laws when changes are enacted.
The calculation of tax liabilities involves dealing with uncertainties in the application of complex tax regulations. The Company recognizes liabilities for anticipated tax audit issues based on the Company’s estimate of whether, and the extent to which, additional taxes will be due. If payment of these amounts ultimately proves to be unnecessary, the reversal of the liabilities would result in tax benefits being recognized in the period when the liabilities are no longer determined to be necessary. If the estimate of tax liabilities proves to be less than the ultimate assessment, a further charge to expense would result.
The Company evaluates uncertain income tax positions taken or expected to be taken in a tax return for recognition in its consolidated financial statements. The Company was not required to recognize any amounts from uncertain tax positions for the years ended December 31, 2023 and 2022. The Company’s conclusions regarding uncertain tax positions may be subject to review and adjustment at a later date based upon ongoing analyses of tax laws, regulations and interpretations thereof, as well as other factors. Generally, federal, state and local authorities may examine the Company’s tax returns for three years from the date of filing.
Recent Accounting Pronouncements
In February 2016, the FASB issued Accounting Standards Update (“ASU”) 2016-02, “Leases (Topic 842).” The objective of this update is to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. This ASU is effective for fiscal years beginning after December 15, 2021, and interim periods within fiscal years beginning after December 15, 2022 and is to be applied utilizing a modified retrospective approach. The Company has adopted this guidance as of January 1, 2022, and it did have a material impact on its consolidated financial statements as now the Company capitalizes all right-of-use assets and lease liabilities.
Recently Issued Accounting Pronouncements Not Yet Adopted
In June 2016, the FASB issued ASU 2016-13, “Financial Instruments - Credit Losses (“Topic 326”)”. The ASU introduces a new accounting model, the Current Expected Credit Losses model (“CECL”), which requires earlier recognition of credit losses and additional disclosures related to credit risk. The CECL model utilizes a lifetime expected credit loss measurement objective for the recognition of credit losses at the time the financial asset is originated or acquired. ASU 2016-13 is effective for annual period beginning after December 15, 2022, including interim reporting periods within those annual reporting periods. The Company is currently evaluating this guidance and expects it will not have material impact to its consolidated financial statements.
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Emerging Growth Company Status and Smaller Reporting Company Status
We are an emerging growth company, as defined in the JOBS Act. The JOBS Act permits an emerging growth company such as us to take advantage of an extended transition period to comply with new or revised accounting standards. We have elected to avail ourselves of such extended transition period, which means that when a standard is issued or revised and it has different application dates for public or private companies, we can adopt the new or revised standard at the time private companies adopt the new or revised standard and may do so until such time that we either (i) irrevocably elect to opt out of such extended transition period or (ii) no longer qualify as an emerging growth company. We may choose to early adopt any new or revised accounting standards whenever such early adoption is permitted for private companies. We will continue to remain an emerging growth company until the earliest of the following: (1) the last day of the fiscal year following the fifth anniversary of the date of the completion of this offering; (2) the last day of the fiscal year in which our total annual gross revenue is equal to or more than $1.235 billion; (3) the date on which we have issued more than $1.0 billion in nonconvertible debt during the previous three years; or (4) the date on which we are deemed to be a large accelerated filer under the rules of the SEC.
We are also a smaller reporting company as defined in the Exchange Act. We may continue to be a smaller reporting company even after we are no longer an emerging growth company. We may take advantage of certain of the scaled disclosures available to smaller reporting companies and will be able to take advantage of these scaled disclosures for so long as our voting and non-voting common stock held by non-affiliates is less than $250.0 million measured on the last business day of our second fiscal quarter, or our annual revenue is less than $100.0 million during the most recently completed fiscal year and our voting and non-voting common stock held by non-affiliates is less than $700.0 million measured on the last business day of our second fiscal quarter.
Quantitative and Qualitative Disclosures about Market Risks
Interest Rate Risk
Our cash and cash equivalents consist of cash held in readily available checking accounts. Our primary exposure to market risk is interest rate sensitivity, which is affected by changes in the general level of U.S. interest rates. However, because of the short-term nature of the instruments in our portfolio, a sudden change in market interest rates would not be expected to have a material impact on our financial condition or results of operations.
We do not invest in financial instruments for trading or speculative purposes, nor do we use leveraged financial instruments. A hypothetical 10% change in interest rates would not have a material impact on the value of our cash, cash equivalents, and cash flows.
Foreign Currency Exchange Risk
All of our revenues and expenses are denominated in U.S. dollars. We do not believe that we currently are exposed to significant foreign exchange risks and have not used derivative financial instruments to hedge exposure to such risk. As we continue to develop our business, our results of operations and cash flows will likely be more affected by fluctuations in foreign currency exchange rates, which could adversely affect our results of operations.
To the extent that we need to convert U.S. dollars into other currencies for our operations, appreciation of the foreign currencies against the U.S. dollar would have an adverse effect on the amount of foreign currencies we receive from the conversion. Conversely, if we decide to convert foreign currencies into U.S. dollars for business purposes, appreciation of the U.S. dollar against the foreign currencies would have a negative effect on the U.S. dollar amounts available to us.
Effects of Inflation
Inflation could affect us by increasing our cost of labor, rent and other costs. We do not believe inflation has had a material effect on our business, financial condition or results of operations, or on our financial statements included elsewhere in this prospectus.
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CORPORATE HISTORY AND STRUCTURE
We were incorporated in the State of Nevada on August 16, 2022 as a holding company. We started operations in 2014 through Toppoint Inc, a Pennsylvania corporation, providing logistics services and solutions for the recycling export supply chain in the U.S. As of the date of this prospectus, we have only one subsidiary, Toppoint Inc.
On the date of incorporation, we issued an aggregate of 7,500,000 shares of common stock to four investors at a per share purchase price of $0.0001. On the same date, these four investors entered into a voting agreement with Hok C Chan, our founder, Chairman of our board of directors and Chief Executive Officer, pursuant to which the investors unconditionally and irrevocably appointed Hok C Chan as each investor’s proxy to attend and vote at all shareholder meetings of the Company and on every action or approval by written consent of the shareholders of the Company, until the earlier of (i) the date on which the Company completes its initial public offering, or (ii) the written agreement of all the parties of the agreement to terminate it. A copy of the voting agreement is filed as an exhibit to the registration statement of which this prospectus forms a part.
On September 29, 2022, we entered into a Share Exchange Agreement with Toppoint Inc and Hok C Chan, the sole stockholder of Toppoint Inc, our founder, Chairman of our board of directors and Chief Executive Officer, pursuant to which Hok C Chan exchanged all of his shares in Toppoint Inc for 7,500,000 shares of common stock of our company. As a result, we acquired all of the issued and outstanding shares of capital stock of Toppoint Inc, making Toppoint Inc our wholly-owned subsidiary.
On October 1, 2022, we adopted the Toppoint Holdings Inc. 2022 Equity Incentive Plan (the “Plan”). The purpose of the Plan is to grant restricted stock, stock options and other forms of incentive compensation to our officers, employees, directors and consultants. The maximum number of shares of common stock that may be issued pursuant to awards granted under the Plan is 2,250,000 shares. As of the date of this prospectus, all shares remain available for issuance under the Plan.
The following diagram presents our corporate structure as of the date of this prospectus:
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Information included in this prospectus relating to our industry, industry size, share of industry sales, industry position, industry capacities, industry demand, growth rates, penetration rates, and other industry data consists of estimates based on reports compiled by professional third-party organizations and analysts, data from external sources, our knowledge of our sales and the industry in which we operate, and our own calculations based on such information. While we have compiled, extracted, and reproduced industry data from external sources, including third-party, industry, or general publications, we have not independently verified the data. Similarly, while we believe our management estimates to be reasonable, they have not been verified by any independent sources. Forecasts and other forward-looking information with respect to industry and ranking are subject to the same qualifications and additional uncertainties regarding the other forward-looking statements in this prospectus.
Among others, we refer to estimates compiled by using publicly available data from the following industry sources:
| ● | Boston Consulting Group, a top global consulting firm |
| ● | Data Bridge Market Research, a market research and consulting firm |
| ● | Fact.MR, a market research provider |
| ● | Fastmarkets, a cross-commodity price reporting agency in the agriculture, forest products, metals and mining, and energy markets |
| ● | Forecon, one of the oldest established professional forestry consulting firms |
| ● | General Kinematics, a provider of quality equipment |
| ● | GMK Center, a Ukraine based think tank and consulting company |
| ● | IBISWorld, a global industry research company |
| ● | Miller Wood Trade Publications, an online provider of information for the forest products industry |
| ● | OEC, the Observatory of Economic Complexity, an online data visualization and distribution platform focused on the geography and dynamics of economic activities |
| ● | Precedence Research, a worldwide market research and consulting organization |
| ● | Recycling Today, a news provider in the recycled materials and environmental services industry |
| ● | ReportLinker, a market intelligence platform |
| ● | Research and Markets, the world’s largest market search store |
| ● | Resource Recycling, a publisher of recycling news and analysis |
| ● | Statista, a German online platform that specializes in data gathering and visualization |
| ● | The Insight Partners, an industry research provider |
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| ● | The Business Research Company, a global market research firm |
| ● | United States Department of Agriculture (USDA) |
| ● | Waste Dive, a publication operated by Industry Dive focused on waste and recycling news |
Waste Paper Export
According to a report titled “Recycled Paper Market Forecast to 2028 - COVID-19 Impact and Global Analysis By Type and Application” offered by The Insight Partners, recycling paper is known to conserve natural resources, thus, reducing greenhouse emissions and saving energy.1 The recycled paper market was valued at $32.558 billion in 2021 and is estimated to grow to $42.396 billion by 2028 at a CAGR of approximately 3.8%.2 The paper recycling market has witnessed significant growth in the last few years. An article of Waste Dive observes that primarily driven by an e-commerce boom during the pandemic, containerboard production reached a record level in 2021, and containerboard comprises the lion’s share of the recovered paper market.3 In addition, consumer brands are further fueling demand for recovered paper as they move away from plastics and increase the use of sustainable packaging materials, especially paper.4
According to the “Recovered Paper Market Report: Global Industry Trends, Insights and Forecast to 2030” published by Research and Markets’ IndexBox, the United States was the largest exporter of recovered paper in the world, with the volume of supplies finishing at 16 million tons, which was approximately 33% of total exports in 2021.5 In value terms, the United States ($3.3 billion) remains the largest recovered paper supplier worldwide, comprising approximately 34% of global exports.6 In the United States, recovered paper exports increased at an average annual rate of approximately 1.2% over the period of 2007-2021.7 The report notes that, in 2021, China (13 million tons), distantly followed by India (7.4 million tons), Germany (6.9 million tons), Indonesia (3.4 million tons), the Netherlands (3.2 million tons) and Vietnam (3.1 million tons) were the largest importers of recovered paper, together comprising approximately 64% of total volume.8 In value terms, the largest recovered paper importing markets worldwide were China ($2.3 billion), India ($1.8 billion) and Germany ($1.2 billion), with a combined 49% share of global imports.9 The report finds that the average recovered paper export price worldwide stood at $200 per tons in 2021, jumping by approximately 40% against the previous year.10
| 1 | The Insight Partners (2021). Recycled Paper Market Forecast to 2028 - COVID-19 Impact and Global Analysis By Type (Pre-Consumer Waste and Post-Consumer Waste) and Application (Writing and Printing Paper, Containerboard, Newsprint Paper, Tissue, and Others). Report Code: TIPRE00008887. |
| 2 | Ibid. |
| 3 | Katie Pyzyk (2022), The Pandemic Pushed Paper Markets to Record Levels. How Long Will Those Prices Continue?, Waste Dive. |
| 4 | Ibid. |
| 5 | IndexBox (2022). Recovered Paper Market Report: Global Industry Trends, Insights and Forecast to 2030. |
| 6 | Ibid. |
| 7 | Ibid. |
| 8 | Ibid. |
| 9 | Ibid. |
| 10 | Ibid. |
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However, the global recovered paper market has been volatile during 2021-2023.1 After a strong upturn in 2021, the global market for bulk grades of recovered paper collapsed in the second half of 2022.2 Most regions found their bottoms at the end of 2022 or the beginning of 2023, and the global markets were weak on an annual basis in 2023.3
In 2023, U.S. recovered paper exports reached a 19-year low, driven by major multi-year declines in shipments into key overseas markets.4 The U.S. exported 14.3 million short tons of recovered fiber in 2023, down 17% from 17.1 million tons in 2022.5 That’s the lowest single-year amount shipped out of the country since 2004, and it’s the third consecutive year of declining export volume.6 The largest export markets for U.S. recovered paper in 2023 were India (importing 2.7 million short tons), Thailand (2.5 million), Mexico (1.9 million), Vietnam (1.6 million) and Malaysia (1.5 million).7 China remained a low importer of U.S. recovered paper in 2023, with bringing in 473,000 short tons of U.S. old corrugated containers or cardboards (“OCC”).8 China had drastically reduced the amount of imported waste paper following import restrictions implemented in 2017 on unsorted waste paper.9 The year 2021 saw a 90% drop in recovered paper that China accepted from the U.S. compared to the prior year.10
General Kinematics listed the following factors that it believed led to the declines in recovered paper exports: (1) a global paper shortage from 2020 to 2023; (2) a reduced recycling rate in the U.S. with only 24% of recyclables being recycled; (3) lacking proper separation of waste paper from other materials; and (4) China’s import restrictions on recycled materials.11 According to Resource Recycling, the declines in waste paper exports are in part due to a growing domestic mill production.12 Fastmarkets also reported that the total share of recovered paper in finished paper and board production in the U.S. had reached 43.9% in 2024 compared to 43.6% in 2023, 42% in 2022, 36.6% about 20 years ago in 2005, and 25.4% in 2000, according to a survey published on May 17, 2024 by the American Forest & Paper Association (AF&PA).13 In 2023, five machines with 2.4 million tons per year of additional 100% recycled containerboard capacity turned key in the U.S.14 Notwithstanding, domestic production of recycled-content paper and board has its capacity limitations. As Fastmarkets noted, “as the ramp-ups of new recycled paper and board and recycled pulp capacity started in 2023 and the beginning of 2024 reached completion, the extra demand pull from the new lines, which helped tighten the US OCC market significantly during most of 2023, will gradually fade.”15 On the supply side, with increased awareness of proper recycling practices and improvements in sorting equipment at recycling facilities, OCC generation is expected to improve modestly16 and support demand for exportation.
Based on data from the Recycled Materials Association (ReMA), the U.S. International Trade Commission and Census Bureau, U.S. exports of recovered paper declined 19% in the first quarter of 2024 to 2.98 million metric tons, and the value of those exports declined nearly 17% to $600 million.17 Thailand was the top importer of U.S. recovered paper in the first quarter, purchasing 547,183 metric tons, but that number was down 27% from the first quarter of 2023.18 India was the second largest buyer in the first quarter, purchasing 514,472 metric tons, a decrease of almost 25% from the first quarter of 2023.19 Of the top 10 importers of U.S. recovered paper, only two countries, Malaysia and Canada, purchased more in the first quarter of 2024 than they did in the first quarter of 2023.20 Malaysian imports were up 62.3% in the first quarter of 2024 while Canadian imports were up 40.5%.21 In total, the top 10 importers reduced purchases by 17.6%, while the rest of the world saw a 45% decrease.22
| 1 | Fastmarkets (January 25, 2024). Key Clues to Watch Out for in the Global Recovered Paper Market | 2024 Preview. |
| 2 | Ibid. |
| 3 | Ibid. |
| 4 | Resource Recycling (February 13, 2024). Fiber Exports Drop 17%, Plastic Shipments Hit Record Low. |
| 5 | Ibid. |
| 6 | Ibid. |
| 7 | Ibid. |
| 8 | Ibid. |
| 9 | Ibid. |
| 10 | Ibid. |
| 11 | General Kinematics (March 21, 2024). New Data: ISRI Reports Decline in Recycled Paper Exports In 2023. |
| 12 | Resource Recycling (December 4, 2023). Paper and Plastic Exports Continue to Decline. |
| 13 | Fastmarkets (May 28, 2024). US Mills to Use Record RCP Volumes and OCC Demand Set to Grow to 25.1 Million Tons This Year. |
| 14 | Ibid. |
| 15 | Fastmarkets (January 25, 2024). Key Clues to Watch Out for in the Global Recovered Paper Market | 2024 |
| 16 | Ibid. |
| 17 | Recycling Today (May 24, 2024). Recovered Paper Exports Continue Downward Trend. |
| 18 | Ibid. |
| 19 | Ibid. |
| 20 | Ibid. |
| 21 | Ibid. |
| 22 | Ibid. |
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Scrap Metal Export
According to a report published by Precedence Research on “Metal Recycling Market Size, Share, Growth Outlook, Trends, Revenue, Consumption and Forecast 2020 to 2027,” metal recycling refers to the reprocessing of waste metals into valuables in order to preserve natural resource, reduce greenhouse gas emission levels, and to manage the energy consumption level.1 This recycling process over metals can be repeated several times without altering their properties.2 Presently, only approximately 30% of the used metals are recycled.3 A report on the “U.S. Scrap Metal Recycling Market Outlook (2022-2032)” released by Fact.MR (the “Fact.MR report”) notes that the challenges facing the metal recycling market include that ferrous and non-ferrous metals such as aluminum, steel, and other metals must be manually separated from other recyclable materials, such as paper and plastic.4 Also, some metals, such as aluminum, degrade after each reuse cycle, impacting product quality, which is likely to hamper the market growth to some extent in the United States.5 However, most metals never reach a point where they are no longer recyclable.6 Furthermore, manufacturing products from recycled scrap metal uses almost 95% less energy than new production.7
The Fact.MR report estimates that the U.S. scrap metal recycling market stood at $9.2 billion in 2022 and is predicted to expand at a noteworthy CAGR of approximately 5.4% over the forecast years of 2022-2032.8 The report finds that the scrap metal recycling market in the United States registered a historical growth rate of approximately 3.7% from 2017 to 2021.9
IBISWorld observes that China is the largest export market for scrap metal produced in the United States and concludes that development in China is one of the main drivers of the global metal market as both ferrous and nonferrous metals are required for building skyscrapers, bridges, roads and other infrastructure in China.10
According to Boston Consulting Group, global steel scrap demand will increase at about 3.3% CAGR over the next eight years, while supply will rise at only about 3% CAGR.11 That boost in demand will in part be the result of scrap increasingly becoming a material of choice for steel production, especially as industries attempt to reduce carbon emissions from their raw materials.12 Currently, about 17% of the world’s annual scrap supply—about 110 million metric tons—is traded globally.13 For instance, Turkey is reliant on the EU, the US, the UK, and Russia for its 25 million metric tons of primarily lower-grade scrap imports each year.14 As scrap availability tightens through the decade, it is anticipated that trade in the raw material will moderate significantly, to around 93 million metric tons by 2030, as domestic consumption rises and countries reduce exports.15 Countries that import a higher percentage of their scrap steel needs will be adversely affected if they are unable to secure sufficient scrap of the required grades or ore-based metalics alternatives.16
GMK Center notes that, in many countries, ferrous scrap is already defined as a strategic raw material rather than a waste product.17 It predicts that most countries will focus on domestic consumption rather than exports, which will increase domestic and regional scrap trade and measures to encourage scrap imports by the largest consumers; by contrast, the largest exporters will increasingly restrict scrap exports.18
According to IBIS World, the market size of the U.S. scrap metal recycling industry is measured at $42.3 billion in 2024.19 Exports of iron and steel scrap from the U.S. amounted to 18 million metric tons in 2023, a decrease of 10% compared to 2022.20 Exports of aluminum scrap from the U.S. amounted to approximately 2 million metric tons in 2023, an increase of 3.3% compared to 2022.21 The U.S. was the largest exporter of aluminum scrap worldwide, and India and Malaysia were the leading destinations for U.S. aluminum scrap exports.22 Exports of scrap copper from the U.S. amounted to 880,000 metric tons in 2023, a decline of 5.5% compared to 2022. Despite this drop, the U.S. remained the largest exporter of copper scrap worldwide in 2023, and China was the leading destination for U.S. copper scrap exports.
| 1 | Precedence Research (2020). Metal Recycling Market Size, Share, Growth Outlook, Trends, Revenue, Consumption and Forecast 2020 to 2027. |
| 2 | Ibid. |
| 3 | Ibid. |
| 4 | Fact.MR (2022). U.S. Scrap Metal Recycling Market Outlook (2022-2032). |
| 5 | Ibid. |
| 6 | Ibid. |
| 7 | Ibid. |
| 8 | Ibid. |
| 9 | Ibid. |
| 10 | IBISWorld (2022). Scrap Metal Recycling in the US – Market Size 2003-2028. |
| 11 | Boston Consulting Group (March 12, 2024). Shortfalls in Scrap Will Challenge the Steel Industry. |
| 12 | Ibid. |
| 13 | Ibid. |
| 14 | Ibid. |
| 15 | Ibid. |
| 16 | Ibid. |
| 17 | GMK Center (November 20, 2023). Global Scrap Market in 2023: Current Trends |
| 18 | Ibid. |
| 19 | IBIS World (May 2024). Scrap Metal Recycling in the US - Market Size, Industry Analysis, Trends and Forecasts (2024-2029) |
| 20 | Statista (May 27, 2024). Iron and Steel Scrap Exports from the United States from 2010 to 2023. |
| 21 | Statista (May 29, 2024). Aluminum Waste and Scrap Export Volume from the U.S. 2015-2023. |
| 22 | Ibid. |
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Wood Products Export
According to the “U.S. Forest Products Annual Market Review and Prospects: 2015-2021” (Research Note FPL-GTR-289), the U.S. is the world’s leading producer and largest single consumer of wood products, and the U.S. plays an essential role in global forest products markets.1 Historically, U.S. softwood log exports have been an important component for softwood producers, with exports ranging from 3.2% to 13.1% of total U.S. softwood production (1965 to 2019).2 From 1992 to 2019, exports have averaged 5.9% of total U.S. softwood production.3 From 2018 to 2019, U.S. softwood log exports decreased 27.1%, from 2.9 million m3 (nominal) to 2.3 million m3, which was the least since 1965.4 This was primarily caused by declines in shipments to China.5 In the first half of 2020, U.S. exports decreased 15.8% (0.1 million m3) compared with the first half of 2019 (1.2 million m3).6 Exports to China were 1.1 million m3 in 2019, decreasing 40.9% compared with 2018.7
This report noted that the hardwood resource comprises 57.8% of U.S. timberland acreage, and nearly 72% of the eastern deciduous forest is owned by private landowners.8 The number of U.S. temperate hardwood species exceeds that of other world regions.9 The United States has an abundant and growing hardwood resource, well-developed transportation systems, numerous seaports, a modern hardwood sawmilling industry (at larger facilities), and very few impediments restricting hardwood log and lumber exports.10 These, and other factors, afford the United States a comparative advantage in lumber production and exportation.11
Forecon reported that in 2021, U.S. forest product exports (excluding paper) were $9.4 billion, nearly surpassing 2018’s high-water mark.12 Total forest product exports increased by approximately 27% in 2021 as compared to 2020.13 Fastmarkets forecasted that, the US will become a net exporter of softwood lumber in overseas trade and overtake Canada as North America’s leading offshore supplier within the next five years as production capacity increases.14 Fastmarkets referenced its report Projections from Fastmarkets’ North American Lumber Forecast Five-Year Outlook, noting that U.S. exports to overseas destinations are expected to increase steadily, from 1.11 billion board feet (“bbf”) in 2023 to 2.7 bbf by 2027.15
According to USDA Foreign Agricultural Service, U.S. forest products exports amounted to $9.39 billion, $10.10 billion and $9.14 million in 2021, 2022, 2023, respectively.16 The year 2022 witnessed a record high of $10.10 billion in forest products exports from the United States, the highest since 2014.17 In 2023, the top destinations for U.S. forest products exports were Canada ($2.29 billion), China ($1.49 billion), the United Kingdom ($1.25 billion), Mexico ($977.04 million) and the European Union ($938.49 million).18 Miller Wood Trade Publication noted that large markets such as China and Canada imported less lumber from the U.S. in 2023, but they expected to see positive trends in 2024.19 China’s consumption of wood products has fallen significantly due to slowing economic growth, a weakened housing sector, changing consumer preferences, and reduced demand from overseas markets.20 Fastmarkets reported that Portugal and the United Arab Emirates represented positive offshore markets for U.S. hardwood in 2023.21
In February 2024, U.S. wood products exports reached $830 million, representing an increase of 9.95% compared to February 2023.22 The increase was primarily attributed to an increase in exports to Japan ($18.4 million or 31.8%), Belgium ($11.9 million, or 726%), and China ($9.93 million or 7.66%).23 In February 2024, the leading destinations included Canada ($219 million), China ($138 million), the United Kingdom ($117 million), Mexico ($89.7 million) and Japan ($54.5 million).24
| 1 | U.S. Department of Agriculture (2022). U.S. Forest Products Annual Market Review and Prospects: 2015-2021. Research Note FPL-GTR-289. |
| 2 | Ibid. |
| 3 | Ibid. |
| 4 | Ibid. |
| 5 | Ibid. |
| 6 | Ibid. |
| 7 | Ibid. |
| 8 | Ibid. |
| 9 | Ibid. |
| 10 | Ibid. |
| 11 | Ibid. |
| 12 | Forecon (2022). U.S. Forest Products Export Update. |
| 13 | Ibid. |
| 14 | Fastmarkets (2023). The US Is Predicted to Become a Net Exporter of Softwood Lumber by 2027. |
| 15 | Ibid. |
| 16 | U.S. Department of Agriculture Foreign Agricultural Service. U.S. Forest Products Exports in 2023. |
| 17 | Ibid. |
| 18 | Ibid. |
| 19 | Miller Wood Trade Publications (February 2024). Exports Tumble in 2023, But 2024 Holds Promise. |
| 20 | U.S. Department of Agriculture Foreign Agricultural Service (August 15, 2023). Solid Wood Products Annual 2023. |
| 21 | Fastmarkets (November 13, 2023). US Struggle with Foreign Trade of Hardwood Lumber in 2023. |
| 22 | OEC. Wood Products in the United States – Latest Trends February 2024. |
| 23 | Ibid. |
| 24 | Ibid. |
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Overview
We are a truckload services and solutions provider focused on the recycling export supply chain. We have become a key player in the New Jersey and Pennsylvania regional trucking market for waste paper, evidenced by our significant market share where we accounted for approximately 34% of the waste paper export drayage volumes through New Jersey’s ports and approximately 30% through Philadelphia’s ports, according to data sourced from IHS Markit. In addition to waste paper, our portfolio also includes the shipment of scrap metal and wooden logs from large waste companies, recycling centers and commodity traders to the ports of Newark, NJ, and Philadelphia, PA. We continue to expand our footprints domestically and have ventured into the recycling export transport market of Tampa and Miami, FL, and Baltimore, MD in 2023. We intend to explore the international market in Canada, the United Kingdom and Australia in the near future.
Our client base includes largest Fortune 500 waste companies and over 280 recycling centers and commodity traders that operate in nearly 2,300 locations. Our growing client base relies on us as their partner to provide a “white glove service” to ensure their time-sensitive, ultra-high throughput commodities are safely loaded and delivered right to container ships. In addition, capitalizing on our know-how in developing logistics solutions over the years, we are able to propose integrated transportation solutions that cover loading, transport, port drayage and unloading.
Currently, our business is broadly categorized into four verticals, by commodity type and the direction of trade as follows:
| ● | Waste Paper Products. Waste paper products have been our core commodity of export transportation. As a word-of-mouth shipper of choice, we have established a significant market presence in the New Jersey and Pennsylvania region’s recycled paper export transport industry. For the years ended December 31, 2023 and 2022, we completed approximately 4,400 and 3,550 orders, involving 18,022 and 20,124 loads, which amounted to approximately 504,616 and 563,472 tons of waste paper, respectively. For the three months ended March 31, 2024 and 2023, we completed approximately 654 and 820 orders, involving 5,360 and 7,259 loads, which amounted to approximately 114,632 and 162,484 tons of waste paper, respectively. We use Number of Loads Completed, or NLC, as a key performance indicator. For more information, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Other Performance Indicator” on page 38. We are the only trucking company that is a member of the Board of the New Jersey Paper Recycling Association, or NJPRA. NJPRA has approximately 20 members, representing approximately 90% of the paper recycling market in New Jersey. |
| ● | Waste Metal and Forestry. We expanded into scrap metal and wood products export markets to diversify our offerings and supply our growing fleet. Serving additional commodities allows us to keep a strong pipeline of loads for independent contractor drivers to deliver and mitigate risks against commodity price fluctuations that affect demand for export. |
| ● | Import. We hold a minority market share in the import delivery sector for ports of Newark, NJ and Philadelphia, PA, picking up containers from ships and dropping at client locations. |
| ● | Others. From time to time, we offer trucking services for plastic and other commodities and provide logistics brokerage solutions servicing the major ports in California, Georgia, South Carolina, Texas and Illinois, as well as commercial rail lines. |
We pride ourselves on being an economically viable, socially responsible and environmentally friendly enterprise. We contribute to a sustainable society through our initiatives to reduce costs and enhance recycling logistics efficiency. Our competitive prices, capability to deliver large amounts on time and fast response ability have enabled us to solidify our partnerships with clients year over year. The number of our clients has grown from 10 in 2016 to 303 in 2023 at a CAGR of approximately 53.17%.
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Our Competitive Strengths
We believe the following competitive strengths are essential to our success and differentiate us from our competitors:
| ● | A Large Vendor Pool with Approximately 100 Trucks. Our truck owner-operators and other independent contractor are our bloodline. The core belief in “culture drives success” has helped us grow the fleet to approximately 100 trucks. We provide a high level of care and support to our vendors. We help independent contractor drivers create a timeline to transition to owner-operators and we assist our owner-operators in expanding their own fleets of trucks with driver recruitment assistance, business management training and retention tactics adoption. With a large fleet, we are able to meet our customers’ transport needs with first-to-final-mile-delivery capabilities, avoid delays or cancellations, and help us build a strong brand image and reputation as a reliable, efficient and professional company. |
| ● | Ability to Offer Competitive Pricing. In the relatively lower-profit recycled paper transport industry, maintaining competitive prices is an important factor in our continued market share expansion. We employ proprietary analytics systems to effectively track our operating results and financial position in real time and continuously enhance processes, with a view to helping customers reduce warehouse costs, lower shipping expenses and maintain operational flexibility. In addition, our full truckload shipping offerings meet the needs of companies requiring maximum movement of the commodities they trade with lower transport costs per unit. |
| ● | Capability to Provide Real-Time Visibility into Shipments and Quickly Respond. We have adopted a leading telematics system to allow us and our customers to easily monitor the status and location of the freight. We typically receive and process 250 driver and truck location updates daily. In addition, our sophisticated dispatch system and experienced professionals enable us to quickly pivot when vessels are delayed and minimize empty miles. |
| ● | A Global Team and a Fully Remote Workspace. Our dedicated growing staff are strategically located in the US and overseas, to allow for immediate response to inquiries by our customers and vendors 24/7. We provide a fully remote engaging workspace that encourages a healthy work-life balance and drives a committed, highly responsible and reliable team with minimal employee turnover . |
| ● | Healthy Cash Flows. We have primarily funded our operations through cash generated from daily operations. Positive cash flows enable us to operate without dependency on factoring companies, improve profit margins, have the ability to invest in new opportunities and expand into new markets, provide resources to help our vendors grow, and strengthen our ability to weather market volatility. |
| ● | Maintaining a Satisfactory DOT Safety Rating, the Highest Awarded by the DOT. A top concern for operating in dense urban areas is ensuring our cargo is delivered as promised, the patrons on the roads we share are free of harm, and independent contractor drivers go home safely nightly. We require Department of Transportation and Federal Motor Carrier Safety Administration (DOT/FMCSA)-compliant drug testing, including pre-employment and quarterly random drug and alcohol testing. New drivers undergo documented training and current drivers undergo refresher training annually. This allows us to maintain a satisfactory DOT safety rating, the highest awarded by the DOT. |
| ● | Innovative and experienced management team with extensive operating expertise. We have an innovative management team able to seize on the opportunities in the recyclable waste transportation industry. Mr. Hok C Chan, our Chief Executive Officer and Chairman of the Board, has a deep understanding of the recycling and trucking sectors. As an innovative and entrepreneurial leader, Mr. Chan has led our company to develop a sizable client base comprising Fortune 500 waste companies and over 280 recycling centers and commodity traders within a short period of eight years and to be a leader in the recycling export supply chain of the New Jersey and Pennsylvania region. Our management team is well versed in trucking services, recycling, heavy equipment, and logistics management. Our experienced management team has also built a solid talent base for our company to drive development and innovation in the long run. |
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Our Services
Operational Procedure
The chart below summarizes our operational flow for a single shipment:
What We Ship
Waste paper products account for the lion’s share of commodities we transport. Factors that contribute to waste paper being our core commodity include high generation amounts, a higher recycling rate compared to other materials and relatively stable export prices throughout the year. In the years ended December 31, 2023 and 2022, we hauled 347 and 387 loads per week on average, which amounted to approximately 9,716 and 10,836 tons of waste paper per week, based on 52 weeks in a year. We use Number of Loads Completed, or NLC, as a key performance indicator. For more information, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Other Performance Indicator” on page 38.
A truck in our fleet was loading waste paper at a recycling center.
As the amount of scrap metal generated is far less than that of waste paper products, and scrap metal export volumes and prices fluctuate significantly, scrap metal transportation has not been a steady source of revenue for us. Ferrous and non-ferrous scrap metals, however, provide a good addition to our offerings and an additional supply of orders for our expanding fleet.
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Additionally, we provide regional and short distance hauling services for wood product exports. The process for shipping wood and timber products is the same as that for waste paper. We dispatch a truck with an empty container to the client facility after the client places an order online or by email. Once loaded, the truck hauls the container filled with logs to the designated port. At the port, the container is loaded onto a ship, which marks the completion of a delivery. Wood supply is less steady than waste paper products and subject to substantial seasonal changes.
Imports transport comprises a more competitive market with more trucking companies focused on this market. In the import sector for Newark, NJ and Philadelphia, PA ports, we provide transport of containers filled with cargo from the port to client locations. Although this sector is crowded, we are able to have a modest presence based on our high-standard, reliable truckload services and competitive prices.
From time to time, we offer logistics brokerage solutions for loads not handled by our fleet, which include loads for plastic and specialty commodities, as well as those involving major ports in California, Georgia, South Carolina, Texas and Illinois and commercial rail lines. In these instances, we assist customers in hiring “outside trucks”—namely trucks not bearing our DOT identification number—for their transportation needs and typically pay a higher rate to such drivers.
Equipment We Use
We transport all the goods by chassis trucks. A chassis truck is a specific kind of truck that has a flatbed made for carrying containers. The containers we carry consist of standard 40-foot shipping containers and 20-foot shipping containers. 40-foot containers are the most popular options and considered offering better value as they provide twice the square footage of a 20-footer at a lower cost per square foot. All of the trucks and chassis in our vendor pool are parked at our rented premises at a discounted parking rate.
Our leased property at 697 Doremus Avenue, Newark, NJ 07105
All the trucks in our fleet are owned by our truck owner-operators, but these trucks are under our exclusive direction and supervision as leased vehicles pursuant to agreements we have entered into with the owner-operators. The owner-operators are responsible for all costs associated with owning, maintaining and repairing the vehicles and have the exclusive right to employ and control drivers for the services of transporting our shipments using such vehicles. For additional information, see “—Employees and Human Capital—Owner-Operators” below.
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Brokerage Model
We operate on a scalable brokerage model in which we help drivers convert into owner-operators utilizing a variety of our resources:
| ● | Training. We share our industry know-hows and practices, management skills, growth strategies and driver retention tactics with our owner-operators. Our training contents target the operational challenges and issues they face as owner-operators and provide on-point guidance, which help them strengthen confidence in transitioning into owner-operators and build loyalty toward us. |
| ● | Market Share. Our owner-operators rely on us for shipping orders. The growing pool of our owner-operators allows us to increase our capacity to handle more shipments and deliveries, leading to increased revenue and growth opportunities. On the other hand, with our enlarged market share, our owner-operators can access a broader market and increase miles. |
| ● | Staffing. We assist our owner-operators with driver recruitment to meet the needs of ever-expanding fleets. We use our rich experience in finding, screening and attracting driver applicants to help owner-operators acquire and retain skilled and responsible drivers. |
| ● | Compliance. We manage the entire process of DOT compliance for our owner-operators. All of the trucks serving our orders are subject to DOT compliance. The trucks of our owner-operators are marked with our DOT registration number. DOT compliance entails a lengthy set of regulations and rules and we are able to maintain a satisfactory DOT safety rating, the highest awarded by the DOT. This is instrumental in building our reputation among truck owner-operators and other independent contractor drivers as a trustworthy carrier. |
This innovative model has resulted in low driver turnover which we believe is below the average of the trucking industry, an industry with alarmingly high turnover rates and chronic shortages of drivers. Based on this model, we have been able to scale up our operations in a relatively short period of time and outpace the industry average growth rate.
Our Customers
We serve a large customer base primarily comprised of global, national, regional and local recycling companies, logistics firms and exporters. Our top customers include CellMark, Republic Services, Accurate Recycling Corporation, Omni Recycling, Traffix USA, L&J Logistics and Genesis Resource Enterprise, Inc., among others. For the fiscal years ended December 31, 2023 and 2022, our ten largest customers in aggregate represented approximately 49% and 48% of the total revenues, respectively.
Currently, our clients are spread across nearly 2,300 locations in a number of states, including without limitation, Pennsylvania, New Jersey, Maryland, Florida, New York, Connecticut and Delaware. We have been constantly expanding our geographic footprint and have expanded into Florida and Maryland, with plans to extend our services to Canada, Australia and the United Kingdom in the near future. Our goal is to solidify existing market share and penetrate new markets where our global and national customers have set foot in. For example, the international markets we are trying to enter are places where our top customers have existing establishments, and the local branches of such top customers will be our initial clients in these new markets.
Our Technology
We believe that technology is critical to our success and is the cornerstone of our goal to become a leader in the first and last mile of the recycling and wood export supply chains. We understand that technology alone will not always provide a better solution if not balanced with a human and personal touch, coupled with a best-in-class customer experience, and driven by interactive service management. By leveraging our data insights, we strive to optimize the efficiency of our operations.
We have developed a proprietary dispatch system that records, analyzes and displays multifaceted aspects of each shipment. Organized by dates, this system registers the schedule date, the driver assigned, ERD (referring to the cut-off date and time for a container to be at a port ready for loading), the booking date, client location, customer identity, SSL (sea shipping line), the load number, container size, pickup terminal, drop-off terminal, region code and other information with respect to a shipment. Based on such entries, this system aggregates the statics and generates a status summary covering the orders as of a specific date, to outline, among others, (i) the total number of scheduled loads for which drivers have been assigned, (ii) the total number of loads needing drivers, (iii) the total number of unscheduled loads, (iv) the number of loads available for booking, (v) the total number of loads actually completed, (vi) the weekly goal for completed loads, and (vii) the percentage of the goal achieved. Our dedicated maintenance of this system has allowed us to ensure a high on-time delivery rate.
Built on our dispatch system, we have utilized a real-time dashboard to keep track of our daily, weekly, monthly, quarterly and year to end operating results and financial position, including among others, our sales growth, gross profit, gross profit margin and number of loads transported. As such, we keep abreast of the performance and health of our business and can make timely adjustments in our execution to achieve our strategic goals. We do not hold any patents, trademarks, licenses, franchises, or concessions regarding our proprietary dispatch system.
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Sales and Marketing
Unlike common sales and marketing strategies targeting customers, our sales and marketing efforts focus on both customers and drivers. Strategic online marketing has become essential to successful marketing campaigns. As we continue to deliver a superior experience for both shippers and drivers through reliability, transparency and service, our sales and marketing strategy continuously seeks to identify and act on new opportunities to grow these relationships. We have engaged in marketing through the following channels:
| ● | Social Media. Social media is most useful for networking with a large audience in the trucking sphere and it provides a cost-effective means to interact and build up relationships with such an audience and increase our visibility. For example, we have used Instagram to find and draw driver applicants by operating our Instagram account (toppoint_trucking) and sharing our business updates. In addition, social media provides an effective way to remain updated on what is trending in the industry and a convenient platform for asking questions and gaining valuable insights about how customers, drivers and communities feel about our company and brand. |
| ● | Referrals & Reviews. In today’s digital world, online reviews have become critical for successful businesses. Reviews impact drivers’ decisions whether to apply to our company and new clients’ decisions whether to purchase our services. Reviews facilitate word-of-mouth marketing and referrals. We place great importance on reviews on our website and Google reviews and plan to create central online reviews that we can engage with the reviews and use them to improve our business. |
| ● | Emails. We have subscribed to recruitment websites that distribute automated emails advertising driver job openings as well as email notifications when candidates apply for such positions. This is an important channel through which we discover and connect with qualified drivers we seek. As we can use filters to target drivers in a specific region, it is particularly helpful in recruiting drivers as we enter new geographic markets. In the future, we may deploy email marketing to promote our company’s services to existing and potential customers. |
Our Competition
We operate in the highly competitive and fragmented truckload industry, and our failure to stay competitive could impair our ability to maintain and increase our profitability and materially adversely affect our results of operations.
Currently, our primary competitors are regional trucking drayage service companies such as Evans Delivery Company, Inc., Matrix Transport LLC, and Portx Inc. that serve the ports of New Jersey, New York and Pennsylvania. Players in our sector primarily compete on price, timeliness, safety and customer experience. We believe our large vendor pool, competitive pricing, technological capabilities, high driver retention, positive cash flows and an innovative and experienced management team enable us to be positioned favorably against our competitors. Additionally, we have achieved a high on-time delivery rate and a customer acquisition CAGR of approximately 53.17% over the past eight years, demonstrating market confidence and demand for our services. Our ability to provide superior services at competitive pricing and our strategy to align our growth with our customers’ needs for success and standards allow us to have a track record in acquiring clients and market shares. Additionally, as a well-capitalized company with positive cash flows, we are able to pay our drivers early and at competitive rates. Based on the statistics regarding 40-foot equivalent unit containers moving through ports in New Jersey and Philadelphia for June to December 2022 sourced from IHS Markit, known as IHS Stats, we estimate that we made up approximately 34% of the waste paper export drayage volumes through the ports of New Jersey and approximately 30% through the ports of Philadelphia.
Our Growth Strategies
We plan to pursue the following strategies to grow our business:
| ● | Increasing wallet shares of current clients. Our top clients service nationwide and globally. We believe the most effective expansion strategy is to capitalize on existing clientele relationships, our track record and reputation, strategically align with their growth goals, and secure opportunities to service more of their markets. |
| ● | Building storage and warehousing capability. We plan to invest in expanding our storage and warehousing space and upgrading the logistics management system in such space. With enhanced storage and warehousing capability, we will be able to provide additional space for the growing fleet to store equipment and vehicles and acquire new space as we expand geographic coverage of services. Also, upgraded warehouses that can sort and store freight may allow us to enter other segments of the trucking industry. |
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| ● | Continuing to improve information technology (IT) Infrastructure. We aim to continue to improve our existing IT-based platforms and systems by remaining alert to new technologies related to the transportation process and strengthen our technology capabilities in order to facilitate, optimize, streamline and ensure the quality of our operations. We intend to make investments to further develop our abilities concerning carrier payments and data analytics, with a view to serving increased market shares and evolving client requirements and cementing client relations. |
| ● | Selectively exploring opportunities of strategic alliance, investments and acquisitions. We have a track record of fostering organic growth. In the future, we may selectively seek strategic alliance, investments and acquisition opportunities to solidify existing market position, accelerate our growth and drive value creation through alliance with strategic partners. Currently we have no agreements or letters of intent for any acquisitions, partnerships or ventures. |
| ● | Enhancing our ability to attract, incentivize and retain a talented workforce. Our people are our core assets, and we believe our success greatly depends on our ability to attract, incentivize and retain our employees, truck owner-operators and other independent contractor drivers. We strive to continue to provide competitive compensation to our drivers, use our resources to support owner-operators’ growth, and maintain the collegial environment for our global staff. Our compensation structure is performance-based and aligned with our strategic objectives. Our culture, which from our inception, was focused on the well-being of independent contractor drivers, helps us recruit and retain drivers. As a leader in our market with underlying core values, we believe that we will continue to be a preferred carrier for both of our clients and independent contractor drivers . |
Seasonality
In terms of waste paper, our transport volumes are largely steady during all seasons. There is a seasonal pattern for transporting wood products with volumes peaking in fall and lowest in winter. Historically, scrap metals are subject to dramatic price and demand fluctuations as a result of a number of factors, and seasonality is one of the factors as construction and automobile industries tend to be busier when the weather is nicer.
Regulation
Our operations are regulated and licensed by various U.S. federal and state governmental agencies. These regulations impact us directly and also indirectly when they regulate third-party providers we arrange and/or contract with to transport freight for our customers.
Regulations Affecting Motor Carriers, Owner-Operators and Transportation Brokers. We have a satisfactory score with the U.S. DOT and utilize JJ Keller as our third-party service provider to ensure we comply with the requirements of the FMCSA of the DOT. We have successfully passed DOT audits and truck inspections in the past. We and third-party motor carriers we contract with within the U.S. must comply with the safety and fitness regulations of the DOT, including, without limitation, those related to controlled substances and alcohol, hours-of-service compliance, vehicle maintenance, hazardous materials compliance, driver fitness, unsafe driving, and minimum insurance requirements, as well as the Compliance Safety Accountability, or CSA, program, which uses a Safety Measurement System, or SMS, to rank motor carriers on seven categories of safety-related data, known as Behavioral Analysis and Safety Improvement Categories, or BASICs. Other federal and state agencies, such as the U.S. Environmental Protection Agency, the U.S. Food and Drug Administration and the U.S. Department of Homeland Security, also regulate our equipment, operations, cargo and independent contractor drivers. We are also subject to various vehicle registration and licensing requirements in certain states and local jurisdictions where we operate. We may become subject to new or more restrictive regulations relating to emissions, drivers’ Hours of Service, independent contractor eligibility requirements, onboard reporting of operations, air cargo security and other matters affecting safety or operating methods.
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Classification of Independent Contractors. U.S. tax and other federal and state regulatory authorities, as well as private litigants, continue to assert that independent contractor drivers in the trucking industry are employees rather than independent contractors, while applying a variety of standards in their determinations of independent contractor status. Federal legislators have introduced legislation in the past to make it easier for tax and other authorities to reclassify independent contractors as employees, including legislation to increase the recordkeeping requirements and heighten the penalties for companies that misclassify workers and are found to have violated overtime or wage requirements. Additionally, federal legislators have sought to abolish the current safe harbor, which allows taxpayers that meet certain criteria to treat individuals as independent contractors if they are following a longstanding, recognized practice. Federal legislators have also sought to expand the Fair Labor Standards Act to cover “non-employees” who perform labor or services for businesses, even if said non-employees are properly classified as independent contractors; to require taxpayers to provide written notice to workers based upon their classification as either an employee or a non-employee; and to impose penalties and fines for violations of the notice requirement or for misclassifications. Some states have launched initiatives to increase tax revenues from items such as unemployment, workers’ compensation and income taxes, and the reclassification of independent contractors as employees could help states increase these revenues. In addition to these possible legislative changes, the National Labor Relations Board (“NLRB”) and NLRB’s general counsel have signaled the desire to reverse several pro-employer precedents in order to make it more difficult for a worker to be classified as an independent contractor by changing the factors used in determining worker classification. The NLRB has also entered into a Memorandum of Understanding with the U.S. Department of Labor regarding the exchange of information and cooperation in enforcement activities regarding the misclassification of employees as independent contractors. On March 11, 2024, the rule entitled “Employee or Independent Contractor Classification Under the Fair Labor Standards Act” issued by the Department of Labor went into effect. This rule addresses how to analyze whether a worker is an employee or an independent contractor under the FLSA using the “economic reality test.” The “economic reality test” focuses on the economic realities of the worker’s relationship with the potential employer and whether the worker is either economically dependent on the potential employer for work or in business for themself. The economic reality test looks at, in the totality of circumstances, multiple factors, including (1) opportunity for profit or loss depending on managerial skill, (2) investments by the worker and the employer, (3) permanence of the work relationship, (4) nature and degree of control, (5) whether the work performed is integral to the employer’s business, and (6) skill and initiative. Additional relevant factors may also be considered in determining the worker’s status. This new rule makes it more likely that a worker will be classified as an employee. Although we believe that the drivers with whom we or owner-operators contract are properly characterized as independent contractors, the Department of Labor or other regulatory authorities may challenge our characterization of such relationships. If the independent contractor drivers that provide services to us are determined to be our employees, we could incur additional exposure under some or all of the following: federal and state employer taxes, workers’ compensation, unemployment benefits, and labor, employment and tort laws, including for prior periods, as well as potential liability for employee benefits and tax withholdings.
Environmental Regulations. Our operations and independent contractors are subject to various environmental laws and regulations in the jurisdictions where we operate. In the U.S., these laws and regulations deal with vehicle emissions, engine-idling, fuel tanks and related fuel spillage and seepage, discharge and retention of stormwater, and other environmental matters that involve inherent environmental risks. We may be responsible for cleaning up any spill or other incident involving hazardous materials caused by our business. In the past, we were responsible for cleaning up diesel fuel spills caused by traffic accidents or other events, and none of these incidents materially affected our business or operations. We believe that our operations are in substantial compliance with current laws and regulations, and we do not know of any existing environmental condition that reasonably would be expected to affect our business or operating results adversely.
Other Regulations. We are subject to a variety of other U.S. federal, state, and local laws and regulations, including, but not limited to, the Foreign Corrupt Practices Act and other anti-bribery and anti-corruption statutes, and export sanction laws. We are also subject to state and U.S. federal laws and regulations addressing some types of cargo transported or stored by us.
Employees and Human Capital
As of March 31, 2024, we had 2 full-time and 1 part-time employees in the U.S., 8 overseas contractual staffers and approximately 125 independent contractor drivers. Our operations are overseen directly by management. Our management functions cover corporate administration, training, business development, technology and marketing. We intend to expand our current operations team to hire about 9 additional skilled employees with experience relevant to our business in the next 12 months. We also anticipate that the number of independent contractor drivers will increase to 150 in the next 12 months. We believe our management’s relationship with our personnel, owner-operators and other drivers is good. We do not have any collective bargaining agreement, and our employees are not unionized.
| Department/Function | Personnel | |||
| Management | 2 | |||
| Operations | 9 | |||
| TOTALS | 11 | |||
Owner-Operators
All the trucks operated by owner-operators for transporting our shipments carry our DOT carrier identification number.
We, as a carrier, enter into an agreement with each of our independently contracted truck owner-operators. Below is a summary of the material terms of this arrangement.
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Owner-Operator’s Responsibilities: The owner-operator is an independent contractor with suitable motor vehicle(s) for hire and is responsible for all costs associated with owning, maintaining and repairing the vehicle(s) covered by the agreement. The owner-operator is also responsible for paying various taxes and charges related to services provided under the agreement, as well as for traffic violations, over-size or over-weight violations and travel costs such as tolls in performing transportation services under the agreement. The owner-operator is obligated to provide necessary documentation and communication regarding the shipments, such as bills of lading, container numbers, arrival and departure times and fuel receipts. The owner-operator agrees to indemnify and hold us harmless for any claims or damages arising out of his or her failure to comply with provisions of the agreement; non-compliance with laws and regulations; use, maintenance or operation of the covered vehicle(s); and misuse or mishandling of the shipments being transported.
Our Responsibilities: We agree to maintain liability and cargo insurance coverage and assume responsibility for the DOT compliance of their vehicle(s). During the term of the agreement, the subject vehicle(s) shall be solely and exclusively under our direction and supervision. However, the owner-operator has the exclusive right to employ and control drivers in performing services under the agreement.
Compensation: We shall pay the owner-operator within 7 days after submission of all necessary delivery documents.
Properties
Our principal executive office is located at 1250 Kenas Road, North Wales, PA 19454, United States. We are renting premises of approximately 2 acres at 697 Doremus Avenue, Newark, NJ 07105, for a term from June 1, 2024 and March 31, 2025, for a monthly rent of $54,000. This lease may be terminated on 90 days’ written notice. We also use such rented premises to provide discounted parking space for our owner-operators.
As we expanded into Florida, we have rented Unit No. 2301 in the building located at 1900 N. Bayshore Drive, Miami Beach, FL, 33141, with an area of 1,378 square feet, for use as office space. The lease term is from October 2022 to October 2025. Pursuant to the lease agreement, we have paid an advance rent of $300,000, covering the entire three-year lease term. In the event of early termination, we agreed to pay $16,000 as liquidated damages or an early termination fee if we elect to terminate the rental agreement and the landlord waives the right to seek additional rent beyond the month in which the landlord retakes possession.
In addition, we have rented parking spaces at three locations in Florida, with monthly rents varying between $250 and $800.
We believe that our current facility is adequate and suitable for our current needs and that, should it be needed, suitable additional or alternative space will be available to accommodate any such expansion of our operations.
Insurance
We maintain insurance with licensed insurance carriers, and independent contractor drivers are covered by our insurance. Currently, we hold commercial general liability and auto liability coverages, with an aggregate limit of $2,000,000 for the former and a combined single limit per accident of $1,000,000 for the later, effective for the period of June 21, 2024 to June 21, 2025. We also carry workers compensation and employer’s liability coverage, currently effective for the period of January 24, 2024 to January 24, 2025.
However, we self-insure or maintain a high deductible for a portion of our claims exposure resulting from workers’ compensation, auto liability, general liability, cargo and property damage claims. Although we believe our aggregate insurance limits should be sufficient to cover reasonably expected claims, it is possible that the amount of one or more claims could exceed our aggregate coverage limits. If any claim were to exceed our coverage, we would bear the excess, in addition to our other self-insured amounts.
Litigation
We may from time to time become involved in legal proceedings or be subject to claims arising in the ordinary course of our business. We are not presently a party to any legal proceedings that in the opinion of our management, if determined adversely to us, would individually or taken together have a material adverse effect on our business, results of operations and financial condition. There is no action, suit, proceeding, inquiry or investigation before or by any court, government agency, self-regulatory organization or body pending or, to the knowledge of our executive officers, threatened against or affecting our Company or our officers or directors in their capacities as such.
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Directors and Executive Officers
Set forth below is information regarding our directors and executive officers as of the date of this prospectus.
| Name | Age | Position | ||
| Hok C Chan | 40 | Chief Executive Officer, Chairman of the Board of Directors, President | ||
| John Feliciano III | 38 | Chief Financial Officer, Director, Secretary | ||
| Dingding He*(1)(2)(3) | 47 | Independent Director Appointee | ||
| Pablo A Santana*(1)(2)(3) | 37 | Independent Director Appointee | ||
| Tan Ying Lo* (1)(2)(3) | 29 | Independent Director Appointee |
| (1) | Member of the Audit Committee |
| (2) | Member of the Compensation Committee |
| (3) | Member of the Nominating and Corporate Governance Committee |
| * | Subject to, and upon effectiveness of, the registration statement of which this prospectus forms a part, Dingding He, Pablo A Santana and Tan Ying Lo will become our independent directors and members of the Audit Committee, Compensation Committee, and Nominating and Corporate Governance Committee. |
Hok C Chan has served as our Chief Executive Officer and Chairman since August 16, 2022. He founded and has been the chief executive officer and sole director of our operating subsidiary, Toppoint Inc, since its inception in 2014. He entered the recycling industry in 2008 and started Toppoint International Recycling Co., a recycling plant in 2010. He led the plant to a successful exit by selling it to a private equity firm in 2014 for approximately $4 million. Mr. Chan earned a certificate in accounting from the Chisholm Institute in Australia. We believe that Mr. Chan is qualified to serve on our board of directors due to his deep knowledge and vision of Toppoint, understanding and impactful relationships in the recycling industry and his long executive and board experience with us since his founding of our company.
John Feliciano III has served as our principal financial officer and director since August 16, 2022 and was appointed as our Chief Financial Officer on July 1, 2024. He joined Toppoint Inc as the Chief of Strategy in 2020. Prior to that, he worked in the heavy equipment rental space from June 2017 to June 2020. During his tenure at Durante Rentals, he oversaw sales to drive EBITDA growth for a successful acquisition of the business by Clairvest, a private equity firm, in 2019. Mr. Feliciano also served as a consultant to Point-of-Rental Software, a software company based in Fort Worth, TX, providing operational and strategic consulting services from July 2020 to December 2023. Mr. Feliciano holds a Bachelor of Business Administration and Marketing from Florida International University. We believe that Mr. Feliciano is qualified to serve on our board of directors due to his track record in managing a company’s overall development and core competitiveness and his industry expertise.
He Dingding He has more than 19 years of extensive experiences in capital markets, corporate finance, investment and finance, and corporate management through working in investment banks, advisory firms and listed companies in Singapore and Hong Kong since 2005. Mr. He has been an executive director and the chief executive officer of Link Holdings Limited, a company listed on the GEM Board of the Stock Exchange of Hong Kong with stock code 8237 since May 2023. Before joining Link Holdings Limited, Mr. He worked with Ta Yang Group Holdings Limited (a company listed on the Stock Exchange of Hong Kong with stock code 1991) from October 2018 to November 2022 and his last position was chief executive officer cum chief financial officer. Mr. He was an independent non-executive director and a member of the audit committee and remuneration committee as well as chairman of nomination committee of China Kangda Food Company Limited, a company listed on both the Main Board of both the Stock Exchange of Hong Kong and Singapore Exchange Securities Trading Limited (stock codes: 834 and P74, respectively), between August 2012 and June 2015. Mr. He was a non-executive director and a member of the audit committee of Perfect Group International Holdings Limited, a company listed on the Main Board of the Stock Exchange of Hong Kong (stock code: 3326), between March 2017 and February 2018 and was subsequently appointed as its deputy chief executive officer between March 2018 and August 2018. From May to September 2021, he had also been an independent non-executive director and a chairman of the audit committee as well as member of the remuneration, quality and nomination committee of Crown International Corporation Limited, a company listed on the Main Board of the Stock Exchange of Hong Kong (stock code: 727). Mr. He currently serves as an independent nonexecutive director of (i) Sino Harbour Holdings Group Limited, listed on the Main Board of the Stock Exchange of Hong Kong (stock code: 1663) since August 2018, (ii) China New Consumption Group Limited, listed on GEM of the Stock Exchange of Hong Kong (stock code: 8275) since May 2021; and (iii) Mobile Internet (China) Holdings Limited, listed on the Main Board of the Stock Exchange of Hong Kong (stock code: 1439) since March 2023. Mr. He graduated from Nanyang Technological University, Singapore with a bachelor’s degree in civil engineering in 1999. Mr. He was awarded the CFA Charter by the CFA Institute in September 2006. We believe that Mr. He is qualified to serve on our board of directors due to his extensive experience as a director and/or executive in public companies and his financial expertise.
Pablo A Santana has been serving as the Sales Account Manager for Custom Truck One Source Inc (NYSE: CTOS) since January 2021. Prior to his current role, he was the Sales Account Manager at C&C Lift Truck Inc. where he oversaw sales development of material handling equipment that is essential for the operations of warehouses and supply chain management from July 2015 to December 2020. Mr. Santana earned his bachelor’s degree in accounting and finance from CUNY College of Staten Island in New York City in 2014. His vast understanding of the trucking and material handling industries as well as public company processes qualify Mr. Santana to serve on our board of directors.
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Tan Ying Lo has been serving as the assistant project manager for Missions Points Network Limited, a company that offers loyalty rewards programs, since October 2021. At Missions Points Network Limited, Ms. Lo’s main responsibility includes implementing customer relationship management campaigns, conducting post campaign analysis, and managing daily operations and various projects. From June to October 2021, Ms. Lo was the assistant project manager for OPPA System Limited, a technology solutions company that organized over 2000 virtual events during the COVID-19 pandemic period. In this role, Ms. Lo planned and coordinated corporate online events, supervised the execution of international and regional events, and explored business opportunities with potential partners. From January 2020 to May 2021, Ms. Lo was the senior partnership executive for HKT The Club, Hong Kong, one of the biggest telecom companies in Hong Kong, where she prepared proposals for pitching potential new partners, coordinated media campaigns, and developed business strategies to support loyalty program growth. From July 2018 to December 2019, Ms. Lo was a graduation trainee for HKT The Club, Hong Kong. Ms. Lo obtained her Bachelor of Arts in Cultural Management from The Chinese University of Hong Kong (“CUHK”) in 2018. We believe that Ms. Lo is qualified to serve on our board of directors due to her business professional training and educational background as well as her extensive experience in developing business-to-business marketing strategies.
Our directors currently have terms which will end at our next annual meeting of the stockholders or until their successors are elected and qualified, subject to their prior death, resignation or removal. Officers serve at the discretion of the board of directors. There is no arrangement or understanding between any director or executive officer and any other person pursuant to which he was or is to be selected as a director, nominee or officer.
Family Relationships
There are no family relationships among any of our officers or directors.
Involvement in Certain Legal Proceedings
To the best of our knowledge, except as described below, none of our directors or executive officers has, during the past ten years:
| ● | been convicted in a criminal proceeding or been subject to a pending criminal proceeding (excluding traffic violations and other minor offences); |
| ● | had any bankruptcy petition filed by or against the business or property of the person, or of any partnership, corporation or business association of which he was a general partner or executive officer, either at the time of the bankruptcy filing or within two years prior to that time; |
| ● | been subject to any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction or federal or state authority, permanently or temporarily enjoining, barring, suspending or otherwise limiting, his involvement in any type of business, securities, futures, commodities, investment, banking, savings and loan, or insurance activities, or to be associated with persons engaged in any such activity; |
| ● | been found by a court of competent jurisdiction in a civil action or by the Securities and Exchange Commission or the Commodity Futures Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended, or vacated; |
| ● | been the subject of, or a party to, any federal or state judicial or administrative order, judgment, decree, or finding, not subsequently reversed, suspended or vacated (not including any settlement of a civil proceeding among private litigants), relating to an alleged violation of any federal or state securities or commodities law or regulation, any law or regulation respecting financial institutions or insurance companies including, but not limited to, a temporary or permanent injunction, order of disgorgement or restitution, civil money penalty or temporary or permanent cease-and-desist order, or removal or prohibition order, or any law or regulation prohibiting mail or wire fraud or fraud in connection with any business entity; or |
| ● | been the subject of, or a party to, any sanction or order, not subsequently reversed, suspended or vacated, of any self-regulatory organization (as defined in Section 3(a)(26) of the Exchange Act (15 U.S.C. 78c(a)(26))), any registered entity (as defined in Section 1(a)(29) of the Commodity Exchange Act (7 U.S.C. 1(a)(29))), or any equivalent exchange, association, entity or organization that has disciplinary authority over its members or persons associated with a member. |
Corporate Governance
Governance Structure
Currently, our Chief Executive Officer is also our Chairman. We believe that, at this time, having a combined Chief Executive Officer and Chairman is the appropriate leadership structure for the Company. In making this determination, we have considered, among other matters, Mr. Chan’s experience and tenure of managing our operating subsidiary, Toppoint Inc, since 2014, and believed that Mr. Chan is highly qualified to act as both Chairman and Chief Executive Officer due to his experience, knowledge, and personality. Among the benefits of a combined Chief Executive Officer/Chairman is that such structure promotes clearer leadership and direction for our company and allows for a single, focused chain of command to execute our strategic initiatives and business plans.
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The Board’s Role in Risk Oversight
The board of directors oversees that the assets of our company are properly safeguarded, that the appropriate financial and other controls are maintained, and that our business is conducted wisely and in compliance with applicable laws and regulations and proper governance. Included in these responsibilities is the board’s oversight of the various risks facing our company. In this regard, our board seeks to understand and oversee critical business risks. Our board does not view risk in isolation. Risks are considered in virtually every business decision and as part of our business strategy. Our board recognizes that it is neither possible nor prudent to eliminate all risks. Indeed, purposeful and appropriate risk-taking is essential for our company to be competitive on a global basis and to achieve its objectives.
While the board oversees risk management, company management is charged with managing risk. Management communicates routinely with the board and individual directors on the significant risks identified and how they are being managed. Directors are free to, and indeed often do, communicate directly with senior management.
Our board administers its risk oversight function as a whole by making risk oversight a matter of collective consideration. Much of this work has been delegated to committees, which will meet regularly and report back to the full board. The audit committee oversees risks related to our financial statements, the financial reporting process, accounting and legal matters, the compensation committee evaluates the risks and rewards associated with our compensation philosophy and programs, and the nominating and corporate governance committee evaluates risks associated with management decisions and strategic direction.
Independent Directors
The Nasdaq listing rules generally require that a majority of an issuer’s board of directors must consist of independent directors. Our board of directors will consist of five directors, including three independent directors, upon the SEC’s declaration of effectiveness of our registration statement on Form S-1 to which this prospectus forms a part.
Committees of the Board of Directors
Our board will establish an audit committee, a compensation committee, and a nominating and corporate governance committee, and each will have its own charter approved by the board. The committee charters will be filed as exhibits to the registration statement of which this prospectus is a part. Upon completion of this offering, we intend to make each committee’s charter available on our website at https://toppointtrucking.com/.
In addition, our board of directors may, from time to time, designate one or more additional committees, which shall have the duties and powers granted to it by our board of directors.
Audit Committee
Dingding He, Pablo A Santana and Tan Ying Lo, each of whom satisfies the “independence” requirements of Rule 10A-3 under the Exchange Act and Nasdaq’s rules, will serve on our audit committee upon their appointment to the board, with Dingding He serving as the chairperson. Our board has determined that Dingding He qualifies as the “audit committee financial expert.” The audit committee oversees our accounting and financial reporting processes and the audits of the financial statements of our company.
The audit committee is responsible for, among other things: (i) retaining and overseeing our independent accountants; (ii) assisting the board in its oversight of the integrity of our financial statements, the qualifications, independence and performance of our independent auditors and our compliance with legal and regulatory requirements; (iii) reviewing and approving the plan and scope of the internal and external audit; (iv) pre-approving any audit and non-audit services provided by our independent auditors; (v) approving the fees to be paid to our independent auditors; (vi) reviewing with our principal executive officer and principal financial officer and independent auditors the adequacy and effectiveness of our internal controls; (vii) reviewing hedging transactions; and (viii) reviewing and assessing annually the audit committee’s performance and the adequacy of its charter.
Compensation Committee
Dingding He, Pablo A Santana and Tan Ying Lo, each of whom satisfies the “independence” requirements of Rule 10C-1 under the Exchange Act and Nasdaq’s rules, will serve on our compensation committee upon their appointment to the board, with Pablo A Santana serving as the chairperson. The members of the compensation committee are also “outside directors” as defined in Section 162(m) of the Internal Revenue Code of 1986, as amended, or the Code, and “non-employee directors” within the meaning of Section 16 of the Exchange Act. The compensation committee assists the board in reviewing and approving the compensation structure, including all forms of compensation, relating to our directors and executive officers.
The compensation committee is responsible for, among other things: (i) reviewing and approving the remuneration of our executive officers; (ii) making recommendations to the board regarding the compensation of our independent directors; (iii) making recommendations to the board regarding equity-based and incentive compensation plans, policies and programs; and (iv) reviewing and assessing annually the compensation committee’s performance and the adequacy of its charter.
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Nominating and Corporate Governance Committee
Dingding He, Pablo A Santana and Tan Ying Lo, each of whom satisfies the “independence” requirements of Nasdaq’s rules, will serve on our nominating and corporate governance committee upon their appointment to the board, with Tan Ying Lo serving as the chairperson. The nominating and corporate governance committee assists the board of directors in selecting individuals qualified to become our directors and in determining the composition of the board and its committees.
The nominating and corporate governance committee will be responsible for, among other things: (i) identifying and evaluating individuals qualified to become members of the board by reviewing nominees for election to the board submitted by shareholders and recommending to the board director nominees for each annual meeting of shareholders and for election to fill any vacancies on the board; (ii) advising the board with respect to board organization, desired qualifications of board members, the membership, function, operation, structure and composition of committees (including any committee authority to delegate to subcommittees), and self-evaluation and policies; (iii) advising on matters relating to corporate governance and monitoring developments in the law and practice of corporate governance; and (iv) overseeing compliance with the our code of ethics.
The nominating and corporate governance committee’s methods for identifying candidates for election to our board of directors (other than those proposed by our shareholders, as discussed below) will include the solicitation of ideas for possible candidates from a number of sources - members of our board of directors, our executives, individuals personally known to the members of our board of directors, and other research. The nominating and corporate governance committee may also, from time-to-time, retain one or more third-party search firms to identify suitable candidates.
In making director recommendations, the nominating and corporate governance committee may consider some or all of the following factors: (i) the candidate’s judgment, skill, experience with other organizations of comparable purpose, complexity and size, and subject to similar legal restrictions and oversight; (ii) the interplay of the candidate’s experience with the experience of other board members; (iii) the extent to which the candidate would be a desirable addition to the board and any committee thereof; (iv) whether or not the person has any relationships that might impair his or her independence; and (v) the candidate’s ability to contribute to the effective management of our company, taking into account the needs of our company and such factors as the individual’s experience, perspective, skills and knowledge of the industry in which we operate.
A shareholder may nominate one or more persons for election as a director at an annual meeting of shareholders if the shareholder complies with the notice and information provisions contained in our bylaws. Such notice must be in writing to our Company not later than the close of business on the ninetieth (90th) day nor earlier than the close of business on the one-hundred-twentieth (120th) day prior to the first anniversary of the preceding year’s annual meeting; provided, however, that in the event that the date of the annual meeting is advanced more than thirty (30) days prior to or delayed by more than thirty (30) days after the anniversary of the preceding year’s annual meeting, notice by the stockholder to be timely must be so delivered not earlier than the close of business on the one hundred twentieth (120th) day prior to such annual meeting and not later than the close of business on the later of the ninetieth (90th) day prior to such annual meeting or the tenth (10th) day following the day on which public announcement of the date of such meeting is first made or as otherwise required by the Exchange Act. In addition, shareholders furnishing such notice must be a holder of record on both (i) the date of delivering such notice and (ii) the record date for the determination of shareholders entitled to vote at such meeting.
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Board Diversity
Upon the closing of this offering, our nominating and corporate governance committee will be responsible for reviewing with the board of directors, on an annual basis, the appropriate characteristics, skills and experience required for the board of directors as a whole and its individual members. In evaluating the suitability of individual candidates (both new candidates and current members) for election or appointment, the nominating and corporate governance committee and the board of directors will take into account many factors, including the following:
| ● | personal and professional integrity, ethics and values; |
| ● | experience in corporate management, such as serving as an officer or former officer of a publicly-held company; |
| ● | experience as a board member or executive officer of another publicly-held company; |
| ● | strong finance experience; |
| ● | diversity of expertise and experience in substantive matters pertaining to our business relative to other board members; |
| ● | diversity of background and perspective, including, but not limited to, with respect to age, gender, race, place of residence and specialized experience; |
| ● | experience relevant to our business industry and with relevant social policy concerns; and |
| ● | relevant expertise or other proficiency in an area of our business operations. |
Currently, our board of directors evaluates, and following the closing of this offering will evaluate, each individual in the context of the board of directors as a whole, with the objective of assembling a group that can best maximize the success of the business and represent stockholder interests through the exercise of sound judgment using its diversity of experience in these various areas.
Code of Ethics and Business Conduct
We have adopted a code of ethics and business conduct (“code of ethics”) that applies to all of our directors, officers and employees, including our principal executive officer, principal financial officer and principal accounting officer. Such code of ethics addresses, among other things, honesty and ethical conduct, conflicts of interest, compliance with laws, regulations and policies, including disclosure requirements under the federal securities laws, and reporting of violations of the code.
A copy of the code of ethics will be filed as an exhibit to the registration statement of which this prospectus is a part. We are required to disclose any amendment to, or waiver from, a provision of our code of ethics applicable to our principal executive officer, principal financial officer, principal accounting officer, controller, or persons performing similar functions. We intend to use our website as a method of disseminating this disclosure as well as by SEC filings, as permitted or required by applicable SEC rules. Any such disclosure will be posted to our website within four (4) business days following the date of any such amendment to, or waiver from, a provision of our code of ethics.
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Summary Compensation Table - Years Ended December 31, 2023 and 2022
The following table sets forth information concerning all cash and non-cash compensation awarded to, earned by or paid to the named persons for services rendered in all capacities during the noted periods. No other executive officers received total annual salary and bonus compensation in excess of $100,000.
| Name and Principal Position | Year | Salary ($) | Bonus ($) | Stock Awards ($) | Option Awards ($) | All Other Compensation ($) | Total ($) | ||||||||||||||||||||
| Hok
C Chan, Chief Executive Officer, | 2023 | 200,000 | - | - | - | - | 200,000 | ||||||||||||||||||||
| Chairman and President | 2022 | 203,846 | - | - | - | - | 203,846 | ||||||||||||||||||||
| John
Feliciano III, Chief Financial Officer, | 2023 | - | - | - | - | - | - | * | |||||||||||||||||||
| Director and Secretary | 2022 | - | - | - | - | - | - | * | |||||||||||||||||||
| * | The Company paid consulting fees of $3,122,040 and $1,044,512 to 4 John Trucking for the years ended December 31, 2023 and 2022, respectively. John Feliciano III is the president of 4 John Trucking. All these fees were allocated directly to settle accounts payable of the Company, and 4 John Trucking did not earn a commission, premium or margin from these transactions. As a result, these payments did not constitute or generate any personal compensation for Mr. Feliciano III from the Company for the years ended December 31, 2023 and 2022. See also “Certain Relationships and Related Party Transactions—Material Transactions with Related Parties” beginning on page 68. |
Employment Agreements
Under our employment agreement with our Chief Executive Officer, Hok C Chan, to become effective as of the effective date of the registration statement of which this prospectus forms a part, we agreed that, for a three-year term, unless terminated earlier in accordance with its terms, we will pay Mr. Chan an annual salary of $350,000. Additionally, Mr. Chan will be eligible to receive an annual cash bonus to the extent the Company achieves or exceeds its annual net profit objectives set forth in Exhibit A to the agreement. The percentage of base salary Mr. Chan is entitled to receive as a bonus is also detailed in Exhibit A, corresponding to the percentage of the Company’s net profit that must be achieved to earn such bonus level. Mr. Chan will be provided with standard executive benefits. The Company will also provide standard indemnification and directors’ and officers’ insurance. The Company may terminate Mr. Chan’s employment by giving at least 60 days written notice. If we terminate Mr. Chan without cause or he resigns for good reason as provided under the agreement, we must pay effect immediate vesting of any outstanding unvested equity granted to Mr. Chan during his employment and immediate lifting of all lockups and restrictions on sales of such equity, or exercise of stock options. All other compensation shall cease as of the date of termination and the Company shall pay all previously earned, accrued and unpaid compensation. Mr. Chan is also subject to standard confidentiality and non-competition provisions.
Under our employment agreement with our Chief Financial Officer, John Feliciano III, to become effective as of the effective date of the registration statement of which this prospectus forms a part, we agreed that, for a three-year term, unless terminated earlier in accordance with its terms, we will pay John Feliciano III an annual salary of $75,000 and a stock option to purchase 750,000 shares of common stock to be granted within three months following the completion of this offering. John Feliciano III will be eligible to receive an annual cash bonus as determined by the board of directors. John Feliciano III will be provided with standard executive benefits. The Company will also provide standard indemnification and directors’ and officers’ insurance. The Company may terminate John Feliciano III’s employment by giving at least 60 days written notice. If we terminate John Feliciano III without cause or he resigns for good reason as provided under the agreement, we must effect immediate vesting of any outstanding unvested equity granted to John Feliciano III during his employment and immediate lifting of all lockups and restrictions on sales of such equity, or exercise of stock options. John Feliciano III is also subject to standard confidentiality and non-competition provisions.
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Outstanding Equity Awards at Fiscal Year-End
No executive officer named above had any unexercised options, stock that has not vested or equity incentive plan awards outstanding as of December 31, 2023.
Director Compensation
No member of our board of directors received any compensation for his or her services as a director during the fiscal year ended December 31, 2023, nor do they currently receive any compensation for such services.
2022 Equity Incentive Plan
On October 1, 2022, we established the Toppoint Holdings Inc. 2022 Equity Incentive Plan. The purpose of the Plan is to grant restricted stock, stock options and other forms of incentive compensation to our officers, employees, directors and consultants. The maximum number of shares of common stock that may be issued pursuant to awards granted under the Plan is 2,250,000 shares. Cancelled and forfeited stock options and stock awards may again become available for grant under the Plan. As of the date of this prospectus, all shares remain available for issuance under the Plan.
The following summary briefly describes the principal features of the Plan and is qualified in its entirety by reference to the full text of the Plan.
Awards that may be granted include: (a) Incentive Stock Options, (b) Non-qualified Stock Options, (c) Stock Appreciation Rights, (d) Restricted Awards, (e) Performance Share Awards, and (f) Performance Compensation Awards. These awards offer our officers, employees, consultants and directors the possibility of future value, depending on the long-term price appreciation of our Common Stock and the award holder’s continuing service with our company.
Stock options give the option holder the right to acquire from us a designated number of shares of Common Stock at a purchase price that is fixed upon the grant of the option. The exercise price will not be less than the market price of the Common Stock on the date of grant. Stock options granted may be either tax-qualified stock options (so-called “incentive stock options”) or non-qualified stock options.
Stock appreciation rights, or SARs, which may be granted alone or in tandem with options, have an economic value similar to that of options. When a SAR for a particular number of shares is exercised, the holder receives a payment equal to the difference between the market price of the shares on the date of exercise and the exercise price of the shares under the SAR. The exercise price for SARs normally is the market price of the shares on the date the SAR is granted. Under the Plan, holders of SARs may receive this payment — the appreciation value — either in cash or shares of Common Stock valued at the fair market value on the date of exercise. The form of payment will be determined by us.
Restricted shares are shares of Common Stock awarded to participants at no cost. Restricted shares can take the form of awards of restricted stock, which represent issued and outstanding shares of our Common Stock subject to vesting criteria, or restricted stock units, which represent the right to receive shares of our Common Stock subject to satisfaction of the vesting criteria. Restricted shares are forfeitable and non-transferable until the shares vest. The vesting date or dates and other conditions for vesting are established when the shares are awarded.
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The Plan also provides for performance compensation awards, representing the right to receive a payment, which may be in the form of cash, shares of Common Stock, or a combination, based on the attainment of pre-established goals.
All of the permissible types of awards under the Plan are described in more detail as follows:
Purposes of Plan: The purposes of the Plan are to attract and retain officers, employees and directors for our company and its subsidiaries; motivate them by means of appropriate incentives to achieve long-range goals; provide incentive compensation opportunities; and further align their interests with those of our stockholders through compensation that is based on our Common Stock.
Administration of the Plan: The Plan is currently administered by our board of directors and will be administered by our compensation committee once it is established (which we refer to as the administrator). Among other things, the administrator has the authority to select persons who will receive awards, determine the types of awards and the number of shares to be covered by awards, and to establish the terms, conditions, performance criteria, restrictions and other provisions of awards. The administrator has authority to establish, amend and rescind rules and regulations relating to the Plan.
Eligible Recipients: Persons eligible to receive awards under the Plan will be those officers, employees, consultants, and directors of our company and its subsidiaries who are selected by the administrator.
Shares Available Under the Plan: The maximum number of shares of our Common Stock that may be delivered to participants under the Plan is 2,250,000 shares, subject to adjustment for certain corporate changes affecting the shares, such as stock splits. Shares subject to an award under the Plan for which the award is canceled, forfeited or expires again become available for grants under the Plan. Shares subject to an award that is settled in cash will not again be made available for grants under the Plan.
Stock Options:
General. Subject to the provisions of the Plan, the administrator has the authority to determine all grants of stock options. That determination will include: (i) the number of shares subject to any option; (ii) the exercise price per share; (iii) the expiration date of the option; (iv) the manner, time and date of permitted exercise; (v) other restrictions, if any, on the option or the shares underlying the option; and (vi) any other terms and conditions as the administrator may determine.
Option Price. The exercise price for stock options will be determined at the time of grant. Normally, the exercise price will not be less than the fair market value on the date of grant. As a matter of tax law, the exercise price for any incentive stock option awarded may not be less than the fair market value of the shares on the date of grant. However, incentive stock option grants to any person owning more than 10% of our voting stock must have an exercise price of not less than 110% of the fair market value on the grant date.
Exercise of Options. An option may be exercised only in accordance with the terms and conditions for the option agreement as established by the administrator at the time of the grant. The option must be exercised by notice to us, accompanied by payment of the exercise price. Payments may be made in cash or, at the option of the administrator, by actual or constructive delivery of shares of Common Stock to the holder of the option based upon the fair market value of the shares on the date of exercise.
Expiration or Termination. Options, if not previously exercised, will expire on the expiration date established by the administrator at the time of grant. In the case of incentive stock options, such term cannot exceed ten years provided that in the case of holders of more than 10% of our voting stock, such term cannot exceed five years. Options will terminate before their expiration date if the holder’s service with our company or a subsidiary terminates before the expiration date. The option may remain exercisable for specified periods after certain terminations of employment, including terminations as a result of death, disability or retirement, with the precise period during which the option may be exercised to be established by the administrator and reflected in the grant evidencing the award.
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Incentive and Non-Qualified Options. As described elsewhere in this summary, an incentive stock option is an option that is intended to qualify under certain provisions of the Code for more favorable tax treatment than applies to non-qualified stock options. Any option that does not qualify as an incentive stock option will be a non-qualified stock option. Under the Code, certain restrictions apply to incentive stock options. For example, the exercise price for incentive stock options may not be less than the fair market value of the shares on the grant date and the term of the option may not exceed ten years. In addition, an incentive stock option may not be transferred, other than by will or the laws of descent and distribution, and must be exercisable during the holder’s lifetime only by the holder. In addition, no incentive stock option may be granted to a holder that is first exercisable in a single year if that option, together with all incentive stock options previously granted to the holder that also first become exercisable in that year, relate to shares having an aggregate market value in excess of $100,000, measured at the grant date.
Stock Appreciation Rights: Awards of SARs may be granted alone or in tandem with stock options. SARs provide the holder with the right, upon exercise, to receive a payment, in cash or shares of stock, having a value equal to the excess of the fair market value on the exercise date of the shares covered by the award over the exercise price of those shares. Essentially, a holder of a SAR benefits when the market price of the Common Stock increases, to the same extent that the holder of an option does, but, unlike an option holder, the SAR holder need not pay an exercise price upon exercise of the award.
Restricted Stock Awards: Restricted stock awards can also be granted under the Plan. A restricted stock award is a grant of shares of Common Stock or of a right to receive shares in the future. These awards will be subject to such conditions, restrictions and contingencies as the administrator shall determine at the date of grant. Those may include requirements for continuous service and/or the achievement of specified performance goals.
Performance Compensation Awards: A performance compensation award is an award that may be in the form of cash or shares of Common Stock or a combination, based on the attainment of pre-established performance goals and other conditions, restrictions and contingencies identified by the administrator.
Section 162(m) of the Code: Section 162(m) of the Code limits publicly held companies to an annual deduction for U.S. federal income tax purposes of $1.0 million for compensation paid to each of their principal executive officer or principal financial officer and their three highest compensated executive officers (other than the principal executive officer or principal financial officer) determined at the end of each year, referred to as covered employees.
Performance Criteria: Under the Plan, one or more performance criteria will be used by the administrator in establishing performance goals. Any one or more of the performance criteria may be used on an absolute or relative basis to measure the performance of our company, as the administrator may deem appropriate, or as compared to the performance of a group of comparable companies, or published or special index that the administrator deems appropriate. In determining the actual size of an individual performance compensation award, the administrator may reduce or eliminate the amount of the award through the use of negative discretion if, in its sole judgment, such reduction or elimination is appropriate. The administrator shall not have the discretion to (i) grant or provide payment in respect of performance compensation awards if the performance goals have not been attained or (ii) increase a performance compensation award above the maximum amount payable under the Plan.
Other Material Provisions: Awards will be evidenced by a written agreement, in such form as may be approved by the administrator. In the event of various changes to the capitalization of our company, such as stock splits, stock dividends and similar re-capitalizations, an appropriate adjustment will be made by the administrator to the number of shares covered by outstanding awards or to the exercise price of such awards. The administrator is also permitted to include in the written agreement provisions that provide for certain changes in the award in the event of a change of control of our company, including acceleration of vesting. Except as otherwise determined by the administrator at the date of grant, awards will not be transferable, other than by will or the laws of descent and distribution. Prior to any award distribution, we are permitted to deduct or withhold amounts sufficient to satisfy any employee withholding tax requirements. Our board also has the authority, at any time, to discontinue the granting of awards. The board also has the authority to alter or amend the Plan or any outstanding award or may terminate the Plan as to further grants, provided that no amendment will, without the approval of our stockholders, to the extent that such approval is required by law or the rules of an applicable exchange, increase the number of shares available under the Plan, change the persons eligible for awards under the Plan, extend the time within which awards may be made, or amend the provisions of the Plan related to amendments. No amendment that would adversely affect any outstanding award made under the Plan can be made without the consent of the holder of such award.
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CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
The following includes a summary of transactions since the beginning of our 2021 fiscal year, or any currently proposed transaction, in which we were or are to be a participant and the amount involved exceeded or exceeds the lesser of $120,000 or one percent of the average of our total assets at year-end for the last two completed fiscal years, and in which any related person had or will have a direct or indirect material interest (other than compensation described under “Executive Compensation” above). We believe the terms obtained or consideration that we paid or received, as applicable, in connection with the transactions described below were comparable to terms available or the amounts that would be paid or received, as applicable, in arm’s-length transactions.
Material Transactions with Related Parties
The Company generated revenue from L&J Logistics LLC, a related party, in the amount of $0, $230,943 and $955,825 for the years ended December 31, 2023, 2022 and 2021, respectively, relating to provision of trucking services for certain loads. Such related party is operated by a relative of Mr. Hok C Chan, our Chief Executive Officer and Chairman of the Board.
The Company leases office space from Yu Ching Su, a relative of Mr. Hok C Chan, at 1900 N. Bayshore Drive, Unit No. 2301, Miami Beach, FL, 33141. The rent expense for this lease amounted to $100,000 and $25,000 for the years ended December 31, 2023 and 2022, respectively. In accordance with the lease agreement, the Company prepaid $300,000 to the related party for the entire amount of lease payments due under the three-year lease. A copy of the lease agreement is filed as an exhibit to the registration statement of which this prospectus forms a part.
On January 1, 2023, the Company entered into a Services Agreement with 4 John Trucking, a Pennsylvania corporation controlled by John Feliciano III, our Chief Financial Officer and a director, pursuant to which 4 John Trucking provided certain administrative and operational services to us, in consideration of 750,000 shares of common stock of our company which was effected through a transfer of such shares from Hok C Chan to John Feliciano III on January 1, 2024. On February 28, 2024, the Company entered into a Rescission Agreement with 4 John Trucking, pursuant to which the Company and 4 John Trucking agreed to rescind, ab initio, the transfer of 750,000 shares from Mr. Hok C. Chan to Mr. John Feliciano III as contemplated in the foregoing Services Agreement, dated January 1, 2023, by and between the Company and 4 John Trucking.
The Company incurred consulting fees of $3,122,040 and $1,044,512 from 4 John Trucking for the years ended December 31, 2023 and 2022, respectively. All these fees were allocated directly to settle accounts payable of the Company, and thus, 4 John Trucking did not earn a commission, premium or margin from these transactions.
On January 1, 2024, we entered into a new Services Agreement (the “2024 Services Agreement”) with 4 John Trucking, pursuant to which 4 John Trucking agreed to continue to provide certain administrative and operational services to us, in consideration of a monthly fee equal to 10% of the total amount of accounts payable of the Company processed by 4 John Trucking during the previous month. A copy of this Services Agreement is filed as an exhibit to the registration statement of which this prospectus forms a part. During the three months ended March 31, 2024, we paid $960,296 under the 2024 Services Agreement.
On July 1, 2024, we issued Hok C Chan a promissory note for advances he may provide to us from time to time, including $600,000 provided on July 1, 2024. The promissory note bears an annual interest rate of 36.88% and outstanding amounts are due 90 days after the delivery of the respective advance to the Company or the respective direct payment to the Company’s creditor(s). We use the proceeds from the promissory note to cover our operating expenses and working capital requirements, including expenses related to this offering.
Share Exchange
On September 29, 2022, we entered into a Share Exchange Agreement with Toppoint Inc and Hok C Chan, the sole stockholder of Toppoint Inc, our founder, Chairman of our board of directors and Chief Executive Officer, pursuant to which Hok C Chan exchanged all of his shares in Toppoint Inc for 7,500,000 shares of common stock of our company. As a result, we acquired all of the issued and outstanding shares of capital stock of Toppoint Inc, making Toppoint Inc our wholly-owned subsidiary. See “Corporate History and Structure.”
Employment Agreements
We have entered into employment agreements or offer letter agreements with certain of our executive officers. For more information regarding our employment agreements with our named executive officers, see “Executive Compensation—Employment Agreements.”
Policies and Procedures for Related Party Transactions
Our board of directors will adopt a related party transaction policy setting forth the policies and procedures for the identification, review and approval or ratification of related party transactions. This policy covers, with certain exceptions set forth in Item 404 of Regulation S-K under the Securities Act, any transaction, arrangement or relationship, or any series of similar transactions, arrangements or relationships, in which we and a related person were or will be participants and the amount involved exceeds the lesser of $120,000 or one percent of the average of our total assets at year-end for the last two fiscal years, including purchases of goods or services by or from the related person in which the related person has a material interest, indebtedness and guarantees of indebtedness. In reviewing and approving any such transactions, our audit committee will consider all relevant facts and circumstances as appropriate, such as the purpose of the transaction, the availability of other sources of comparable products or services, whether the transaction is on terms comparable to those that could be obtained in an arm’s length transaction, management’s recommendation with respect to the proposed related party transaction, and the extent of the related person’s interest in the transaction.
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The following table sets forth certain information with respect to the beneficial ownership of our common stock as of the date of this prospectus for (i) each of our named executive officers and directors; (ii) all of our named executive officers and directors as a group; and (iii) each other shareholder known by us to be the beneficial owner of more than 5% of our outstanding common stock. The following table assumes that the underwriters have not exercised the over-allotment option.
Beneficial ownership is determined in accordance with SEC rules and generally includes voting or investment power with respect to securities. For purposes of this table, a person or group of persons is deemed to have “beneficial ownership” of any shares of common stock that such person or any member of such group has the right to acquire within sixty (60) days of the date of this prospectus. For purposes of computing the percentage of outstanding shares of our common stock held by each person or group of persons named above, any shares that such person or persons has the right to acquire within sixty (60) days of the date of this prospectus are deemed to be outstanding for such person, but not deemed to be outstanding for the purpose of computing the percentage ownership of any other person. The inclusion herein of any shares listed as beneficially owned does not constitute an admission of beneficial ownership by any person.
Unless otherwise indicated, the address of each beneficial owner listed in the table below is c/o our company, Toppoint Holdings Inc., 1250 Kenas Road, North Wales, PA 19454.
| Common Stock Beneficially Owned Prior to this Offering(1) | Common Stock Beneficially Owned After this Offering(2) | |||||||||||||||
| Name of Beneficial Owner | Number of Shares | Percent of Class | Number of Shares | Percent of Class | ||||||||||||
| Directors and Executive Officers | ||||||||||||||||
| Hok C Chan | 7,500,000 | 50.0 | % | 7,500,000 | [ ] | % | ||||||||||
| John Feliciano III | - | * | - | * | ||||||||||||
| Dingding He | - | * | - | * | ||||||||||||
| Pablo A Santana | - | * | - | * | ||||||||||||
| Tan Ying Lo | - | * | - | * | ||||||||||||
| All executive officers and directors (5 persons) | 7,500,000 | 50.0 | % | 7,500,000 | [ ] | % | ||||||||||
| Other Principal Shareholders | ||||||||||||||||
| Heung Ling Chan | 5,700,000 | 38.0 | % | 5,700,000 | [ ] | % | ||||||||||
| * | Less than 1% |
| (1) | Based on 15,000,000 shares of common stock issued and outstanding as of the date of this prospectus. |
| (2) | Based on [ ] shares of common stock issued and outstanding after this offering (assuming no exercise of the over-allotment option), based on an assumed initial public offering price of $[ ] per share, which is the midpoint of the estimated range of the initial public offering price shown on the cover page of this prospectus. |
None of our major shareholders have different voting rights from other shareholders. We do not currently have any arrangements which if consummated may result in a change of control of our company.
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General
Our authorized capital stock currently consists of 350,000,000 shares, consisting of 300,000,000 shares of common stock, par value $0.0001 per share, and 50,000,000 shares of “blank check” preferred stock, par value $0.0001 per share.
The following description summarizes important terms of the classes of our capital stock under our articles of incorporation and our bylaws. This summary does not purport to be complete and is qualified in its entirety by the provisions of our articles of incorporation and our bylaws currently in effect which have been filed as exhibits to the registration statement of which this prospectus is a part.
As of the date of this prospectus, there were 15,000,000 shares of common stock and no shares of preferred stock issued and outstanding.
Common Stock
Voting Rights. The holders of common stock are entitled to one vote for each share held of record on all matters submitted to a vote of the shareholders. Under Nevada law and our bylaws, any corporate action to be taken by vote of shareholders other than for election of directors is approved if the number of votes cast in favor of the action exceeds the number of votes cast in opposition to the action. Shareholders do not have cumulative voting rights.
Dividend Rights. Subject to preferences that may be applicable to any then-outstanding preferred stock, holders of common stock are entitled to receive ratably those dividends, if any, as may be declared from time to time by the board of directors out of legally available funds.
Liquidation Rights. In the event of our liquidation, dissolution or winding up, holders of common stock will be entitled to share ratably in the net assets legally available for distribution to shareholders after the payment of all of our debts and other liabilities and the satisfaction of any liquidation preference granted to the holders of any then-outstanding shares of preferred stock.
Other Rights. Holders of common stock have no preemptive, conversion or subscription rights and there are no redemption or sinking fund provisions applicable to the common stock. The rights, preferences and privileges of the holders of common stock are subject to, and may be adversely affected by, the rights of the holders of shares of any series of preferred stock.
Preferred Stock
Our articles of incorporation authorize our board to issue up to 50,000,000 shares of preferred stock in one or more series, to determine the designations and the powers, preferences and rights and the qualifications, limitations and restrictions thereof, including the dividend rights, conversion or exchange rights, voting rights (including the number of votes per share), redemption rights and terms, liquidation preferences, sinking fund provisions and the number of shares constituting the series. Our board of directors could, without shareholder approval, issue preferred stock with voting and other rights that could adversely affect the voting power and other rights of the holders of common stock and which could have the effect of making it more difficult for a third party to acquire, or of discouraging a third party from attempting to acquire, a majority of our outstanding voting stock.
Representative’s Warrants
Upon the closing of this offering, there will be up to [ ] shares of common stock issuable upon exercise of the Representative’s Warrants, assuming an initial public offering price of $[ ] per share (which is the midpoint of the estimated range of the initial public offering price shown on the cover page of this prospectus) and if the underwriters exercise the over-allotment option in full. See “Underwriting—Representative’s Warrants” below for a description of the Representative’s Warrants.
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Anti-Takeover Provisions
Provisions of the Nevada Revised Statutes, our articles of incorporation and our bylaws could have the effect of delaying or preventing a third-party from acquiring us, even if the acquisition would benefit our stockholders. Such provisions of the Nevada Revised Statutes, our articles of incorporation and our bylaws are intended to enhance the likelihood of continuity and stability in the composition of our board of directors and in the policies formulated by the board of directors and to discourage certain types of transactions that may involve an actual or threatened change of control of our company. These provisions are designed to reduce our vulnerability to an unsolicited proposal for a takeover that does not contemplate the acquisition of all of our outstanding shares, or an unsolicited proposal for the restructuring or sale of all or part of our company.
Nevada Anti-Takeover Statutes
Pursuant to our articles of incorporation, we have elected not to be governed by the terms and provisions of Nevada’s control share acquisition laws (Nevada Revised Statutes 78.378 - 78.3793), which prohibit an acquirer, under certain circumstances, from voting shares of a corporation’s stock after crossing specific threshold ownership percentages, unless the acquirer obtains the approval of the issuing corporation’s stockholders. The first such threshold is the acquisition of at least one-fifth but less than one-third of the outstanding voting power.
Pursuant to our articles of incorporation, we have also elected not to be governed by the terms and provisions of Nevada’s combination with interested stockholders statute (Nevada Revised Statutes 78.411 - 78.444) which prohibits an “interested stockholder” from entering into a “combination” with the corporation, unless certain conditions are met. An “interested stockholder” is a person who, together with affiliates and associates, beneficially owns (or within the prior two years, did beneficially own) 10 percent or more of the corporation’s voting stock, or otherwise has the ability to influence or control such corporation’s management or policies.
Bylaws
In addition, various provisions of our bylaws may also have an anti-takeover effect. These provisions may delay, defer or prevent a tender offer or takeover attempt of the company that a stockholder might consider in his or her best interest, including attempts that might result in a premium over the market price for the shares held by our stockholders. Our bylaws may be adopted, amended or repealed by our stockholders at a duly called meeting of stockholders, and except as provided by Nevada law, our board of directors shall have the power to adopt, amend or repeal the bylaws. Any bylaw provision adopted by the board of directors may be amended or repealed by our stockholders at a duly called meeting of stockholders. Our bylaws also contain limitations as to who may call special meetings as well as require advance notice of stockholder matters to be brought at a meeting. Additionally, our bylaws also provide that no director may be removed by less than a two-thirds vote of the issued and outstanding shares entitled to vote on the removal. Our bylaws also permit the board of directors to establish the number of directors and fill any vacancies and newly created directorships. These provisions will prevent a shareholder from increasing the size of our board of directors and gaining control of our board of directors by filling the resulting vacancies with its own nominees.
Our bylaws establish an advance notice procedure for shareholder proposals to be brought before an annual meeting of our shareholders, including proposed nominations of persons for election to the board of directors. Shareholders at an annual meeting will only be able to consider proposals or nominations specified in the notice of meeting or brought before the meeting by or at the direction of the board of directors or by a shareholder who was a shareholder of record on the record date for the meeting, who is entitled to vote at the meeting and who has given us timely written notice, in proper form, of the shareholder’s intention to bring that business before the meeting. Although our bylaws do not give the board of directors the power to approve or disapprove shareholder nominations of candidates or proposals regarding other business to be conducted at a special or annual meeting, our bylaws may have the effect of precluding the conduct of certain business at a meeting if the proper procedures are not followed or may discourage or deter a potential acquirer from conducting a solicitation of proxies to elect its own slate of directors or otherwise attempting to obtain control of our company.
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Authorized but Unissued Shares
Our authorized but unissued shares of common stock are available for our board of directors to issue without stockholder approval. We may use these additional shares for a variety of corporate purposes, including raising additional capital, corporate acquisitions and employee stock plans. The existence of our authorized but unissued shares of common stock could render it more difficult or discourage an attempt to obtain control of the company by means of a proxy context, tender offer, merger or other transaction since our board of directors can issue large amounts of capital stock as part of a defense to a take-over challenge. In addition, we have authorized in our articles of incorporation 50,000,000 shares of preferred stock, none of which are currently designated or outstanding. However, the board acting alone and without approval of our stockholders can designate and issue one or more series of preferred stock containing super-voting provisions, enhanced economic rights, rights to elect directors, or other dilutive features, that could be utilized as part of a defense to a take-over challenge.
Supermajority Voting Provisions
Nevada Law provides generally that the affirmative vote of a majority of the shares entitled to vote on any matter is required to amend a corporation’s articles of incorporation, unless a corporation’s articles of incorporation or bylaws, as the case may be, require a greater percentage. Although our articles of incorporation and bylaws do not currently provide for such a supermajority vote on any matters, our board of directors can amend our bylaws and we can, with the approval of our stockholders, amend our articles of incorporation to provide for such a super-majority voting provision.
Cumulative Voting
Furthermore, neither the holders of our common stock nor the holders of our preferred stock have cumulative voting rights in the election of our directors. The combination of the present ownership by a few shareholders of a significant portion of our issued and outstanding common stock and lack of cumulative voting makes it more difficult for other shareholders to replace our board of directors or for a third party to obtain control of our company by replacing its board of directors.
Listing
We have filed an application to list our shares of common stock on the Nasdaq Capital Market under the symbol “TOPP.”
Transfer Agent and Registrar
We have appointed Vstock Transfer, LLC, telephone 212-828-8436, located at18 Lafayette Place, Woodmere, NY 11598, as the transfer agent for our common stock.
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SHARES ELIGIBLE FOR FUTURE SALE
Before this offering, there has not been a public market for shares of our common stock. Future sales of substantial amounts of shares of our common stock, including shares issued upon the conversion of convertible notes, the exercise of outstanding options and warrants, in the public market after this offering, or the possibility of these sales occurring, could cause the prevailing market price for our common stock to fall or impair our ability to raise equity capital in the future.
Immediately following the closing of this offering, we will have [ ] shares of common stock issued and outstanding, assuming an initial public offering price of $[ ] per share (which is the midpoint of the estimated range of the initial public offering price shown on the cover page of this prospectus). In the event the underwriters exercise the over-allotment option to purchase additional shares of common stock in full, we will have [ ] shares of common stock issued and outstanding. The common stock sold in this offering will be freely tradable without restriction or further registration or qualification under the Securities Act.
Previously issued shares of common stock that were not offered and sold in this offering are “restricted securities,” as that term is defined in Rule 144 under the Securities Act. These restricted securities are eligible for public sale only if such public resale is registered under the Securities Act or if the resale qualifies for an exemption from registration under Rule 144 or Rule 701 under the Securities Act, which are summarized below.
Rule 144
In general, a person who has beneficially owned restricted shares of our common stock for at least twelve months, or at least six months in the event we have been a reporting company under the Exchange Act for at least ninety (90) days before the sale, would be entitled to sell such securities, provided that such person is not deemed to be an affiliate of ours at the time of sale or to have been an affiliate of ours at any time during the ninety (90) days preceding the sale. A person who is an affiliate of ours at such time would be subject to additional restrictions, by which such person would be entitled to sell within any three-month period only a number of shares that does not exceed the greater of the following:
| ● | 1% of the number of shares of our common stock then outstanding; or |
| ● | 1% of the average weekly trading volume of our common stock during the four calendar weeks preceding the filing by such person of a notice on Form 144 with respect to the sale; |
provided that, in each case, we are subject to the periodic reporting requirements of the Exchange Act for at least 90 days before the sale. Rule 144 trades must also comply with the manner of sale, notice and other provisions of Rule 144, to the extent applicable.
Rule 701
In general, Rule 701 allows a shareholder who purchased shares of our capital stock pursuant to a written compensatory plan or contract and who is not deemed to have been an affiliate of ours during the immediately preceding 90 days to sell those shares in reliance upon Rule 144, but without being required to comply with the public information, holding period, volume limitation or notice provisions of Rule 144. All holders of Rule 701 shares, however, are required to wait until ninety (90) days after the date of this prospectus before selling shares pursuant to Rule 701.
Lock-Up Agreements
We, all of our directors and officers and any other holder of 5% or more of our outstanding shares of common stock as of the effective date of this registration statement have agreed with the underwriters, subject to certain exceptions, not to sell, transfer or dispose of, directly or indirectly, any of our common stock or securities convertible into or exercisable or exchangeable for our common stock for, in the case of our company, a period of six (6) months from the closing of this offering, and in the case of our directors, officers and 5% or greater shareholders, a period of six (6) months from the date of this prospectus. See “Underwriting—Lock-Up – No Sales of Securities.”
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MATERIAL U.S. FEDERAL TAX CONSIDERATIONS FOR NON-U.S. HOLDERS OF OUR COMMON STOCK
The following is a summary of the material U.S. federal income and estate tax consequences of the ownership and disposition of our common stock that is being issued pursuant to the Company’s initial public offering. This summary is limited to Non-U.S. Holders (as defined below) that hold our common stock as a capital asset (generally, property held for investment) for U.S. federal income tax purposes. This summary does not discuss all of the aspects of U.S. federal income and estate taxation that may be relevant to a non-U.S. Holder in light of the Non-U.S. Holder’s particular circumstances. Accordingly, all prospective Non-U.S. Holders should consult their own tax advisors with respect to the U.S. federal, state, local and non-U.S. tax consequences of the ownership and disposition of our common stock.
This summary is based on provisions of the Code, applicable U.S. Treasury regulations, and administrative and judicial interpretations, all as in effect or in existence on the date of this prospectus. Subsequent developments in U.S. federal income or estate tax law, including changes in law or differing interpretations, which may be applied retroactively, could alter the U.S. federal income and estate tax consequences of owning and disposing of our common stock as described in this summary. There can be no assurance that the Internal Revenue Service, or IRS, will not take a contrary position with respect to one or more of the tax consequences described herein and we have not obtained, nor do we intend to obtain, a ruling from the IRS with respect to the U.S. federal income or estate tax consequences of the ownership or disposition of our common stock.
As used in this summary, the term “Non-U.S. Holder” means a beneficial owner of our common stock that is not, for U.S. federal income tax purposes:
| ● | an individual who is a citizen or resident of the United States; |
| ● | a corporation (or other entity treated as a corporation) created or organized in or under the laws of the United States, any state thereof, or the District of Columbia; |
| ● | an entity or arrangement treated as a domestic partnership; |
| ● | an estate whose income is includible in gross income for U.S. federal income tax purposes regardless of its source; or |
| ● | a trust, if (1) a U.S. court is able to exercise primary supervision over the trust’s administration and one or more “United States persons” (within the meaning of the Code) has the authority to control all of the trust’s substantial decisions, or (2) the trust has a valid election in effect under applicable U.S. Treasury regulations to be treated as a United States person. |
If an entity or arrangement treated as a partnership for U.S. federal income tax purposes holds our common stock, the tax treatment of a partner in such a partnership generally will depend upon the status of the partner, the activities of the partnership and certain determinations made at the partner level. Partnerships, and partners in partnerships, that hold our common stock should consult their own tax advisors as to the particular U.S. federal income and estate tax consequences of owning and disposing of our common stock that are applicable to them.
This summary does not consider any specific facts or circumstances that may apply to a Non-U.S. Holder and does not address any special tax rules that may apply to particular Non-U.S. Holders, such as:
| ● | a Non-U.S. Holder that is a financial institution, insurance company, tax-exempt organization, pension plan, broker, dealer or trader in securities, dealer in currencies, U.S. expatriate, controlled foreign corporation or passive foreign investment company; |
| ● | a Non-U.S. Holder holding our common stock as part of a conversion transaction, constructive sale, wash sale or other integrated transaction or a hedge, straddle or synthetic security; |
| ● | a Non-U.S. Holder that holds or receives our common stock pursuant to the exercise of any employee stock option or otherwise as compensation; or |
| ● | a Non-U.S. Holder that at any time owns, directly, indirectly or constructively, 5% or more of our outstanding common stock. |
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In addition, this summary does not address any U.S. state or local, or non-U.S. or other tax consequences, or any U.S. federal income or estate tax consequences for beneficial owners of a Non-U.S. Holder, including stockholders of a controlled foreign corporation or passive foreign investment company that holds our common stock.
Each Non-U.S. Holder should consult its own tax advisor regarding the U.S. federal, state, local and non-U.S. income and other tax consequences of owning and disposing of our common stock.
Distributions on Our Common Stock
We do not currently expect to pay any cash dividends on our common stock. If we make distributions of cash or property (other than certain pro rata distributions of our common stock) with respect to our common stock, any such distributions generally will constitute dividends for U.S. federal income tax purposes to the extent paid from our current or accumulated earnings and profits, as determined under U.S. federal income tax rules. If a distribution exceeds our current and accumulated earnings and profits, the excess will be treated as a nontaxable return of capital to the extent of the Non-U.S. Holder’s adjusted tax basis in our common stock and will reduce (but not below zero) such Non-U.S. Holder’s adjusted tax basis in our common stock. Any remaining excess will be treated as gain from a disposition of our common stock subject to the tax treatment described below in “— Dispositions of Our Common Stock.”
Distributions on our common stock that are treated as dividends and that are effectively connected with a Non-U.S. Holder’s conduct of a trade or business in the United States will be taxed on a net income basis at the regular graduated rates and in the manner applicable to United States persons. An exception may apply if the Non-U.S. Holder is eligible for, and properly claims, the benefit of an applicable income tax treaty and the dividends are not attributable to a permanent establishment or fixed base maintained by the Non-U.S. Holder in the United States. In such case, the Non-U.S. Holder may be eligible for a lower rate under an applicable income tax treaty between the United States and its jurisdiction of tax residence. Dividends that are effectively connected with a Non-U.S. Holder’s conduct of a trade or business in the United States will not be subject to U.S. withholding tax if the Non-U.S. Holder provides to the applicable withholding agent a properly executed IRS Form W-8ECI (or other applicable form) in accordance with the applicable certification and disclosure requirements. A Non-U.S. Holder treated as a corporation for U.S. federal income tax purposes may also be subject to a “branch profits tax” at a 30% rate (unless the Non-U.S. Holder is eligible for a lower rate under an applicable income tax treaty) on the Non-U.S. Holder’s earnings and profits (attributable to dividends on our common stock or otherwise) that are effectively connected with the Non-U.S. Holder’s conduct of a trade or business within the United States. The amount of taxable earnings and profits is generally reduced by amounts reinvested in the operations of the U.S. trade or business and increased by any decline in its equity.
The certifications described above must be provided to the applicable withholding agent prior to the payment of dividends and must be updated periodically. A Non-U.S. Holder may obtain a refund or credit of any excess amounts withheld by timely filing an appropriate claim for a refund with the IRS. Non-U.S. Holders should consult their own tax advisors regarding their eligibility for benefits under any relevant income tax treaty and the manner of claiming such benefits.
The foregoing discussion is subject to the discussions below under “—Backup Withholding and Information Reporting” and “—FATCA Withholding.”
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Dispositions of Our Common Stock
A Non-U.S. Holder generally will not be subject to U.S. federal income tax (including U.S. withholding tax) on gain recognized on any sale or other disposition of our common stock unless:
| ● | the gain is effectively connected with the Non-U.S. Holder’s conduct of a trade or business in the United States (and, if required by an applicable income tax treaty, is attributable to a permanent establishment or fixed base maintained by the Non-U.S. Holder in the United States); in such case, the gain would be subject to U.S. federal income tax on a net income basis at the regular graduated rates and in the manner applicable to United States persons (unless an applicable income tax treaty provides otherwise) and, if the Non-U.S. Holder is treated as a corporation for U.S. federal income tax purposes, the “branch profits tax” described above may also apply; |
| ● | the Non-U.S. Holder is an individual who is present in the United States for 183 days or more in the taxable year of the disposition and meets certain other requirements; in such case, except as otherwise provided by an applicable income tax treaty, the gain, which may be offset by certain U.S. source capital losses, generally will be subject to a flat 30% U.S. federal income tax, even if the Non-U.S. Holder is not treated as a resident of the United States under the Code; or |
| ● | we are or have been a “United States real property holding corporation,” or USRPHC, for U.S. federal income tax purposes at any time during the shorter of (i) the five-year period ending on the date of disposition and (ii) the period that the Non-U.S. Holder held our common stock. |
Generally, a corporation is a USRPHC if the fair market value of its “United States real property interests” equals or exceeds 50% of the sum of the fair market value of its worldwide real property interests plus its other assets used or held for use in a trade or business. We believe that we are not currently, and we do not anticipate becoming in the future, a USRPHC. However, because the determination of whether we are a USRPHC is made from time to time and depends on the relative fair market values of our assets, there can be no assurance in this regard. If we were a USRPHC, the tax relating to disposition of stock in a USRPHC generally will not apply to a Non-U.S. Holder whose holdings, direct, indirect and constructive, constituted 5% or less of our common stock at all times during the applicable period, provided that our common stock is “regularly traded on an established securities market” (including Nasdaq and as provided in applicable U.S. Treasury regulations) at any time during the calendar year in which the disposition occurs. However, no assurance can be provided that our common stock will be regularly traded on an established securities market for purposes of the rules described above. Non-U.S. Holders should consult their own tax advisors regarding any possible adverse U.S. federal income tax consequences to them if we are, or were to become, a USRPHC.
The foregoing discussion is subject to the discussions below under “—Backup Withholding and Information Reporting” and “—FATCA Withholding.”
Federal Estate Tax
Any shares of our common stock that are owned (or treated as owned) by an individual who is not a U.S. citizen or resident of the United States (as specially defined for U.S. federal estate tax purposes) at the time of his or her death will be included in that individual’s gross estate for U.S. federal estate tax purposes, unless an applicable estate tax or other treaty provides otherwise, and therefore may be subject to U.S. federal estate tax.
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Backup Withholding and Information Reporting
Backup withholding (currently at a rate of 24%) may apply to dividends paid by U.S. corporations in some circumstances, but will not apply to payments of dividends on our common stock to a Non-U.S. Holder if the Non-U.S. Holder provides to the applicable withholding agent a properly executed IRS Form W-8BEN or W-8BEN-E (or other applicable form) certifying under penalties of perjury that the Non-U.S. Holder is not a United States person or is otherwise entitled to an exemption. However, the applicable withholding agent generally will be required to report to the IRS (and to such Non-U.S. Holder) payments of dividends on our common stock and the amount of U.S. federal income tax, if any, withheld from those payments. In accordance with applicable treaties or agreements, the IRS may provide copies of such information returns to the tax authorities in the country in which the Non-U.S. Holder resides.
The gross proceeds from sales or other dispositions of our common stock may be subject, in certain circumstances discussed below, to U.S. backup withholding and information reporting. If a Non-U.S. Holder sells or otherwise disposes of any of our common stock outside the United States through a non-U.S. office of a non-U.S. broker and the disposition proceeds are paid to the Non-U.S. Holder outside the United States, the U.S. backup withholding and information reporting requirements generally will not apply to that payment. However, U.S. information reporting, but not U.S. backup withholding, will apply to a payment of disposition proceeds, even if that payment is made outside the United States, if a Non-U.S. Holder sells our common stock through a non-U.S. office of a broker that is a United States person or has certain enumerated connections with the United States, unless the broker has documentary evidence in its files that the Non-U.S. Holder is not a United States person and certain other conditions are met or the Non-U.S. Holder otherwise qualifies for an exemption.
If a Non-U.S. Holder receives payments of the proceeds of a disposition of our common stock to or through a U.S. office of a broker, the payment will be subject to both U.S. backup withholding and information reporting unless the Non-U.S. Holder provides to the broker a properly executed IRS Form W-8BEN or W-8BEN-E (or other applicable form) certifying under penalties of perjury that the Non-U.S. Holder is not a United States person, or the Non-U.S. Holder otherwise qualifies for an exemption.
Backup withholding is not an additional tax. Any amounts withheld under the backup withholding rules may be credited against the Non-U.S. Holder’s U.S. federal income tax liability (which may result in the Non-U.S. Holder being entitled to a refund), provided that the required information is timely furnished to the IRS.
FATCA Withholding
The Foreign Account Tax Compliance Act and related Treasury guidance (commonly referred to as FATCA) impose U.S. federal withholding tax at a rate of 30% on payments to certain foreign entities of (i) U.S.-source dividends (including dividends paid on our common stock) and (ii) the gross proceeds from the sale or other disposition of property that produces U.S.-source dividends (including sales or other dispositions of our common stock). This withholding tax applies to a foreign entity, whether acting as a beneficial owner or an intermediary, unless such foreign entity complies with (i) certain information reporting requirements regarding its U.S. account holders and its U.S. owners and (ii) certain withholding obligations regarding certain payments to its account holders and certain other persons. Accordingly, the entity through which a Non-U.S. Holder holds its common stock will affect the determination of whether such withholding is required. While withholding under FATCA would have also applied to payments of gross proceeds from the sale or other disposition of our common stock on or after January 1, 2019, U.S. Treasury regulations proposed in December 2018 eliminate such withholding on payments of gross proceeds entirely. Taxpayers generally may rely on these proposed U.S. Treasury regulations until final U.S. Treasury regulations are issued. Non-U.S. Holders are encouraged to consult their tax advisors regarding the possible application of FATCA in their particular circumstances.
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A.G.P./Alliance Global Partners, the Representative, is acting as the sole book-running manager of the offering and as representative of the underwriters named below. We will enter into an underwriting agreement dated , 2024 with the Representative. Subject to the terms and conditions of the underwriting agreement dated the date of this prospectus, the underwriters named below, through the Representative, have severally and not jointly agreed to purchase, and we have agreed to sell to the underwriters, the following respective number of shares of common stock set forth opposite the underwriters’ name below:
| Underwriter | Number of Shares | |||
| A.G.P./Alliance Global Partners | [ ] | |||
| Total | [ ] | |||
This offering is being conducted on a firm commitment basis. The underwriting agreement provides that the obligation of the underwriters to purchase the shares of common stocks offered by this prospectus is subject to certain conditions. The underwriters are obligated to purchase all of the shares of common stocks (other than those covered by the over-allotment option to purchase additional shares of common stock described below) offered hereby if any of the shares are purchased.
Underwriting Discounts, Commissions and Expenses
We have agreed to sell the securities to the underwriters at the offering price of $ per share, which represents the offering price of such securities set forth on the cover page of this prospectus, less the applicable 7.0% underwriting discount.
We have also agreed to reimburse the underwriters for accountable legal expenses not to exceed $150,000 and non-accountable expenses not to exceed 1.0% of the aggregate gross proceeds of this offering. We estimate that expenses payable by us in connection with this offering, including reimbursement of the underwriters’ out-of-pocket expenses, but excluding the underwriting discount referred to above, will be approximately . Any expense deposits in excess of the amount paid by us on account of the underwriters’ out-of-pocket expenses will be refunded to us in accordance with FINRA Rule 5110(g)(4).
The following table shows the underwriting discounts and commissions payable to the underwriters by us in connection with this offering (assuming both the exercise and non-exercise of the over-allotment option to purchase additional shares of common stock we have granted to the underwriters).
| Paid by the Company | |||||||||||||||
| No Exercise of Over- allotment option |
Full Exercise of Over- allotment option |
||||||||||||||
| Per Share | Total | Per Share | Total | ||||||||||||
| Public Offering Price | $ | [ ] | $ | [ ] | $ | [ ] | $ | [ ] | |||||||
| Underwriting discounts and commissions (7.0%) | [ ] | [ ] | [ ] | [ ] | |||||||||||
| Proceeds to us, before expenses | $ | [ ] | $ | [ ] | $ | [ ] | $ | [ ] | |||||||
Over-Allotment Option to Purchase Additional Shares
Pursuant to the underwriting agreement, we have granted the underwriters an option, exercisable for up to 45 days from the date of this prospectus, to purchase up to [ ] additional shares (15%) on the same terms as the other shares of common stock being purchased by the underwriters from us. The underwriters may exercise the option solely to cover over-allotments. If the over-allotment option to purchase additional shares is exercised in full, the total public offering price, underwriting compensation (including discounts, but not including any other compensation described hereunder) and proceeds to us before offering expenses will be approximately $[ ], $[ ] and $[ ].
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Representative’s Warrants
We have agreed to issue warrants to the Representative or its designees to purchase a number of shares of common stock equal to five percent (5.0%) of the total number of shares sold in this offering, including shares of common stock issued upon exercise of underwriters’ over-allotment option. Such Representative’s Warrants shall have an exercise price equal to 120% of the public offering price of the shares of common stock sold in this offering. The Representative’s Warrants are exercisable for a period of three years following the date of commencement of sales of the offering, in whole or in part. The shares of common stock underlying the Representative’s Warrants have resale registration rights including one demand and unlimited “piggy-back” rights for periods of not greater than five and seven years, respectively, from the commencement of sales of this offering. In compliance with FINRA Rule 5110(g)(8), such registration rights are limited to demand and “piggy back” rights for periods of five and seven years, respectively, from the effective date of the registration statement of which this prospectus forms a part, and such demand rights may be exercised on only one occasion.
The Representative’s Warrants and the underlying shares of common stock are deemed compensation by FINRA and are therefore subject to a lock-up for a period of 180 days immediately following the commencement of sales of this offering. Pursuant to FINRA 5110(e)(1), these securities may not be sold, transferred, assigned, pledged or hypothecated, nor may they be the subject of any hedging, short sale, derivative, put or call transaction that would result in the economic disposition of the securities by any person for a period of 180 days immediately following the commencement of sales of this offering.
Indemnification
We have agreed to indemnify the underwriters against certain liabilities, including liabilities under the Securities Act and liabilities arising from breaches of representations and warranties contained in the underwriting agreement, or to contribute to payments that the underwriters may be required to make in respect any of those liabilities.
Lock-Up Agreements
The Company, on behalf of itself and any successor entity, agrees that, without the prior written consent of the Representative, it will not, for a period of six (6) months after the closing of the offering, (i) offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any notion or contract to sell, grant any option, right or warrant to purchase, lead, or otherwise transfer or dispose of directly or indirectly, any share of capital share of the Company or any securities convertible into or exercisable or exchangeable for shares of capital share of the Company; (ii) file or caused to be filed any registration statement with the SEC relating to the offering of any shares of capital share of the Company of any securities convertible into or exercisable or exchangeable for shares of capital shares of the company; or (iii) enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of capital share of the Company, whether any such transaction described in clause (i), (ii), or (iii) above is to be settled by delivery of shares of capital share of the Company or such other securities, in such or otherwise. The foregoing shall not apply to (i) the filing of a registration statement on Form S-8 for registering an equity incentive plan, (ii) any of the Company’s issuances of shares of common stock to employees and/or consultants under the Company’s equity incentive plan, and/or (iii) commitment that exists at the time of entering the engagement agreement between the Company and the Representative, for securities to be issued in strategic transactions and/or transactions relating to the regular business activity of the Company.
Our directors, executive officers and holders of 5% or more of our shares of common stock have agreed, subject to limited exceptions set forth below, not to offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, lend, or otherwise transfer or dispose of, directly or indirectly, any shares of capital stock of the Company or any securities convertible into or exercisable or exchangeable for shares of capital stock of the Company (the “Lock-Up Securities”), that transfers, in whole or in part, any of the economic consequences of ownership of our shares of common stock or such other securities for a period of six (6) months after the date of this prospectus, without the prior written consent of the Representative.
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Notwithstanding the foregoing to the contrary and subject to the conditions below, a holder may transfer Lock-Up Securities without the prior written consent of the Representative in connection with (a) transactions relating to Lock-Up Securities acquired in open market transactions after the completion of the Public Offering; provided that no filing under Section 16(a) of the Exchange Act, shall be required or shall be voluntarily made in connection with subsequent sales of Lock-Up Securities acquired in such open market transactions; (b) transfers of Lock-Up Securities (i) as a bona fide gift, by will or intestacy, (ii) by operation of law, such as pursuant to a qualified domestic order or as required by a divorce settlement, or (iii) to a family member or trust for the benefit of a family member (for purposes hereof, “family member” means any relationship by blood, marriage or adoption, not more remote than first cousin); (c) transfers of Lock-Up Securities to a charity or educational institution; or (d) if the holder, directly or indirectly, controls a corporation, partnership, limited liability company or other business entity, any transfers of Lock-Up Securities to any shareholder, partner or member of, or owner of similar equity interests in, the undersigned, as the case may be; provided that in the case of any transfer pursuant to the foregoing clauses (b), (c) or (d), (i) any such transfer shall not involve a disposition for value, (ii) each transferee shall sign and deliver to the Representative a lock-up agreement substantially in the form of this lock-up agreement and (ii) no filing under Section 16(a) of the Exchange Act shall be required or shall be voluntarily made.
Right of First Refusal
We have granted the Representative a right of first refusal, for a period of twelve (12) months from the closing of the offering, to act as sole investment banker, sole book-runner and/or sole placement agent for any future public and private equity and debt offering, including all equity linked financings (excluding (i) shares issued under any compensation or stock option plan approved by the Company’s shareholders, (ii) shares issued as consideration of an acquisition or as part of a strategic partnership or transaction and (iii) conventional banking arrangements and commercial debt financing), during such 12-month period, of the Company, or any successor to or any current or future subsidiary of the Company. If the Representative fails to accept in writing any such proposal within ten (10) days after receipt of a written notice from us containing such proposal, the Representative will have no claim or right with respect to any such sale contained in any such notice. If, thereafter, such proposal is modified in any material respect, the Company will adopt the same procedure as with respect to the original proposed public of private sale, and the Representative shall have the right of first refusal with respect to such revised proposal as set forth above. In accordance with FINRA Rule 5110(g)(6)(A), such right of first refusal shall not have a duration of more than three years from the commencement of sales of this offering.
Pricing of the Offering
Prior to this offering, there has been no public market for our common stock. The initial public offering price of the shares has been negotiated between us and the underwriter. Among the factors considered in determining the initial public offering price of the shares, in addition to the prevailing market conditions, are our historical performance, estimates of our business potential and earnings prospects, an assessment of our management and the consideration of the above factors in relation to market valuation of companies in related businesses.
Price Stabilization, Short Positions, and Penalty Bids
The underwriters may also impose a penalty bid. This occurs when a particular underwriter or dealer repays selling concessions allowed to it for distributing our shares of common stock in this offering because such underwriter repurchases those shares in stabilizing or short covering transactions.
Passive Market Making
In connection with this offering, the underwriters and any selling group members may engage in passive market making transactions in our shares of common stock on Nasdaq in accordance with Rule 103 of Regulation M under the Securities Exchange Act of 1934, as amended, during a period before the commencement of offers or sales of shares of common stock and extending through the completion of the distribution. A passive market maker must display its bid at a price not in excess of the highest independent bid of that security. However, if all independent bids are lowered below the passive market maker’s bid that bid must then be lowered when specified purchase limits are exceeded.
Electronic Distribution
This prospectus in electronic format may be made available on websites or through other online services maintained by the underwriters, or by their affiliates. Other than this prospectus in electronic format, the information on any underwriter’s website and any information contained in any other website maintained by any of the underwriters is not part of this prospectus or the registration statement of which this prospectus forms a part, has not been approved and/or endorsed by us or the underwriters in their capacity as underwriters, and should not be relied upon by investors.
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Other
From time to time, the underwriters and/or their affiliates have provided, and may in the future provide, various investment banking and other financial services for us which services they have received and may in the future receive, customary fees. In the course of their businesses, the underwriters and their affiliates may actively trade our securities or loans for its own account or for the accounts of customers, and, accordingly, the underwriters and their affiliates may at any time hold long or short positions in such securities or loans. Except for services provided in connection with this offering, the underwriters have not provided any investment banking or other financial services to us during the 180-day period preceding the date of this prospectus, and we do not expect to retain the underwriters to perform any investment banking or other financial services for at least 90 days after the date of this prospectus.
Selling Restrictions
This prospectus does not constitute an offer to sell to, or a solicitation of an offer to buy from, anyone in any country or jurisdiction (i) in which such an offer or solicitation is not authorized, (ii) in which any person making such offer or solicitation is not qualified to do so or (iii) in which any such offer or solicitation would otherwise be unlawful. No action has been taken that would, or is intended to, permit a public offer of the securities or possession or distribution of this prospectus or any other offering or publicity material relating to the securities in any country or jurisdiction (other than the United States) where any such action for that purpose is required. Accordingly, the underwriters have undertaken that they will not, directly or indirectly, offer or sell any securities or have in its possession, distribute, or publish any prospectus, form of application, advertisement, or other document or information in any country or jurisdiction except under circumstances that will, to the best of its knowledge and belief, result in compliance with any applicable laws and regulations and all offers and sales of securities by it will be made on the same terms.
Selling Restrictions outside the United States
No action has been taken in any jurisdiction (except in the United States) that would permit a public offering of the shares of common stock, or the possession, circulation, or distribution of this prospectus or any other material relating to us or the common stock, where action for that purpose is required. Accordingly, the common stock may not be offered or sold, directly or indirectly, and neither this prospectus nor any other offering material or advertisements in connection with the shares of common stock may be distributed or published, in or from any country or jurisdiction except in compliance with any applicable rules and regulations of any such country or jurisdiction.
Australia
This prospectus is not a disclosure document under Chapter 6D of the Australian Corporations Act, has not been lodged with the Australian Securities and Investments Commission and does not purport to include the information required of a disclosure document under Chapter 6D of the Australian Corporations Act. Accordingly, (i) the offer of the securities under this prospectus is only made to persons to whom it is lawful to offer the securities without disclosure under Chapter 6D of the Australian Corporations Act under one or more exemptions set out in section 708 of the Australian Corporations Act; (ii) this prospectus is made available in Australia only to those persons as set forth in clause (i) above; and (iii) the offeree must be sent a notice stating in substance that, by accepting this offer, the offeree represents that the offeree is such a person as set forth in clause (i) above, and, unless permitted under the Australian Corporations Act, agrees not to sell or offer for sale within Australia any of the securities sold to the offeree within 12 months after its transfer to the offeree under this prospectus.
Canada
The securities may be sold in Canada only to purchasers purchasing, or deemed to be purchasing, as principal that are accredited investors, as defined in National Instrument 45-106 Prospectus Exemptions or subsection 73.3(1) of the Securities Act (Ontario), and are permitted clients, as defined in National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations. Any resale of the securities must be made in accordance with an exemption from, or in a transaction not subject to, the prospectus requirements of applicable securities laws.
Securities legislation in certain provinces or territories of Canada may provide a purchaser with remedies for rescission or damages if this prospectus (including any amendment thereto) contains a misrepresentation, provided that the remedies for rescission or damages are exercised by the purchaser within the time limit prescribed by the securities legislation of the purchaser’s province or territory. The purchaser should refer to any applicable provisions of the securities legislation of the purchaser’s province or territory for particulars of these rights or consult with a legal advisor.
Pursuant to section 3A.3 of National Instrument 33-105 Underwriting Conflicts (NI 33-105), the underwriters are not required to comply with the disclosure requirements of NI 33-105 regarding underwriter conflicts of interest in connection with this offering.
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China
The information in this document does not constitute a public offer of the securities, whether by way of sale or subscription, in the People’s Republic of China (“China”) (excluding, for purposes of this paragraph, Hong Kong Special Administrative Region, Macau Special Administrative Region and Taiwan). The securities may not be offered or sold directly or indirectly in China to legal or natural persons other than directly to “qualified domestic institutional investors.”
European Economic Area — Belgium, Germany, Luxembourg and Netherlands
In relation to each Member State of the European Economic Area that has implemented the Prospectus Regulation (each, a “Relevant Member State”), an offer to the public of our securities may not be made in that Relevant Member State, except that an offer to the public in that Relevant Member State of our securities may be made at any time under the following exemptions under the Prospectus Regulation:
| (a) | to any legal entity which is a qualified investor as defined in the Prospectus Regulation; | |
| (b) | to fewer than 150 natural or legal persons (other than qualified investors as defined in the Prospectus Regulation), subject to obtaining the prior consent of the Representative for any such offer; or | |
| (c) | in any other circumstances falling within Article 1(4) of the Prospectus Regulation, provided that no such offer of our securities shall result in a requirement for the publication by us or any underwriter of a prospectus pursuant to Article 3 of the Prospectus Regulation. |
For the purposes of this provision, the expression an “offer to the public” in relation to our securities in any Relevant Member State means the communication in any form and by any means of sufficient information on the terms of the offer and our securities to be offered so as to enable an investor to decide to purchase our securities, and the expression “Prospectus Regulation” means Regulation (EU) 2017/1129 (as amended).
This European Economic Area selling restriction is in addition to any other applicable selling restrictions set out below.
France
This document is not being distributed in the context of a public offering of financial securities (offre au public de titres financiers) in France within the meaning of Article L.411-1 of the French Monetary and Financial Code (Code Monétaire et Financier) and Articles 211-1 et seq. of the General Regulation of the French Autorité des Marchés Financiers (“AMF”). The securities have not been offered or sold and will not be offered or sold, directly or indirectly, to the public in France.
This document and any other offering material relating to the securities have not been, and will not be, submitted to the AMF for approval in France and, accordingly, may not be distributed or caused to distributed, directly or indirectly, to the public in France.
Such offers, sales and distributions have been and shall only be made in France to (i) qualified investors (investisseurs qualifiés) acting for their own account, as defined in and in accordance with Articles L.411-2-II-2° and D.411-1 to D.411-3, D. 744-1, D.754-1 and D.764-1 of the French Monetary and Financial Code and any implementing regulation; and/or (ii) a restricted number of non-qualified investors (cercle restreint d’investisseurs) acting for their own account, as defined in and in accordance with Articles L.411-2-II-2 and D.411-4, D.744-1, D.754-1 and D.764-1 of the French Monetary and Financial Code and any implementing regulation.
Pursuant to Article 211-3 of the General Regulation of the AMF, investors in France are informed that the securities cannot be distributed (directly or indirectly) to the public by the investors otherwise than in accordance with Articles L.411-1, L.411-2, L.412-1 and L.621-8 to L.621-8-3 of the French Monetary and Financial Code.
Ireland
The information in this document does not constitute a prospectus under any Irish laws or regulations, and this document has not been filed with or approved by any Irish regulatory authority, as the information has not been prepared in the context of a public offering of securities in Ireland within the meaning of the Irish Prospectus (Directive 2003/71/EC) Regulations 2005 (the “Prospectus Regulations”). The securities have not been offered or sold, and will not be offered, sold or delivered directly or indirectly in Ireland by way of a public offering, except to (i) qualified investors as defined in Regulation 2(l) of the Prospectus Regulations; and (ii) fewer than 100 natural or legal persons who are not qualified investors.
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Hong Kong
The securities may not be offered or sold in Hong Kong by means of any document other than (i) in circumstances which do not constitute an offer to the public within the meaning of the Companies (Winding Up and Miscellaneous Provisions) Ordinance (Cap. 32 of the Laws of Hong Kong) (“Companies (Winding Up and Miscellaneous Provisions) Ordinance”) or which do not constitute an invitation to the public within the meaning of the Securities and Futures Ordinance (Cap. 571 of the Laws of Hong Kong) (“Securities and Futures Ordinance”); (ii) to “professional investors” as defined in the Securities and Futures Ordinance and any rules made thereunder; or (iii) in other circumstances which do not result in the document being a “prospectus” as defined in the Companies (Winding Up and Miscellaneous Provisions) Ordinance, and no advertisement, invitation or document relating to our securities may be issued or may be in the possession of any person for the purpose of issue (in each case whether in Hong Kong or elsewhere), which is directed at, or the contents of which are likely to be accessed or read by, the public in Hong Kong (except if permitted to do so under the securities laws of Hong Kong) other than with respect to our securities that are or are intended to be disposed of only to persons outside Hong Kong or only to “professional investors” in Hong Kong as defined in the Securities and Futures Ordinance and any rules made thereunder.
Israel
The securities offered by this prospectus have not been approved or disapproved by the Israeli Securities Authority (the ISA), nor have such securities been registered for sale in Israel. The shares may not be offered or sold, directly or indirectly, to the public in Israel, absent the publication of a prospectus. The ISA has not issued permits, approvals or licenses in connection with the offering or publishing of the prospectus; nor has it authenticated the details included herein, confirmed their reliability or completeness, or rendered an opinion as to the quality of the securities being offered. Any resale in Israel, directly or indirectly, to the public of the securities offered by this prospectus is subject to restrictions on transferability and must be effected only in compliance with the Israeli securities laws and regulations.
Italy
The offering of the securities in the Republic of Italy has not been authorized by the Italian Securities and Exchange Commission (Commissione Nazionale per le Societ - $$ - Aga e la Borsa, “CONSOB”) pursuant to Italian securities legislation, and, accordingly, no offering material relating to the securities may be distributed in Italy, and such securities may not be offered or sold in Italy in a public offer within the meaning of Article 1.1(t) of Legislative Decree No. 58 of 24 February 1998 (“Decree No. 58”), other than:
| ● | to Italian qualified investors, as defined in Article 100 of Decree no. 58 by reference to Article 34-ter of CONSOB Regulation no. 11971 of 14 May 1999 (“Regulation no. 1197l”) as amended (“Qualified Investors”); and | |
| ● | in other circumstances that are exempt from the rules on public offer pursuant to Article 100 of Decree No. 58 and Article 34-ter of Regulation No. 11971 as amended. |
Any offer, sale or delivery of the securities or distribution of any offer document relating to the securities in Italy (excluding placements where a Qualified Investor solicits an offer from the issuer) under the paragraphs above must be:
| ● | made by investment firms, banks or financial intermediaries permitted to conduct such activities in Italy in accordance with Legislative Decree No. 385 of 1 September 1993 (as amended), Decree No. 58, CONSOB Regulation No. 16190 of 29 October 2007 and any other applicable laws; and | |
| ● | in compliance with all relevant Italian securities, tax and exchange controls and any other applicable laws. |
Any subsequent distribution of the securities in Italy must be made in compliance with the public offer and prospectus requirement rules provided under Decree No. 58 and Regulation No. 11971, as amended, unless an exception from those rules applies. Failure to comply with such rules may result in the sale of such securities being declared null and void and in the liability of the entity transferring the securities for any damages suffered by the investors.
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Japan
The securities have not been and will not be registered under the Financial Instruments and Exchange Act of Japan (Act No. 25 of 1948, as amended), or the FIEA. The securities may not be offered or sold, directly or indirectly, in Japan or to or for the benefit of any resident of Japan (including any person resident in Japan or any corporation or other entity organized under the laws of Japan) or to others for reoffering or resale, directly or indirectly, in Japan or to or for the benefit of any resident of Japan, except pursuant to an exemption from the registration requirements of the FIEA and otherwise in compliance with any relevant laws and regulations of Japan.
Portugal
This document is not being distributed in the context of a public offer of financial securities (oferta pública de valores mobiliários) in Portugal, within the meaning of Article 109 of the Portuguese Securities Code (Código dos Valores Mobiliários). The securities have not been offered or sold and will not be offered or sold, directly or indirectly, to the public in Portugal. This document and any other offering material relating to the securities have not been, and will not be, submitted to the Portuguese Securities Market Commission (Comissão do Mercado de Valores Mobiliários) for approval in Portugal and, accordingly, may not be distributed or caused to distributed, directly or indirectly, to the public in Portugal, other than under circumstances that are deemed not to qualify as a public offer under the Portuguese Securities Code. Such offers, sales and distributions of securities in Portugal are limited to persons who are “qualified investors” (as defined in the Portuguese Securities Code). Only such investors may receive this document, and they may not distribute it or the information contained in it to any other person.
Singapore
This prospectus has not been registered as a prospectus with the Monetary Authority of Singapore. Accordingly, this prospectus and any other document or material in connection with the offer or sale, or invitation for subscription or purchase, of our securities may not be circulated or distributed, nor may our securities be offered or sold, or be made the subject of an invitation for subscription or purchase, whether directly or indirectly, to persons in Singapore other than (i) to an institutional investor (as defined under Section 4A of the Securities and Futures Act, 2001 of Singapore (“SFA”)) under Section 274 of the SFA; (ii) to a relevant person (as defined in Section 275(2) of the SFA) pursuant to Section 275(1) of the SFA, or any person pursuant to Section 275(1A) of the SFA, and in accordance with the conditions specified in Section 275 of the SFA and (where applicable) Regulation 3 of the Securities and Futures (Classes of Investors) Regulations 2018; or (iii) otherwise pursuant to, and in accordance with the conditions of, any other applicable provision of the SFA, in each case subject to conditions set forth in the SFA.
Where our securities are subscribed or purchased under Section 275 of the SFA by a relevant person which is a corporation (which is not an accredited investor (as defined in Section 4A of the SFA)) the sole business of which is to hold investments and the entire share capital of which is owned by one or more individuals, each of whom is an accredited investor, the securities or securities-based derivatives contracts of that corporation shall not be transferable within six months after that corporation has acquired the securities or securities-based derivatives contracts under Section 275 of the SFA except: (1) to an institutional investor or to a relevant person, or to any person arising from an offer referred to in Section 275(1A) or Section 276(4)(c)(ii) of the SFA, (2) where no consideration is or will be given for the transfer, (3) where the transfer is by operation of law, (4) as specified in Section 276(7) of the SFA, or (5) as specified in Regulation 37A of the Securities and Futures (Offers of Investments) (Securities and Securities-based Derivatives Contracts) Regulations 2018.
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Where our securities are subscribed or purchased under Section 275 of the SFA by a relevant person which is a trust (where the trustee is not an accredited investor (as defined in Section 4A of the SFA)) whose sole purpose is to hold investments and each beneficiary of the trust is an accredited investor, the beneficiaries’ rights and interest (howsoever described) in that trust shall not be transferable within six months after that trust has acquired the shares under Section 275 of the SFA except: (1) to an institutional investor or to a relevant person, or to any person arising from an offer referred to in Section 275(1A) or Section 276(4)(c)(ii) of the SFA, (2) where no consideration is or will be given for the transfer, (3) where the transfer is by operation of law, (4) as specified in Section 276(7) of the SFA, or (5) as specified in Regulation 37A of the Securities and Futures (Offers of Investments) (Securities and Securities-based Derivatives Contracts) Regulations 2018.
The securities have not been and may not be approved by the Securities Commission Malaysia, or SC, and this document has not been and will not be registered as a prospectus with the SC under the Malaysian capital markets and services act of 2007, or CMSA. Accordingly, no securities or offer for subscription or purchase of securities or invitation to subscribe for or purchase securities are being made to any person in or from within Malaysia under this document except to persons falling within any of paragraphs 2(g)(i) to (xi) of schedule 5 of the CMSA and distributed only by a holder of a capital markets services license who carries on the business of dealing in securities and subject to the issuer having lodged this prospectus with the SC within seven days from the date of the distribution of this prospectus in Malaysia. The distribution in Malaysia of this document is subject to Malaysian laws. Save as aforementioned, no action has been taken in Malaysia under its securities laws in respect of this document. This document does not constitute and may not be used for the purpose of a public offering or an issue, offer for subscription or purchase, invitation to subscribe for or purchase any securities requiring the approval of the SC or the registration of a prospectus with the SC under the CMSA.
Sweden
This document has not been, and will not be, registered with or approved by Finansinspektionen (the Swedish Financial Supervisory Authority). Accordingly, this document may not be made available, nor may the securities be offered for sale in Sweden, other than under circumstances that are deemed not to require a prospectus under the Swedish Financial Instruments Trading Act (1991:980) (Sw. lag (1991:980) om handel med finansiella instrument). Any offering of securities in Sweden is limited to persons who are “qualified investors” (as defined in the Financial Instruments Trading Act). Only such investors may receive this document, and they may not distribute it or the information contained in it to any other person.
Switzerland
The securities may not be publicly offered in Switzerland and will not be listed on the SIX Swiss Exchange (“SIX”) or on any other stock exchange or regulated trading facility in Switzerland. This document has been prepared without regard to the disclosure standards for issuance prospectuses under art. 652a or art. 1156 of the Swiss Code of Obligations or the disclosure standards for listing prospectuses under art. 27 ff. of the SIX Listing Rules or the listing rules of any other stock exchange or regulated trading facility in Switzerland. Neither this document nor any other offering material relating to the securities may be publicly distributed or otherwise made publicly available in Switzerland.
Neither this document nor any other offering material relating to the securities has been or will be filed with or approved by any Swiss regulatory authority. In particular, this document will not be filed with, and the offer of securities will not be supervised by, the Swiss Financial Market Supervisory Authority (FINMA). This document is personal to the recipient only and not for general circulation in Switzerland.
United Arab Emirates
Neither this document nor the securities have been approved, disapproved or passed on in any way by the Central Bank of the United Arab Emirates or any other governmental authority in the United Arab Emirates, nor has the Company received authorization or licensing from the Central Bank of the United Arab Emirates or any other governmental authority in the United Arab Emirates to market or sell the securities within the United Arab Emirates. This document does not constitute and may not be used for the purpose of an offer or invitation. No services relating to the securities, including the receipt of applications and/or the allotment or redemption of such shares, may be rendered within the United Arab Emirates by the Company.
No offer or invitation to subscribe for securities is valid or permitted in the Dubai International Financial Centre.
United Kingdom
Neither the information in this document nor any other document relating to the offer has been delivered for approval to the Financial Services Authority in the United Kingdom, and no prospectus (within the meaning of section 85 of the Financial Services and Markets Act 2000, as amended (“FSMA”)) has been published or is intended to be published in respect of the securities. This document is issued on a confidential basis to “qualified investors” (within the meaning of section 86(7) of FSMA) in the United Kingdom, and the securities may not be offered or sold in the United Kingdom by means of this document, any accompanying letter or any other document, except in circumstances which do not require the publication of a prospectus pursuant to section 86(1) FSMA. This document should not be distributed, published or reproduced, in whole or in part, nor may its contents be disclosed by recipients to any other person in the United Kingdom.
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Certain legal matters as to the United States federal and New York law in connection with this offering will be passed upon for us by Bevilacqua PLLC. The validity of shares of common stock covered by this prospectus and certain other legal matters as to Nevada law will be passed upon by Fennemore Craig, P.C. Bevilacqua PLLC may rely upon Fennemore Craig, P.C. with respect to matters governed by Nevada law. The underwriters have been represented in connection with this offering by Loeb & Loeb LLP.
Our financial statements as of December 31, 2023 and 2022 and for the years then ended included in this prospectus have been audited by TAAD, LLP, an independent registered public accounting firm, as stated in their report appearing herein. Such financial statements are included in reliance upon the report of such firm given upon their authority as experts in accounting and auditing.
The office of TAAD, LLP is located at 20955 Pathfinder Rd Suite #370, Diamond Bar, CA 91765.
WHERE YOU CAN FIND MORE INFORMATION
We have filed a registration statement, of which this prospectus is a part, on Form S-1 with the SEC relating to this offering. This prospectus does not contain all of the information in the registration statement and the exhibits included with the registration statement. For further information pertaining to us and the shares to be sold in this offering, you should refer to the registration statement and its exhibits. References in this prospectus to any of our contracts, agreements or other documents are not necessarily complete, and you should refer to the exhibits attached to the registration statement for copies of the actual contracts, agreements or documents. The SEC maintains an internet site that contains reports, proxy and information statements and other information regarding issuers that file with the SEC. The website address is http://www.sec.gov.
Upon the effectiveness of the registration statement, we will be subject to the information reporting requirements of the Exchange Act, and, in accordance with the Exchange Act, will file reports, proxy and information statements and other information with the SEC. Such annual, quarterly and special reports, proxy and information statements and other information will be available at http://www.sec.gov. We also anticipate making these documents publicly available, free of charge, on our website at https://toppointtrucking.com/ as soon as reasonably practicable after filing such documents with the SEC. Information on, or accessible through, our website is not part of this prospectus.
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CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED
DECEMBER 31, 2023 AND 2022
INDEX TO AUDITED FINANCIAL STATEMENTS
F-1
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and
Shareholders of Toppoint Holdings, Inc,
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Toppoint Holdings, Inc (the Company) as of December 31, 2023 and 2022, and the related consolidated statements of operations, stockholders’ equity, and cash flows for the years ended December 31, 2023 and 2022, and the related notes (collectively referred to as the financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2023 and 2022, and the results of its operations and its cash flows for the years ended, in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Sincerely,
We have served as the Company’s auditors starting 2022
Diamond Bar, CA
May 13, 2024, except for Notes 5 and 7, as to which the date is June 20, 2024; and Note 2, as to which the date is August 12, 2024.
F-2
Consolidated Balance Sheets
| December 31, 2023 | December 31, 2022 | |||||||
| Assets | ||||||||
| Current Assets | ||||||||
| Cash | $ | 1,455,976 | $ | 744,853 | ||||
| Accounts receivable | 940,622 | 1,500,368 | ||||||
| Contract assets | 230,610 | 317,495 | ||||||
| Deferred offering costs | 205,870 | - | ||||||
| Prepaid expenses and other current assets | 750 | 750 | ||||||
| Total Current Assets | 2,833,828 | 2,563,466 | ||||||
| Other Assets | ||||||||
| Property and equipment, net | 96,073 | 65,377 | ||||||
| Intangible asset | 798,614 | - | ||||||
| Advances to stockholder | 207,016 | - | ||||||
| Right-of-use asset | 843,699 | 1,880,251 | ||||||
| Right-of-use asset – related party | 177,077 | 268,338 | ||||||
| Total Assets | $ | 4,956,307 | $ | 4,777,432 | ||||
| Liabilities and Shareholders’ Equity | ||||||||
| Current Liabilities | ||||||||
| Accounts payable and accrued expenses | $ | 335,596 | $ | 74,195 | ||||
| Income taxes payable | 296,405 | 381,831 | ||||||
| Deferred revenue | 862,841 | 862,841 | ||||||
| Loans payable, current maturities | 3,147 | 3,147 | ||||||
| Lease liability, current maturities | 99,959 | 146,179 | ||||||
| Total Current Liabilities | 1,597,948 | 1,468,193 | ||||||
| Loans payable, net of current maturities | 146,753 | 146,753 | ||||||
| Lease liability, net of current maturities | 462,387 | 928,005 | ||||||
| Deferred tax liability | 382,216 | 409,829 | ||||||
| Total Liabilities | 2,589,304 | 2,952,780 | ||||||
| Shareholders’ Equity | ||||||||
| Preferred stock, $0.0001 par value, 50,000,000 authorized, 0 shares issued and outstanding at December 31, 2023 and December 31, 2022, respectively | - | - | ||||||
| Common stock, $0.0001 par value, 300,000,000 shares authorized, 15,000,000 and shares issued and outstanding at December 31, 2023 and December 31, 2022, respectively | 1,500 | 1,500 | ||||||
| Additional paid-in capital | 139,750 | 139,750 | ||||||
| Retained earnings | 2,225,753 | 1,683,402 | ||||||
| Total Shareholders’ Equity | 2,367,003 | 1,824,652 | ||||||
| Total Liabilities and Shareholders’ Equity | $ | 4,956,307 | $ | 4,777,432 | ||||
The accompanying notes are an integral part of these consolidated financial statements.
F-3
Consolidated Statements of Operations
| For The Year Ended December 31, 2023 | For The Year Ended December 31, 2022 | |||||||
| Revenues | ||||||||
| Non-related party | $ | 18,035,532 | $ | 21,254,848 | ||||
| Related party | - | 230,943 | ||||||
| Total Revenue | 18,035,532 | 21,485,791 | ||||||
| Costs and expenses | ||||||||
| Costs of revenues | 15,386,379 | 16,459,774 | ||||||
| Selling expenses | - | 3,549 | ||||||
| General and administrative expenses | 1,874,837 | 2,571,613 | ||||||
| Total costs and expenses | 17,261,216 | 19,034,936 | ||||||
| Income from operations | 774,316 | 2,450,855 | ||||||
| Other income (expense) | ||||||||
| Interest expense | (10,261 | ) | (20,406 | ) | ||||
| Other income | 156,227 | 62,899 | ||||||
| Total other income (expense) | 145,966 | 42,493 | ||||||
| Income before income taxes | 920,282 | 2,493,348 | ||||||
| Provision for income taxes: | ||||||||
| Current | 405,544 | 394,203 | ||||||
| Deferred | (27,613 | ) | 409,926 | |||||
| 377,931 | 804,129 | |||||||
| Net income | $ | 542,351 | 1,689,219 | |||||
| Basic and diluted net loss per share attributed to common stockholders | $ | 0.04 | 0.14 | |||||
| Weighted Average Number of Shares Outstanding - Basic and Diluted | 15,000,000 | 12,184,932 | ||||||
The accompanying notes are an integral part of these consolidated financial statements.
F-4
Consolidated Statements of Shareholders’ Equity
| Common Stock | Additional Paid-in | Retained | Total Stockholders’ | |||||||||||||||||
| Shares | Amount | Capital | Earnings | Equity | ||||||||||||||||
| Balance – January 1, 2023 | 15,000,000 | $ | 1,500 | $ | 139,750 | $ | 1,683,402 | $ | 1,824,652 | |||||||||||
| Net income | 542,351 | 542,351 | ||||||||||||||||||
| Balance - December 31, 2023 | 15,000,000 | $ | 1,500 | $ | 139,750 | $ | 2,225,753 | $ | 2,367,003 | |||||||||||
| Common Stock | Additional Paid-in | Retained | Total Stockholders’ | |||||||||||||||||
| Shares | Amount | Capital | Earnings | Equity | ||||||||||||||||
| Balance – January 1, 2022 | 7,500,000 | $ | 750 | $ | 139,750 | $ | 371,231 | $ | 511,731 | |||||||||||
| Distributions | - | - | - | (377,048 | ) | (377,048 | ) | |||||||||||||
| Net income | - | - | - | 1,689,219 | 1,689,219 | |||||||||||||||
| Issuance of common stock | 7,500,000 | 750 | - | - | 750 | |||||||||||||||
| Balance - December 31, 2022 | 15,000,000 | $ | 1,500 | $ | 139,750 | $ | 1,683,402 | $ | 1,824,652 | |||||||||||
The accompanying notes are an integral part of these consolidated financial statements.
F-5
Consolidated Statements of Cash Flows
| For The Year Ended December 31, 2023 | For The Year Ended December 31, 2022 | |||||||
| Cash flows from operating activities: | ||||||||
| Net income | $ | 542,351 | $ | 1,689,219 | ||||
| Adjustments to reconcile from net income to net cash provided by (used in) operating activities: | ||||||||
| Amortization of ROU | 452,669 | 96,465 | ||||||
| Non-cash rent expense | 433,574 | - | ||||||
| Depreciation | 54,900 | - | ||||||
| Deferred taxes | (27,613 | ) | 409,829 | |||||
| Changes in operating assets and liabilities | ||||||||
| Accounts receivable | 559,746 | (948,898 | ) | |||||
| Contract asset | 86,885 | (317,495 | ) | |||||
| Accounts payable | 261,399 | (114,084 | ) | |||||
| Income taxes payable | (85,426 | ) | 381,831 | |||||
| Deferred revenue | - | 862,841 | ||||||
| Lease payable | (270,266 | ) | (1,170,869 | ) | ||||
| Net cash provided by (used in) operating activities | 2,008,219 | 888,839 | ||||||
| Cash flows from investing activities: | ||||||||
| Purchase of intangible assets | (798,614 | ) | - | |||||
| Advances to stockholder | (207,016 | ) | - | |||||
| Purchases of property and equipment | (85,596 | ) | (65,377 | ) | ||||
| Net cash provided by (used in) investing activities | (1,091,226 | ) | (65,377 | ) | ||||
| Cash flows from financing activities: | ||||||||
| Distributions | - | (377,048 | ) | |||||
| Deferred offering costs | (205,870 | ) | - | |||||
| Repayment of loan payable | - | (141,499 | ) | |||||
| Net cash provided by financing activities | (205,870 | ) | (518,547 | ) | ||||
| Net increase in cash | 711,123 | 304,915 | ||||||
| Cash, beginning of year | 744,853 | 439,938 | ||||||
| Cash, end of year | $ | 1,455,976 | 744,853 | |||||
| Supplemental disclosure of cash flow information: | ||||||||
| Cash paid during the year for: | ||||||||
| Interest | $ | 20,406 | $ | 20,406 | ||||
| Income taxes | $ | - | $ | - | ||||
| Supplemental disclosure of non-cash investing and financing activities: | ||||||||
| Initial value of ROU | $ | - | $ | 2,245,053 | ||||
The accompanying notes are an integral part of these consolidated financial statements.
F-6
Notes to Consolidated Financial Statements
December 31, 2023 and 2022
NOTE 1: NATURE OF OPERATIONS
Nature of Operations
In these notes, the terms “us”, “we”, “it”, “its”, the “Company” or “our” refer to Toppoint Holdings Inc. The Company was incorporated during August 2022 in the State of Nevada. During September 2022, we entered into a Share Exchange Agreement with Toppoint, Inc. and its sole stockholder and Chief Executive Officer of the Company, Hok C. Chan (“Former Owner”), pursuant to which the sole stockholder exchanged all common stock in Toppoint, Inc. for 7,500,000 shares of common stock of the Company. As a result, we acquired all of the issued and outstanding shares of common stock of Toppoint, Inc., making it our wholly-owned subsidiary (“Common Control Transfer”). The Former Owner owned 100% of Toppoint, Inc., and still effectively controls the Company after the merger. Since the exchange was a transaction between entities under common control, the net assets received by the Company were accounted for at historical cost as of January 1, 2022, the earliest date of presentation of these consolidated financial statements. This is a retrospective presentation for all equity related disclosures, including issued shares and earnings per share, which have been revised to reflect the effects of the commonly controlled transaction with ASC 250 “Accounting Changes and Errors” as of January 1, 2022. ASC 250 requires that a change in the reporting entity from reorganization entities under common control, be retrospectively applied to the financials statements of all prior periods when the financial statements are issued for a period that includes the date the change in reporting entity of the transaction occurred.
We are a truckload services and solutions provider focused on the recycling export supply chain. We have become a key player in the New Jersey and Pennsylvania regional trucking market for waste paper, evidenced by our significant market share where we accounted for approximately 34% of the waste paper export drayage volumes through New Jersey’s ports and approximately 30% through Philadelphia’s ports, according to data sourced from IHS Markit. In addition to waste paper, our portfolio also includes the shipment of scrap metal and wooden logs from large waste companies, recycling centers and commodity traders to the ports of Newark, NJ, and Philadelphia, PA. We continue to expand our footprints domestically and intend to internationally and have ventured into the recycling export transport market of Tampa and Miami, FL recently.
Basis of Presentation and Preparation
The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). The consolidated financial statements and accompanying notes are the representations of the Company’s management, who is responsible for their integrity and objectivity. In the opinion of the Company’s management, the consolidated financial statements reflect all adjustments, which are normal and recurring in nature, necessary for fair financial statement presentation.
Principles of Consolidation
The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary, Toppoint, Inc. All intercompany balances and transactions are eliminated.
NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Use of Estimates
The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. The Company regularly evaluates estimates and assumptions related to the valuation of accounts receivables, valuation of long-lived assets, intangible assets, and accounts payable and accrued expenses. The Company bases its estimates and assumptions on current facts, historical experience and various other factors that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the accrual of costs and expenses that are not readily apparent from other sources. The actual results experienced by the Company may differ materially and adversely from the Company’s estimates. To the extent there are material differences between the estimates and the actual results, future results of operations will be affected.
Cash and Cash Equivalents
The Company considers all highly liquid instruments with maturity of three months or less at the time of issuance to be cash equivalents. The Company had $1,455,976 and $744,853 cash and cash equivalents at December 31, 2023 and 2022, respectively.
Property and Equipment
Property and equipment are recorded at cost, less accumulated depreciation. The Company provides for depreciation on a straight-line basis over the estimated useful lives of the assets. Leasehold improvements are amortized over the shorter of the lease term or the estimated useful life of the related assets when they are placed into service. The Company evaluates property and equipment for impairment periodically to determine if changes in circumstances or the occurrence of events suggest the carrying value of the asset or asset group may not be recoverable. Maintenance and repairs are charged to operations as incurred. Expenditures which substantially increase the useful lives of the related assets are capitalized. As of December 31, 2023 and 2022, the Company’s property and equipment balance consisted of leasehold improvements. Such amounts were not placed into service as of December 31, 2022.
F-7
Intangible Assets
Intangible assets consist of internally developed software in the amount of $798,614 as of December 31, 2023. The software has not been placed into service and has thus not been amortized to date. The software is being developed to utilize AI based technology and synch with custom software designed specifically for the Company’s needs in the export drayage vertical. The software will offer a variety of features and benefits that allow AI to scale and automate business operations. The Company evaluated intangible assets for impairment during the year ended December 31,2023 and determined that there are no impairment losses.
Long-lived Assets
In accordance with ASC 360, “Property, Plant, and Equipment”, the Company tests long-lived assets or asset groups for recoverability when events or changes in circumstances indicate that their carrying amount may not be recoverable. Circumstances which could trigger a review include, but are not limited to: significant decreases in the market price of the asset; significant adverse changes in the business climate or legal factors; accumulation of costs significantly in excess of the amount originally expected for the acquisition or construction of the asset; current period cash flow or operating losses combined with a history of losses or a forecast of continuing losses associated with the use of the asset; and current expectation that the asset will more likely than not be sold or disposed of significantly before the end of its estimated useful life. Recoverability is assessed based on the carrying amount of the asset compared to the estimated future undiscounted cash flows expected to result from the use and the eventual disposal of the asset, as well as specific appraisal in certain instances. An impairment loss equal to the excess of the carrying value over the assets fair market value is recognized when the carrying amount exceeds the undiscounted cash flows. The impairment loss is recorded as an expense and a direct write-down of the asset. No impairment loss was recorded during the years ended December 31, 2023 and 2022.
Deferred Offering Costs
Deferred offering costs represents specific incremental costs incurred by the Company directly attributable to a proposed offering of securities. These amounts have been deferred and will be charged against the gross proceeds of the offering. These offering costs include fees paid to underwriters, attorneys, accountants as well as printers and other third parties directly related to the offering. Costs such as management salaries or other general administrative expenses that are not incremental to the offering are not included in the deferred costs. Deferred offering costs amounted to $205,870 as of December 31, 2023.
Revenue Recognition
The Company’s revenue recognition policy is based on the revenue recognition criteria established under the Financial Accounting Standards Board (“FASB”) – Accounting Standards Codification 606 “Revenue From Contracts With Customers” (“ASC 606”), which has established a five-step process to govern contract revenue and satisfy each element is as follows: (1) identify the contract(s) with a customer; (2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to the performance obligations in the contract; and (5) recognize revenue when or as you satisfy a performance obligation. The Company records the revenue once all the above steps are completed and services are performed.
The Company’s contracts with customers only include one performance obligation, which is to provide the delivery of truckload services. Revenue is recognized in the gross amount at a point in time when the service is completed and the benefit of our services has been transferred to the customer. This has been determined to be when the goods are delivered to its final destination point. At this point in time, the Company has a present right to payment, and the performance obligation has been met. It is not until delivery is completed that the Company completed its performance obligation. The customer is not simultaneously receiving and consuming the benefit of the performance until the delivery to its final destination. The Company is primarily responsible for fulfilling the promise to provide the specified service to its customers. In addition, the Company has discretion in establishing the price for the specified services and bears risk of loss of goods until delivery is completed. Transport time from pick up to the delivery of truckloads is typically within the same day. Revenue is measured as the amount of consideration the Company expects to be entitled to in exchange for those services. Because revenue is recognized at the point in time services are sold to customers, there are no contract liability balances except for when an amount is billed before the service is performed, however there may be contract asset balances for any services provided that were not billed. The Company’s revenue recognition is the same for whether the Company engages independent contractors or its brokerage model for owner operators.
Disaggregation of Revenues
The Company’s revenues is principally derived from providing truckload services focused on the recycling export supply chain. The Company disaggregates their revenue by the type of commodity, as shown below for the years ending December 31, 2023 and 2022:
| 2023 | 2022 | |||||||
| Commodity | ||||||||
| Paper | $ | 13,476,877 | $ | 15,011,459 | ||||
| Import | 2,798,629 | 3,193,701 | ||||||
| Metal | 1,076,718 | 787,031 | ||||||
| Log | 447,995 | 2,341,591 | ||||||
| Plastic | 235,313 | 152,009 | ||||||
| $ | 18,035,532 | $ | 21,485,791 | |||||
F-8
Accounts Receivable and Contract Assets
Accounts receivable represent revenue earned for which the Company has not yet received payment. Accounts receivable are recorded at the invoiced amount and adjusted for amounts management expects to collect from balances outstanding at period-end. The Company estimates the allowance for doubtful accounts based on an analysis of specific accounts and an assessment of the customer’s ability to pay, among other factors. At December 31, 2023 and 2022 no allowance for doubtful accounts was recorded. The balance of accounts receivable as of December 31, 2023, 2022 and 2021, amounted to $940,622, $1,500,368 and $551,570, respectively.
Contract assets include unbilled amounts from services which have been provided and revenue recognized. Contract asset balances amounted to $230,610 and $317,495 as of December 31, 2023 and 2022, respectively.
Contract Liabilities
Contract liabilities included deferred revenue which includes monies collected in the advance of revenue recognition. Deferred revenue amounted to $862,841 as of December 31, 2023 and 2022. The Company expected to recognize revenue from its deferred revenue upon completion of its performance obligation on the specific contracts. As of December 31, 2023 and 2022, the Company did not support its full satisfaction of its performance obligations. Our customers have a right of refund, within two years of services provided, or monies received. Because the Company cannot support the completion of revenue recognition on this balance, the Company will record other income for the amount of advances received upon expiration of the two year right of refund period.
Costs of revenues
Costs of revenue includes all directly related costs to deliver our services, which includes independent contractor drivers, insurance, truck maintenance costs, equipment rental and other directly related costs. Such costs are expensed as incurred.
Other income
Other income consists of forgiveness of the Paycheck Protection Program Loan in the amount of $29,075 as described in Note 4 during the year ending December 31, 2022 as well as other income which does not fall under the guidance of ASC 606 during the years ended December 31, 2023 and 2022 in the amount of $156,227 and $33,824, respectively. Such amounts were determined to not be under the guidance of ASC 606 because they do not represent an output of the Company’s ongoing or major operations. The amounts besides the forgiveness of the Paycheck Protection Program Loan were from the sale of scrap material which is one time service the Company does not currently perform in.
Income Taxes
Historically and through December 31, 2021, the Company elected, by consent of its stockholders, to be taxed under the provisions of Subchapter S of the Internal Revenue Code and applicable state statutes. The Company made a qualified Subchapter S subsidiary election with the Internal Revenue Service and accordingly the Company’s income is to be included in the Parent’s income tax return for Federal tax purposes. The Company has also elected S Corporation status for Pennsylvania State tax purposes. The Company revoked its Subchapter S election with the Internal Revenue Service and Pennsylvania as of January 1, 2022.
As of January 1 2022, the Company accounts for income taxes utilizing the asset and liability approach. Under this approach, deferred taxes represent the future tax consequences expected to occur when the reported amounts of assets and liabilities are recovered or paid. The provision for income taxes generally represents income taxes paid or payable for the current year plus the change in deferred taxes during the year. Deferred taxes result from the differences between the financial and tax bases of the Company’s assets and liabilities and are adjusted for changes in tax rates and tax laws when changes are enacted.
The calculation of tax liabilities involves dealing with uncertainties in the application of complex tax regulations. The Company recognizes liabilities for anticipated tax audit issues based on the Company’s estimate of whether, and the extent to which, additional taxes will be due. If payment of these amounts ultimately proves to be unnecessary, the reversal of the liabilities would result in tax benefits being recognized in the period when the liabilities are no longer determined to be necessary. If the estimate of tax liabilities proves to be less than the ultimate assessment, a further charge to expense would result.
F-9
The Company evaluates uncertain income tax positions taken or expected to be taken in a tax return for recognition in its consolidated financial statements. The Company was not required to recognize any amounts from uncertain tax positions for the years ended December 31, 2023 and 2022. The Company’s conclusions regarding uncertain tax positions may be subject to review and adjustment at a later date based upon ongoing analyses of tax laws, regulations and interpretations thereof, as well as other factors. Generally, federal, state and local authorities may examine the Company’s tax returns for three years from the date of filing.
Earnings Per Share
The Company computes net earnings per share in accordance with ASC 260, “Earnings per Share”. ASC 260 requires presentation of both basic and diluted net earnings per share (“EPS”) on the face of the statement of operations. Basic EPS is computed by dividing earnings (loss) available to common shareholders (numerator) by the weighted average number of shares outstanding (denominator) during the period. Diluted EPS gives effect to all dilutive potential common shares outstanding during the period using the treasury stock method and convertible preferred stock using the if-converted method. In computing diluted EPS, the average stock price for the period is used in determining the number of shares assumed to be purchased from the exercise of warrants, options, and restricted stock units. Diluted EPS excludes all dilutive potential shares if their effect is anti-dilutive. The Company had no potentially dilutive securities as of December 31, 2023 and 2022. Due to the Common Control Transfer, the weighted average number of shares was retroactively restated as of January 1, 2022.
Recent Accounting Pronouncements
In February 2016, the FASB issued Accounting Standards Update (“ASU”) 2016-02, “Leases (Topic 842).” The objective of this update is to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. This ASU is effective for fiscal years beginning after December 15, 2021, and interim periods within fiscal years beginning after December 15, 2022 and is to be applied utilizing a modified retrospective approach. The Company has adopted this guidance as of January 1, 2022, and it did have a material impact on its consolidated financial statements as now the Company capitalizes all right-of-use assets and lease liabilities.
In June 2016, the FASB issued ASU 2016-13, “Financial Instruments - Credit Losses (“Topic 326”)”. The ASU introduces a new accounting model, the Current Expected Credit Losses model (“CECL”), which requires earlier recognition of credit losses and additional disclosures related to credit risk. The CECL model utilizes a lifetime expected credit loss measurement objective for the recognition of credit losses at the time the financial asset is originated or acquired. ASU 2016-13 is effective for annual period beginning after December 15, 2022, including interim reporting periods within those annual reporting periods. The Company has adopted this guidance as of January 1, 2023, and it did not have a material impact on its consolidated financial statements.
NOTE 3: PROPERTY AND EQUIPMENT, NET AND INTANGIBLE ASSETS
Property and equipment consist of the following:
| December 31, 2023 | December 31, 2022 | |||||||
| Leasehold improvements | $ | 150,973 | $ | 65,377 | ||||
| Less: accumulated depreciation | (54,900 | ) | ||||||
| Property and Equipment, net | $ | 96,073 | $ | 65,377 | ||||
F-10
Depreciation expense amounted to $54,900 for the year ended December 31, 2023.
Intangible assets consist of the following at December 31, 2023:
| Software development | $ | 798,614 | ||
| Less: accumulated amortization | - | |||
| Software development, net | $ | 798,614 |
NOTE 4 – LOANS PAYABLE
Loans payable is summarized as follows:
| Description | Loan Date | Loan Amount | Interest Rate | Maturity Date | Remaining Principal Balance as of December 31, 2023 | Remaining Principal Balance as of December 31, 2022 | ||||||||||||||
| Revolving loan | July 2021 | $ | 147,015 | Weekly rate of 0.477% | October 2022 | $ | - | $ | - | |||||||||||
| Economic Injury Disaster Loan (“EIDL”) | May 2020 | $ | 149,000 | 3.75 | % | May 2050 | 149,900 | 149,900 | ||||||||||||
| Paycheck Protection Program Loan (“PPP”) | February 2021 | $ | 29,075 | 1 | % | February 2023 | - | - | ||||||||||||
| 149,900 | 149,900 | |||||||||||||||||||
| Less current maturities | - | - | ||||||||||||||||||
| $ | 149,900 | $ | 149,900 | |||||||||||||||||
The Revolving loan was entered into during July 2021, and called for monthly payments of principal and interest. Such loan was paid off during 2022.
The EIDL was entered into during May 2020. Interest accrues at 3.75% per annum. Under the original agreement, principal payments were deferred, and the maturity date is May 2050.
During February 2021, the Company entered into a promissory note with an approved lender in the principal amount of $29,075. The note was approved under the provisions of the Coronavirus, Aid, Relief and Economic Security Act (the “CARES Act”) and the terms of the Paycheck Protection Program (“PPP”) of the U.S. Small Business Administration’s 7(a) Loan Program. The note accrues interest at a rate of 1% per annum with no payments due for a period defined under the CARES Act. The original maturity date is February 2023. The final payment will consist of all the unpaid principal plus accrued and unpaid interest accrued during the deferral period.
The note may be prepaid by the Company at any time prior to the maturity date with no prepayment penalties. Additionally, any portion of the notes up to the entire principal and accrued interest balance may be forgiven in the event the Company satisfies certain requirements as determined by the CARES Act. The Company received formal forgiveness during 2022 and recorded $29,075 in other income.
F-11
Interest expense on loans payable amounted to $10,261 and $20,406 for the years ended December 31, 2023 and 2022, respectively.
At December 31, 2023, combined scheduled maturities of the outstanding debt are as follows:
| For the Years Endings: | ||||
| 2024 | $ | 3,147 | ||
| 2025 | 3,147 | |||
| 2026 | 3,147 | |||
| 2027 | 3,147 | |||
| 2028 | 3,147 | |||
| Thereafter | 134,165 | |||
| $ | 149,900 | |||
NOTE 5 – LEASES
The Company leases an office and automobiles under non-cancelable operating and finance lease agreements. The leases have remaining lease terms ranging from three to five years.
Supplemental balance sheet information related to leases is as follows:
| Balance Sheet Location | December 31, 2023 | December 31, 2022 | ||||||||
| Operating Leases | ||||||||||
| Right-of-use assets, net | $ | 843,699 | $ | 1,880,251 | ||||||
| Right-of-use assets – related party, net | 177,077 | 268,338 | ||||||||
| Current liabilities | Lease liability, current maturities | (99,959 | ) | (146,179 | ) | |||||
| Non-current liabilities | Lease liability, net of current maturities | (462,387 | ) | (928,005 | ) | |||||
| Total operating lease liabilities | $ | (562,346 | ) | $ | (1,074,184 | ) | ||||
| Weighted Average Remaining Lease Term | ||||||||||
| Operating leases | 3.68 years | 4.51 years | ||||||||
| Weighted Average Discount Rate | ||||||||||
| Operating leases | 25 | % | 25 | % | ||||||
The Company calculated the implicit rate on the automobile leases with information contained in the respective leases. Based upon the lease agreements, the Company was able to calculate such amount.. As the office lease did not provide an implicit rate, the Company used an incremental borrowing rate based on the information available at the lease commencement date in determining the present value of the lease payments, which is reflective of the specific term of the leases and economic environment of each geographic region.
The Company’s leased automobiles are currently used for promotional services. These leases often contain large material upfront downpayments due to the fact that they are expensive automobiles which are necessary for business development. As of December 31, 2022, the Company had three automobile leases, of which two were early terminated during 2023. Upon termination, the Company removed the remaining right of use asset and lease liability, resulting in an early termination charge of $433,574 which is included in general and administrative expenses for the year ending December 31, 2023.
The Company’s office lease is leased from a related party, which is a family member of the chief executive officer.
F-12
Anticipated future lease costs, which are based in part on certain assumptions to approximate minimum annual rental commitments under non-cancelable leases, are as follows:
| Year Ending December 31, | Operating | |||
| 2024 | $ | 240,018 | ||
| 2025 | 240,018 | |||
| 2026 | 240,018 | |||
| 2027 | 180,014 | |||
| Total lease payments | 900,068 | |||
| Less: Imputed interest | 337,722 | |||
| Present value of lease liabilities | $ | 562,346 | ||
Total lease expense for leases accounted for under ASC 842 amounted to $524,385 and $130,242 for the years ending December 31, 2023 and 2022, respectively.
The Company has various other leases which do not fall under the guidance of ASC 842, primarily because there is not an identified asset. Such leases are not included in any amounts noted above.
NOTE 6 – COMMITMENTS AND CONTINGENCIES
Litigation Costs and Contingencies
From time to time, the Company may become involved in various lawsuits and legal proceedings, which arise in the ordinary course of business. Litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm business. Management is currently not aware of any such legal proceedings or claims that could have, individually or in the aggregate, a material adverse effect on our business, financial condition, or operating results.
NOTE 7 – INCOME TAXES
The Company’s provision for income taxes consists of the following for the year ended December 31, 2023 and December 31, 2022:
| 2023 | 2022 | |||||||
| Current: | ||||||||
| Federal | $ | 303,053 | $ | 294,652 | ||||
| State and local | 102,491 | 99,650 | ||||||
| Total current | 405,544 | 294,302 | ||||||
| Deferred: | ||||||||
| Federal | $ | (20,634 | ) | $ | 306,254 | |||
| State and local | (6,979 | ) | 103,574 | |||||
| Total deferred | (27,613 | ) | 409,828 | |||||
| Income tax provision | $ | 377,931 | $ | 804,130 | ||||
A reconciliation of the federal statutory rate of 21% for the years ended December 31, 2023 and 2022 to the effective rate for income from operations before income taxes is as follows:
| 2023 | 2022 | |||||||
| Benefit for income taxes at federal statutory rate | 21.00 | % | 21.00 | % | ||||
| State and local income taxes, net of federal benefit | 7.10 | 7.10 | ||||||
| Right-of-use asset | 9.44 | — | ||||||
| Meals and entertainment | 1.06 | — | ||||||
| Fines and penalties | 0.14 | — | ||||||
| Opening balance sheet | — | 4.15 | ||||||
| Effective income tax rate | 38.74 | % | 32.25 | % | ||||
F-13
The 4.15% opening balance sheet adjustment resulted from the January 1, 2022 conversion from a Subchapter S Corporation to a C Corporation under the Internal Revenue Code.
The tax effects of these temporary differences along with the net operating losses, net of an allowance for credits, have been recognized as deferred tax assets (liabilities) at December 31, 2023 and 2022 as follows:
| 2023 | 2022 | |||||||
| Accounts and contracts receivable | $ | 329,141 | $ | 510,858 | ||||
| Accounts payable and accrued expenses | (94,309 | ) | (20,850 | ) | ||||
| Depreciation | 18,556 | - | ||||||
| Lease liability | 128,830 | (80,180 | ) | |||||
| Net deferred tax liability | $ | 382,216 | $ | 409,828 | ||||
NOTE 8: STOCKHOLDERS’ EQUITY
At December 31, 2023, the Company had 300,000,000 shares of common stock authorized with a par value of $0.0001, and 50,000,000 shares of preferred stock authorized with a par value of $0.0001.
On August 16, 2022, the Company issued 7,500,000 shares of common stock to four investors at a per share purchase price of $0.0001. The four investors were the founders of the Company. On September 29, 2022, the Company issued 7,500,000 shares of common stock at par, in conjunction with the Common Control Transfer. Prior to the Common Control Transfer, the Former Owner, owned 100% of Toppoint, Inc. Additionally, the Company and the current shareholders entered into a Voting Agreement and Irrevocable Proxy (the “Voting Agreement”), whereas each shareholder, unconditionally and irrevocably appoints the Former Owner, as each shareholders proxy to attend and vote at each annual general meeting of the shareholders of the Company and at any other meetings of the shareholders of the Company called, and at every adjournment or postponement thereof, and on every action or approval by written consent or resolution of the shareholders of the Company. Based upon the underlying agreement, the Former Owner, effectively controls the Company.
Equity Incentive Plan
On October 1, 2022, the Company established the 2022 Equity Incentive Plan. The purpose of the Plan is to grant restricted stock, stock options and other forms of incentive compensation to our officers, employees, directors and consultants. The maximum number of shares of common stock that may be issued pursuant to awards granted under the Plan is 2,250,000 shares. Cancelled and forfeited stock options and stock awards may again become available for grant under the Plan. Awards that may be granted include: (a) Incentive Stock Options, (b) Non-qualified Stock Options, (c) Stock Appreciation Rights, (d) Restricted Awards, (e) Performance Share Awards, and (f) Performance Compensation Awards. As of December 31, 2023, all shares remain available for issuance under the Plan.
NOTE 9: CONCENTRATIONS
Concentration of Credit Risk
The Company maintains its cash in bank and financial institution deposits that at times may exceed federally insured limits. The Company has not experienced any losses in such accounts through December 31, 2023. The Company’s bank balances exceeded FDIC insured amounts at times during the years ended December 31, 2023 and 2022.
NOTE 10: RELATED PARTY TRANSACTIONS
The Company generated revenue from a related party in the amount of $0 and $230,943 for the years ended December 31, 2023 and 2022, respectively. Such related party is a family member of the chief executive officer.
As disclosed in Note 5, the Company leases office space from a related party. Rent expense for this lease amounted to $100,000 and $25,000 for the years ending December 31, 2023 and 2022, respectively. The Company prepaid $300,000 to the related party for the entire amount of lease payments due during the year ended December 31, 2022.
The Company incurred consulting fees of $534,618 and $1,044,512 from a related party for the years ended December 31, 2023 and 2022, respectively. Additionally, during 2023, additional amounts of $2,587,522 were paid to a related party for reimbursement of expenses. Such related party is a company owned by our Chief Financial Officer.
As of December 31, 2023, the Company advanced $207,016 to the Former Owner. Such amount is non-interest bearing and due on demand.
NOTE 11: SUBSEQUENT EVENTS
The Company evaluated subsequent events through May 13, 2024, to ensure that this filing includes appropriate disclosures of events both recognized in the consolidated financial statements as of December 31, 2023, and events which occurred subsequent to December 31, 2023 but were not recognized in the consolidated financial statements. The Company has determined that there were no subsequent events which required recognition, adjustment to or disclosure in the consolidated financial statements.
The below are Events (Unaudited) Subsequent to the Date of the Independent Auditor’s Report:
On July 1, 2024, we issued Hok C Chan a promissory note for advances he may provide to us from time to time, including $600,000 provided on July 1, 2024. The promissory note bears an annual interest rate of 36.88% and outstanding amounts are due 90 days after the delivery of the respective advance to the Company or the respective direct payment to the Company’s creditor(s).
F-14
TOPPOINT HOLDINGS INC.
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED
MARCH 31, 2024 AND 2023
INDEX TO UNAUDITED FINANCIAL STATEMENTS
F-15
Condensed Consolidated Balance Sheets
(Unaudited)
| March 31, 2024 | December 31, 2023 | |||||||
| Assets | ||||||||
| Current Assets | ||||||||
| Cash | $ | 1,237,471 | $ | 1,455,976 | ||||
| Accounts receivable | 915,682 | 940,622 | ||||||
| Contract assets | 290,955 | 230,610 | ||||||
| Deferred offering costs | 417,146 | 205,870 | ||||||
| Prepaid expenses and other current assets | 750 | 750 | ||||||
| Total Current Assets | 2,862,004 | 2,833,828 | ||||||
| Other Assets | ||||||||
| Property and equipment, net | 82,348 | 96,073 | ||||||
| Intangible asset | 798,614 | 798,614 | ||||||
| Advances to stockholder | 229,934 | 207,016 | ||||||
| Right-of-use asset | 804,108 | 843,699 | ||||||
| Right-of-use asset – related party | 153,687 | 177,077 | ||||||
| Total Assets | $ | 4,930,695 | $ | 4,956,307 | ||||
| Liabilities and Shareholders’ Equity | ||||||||
| Current Liabilities | ||||||||
| Accounts payable and accrued expenses | $ | 186,005 | $ | 335,596 | ||||
| Income taxes payable | 309,772 | 296,405 | ||||||
| Deferred revenue | 862,841 | 862,841 | ||||||
| Loans payable, current maturities | 3,147 | 3,147 | ||||||
| Lease liability, current maturities | 106,859 | 99,959 | ||||||
| Total Current Liabilities | 1,468,624 | 1,597,948 | ||||||
| Loans payable, net of current maturities | 146,753 | 146,753 | ||||||
| Lease liability, net of current maturities | 432,940 | 462,387 | ||||||
| Deferred tax liability | 404,285 | 382,216 | ||||||
| Total Liabilities | 2,452,602 | 2,589,304 | ||||||
| Shareholders’ Equity | ||||||||
| Preferred stock, $0.0001 par value, 50,000,000 authorized, 0 shares issued and outstanding at March 31, 2024 and December 31, 2023, respectively | - | - | ||||||
| Common stock, $0.0001 par value, 300,000,000 shares authorized, 15,000,000 and shares issued and outstanding at March 31, 2024 and December 31, 2023, respectively | 1,500 | 1,500 | ||||||
| Additional paid-in capital | 139,750 | 139,750 | ||||||
| Retained earnings | 2,336,843 | 2,225,753 | ||||||
| Total Shareholders’ Equity | 2,478,093 | 2,367,003 | ||||||
| Total Liabilities and Shareholders’ Equity | $ | 4,930,695 | $ | 4,956,307 | ||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
F-16
Condensed Consolidated Statements of Operations (Unaudited)
| For The Three Months Ended March 31, 2024 | For The Three Months Ended March 31, 2023 | |||||||
| Revenues | ||||||||
| Non-related party | $ | 3,733,896 | $ | 5,723,313 | ||||
| Total Revenue | 3,733,896 | 5,723,313 | ||||||
| Costs and expenses | ||||||||
| Costs of revenues | 3,254,946 | 4,172,789 | ||||||
| General and administrative expenses | 331,055 | 1,312,069 | ||||||
| Total costs and expenses | 3,586,001 | 5,484,858 | ||||||
| Income from operations | 147,895 | 238,455 | ||||||
| Other income (expense) | ||||||||
| Interest expense | (1,369 | ) | - | |||||
| Other income | - | 152,768 | ||||||
| Total other income (expense) | (1,369 | ) | 152,768 | |||||
| Income before income taxes | 146,526 | 391,223 | ||||||
| Provision for income taxes: | ||||||||
| Current | 13,367 | 103,398 | ||||||
| Deferred | 22,069 | - | ||||||
| 35,436 | 103,398 | |||||||
| Net income | $ | 111,090 | 287,825 | |||||
| Basic and diluted net loss per share attributed to common stockholders | $ | 0.01 | 0.02 | |||||
| Weighted Average Number of Shares Outstanding - Basic and Diluted | 15,000,000 | 15,000,000 | ||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
F-17
Consolidated Statements of Shareholders’ Equity (Unaudited)
| Common Stock | Additional Paid-in | Retained | Total | |||||||||||||||||
| Shares | Amount | Capital | Earnings | Equity | ||||||||||||||||
| Balance – January 1, 2024 | 15,000,000 | $ | 1,500 | $ | 139,750 | $ | 2,225,753 | $ | 2,367,003 | |||||||||||
| Net income | 111,090 | 111,090 | ||||||||||||||||||
| Balance - March 31, 2024 | 15,000,000 | $ | 1,500 | $ | 139,750 | $ | 2,336,843 | $ | 2,478,093 | |||||||||||
| Common Stock | Additional Paid-in | Retained | Total | |||||||||||||||||
| Shares | Amount | Capital | Earnings | Equity | ||||||||||||||||
| Balance – January 1, 2023 | 15,000,000 | $ | 750 | $ | 139,750 | $ | 1,683,402 | $ | 1,824,652 | |||||||||||
| Net income | - | - | - | 287,825 | 287,825 | |||||||||||||||
| Balance – March 31, 2023 | 15,000,000 | $ | 1,500 | $ | 139,750 | $ | 1,971,227 | $ | 2,112,477 | |||||||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
F-18
Consolidated Statements of Cash Flows (Unaudited)
| For The Three Months Ended March 31, 2024 | For The Three Months Ended March 31, 2023 | |||||||
| Cash flows from operating activities: | ||||||||
| Net income | $ | 111,090 | $ | 287,825 | ||||
| Adjustments to reconcile from net income to net cash provided by operating activities: | ||||||||
| Amortization of ROU | 62,982 | 515,046 | ||||||
| Non-cash rent expense | - | 433,574 | ||||||
| Depreciation | 13,725 | 13,725 | ||||||
| Deferred taxes | 22,069 | - | ||||||
| Changes in operating assets and liabilities | ||||||||
| Accounts receivable | 24,940 | 423,515 | ||||||
| Contract asset | (60,345 | ) | (75,590 | ) | ||||
| Accounts payable | (149,593 | ) | 91,299 | |||||
| Income taxes payable | 13,367 | 103,398 | ||||||
| Lease payable | (22,546 | ) | (215,036 | ) | ||||
| Net cash provided by operating activities | 15,689 | 1,577,756 | ||||||
| Cash flows from investing activities: | ||||||||
| Purchase of intangible assets | - | (340,000 | ) | |||||
| Advances to stockholder | (22,918 | ) | (20,004 | ) | ||||
| Purchases of property and equipment | - | (70,646 | ) | |||||
| Net cash used in investing activities | (22,918 | ) | (430,650 | ) | ||||
| Cash flows from financing activities: | ||||||||
| Deferred offering costs | (211,276 | ) | - | |||||
| Net cash used in financing activities | (211,276 | ) | - | |||||
| Net increase (decrease) in cash | (218,505 | ) | 1,147,106 | |||||
| Cash, beginning of period | 1,455,976 | 744,853 | ||||||
| Cash, end of period | $ | 1,237,471 | 1,891,959 | |||||
| Supplemental disclosure of cash flow information: | ||||||||
| Cash paid during the period for: | ||||||||
| Interest | $ | - | $ | - | ||||
| Income taxes | $ | - | $ | - | ||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
F-19
Notes to Condensed Consolidated Financial Statements
March 31, 2024 and 2023
NOTE 1: NATURE OF OPERATIONS
Nature of Operations
In these notes, the terms “us”, “we”, “it”, “its”, the “Company” or “our” refer to Toppoint Holdings Inc. The Company was incorporated during August 2022 in the State of Nevada. During September 2022, we entered into a Share Exchange Agreement with Toppoint, Inc. and its sole stockholder and Chief Executive Officer of the Company, Hok C. Chan (“Former Owner”), pursuant to which the sole stockholder exchanged all common stock in Toppoint, Inc. for 7,500,000 shares of common stock of the Company. As a result, we acquired all of the issued and outstanding shares of common stock of Toppoint, Inc., making it our wholly-owned subsidiary (“Common Control Transfer”). The Former Owner owned 100% of Toppoint, Inc., and still effectively controls the Company after the merger. Since the exchange was a transaction between entities under common control, the net assets received by the Company were accounted for at historical cost as of January 1, 2022, the earliest date of presentation of these condensed consolidated financial statements. This is a retrospective presentation for all equity related disclosures, including issued shares and earnings per share, which have been revised to reflect the effects of the commonly controlled transaction with ASC 250 “Accounting Changes and Errors” as of January 1, 2022. ASC 250 requires that a change in the reporting entity from reorganization entities under common control, be retrospectively applied to the financials statements of all prior periods when the financial statements are issued for a period that includes the date the change in reporting entity of the transaction occurred.
We are a truckload services and solutions provider focused on the recycling export supply chain. We have become a key player in the New Jersey and Pennsylvania regional trucking market for waste paper, evidenced by our significant market share where we accounted for approximately 34% of the waste paper export drayage volumes through New Jersey’s ports and approximately 30% through Philadelphia’s ports, according to data sourced from IHS Markit. In addition to waste paper, our portfolio also includes the shipment of scrap metal and wooden logs from large waste companies, recycling centers and commodity traders to the ports of Newark, NJ, and Philadelphia, PA. We continue to expand our footprints domestically and intend to internationally and have ventured into the recycling export transport market of Tampa and Miami, FL recently.
Basis of Presentation and Preparation
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and with the instructions to Article 8 Regulation S-X. Accordingly, they do not include all of the information and notes required by GAAP for annual financial statements. The condensed consolidated financial statements and accompanying notes are the representations of the Company’s management, who is responsible for their integrity and objectivity. In the opinion of the Company’s management, the condensed consolidated financial statements reflect all adjustments, which are normal and recurring in nature, necessary for a fair presentation of the interim financial statements. Results for the three months ended March 31, 2024 are not necessarily indicative of the results that may be expected for the year ending December 31, 2024.
Principles of Consolidation
The condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary, Toppoint, Inc. All intercompany balances and transactions are eliminated.
F-20
NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Use of Estimates
The preparation of condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. The Company regularly evaluates estimates and assumptions related to the valuation of accounts receivables, valuation of long-lived assets, intangible assets, and accounts payable and accrued expenses. The Company bases its estimates and assumptions on current facts, historical experience and various other factors that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the accrual of costs and expenses that are not readily apparent from other sources. The actual results experienced by the Company may differ materially and adversely from the Company’s estimates. To the extent there are material differences between the estimates and the actual results, future results of operations will be affected.
Cash and Cash Equivalents
The Company considers all highly liquid instruments with maturity of three months or less at the time of issuance to be cash equivalents. The Company had $1,237,471 and $1,455,976 cash and cash equivalents at March 31, 2024 and December 31, 2023, respectively.
Property and Equipment
Property and equipment are recorded at cost, less accumulated depreciation. The Company provides for depreciation on a straight-line basis over the estimated useful lives of the assets. Leasehold improvements are amortized over the shorter of the lease term or the estimated useful life of the related assets when they are placed into service. The Company evaluates property and equipment for impairment periodically to determine if changes in circumstances or the occurrence of events suggest the carrying value of the asset or asset group may not be recoverable. Maintenance and repairs are charged to operations as incurred. Expenditures which substantially increase the useful lives of the related assets are capitalized. As of March 31, 2024 and December 31, 2023, the Company’s property and equipment balance consisted of leasehold improvements.
Intangible Assets
Intangible assets consist of internally developed software in the amount of $798,614 as of March 31, 2024 and December 31, 2023. The software has not been placed into service as of March 31, 2024 and has thus not been amortized to date. The software is being developed to utilize AI based technology and synch with custom software designed specifically for the Company’s needs in the export drayage vertical. The software will offer a variety of features and benefits that allow AI to scale and automate business operations. The Company evaluated intangible assets for impairment during the year ended December 31,2023 and three months ended March 31, 2024 and 2023 and determined that there are no impairment losses.
Long-lived Assets
In accordance with ASC 360, “Property, Plant, and Equipment”, the Company tests long-lived assets or asset groups for recoverability when events or changes in circumstances indicate that their carrying amount may not be recoverable. Circumstances which could trigger a review include, but are not limited to: significant decreases in the market price of the asset; significant adverse changes in the business climate or legal factors; accumulation of costs significantly in excess of the amount originally expected for the acquisition or construction of the asset; current period cash flow or operating losses combined with a history of losses or a forecast of continuing losses associated with the use of the asset; and current expectation that the asset will more likely than not be sold or disposed of significantly before the end of its estimated useful life. Recoverability is assessed based on the carrying amount of the asset compared to the estimated future undiscounted cash flows expected to result from the use and the eventual disposal of the asset, as well as specific appraisal in certain instances. An impairment loss equal to the excess of the carrying value over the assets fair market value is recognized when the carrying amount exceeds the undiscounted cash flows.
The impairment loss is recorded as an expense and a direct write-down of the asset. No impairment loss was recorded during the year ended December 31, 2023 or the three months ended March 31, 2024 and 2023.
F-21
Deferred Offering Costs
Deferred offering costs represents specific incremental costs incurred by the Company directly attributable to a proposed offering of securities. These amounts have been deferred and will be charged against the gross proceeds of the offering. These offering costs include fees paid to underwriters, attorneys, accountants as well as printers and other third parties directly related to the offering. Costs such as management salaries or other general administrative expenses that are not incremental to the offering are not included in the deferred costs. Deferred offering costs amounted to $417,146 and $205,870 as of March 31, 2024 and December 31, 2023, respectively.
Revenue Recognition
The Company’s revenue recognition policy is based on the revenue recognition criteria established under the Financial Accounting Standards Board (“FASB”) – Accounting Standards Codification 606 “Revenue From Contracts With Customers” (“ASC 606”), which has established a five-step process to govern contract revenue and satisfy each element is as follows: (1) identify the contract(s) with a customer; (2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to the performance obligations in the contract; and (5) recognize revenue when or as you satisfy a performance obligation. The Company records the revenue once all the above steps are completed and services are performed.
The Company’s contracts with customers only include one performance obligation, which is to provide the delivery of truckload services. Revenue is recognized in the gross amount at a point in time when the service is completed and the benefit of our services has been transferred to the customer. This has been determined to be when the goods are delivered to its final destination point. At this point in time, the Company has a present right to payment, and the performance obligation has been met. It is not until delivery is completed, that the Company completed its performance obligation. The customer is not simultaneously receiving and consuming the benefit of the performance until the delivery to its final destination. The Company is primarily responsible for fulfilling the promise to provide the specified service to its customers. In addition, the Company has discretion in establishing the price for the specified services and bears risk of loss of goods until delivery is completed. Transport time from pick up to the delivery of truckloads is typically within the same day. Revenue is measured as the amount of consideration the Company expects to be entitled to in exchange for those services. Because revenue is recognized at the point in time services are sold to customers, there are no contract liability balances except for when an amount is billed before the service is performed, however there may be contract asset balances for any services provided that were not billed. The Company’s revenue recognition is the same for whether the Company engages independent contractors or its brokerage model for owner operators.
Disaggregation of Revenues
The Company’s revenues is principally derived from providing truckload services focused on the recycling export supply chain. The Company disaggregates their revenue by the type of commodity, as shown below for the three months ended March 31, 2024 and 2023:
| 2024 | 2023 | |||||||
| Commodity | ||||||||
| Paper | $ | 2,748,818 | $ | 4,503,801 | ||||
| Import | 612,673 | 784,599 | ||||||
| Metal | 211,217 | 209,825 | ||||||
| Log | 76,225 | 165,650 | ||||||
| Plastic | 84,963 | 59,438 | ||||||
| $ | 3,733,896 | $ | 5,723,313 | |||||
F-22
Accounts Receivable and Contract Assets
Accounts receivable represent revenue earned for which the Company has not yet received payment. Accounts receivable are recorded at the invoiced amount and adjusted for amounts management expects to collect from balances outstanding at period-end. The Company estimates the allowance for doubtful accounts based on an analysis of specific accounts and an assessment of the customer’s ability to pay, among other factors. At March 31, 2024 and December 31, 2023 no allowance for doubtful accounts was recorded. The balance of accounts receivable as of March 31, 2024 and December 31, 2023, amounted to $915,682 and $940,622, respectively.
Contract assets include unbilled amounts from services which have been provided and revenue recognized. Contract asset balances amounted to $290,955 and$230,610 as of March 31, 2024 and December 31, 2023, respectively.
Contract Liabilities
Contract liabilities included deferred revenue which includes monies collected in the advance of revenue recognition. Deferred revenue amounted to $862,841 as of March 31, 2024 and December 31, 2023. The Company expected to recognize revenue from its deferred revenue upon completion of its performance obligation on the specific contracts. As of March 31, 2024 and December 31, 2023, the Company did not support its full satisfaction of its performance obligations. Our customers have a right of return, within two years of services provided, or monies received. Because the Company cannot support the completion of revenue recognition on this balance, the Company will record other income for the amount of advances received upon expiration of the two year right of return period.
Costs of revenues
Costs of revenue includes all directly related costs to deliver our services, which includes independent contractor drivers, insurance, truck maintenance costs, equipment rental and other directly related costs. Such costs are expensed as incurred.
Other income
Other income consists of other income which does not fall under the guidance of ASC 606 during the three months ended March 31, 2023. Such amounts were determined to not be under the guidance of ASC 606 because they do not represent an output of the Company’s ongoing or major operations. The amounts were from the sale of scrap material which is a one-time service the Company does not currently perform in.
Income Taxes
Historically and through December 31, 2021, the Company elected, by consent of its stockholders, to be taxed under the provisions of Subchapter S of the Internal Revenue Code and applicable state statutes. The Company made a qualified Subchapter S subsidiary election with the Internal Revenue Service and accordingly the Company’s income is to be included in the Parent’s income tax return for Federal tax purposes. The Company has also elected S Corporation status for Pennsylvania State tax purposes. The Company revoked its Subchapter S election with the Internal Revenue Service and Pennsylvania as of January 1, 2022.
As of January 1 2022, the Company accounts for income taxes utilizing the asset and liability approach. Under this approach, deferred taxes represent the future tax consequences expected to occur when the reported amounts of assets and liabilities are recovered or paid. The provision for income taxes generally represents income taxes paid or payable for the current year plus the change in deferred taxes during the year. Deferred taxes result from the differences between the financial and tax bases of the Company’s assets and liabilities and are adjusted for changes in tax rates and tax laws when changes are enacted.
The calculation of tax liabilities involves dealing with uncertainties in the application of complex tax regulations. The Company recognizes liabilities for anticipated tax audit issues based on the Company’s estimate of whether, and the extent to which, additional taxes will be due. If payment of these amounts ultimately proves to be unnecessary, the reversal of the liabilities would result in tax benefits being recognized in the period when the liabilities are no longer determined to be necessary. If the estimate of tax liabilities proves to be less than the ultimate assessment, a further charge to expense would result.
The Company evaluates uncertain income tax positions taken or expected to be taken in a tax return for recognition in its condensed consolidated financial statements. The Company was not required to recognize any amounts from uncertain tax positions for the three months ended March 31, 2024 and 2023. The Company’s conclusions regarding uncertain tax positions may be subject to review and adjustment at a later date based upon ongoing analyses of tax laws, regulations and interpretations thereof, as well as other factors. Generally, federal, state and local authorities may examine the Company’s tax returns for three years from the date of filing.
F-23
Earnings Per Share
The Company computes net earnings per share in accordance with ASC 260, “Earnings per Share”. ASC 260 requires presentation of both basic and diluted net earnings per share (“EPS”) on the face of the statement of operations. Basic EPS is computed by dividing earnings (loss) available to common shareholders (numerator) by the weighted average number of shares outstanding (denominator) during the period. Diluted EPS gives effect to all dilutive potential common shares outstanding during the period using the treasury stock method and convertible preferred stock using the if-converted method. In computing diluted EPS, the average stock price for the period is used in determining the number of shares assumed to be purchased from the exercise of warrants, options, and restricted stock units. Diluted EPS excludes all dilutive potential shares if their effect is anti-dilutive. The Company had no potentially dilutive securities as of March 31, 2024 and 2023.
Recent Accounting Pronouncements
In June 2016, the FASB issued ASU 2016-13, “Financial Instruments - Credit Losses (“Topic 326”)”. The ASU introduces a new accounting model, the Current Expected Credit Losses model (“CECL”), which requires earlier recognition of credit losses and additional disclosures related to credit risk. The CECL model utilizes a lifetime expected credit loss measurement objective for the recognition of credit losses at the time the financial asset is originated or acquired. ASU 2016-13 is effective for annual period beginning after December 15, 2022, including interim reporting periods within those annual reporting periods. The Company has adopted this guidance as of January 1, 2023, and it did not have a material impact on its consolidated financial statements.
NOTE 3: PROPERTY AND EQUIPMENT, NET AND INTANGIBLE ASSETS
Property and equipment consist of the following:
| March 31, 2024 | December 31, 2023 | |||||||
| Leasehold improvements | $ | 150,973 | $ | 150,973 | ||||
| Less: accumulated depreciation | (68,625 | ) | (54,900 | ) | ||||
| Property and Equipment, net | $ | 82,348 | $ | 96,073 | ||||
Depreciation expense amounted to $13,725 and $13,725 for the three months ended March 31, 2024 and 2023, respectively.
Intangible assets consist of the following at March 31, 2024 and December 31, 2023:
| Software development | $ | 798,614 | ||
| Less: accumulated amortization | - | |||
| Software development, net | $ | 798,614 |
F-24
NOTE 4 – LOANS PAYABLE
Loans payable is summarized as follows:
| Description | Loan | Loan | Interest | Maturity | Remaining Principal Balance as of March 31, 2024 | Remaining Principal Balance as of December 31, 2023 | ||||||||||||||
| Economic Injury Disaster Loan (“EIDL”) | May 2020 | $ | 149,000 | 3.75 | % | May 2050 | $ | 149,900 | $ | 149,900 | ||||||||||
| Less current maturities | - | - | ||||||||||||||||||
| $ | 149,900 | $ | 149,900 | |||||||||||||||||
The EIDL was entered into during May 2020. Interest accrues at 3.75% per annum. Under the original agreement, principal payments were deferred, and the maturity date is May 2050.
Interest expense on loans payable amounted to $1,368 and $0 for the three months ended March 31, 2024 and 2023, respectively.
At March 31, 2024, combined scheduled maturities of the outstanding debt are as follows:
| For the Years Endings: | ||||
| 2024 | $ | 3,147 | ||
| 2025 | 3,147 | |||
| 2026 | 3,147 | |||
| 2027 | 3,147 | |||
| 2028 | 3,147 | |||
| Thereafter | 134,165 | |||
| $ | 149,900 | |||
NOTE 5 – LEASES
The Company leases an office and automobiles under non-cancelable operating and finance lease agreements. The leases have remaining lease terms ranging from three to five years.
Supplemental balance sheet information related to leases is as follows:
| Balance Sheet Location | March 31, 2024 | December 31, 2023 | ||||||||
| Operating Leases | ||||||||||
| Right-of-use assets, net | $ | 804,108 | $ | 843,699 | ||||||
| Right-of-use assets – related party, net | 153,687 | 177,077 | ||||||||
| Current liabilities | Lease liability, current maturities | (106,859 | ) | (99,959 | ) | |||||
| Non-current liabilities | Lease liability, net of current maturities | (432,940 | ) | (462,387 | ) | |||||
| Total operating lease liabilities | $ | (539,799 | ) | $ | (562,346 | ) | ||||
| Weighted Average Remaining Lease Term | ||||||||||
| Operating leases | 3.43 years | 3.68 years | ||||||||
| Weighted Average Discount Rate | ||||||||||
| Operating leases | 25 | % | 25 | % | ||||||
The Company calculated the implicit rate on the automobile leases with information contained in the respective leases. Based upon the lease agreements, the Company was able to calculate such amount. As the office lease did not provide an implicit rate, the Company used an incremental borrowing rate based on the information available at the lease commencement date in determining the present value of the lease payments, which is reflective of the specific term of the leases and economic environment of each geographic region.
F-25
The Company’s leased automobiles are currently used for promotional services. These leased often contain large material upfront downpayments due to the fact that they are expensive automobiles which are necessary for business development. As of December 31, 2022, the Company had three automobile leases, of which two were early terminated during 2023. Upon termination, the Company removed the remaining right of use asset and lease liability, resulting in an early termination charge of $433,574 which is included in general and administrative expenses for the three months ending December 31, 2023.
The Company’s office lease is leased from a related party, which is a family member of the chief executive officer.
Anticipated future lease costs, which are based in part on certain assumptions to approximate minimum annual rental commitments under non-cancelable leases, are as follows:
| Year Ending December 31, | Operating | |||
| 2024 (remaining) | $ | 180,014 | ||
| 2025 | 240,018 | |||
| 2026 | 240,018 | |||
| 2027 | 180,014 | |||
| Total lease payments | 840,064 | |||
| Less: Imputed interest | 300,265 | |||
| Present value of lease liabilities | $ | 539,799 | ||
Total lease expense for leases accounted for under ASC 842 amounted to $100,439 and $823,835 for the three months ending March 31, 2024 and 2023, respectively.
The Company has various other leases which do not fall under the guidance of ASC 842, primarily because there is not an identified asset. Such leases are not included in any amounts noted above.
NOTE 6 – COMMITMENTS AND CONTINGENCIES
Litigation Costs and Contingencies
From time to time, the Company may become involved in various lawsuits and legal proceedings, which arise in the ordinary course of business. Litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm business. Management is currently not aware of any such legal proceedings or claims that could have, individually or in the aggregate, a material adverse effect on our business, financial condition, or operating results.
NOTE 7: STOCKHOLDERS’ EQUITY
At March 31, 2024, the Company had 300,000,000 shares of common stock authorized with a par value of $0.0001, and 50,000,000 shares of preferred stock authorized with a par value of $0.0001.
On August 16, 2022, the Company issued 7,500,000 shares of common stock to four investors at a per share purchase price of $0.0001. The four investors were the founders of the Company. On September 29, 2022, the Company issued 7,500,000 shares of common stock at par, in conjunction with the Common Control Transfer. Prior to the Common Control Transfer, the Former Owner, owned 100% of Toppoint, Inc. Additionally, the Company and the current shareholders entered into a Voting Agreement and Irrevocable Proxy (the “Voting Agreement”), whereas each shareholder, unconditionally and irrevocably appoints the Former Owner, as each shareholders proxy to attend and vote at each annual general meeting of the shareholders of the Company and at any other meetings of the shareholders of the Company called, and at every adjournment or postponement thereof, and on every action or approval by written consent or resolution of the shareholders of the Company. Based upon the underlying agreement, the Former Owner, effectively controls the Company.
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Equity Incentive Plan
On October 1, 2022, the Company established the 2022 Equity Incentive Plan. The purpose of the Plan is to grant restricted stock, stock options and other forms of incentive compensation to our officers, employees, directors and consultants. The maximum number of shares of common stock that may be issued pursuant to awards granted under the Plan is 2,250,000 shares. Cancelled and forfeited stock options and stock awards may again become available for grant under the Plan. Awards that may be granted include: (a) Incentive Stock Options, (b) Non-qualified Stock Options, (c) Stock Appreciation Rights, (d) Restricted Awards, (e) Performance Share Awards, and (f) Performance Compensation Awards. As of March 31, 2024, all shares remain available for issuance under the Plan.
NOTE 8: CONCENTRATIONS
Concentration of Credit Risk
The Company maintains its cash in bank and financial institution deposits that at times may exceed federally insured limits. The Company has not experienced any losses in such accounts through March 31, 2024. The Company’s bank balances exceeded FDIC insured amounts at times during the three months ended March 31, 2024 and the year ended December 31, 2023.
NOTE 9: RELATED PARTY TRANSACTIONS
As disclosed in Note 5, the Company leases office space from a related party. Rent expense for this lease amounted to $25,000 and $25,000 for the three months ended March 31, 2024 and 2023, respectively. The Company prepaid $300,000 to the related party for the entire amount of lease payments due during the year ended December 31, 2022.
The Company incurred consulting fees of $100,357 and $130,237 from a related party for the three months ended March 31, 2024 and 2023, respectively. Additionally, during the three months ended March 31, 2024 and 2023, additional amounts of $789,989 and $572,753, respectively, were paid to a related party for reimbursement of expenses. Such related party is a company owned by our Chief Financial Officer.
As of March 31, 2024 and December 31, 2023, the Company advanced $229,934 and $207,016, respectively, to the Former Owner. Such amount is non-interest bearing and due on demand.
NOTE 10: SUBSEQUENT EVENTS
The Company evaluated subsequent events through August 12, 2024 to ensure that this filing includes appropriate disclosures of events both recognized in the condensed consolidated financial statements as of March 31, 2024, and events which occurred subsequent to March 31, 2024 but were not recognized in the condensed consolidated financial statements. The Company has determined that there were no subsequent events which required recognition, adjustment to or disclosure in the condensed consolidated financial statements, except the events described below.
On July 1, 2024, we issued Hok C Chan a promissory note for advances he may provide to us from time to time, including $600,000 provided on July 1, 2024. The promissory note bears an annual interest rate of 36.88% and outstanding amounts are due 90 days after the delivery of the respective advance to the Company or the respective direct payment to the Company’s creditor(s).
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[ ] Shares of Common Stock
Toppoint Holdings Inc.
PROSPECTUS
Sole Book-Running Manager
A.G.P.
______________, 2024
Until [ ], 2024 (25 days after the date of this prospectus), all dealers that buy, sell or trade our securities, whether or not participating in this offering, may be required to deliver a prospectus. This is in addition to the dealers’ obligation to deliver a prospectus when acting as underwriters and with respect to their unsold allotments or subscriptions.
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
Item 13. Other Expenses of Issuance and Distribution
The following table sets forth the costs and expenses, other than underwriting discounts and commissions, payable by us in connection with the offering described in this registration statement. All amounts, other than the SEC registration fee, Nasdaq listing fee and FINRA filing fee, are estimates. We will pay all these expenses.
| Amount | ||||
| SEC registration fee | $ | 2,699 | ||
| Nasdaq listing application fee | 5,000 | |||
| FINRA filing fee | 2,000 | |||
| Accounting fees and expenses | [ ]* | |||
| Legal fees and expenses | [ ]* | |||
| Transfer agent fees and expenses | [ ]* | |||
| Printing and related fees | [ ]* | |||
| Miscellaneous | [ ]* | |||
| Total | $ | [ ]* | ||
| * | To be filed by amendment. |
Item 14. Indemnification of Directors and Officers
We are a Nevada corporation. The Nevada Revised Statutes and certain provisions of our bylaws under certain circumstances provide for indemnification of our officers, directors and controlling persons against liabilities which they may incur in such capacities. A summary of the circumstances in which such indemnification is provided for is contained herein, but this description is qualified in its entirety by reference to our bylaws and to the statutory provisions.
In general, any officer, director, employee or agent may be indemnified against expenses, fines, settlements or judgments arising in connection with a legal proceeding to which such person is a party, if that person’s actions were in good faith, were believed to be in our best interest, and were not unlawful. Unless such person is successful upon the merits in such an action, indemnification may be awarded only after a determination by independent decision of our board of directors, by legal counsel, or by a vote of our stockholders, that the applicable standard of conduct was met by the person to be indemnified.
The circumstances under which indemnification is granted in connection with an action brought on our behalf is generally the same as those set forth above; however, with respect to such actions, indemnification is granted only with respect to expenses actually incurred in connection with the defense or settlement of the action. In such actions, the person to be indemnified must have acted in good faith and in a manner believed to have been in our best interest, and have not been adjudged liable for negligence or misconduct.
Indemnification may also be granted pursuant to the terms of agreements which may be entered in the future or pursuant to a vote of stockholders or directors. The Nevada Revised Statutes also grant us the power to purchase and maintain insurance which protects our officers and directors against any liabilities incurred in connection with their service in such a position, and such a policy may be obtained by us.
To the maximum extent permitted by law, our articles of incorporation eliminate or limit the liability of our directors to us or our shareholders for monetary damages for breach of a director’s fiduciary duty as a director.
We intend to enter into separate indemnification agreements with our directors and officers. Each indemnification agreement will provide, among other things, for indemnification to the fullest extent permitted by law and our articles of incorporation and bylaws against any and all expenses, judgments, fines, penalties and amounts paid in settlement of any claim. The indemnification agreements will provide for the advancement or payment of all expenses to the indemnitee and for reimbursement to us if it is found that such indemnitee is not entitled to such indemnification under applicable law and our articles of incorporation and bylaws.
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We are in the process of obtaining standard policies of insurance under which coverage is provided (a) to our directors and officers against loss arising from claims made by reason of breach of duty or other wrongful act, and (b) to us with respect to payments which we may make to such officers and directors pursuant to the above indemnification provision or otherwise as a matter of law.
The underwriting agreement, filed as Exhibit 1.1 to this registration statement, will provide for indemnification, under certain circumstances, by the underwriters of us and our officers and directors for certain liabilities arising under the Securities Act or otherwise.
Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers or persons controlling us under the foregoing provisions, we have been informed that in the opinion of the SEC such indemnification is against public policy as expressed in the Securities Act and is therefore unenforceable.
Item 15. Recent Sales of Unregistered Securities
During the past three years, we issued the following securities, which were not registered under the Securities Act.
On August 16, 2022, we issued an aggregate of 7,500,000 shares of common stock to four investors at a per share purchase price of $0.0001.
On September 29, 2022, we entered into a Share Exchange Agreement with Toppoint Inc and Hok C Chan, the sole stockholder of Toppoint Inc, our founder, Chairman of our board of directors and Chief Executive Officer, pursuant to which Hok C Chan exchanged all of his shares in Toppoint Inc for 7,500,000 shares of common stock of our company.
The foregoing transactions were exempt from the registration requirements of the Securities Act in reliance on Section 4(a)(2) of the Securities Act (and Regulation D or Regulation S promulgated thereunder) as transactions by an issuer not involving any public offering. No underwriter was engaged in connection with the foregoing sales of securities. The Company has reason to believe that all of the foregoing purchasers were familiar with or had access to information concerning the operations and financial conditions of the Company, and all of those individuals purchasing securities represented their intentions to acquire the securities for investment and without a view to the distribution thereof. At the time of issuance, all of the foregoing securities were deemed to be restricted securities for purposes of the Securities Act and the certificates representing such securities bore legends to that effect.
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Item 16. Exhibits.
(a) Exhibits.
| † | Executive compensation plan or arrangement. |
| * | To be filed by amendment. |
(b) Financial Statement Schedules.
All financial statement schedules are omitted because the information called for is not required or is shown either in the financial statements or in the notes thereto.
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Item 17. Undertakings
The undersigned registrant hereby undertakes to provide to the underwriters at the closing specified in the underwriting agreement, certificates in such denominations and registered in such names as required by the underwriters to permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the SEC such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.
(a) The undersigned Registrant hereby undertakes:
(1) to file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement:
(i) to include any prospectus required by Section 10(a)(3) of the Securities Act;
(ii) to reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than 20% change in the maximum aggregate offering price set forth in the “Calculation of Registration Fee” table in the effective registration statement; and
(iii) to include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement; provided, however, that paragraphs (a)(1)(i), (a)(1)(ii) and (a)(1)(iii) do not apply if the information required to be included in a post-effective amendment by those paragraphs is contained in reports filed with or furnished to the Commission by the Registrant pursuant to Section 13 or Section 15(d) of the Exchange Act that are incorporated by reference in the registration statement.
(2) that, for the purpose of determining any liability under the Securities Act, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.
(3) to remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offerings.
(4) to file a post-effective amendment to the registration statement to include any financial statements required by Item 8.A of Form 20-F at the start of any delayed offering or throughout a continuous offering. Financial statements and information otherwise required by Section 10(a)(3) of the Act (15 U.S.C. 77j(a)(3)) need not be furnished, provided that the issuer includes in the prospectus, by means of a post-effective amendment, financial statements required pursuant to this paragraph (a)(4) and other information necessary to ensure that all other information in the prospectus is at least as current as the date of those financial statements.
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(5) that, for the purpose of determining liability under the Securities Act to any purchaser:
(i) if the issuer is relying on Rule 430B:
(A) each prospectus filed by the undersigned issuer pursuant to Rule 424(b)(3) shall be deemed to be part of the registration statement as of the date the filed prospectus was deemed part of and included in the registration statement; and
(B) each prospectus required to be filed pursuant to Rule 424(b)(2), (b)(5), or (b)(7) as part of a registration statement in reliance on Rule 430B relating to an offering made pursuant to Rule 415(a)(1)(i), (vii), or (x) for the purpose of providing the information required by section 10(a) of the Securities Act shall be deemed to be part of and included in the registration statement as of the earlier of the date such form of prospectus is first used after effectiveness or the date of the first contract of sale of securities in the offerings described in the prospectus. As provided in Rule 430B, for liability purposes of the issuer and any person that is at that date an underwriter, such date shall be deemed to be a new effective date of the registration statement relating to the securities in the registration statement to which that prospectus relates, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. Provided, however, that no statement made in a registration statement or prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated by reference into the registration statement or prospectus that is part of the registration statement will, as to a purchaser with a time of contract of sale prior to such effective date, supersede or modify any statement that was made in the registration statement or prospectus that was part of the registration statement or made in any such document immediately prior to such effective date; or
(ii) if the issuer is relying on Rule 430C, each prospectus filed pursuant to Rule 424(b) as part of a registration statement relating to an offering, other than registration statements relying on Rule 430B or other than prospectuses filed in reliance on Rule 430A, shall be deemed to be part of and included in the registration statement as of the date it is first used after effectiveness. Provided, however, that no statement made in a registration statement or prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated by reference into the registration statement or prospectus that is part of the registration statement will, as to a purchaser with a time of contract of sale prior to such first use, supersede or modify any statement that was made in the registration statement or prospectus that was part of the registration statement or made in any such document immediately prior to such date of first use.
(6) that, for the purpose of determining liability of the registrant under the Securities Act to any purchaser in the initial distribution of the securities, the undersigned registrant undertakes that in a primary offering of securities of the undersigned registrant pursuant to this registration statement, regardless of the underwriting method used to sell the securities to the purchaser, if the securities are offered or sold to such purchaser by means of any of the following communications, the undersigned registrant will be a seller to the purchaser and will be considered to offer or sell such securities to such purchaser:
(i) any preliminary prospectus or prospectus of the undersigned registrant relating to the offerings required to be filed pursuant to Rule 424;
(ii) any free writing prospectus relating to the offerings prepared by or on behalf of the undersigned registrant or used or referred to by the undersigned registrant;
(iii) the portion of any other free writing prospectus relating to the offerings containing material information about the undersigned registrant or its securities provided by or on behalf of the undersigned registrant; and
(iv) any other communication that is an offer in the offerings made by the undersigned registrant to the purchaser.
(b) The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act, the information omitted from the form of prospectus filed as part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the registrant under Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities Act, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.
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SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of North Wales, State of Pennsylvania, on August 12, 2024.
Toppoint Holdings Inc. | ||
| By: | /s/ Hok C Chan | |
Hok C Chan Chief Executive Officer and President | ||
Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities and on the dates indicated.
| SIGNATURE | TITLE | DATE | ||
| /s/ Hok C Chan | Chief Executive Officer, President and Chairman of the Board of Directors (principal executive officer) |
August 12, 2024 | ||
| Hok C Chan | ||||
| /s/ John Feliciano III | Chief Financial Officer and Director (principal financial and accounting officer) | August 12, 2024 | ||
| John Feliciano III |
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Exhibit 3.1
Exhibit 3.2
AMENDED AND RESTATED
BYLAWS
OF
Toppoint Holdings Inc.
Adopted on February 8, 2024
_______________________________________________________
article
I
OFFICES
1.1 Registered Office. The registered office and registered agent of Toppoint Holdings Inc. (the “Corporation”) shall be as from time to time set forth in the Corporation’s Articles of Incorporation.
1.2 Other Offices. The Corporation may also have offices at such other places, both within and without the State of Nevada, as the Board of Directors may from time to time determine or the business of the Corporation may require.
article
II
STOCKHOLDERS’ MEETINGS
2.1 Place of Meetings. Meetings of stockholders may be held at such time and place, within or without the State of Nevada, as shall be stated in the notice of the meeting or in a duly executed waiver of notice thereof. The Board of Directors may, in its sole discretion, determine that the meeting shall not be held at any place, but may instead be held solely by means of conference telephone or similar communications equipment by which all persons participating in the meeting can hear each other.
2.2 Annual Meeting.
(a) The annual meeting of the stockholders of the Corporation, for the purpose of election of directors and for such other business as may lawfully come before it, shall be held on such date and at such time as may be designated from time to time by the Board of Directors. Nominations of persons for election to the Board of Directors of the Corporation and the proposal of business to be considered by the stockholders may be made at an annual meeting of stockholders: (i) pursuant to the Corporation’s notice of meeting of stockholders; (ii) by or at the direction of the Board of Directors; or (iii) by any stockholder of the Corporation who was a stockholder of record at the time of giving of notice provided for in the following paragraph, who is entitled to vote at the meeting and who complied with the notice procedures set forth in this Section.
(b) At an annual meeting of the stockholders, only such business shall be conducted as shall have been properly brought before the meeting. For nominations or other business to be properly brought before an annual meeting by a stockholder pursuant to clause (iii) of paragraph (a) of this Section, (i) the stockholder must have given timely notice thereof in writing to the Secretary of the Corporation, (ii) such other business must be a proper matter for stockholder action under the Nevada Revised Statues, (iii) if the stockholder, or the beneficial owner on whose behalf any such proposal or nomination is made, has provided the Corporation with a Solicitation Notice (as defined in this Section), such stockholder or beneficial owner must, in the case of a proposal, have delivered a proxy statement and form of proxy to holders of at least the percentage of the Corporation’s voting shares required under applicable law to carry any such proposal, or, in the case of a nomination or nominations, have delivered a proxy statement and form of proxy to holders of a percentage of the Corporation’s voting shares reasonably believed by such stockholder or beneficial owner to be sufficient to elect the nominee or nominees proposed to be nominated by such stockholder, and must, in either case, have included in such materials the Solicitation Notice, and (iv) if no Solicitation Notice relating thereto has been timely provided pursuant to this Section, the stockholder or beneficial owner proposing such business or nomination must not have solicited a number of proxies sufficient to have required the delivery of such a Solicitation Notice under this Section. To be timely, a stockholder’s notice shall be delivered to the Secretary by registered mail at the principal executive offices of the Corporation not later than the close of business on the ninetieth (90th) day nor earlier than the close of business on the one hundred twentieth (120th) day prior to the first anniversary of the preceding year’s annual meeting; provided, however, that in the event that the date of the annual meeting is advanced more than thirty (30) days prior to or delayed by more than thirty (30) days after the anniversary of the preceding year’s annual meeting, notice by the stockholder to be timely must be so received (i) not earlier than the close of business on the one hundred twentieth (120th) day prior to the currently proposed annual meeting and not later than the close of business on the later of the ninetieth (90th) day prior to such annual meeting or (ii) by the tenth (10th) business day following the day on which public announcement of the date of such meeting is first made, whichever of (i) or (ii) occurs first. In the event that an annual meeting has not been previously held, notice by the stockholder to be timely must be so received not later than the close of business on the tenth (10th) business day following the day on which public announcement of the date of such meeting is first made. In no event shall the public announcement of an adjournment of an annual meeting commence a new time period for the giving of a stockholder’s notice as described above. Such stockholder’s notice shall set forth: (A) as to each person whom the stockholder proposed to nominate for election or reelection as a director all information relating to such person that is required to be disclosed in solicitations of proxies for election of directors in an election contest, or is otherwise required, in each case pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended (the “1934 Act”) and Rule 14a-4(d) thereunder (including such person’s written consent to being named in the proxy statement as a nominee and to serving as a director if elected); (B) as to any other business that the stockholder proposes to bring before the meeting, a brief description of the business desired to be brought before the meeting, the reasons for conducting such business at the meeting and any material interest in such business of such stockholder and the beneficial owner, if any, on whose behalf the proposal is made; and (C) as to the stockholder giving the notice and the beneficial owner, if any, on whose behalf the nomination or proposal is made (i) the name and address of such stockholder, as they appear on the Corporation’s books, and of such beneficial owner, (ii) the class and number of shares of the Corporation which are owned beneficially and of record by such stockholder and such beneficial owner, and (iii) whether either such stockholder or beneficial owner intends to deliver a proxy statement and form of proxy to holders of, in the case of the proposal, at least the percentage of the Corporation’s voting shares required under applicable law to carry the proposal or, in the case of a nomination or nominations, a sufficient number of holders of the Corporation’s voting shares to elect such nominee or nominees (an affirmative statement of such intent, a “Solicitation Notice”).
(c) Notwithstanding anything in the second sentence of paragraph (b) of this Section to the contrary, in the event that the number of directors to be elected to the Board of Directors of the Corporation is increased and there is no public announcement naming all of the nominees for director or specifying the size of the increased Board of Directors made by the Corporation at least one hundred (100) days prior to the first anniversary of the preceding year’s annual meeting, a stockholder’s notice required by this Section shall also be considered timely, but only with respect to nominees for any new positions created by such increase, if it shall be delivered to the Secretary at the principal executive offices of the Corporation not later than the close of business on the tenth (10th) day following the day on which such public announcement is first made by the Corporation.
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(d) Only such persons who are nominated in accordance with the procedures set forth in this Section shall be eligible to serve as directors and only such business shall be conducted at a meeting of stockholders as shall have been brought before the meeting in accordance with the procedures set forth in this Section. Except as otherwise provided by law, the chairman of the meeting shall have the power and duty to determine whether a nomination or any business proposed to be brought before the meeting was made, or proposed, as the case may be, in accordance with the procedures set forth in these Bylaws and, if any proposed nomination or business is not in compliance with these Bylaws, to declare that such defective proposal or nomination shall not be presented for stockholder action at the meeting and shall be disregarded.
(e) Notwithstanding the foregoing provisions of this Section, in order to include information with respect to a stockholder proposal in the proxy statement and form of proxy for a stockholders’ meeting, stockholders must provide notice as required by the regulations promulgated under the 1934 Act. Nothing in these Bylaws shall be deemed to affect any rights of stockholders to request inclusion of proposals in the Corporation proxy statement pursuant to Rule 14a-8 under the 1934 Act.
(f) For purposes of this Section, “public announcement” shall mean disclosure in a press release reported by the Dow Jones News Service, Associated Press, Accesswire, Market Wire or comparable national news service or in a document publicly filed by the Corporation with the Securities and Exchange Commission pursuant to Section 13, 14 or 15(d) of the 1934 Act.
2.3 Special Meetings. Special meetings of the stockholders, for any purpose or purposes, unless otherwise prescribed by law, by the Articles of Incorporation or by these Bylaws, may be called by the Chief Executive Officer or the President, or shall be called by the President or Secretary at the request in writing of a majority of the Board of Directors or at the request in writing of the holders of at least 30% of all the shares issued, outstanding and entitled to vote. Such request shall state the purpose or purposes of the proposed meeting. Business transacted at all special meetings shall be confined to the purposes stated in the notice of the meeting unless all stockholders entitled to vote are present and consent.
2.4 Notice of Meetings. Written or printed notice stating the place, day and hour of any meeting of the stockholders and, in case of a special meeting, the purpose or purposes for which the meeting is called, shall be delivered not less than ten (10) nor more than sixty (60) days before the date of the meeting, either personally or by mail, by or at the direction of the Chief Executive Officer, the President, the Secretary, or the officer or person calling the meeting, to each stockholder of record entitled to vote at the meeting. If mailed, such notice shall be deemed to be delivered when deposited in the mail, addressed to the stockholder at his address as it appears on the stock transfer books and records of the Corporation or its transfer agent, with postage thereon prepaid.
2.5 List of Stockholders. At least ten (10) days before each meeting of stockholders, a complete list of the stockholders entitled to vote at such meeting, arranged in alphabetical order, with the address of and the number of voting shares registered in the name of each, shall be prepared by the officer or agent having charge of the stock transfer books. Such list shall be kept on file at the registered office of the Corporation (or at such other location determined by the Board of Directors) for a period of ten (10) days prior to such meeting and shall be subject to inspection by any stockholder at any time during usual business hours. Such list shall be produced and kept open at the time and place of the meeting during the whole time thereof, and shall be subject to the inspection of any stockholder who may be present.
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2.6 Quorum; Adjournment. At all meetings of the stockholders, the presence in person or by proxy of the holders of a majority of the shares issued and outstanding and entitled to vote shall be necessary and sufficient to constitute a quorum for the transaction of business, except as otherwise provided by law, by the Articles of Incorporation or by these Bylaws. If, however, such quorum shall not be present or represented at any meeting of the stockholders, the stockholders entitled to vote thereat, present in person or represented by proxy, shall have power to adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present or represented. If the adjournment is for more than thirty (30) days, or if after the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the meeting. At such adjourned meeting at which a quorum shall be present or represented, any business may be transacted which might have been transacted at the meeting as originally notified.
2.7 Voting. When a quorum is present at any meeting of the Corporation’s stockholders, any action brought before the meeting of the stockholders is approved if the number of votes cast in favor of the action exceeds the number of votes cast in opposition to the action, unless the action is for the election of directors or is one upon which, by express provision of the Nevada Revised Statutes, the Articles of Incorporation or these Bylaws, a different vote is required, in which case such express provision shall govern and control the decision of such question. Voting for directors shall be in accordance with Section 3.2 of these Bylaws. The stockholders present at a duly organized meeting may continue to transact business until adjournment, notwithstanding the withdrawal of enough stockholders to leave less than a quorum.
2.8 Method of Voting. Each outstanding share of the Corporation’s capital stock shall be entitled to one vote on each matter submitted to a vote at a meeting of stockholders, except to the extent that the voting rights of the shares of any class or classes are otherwise provided by applicable law or the Articles of Incorporation, as amended from time to time. At any meeting of the stockholders, every stockholder having the right to vote shall be entitled to vote in person or by proxy appointed by an instrument in writing subscribed by such stockholder or by his duly authorized attorney-in-fact and bearing a date not more than six (6) months prior to such meeting, unless such instrument provides for a longer period. Each proxy shall be revocable unless expressly provided therein to be irrevocable and if, and only so long as, it is coupled with an interest sufficient in law to support an irrevocable power. Such proxy shall be filed with the Secretary of the Corporation prior to or at the time of the meeting. Voting on any question or in any election may be by voice vote or show of hands unless the presiding officer shall order or any stockholder shall demand that voting be by written ballot.
2.9 Inspectors of Election. In advance of any meeting of the stockholders, the Board of Directors, by resolution, the Chairman or the President shall appoint one or more inspectors to act at the meeting and make a written report thereof. One or more other persons may be designated as alternate inspectors to replace any inspector who fails to act. If no inspector or alternate is able to act at a meeting of the stockholders, the chairman of the meeting shall appoint one or more inspectors to act at the meeting. Unless otherwise required by applicable law, inspectors may be officers, employees or agents of the Corporation. Each inspector, before entering upon the discharge of the duties of inspector, shall take and sign an oath to faithfully execute the duties of inspector with strict impartiality and according to the best of such inspector’s ability. The inspector or inspectors may: (1) ascertain the number of shares outstanding and the voting power of each; (2) determine the number of shares represented at a meeting and the validity of proxies or ballots; (3) count all votes and ballots; (4) determine any challenges made to any determination made by the inspector(s); and (5) certify the determination of the number of shares represented at the meeting and the count of all votes and ballots.
2.10 Record Date; Closing Transfer Books. The Board of Directors may fix in advance a record date for the purpose of determining stockholders entitled to notice of or to vote at a meeting of stockholders, such record date to be not less than ten (10) nor more than sixty (60) days prior to such meeting, or the Board of Directors may close the stock transfer books for such purpose for a period of not less than ten (10) nor more than sixty (60) days prior to such meeting. In the absence of any action by the Board of Directors, the date upon which the notice of the meeting is mailed shall be the record date.
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2.11 Action by Consent. Any action required or permitted by law, the Articles of Incorporation, or these Bylaws to be taken at a meeting of the stockholders of the Corporation may be taken without a meeting if a consent or consents in writing, setting forth the action so taken, shall be signed by stockholders holding at least a majority of the voting power; provided that if a different proportion of voting power is required for such an action at a meeting, then that proportion of written consents is required. Such signed consents shall be delivered to the Secretary for inclusion in the Minute Book of the Corporation.
2.12 Meetings Through Electronic Communications. Unless otherwise required by law or the Articles of Incorporation, stockholders may participate in a meeting of the stockholders by any means of electronic communications, videoconferencing, teleconferencing or other available technology permitted under Nevada law (including, without limitation, a telephone conference or similar method of communication by which all individuals participating in the meeting can hear each other) and utilized by the Corporation. If any such means are utilized, the Corporation shall, to the extent required under the Nevada law, implement reasonable measures to (1) verify the identity of each person participating through such means as a stockholder and (2) provide the stockholders a reasonable opportunity to participate in the meeting and to vote on matters submitted to the stockholders, including an opportunity to communicate, and to read or hear the proceedings of the meeting in a substantially concurrent manner with such proceedings. Participation in a meeting pursuant to this Section 2.12 constitutes presence in person at the meeting.
article
III
BOARD OF DIRECTORS
3.1 Management. The business and affairs of the Corporation shall be managed by or under the direction of the Board of Directors, who may exercise all such powers of the Corporation and do all such lawful acts and things as are not by law, the Articles of Incorporation, a stockholders’ agreement or these Bylaws directed or required to be exercised or done by the stockholders.
3.2 Qualification; Election; Term. None of the directors need be a stockholder of the Corporation or a resident of the State of Nevada. The directors shall be elected by plurality vote at the annual meeting of the stockholders, except as hereinafter provided, and each director elected shall hold office until his successor shall be elected and qualified.
3.3 Number. The initial number of directors of the Corporation shall be two (2). Thereafter, the number of directors of the Corporation shall be fixed as the Board of Directors may from time to time designate. No decrease in the number of directors shall have the effect of shortening the term of any incumbent director.
3.4 Resignation. Any director may resign at any time by delivering his or her notice in writing to the Secretary, such resignation to specify whether it will be effective at a particular time, upon receipt by the Secretary or at the pleasure of the Board of Directors. If no such specification is made, it shall be deemed effective at the pleasure of the Board of Directors.
3.5 Removal. Any director may be removed either for or without cause at any special meeting of stockholders by the affirmative vote of at least two-thirds of the voting power of the issued and outstanding stock entitled to vote; provided, however, that notice of intention to act upon such matter shall have been given in the notice calling such meeting.
3.6 Vacancies. Any vacancy occurring in the Board of Directors by death, resignation, removal or otherwise may be filled by an affirmative vote of at least a majority of the remaining directors though less than a quorum of the Board of Directors. A director elected to fill a vacancy shall be elected for the unexpired term of his predecessor in office. A directorship to be filled by reason of an increase in the number of directors may be filled by the Board of Directors for a term of office only until the next election of one or more directors by the stockholders.
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3.7 Place of Meetings. Meetings of the Board of Directors, regular or special, may be held at such place within or without the State of Nevada as may be fixed from time to time by the Board of Directors. Directors may participate in and hold a meeting by means of conference telephone or similar communications equipment by which all persons participating in the meeting can hear each other.
3.8 Annual Meeting. The first meeting of each newly elected Board of Directors shall be held without further notice immediately following the annual meeting of stockholders and at the same place, unless by unanimous consent or unless the directors then elected and serving shall change such time or place.
3.9 Regular Meetings. Regular meetings of the Board of Directors may be held without notice at such time and place as shall from time to time be determined by resolution of the Board of Directors.
3.10 Special Meetings. Special meetings of the Board of Directors may be called by the Chairman of the Board of Directors, the Chief Executive Officer or the President on oral or written notice to each director, given either personally, by telephone, by telegram, by mail, by facsimile or by e-mail at least forty-eight (48) hours prior to the time of the meeting. Special meetings shall be called by the Chief Executive Officer, the President or the Secretary in like manner and on like notice on the written request of any director. Except as may be otherwise expressly provided by law, the Articles of Incorporation or these Bylaws, neither the business to be transacted at, nor the purpose of, any special meeting need to be specified in a notice or waiver of notice.
3.11 Quorum and Voting. At all meetings of the Board of Directors the presence of a majority of the number of directors shall be necessary and sufficient to constitute a quorum for the transaction of business, and the affirmative vote of at least a majority of the directors present at any meeting at which there is a quorum shall be the act of the Board of Directors, except as may be otherwise specifically provided by law, the Articles of Incorporation or these Bylaws. If a quorum shall not be present at any meeting of directors, the directors present thereat may adjourn the meeting from time to time without notice other than announcement at the meeting, until a quorum shall be present.
3.12 Action by Consent. Any action required or permitted to be taken at any meeting of the Board of Directors may be taken without such a meeting if a consent or consents in writing, setting forth the action so taken, is signed by all the members of the Board of Directors.
3.13 Interested Directors. No contract or transaction between the Corporation and one or more of its directors or officers, or between the Corporation and any other corporation, partnership, association, or other organization in which one or more of its directors or officers are directors or officers or have a financial interest, shall be void or voidable solely for this reason, solely because the director or officer is present at or participates in the meeting of the Board of Directors or committee thereof which authorizes the contract or transaction, or solely because his or their votes are counted for such purpose, if: (1) the fact as to his relationship or interest and as to the contract or transaction is known to the Board of Directors or the committee, and the Board of Directors or committee in good faith authorizes the contract or transaction by the affirmative vote of a majority of the disinterested directors, even though the disinterested directors be less than a quorum; or (2) the fact as to his relationship or interest and as to the contract or transaction is known to the stockholders entitled to vote thereon, and the contract or transaction is specifically approved in good faith by vote of the stockholders; or (3) the fact that the common directorship, office, or financial interest is not known to the director or officer at the time the transaction is brought before the Board of Directors for action; or (4) the contract or transaction is fair as to the Corporation as of the time it is authorized, approved, or ratified by the Board of Directors, a committee thereof, or the stockholders. Common or interested directors may be counted in determining the presence of a quorum at a meeting of the Board of Directors or of a committee which authorizes the contract or transaction.
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3.14 Compensation of Directors. Directors shall receive such compensation for their services, and reimbursement for their expenses as the Board of Directors, by resolution, shall establish; provided that nothing herein contained shall be construed to preclude any director from serving the Corporation in any other capacity and receiving compensation therefor.
3.15 Committees. The Board of Directors may, by resolution passed by a majority of the whole Board, designate committees, each committee to consist of one or more directors of the Corporation, which committees shall have such power and authority and shall perform such functions as may be provided in such resolution. Each committee, to the extent provided in such resolution, shall have and may exercise all of the authority of the Board of Directors in the management of the business and affairs of the Corporation, except where action of the full Board of Directors is required by statute or by the Articles of Incorporation. Unless the Board of Directors shall otherwise provide, regular meetings of the committee appointed pursuant to this Section shall be held at such times and places as are determined by the Board of Directors, or by any such committee, and when notice thereof has been given to each member of such committee, no further notice of such regular meetings need be given thereafter. Special meetings of any such committee may be held at any place which has been determined from time to time by such committee, and may be called by any director who is a member of such committee, upon notice to the members of such committee of the time and place of such special meeting given in the manner provided for the giving of notice to members of the Board of Directors of the time and place of special meetings of the Board of Directors. Notice of any special meeting of any committee may be waived in writing at any time before or after the meeting and will be waived by any director by attendance thereat, except when the director attends such special meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened. Unless otherwise provided by the Board of Directors in the resolutions authorizing the creation of the committee, a majority of the authorized number of members of any such committee shall constitute a quorum for the transaction of business, and the act of a majority of those present at any meeting at which a quorum is present shall be the act of such committee.
article
IV
OFFICERS
4.1 In General. The officers of the Corporation shall be elected by the Board of Directors and shall be a President, a Treasurer, and a Secretary. The Board of Directors may also elect a Chairman of the Board, a Chief Executive Officer, one or more Vice Presidents, Assistant Vice Presidents, Assistant Secretaries and Assistant Treasurers. Any two or more offices may be held by the same person. The Board of Directors may also elect and appoint such other officers and agents as it shall deem necessary, who shall be elected and appointed for such terms and shall exercise such powers and perform such duties as shall be determined from time to time by the Board.
4.2 Election and Term. The Board of Directors, at its first meeting after each annual meeting of stockholders, shall elect the officers, none of whom need be a member of the Board of Directors. Each officer of the Corporation shall hold office until his death, or his resignation or removal from office, or the election and qualification of his successor, whichever shall first occur.
4.3 Resignation. Any officer may resign at any time by giving notice in writing or by electronic transmission notice to the Board of Directors or to the President or to the Secretary. Any such resignation shall be effective when received by the person or persons to whom such notice is given, unless a later time is specified therein, in which event the resignation shall become effective at such later time. Unless otherwise specified in such notice, the acceptance of any such resignation shall not be necessary to make it effective. Any resignation shall be without prejudice to the rights, if any, of the Corporation under any contract with the resigning officer.
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4.4 Removal. Any officer or agent elected or appointed by the Board of Directors may be removed at any time, for or without cause, by the affirmative vote of a majority of the whole Board of Directors, but such removal shall be without prejudice to the contract rights, if any, of the person so removed. If the office of any officer becomes vacant for any reason, the vacancy may be filled by the Board of Directors.
4.5 Duties of Officers.
(a) Chairman of the Board of Directors. The Chairman of the Board of Directors, when present, shall preside at all meetings of the stockholders and the Board of Directors. The Chairman of the Board of Directors shall perform other duties commonly incident to the office and shall also perform such other duties and have such other powers as the Board of Directors shall designate from time to time.
(b) Chief Executive Officer. The powers and duties of the Chief Executive Officer are: (a) to act as the general manager and chief executive officer of the Corporation and, subject to the direction of the Board of Directors, to have general supervision, direction and control of the business and affairs of the Corporation; (b) to preside at all meetings of the stockholders and, in the absence of the Chairman of the Board of Directors or if there is no Chairman of the Board of Directors, at all meetings of the Board of Directors; (c) to call meetings of the stockholders and meetings of the Board of Directors to be held at such times and, subject to the limitations prescribed by law or by these Bylaws, at such places as he or she shall deem proper; and (d) to affix the signature of the Corporation to all deeds, conveyances, mortgages, leases, obligations, bonds, certificates and other papers and instruments in writing which have been authorized by the Board of Directors or which, in the judgment of the Chief Executive Officer, should be executed on behalf of the Corporation, to sign certificates for shares of stock of the Corporation, and, subject to the direction of the Board of Directors, to have general charge of the property of the Corporation and to supervise and control all officers, agents and employees of the Corporation.
(c) President. The powers and duties of the President are: (a) subject to the authority granted to the Chief Executive Officer, if any, to act as the general manager of the Corporation and, subject to the control of the Board of Directors, to have general supervision, direction and control of the business and affairs of the Corporation; (b) to preside at all meetings of the stockholders and Board of Directors in the absence of the Chairman of the Board of Directors and the Chief Executive Officer or if there be no Chairman of the Board of Directors or Chief Executive Officer; and (c) to affix the signature of the Corporation to all deeds, conveyances, mortgages, leases, obligations, bonds, certificates and other papers and instruments in writing which have been authorized by the Board of Directors or which, in the judgment of the President, should be executed on behalf of the Corporation, to sign certificates for shares of stock of the Corporation, and, subject to the direction of the Board of Directors, to have general charge of the property of the Corporation and to supervise and control all officers, agents and employees of the Corporation. The President shall perform other duties commonly incident to the office and shall also perform such other duties and have such other powers as the Board of Directors shall designate from time to time.
(d) Vice Presidents. The Vice Presidents may assume and perform the duties of the President in the absence or disability of the President or whenever the office of President is vacant. The Vice Presidents shall perform other duties commonly incident to their office and shall also perform such other duties and have such other powers as the Board of Directors or the President shall designate from time to time.
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(e) Treasurer. The powers and duties of the Treasurer are: (a) to supervise and control the keeping and maintaining of adequate and correct accounts of the Corporation’s properties and business transactions, including accounts of its assets, liabilities, receipts, disbursements, gains, losses, capital, surplus and shares; (b) to have the custody of all funds, securities, evidences of indebtedness and other valuable documents of the Corporation and, at his or her discretion, to cause any or all thereof to be deposited for the account of the Corporation with such depository as may be designated from time to time by the Board of Directors; (c) to receive or cause to be received, and to give or cause to be given, receipts and acquittances for moneys paid in for the account of the Corporation; (d) to disburse, or cause to be disbursed, all funds of the Corporation as may be directed by the Chief Executive Officer, the President or the Board of Directors, taking proper vouchers for such disbursements; (e) to render to the Chief Executive Officer, the President or to the Board of Directors, whenever either may require, accounts of all transactions as Treasurer and of the financial condition of the Corporation; and (f) generally to do and perform all such duties as pertain to such office and as may be required by the Board of Directors or these Bylaws. The Treasurer may direct the any Assistant Treasurer, or the Controller or any Assistant Controller to assume and perform the duties of the Treasurer in the absence or disability of the Treasurer, and each Assistant Treasurer and each Controller and Assistant Controller shall perform other duties commonly incident to the office and shall also perform such other duties and have such other powers as the Board of Directors or the Chief Executive Officer shall designate from time to time.
(f) Secretary. The powers and duties of the Secretary are: (a) to keep a book of minutes at the principal executive office of the Corporation, or such other place as the Board of Directors may order, of all meetings of its directors and stockholders, whether regular or special, the notice thereof given, the names of those present at directors’ meetings, the number of shares present or represented at stockholders’ meetings and the proceedings thereof; (b) to keep the seal of the Corporation and to affix the same to all instruments which may require it; (c) to keep or cause to be kept at the principal executive office of the Corporation, or at the office of the transfer agent or agents, a record of the stockholders of the Corporation; (d) to keep a supply of certificates for shares of the Corporation, to fill in and sign all certificates issued or prepare the initial transaction statement or written statements for uncertificated shares, and to make a proper record of each such issuance, provided that so long as the Corporation shall have one or more duly appointed and acting transfer agents of the shares, or any class or series of shares, of the Corporation, such duties with respect to such shares shall be performed by such transfer agent or transfer agents; (e) to transfer upon the share books of the Corporation any and all shares of the Corporation, provided that so long as the Corporation shall have one or more duly appointed and acting transfer agents of the shares, or any class or series of shares, of the Corporation, such duties with respect to such shares shall be performed by such transfer agent or transfer agents; and (f) to make service and publication of all notices that may be necessary or proper and without command or direction from anyone. The Secretary shall perform all other duties provided for in these Bylaws and other duties commonly incident to the office and shall also perform such other duties and have such other powers as the Board of Directors shall designate from time to time. The Chief Executive Officer may direct any Assistant Secretary to assume and perform the duties of the Secretary in the absence or disability of the Secretary, and each Assistant Secretary shall perform other duties commonly incident to the office and shall also perform such other duties and have such other powers as the Board of Directors or the Chief Executive Officer shall designate from time to time.
4.6 Salaries. The salaries of all officers and agents of the Corporation shall be fixed by the Board of Directors or any committee of the Board, if so authorized by the Board.
4.7 Employment and Other Contracts. The Board of Directors may authorize any officer or officers or agent or agents to enter into any contract or execute and deliver any instrument in the name or on behalf of the Corporation, and such authority may be general or confined to specific instances. The Board of Directors may, when it believes the interest of the Corporation will best be served thereby, authorize executive employment contracts which will contain such terms and conditions as the Board of Directors deems appropriate.
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4.8 Bonding. If required by the Board of Directors, all or certain of the officers shall give the Corporation a bond, in such form, in such sum, and with such surety or sureties as shall be satisfactory to the Board of Directors, for the faithful performance of the duties of their office and for the restoration to the Corporation, in case of their death, resignation, retirement or removal from office, of all books, papers, vouchers, money and other property of whatever kind in their possession or under their control belonging to the Corporation.
article
V
SHARES OF STOCK
5.1 Form of Certificates. The Corporation may, but is not required to, deliver to each stockholder a certificate or certificates, in such form as may be determined by the Board of Directors, representing shares to which the stockholder is entitled. Such certificates shall be consecutively numbered and shall be registered on the books and records the Corporation or its transfer agent as they are issued. Each certificate shall state on the face thereof the holder’s name, the number, class of shares, and the par value of such shares or a statement that such shares are without par value.
5.2 Shares without Certificates. The Board of Directors may authorize the issuance of uncertificated shares of some or all of the shares of any or all of its classes or series. The issuance of uncertificated shares has no effect on existing certificates for shares until surrendered to the Corporation, or on the respective rights and obligations of the stockholders. Unless otherwise provided by the Nevada Revised Statutes, the rights and obligations of stockholders are identical whether or not their shares of stock are represented by certificates. Within a reasonable time after the issuance or transfer of uncertificated shares, the Corporation shall send the stockholder a written statement containing the information required on the certificates pursuant to Section 5.1. At least annually thereafter, the Corporation shall provide to its stockholders of record, a written statement confirming the information contained in the informational statement previously sent pursuant to this Section.
5.3 Lost, Stolen or Destroyed Certificates. The Board of Directors may direct that a new certificate be issued, or that uncertificated shares be issued, in place of any certificate theretofore issued by the Corporation alleged to have been lost or destroyed, upon the making of an affidavit of that fact by the person claiming the certificate to be lost or destroyed. When authorizing such issue of a new certificate or uncertificated shares, the Board of Directors, in its discretion and as a condition precedent to the issuance thereof, may require the owner of such lost or destroyed certificate, or his legal representative, to advertise the same in such manner as it shall require and/or to give the Corporation a bond, in such form, in such sum, and with such surety or sureties as it may direct as indemnity against any claim that may be made against the Corporation with respect to the certificate alleged to have been lost or destroyed. When a certificate has been lost, apparently destroyed or wrongfully taken, and the holder of record fails to notify the Corporation within a reasonable time after he has notice of it, and the Corporation registers a transfer of the shares represented by the certificate before receiving such notification, the holder of record is precluded from making any claim against the Corporation for the transfer or a new certificate or uncertificated shares.
5.4 Restrictions on Transfer. The Corporation shall have power to enter into and perform any agreement with any number of stockholders of any one or more classes of stock of the Corporation to restrict the sale, transfer, assignment, pledge, or other disposal of or encumbering of any of the shares of stock of the Corporation or any right or interest therein, whether voluntarily or by operation of law, or by gift or otherwise (each, a “Transfer”) of shares of stock of the Corporation of any one or more classes owned by such stockholders in any manner not prohibited by the Nevada Revised Statutes. Transfers of record of shares of stock of the Corporation shall be made only upon its books by the holders thereof, in person or by attorney duly authorized, and, in the case of stock represented by certificate, upon the surrender of a properly endorsed certificate or certificates for a like number of shares.
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5.5 Registered Stockholders. The Corporation shall be entitled to treat the holder of record of any share or shares of stock as the holder in fact thereof and, accordingly, shall not be bound to recognize any equitable or other claim to or interest in such share or shares on the part of any other person, whether or not it shall have express or other notice thereof, except as otherwise provided by law.
article
VI
indemnification
6.1 Directors and Executive Officers. The Corporation shall indemnify its directors and officers to the fullest extent not prohibited by the Nevada Revised Statutes or any other applicable law; provided, however, that the Corporation may modify the extent of such indemnification by individual contracts with its directors and officers; and, provided, further, that the Corporation shall not be required to indemnify any director or officer in connection with any proceeding (or part thereof) initiated by such person unless (a) such indemnification is expressly required to be made by law, (b) the proceeding was authorized by the Board of Directors of the Corporation, (c) such indemnification is provided by the Corporation, in its sole discretion, pursuant to the powers vested in the Corporation under the Nevada Revised Statutes or any other applicable law or (d) such indemnification is required to be made under Section 6.4.
6.2 Employees and Other Agents. The Corporation shall have power to indemnify its other employees and other agents as set forth in the Nevada Revised Statutes or any other applicable law. The Board of Directors shall have the power to delegate the determination of whether indemnification shall be given to any such person except such officers or other persons as the Board of Directors shall determine.
6.3 Expenses. The Corporation shall advance to any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, by reason of the fact that he is or was a director or officer of the Corporation, or is or was serving at the request of the Corporation as a director or officer of another corporation, partnership, joint venture, trust or other enterprise, prior to the final disposition of the proceeding, promptly following request therefor, all expenses incurred by any director or officer in connection with such proceeding, provided, however, that, if the Nevada Revised Statutes requires, an advancement of expenses incurred by a director or officer in his or her capacity as a director or officer (and not in any other capacity in which service was or is rendered by such indemnitee, including, without limitation, service to an employee benefit plan) shall be made only upon delivery to the Corporation of an undertaking, by or on behalf of such indemnitee, to repay all amounts so advanced if it shall ultimately be determined by final judicial decision from which there is no further right to appeal that such indemnitee is not entitled to be indemnified for such expenses under this Section or otherwise. Notwithstanding the foregoing, unless otherwise determined pursuant to Section 6.5, no advance shall be made by the Corporation to an officer of the Corporation (except by reason of the fact that such officer is or was a director of the Corporation, in which event this paragraph shall not apply) in any action, suit or proceeding, whether civil, criminal, administrative or investigative, if a determination is reasonably and promptly made (a) by a majority vote of a quorum consisting of directors who were not parties to the proceeding, even if not a quorum, or (b) by a committee of such directors designated by a majority of such directors, even though less than a quorum, or (c) if there are no such directors, or such directors so direct, by independent legal counsel in a written opinion, that the facts known to the decision-making party at the time such determination is made demonstrate clearly and convincingly that such person acted in bad faith or in a manner that such person did not believe to be in or not opposed to the best interests of the Corporation.
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6.4 Enforcement. Without the necessity of entering into an express contract, all rights to indemnification and advances to directors and officers under this Article VI shall be deemed to be contractual rights and be effective to the same extent and as if provided for in a contract between the Corporation and the director or officer. Any right to indemnification or advances granted by this Article VI to a director or officer shall be enforceable by or on behalf of the person holding such right in any court of competent jurisdiction if (a) the claim for indemnification or advances is denied, in whole or in part, or (b) no disposition of such claim is made within ninety (90) days of request therefor. The claimant in such enforcement action, if successful in whole or in part, shall be entitled to be paid also the expense of prosecuting the claim. In connection with any claim for indemnification, the Corporation shall be entitled to raise as a defense to any such action that the claimant has not met the standards of conduct that make it permissible under the Nevada Revised Statutes or any other applicable law for the Corporation to indemnify the claimant for the amount claimed. In connection with any claim by an officer of the Corporation (except in any action, suit or proceeding, whether civil, criminal, administrative or investigative, by reason of the fact that such officer is or was a director of the Corporation) for advances, the Corporation shall be entitled to raise as a defense as to any such action clear and convincing evidence that such person acted in bad faith or in a manner that such person did not believe to be in or not opposed to the best interests of the Corporation, or with respect to any criminal action or proceeding that such person acted without reasonable cause to believe that his conduct was lawful. Neither the failure of the Corporation (including its Board of Directors, independent legal counsel or its stockholders) to have made a determination prior to the commencement of such action that indemnification of the claimant is proper in the circumstances because he has met the applicable standard of conduct set forth in the Nevada Revised Statutes or any other applicable law, nor an actual determination by the Corporation (including its Board of Directors, independent legal counsel or its stockholders) that the claimant has not met such applicable standard of conduct, shall be a defense to the action or create a presumption that claimant has not met the applicable standard of conduct.
6.5 Non-Exclusivity of Rights. The rights conferred on any person by this Article VI shall not be exclusive of any other right which such person may have or hereafter acquire under any applicable statute, provision of the Articles of Incorporation, these Bylaws, agreement, vote of stockholders or disinterested directors or otherwise, both as to action in his official capacity and as to action in another capacity while holding office. The Corporation is specifically authorized to enter into individual contracts with any or all of its directors, officers, employees or agents respecting indemnification and advances, to the fullest extent not prohibited by the Nevada Revised Statutes or any other applicable law.
6.6 Survival of Rights. The rights conferred on any person by this Article VI shall continue as to a person who has ceased to be a director or officer and shall inure to the benefit of the heirs, executors and administrators of such a person.
6.7 Insurance. To the fullest extent permitted by the Nevada Revised Statutes, or any other applicable law, the Corporation, upon approval by the Board of Directors, may purchase insurance on behalf of any person required or permitted to be indemnified pursuant to this Article VI.
6.8 Amendments. Any repeal or modification of this Article VI shall only be prospective and shall not affect the rights under this Bylaw in effect at the time of the alleged occurrence of any action or omission to act that is the cause of any proceeding against any agent of the Corporation.
6.9 Saving Clause. If this Article VI or any portion hereof shall be invalidated on any ground by any court of competent jurisdiction, then the Corporation shall nevertheless indemnify each director and officer to the full extent not prohibited by any applicable portion of this Article that shall not have been invalidated, or by any other applicable law. If this Article VI shall be invalid due to the application of the indemnification provisions of another jurisdiction, then the Corporation shall indemnify each director and officer to the full extent under applicable law.
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6.10 Certain Definitions. For the purposes of this Article VI, the following definitions shall apply:
(a) The term “proceeding” shall be broadly construed and shall include, without limitation, the investigation, preparation, prosecution, defense, settlement, arbitration and appeal of, and the giving of testimony in, any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative.
(b) The term “expenses” shall be broadly construed and shall include, without limitation, court costs, attorneys’ fees, witness fees, fines, amounts paid in settlement or judgment and any other costs and expenses of any nature or kind incurred in connection with any proceeding.
(c) The term the “Corporation” shall include, in addition to the resulting Corporation, any constituent corporation (including any constituent of a constituent) absorbed in a consolidation or merger which, if its separate existence had continued, would have had power and authority to indemnify its directors, officers, and employees or agents, so that any person who is or was a director, officer, employee or agent of such constituent corporation, or is or was serving at the request of such constituent corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, shall stand in the same position under the provisions of this Article with respect to the resulting or surviving Corporation as he would have with respect to such constituent corporation if its separate existence had continued.
(d) References to a “director,” “officer,” “employee,” or “agent” of the Corporation shall include, without limitation, situations where such person is serving at the request of the Corporation as, respectively, a director, officer, employee, trustee or agent of another corporation, partnership, joint venture, trust or other enterprise.
(e) References to “other enterprises” shall include employee benefit plans; references to “fines” shall include any excise taxes assessed on a person with respect to an employee benefit plan; and references to “serving at the request of the Corporation” shall include any service as a director, officer, employee or agent of the Corporation which imposes duties on, or involves services by, such director, officer, employee, or agent with respect to an employee benefit plan, its participants, or beneficiaries; and a person who acted in good faith and in a manner he reasonably believed to be in the interest of the participants and beneficiaries of an employee benefit plan shall be deemed to have acted in a manner “not opposed to the best interests of the Corporation” as referred to in this Article.
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VII
NOTICES
7.1 Form of Notice. Whenever required by the Nevada Revised Statutes, the Articles of Incorporation or these Bylaws, notice is to be given to any director or stockholder, and no provision is made as to how such notice shall be given, such notice may be given: (a) in writing, by mail, postage prepaid, addressed to such director or stockholder at such address as appears on the books and records of the Corporation or its transfer agent; or (b) in any other method permitted by law. Any notice required or permitted to be given by mail shall be deemed to be given at the time when the same shall be deposited in the United States mail. Written notice may also be given personally or by electronic transmission (fax, electronic mail, or posting on electronic network).
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7.2 Waiver. Whenever any notice is required to be given to any stockholder or director of the Corporation as required by law, the Articles of Incorporation or these Bylaws, a waiver thereof in writing signed by the person or persons entitled to such notice, whether before or after the time stated in such notice, shall be equivalent to the giving of such notice. Attendance of a stockholder or director at a meeting shall constitute a waiver of notice of such meeting, except where such stockholder or director attends for the express purpose of objecting to the transaction of any business on the ground that the meeting is not lawfully called or convened.
7.3 Affidavit of Mailing. An affidavit of mailing, executed by a duly authorized and competent employee of the Corporation or its transfer agent appointed with respect to the class of stock affected or other agent, specifying the name and address or the names and addresses of the stockholder or stockholders, or director or directors, to whom any such notice or notices was or were given, and the time and method of giving the same, shall in the absence of fraud, be prima facie evidence of the facts therein contained.
7.4 Methods of Notice. It shall not be necessary that the same method of giving notice be employed in respect of all recipients of notice, but one permissible method may be employed in respect of any one or more, and any other permissible method or methods may be employed in respect of any other or others.
7.5 Notice to Stockholders Sharing an Address. Except as otherwise prohibited under the Nevada Revised Statutes, any notice given under the provisions of the Nevada Revised Statutes, the Articles of Incorporation or these Bylaws, shall be effective if given by a single written notice to stockholders who share an address if consented to by the stockholders at that address to whom such notice is given. Such consent shall have been deemed to have been given if such stockholder fails to object in writing to the Corporation within sixty (60) days of having been given notice by the Corporation of its intention to send the single notice. Any consent shall be revocable by the stockholder by written notice to the Corporation.
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VIII
GENERAL PROVISIONS
8.1 Execution of Corporate Instruments. The Board of Directors may, in its discretion, determine the method and designate the signatory officer or officers, or other person or persons, to execute on behalf of the Corporation any corporate instrument or document, or to sign on behalf of the Corporation the corporate name without limitation, or to enter into contracts on behalf of the Corporation, except where otherwise provided by law or these Bylaws, and such execution or signature shall be binding upon the Corporation. All checks and drafts drawn on banks or other depositaries on funds to the credit of the Corporation or in special accounts of the Corporation shall be signed by such person or persons as the Board of Directors shall authorize so to do. Unless authorized or ratified by the Board of Directors or within the agency power of an officer, no officer, agent or employee shall have any power or authority to bind the Corporation by any contract or engagement or to pledge its credit or to render it liable for any purpose or for any amount.
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8.2 Execution of Other Securities. All bonds, debentures and other corporate securities of the Corporation, other than stock certificates (covered in Section 5.1 of these Bylaws), may be signed by the Chairman of the Board of Directors, the Chief Executive Officer, the President or any Vice President, or such other person as may be authorized by the Board of Directors, and the corporate seal impressed thereon or a facsimile of such seal imprinted thereon and attested by the signature of the Secretary or an Assistant Secretary, or the Treasurer or an Assistant Treasurer; provided, however, that where any such bond, debenture or other corporate security shall be authenticated by the manual signature, or where permissible facsimile signature, of a trustee under an indenture pursuant to which such bond, debenture or other corporate security shall be issued, the signatures of the persons signing and attesting the corporate seal on such bond, debenture or other corporate security may be the imprinted facsimile of the signatures of such persons. Interest coupons appertaining to any such bond, debenture or other corporate security, authenticated by a trustee as aforesaid, shall be signed by the Treasurer or an Assistant Treasurer of the Corporation or such other person as may be authorized by the Board of Directors, or bear imprinted thereon the facsimile signature of such person. In case any officer who shall have signed or attested any bond, debenture or other corporate security, or whose facsimile signature shall appear thereon or on any such interest coupon, shall have ceased to be such officer before the bond, debenture or other corporate security so signed or attested shall have been delivered, such bond, debenture or other corporate security nevertheless may be adopted by the Corporation and issued and delivered as though the person who signed the same or whose facsimile signature shall have been used thereon had not ceased to be such officer of the Corporation.
8.3 Voting of Securities Owned by the Corporation. All stock and other securities of other corporations owned or held by the Corporation for itself, or for other parties in any capacity, shall be voted, and all proxies with respect thereto shall be executed, by the person authorized so to do by resolution of the Board of Directors, or, in the absence of such authorization, by the Chairman of the Board of Directors, the Chief Executive Officer, the President, or any Vice President.
8.4 Dividends. Dividends upon the outstanding shares of the Corporation, subject to the provisions of the Articles of Incorporation, if any, may be declared by the Board of Directors at any regular or special meeting. Dividends may be declared and paid in cash, in property, or in shares of the Corporation, subject to the provisions of the Nevada Revised Statutes and the Articles of Incorporation. The Board of Directors may fix in advance a record date for the purpose of determining stockholders entitled to receive payment of any dividend, such record date to be not more than sixty (60) days prior to the payment date of such dividend, or the Board of Directors may close the stock transfer books for such purpose for a period of not more than sixty (60) days prior to the payment date of such dividend. In the absence of any action by the Board of Directors, the date upon which the Board of Directors adopts the resolution declaring such dividend shall be the record date.
8.5 Reserves. There may be created by resolution of the Board of Directors out of the surplus of the Corporation such reserve or reserves as the directors from time to time, in their discretion, think proper to provide for contingencies, or to equalize dividends, or to repair or maintain any property of the Corporation, or for such other purpose as the directors shall think beneficial to the Corporation, and the directors may modify or abolish any such reserve in the manner in which it was created. Surplus of the Corporation to the extent so reserved shall not be available for the payment of dividends or other distributions by the Corporation.
8.6 Books and Records. The Corporation shall keep correct and complete books and records of account and minutes of the proceedings of its stockholders and Board of Directors and shall keep at its registered office or principal place of business, or at the office of its transfer agent or registrar, a record of its stockholders, giving the names and addresses of all stockholders and the number and class of the shares held by each.
8.7 Corporate Seal. The Board of Directors may adopt a corporate seal. The corporate seal shall consist of a die bearing the name of the Corporation and the inscription, “Corporate Seal-Nevada.” Said seal may be used by causing it or a facsimile thereof to be impressed or affixed or reproduced or otherwise.
8.8 Fiscal Year. The fiscal year of the Corporation shall be fixed by resolution of the Board of Directors.
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8.9 Interpretation and Construction. Reference in these Bylaws to any provision of the Nevada Revised Statutes shall be deemed to include all amendments thereof. Unless the context requires otherwise, the general provisions, rules of construction and definitions in the Nevada Revised Statutes shall govern the construction of these Bylaws. Without limiting the generality of the provision, the singular number includes the plural, the plural number includes the singular, and the term “person” includes both a corporation and a natural person. All restrictions, limitations, requirements and other provisions of these Bylaws shall be construed, insofar as possible, as supplemental and additional to all provisions of law applicable to the subject matter thereof and shall be fully complied with in addition to the said provisions of law unless such compliance shall be illegal. Any article, section, subsection, subdivision, sentence, clause or phrase of these Bylaws which, upon being construed in the manner provided in this Section 8.9, shall be contrary to or inconsistent with any applicable provision of law, shall not apply so long as said provisions of law shall remain in effect, but such result shall not affect the validity or applicability of any other portions of these Bylaws, it being hereby declared that these Bylaws, and each article, section, subsection, subdivision, sentence, clause, or phrase thereof, would have been adopted irrespective of the fact that any one or more articles, sections, subsections, subdivisions, sentences, clauses or phrases is or are illegal.
8.10 Forum for Adjudication of Disputes. To the fullest extent permitted by law, and unless the Corporation consents in writing to the selection of an alternative forum, the Eight Judicial District Court of Clark County, Nevada, shall, to the fullest extent permitted by law, be the sole and exclusive forum for state law claims with respect to: (1) any derivative action or proceeding brought in the name or right of the Corporation or on its behalf, (2) any action asserting a claim for breach of any fiduciary duty owed by any director, officer, employee or agent of the Corporation to the Corporation or the Corporation’s stockholders, (3) any action arising or asserting a claim arising pursuant to any provision of the Nevada Revised Statutes Chapters 78 or 92A or any provision of the Articles of Incorporation or these Bylaws, or (4) any action asserting a claim governed by the internal affairs doctrine, including, without limitation, any action to interpret, apply, enforce or determine the validity of the Articles of Incorporation or these Bylaws. This exclusive forum provision would not apply to suits brought to enforce any liability or duty created by the Securities Act of 1933, as amended, or the Exchange Act or any other claim for which the federal courts have exclusive jurisdiction. Any person or entity purchasing or otherwise acquiring any interest in shares of capital stock of the Corporation shall be deemed to have notice of and consented to the provisions of this Section 8.10.
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IX
ADOPTION, AMENDMENT OR REPEAL OF BYLAWS
9.1 By the Board of Directors. The Board of Directors is expressly empowered to amend, modify, restate or repeal these Bylaws, or adopt any new provision.
9.2 By the Stockholders. The stockholders of the Corporation shall also have the power to amend, modify, restate or repeal these Bylaws, or adopt any new provision, at a duly called meeting of the stockholders; provided, that notice of the proposed amendment, modification, restatement or repeal was given in the notice of the meeting.
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CERTIFICATE OF ADOPTION OF BYLAWS
OF
TOPPOINT HOLDINGS INC.
The undersigned hereby certifies that he is the duly elected, qualified and acting Secretary of Toppoint Holdings Inc., a Nevada corporation (the “Corporation”), and that the foregoing Bylaws were adopted as the Corporation’s bylaws as of the date hereof by the Corporation’s Board of Directors.
The undersigned has executed this Certificate as of February 8, 2024.
| /s/ John Feliciano III | |
| John Feliciano III | |
| Secretary |
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Exhibit 10.1
SHARE EXCHANGE AGREEMENT
This SHARE EXCHANGE AGREEMENT is dated September 29, 2022 (this “Agreement”), by and among TOPPOINT INC, a Pennsylvania corporation (the “Company”), the sole stockholder of the Company, Hok C Chan (the “Company Stockholder”) and TOPPOINT HOLDINGS INC., a Nevada corporation (“Holdings”).
RECITALS
A. The Company Stockholder owns all of the issued and outstanding shares of capital stock of the Company (the “Company Shares”).
B. Holdings is willing to acquire all of the Company Shares, making the Company a wholly-owned subsidiary of Holdings, and the Company Stockholder desires to exchange all of his Company Shares for certain number of shares of Holdings’ common stock, $0.0001 par value per share, as hereinafter provided.
D. It is the intention of the parties hereto that:
| (1) | Holdings shall acquire all of the Company Shares held by the Company Stockholder in exchange for Seven Million Five Hundred Thousand (7,500,000) shares of Holdings’ common stock (the “Exchange”); |
| (2) | The Exchange is intended to qualify as a tax-free reorganization under Section 351 of the Internal Revenue Code of 1986, as amended, and related sections thereunder; and |
| (3) | The Exchange is also intended to qualify as a transaction in securities exempt from registration or qualification under the Securities Act of 1933, as amended, (the “Act”) and under the applicable securities laws of the state or jurisdiction where the Company Stockholder resides. |
NOW, THEREFORE, in consideration of the mutual covenants, agreements, representations and warranties contained in this Agreement, the parties hereto agree as follows:
1. EXCHANGE OF SHARES
(a) Exchange of Shares. Holdings and the Company Stockholder hereby agree that the Company Stockholder shall, on the date hereof or as soon as practicable after the date hereof (the “Closing Date”), exchange all of the Company Shares for Seven Million Five Hundred Thousand (7,500,000) shares of common stock of Holdings (the “Holdings Shares”).
(b) Delivery of Company Shares and Holdings Shares. On the Closing Date, automatically, and without any action on the part of the Company Stockholder, Company Stockholder shall become the owner of all of the Holdings Shares. Simultaneously, on the Closing Date, Holdings will deliver certificate or book entry statement representing the Holdings Shares to the Company Stockholder and the Company Stockholder shall transfer and deliver to Holdings a stock certificate representing the Company Shares, if certificated, along with a stock power or other evidence as necessary to transfer to Holdings the Company Shares.
(c) Investment Intent. The Holdings Shares have not been registered under the Act and may not be resold unless the Holdings Shares are registered under the Act or an exemption from such registration is available. The Company Stockholder represents and warrants that he is acquiring the Holdings Shares for his own account, for investment, and not with a view to the sale or distribution of such Holdings Shares. The Holdings Shares will have a legend thereon referring to the transfer restrictions of the Act.
2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE COMPANY STOCKHOLDER.
The Company and the Company Stockholder hereby jointly and severally represent and warrant to Holdings as follows:
(a) Organization and Good Standing; Ownership of Shares. The Company is an entity duly organized, validly existing and in good standing under the laws of its jurisdiction of incorporation, and is entitled to own or lease its properties and to carry on its business as and in the places where such properties are now owned, leased or operated and such business is now conducted. The Company is duly licensed or qualified and in good standing as a foreign corporation where the character of the properties owned by it or the nature of the business transacted by it make such licenses or qualifications necessary. There are no outstanding subscriptions, rights, options, warrants or other agreements obligating either the Company or any of the Company Stockholder to issue, sell or transfer any stock or other securities of the Company.
(b) Ownership of Shares. The Company Stockholder is the owner of record and beneficially of all of the Company Shares, free and clear of all rights, claims, liens and encumbrances, and such Company Shares have not been sold, pledged, assigned or otherwise transferred except pursuant to this Agreement.
(c) No Breach. The execution, delivery and performance of this Agreement and the consummation of the transactions contemplated hereby will not:
(i) violate any provision of the articles of incorporation, bylaws or other constituent instruments of the Company;
(ii) violate, conflict with or result in the breach of any of the terms of, result in a material modification of, otherwise give any other contracting party the right to terminate, or constitute (or with notice or lapse of time or both constitute) a default under, any contract or other agreement to which the Company is a party or by or to which the Company or any of its assets or properties may be bound or subject;
(iii) violate any order, judgment, injunction, award or decree of any court, arbitrator or governmental or regulatory body against, or binding upon the Company, or upon the properties or business of the Company; or
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(iv) violate any statute, law or regulation of any jurisdiction applicable to the transactions contemplated herein which could have a materially adverse effect on the business or operations of the Company.
(d) Actions and Proceedings. There is no outstanding order, judgment, injunction, award or decree of any court, governmental or regulatory body or arbitration tribunal against or involving the Company. There is no action, suit or claim or legal, administrative or arbitral proceeding or (whether or not the defense thereof or liabilities in respect thereof are covered by insurance) pending or threatened against or involving the Company or any of its properties or assets.
3. REPRESENTATIONS AND WARRANTIES OF HOLDINGS
Holdings hereby represents and warrants to the Company and the Company Stockholder as follows:
(a) Organization and Good Standing. Holdings is a corporation duly organized, validly existing and in good standing under the laws of the State of Nevada and is entitled to own or lease its properties and to carry on its business as and in the places where such properties are now owned, leased, or operated and such business is now conducted. As of the Closing Date, the authorized capital stock of the Company will consist of 300,000,000 shares of Common Stock, 7,500,000 shares of which will be issued and outstanding immediately prior to the Closing, and 50,000,000 shares of Preferred Stock, none of which will be issued and outstanding immediately prior to the Closing. Holdings is duly licensed or qualified and in good standing where the character of the properties owned by Holdings or the nature of the business transacted by it make such license or qualification necessary. Holdings does not have any subsidiaries.
(b) The Holdings Shares. The Holdings Shares to be issued to the Company Stockholder have been or will have been duly authorized for issuance and no other corporate or shareholder action is required to authorize the Holdings Shares for issuance and, when so issued in accordance with the terms of this Agreement, the Holdings Shares will be validly issued, fully paid and non-assessable.
(c) No Breach. The execution, delivery and performance of this Agreement and the consummation of the transactions contemplated hereby will not:
(i) violate any provision of the articles of incorporation or bylaws of Holdings;
(ii) violate, conflict with or result in the breach of any of the terms of, result in a material modification of, otherwise give any other contracting party the right to terminate, or constitute (or with notice or lapse of time or both constitute) a default under, any contract or other agreement to which Holdings is a party or by or to which it or any of its assets or properties may be bound or subject;
(iii) violate any order, judgment, injunction, award or decree of any court, arbitrator or governmental or regulatory body against, or binding upon Holdings or upon the properties or business of Holdings; or
(iv) violate any statute, law or regulation of any jurisdiction applicable to the transactions contemplated herein which could have a material adverse effect on the business or operations of Holdings.
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(d) Actions and Proceedings. There is no outstanding order, judgment, injunction, award or decree of any court, governmental or regulatory body or arbitration tribunal against or involving Holdings. There is no action, suit or claim or legal, administrative or arbitral proceeding or (whether or not the defense thereof or liabilities in respect thereof are covered by insurance) pending or threatened against or involving Holdings or any of its properties or assets.
4. MISCELLANEOUS
(a) Waivers. The waiver of a breach of this Agreement or the failure of any party hereto to exercise any right under this Agreement shall in no event constitute waiver as to any future breach whether similar or dissimilar in nature or as to the exercise of any further right under this Agreement.
(b) Amendment. This Agreement may be amended or modified only by an instrument of equal formality signed by Holdings, Company Stockholder and the Company.
(c) Assignment. This Agreement is not assignable except by operation of law.
(d) Notices. Until otherwise specified in writing, the mailing addresses of the parties of this Agreement shall be as set forth on the signature pages to this Agreement. Any notice or statement given under this Agreement shall be deemed to have been given if sent by registered mail addressed to the other party at the address indicated above or at such other address which shall have been furnished in writing to the addressor.
(e) Governing Law. This Agreement shall be construed, and the legal relations among the parties determined, in accordance with the laws of the State of Nevada, thereby precluding any choice of law rules which may direct the application of the laws of any other jurisdiction.
(f) Publicity. No publicity release or announcement concerning this Agreement or the transactions contemplated hereby shall be issued by either party hereto at any time from the signing hereof without advance approval in writing of the form and substance thereof by the other party.
(g) Entire Agreement. This Agreement (including the Exhibits and Schedules hereto) contains the entire agreement among the parties with respect to the exchange of the Company Shares for the Holdings Shares and related transactions, and supersedes all prior agreements, written or oral, with respect thereto.
(h) Headings. The headings in this Agreement are for reference purposes only and shall not in any way affect the meaning or interpretation of this Agreement.
(i) Severability of Provisions. The invalidity or unenforceability of any term, phrase, clause, paragraph, restriction, covenant, agreement or other provision of this Agreement shall in no way affect the validity or enforcement of any other provision or any part thereof.
(j) Counterparts; Facsimile Execution. This Agreement may be executed in any number of counterparts, each of which when so executed, shall constitute an original copy hereof, but all of which together shall consider but one and the same document. Facsimile execution and delivery of this Agreement is legal, valid and binding for all purposes.
(k) Expenses. Each party hereto agrees to pay its own costs and expenses incurred in negotiating this Agreement and consummating the transactions described herein.
(l) Further Assurances. The parties shall execute such documents and other papers and take such further actions as may be reasonably required or desirable to carry out the provisions hereof and the transactions contemplated hereby.
[Signature pages follow]
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[Company Signature Page]
IN WITNESS WHEREOF, the Company has executed this Share Exchange Agreement on the date first above written.
| TOPPOINT INC | ||
| By: | /s/ Hok C Chan | |
| Name: | Hok C Chan | |
| Its: | Chief Executive Officer | |
| Address: | 1907 Black Hawk Cir | |
| Audubon, PA 19403 | ||
[Holdings Signature Page]
IN WITNESS WHEREOF, Holdings has executed this Share Exchange Agreement on the date first above written.
| TOPPOINT HOLDINGS INC. | ||
| By: | /s/ John Feliciano III | |
| Name: | John Feliciano III | |
| Its: | Chief Financial Officer | |
| Address: | 1907 Black Hawk Cir | |
| Audubon, PA 19403 | ||
[Company Stockholder Signature Page]
IN WITNESS WHEREOF, the undersigned Company Stockholder has executed this Share Exchange Agreement on the date first above written.
| /s/ Hok C Chan | ||
| Name: | Hok C Chan | |
| Address: | 1250 Kenas Rd | |
| North Wales, PA, 19454 | ||
Exhibit 10.2
EXECUTIVE EMPLOYMENT AGREEMENT
This executive employment agreement (the “Agreement”) will become effective as of the date (the “Effective Date”) on which the U.S. Securities and Exchange Commission declares the registration statement in connection with the initial public offering of the Company (as defined below) effective, by and between Toppoint Holdings Inc., a Nevada corporation with an office at 1250 Kenas Road, North Wales, PA 19454 (“TOPP” or the “Company”), and Hok C Chan, an individual (“Executive”). TOPP and Executive are referred to herein from time to time on a collective basis as the “Parties” and each on individual basis as a “Party.”
Recitals
TOPP wishes to secure the services of Executive as the Chief Executive Officer of TOPP (with such other duties and/or offices in TOPP or its affiliates as may be assigned by TOPP’s Board of Directors (the “Board”) and as agreed to by Executive) upon the terms and conditions hereinafter set forth, and Executive wishes to render such services to TOPP upon the terms and conditions hereinafter set forth.
Agreement
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants herein contained and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the Parties hereto, intending to be legally bound, agree as follows:
1. Employment by TOPP. TOPP agrees to employ Executive during the Term (defined below) in the position of Chief Executive Officer in which Executive will have such duties and responsibilities to TOPP as are customary for such a position in companies comparable to TOPP and as are reasonably assigned, delegated and determined from time to time by the Board and as agreed to by Executive, and Executive accepts such employment and agrees to perform such duties and responsibilities. Executive shall devote his full business time and attention exclusively to TOPP and shall use his/her best efforts to faithfully carry out Executive’s duties and responsibilities hereunder, provided, however, that during the Term (as defined herein), Executive may serve on charitable and civic boards, subject to the prior approval of the Board, which approval shall not be unreasonably withheld, and so long as such charitable or civ board position(s) do not limit or interfere with Executive’s duties to TOPP hereunder or breach any agreement between Executive and TOPP.
2. Term of Employment. The term of this Agreement (the “Term”) shall begin on the Effective Date and end at 11:59 p.m. United States Pacific Time on the third anniversary of the Effective Date, unless terminated earlier as provided in Section 4, in which case the Term shall be from the Effective Date to the earlier termination date.
3. Compensation and Benefits.
(a) Base Salary. The Company shall pay to the Executive a base salary for all services to be rendered by the Executive under this Employment Agreement at the rate of $350,000 per year (the “Base Salary”), which Base Salary shall be paid in approximately equal installments (less applicable payroll deductions and taxes) in accordance with the Company’s normal payroll schedule, procedures and policies (which schedules, procedures and policies may be modified from time to time in the Company’s sole discretion), but not less frequently than monthly. The Company shall have no obligation to pay the Executive’s Base Salary following the date of the expiration or termination of this Agreement, whichever is earlier.
(b) Expenses. TOPP shall pay or reimburse Executive for all reasonable and necessary expenses actually incurred or paid by Executive during the Term in the performance of Executive’s duties under this Agreement, upon submission and approval of expense statements, vouchers, or other supporting information in accordance with the then customary practices of TOPP.
(c) Vacation and Sick Leave; Holidays. Executive shall be entitled to: (i) all public holidays observed by the United States federal government and (ii) unlimited paid time off for vacation, illness, personal, or religious reasons in each year during the Term, subject to TOPP’s leave policies (which TOPP may amend from time to time in its sole discretion), Executive fulfilling his job duties and responsibilities, and such paid time off not impacting TOPP negatively. The time or times during which paid time off under (ii) may be taken shall be by mutual agreement of TOPP and Executive, and, whenever reasonably possible, TOPP agrees to accommodate and grant Executive’s request for such paid time off. Because Executive does not accrue paid time off for vacation, illness, etc., Executive is not entitled to compensation for any paid time off upon the end of his employment with TOPP.
(d) Benefits. Whether and to what extent Executive is entitled to receive benefits, if any, from the Company is set forth on Schedule 1 hereto.
(e) Bonus(es). Whether and to what extent Executive is entitled to receive bonuses, if any, from the Company is set forth on Schedule 2 hereto.
(f) Severance. Whether and to what extent Executive is entitled to receive a severance payment, if any, from the Company upon the Executive’s termination of employment with the Company, whether by the Executive or the Company, is set forth on Schedule 3 hereto.
(g) Equity Grants. Whether and to what extent Executive is entitled to receive equity grants (e.g., stock or stock options), if any, from the Company is set forth on Schedule 4 hereto.
(h) Withholding of Taxes. TOPP may withhold from any Base Salary, benefits, severance, and equity grants payable or deliverable under this Agreement all federal, state, city and other taxes as shall be required pursuant to any law or governmental regulation or ruling.
4. Termination.
(a) Termination by TOPP.
(i) Termination upon Disability of Executive. If during the Term, Executive becomes physically or mentally disabled, whether totally or partially, so that Executive is unable to perform his essential job functions hereunder for a period aggregating 180 days during any twelve-month period, and it is determined by a physician acceptable to both TOPP and Executive that, by reason of such physical or mental disability, Executive shall be unable to perform the essential job functions required of him hereunder for such period or periods, TOPP may, by written notice to Executive, terminate this Agreement, in which event the Term shall terminate 10 days after the date upon which TOPP shall have given notice to Executive of its intention to terminate this Agreement because of the disability. Except as set forth in Section 5 hereof, Executive shall have no right to any compensation or benefit hereunder on and after the date of such termination.
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(ii) Termination for Cause. TOPP may at any time by written notice to Executive terminate this Agreement immediately and, except as provided in Section 5 hereof, Executive shall have no right to receive any compensation or benefit hereunder on and after the date of such notice, in the event that an event of “Cause” occurs. For purposes of this Agreement “Cause” shall mean:
(A) any willful breach by Executive of any material term of this Agreement, if Executive fails to reasonably cure such breach within 30 days after the receipt of written notice from the Board of such breach, which notice shall state in reasonable detail the facts and circumstances claimed to be a failure or willful breach and of the intent of TOPP to terminate Executive’s employment upon the failure of Executive to reasonably cure such failure or breach; or
(B) Executive has committed an intentional felonious act of fraud, misappropriation, embezzlement, or theft or an intentional breach of fiduciary duty involving personal profit; or
(C) Executive is indicted for any criminal offense constituting a felony or a crime involving moral turpitude (except that Executive shall continue to be entitled to all compensation until a conviction of such offense); or
(D) Executive intentionally breaches any of the provisions of Employee Confidential Information And Inventions Assignment Agreement he has entered into with the Company.
For purposes of this Agreement, an act, or a failure to act, shall not be deemed willful or intentional, as those terms are used herein, unless it is done, or admitted to having been done, by Executive in bad faith or without a reasonable belief that Executive’s action or omission was in the interest of TOPP.
(iii) Termination without Cause. TOPP may terminate this Agreement at any time, without cause, upon sixty (60) days’ written notice by TOPP to Executive and, except as provided in Section 5 hereof, Executive shall have no right to receive any compensation or benefit hereunder after such termination.
(b) Termination by Executive.
(i) Termination upon Death of Executive. If Executive dies during the Term, this Agreement shall terminate as of the date of his death and except as set forth in Section 5 hereof Executive’s estate shall have no right to any compensation or benefit hereunder on and after the date of death.
(ii) Termination for Good Reason. In the event that an event of “Good Reason” occurs, Executive may terminate this Agreement at any time by written notice to TOPP and, except as provided in Section 5 hereof, Executive shall have no right to receive any compensation or benefit hereunder on and after the date of such notice. For purposes of this Agreement, “Good Reason” shall mean, the existence, without the consent of Executive, of any of the following events: (A) Executive’s duties and responsibilities are substantially reduced or diminished; (B) Executive’s Base Salary is materially reduced from the level prior to such reduction, except for an across-the-board reduction in base salary for all executive officers, or (C) TOPP materially breaches its obligations under this Agreement. In addition to any requirements set forth above, in order for any of the above events to constitute “Good Reason,” Executive must (x) inform TOPP of the existence of the event within ninety (90) days of the initial existence of the event, after which date TOPP shall have no less than thirty (30) days to cure the event which otherwise would constitute “Good Reason” hereunder and (y) Executive must terminate employment with TOPP for such “Good Reason” no later than six months after the initial existence of the event which prompted Executive’s termination.
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(iii) Termination Other than for Death or Good Reason. Executive may terminate this Agreement at any time, without Good Reason, upon sixty (60) days’ written notice by Executive to TOPP and, except as provided in Section 5 hereof, Executive shall have no right to receive any compensation or benefit hereunder after such termination.
5. Payments Upon Termination. If during the Term, this Agreement is terminated pursuant to Section 4, all compensation (including, without limitation, Base Salary) payable to Executive under Section 3 hereof shall cease as of the date of termination specified in the notice of termination from the Company or the Executive, as the case may be, or, if the termination is due to the Executive’s death, on the date of the Executive’s death, and the Company shall pay to the Executive (or if the Executive has died, to his/her estate) all previously earned, accrued, and unpaid Base Salary and benefits from the Company’s employee benefit plans in which Executive participated and is entitled to receive under the terms of those plans (including any such benefits under the Company’s pension, disability, and life insurance plans, policies, and programs).
6. Certain Restrictive Covenants.
(a) Non-Solicitation of Customers, Vendors, etc. During your employment with the Company and for the Restrictive Covenant Period, you agree not to, directly or indirectly, on your behalf or on behalf of themselves or any other person: (i) solicit the business of any customer, client or distributor, including any insurance carriers, of the Company or any of its affiliates or subsidiaries, including any partnerships or joint ventures of the Company, for a Competing Business or induce or attempt to induce any such customer or client to withdraw, decrease or cancel its business with the Company or any of its affiliates or subsidiaries; or (ii) attempt to do any of the foregoing, or assist, entice, induce or encourage any other person to do or attempt to do any activity which, were it done by you, would violate any provision of this Section 6(a).
(b) Non-Solicitation of Employees. During your employment with the Company and for the Restrictive Covenant Period after your termination of employment, you agree that you will not hire as an employee, retain as an independent contractor, call upon, solicit or communicate with any individual who at the applicable time is or, during the 12-month period preceding your termination of employment, was either an employee or an independent sales representative of the Company or any of its affiliates or subsidiaries, including any partnerships or joint ventures of the Company, for the purpose or with the intent of enticing, or in a manner reasonably likely to entice, such person away from the Company or any of its affiliates, other than a general solicitation not specifically targeting employees of the Company or its affiliates or subsidiaries.
(c) Media Nondisclosure.
(i) During and after the Term, you shall not directly or indirectly disclose to the Media (as defined below) any information relating to any aspect of your employment, resignation, or termination from employment with the Company and/or any affiliate, any non-public information related to the business of the Company and/or any affiliate (or any of their respective members, shareholders, partners, officers, directors, managers, employees, representatives or agents), and/or any aspect of any controversy or claims between the Parties of or relating to the subject matter of this Agreement, your employment with, termination or resignation from, the Company and its affiliates and/or the Parties’ relationship. For purposes hereof, “Media” means any station, publication, show, website, web log (blog), bulletin board, social networking site, chat room, program and/or new organization, whether published through the means of print, radio, television, email, text message, the internet or otherwise and any member, representative, agent and/or employee of the same.
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(ii) During and after the Term, the Board shall not directly or indirectly disclose to the Media any information relating to any aspect of your employment, resignation, or termination from employment with the Company and/or any affiliate, and/or any aspect of any controversy or claims between the Parties of or relating to the subject matter of this Agreement, your employment with, termination or resignation from, the Company and its affiliates and/or the Parties’ relationship.
(d) Non-Disparagement.
(i) During and after the Term, you shall not make any statements, comments or communications in any form, oral, written or electronic to any Media or any customer, client or supplier of the Company or any of its affiliates, which would constitute libel, slander or disparagement of the Company or any of its affiliates, including, without limitation, any such statements, comments or communications that criticize, ridicule or are derogatory to the Company or any of its affiliates; provided, however, that the terms of this Section 6(d)(i) shall not apply to communications between the Company and you and, as applicable, its or your attorneys or other persons with whom communications would be subject to a claim of privilege existing under common law, statute or rule of procedure. You further agree that you will not in any way solicit any such statements, comments or communications from others.
(ii) During and after the Term, the Board shall not make any statements, comments or communications in any form, oral, written or electronic to any Media or any customer, client or supplier of the Company or any of its affiliates, which would constitute libel, slander or disparagement of you, including, without limitation, any such statements, comments or communications that criticize, ridicule or are derogatory to you; provided, however, that the terms of this Section 6(d)(ii) shall not apply to communications between the Company and you and, as applicable, its or your attorneys or other persons with whom communications would be subject to a claim of privilege existing under common law, statute or rule of procedure. The Board further agrees that it will not in any way solicit any such statements, comments or communications from others.
(iii) For avoidance of doubt, the Company shall not take any action to impede the Executive from communicating directly with the U.S. Securities and Exchange Commission (the “SEC”) staff about a possible securities law violation.
(e) For purposes of this Section 6:
(i) “Competing Business” means any person in North America in the business of providing trucking services. Businesses that engage in a Competing Business include, without limitation, the Executive operating his own business in any capacity.
(ii) “Restrictive Covenant Period” means a period equal to six (6) months after your termination of employment with the Company for whatever reason (including, without limitation, by the Company without Cause or by you due to Good Reason). For avoidance of doubt, the Restricted Covenant Period shall apply regardless of the reason your employment terminates.
7. Conditions to Agreement Becoming Effective. In addition to any other conditions to this Agreement becoming effective set forth in this Agreement, this Agreement shall not become effective until the Executive provides requisite verification of the Executive’s right to work in the United States, as demonstrated by his/her completion of an I-9 form upon hire and submission of acceptable documentation (as noted on the I-9 form).
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8. Other Provisions.
(a) Notices. Any notice or other communication required or which may be given hereunder shall be in writing and shall be delivered personally, emailed, telecopied, telegraphed or telexed, or sent by certified, registered or express mail, postage prepaid, to the Parties at the addresses specified on the signature page hereto, or at such other addresses as shall be specified by the Parties by like notice, and shall be deemed given so long as such provides a receipt of delivery, when so delivered personally, emailed, telecopied, telegraphed or telexed, or mailed.
(b) Entire Agreement. This Agreement, and the Employee Confidential Information and Inventions Assignment Agreement by and between TOPP and Executive dated August 16, 2022 attached hereto as Attachment A, contain the entire agreement between the Parties with respect to the subject matter of those two agreements and supersedes all prior contracts and other agreements, written or oral, with respect to those two agreements.
(c) Waivers and Amendments. This Agreement may be amended, modified, superseded, cancelled, and the terms and conditions hereof may be waived, only by a written instrument signed by the Parties or, in the case of a waiver, by the Party waiving compliance. No delay on the part of any Party in exercising any right, power or privilege hereunder shall operate as a waiver thereof, nor shall any waiver on the part of any Party of any right, power, or privilege hereunder, nor any single or partial exercise of any right, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, power, or privilege hereunder.
(d) Governing Law. This Agreement shall be governed by and construed under the laws of the State of Nevada without regard to the choice of law principles thereof.
(e) Dispute Resolution.
(i) Unless otherwise provided in this Agreement, the Parties agree that the exclusive forum and venue for the resolution of any controversy or claim between them arising out of or relating to this Agreement, or breach thereof (a “Dispute”), shall be the state and federal courts whose jurisdictional territory includes the county in which Company’s principal place of business is located. Each Party consents to personal jurisdiction and venue in those courts for litigation of a Dispute, and each Party waives any forum non conveniens objection to litigating a Dispute in those courts. TO THE FULLEST EXTENT PERMITTED BY LAW, EACH PARTY IRREVOCABLY WAIVES ITS RIGHT TO HAVE A TRIAL BY JURY FOR ANY LEGAL OR OTHER COURT PROCEEDING ADDRESSING A DISPUTE.
(ii) As a condition precedent to a Party’s ability to commence litigation for a Dispute, the Party shall first give written notice to the other Party of the Dispute, and, no later than twenty-one (21) days after such notice is delivered, each Party (or a representative of each Party with authority to settle the Dispute for each Party) shall confer in good faith in an effort to resolve the Dispute. The notice of the Dispute shall include a reasonable description of the basis of the Dispute. Only after the Parties have conferred, or made a good faith effort to confer, in accord with this Section 7(e)(ii) may a Party commence litigation for the Dispute.
(f) Binding Effect; Benefit. This Agreement shall inure to the benefit of and be binding upon the Parties hereto and any successors and assigns permitted or required by Section 8(g) hereof. Nothing in this Agreement, expressed or implied, is intended to confer on any person other than the Parties hereto or such successors and assigns, any rights, remedies, obligations, or liabilities under or by reason of this Agreement.
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(g) Assignment. This Agreement, and Executive’s rights and obligations hereunder, may not be assigned by Executive. TOPP may assign this Agreement and its rights, together with its obligations, hereunder in connection with any sale, transfer, or other disposition of all or substantially all of its assets or business, whether by merger, consolidation or otherwise.
(h) Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original but all of which together shall constitute one and the same instrument. This Agreement may be executed manually or by facsimile, scan, or other electronic means (e.g., DocuSign).
(i) Severability. If a court or other tribunal of competent jurisdiction or any foreign, federal, state, county, or local government or other governmental, regulatory, or administrative agency or authority holds that any term or provision of this Agreement is invalid, illegal, or unenforceable, such term or provision shall be considered severed from this Agreement and not affect the validity, legality, or enforceability of the remaining terms or provisions of this Agreement. Upon a holding that any term or provision is invalid, illegal, or unenforceable, the Parties shall negotiate in good faith to modify, or the court, tribunal, or regulatory or administrative agency or authority may modify, this Agreement to give effect to the original intent of the Parties as closely as possible in order that the transactions contemplated hereby be consummated as originally contemplated to the greatest extent possible.
(j) Drafting. Should any provision of this Agreement require interpretation or construction, it is agreed by Executive and TOPP that the person interpreting or construing this Agreement shall not apply a presumption against one Party by reason of the rule of construction that a document is to be construed more strictly against the party who prepared the document.
(k) Headings. The headings and subheadings in this Agreement (e.g., “Drafting” in the above paragraph) are for reference purposes only and shall not in any way affect the meaning or interpretation of this Agreement.
[The remainder of this page is purposefully blank; the signature page follows.]
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IN WITNESS WHEREOF, the Parties have executed this Agreement as of July 23, 2024.
| COMPANY: | |||
| Toppoint Holdings Inc. | |||
| By: | /s/ John Feliciano III | ||
| Name: | John Feliciano III | ||
| Title: | Chief Financial Officer | ||
| Address: | 1250 Kenas Road, North Wales, PA 19454 | ||
| Email: | *** | ||
| Date signed: | July 23, 2024 | ||
| EXECUTIVE: | ||
| Hok C Chan | ||
| /s/ Hok C Chan | ||
| Signature | ||
| Address: | 1250 Kenas Road, North Wales, PA 19454 | |
| Email: | *** | |
| Date signed: | July 23, 2024 | |
[Signature Page to the Executive Employment Agreement]
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Schedule 1
(Benefits)
During the Term, Executive shall be entitled to such medical, life, disability, and other benefits as are generally afforded to other executives of TOPP and to participate in all other company-wide employee benefits, including a defined contribution pension plan and 401(k) plan, as may be made available generally to Company executives from time to time, subject to Executive satisfying waiting periods, eligibility, and other terms and conditions, if any, that may be applicable to each such benefit or plan.
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Schedule 2
(Bonuses)
During the Term, Executive shall be entitled to an annual incentive bonus to the extent the Company achieves or exceeds the annual net profit objective of the Company set forth below. The percentage of Base Salary which the Executive shall be entitled to receive as a bonus in this Schedule 2 next to the corresponding percentage of budgeted net profit of the Company which must be achieved in order to earn such bonus level. Any such bonus shall be payable within 30 days following the filing of the Company’s annual report on Form 10-K with the SEC for the applicable year. The net profit of the Company for any period shall be determined in accordance with the U.S. generally accepted accounting principles, or U.S. GAAP.
So long as the Company has achieved its budgeted net profit level for the period commencing with the end of the Company’s immediately previous fiscal year through the termination date, an amount equal to the product of the bonus paid to the Executive in respect of the immediately preceding fiscal year, times the quotient obtained by dividing (x) the number of full calendar months occurring since the end of the immediately previous fiscal year through the termination date, by (y) 12.
Bonus Criteria
| Net Profit | % of Net Profit Objective | Bonus as a % of Base Salary | Bonus ($) | |||
| $1,150,000.00 | 125% | 140% | $490,000 | |||
| $1,100,000.00 | 120% | 120% | $420,000 | |||
| $1,050,000.00 | 115% | 100% | $350,000 | |||
| $1,000,000.00 | 110% | 80% | $280,000 | |||
| $950,000.00 | 105% | 60% | $210,000 | |||
| $900,000.00 | 100% | 40% | $140,000 | |||
| $850,000.00 | 95% | 20% | $70,000 | |||
| $800,000.00 | 90% | 10% | $35,000 | |||
| <90% | 0 | 0 |
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Schedule 3
(Severance)
If Executive is terminated without Cause or resigns for Good Reason as provided under Section 4 of the Agreement, any and all outstanding unvested equity granted to Executive during the Term shall vest immediately, and all lockups and restrictions on sales of such equity, or exercise of stock options shall be lifted immediately. Other than the foregoing, Executive is not entitled to any other severance payment or benefits.
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Schedule 4
(Equity Grants)
During the Term, the Executive may be eligible to be considered from time to time for an award under the Company’s Equity Incentive Plan (the “Plan”), in the Company’s sole discretion. The eligibility criteria for an award under the Plan and whether the Executive is provided with an award under the Plan are in the Company’s sole discretion.
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ATTACHMENT A
(Employee Confidential Information and Inventions Assignment Agreement)
EMPLOYEE CONFIDENTIAL INFORMATION AND INVENTIONS ASSIGNMENT AGREEMENT
In consideration of my employment or continued employment by Toppoint Holdings Inc., a Nevada corporation (“Company”), and the compensation paid to me now and during my employment with the Company, I agree to the terms of this Agreement as follows:
1. Confidential Information Protections.
1.1 Nondisclosure; Recognition of Company’s Rights. At all times during and after my employment, I will hold in confidence and will not disclose, use, lecture upon, or publish any of Company’s Confidential Information (defined below), except as may be required in connection with my work for Company, or as expressly authorized by the Chief Executive Officer or President at the direction of the Board of Directors of Company. I will obtain the Chief Executive Officer or President’s written approval before publishing or submitting for publication any material (written, oral, or otherwise) that relates to my work at Company and/or incorporates any Confidential Information. I hereby assign to Company any rights I may have or acquire in any and all Confidential Information and recognize that all Confidential Information shall be the sole and exclusive property of Company and its assigns.
1.2 Confidential Information. The term “Confidential Information” shall mean any and all confidential knowledge, data or information related to Company’s business or its actual or demonstrably anticipated research or development, including without limitation (a) trade secrets, inventions, ideas, processes, computer source and object code, data, formulae, programs, other works of authorship, know-how, improvements, discoveries, developments, designs, and techniques; (b) information regarding products, services, plans for research and development, marketing and business plans, budgets, financial statements, contracts, prices, suppliers, and customers; (c) information regarding the skills and compensation of Company’s employees, contractors, and any other service providers of Company; and (d) the existence of any business discussions, negotiations, or agreements between Company and any third party.
1.3 Third Party Information. I understand that Company has received and in the future will receive from third parties confidential or proprietary information (“Third Party Information”) subject to a duty on Company’s part to maintain the confidentiality of such information and to use it only for certain limited purposes. During and after the term of my employment, I will hold Third Party Information in strict confidence and will not disclose to anyone (other than Company personnel who need to know such information in connection with their work for Company) or use, Third Party Information, except in connection with my work for Company or unless expressly authorized by an officer of Company in writing.
1.4 No Improper Use of Information of Prior Employers and Others. I represent that my employment by Company does not and will not breach any agreement with any former employer, including any noncompete agreement or any agreement to keep in confidence or refrain from using information acquired by me prior to my employment by Company. I further represent that I have not entered into, and will not enter into, any agreement, either written or oral, in conflict with my obligations under this Agreement. During my employment by Company, I will not improperly make use of, or disclose, any information or trade secrets of any former employer or other third party, nor will I bring onto the premises of Company or use any unpublished documents or any property belonging to any former employer or other third party, in violation of any lawful agreements with that former employer or third party. I will use in the performance of my duties only information that is generally known and used by persons with training and experience comparable to my own, is common knowledge in the industry or otherwise legally in the public domain, or is otherwise provided or developed by Company.
2. Inventions.
2.1 Definitions. As used in this Agreement, the term “Invention” means any ideas, concepts, information, materials, processes, data, programs, know-how, improvements, discoveries, developments, designs, artwork, formulae, other copyrightable works, and techniques and all Intellectual Property Rights in any of the items listed above. The term “Intellectual Property Rights” means all trade secrets, copyrights, trademarks, mask work rights, patents and other intellectual property rights recognized by the laws of any jurisdiction or country. The term “Moral Rights” means all paternity, integrity, disclosure, withdrawal, special and any other similar rights recognized by the laws of any jurisdiction or country.
2.2 Prior Inventions. I have disclosed on Exhibit A a complete list of all Inventions that (a) I have, or I have caused to be, alone or jointly with others, conceived, developed, or reduced to practice prior to the commencement of my employment by Company; (b) in which I have an ownership interest or which I have a license to use; (c) and that I wish to have excluded from the scope of this Agreement (collectively referred to as “Prior Inventions”). If no Prior Inventions are listed in Exhibit A or if I have not completed Exhibit A, I warrant that there are no Prior Inventions. I agree that I will not incorporate, or permit to be incorporated, Prior Inventions in any Company Inventions (defined below) without Company’s prior written consent. If, in the course of my employment with Company, I incorporate a Prior Invention into a Company process, machine or other work, I hereby grant Company a non-exclusive, perpetual, fully-paid and royalty-free, irrevocable and worldwide license, with rights to sublicense through multiple levels of sublicensees, to reproduce, make derivative works of, distribute, publicly perform, and publicly display in any form or medium, whether now known or later developed, make, have made, use, sell, import, offer for sale, and exercise any and all present or future rights in, such Prior Invention.
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2.3 Assignment of Company Inventions. Inventions assigned to the Company or to a third party as directed by the Company pursuant to the subsection titled Government or Third Party are referred to in this Agreement as “Company Inventions.” Subject to the subsection titled Government or Third Party and except for Inventions that I can prove qualify fully under the provisions of California Labor Code section 2870 and I have set forth in Exhibit A, I hereby assign and agree to assign in the future (when any such Inventions or Intellectual Property Rights are first reduced to practice or first fixed in a tangible medium, as applicable) to Company all my right, title, and interest in and to any and all Inventions (and all Intellectual Property Rights with respect thereto) made, conceived, reduced to practice, or learned by me, either alone or with others, during the period of my employment by Company. Any assignment of Inventions (and all Intellectual Property Rights with respect thereto) hereunder includes an assignment of all Moral Rights. To the extent such Moral Rights cannot be assigned to Company and to the extent the following is allowed by the laws in any country where Moral Rights exist, I hereby unconditionally and irrevocably waive the enforcement of such Moral Rights, and all claims and causes of action of any kind against Company or related to Company’s customers, with respect to such rights. I further acknowledge and agree that neither my successors-in-interest nor legal heirs retain any Moral Rights in any Inventions (and any Intellectual Property Rights with respect thereto).
2.4 Obligation to Keep Company Informed. During the period of my employment and for one (1) year after my employment ends, I will promptly and fully disclose to Company in writing (a) all Inventions authored, conceived, or reduced to practice by me, either alone or with others, including any that might be covered under California Labor Code section 2870, and (b) all patent applications filed by me or in which I am named as an inventor or co-inventor.
2.5 Government or Third Party. I agree that, as directed by the Company, I will assign to a third party, including without limitation the United States, all my right, title, and interest in and to any particular Company Invention.
2.6 Enforcement of Intellectual Property Rights and Assistance. During and after the period of my employment and at Company’s request and expense, I will assist Company in every proper way, including consenting to and joining in any action, to obtain and enforce United States and foreign Intellectual Property Rights and Moral Rights relating to Company Inventions in all countries. If the Company is unable to secure my signature on any document needed in connection with such purposes, I hereby irrevocably designate and appoint Company and its duly authorized officers and agents as my agent and attorney in fact, which appointment is coupled with an interest, to act on my behalf to execute and file any such documents and to do all other lawfully permitted acts to further such purposes with the same legal force and effect as if executed by me.
2.7 Incorporation of Software Code. I agree that I will not incorporate into any Company software or otherwise deliver to Company any software code licensed under the GNU General Public License or Lesser General Public License or any other license that, by its terms, requires or conditions the use or distribution of such code on the disclosure, licensing, or distribution of any source code owned or licensed by Company except as expressly authorized by the Company or in strict compliance with the Company’s policies regarding the use of such software.
3. Records. I agree to keep and maintain adequate and current records (in the form of notes, sketches, drawings and in any other form that is required by the Company) of all Inventions made by me during the period of my employment by the Company, which records shall be available to, and remain the sole property of, the Company at all times.
4. Additional Activities. I agree that during the term of my employment by Company, I will not (a) without Company’s express written consent, engage in any employment or business activity that is competitive with, or would otherwise conflict with my employment by, Company; and (b) for the period of my employment by Company and for one (1) year thereafter, I will not either directly or indirectly, solicit or attempt to solicit any employee, independent contractor, or consultant of Company to terminate his, her or its relationship with Company in order to become an employee, consultant, or independent contractor to or for any other person or entity. Furthermore, I agree that during the term and thereafter, I shall not disparage the Company, any officer or director of the Company or any affiliate or agent of the Company.
5. Return Of Company Property. Upon termination of my employment or upon Company’s request at any other time, I will deliver to Company all of Company’s property, equipment, and documents, together with all copies thereof, and any other material containing or disclosing any Inventions, Third Party Information or Confidential Information and certify in writing that I have fully complied with the foregoing obligation. I agree that I will not copy, delete, or alter any information contained upon my Company computer or Company equipment before I return it to Company. In addition, if I have used any personal computer, server, or e-mail system to receive, store, review, prepare or transmit any Company information, including but not limited to, Confidential Information, I agree to provide the Company with a computer-useable copy of all such Confidential Information and then permanently delete and expunge such Confidential Information from those systems; and I agree to provide the Company access to my system as reasonably requested to verify that the necessary copying and/or deletion is completed. I further agree that any property situated on Company’s premises and owned by Company is subject to inspection by Company’s personnel at any time with or without notice. Prior to the termination of my employment or promptly after termination of my employment, I will cooperate with Company in attending an exit interview and certify in writing that I have complied with the requirements of this section.
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6. Notification Of New Employer. If I leave the employ of Company, I consent to the notification of my new employer of my rights and obligations under this Agreement, by Company providing a copy of this Agreement or otherwise.
7. General Provisions.
7.1 Governing Law and Venue. This Agreement and any action related thereto will be governed and interpreted by and under the laws of the State of Nevada, without giving effect to any conflicts of laws principles that require the application of the law of a different state. I expressly consent to personal jurisdiction and venue in the state and federal courts for the county in which Company’s principal place of business is located for any lawsuit filed there against me by Company arising from or related to this Agreement.
7.2 Severability. If any provision of this Agreement is, for any reason, held to be invalid or unenforceable, the other provisions of this Agreement will remain enforceable and the invalid or unenforceable provision will be deemed modified so that it is valid and enforceable to the maximum extent permitted by law.
7.3 Survival. This Agreement shall survive the termination of my employment and the assignment of this Agreement by Company to any successor or other assignee and shall be binding upon my heirs and legal representatives.
7.4 Employment. I agree and understand that nothing in this Agreement shall give me any right to continued employment by Company, and it will not interfere in any way with my right or Company’s right to terminate my employment at any time, with or without cause and with or without advance notice.
7.5 Notices. Each party must deliver all notices or other communications required or permitted under this Agreement in writing to the other party at the address listed on the signature page, by courier, by certified or registered mail (postage prepaid and return receipt requested), or by a nationally-recognized express mail service. Notice will be effective upon receipt or refusal of delivery. If delivered by certified or registered mail, notice will be considered to have been given five (5) business days after it was mailed, as evidenced by the postmark. If delivered by courier or express mail service, notice will be considered to have been given on the delivery date reflected by the courier or express mail service receipt. Each party may change its address for receipt of notice by giving notice of the change to the other party.
7.6 Injunctive Relief. I acknowledge that, because my services are personal and unique and because I will have access to the Confidential Information of Company, any breach of this Agreement by me would cause irreparable injury to Company for which monetary damages would not be an adequate remedy and, therefore, will entitle Company to injunctive relief (including specific performance). The rights and remedies provided to each party in this Agreement are cumulative and in addition to any other rights and remedies available to such party at law or in equity.
7.7 Waiver. Any waiver or failure to enforce any provision of this Agreement on one occasion will not be deemed a waiver of that provision or any other provision on any other occasion.
7.8 Export. I agree not to export, reexport, or transfer, directly or indirectly, any U.S. technical data acquired from Company or any products utilizing such data, in violation of the United States export laws or regulations.
7.9 Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original and all of which shall be taken together and deemed to be one instrument.
7.10 Entire Agreement. If no other agreement governs nondisclosure and assignment of inventions during any period in which I was previously employed or am in the future employed by Company as an independent contractor, the obligations pursuant to sections of this Agreement titled Confidential Information Protections and Inventions shall apply. This Agreement is the final, complete and exclusive agreement of the parties with respect to the subject matter hereof and supersedes and merges all prior communications between us with respect to such matters. No modification of or amendment to this Agreement, or any waiver of any rights under this Agreement, will be effective unless in writing and signed by me and the Company. Any subsequent change or changes in my duties, salary or compensation will not affect the validity or scope of this Agreement.
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This Agreement shall be effective as of the first day of my employment with Company.
| COMPANY: | |||
| TOPPOINT HOLDINGS INC. | |||
| By: | /s/ John Feliciano III | ||
| Name: | John Feliciano III | ||
| Title: | Secretary | ||
| Address: | 1907 Black Hawk Cir | ||
| Audubon, PA 19403 | |||
| EMPLOYEE: | |||
| I have read, understand, and accept this agreement and have been given the opportunity to review it with independent legal counsel. | |||
| /s/ Hok C Chan | |||
| (Signature) | |||
| Hok C Chan | |||
| Name (Please Print) | |||
| August 16, 2022 | |||
| Date | |||
| Address: | 1250 Kenas Rd | ||
| North Wales, PA 19454 | |||
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Exhibit A
INVENTIONS
1. Prior Inventions Disclosure. The following is a complete list of all Prior Inventions (as provided in Subsection 2.2 of the attached Employee Confidential Information and Inventions Assignment Agreement):
☒ None
☐ See immediately below:
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Exhibit 10.3
EXECUTIVE EMPLOYMENT AGREEMENT
This executive employment agreement (the “Agreement”) will become effective as of the date (the “Effective Date”) on which the U.S. Securities and Exchange Commission declares the registration statement in connection with the initial public offering of the Company (as defined below) effective, by and between Toppoint Holdings Inc., a Nevada corporation with an office at 1250 Kenas Road, North Wales, PA 19454 (“TOPP” or the “Company”), and John Feliciano III, an individual (“Executive”). TOPP and Executive are referred to herein from time to time on a collective basis as the “Parties” and each on individual basis as a “Party.”
Recitals
TOPP wishes to secure the services of Executive as the Chief Financial Officer of TOPP (with such other duties and/or offices in TOPP or its affiliates as may be assigned by TOPP’s Chief Executive Officer (“CEO”) and as agreed to by Executive) upon the terms and conditions hereinafter set forth, and Executive wishes to render such services to TOPP upon the terms and conditions hereinafter set forth.
Agreement
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants herein contained and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the Parties hereto, intending to be legally bound, agree as follows:
1. Employment by TOPP. TOPP agrees to employ Executive during the Term (defined below) in the position of Chief Financial Officer in which Executive will have such duties and responsibilities to TOPP as are customary for such a position in companies comparable to TOPP and as are reasonably assigned, delegated and determined from time to time by the CEO and as agreed to by Executive, and Executive accepts such employment and agrees to perform such duties and responsibilities. Executive shall devote his full business time and attention exclusively to TOPP and shall use his/her best efforts to faithfully carry out Executive’s duties and responsibilities hereunder, provided, however, that during the Term (as defined herein), Executive may serve on charitable and civic boards, subject to the prior approval of CEO, which approval shall not be unreasonably withheld, and so long as such charitable or civ board position(s) do not limit or interfere with Executive’s duties to TOPP hereunder or breach any agreement between Executive and TOPP.
2. Term of Employment. The term of this Agreement (the “Term”) shall begin on the Effective Date and end at 11:59 p.m. United States Pacific Time on the third anniversary of the Effective Date, unless terminated earlier as provided in Section 4, in which case the Term shall be from the Effective Date to the earlier termination date.
3. Compensation and Benefits.
(a) Base Salary. The Company shall pay to the Executive a base salary for all services to be rendered by the Executive under this Employment Agreement at the rate of $75,000 per year (the “Base Salary”), which Base Salary shall be paid in approximately equal installments (less applicable payroll deductions and taxes) in accordance with the Company’s normal payroll schedule, procedures and policies (which schedules, procedures and policies may be modified from time to time in the Company’s sole discretion), but not less frequently than monthly. The Company shall have no obligation to pay the Executive’s Base Salary following the date of the expiration or termination of this Agreement, whichever is earlier.
(b) Expenses. TOPP shall pay or reimburse Executive for all reasonable and necessary expenses actually incurred or paid by Executive during the Term in the performance of Executive’s duties under this Agreement, upon submission and approval of expense statements, vouchers, or other supporting information in accordance with the then customary practices of TOPP.
(c) Vacation and Sick Leave; Holidays. Executive shall be entitled to: (i) all public holidays observed by the United States federal government and (ii) unlimited paid time off for vacation, illness, personal, or religious reasons in each year during the Term, subject to TOPP’s leave policies (which TOPP may amend from time to time in its sole discretion), Executive fulfilling his job duties and responsibilities, and such paid time off not impacting TOPP negatively. The time or times during which paid time off under (ii) may be taken shall be by mutual agreement of TOPP and Executive, and, whenever reasonably possible, TOPP agrees to accommodate and grant Executive’s request for such paid time off. Because Executive does not accrue paid time off for vacation, illness, etc., Executive is not entitled to compensation for any paid time off upon the end of his employment with TOPP.
(d) Benefits. Whether and to what extent Executive is entitled to receive benefits, if any, from the Company is set forth on Schedule 1 hereto.
(e) Bonus(es). Whether and to what extent Executive is entitled to receive bonuses, if any, from the Company is set forth on Schedule 2 hereto.
(f) Severance. Whether and to what extent Executive is entitled to receive a severance payment, if any, from the Company upon the Executive’s termination of employment with the Company, whether by the Executive or the Company, is set forth on Schedule 3 hereto.
(g) Equity Grants. Whether and to what extent Executive is entitled to receive equity grants (e.g., stock or stock options), if any, from the Company is set forth on Schedule 4 hereto.
(h) Withholding of Taxes. TOPP may withhold from any Base Salary, benefits, severance, and equity grants payable or deliverable under this Agreement all federal, state, city and other taxes as shall be required pursuant to any law or governmental regulation or ruling.
4. Termination.
(a) Termination by TOPP.
(i) Termination upon Disability of Executive. If during the Term, Executive becomes physically or mentally disabled, whether totally or partially, so that Executive is unable to perform his essential job functions hereunder for a period aggregating 180 days during any twelve-month period, and it is determined by a physician acceptable to both TOPP and Executive that, by reason of such physical or mental disability, Executive shall be unable to perform the essential job functions required of him hereunder for such period or periods, TOPP may, by written notice to Executive, terminate this Agreement, in which event the Term shall terminate 10 days after the date upon which TOPP shall have given notice to Executive of its intention to terminate this Agreement because of the disability. Except as set forth in Section 5 hereof, Executive shall have no right to any compensation or benefit hereunder on and after the date of such termination.
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(ii) Termination for Cause. TOPP may at any time by written notice to Executive terminate this Agreement immediately and, except as provided in Section 5 hereof, Executive shall have no right to receive any compensation or benefit hereunder on and after the date of such notice, in the event that an event of “Cause” occurs. For purposes of this Agreement “Cause” shall mean:
(A) any willful breach by Executive of any material term of this Agreement, if Executive fails to reasonably cure such breach within 30 days after the receipt of written notice from the Board of Directors (the “Board”) of such breach, which notice shall state in reasonable detail the facts and circumstances claimed to be a failure or willful breach and of the intent of TOPP to terminate Executive’s employment upon the failure of Executive to reasonably cure such failure or breach; or
(B) Executive has committed an intentional felonious act of fraud, misappropriation, embezzlement, or theft or an intentional breach of fiduciary duty involving personal profit; or
(C) Executive is indicted for any criminal offense constituting a felony or a crime involving moral turpitude (except that Executive shall continue to be entitled to all compensation until a conviction of such offense); or
(D) Executive intentionally breaches any of the provisions of Employee Confidential Information And Inventions Assignment Agreement he has entered into with the Company.
For purposes of this Agreement, an act, or a failure to act, shall not be deemed willful or intentional, as those terms are used herein, unless it is done, or admitted to having been done, by Executive in bad faith or without a reasonable belief that Executive’s action or omission was in the interest of TOPP.
(iii) Termination without Cause. TOPP may terminate this Agreement at any time, without cause, upon sixty (60) days’ written notice by TOPP to Executive and, except as provided in Section 5 hereof, Executive shall have no right to receive any compensation or benefit hereunder after such termination.
(b) Termination by Executive.
(i) Termination upon Death of Executive. If Executive dies during the Term, this Agreement shall terminate as of the date of his death and except as set forth in Section 5 hereof Executive’s estate shall have no right to any compensation or benefit hereunder on and after the date of death.
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(ii) Termination for Good Reason. In the event that an event of “Good Reason” occurs, Executive may terminate this Agreement at any time by written notice to TOPP and, except as provided in Section 5 hereof, Executive shall have no right to receive any compensation or benefit hereunder on and after the date of such notice. For purposes of this Agreement, “Good Reason” shall mean, the existence, without the consent of Executive, of any of the following events: (A) Executive’s duties and responsibilities are substantially reduced or diminished; (B) Executive’s Base Salary is materially reduced from the level prior to such reduction, except for an across-the-board reduction in base salary for all executive officers, or (C) TOPP materially breaches its obligations under this Agreement. In addition to any requirements set forth above, in order for any of the above events to constitute “Good Reason,” Executive must (x) inform TOPP of the existence of the event within ninety (90) days of the initial existence of the event, after which date TOPP shall have no less than thirty (30) days to cure the event which otherwise would constitute “Good Reason” hereunder and (y) Executive must terminate employment with TOPP for such “Good Reason” no later than six months after the initial existence of the event which prompted Executive’s termination.
(iii) Termination Other than for Death or Good Reason. Executive may terminate this Agreement at any time, without Good Reason, upon sixty (60) days’ written notice by Executive to TOPP and, except as provided in Section 5 hereof, Executive shall have no right to receive any compensation or benefit hereunder after such termination.
5. Payments Upon Termination. If during the Term, this Agreement is terminated pursuant to Section 4, all compensation (including, without limitation, Base Salary) payable to Executive under Section 3 hereof shall cease as of the date of termination specified in the notice of termination from the Company or the Executive, as the case may be, or, if the termination is due to the Executive’s death, on the date of the Executive’s death, and the Company shall pay to the Executive (or if the Executive has died, to his/her estate) all previously earned, accrued, and unpaid Base Salary and benefits from the Company’s employee benefit plans in which Executive participated and is entitled to receive under the terms of those plans (including any such benefits under the Company’s pension, disability, and life insurance plans, policies, and programs).
6. Certain Restrictive Covenants.
(a) Non-Solicitation of Customers, Vendors, etc. During your employment with the Company and for the Restrictive Covenant Period, you agree not to, directly or indirectly, on your behalf or on behalf of themselves or any other person: (i) solicit the business of any customer, client or distributor, including any insurance carriers, of the Company or any of its affiliates or subsidiaries, including any partnerships or joint ventures of the Company, for a Competing Business or induce or attempt to induce any such customer or client to withdraw, decrease or cancel its business with the Company or any of its affiliates or subsidiaries; or (ii) attempt to do any of the foregoing, or assist, entice, induce or encourage any other person to do or attempt to do any activity which, were it done by you, would violate any provision of this Section 6(a).
(b) Non-Solicitation of Employees. During your employment with the Company and for the Restrictive Covenant Period after your termination of employment, you agree that you will not hire as an employee, retain as an independent contractor, call upon, solicit or communicate with any individual who at the applicable time is or, during the 12-month period preceding your termination of employment, was either an employee or an independent sales representative of the Company or any of its affiliates or subsidiaries, including any partnerships or joint ventures of the Company, for the purpose or with the intent of enticing, or in a manner reasonably likely to entice, such person away from the Company or any of its affiliates, other than a general solicitation not specifically targeting employees of the Company or its affiliates or subsidiaries.
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(c) Media Nondisclosure.
(i) During and after the Term, you shall not directly or indirectly disclose to the Media (as defined below) any information relating to any aspect of your employment, resignation, or termination from employment with the Company and/or any affiliate, any non-public information related to the business of the Company and/or any affiliate (or any of their respective members, shareholders, partners, officers, directors, managers, employees, representatives or agents), and/or any aspect of any controversy or claims between the Parties of or relating to the subject matter of this Agreement, your employment with, termination or resignation from, the Company and its affiliates and/or the Parties’ relationship. For purposes hereof, “Media” means any station, publication, show, website, web log (blog), bulletin board, social networking site, chat room, program and/or new organization, whether published through the means of print, radio, television, email, text message, the internet or otherwise and any member, representative, agent and/or employee of the same.
(ii) During and after the Term, the Board shall not directly or indirectly disclose to the Media any information relating to any aspect of your employment, resignation, or termination from employment with the Company and/or any affiliate, and/or any aspect of any controversy or claims between the Parties of or relating to the subject matter of this Agreement, your employment with, termination or resignation from, the Company and its affiliates and/or the Parties’ relationship.
(d) Non-Disparagement.
(i) During and after the Term, you shall not make any statements, comments or communications in any form, oral, written or electronic to any Media or any customer, client or supplier of the Company or any of its affiliates, which would constitute libel, slander or disparagement of the Company or any of its affiliates, including, without limitation, any such statements, comments or communications that criticize, ridicule or are derogatory to the Company or any of its affiliates; provided, however, that the terms of this Section 6(d)(i) shall not apply to communications between the Company and you and, as applicable, its or your attorneys or other persons with whom communications would be subject to a claim of privilege existing under common law, statute or rule of procedure. You further agree that you will not in any way solicit any such statements, comments or communications from others.
(ii) During and after the Term, the Board shall not make any statements, comments or communications in any form, oral, written or electronic to any Media or any customer, client or supplier of the Company or any of its affiliates, which would constitute libel, slander or disparagement of you, including, without limitation, any such statements, comments or communications that criticize, ridicule or are derogatory to you; provided, however, that the terms of this Section 6(d)(ii) shall not apply to communications between the Company and you and, as applicable, its or your attorneys or other persons with whom communications would be subject to a claim of privilege existing under common law, statute or rule of procedure. The Board further agrees that it will not in any way solicit any such statements, comments or communications from others.
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(iii) For avoidance of doubt, the Company shall not take any action to impede the Executive from communicating directly with the U.S. Securities and Exchange Commission (the “SEC”) staff about a possible securities law violation.
(e) For purposes of this Section 6:
(i) “Competing Business” means any person in North America in the business of providing trucking services. Businesses that engage in a Competing Business include, without limitation, the Executive operating his own business in any capacity.
(ii) “Restrictive Covenant Period” means a period equal to six (6) months after your termination of employment with the Company for whatever reason (including, without limitation, by the Company without Cause or by you due to Good Reason). For avoidance of doubt, the Restricted Covenant Period shall apply regardless of the reason your employment terminates.
7. Conditions to Agreement Becoming Effective. In addition to any other conditions to this Agreement becoming effective set forth in this Agreement, this Agreement shall not become effective until the Executive provides requisite verification of the Executive’s right to work in the United States, as demonstrated by his/her completion of an I-9 form upon hire and submission of acceptable documentation (as noted on the I-9 form).
8. Other Provisions.
(a) Notices. Any notice or other communication required or which may be given hereunder shall be in writing and shall be delivered personally, emailed, telecopied, telegraphed or telexed, or sent by certified, registered or express mail, postage prepaid, to the Parties at the addresses specified on the signature page hereto, or at such other addresses as shall be specified by the Parties by like notice, and shall be deemed given so long as such provides a receipt of delivery, when so delivered personally, emailed, telecopied, telegraphed or telexed, or mailed.
(b) Entire Agreement. This Agreement, and the Employee Confidential Information and Inventions Assignment Agreement by and between TOPP and Executive dated August 16, 2022 attached hereto as Attachment A, contain the entire agreement between the Parties with respect to the subject matter of those two agreements and supersedes all prior contracts and other agreements, written or oral, with respect to those two agreements.
(c) Waivers and Amendments. This Agreement may be amended, modified, superseded, cancelled, and the terms and conditions hereof may be waived, only by a written instrument signed by the Parties or, in the case of a waiver, by the Party waiving compliance. No delay on the part of any Party in exercising any right, power or privilege hereunder shall operate as a waiver thereof, nor shall any waiver on the part of any Party of any right, power, or privilege hereunder, nor any single or partial exercise of any right, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, power, or privilege hereunder.
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(d) Governing Law. This Agreement shall be governed by and construed under the laws of the State of Nevada without regard to the choice of law principles thereof.
(e) Dispute Resolution.
(i) Unless otherwise provided in this Agreement, the Parties agree that the exclusive forum and venue for the resolution of any controversy or claim between them arising out of or relating to this Agreement, or breach thereof (a “Dispute”), shall be the state and federal courts whose jurisdictional territory includes the county in which Company’s principal place of business is located. Each Party consents to personal jurisdiction and venue in those courts for litigation of a Dispute, and each Party waives any forum non conveniens objection to litigating a Dispute in those courts. TO THE FULLEST EXTENT PERMITTED BY LAW, EACH PARTY IRREVOCABLY WAIVES ITS RIGHT TO HAVE A TRIAL BY JURY FOR ANY LEGAL OR OTHER COURT PROCEEDING ADDRESSING A DISPUTE.
(ii) As a condition precedent to a Party’s ability to commence litigation for a Dispute, the Party shall first give written notice to the other Party of the Dispute, and, no later than twenty-one (21) days after such notice is delivered, each Party (or a representative of each Party with authority to settle the Dispute for each Party) shall confer in good faith in an effort to resolve the Dispute. The notice of the Dispute shall include a reasonable description of the basis of the Dispute. Only after the Parties have conferred, or made a good faith effort to confer, in accord with this Section 7(e)(ii) may a Party commence litigation for the Dispute.
(f) Binding Effect; Benefit. This Agreement shall inure to the benefit of and be binding upon the Parties hereto and any successors and assigns permitted or required by Section 8(g) hereof. Nothing in this Agreement, expressed or implied, is intended to confer on any person other than the Parties hereto or such successors and assigns, any rights, remedies, obligations, or liabilities under or by reason of this Agreement.
(g) Assignment. This Agreement, and Executive’s rights and obligations hereunder, may not be assigned by Executive. TOPP may assign this Agreement and its rights, together with its obligations, hereunder in connection with any sale, transfer, or other disposition of all or substantially all of its assets or business, whether by merger, consolidation or otherwise.
(h) Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original but all of which together shall constitute one and the same instrument. This Agreement may be executed manually or by facsimile, scan, or other electronic means (e.g., DocuSign).
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(i) Severability. If a court or other tribunal of competent jurisdiction or any foreign, federal, state, county, or local government or other governmental, regulatory, or administrative agency or authority holds that any term or provision of this Agreement is invalid, illegal, or unenforceable, such term or provision shall be considered severed from this Agreement and not affect the validity, legality, or enforceability of the remaining terms or provisions of this Agreement. Upon a holding that any term or provision is invalid, illegal, or unenforceable, the Parties shall negotiate in good faith to modify, or the court, tribunal, or regulatory or administrative agency or authority may modify, this Agreement to give effect to the original intent of the Parties as closely as possible in order that the transactions contemplated hereby be consummated as originally contemplated to the greatest extent possible.
(j) Drafting. Should any provision of this Agreement require interpretation or construction, it is agreed by Executive and TOPP that the person interpreting or construing this Agreement shall not apply a presumption against one Party by reason of the rule of construction that a document is to be construed more strictly against the party who prepared the document.
(k) Headings. The headings and subheadings in this Agreement (e.g., “Drafting” in the above paragraph) are for reference purposes only and shall not in any way affect the meaning or interpretation of this Agreement.
[The remainder of this page is purposefully blank; the signature page follows.]
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IN WITNESS WHEREOF, the Parties have executed this Agreement as of July 23, 2024.
| COMPANY: | |||
| Toppoint Holdings Inc. | |||
| By: | /s/ Hok C Chan | ||
| Name: | Hok C Chan | ||
| Title: | Chief Executive Officer | ||
| Address: | 1250 Kenas Road, North Wales, PA 19454 | ||
| Email: | *** | ||
| Date signed: | July 23, 2024 | ||
| EXECUTIVE: | |
| John Feliciano III | |
| /s/ John Feliciano III | |
| Signature |
| Address: | 1250 Kenas Road, North Wales, PA 19454 | |
| Email: | *** | |
| Date signed: | July 23, 2024 |
[Signature Page to the Executive Employment Agreement]
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Schedule 1
(Benefits)
During the Term, Executive shall be entitled to such medical, life, disability, and other benefits as are generally afforded to other executives of TOPP and to participate in all other company-wide employee benefits, including a defined contribution pension plan and 401(k) plan, as may be made available generally to Company executives from time to time, subject to Executive satisfying waiting periods, eligibility, and other terms and conditions, if any, that may be applicable to each such benefit or plan.
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Schedule 2
(Bonuses)
In addition to the Base Salary, the Executive may be eligible to be considered for an annual bonus based upon the performance of the Executive and of the Company. The eligibility criteria to be a considered for annual bonus, whether to award the Executive any such bonus, the amount of any such bonus, and when any such bonus is paid are in the Company’s absolute discretion. The Executive must be actively employed at the time of payment to receive an annual bonus.
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Schedule 3
(Severance)
If Executive is terminated without Cause or resigns for Good Reason as provided under Section 4 of the Agreement, any and all outstanding unvested equity granted to Executive during the Term shall vest immediately, and all lockups and restrictions on sales of such equity, or exercise of stock options shall be lifted immediately. Other than the foregoing, Executive is not entitled to any other severance payment or benefits.
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Schedule 4
(Equity Grants)
As consideration for entering into this Agreement, Executive shall receive an option to purchase 750,000 shares of the Company’s common stock under the Company’s 2022 Equity Incentive Plan (the “Plan”), which option shall be granted by the Board within three (3) months following the closing date of the Company’s initial public offering.
Additionally, during the Term, the Executive may be eligible to be considered from time to time for additional awards under the Plan, in the Company’s sole discretion. The eligibility criteria for any additional award under the Plan and whether the Executive is provided with such award under the Plan are in the Company’s sole discretion.
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ATTACHMENT A
(Employee Confidential Information and Inventions Assignment Agreement)
EMPLOYEE CONFIDENTIAL INFORMATION AND INVENTIONS ASSIGNMENT AGREEMENT
In consideration of my employment or continued employment by Toppoint Holdings Inc., a Nevada corporation (“Company”), and the compensation paid to me now and during my employment with the Company, I agree to the terms of this Agreement as follows:
8. Confidential Information Protections.
8.1 Nondisclosure; Recognition of Company’s Rights. At all times during and after my employment, I will hold in confidence and will not disclose, use, lecture upon, or publish any of Company’s Confidential Information (defined below), except as may be required in connection with my work for Company, or as expressly authorized by the Chief Executive Officer or President at the direction of the Board of Directors of Company. I will obtain the Chief Executive Officer or President’s written approval before publishing or submitting for publication any material (written, oral, or otherwise) that relates to my work at Company and/or incorporates any Confidential Information. I hereby assign to Company any rights I may have or acquire in any and all Confidential Information and recognize that all Confidential Information shall be the sole and exclusive property of Company and its assigns.
8.2 Confidential Information. The term “Confidential Information” shall mean any and all confidential knowledge, data or information related to Company’s business or its actual or demonstrably anticipated research or development, including without limitation (a) trade secrets, inventions, ideas, processes, computer source and object code, data, formulae, programs, other works of authorship, know-how, improvements, discoveries, developments, designs, and techniques; (b) information regarding products, services, plans for research and development, marketing and business plans, budgets, financial statements, contracts, prices, suppliers, and customers; (c) information regarding the skills and compensation of Company’s employees, contractors, and any other service providers of Company; and (d) the existence of any business discussions, negotiations, or agreements between Company and any third party.
8.3 Third Party Information. I understand that Company has received and in the future will receive from third parties confidential or proprietary information (“Third Party Information”) subject to a duty on Company’s part to maintain the confidentiality of such information and to use it only for certain limited purposes. During and after the term of my employment, I will hold Third Party Information in strict confidence and will not disclose to anyone (other than Company personnel who need to know such information in connection with their work for Company) or use, Third Party Information, except in connection with my work for Company or unless expressly authorized by an officer of Company in writing.
8.4 No Improper Use of Information of Prior Employers and Others. I represent that my employment by Company does not and will not breach any agreement with any former employer, including any noncompete agreement or any agreement to keep in confidence or refrain from using information acquired by me prior to my employment by Company. I further represent that I have not entered into, and will not enter into, any agreement, either written or oral, in conflict with my obligations under this Agreement. During my employment by Company, I will not improperly make use of, or disclose, any information or trade secrets of any former employer or other third party, nor will I bring onto the premises of Company or use any unpublished documents or any property belonging to any former employer or other third party, in violation of any lawful agreements with that former employer or third party. I will use in the performance of my duties only information that is generally known and used by persons with training and experience comparable to my own, is common knowledge in the industry or otherwise legally in the public domain, or is otherwise provided or developed by Company.
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9. Inventions.
9.1 Definitions. As used in this Agreement, the term “Invention” means any ideas, concepts, information, materials, processes, data, programs, know-how, improvements, discoveries, developments, designs, artwork, formulae, other copyrightable works, and techniques and all Intellectual Property Rights in any of the items listed above. The term “Intellectual Property Rights” means all trade secrets, copyrights, trademarks, mask work rights, patents and other intellectual property rights recognized by the laws of any jurisdiction or country. The term “Moral Rights” means all paternity, integrity, disclosure, withdrawal, special and any other similar rights recognized by the laws of any jurisdiction or country.
9.2 Prior Inventions. I have disclosed on Exhibit A a complete list of all Inventions that (a) I have, or I have caused to be, alone or jointly with others, conceived, developed, or reduced to practice prior to the commencement of my employment by Company; (b) in which I have an ownership interest or which I have a license to use; (c) and that I wish to have excluded from the scope of this Agreement (collectively referred to as “Prior Inventions”). If no Prior Inventions are listed in Exhibit A or if I have not completed Exhibit A, I warrant that there are no Prior Inventions. I agree that I will not incorporate, or permit to be incorporated, Prior Inventions in any Company Inventions (defined below) without Company’s prior written consent. If, in the course of my employment with Company, I incorporate a Prior Invention into a Company process, machine or other work, I hereby grant Company a non-exclusive, perpetual, fully-paid and royalty-free, irrevocable and worldwide license, with rights to sublicense through multiple levels of sublicensees, to reproduce, make derivative works of, distribute, publicly perform, and publicly display in any form or medium, whether now known or later developed, make, have made, use, sell, import, offer for sale, and exercise any and all present or future rights in, such Prior Invention.
9.3 Assignment of Company Inventions. Inventions assigned to the Company or to a third party as directed by the Company pursuant to the subsection titled Government or Third Party are referred to in this Agreement as “Company Inventions.” Subject to the subsection titled Government or Third Party and except for Inventions that I can prove qualify fully under the provisions of California Labor Code section 2870 and I have set forth in Exhibit A, I hereby assign and agree to assign in the future (when any such Inventions or Intellectual Property Rights are first reduced to practice or first fixed in a tangible medium, as applicable) to Company all my right, title, and interest in and to any and all Inventions (and all Intellectual Property Rights with respect thereto) made, conceived, reduced to practice, or learned by me, either alone or with others, during the period of my employment by Company. Any assignment of Inventions (and all Intellectual Property Rights with respect thereto) hereunder includes an assignment of all Moral Rights. To the extent such Moral Rights cannot be assigned to Company and to the extent the following is allowed by the laws in any country where Moral Rights exist, I hereby unconditionally and irrevocably waive the enforcement of such Moral Rights, and all claims and causes of action of any kind against Company or related to Company’s customers, with respect to such rights. I further acknowledge and agree that neither my successors-in-interest nor legal heirs retain any Moral Rights in any Inventions (and any Intellectual Property Rights with respect thereto).
9.4 Obligation to Keep Company Informed. During the period of my employment and for one (1) year after my employment ends, I will promptly and fully disclose to Company in writing (a) all Inventions authored, conceived, or reduced to practice by me, either alone or with others, including any that might be covered under California Labor Code section 2870, and (b) all patent applications filed by me or in which I am named as an inventor or co-inventor.
9.5 Government or Third Party. I agree that, as directed by the Company, I will assign to a third party, including without limitation the United States, all my right, title, and interest in and to any particular Company Invention.
9.6 Enforcement of Intellectual Property Rights and Assistance. During and after the period of my employment and at Company’s request and expense, I will assist Company in every proper way, including consenting to and joining in any action, to obtain and enforce United States and foreign Intellectual Property Rights and Moral Rights relating to Company Inventions in all countries. If the Company is unable to secure my signature on any document needed in connection with such purposes, I hereby irrevocably designate and appoint Company and its duly authorized officers and agents as my agent and attorney in fact, which appointment is coupled with an interest, to act on my behalf to execute and file any such documents and to do all other lawfully permitted acts to further such purposes with the same legal force and effect as if executed by me.
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9.7 Incorporation of Software Code. I agree that I will not incorporate into any Company software or otherwise deliver to Company any software code licensed under the GNU General Public License or Lesser General Public License or any other license that, by its terms, requires or conditions the use or distribution of such code on the disclosure, licensing, or distribution of any source code owned or licensed by Company except as expressly authorized by the Company or in strict compliance with the Company’s policies regarding the use of such software.
10. Records. I agree to keep and maintain adequate and current records (in the form of notes, sketches, drawings and in any other form that is required by the Company) of all Inventions made by me during the period of my employment by the Company, which records shall be available to, and remain the sole property of, the Company at all times.
11. Additional Activities. I agree that during the term of my employment by Company, I will not (a) without Company’s express written consent, engage in any employment or business activity that is competitive with, or would otherwise conflict with my employment by, Company; and (b) for the period of my employment by Company and for one (1) year thereafter, I will not either directly or indirectly, solicit or attempt to solicit any employee, independent contractor, or consultant of Company to terminate his, her or its relationship with Company in order to become an employee, consultant, or independent contractor to or for any other person or entity. Furthermore, I agree that during the term and thereafter, I shall not disparage the Company, any officer or director of the Company or any affiliate or agent of the Company.
12. Return Of Company Property. Upon termination of my employment or upon Company’s request at any other time, I will deliver to Company all of Company’s property, equipment, and documents, together with all copies thereof, and any other material containing or disclosing any Inventions, Third Party Information or Confidential Information and certify in writing that I have fully complied with the foregoing obligation. I agree that I will not copy, delete, or alter any information contained upon my Company computer or Company equipment before I return it to Company. In addition, if I have used any personal computer, server, or e-mail system to receive, store, review, prepare or transmit any Company information, including but not limited to, Confidential Information, I agree to provide the Company with a computer-useable copy of all such Confidential Information and then permanently delete and expunge such Confidential Information from those systems; and I agree to provide the Company access to my system as reasonably requested to verify that the necessary copying and/or deletion is completed. I further agree that any property situated on Company’s premises and owned by Company is subject to inspection by Company’s personnel at any time with or without notice. Prior to the termination of my employment or promptly after termination of my employment, I will cooperate with Company in attending an exit interview and certify in writing that I have complied with the requirements of this section.
13. Notification Of New Employer. If I leave the employ of Company, I consent to the notification of my new employer of my rights and obligations under this Agreement, by Company providing a copy of this Agreement or otherwise.
14. General Provisions.
14.1 Governing Law and Venue. This Agreement and any action related thereto will be governed and interpreted by and under the laws of the State of Nevada, without giving effect to any conflicts of laws principles that require the application of the law of a different state. I expressly consent to personal jurisdiction and venue in the state and federal courts for the county in which Company’s principal place of business is located for any lawsuit filed there against me by Company arising from or related to this Agreement.
14.2 Severability. If any provision of this Agreement is, for any reason, held to be invalid or unenforceable, the other provisions of this Agreement will remain enforceable and the invalid or unenforceable provision will be deemed modified so that it is valid and enforceable to the maximum extent permitted by law.
14.3 Survival. This Agreement shall survive the termination of my employment and the assignment of this Agreement by Company to any successor or other assignee and shall be binding upon my heirs and legal representatives.
14.4 Employment. I agree and understand that nothing in this Agreement shall give me any right to continued employment by Company, and it will not interfere in any way with my right or Company’s right to terminate my employment at any time, with or without cause and with or without advance notice.
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14.5 Notices. Each party must deliver all notices or other communications required or permitted under this Agreement in writing to the other party at the address listed on the signature page, by courier, by certified or registered mail (postage prepaid and return receipt requested), or by a nationally-recognized express mail service. Notice will be effective upon receipt or refusal of delivery. If delivered by certified or registered mail, notice will be considered to have been given five (5) business days after it was mailed, as evidenced by the postmark. If delivered by courier or express mail service, notice will be considered to have been given on the delivery date reflected by the courier or express mail service receipt. Each party may change its address for receipt of notice by giving notice of the change to the other party.
14.6 Injunctive Relief. I acknowledge that, because my services are personal and unique and because I will have access to the Confidential Information of Company, any breach of this Agreement by me would cause irreparable injury to Company for which monetary damages would not be an adequate remedy and, therefore, will entitle Company to injunctive relief (including specific performance). The rights and remedies provided to each party in this Agreement are cumulative and in addition to any other rights and remedies available to such party at law or in equity.
14.7 Waiver. Any waiver or failure to enforce any provision of this Agreement on one occasion will not be deemed a waiver of that provision or any other provision on any other occasion.
14.8 Export. I agree not to export, reexport, or transfer, directly or indirectly, any U.S. technical data acquired from Company or any products utilizing such data, in violation of the United States export laws or regulations.
14.9 Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original and all of which shall be taken together and deemed to be one instrument.
14.10 Entire Agreement. If no other agreement governs nondisclosure and assignment of inventions during any period in which I was previously employed or am in the future employed by Company as an independent contractor, the obligations pursuant to sections of this Agreement titled Confidential Information Protections and Inventions shall apply. This Agreement is the final, complete and exclusive agreement of the parties with respect to the subject matter hereof and supersedes and merges all prior communications between us with respect to such matters. No modification of or amendment to this Agreement, or any waiver of any rights under this Agreement, will be effective unless in writing and signed by me and the Company. Any subsequent change or changes in my duties, salary or compensation will not affect the validity or scope of this Agreement.
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This Agreement shall be effective as of the first day of my employment with Company.
| COMPANY: | |||
| TOPPOINT HOLDINGS INC. | |||
| By: | /s/ Hok C Chan | ||
| Name: | Hok C Chan | ||
| Title: | President | ||
| Address: | 1907 Black Hawk Cir | |
| Audubon, PA 19403 | ||
| EMPLOYEE: | ||
| I have read, understand, and accept this agreement and have been given the opportunity to review it with independent legal counsel. | ||
| /s/ John Feliciano III | ||
| (Signature) | ||
| John Feliciano III | ||
| Name (Please Print) | ||
| August 16, 2022 | ||
| Date | ||
| Address: | 8 Jobson CT | |
| Toms River, NJ 08757 | ||
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Exhibit A
INVENTIONS
1. Prior Inventions Disclosure. The following is a complete list of all Prior Inventions (as provided in Subsection 2.2 of the attached Employee Confidential Information and Inventions Assignment Agreement):
☒ None
☐ See immediately below:
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Exhibit 10.4
INDEPENDENT DIRECTOR AGREEMENT
INDEPENDENT DIRECTOR AGREEMENT (this “Agreement”), dated [ ], 2024, by and between Toppoint Holdings Inc., a Nevada corporation (the “Company”), and the undersigned (the “Director”).
RECITALS
A. The Company is filing a registration statement on Form S-1 relating to a firm commitment initial public offering of its securities (the “IPO”).
B. The current Board consists of two (2) members and the Board intends to appoint three (3) additional independent directors prior to the closing of the IPO.
C. The Company desires to appoint the Director to serve on the Company’s board of directors (the “Board”), which will include membership on one or more committees of the Board, and the Director desires to accept such appointment to serve on the Board.
AGREEMENT
NOW THEREFORE, in consideration of the mutual promises contained herein, the adequacy and sufficiency of which are hereby acknowledged, and intending to be legally bound hereby, the Company and the Director hereby agree as follows:
1. Duties. From and after the effective date of the registration statement for the IPO and related pricing of the IPO (the “Effective Time”), the Company requires that the Director be available to perform the duties of an independent director customarily related to this function as may be determined and assigned by the Board and as may be required by the Company’s constituent instruments, including its articles of incorporation and bylaws, as amended, and its corporate governance and board committee charters, each as amended or modified from time to time, and by applicable law, including the Nevada Revised Statutes. The Director agrees to devote as much time as is necessary to perform completely the duties as a Director of the Company, including duties as a member of one or more committees of the Board, to which the Director may hereafter be appointed. The Director will perform such duties described herein in accordance with the general fiduciary duty of directors.
2. Term. The term of this Agreement shall commence as of the Effective Time, which shall be the effective date of the Director’s appointment by the board of directors of the Company, and shall continue until the Director’s removal or resignation. In addition to a termination of this Agreement pursuant to Section 8, the Company shall have the right to terminate this Agreement upon written notice to the Director at any time without liability prior to the Effective Time.
3. Compensation.
(a) Cash Compensation. Following the commencement of the term of this Agreement, for all services to be rendered by the Director in any capacity hereunder, the Company agrees to compensate the Director a fee of $[ ] per year in cash (the “Annual Fee”), which Annual Fee shall be paid to the Director in [ ] no later than the fifth business day of each calendar quarter commencing in the first quarter following the Effective Date. The Director shall be responsible for his or her own individual income tax payment on the Annual Fee in jurisdictions where the Director resides.
(b) Equity Compensation.
(i) Upon execution of this agreement, the Director shall be entitled to receive the Company’s Restricted Common Stock worth $[ ] per year (the “Share Grants”), which Share Grants shall vest in [ ] commencing in the first quarter following the Effect Date. The per share price of each share issued to the Director shall equal to the price of Company stock offered in the IPO.
(ii) Upon execution of this agreement, the Director shall be entitled to receive an initial stock option (the “Initial Award”) to purchase [ ] of the Company’s ordinary shares. The per share exercise price of each option granted to the Director shall equal to the price of Company stock offered in the IPO. The Initial Award shall vest and become exercisable in twelve (12) equal monthly installments over the first year following the date of grant, subject to the Director continuing in service on the Board through each such vesting date. The term of each stock option granted to the Director shall be ten (10) years from the date of grant.
In the event that the Director serves less than a full year on the Board, the Company shall only be obligated to pay the pro rata portion of such Annual Fee to the Director for his services performed during such year. Furthermore, the vesting of the Option shall not accelerate in the event the Director serves less than a full year on the Board.
4. Independence. The Director acknowledges that his or her appointment hereunder is contingent upon the Board’s determination that he or she is “independent” with respect to the Company, in accordance with the listing requirements of the Nasdaq stock exchange, and that his or her appointment may be terminated by the Company in the event that the Director does not maintain such independence standard.
5. Expenses. The Company shall reimburse the Director for pre-approved reasonable business related expenses incurred in good faith in connection with the performance of the Director’s duties for the Company. Such reimbursement shall be made by the Company upon submission by the Director of a signed statement itemizing the expenses incurred, which shall be accompanied by sufficient documentation to support the expenditures.
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6. Other Agreements.
(a) Confidential Information and Insider Trading. The Company and the Director each acknowledge that, in order for the intentions and purposes of this Agreement to be accomplished, the Director shall necessarily be obtaining access to certain confidential information concerning the Company and its affairs, including, but not limited to, business methods, information systems, financial data and strategic plans which are unique assets of the Company (as further defined below, the “Confidential Information”) and that the communication of such Confidential Information to third parties could irreparably injure the Company and its business. Accordingly, the Director agrees that, during his or her association with the Company and thereafter, he or she will treat and safeguard as confidential and secret all Confidential Information received by him or her at any time and that, without the prior written consent of the Company, he or she will not disclose or reveal any of the Confidential Information to any third party whatsoever or use the same in any manner except in connection with the business of the Company and in any event in no way harmful to or competitive with the Company or its business. For purposes of this Agreement, “Confidential Information” includes any information not generally known to the public or recognized as confidential according to standard industry practice, any trade secrets, know-how, development, manufacturing, marketing and distribution plans and information, inventions, formulas, methods or processes, whether or not patented or patentable, pricing policies and records of the Company (and such other information normally understood to be confidential or otherwise designated as such in writing by the Company), all of which the Director expressly acknowledges and agrees shall be confidential and proprietary information belonging to the Company. Upon termination of his or her association with the Company, the Director shall return to the Company all documents and papers relating to the Company, including any Confidential Information, together with any copies thereof, or certify that he or she has destroyed all such documents and papers. Furthermore, the Director recognizes that the Company has received and in the future will receive confidential or proprietary information from third parties subject to a duty on the Company’s part to maintain the confidentiality of such information and, in some cases, to use it only for certain limited purposes. The Director agrees that the Director owes the Company and such third parties, both during the term of the Director’s association with the Company and thereafter, a duty to hold all such confidential or proprietary information in the strictest confidence and not to, except as is consistent with the Company’s agreement with the third party, disclose it to any person or entity or use it for the benefit of anyone other than the Company or such third party, unless expressly authorized to act otherwise by an officer of the Company. In addition, the Director acknowledges and agrees that the Director may have access to “material non-public information” for purposes of the federal securities laws (“Insider Information”) and that the Director will abide by all securities laws relating to the handling of and acting upon such Insider Information.
(b) Disparaging Statements. At all times during and after the period in which the Director is a member of the Board and at all times thereafter, the Director shall not either verbally, in writing, electronically or otherwise: (i) make any derogatory or disparaging statements about the Company, any of its affiliates, any of their respective officers, directors, shareholders, employees and agents, or any of the Company’s current or past customers or employees, or (ii) make any public statement or perform or do any other act prejudicial or injurious to the reputation or goodwill of the Company or any of its affiliates or otherwise interfere with the business of the Company or any of its affiliates; provided, however, that nothing in this paragraph shall preclude the Director from complying with all obligations imposed by law or legal compulsion, and provided, further, however, that nothing in this paragraph shall be deemed applicable to any testimony given by the Director in any legal or administrative proceedings.
(c) Work Product. Director agrees that any and all Work Product (as defined below) shall be the Company’s sole and exclusive property. Director hereby irrevocably assigns to the Company all right, title and interest worldwide in and to any deliverables resulting from the Director’s services as a director to the Company (“Deliverables”), and to any ideas, concepts, processes, discoveries, developments, formulae, information, materials, improvements, designs, artwork, content, software programs, other copyrightable works, and any other work product created, conceived or developed by you (whether alone or jointly with others) for the Company during or before the term of this Agreement, including all copyrights, patents, trademarks, trade secrets, and other intellectual property rights therein (the “Work Product”). Director retains no rights to use the Work Product and agrees not to challenge the validity of our ownership of the Work Product. Director agrees to execute, at Company’s request and expense, all documents and other instruments necessary or desirable to confirm such assignment. In the event that Director does not, for any reason, execute such documents within a reasonable time after the Company’s request, Director hereby irrevocably appoint the Company as Director’s attorney-in-fact for the purpose of executing such documents on your behalf, which appointment is coupled with an interest. Director will deliver to the Company any Deliverables and disclose promptly in writing to us all other Work Product.
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(d) Enforcement. The Director acknowledges and agrees that the covenants contained herein are reasonable, that valid consideration has been and will be received and that the agreements set forth herein are the result of arms-length negotiations between the parties hereto. The Director recognizes that the provisions of this Section 6 are vitally important to the continuing welfare of the Company and its affiliates and that any violation of this Section 6 could result in irreparable harm to the Company and its affiliates for which money damages would constitute a totally inadequate remedy. Accordingly, in the event of any such violation by the Director, the Company and its affiliates, in addition to any other remedies they may have, shall have the right to institute and maintain a proceeding to compel specific performance thereof or to obtain an injunction or other equitable relief restraining any action by the Director in violation of this Section 6 without posting any bond therefore or demonstrating actual damages, and the Director will not claim as a defense thereto that the Company has an adequate remedy at law or require the posting of a bond. If any of the restrictions or activities contained in this Section 6 shall for any reason be held by an arbitrator to be excessively broad as to duration, geographical scope, activity or subject, such restrictions shall be construed so as thereafter to be limited or reduced to be enforceable to the extent compatible with the applicable law; it being understood that by the execution of this Agreement the parties hereto regard such restrictions as reasonable and compatible with their respective rights. The Director acknowledges that injunctive relief may be granted immediately upon the commencement of any such action without notice to the Director and in addition Company may recover monetary damages.
(e) Separate Agreement. The parties hereto further agree that the provisions of Section 6 are separate from and independent of the remainder of this Agreement and that Section 6 is specifically enforceable by the Company notwithstanding any claim made by the Director against the Company. The terms of this Section 6 shall survive termination of this Agreement.
7. Market Stand-Off Agreement. In the event of a public or private offering of the Company’s securities, including in connection with the IPO, and upon request of the Company, the underwriters or placement agents placing the offering of the Company’s securities, the Director agrees not to sell, make any short sale of, loan, grant any option for the purchase of, or otherwise dispose of any securities of the Company that the Director may own, other than those included in the registration, without the prior written consent of the Company or such underwriters, as the case may be, for such period of time from the effective date of such registration as may be requested by the Company or such placement agent or underwriter.
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8. Termination. With or without cause, the Company and the Director may each terminate this Agreement at any time upon ten (10) days written notice, and the Company shall be obligated to pay to the Director the compensation and expenses due up to the date of the termination. Nothing contained herein or omitted herefrom shall prevent the stockholder(s) of the Company from removing the Director with immediate effect at any time for any reason. For the avoidance of doubt, if the Company terminates this Agreement prior to the closing of the IPO in accordance with Section 2 hereof, then the Company shall not have any liability whatsoever to the Director.
9. Indemnification. The Company shall indemnify, defend and hold harmless the Director, to the full extent allowed by the law of the State of Nevada, and as provided by, or granted pursuant to, any charter provision, bylaw provision, agreement (including, without limitation, the Indemnification Agreement executed herewith), vote of stockholders or disinterested directors or otherwise, both as to action in the Director’s official capacity and as to action in another capacity while holding such office. The Company and the Director are executing an indemnification agreement in the form attached hereto as Exhibit A.
10. Effect Of Waiver. The waiver by either party of the breach of any provision of this Agreement shall not operate as or be construed as a waiver of any subsequent breach thereof.
11. Notice. Any and all notices referred to herein shall be sufficient if furnished in writing at the addresses specified on the signature page hereto or, if to the Company, to the Company’s address as specified in filings made by the Company with the U.S. Securities and Exchange Commission (the “SEC”).
12. Governing Law; Arbitration. This Agreement shall be interpreted in accordance with, and the rights of the parties hereto shall be determined by, the laws of the State of Nevada without reference to that state’s conflicts of laws principles. Any disputes or claims arising under or in connection with this Agreement or the transactions contemplated hereunder shall be resolved by binding arbitration. Notice of a demand to arbitrate a dispute by any party hereto shall be given in writing to the other parties hereto at their last known addresses. Arbitration shall be commenced by the filing by such a party of an arbitration demand with the American Arbitration Association (“AAA”). The arbitration and resolution of the dispute shall be resolved by a single arbitrator appointed by the AAA pursuant to AAA rules. The arbitration shall in all respects be governed and conducted by applicable AAA rules, and any award and/or decision shall be conclusive and binding on the parties. The arbitration shall be conducted in the city where the Company’s principal executive offices are located as specified in filings made by the Company with the SEC. The arbitrator shall supply a written opinion supporting any award, and judgment may be entered on the award in any court of competent jurisdiction. Each party hereto shall pay its own fees and expenses for the arbitration, except that any costs and charges imposed by the AAA and any fees of the arbitrator for his services shall be assessed against the losing party by the arbitrator. In the event that preliminary or permanent injunctive relief is necessary or desirable in order to prevent a party from acting contrary to this Agreement or to prevent irreparable harm prior to a confirmation of an arbitration award, then any party hereto is authorized and entitled to commence a lawsuit solely to obtain equitable relief against the other such parties pending the completion of the arbitration in a court having jurisdiction over those parties.
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13. Assignment. The rights and benefits of the Company under this Agreement shall be transferable, and all the covenants and agreements hereunder shall inure to the benefit of, and be enforceable by or against, its successors and assigns. The duties and obligations of the Director under this Agreement are personal and therefore the Director may not assign any right or duty under this Agreement without the prior written consent of the Company.
14. Miscellaneous. If any provision of this Agreement shall be declared invalid or illegal, for any reason whatsoever, then, notwithstanding such invalidity or illegality, the remaining terms and provisions of the this Agreement shall remain in full force and effect in the same manner as if the invalid or illegal provision had not been contained herein. The article headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. This Agreement may be executed in any number of counterparts, each of which shall be deemed an original but all of which taken together shall constitute one and the same instrument. 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 shall be deemed to have been duly and validly delivered and be valid and effective for all purposes. Except as provided elsewhere herein, this Agreement sets forth the entire agreement of the parties with respect to its subject matter and supersedes all prior agreements, promises, covenants, arrangements, communications, representations or warranties, whether oral or written, by any officer, employee or representative of any party to this Agreement with respect to such subject matter.
[Signature Page Follows]
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IN WITNESS WHEREOF, the parties hereto have caused this Independent Director Agreement to be duly executed and signed as of the day and year first above written.
| COMPANY: | ||
| Toppoint Holdings Inc. | ||
| By: | ||
| Name: | Hok C Chan | |
| Title: | Chief Executive Officer | |
| DIRECTOR: | ||
| Name: | ||
| Address: | ||
EXHIBIT A
Indemnification Agreement
See Attached.
A-1
INDEMNIFICATION AGREEMENT
INDEMNIFICATION AGREEMENT (this “Agreement”) is entered into as of [ ], 2024 by and between Toppoint Holdings Inc., a Nevada corporation (the “Company”) and the undersigned, a director and/or an officer of the Company (“Indemnitee”), as applicable.
BACKGROUND
The Board of Directors of the Company (the “Board of Directors”) has determined that the inability to attract and retain highly competent persons to serve the Company is detrimental to the best interests of the Company and its shareholders and that it is reasonable and necessary for the Company to provide adequate protection to such persons against risks of claims and actions against them arising out of their services to the corporation.
AGREEMENT
In consideration of the premises and the covenants contained herein, the Company and Indemnitee do hereby covenant and agree as follows:
| A. | DEFINITIONS |
1. Definitions. The following terms shall have the meanings defined below:
Expenses shall include, without limitation, damages, judgments, fines, penalties, settlements and costs, attorneys’ fees and disbursements and costs of attachment or similar bond, investigations, and any other expenses paid or incurred in connection with investigating, defending, being a witness in, participating in (including on appeal), or preparing for any of the foregoing in, any Proceeding.
Indemnifiable Event means any event or occurrence that takes place either before or after the execution of this Agreement, related to the fact that Indemnitee is or was a director or an officer of the Company, or is or was serving at the request of the Company as a director or officer of another corporation, partnership, joint venture or other entity, or related to anything done or not done by Indemnitee in any such capacity, including, but not limited to, neglect, breach of duty, error, misstatement, misleading statement or omission.
Participant means a person who is a party to, or witness or participant (including on appeal) in, a Proceeding.
Proceeding means any threatened, pending, or completed action, suit, arbitration or proceeding, or any inquiry, hearing or investigation, whether civil, criminal, administrative, investigative or other, including appeal, in which Indemnitee may be or may have been involved as a party or otherwise by reason of an Indemnifiable Event.
| B. | AGREEMENT TO INDEMNIFY |
1. General Agreement to Indemnify. In the event Indemnitee was, is, or becomes a Participant in, or is threatened to be made a Participant in, a Proceeding, the Company shall indemnify the Indemnitee from and against any and all Expenses which Indemnitee incurs or becomes obligated to incur in connection with such Proceeding, whether or not such Proceeding proceeds to judgment or is settled or is otherwise brought to a final disposition, to the fullest extent permitted by applicable law.
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2. Indemnification of Expenses of Successful Party. Notwithstanding any other provision of this Agreement, to the extent that Indemnitee has been successful on the merits in defense of any Proceeding or in defense of any claim, issue or matter in such Proceeding, the Company shall indemnify Indemnitee against all Expenses incurred in connection with such Proceeding or such claim, issue or matter, whether or not such Proceeding proceeds to judgment or is settled or is otherwise brought to a final disposition, as the case may be, offset by the amount of cash, if any, received by the Indemnitee resulting from his/her success therein.
3. Partial Indemnification. If Indemnitee is entitled under any provision of this Agreement to indemnification by the Company for a portion of Expenses, but not for the total amount of Expenses, the Company shall indemnify the Indemnitee for the portion of such Expenses to which Indemnitee is entitled.
4. Exclusions. Notwithstanding anything in this Agreement to the contrary, Indemnitee shall not be entitled to indemnification under this Agreement:
(a) to the extent that payment is actually made to Indemnitee under a valid, enforceable and collectible insurance policy;
(b) to the extent that Indemnitee is indemnified and actually paid other than pursuant to this Agreement;
(c) subject to Section C.2(a), in connection with a judicial action by or in the right of the Company, in respect of any claim, issue or matter as to which the Indemnitee shall have been adjudicated by a court of competent jurisdiction, in a decision from which there is no further right of appeal, to be liable for gross negligence or knowing or willful misconduct in the performance of his/her duty to the Company unless and only to the extent that any court in which such action was brought shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, the Indemnitee is fairly and reasonably entitled to indemnity for such Expenses as such court shall deem proper;
(d) in connection with any Proceeding initiated by Indemnitee against the Company, any director or officer of the Company or any other party, and not by way of defense, unless (i) the Company has joined in or the Board of Directors has consented to the initiation of such Proceeding; or (ii) the Proceeding is one to enforce indemnification rights under this Agreement or any applicable law;
(e) brought about by the dishonesty or fraud of the Indemnitee seeking payment hereunder; provided, however, that the Company shall indemnify Indemnitee under this Agreement as to any claims upon which suit may be brought against him/her by reason of any alleged dishonesty on his/her part, unless a judgment or other final adjudication thereof adverse to the Indemnitee establishes that he/she committed (i) acts of active and deliberate dishonesty, (ii) with actual dishonest purpose and intent, and (iii) which acts were material to the cause of action so adjudicated;
(f) for any judgment, fine or penalty which the Company is prohibited by applicable law from paying as indemnity;
(g) arising out of Indemnitee’s breach of an employment agreement with the Company (if any) or any other agreement with the Company or any of its subsidiaries, or
(h) arising out of Indemnitee’s personal income tax payable on any salaries, bonuses, director’s fees, including fees for attending meetings, or gain on disposition of shares, options or restricted shares of the Company.
A-3
5. No Employment Rights. Nothing in this Agreement is intended to create in Indemnitee any right to continued employment with the Company.
6. Contribution. If the indemnification provided in this Agreement is unavailable and may not be paid to Indemnitee for any reason other than those set forth in Section B.4, then the Company shall contribute to the amount of Expenses paid in settlement actually and reasonably incurred and paid or payable by Indemnitee in such proportion as is appropriate to reflect (i) the relative benefits received by the Company on the one hand and by the Indemnitee on the other hand from the transaction or events from which such Proceeding arose, and (ii) the relative fault of the Company on the one hand and of the Indemnitee on the other hand in connection with the events which resulted in such Expenses, as well as any other relevant equitable considerations. The relative fault of the Company on the one hand and of the Indemnitee on the other hand shall be determined by reference to, among other things, the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent the circumstances resulting in such Expenses, judgments, fines or settlement amounts. The Company agrees that it would not be just and equitable if contribution pursuant to this Section B.6 were determined by pro rata allocation or any other method of allocation which does not take account of the foregoing equitable considerations.
| C. | INDEMNIFICATION PROCESS |
1. Notice and Cooperation by Indemnitee. Indemnitee shall, as a condition precedent to his/her right to be indemnified under this Agreement, give the Company notice in writing as soon as practicable of any claim made against Indemnitee for which indemnification will or could be sought under this Agreement, provided that the delay of Indemnitee to give notice hereunder shall not prejudice any of Indemnitee’s rights hereunder, unless such delay results in the Company’s forfeiture of substantive rights or defenses. Notice to the Company shall be given in accordance with Section F.7 below. If, at the time of receipt of such notice, the Company has directors’ and officers’ liability insurance policies in effect, the Company shall give prompt notice to its insurers of the Proceeding relating to the notice. The Company shall thereafter take all necessary and desirable action to cause such insurers to pay, on behalf of Indemnitee, all Expenses payable as a result of such Proceeding. In addition, Indemnitee shall give the Company such cooperation as the Company may reasonably request and the Company shall give the Indemnitee such cooperation as the Indemnitee may reasonably request, including providing any documentation or information which is not privileged or otherwise protected from disclosure and which is reasonably available to Indemnitee or the Company, as the case may be.
2. Indemnification Payment.
(a) Advancement of Expenses. Indemnitee may submit a written request with reasonable particulars to the Company requesting that the Company advance to Indemnitee all Expenses that may be reasonably incurred in advance by Indemnitee in connection with a Proceeding. The Company shall, within ten (10) business days of receiving such a written request by Indemnitee, advance all requested Expenses to Indemnitee. Any excess of the advanced Expenses over the actual Expenses will be repaid to the Company.
(b) Reimbursement of Expenses. To the extent Indemnitee has not requested any advanced payment of Expenses from the Company, Indemnitee shall be entitled to receive reimbursement for the Expenses incurred in connection with a Proceeding from the Company as soon as practicable and, in any event, within thirty (30) days after Indemnitee makes a written request to the Company for reimbursement unless the Company refers the indemnification request to the Reviewing Party in compliance with Section C.2(c) below.
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(c) Determination by the Reviewing Party. If the Company reasonably believes that it is not obligated under this Agreement to indemnify the Indemnitee, the Company shall, within ten (10) days after the Indemnitee’s written request for an advancement or reimbursement of Expenses, notify the Indemnitee that the request for advancement of Expenses or reimbursement of Expenses will be submitted to the Reviewing Party (as hereinafter defined). The Reviewing Party shall make a determination on the request within thirty (30) days after the Indemnitee’s written request for an advancement or reimbursement of Expenses. Notwithstanding anything foregoing to the contrary, in the event the Reviewing Party informs the Company that Indemnitee is not entitled to indemnification in connection with a Proceeding under this Agreement or applicable law, the Company shall be entitled to be reimbursed by Indemnitee for all the Expenses previously advanced or otherwise paid to Indemnitee in connection with such Proceeding; provided, however, that Indemnitee may bring a suit to enforce his/her indemnification right in accordance with Section C.3 below.
3. Suit to Enforce Rights. Regardless of any action by the Reviewing Party, if Indemnitee has not received full indemnification within thirty (30) days after making a written demand in accordance with Section C.2 above or fifty (50) days if the Company submits a request for advancement or reimbursement to the Reviewing Party under Section C.2(c), Indemnitee shall have the right to enforce its indemnification rights under this Agreement by commencing litigation in any court of competent jurisdiction seeking a determination by the court or challenging any determination by the Reviewing Party or with respect to any breach in any aspect of this Agreement. Any determination by the Reviewing Party not challenged by Indemnitee and any judgment entered by the court shall be binding on the Company and Indemnitee.
4. Assumption of Defense. In the event the Company is obligated under this Agreement to advance or bear any Expenses for any Proceeding against Indemnitee, the Company shall be entitled to assume the defense of such Proceeding, with counsel approved by Indemnitee, upon delivery to Indemnitee of written notice of its election to do so. After delivery of such notice, approval of such counsel by Indemnitee and the retention of such counsel by the Company, the Company will not be liable to Indemnitee under this Agreement for any fees of counsel subsequently incurred by Indemnitee with respect to the same Proceeding, unless (i) the employment of counsel by Indemnitee has been previously authorized by the Company, (ii) Indemnitee shall have reasonably concluded, based on written advice of counsel, that there may be a conflict of interest of such counsel retained by the Company between the Company and Indemnitee in the conduct of any such defense, or (iii) the Company ceases or terminates the employment of such counsel with respect to the defense of such Proceeding, in any of which events the fees and expenses of Indemnitee’s counsel shall be at the expense of the Company. At all times, Indemnitee shall have the right to employ counsel in any Proceeding at Indemnitee’s expense.
5. Burden of Proof and Presumptions. Upon making a request for indemnification, Indemnitee shall be presumed to be entitled to indemnification under this Agreement and the Company shall have the burden of proof to overcome that presumption in reaching any contrary determination.
6. No Settlement Without Consent. Neither party to this Agreement shall settle any Proceeding in any manner that would impose any damage, loss, penalty or limitation on Indemnitee without the other party’s written consent. Neither the Company nor Indemnitee shall unreasonably withhold its consent to any proposed settlement.
7. Company Participation. Subject to Section B.6, the Company shall not be liable to indemnify the Indemnitee under this Agreement with regard to any judicial action if the Company was not given a reasonable and timely opportunity, at its expense, to participate in the defense, conduct and/or settlement of such action.
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8. Reviewing Party.
(a) For purposes of this Agreement, the Reviewing Party with respect to each indemnification request of Indemnitee that is referred by the Company pursuant to Section C.2(c) above shall be shall be (A) the Board of Directors by a majority vote of a quorum consisting of Disinterested Directors (as hereinafter defined), or (B) if a quorum of the Board of Directors consisting of Disinterested Directors is not obtainable or, even if obtainable, said Disinterested Directors so direct, by Independent Counsel in a written opinion to the Board of Directors, a copy of which shall be delivered to Indemnitee. If the Reviewing Party determines that Indemnitee is entitled to indemnification, payment to Indemnitee shall be made within ten (10) days after such determination. Indemnitee shall cooperate with the person, persons or entity making such determination with respect to Indemnitee’s entitlement to indemnification, including providing to such person, persons or entity upon reasonable advance request any documentation or information which is not privileged or otherwise protected from disclosure and which is reasonably available to Indemnitee and reasonably necessary to such determination. Any Independent Counsel or member of the Board of Directors shall act reasonably and in good faith in making a determination under this Agreement of the Indemnitee’s entitlement to indemnification. Any reasonable costs or expenses (including reasonable attorneys’ fees and disbursements) incurred by Indemnitee in so cooperating with the person, persons or entity making such determination shall be borne by the Company (irrespective of the determination as to Indemnitee’s entitlement to indemnification) and the Company hereby indemnifies and agrees to hold Indemnitee harmless therefrom. “Disinterested Director” means a director of the Company who is not and was not a party to the Proceeding in respect of which indemnification is sought by Indemnitee.
(b) If the determination of entitlement to indemnification is to be made by Independent Counsel, the Independent Counsel shall be selected as provided in this Section C.8(b). The Independent Counsel shall be selected by Indemnitee (unless Indemnitee shall request that such selection be made by the Board of Directors, in which event the proceeding sentence shall apply), and Indemnitee shall give written notice to the Company advising it of the identity of the Independent Counsel so selected. In either event, Indemnitee or the Company, as the case may be, may, within 10 days after such written notice of selection shall have been given, deliver to the Company or to Indemnitee, as the case may be, a written objection to such selection; provided, however, that such objection may be asserted only on the ground that the Independent Counsel so selected does not meet the requirements of “Independent Counsel” as defined in Section C.8(d) of this Agreement, and the objection shall set forth with particularity the factual basis of such assertion. Absent a proper and timely objection, the person so selected shall act as Independent Counsel. If a written objection is made and substantiated, the Independent Counsel selected may not serve as Independent Counsel unless and until such objection is withdrawn or a court has determined that such objection is without merit. If, within 20 days after submission by Indemnitee of a written request for indemnification, no Independent Counsel shall have been selected and not objected to, either the Company or Indemnitee may petition the a court of competent jurisdiction for resolution of any objection which shall have been made by the Company or Indemnitee to the other’s selection of Independent Counsel and/or for the appointment as Independent Counsel of a person selected by the court or by such other person as the court shall designate, and the person with respect to whom all objections are so resolved or the person so appointed shall act as Independent Counsel. The Company shall pay any and all reasonable fees and expenses of Independent Counsel incurred by such Independent Counsel in connection with acting under this Agreement, and the Company shall pay all reasonable fees and expenses incident to the procedures of this Section C.8(b), regardless of the manner in which such Independent Counsel was selected or appointed.
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(c) In making a determination with respect to entitlement to indemnification hereunder, the Reviewing Party shall presume that Indemnitee is entitled to indemnification under this Agreement if Indemnitee has submitted a request for indemnification in accordance with this Agreement, and the Company shall have the burden of proof to overcome that presumption in connection with the making by any person, persons or entity of any determination contrary to that presumption. The termination of any Proceeding or of any claim, issue or matter therein, by judgment, order, settlement (with or without court approval), conviction, or upon a plea of nolo contendere or its equivalent, shall not (except as otherwise expressly provided in this Agreement) of itself adversely affect the right of Indemnitee to indemnification or create a presumption that Indemnitee did not act in good faith and in a manner which he/she reasonably believed to be in or not opposed to the best interests of the Company or, with respect to any criminal Proceeding, that Indemnitee had reasonable cause to believe that his/her conduct was unlawful. For purposes of any determination of good faith, Indemnitee shall be deemed to have acted in good faith if Indemnitee’s action is based on the records or books of account of the Company and any other corporation, partnership, joint venture or other entity of which Indemnitee is or was serving at the written request of the Company as a director, officer, employee, agent or fiduciary, including financial statements, or on information supplied to Indemnitee by the officers and directors of the Company or such other corporation, partnership, joint venture or other entity in the course of their duties, or on the advice of legal counsel for the Company or such other corporation, partnership, joint venture or other entity or on information or records given or reports made to the Company or such other corporation, partnership, joint venture or other entity by an independent certified public accountant or by an appraiser or other expert selected with reasonable care by the Company or such other corporation, partnership, joint venture or other entity. In addition, the knowledge and/or actions, or failure to act, of any director, officer, agent or employee of the Company or such other corporation, partnership, joint venture or other entity shall not be imputed to Indemnitee for purposes of determining the right to indemnification under this Agreement. The provisions of this Section C.8(c) shall not be deemed to be exclusive or to limit in any way the other circumstances in which the Indemnitee may be deemed to have met the applicable standard of conduct set forth in this Agreement.
(d) “Independent Counsel” means a law firm, or a member of a law firm, that is experienced in matters of corporation law and neither presently is, nor in the past five (5) years has been, retained to represent (i) the Company or Indemnitee in any matter material to either such party (other than with respect to matters concerning the Indemnitee under this Agreement, or of other indemnitees under similar indemnification agreements), or (ii) any other party to the Proceeding giving rise to a claim for indemnification hereunder. Notwithstanding the foregoing, the term “Independent Counsel” shall not include any person who, under the applicable standards of professional conduct then prevailing, would have a conflict of interest in representing either the Company or Indemnitee in an action to determine Indemnitee’s rights under this Agreement. The Company agrees to pay the reasonable fees of the Independent Counsel referred to above and to fully indemnify such counsel against any and all Expenses, claims, liabilities and damages arising out of or relating to this Agreement or its engagement pursuant hereto.
| D. | DIRECTOR AND OFFICER LIABILITY INSURANCE |
1. Good Faith Determination. The Company shall from time to time make the good faith determination whether or not it is practicable for the Company to obtain and maintain a policy or policies of insurance with reputable insurance companies providing the officers and directors of the Company with coverage for losses incurred in connection with their services to the Company or to ensure the Company’s performance of its indemnification obligations under this Agreement.
2. Coverage of Indemnitee. To the extent the Company maintains an insurance policy or policies providing directors’ and officers’ liability insurance, Indemnitee shall be covered by such policy or policies, in accordance with its or their terms, to the maximum extent of the coverage available for any of the Company’s directors or officers.
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3. No Obligation. Notwithstanding the foregoing, the Company shall have no obligation to obtain or maintain any director and officer insurance policy if the Company determines in good faith that such insurance is not reasonably available in the case that (i) premium costs for such insurance are disproportionate to the amount of coverage provided, or (ii) the coverage provided by such insurance is limited by exclusions so as to provide an insufficient benefit.
| E. | NON-EXCLUSIVITY; FEDERAL PREEMPTION; TERM |
1. Non-Exclusivity. The indemnification provided by this Agreement shall not be deemed exclusive of any rights to which Indemnitee may be entitled under the Company’s memorandum and articles of association, as may be amended from time to time, applicable law or any written agreement between Indemnitee and the Company (including its subsidiaries and affiliates). The indemnification provided under this Agreement shall continue to be available to Indemnitee for any action taken or not taken while serving in an indemnified capacity even though he/she may have ceased to serve in any such capacity at the time of any Proceeding. To the extent that a change in the laws of the State of Nevada permits greater indemnification by agreement than would be afforded under the Articles of Incorporation or this Agreement, it is the intent of the parties hereto that Indemnitee shall enjoy by this Agreement the greater benefits so afforded by such change.
2. Federal Preemption. Notwithstanding the foregoing, both the Company and Indemnitee acknowledge that in certain instances, U.S. federal law or public policy may override applicable law and prohibit the Company from indemnifying its directors and officers under this Agreement or otherwise. Such instances include, but are not limited to, the U.S. Securities and Exchange Commission’s (the “SEC”) prohibition on indemnification for liabilities arising under certain Federal securities laws. Indemnitee understands and acknowledges that the Company has undertaken or may be required in the future to undertake with the SEC to submit the question of indemnification to a court in certain circumstances for a determination of the Company’s right under public policy to indemnify Indemnitee.
3. Company Indemnitor of First Resort. The Company hereby acknowledges that the Indemnitee may have certain rights to indemnification, advancement of expenses and/or insurance provided by one or more of his or her employers and certain of their Affiliates (collectively, the “Employer Indemnitors”). The Company hereby agrees (i) that it is the indemnitor of first resort (i.e., its obligations to Indemnitee is primary and any obligation of the Employer Indemnitors to advance expenses or to provide indemnification for the same expenses or liabilities incurred by Indemnitee are secondary), (ii) that it shall be required to advance the full amount of expenses incurred by Indemnitee and shall be liable for the full amount of all expenses, judgments, penalties, fines and amounts paid in settlement by or on behalf of any Indemnitee to the extent legally permitted and as required by this Agreement (or any agreement between the Company and such Indemnitee), without regard to any rights such Indemnitee may have against the Employer Indemnitors and (iii) it irrevocably waives, relinquishes and releases the Employer Indemnitors from any and all claims against the Employer Indemnitors for contribution, subrogation or any other recovery of any kind in respect thereof.
4. Duration of Agreement. All agreements and obligations of the Company contained herein shall continue during the period Indemnitee is an officer and/or a director of the Company (or is or was serving at the request of the Company as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise) and shall continue thereafter so long as Indemnitee shall be subject to any Proceeding by reason of his/her former or current capacity at the Company or any other enterprise at the Company’s request, whether or not he/she is acting or serving in any such capacity at the time any Expense is incurred for which indemnification can be provided under this Agreement. This Agreement shall continue in effect regardless of whether Indemnitee continues to serve as an officer and/or a director of the Company or any other enterprise at the Company’s request.
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| F. | MISCELLANEOUS |
1. Amendment of this Agreement. No supplement, modification, or amendment of this Agreement shall be binding unless executed in writing by the parties hereto. No waiver of any of the provisions of this Agreement shall operate as a waiver of any other provisions (whether or not similar), nor shall such waiver constitute a continuing waiver. Except as specifically provided in this Agreement, no failure to exercise or any delay in exercising any right or remedy shall constitute a waiver.
2. Subrogation. In the event of payment to Indemnitee by the Company under this Agreement, the Company shall be subrogated to the extent of such payment to all of the rights of recovery of Indemnitee, who shall execute all papers required and shall do everything that may be necessary to secure such rights, including the execution of such documents necessary to enable the Company to bring suit to enforce such rights.
3. Assignment; Binding Effect. Neither this Agreement nor any of the rights or obligations hereunder may be assigned by either party hereto without the prior written consent of the other party; except that the Company may, without such consent, assign all such rights and obligations to a successor in interest to the Company which assumes all obligations of the Company under this Agreement. Notwithstanding the foregoing, this Agreement shall be binding upon and inure to the benefit of and be enforceable by and against the parties hereto and the Company’s successors (including any direct or indirect successor by purchase, merger, consolidation, or otherwise to all or substantially all of the business and/or assets of the Company) and assigns, as well as Indemnitee’s spouses, heirs, and personal and legal representatives.
4. Severability and Construction. Nothing in this Agreement is intended to require or shall be construed as requiring the Company to do or fail to do any act in violation of applicable law. The Company’s inability, pursuant to a court order, to perform its obligations under this Agreement shall not constitute a breach of this Agreement. In addition, if any portion of this Agreement shall be held by a court of competent jurisdiction to be invalid, void, or otherwise unenforceable, the remaining provisions shall remain enforceable to the fullest extent permitted by applicable law. The parties hereto acknowledge that they each have opportunities to have their respective counsels review this Agreement. Accordingly, this Agreement shall be deemed to be the product of both of the parties hereto, and no ambiguity shall be construed in favor of or against either of the parties hereto.
5. Counterparts. This Agreement may be executed in two counterparts, both of which taken together shall constitute one instrument.
6. Governing Law. This agreement and all acts and transactions pursuant hereto and the rights and obligations of the parties hereto shall be governed, construed and interpreted in accordance with the laws of the State of Nevada, without giving effect to conflicts of law provisions thereof.
7. Notices. All notices, demands, and other communications required or permitted under this Agreement shall be made in writing and shall be deemed to have been duly given if delivered by hand, against receipt, or mailed via postage prepaid, certified or registered mail, return receipt requested, and addressed to the Company at:
Toppoint Holdings Inc.
1250 Kenas Road.,
North Wales, PA 19454
Attention: Chief Executive Officer
and to Indemnitee at his/her address last known to the Company.
8. Entire Agreement. This Agreement constitutes the entire agreement and supersedes all prior agreements and understandings, both written and oral, between the parties with respect to the subject matter hereof.
[Signature Page Follows]
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IN WITNESS WHEREOF, the parties hereto execute this Agreement as of the date first written above.
| COMPANY: | ||
| Toppoint Holdings Inc. | ||
| By: | ||
| Name: | Hok C Chan | |
| Title: | Chief Executive Officer | |
| INDEMNITEE: | ||
| Name: | ||
Exhibit 10.5
INDEMNIFICATION AGREEMENT
INDEMNIFICATION AGREEMENT (this “Agreement”) is entered into as of [ ], 2024 by and between Toppoint Holdings Inc., a Nevada corporation (the “Company”) and the undersigned, a director and/or an officer of the Company (“Indemnitee”), as applicable.
BACKGROUND
The Board of Directors of the Company (the “Board of Directors”) has determined that the inability to attract and retain highly competent persons to serve the Company is detrimental to the best interests of the Company and its shareholders and that it is reasonable and necessary for the Company to provide adequate protection to such persons against risks of claims and actions against them arising out of their services to the corporation.
AGREEMENT
In consideration of the premises and the covenants contained herein, the Company and Indemnitee do hereby covenant and agree as follows:
| A. | DEFINITIONS |
1. Definitions. The following terms shall have the meanings defined below:
Expenses shall include, without limitation, damages, judgments, fines, penalties, settlements and costs, attorneys’ fees and disbursements and costs of attachment or similar bond, investigations, and any other expenses paid or incurred in connection with investigating, defending, being a witness in, participating in (including on appeal), or preparing for any of the foregoing in, any Proceeding.
Indemnifiable Event means any event or occurrence that takes place either before or after the execution of this Agreement, related to the fact that Indemnitee is or was a director or an officer of the Company, or is or was serving at the request of the Company as a director or officer of another corporation, partnership, joint venture or other entity, or related to anything done or not done by Indemnitee in any such capacity, including, but not limited to, neglect, breach of duty, error, misstatement, misleading statement or omission.
Participant means a person who is a party to, or witness or participant (including on appeal) in, a Proceeding.
Proceeding means any threatened, pending, or completed action, suit, arbitration or proceeding, or any inquiry, hearing or investigation, whether civil, criminal, administrative, investigative or other, including appeal, in which Indemnitee may be or may have been involved as a party or otherwise by reason of an Indemnifiable Event.
| B. | AGREEMENT TO INDEMNIFY |
1. General Agreement to Indemnify. In the event Indemnitee was, is, or becomes a Participant in, or is threatened to be made a Participant in, a Proceeding, the Company shall indemnify the Indemnitee from and against any and all Expenses which Indemnitee incurs or becomes obligated to incur in connection with such Proceeding, whether or not such Proceeding proceeds to judgment or is settled or is otherwise brought to a final disposition, to the fullest extent permitted by applicable law.
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2. Indemnification of Expenses of Successful Party. Notwithstanding any other provision of this Agreement, to the extent that Indemnitee has been successful on the merits in defense of any Proceeding or in defense of any claim, issue or matter in such Proceeding, the Company shall indemnify Indemnitee against all Expenses incurred in connection with such Proceeding or such claim, issue or matter, whether or not such Proceeding proceeds to judgment or is settled or is otherwise brought to a final disposition, as the case may be, offset by the amount of cash, if any, received by the Indemnitee resulting from his/her success therein.
3. Partial Indemnification. If Indemnitee is entitled under any provision of this Agreement to indemnification by the Company for a portion of Expenses, but not for the total amount of Expenses, the Company shall indemnify the Indemnitee for the portion of such Expenses to which Indemnitee is entitled.
4. Exclusions. Notwithstanding anything in this Agreement to the contrary, Indemnitee shall not be entitled to indemnification under this Agreement:
(a) to the extent that payment is actually made to Indemnitee under a valid, enforceable and collectible insurance policy;
(b) to the extent that Indemnitee is indemnified and actually paid other than pursuant to this Agreement;
(c) subject to Section C.2(a), in connection with a judicial action by or in the right of the Company, in respect of any claim, issue or matter as to which the Indemnitee shall have been adjudicated by a court of competent jurisdiction, in a decision from which there is no further right of appeal, to be liable for gross negligence or knowing or willful misconduct in the performance of his/her duty to the Company unless and only to the extent that any court in which such action was brought shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, the Indemnitee is fairly and reasonably entitled to indemnity for such Expenses as such court shall deem proper;
(d) in connection with any Proceeding initiated by Indemnitee against the Company, any director or officer of the Company or any other party, and not by way of defense, unless (i) the Company has joined in or the Board of Directors has consented to the initiation of such Proceeding; or (ii) the Proceeding is one to enforce indemnification rights under this Agreement or any applicable law;
(e) brought about by the dishonesty or fraud of the Indemnitee seeking payment hereunder; provided, however, that the Company shall indemnify Indemnitee under this Agreement as to any claims upon which suit may be brought against him/her by reason of any alleged dishonesty on his/her part, unless a judgment or other final adjudication thereof adverse to the Indemnitee establishes that he/she committed (i) acts of active and deliberate dishonesty, (ii) with actual dishonest purpose and intent, and (iii) which acts were material to the cause of action so adjudicated;
(f) for any judgment, fine or penalty which the Company is prohibited by applicable law from paying as indemnity;
(g) arising out of Indemnitee’s breach of an employment agreement with the Company (if any) or any other agreement with the Company or any of its subsidiaries, or
(h) arising out of Indemnitee’s personal income tax payable on any salaries, bonuses, director’s fees, including fees for attending meetings, or gain on disposition of shares, options or restricted shares of the Company.
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5. No Employment Rights. Nothing in this Agreement is intended to create in Indemnitee any right to continued employment with the Company.
6. Contribution. If the indemnification provided in this Agreement is unavailable and may not be paid to Indemnitee for any reason other than those set forth in Section B.4, then the Company shall contribute to the amount of Expenses paid in settlement actually and reasonably incurred and paid or payable by Indemnitee in such proportion as is appropriate to reflect (i) the relative benefits received by the Company on the one hand and by the Indemnitee on the other hand from the transaction or events from which such Proceeding arose, and (ii) the relative fault of the Company on the one hand and of the Indemnitee on the other hand in connection with the events which resulted in such Expenses, as well as any other relevant equitable considerations. The relative fault of the Company on the one hand and of the Indemnitee on the other hand shall be determined by reference to, among other things, the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent the circumstances resulting in such Expenses, judgments, fines or settlement amounts. The Company agrees that it would not be just and equitable if contribution pursuant to this Section B.6 were determined by pro rata allocation or any other method of allocation which does not take account of the foregoing equitable considerations.
| C. | INDEMNIFICATION PROCESS |
1. Notice and Cooperation by Indemnitee. Indemnitee shall, as a condition precedent to his/her right to be indemnified under this Agreement, give the Company notice in writing as soon as practicable of any claim made against Indemnitee for which indemnification will or could be sought under this Agreement, provided that the delay of Indemnitee to give notice hereunder shall not prejudice any of Indemnitee’s rights hereunder, unless such delay results in the Company’s forfeiture of substantive rights or defenses. Notice to the Company shall be given in accordance with Section F.7 below. If, at the time of receipt of such notice, the Company has directors’ and officers’ liability insurance policies in effect, the Company shall give prompt notice to its insurers of the Proceeding relating to the notice. The Company shall thereafter take all necessary and desirable action to cause such insurers to pay, on behalf of Indemnitee, all Expenses payable as a result of such Proceeding. In addition, Indemnitee shall give the Company such cooperation as the Company may reasonably request and the Company shall give the Indemnitee such cooperation as the Indemnitee may reasonably request, including providing any documentation or information which is not privileged or otherwise protected from disclosure and which is reasonably available to Indemnitee or the Company, as the case may be.
2. Indemnification Payment.
(a) Advancement of Expenses. Indemnitee may submit a written request with reasonable particulars to the Company requesting that the Company advance to Indemnitee all Expenses that may be reasonably incurred in advance by Indemnitee in connection with a Proceeding. The Company shall, within ten (10) business days of receiving such a written request by Indemnitee, advance all requested Expenses to Indemnitee. Any excess of the advanced Expenses over the actual Expenses will be repaid to the Company.
(b) Reimbursement of Expenses. To the extent Indemnitee has not requested any advanced payment of Expenses from the Company, Indemnitee shall be entitled to receive reimbursement for the Expenses incurred in connection with a Proceeding from the Company as soon as practicable and, in any event, within thirty (30) days after Indemnitee makes a written request to the Company for reimbursement unless the Company refers the indemnification request to the Reviewing Party in compliance with Section C.2(c) below.
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(c) Determination by the Reviewing Party. If the Company reasonably believes that it is not obligated under this Agreement to indemnify the Indemnitee, the Company shall, within ten (10) days after the Indemnitee’s written request for an advancement or reimbursement of Expenses, notify the Indemnitee that the request for advancement of Expenses or reimbursement of Expenses will be submitted to the Reviewing Party (as hereinafter defined). The Reviewing Party shall make a determination on the request within thirty (30) days after the Indemnitee’s written request for an advancement or reimbursement of Expenses. Notwithstanding anything foregoing to the contrary, in the event the Reviewing Party informs the Company that Indemnitee is not entitled to indemnification in connection with a Proceeding under this Agreement or applicable law, the Company shall be entitled to be reimbursed by Indemnitee for all the Expenses previously advanced or otherwise paid to Indemnitee in connection with such Proceeding; provided, however, that Indemnitee may bring a suit to enforce his/her indemnification right in accordance with Section C.3 below.
3. Suit to Enforce Rights. Regardless of any action by the Reviewing Party, if Indemnitee has not received full indemnification within thirty (30) days after making a written demand in accordance with Section C.2 above or fifty (50) days if the Company submits a request for advancement or reimbursement to the Reviewing Party under Section C.2(c), Indemnitee shall have the right to enforce its indemnification rights under this Agreement by commencing litigation in any court of competent jurisdiction seeking a determination by the court or challenging any determination by the Reviewing Party or with respect to any breach in any aspect of this Agreement. Any determination by the Reviewing Party not challenged by Indemnitee and any judgment entered by the court shall be binding on the Company and Indemnitee.
4. Assumption of Defense. In the event the Company is obligated under this Agreement to advance or bear any Expenses for any Proceeding against Indemnitee, the Company shall be entitled to assume the defense of such Proceeding, with counsel approved by Indemnitee, upon delivery to Indemnitee of written notice of its election to do so. After delivery of such notice, approval of such counsel by Indemnitee and the retention of such counsel by the Company, the Company will not be liable to Indemnitee under this Agreement for any fees of counsel subsequently incurred by Indemnitee with respect to the same Proceeding, unless (i) the employment of counsel by Indemnitee has been previously authorized by the Company, (ii) Indemnitee shall have reasonably concluded, based on written advice of counsel, that there may be a conflict of interest of such counsel retained by the Company between the Company and Indemnitee in the conduct of any such defense, or (iii) the Company ceases or terminates the employment of such counsel with respect to the defense of such Proceeding, in any of which events the fees and expenses of Indemnitee’s counsel shall be at the expense of the Company. At all times, Indemnitee shall have the right to employ counsel in any Proceeding at Indemnitee’s expense.
5. Burden of Proof and Presumptions. Upon making a request for indemnification, Indemnitee shall be presumed to be entitled to indemnification under this Agreement and the Company shall have the burden of proof to overcome that presumption in reaching any contrary determination.
6. No Settlement Without Consent. Neither party to this Agreement shall settle any Proceeding in any manner that would impose any damage, loss, penalty or limitation on Indemnitee without the other party’s written consent. Neither the Company nor Indemnitee shall unreasonably withhold its consent to any proposed settlement.
7. Company Participation. Subject to Section B.6, the Company shall not be liable to indemnify the Indemnitee under this Agreement with regard to any judicial action if the Company was not given a reasonable and timely opportunity, at its expense, to participate in the defense, conduct and/or settlement of such action.
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8. Reviewing Party.
(a) For purposes of this Agreement, the Reviewing Party with respect to each indemnification request of Indemnitee that is referred by the Company pursuant to Section C.2(c) above shall be shall be (A) the Board of Directors by a majority vote of a quorum consisting of Disinterested Directors (as hereinafter defined), or (B) if a quorum of the Board of Directors consisting of Disinterested Directors is not obtainable or, even if obtainable, said Disinterested Directors so direct, by Independent Counsel in a written opinion to the Board of Directors, a copy of which shall be delivered to Indemnitee. If the Reviewing Party determines that Indemnitee is entitled to indemnification, payment to Indemnitee shall be made within ten (10) days after such determination. Indemnitee shall cooperate with the person, persons or entity making such determination with respect to Indemnitee’s entitlement to indemnification, including providing to such person, persons or entity upon reasonable advance request any documentation or information which is not privileged or otherwise protected from disclosure and which is reasonably available to Indemnitee and reasonably necessary to such determination. Any Independent Counsel or member of the Board of Directors shall act reasonably and in good faith in making a determination under this Agreement of the Indemnitee’s entitlement to indemnification. Any reasonable costs or expenses (including reasonable attorneys’ fees and disbursements) incurred by Indemnitee in so cooperating with the person, persons or entity making such determination shall be borne by the Company (irrespective of the determination as to Indemnitee’s entitlement to indemnification) and the Company hereby indemnifies and agrees to hold Indemnitee harmless therefrom. “Disinterested Director” means a director of the Company who is not and was not a party to the Proceeding in respect of which indemnification is sought by Indemnitee.
(b) If the determination of entitlement to indemnification is to be made by Independent Counsel, the Independent Counsel shall be selected as provided in this Section C.8(b). The Independent Counsel shall be selected by Indemnitee (unless Indemnitee shall request that such selection be made by the Board of Directors, in which event the proceeding sentence shall apply), and Indemnitee shall give written notice to the Company advising it of the identity of the Independent Counsel so selected. In either event, Indemnitee or the Company, as the case may be, may, within 10 days after such written notice of selection shall have been given, deliver to the Company or to Indemnitee, as the case may be, a written objection to such selection; provided, however, that such objection may be asserted only on the ground that the Independent Counsel so selected does not meet the requirements of “Independent Counsel” as defined in Section C.8(d) of this Agreement, and the objection shall set forth with particularity the factual basis of such assertion. Absent a proper and timely objection, the person so selected shall act as Independent Counsel. If a written objection is made and substantiated, the Independent Counsel selected may not serve as Independent Counsel unless and until such objection is withdrawn or a court has determined that such objection is without merit. If, within 20 days after submission by Indemnitee of a written request for indemnification, no Independent Counsel shall have been selected and not objected to, either the Company or Indemnitee may petition the a court of competent jurisdiction for resolution of any objection which shall have been made by the Company or Indemnitee to the other’s selection of Independent Counsel and/or for the appointment as Independent Counsel of a person selected by the court or by such other person as the court shall designate, and the person with respect to whom all objections are so resolved or the person so appointed shall act as Independent Counsel. The Company shall pay any and all reasonable fees and expenses of Independent Counsel incurred by such Independent Counsel in connection with acting under this Agreement, and the Company shall pay all reasonable fees and expenses incident to the procedures of this Section C.8(b), regardless of the manner in which such Independent Counsel was selected or appointed.
(c) In making a determination with respect to entitlement to indemnification hereunder, the Reviewing Party shall presume that Indemnitee is entitled to indemnification under this Agreement if Indemnitee has submitted a request for indemnification in accordance with this Agreement, and the Company shall have the burden of proof to overcome that presumption in connection with the making by any person, persons or entity of any determination contrary to that presumption. The termination of any Proceeding or of any claim, issue or matter therein, by judgment, order, settlement (with or without court approval), conviction, or upon a plea of nolo contendere or its equivalent, shall not (except as otherwise expressly provided in this Agreement) of itself adversely affect the right of Indemnitee to indemnification or create a presumption that Indemnitee did not act in good faith and in a manner which he/she reasonably believed to be in or not opposed to the best interests of the Company or, with respect to any criminal Proceeding, that Indemnitee had reasonable cause to believe that his/her conduct was unlawful. For purposes of any determination of good faith, Indemnitee shall be deemed to have acted in good faith if Indemnitee’s action is based on the records or books of account of the Company and any other corporation, partnership, joint venture or other entity of which Indemnitee is or was serving at the written request of the Company as a director, officer, employee, agent or fiduciary, including financial statements, or on information supplied to Indemnitee by the officers and directors of the Company or such other corporation, partnership, joint venture or other entity in the course of their duties, or on the advice of legal counsel for the Company or such other corporation, partnership, joint venture or other entity or on information or records given or reports made to the Company or such other corporation, partnership, joint venture or other entity by an independent certified public accountant or by an appraiser or other expert selected with reasonable care by the Company or such other corporation, partnership, joint venture or other entity. In addition, the knowledge and/or actions, or failure to act, of any director, officer, agent or employee of the Company or such other corporation, partnership, joint venture or other entity shall not be imputed to Indemnitee for purposes of determining the right to indemnification under this Agreement. The provisions of this Section C.8(c) shall not be deemed to be exclusive or to limit in any way the other circumstances in which the Indemnitee may be deemed to have met the applicable standard of conduct set forth in this Agreement.
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(d) “Independent Counsel” means a law firm, or a member of a law firm, that is experienced in matters of corporation law and neither presently is, nor in the past five (5) years has been, retained to represent (i) the Company or Indemnitee in any matter material to either such party (other than with respect to matters concerning the Indemnitee under this Agreement, or of other indemnitees under similar indemnification agreements), or (ii) any other party to the Proceeding giving rise to a claim for indemnification hereunder. Notwithstanding the foregoing, the term “Independent Counsel” shall not include any person who, under the applicable standards of professional conduct then prevailing, would have a conflict of interest in representing either the Company or Indemnitee in an action to determine Indemnitee’s rights under this Agreement. The Company agrees to pay the reasonable fees of the Independent Counsel referred to above and to fully indemnify such counsel against any and all Expenses, claims, liabilities and damages arising out of or relating to this Agreement or its engagement pursuant hereto.
| D. | DIRECTOR AND OFFICER LIABILITY INSURANCE |
1. Good Faith Determination. The Company shall from time to time make the good faith determination whether or not it is practicable for the Company to obtain and maintain a policy or policies of insurance with reputable insurance companies providing the officers and directors of the Company with coverage for losses incurred in connection with their services to the Company or to ensure the Company’s performance of its indemnification obligations under this Agreement.
2. Coverage of Indemnitee. To the extent the Company maintains an insurance policy or policies providing directors’ and officers’ liability insurance, Indemnitee shall be covered by such policy or policies, in accordance with its or their terms, to the maximum extent of the coverage available for any of the Company’s directors or officers.
3. No Obligation. Notwithstanding the foregoing, the Company shall have no obligation to obtain or maintain any director and officer insurance policy if the Company determines in good faith that such insurance is not reasonably available in the case that (i) premium costs for such insurance are disproportionate to the amount of coverage provided, or (ii) the coverage provided by such insurance is limited by exclusions so as to provide an insufficient benefit.
| E. | NON-EXCLUSIVITY; FEDERAL PREEMPTION; TERM |
1. Non-Exclusivity. The indemnification provided by this Agreement shall not be deemed exclusive of any rights to which Indemnitee may be entitled under the Company’s memorandum and articles of association, as may be amended from time to time, applicable law or any written agreement between Indemnitee and the Company (including its subsidiaries and affiliates). The indemnification provided under this Agreement shall continue to be available to Indemnitee for any action taken or not taken while serving in an indemnified capacity even though he/she may have ceased to serve in any such capacity at the time of any Proceeding. To the extent that a change in the laws of the State of Nevada permits greater indemnification by agreement than would be afforded under the Articles of Incorporation or this Agreement, it is the intent of the parties hereto that Indemnitee shall enjoy by this Agreement the greater benefits so afforded by such change.
2. Federal Preemption. Notwithstanding the foregoing, both the Company and Indemnitee acknowledge that in certain instances, U.S. federal law or public policy may override applicable law and prohibit the Company from indemnifying its directors and officers under this Agreement or otherwise. Such instances include, but are not limited to, the U.S. Securities and Exchange Commission’s (the “SEC”) prohibition on indemnification for liabilities arising under certain Federal securities laws. Indemnitee understands and acknowledges that the Company has undertaken or may be required in the future to undertake with the SEC to submit the question of indemnification to a court in certain circumstances for a determination of the Company’s right under public policy to indemnify Indemnitee.
3. Company Indemnitor of First Resort. The Company hereby acknowledges that the Indemnitee may have certain rights to indemnification, advancement of expenses and/or insurance provided by one or more of his or her employers and certain of their Affiliates (collectively, the “Employer Indemnitors”). The Company hereby agrees (i) that it is the indemnitor of first resort (i.e., its obligations to Indemnitee is primary and any obligation of the Employer Indemnitors to advance expenses or to provide indemnification for the same expenses or liabilities incurred by Indemnitee are secondary), (ii) that it shall be required to advance the full amount of expenses incurred by Indemnitee and shall be liable for the full amount of all expenses, judgments, penalties, fines and amounts paid in settlement by or on behalf of any Indemnitee to the extent legally permitted and as required by this Agreement (or any agreement between the Company and such Indemnitee), without regard to any rights such Indemnitee may have against the Employer Indemnitors and (iii) it irrevocably waives, relinquishes and releases the Employer Indemnitors from any and all claims against the Employer Indemnitors for contribution, subrogation or any other recovery of any kind in respect thereof.
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4. Duration of Agreement. All agreements and obligations of the Company contained herein shall continue during the period Indemnitee is an officer and/or a director of the Company (or is or was serving at the request of the Company as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise) and shall continue thereafter so long as Indemnitee shall be subject to any Proceeding by reason of his/her former or current capacity at the Company or any other enterprise at the Company’s request, whether or not he/she is acting or serving in any such capacity at the time any Expense is incurred for which indemnification can be provided under this Agreement. This Agreement shall continue in effect regardless of whether Indemnitee continues to serve as an officer and/or a director of the Company or any other enterprise at the Company’s request.
| F. | MISCELLANEOUS |
1. Amendment of this Agreement. No supplement, modification, or amendment of this Agreement shall be binding unless executed in writing by the parties hereto. No waiver of any of the provisions of this Agreement shall operate as a waiver of any other provisions (whether or not similar), nor shall such waiver constitute a continuing waiver. Except as specifically provided in this Agreement, no failure to exercise or any delay in exercising any right or remedy shall constitute a waiver.
2. Subrogation. In the event of payment to Indemnitee by the Company under this Agreement, the Company shall be subrogated to the extent of such payment to all of the rights of recovery of Indemnitee, who shall execute all papers required and shall do everything that may be necessary to secure such rights, including the execution of such documents necessary to enable the Company to bring suit to enforce such rights.
3. Assignment; Binding Effect. Neither this Agreement nor any of the rights or obligations hereunder may be assigned by either party hereto without the prior written consent of the other party; except that the Company may, without such consent, assign all such rights and obligations to a successor in interest to the Company which assumes all obligations of the Company under this Agreement. Notwithstanding the foregoing, this Agreement shall be binding upon and inure to the benefit of and be enforceable by and against the parties hereto and the Company’s successors (including any direct or indirect successor by purchase, merger, consolidation, or otherwise to all or substantially all of the business and/or assets of the Company) and assigns, as well as Indemnitee’s spouses, heirs, and personal and legal representatives.
4. Severability and Construction. Nothing in this Agreement is intended to require or shall be construed as requiring the Company to do or fail to do any act in violation of applicable law. The Company’s inability, pursuant to a court order, to perform its obligations under this Agreement shall not constitute a breach of this Agreement. In addition, if any portion of this Agreement shall be held by a court of competent jurisdiction to be invalid, void, or otherwise unenforceable, the remaining provisions shall remain enforceable to the fullest extent permitted by applicable law. The parties hereto acknowledge that they each have opportunities to have their respective counsels review this Agreement. Accordingly, this Agreement shall be deemed to be the product of both of the parties hereto, and no ambiguity shall be construed in favor of or against either of the parties hereto.
5. Counterparts. This Agreement may be executed in two counterparts, both of which taken together shall constitute one instrument.
6. Governing Law. This agreement and all acts and transactions pursuant hereto and the rights and obligations of the parties hereto shall be governed, construed and interpreted in accordance with the laws of the State of Nevada, without giving effect to conflicts of law provisions thereof.
7. Notices. All notices, demands, and other communications required or permitted under this Agreement shall be made in writing and shall be deemed to have been duly given if delivered by hand, against receipt, or mailed via postage prepaid, certified or registered mail, return receipt requested, and addressed to the Company at:
Toppoint Holdings Inc.
1250 Kenas Road.,
North Wales, PA 19454
Attention: Chief Executive Officer
and to Indemnitee at his/her address last known to the Company.
8. Entire Agreement. This Agreement constitutes the entire agreement and supersedes all prior agreements and understandings, both written and oral, between the parties with respect to the subject matter hereof.
[Signature Page Follows]
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IN WITNESS WHEREOF, the parties hereto execute this Agreement as of the date first written above.
| COMPANY: | ||
| Toppoint Holdings Inc. | ||
| By: | ||
| Name: | Hok C Chan | |
| Title: | Chief Executive Officer | |
| INDEMNITEE: | ||
| Name: | ||
Exhibit 10.6
TOPPOINT HOLDINGS INC.
2022 EQUITY INCENTIVE PLAN
1. Purpose; Eligibility.
1.1. General Purpose. The name of this plan is the Toppoint Holdings Inc. 2022 Equity Incentive Plan (the “Plan”). The purposes of the Plan are to (a) enable Toppoint Holdings Inc., a Nevada corporation (the “Company”), and any Affiliate to attract and retain the types of Employees, Consultants and Directors who will contribute to the Company’s long-term success; (b) provide incentives that align the interests of Employees, Consultants and Directors with those of the stockholders of the Company; and (c) promote the success of the Company’s business.
1.2. Eligible Award Recipients. The persons eligible to receive Awards are the Employees, Consultants and Directors of the Company and its Affiliates and such other individuals designated by the Committee who are reasonably expected to become Employees, Consultants and Directors after the receipt of Awards.
1.3. Available Awards. Awards that may be granted under the Plan include: (a) Incentive Stock Options, (b) Non-qualified Stock Options, (c) Stock Appreciation Rights, (d) Restricted Awards, (e) Performance Share Awards, and (f) Performance Compensation Awards.
2. Definitions.
“Affiliate” means a corporation or other entity that, directly or through one or more intermediaries, controls, is controlled by or is under common control with, the Company, including, without limitation, any corporation that is a “parent corporation” or a “subsidiary corporation” with respect to the Company within the meaning of Section 424(e) or (f) of the Code, and any other non-corporate entity that would be such a subsidiary corporation if such entity were a corporation.
“Applicable Laws” means the requirements related to or implicated by the administration of the Plan under applicable state corporate law, United States federal and state securities laws, the Code, any stock exchange or quotation system on which the shares of Common Stock are listed or quoted, and the applicable laws of any foreign country or jurisdiction where Awards are granted under the Plan.
“Award” means any right granted under the Plan, including an Incentive Stock Option, a Non-qualified Stock Option, a Stock Appreciation Right, a Restricted Award, a Performance Share Award or a Performance Compensation Award.
“Award Agreement” means a written agreement, contract, certificate or other instrument or document evidencing the terms and conditions of an individual Award granted under the Plan which may, in the discretion of the Company, be transmitted electronically to any Participant. Each Award Agreement shall be subject to the terms and conditions of the Plan.
“Beneficial Owner” has the meaning assigned to such term in Rule 13d-3 and Rule 13d-5 under the Exchange Act, except that in calculating the beneficial ownership of any particular “person” (as that term is used in Section 13(d)(3) of the Exchange Act), such “person” shall be deemed to have beneficial ownership of all securities that such “person” has the right to acquire by conversion or exercise of other securities, whether such right is currently exercisable or is exercisable only after the passage of time. The terms “Beneficially Owns” and “Beneficially Owned” have a corresponding meaning.
“Board” means the Board of Directors of the Company, as constituted at any time.
“Cause” means:
With respect to any Employee or Consultant: (a) if the Employee or Consultant is a party to an employment or service agreement with the Company or its Affiliates and such agreement provides for a definition of Cause, the definition contained therein; or (b) if no such agreement exists, or if such agreement does not define Cause: (i) the commission of, or plea of guilty or no contest to, a felony or a crime involving moral turpitude or the commission of any other act involving willful malfeasance or material fiduciary breach with respect to the Company or an Affiliate; (ii) conduct that results in or is reasonably likely to result in harm to the reputation or business of the Company or any of its Affiliates; (iii) gross negligence or willful misconduct with respect to the Company or an Affiliate; or (iv) material violation of state or federal securities laws.
With respect to any Director, a determination by a majority of the disinterested Board members that the Director has engaged in any of the following: (a) malfeasance in office; (b) gross misconduct or neglect; (c) false or fraudulent misrepresentation inducing the director’s appointment; (d) willful conversion of corporate funds; or (e) repeated failure to participate in Board meetings on a regular basis despite having received proper notice of the meetings in advance.
The Committee, in its absolute discretion, shall determine the effect of all matters and questions relating to whether a Participant has been discharged for Cause.
“Change in Control” means (a) the direct or indirect sale, transfer, conveyance or other disposition (other than by way of merger or consolidation), in one or a series of related transactions, of all or substantially all of the properties or assets of the Company and its subsidiaries, taken as a whole, to any Person that is not a subsidiary of the Company; (b) the Incumbent Directors cease for any reason to constitute at least a majority of the Board; (c) the date which is 10 business days prior to the consummation of a complete liquidation or dissolution of the Company; (d) the acquisition by any Person of Beneficial Ownership of more than 50% (on a fully diluted basis) of either (i) the then outstanding shares of Common Stock of the Company, taking into account as outstanding for this purpose such Common Stock issuable upon the exercise of options or warrants, the conversion of convertible stock or debt, and the exercise of any similar right to acquire such Common Stock (the “Outstanding Company Common Stock”) or (ii) the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of directors (the “Outstanding Company Voting Securities”); provided, however, that for purposes of this Plan, the following acquisitions shall not constitute a Change in Control: (A) any acquisition by the Company or any Affiliate, (B) any acquisition by any employee benefit plan sponsored or maintained by the Company or any subsidiary, (C) any acquisition which complies with clauses, (i), (ii) and (iii) of subsection (e) of this definition or (D) in respect of an Award held by a particular Participant, any acquisition by the Participant or any group of persons including the Participant (or any entity controlled by the Participant or any group of persons including the Participant); or (e) the consummation of a reorganization, merger, consolidation, statutory share exchange or similar form of corporate transaction involving the Company that requires the approval of the Company’s stockholders, whether for such transaction or the issuance of securities in the transaction (a “Business Combination”), unless immediately following such Business Combination: (i) more than 50% of the total voting power of (A) the entity resulting from such Business Combination (the “Surviving Company”), or (B) if applicable, the ultimate parent entity that directly or indirectly has beneficial ownership of sufficient voting securities eligible to elect a majority of the members of the board of directors (or the analogous governing body) of the Surviving Company (the “Parent Company”), is represented by the Outstanding Company Voting Securities that were outstanding immediately prior to such Business Combination (or, if applicable, is represented by shares into which the Outstanding Company Voting Securities were converted pursuant to such Business Combination), and such voting power among the holders thereof is in substantially the same proportion as the voting power of the Outstanding Company Voting Securities among the holders thereof immediately prior to the Business Combination; (ii) no Person (other than any employee benefit plan sponsored or maintained by the Surviving Company or the Parent Company) is or becomes the Beneficial Owner, directly or indirectly, of 50% or more of the total voting power of the outstanding voting securities eligible to elect members of the board of directors of the Parent Company (or the analogous governing body) (or, if there is no Parent Company, the Surviving Company); and (iii) at least a majority of the members of the board of directors (or the analogous governing body) of the Parent Company (or, if there is no Parent Company, the Surviving Company) following the consummation of the Business Combination were Board members at the time of the Board’s approval of the execution of the initial agreement providing for such Business Combination. The foregoing notwithstanding, if the Award constitutes non-qualified deferred compensation under Section 409A of the Code, in no event shall a Change in Control be deemed to have occurred unless such change shall satisfy the definition of a change in control under Section 409A of the Code.
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“Code” means the Internal Revenue Code of 1986, as it may be amended from time to time. Any reference to a section of the Code shall be deemed to include a reference to any regulations promulgated thereunder.
“Committee” means the compensation committee of the Board, or if no such committee has been established, the full Board, or a committee of one or more members appointed to administer the Plan in accordance with Section 3.3 and Section 3.4.
“Common Stock” means the common stock, $0.0001 par value per share, of the Company, or such other securities of the Company as may be designated by the Committee from time to time in substitution thereof.
“Consultant” means any individual who is engaged by the Company or any Affiliate to render consulting or advisory services.
“Continuous Service” means that the Participant’s service with the Company or an Affiliate, whether as an Employee, Consultant or Director, is not interrupted or terminated. The Participant’s Continuous Service shall not be deemed to have terminated merely because of a change in the capacity in which the Participant renders service to the Company or an Affiliate as an Employee, Consultant or Director or a change in the entity for which the Participant renders such service, provided that there is no interruption or termination of the Participant’s Continuous Service; provided further that if any Award is subject to Section 409A of the Code, this sentence shall only be given effect to the extent consistent with Section 409A of the Code. For example, a change in status from an Employee of the Company to a Director of an Affiliate will not constitute an interruption of Continuous Service unless otherwise required by Section 409A of the Code. The Committee or its delegate, in its sole discretion, may determine whether Continuous Service shall be considered interrupted in the case of any leave of absence approved by that party, including sick leave, military leave or any other personal or family leave of absence.
“Director” means a member of the Board.
“Disability” means that the Participant is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment; provided, however, for purposes of determining the term of an Incentive Stock Option pursuant to Section 6.10 hereof, the term Disability shall have the meaning ascribed to it under Section 22(e)(3) of the Code. The determination of whether an individual has a Disability shall be determined under procedures established by the Committee. Except in situations where the Committee is determining Disability for purposes of the term of an Incentive Stock Option pursuant to Section 6.10 hereof within the meaning of Section 22(e)(3) of the Code, the Committee may rely on any determination that a Participant is disabled for purposes of benefits under any long-term disability plan maintained by the Company or any Affiliate in which a Participant participates. The foregoing notwithstanding, if the Award is subject to Section 409A of the Code, in no event shall a Disability be deemed to have occurred unless such disability satisfies the requirements of Section 409A of the Code.
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“Effective Date” shall mean October 1, 2022.
“Employee” means any person, including an Officer or Director, employed by the Company or an Affiliate; provided, that, for purposes of determining eligibility to receive Incentive Stock Options, an Employee shall mean an employee of the Company or a parent or subsidiary corporation within the meaning of Section 424 of the Code. Mere service as a Director or payment of a director’s fee by the Company or an Affiliate shall not be sufficient to constitute “employment” by the Company or an Affiliate.
“Exchange Act” means the Securities Exchange Act of 1934, as amended.
“Fair Market Value” means, as of any date, the value of the Common Stock as determined below. If the Common Stock is listed on any established stock exchange or a national market system, including without limitation, the New York Stock Exchange or the Nasdaq Stock Market, the Fair Market Value shall be the closing price of a share of Common Stock (or if no sales were reported the closing price on the date immediately preceding such date) as quoted on such exchange or system on the day of determination, as reported in the Wall Street Journal or similar publication. In the absence of an established market for the Common Stock, the Fair Market Value shall be determined in good faith by the Committee and such determination shall be conclusive and binding on all persons; provided that if an Award is subject to Section 409A of the Code, then the Fair Market Value shall be determined in accordance with Section 409A of the Code.
“Grant Date” means the date on which the Committee adopts a resolution, or takes other appropriate action, expressly granting an Award to a Participant that specifies the key terms and conditions of the Award or, if a later date is set forth in such resolution, then such date as is set forth in such resolution.
“Incentive Stock Option” means an Option intended to qualify as an incentive stock option within the meaning of Section 422 of the Code.
“Incumbent Directors” means individuals who, on the Effective Date, constitute the Board, provided that any individual becoming a Director subsequent to the Effective Date whose election or nomination for election to the Board was approved by a vote of at least two-thirds of the Incumbent Directors then on the Board (either by a specific vote or by approval of the proxy statement of the Company in which such person is named as a nominee for Director without objection to such nomination) shall be an Incumbent Director. No individual initially elected or nominated as a director of the Company as a result of an actual or threatened election contest with respect to Directors or as a result of any other actual or threatened solicitation of proxies by or on behalf of any person other than the Board shall be an Incumbent Director.
“Non-qualified Stock Option” means an Option that by its terms does not qualify or is not intended to qualify as an Incentive Stock Option.
“Officer” means a person who is an officer of the Company within the meaning of Section 16 of the Exchange Act and the rules and regulations promulgated thereunder.
“Option” means an Incentive Stock Option or a Non-qualified Stock Option granted pursuant to the Plan.
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“Optionholder” means a person to whom an Option is granted pursuant to the Plan or, if applicable, such other person who holds an outstanding Option.
“Option Exercise Price” means the price at which a share of Common Stock may be purchased upon the exercise of an Option.
“Participant” means an eligible person to whom an Award is granted pursuant to the Plan or, if applicable, such other person who holds an outstanding Award.
“Performance Compensation Award” means any Award designated by the Committee as a Performance Compensation Award pursuant to Section 7.4 of the Plan.
“Performance Criteria” means the criterion or criteria that the Committee shall select for purposes of establishing the Performance Goal(s) for a Performance Period with respect to any Performance Compensation Award under the Plan. The Performance Criteria that will be used to establish the Performance Goal(s) shall be based on the attainment of specific levels of performance of the Company (or Affiliate, division, business unit or operational unit of the Company) and may include the following: (a) net earnings or net income (before or after taxes); (b) basic or diluted earnings per share (before or after taxes); (c) net revenue or net revenue growth; (d) gross revenue; (e) gross profit or gross profit growth; (f) net operating profit (before or after taxes); (g) return on assets, capital, invested capital, equity, or sales; (h) cash flow (including, but not limited to, operating cash flow, free cash flow, and cash flow return on capital); (i) earnings before or after taxes, interest, depreciation and/or amortization; (j) gross or operating margins; (k) improvements in capital structure; (l) budget and expense management; (m) productivity ratios; (n) economic value added or other value added measurements; (o) share price (including, but not limited to, growth measures and total stockholder return); (p) expense targets; (q) margins; (r) operating efficiency; (s) working capital targets; (t) enterprise value; (u) safety record; (v) completion of acquisitions or business expansion; (w) achieving research and development goals and milestones; (x) achieving product commercialization goals; and (y) other criteria as may be set by the Committee from time to time.
Any one or more of the Performance Criteria may be used on an absolute or relative basis to measure the performance of the Company and/or an Affiliate as a whole or any division, business unit or operational unit of the Company and/or an Affiliate or any combination thereof, as the Committee may deem appropriate, or as compared to the performance of a group of comparable companies, or published or special index that the Committee, in its sole discretion, deems appropriate, or the Committee may select Performance Criterion (o) above as compared to various stock market indices. The Committee also has the authority to provide for accelerated vesting of any Award based on the achievement of Performance Goals pursuant to the Performance Criteria specified in this paragraph, provided that if the Award is subject to Section 409A of the Code, such accelerated vesting does not violate the rules of Code Section 409A. The Committee shall, within the first 90 days of a Performance Period (or, such longer or shorter time period as the Committee shall determine) define in an objective fashion the manner of calculating the Performance Criteria it selects to use for such Performance Period. In the event that applicable tax and/or securities laws change to permit the Committee discretion to alter the governing Performance Criteria without obtaining stockholder approval of such changes, the Committee shall have sole discretion to make such changes without obtaining stockholder approval.
“Performance Formula” means, for a Performance Period, the one or more objective formulas applied against the relevant Performance Goal to determine, with regard to the Performance Compensation Award of a particular Participant, whether all, some portion but less than all, or none of the Performance Compensation Award has been earned for the Performance Period.
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“Performance Goals” means, for a Performance Period, the one or more goals established by the Committee for the Performance Period based upon the Performance Criteria. The Committee is authorized at any time during the first 90 days of a Performance Period (or such longer or shorter time period as the Committee shall determine) or at any time thereafter, in its sole and absolute discretion, to adjust or modify the calculation of a Performance Goal for such Performance Period in order to prevent the dilution or enlargement of the rights of Participants based on the following events: (a) asset write-downs; (b) litigation or claim judgments or settlements; (c) the effect of changes in tax laws, accounting principles, or other laws or regulatory rules affecting reported results; (d) any reorganization and restructuring programs; (e) extraordinary nonrecurring items as described in Accounting Principles Board Opinion No. 30 (or any successor or pronouncement thereto) and/or in management’s discussion and analysis of financial condition and results of operations appearing in the Company’s annual report to stockholders for the applicable year; (f) acquisitions or divestitures; (g) any other specific unusual or nonrecurring events, or objectively determinable category thereof; (h) foreign exchange gains and losses; and (i) a change in the Company’s fiscal year.
“Performance Period” means the one or more periods of time not less than one fiscal quarter in duration, as the Committee may select, over which the attainment of one or more Performance Goals will be measured for the purpose of determining a Participant’s right to and the payment of a Performance Compensation Award.
“Performance Share” means the grant of a right to receive a number of actual shares of Common Stock or share units based upon the performance of the Company during a Performance Period, as determined by the Committee.
“Permitted Transferee” means: (a) a member of the Optionholder’s immediate family (child, stepchild, grandchild, parent, stepparent, grandparent, spouse, former spouse, sibling, niece, nephew, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law, or sister-in-law, including adoptive relationships), any person sharing the Optionholder’s household (other than a tenant or employee), a trust in which these persons have more than 50% of the beneficial interest, a foundation in which these persons (or the Optionholder) control the management of assets, and any other entity in which these persons (or the Optionholder) own more than 50% of the voting interests; (b) third parties designated by the Committee in connection with a program established and approved by the Committee pursuant to which Participants may receive a cash payment or other consideration in consideration for the transfer of a Non-qualified Stock Option; and (c) such other transferees as may be permitted by the Committee in its sole discretion.
“Restricted Award” means any Award granted pursuant to Section 7.2(a).
“Rule 16b-3” means Rule 16b-3 promulgated under the Exchange Act or any successor to Rule 16b-3, as in effect from time to time.
“Securities Act” means the Securities Act of 1933, as amended.
“Stock Appreciation Right” means the right pursuant to an Award granted under Section 7.1 to receive, upon exercise, an amount payable in cash or shares equal to the number of shares subject to the Stock Appreciation Right that is being exercised multiplied by the excess of (a) the Fair Market Value of a share of Common Stock on the date the Award is exercised, over (b) the exercise price specified in the Stock Appreciation Right Award Agreement.
“Ten Percent Stockholder” means a person who owns (or is deemed to own pursuant to Section 424(d) of the Code) stock possessing more than 10% of the total combined voting power of all classes of stock of the Company or of any of its Affiliates.
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3. Administration.
3.1. Authority of Committee. The Plan shall be administered by the Committee or, in the Board’s sole discretion, by the Board. Subject to the terms of the Plan and the provisions of Section 409A of the Code (if applicable), the Committee’s charter and Applicable Laws, and in addition to other express powers and authorization conferred by the Plan, the Committee shall have the authority:
(a) to construe and interpret the Plan and apply its provisions;
(b) to promulgate, amend, and rescind rules and regulations relating to the administration of the Plan;
(c) to authorize any person to execute, on behalf of the Company, any instrument required to carry out the purposes of the Plan;
(d) to delegate its authority to one or more Officers of the Company with respect to Awards that do not involve “insiders” within the meaning of Section 16 of the Exchange Act;
(e) to determine when Awards are to be granted under the Plan and the applicable Grant Date;
(f) from time to time to select, subject to the limitations set forth in this Plan, those Participants to whom Awards shall be granted;
(g) to determine the number of shares of Common Stock to be made subject to each Award;
(h) to determine whether each Option is to be an Incentive Stock Option or a Non-qualified Stock Option;
(i) to prescribe the terms and conditions of each Award, including, without limitation, the exercise price and medium of payment and vesting provisions, and to specify the provisions of the Award Agreement relating to such grant;
(j) to determine the target number of Performance Shares to be granted pursuant to a Performance Share Award, the performance measures that will be used to establish the performance goals, the performance period(s) and the number of Performance Shares earned by a Participant;
(k) to designate an Award (including a cash bonus) as a Performance Compensation Award and to select the Performance Criteria that will be used to establish the Performance Goals;
(l) to amend any outstanding Awards, including for the purpose of modifying the time or manner of vesting, or the term of any outstanding Award; provided, however, that if any such amendment impairs a Participant’s rights or increases a Participant’s obligations under his or her Award or creates or increases a Participant’s federal income tax liability with respect to an Award, such amendment shall also be subject to the Participant’s consent;
(m) to determine the duration and purpose of leaves of absences which may be granted to a Participant without constituting termination of their employment for purposes of the Plan, which periods shall be no shorter than the periods generally applicable to Employees under the Company’s employment policies;
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(n) to make decisions with respect to outstanding Awards that may become necessary upon a change in corporate control or an event that triggers anti-dilution adjustments;
(o) to interpret, administer, reconcile any inconsistency in, correct any defect in and/or supply any omission in the Plan and any instrument or agreement relating to, or Award granted under, the Plan; and
(p) to exercise discretion to make any and all other determinations which it determines to be necessary or advisable for the administration of the Plan.
The Committee also may modify the purchase price or the exercise price of any outstanding Award, provided that if the modification effects a repricing, stockholder approval shall be required before the repricing is effective.
3.2. Committee Decisions Final. All decisions made by the Committee pursuant to the provisions of the Plan shall be final and binding on the Company and the Participants, unless such decisions are determined by a court having jurisdiction to be arbitrary and capricious.
3.3. Delegation. The Committee may delegate administration of the Plan to a subcommittee or subcommittees of one or more members of the Committee, and the term “Committee” shall apply to any person or persons to whom such authority has been delegated. The Committee shall have the power to delegate to a subcommittee any of the administrative powers the Committee is authorized to exercise (and references in this Plan to the Board or the Committee shall thereafter be to the committee or subcommittee), subject, however, to such resolutions, not inconsistent with the provisions of the Plan, as may be adopted from time to time by the Board. The Board may abolish the Committee at any time and re-vest in the Board the administration of the Plan. The members of the Committee shall be appointed by and serve at the pleasure of the Board. From time to time, the Board may increase or decrease the size of the Committee, add additional members to, remove members (with or without cause) from, appoint new members in substitution therefor, and fill vacancies, however caused, in the Committee. The Committee shall act pursuant to a vote of the majority of its members or, in the case of a Committee comprised of only two members, the unanimous consent of its members, whether present or not, or by the written consent of the majority of its members and minutes shall be kept of all of its meetings and copies thereof shall be provided to the Board. Subject to the limitations prescribed by the Plan and the Board, the Committee may establish and follow such rules and regulations for the conduct of its business as it may determine to be advisable.
3.4. Committee Composition. Except as otherwise determined by the Board, the Committee shall consist solely of two or more Non-Employee Directors. The Board shall have discretion to determine whether or not it intends to comply with the exemption requirements of Rule 16b-3 to the extent applicable to the Company. However, if the Board intends to satisfy such exemption requirements, with respect to Awards to any insider subject to Section 16 of the Exchange Act, the Committee shall be a compensation committee of the Board that at all times consists solely of two or more Non-Employee Directors. Within the scope of such authority, the Board or the Committee may delegate to a committee of one or more members of the Board who are not Non-Employee Directors the authority to grant Awards to eligible persons who are not then subject to Section 16 of the Exchange Act. Nothing herein shall create an inference that an Award is not validly granted under the Plan in the event Awards are granted under the Plan by a compensation committee of the Board that does not at all times consist solely of two or more Non-Employee Directors.
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3.5. Indemnification. In addition to such other rights of indemnification as they may have as Directors or members of the Committee, and to the extent allowed by Applicable Laws, the Committee shall be indemnified by the Company against the reasonable expenses, including attorney’s fees, actually incurred in connection with any action, suit or proceeding or in connection with any appeal therein, to which the Committee may be party by reason of any action taken or failure to act under or in connection with the Plan or any Award granted under the Plan, and against all amounts paid by the Committee in settlement thereof (provided, however, that the settlement has been approved by the Company, which approval shall not be unreasonably withheld) or paid by the Committee in satisfaction of a judgment in any such action, suit or proceeding, except in relation to matters as to which it shall be adjudged in such action, suit or proceeding that such Committee did not act in good faith and in a manner which such person reasonably believed to be in the best interests of the Company, or in the case of a criminal proceeding, had no reason to believe that the conduct complained of was unlawful; provided, however, that within 60 days after institution of any such action, suit or proceeding, such Committee shall, in writing, offer the Company the opportunity at its own expense to handle and defend such action, suit or proceeding.
4. Shares Subject to the Plan.
4.1. Subject to adjustment in accordance with Section 11, a total of 2,250,000 shares of Common Stock shall be available for the grant of Awards under the Plan. Shares of Common Stock granted in connection with all Awards under the Plan shall be counted against this limit as one (1) share of Common Stock for every one (1) share of Common Stock granted in connection with such Award. During the terms of the Awards, the Company shall keep available at all times the number of shares of Common Stock required to satisfy such Awards.
4.2. Shares of Common Stock available for distribution under the Plan may consist, in whole or in part, of authorized and unissued shares, treasury shares or shares reacquired by the Company in any manner.
4.3. Any shares of Common Stock subject to an Award that is canceled, forfeited or expires prior to exercise or realization, either in full or in part, shall again become available for issuance under the Plan. Any shares of Common Stock that again become available for future grants pursuant to this Section 4.3 shall be added back as one (1) share. Notwithstanding anything to the contrary contained herein: shares subject to an Award under the Plan shall not again be made available for issuance or delivery under the Plan if such shares are (a) shares tendered in payment of an Option, (b) shares delivered or withheld by the Company to satisfy any tax withholding obligation, or (c) shares covered by a stock-settled Stock Appreciation Right or other Awards that were not issued upon the settlement of the Award.
5. Eligibility.
5.1. Eligibility for Specific Awards. Incentive Stock Options may be granted only to Employees. Awards other than Incentive Stock Options may be granted to Employees, Consultants and Directors and those individuals whom the Committee determines are reasonably expected to become Employees, Consultants and Directors following the Grant Date.
5.2. Ten Percent Stockholders. A Ten Percent Stockholder shall not be granted an Incentive Stock Option unless the Option Exercise Price is at least 110% of the Fair Market Value of the Common Stock at the Grant Date and the Option is not exercisable after the expiration of five years from the Grant Date.
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6. Option Provisions. Each Option granted under the Plan shall be evidenced by an Award Agreement. Each Option so granted shall be subject to the conditions set forth in this Section 6, and to such other conditions not inconsistent with the Plan as may be reflected in the applicable Award Agreement. All Options shall be separately designated Incentive Stock Options or Non-qualified Stock Options at the time of grant, and, if certificates are issued, a separate certificate or certificates will be issued for shares of Common Stock purchased on exercise of each type of Option. Notwithstanding the foregoing, the Company shall have no liability to any Participant or any other person if an Option designated as an Incentive Stock Option fails to qualify as such at any time or if an Option is determined to constitute “nonqualified deferred compensation” within the meaning of Section 409A of the Code and the terms of such Option do not satisfy the requirements of Section 409A of the Code. The provisions of separate Options need not be identical, but each Option shall include (through incorporation of provisions hereof by reference in the Option or otherwise) the substance of each of the following provisions:
6.1. Term. Subject to the provisions of Section 5.2 regarding Ten Percent Stockholders, no Incentive Stock Option shall be exercisable after the expiration of 10 years from the Grant Date. The term of a Non-qualified Stock Option granted under the Plan shall be determined by the Committee; provided, however, no Non-qualified Stock Option shall be exercisable after the expiration of 10 years from the Grant Date.
6.2. Exercise Price of An Incentive Stock Option. Subject to the provisions of Section 5.2 regarding Ten Percent Stockholders, the Option Exercise Price of each Incentive Stock Option shall be not less than 100% of the Fair Market Value of the Common Stock subject to the Option on the Grant Date. Notwithstanding the foregoing, an Incentive Stock Option may be granted with an Option Exercise Price lower than that set forth in the preceding sentence if such Option is granted pursuant to an assumption or substitution for another option in a manner satisfying the provisions of Section 424(a) of the Code.
6.3. Exercise Price of a Non-qualified Stock Option. The Option Exercise Price of each Non-qualified Stock Option shall be not less than 100% of the Fair Market Value of the Common Stock subject to the Option on the Grant Date. Notwithstanding the foregoing, a Non-qualified Stock Option may be granted with an Option Exercise Price lower than that set forth in the preceding sentence if such Option is granted pursuant to an assumption or substitution for another option in a manner satisfying the provisions of Section 409A of the Code.
6.4. Consideration. The Option Exercise Price of Common Stock acquired pursuant to an Option shall be paid, to the extent permitted by applicable statutes and regulations, either (a) in cash or by certified or bank check at the time the Option is exercised or (b) in the discretion of the Committee, upon such terms as the Committee shall approve, the Option Exercise Price may be paid: (i) by delivery to the Company of other Common Stock, duly endorsed for transfer to the Company, with a Fair Market Value on the date of delivery equal to the Option Exercise Price (or portion thereof) due for the number of shares being acquired, or by means of attestation whereby the Participant identifies for delivery specific shares of Common Stock that have an aggregate Fair Market Value on the date of attestation equal to the Option Exercise Price (or portion thereof) and receives a number of shares of Common Stock equal to the difference between the number of shares thereby purchased and the number of identified attestation shares of Common Stock (a “Stock for Stock Exchange”); (ii) a “cashless” exercise program established with a broker; (iii) by reduction in the number of shares of Common Stock otherwise deliverable upon exercise of such Option with a Fair Market Value equal to the aggregate Option Exercise Price at the time of exercise; (iv) any combination of the foregoing methods; or (v) in any other form of legal consideration that may be acceptable to the Committee. Unless otherwise specifically provided in the Option, the exercise price of Common Stock acquired pursuant to an Option that is paid by delivery (or attestation) to the Company of other Common Stock acquired, directly or indirectly from the Company, shall be paid only by shares of the Common Stock of the Company that have been held for more than six months (or such longer or shorter period of time required to avoid a charge to earnings for financial accounting purposes). Notwithstanding the foregoing, during any period for which the Common Stock is publicly traded (i.e., the Common Stock is listed on any established stock exchange or a national market system) an exercise by a Director or Officer that involves or may involve a direct or indirect extension of credit or arrangement of an extension of credit by the Company, directly or indirectly, in violation of Section 402(a) of the Sarbanes-Oxley Act of 2002 shall be prohibited with respect to any Award under this Plan.
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6.5. Transferability of An Incentive Stock Option. An Incentive Stock Option shall not be transferable except by will or by the laws of descent and distribution and shall be exercisable during the lifetime of the Optionholder only by the Optionholder. Notwithstanding the foregoing, the Optionholder may, by delivering written notice to the Company, in a form satisfactory to the Company, designate a third party who, in the event of the death of the Optionholder, shall thereafter be entitled to exercise the Option.
6.6. Transferability of a Non-qualified Stock Option. A Non-qualified Stock Option may, in the sole discretion of the Committee, be transferable to a Permitted Transferee, upon written approval by the Committee to the extent provided in the Award Agreement. If the Non-qualified Stock Option does not provide for transferability, then the Non-qualified Stock Option shall not be transferable except by will or by the laws of descent and distribution and shall be exercisable during the lifetime of the Optionholder only by the Optionholder. Notwithstanding the foregoing, the Optionholder may, by delivering written notice to the Company, in a form satisfactory to the Company, designate a third party who, in the event of the death of the Optionholder, shall thereafter be entitled to exercise the Option.
6.7. Vesting of Options. Each Option may, but need not, vest and therefore become exercisable in periodic installments that may, but need not, be equal. The Option may be subject to such other terms and conditions on the time or times when it may be exercised (which may be based on performance or other criteria) as the Committee may deem appropriate. The vesting provisions of individual Options may vary. No Option may be exercised for a fraction of a share of Common Stock. The Committee may, but shall not be required to, provide for an acceleration of vesting and exercisability in the terms of any Award Agreement upon the occurrence of a specified event, provided that if such Award is subject to Section 409A of the Code, such acceleration of vesting and exercisability complies with the provisions of Section 409A of the Code.
6.8. Termination of Continuous Service. Unless otherwise provided in an Award Agreement or in an employment agreement the terms of which have been approved by the Committee, in the event an Optionholder’s Continuous Service terminates (other than upon the Optionholder’s death or Disability), the Optionholder may exercise his or her Option (to the extent that the Optionholder was entitled to exercise such Option as of the date of termination) but only within such period of time ending on the earlier of (a) the date three months following the termination of the Optionholder’s Continuous Service or (b) the expiration of the term of the Option as set forth in the Award Agreement; provided that, if the termination of Continuous Service is by the Company for Cause, all outstanding Options (whether or not vested) shall immediately terminate and cease to be exercisable. If, after termination, the Optionholder does not exercise his or her Option within the time specified in the Award Agreement, the Option shall terminate.
6.9. Extension of Termination Date. An Optionholder’s Award Agreement may also provide that if the exercise of the Option following the termination of the Optionholder’s Continuous Service for any reason would be prohibited at any time because the issuance of shares of Common Stock would violate the registration requirements under the Securities Act or any other state or federal securities law or the rules of any securities exchange or interdealer quotation system, then the Option shall terminate on the earlier of (a) the expiration of the term of the Option in accordance with Section 6.1 or (b) the expiration of a period after termination of the Participant’s Continuous Service that is three months after the end of the period during which the exercise of the Option would be in violation of such registration or other securities law requirements.
6.10. Disability of Optionholder. Unless otherwise provided in an Award Agreement, in the event that an Optionholder’s Continuous Service terminates as a result of the Optionholder’s Disability, the Optionholder may exercise his or her Option (to the extent that the Optionholder was entitled to exercise such Option as of the date of termination), but only within such period of time ending on the earlier of (a) the date 12 months following such termination or (b) the expiration of the term of the Option as set forth in the Award Agreement. If, after termination, the Optionholder does not exercise his or her Option within the time specified herein or in the Award Agreement, the Option shall terminate.
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6.11. Death of Optionholder. Unless otherwise provided in an Award Agreement, in the event an Optionholder’s Continuous Service terminates as a result of the Optionholder’s death, then the Option may be exercised (to the extent the Optionholder was entitled to exercise such Option as of the date of death) by the Optionholder’s estate, by a person who acquired the right to exercise the Option by bequest or inheritance or by a person designated to exercise the Option upon the Optionholder’s death, but only within the period ending on the earlier of (a) the date 12 months following the date of death or (b) the expiration of the term of such Option as set forth in the Award Agreement. If, after the Optionholder’s death, the Option is not exercised within the time specified herein or in the Award Agreement, the Option shall terminate.
6.12. Incentive Stock Option $100,000 Limitation. To the extent that the aggregate Fair Market Value (determined at the time of grant) of Common Stock with respect to which Incentive Stock Options are exercisable for the first time by any Optionholder during any calendar year (under all plans of the Company and its Affiliates) exceeds $100,000, the Options or portions thereof which exceed such limit (according to the order in which they were granted) shall be treated as Non-qualified Stock Options.
7. Provisions of Awards Other Than Options.
7.1. Stock Appreciation Rights.
(a) General. Each Stock Appreciation Right granted under the Plan shall be evidenced by an Award Agreement. Each Stock Appreciation Right so granted shall be subject to the conditions set forth in this Section 7.1, and to such other conditions not inconsistent with the Plan as may be reflected in the applicable Award Agreement. Stock Appreciation Rights may be granted alone (“Free Standing Rights”) or in tandem with an Option granted under the Plan (“Related Rights”). All such grants shall be exempt from, or comply with, the provisions of Section 409A of the Code.
(b) Grant Requirements. Any Related Right that relates to a Non-qualified Stock Option may be granted at the same time the Option is granted or at any time thereafter but before the exercise or expiration of the Option. Any Related Right that relates to an Incentive Stock Option must be granted at the same time the Incentive Stock Option is granted.
(c) Term of Stock Appreciation Rights. The term of a Stock Appreciation Right granted under the Plan shall be determined by the Committee; provided, however, no Stock Appreciation Right shall be exercisable later than the tenth anniversary of the Grant Date.
(d) Vesting of Stock Appreciation Rights. Each Stock Appreciation Right may, but need not, vest and therefore become exercisable in periodic installments that may, but need not, be equal. The Stock Appreciation Right may be subject to such other terms and conditions on the time or times when it may be exercised as the Committee may deem appropriate. The vesting provisions of individual Stock Appreciation Rights may vary. No Stock Appreciation Right may be exercised for a fraction of a share of Common Stock. The Committee may, but shall not be required to, provide for an acceleration of vesting and exercisability in the terms of any Stock Appreciation Right upon the occurrence of a specified event, provided that if such Award is subject to Section 409A of the Code, such acceleration of vesting and exercisability complies with the provisions of Section 409A of the Code.
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(e) Exercise and Payment. Upon exercise of a Stock Appreciation Right, the holder shall be entitled to receive from the Company an amount equal to the number of shares of Common Stock subject to the Stock Appreciation Right that is being exercised multiplied by the excess of (i) the Fair Market Value of a share of Common Stock on the date the Award is exercised, over (ii) the exercise price specified in the Stock Appreciation Right or related Option. Payment with respect to the exercise of a Stock Appreciation Right shall be made on the date of exercise. Payment shall be made in the form of shares of Common Stock (with or without restrictions as to substantial risk of forfeiture and transferability, as determined by the Committee in its sole discretion), cash or a combination thereof, as determined by the Committee.
(f) Exercise Price. The exercise price of a Free Standing Stock Appreciation Right shall be determined by the Committee, but shall not be less than 100% of the Fair Market Value of one share of Common Stock on the Grant Date of such Stock Appreciation Right. A Related Right granted simultaneously with or subsequent to the grant of an Option and in conjunction therewith or in the alternative thereto shall have the same exercise price as the related Option, shall be transferable only upon the same terms and conditions as the related Option, and shall be exercisable only to the same extent as the related Option; provided, however, that a Stock Appreciation Right, by its terms, shall be exercisable only when the Fair Market Value per share of Common Stock subject to the Stock Appreciation Right and related Option exceeds the exercise price per share thereof and no Stock Appreciation Rights may be granted in tandem with an Option unless the Committee determines that the requirements of Section 7.1(b) are satisfied.
(g) Reduction in the Underlying Option Shares. Upon any exercise of a Related Right, the number of shares of Common Stock for which any related Option shall be exercisable shall be reduced by the number of shares for which the Stock Appreciation Right has been exercised. The number of shares of Common Stock for which a Related Right shall be exercisable shall be reduced upon any exercise of any related Option by the number of shares of Common Stock for which such Option has been exercised.
7.2. Restricted Awards.
(a) General. A Restricted Award is an Award of actual shares of Common Stock (“Restricted Stock”) or hypothetical Common Stock units (“Restricted Stock Units”) having a value equal to the Fair Market Value of an identical number of shares of Common Stock, which may, but need not, provide that such Restricted Award may not be sold, assigned, transferred or otherwise disposed of, pledged or hypothecated as collateral for a loan or as security for the performance of any obligation or for any other purpose for such period (the “Restricted Period”) as the Committee shall determine. Each Restricted Award granted under the Plan shall be evidenced by an Award Agreement. Each Restricted Award so granted shall be subject to the conditions set forth in this Section 7.2, and to such other conditions not inconsistent with the Plan as may be reflected in the applicable Award Agreement.
(b) Restricted Stock and Restricted Stock Units.
(i) Each Participant granted Restricted Stock shall execute and deliver to the Company an Award Agreement with respect to the Restricted Stock setting forth the restrictions and other terms and conditions applicable to such Restricted Stock. If the Committee determines that the Restricted Stock shall be held by the Company or in escrow rather than delivered to the Participant pending the release of the applicable restrictions, the Committee may require the Participant to additionally execute and deliver to the Company (A) an escrow agreement satisfactory to the Committee, if applicable and (B) the appropriate blank stock power with respect to the Restricted Stock covered by such agreement. If a Participant fails to execute an agreement evidencing an Award of Restricted Stock and, if applicable, an escrow agreement and stock power, the Award shall be null and void. Subject to the restrictions set forth in the Award, the Participant generally shall have the rights and privileges of a stockholder as to such Restricted Stock, including the right to vote such Restricted Stock and the right to receive dividends; provided that, any cash dividends and stock dividends with respect to the Restricted Stock shall similarly be held in escrow by the Company for the Participant’s account, and interest may be credited on the amount of the cash dividends so placed in escrow at a rate and subject to such terms as determined by the Committee. The cash dividends or stock dividends so placed in escrow by the Committee and attributable to any particular share of Restricted Stock (and earnings thereon, if applicable) shall be distributed to the Participant in cash or, at the discretion of the Committee, in shares of Common Stock having a Fair Market Value equal to the amount of such dividends, if applicable, upon the release of restrictions on such share and, if such share is forfeited, the Participant shall have no right to such dividends.
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(ii) The terms and conditions of a grant of Restricted Stock Units shall be reflected in an Award Agreement. No shares of Common Stock shall be issued at the time a Restricted Stock Unit is granted, and the Company will not be required to set aside a fund for the payment of any such Award. A Participant shall have no voting rights with respect to any Restricted Stock Units granted hereunder. The Committee may also grant Restricted Stock Units with a deferral feature, if permitted in Section 409A of the Code, whereby settlement is deferred beyond the vesting date until the occurrence of a future payment date or event set forth in an Award Agreement (“Deferred Stock Units”). At the discretion of the Committee, each Restricted Stock Unit or Deferred Stock Unit (representing one share of Common Stock) may be credited with cash and stock dividends paid by the Company in respect of one share of Common Stock (“Dividend Equivalents”). Dividend Equivalents shall not be paid but shall be credited to the Participant’s account, and interest may be credited on the amount of cash Dividend Equivalents credited to the Participant’s account at a rate and subject to such terms as determined by the Committee. Dividend Equivalents credited to a Participant’s account and attributable to any particular Restricted Stock Unit or Deferred Stock Unit (and earnings thereon, if applicable) shall be distributed in cash or, at the discretion of the Committee, in shares of Common Stock having a Fair Market Value equal to the amount of such Dividend Equivalents and earnings, if applicable, to the Participant upon settlement of such Restricted Stock Unit or Deferred Stock Unit and, if such Restricted Stock Unit or Deferred Stock Unit is forfeited, the Participant shall have no right to such Dividend Equivalents.
(c) Restrictions.
(i) Restricted Stock awarded to a Participant shall be subject to the following restrictions until the expiration of the Restricted Period, and to such other terms and conditions as may be set forth in the applicable Award Agreement: (A) if an escrow arrangement is used, the Participant shall not be entitled to delivery of the stock certificate; (B) the shares shall be subject to the restrictions on transferability set forth in the Award Agreement; (C) the shares shall be subject to forfeiture to the extent provided in the applicable Award Agreement; and (D) to the extent such shares are forfeited, the stock certificates shall be returned to the Company, and all rights of the Participant to such shares and as a stockholder with respect to such shares shall terminate without further obligation on the part of the Company.
(ii) Restricted Stock Units and Deferred Stock Units awarded to any Participant shall be subject to (A) forfeiture until the expiration of the Restricted Period, and satisfaction of any applicable Performance Goals during such period, to the extent provided in the applicable Award Agreement, and to the extent such Restricted Stock Units or Deferred Stock Units are forfeited, all rights of the Participant to such Restricted Stock Units or Deferred Stock Units shall terminate without further obligation on the part of the Company and (B) such other terms and conditions as may be set forth in the applicable Award Agreement.
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(iii) The Committee shall have the authority to remove any or all of the restrictions on the Restricted Stock, Restricted Stock Units and Deferred Stock Units whenever it may determine that, by reason of changes in Applicable Laws or other changes in circumstances arising after the date the Restricted Stock or Restricted Stock Units or Deferred Stock Units are granted, such action is appropriate.
(d) Restricted Period. With respect to Restricted Awards, the Restricted Period shall commence on the Grant Date and end at the time or times set forth on a schedule established by the Committee in the applicable Award Agreement. No Restricted Award may be granted or settled for a fraction of a share of Common Stock. The Committee may, but shall not be required to, provide for an acceleration of vesting in the terms of any Award Agreement upon the occurrence of a specified event, provided that if such Award is subject to Section 409A of the Code, such acceleration is consistent with the provisions of Section 409A of the Code.
(e) Delivery of Restricted Stock and Settlement of Restricted Stock Units. Upon the expiration of the Restricted Period with respect to any shares of Restricted Stock, the restrictions set forth in Section 7.2(c) and the applicable Award Agreement shall be of no further force or effect with respect to such shares, except as set forth in the applicable Award Agreement. If an escrow arrangement is used, upon such expiration, the Company shall deliver to the Participant, or his or her beneficiary, without charge, the stock certificate evidencing the shares of Restricted Stock which have not then been forfeited and with respect to which the Restricted Period has expired (to the nearest full share) and any cash dividends or stock dividends credited to the Participant’s account with respect to such Restricted Stock and the interest thereon, if any. Upon the expiration of the Restricted Period with respect to any outstanding Restricted Stock Units, or at the expiration of the deferral period with respect to any outstanding Deferred Stock Units, the Company shall deliver to the Participant, or his or her beneficiary, without charge, one share of Common Stock for each such outstanding vested Restricted Stock Unit or Deferred Stock Unit (“Vested Unit”) and cash equal to any Dividend Equivalents credited with respect to each such Vested Unit in accordance with Section 7.2(b)(ii) hereof and the interest thereon or, at the discretion of the Committee, in shares of Common Stock having a Fair Market Value equal to such Dividend Equivalents and the interest thereon, if any; provided, however, that, if explicitly provided in the applicable Award Agreement, the Committee may, in its sole discretion, elect to pay cash or part cash and part Common Stock in lieu of delivering only shares of Common Stock for Vested Units. If a cash payment is made in lieu of delivering shares of Common Stock, the amount of such payment shall be equal to the Fair Market Value of the Common Stock as of the date on which the Restricted Period lapsed in the case of Restricted Stock Units, or the delivery date in the case of Deferred Stock Units, with respect to each Vested Unit.
(f) Stock Restrictions. Each certificate representing Restricted Stock awarded under the Plan shall bear a legend in such form as the Company deems appropriate.
7.3. Performance Share Awards.
(a) Grant of Performance Share Awards. Each Performance Share Award granted under the Plan shall be evidenced by an Award Agreement. Each Performance Share Award so granted shall be subject to the conditions set forth in this Section 7.3, and to such other conditions not inconsistent with the Plan as may be reflected in the applicable Award Agreement. The Committee shall have the discretion to determine: (i) the number of shares of Common Stock or stock-denominated units subject to a Performance Share Award granted to any Participant; (ii) the performance period applicable to any Award; (iii) the conditions that must be satisfied for a Participant to earn an Award; and (iv) the other terms, conditions and restrictions of the Award.
(b) Earning Performance Share Awards. The number of Performance Shares earned by a Participant will depend on the extent to which the performance goals established by the Committee are attained within the applicable Performance Period, as determined by the Committee. No payout shall be made with respect to any Performance Share Award except upon written certification by the Committee that the minimum threshold performance goal(s) have been achieved.
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7.4. Performance Compensation Awards.
(a) General. The Committee shall have the authority, at the time of grant of any Award described in this Plan (other than Options and Stock Appreciation Rights granted with an exercise price equal to or greater than the Fair Market Value per share of Common Stock on the Grant Date), to designate such Award as a Performance Compensation Award. In addition, the Committee shall have the authority to make an Award of a cash bonus to any Participant and designate such Award as a Performance Compensation Award.
(b) Eligibility. The Committee will, in its sole discretion, designate within the first 90 days of a Performance Period (or such shorter or longer time period as the Committee shall determine) which Participants will be eligible to receive Performance Compensation Awards in respect of such Performance Period. However, designation of a Participant eligible to receive an Award hereunder for a Performance Period shall not in any manner entitle the Participant to receive payment in respect of any Performance Compensation Award for such Performance Period. The determination as to whether or not such Participant becomes entitled to payment in respect of any Performance Compensation Award shall be decided solely in accordance with the provisions of this Section 7.4. Moreover, designation of a Participant eligible to receive an Award hereunder for a particular Performance Period shall not require designation of such Participant eligible to receive an Award hereunder in any subsequent Performance Period and designation of one person as a Participant eligible to receive an Award hereunder shall not require designation of any other person as a Participant eligible to receive an Award hereunder in such period or in any other period.
(c) Discretion of Committee with Respect to Performance Compensation Awards. With regard to a particular Performance Period, the Committee shall have full discretion to select the length of such Performance Period (provided any such Performance Period shall be not less than one fiscal quarter in duration), the type(s) of Performance Compensation Awards to be issued, the Performance Criteria that will be used to establish the Performance Goal(s), the kind(s) and/or level(s) of the Performance Goal(s) that is (are) to apply to the Company and the Performance Formula. Within the first 90 days of a Performance Period (or such shorter or longer time period as the Committee shall determine), the Committee shall, with regard to the Performance Compensation Awards to be issued for such Performance Period, exercise its discretion with respect to each of the matters enumerated in the immediately preceding sentence of this Section 7.4(c) and record the same in writing.
(d) Payment of Performance Compensation Awards.
(i) Condition to Receipt of Payment. Unless otherwise provided in the applicable Award Agreement, a Participant must be employed by the Company on the last day of a Performance Period to be eligible for payment in respect of a Performance Compensation Award for such Performance Period.
(ii) Limitation. A Participant shall be eligible to receive payment in respect of a Performance Compensation Award only to the extent that: (A) the Performance Goals for such period are achieved; and (B) the Performance Formula as applied against such Performance Goals determines that all or some portion of such Participant’s Performance Compensation Award has been earned for the Performance Period.
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(iii) Certification. Following the completion of a Performance Period, the Committee shall review and certify in writing whether, and to what extent, the Performance Goals for the Performance Period have been achieved and, if so, calculate and certify in writing the amount of the Performance Compensation Awards earned for the period based upon the Performance Formula. The Committee shall then determine the actual size of each Participant’s Performance Compensation Award for the Performance Period.
(iv) Use of Discretion. The Committee shall not have the discretion to grant or provide payment in respect of Performance Compensation Awards for a Performance Period if the Performance Goals for such Performance Period have not been attained.
(v) Timing of Award Payments. Performance Compensation Awards granted for a Performance Period shall be paid to Participants as soon as administratively practicable following completion of the certifications required by this Section 7.4 but in no event later than 2 1/2 months following the end of the fiscal year during which the Performance Period is completed.
8. Securities Law Compliance. Each Award Agreement shall provide that no shares of Common Stock shall be purchased or sold thereunder unless and until (a) any then applicable requirements of state or federal laws and regulatory agencies have been fully complied with to the satisfaction of the Company and its counsel and (b) if required to do so by the Company, the Participant has executed and delivered to the Company a letter of investment intent in such form and containing such provisions as the Committee may require. The Company shall use reasonable efforts to seek to obtain from each regulatory commission or agency having jurisdiction over the Plan such authority as may be required to grant Awards and to issue and sell shares of Common Stock upon exercise of the Awards; provided, however, that this undertaking shall not require the Company to register under the Securities Act the Plan, any Award or any Common Stock issued or issuable pursuant to any such Award. If, after reasonable efforts, the Company is unable to obtain from any such regulatory commission or agency the authority which counsel for the Company deems necessary for the lawful issuance and sale of Common Stock under the Plan, the Company shall be relieved from any liability for failure to issue and sell Common Stock upon exercise of such Awards unless and until such authority is obtained.
9. Use of Proceeds from Stock. Proceeds from the sale of Common Stock pursuant to Awards, or upon exercise thereof, shall constitute general funds of the Company.
10. Miscellaneous.
10.1. Acceleration of Exercisability and Vesting. The Committee shall have the power to accelerate the time at which an Award may first be exercised or the time during which an Award or any part thereof will vest in accordance with the Plan, notwithstanding the provisions in the Award stating the time at which it may first be exercised or the time during which it will vest, provided that if such Award is subject to Section 409A of the Code, any such acceleration or exercisability or vesting is in compliance with the provisions of Section 409A of the Code.
10.2. Stockholder Rights. Except as provided in the Plan or an Award Agreement, no Participant shall be deemed to be the holder of, or to have any of the rights of a holder with respect to, any shares of Common Stock subject to such Award unless and until such Participant has satisfied all requirements for exercise of the Award pursuant to its terms and no adjustment shall be made for dividends (ordinary or extraordinary, whether in cash, securities or other property) or distributions of other rights for which the record date is prior to the date such Common Stock certificate is issued, except as provided in Section 11 hereof.
10.3. No Employment or Other Service Rights. Nothing in the Plan or any instrument executed or Award granted pursuant thereto shall confer upon any Participant any right to continue to serve the Company or an Affiliate in the capacity in effect at the time the Award was granted or shall affect the right of the Company or an Affiliate to terminate (a) the employment of an Employee with or without notice and with or without Cause or (b) the service of a Director pursuant to the By-laws of the Company or an Affiliate, and any applicable provisions of the corporate law of the state in which the Company or the Affiliate is incorporated, as the case may be.
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10.4. Transfer; Approved Leave of Absence. For purposes of the Plan, no termination of employment by an Employee shall be deemed to result from either (a) a transfer of employment to the Company from an Affiliate or from the Company to an Affiliate, or from one Affiliate to another, or (b) an approved leave of absence for military service or sickness, or for any other purpose approved by the Company, if the Employee’s right to reemployment is guaranteed either by a statute or by contract or under the policy pursuant to which the leave of absence was granted or if the Committee otherwise so provides in writing, in either case, except to the extent inconsistent with Section 409A of the Code if the applicable Award is subject thereto.
10.5. Withholding Obligations. To the extent provided by the terms of an Award Agreement and subject to the discretion of the Committee, the Participant may satisfy any federal, state or local tax withholding obligation relating to the exercise or acquisition of Common Stock under an Award by any of the following means (in addition to the Company’s right to withhold from any compensation paid to the Participant by the Company) or by a combination of such means: (a) tendering a cash payment; (b) authorizing the Company to withhold shares of Common Stock from the shares of Common Stock otherwise issuable to the Participant as a result of the exercise or acquisition of Common Stock under the Award, provided, however, that no shares of Common Stock are withheld with a value exceeding the minimum amount of tax required to be withheld by law; or (c) delivering to the Company previously owned and unencumbered shares of Common Stock of the Company.
11. Adjustments Upon Changes in Stock. In the event of changes in the outstanding Common Stock or in the capital structure of the Company by reason of any stock or extraordinary cash dividend, stock split, reverse stock split, an extraordinary corporate transaction such as any recapitalization, reorganization, merger, consolidation, combination, exchange, or other relevant change in capitalization occurring after the Grant Date of any Award, Awards granted under the Plan and any Award Agreements, the exercise price of Options and Stock Appreciation Rights, the maximum number of shares of Common Stock subject to all Awards stated in Section 4 and the maximum number of shares of Common Stock with respect to which any one person may be granted Awards during any period stated in Section 4 will be equitably adjusted or substituted, as to the number, price or kind of a share of Common Stock or other consideration subject to such Awards to the extent necessary to preserve the economic intent of such Award. In the case of adjustments made pursuant to this Section 11, unless the Committee specifically determines that such adjustment is in the best interests of the Company or its Affiliates, the Committee shall, in the case of Incentive Stock Options, ensure that any adjustments under this Section 11 will not constitute a modification, extension or renewal of the Incentive Stock Options within the meaning of Section 424(h)(3) of the Code and in the case of Non-qualified Stock Options, ensure that any adjustments under this Section 11 will not constitute a modification of such Non-qualified Stock Options within the meaning of Section 409A of the Code. Any adjustments made under this Section 11 shall be made in a manner which does not adversely affect the exemption provided pursuant to Rule 16b-3 under the Exchange Act. The Company shall give each Participant notice of an adjustment hereunder and, upon notice, such adjustment shall be conclusive and binding for all purposes.
12. Effect of Change in Control.
12.1. In the discretion of the Board and the Committee, any Award Agreement may provide, or the Board or the Committee may provide by amendment of any Award Agreement or otherwise, notwithstanding any provision of the Plan to the contrary, that in the event of a Change in Control, Options and/or Stock Appreciation Rights shall become immediately exercisable with respect to all or a specified portion of the shares subject to such Options or Stock Appreciation Rights, and/or the Restricted Period shall expire immediately with respect to all or a specified portion of the shares of Restricted Stock or Restricted Stock Units.
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12.2. In addition, in the event of a Change in Control, the Committee may in its discretion and upon at least 10 days’ advance notice to the affected persons, cancel any outstanding Awards and pay to the holders thereof, in cash or stock, or any combination thereof, the value of such Awards based upon the price per share of Common Stock received or to be received by other stockholders of the Company in the event. In the case of any Option or Stock Appreciation Right with an exercise price that equals or exceeds the price paid for a share of Common Stock in connection with the Change in Control, the Committee may cancel the Option or Stock Appreciation Right without the payment of consideration therefor.
12.3. The obligations of the Company under the Plan shall be binding upon any successor corporation or organization resulting from the merger, consolidation or other reorganization of the Company, or upon any successor corporation or organization succeeding to all or substantially all of the assets and business of the Company and its Subsidiaries, taken as a whole.
13. Amendment of the Plan and Awards.
13.1. Amendment of Plan. The Board may amend, alter, suspend, discontinue, or terminate this Plan or any portion thereof at any time; provided that (a) no amendment to the persons eligible to receive Awards set forth in Section 1.2 or to the maximum number of shares as to which Awards may be granted set forth in Section 4.1 (except for adjustments pursuant to Section 11), shall be made without stockholder approval, and (b) no such amendment, alteration, suspension, discontinuation or termination shall be made without stockholder approval if such approval is necessary to comply with any Applicable Laws (including, without limitation, as necessary to comply with any tax or regulatory requirement applicable to this Plan or to prevent the Company from being denied a tax deduction under Section 162(m) of the Code); and provided further, that any such amendment, alteration, suspension, discontinuance or termination that would materially and adversely affect the rights of any Participant or any holder or beneficiary of any Award theretofore granted shall not to that extent be effective without the prior written consent of the affected Participant, holder or beneficiary.
13.2. Contemplated Amendments. It is expressly contemplated that the Board may amend the Plan in any respect the Board deems necessary or advisable to provide eligible Employees, Consultants and Directors with the maximum benefits provided or to be provided under the provisions of the Code and the regulations promulgated thereunder relating to Incentive Stock Options or to the nonqualified deferred compensation provisions of Section 409A of the Code and/or to bring the Plan and/or Awards granted under it into compliance therewith.
13.3. No Impairment of Rights. Rights under any Award granted before amendment of the Plan shall not be impaired by any amendment of the Plan unless (a) the Company requests the consent of the Participant and (b) the Participant consents in writing.
13.4. Amendment of Awards. The Committee may, to the extent consistent with the terms of any applicable Award Agreement, waive any conditions or rights under, amend any terms of, or alter, suspend, discontinue, cancel or terminate, any Award theretofore granted or the associated Award Agreement, prospectively or retroactively; provided, however that any such waiver, amendment, alteration, suspension, discontinuance, cancellation or termination that would materially and adversely affect the rights of any Participant with respect to any Award theretofore granted shall not to that extent be effective without the consent of the affected Participant.
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14. General Provisions.
14.1. Forfeiture Events. The Committee may specify in an Award Agreement that the Participant’s rights, payments and benefits with respect to an Award shall be subject to reduction, cancellation, forfeiture or recoupment upon the occurrence of certain events, in addition to applicable vesting conditions of an Award. Such events may include, without limitation, breach of non-competition, non-solicitation, confidentiality, or other restrictive covenants that are contained in the Award Agreement or otherwise applicable to the Participant, a termination of the Participant’s Continuous Service for Cause, or other conduct by the Participant that is detrimental to the business or reputation of the Company and/or its Affiliates.
14.2. Clawback. Notwithstanding any other provisions in this Plan, any Award which is subject to recovery under any law, government regulation or stock exchange listing requirement, will be subject to such deductions and clawback as may be required to be made pursuant to such law, government regulation or stock exchange listing requirement (or any policy adopted by the Company pursuant to any such law, government regulation or stock exchange listing requirement).
14.3. Other Compensation Arrangements. Nothing contained in this Plan shall prevent the Board from adopting other or additional compensation arrangements, subject to stockholder approval if such approval is required; and such arrangements may be either generally applicable or applicable only in specific cases.
14.4. Sub-plans. The Committee may from time to time establish sub-plans under the Plan for purposes of satisfying blue sky, securities, tax or other laws of various jurisdictions in which the Company intends to grant Awards. Any sub-plans shall contain such limitations and other terms and conditions as the Committee determines are necessary or desirable. All sub-plans shall be deemed a part of the Plan, but each sub-plan shall apply only to the Participants in the jurisdiction for which the sub-plan was designed.
14.5. Deferral of Awards. The Committee may establish one or more programs under the Plan to permit selected Participants the opportunity to elect to defer receipt of consideration upon exercise of an Award, satisfaction of performance criteria, or other event that absent the election would entitle the Participant to payment or receipt of shares of Common Stock or other consideration under an Award. The Committee may establish the election procedures, the timing of such elections, the mechanisms for payments of, and accrual of interest or other earnings, if any, on amounts, shares or other consideration so deferred, and such other terms, conditions, rules and procedures that the Committee deems advisable for the administration of any such deferral program. All of such programs and procedures shall be consistent with the rules of Section 409A of the Code.
14.6. Unfunded Plan. The Plan shall be unfunded. Neither the Company, the Board nor the Committee shall be required to establish any special or separate fund or to segregate any assets to assure the performance of its obligations under the Plan.
14.7. Recapitalizations. Each Award Agreement shall contain provisions required to reflect the provisions of Section 11.
14.8. Delivery. Upon exercise of a right granted under this Plan, the Company shall issue Common Stock or pay any amounts due within a reasonable period of time thereafter. Subject to any statutory or regulatory obligations the Company may otherwise have, for purposes of this Plan, thirty (30) days shall be considered a reasonable period of time.
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14.9. No Fractional Shares. No fractional shares of Common Stock shall be issued or delivered pursuant to the Plan. The Committee shall determine whether cash, additional Awards or other securities or property shall be issued or paid in lieu of fractional shares of Common Stock or whether any fractional shares should be rounded, forfeited or otherwise eliminated.
14.10. Other Provisions. The Award Agreements authorized under the Plan may contain such other provisions not inconsistent with this Plan, including, without limitation, restrictions upon the exercise of the Awards, as the Committee may deem advisable.
14.11. Section 409A. The Plan and all Awards granted under the Plan are intended to comply with Section 409A of the Code to the extent subject thereto, and, accordingly, to the maximum extent permitted, the Plan and all Awards Agreements shall be interpreted and administered to be in compliance therewith. Any payments described in the Plan that are due within the “short-term deferral period” as defined in Section 409A of the Code shall not be treated as deferred compensation unless Applicable Laws require otherwise. Notwithstanding anything to the contrary in the Plan or any Award Agreement, to the extent required to avoid accelerated taxation and tax penalties under Section 409A of the Code, amounts that would otherwise be payable and benefits that would otherwise be provided pursuant to the Plan or Award Agreement during the six (6) month period immediately following the Participant’s termination of Continuous Service shall instead be paid on the first payroll date after the six-month anniversary of the Participant’s separation from service (or the Participant’s death, if earlier). Notwithstanding the foregoing, neither the Company nor the Committee shall have any obligation to take any action to prevent the assessment of any excise tax or penalty on any Participant under Section 409A of the Code and neither the Company nor the Committee will have any liability to any Participant for such tax or penalty.
14.12. Disqualifying Dispositions. Any Participant who shall make a “disposition” (as defined in Section 424 of the Code) of all or any portion of shares of Common Stock acquired upon exercise of an Incentive Stock Option within two years from the Grant Date of such Incentive Stock Option or within one year after the issuance of the shares of Common Stock acquired upon exercise of such Incentive Stock Option (a “Disqualifying Disposition”) shall be required to immediately advise the Company in writing as to the occurrence of the sale and the price realized upon the sale of such shares of Common Stock.
14.13. Section 16. It is the intent of the Company that the Plan satisfy, and be interpreted in a manner that satisfies, the applicable requirements of Rule 16b-3 as promulgated under Section 16 of the Exchange Act so that Participants will be entitled to the benefit of Rule 16b-3, or any other rule promulgated under Section 16 of the Exchange Act, and will not be subject to short-swing liability under Section 16 of the Exchange Act. Accordingly, if the operation of any provision of the Plan would conflict with the intent expressed in this Section 14.13, such provision to the extent possible shall be interpreted and/or deemed amended so as to avoid such conflict.
14.14. Beneficiary Designation. Each Participant under the Plan may from time to time name any beneficiary or beneficiaries by whom any right under the Plan is to be exercised in case of such Participant’s death. Each designation will revoke all prior designations by the same Participant, shall be in a form reasonably prescribed by the Committee and shall be effective only when filed by the Participant in writing with the Company during the Participant’s lifetime.
14.15. Expenses. The costs of administering the Plan shall be paid by the Company.
14.16. Severability. If any of the provisions of the Plan or any Award Agreement is held to be invalid, illegal or unenforceable, whether in whole or in part, such provision shall be deemed modified to the extent, but only to the extent, of such invalidity, illegality or unenforceability and the remaining provisions shall not be affected thereby.
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14.17. Plan Headings. The headings in the Plan are for purposes of convenience only and are not intended to define or limit the construction of the provisions hereof.
14.18. Non-Uniform Treatment. The Committee’s determinations under the Plan need not be uniform and may be made by it selectively among persons who are eligible to receive, or actually receive, Awards. Without limiting the generality of the foregoing, the Committee shall be entitled to make non-uniform and selective determinations, amendments and adjustments, and to enter into non-uniform and selective Award Agreements.
15. Effective Date of Plan. The Plan shall become effective as of the Effective Date, but no Award shall be exercised (or, in the case of a stock Award, shall be granted) unless and until the Plan has been approved by the stockholders of the Company, which approval shall be within twelve (12) months before or after the date the Plan is adopted by the Board.
16. Termination or Suspension of the Plan. The Plan shall terminate automatically on October 1, 2032. No Award shall be granted pursuant to the Plan after such date, but Awards theretofore granted may extend beyond that date. The Board may suspend or terminate the Plan at any earlier date pursuant to Section 13.1 hereof, provided any such suspension or termination is consistent with the provisions of Section 409A of the Code. No Awards may be granted under the Plan while the Plan is suspended or after it is terminated.
17. Choice of Law. Except to the extent governed by Federal law, the law of the State of Nevada shall govern all questions concerning the construction, validity and interpretation of this Plan, without regard to such state’s conflict of law rules.
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Exhibit 10.7
STOCK OPTION AGREEMENT
This Stock Option Agreement (this “Agreement”) is made and entered into as of the Grant Date specified below by and between Toppoint Holdings Inc., a Nevada corporation (the “Company”), and the participant named below (the “Participant”).
| Name of Participant: | |
| Grant Date: | |
| Expiration Date: | |
| Exercise Price: | |
| Number of Option Shares: | |
| Type of Option: | |
| Vesting Start Date: | |
| Vesting Schedule: |
1. Grant of Option.
1.1. Grant. The Company hereby grants to the Participant an option (the “Option”) to purchase the total number of shares of Common Stock of the Company equal to the number of Option Shares set forth above, at the Exercise Price set forth above. The Option is being granted pursuant to the terms of the Company’s 2022 Equity Incentive Plan (the “Plan”). Capitalized terms used but not defined herein will have the meanings ascribed to them in the Plan.
1.2. Type of Option. The Option is intended to be either a Non-qualified Stock Option (i.e., not an Incentive Stock Option) or an Incentive Stock Option within the meaning of Section 422 of the Code, as indicated above, although the Company makes no representation or guarantee that the Option will qualify as an Incentive Stock Option. To the extent that the aggregate Fair Market Value (determined on the Grant Date) of the shares of Common Stock with respect to which Incentive Stock Options are exercisable for the first time by the Participant during any calendar year (under all plans of the Company and its Affiliates) exceeds $100,000, the Options or portions thereof which exceed such limit (according to the order in which they were granted) shall be treated as Non-qualified Stock Options.
1.3. Consideration. The grant of the Option is made in consideration of the services to be rendered by the Participant to the Company and is subject to the terms and conditions of the Plan.
2. Exercise Period; Vesting.
2.1. Vesting Schedule. The Option will become vested and exercisable in accordance with the Vesting Schedule specified above until the Option is 100% vested. The unvested portion of the Option will not be exercisable on or after the Participant’s termination of Continuous Service.
2.2. Expiration. The Option will expire on the Expiration Date set forth above, or earlier as provided in this Agreement or the Plan.
3. Termination of Continuous Service.
3.1. Termination for Reasons Other Than Cause, Death or Disability. If the Participant’s Continuous Service is terminated for any reason other than Cause, death or Disability, the Participant may exercise the vested portion of the Option, but only within such period of time ending on the earlier of (a) the date that is three months following the termination of the Participant’s Continuous Service or (b) the Expiration Date.
3.2. Termination for Cause. If the Participant’s Continuous Service is terminated for Cause, the Option (whether vested or unvested) shall immediately terminate and cease to be exercisable.
3.3. Termination Due to Disability. If the Participant’s Continuous Service terminates as a result of the Participant’s Disability, the Participant may exercise the vested portion of the Option, but only within such period of time ending on the earlier of (a) the date that is 12 months following the Participant’s termination of Continuous Service or (b) the Expiration Date.
3.4. Termination Due to Death. If the Participant’s Continuous Service terminates as a result of the Participant’s death, or the Participant dies within a period following termination of the Participant’s Continuous Service during which the vested portion of the Option remains exercisable, the vested portion of the Option may be exercised by the Participant’s estate, by a person who acquired the right to exercise the Option by bequest or inheritance or by the person designated to exercise the Option upon the Participant’s death, but only within the time period ending on the earlier of (a) the date that is 12 months following the Participant’s death or (b) the Expiration Date.
3.5. Extension of Termination Date. If following the Participant’s termination of Continuous Service for any reason the exercise of the Option is prohibited because the exercise of the Option would violate the registration requirements under the Securities Act or any other state or federal securities law or the rules of any securities exchange or interdealer quotation system, then the expiration of the Option shall be tolled until the date that is thirty (30) days after the end of the period during which the exercise of the Option would be in violation of such registration or other securities requirements.
4. Manner of Exercise.
4.1. Election to Exercise. To exercise the Option, the Participant (or in the case of exercise after the Participant’s death or incapacity, the Participant’s executor, administrator, heir or legatee, as the case may be) must deliver to the Company an executed stock option exercise agreement in the form attached hereto as Exhibit A, or as is approved by the Committee from time to time (the “Exercise Agreement”), which shall set forth, inter alia: (a) the Participant’s election to exercise the Option; (b) the number of shares of Common Stock being purchased; (c) any restrictions imposed on the shares; and (d) any representations, warranties and agreements regarding the Participant’s investment intent and access to information as may be required by the Company to comply with applicable securities laws. If someone other than the Participant exercises the Option, then such person must submit documentation reasonably acceptable to the Company verifying that such person has the legal right to exercise the Option.
4.2. Payment of Exercise Price. The entire Exercise Price of the Option shall be payable in full at the time of exercise to the extent permitted by applicable statutes and regulations, either: (a) in cash or by certified or bank check at the time the Option is exercised; (b) by delivery to the Company of other shares of Common Stock, duly endorsed for transfer to the Company, with a Fair Market Value on the date of delivery equal to the Exercise Price (or portion thereof) due for the number of shares being acquired, or by means of attestation whereby the Participant identifies for delivery specific shares that have a Fair Market Value on the date of attestation equal to the Exercise Price (or portion thereof) and receives a number of shares equal to the difference between the number of shares thereby purchased and the number of identified attestation shares (a “Stock for Stock Exchange”); (c) through a “cashless exercise program” established with a broker; (d) by reduction in the number of shares otherwise deliverable upon exercise of such Option with a Fair Market Value equal to the aggregate Exercise Price at the time of exercise; (e) by any combination of the foregoing methods; or (f) in any other form of legal consideration that may be acceptable to the Committee.
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4.3. Withholding. Prior to the issuance of shares upon the exercise of the Option, the Participant must make arrangements satisfactory to the Company to pay or provide for any applicable federal, state and local withholding obligations of the Company. The Participant may satisfy any federal, state or local tax withholding obligation relating to the exercise of the Option by any of the following means: (a) tendering a cash payment; (b) authorizing the Company to withhold shares of Common Stock from the shares of Common Stock otherwise issuable to the Participant as a result of the exercise of the Option; provided, however, that no shares of Common Stock are withheld with a value exceeding the minimum amount of tax required to be withheld by law; or (c) delivering to the Company previously owned and unencumbered shares of Common Stock. The Company has the right to withhold from any compensation paid to a Participant.
4.4. Issuance of Shares. Provided that the Exercise Agreement and payment are in form and substance satisfactory to the Company, the Company shall issue the shares of Common Stock registered in the name of the Participant, the Participant’s authorized assignee, or the Participant’s legal representative which shall be evidenced by stock certificates representing the shares with the appropriate legends affixed thereto, appropriate entry on the books of the Company or of a duly authorized transfer agent, or other appropriate means as determined by the Company.
5. No Right to Continued Service; No Rights as Stockholder. Neither the Plan nor this Agreement shall confer upon the Participant any right to be retained in any position, as an Employee, Consultant or Director of the Company. Further, nothing in the Plan or this Agreement shall be construed to limit the discretion of the Company to terminate the Participant’s Continuous Service at any time, with or without Cause. The Participant shall not have any rights as a stockholder with respect to any shares of Common Stock subject to the Option prior to the date of exercise of the Option.
6. Transferability. The Option is not transferable by the Participant other than to a designated beneficiary upon the Participant’s death or by will or the laws of descent and distribution, and is exercisable during the Participant’s lifetime only by him or her. No assignment or transfer of the Option, or the rights represented thereby, whether voluntary or involuntary, by operation of law or otherwise (except to a designated beneficiary upon death by will or the laws of descent or distribution) will vest in the assignee or transferee any interest or right herein whatsoever, but immediately upon such assignment or transfer the Option will terminate and become of no further effect.
7. Change in Control. In the event of a Change in Control, the Committee may, in its discretion and upon at least ten (10) days’ advance notice to the Participant, cancel the Option and pay to the Participant the value of the Option based upon the price per share of Common Stock received or to be received by other stockholders of the Company in the event. Notwithstanding the foregoing, if at the time of a Change in Control the Exercise Price of the Option equals or exceeds the price paid for a share of Common Stock in connection with the Change in Control, the Committee may cancel the Option without the payment of consideration therefor.
8. Adjustments. The shares of Common Stock subject to the Option may be adjusted or terminated in any manner as contemplated by Section 11 of the Plan.
9. Tax Liability and Withholding. Notwithstanding any action the Company takes with respect to any or all income tax, social insurance, payroll tax, or other tax-related withholding (“Tax-Related Items”), the ultimate liability for all Tax-Related Items is and remains the Participant’s responsibility and the Company (a) makes no representations or undertakings regarding the treatment of any Tax-Related Items in connection with the grant, vesting, or exercise of the Option or the subsequent sale of any shares acquired on exercise; and (b) does not commit to structure the Option to reduce or eliminate the Participant’s liability for Tax-Related Items.
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10. Qualification as an Incentive Stock Option. If this Option is an Incentive Stock Option, the Participant understands that in order to obtain the benefits of an Incentive Stock Option, no sale or other disposition may be made of shares for which incentive stock option treatment is desired within one (1) year following the date of exercise of the Option or within two (2) years from the Grant Date. The Participant understands and agrees that the Company shall not be liable or responsible for any additional tax liability the Participant incurs in the event that the Internal Revenue Service for any reason determines that this Option does not qualify as an incentive stock option within the meaning of the Code.
11. Disqualifying Disposition. If this Option is an Incentive Stock Option and the Participant disposes of the shares of Common Stock prior to the expiration of either two (2) years from the Grant Date or one (1) year from the date the shares are transferred to the Participant pursuant to the exercise of the Option, the Participant shall notify the Company in writing within thirty (30) days after such disposition of the date and terms of such disposition. The Participant also agrees to provide the Company with any information concerning any such dispositions as the Company requires for tax purposes.
12. Compliance with Law. The exercise of the Option and the issuance and transfer of shares of Common Stock shall be subject to compliance by the Company and the Participant with all applicable requirements of federal and state securities laws and with all applicable requirements of any stock exchange on which the Company’s shares of Common Stock may be listed. No shares of Common Stock shall be issued pursuant to this Option unless and until any then applicable requirements of state or federal laws and regulatory agencies have been fully complied with to the satisfaction of the Company and its counsel. The Participant understands that the Company is under no obligation to register the shares of Common Stock with the Securities and Exchange Commission, any state securities commission or any stock exchange to effect such compliance.
13. Notices. Any notice required to be delivered to the Company under this Agreement shall be in writing and addressed to the Secretary of the Company at the Company’s principal corporate offices. Any notice required to be delivered to the Participant under this Agreement shall be in writing and addressed to the Participant at the Participant’s address as shown in the records of the Company. Either party may designate another address in writing (or by such other method approved by the Company) from time to time.
14. Governing Law. This Agreement will be construed and interpreted in accordance with the laws of the State of Nevada without regard to conflict of law principles.
15. Interpretation. Any dispute regarding the interpretation of this Agreement shall be submitted by the Participant or the Company to the Committee for review. The resolution of such dispute by the Committee shall be final and binding on the Participant and the Company.
16. Options Subject to Plan. This Agreement is subject to the Plan as approved by the Company’s stockholders. The terms and provisions of the Plan as it may be amended from time to time are hereby incorporated herein by reference. In the event of a conflict between any term or provision contained herein and a term or provision of the Plan, the applicable terms and provisions of the Plan will govern and prevail.
17. Successors and Assigns. The Company may assign any of its rights under this Agreement. This Agreement will be binding upon and inure to the benefit of the successors and assigns of the Company. Subject to the restrictions on transfer set forth herein, this Agreement will be binding upon the Participant and the Participant’s beneficiaries, executors, administrators and the person(s) to whom the Option may be transferred by will or the laws of descent or distribution.
18. Severability. The invalidity or unenforceability of any provision of the Plan or this Agreement shall not affect the validity or enforceability of any other provision of the Plan or this Agreement, and each provision of the Plan and this Agreement shall be severable and enforceable to the extent permitted by law.
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19. Discretionary Nature of Plan. The Plan is discretionary and may be amended, cancelled or terminated by the Company at any time, in its discretion. The grant of the Option in this Agreement does not create any contractual right or other right to receive any Options or other Awards in the future. Future Awards, if any, will be at the sole discretion of the Company. Any amendment, modification, or termination of the Plan shall not constitute a change or impairment of the terms and conditions of the Participant’s employment with the Company.
20. Amendment. The Committee has the right to amend, alter, suspend, discontinue or cancel the Option, prospectively or retroactively; provided, that, no such amendment shall adversely affect the Participant’s material rights under this Agreement without the Participant’s consent.
21. No Impact on Other Benefits. The value of the Participant’s Option is not part of his or her normal or expected compensation for purposes of calculating any severance, retirement, welfare, insurance or similar employee benefit.
22. Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed an original but all of which together will constitute one and the same instrument. Counterpart signature pages to this Agreement transmitted by facsimile transmission, by electronic mail in portable document format (.pdf), or by any other electronic means intended to preserve the original graphic and pictorial appearance of a document, will have the same effect as physical delivery of the paper document bearing an original signature.
23. Acceptance. The Participant hereby acknowledges receipt of a copy of the Plan and this Agreement. The Participant has read and understands the terms and provisions thereof, and accepts the Option subject to all of the terms and conditions of the Plan and this Agreement. The Participant acknowledges that there may be adverse tax consequences upon exercise of the Option or disposition of the underlying shares and that the Participant should consult a tax advisor prior to such exercise or disposition.
[SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the Grant Date set forth above.
| COMPANY: | |||
| Toppoint Holdings Inc. | |||
| By: | |||
| Name: | |||
| Title: | |||
| Address: | |||
| PARTICIPANT: | |||
| (Signature) | |||
| (Name) | |||
| Address: | |||
Exhibit A
STOCK OPTION EXERCISE AGREEMENT
This Stock Option Exercise Agreement (this “Exercise Agreement”) is made and entered into as of _______________ by and between Toppoint Holdings Inc., a Nevada corporation (the “Company”), and the purchaser named below (the “Purchaser”). Capitalized terms used but not defined herein shall have the meanings ascribed to them in the Toppoint Holdings Inc. 2022 Equity Incentive Plan (the “Plan”).
| Purchaser Name: |
| Address: |
| Social Security Number: |
1. Option. The Purchaser was granted an option (the “Option”) to purchase shares of Common Stock pursuant to the terms of the Plan and the Stock Option Agreement between the Company and the Purchaser dated ________________, as follows:
Type of Option (check one):
☐ Incentive Stock Option
☐ Non-qualified Stock Option
| Grant Date: |
| Number of Option shares: |
| Exercise Price per share: |
| Expiration Date: |
2. Exercise of Option. The Purchaser hereby elects to exercise the Option to purchase __________ shares of Common Stock (“Shares”), all of which are vested pursuant to the terms of the Stock Option Agreement. The total Exercise Price for all of the Shares is ________ (Total Shares times Exercise Price per Share).
3. Payment of the Exercise Price; Delivery of Required Documents. The Purchaser encloses payment in full of the total Exercise Price for the Shares in the following form(s), as authorized by the Stock Option Agreement (check and complete as appropriate):
☐ In cash (by certified or bank check) in the amount of $_____, receipt of which is acknowledged by the Company.
☐ By delivery of ______ previously acquired shares of Common Stock duly endorsed for transfer to the Company.
☐ Through a Stock for Stock Exchange (Contact Company CFO).
☐ By a broker-assisted cashless exercise (Contact Company CFO).
☐ By reduction in the number of Shares otherwise deliverable upon exercise with a Fair Market Value equal to the total Exercise Price (Contact Company CFO).
A-1
The Purchaser will deliver any other documents that the Company requires.
4. Tax Withholding. The Purchaser authorizes payroll withholding and will make arrangements satisfactory to the Company to pay or provide for any applicable federal, state and local withholding obligations of the Company. The Purchaser may satisfy any federal, state or local tax withholding obligation relating to the exercise of the Option by any of the methods set forth in the Plan or Stock Option Agreement. The Purchaser understands that ownership of the Shares will not be transferred to the Purchaser until the total Exercise Price and all applicable withholding taxes have been paid.
5. Notice of Disqualifying Disposition. If the Option is an Incentive Stock Option, the Purchaser agrees to promptly notify the Secretary at the Company if he or she transfers any of the Shares purchased pursuant to this Exercise Agreement within one (1) year from the date of exercise of the Option or within two (2) years from the Grant Date.
6. Tax Consequences. The Purchaser understands that there may be adverse federal or state tax consequences as a result of his or her purchase or disposition of the Shares. The Purchaser also acknowledges that he or she has been advised to consult with a tax advisor in connection with the purchase or disposition of the Shares. The Purchaser is not relying on the Company for tax advice.
7. Compliance with Law. The issuance and transfer of the Shares will be subject to, and conditioned upon compliance by the Company and the Purchaser with, all applicable federal, state and local laws and regulations and all applicable requirements of any stock exchange or automated quotation system on which the Shares may be listed or quoted at the time of such issuance or transfer.
8. Successors and Assigns; Binding Effect. The Company may assign any of its rights under this Exercise Agreement. This Exercise Agreement will be binding upon and inure to the benefit of the successors and assigns of the Company. This Exercise Agreement will be binding upon the Purchaser and the Purchaser's heirs, executors, legal representatives, successors and assigns.
9. Governing Law. This Exercise Agreement will be construed and interpreted in accordance with the laws of the State of Nevada without regard to conflict of law principles.
10. Severability. The invalidity or unenforceability of any provision of this Exercise Agreement shall not affect the validity or enforceability of any other provision, and each provision of this Exercise Agreement shall be severable and enforceable to the extent permitted by law.
11. Counterparts. This Exercise Agreement may be executed in counterparts, each of which shall be deemed an original but all of which together will constitute one and the same instrument.
12. Notice. Any notice required to be delivered to the Company under this Exercise Agreement shall be in writing and addressed to the Secretary of the Company at the Company's principal corporate offices. Any notice required to be delivered to the Purchaser under this Exercise Agreement shall be in writing and addressed to the Purchaser at the Purchaser's address as set forth above. Either party may designate another address in writing (or by such other method approved by the Company) from time to time.
13. Acknowledgement. The Purchaser understands that he or she is purchasing the Shares pursuant to the terms and conditions of the Plan and the Stock Option Agreement, copies of which the Purchaser has read and understands.
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IN WITNESS WHEREOF, the parties have executed this Exercise Agreement as of the date first above written.
| COMPANY: | ||
| Toppoint Holdings Inc. | ||
| By: | ||
| Name: | ||
| Title: | ||
| PURCHASER: | ||
| [Name] | ||
A-3
Exhibit 10.8
RESTRICTED STOCK AWARD AGREEMENT
This Restricted Stock Award Agreement (this “Agreement”) is made and entered into as of _______________ (the “Grant Date”) by and between Toppoint Holdings Inc., a Nevada corporation (the “Company”), and ______________ (the “Grantee”).
WHEREAS, the Company has adopted the Toppoint Holdings Inc. 2022 Equity Incentive Plan (the “Plan”) pursuant to which awards of Restricted Stock may be granted; and
WHEREAS, the Committee has determined that it is in the best interests of the Company and its stockholders to grant the award of Restricted Stock provided for herein.
NOW, THEREFORE, the parties hereto, intending to be legally bound, agree as follows:
1. Grant of Restricted Stock. Pursuant to Section 7.2 of the Plan, the Company hereby issues to the Grantee on the Grant Date a Restricted Stock Award consisting of, in the aggregate, _________ shares of Common Stock of the Company (the “Restricted Stock”), on the terms and conditions and subject to the restrictions set forth in this Agreement and the Plan. Capitalized terms that are used but not defined herein have the meaning ascribed to them in the Plan.
2. Consideration. The grant of the Restricted Stock is made in consideration of the services to be rendered by the Grantee to the Company.
3. Restricted Period; Vesting.
3.1. Except as otherwise provided herein, provided that the Grantee remains in Continuous Service through the applicable vesting date, and further provided that any additional conditions and performance goals set forth in Schedule I have been satisfied, the Restricted Stock will vest in accordance with the following schedule:
| Vesting Date | Shares of Common Stock | |
| [VESTING DATE] | [NUMBER OR PERCENTAGE OF SHARES THAT VEST ON THE VESTING DATE] | |
| [VESTING DATE] | [NUMBER OR PERCENTAGE OF SHARES THAT VEST ON THE VESTING DATE] |
The period over which the Restricted Stock vests is referred to as the “Restricted Period”.
3.2. The foregoing vesting schedule notwithstanding, if the Grantee’s Continuous Service terminates for any reason at any time before all of his or her Restricted Stock has vested other than death or retirement (in the case of a Director), or termination of the Grantee’s Continuous Service by the Company or an Affiliate for Disability, the Grantee’s unvested Restricted Stock shall be automatically forfeited upon such termination of Continuous Service and neither the Company nor any Affiliate shall have any further obligations to the Grantee under this Agreement.
3.3. The foregoing vesting schedule notwithstanding, in the event of the Grantee’s death or if the Grantee’s Continuous Service is terminated by the Company or an Affiliate for Disability, 100% of the unvested Restricted Stock shall vest as of the date of such termination.
4. Restrictions. Subject to any exceptions set forth in this Agreement or the Plan, during the Restricted Period, the Restricted Stock or the rights relating thereto may not be assigned, alienated, pledged, attached, sold or otherwise transferred or encumbered by the Grantee. Any attempt to assign, alienate, pledge, attach, sell or otherwise transfer or encumber the Restricted Stock or the rights relating thereto during the Restricted Period shall be wholly ineffective and, if any such attempt is made, the Restricted Stock will be forfeited by the Grantee and all of the Grantee’s rights to such shares shall immediately terminate without any payment or consideration by the Company.
5. Rights as Stockholder; Dividends.
5.1. The Grantee shall be the record owner of the Restricted Stock until the shares of Common Stock are sold or otherwise disposed of, and shall be entitled to all of the rights of a stockholder of the Company including, without limitation, the right to vote such shares and receive all dividends or other distributions paid with respect to such shares. Notwithstanding the foregoing, any dividends or other distributions shall be subject to the same restrictions on transferability as the shares of Restricted Stock with respect to which they were paid.
5.2. The Company may issue stock certificates or evidence the Grantee’s interest by using a restricted book entry account with the Company’s transfer agent. Physical possession or custody of any stock certificates that are issued may be retained by the Company until such time as the Restricted Stock vests.
5.3. If the Grantee forfeits any rights he or she has under this Agreement in accordance with Section 3, the Grantee shall, on the date of such forfeiture, no longer have any rights as a stockholder with respect to the Restricted Stock and shall no longer be entitled to vote or receive dividends on such shares.
6. No Right to Continued Service. Neither the Plan nor this Agreement shall confer upon the Grantee any right to be retained in any position, as an Employee, Consultant or Director of the Company. Further, nothing in the Plan or this Agreement shall be construed to limit the discretion of the Company to terminate the Grantee’s Continuous Service at any time, with or without Cause.
7. Adjustments. If any change is made to the outstanding Common Stock or the capital structure of the Company, if required, the shares of Common Stock shall be adjusted or terminated in any manner as contemplated by Section 11 of the Plan.
8. Tax Liability and Withholding.
8.1. The Grantee shall be required to pay to the Company, and the Company shall have the right to deduct from any compensation paid to the Grantee pursuant to the Plan, the amount of any required withholding taxes in respect of the Restricted Stock and to take all such other action as the Committee deems necessary to satisfy all obligations for the payment of such withholding taxes. The Committee may permit the Grantee to satisfy any federal, state or local tax withholding obligation by any of the following means, or by a combination of such means: (a) tendering a cash payment; (b) authorizing the Company to withhold shares of Common Stock from the shares of Common Stock otherwise issuable or deliverable to the Grantee as a result of the vesting of the Restricted Stock; provided, however, that no shares of Common Stock shall be withheld with a value exceeding the minimum amount of tax required to be withheld by law; or (c) delivering to the Company previously owned and unencumbered shares of Common Stock.
8.2. Notwithstanding any action the Company takes with respect to any or all income tax, social insurance, payroll tax, or other tax-related withholding (“Tax-Related Items”), the ultimate liability for all Tax-Related Items is and remains the Grantee’s responsibility and the Company (a) makes no representation or undertakings regarding the treatment of any Tax-Related Items in connection with the grant or vesting of the Restricted Stock or the subsequent sale of any shares; and (b) does not commit to structure the Restricted Stock to reduce or eliminate the Grantee’s liability for Tax-Related Items.
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9. Section 83(b) Election. The Grantee may make an election under Code Section 83(b) (a “Section 83(b) Election”) with respect to the Restricted Stock. Any such election must be made within thirty (30) days after the Grant Date. If the Grantee elects to make a Section 83(b) Election, the Grantee shall provide the Company with a copy of an executed version and satisfactory evidence of the filing of the executed Section 83(b) Election with the US Internal Revenue Service. The Grantee agrees to assume full responsibility for ensuring that the Section 83(b) Election is actually and timely filed with the US Internal Revenue Service and for all tax consequences resulting from the Section 83(b) Election.
10. Compliance with Law. The issuance and transfer of shares of Common Stock shall be subject to compliance by the Company and the Grantee with all applicable requirements of federal and state securities laws and with all applicable requirements of any stock exchange on which the Company’s shares of Common Stock may be listed. No shares of Common Stock shall be issued or transferred unless and until any then applicable requirements of state and federal laws and regulatory agencies have been fully complied with to the satisfaction of the Company and its counsel. The Grantee understands that the Company is under no obligation to register the shares of Common Stock with the Securities and Exchange Commission, any state securities commission or any stock exchange to effect such compliance.
11. Legends. A legend may be placed on any certificate(s) or other document(s) delivered to the Grantee indicating restrictions on transferability of the shares of Restricted Stock pursuant to this Agreement or any other restrictions that the Committee may deem advisable under the rules, regulations and other requirements of the Securities and Exchange Commission, any applicable federal or state securities laws or any stock exchange on which the shares of Common Stock are then listed or quoted.
12. Notices. Any notice required to be delivered to the Company under this Agreement shall be in writing and addressed to the Secretary of the Company at the Company’s principal corporate offices. Any notice required to be delivered to the Grantee under this Agreement shall be in writing and addressed to the Grantee at the Grantee’s address as shown in the records of the Company. Either party may designate another address in writing (or by such other method approved by the Company) from time to time.
13. Governing Law. This Agreement will be construed and interpreted in accordance with the laws of the State of Nevada without regard to conflict of law principles.
14. Interpretation. Any dispute regarding the interpretation of this Agreement shall be submitted by the Grantee or the Company to the Committee for review. The resolution of such dispute by the Committee shall be final and binding on the Grantee and the Company.
15. Restricted Stock Subject to Plan. This Agreement is subject to the Plan as approved by the Company’s stockholders. The terms and provisions of the Plan as it may be amended from time to time are hereby incorporated herein by reference. In the event of a conflict between any term or provision contained herein and a term or provision of the Plan, the applicable terms and provisions of the Plan will govern and prevail.
16. Successors and Assigns. The Company may assign any of its rights under this Agreement. This Agreement will be binding upon and inure to the benefit of the successors and assigns of the Company. Subject to the restrictions on transfer set forth herein, this Agreement will be binding upon the Grantee and the Grantee’s beneficiaries, executors, administrators and the person(s) to whom the Restricted Stock may be transferred by will or the laws of descent or distribution.
17. Severability. The invalidity or unenforceability of any provision of the Plan or this Agreement shall not affect the validity or enforceability of any other provision of the Plan or this Agreement, and each provision of the Plan and this Agreement shall be severable and enforceable to the extent permitted by law.
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18. Discretionary Nature of Plan. The Plan is discretionary and may be amended, cancelled or terminated by the Company at any time, in its discretion. The grant of the Restricted Stock in this Agreement does not create any contractual right or other right to receive any Restricted Stock or other Awards in the future. Future Awards, if any, will be at the sole discretion of the Company. Any amendment, modification, or termination of the Plan shall not constitute a change or impairment of the terms and conditions of the Grantee’s employment with the Company.
19. Amendment. The Committee has the right to amend, alter, suspend, discontinue or cancel the Restricted Stock, prospectively or retroactively; provided, that, no such amendment shall adversely affect the Grantee’s material rights under this Agreement without the Grantee’s consent.
20. No Impact on Other Benefits. The value of the Grantee’s Restricted Stock is not part of his normal or expected compensation for purposes of calculating any severance, retirement, welfare, insurance or similar employee benefit.
21. Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed an original but all of which together will constitute one and the same instrument. Counterpart signature pages to this Agreement transmitted by facsimile transmission, by electronic mail in portable document format (.pdf), or by any other electronic means intended to preserve the original graphic and pictorial appearance of a document, will have the same effect as physical delivery of the paper document bearing an original signature.
22. Acceptance. The Grantee hereby acknowledges receipt of a copy of the Plan and this Agreement. The Grantee has read and understands the terms and provisions thereof, and accepts the Restricted Stock subject to all of the terms and conditions of the Plan and this Agreement. The Grantee acknowledges that there may be adverse tax consequences upon the grant or vesting of the Restricted Stock or disposition of the shares and that the Grantee has been advised to consult a tax advisor prior to such grant, vesting or disposition.
[SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written.
| COMPANY: | |||
| Toppoint Holdings Inc. | |||
| By: | |||
| Name: | |||
| Title: | |||
| Address: | |||
| GRANTEE: | |||
| (Signature) | |||
| (Name) | |||
| Address: | |||
| SSN: | |||
Exhibit 10.9
SERVICES AGREEMENT
This Services Agreement (this “Agreement”) is dated as of January 1, 2024, by and between Toppoint Holdings Inc., a Nevada corporation (the “Company”), and 4 John Trucking Inc., a Pennsylvania corporation (the “Vendor”). Unless otherwise indicated, references to the “Company” include both the Company, and its wholly-owned subsidiary, Toppoint Inc, a Pennsylvania corporation, as a whole.
WHEREAS, the Company desires to retain the Vendor and its permitted designees to provide certain administrative and operational services set forth in Schedule A to this Agreement (the “Services”) to the Company on the terms set forth in this Agreement, and the Vendor and its designees are willing to provide the Services to the Company on the terms set forth in this Agreement.
NOW, THEREFORE, in consideration of the premises and the covenants contained in this Agreement, the Company and the Vendor hereby agree as follows:
1. Services. During the term of this Agreement, the Vendor shall provide the Services set forth in Schedule A for the benefit of the Company, as mutually agreed by the Company and the Vendor.
2. Fee. For all the Services provided under this Agreement, the Vendor will be compensated as set forth on Schedule B. The Vendor may from time to time agree not to impose all or a portion of its fee otherwise payable under this Agreement and/or undertake to pay or reimburse the Company for all or a portion of its expenses not otherwise required to be paid by or reimbursed by the Vendor. Unless otherwise agreed, any fee reduction or undertaking may be discontinued or modified by the Vendor at any time. For the month and year in which this Agreement becomes effective or terminates, there will be an appropriate pro ration of any fee based on the number of days that the Agreement is in effect during such month and year, respectively.
3. Expenses. Except as otherwise provided in this Agreement, the Company shall reimburse the Vendor, for all reasonable out-of-pocket fees and expenses incurred in the ordinary course of business by the Vendor in connection with the Vendor’s obligations hereunder, including fees and expenses paid to drivers, contractors and other third parties in connection with such obligations.
4. Indemnification.
(a) The Vendor will exercise reasonable care and diligence in the performance of its duties under this Agreement.
(b) The Company shall indemnify and hold harmless the Vendor and its members, employees, representatives and affiliates (each being an “Indemnified Party”) from and against any and all losses, claims, damages and liabilities to which such Indemnified Party may become subject under any applicable law or under any claim made by any third party or otherwise, directly or indirectly relating to or arising out of the engagement of the Vendor pursuant to, and the performance by the Vendor of the Services contemplated by, this Agreement, and the Company shall reimburse any Indemnified Party for all costs and expenses (including reasonable attorneys’ fees and expenses) as they are incurred in connection with the investigation of, preparation for or defense of any pending or threatened claim, or any action or proceeding arising therefrom, whether or not such Indemnified Party is a party hereto. The Company will not be liable under this Section 4, and an Indemnified Party shall reimburse the Company for any related payments made by the Company under this Section 4, to the extent that any loss, claim, damage, liability, cost or expense is determined by a court or arbitral tribunal, in a final judgment from which no further appeal may be taken, to have resulted primarily from the gross negligence or willful misconduct of such Indemnified Party. The Vendor makes no representations or warranties, express or implied, in respect of the Services to be provided by any Indemnified Party acting within the scope of his, her or its employment or authority. In no event will any of the parties hereto be liable to any other party hereto for any indirect, special, incidental or consequential damages, including lost profits or savings, whether or not such damages are foreseeable, or in respect of any liabilities relating to any third party claims (whether based in contract, tort or otherwise) other than for claims relating to the Services which may be provided by the Vendor hereunder.
5. Services Not Exclusive. The Vendor’s services pursuant to this Agreement are not exclusive, and it is understood that the Vendor may perform similar services for other persons. In acting under this Agreement, the Vendor will be an independent contractor and not an agent of the Company. The Vendor and its affiliates, by separate agreement with the Company, may also serve the Company in other capacities.
6. Term and Termination. This Agreement shall commence on the date hereof and shall continue in force from year to year thereafter. Either party to this Agreement may terminate this Agreement or any Service under this Agreement without penalty by an instrument in writing delivered or mailed to the other party. Any termination under this Section will take effect not sooner than thirty (30) days after the date of delivery or mailing of such notice of termination, unless the Company terminates this Agreement or Service under this Agreement due to a material failure of the Vendor to fulfill its obligations under this Agreement or with respect to the Service, in which case the termination will take effect immediately.
7. No Assignment. Neither this Agreement nor any of the rights, interests or obligations hereunder shall be assigned or delegated by any party hereto without the prior written consent of the other party hereto; provided that the Vendor may assign all of its rights and obligations hereunder to any of its affiliates.
8. Notice. All notices, requests, demands, claims, and other communications hereunder shall be in writing. Any notice, request, demand, claim, or other communication hereunder shall be deemed duly given (i) when delivered personally to the recipient, (ii) one business day after being sent to the recipient by reputable overnight courier service (charges prepaid), or (iii) upon transmission to the designated email address of the recipient, and addressed to the intended recipient as set forth below:
If to the Company:
Toppoint Holdings Inc.
1250 Kenas Road.,
North Wales, PA 19454
Attn: Hok C Chan
Email: ***
If to the Vendor:
4 John Trucking Inc.
201 S. Blakely St Suite 191,
Dunmore, PA 18512
Attn: John Feliciano III
Email: ***
Either party hereto may change the address to which notices, requests, demands, claims, and other communications hereunder are to be delivered by giving the other party notice in the manner herein set forth.
9. Waiver. The waiver by either party of a breach of any provision of this Agreement by the other party shall not operate or be construed as a waiver of any subsequent breach of that provision or any other provision hereof.
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10. Governing Law. This Agreement shall be governed by and construed in all respects in accordance with the laws of the State of Nevada. The parties to this Agreement hereby irrevocably agree that the courts of the State of Pennsylvania shall have exclusive jurisdiction in respect of any dispute, suit, action, arbitration or proceedings (“Proceedings”) which may arise out of or in connection with this Agreement and waive any objection to Proceedings in the courts of the State of Pennsylvania on the ground of venue or on the basis that the Proceedings have been brought in an inconvenient forum.
11. Counterparts. This Agreement may be executed and delivered by each party hereto in separate counterparts, each of which when so executed and delivered shall be deemed an original and all of which taken together shall constitute but one and the same agreement.
12. Entire Agreement; Amendment. This Agreement constitutes the entire agreement and understanding between the parties hereto with respect to the subject matter hereof and supersedes all previous or contemporaneous communications, representations or warranties of any kind, either oral or written. This Agreement may be amended or modified, or any provision hereof may be waived, provided that such amendment or waiver is set forth in a writing executed by the parties. No courses of dealing between or among any persons having any interest in this Agreement will be deemed effective to modify, amend or discharge any part of this Agreement or any rights or obligations of any person under or by reason of this Agreement.
13. Construction. The captions in this Agreement are included for convenience of reference only and in no way define or limit any of the provisions hereof or otherwise affect their construction or effect.
14. Severability. In the event that any provision of this Agreement, or the application thereof, becomes or is declared by a court of competent jurisdiction to be illegal, void or unenforceable, the remainder of this Agreement shall continue in full force and effect and the application of such provision to other persons or circumstances shall be interpreted so as reasonably to effect the intent of the parties hereto. The parties hereto further agree to use their commercially reasonable efforts to replace such void or unenforceable provision of this Agreement with a valid and enforceable provision that shall achieve, to the extent possible, the purposes of such void or unenforceable provision.
15. Confidentiality. Except as otherwise provided in this Agreement or as required by law, the Vendor will keep confidential all records of and information in its possession relating to the Company or the performance of its obligations under this Agreement, and will not disseminate those records and information except at the request of or with the consent of the Company.
[Signature Page Follows]
3
IN WITNESS WHEREOF, the Company and the Vendor have caused this Services Agreement to be duly executed and delivered on the date first above written.
| COMPANY: | ||
| TOPPOINT HOLDINGS INC. | ||
|
By: |
/s/ Hok C Chan | |
| Name: | Hok C Chan | |
| Title: | Chief Executive Officer | |
| VENDOR: | ||
| 4 JOHN TRUCKING INC. | ||
| By: | /s/ John Feliciano III | |
| Name: | John Feliciano III | |
| Title: | President | |
[Signature Page to Services Agreement]
SCHEDULE A
Subject to the oversight and control of the Company, the Vendor will perform and provide the following services:
| 1. | Driver Compliance & Fleet Compliance |
| ● | Ensure all drivers meet regulatory compliance standards. |
| ● | Regularly inspect and maintain fleet to meet safety and environmental regulations. |
| ● | Conduct periodic audits of compliance documentation. |
| 2. | Driver Recruitment & Onboarding |
| ● | Implement targeted recruitment strategies to attract qualified drivers. |
| ● | Conduct background checks and driving record verification for all new hires. |
| ● | Provide comprehensive onboarding and training programs for new drivers. |
| 3. | IT Systems |
| ● | Manage and maintain all IT infrastructure related to logistics and transportation. |
| ● | Provide ongoing IT support and troubleshooting. |
| 4. | Operation Process |
| ● | Develop and maintain standard operating procedures for business activities as needed. |
| ● | Monitor and optimize operational workflows for efficiency. |
| 5. | KPIs Development |
| ● | Develop and implement key performance indicators (KPIs) to track and evaluate operational efficiency. |
| ● | Provide daily, monthly and annual reports on KPI performance. |
| ● | Work with the Company to adjust KPIs as needed to align with business goals. |
| 6. | Payment Services |
| ● | Manage and process payments related to operational expenses, including without limitation, vendor invoices, utility bills, staffing agency, rent and insurance, as instructed by the Company. |
| ● | Ensure timely payment of the bills to avoid late fees and maintain good credit standing. |
| ● | Provide periodic reports detailing all bills paid, as requested by the Company. |
This schedule is subject to change based on mutual agreement between the Company and the Vendor. Regular reviews will be conducted to ensure that the Services provided meet the evolving needs of the Company.
SCHEDULE B
In consideration for the Services provided under this Agreement, the Company shall pay the Vendor, within five (5) business days following the end of each month, a fee equal to 10% of the total amount of accounts payable of the Company processed by the Vendor during the previous month. Such payment is subject to the submission of an itemized invoice or documentation by the Vendor, as the Company may require.
Exhibit 10.10
VOTING AGREEMENT AND IRREVOCABLE PROXY
This VOTING AGREEMENT AND IRREVOCABLE PROXY (this “Agreement”) is made and entered into as of August 16, 2022, by and among Toppoint Holdings Inc., a Nevada corporation (the “Company”), and each person or entity identified on Schedule A hereto (each, a “Holder” and, collectively, the “Holders”).
RECITALS
WHEREAS, the Company’s authorized capital stock currently consists of 350,000,000 shares, consisting of 300,000,000 shares of common stock, par value $0.0001 per share, and 50,000,000 shares of “blank check” preferred stock, par value $0.0001 per share;
WHEREAS, as of the date of this Agreement, each Holder owns the number and percentage of the issued and outstanding shares (collectively, “Holders’ Shares”) set forth opposite such Holder’s name on Schedule A hereto;
WHEREAS, the Holders and the other parties hereto deem it in their best interests and in the best interests of the Company to set forth in this Agreement their respective rights and obligations in connection with their investment in the Company.
NOW, THEREFORE, in consideration of the promises and the covenants and agreements set forth in this Agreement, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows:
1. Restrictions on Holders’ Shares.
(a) Except pursuant to the terms of this Agreement, the Holders shall not, directly or indirectly, grant any proxies or powers of attorney with respect to the exercise of voting rights attached to any of the Holders’ Shares, deposit any of the Holders’ Shares into a voting trust, or enter into a voting agreement or similar arrangement or commitment with respect to any of the Holders’ Shares or make any public announcement that is in any manner inconsistent with the irrevocable appointment contained in Section 2 (Agreement to Vote Shares) hereof.
(b) Except as otherwise provided herein, each Holder shall not, in its capacity as a legal or beneficial shareholder of the Company, directly or indirectly, take any action that would make any representation or warranty contained herein untrue or incorrect or be reasonably expected to have the effect of impairing the ability of such Holder to perform its obligations under this Agreement.
(c) Any shares or other securities of the Company that any Holder purchases or with respect to which such Holder otherwise acquires legal or beneficial ownership (as defined in Rule 13d-3 under the Securities and Exchange Act of 1934, as amended) after the date of this Agreement and prior to the Expiration Time, including by reason of any share split, share dividend, share consolidation, reclassification, recapitalization or other similar transaction (collectively, the “New Shares”) shall be subject to the terms and conditions of this Agreement to the same extent as if they constituted Holders’ Shares. As used herein, the term “Expiration Time” shall mean the earlier to occur of (A) the date on which the Company completes its initial public offering pursuant to the Securities Act of 1933, as amended, or (B) the written agreement of all the parties hereto to terminate this Agreement.
(d) Should any Holder(s) choose to transfer or sell their Holders’ Shares privately (“Private Transfer”), such action shall be permissible under the terms set forth in this Agreement. Notwithstanding any Private Transfer of shares by the Holder(s), the granting, allocation, or attribution of voting rights to Mr. Hok C Chan and appointing him as the proxy shall remain unchanged and unaffected by such Private Transfer. The Holder(s) undertaking a Private Transfer shall (i) provide timely notice to the Company and the relevant parties involved of any such transaction to ensure clarity on the continuation of voting rights as specified; and (ii) have the buyer of the Holders’ Shares appoint Mr. Hok C Chan as their proxy.
2. Agreement to Vote Shares. Prior to the Expiration Time, each Holder unconditionally and irrevocably appoints Mr. Hok C Chan, who is a director and the Chief Executive Officer of the Company, as each Holder’s proxy to attend and vote at each annual general meeting of the shareholders of the Company and at any other meetings of the shareholders of the Company called, and at every adjournment or postponement thereof, and on every action or approval by written consent or resolution of the shareholders of the Company.
3. Irrevocable Proxy. Concurrently with the execution and delivery of this Agreement, each Holder shall deliver to the Company a duly executed proxy in the form attached hereto as Annex A (the “Proxy”), which proxy is coupled with an interest sufficient in law to support an irrevocable proxy, and, until the Expiration Time, shall be irrevocable to the fullest extent permitted by law, with respect to each and every meeting of shareholders of the Company or action or approval by written resolution or consent of shareholders of the Company covering the total number of the Holders’ Shares and New Shares in respect of which each of the Holders is entitled to vote at any such meeting or in connection with any such written consent. Upon the execution of this Agreement by the Holders, (i) each of the Holders hereby revokes any and all prior proxies (other than the Proxy) given by each of the Holders and (ii) each of the Holders shall not grant any subsequent proxies, or enter into any agreement or understanding with any person to vote or give instructions with respect to the Holders’ Shares and New Shares in any manner inconsistent with the terms of Section 2, until after the Expiration Time.
4. Representations, Warranties and Covenants of Holders. Each of the Holders hereby in respect of itself only represents, warrants and covenants to the Company as follows:
(a) The Holder is the legal or beneficial owner of, or exercises voting power over, that number of common stock of the Company set forth on the Schedule A hereto. No person not a signatory to this Agreement has a beneficial interest in or a right to acquire or vote any of the Holders’ Shares (other than, if such Holder is a partnership or a limited liability company, the rights and interest of persons and entities that own partnership interests or units in such Holder under the partnership agreement or operating agreement governing such Holder and applicable partnership law or limited liability company law, or if such Holder is a married individual and resides in a state with community property laws, the community property interest of his or her spouse to the extent applicable under such community property laws). The Holders’ Shares are and will be at all times up until the Expiration Time be legally or beneficially owned by such Holder free and clear of any security interests, liens, claims, pledges, options, rights of first refusal, co-sale rights, agreements, limitations on such Holder’s voting rights, charges and other encumbrances of any nature that would adversely affect Mr. Hok C Chan’s exercise or fulfillment of the rights and obligations of such Holders under this Agreement or of the parties to this Agreement. Each of the Holders’ registered office is set forth on the signature page hereto.
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(b) If such Holder is a corporation, limited partnership or limited liability company, such Holder is an entity duly incorporated or organized, validly existing and in good standing under the laws of the jurisdiction in which it is incorporated or constituted.
(c) Such Holder has all requisite power, capacity and authority to enter into this Agreement and to consummate the transactions contemplated hereby. The execution and delivery of this Agreement by such Holder and the consummation by such Holder of the transactions contemplated hereby have been duly authorized by all necessary action, if any, on the part of such Holder (or its board of directors or similar governing body, as applicable), and no other actions or proceedings on the part of such Holder are necessary to authorize the execution and delivery by such Holder of this Agreement and the consummation by such Holder of the transactions contemplated hereby. This Agreement has been duly executed and delivered by such Holder and, assuming the due authorization, constitutes a valid and binding obligation of such Holder, enforceable against such Holder in accordance with its terms, subject to applicable bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and similar laws affecting creditors’ rights and remedies generally and to general principles of equity.
(d) The execution and delivery of this Agreement does not, and the performance by such Holder of its agreements and obligations hereunder will not, conflict with, result in a breach or violation of or default under (with or without notice or lapse of time or both), or require notice to or the consent of any person under, any provisions of the organizational documents of such Holder (if applicable), or any agreement, commitment, law, rule, regulation, judgment, order or decree to which such Holder is a party or by which such Holder is, or any of its assets are, bound, except for such conflicts, breaches, violations or defaults that would not, individually or in the aggregate, prevent or delay such Holder from performing his, her or its obligations under this Agreement.
(e) Each of the Holders agree that it will not in its capacity as a shareholder of the Company bring, commence, institute, maintain, prosecute or voluntary aid any action, claim, suit or cause of action, in law or in equity, in any court or before any governmental entity, which (i) challenges the validity or seeks to enjoin the operation of any provision of this Agreement or (ii) refute the due execution and delivery by it of this Agreement.
5. Restrictions on Disposals.
The parties hereby agree that no person (other than an existing Holder) shall acquire any interest in any Holders’ Shares or New Shares (and the Company shall not be obliged to register any transfer of any Holders’ Shares or New Shares or any interest therein by any Holder) by way of a Private Transfer unless such person has (i) entered into a deed of adherence in a form reasonably acceptable to the Company agreeing to be bound by this Agreement and (ii) provided to the Company a duly executed Proxy covering the total number of Holders’ Shares and New Shares in respect of which such person is to acquire an interest.
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6. Miscellaneous.
(a) Notices. All notices and other communications hereunder shall be in writing and shall be deemed given on (i) the date of delivery, if delivered personally or by commercial delivery service, or (ii) on the date of confirmation of receipt (or the next Business Day, if the date of confirmation of receipt is not a Business Day), if sent via facsimile (with confirmation of receipt), to the parties hereto at the following address (or at such other address for a party as shall be specified by like notice):
| (i) | if to the Company, to: |
Toppoint Holdings Inc.
1250 Kenas Road.,
North Wales, PA 19454
Attn: Hok C Chan
Email: ***
with a copy (which shall not constitute notice) to:
Bevilacqua PLLC
1050 Connecticut Avenue, NW, Suite 500
Washington, DC 20036
Attn: Louis A. Bevilacqua, Esq.
Email: lou@bevilacquapllc.com
| (ii) | if to the Holders, to the address set forth for each of the Holders on the signature page hereof. |
(b) Interpretation. When a reference is made in this Agreement to sections or exhibits, such reference shall be to a section of or an exhibit to this Agreement unless otherwise indicated. 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 words “include,” “includes” and “including” when used herein shall be deemed in each case to be followed by the words “without limitation.” The phrases “the date of this Agreement”, “the date hereof”, and terms of similar import, unless the context otherwise requires, shall be deemed to refer to the date first above written. Unless the context of this Agreement otherwise requires: (i) words of any gender include each other gender; (ii) words using the singular or plural number also include the plural or singular number, respectively; and (iii) the terms “hereof,” “herein,” “hereunder” and derivative or similar words refer to this entire Agreement.
(c) Specific Performance; Injunctive Relief. The parties hereto acknowledge that the Company will be irreparably harmed and that there will be no adequate remedy at law for a violation of any of the covenants or agreements set forth herein or in the Proxy. Therefore, it is agreed that, in addition to any other remedies that may be available to the Company upon any such violation of this Agreement or the Proxy, the Company shall have the right to enforce such covenants and agreements and the Proxy by specific performance, injunctive relief or by any other means available to the Company at law or in equity and each of the Holders hereby waives any and all defenses that could exist in its favor in connection with such enforcement and waives any requirement for the security or posting of any bond in connection with such enforcement.
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(d) Counterparts. This Agreement may be executed in one or more counterparts, all of which shall be considered one and the same instrument and shall become effective when one or more counterparts have been signed by each of the parties and delivered to the other parties hereto; it being understood that all parties need not sign the same counterpart. Delivery of an executed counterpart of a signature page to this Agreement by telecopy or by electronic delivery in Adobe Portable Document Format or other electronic format based on common standards will be effective as delivery of a manually executed counterpart of this Agreement.
(e) Entire Agreement; Nonassignability; Parties in Interest; Death or Incapacity. This Agreement and the documents and instruments and other agreements specifically referred to herein or delivered pursuant hereto (including, without limitation, the Proxy) (i) constitute the entire agreement among the parties with respect to the subject matter hereof and supersede all prior agreements and understandings, both written and oral, among the parties with respect to the subject matter hereof and (ii) are not intended to confer, and shall not be construed as conferring, upon any person other than the parties hereto any rights or remedies hereunder. Neither this Agreement nor any of the rights, interests, or obligations under this Agreement may be assigned or delegated, in whole or in part, by operation of law or otherwise, by the Holders without the prior written consent of the Company, and any such assignment or delegation that is not consented to shall be null and void. This Agreement, together with any rights, interests or obligations of the Company hereunder, may be assigned or delegated in whole or in part by the Company to any direct or indirect wholly owned subsidiary of the Company without the consent of or any action by the Company upon notice by the Company to the Holders as herein provided. Subject to the preceding sentence, this Agreement shall be binding upon, inure to the benefit of, and be enforceable by, the parties hereto and their respective successors and assigns (including, without limitation, any person to whom any Holders’ Shares or New Shares are sold, transferred or assigned). All authority conferred herein shall survive the death or incapacity of each of the Holders and in the event of each of the Holders’ death or incapacity, any obligation of each of the Holders hereunder shall be binding upon the heirs, personal representatives, successors and assigns of each of the Holders.
(f) Severability. In the event that any provision of this Agreement, or the application thereof, becomes or is declared by a court of competent jurisdiction to be illegal, void or unenforceable, the remainder of this Agreement shall continue in full force and effect and the application of such provision to other persons or circumstances shall be interpreted so as reasonably to effect the intent of the parties hereto. The parties hereto further agree to use their commercially reasonable efforts to replace such void or unenforceable provision of this Agreement with a valid and enforceable provision that shall achieve, to the extent possible, the purposes of such void or unenforceable provision.
(g) Several Obligations. The obligations of each Holder to the Company under this Agreement are several only. No Holder is responsible to the Company for the obligations of any other Holders under this Agreement.
(h) Remedies Cumulative. Except as otherwise provided herein, any and all remedies herein expressly conferred upon a party shall be deemed cumulative with and not exclusive of any other remedy conferred hereby, or by law or equity upon such party, and the exercise by a party of any one remedy shall not preclude the exercise of any other remedy.
(i) Governing Law. The terms and conditions of this Agreement and the rights of the parties hereunder shall be governed by and construed in all respects in accordance with the laws of the state of Nevada. The parties to this Agreement hereby irrevocably agree that the courts of the state of Nevada shall have exclusive jurisdiction in respect of any dispute, suit, action, arbitration or proceedings (“Proceedings”) which may arise out of or in connection with this Agreement and waive any objection to Proceedings in the courts of the state of Nevada on the ground of venue or on the basis that the Proceedings have been brought in an inconvenient forum.
(j) Termination. This Agreement shall terminate and shall have no further force or effect from and after the Expiration Time, and thereafter there shall be no liability or obligation on the part of the Holders, provided, that no such termination shall relieve any party from liability for any willful breach of this Agreement prior to such termination.
(k) Amendment. Any provision of this Agreement may be amended or waived if, and only if, such amendment or waiver is in writing and signed, in the case of an amendment, by each of the parties hereto, or in the case of a waiver, by the party against which the waiver is to be effective. Notwithstanding the foregoing, no failure or delay by any party hereto in exercising any right hereunder shall operate as a waiver thereof nor shall any single or partial exercise thereof preclude any other or further exercise of any right hereunder.
(l) Rules of Construction. The Parties hereto agree that they have been represented by counsel during the negotiation, preparation and execution of this Agreement and, therefore, waive the application of any law, regulation, holding or rule of construction providing that ambiguities in an agreement or other document shall be construed against the party drafting such agreement or document.
(m) WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER BASED ON CONTRACT, TORT, OR OTHERWISE) ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE ACTIONS OF ANY PARTY HERETO IN NEGOTIATION, ADMINISTRATION, PERFORMANCE OR ENFORCEMENT HEREOF.
[Signature Page Follows]
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IN WITNESS WHEREOF, the parties have executed this Voting Agreement and Irrevocable Proxy as of the date first written above.
| Company: | ||
| Toppoint Holdings Inc. | ||
| a Nevada corporation | ||
| By: | /s/ Hok C Chan | |
| Name: | Hok C Chan | |
| Title: | Director and Chief Executive Officer | |
| Address: | ||
| 1250 Kenas Road., | ||
| North Wales, PA 19454 | ||
Signature Page to Voting Agreement and irrevocable proxy
| HOLDERS: | ||
| Chan Heung Ling | ||
| By: | /s/ Chan Heung Ling | |
| Name: | Chan Heung Ling | |
| Address: | ||
| *** | ||
| Hung Hom, Hong Kong | ||
| Email address: *** | ||
| Guido Ji-Zhong Chen | ||
| By: | /s/ Guido Ji-Zhong Chen | |
| Name: | Guido Ji-Zhong Chen | |
| Address: | ||
| *** | ||
| Hung Hom, Hong Kong | ||
| Email address: *** | ||
| Lam Lok Ki Kenneth | ||
| By: | /s/ Lam Lok Ki Kenneth | |
| Name: | Lam Lok Ki Kenneth | |
| Address: | ||
| *** | ||
| Kowloon, Hong Kong | ||
| Email address: *** | ||
Signature Page to Voting Agreement and irrevocable proxy
| Ho King Chi Roy | ||
| By: | /s/ Ho King Chi Roy | |
| Name: | Ho King Chi Roy | |
| Address: *** | ||
| Shatin, N.T., Hong Kong | ||
| Email address: *** | ||
Signature Page to Voting Agreement and irrevocable proxy
Schedule A
List of Holders
| Holder Name | Shares of Common Stock |
| Chan Heung Ling | 5,700,000 |
| Guido Ji-Zhong Chen | 600,000 |
| Lam Lok Ki Kenneth | 600,000 |
| Ho King Chi Roy | 600,000 |
| Total | 7,500,000 |
Annex A
IRREVOCABLE PROXY
We, [name] of [address] (the “Shareholder”) being the holder of [number] share of common stock of Toppoint Holdings Inc., a Nevada corporation (the “Company”), hereby appoint Mr. Hok C Chan, a director and the Chief Executive Officer of the Company (the “Proxy Holder”) the true and lawful attorney and proxy of the Shareholder for and in the Shareholder’s name, place and stead to attend all meetings of the shareholders of the Company and to vote at a meeting any and all shares in the Company at the time standing in the Shareholder’s name and to exercise all consensual rights in respect of such shares (including without limitation giving or withholding written consents of shareholders and calling special general meetings of shareholders) upon and during the continuance of the voting agreement made between, among others, the Company and the Shareholder dated August 16, 2022 (the “Voting Agreement”).
The Shareholder hereby affirms that this proxy is given pursuant to Section 3 of the Voting Agreement. THIS PROXY IS COUPLED WITH AN INTEREST AND IS IRREVOCABLE.
The Shareholder hereby ratifies and confirms and undertakes to ratify and confirm all that the Proxy Holder may lawfully do or cause to be done by virtue hereof.
If at any time this proxy shall or for any reason be ineffective or unenforceable or fail to provide the Proxy Holder with the rights or the control over the Shareholder’s shares of the Company purported to be provided herein, the Shareholder shall execute a replacement instrument which provides the Proxy Holder with substantially the same control over the Shareholder’s shares of the Company as contemplated herein.
This proxy shall terminate and cease to have effect on and from (i) the Expiration Time or (ii) the time when the Shareholder ceases to own any voting shares in the Company’s issued capital.
This irrevocable proxy shall be governed by the laws of the state of Nevada and the Shareholder irrevocably submits to the jurisdiction of the courts of the state of Nevada in relation to the matters contained herein.
IN WITNESS WHEREOF this Deed is duly executed and delivered the day and year first before written.
|
SIGNED as a DEED
by
In the presence of:
Name: ____________________________
[Name of Witness] |
) ) ) |
_____________________________ |
Exhibit 10.11
PARKING LICENSE AGREEMENT
THIS PARKING LICENSE AGREEMENT (the “Agreement”) is entered into as of June 1, 2024 by and between Top Point Inc. (the “Licensee”), a PA Corporation with its principal place of business located at 210 Division Street, Kingston PA, 18704 and 87 Doremus Ave LLC (the “Licensor”), a New Jersey limited liability company with its principal place of business located at 440 State Route 17, Suite 1, Hasbrouck Heights, New Jersey 07604.
1. Right to Occupy Parking Area: Licensor hereby licenses to Licensee, and Licensee hereby licenses from Licensor, the right to occupy two (2) acres (70 Stalls) (the “Parking Area”) at 697 Doremus Avenue, Newark NJ 07105 (the “Property”). Licensee hereby accepts the Parking Area in its existing “AS IS”, “WHERE IS”, “WITH ALL FAULTS” condition. Licensor reserves the right to relocate the Parking Area to a different location on the Property.
2. Permitted Use: Licensee shall use the Parking Area only for the parking and storage of tractors, empty trailers and other vehicles (the “Permitted Use”), and the Parking Area shall be used only by Licensee. The service and maintenance of vehicles and the storage of hazardous substances and materials (including oil and gasoline) shall be strictly prohibited on the Parking Area.
3. Term: The term of this Agreement will begin on June 1st, 2024 (the “Commencement Date”) and continue through March 31st , 2025, unless sooner terminated pursuant to the terms of this Agreement (the “Term”); provided, however, that this Agreement shall not be effective and the Term shall not commence unless and until Licensor has received the first month’s Parking Fee, the Parking Fee for the period of June 1st , 2024 through June 30th, 2024, the Security Deposit, and the Certificate of Liability Insurance. Licensee agrees that it shall not enter the Parking Area or the Property until it has delivered these items to Licensor and that if it fails to deliver any of these items to Licensor when required by the terms of this Agreement, Licensor shall have the right to terminate this Agreement.
4. Termination: This Agreement may be terminated by Licensor or Licensee on 90 days written notice to the other party. In the event of a termination by Licensor in the middle of the month, Licensor will return the prorated Parking Fee to Licensee within three business days after Licensee’s vacation of the Parking Area. For example, if Licensor sends written notice of termination on the 3rd day of a 30-day month and Licensee vacates the Parking Area on the 10th day of a 30-day month, Licensor will return two-thirds of the Parking Fee to Licensee; provided, however, that Licensee leaves the Parking Area in the same condition as it was at the start of the Term, ordinary wear and tear excepted (as determined by Licensor).
5. Renewal Term: Provided Licensee is not then in default of this Agreement, Licensee and Licensor may mutually agree to extend the Term based on the Licensor’s ability to renew and extend with Master Landlord. Renewal and/or extension will be based on terms mutually agreeable to Licensee and Licensor. If Licensee is interested in such a renewal term, Licensee shall provide irrevocable, unconditional written notice of renewal to Licensor at least ninety (90) days prior to the then-current expiration date of the Term. If Licensor and Licensee fail to reach agreement on the terms of such renewal term within sixty (60) days of Licensee’s written notice of renewal, then said written notice of renewal shall be deemed null and void.
6. Parking Fee: Licensee shall pay Licensor $54,000 per month (the “Parking Fee”), without setoff, deduction or demand, prorated for any partial month, which shall be due on or before the first day of each month, by wire transfer of immediately available funds to an account designated in writing by Licensor. The first month’s Parking Fee and the Parking Fee for the period of June 1st, 2024 through June 30th, 2024 shall be payable upon execution of this Agreement. If Licensee fails to make a payment of the Parking Fee or any other amounts due within 3 days following the due date, Licensee will pay to Licensor a late charge of 5% of such overdue amount. Further, if Licensee fails to make a payment of the Parking Fee or any other amounts due after said 5-day period, Licensee shall pay interest on the unpaid amount from the due date of payment at the lesser of the rate of eighteen percent (18%) per annum or the maximum legal rate of interest. In the event Licensee makes any payment by check and said check is returned by the bank unpaid, Licensee shall immediately pay to Licensor the sum of $100.00 to cover the costs and expenses of processing the returned check, in addition to the payment and any other charges provided for in this Agreement. The Parking Fee shall be subject to four percent (4%) annual increases on each anniversary of the Commencement Date.
7. Security Deposit: Upon execution of this Agreement, Licensee shall pay Licensor a security deposit equal to $50,000 (the “Security Deposit”) as security for the performance by Licensee of the terms, covenants and conditions of this Agreement. The Security Deposit may be commingled with Licensor’s other funds and will not bear interest. Licensor may apply the Security Deposit to any amount due to Licensor or which Licensor may pay by reason of Licensee’s default.
If all or any portion of the Security Deposit is so applied by Licensor, Licensee shall, within 5 days after written demand from Licensor, replenish the Security Deposit in full. Licensor will return the Security Deposit to Licensee no more than 15 days after the later of (a) the end of the Term and (b) the date Licensee vacates the Parking Area and delivers possession of the same to Licensor; provided, however, that Licensee complies with all of the terms of this Agreement and delivers the Parking Area to Licensor in the same condition as it was at the start of the Term, ordinary wear and tear excepted (as determined by Licensor).
8. Maintenance and Repairs: Licensee will maintain the Parking Area, including any existing gravel, pavement and striping, and any trash, snow and ice removal. Licensee will repair any damage to the Parking Area caused by it or any of its agents, employees or invitees. Licensor will repair the fencing around the perimeter of the Parking Area. Licensee acknowledges and agrees that Licensor has no obligation to provide lighting or security in the Parking Area.
9. Structures and Alterations: Licensee may install, at its sole cost and expense, reasonable temporary structures or alterations related to its use of the Parking Area (for example, signage, striping and wheel stops, lighting, crushed gravel (no millings), trash receptacles, and portable toilets), with Licensor’s prior written consent. Upon Licensor’s request, Licensee will remove any and all structures and alterations at the end of the Term or upon an earlier termination of this Agreement. In the event of Licensee’s failure to do so, Licensor will remove such structures and alterations at Licensee’s sole cost and expense.
10. Licensee Representations and Warranties: Licensee represents, warrants and covenants to Licensor as follows (initial one only):
Initial
| a. | License does not have any employees and, therefore, is not legally required to maintain Worker’s Compensation and Disability Benefits Insurance. Licensee shall immediately send written notice (email being sufficient) to Licensor when it hires an employee and shall provide Licensor with the evidence of Worker’s Compensation and Disability Benefits Insurance as set forth below. | ☐ |
| b. | License has one or more employees and, therefore, is legally required to maintain Worker’s Compensation and Disability Benefits Insurance. | ☒ |
11. Insurance:
a. Licensee shall, at its sole cost and expense, obtain and maintain the following insurance coverage during the Term:
| ● | Commercial General Liability Insurance with minimum limits of not less than $2,000,000 per occurrence and $5,000,000 in the aggregate, which shall include Broad Form Contractual Liability shall be written on an occurrence (not a claims-made) basis; |
| ● | Commercial Automotive Liability Insurance with minimum limits of not less than $1,500,000 per occurrence, including bodily injury and property damage liability, and, where applicable, appropriate endorsements for the coverage of hazardous materials (MCS-90 and ISO-9948); |
| ● | Personal Property Insurance (All Risks) covering 100% of the replacement cost of License’s property; and |
| ● | Worker’s Compensation and Disability Benefits Insurance in the amounts required by applicable law of the state where the Parking Area is located, and Employers Liability Insurance with minimum limits of not less than $1,000,000 per occurrence. |
b. Licensee shall name Licensor (and, if requested, the owner of the Property) as an additional insured on a primary and non-contributory basis on the Commercial General Liability Insurance and the Commercial Automobile Liability Insurance policies, as shown in the accompanying sample Certificate of Liability Insurance. Licensee shall, and shall cause its insurance carriers to, (x) waive all rights of subrogation against Licensor (and the owner of the Property if named as an additional insured) and insurance companies on account of any loss or damage occasioned to Licensor (and the owner of the Property if named as an additional insured), the Property or the Parking Area, arising from any risk to the extent covered by, or would have been covered by, such party’s insurance, as permitted by state law, and (y) provide Licensor with thirty days’ written notice of any change or cancellation of any such insurance policies. Upon the execution of this Agreement, and in no event later than the day prior to the Commencement Date, and on each insurance policy renewal, Licensee shall provide Licensor with (i) a Certificate of Liability Insurance showing Licensor (and the owner of the Property, if applicable) as an additional insured and (ii) additional insured endorsements.
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12. Indemnification and Hold Harmless: Licensee shall protect, indemnify and hold harmless Licensor and its members, managers, officers, employees, agents, successors and assigns (collectively, “Indemnified Parties”) from and against, and shall compensate and reimburse Indemnified Parties for, any Damages that are suffered or incurred by any of the Indemnified Parties or to which any of the Indemnified Parties may otherwise become subject at any time and that arise from, as a result of, or are connected with (a) Licensee’s breach of this Agreement, (b) Licensee’s use of the Parking Area, including any Damages incurred in connection with environmental contamination or other environmental condition in connection with Licensee’s use and occupancy of the Parking Area, (c) the negligent, wrongful, or unlawful conduct of Licensee and its employees and independent contractors in the Parking Area or the Property, or (d) costs and expenses (including reasonable attorneys’ fees) incurred by Licensor incident to any of the foregoing or incurred in investigating or attempting to avoid the same or to oppose the imposition thereof, or in successfully enforcing the indemnity under this provision. Licensee shall defend the Indemnified Parties in any lawsuit for personal injury to, or death of, any person, or loss or damage to property. Licensee waives any and all claims against Licensor, including but not limited to (i) theft and vandalism of any of the vehicles or personal property present in the Parking Area, (ii) any loss from business interruption or loss of use of the Parking Area,
(iii) any latent or patent defects in the Parking Area or the Property, or (iv) any matters that would have been covered by appropriate insurance of Licensee, excepting only claims arising from the gross negligence or willful misconduct of Licensor. The term “Damages” means any and all losses, damages, penalties, fines, interest, awards, charges, sanctions, orders, settlements, judgments, claims, actions, enforcement actions, demands, suits, proceedings, investigations, arbitrations, indebtedness, liabilities, obligations, taxes, liens, fees and expenses (including reasonable fees and expenses of attorneys and other professionals) of any kind. This obligation shall survive the expiration or earlier termination of this Agreement.
13. Surrender/Holdover: At the end of the Term (including if this Agreement is terminated prior to the end of the Term as provided in this Agreement), Licensee shall vacate the Parking Area and remove all of its vehicles, structures and installations, and other personal property (collectively, “Licensee Property”) and, if requested by Licensor, return the Parking Area to its condition prior to the start of the Term, ordinary wear and tear excepted (as determined by Licensor). Licensee consents and agrees that any Licensee Property remaining in the Parking Area may be towed, removed and stored at Licensee’s cost and expense without Licensor being deemed to have violated any applicable laws or becoming liable for any loss or damage thereto. If Licensee continues to use or occupy the Parking Area after the Term (including if this Agreement is terminated prior to the end of the Term as provided in this Agreement), Licensee shall pay Licensor a monthly amount equal to the greater of (a) 200% of the Parking Fee (for example, if the Parking Fee is $5,000 per month, then the Holdover Fee would be $10,000 per month) or (b) the amount of Licensor’s damages as a result of Licensee’s refusal or failure to vacate the Parking Area (either, a “Holdover Fee”).
14. Inability to Operate: Notwithstanding anything to the contrary in this Agreement, Licensor shall have the right to terminate this Agreement, without penalty, in the event that any governmental authority requires Licensor or Licensee to cease its operations on, or to vacate, the Parking Area. In such an event, this Agreement shall terminate on the date specified in such party’s written notice, and Licensee shall surrender the Parking Area to Licensor in accordance with terms of this Agreement on or before such date.
15. Compliance with Law; Environmental: Licensee shall comply with all applicable laws, orders and regulations of federal, state and municipal governments and their agencies, including but not limited to environmental laws. Licensee shall not use, store, dispose of, or otherwise permit the presence of any hazardous substances or materials (as defined by applicable federal and state law, including 42 U.S.C. 9601 et seq.) at, in, on, under or around the Parking Area or the Property, except as permitted by applicable law.
16. Licensor Access: Licensee agrees that Licensor shall have access to the Parking Area to inspect the Parking Area or to undertake activities reasonably required by Licensor, and Licensor agrees to use commercially reasonable efforts not to interfere with Licensee’s use of, or access to, the Parking Area.
17. Events of Default: Licensee shall be in default in the event of any of the following:
a. Licensee fails to pay the Parking Fee or any other amount payable under this Agreement when it is due, and such failure remains uncured within 5 days after such Parking Fee or any other amount is due;
b. Licensee fails to vacate and deliver possession of the Parking Area to Licensor upon the expiration or termination of this Agreement in strict compliance with the terms of this Agreement;
c. Licensee fails to maintain the insurance required by this Agreement;
d. Licensee becomes bankrupt or insolvent, as reasonably determined by Licensor; or
e. Licensee fails to perform any of its other obligations under this Agreement and such failure continues for a period of 10 days after notice from Licensor.
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18. Remedies: Upon a default by Licensee, in addition to any other remedies available at law or equity, Licensor may elect to do all or any combination of the following: (a) terminate this Agreement immediately upon notice to Licensee, (b) tow, remove and store any Licensee Property remaining on the Parking Area, and (c) recover from Licensee the sum of (i) all Parking Fees and all other amounts accrued hereunder to the date of such termination, (ii) the costs of towing, removing and storing Licensee Property or any other occupant’s property, (iii) the cost of repairing or otherwise restoring the Parking Area to the same condition as it was at the start of the Term, ordinary wear and tear excepted (as determined by Licensor), and (iv) the amount equal to the Parking Fee which would have been payable by Licensee to Licensor had this Agreement not been terminated; provided, however, that with regard to (iv), if Licensor re-licenses the Parking Area to a third party during the Term, Licensor shall credit Licensee with the net parking fees received by Licensor from such re- licensing, with such net parking fees being determined by first deducting from the gross parking fees the costs and expenses incurred or paid by Licensor in connection with Licensee’s default, including but not limited to preparing the Parking Area for the new licensee, broker’s commissions relating to the licensing to the new licensee, and reasonable attorney’s fees, but in no event shall Licensee be entitled to receive any excess of such net parking fees over the amounts payable by Licensee to Licensor hereunder.
19. License (Not Lease): This Agreement and the rights granted to Licensee herein are intended and shall be deemed to constitute merely a license to use and occupy the Parking Area upon the terms and conditions set forth in this Agreement, and shall not be deemed to constitute a lease or any other interest in real property, and, therefore, Licensee shall not be entitled to any statutory or common law right or benefit afforded to a lessee or tenant of real property.
20. Entire Agreement; Amendment: This Agreement is a complete and exclusive statement of the terms of the parties with respect to its subject matter and supersedes all prior agreements, whether written or oral, between the parties with respect to its subject matter. This Agreement may not be amended, supplemented, or otherwise modified except by a written agreement executed by the parties.
21. Governing Law and Jurisdiction: This Agreement will be governed by and construed under the laws of the State of New Jersey, without regard to its conflicts-of-laws principles that would require the application of any other law. Each party (a) irrevocably submits to the exclusive jurisdiction of the Superior Court of New Jersey in Bergen County (or, if required by applicable law, in the state and county where the Parking Area is located), (b) agrees that such court may decide all claims properly submitted to such court, (c) waives, to the fullest extent it may effectively do so, the defense of an inconvenient forum, and (d) consents to the service of process by mail.
22. Waiver of Trial by Jury: TO THE FULLEST EXTENT PERMITTED BY LAW, EACH PARTY HEREBY WAIVES ANY AND ALL RIGHTS TO A TRIAL BY JURY OF ANY ISSUE ARISING OUT OF OR RELATING TO THIS AGREEMENT.
23. Legal Fees: Licensee shall pay all reasonable costs and expenses incurred by or on behalf of Licensor in connection with any litigation or other legal proceeding involving the interpretation of this Agreement or the exercise of any rights and remedies under this Agreement or under applicable law, including reasonable attorneys’ fees.
24. Assignment: Licensee shall not assign this Agreement or any of its rights or delegate any of its obligations under this Agreement without the prior written consent of Licensor, which shall be in Licensor’s discretion. For the avoidance of doubt, Licensee shall not sublicense, rent or allow any third party to use or occupy any portion of the Parking Area. Licensor may assign this Agreement with written notice to Licensee. Any purported assignment, delegation, sublicensing, etc. in violation of this provision shall be null and void. Subject to the preceding sentence, this Agreement will apply to, be binding in all respects upon and inure to the benefit of, the successors and permitted assigns of the parties.
25. Confidentiality: Licensee agrees that the terms and conditions of this Agreement are confidential and shall not to be disclosed to any third parties (other than Licensee’s legal counsel and other advisors who need to know such information), unless Licensor provides its prior written consent.
26. Non-Interference. Licensee shall not interfere with the operations and property of any other occupant on or adjoining the Property, including without limitation Americold Logistics, LLC.
27. Authority: Each party represents and warrants that the person executing this Agreement on behalf of such party has the authority to do so and to bind the party to the terms and conditions of this Agreement.
28. Counterparts: This Agreement may be executed in one or more counterparts (including by fax, PDF via email or DocuSign), each of which will be deemed to be an original copy of this Agreement and all of which, when taken together, will be deemed to constitute one and the same agreement.
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IN WITNESS WHEREOF, the parties hereto have executed and delivered this Parking License Agreement as of the date first written above.
| LICENSOR: | LICENSEE: | |||
87 Doremus Ave LLC |
TOP POINT INC. | |||
| By: | /s/ Joseph Trancucci | By: | /s/ John Feliciano | |
| Name: | Joseph Trancucci |
Name: | John Feliciano | |
| Title: | Authorized Signature | Title: | CEO | |
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Exhibit 10.12
ND - 3 Rev 4/22 ©2022 Florida Realtors ® Nonlawyer Disclosure Instructions to Licensee : Before you begin to complete the next form, you must give this nonlawyer disclosure to the landlord or tenant for whom you are filling in the blanks . (If you are filling in the blanks for both landlord and tenant, complete two nonlawyer disclosures and give one to each . ) 1. Insert your name in the first 5 blank ” Name ” spaces and sign below . 2. Have the landlord or tenant whom you are assisting complete the provision regarding her/his ability to read English, and have her/him sign below. 3. Give this completed disclosure to the landlord or tenant, as appropriate. Keep a copy of this completed disclosure and all forms you give to the landlord or tenant in your files for at least 6 years. - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - Alex Algarin told me that he/she is a nonlawyer and may not give legal ( Name ) advice, cannot tell me what my rights or remedies are, cannot tell me how to testify in court, and cannot represent me in court. Rule 10 - 2.1(b) of the Rules Regulating The Florida Bar defines a paralegal as a person who works under the supervision of a member of The Florida Bar, an out - of - state lawyer engaged in the authorized practice of law in Florida, or a foreign lawyer engaged in the authorized practice of law in Florida, and who performs specifically delegated substantive legal work for which the supervising lawyer is responsible. Only persons who meet the Alex Algarin definition may call themselves paralegals. informed me that he/she is ( Name ) not a paralegal as defined by the rule and cannot call himself/herself a paralegal. Alex Algarin told me that he/she may only type the factual information ( Name ) provided by me in writing into the blanks on the form. Except for typing, Alex Algarin ( Name ) may not tell me what to put in the form and may not complete the form for me. However, if using a form approved by the Supreme Court of Florida, Alex Algarin may ask me factual questions to fill in ( Name ) the blanks on the form and may also tell me how to file the form. Landlord or Tenant: I can read English. I cannot read English but this notice was read to me by ( Name) in which I understand. ( Language ) Landlord or Tenant signature Licensee signature Landlord or Tenant signature Serial#: 030626 - 600167 - 8487912
RESIDENTIAL LEASE FOR APARTMENT OR UNIT IN MULTI - FAMILY RENTAL HOUSING (OTHER THAN A DUPLEX) INCLUDING A MOBILE HOME,CONDOMINIUM, OR COOPERATIVE (FOR A TERM NOT TO EXCEED ONE YEAR) (Not To Be Used For Commercial, Agricultural, or Other Residential Property) WARNING: IT IS VERY IMPORTANT TO READ ALL OF THE LEASE CAREFULLY. THE LEASE IMPOSES IMPORTANT LEGAL OBLIGATIONS. AN ASTERISK (*) OR A BLANK SPA C E ( ) INDICATES A PR O VISI ON WHERE A C H O ICE O R A DE CISI ON M UST B E M ADE BY THE PARTIES. NO CHANGES OR ADDITIONS TO THIS FORM MAY BE MADE UNLESS A LAWYER IS CONSULTED. I. TERMS AND PARTIES. This is a lease (the “Lease”) for a period of 36 months (the “Lease Term”), beginning (number) October 1, 2022 and ending October 1, 2025 , between (month, day, year) (month, day, year) Y U CH I NG S U and (name of owner of the property) TOPPOINT INC (name(s) of person(s) to whom the property is leased) (In the Lease, the owner, whether one or more, of the property is called “Landlord.” All persons to whom the property is leased are called “Tenant.”) Landlord’s E - mail Address: Landlord’s Telephone Number: Tenant’s E - mail Address: Tenant’s Telephone Number: II. PROPERTY RENTED. Landlord 2301 in leases to Tenant apartment or unit no. the building located at 1900 N Bayshore Drive known as (street address) Quantum on the Bay (name of apartment or condominium) Florida 33141 , together with the following furniture and appliances: , M i a mi B ea c h , (city) ( zip c ode ) Fully furnished with refrigerator, oven, stove, washing machine, dryer, microwave [List all furniture and appliances . If none, write “none . “] (In the Lease, the property leased, including furniture and appliances, if any, is called “the Premises . “) III. COMMON AREAS . Landlord grants to Tenant permission to use, during the Lease Term, along with others, the common areas of the building and the development of which the Premises are a part . IV. RENT PAYMENTS AND CHARGES . Tenant shall pay rent for the Premises in installments of $ each on the day of each [month, week] (a “Rental Installment Period,” as used in the Lease, shall be a month if rent is paid monthly, and a week if rent is paid weekly . ) Tenant shall pay with each rent payment all taxes imposed on the rent by taxing authorities . The amount of taxes payable on the beginning date of the Lease is $ for each installment . The amount of each installment of rent plus taxes (“the Lease Payment”), as of the date the Lease begins, is $ . Landlord will notify Tenant if the amount of the tax changes . Tenant shall pay the rent and all other charges required to be paid under the Lease by cash, valid check, or money order . Landlord may appoint an agent to collect the Lease Payment and to perform Landlord’s obligations . Tenant ( ) ( ) and Landlord ( ) ( ) acknowledge receipt of a copy of this page, which is Page 1 of 18 . RLAUCC - 1x Rev 7/16 Approved on April 15, 2010, by the Supreme Court of Florida, for use under rule 10 - 2.1(a) of the Rules Regulating the Florida Bar. Serial#: 030626 - 600167 - 8487912
| Tenant ( ) ( ) and Landlord ( ) ( ) acknowledge receipt of a copy of this page, which is Page 1 of 28. | |
| RLAUCC-1x Rev 7/16 Approved on April 15, 2010, by the Supreme Court of Florida, for use under rule 10-2.1(a) of the Rules Regulating the Florida Bar. | |
| Serial#: 030626-600167-8487912 |  |
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ Other : Tenant ( ) ( ) and Landlord ( ) ( ) acknowledge receipt of a copy of this page, which is Page 2 of 18. RLAUCC - 1x Rev 7/16 Approved on April 15, 2010, by the Supreme Court of Florida, for use under rule 10 - 2.1(a) of the Rules Regulating the Florida Bar. Serial#: 030626 - 600167 - 8487912 a security deposit of $ 8,333.00 to be paid upon signing the Lease. Unless this box is c h e ck e d , t he L ea s e P a y m e n ts m u s t be pa i d in a d v a n c e b e gin n ing . (date) If the tenancy starts on a day other than the first day of the month or week as designated above, the rent shall be prorated from through in the amount of $ and shall be due (date) (date) on . (If rent paid monthly, prorate on a 30 - day month.) (date) V. DEPOSITS, ADVANCE RENT, AND LATE CHARGES. In addition to the Lease Payments described above, Tenant shall pay the following: (check only those items that apply) advance rent in the amount of $ 300,000.00 to be paid upon signing the Lease. for the Rental Installment Periods of Oct 2022 - Oct 2025 a pet deposit in the amount of $ to be paid upon signing the Lease. a late charge in the amount of $ for each Lease Payment made more than days after the date it is due. a bad check fee in the amount $ (not to exceed $ 20 . 00 or 5 % of the Lease Payment, whichever is greater) if Tenant makes any Lease Payment with a bad check . If Tenant makes any Lease Payment with a bad check, Landlord can require Tenant to pay all future Lease Payments in cash or by money order . Other: VI. SECURITY DEPOSITS AND ADVANCE RENT. If Tenant has paid a security deposit or advance rent the following provisions apply: A. Landlord shall hold the money in a separate interest - bearing or non - interest - bearing account in a Florida banking institution for the benefit of Tenant . If Landlord deposits the money in an interest - bearing account, Landlord must pay Tenant interest of at least 75 % of the annualized average interest paid by the bank or 5 % per year simple interest, whichever Landlord chooses . Landlord cannot mix such money with any other funds of Landlord or pledge, mortgage, or make any other use of such money until the money is actually due to Landlord ; or B. Landlord must post a surety bond in the manner allowed by law . If Landlord posts the bond, Landlord shall pay Tenant 5 % interest per year . At the end of the Lease, Landlord will pay Tenant, or credit against rent, the interest due to Tenant . No interest will be due Tenant if Tenant wrongfully terminates the Lease before the end of the Lease Term . C. If Landlord rents 5 or more dwelling units, then within 30 days of Tenant’s payment of the advance rent or any security deposit, Landlord must notify Tenant in writing of the manner in which Landlord is holding such money, the interest rate, if any, that Tenant will receive, and when such payments will be made . Alex Algarin (na m e ) VII. NOTICES. is Landlord’s Agent. All notices to Landlord and all Lease Payments must be sent to Landlord’s Agent at s ee A d d e n u d um (address) unless Landlord gives Tenant written notice of a change . Landlord’s Agent may perform inspections on behalf of Landlord, subject to Article XII below . All notices to Landlord shall be given by certified mail, return receipt requested, or by hand delivery to Landlord or Landlord’s Agent . Any notice to Tenant shall be given by certified mail, return receipt requested, or delivered to Tenant at the Premises . If Tenant is absent from the Premises, a notice to Tenant may be given by leaving a copy of the notice at the Premises . VIII . USE OF PREMISES . Tenant shall use the Premises only for residential purposes . Tenant also shall obey, and require anyone on the Premises to obey, all laws and any restrictions that apply to the Premises . Landlord will give Tenant notice of any restrictions that apply to the Premises . If the Premises are located in a condominium or cooperative development, the Lease and Tenant’s rights under it, including as to the common areas, are subject to all terms of the governing documents for the project, including, without limitation, any Declaration of Condominium or proprietary lease, and any restrictions, rules, and regulations now existing or hereafter adopted, amended, or repealed .
| Tenant ( ) ( ) and Landlord ( ) ( ) acknowledge receipt of a copy of this page, which is Page 2 of 28. | |
| RLAUCC-1x Rev 7/16 Approved on April 15, 2010, by the Supreme Court of Florida, for use under rule 10-2.1(a) of the Rules Regulating the Florida Bar. | |
| Serial#: 030626-600167-8487912 | |
Unless this box ☐ is checked, Landlord may adopt, modify, or repeal rules and regulations for the use of common areas and conduct on the Premises during the Lease Term. All rules and regulations must be reasonable and in the best interest of the development in which the Premises are located.
Occasional overnight guests are permitted. An occasional overnight guest is one who does not stay more than 14 nights in any calendar month (If left blank, 7). Landlord’s written approval is required to allow anyone else to occupy the Premises.
Unless this box ☐ is checked or a pet deposit has been paid, Tenant may not keep or allow pets or animals on the Premises without Landlord’s approval of the pet or animal in writing.
Unless this box ☐ is checked, no smoking is permitted in the Premises.
Tenant shall not keep any dangerous or flammable items that might increase the danger of fire or damage on the Premises without Landlord’s consent.
Tenant shall not create any environmental hazards on or about the Premises.
Tenant shall not destroy, deface, damage, impair, or remove any part of the Premises belonging to Landlord, nor permit any person to do so.
Tenant may not make any alterations or improvements to the Premises without first obtaining Landlord’s written consent to the alteration or improvement. However, unless this box ☐ is checked, Tenant may hang pictures and install window treatments in the Premises without Landlord’s consent, provided Tenant removes all such items before the end of the Lease Term and repairs all damage resulting from the removal.
Tenant must act, and require all other persons on the Premises to act, in a manner that does not unreasonably disturb any neighbors or constitute a breach of the peace.
IX. MAINTENANCE. Landlord and Tenant agree that the maintenance of the Premises must be performed by the person indicated below:
A. Landlord’s Required Maintenance. Landlord will comply with applicable building, housing, and health codes relating to the Premises. If there are no applicable building, housing, or health codes, Landlord shall maintain and repair the roofs, porches, windows, exterior walls, screens, foundations, floors, structural components, and steps, and keep the plumbing in reasonable working order. If the Premises are located in a condominium, Landlord and Tenant acknowledge that the maintenance of the structural elements and common areas is performed by the condominium association as part of the common area maintenance. Landlord shall assure that the association complies with applicable building, housing, and health codes relating to the Premises. If there are no applicable building, housing, or health codes, Landlord shall assure that the association maintains and repairs roofs, porches, windows, exterior walls, screens, foundations, floors, structural components, and steps, and keeps the plumbing in reasonable working order. Landlord will be responsible for the maintenance of any items listed above for which the association is not responsible.
B. Elective Maintenance. Fill in each blank space in this section with Landlord or Tenant to show who will take care of the item noted. If a space is left blank, Landlord will be required to take care of that item (or assure that the association takes care of the items if the Premises are located in a condominium).
| ☒ | Landlord | ☐ | Tenant | Smoke Detectors |
| ☒ | Landlord | ☐ | Tenant | Extermination of rats, mice, roaches, ants, wood-destroying organisms, and bedbugs |
| ☒ | Landlord | ☐ | Tenant | Locks and keys |
| ☒ | Landlord | ☐ | Tenant | Clean and safe condition of outside areas |
| ☒ | Landlord | ☐ | Tenant | Garbage removal and outside garbage receptacles |
| ☒ | Landlord | ☐ | Tenant | Running water |
| ☒ | Landlord | ☐ | Tenant | Hot water |
| ☒ | Landlord | ☐ | Tenant | Lawn |
| ☒ | Landlord | ☐ | Tenant | Heat |
| ☒ | Landlord | ☐ | Tenant | Air conditioning |
| ☒ | Landlord | ☐ | Tenant | Furniture |
| ☒ | Landlord | ☐ | Tenant | Appliances |
| ☒ | Landlord | ☐ | Tenant | Fixtures |
| ☒ | Landlord | ☐ | Tenant | Pool (including filters, machinery, and equipment) |
| ☒ | Landlord | ☐ | Tenant | Heating and air conditioning filters |
| ☐ | Landlord | ☐ | Tenant | Other: ____________________________________________________________ |
Tenant’s responsibility, if any, indicated above, shall not include major maintenance or major replacement of equipment.
Landlord shall be responsible for major maintenance or major replacement of equipment, except for equipment for which Tenant has accepted responsibility for major maintenance or major replacement in the previous paragraph.
Major maintenance or major replacement means a repair or replacement that costs more than $ 200.00
| Tenant ( ) ( ) and Landlord ( ) ( ) acknowledge receipt of a copy of this page, which is Page 3 of 28. | |
| RLAUCC-1x Rev 7/16 Approved on April 15, 2010, by the Supreme Court of Florida, for use under rule 10-2.1(a) of the Rules Regulating the Florida Bar. | |
| Serial#: 030626-600167-8487912 | |
Tenant shall be required to vacate the Premises on 7 days’ written notice, if necessary, for extermination pursuant to this subparagraph. When vacation of the Premises is required for extermination, Landlord shall not be liable for damages but shall abate the rent.
Nothing in this section makes Landlord responsible for any condition created or caused by the negligent or wrongful act or omission of Tenant, any member of Tenant’s family, or any other person on the Premises with Tenant’s consent.
| C. | Tenant’s Required Maintenance. At all times during the Lease Term, Tenant shall: |
| 1. | comply with all obligations imposed upon tenants by applicable provisions of building, housing, and health codes; |
| 2. | keep the Premises clean and sanitary; |
| 3. | remove all garbage from the dwelling unit in a clean and sanitary manner; |
| 4. | keep all plumbing fixtures in the dwelling unit clean, sanitary, and in repair; and | |
| 5. | use and operate in a reasonable manner all electrical, plumbing, sanitary, heating, ventilating, air conditioning, and other facilities and appliances, including elevators. |
X. UTILITIES. Tenant shall pay all charges for hook-up, connection, and deposit for providing all utilities and utility services to the Premises during the Lease Term except those included in the HOA payment, which Landlord agrees to provide at Landlord’s expense. (Specify any utilities to be provided and paid for by Landlord such as water, sewer, oil, gas, electricity, telephone, garbage removal, etc.).
XI. SERVICEMEMBER. If Tenant is a member of the United States Armed Forces on active duty or state active duty or a member of the Florida National Guard or United States Reserve Forces, the Tenant has rights to terminate the Lease as provided in Section 83.682, Florida Statutes, the provisions of which can be found in the attachment to this Lease.
XII. LANDLORD’S ACCESS TO PREMISES. Landlord or Landlord’s Agent may enter the Premises in the following circumstances:
| A. | At any time for the protection or preservation of the Premises. |
| B. | After reasonable notice to Tenant at reasonable times for the purpose of repairing the Premises. |
| C. | To inspect the Premises; make necessary or agreed-upon repairs, decorations, alterations, or improvements; supply agreed services; or exhibit the Premises to prospective or actual purchasers, mortgagees, tenants, workers, or contractors under any of the following circumstances: |
| 1. | with Tenant’s consent; |
| 2. | in case of emergency; |
| 3. | when Tenant unreasonably withholds consent; or | |
| 4. | if Tenant is absent from the Premises for a period of at least one-half a Rental Installment Period. (If the rent is current and Tenant notifies Landlord of an intended absence, then Landlord may enter only with Tenant’s consent or for the protection or preservation of the Premises.) |
XIII. PROHIBITED ACTS BY LANDLORD. Landlord is prohibited from taking certain actions as described in Section 83.67, Florida Statutes, the provisions of which can be found in the attachment to this Lease.
XIV. CASUALTY DAMAGE. If the Premises are damaged or destroyed other than by wrongful or negligent acts of Tenant or persons on the Premises with Tenant’s consent, so that the use of the Premises is substantially impaired, Tenant may terminate the Lease within 30 days after the damage or destruction and Tenant will immediately vacate the Premises. If Tenant vacates, Tenant is not liable for rent that would have been due after the date of termination. Tenant may vacate the part of the Premises rendered unusable by the damage or destruction, in which case Tenant’s liability for rent shall be reduced by the fair rental value of the part of the Premises that was damaged or destroyed.
XV. DEFAULTS/REMEDIES. Should a party to the Lease fail to fulfill their responsibilities under the Lease or need to determine whether there has been a default of the Lease, refer to Part II, Chapter 83, entitled Florida Residential Landlord and Tenant Act which contains information on defaults and remedies. A copy of the current version of this Act is attached to the Lease.
XVI. ASSIGNMENT AND SUBLEASING. Unless this box ☐ is checked, Tenant may not assign the Lease or sublease all or any part of the Premises without first obtaining Landlord’s written approval and consent to the assignment or sublease.
XVII. RISK OF LOSS. Subject to the next sentence, Landlord shall not be liable for any loss by reason of damage, theft, or otherwise to the contents, belongings, and personal effects of the Tenant, or Tenant’s family, agents, employees, guests, or visitors. Landlord shall not be liable if such damage, theft, or loss is caused by Tenant, Tenant’s family, agents, employees, guests, or visitors. Nothing contained in this provision shall relieve Landlord or Tenant from responsibility for loss, damage, or injury caused by its own negligence or willful conduct.
XVIII SUBORDINATION. The Lease is automatically subordinate to the lien of any mortgage encumbering the fee title to the Premises from time to time.
XIX. LIENS. The interest of the Landlord shall not be subject to liens for improvements by the Tenant as provided in Section 713.10, Florida Statutes. Tenant shall notify all parties performing work on the Premises at Tenant’s request that the Lease does not allow any liens to attach to Landlord’s interest.
| Tenant ( ) ( ) and Landlord ( ) ( ) acknowledge receipt of a copy of this page, which is Page 4 of 28. | |
| RLAUCC-1x Rev 7/16 Approved on April 15, 2010, by the Supreme Court of Florida, for use under rule 10-2.1(a) of the Rules Regulating the Florida Bar. | |
| Serial#: 030626-600167-8487912 | |
XX. APPROVAL CONTINGENCY. If applicable, the Lease is conditioned upon approval of Tenant by the association that governs the Premises. Any application fee required by an association shall be paid by ☐ Landlord ☒ Tenant. If such approval is not obtained prior to commencement of Lease Term, either party may terminate the Lease by written notice to the other given at any time prior to approval by the association, and if the Lease is terminated, Tenant shall receive return of deposits specified in Article V, if made. If the Lease is not terminated, rent shall abate until the approval is obtained from the association. Tenant agrees to use due diligence in applying for association approval and to comply with the requirements for obtaining approval. ☐ Landlord ☒ Tenant shall pay the security deposit required by the association, if applicable.
XXI. RENEWAL/EXTENSION. The Lease can be renewed or extended only by a written agreement signed by both Landlord and Tenant, but in no event may the total Lease Term exceed one year. A new lease is required for each year.
XXII. LEAD-BASED PAINT. ☐ Check and complete if the dwelling was built before January 1, 1978. Lead Warning Statement (when used in this article, the term Lessor refers to Landlord and the term Lessee refers to Tenant)
Housing built before 1978 may contain lead-based paint. Lead from paint, paint chips, and dust can pose health hazards if not managed properly. Lead exposure is especially harmful to young children and pregnant women. Before renting pre-1978 housing, Lessors must disclose the presence of known lead-based paint and/or lead-based paint hazards in the dwelling. Lessees must also receive a federally approved pamphlet on lead poisoning prevention.
Lessor’s Disclosure (initial)
| (a) | Presence of lead-based paint or lead-based paint hazards (check (i) or (ii) below): |
| (i) | ☐ Known lead-based paint and/or lead-based paint hazards are present in the housing (explain). | |
| (ii) | ☐ Lessor has no knowledge of lead-based paint and/or lead-based paint hazards in the housing. |
| (b) | Records and reports available to the Lessor (check (i) or (ii) below): |
| (i) | ☐ Lessor has provided the Lessee with all available records and reports pertaining to lead-based paint and/or lead-based paint hazards in the housing (list documents below). | |
| (ii) | ☐ Lessor has no reports or records pertaining to lead-based paint and/or lead-based paint hazards in the housing. |
Lessee’s Acknowledgment (initial)
| (c) | Lessee has received copies of all information listed above. |
| (d) | Lessee has received the pamphlet Protect Your Family From Lead in Your Home. |
Agent’s Acknowledgment (initial)
| (e) | Agent has informed the Lessor of the Lessor’s obligations under 42 U.S.C. 4852d and is aware of his/her responsibility to ensure compliance. |
Certification of Accuracy
The following parties have reviewed the information above and certify, to the best of their knowledge, that the information provided by the signatory is true and accurate.
| Lessor’s signature | Date | Lessor’s signature | Date | |||
| Lessor’s signature | Date | Lessee’s signature | Date | |||
| Agent’s signature | Date | Agent’s signature | Date | |||
| Tenant ( ) ( ) and Landlord ( ) ( ) acknowledge receipt of a copy of this page, which is Page 5 of 28. | |
| RLAUCC-1x Rev 7/16 Approved on April 15, 2010, by the Supreme Court of Florida, for use under rule 10-2.1(a) of the Rules Regulating the Florida Bar. | |
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XXIII. ATTORNEYS’ FEES. In any lawsuit brought to enforce the Lease or under applicable law, the party in whose favor a judgment or decree has been rendered may recover its reasonable court costs, including attorneys’ fees, from the non-prevailing party.
XXIV. MISCELLANEOUS.
A. Time is of the essence of the performance of each party’s obligations under the Lease.
B. The Lease shall be binding upon and for the benefit of the heirs, personal representatives, successors, and permitted assigns of Landlord and Tenant, subject to the requirements specifically mentioned in the Lease. Whenever used, the singular number shall include the plural or singular and the use of any gender shall include all appropriate genders.
C. The agreements contained in the Lease set forth the complete understanding of the parties and may not be changed or terminated orally.
D. No agreement to accept surrender of the Premises from Tenant will be valid unless in writing and signed by Landlord.
E. All questions concerning the meaning, execution, construction, effect, validity, and enforcement of the Lease shall be determined pursuant to the laws of Florida.
F. The place for filing any suits or other proceedings with respect to the Lease shall be the county in which the Premises is located.
G. Landlord and Tenant will use good faith in performing their obligations under the Lease.
H. As required by law, Landlord makes the following disclosure: “RADON GAS.” Radon is a naturally occurring radioactive gas that, when it has accumulated in a building in sufficient quantities, may present health risks to persons who are exposed to it over time. Levels of radon that exceed federal and state guidelines have been found in buildings in Florida. Additional information regarding radon and radon testing may be obtained from your county health department.
XXV. TENANT’S PERSONAL PROPERTY. TENANT MUST INITIAL IN THIS BOX ☐ FOR THE FOLLOWING PROVISION TO APPLY. BY SIGNING THIS RENTAL AGREEMENT, THE TENANT AGREES THAT UPON SURRENDER, ABANDONMENT, OR RECOVERY OF POSSESSION OF THE DWELLING UNIT DUE TO THE DEATH OF THE LAST REMAINING TENANT, AS PROVIDED BY CHAPTER 83, FLORIDA STATUTES, THE LANDLORD SHALL NOT BE LIABLE OR RESPONSIBLE FOR STORAGE OR DISPOSITION OF THE TENANT’S PERSONAL PROPERTY.
The Lease has been executed by the parties on the dates indicated below.
| /s/ YU CHING SU | October 1, 2022 | |
| Landlord’s Signature | Date | |
| Landlord’s Signature | Date | |
| /s/ Leo Chan, CEO of Toppoint Inc | October 1, 2022 | |
| Tenant’s Signature | Date | |
| Tenant’s Signature | Date |
This form was completed with the assistance of:
| Name of Individual: | Alex Algarin |
| Name of Business: | Compass FL |
| Address: | 605 Lincoln Road 7th Floor Miami Beach, FL 33141 |
| Telephone Number: | 7862957184 |
Copy of Current Version of Florida Residential Landlord and Tenant Act, Part II, Chapter 83, Florida Statutes to Be Attached
| Tenant ( ) ( ) and Landlord ( ) ( ) acknowledge receipt of a copy of this page, which is Page 6 of 28. | |
| RLAUCC-1x Rev 7/16 Approved on April 15, 2010, by the Supreme Court of Florida, for use under rule 10-2.1(a) of the Rules Regulating the Florida Bar. | |
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Early Termination Fee/Liquidated Damages Addendum
[ ☒ ] I agree, as provided in the rental agreement, to pay $ 16,000.00 (an amount that does not exceed two months’ rent) as liquidated damages or an early termination fee if I elect to terminate the rental agreement and the landlord waives the right to seek additional rent beyond the month in which the landlord retakes possession.
[ ☐ ] I do not agree to liquidated damages or an early termination fee, and I acknowledge that the landlord may seek damages as provided by law.
| Landlord’s Signature | Date | ||
| Landlord’s Signature | Date | ||
| Tenant’s Signature | Date | ||
| Tenant’s Signature | Date | ||
| Tenant ( ) ( ) and Landlord ( ) ( ) acknowledge receipt of a copy of this page, which is Page 7 of 28. | |
| RLAUCC-1x Rev 7/16 Approved on April 15, 2010, by the Supreme Court of Florida, for use under rule 10-2.1(a) of the Rules Regulating the Florida Bar. | |
| Serial#: 030626-600167-8487912 | |
Florida Residential Landlord and Tenant Act
PART II
RESIDENTIAL TENANCIES
| 83.40 | Short title. |
| 83.41 | Application. |
| 83.42 | Exclusions from application of part. |
| 83.43 | Definitions. |
| 83.44 | Obligation of good faith. |
| 83.45 | Unconscionable rental agreement or provision. |
| 83.46 | Rent; duration of tenancies. |
| 83.47 | Prohibited provisions in rental agreements. |
| 83.48 | Attorney fees. |
| 83.49 | Deposit money or advance rent; duty of landlord and tenant. |
| 83.50 | Disclosure of landlord’s address. |
| 83.51 | Landlord’s obligation to maintain premises. |
| 83.515 | Background screening of apartment employees; employment disqualification |
| 83.52 | Tenant’s obligation to maintain dwelling unit. |
| 83.53 | Landlord’s access to dwelling unit. |
| 83.535 | Flotation bedding system; restrictions on use. |
| 83.54 | Enforcement of rights and duties; civil action; criminal offenses. |
| 83.55 | Right of action for damages. |
| 83.56 | Termination of rental agreement. |
| 83.5615 | Termination of rental agreement upon foreclosure. |
| 83.57 | Termination of tenancy without specific term. |
| 83.575 | Termination of tenancy with specific duration. |
| 83.58 | Remedies; tenant holding over. |
| 83.59 | Right of action for possession. |
| Tenant ( ) ( ) and Landlord ( ) ( ) acknowledge receipt of a copy of this page, which is Page 8 of 28. | |
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| 83.595 | Choice of remedies upon breach or early termination by tenant. |
| 83.60 | Defenses to action for rent or possession; procedure. |
| 83.61 | Disbursement of funds in registry of court; prompt final hearing. |
| 83.62 | Restoration of possession to landlord. |
| 83.625 | Power to award possession and enter money judgment. |
| 83.63 | Casualty damage. |
| 83.64 | Retaliatory conduct. |
| 83.67 | Prohibited practices. |
| 83.681 | Orders to enjoin violations of this part. |
| 83.682 | Termination of rental agreement by a servicemember. 83.683 Rental application by a servicemember |
83.40 Short title. --This part shall be known as the “Florida Residential Landlord and Tenant Act.”
History. --s. 2, ch. 73-330.
83.41 Application. --This part applies to the rental of a dwelling unit.
History. --s. 2, ch. 73-330; ss. 2, 20, ch. 82-66.
83.42 Exclusions from application of part. --This part does not apply to:
(1) Residency or detention in a facility, whether public or private, when residence or detention is incidental to the provision of medical, geriatric, educational, counseling, religious, or similar services. For residents of a facility licensed under part II of chapter 400, the provisions of s. 400.0255 are the exclusive procedures for all transfers and discharges.
(2) Occupancy under a contract of sale of a dwelling unit or the property of which it is a part in which the buyer has paid at least 12 months’ rent or in which the buyer has paid at least 1 month’s rent and a deposit of at least 5 percent of the purchase price of the property.
(3) Transient occupancy in a hotel, condominium, motel, roominghouse, or similar public lodging, or transient occupancy in a mobile home park.
(4) Occupancy by a holder of a proprietary lease in a cooperative apartment.
(5) Occupancy by an owner of a condominium unit.
History. --s. 2, ch. 73-330; s. 40, ch. 2012-160; s. 1, ch. 2013-136.
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83.43 Definitions. --As used in this part, the following words and terms shall have the following meanings unless some other meaning is plainly indicated:
(1) “Building, housing, and health codes” means any law, ordinance, or governmental regulation concerning health, safety, sanitation or fitness for habitation, or the construction, maintenance, operation, occupancy, use, or appearance, of any dwelling unit.
(2) “Dwelling unit” means:
(a) A structure or part of a structure that is rented for use as a home, residence, or sleeping place by one person or by two or more persons who maintain a common household.
(b) A mobile home rented by a tenant.
(c) A structure or part of a structure that is furnished, with or without rent, as an incident of employment for use as a home, residence, or sleeping place by one or more persons.
(3) “Landlord” means the owner or lessor of a dwelling unit.
(4) “Tenant” means any person entitled to occupy a dwelling unit under a rental agreement.
(5) “Premises” means a dwelling unit and the structure of which it is a part and a mobile home lot and the appurtenant facilities and grounds, areas, facilities, and property held out for the use of tenants generally.
(6) “Rent” means the periodic payments due the landlord from the tenant for occupancy under a rental agreement and any other payments due the landlord from the tenant as may be designated as rent in a written rental agreement.
(7) “Rental agreement” means any written agreement, including amendments or addenda, or oral agreement for a duration of less than 1 year, providing for use and occupancy of premises.
(8) “Good faith” means honesty in fact in the conduct or transaction concerned.
(9) “Advance rent” means moneys paid to the landlord to be applied to future rent payment periods, but does not include rent paid in advance for a current rent payment period.
(10) “Transient occupancy” means occupancy when it is the intention of the parties that the occupancy will be temporary.
(11) “Deposit money” means any money held by the landlord on behalf of the tenant, including, but not limited to, damage deposits, security deposits, advance rent deposit, pet deposit, or any contractual deposit agreed to between landlord and tenant either in writing or orally.
(12) “Security deposits” means any moneys held by the landlord as security for the performance of the rental agreement, including, but not limited to, monetary damage to the landlord caused by the tenant’s breach of lease prior to the expiration thereof.
(13) “Legal holiday” means holidays observed by the clerk of the court.
(14) “Servicemember” shall have the same meaning as provided in s. 250.01.
(15) “Active duty” shall have the same meaning as provided in s. 250.01.
(16) “State active duty” shall have the same meaning as provided in s. 250.01.
(17) “Early termination fee” means any charge, fee, or forfeiture that is provided for in a written rental agreement and is assessed to a tenant when a tenant elects to terminate the rental agreement, as provided in the agreement, and vacates a dwelling unit before the end of the rental agreement. An early termination fee does not include:
(a) Unpaid rent and other accrued charges through the end of the month in which the landlord retakes possession of the dwelling unit.
(b) Charges for damages to the dwelling unit.
(c) Charges associated with a rental agreement settlement, release, buyout, or accord and satisfaction agreement.
History. --s. 2, ch. 73-330; s. 1, ch. 74-143; s. 1, ch. 81-190; s. 3, ch. 83-151; s. 17, ch. 94-170; s. 2, ch. 2003-72; s. 1, ch. 2008-131.
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83.44 Obligation of good faith. --Every rental agreement or duty within this part imposes an obligation of good faith in its performance or enforcement.
History. --s. 2, ch. 73-330.
83.45 Unconscionable rental agreement or provision. --
(1) If the court as a matter of law finds a rental agreement or any provision of a rental agreement to have been unconscionable at the time it was made, the court may refuse to enforce the rental agreement, enforce the remainder of the rental agreement without the unconscionable provision, or so limit the application of any unconscionable provision as to avoid any unconscionable result.
(2) When it is claimed or appears to the court that the rental agreement or any provision thereof may be unconscionable, the parties shall be afforded a reasonable opportunity to present evidence as to meaning, relationship of the parties, purpose, and effect to aid the court in making the determination.
History. --s. 2, ch. 73-330.
83.46 Rent; duration of tenancies. --
(1) Unless otherwise agreed, rent is payable without demand or notice; periodic rent is payable at the beginning of each rent payment period; and rent is uniformly apportionable from day to day.
(2) If the rental agreement contains no provision as to duration of the tenancy, the duration is determined by the periods for which the rent is payable. If the rent is payable weekly, then the tenancy is from week to week; if payable monthly, tenancy is from month to month; if payable quarterly, tenancy is from quarter to quarter; if payable yearly, tenancy is from year to year.
(3) If the dwelling unit is furnished without rent as an incident of employment and there is no agreement as to the duration of the tenancy, the duration is determined by the periods for which wages are payable. If wages are payable weekly or more frequently, then the tenancy is from week to week; and if wages are payable monthly or no wages are payable, then the tenancy is from month to month. In the event that the employee ceases employment, the employer shall be entitled to rent for the period from the day after the employee ceases employment until the day that the dwelling unit is vacated at a rate equivalent to the rate charged for similarly situated residences in the area. This subsection shall not apply to an employee or a resident manager of an apartment house or an apartment complex when there is a written agreement to the contrary.
History. --s. 2, ch. 73-330; s. 2, ch. 81-190; s. 2, ch. 87-195; s. 2, ch. 90-133; s. 1, ch. 93-255.
83.47 Prohibited provisions in rental agreements. --
(1) A provision in a rental agreement is void and unenforceable to the extent that it:
(a) Purports to waive or preclude the rights, remedies, or requirements set forth in this part.
(b) Purports to limit or preclude any liability of the landlord to the tenant or of the tenant to the landlord, arising under law.
(2) If such a void and unenforceable provision is included in a rental agreement entered into, extended, or renewed after the effective date of this part and either party suffers actual damages as a result of the inclusion, the aggrieved party may recover those damages sustained after the effective date of this part.
History. --s. 2, ch. 73-330.
83.48 Attorney fees. --In any civil action brought to enforce the provisions of the rental agreement or this part, the party in whose favor a judgment or decree has been rendered may recover reasonable attorney fees and court costs from the nonprevailing party. The right to attorney fees in this section may not be waived in a lease agreement. However, attorney fees may not be awarded under this section in a claim for personal injury damages based on a breach of duty under s. 83.51.
History. --s. 2, ch. 73-330; s. 4, ch. 83-151; s. 2, ch. 2013-136.
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83.49 Deposit money or advance rent; duty of landlord and tenant. --
(1) Whenever money is deposited or advanced by a tenant on a rental agreement as security for performance of the rental agreement or as advance rent for other than the next immediate rental period, the landlord or the landlord’s agent shall either:
(a) Hold the total amount of such money in a separate non-interest-bearing account in a Florida banking institution for the benefit of the tenant or tenants. The landlord shall not commingle such moneys with any other funds of the landlord or hypothecate, pledge, or in any other way make use of such moneys until such moneys are actually due the landlord;
(b) Hold the total amount of such money in a separate interest-bearing account in a Florida banking institution for the benefit of the tenant or tenants, in which case the tenant shall receive and collect interest in an amount of at least 75 percent of the annualized average interest rate payable on such account or interest at the rate of 5 percent per year, simple interest, whichever the landlord elects. The landlord shall not commingle such moneys with any other funds of the landlord or hypothecate, pledge, or in any other way make use of such moneys until such moneys are actually due the landlord; or
(c) Post a surety bond, executed by the landlord as principal and a surety company authorized and licensed to do business in the state as surety, with the clerk of the circuit court in the county in which the dwelling unit is located in the total amount of the security deposits and advance rent he or she holds on behalf of the tenants or $50, 000, whichever is less. The bond shall be conditioned upon the faithful compliance of the landlord with the provisions of this section and shall run to the Governor for the benefit of any tenant injured by the landlord’s violation of the provisions of this section. In addition to posting the surety bond, the landlord shall pay to the tenant interest at the rate of 5 percent per year, simple interest. A landlord, or the landlord’s agent, engaged in the renting of dwelling units in five or more counties, who holds deposit moneys or advance rent and who is otherwise subject to the provisions of this section, may, in lieu of posting a surety bond in each county, elect to post a surety bond in the form and manner provided in this paragraph with the office of the Secretary of State. The bond shall be in the total amount of the security deposit or advance rent held on behalf of tenants or in the amount of $250, 000, whichever is less. The bond shall be conditioned upon the faithful compliance of the landlord with the provisions of this section and shall run to the Governor for the benefit of any tenant injured by the landlord’s violation of this section. In addition to posting a surety bond, the landlord shall pay to the tenant interest on the security deposit or advance rent held on behalf of that tenant at the rate of 5 percent per year simple interest.
(2) The landlord shall, in the lease agreement or within 30 days after receipt of advance rent or a security deposit, give written notice to the tenant which includes disclosure of the advance rent or security deposit. Subsequent to providing such written notice, if the landlord changes the manner or location in which he or she is holding the advance rent or security deposit, he or she must notify the tenant within 30 days after the change as provided in paragraphs (a)-(d). The landlord is not required to give new or additional notice solely because the depository has merged with another financial institution, changed its name, or transferred ownership to a different financial institution. This subsection does not apply to any landlord who rents fewer than five individual dwelling units. Failure to give this notice is not a defense to the payment of rent when due. The written notice must:
(a) Be given in person or by mail to the tenant.
(b) State the name and address of the depository where the advance rent or security deposit is being held or state that the landlord has posted a surety bond as provided by law.
(c) State whether the tenant is entitled to interest on the deposit.
(d) Contain the following disclosure:
YOUR LEASE REQUIRES PAYMENT OF CERTAIN DEPOSITS. THE LANDLORD MAY TRANSFER ADVANCE RENTS TO THE LANDLORD’S ACCOUNT AS THEY ARE DUE AND WITHOUT NOTICE. WHEN YOU MOVE OUT, YOU MUST GIVE THE LANDLORD YOUR NEW ADDRESS SO THAT THE LANDLORD CAN SEND YOU NOTICES REGARDING YOUR DEPOSIT. THE LANDLORD MUST MAIL YOU NOTICE, WITHIN 30 DAYS AFTER YOU MOVE OUT, OF THE LANDLORD’S INTENT TO IMPOSE A CLAIM AGAINST THE DEPOSIT. IF YOU DO NOT REPLY TO THE LANDLORD STATING YOUR OBJECTION TO THE CLAIM WITHIN 15 DAYS AFTER RECEIPT OF THE LANDLORD’S NOTICE, THE LANDLORD WILL COLLECT THE CLAIM AND MUST MAIL YOU THE REMAINING DEPOSIT, IF ANY.
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IF THE LANDLORD FAILS TO TIMELY MAIL YOU NOTICE, THE LANDLORD MUST RETURN THE DEPOSIT BUT MAY LATER FILE A LAWSUIT AGAINST YOU FOR DAMAGES. IF YOU FAIL TO TIMELY OBJECT TO A CLAIM, THE LANDLORD MAY COLLECT FROM THE DEPOSIT, BUT YOU MAY LATER FILE A LAWSUIT CLAIMING A REFUND.
YOU SHOULD ATTEMPT TO INFORMALLY RESOLVE ANY DISPUTE BEFORE FILING A LAWSUIT. GENERALLY, THE PARTY IN WHOSE FAVOR A JUDGMENT IS RENDERED WILL BE AWARDED COSTS AND ATTORNEY FEES PAYABLE BY THE LOSING PARTY.
THIS DISCLOSURE IS BASIC. PLEASE REFER TO PART II OF CHAPTER 83, FLORIDA STATUTES, TO DETERMINE YOUR LEGAL RIGHTS AND OBLIGATIONS.
(3) The landlord or the landlord’s agent may disburse advance rents from the deposit account to the landlord’s benefit when the advance rental period commences and without notice to the tenant. For all other deposits:
(a) Upon the vacating of the premises for termination of the lease, if the landlord does not intend to impose a claim on the security deposit, the landlord shall have 15 days to return the security deposit together with interest if otherwise required, or the landlord shall have 30 days to give the tenant written notice by certified mail to the tenant’s last known mailing address of his or her intention to impose a claim on the deposit and the reason for imposing the claim. The notice shall contain a statement in substantially the following form:
This is a notice of my intention to impose a claim for damages in the amount of upon your security deposit, due to . It is sent to you as required by s. 83.49(3), Florida Statutes. You are hereby notified that you must object in writing to this deduction from your security deposit within 15 days from the time you receive this notice or I will be authorized to deduct my claim from your security deposit. Your objection must be sent to (landlord’s address) . If the landlord fails to give the required notice within the 30-day period, he or she forfeits the right to impose a claim upon the security deposit and may not seek a setoff against the deposit but may file an action for damages after return of the deposit.
(b) Unless the tenant objects to the imposition of the landlord’s claim or the amount thereof within 15 days after receipt of the landlord’s notice of intention to impose a claim, the landlord may then deduct the amount of his or her claim and shall remit the balance of the deposit to the tenant within 30 days after the date of the notice of intention to impose a claim for damages. The failure of the tenant to make a timely objection does not waive any rights of the tenant to seek damages in a separate action.
(c) If either party institutes an action in a court of competent jurisdiction to adjudicate the party’s right to the security deposit, the prevailing party is entitled to receive his or her court costs plus a reasonable fee for his or her attorney. The court shall advance the cause on the calendar.
(d) Compliance with this section by an individual or business entity authorized to conduct business in this state, including Florida-licensed real estate brokers and sales associates, constitutes compliance with all other relevant Florida Statutes pertaining to security deposits held pursuant to a rental agreement or other landlord-tenant relationship. Enforcement personnel shall look solely to this section to determine compliance. This section prevails over any conflicting provisions in chapter 475 and in other sections of the Florida Statutes, and shall operate to permit licensed real estate brokers to disburse security deposits and deposit money without having to comply with the notice and settlement procedures contained in s. 475.25(1)(d).
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(4) The provisions of this section do not apply to transient rentals by hotels or motels as defined in chapter 509; nor do they apply in those instances in which the amount of rent or deposit, or both, is regulated by law or by rules or regulations of a public body, including public housing authorities and federally administered or regulated housing programs including s. 202, s. 221(d)(3) and (4), s. 236, or s. 8 of the National Housing Act, as amended, other than for rent stabilization. With the exception of subsections (3), (5), and (6), this section is not applicable to housing authorities or public housing agencies created pursuant to chapter 421 or other statutes.
(5) Except when otherwise provided by the terms of a written lease, any tenant who vacates or abandons the premises prior to the expiration of the term specified in the written lease, or any tenant who vacates or abandons premises which are the subject of a tenancy from week to week, month to month, quarter to quarter, or year to year, shall give at least 7 days’ written notice by certified mail or personal delivery to the landlord prior to vacating or abandoning the premises which notice shall include the address where the tenant may be reached. Failure to give such notice shall relieve the landlord of the notice requirement of paragraph (3)(a) but shall not waive any right the tenant may have to the security deposit or any part of it.
(6) For the purposes of this part, a renewal of an existing rental agreement shall be considered a new rental agreement, and any security deposit carried forward shall be considered a new security deposit.
(7) Upon the sale or transfer of title of the rental property from one owner to another, or upon a change in the designated rental agent, any and all security deposits or advance rents being held for the benefit of the tenants shall be transferred to the new owner or agent, together with any earned interest and with an accurate accounting showing the amounts to be credited to each tenant account. Upon the transfer of such funds and records to the new owner or agent, and upon transmittal of a written receipt therefor, the transferor is free from the obligation imposed in subsection (1) to hold such moneys on behalf of the tenant. There is a rebuttable presumption that any new owner or agent received the security deposit from the previous owner or agent; however, this presumption is limited to 1 month’s rent. This subsection does not excuse the landlord or agent for a violation of other provisions of this section while in possession of such deposits.
(8) Any person licensed under the provisions of s. 509.241, unless excluded by the provisions of this part, who fails to comply with the provisions of this part shall be subject to a fine or to the suspension or revocation of his or her license by the Division of Hotels and Restaurants of the Department of Business and Professional Regulation in the manner provided in s. 509.261.
(9) In those cases in which interest is required to be paid to the tenant, the landlord shall pay directly to the tenant, or credit against the current month’s rent, the interest due to the tenant at least once annually. However, no interest shall be due a tenant who wrongfully terminates his or her tenancy prior to the end of the rental term.
History. --s. 1, ch. 69-282; s. 3, ch. 70-360; s. 1, ch. 72-19; s. 1, ch. 72-43; s. 5, ch. 73-330; s. 1, ch. 74-93; s. 3, ch. 74-146; ss. 1, 2, ch. 75-133; s. 1, ch. 76-15; s. 1, ch. 77-445; s. 20, ch. 79-400; s. 21, ch. 82-66; s. 5, ch. 83-151; s. 13, ch. 83-217; s. 3, ch. 87-195; s. 1, ch. 87 -369; s. 3, ch. 88-379; s. 2, ch. 93-255; s. 5, ch. 94-218; s. 1372, ch. 95-147; s. 1, ch. 96-146; s. 1, ch. 2001-179; s. 53, ch. 2003-164; s. 3, ch. 2013-136.
Note. --Former s. 83.261.
83.50 Disclosure of landlord’s address. --In addition to any other disclosure required by law, the landlord, or a person authorized to enter into a rental agreement on the landlord’s behalf, shall disclose in writing to the tenant, at or before the commencement of the tenancy, the name and address of the landlord or a person authorized to receive notices and demands in the landlord’s behalf. The person so authorized to receive notices and demands retains authority until the tenant is notified otherwise. All notices of such names and addresses or changes thereto shall be delivered to the tenant’s residence or, if specified in writing by the tenant, to any other address.
History. --s. 2, ch. 73-330; s. 443, ch. 95-147; s. 5, ch. 2013-136.
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83.51 Landlord’s obligation to maintain premises. --
(1) The landlord at all times during the tenancy shall:
(a) Comply with the requirements of applicable building, housing, and health codes; or
(b) Where there are no applicable building, housing, or health codes, maintain the roofs, windows, doors, floors, steps, porches, exterior walls, foundations, and all other structural components in good repair and capable of resisting normal forces and loads and the plumbing in reasonable working condition. The landlord, at commencement of the tenancy, must ensure that screens are installed in a reasonable condition. Thereafter, the landlord must repair damage to screens once annually, when necessary, until termination of the rental agreement.
The landlord is not required to maintain a mobile home or other structure owned by the tenant. The landlord’s obligations under this subsection may be altered or modified in writing with respect to a single-family home or duplex.
(2)(a) Unless otherwise agreed in writing, in addition to the requirements of subsection (1), the landlord of a dwelling unit other than a single-family home or duplex shall, at all times during the tenancy, make reasonable provisions for:
1. The extermination of rats, mice, roaches, ants, wood-destroying organisms, and bedbugs. When vacation of the premises is required for such extermination, the landlord is not liable for damages but shall abate the rent. The tenant must temporarily vacate the premises for a period of time not to exceed 4 days, on 7 days’ written notice, if necessary, for extermination pursuant to this subparagraph.
2. Locks and keys.
3. The clean and safe condition of common areas.
4. Garbage removal and outside receptacles therefor.
5. Functioning facilities for heat during winter, running water, and hot water.
(b) Unless otherwise agreed in writing, at the commencement of the tenancy of a single-family home or duplex, the landlord shall install working smoke detection devices. As used in this paragraph, the term “smoke detection device” means an electrical or battery-operated device which detects visible or invisible particles of combustion and which is listed by Underwriters Laboratories, Inc., Factory Mutual Laboratories, Inc., or any other nationally recognized testing laboratory using nationally accepted testing standards.
(c) Nothing in this part authorizes the tenant to raise a noncompliance by the landlord with this subsection as a defense to an action for possession under s. 83.59.
(d) This subsection shall not apply to a mobile home owned by a tenant.
(e) Nothing contained in this subsection prohibits the landlord from providing in the rental agreement that the tenant is obligated to pay costs or charges for garbage removal, water, fuel, or utilities.
(3) If the duty imposed by subsection (1) is the same or greater than any duty imposed by subsection (2), the landlord’s duty is determined by subsection (1).
(4) The landlord is not responsible to the tenant under this section for conditions created or caused by the negligent or wrongful act or omission of the tenant, a member of the tenant’s family, or other person on the premises with the tenant’s consent.
History. --s. 2, ch. 73-330; s. 22, ch. 82-66; s. 4, ch. 87-195; s. 1, ch. 90-133; s. 3, ch. 93-255; s. 444, ch. 95-147; s. 8, ch. 97-95; s. 6, ch.
2013-136.
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83.515 Background screening of apartment employees; employment disqualification. --
(1) The landlord of a public lodging establishment classified under s. 509.242(1)(d) or (e) as a nontransient apartment or transient apartment, respectively, must require that each employee of the establishment undergo a background screening as a condition of employment.
(2) The background screening required under subsection (1) must be performed by a consumer reporting agency in accordance with the federal Fair Credit Reporting Act, and must include a screening of criminal history records and sexual predator and sexual offender registries of all states and the District of Columbia.
(3) A landlord may disqualify a person from employment if the person has been convicted or found guilty of, or entered a plea of guilty or nolo contendere to, regardless of adjudication, any of the following offenses:
(a) A criminal offense involving disregard for the safety of others which, if committed in this state, is a felony or a misdemeanor of the first degree or, if committed in another state, would be a felony or a misdemeanor of the first degree if committed in this state.
(b) A criminal offense committed in any jurisdiction which involves violence, including, but not limited to, murder, sexual battery, robbery, carjacking, home-invasion robbery, and stalking.
83.52 Tenant’s obligation to maintain dwelling unit. --The tenant at all times during the tenancy shall:
(1) Comply with all obligations imposed upon tenants by applicable provisions of building, housing, and health codes. (2) Keep that part of the premises which he or she occupies and uses clean and sanitary.
(3) Remove from the tenant’s dwelling unit all garbage in a clean and sanitary manner.
(4) Keep all plumbing fixtures in the dwelling unit or used by the tenant clean and sanitary and in repair.
(5) Use and operate in a reasonable manner all electrical, plumbing, sanitary, heating, ventilating, air-conditioning and other facilities and appliances, including elevators.
(6) Not destroy, deface, damage, impair, or remove any part of the premises or property therein belonging to the landlord nor permit any person to do so.
(7) Conduct himself or herself, and require other persons on the premises with his or her consent to conduct themselves, in a manner that does not unreasonably disturb the tenant’s neighbors or constitute a breach of the peace.
History. --s. 2, ch. 73-330; s. 445, ch. 95-147.
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83.53 Landlord’s access to dwelling unit. --
(1) The tenant shall not unreasonably withhold consent to the landlord to enter the dwelling unit from time to time in order to inspect the premises; make necessary or agreed repairs, decorations, alterations, or improvements; supply agreed services; or exhibit the dwelling unit to prospective or actual purchasers, mortgagees, tenants, workers, or contractors.
(2) The landlord may enter the dwelling unit at any time for the protection or preservation of the premises. The landlord may enter the dwelling unit upon reasonable notice to the tenant and at a reasonable time for the purpose of repair of the premises. “Reasonable notice” for the purpose of repair is notice given at least 24 hours prior to the entry, and reasonable time for the purpose of repair shall be between the hours of 7: 30 a. m. and 8: 00 p. m. The landlord may enter the dwelling unit when necessary for the further purposes set forth in subsection (1) under any of the following circumstances:
(a) With the consent of the tenant;
(b) In case of emergency;
(c) When the tenant unreasonably withholds consent; or
(d) If the tenant is absent from the premises for a period of time equal to one-half the time for periodic rental payments. If the rent is current and the tenant notifies the landlord of an intended absence, then the landlord may enter only with the consent of the tenant or for the protection or preservation of the premises.
(3) The landlord shall not abuse the right of access nor use it to harass the tenant.
History. --s. 2, ch. 73-330; s. 5, ch. 87-195; s. 4, ch. 93-255; s. 446, ch. 95-147.
83.535 Flotation bedding system; restrictions on use. --No landlord may prohibit a tenant from using a flotation bedding system in a dwelling unit, provided the flotation bedding system does not violate applicable building codes. The tenant shall be required to carry in the tenant’s name flotation insurance as is standard in the industry in an amount deemed reasonable to protect the tenant and owner against personal injury and property damage to the dwelling units. In any case, the policy shall carry a loss payable clause to the owner of the building.
History. --s. 7, ch. 82-66; s. 5, ch. 93-255.
83.54 Enforcement of rights and duties; civil action; criminal offenses. --Any right or duty declared in this part is enforceable by civil action. A right or duty enforced by civil action under this section does not preclude prosecution for a criminal offense related to the lease or leased property.
History. --s. 2, ch. 73-330; s. 7, ch. 2013-136.
83.55 Right of action for damages. --If either the landlord or the tenant fails to comply with the requirements of the rental agreement or this part, the aggrieved party may recover the damages caused by the noncompliance.
History. --s. 2, ch. 73-330.
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83.56 Termination of rental agreement. --
(1) If the landlord materially fails to comply with s. 83.51(1) or material provisions of the rental agreement within 7 days after delivery of written notice by the tenant specifying the noncompliance and indicating the intention of the tenant to terminate the rental agreement by reason thereof, the tenant may terminate the rental agreement. If the failure to comply with s. 83.51(1) or material provisions of the rental agreement is due to causes beyond the control of the landlord and the landlord has made and continues to make every reasonable effort to correct the failure to comply, the rental agreement may be terminated or altered by the parties, as follows:
(a) If the landlord’s failure to comply renders the dwelling unit untenantable and the tenant vacates, the tenant shall not be liable for rent during the period the dwelling unit remains uninhabitable.
(b) If the landlord’s failure to comply does not render the dwelling unit untenantable and the tenant remains in occupancy, the rent for the period of noncompliance shall be reduced by an amount in proportion to the loss of rental value caused by the noncompliance.
(2) If the tenant materially fails to comply with s. 83.52 or material provisions of the rental agreement, other than a failure to pay rent, or reasonable rules or regulations, the landlord may:
(a) If such noncompliance is of a nature that the tenant should not be given an opportunity to cure it or if the noncompliance constitutes a subsequent or continuing noncompliance within 12 months of a written warning by the landlord of a similar violation, deliver a written notice to the tenant specifying the noncompliance and the landlord’s intent to terminate the rental agreement by reason thereof. Examples of noncompliance which are of a nature that the tenant should not be given an opportunity to cure include, but are not limited to, destruction, damage, or misuse of the landlord’s or other tenants’ property by intentional act or a subsequent or continued unreasonable disturbance. In such event, the landlord may terminate the rental agreement, and the tenant shall have 7 days from the date that the notice is delivered to vacate the premises. The notice shall be in substantially the following form:
You are advised that your lease is terminated effective immediately. You shall have 7 days from the delivery of this letter to vacate the premises. This action is taken because (cite the noncompliance).
(b) If such noncompliance is of a nature that the tenant should be given an opportunity to cure it, deliver a written notice to the tenant specifying the noncompliance, including a notice that, if the noncompliance is not corrected within 7 days from the date that the written notice is delivered, the landlord shall terminate the rental agreement by reason thereof. Examples of such noncompliance include, but are not limited to, activities in contravention of the lease or this part such as having or permitting unauthorized pets, guests, or vehicles; parking in an unauthorized manner or permitting such parking; or failing to keep the premises clean and sanitary. If such noncompliance recurs within 12 months after notice, an eviction action may commence without delivering a subsequent notice pursuant to paragraph (a) or this paragraph. The notice shall be in substantially the following form:
You are hereby notified that (cite the noncompliance). Demand is hereby made that you remedy the noncompliance within 7 days of receipt of this notice or your lease shall be deemed terminated and you shall vacate the premises upon such termination. If this same conduct or conduct of a similar nature is repeated within 12 months, your tenancy is subject to termination without further warning and without your being given an opportunity to cure the noncompliance.
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(3) If the tenant fails to pay rent when due and the default continues for 3 days, excluding Saturday, Sunday, and legal holidays, after delivery of written demand by the landlord for payment of the rent or possession of the premises, the landlord may terminate the rental agreement. Legal holidays for the purpose of this section shall be court-observed holidays only. The 3-day notice shall contain a statement in substantially the following form:
You are hereby notified that you are indebted to me in the sum of _______dollars for the rent and use of the premises (address of leased premises, including county), Florida, now occupied by you and that I demand payment of the rent or possession of the premises within 3 days (excluding Saturday, Sunday, and legal holidays) from the date of delivery of this notice, to wit: on or before the day of , (year) .
(landlord’s name, address and phone number)
(4) The delivery of the written notices required by subsections (1), (2), and (3) shall be by mailing or delivery of a true copy thereof or, if the tenant is absent from the premises, by leaving a copy thereof at the residence. The notice requirements of subsections (1), (2), and
(3) may not be waived in the lease.
(5)(a) If the landlord accepts rent with actual knowledge of a noncompliance by the tenant or accepts performance by the tenant of any other provision of the rental agreement that is at variance with its provisions, or if the tenant pays rent with actual knowledge of a noncompliance by the landlord or accepts performance by the landlord of any other provision of the rental agreement that is at variance with its provisions, the landlord or tenant waives his or her right to terminate the rental agreement or to bring a civil action for that noncompliance, but not for any subsequent or continuing noncompliance. However, a landlord does not waive the right to terminate the rental agreement or to bring a civil action for that noncompliance by accepting partial rent for the period. If partial rent is accepted after posting the notice for nonpayment, the landlord must:
1. Provide the tenant with a receipt stating the date and amount received and the agreed upon date and balance of rent due before filing an action for possession;
2. Place the amount of partial rent accepted from the tenant in the registry of the court upon filing the action for possession; or
3. Post a new 3-day notice reflecting the new amount due.
(b) Any tenant who wishes to defend against an action by the landlord for possession of the unit for noncompliance of the rental agreement or of relevant statutes must comply with s. 83.60(2). The court may not set a date for mediation or trial unless the provisions of s. 83.60(2) have been met, but must enter a default judgment for removal of the tenant with a writ of possession to issue immediately if the tenant fails to comply with s. 83.60(2).
(c) This subsection does not apply to that portion of rent subsidies received from a local, state, or national government or an agency of local, state, or national government; however, waiver will occur if an action has not been instituted within 45 days after the landlord obtains actual knowledge of the noncompliance.
(6) If the rental agreement is terminated, the landlord shall comply with s. 83.49(3).
History. --s. 2, ch. 73-330; s. 23, ch. 82-66; s. 6, ch. 83-151; s. 14, ch. 83-217; s. 6, ch. 87-195; s. 6, ch. 93-255; s. 6, ch. 94-170; s. 1373, ch. 95-147; s. 5, ch. 99-6; s. 8, ch. 2013-136.
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83.5615 Termination of rental agreement upon foreclosure. --
(1) If a tenant is occupying residential premises that are the subject of a foreclosure sale, upon issuance of a certificate of title following the sale, the purchaser named in the certificate of title takes title to the residential premises subject to the rights of the tenant under this section.
(a) The tenant may remain in possession of the premises for 30 days following the date of the purchaser’s delivery of a written 30-day notice of termination.
(b) The tenant is entitled to the protections of s. 83.67.
(c) The 30-day notice of termination must be in substantially the following form:
NOTICE TO TENANT OF TERMINATION
You are hereby notified that your rental agreement is terminated on the date of delivery of this notice, that your occupancy is terminated 30 days following the date of the delivery of this notice, and that I demand possession of the premises on (date). If you do not vacate the premises by that date, I will ask the court for an order allowing me to remove you and your belongings from the premises. You are obligated to pay rent during the 30-day period for any amount that might accrue during that period. Your rent must be delivered to (landlord’s name and address).
(d) The 30-day notice of termination shall be delivered in the same manner as provided in s. 83.56(4).
(2) The purchaser at the foreclosure sale may apply to the court for a writ of possession based upon a sworn affidavit that the 30-day notice of termination was delivered to the tenant and the tenant has failed to vacate the premises at the conclusion of the 30-day period. If the court awards a writ of possession, the writ must be served on the tenant. The writ of possession shall be governed by s. 83.62.
(3) This section does not apply if:
(a) The tenant is the mortgagor in the subject foreclosure or is the child, spouse, or parent of the mortgagor in the subject foreclosure.
(b) The tenant’s rental agreement is not the result of an arm’s length transaction.
(c) The tenant’s rental agreement allows the tenant to pay rent that is substantially less than the fair market rent for the premises, unless the rent is reduced or subsidized due to a federal, state, or local subsidy.
(4) A purchaser at a foreclosure sale of a residential premises occupied by a tenant does not assume the obligations of a landlord, except as provided in paragraph (1)(b), unless or until the purchaser assumes an existing rental agreement with the tenant that has not ended or enters into a new rental agreement with the tenant.
History. --s. 1, ch. 2015-96.
83.57 Termination of tenancy without specific term. --A tenancy without a specific duration, as defined in s. 83.46(2) or (3), may be terminated by either party giving written notice in the manner provided in s. 83.56(4), as follows:
(1) When the tenancy is from year to year, by giving not less than 60 days’ notice prior to the end of any annual period;
(2) When the tenancy is from quarter to quarter, by giving not less than 30 days’ notice prior to the end of any quarterly period;
(3) When the tenancy is from month to month, by giving not less than 15 days’ notice prior to the end of any monthly period; and
(4) When the tenancy is from week to week, by giving not less than 7 days’ notice prior to the end of any weekly period.
History. --s. 2, ch. 73-330; s. 3, ch. 81-190; s. 15, ch. 83-217.
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83.575 Termination of tenancy with specific duration. --
(1) A rental agreement with a specific duration may contain a provision requiring the tenant to notify the landlord within a specified period before vacating the premises at the end of the rental agreement, if such provision requires the landlord to notify the tenant within such notice period if the rental agreement will not be renewed; however, a rental agreement may not require more than 60 days’ notice from either the tenant or the landlord.
(2) A rental agreement with a specific duration may provide that if a tenant fails to give the required notice before vacating the premises at the end of the rental agreement, the tenant may be liable for liquidated damages as specified in the rental agreement if the landlord provides written notice to the tenant specifying the tenant’s obligations under the notification provision contained in the lease and the date the rental agreement is terminated. The landlord must provide such written notice to the tenant within 15 days before the start of the notification period contained in the lease. The written notice shall list all fees, penalties, and other charges applicable to the tenant under this subsection.
(3) If the tenant remains on the premises with the permission of the landlord after the rental agreement has terminated and fails to give notice required under s. 83.57(3), the tenant is liable to the landlord for an additional 1 month’s rent.
History. --s. 3, ch. 2003-30; s. 1, ch. 2004-375; s. 9, ch. 2013-136.
83.58 Remedies; tenant holding over. --If the tenant holds over and continues in possession of the dwelling unit or any part thereof after the expiration of the rental agreement without the permission of the landlord, the landlord may recover possession of the dwelling unit in the manner provided for in s. 83.59. The landlord may also recover double the amount of rent due on the dwelling unit, or any part thereof, for the period during which the tenant refuses to surrender possession.
History. --s. 2, ch. 73-330; s. 10, ch. 2013-136.
83.59 Right of action for possession. --
(1) If the rental agreement is terminated and the tenant does not vacate the premises, the landlord may recover possession of the dwelling unit as provided in this section.
(2) A landlord, the landlord’s attorney, or the landlord’s agent, applying for the removal of a tenant, shall file in the county court of the county where the premises are situated a complaint describing the dwelling unit and stating the facts that authorize its recovery. A landlord’s agent is not permitted to take any action other than the initial filing of the complaint, unless the landlord’s agent is an attorney. The landlord is entitled to the summary procedure provided in s. 51.011, and the court shall advance the cause on the calendar.
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(3) The landlord shall not recover possession of a dwelling unit except:
(a) In an action for possession under subsection (2) or other civil action in which the issue of right of possession is determined;
(b) When the tenant has surrendered possession of the dwelling unit to the landlord;
(c) When the tenant has abandoned the dwelling unit. In the absence of actual knowledge of abandonment, it shall be presumed that the tenant has abandoned the dwelling unit if he or she is absent from the premises for a period of time equal to one-half the time for periodic rental payments. However, this presumption does not apply if the rent is current or the tenant has notified the landlord, in writing, of an intended absence; or
(d) When the last remaining tenant of a dwelling unit is deceased, personal property remains on the premises, rent is unpaid, at least 60 days have elapsed following the date of death, and the landlord has not been notified in writing of the existence of a probate estate or of the name and address of a personal representative. This paragraph does not apply to a dwelling unit used in connection with a federally administered or regulated housing program, including programs under s. 202, s. 221(d)(3) and (4), s. 236, or s. 8 of the National Housing Act, as amended.
(4) The prevailing party is entitled to have judgment for costs and execution therefor.
History. --s. 2, ch. 73-330; s. 1, ch. 74-146; s. 24, ch. 82-66; s. 1, ch. 92-36; s. 447, ch. 95-147; s. 1, ch. 2007-136; s. 11, ch. 2013-136.
83.595 Choice of remedies upon breach or early termination by tenant. --If the tenant breaches the rental agreement for the dwelling unit and the landlord has obtained a writ of possession, or the tenant has surrendered possession of the dwelling unit to the landlord, or the tenant has abandoned the dwelling unit, the landlord may:
(1) Treat the rental agreement as terminated and retake possession for his or her own account, thereby terminating any further liability of the tenant;
(2) Retake possession of the dwelling unit for the account of the tenant, holding the tenant liable for the difference between the rent stipulated to be paid under the rental agreement and what the landlord is able to recover from a reletting. If the landlord retakes possession, the landlord has a duty to exercise good faith in attempting to relet the premises, and any rent received by the landlord as a result of the reletting must be deducted from the balance of rent due from the tenant. For purposes of this subsection, the term “good faith in attempting to relet the premises” means that the landlord uses at least the same efforts to relet the premises as were used in the initial rental or at least the same efforts as the landlord uses in attempting to rent other similar rental units but does not require the landlord to give a preference in renting the premises over other vacant dwelling units that the landlord owns or has the responsibility to rent;
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(3) Stand by and do nothing, holding the lessee liable for the rent as it comes due; or
(4) Charge liquidated damages, as provided in the rental agreement, or an early termination fee to the tenant if the landlord and tenant have agreed to liquidated damages or an early termination fee, if the amount does not exceed 2 months’ rent, and if, in the case of an early termination fee, the tenant is required to give no more than 60 days’ notice, as provided in the rental agreement, prior to the proposed date of early termination. This remedy is available only if the tenant and the landlord, at the time the rental agreement was made, indicated acceptance of liquidated damages or an early termination fee. The tenant must indicate acceptance of liquidated damages or an early termination fee by signing a separate addendum to the rental agreement containing a provision in substantially the following form:
| ☐ | I agree, as provided in the rental agreement, to pay $ (an amount that does not exceed 2 months’ rent) as liquidated damages or an early termination fee if I elect to terminate the rental agreement, and the landlord waives the right to seek additional rent beyond the month in which the landlord retakes possession. |
| ☐ | I do not agree to liquidated damages or an early termination fee, and I acknowledge that the landlord may seek damages as provided by law. |
(a) In addition to liquidated damages or an early termination fee, the landlord is entitled to the rent and other charges accrued through the end of the month in which the landlord retakes possession of the dwelling unit and charges for damages to the dwelling unit.
(b) This subsection does not apply if the breach is failure to give notice as provided in s. 83.575.
History. --s. 2, ch. 87-369; s. 4, ch. 88-379; s. 448, ch. 95-147; s. 2, ch. 2008-131.
83.60 Defenses to action for rent or possession; procedure. --
(1)(a) In an action by the landlord for possession of a dwelling unit based upon nonpayment of rent or in an action by the landlord under s. 83.55 seeking to recover unpaid rent, the tenant may defend upon the ground of a material noncompliance with s. 83.51(1), or may raise any other defense, whether legal or equitable, that he or she may have, including the defense of retaliatory conduct in accordance with s. 83.64. The landlord must be given an opportunity to cure a deficiency in a notice or in the pleadings before dismissal of the action.
(b) The defense of a material noncompliance with s. 83.51(1) may be raised by the tenant if 7 days have elapsed after the delivery of written notice by the tenant to the landlord, specifying the noncompliance and indicating the intention of the tenant not to pay rent by reason thereof. Such notice by the tenant may be given to the landlord, the landlord’s representative as designated pursuant to s. 83.50, a resident manager, or the person or entity who collects the rent on behalf of the landlord. A material noncompliance with s. 83.51(1) by the landlord is a complete defense to an action for possession based upon nonpayment of rent, and, upon hearing, the court or the jury, as the case may be, shall determine the amount, if any, by which the rent is to be reduced to reflect the diminution in value of the dwelling unit during the period of noncompliance with s. 83.51(1). After consideration of all other relevant issues, the court shall enter appropriate judgment.
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(2) In an action by the landlord for possession of a dwelling unit, if the tenant interposes any defense other than payment, including, but not limited to, the defense of a defective 3-day notice, the tenant shall pay into the registry of the court the accrued rent as alleged in the complaint or as determined by the court and the rent that accrues during the pendency of the proceeding, when due. The clerk shall notify the tenant of such requirement in the summons. Failure of the tenant to pay the rent into the registry of the court or to file a motion to determine the amount of rent to be paid into the registry within 5 days, excluding Saturdays, Sundays, and legal holidays, after the date of service of process constitutes an absolute waiver of the tenant’s defenses other than payment, and the landlord is entitled to an immediate default judgment for removal of the tenant with a writ of possession to issue without further notice or hearing thereon. If a motion to determine rent is filed, documentation in support of the allegation that the rent as alleged in the complaint is in error is required. Public housing tenants or tenants receiving rent subsidies are required to deposit only that portion of the full rent for which they are responsible pursuant to the federal, state, or local program in which they are participating.
History. --s. 2, ch. 73-330; s. 7, ch. 83-151; s. 7, ch. 87-195; s. 7, ch. 93-255; s. 7, ch. 94-170; s. 1374, ch. 95-147; s. 12, ch. 2013-136.
83.61 Disbursement of funds in registry of court; prompt final hearing. --When the tenant has deposited funds into the registry of the court in accordance with the provisions of s. 83.60(2) and the landlord is in actual danger of loss of the premises or other personal hardship resulting from the loss of rental income from the premises, the landlord may apply to the court for disbursement of all or part of the funds or for prompt final hearing. The court shall advance the cause on the calendar. The court, after preliminary hearing, may award all or any portion of the funds on deposit to the landlord or may proceed immediately to a final resolution of the cause.
History. --s. 2, ch. 73-330; s. 2, ch. 74-146.
83.62 Restoration of possession to landlord. --
(1) In an action for possession, after entry of judgment in favor of the landlord, the clerk shall issue a writ to the sheriff describing the premises and commanding the sheriff to put the landlord in possession after 24 hours’ notice conspicuously posted on the premises. Saturdays, Sundays, and legal holidays do not stay the 24-hour notice period.
(2) At the time the sheriff executes the writ of possession or at any time thereafter, the landlord or the landlord’s agent may remove any personal property found on the premises to or near the property line. Subsequent to executing the writ of possession, the landlord may request the sheriff to stand by to keep the peace while the landlord changes the locks and removes the personal property from the premises. When such a request is made, the sheriff may charge a reasonable hourly rate, and the person requesting the sheriff to stand by to keep the peace shall be responsible for paying the reasonable hourly rate set by the sheriff. Neither the sheriff nor the landlord or the landlord’s agent shall be liable to the tenant or any other party for the loss, destruction, or damage to the property after it has been removed.
History. --s. 2, ch. 73-330; s. 3, ch. 82-66; s. 5, ch. 88-379; s. 8, ch. 94-170; s. 1375, ch. 95-147; s. 2, ch. 96-146; s. 13, ch. 2013-136.
83.625 Power to award possession and enter money judgment. --In an action by the landlord for possession of a dwelling unit based upon nonpayment of rent, if the court finds the rent is due, owing, and unpaid and by reason thereof the landlord is entitled to possession of the premises, the court, in addition to awarding possession of the premises to the landlord, shall direct, in an amount which is within its jurisdictional limitations, the entry of a money judgment with costs in favor of the landlord and against the tenant for the amount of money found due, owing, and unpaid by the tenant to the landlord. However, no money judgment shall be entered unless service of process has been effected by personal service or, where authorized by law, by certified or registered mail, return receipt, or in any other manner prescribed by law or the rules of the court; and no money judgment may be entered except in compliance with the Florida Rules of Civil Procedure. The prevailing party in the action may also be awarded attorney’s fees and costs.
History. --s. 1, ch. 75-147; s. 8, ch. 87-195; s. 6, ch. 88-379.
83.63 Casualty damage. --If the premises are damaged or destroyed other than by the wrongful or negligent acts of the tenant so that the enjoyment of the premises is substantially impaired, the tenant may terminate the rental agreement and immediately vacate the premises. The tenant may vacate the part of the premises rendered unusable by the casualty, in which case the tenant’s liability for rent shall be reduced by the fair rental value of that part of the premises damaged or destroyed. If the rental agreement is terminated, the landlord shall comply with s. 83.49(3).
History. --s. 2, ch. 73-330; s. 449, ch. 95-147; s. 14, ch. 2013-136.
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83.64 Retaliatory conduct. --
(1) It is unlawful for a landlord to discriminatorily increase a tenant’s rent or decrease services to a tenant, or to bring or threaten to bring an action for possession or other civil action, primarily because the landlord is retaliating against the tenant. In order for the tenant to raise the defense of retaliatory conduct, the tenant must have acted in good faith. Examples of conduct for which the landlord may not retaliate include, but are not limited to, situations where:
(a) The tenant has complained to a governmental agency charged with responsibility for enforcement of a building, housing, or health code of a suspected violation applicable to the premises;
(b) The tenant has organized, encouraged, or participated in a tenant organization;
(c) The tenant has complained to the landlord pursuant to s. 83.56(1);
(d) The tenant is a servicemember who has terminated a rental agreement pursuant to s. 83.682;
(e) The tenant has paid rent to a condominium, cooperative, or homeowners’ association after demand from the association in order to pay the landlord’s obligation to the association; or
(f) The tenant has exercised his or her rights under local, state, or federal fair housing laws.
(2) Evidence of retaliatory conduct may be raised by the tenant as a defense in any action brought against him or her for possession.
(3) In any event, this section does not apply if the landlord proves that the eviction is for good cause. Examples of good cause include, but are not limited to, good faith actions for nonpayment of rent, violation of the rental agreement or of reasonable rules, or violation of the terms of this chapter.
(4) “Discrimination” under this section means that a tenant is being treated differently as to the rent charged, the services rendered, or the action being taken by the landlord, which shall be a prerequisite to a finding of retaliatory conduct.
History. --s. 8, ch. 83-151; s. 450, ch. 95-147; s. 3, ch. 2003-72; s. 15, ch. 2013-136.
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83.67 Prohibited practices. --
(1) A landlord of any dwelling unit governed by this part shall not cause, directly or indirectly, the termination or interruption of any utility service furnished the tenant, including, but not limited to, water, heat, light, electricity, gas, elevator, garbage collection, or refrigeration, whether or not the utility service is under the control of, or payment is made by, the landlord.
(2) A landlord of any dwelling unit governed by this part shall not prevent the tenant from gaining reasonable access to the dwelling unit by any means, including, but not limited to, changing the locks or using any bootlock or similar device.
(3) A landlord of any dwelling unit governed by this part shall not discriminate against a servicemember in offering a dwelling unit for rent or in any of the terms of the rental agreement.
(4) A landlord shall not prohibit a tenant from displaying one portable, removable, cloth or plastic United States flag, not larger than 4 and 1/2 feet by 6 feet, in a respectful manner in or on the dwelling unit regardless of any provision in the rental agreement dealing with flags or decorations. The United States flag shall be displayed in accordance with s. 83.52(6). The landlord is not liable for damages caused by a United States flag displayed by a tenant. Any United States flag may not infringe upon the space rented by any other tenant.
(5) A landlord of any dwelling unit governed by this part shall not remove the outside doors, locks, roof, walls, or windows of the unit except for purposes of maintenance, repair, or replacement; and the landlord shall not remove the tenant’s personal property from the dwelling unit unless such action is taken after surrender, abandonment, recovery of possession of the dwelling unit due to the death of the last remaining tenant in accordance with s. 83.59(3)(d), or a lawful eviction. If provided in the rental agreement or a written agreement separate from the rental agreement, upon surrender or abandonment by the tenant, the landlord is not required to comply with s. 715.104 and is not liable or responsible for storage or disposition of the tenant’s personal property; if provided in the rental agreement, there must be printed or clearly stamped on such rental agreement a legend in substantially the following form:
BY SIGNING THIS RENTAL AGREEMENT, THE TENANT AGREES THAT UPON SURRENDER, ABANDONMENT, OR RECOVERY OF POSSESSION OF THE DWELLING UNIT DUE TO THE DEATH OF THE LAST REMAINING TENANT, AS PROVIDED BY CHAPTER 83, FLORIDA STATUTES, THE LANDLORD SHALL NOT BE LIABLE OR RESPONSIBLE FOR STORAGE OR DISPOSITION OF THE TENANT’S PERSONAL PROPERTY.
For the purposes of this section, abandonment shall be as set forth in s. 83.59(3)(c).
(6) A landlord who violates any provision of this section shall be liable to the tenant for actual and consequential damages or 3 months’ rent, whichever is greater, and costs, including attorney’s fees. Subsequent or repeated violations that are not contemporaneous with the initial violation shall be subject to separate awards of damages.
(7) A violation of this section constitutes irreparable harm for the purposes of injunctive relief.
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(8) The remedies provided by this section are not exclusive and do not preclude the tenant from pursuing any other remedy at law or equity that the tenant may have. The remedies provided by this section shall also apply to a servicemember who is a prospective tenant who has been discriminated against under subsection (3).
History. --s. 3, ch. 87-369; s. 7, ch. 88-379; s. 3, ch. 90-133; s. 3, ch. 96-146; s. 2, ch. 2001-179; s. 2, ch. 2003-30; s. 4, ch. 2003-72; s. 1, ch. 2004-236; s. 2, ch. 2007-136.
83.681 Orders to enjoin violations of this part. --
(1) A landlord who gives notice to a tenant of the landlord’s intent to terminate the tenant’s lease pursuant to s. 83.56(2)(a), due to the tenant’s intentional destruction, damage, or misuse of the landlord’s property may petition the county or circuit court for an injunction prohibiting the tenant from continuing to violate any of the provisions of that part.
(2) The court shall grant the relief requested pursuant to subsection (1) in conformity with the principles that govern the granting of injunctive relief from threatened loss or damage in other civil cases.
(3) Evidence of a tenant’s intentional destruction, damage, or misuse of the landlord’s property in an amount greater than twice the value of money deposited with the landlord pursuant to s. 83.49 or $300, whichever is greater, shall constitute irreparable harm for the purposes of injunctive relief.
History. --s. 8, ch. 93-255; s. 451, ch. 95-147.
83.682 Termination of rental agreement by a servicemember. --
(1) Any servicemember may terminate his or her rental agreement by providing the landlord with a written notice of termination to be effective on the date stated in the notice that is at least 30 days after the landlord’s receipt of the notice if any of the following criteria are met:
(a) The servicemember is required, pursuant to a permanent change of station orders, to move 35 miles or more from the location of the rental premises;
(b) The servicemember is prematurely or involuntarily discharged or released from active duty or state active duty;
(c) The servicemember is released from active duty or state active duty after having leased the rental premises while on active duty or state active duty status and the rental premises is 35 miles or more from the servicemember’s home of record prior to entering active duty or state active duty;
(d) After entering into a rental agreement, the servicemember receives military orders requiring him or her to move into government quarters or the servicemember becomes eligible to live in and opts to move into government quarters;
(e) The servicemember receives temporary duty orders, temporary change of station orders, or state active duty orders to an area 35 miles or more from the location of the rental premises, provided such orders are for a period exceeding 60 days; or
(f) The servicemember has leased the property, but prior to taking possession of the rental premises, receives a change of orders to an area that is 35 miles or more from the location of the rental premises.
(2) The notice to the landlord must be accompanied by either a copy of the official military orders or a written verification signed by the servicemember’s commanding officer.
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(3) In the event a servicemember dies during active duty, an adult member of his or her immediate family may terminate the servicemember’s rental agreement by providing the landlord with a written notice of termination to be effective on the date stated in the notice that is at least 30 days after the landlord’s receipt of the notice. The notice to the landlord must be accompanied by either a copy of the official military orders showing the servicemember was on active duty or a written verification signed by the servicemember’s commanding officer and a copy of the servicemember’s death certificate.
(4) Upon termination of a rental agreement under this section, the tenant is liable for the rent due under the rental agreement prorated to the effective date of the termination payable at such time as would have otherwise been required by the terms of the rental agreement. The tenant is not liable for any other rent or damages due to the early termination of the tenancy as provided for in this section. Notwithstanding any provision of this section to the contrary, if a tenant terminates the rental agreement pursuant to this section 14 or more days prior to occupancy, no damages or penalties of any kind will be assessable.
(5) The provisions of this section may not be waived or modified by the agreement of the parties under any circumstances.
History. --s. 6, ch. 2001-179; s. 1, ch. 2002-4; s. 1, ch. 2003-30; s. 5, ch. 2003-72.
83.683 Rental application by a servicemember. --
(1) If a landlord requires a prospective tenant to complete a rental application before residing in a rental unit, the landlord must complete processing of a rental application submitted by a prospective tenant who is a servicemember, as defined in s. 250.01, within 7 days after submission and must, within that 7-day period, notify the servicemember in writing of an application approval or denial and, if denied, the reason for denial. Absent a timely denial of the rental application, the landlord must lease the rental unit to the servicemember if all other terms of the application and lease are complied with.
(2) If a condominium association, as defined in chapter 718, a cooperative association, as defined in chapter 719, or a homeowners’ association, as defined in chapter 720, requires a prospective tenant of a condominium unit, cooperative unit, or parcel within the association’s control to complete a rental application before residing in a rental unit or parcel, the association must complete processing of a rental application submitted by a prospective tenant who is a servicemember, as defined in s. 250.01, within 7 days after submission and must, within that 7-day period, notify the servicemember in writing of an application approval or denial and, if denied, the reason for the denial. Absent timely denial of the rental application, the association must allow the unit or parcel owner to lease the rental unit or parcel to the servicemember and the landlord must lease the unit or parcel to the servicemember if all other terms of the application and lease are complied with.
(3) The provisions of this section may not be waived or modified by the agreement of the parties under any circumstances.
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Exhibit 10.13
RESCISSION AGREEMENT
THIS RESCISSION AGREEMENT (this “Agreement”), is entered into effective as of February 28 , 2024, by and between Toppoint Holdings Inc., a Nevada corporation (the “Company”) and 4 John Trucking Inc., a Pennsylvania corporation (the “Vendor”) (each a “Party” and together, the “Parties”).
RECITALS
| A. | Pursuant to that certain Services Agreement, dated as of January 1, 2023, by and between the Company and the Vendor, a copy of which is attached hereto as Exhibit A (the “Services Agreement”), Vendor is entitled to 750,000 shares of common stock (the “Shares”) of the Company in consideration of certain services provided by the Vendor as detailed in the Services Agreement. According to the Services Agreement, the Shares would be effected through a transfer of 750,000 shares from Mr. Hok C. Chan, the Company’s Chief Executive Officer and a principal shareholder, to Mr. John Feliciano III, effective on January 1, 2024. |
| B. | The Parties now desire to rescind, ab initio, the transfer of the Shares pursuant to the Services Agreement (the “Rescission”). |
NOW THEREFORE, in consideration of the mutual covenants and agreements contained herein and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the undersigned do hereby agree as follows:
1. The Parties agree that the transfer of the Shares is hereby unconditionally and irrevocably rescinded ab initio by Mr. Hok C. Chan and Mr. John Feliciano III, and the transfer is neither valid nor effective in any manner whatsoever. Each Party hereby acknowledges that it has been restored to the position in which such Party found itself on the date that the Services Agreement was executed but without any references, rights or obligations relative to the Shares contained in, or otherwise granted in, either the Services Agreement or Shares. As a result, Mr. John Feliciano III or Vendor has no rights whatsoever to the Shares.
2. In connection with the Rescission, the Parties agree that: (a) the Parties shall treat the Services Agreement as rescinded for all purposes regarding the Shares and shall take no action inconsistent with such treatment; and (b) this Agreement and the Rescission of the transfer of the Shares are binding upon each of the Parties and their respective legal representatives, successors and assigns and shall become effective automatically without further act on the part of any Party upon execution of this Agreement.
3. At the request of the Company, and without further consideration, the Vendor will execute and deliver such other documents, forms, agreements, or instruments as may be reasonably requested for the Rescission.
4. This Agreement shall be governed by, and construed and interpreted in accordance with, the laws of the State of Nevada, without regard to conflicts of law principles that would require the application of the laws of another jurisdiction.
5. This Agreement may be executed in any number of counterparts and each of such counterparts shall for all purposes be deemed to be an original, and all such counterparts shall together constitute but one and the same instrument.
6. This Agreement constitutes the final, complete, and exclusive statement of the agreement of the Parties with respect to the subject matter hereof, and supersedes any and all other prior and contemporaneous agreements and understandings, both written and oral, between the Parties.
[Signature page follows]
IN WITNESS WHEREOF, the parties hereto have caused this Rescission Agreement to be executed as of the date first above written.
| COMPANY: | ||
| TOPPOINT HOLDINGS INC. | ||
| By: | /s/ Hok C Chan | |
| Name: | Hok C Chan | |
| Title: | Chief Executive Officer | |
| VENDOR: | ||
| 4 JOHN TRUCKING INC. | ||
| By: | /s/ John Feliciano III | |
| Name: | John Feliciano III | |
| Title: | President | |
EXHIBIT A
Services Agreement
(See Attached)
Exhibit 10.14
PROMISSORY NOTE
FOR VALUE RECEIVED Toppoint Holdings Inc., a Nevada corporation (the “Company”), with an office at 1250 Kenas Road., North Wales, PA 19454, hereby promises to pay to Hok C Chan, an individual, (the “Holder”), with an office at 1250 Kenas Road., North Wales, PA 19454, the principal sum of zero Dollars ($0) (the “Base Amount”), plus the aggregate unpaid principal amount of all advances made to the Company, or direct payments to creditors of the Company, by the Holder (together, “Advances”) outstanding 90 days after the delivery of the respective advance to the Company or the respective direct payment to the creditor(s), as the case may be (the “Maturity Date”) when all amounts due hereunder shall be due and payable together with interest thereon as hereinafter provided, in lawful money of the United States of America and in immediately available funds.
In no event shall the amount payable by the Company as interest or other charges on this Promissory Note (this “Note”) exceed the highest lawful rate permissible under any law applicable hereto.
If any payment under this Note shall be specified to be made on a day which is not a business day, it shall be made on the next succeeding day which is a business day. For purposes of this Note, a “business day” shall mean any day other than Saturday, Sunday or other day in which banks are authorized to close in the State of New York.
The Company and the Holder shall each endorse on the Schedule annexed to this Note all Advances hereafter made to the Company or to Company creditors and all payments of the principal amounts in respect of such Advances or in respect of the Base Amount, which endorsements shall, in the absence of manifest error, be conclusive as to the outstanding principal amount of all Advances and as to the outstanding principal amount of the Base Amount; provided, however, that the failure to make such notation with respect to any Advances or payment shall not limit or otherwise affect the obligations of the Company under this Note. The Holder shall promptly deliver a copy of the Schedule to the Company for its approval and signature each time that the Schedule is modified.
1. Payment of Base Amount and Advances under the Note. The outstanding portion of the Base Amount plus the outstanding portion of all Advances shall be payable in one lump sum due on the Maturity Date. Payments of principal are to be made to the Holder at the Holder’s address designated above or at such other place as the Holder shall have notified the Company in writing.
2. Payment of Interest on this Note. Interest shall accrue on the unpaid portion of the Base Amount and the unpaid portion of all Advances outstanding from time to time at a fixed rate of interest equal to Thirty Six Point Eight Eight Percent (36.88%) per annum. Payments of interest hereunder are to be made to the Holder at the Holder’s address designated above or at such other place as the Holder shall have notified the Company in writing. If all or a portion of (i) the Base Amount or any Advance under this Note or (ii) any interest payable hereon shall not be paid when due (whether at the stated maturity, by acceleration or otherwise), such overdue amount shall bear interest at a rate of Fifty Five percent (55%) per annum.
3. Prepayment.
(a) The outstanding portion of the Base Amount and the interest thereon and the outstanding portion of any Advances hereunder and the interest thereon may be prepaid in whole or in part at any time without penalty or premium of any kind; provided, however, that the Company shall give the Holder at least five (5) days advance written notice of the Company’s intention to make a repayment. The amount of each prepayment of such principal shall be applied in the order that such principal becomes due hereunder.
4. Events of Default. The existence of any of the following conditions shall constitute an event of default hereunder (an “Event of Default”):
(a) The failure by the Company to pay when due any portion of the Base Amount or any Advance, or the failure by the Company to pay when due any interest under this Note; or
(b) If the Company:
(i) shall commence any case or proceeding under any bankruptcy, insolvency or other similar law or seek reorganization, arrangement, readjustment of its debts, dissolution, liquidation, winding-up, composition or any other relief under any bankruptcy, insolvency, reorganization, liquidation, dissolution, arrangement, composition, readjustment of debt or any other similar act or law, of any jurisdiction, domestic or foreign, now or hereafter existing; or
(ii) shall admit the material allegations of any petition or pleading in connection with any such case or proceeding; or
(iii) makes an application for, or consents or acquiesces to, the appointment of a receiver, conservator, trustee or similar officer for the Company or for all or a substantial part of the Company’s property; or
(iv) makes a general assignment for the benefit of the Company’s creditors; or
(v) is unable or admits in writing its inability to generally pay the Company’s debts as they mature; or
(c) The (i) commencement of any case or proceeding against the Company under any bankruptcy, insolvency, or other similar law or seeking reorganization, arrangement, readjustment of its debts, liquidation, dissolution, winding-up, composition or any other relief under any bankruptcy, insolvency, reorganization, liquidation, dissolution, arrangement, composition, readjustment of debt or any other similar act or law of any jurisdiction, domestic or foreign, now or hereafter existing, (ii) appointment of a receiver, trustee or similar officer for the Company or for all or a substantial part of the Company’s property, or (iii) issuance of a warrant of attachment, execution or similar process against any substantial part of the property of the Company, and such case, proceeding, receiver, trustee, officer, warrant, execution or process shall not be dismissed, bonded or discharged, as applicable, within sixty (60) days of the commencement, appointment or issuance thereof.
6. Rights and Remedies. In the event that one or more Events of Default shall have occurred and be continuing, the Holder may at the Holder’s option by written notice to the Company declare the Base Amount and all Advances hereunder and the accrued and unpaid interest on this Note to be immediately due and payable, and thereupon the same shall become so due and payable, without presentment, demand, protest or further notice, all of which are hereby waived by the Company. No course of dealing or delay on the part of the Holder in exercising any right under this Note shall operate as a waiver thereof or otherwise prejudice the right of the Holder. Subject as aforesaid, no remedy conferred hereby shall be exclusive of any other remedy referred to herein or now or hereafter available at law, in equity, by statute, other agreement or instrument, or otherwise.
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7. Lost Documents. Upon receipt by the Company of (i) evidence reasonably satisfactory to it of the loss, theft, destruction or mutilation of this Note, (ii) in the case of loss, theft or destruction, indemnification satisfactory to the Company, and (iii) in the case of mutilation, surrender and cancellation of this Note, the Company will cancel this Note on its books and make and deliver in its place a new note in the then unpaid principal amount of this Note, of like tenor to this Note, dated and bearing interest from the date next following the date through which interest has been paid on the unpaid principal amount of this Note.
8. Costs and Expenses. Upon the occurrence of any Event of Default, the Company shall pay all reasonable costs and expenses incurred by the Holder (including, without limitation, court costs and reasonable attorneys’ fees) in preserving, protecting, maintaining or enforcing the Holder’s rights and remedies hereunder, including, without limitation, all costs and expenses of collection.
9. Assignment. This Note may not be sold, offered for sale, pledged, hypothecated or otherwise encumbered, transferred or disposed of by the Holder without the prior written consent of the Company. The Company shall not assign any or all of its obligations hereunder without the prior written consent of the Holder.
10. Cancellation. After the principal balance of this Note and all accrued interest thereon has been satisfied, the Holder shall surrender this Note to the Company for cancellation.
11. Miscellaneous.
(a) Parties in Interest. All covenants, agreements and undertakings in this Note by and on behalf of the Company and the Holder hereof shall, subject to the provisions of Section 9 hereof, bind and inure to the benefit of the parties hereto and their respective permitted successors and assigns, whether so expressed or not.
(b) Notices. All notices, requests, communications, consents and demands shall be made in writing and shall be (i) sent by registered or certified mail, first class, postage prepaid, return receipt requested or (ii) delivered by hand, electronic mail, facsimile transmission or messenger to the Company or to the Holder hereof, as the case may be, at their respective addresses set forth at the beginning of this Note, or at such other respective addresses as may be furnished in writing to each other. All such notices, requests, communications, consents and demands shall be deemed given if mailed, three business days after mailing, and if personally delivered, the day so delivered.
(c) Governing Law. This Note shall be governed by, and construed and interpreted in accordance with, the laws of the State of Nevada, without regard to conflicts of law principles that would require the application of the laws of another jurisdiction.
(d) Submission To Jurisdiction. Each of the Company and the Holder hereby irrevocably and unconditionally submits in any legal action or proceeding relating to this Note, or for recognition and enforcement of any judgment in respect thereof, to the non-exclusive general jurisdiction of any state or federal court sitting in the county nearest to where the Company’s executive office is then based; consents that any such action or proceeding may be brought in such courts, and waives any objection that such party may now or hereafter have to the venue of any such action or proceeding in any such court or that such action or proceeding was brought in an inconvenient court and agrees not to plead or claim the same; agrees that service of process in any such action or proceeding may be effected by mailing a copy thereof by registered or certified mail (or any substantially similar form of mail), postage prepaid, to such party, at the address set forth in the preamble hereof; and agrees that nothing herein shall affect the right to effect service of process in any other manner permitted by law or shall limit the right to sue in any other jurisdiction.
(e) WAIVERS OF JURY TRIAL. EACH OF THE COMPANY AND THE HOLDER HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVE TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS NOTE AND FOR ANY COUNTERCLAIM THEREIN.
[Signature Page Follows]
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IN WITNESS WHEREOF, this Note has been executed and delivered on the date set forth at the beginning of this Note by the duly authorized representative of the Company.
| TOPPOINT HOLDINGS INC. | |||
| By: | /s/ John Feliciano III | ||
| Name: | John Feliciano III | ||
| Title: | Interim Chief Financial Officer | ||
SCHEDULE TO PROMISSORY NOTE
| DATE |
AMOUNT OF ADVANCE (+) OR PRE-PAYMENT (-) |
UNPAID PRINCIPAL BALANCE OF NOTE | INVOICE NUMBER, IF APPLICABLE | COMPANY SIGNATURE | HOLDER SIGNATURE |
| 7/1/2024 | +$600,000.00 | $654,562.19 | N/A | /s/ John Feliciano III | /s/ Hok C Chan |
Exhibit 14.1
TOPPOINT HOLDINGS INC.
Code of Ethics and Business Conduct
| 1. | Introduction. |
1.1. The Board of Directors of Toppoint Holdings Inc. (together with its subsidiaries, the “Company”) has adopted this Code of Ethics and Business Conduct (this “Code”) in order to:
(a) promote honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest;
(b) promote full, fair, accurate, timely and understandable disclosure in reports and documents that the Company files with, or submits to, the Securities and Exchange Commission (the “SEC”) and in other public communications made by the Company;
(c) promote compliance with applicable governmental laws, rules and regulations;
(d) deter wrongdoing; and
(e) ensure accountability for adherence to this Code.
1.2. All directors, officers and employees, including principal executive officer, principal financial officer and principal accounting officer are required to be familiar with this Code, comply with its provisions and report any suspected violations as described below in Section 6.
| 2. | Honest and Ethical Conduct. |
2.1. The Company’s policy is to promote high standards of integrity by conducting its affairs honestly and ethically.
2.2. Each director, officer and employee must act with integrity and observe the highest ethical standards of business conduct in his or her dealings with the Company’s customers, suppliers, partners, service providers, competitors, employees and anyone else with whom he or she has contact in the course of performing his or her job.
| 3. | Conflicts of Interest. |
3.1. A conflict of interest occurs when an individual’s private interest (or the interest of a member of his or her family) interferes, or even appears to interfere, with the interests of the Company as a whole. A conflict of interest can arise when an employee, officer or director (or a member of his or her family) takes actions or has interests that may make it difficult to perform his or her work for the Company objectively and effectively. Conflicts of interest also arise when an employee, officer or director (or a member of his or her family) receives improper personal benefits as a result of his or her position in the Company.
3.2. Loans by the Company to, or guarantees by the Company of obligations of, employees or their family members are of special concern and could constitute improper personal benefits to the recipients of such loans or guarantees, depending on the facts and circumstances. Loans by the Company to, or guarantees by the Company of obligations of, any director or executive officer are expressly prohibited.
3.3. Whether or not a conflict of interest exists or will exist can be unclear. Conflicts of interest should be avoided unless specifically authorized as described in Section 3.4.
3.4. Persons other than directors and executive officers who have questions about a potential conflict of interest or who become aware of an actual or potential conflict should discuss the matter with, and seek a determination and prior authorization or approval from, their supervisor or the Chief Compliance Officer. If the Company does not have a Chief Compliance Officer, then references in this Code to Chief Compliance Officer shall be deemed to be references to the Company’s Chief Financial Officer. A supervisor may not authorize or approve conflict of interest matters or make determinations as to whether a problematic conflict of interest exists without first providing the Chief Compliance Officer with a written description of the activity and seeking the Chief Compliance Officer’s written approval. If the supervisor is himself involved in the potential or actual conflict, the matter should instead be discussed directly with the Chief Compliance Officer.
3.5. Directors and executive officers must seek determinations and prior authorizations or approvals of potential conflicts of interest exclusively from the Audit Committee, or the Board of Directors if no Audit Committee exists.
| 4. | Compliance. |
4.1. Employees, officers and directors should comply, both in letter and spirit, with all applicable laws, rules and regulations in the cities, states and countries in which the Company operates.
4.2. Although not all employees, officers and directors are expected to know the details of all applicable laws, rules and regulations, it is important to know enough to determine when to seek advice from appropriate personnel. Questions about compliance should be addressed to the Chief Compliance Officer.
4.3. No director, officer or employee may purchase or sell any Company securities while in possession of material non-public information regarding the Company, nor may any director, officer or employee purchase or sell another company’s securities while in possession of material non-public information regarding that company. It is against Company policies and illegal for any director, officer or employee to use material non-public information regarding the Company or any other company to (a) obtain profit for himself or herself; or (b) directly or indirectly “tip” others who might make an investment decision on the basis of that information.
| 5. | Disclosure. |
5.1. The Company’s periodic reports and other documents filed with the SEC, including all financial statements and other financial information, must comply with applicable federal securities laws and SEC rules.
5.2. Each director, officer and employee who contributes in any way to the preparation or verification of the Company’s financial statements and other financial information must ensure that the Company’s books, records and accounts are accurately maintained. Each director, officer and employee must cooperate fully with the Company’s accounting and internal audit departments, as well as the Company’s independent public accountants and counsel.
5.3. Each director, officer and employee who is involved in the Company’s disclosure process must: (a) be familiar with and comply with the Company’s disclosure controls and procedures and its internal control over financial reporting; and (b) take all necessary steps to ensure that all filings with the SEC and all other public communications about the financial and business condition of the Company provide full, fair, accurate, timely and understandable disclosure.
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| 6. | Reporting. |
6.1. Actions prohibited by this Code involving directors or executive officers must be reported to the Audit Committee, or the Board of Directors if no Audit Committee exists.
6.2. Actions prohibited by this Code involving any other person must be reported to the reporting person’s supervisor or the Chief Compliance Officer.
6.3. After receiving a report of an alleged prohibited action, the Audit Committee, or the Board of Directors if no Audit Committee exists, the relevant supervisor or the Chief Compliance Officer must promptly take all appropriate actions necessary to investigate.
6.4. All directors, officers and employees are expected to cooperate in any internal investigation of misconduct.
| 7. | Enforcement. |
7.1. The Company must ensure prompt and consistent action against violations of this Code.
7.2. If, after investigating a report of an alleged prohibited action by a director or executive officer, the Audit Committee determines that a violation of this Code has occurred, the Audit Committee will report such determination to the full Board of Directors.
7.3. If, after investigating a report of an alleged prohibited action by any other person, the relevant supervisor or the Chief Compliance Officer determines that a violation of this Code has occurred, the supervisor or the Chief Compliance Officer will report such determination to the Chief Executive Officer or the General Counsel, if the Company has a General Counsel.
7.4. Upon receipt of a determination that there has been a violation of this Code, the Board of Directors or the Chief Executive Officer or General Counsel will take such preventative or disciplinary action as it deems appropriate, including, but not limited to, reassignment, demotion, dismissal and, in the event of criminal conduct or other serious violations of the law, notification of appropriate governmental authorities.
| 8. | Waivers and Amendments. |
8.1. Each of the Audit Committee (or the Board of Directors if no Audit Committee exists) (in the case of a violation by a director or executive officer) and the Chief Executive Officer or General Counsel (in the case of a violation by any other person) may, in its discretion, waive any violation of this Code or make any amendment of this Code.
8.2. Any waiver for a director or an executive officer or any amendment of this Code shall be disclosed as required by SEC rules and the applicable rules of any trading market on which the Company’s securities are listed or quoted, or on the Company’s website within four (4) business days following the date of such amendment or waiver.
| 9. | Prohibition on Retaliation. |
The Company does not tolerate acts of retaliation against any director, officer or employee who makes a good faith report of known or suspected acts of misconduct or other violations of this Code.
April 9, 2024
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Exhibit 21.1
List of Subsidiaries
| Name | Jurisdiction of Incorporation | Percentage of Ownership | ||
| Toppoint Inc | Pennsylvania, USA | 100% |
Exhibit 23.1
Consent of Independent Registered Public Accounting Firm
To the Board of Directors and
Shareholders of Toppoint Holdings, Inc.
We hereby consent to the inclusion in this Registration Statement of Toppoint Holdings, Inc. (the “Company”) on Form S-1 of our report dated May 13, 2024, except for Notes 5 and 7, as to which the date is June 20, 2024; and Note 2, as which the date is August 12, 2024 which appears in this Registration Statement on Form S-1.
We also consent to the reference to our Firm under the caption “Experts” in such Prospectus.
/s/ TAAD LLP
Diamond Bar, California
August 12, 2024
Exhibit 99.1
TOPPOINT HOLDINGS INC.
AUDIT COMMITTEE CHARTER
| I. | Purpose. |
The Audit Committee (the “Committee”) is appointed by the Board of Directors (the “Board”) of Toppoint Holdings Inc. (the “Company”). The purpose of the Committee is to assist the Board in fulfilling its oversight responsibility relating to (i) the integrity of the Company’s and its subsidiaries’ financial statements and financial reporting process and the Company’s and its subsidiaries’ systems of internal accounting and financial controls, (ii) the performance of the internal and external audit services function, (iii) the annual independent audit of the Company’s and subsidiaries’ financial statements, the engagement of the independent auditors and the evaluation of the independent auditors’ qualifications, independence and performance, (iv) the compliance by the Company with legal and regulatory requirements, including the Company’s disclosure of controls and procedures, (v) the evaluation of enterprise risk issues, and (vi) the fulfillment of the other responsibilities set out herein.
The Audit Committee shall prepare the report required by the U.S. Securities and Exchange Commission (the “SEC”) to be included in the Company’s public filing.
| II. | Membership, Structure and Qualifications. |
Membership and Structure. The Committee shall not consist of fewer than three (3) or more than seven (7) directors. The Committee members shall be elected annually by the Board, upon the recommendation of the Nominating and Corporate Governance Committee, for terms of one (1) year, or until their successors shall be duly elected and qualified.
Qualifications. All Committee members shall meet all applicable independence requirements under Nasdaq Listing Rule 5605 (the “Nasdaq Rules”) and of Rule 10A-3 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), subject to the exemptions provided in Rule 10A-3(c) under the Exchange Act, and other applicable rules and regulations of the SEC. Additionally, no member of the Committee shall have participated in the preparation of the financial statements of the Company or any current subsidiary of the Company at any time during the preceding three (3) years and all members of the Committee must be able to read and understand fundamental financial statements, including a balance sheet, income statement, and cash flow statement.
Chairman. Unless the Chairman of the Committee (the “Chairman”) is elected by the full Board, the Committee members may designate a Chairman consistent with any recommendation of the Nominating and Corporate Governance Committee.
Resignation, Removal and Replacement. Any director may resign from the Committee at any time upon notice of such resignation to the Company. An independent director who ceases to be independent under the Nasdaq Rules shall promptly resign to the extent required for the Company to comply with applicable laws, rules and regulations. The Board shall have the power at any time to remove a member of the Committee with or without cause, to fill all vacancies, and to designate alternate members, upon the recommendation of the Committee, to replace any absent or disqualified members, so long as the Committee shall at all times have at least three (3) members and be composed solely of independent board members.
Financial Expert. As a matter of best practices, the Committee will endeavor to have at least one of its members with the requisite qualifications to be designated by the Board as an “audit committee financial expert,” as such term is defined by Item 407(d)(5) of Regulation S-K. The Committee shall report to the Board for further action as appropriate, including, but not limited to, a determination by the Board that the Committee membership includes or does not include one or more “audit committee financial experts” and any related disclosure to be made concerning this matter. The designation of a member of the Committee as an “audit committee financial expert” will not increase the duties, obligations or liability of the designee as compared to the duties, obligations and liability imposed on the designee as a member of the Committee and of the Board. If the Committee does not have an “audit committee financial expert,” then, in accordance with the requirements of the Nasdaq Rules, at least one member of the Committee must be financially sophisticated, in that he or she has past employment experience in finance or accounting, requisite professional certification in accounting, or any other comparable experience or background which results in the individual’s financial sophistication, including but not limited to being or having been a chief executive officer, chief financial officer, other senior officer with financial oversight responsibilities.
| III. | Meetings and Other Actions. |
All meetings of and other actions by the Committee shall be held and taken pursuant to the bylaws of the Company (as may be amended from time to time, the “Bylaws”), including provisions governing notice of meetings and waiver thereof, the number of Committee members required to take action at meetings and by written consent, and other related matters. The Committee may invite any director who is not a member of the Committee, management, counsel, representatives of service providers or other persons to attend meetings and provide information as the Committee, in its sole discretion, considers appropriate.
Unless otherwise authorized by the Board, the Committee shall not delegate any of its authority to any subcommittee.
| IV. | Goals, Responsibilities and Authority. |
The function of the Committee is to oversee the Company’s management and independent accountants in the production of the Company’s financial statements, as well as all controls and procedures relating thereto. The Company’s management is primarily responsible for the preparation and presentation of the Company’s financial statements and for maintaining appropriate systems for accounting and financial reporting principles and policies and internal controls and procedures that provide for compliance with accounting standards and applicable laws and regulations. The Company’s independent accountants are primarily responsible for planning and carrying out a proper audit of the Company’s annual financial statements, reviewing the Company’s unaudited interim financial statements and auditing management’s assessment of effectiveness of internal control over financial reporting in accordance with the standards of the Public Company Accounting Oversight Board (the “PCAOB”) and other procedures, to the extent required by applicable rules. The independent accountants are accountable to the Board and the Committee, as representatives of the Company’s stockholders. The Board and the Committee have the ultimate authority and responsibility to select, evaluate and, where appropriate, replace the Company’s independent accountants. For purposes of this Charter, the term “management” means the appropriate officers of each of the Company and its subsidiaries and the phrase “internal accounting staff” means the appropriate officers and employees of each of the Company and its subsidiaries.
In fulfilling their responsibilities hereunder, it is recognized that members of the Committee are not full-time employees of the Company or members of management and are not, and do not represent themselves to be, accountants or auditors by profession. As such, it is not the duty or the responsibility of the Committee or its members to conduct “field work” or other types of auditing or accounting reviews or procedures to determine if the financial statements are complete and accurate and whether they have been prepared in accordance with generally accepted accounting principles in effect in the United States (“GAAP”) or to set auditor independence standards.
Each member of the Committee shall be entitled to rely on (i) the integrity of those persons within and outside the Company and management from which it receives information, (ii) the accuracy of the financial and other information provided to the Committee absent actual knowledge to the contrary (which shall be promptly reported to the Board), and (iii) statements made by the officers and employees of the Company and its subsidiaries or other third parties as to any information technology, internal and external audit and other non-audit services provided by the independent accountants to the Company. In carrying out its responsibilities, the Committee’s policies and procedures shall be adapted, as appropriate, to best react to changing markets and regulatory environments.
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Nothing in this Charter shall be interpreted as diminishing or derogating the duties, responsibilities or obligations of the Board. Subject to the requirements of the Bylaws, the Committee shall:
Retention of Independent Accountants and Approval of Services
1. Select or retain each year a firm or firms of independent accountants to audit the accounts and records of the Company and its subsidiaries, to approve the terms of compensation of such independent accountants (including negotiating and executing on behalf of the Company engagement letters) and to terminate such independent accountants as it deems appropriate.
2. Pre-approve any independent accountants’ engagement to render audit and/or permissible non-audit services (including the fees charged and proposed to be charged by the independent accountants), subject to the de minimus exceptions under Section 10A(i)(1)(B) of the Exchange Act, and as otherwise required by law.
3. The Committee may delegate its pre-approval responsibilities to one (1) or more of its members. The member(s) to whom such responsibility is delegated must report, for informational purposes only, any pre-approval decisions to the Committee at its next scheduled meeting.
Oversight of the Independent Accountants
4. Obtain and review a report from the independent accountants at least annually regarding:
| (a) | the independent accountants’ internal quality-control procedures; |
| (b) | any material issues raised by the most recent internal quality-control review, peer review, or review by the PCAOB, of the firm, or by any inquiry or investigation by governmental or professional authorities within the preceding five (5) years respecting one (1) or more independent audits carried out by the firm; |
| (c) | any steps taken with regard to the issues identified in (a) or (b) above; and |
| (d) | all relationships between the independent accountants and the Company and its subsidiaries. |
5. Obtain from the independent accountants annually a formal written statement of the fees billed in each of the last two (2) fiscal years for each of the following categories of services rendered by the independent accountants:
| (a) | the audit of the Company’s annual financial statements and the reviews of the financial statements included in the Company’s quarterly reports or services that are normally provided by the independent accountants in connection with statutory or regulatory filings or engagements; |
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| (b) | that are reasonably related to the performance of the audit or review of the Company’s financial statements, in the aggregate and by each service; |
| (c) | tax compliance, tax advice and tax planning services, in the aggregate and by each service; and |
| (d) | all other products and services rendered by the independent accountants, in the aggregate and by each service. |
6. Evaluate the qualifications, performance and independence of the independent accountants, including the following:
| (a) | evaluating the performance of the lead (or coordinating) audit partner, and the quality and depth of the professional staff assigned to the Company and its subsidiaries; |
| (b) | considering whether the accountant’s quality controls are appropriate and adequate in light of the standards and requirements established by the PCAOB and under applicable law at such time; and |
| (c) | considering whether the provision of permitted non-audit services is compatible with maintaining the accountant’s independence. |
7. Consider the opinions of management and the internal accounting staff in connection with the foregoing responsibilities. The Committee shall present its conclusions with respect to the independent accountants to the Board.
8. Monitor the rotation required by Section 10A(j) of the Exchange Act of the lead (or coordinating) audit partner having primary responsibility for the audit and the audit partner responsible for reviewing the audit.
9. Oversee compliance with the following guidelines relating to the Company’s hiring of employees or former employees of the independent accountants:
| (a) | no member of the audit team that is auditing the Company can be hired by the Company in a financial reporting oversight role (as defined in the SEC’s Regulation S-X) for a period of one (1) year following association with that audit; and |
| (b) | the Company’s Chief Financial Officer shall report annually to the Committee the profile of the preceding year’s hires from the independent accountants. |
10. Consider the effect on the Company of:
| (a) | any changes in accounting principles or practices proposed by management or the independent accountants; |
| (b) | any changes in service providers, such accountants, that could impact the Company’s internal control over financial reporting; and |
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| (c) | any changes in schedules (such as fiscal or tax year-end changes) or structures or transactions that require special accounting activities, services or resources. |
11. Review any presentations or reports prepared by the independent accountants with respect to any applicable Federal tax matters.
12. Annually review a formal written statement from the independent accountants delineating all relationships between the independent accountants and the Company, consistent with applicable requirements and standards of the SEC and the PCAOB, and discuss with the independent accountants their methods and procedures for ensuring independence.
13. Evaluate the efficiency and appropriateness of the services provided by the independent accountants, including any significant difficulties with the audit or any restrictions on the scope of their activities or access to required records, data and information.
14. Interact with the independent accountants, including reviewing and, where necessary, resolving any problems or difficulties the independent accountants may have encountered in connection with the annual audit or otherwise, any management letters provided to the Committee and the Company’s responses. Such review shall address any difficulties encountered in the course of the audit work, including any restrictions on the scope of activities or access to required information, any disagreements that have arisen between management and the independent accountants regarding financial reporting.
15. Review with the independent accountants the effect of regulatory and accounting initiatives, as well as off-balance sheet structures, on the financial statements of the Company.
Financial Statements and Disclosure Matters
16. Review and discuss with management and the independent accountants the annual audited financial statements, including disclosures made in management’s discussion and analysis of financial condition and results of operations, and recommend to the Board whether the audited financial statements should be included in the Company’s Annual Report on Form 10-K.
17. Review and discuss with management and the independent accountants the Company’s quarterly financial statements, including disclosures made in management’s discussion and analysis of financial condition and results of operations, prior to the filing of its Quarterly Reports on Form 10-Q, including the results of the independent accountants’ reviews of the quarterly financial statements.
18. Review with the Company’s Chief Executive Officer, Chief Financial Officer and independent accountants, the adequacy and effectiveness of the Company’s and its subsidiaries’ internal control over financial reporting and review periodically, but in no event less frequently than quarterly, management’s conclusions about the effectiveness of such internal control over financial reporting, including any significant deficiencies and material weaknesses in, or material non-compliance with, such internal control.
19. Review with the Company’s Chief Executive Officer, Chief Financial Officer and independent accountants, the adequacy and effectiveness of the Company’s and its subsidiaries’ disclosure controls and procedures and review periodically, but in no event less frequently than quarterly, management’s conclusions about the effectiveness of such disclosure controls and procedures, including any significant deficiencies in, or material non-compliance with, such controls and procedures.
20. Review disclosures made to the Committee by the Company’s Chief Executive Officer and Chief Financial Officer, or persons performing similar roles, during their certification process for the Company’s Annual Report on Form 10-K and Quarterly Reports on Form 10-Q concerning any significant deficiencies in the design or operation of disclosure controls and procedures and, when applicable, internal control over financial reporting, or material weaknesses in such control, and any fraud involving management or other employees who have a significant role in the Company’s disclosure controls and procedures and internal control over financial reporting.
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21. Review and discuss the types of information to be disclosed and the types of presentation to be made in connection with earnings releases by the Company and its subsidiaries.
22. Review and discuss the types of financial and non-financial information and earning guidance to be provided to analysts and ratings agencies.
23. Meet with the Company’s independent accountants at least four times during each fiscal year, including private meetings, and review written materials prepared by the independent accountants, as appropriate. At these meetings, the Committee shall:
| (a) | review the arrangements for and the scope of the annual audit and any special audits or other special permissible services; |
| (b) | review the Company’s financial statements and to discuss any matters of concern arising in connection with audits of such financial statements, including any adjustments to such statements recommended by the independent accountants or any other results of the audits; |
| (c) | consider and review, as appropriate and in consultation with the independent accountants, the appropriateness and adequacy of the Company’s financial and accounting policies, internal control over financial reporting and, as appropriate, the internal controls of key service providers, and to review management’s responses to the independent accountants’ comments relating to those policies, procedures and controls, and to take any necessary action in light of material control deficiencies; |
| (d) | review with the independent accountants their opinions as to the fairness of the financial statements; and |
| (e) | review and discuss quarterly reports from the independent accountants relating to: (1) all critical accounting policies and practices to be used; (2) all alternative treatment of financial information within GAAP that have been discussed with management, ramifications of the use of such alternative disclosures and treatments and the treatment preferred by the independent accountants; and (3) other material written communications between the independent accountant and management, such as any management letter or schedule of unadjusted differences. |
24. Prepare the report required by the SEC to be included in the Company’s public filing.
Compliance Oversight
25. Administer the following procedures relating to the receipt, retention and treatment of complaints received by the Company regarding questionable accounting, internal accounting controls over financial reporting or auditing matters, and the confidential, anonymous submission by employees of the Company of concerns regarding questionable accounting or auditing matters:
| (a) | the Company shall forward to the Committee any complaints or concerns that it has received regarding questionable financial statement disclosures, accounting, internal accounting controls or auditing matters; |
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| (b) | the Company shall establish and publish on its website an e-mail address for receiving anonymous complaints or concerns related to questionable financial statement disclosures, accounting, internal accounting controls or auditing matters, provided that the Company may engage the services of a third-party service provider to receive such complaints on behalf of the Company via telephone, email or other appropriate method; |
| (c) | any employee of the Company may submit, on a confidential, anonymous basis if the employee so desires, any concerns regarding questionable financial statement disclosures, accounting, internal accounting controls or auditing matters by setting forth such concerns in writing and forwarding them in a sealed envelope to the Chairman of the Committee, such envelope to be labeled with a legend such as “To be opened by the Committee only” (employees may deposit such envelope in the Company’s internal mail system or deliver it by hand to a member of the Committee and if an employee would like to discuss any matter with the Committee, the employee should indicate this in the submission and include a telephone number at which he or she might be contacted if the Committee deems it appropriate); |
| (d) | the Committee shall review and consider any such complaints and concerns that it has received and take any action that it deems appropriate in order to respond thereto; |
| (e) | the Committee may request special treatment for any complaint or concern, including the retention of outside counsel or other advisors; and |
| (f) | the Committee shall retain any such complaints or concerns for a period of no less than five (5) years. |
The Committee shall annually reassess the effectiveness of the procedures described immediately above and modify them as necessary
26. The Committee will be designated as and serve as the Qualified Legal Compliance Committee for the Company in accordance with the provisions of Section 307 of Sarbanes-Oxley Act of 2002. Upon receipt of a report of evidence of a material legal violation, the Committee will notify the Board of such report, investigate and recommend appropriate measure to the Board. If the Company does not appropriately respond, the Committee may take further appropriate action, including notification to the SEC.
27. Review with management or any external counsel as the Committee considers appropriate, any legal matters (including the status of pending litigation) that may have a material impact on the Company and any material reports or inquiries from regulatory or governmental agencies.
28. Review with management the adequacy and effectiveness of the Company’s procedures to ensure compliance with its legal and regulatory responsibilities.
29. Discuss with management, the independent accountants, outside counsel, as appropriate, and, in the judgment of the Committee, such special counsel, separate accounting firm and other consultants and advisors as the Committee deems appropriate, any correspondence with regulators or governmental agencies and any published reports which raise material issues regarding the Company’s financial statements, accounting policies or internal control over financial reporting.
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30. Obtain reports from management, the internal or external auditor or internal or external audit service provider, as the case may be, and the independent auditor regarding compliance with applicable legal and regulatory requirements.
Oversight of Company’s Internal And External Audit Function
31. The internal and external auditor or internal and external audit service provider, as the case may be, shall report periodically to the Committee regarding any significant deficiencies in the design or operation of the Company’s and its subsidiaries’ internal control over financial reporting, material weaknesses in the internal control over financial reporting and any fraud (regardless of materiality) involving persons having a significant role in the internal control over financial reporting, as well as any significant changes in internal control over financial reporting implemented by management during the most recent reporting period of the Company.
32. Discuss with management, the internal and external auditor or internal and external audit service provider, as the case may be, and the independent accountant the Company’s major risk exposures (whether financial, operations or both) and the steps management has taken to monitor and control such exposures, including the Company’s risk assessment and risk management policies.
33. With respect to any internal and external audit services that may be outsourced, engage, evaluate and terminate internal and external audit service providers and approve fees to be paid to such internal and external audit service providers.
Financial Oversight
34. Review and approve decisions by the Company and its subsidiaries to enter into derivative transactions (including, but limited to, swaps, put and call options or combinations thereof, caps, floors, collars, and forward or spot exchanges) and related matters, as appropriate, as well as non-cleared swaps that are exempt from the clearing and trade execution requirements established under applicable federal law, rules and regulations, including swaps that are entered into in reliance upon the “end-user exceptions” to the mandatory execution and clearing requirements of the Dodd-Frank Wall Street Reform and Consumer Protection Act and related regulations. The Committee may review and approve swap transactions submitted to it by management on (a) an individual transaction basis or (b) a blanket basis, with respect to all non-cleared swaps that are exempt from the federal clearing and trade execution requirements, which approval must be reviewed at least annually.
35. Periodically review, at least on an annual basis, or more often (particularly in the event of a material change in hedging strategy) and approve the Company’s policies for the use of swaps that are entered into in reliance upon the end-user exceptions.
Other
36. Prepare the disclosure required by Item 407(d)(3)(i) of Regulation S-K.
37. Report its activities to the Board on a regular basis and make such recommendations with respect to the matters described above and other matters as the Committee may deem necessary or appropriate.
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38. Perform an annual self-evaluation of the Committee’s performance and annually review and reassess the adequacy of and, if appropriate, propose to the Board, any desired changes in, this Charter, all to supplement the oversight authority by the Nominating and Corporate Governance Committee with respect to such matters.
39. The Committee shall have such further responsibilities as are given to it from time to time by the Board. The Committee shall consult, on an ongoing basis, with management, the independent accountants and counsel as to legal or regulatory developments affecting its responsibilities, as well as relevant tax, accounting and industry developments.
The foregoing list of duties is not exhaustive, and the Committee may, in addition, perform such other functions as may be necessary or appropriate for the performance of its duties.
| V. | Additional Resources. |
The Committee shall have the right to use reasonable amounts of time of the Company’s independent accountants, outside lawyers and other internal staff and also shall have the right to hire independent experts, lawyers and other consultants to assist and advise the Committee in connection with its responsibilities. The Committee shall also be given the resources, as determined by the Committee, for payment of (i) compensation to any registered independent public accounting firm engaged for the purpose of preparing or issuing an audit report or performing other audit, review or attest services for the Company, (ii) compensation to any independent experts, lawyers and other consultants hired to assist and advise the Committee in connection with its responsibilities, and (iii) ordinary administrative expenses of the Committee that are necessary or appropriate in carrying out its duties. The Committee shall keep the Company’s Chief Financial Officer advised as to the general range of anticipated expenses for outside consultants, and shall obtain the concurrence of the Board in advance for any expenditures.
| VI. | Amendments. |
Any amendments to this Charter must be approved or ratified by a majority vote of the Company’s Board, including a majority of independent directors.
| VII. | Disclosure of Charter. |
This Charter will be made available on the Company’s website at “https://toppointtrucking.com/.”
Adopted by the Board of Directors on April 9, 2024.
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Exhibit 99.2
TOPPOINT HOLDINGS INC.
COMPENSATION COMMITTEE CHARTER
| I. | Purpose. |
The Compensation Committee (the “Committee”) is established by the Board of Directors (the “Board”) of Toppoint Holdings Inc. (the “Company”). The purpose of the Committee is to assist the Board in fulfilling its oversight responsibilities related to the Company’s compensation structure and compensation, including equity compensation, and other remunerations paid by the Company.
The Committee has overall responsibility for (i) reviewing and approving the remuneration of the Company’s Chief Executive Officer, Chief Financial Officer and any other executive officers that serve in executive officer capacities for the Company, (ii) evaluating and making recommendations to the Board regarding the compensation of the directors of the Company; (iii) evaluating and making recommendations to the Board regarding equity-based and incentive-compensation plans, policies and programs that are subject to Board approval; and (iv) the fulfillment of the other responsibilities set out herein.
| II. | Membership, Structure and Qualifications. |
Membership and Structure. The Committee shall consist of three (3) or more directors. The Committee members shall be elected annually by the Board, upon the recommendation of the Nominating and Corporate Governance Committee, for terms of one (1) year, or until their successors shall be duly elected and qualified.
Qualifications. All Committee members shall meet all applicable independence requirements under Nasdaq Listing Rule 5605 (the “Nasdaq Rules”) and applicable rules and regulations of the U.S. Securities and Exchange Commission (the “SEC”). In addition, each member of the Committee also shall satisfy all requirements necessary from time to time to be “non- employee directors” under Rule 16b-3 of the Exchange Act of 1934, as amended, and qualified “outside director” under Section 162(m) of the Internal Revenue Code of 1986 and related regulations, all as amended from time to time (“Section 162(m)”).
Chairman. Unless the Chairman of the Committee (the “Chairman”) is elected by the full Board, the Committee members may designate a Chairman consistent with any recommendation of the Nominating and Corporate Governance Committee.
Resignation, Removal and Replacement. Any director may resign from the Committee at any time upon notice of such resignation to the Company. An independent director who ceases to be independent under the Nasdaq Rules shall promptly resign to the extent required for the Company to comply with applicable laws, rules and regulations. The Board shall have the power at any time to remove a member of the Committee with or without cause, to fill all vacancies, and to designate alternate members, upon the recommendation of the Committee, to replace any absent or disqualified members, so long as the Committee shall at all times have at least three (3) members and be composed solely of independent board members.
| III. | Meetings and Other Actions. |
All meetings of and other actions by the Committee shall be held and taken pursuant to the bylaws of the Company (as may be amended from time to time, the “Bylaws”), including provisions governing notice of meetings and waiver thereof, the number of Committee members required to take action at meetings and by written consent, and other related matters. The Committee may invite any director who is not a member of the Committee, management, counsel, representatives of service providers or other persons to attend meetings and provide information as the Committee, in its sole discretion, considers appropriate.
Unless otherwise authorized by the Board, the Committee shall not delegate any of its authority to any subcommittee.
| IV. | Goals, Responsibilities and Authority. |
The following are the general goals, responsibilities and authority of the Committee and are set forth only for its guidance. The Committee, however, may diverge from these responsibilities and/or may assume such other responsibilities as the Board may delegate from time to time and/or as the Committee may deem necessary or appropriate from time to time in performing its functions in accordance with the Bylaws and other governance documents of the Company and with applicable law (it being understood that the Committee may condition its approval of any compensation on Board ratification to the extent so required to comply with applicable tax law such as Section 162(m)).
Nothing in this Charter shall be interpreted as diminishing or derogating the duties, responsibilities or obligations of the Board. Subject to the requirements of the Bylaws, the Committee shall:
Executive Compensation
1. Review from time to time, modify if necessary, and approve the Company’s corporate goals and objectives relevant to compensation and the Company’s executive compensation structure and compensation range to ensure that it is designed to achieve the objectives of rewarding the Company’s executive officers appropriately for their contributions to corporate growth and profitability.
2. Evaluate the Chief Executive Officer’s performance in light of such goals and objectives and, either as a Committee or together with the other independent directors (as directed by the Board), determine and approve the Chief Executive Officer’s compensation based on this evaluation. The Chief Executive Officer may not be present during voting or deliberations on his or her compensation.
3. Upon the engagement of and annually thereafter, determine and approve the compensation paid to the Company’s Chief Financial Officer and any other executive officers that serve in executive officer capacities for the Company.
Director Compensation
4. Select peer groups of companies that shall be used for purposes of determining competitive director compensation packages.
5. Periodically evaluate and make recommendations to the Board concerning the reimbursement of directors’ expenses, if any, for attendance of each meeting of the Board.
6. Periodically evaluate and make recommendations to the Board concerning the total compensation package for directors including, without limitation, the annual retainer fee, the meeting fee, incentives, equity-based compensation and other benefits paid to directors, taking into account the compensation of directors at selected peer groups of companies. The Committee shall recommend to the Board any adjustments in director compensation that the Committee considers appropriate.
7. Recommend to the Board the terms and awards of any stock compensation for members of the Board.
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Long-Term Incentive Plans
8. Approve all long-term incentive awards for the executive officers of the Company and its subsidiaries.
9. Periodically evaluate (and approve any proposed amendments to) the terms and administration of the Company’s and its subsidiaries’ annual and long-term incentive plans to assure that they are structured and administered in a manner consistent with the Company’s and its subsidiaries’ goals and objectives as to participation in such plans, target annual incentive awards, corporate financial goals, actual awards paid to the executive officers of the Company’s subsidiaries, and total funds reserved for payment under the compensation plans.
10. Determine when it is necessary (based on advice of counsel) or otherwise desirable: (a) to modify, discontinue or supplement any such plans; or (b) to submit such amendment or adoption to a vote of the full Board and/or the Company’s stockholders to the extent required by law.
11. Evaluate and make recommendations to the Board concerning the adoption of any new equity-based and incentive-compensation plan.
12. Oversee the administration of any equity incentive plans of the Company in accordance with their terms, construe all terms, provisions, conditions and limitations of such plan and make factual determinations required for the administration of such plans. The Committee may amend or terminate such plans at any time, subject to the terms of the plans.
Compensation Advisers
13. In its sole discretion, retain or obtain the advice of a compensation consultant, independent legal counsel or other adviser.
14. Have the direct responsibility for the appointment, compensation and oversight of the work of any compensation consultant, independent legal counsel or other adviser retained by the Committee. The Company must provide for appropriate funding, as determined by the Committee, for payment of reasonable compensation to a compensation consultant, independent or legal counsel that is not independent or any other adviser retained by the Committee.
15. Prior to retaining or obtaining any compensation consultant, independent legal counsel or other adviser (other than in-house legal counsel), the Committee must conduct an independence assessment of such compensation consultant, legal counsel or other adviser, including the consideration of all relevant factors to that person’s independence from management. Such factors include, but are not limited to, the following: (a) the provision of other services to the Company by the person that employs the compensation consultant, legal counsel or other adviser; (b) the amount of fees received from the Company by the person that employs the compensation consultant, legal counsel or other adviser, as a percentage of the total revenue of the person that employs the compensation consultant, legal counsel or other adviser; (c) the policies and procedures of the person that employs the compensation consultant, legal counsel or other adviser that are designed to prevent conflicts of interest; (d) any business or personal relationship of the compensation consultant, legal counsel or other adviser with a Committee member; (e) any stock of the Company owned by the compensation consultant, legal counsel or other adviser; and (f) any business or personal relationship of the compensation consultant, legal counsel, other adviser or the person employing the adviser with an executive officer of the Company. Only after the Committee has considered the preceding independence factors, the Committee may select or receive advice from any compensation advisor they prefer, including those who are not independent. The Committee is not required to conduct any independence assessment if, pursuant to Regulation S-K Item 407, disclosure of the engagement of such compensation consultant, legal counsel or other adviser is not required.
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Other
16. Fulfill any disclosure, reporting or other requirements imposed on or required of the Committee by the SEC, Nasdaq Stock Market or other applicable laws, rules and regulations, as the forgoing may be amended from time to time.
17. Review organizational and staffing matters with respect to the Company.
18. Prepare the disclosure required by Item 407(e)(5) of Regulation S-K.
19. Grant the right to receive indemnification and right to be paid by the Company the expenses incurred in defending any proceeding in advance to its disposition, to any employees in their capacity as officer, director employee or agent of the Company, any of directors the Company and any of the Company’s and its subsidiaries’ executive officers to the fullest extent of the provisions of the Bylaws.
20. Perform an annual self-evaluation of the Committee’s performance and annually review and reassess the adequacy of and, if appropriate, propose to the Board, any desired changes in, the Committee’s Charter, all to supplement the oversight authority by the Nominating and Corporate Governance Committee with respect to such matters.
21. Perform such other duties and responsibilities as may be assigned to the Committee, from time to time, by the Board of the Company and/or the Chairman of the Board, or as designated in plan documents.
22. Make regular reports to the Board and propose any necessary action to the Board. Such reports shall provide information with respect to any delegation of authority by the Committee to the Company and its subsidiaries’ executive officers or to a third party.
The foregoing list of duties is not exhaustive, and the Committee may, in addition, perform such other functions as may be necessary or appropriate for the performance of its duties.
| V. | Additional Resources. |
Subject to the approval of the Board, the Committee shall have the right to use reasonable amounts of time of the Company’s independent accountants, outside lawyers and other internal staff to assist and advise the Committee in connection with its responsibilities. The Committee shall keep the Company’s Chief Financial Officer informed as to the general range of anticipated expenses for outside consultants.
| VI. | Amendments. |
Any amendments to this Charter must be approved or ratified by a majority vote of the Company’s Board, including a majority of independent directors.
| VII. | Disclosure of Charter. |
This charter will be made available on the Company’s website “https://toppointtrucking.com/.”
Adopted by the Board of Directors on April 9, 2024.
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Exhibit 99.3
TOPPOINT HOLDINGS INC.
NOMINATING AND CORPORATE GOVERNANCE COMMITTEE CHARTER
| I. | Purpose. |
The Nominating and Corporate Governance Committee (the “Committee”) is appointed by the Board of Directors (the “Board”) of Toppoint Holdings Inc. (the “Company”). The purpose of the Committee is to assist the Board in fulfilling its oversight responsibility to assure that the Company is governed in a manner consistent with the interests of the Company’s stockholders and in compliance with applicable laws, regulations, rules and orders.
The Committee has overall responsibility for: (i) identifying and evaluating individuals qualified to become members of the Board by reviewing nominees for election to the Board submitted by stockholders and recommending to the Board director nominees for each annual meeting of stockholders and for election to fill any vacancies on the Board, (ii) advising the Board with respect to Board organization, desired qualifications of Board members, the membership, function, operation, structure and composition of committees (including any committee authority to delegate to subcommittees), and self-evaluation and policies, (iii) advising on matters relating to corporate governance, in each case subject to the requirements of the bylaws of the Company (as may be amended from time to time, the “Bylaws”) and monitoring developments in the law and practice of corporate governance, (iv) overseeing compliance with the Company’s Code of Ethics and Business Conduct and conduct of the Company’s officers and directors, and (v) approving any related party transactions.
| II. | Membership, Structure and Qualifications. |
Membership and Structure. The Committee shall consist of three (3) or more independent directors. The Committee members shall be elected annually by the Board, upon the recommendation of the Committee, for terms of one (1) year, or until their successors shall be duly elected and qualified.
Qualifications. All Committee members shall meet all applicable independence requirements under Nasdaq Listing Rule 5605 (the “Nasdaq Rules”) and applicable rules and regulations of the U.S. Securities and Exchange Commission (the “SEC”).
Chairman. Unless the Chairman of the Committee (the “Chairman”) is elected by the full Board, the Committee members may designate a Chairman consistent with any recommendation of the Committee.
Resignation, Removal and Replacement. Any director may resign from the Committee at any time upon notice of such resignation to the Company. An independent director who ceases to be independent under the Nasdaq Rules shall promptly resign to the extent required for the Company to comply with applicable laws, rules and regulations. The Board shall have the power at any time to remove a member of the Committee with or without cause, to fill all vacancies, and to designate alternate members, upon the recommendation of the Committee, to replace any absent or disqualified members, so long as the Committee shall at all times have at least three (3) members and be composed solely of independent board members.
| III. | Meetings and Other Actions. |
All meetings of and other actions by the Committee shall be held and taken pursuant to the Bylaws, including provisions governing notice of meetings and waiver thereof, the number of Committee members required to take actions at meetings and by written consent, and other related matters. The Committee may invite any director who is not a member of the Committee, management, counsel, representatives of service providers or other persons to attend meetings and provide information as the Committee, in its sole discretion, considers appropriate.
Unless otherwise authorized by the Board, the Committee shall not delegate any of its authority to any subcommittee.
In the event that the Committee’s Chairman is unable to perform any of his or her functions or obligations hereunder, the Chairman of the Company’s Compensation Committee is hereby authorized and directed to act in the place and stead of the Chairman of this Committee and fulfill any and all functions or obligations that would otherwise be the responsibility of the Chairman of this Committee, without any further action or authorization by this Committee.
| IV. | Goals, Responsibilities and Authority. |
The following are the general goals, responsibilities and authority of the Committee and are set forth only for its guidance. The Committee, however, may diverge from these responsibilities and/or may assume such other responsibilities as the Board may delegate from time to time and/or as the Committee may deem necessary or appropriate from time to time in performing its functions in accordance with the Bylaws and other governance documents of the Company with applicable law.
Nothing in this Charter shall be interpreted as diminishing or derogating the duties, responsibilities or obligations of the Board. Subject to the requirements of the Bylaws, the Committee shall:
Nominating Directors
1. Evaluate periodically the desirability of and recommend to the Board any changes in the size and composition of the Board or the qualifications for Board membership.
2. Select and evaluate nominated directors, nominated either by the Board or the stockholders, in accordance with the general and specific considerations set forth below:
(a) General Considerations. The Board shall be comprised of at least enough independent directors to comply with the requirements of the Nasdaq Rules as well as applicable rules and regulations of the SEC (each such independent director, an “Independent Director” and collectively, the “Independent Directors”). In making its recommendations, the Committee may consider some or all of the following factors:
1. the candidate’s judgment, skill, experience with other organizations of comparable purpose, complexity and size, and subject to similar legal restrictions and oversight;
2. the interplay of the candidate’s experience with the experience of other Board members;
3. the extent to which the candidate would be a desirable addition to the Board and any committee thereof;
4. whether or not the person has any relationships that might impair his or her independence, including, but not limited to, business, financial or family relationships with the Company’s management;
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5. the candidate’s ability to contribute to the effective management of the Company, taking into account the needs of the Company and such factors as the individual’s experience, perspective, skills and knowledge of the industries in which the Company’s subsidiaries operate; and
6. whether the candidates represent diverse populations, expertise, and viewpoints for representation on the Board.
(b) Specific Considerations. In addition to the foregoing general considerations, the Committee shall develop, reevaluate at least annually and modify as appropriate a set of specific considerations outlining the skills, experiences (whether in business or in other areas such as public service, academia or scientific communities), particular areas of expertise, specific backgrounds, and other characteristics for which there is a specific need on the Board and which would enhance the effectiveness of the Board and its committees given its current composition.
3. Evaluate each new director candidate and each incumbent director before recommending that the Board nominate or re-nominate such individual for election or reelection (or that the Board elect such individual on an interim basis) as a director based upon the extent to which such individual satisfies the general criteria above and will contribute significantly to satisfying the overall mix of specific criteria identified above. Each annual decision to re-nominate an incumbent director should be based upon a careful consideration of such individual’s contributions, including the value of his or her experience as a director of the Company, the availability of new director candidates who may offer unique contributions and the Company’s changing needs.
4. Seek to identify potential director candidates who will strengthen the Board and will contribute to the overall mix of considerations identified above. This process should include establishing procedures for soliciting and reviewing potential nominees from directors and stockholders and for notifying those who suggest nominees of the outcome of such review. The Committee shall have sole authority to retain and terminate any third-party search firms to be used to identify director candidates, including sole authority to approve any such search firm’s fees and other terms of retention.
5. Submit to the Board the candidates for director to be recommended by the Board for election at each annual meeting of stockholders and to be added to the Board at any other times due to any expansion of the Board, director resignations or retirements or otherwise.
6. In the event of a vacancy on the Board, following determination by the Board that such vacancy shall be filled, identify candidates for director qualified to fill such vacancy that satisfies the general criteria above.
Board of Directors
7. Monitor performance of the Board and its individual members based upon the general criteria and the specific criteria applicable to the Board and each of its members. If any serious issues are identified with any director, work with such director to resolve such issues or, if necessary, seek such director’s resignation or recommend to the Board such person’s removal.
8. Review director compensation process, self-evaluation and policies.
9. Develop and periodically evaluate initial orientation guidelines and continuing education guidelines for each member of the Board and each member of each committee thereof regarding his or her responsibilities as a director generally and as a member of any applicable committee of the Board, and monitor and evaluate annually (and at any additional time a new member joins the Board or any committee thereof).
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Board Committees
10. Review and evaluate at least annually the adequacy of the Committee’s own performance and Charter and provide a report on such evaluation and recommended proposed changes to the Charter to the Board.
11. Evaluate at least annually the performance, authority, operations, charter and composition of each standing or ad hoc committee of the Board (including any authority of a committee to delegate to a subcommittee) and the performance of each committee member and recommend any changes considered appropriate in the authority, operations, charter, number or membership of each committee.
12. Submit to the Board annually (and at any additional times that any committee members are to be selected) recommendations regarding candidates for membership on each committee of the Board.
Evaluation of and Succession Planning for Executive Officers
13. Assist the Board in evaluating the performance of and other factors relating to the retention of executive officers.
14. Develop and periodically review and revise as appropriate a management succession plan and related procedures. Consider and recommend to the Board candidates for successor to executive officers.
Corporate Governance
15. Develop, monitor and make recommendations to the Board on matters of Company policies and practices relating to corporate governance, including the Company’s corporate governance guidelines.
16. Review and make recommendations to the Board regarding proposals of stockholders that relate to corporate governance.
17. Oversee the evaluation of the Board.
Other Matters
18. Perform such other duties and responsibilities as may be assigned to the Committee, from time to time, by the Board and/or the Chairman of the Board, or as designated in the Bylaws.
The forgoing list of duties is not exhaustive, and the Committee may, in addition, perform such other functions as may be necessary or appropriate for the performance of its duties.
| V. | Additional Resources. |
Subject to the approval of the Board, the Committee shall have the right to use reasonable amounts of time of the Company’s independent accountants, outside lawyers and other internal staff and also shall have the right to hire independent experts, lawyers and other consultants to assist and advise the Committee in connection with its responsibilities. The Committee shall keep the Company’s Chief Financial Officer informed as to the general range of anticipated expenses for outside consultants, and shall obtain the approval of the Board in advance for any expenditures.
| VI. | Amendments. |
Any amendments to this Charter must be approved or ratified by a majority vote of the Company’s Board, including a majority of independent directors.
| VII. | Disclosure of Charter. |
This charter will be made available on the Company’s website at “https://toppointtrucking.com/.”
Adopted by the Board of Directors on April 9, 2024.
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Exhibit 99.4
CONSENT OF PERSON NAMED TO BECOME A DIRECTOR
Pursuant to Rule 438 promulgated under the Securities Act of 1933, as amended, the undersigned hereby consents to being named as a director nominee and to the disclosure of the undersigned’s biographical information included in the Registration Statement on Form S-1, and any amendments thereto, to be filed by Toppoint Holdings Inc. with the Securities and Exchange Commission. The undersigned further consents to the filing of this consent as an exhibit to such Registration Statement.
| /s/ Dingding He | |
| Name: Dingding He | |
| Date: August 12, 2024 |
Exhibit 99.5
CONSENT OF PERSON NAMED TO BECOME A DIRECTOR
Pursuant to Rule 438 promulgated under the Securities Act of 1933, as amended, the undersigned hereby consents to being named as a director nominee and to the disclosure of the undersigned’s biographical information included in the Registration Statement on Form S-1, and any amendments thereto, to be filed by Toppoint Holdings Inc. with the Securities and Exchange Commission. The undersigned further consents to the filing of this consent as an exhibit to such Registration Statement.
| /s/ Pablo A Santana | |
| Name: Pablo A Santana | |
| Date: August 12, 2024 |
Exhibit 99.6
CONSENT OF PERSON NAMED TO BECOME A DIRECTOR
Pursuant to Rule 438 promulgated under the Securities Act of 1933, as amended, the undersigned hereby consents to being named as a director nominee and to the disclosure of the undersigned’s biographical information included in the Registration Statement on Form S-1, and any amendments thereto, to be filed by Toppoint Holdings Inc. with the Securities and Exchange Commission. The undersigned further consents to the filing of this consent as an exhibit to such Registration Statement.
| /s/ Tan Ying Lo | |
| Name: Tan Ying Lo | |
| Date: August 12, 2024 |