Document:

ex_189512.htm

Exhibit 10.1

 

 

This PREFERRED STOCK CONVERSION AGREEMENT (this “Agreement”) dated as of June 8, 2020, among The Providence Service Corporation (the “Company”) on the one hand and Coliseum Capital Partners, L.P. (“CCP”), Coliseum Capital Partners II, L.P. (“CCP2”), Coliseum Capital Co-Invest, L.P. (“CCC”) and Blackwell Partners LLC – Series A (“Blackwell”, each a “Preferred Stockholder” and collectively, the “Preferred Stockholders”) and CCP, CCP2 and Blackwell (each a “Common Stockholder” and collectively, the “Common Stockholders” and the Common Stockholders together with the Preferred Stockholders, the “Holders” and each a “Holder”).

 

WHEREAS, the Holders collectively own (x) 765,916 shares (the “Preferred Shares”) of Series A Convertible Preferred Stock, par value $0.001 per share, of the Company (the “Series A Preferred Stock”) representing approximately 96.5% of the outstanding Series A Preferred Stock and (y) 869,091 shares of Common Stock, par value $0.001 per share, of the Company (the “Common Stock”); and

 

WHEREAS, the Company has requested that the Preferred Stockholders agree to convert certain of their shares of Series A Preferred Stock and the Preferred Stockholders have agreed to do so, subject to the terms and conditions of this Agreement.

 

NOW, THEREFORE, in consideration of the premises and of the mutual representations, warranties and covenants contained herein, the parties hereby agree as follows:

 

1.     Initial Conversion of Preferred Stock. Subject to the terms of this Agreement, at the Initial Conversion Closing (as defined below):

 

(a)     the Company shall repurchase and acquire from the Preferred Stockholders, and each of the Preferred Stockholders shall sell, assign, deliver and convey to the Company, the shares of Series A Preferred Stock listed next to such Preferred Stockholder’s name on Schedule 1 to this Agreement (the “Initial Cash Exchange Preferred Shares”) representing 369,120 shares of Series A Preferred Stock in the aggregate in exchange for (i) a cash amount equal to $209.88 per Initial Cash Exchange Preferred Share plus (ii) a cash amount equal to accrued but unpaid dividends on the Initial Cash Exchange Preferred Shares through the day prior to the Initial Conversion Closing ((i) and (ii) together, the “Cash Exchange Price”); and

 

(b)     the Preferred Stockholders shall convert the shares of Series A Preferred Stock listed next to such Preferred Stockholder’s name on Schedule 2 to this Agreement (the “Initial Share Conversion Preferred Shares”) representing 369,120 shares of Series A Preferred Stock in the aggregate in exchange for (i) 2.5075 shares of Common Stock per Initial Share Conversion Preferred Share (the “Share Issuance Amount”) plus (ii) a cash payment equal to accrued but unpaid dividends on the Initial Share Conversion Preferred Shares through the day prior to the Initial Conversion Closing plus (iii) a cash payment per Initial Share Conversion Preferred Share of $8.82 ((i), (ii) and (iii) together, the “Share Conversion Consideration”, and together with the Cash Exchange Price, the “Conversion Price”).

 

The Conversion Price, as applicable, shall be paid in full satisfaction of all obligations of the Company to the Preferred Stockholders with respect to the Initial Cash Exchange Preferred Shares and the Initial Share Conversion Preferred Shares (including, in each case, pursuant to the Certificate of Designations of Series A Convertible Preferred Stock, Par Value $0.001 Per Share, of the Company (the “COD”)). The transactions contemplated by clauses (a) and (b) of this Section 1 are referred to in this Agreement as the “Conversion”. Notwithstanding the foregoing, no fractional shares of Common Stock will be issued in connection with the Conversion, and any Preferred Stockholder otherwise entitled to receive a fractional share of Common Stock pursuant to Section 1(b) shall receive, in lieu thereof, cash in an amount equal to such fractional amount multiplied by the volume weighted average of the trading price of the Common Stock on each of the five (5) consecutive trading days ending on (and including) the day prior to the Initial Closing Date.

 

 

 

 

2.     Closing.

 

(a)     The Conversion of the Initial Cash Exchange Preferred Shares and the Initial Share Conversion Preferred Shares shall take place at a closing (the “Initial Conversion Closing”) at the offices of Gibson, Dunn & Crutcher, LLP at 200 Park Avenue, New York, New York on June 11, 2020 or such other date as each of the parties hereto agrees in writing. The date on which the Initial Conversion Closing actually occurs is referred to as the “Initial Closing Date”.

 

(b)     At the Initial Conversion Closing: (i) the Preferred Stockholders shall either, as applicable, (A) with respect to uncertificated or book-entry shares of Series A Preferred Stock, take such action as may reasonably be necessary to have the Company’s transfer agent record the transfer of the Initial Cash Exchange Preferred Shares and the Initial Share Conversion Preferred Shares in the Company’s share registry or (B) with respect to any certificated shares of Series A Preferred Stock, deliver and surrender (or cause to be delivered and surrendered) to the Company certificates representing all of the Initial Cash Exchange Preferred Shares and the Initial Share Conversion Preferred Shares, duly endorsed in blank; and (ii) subject to receipt by the Company of the certificates described in clause (i)(B) above, if applicable, the Company shall (x) deliver to each of the Preferred Stockholders an amount in cash equal to the sum of (A) the Cash Exchange Price multiplied by the number of Initial Cash Exchange Preferred Shares being sold to the Company by the applicable Preferred Stockholder, (B) the accrued but unpaid dividends through the day prior to the Initial Conversion Closing payable with respect to Initial Share Conversion Preferred Shares being converted by the applicable Preferred Stockholder, (C) the cash payment set forth in Section 1(b)(iii), and (D) the amount, if any, of cash in lieu of fractional shares of Common Stock payable to the applicable Preferred Stockholder pursuant to Section 1 of this Agreement and (y) issue to each of the Preferred Stockholders that number of shares of Common Stock equal to the Share Issuance Amount multiplied by the number of Initial Share Conversion Preferred Shares being sold to the Company by the applicable Preferred Stockholder. The cash payable to each Preferred Stockholder pursuant to Section 2(b)(ii) shall be paid by check or wire transfer in immediately available funds to a bank account designated by the Preferred Stockholders prior to the Initial Closing Date. The payment of the Conversion Price shall be subject to any deduction or withholding (tax or otherwise) required under any applicable law, and any amounts so deducted or withheld shall be treated for all purposes under this Agreement as having been paid to the applicable Preferred Stockholder by the Company. At the Initial Conversion Closing, each Preferred Stockholder will deliver to the Company duly signed W-8 or W-9 forms, as the case may be.

 

2

 

 

3.     Representations and Warranties of the Holders. Each Holder represents and warrants to the Company as to itself as follows as of the date hereof and as of the Initial Closing Date:

 

(a)     Such Holder is the legal and beneficial owner of the aggregate number of Preferred Shares and shares of Common Stock listed next to such Holder’s name on Schedule 3 to this Agreement as of the date hereof. Such Holder owns such Preferred Shares and shares of Common Stock outright and free and clear of any options, contracts, agreements, liens, security interests, mortgages, pledges, charges, equities, claims or restrictions on transferability or encumbrances of any kind, or other encumbrances.

 

(b)     Assuming the accuracy of the representations and warranties set forth in Section 4(b), following the Initial Conversion Closing, such Holder will be the legal and beneficial owner of the aggregate number of Preferred Shares (the “Remainder Preferred Shares”) and shares of Common Stock (the “Post-Initial Conversion Common Shares”) listed next to such Holder’s name on Schedule 4 to this Agreement as of the date hereof.

 

(c)     Such Preferred Stockholder has all requisite power and authority to sell and transfer the Initial Cash Exchange Preferred Shares and the Initial Share Conversion Preferred Shares to the Company in the manner provided herein.

 

(d)     Such Holder has sole or shared with other Holders, and otherwise unrestricted, voting power with respect to the Preferred Shares and shares of Common Stock listed next to such Holder’s name on Schedule 3 to this Agreement, and none of such Preferred Shares or shares of Common Stock is subject to any voting trust or other agreement, arrangement, or restriction with respect to the voting of such shares, except as contemplated by this Agreement.

 

(e)     Such Holder has the right, power, legal capacity and authority to enter into and perform its obligations under this Agreement, and has obtained all required consents or approvals necessary for the execution, delivery and performance by it of this Agreement and the transactions contemplated hereby. This Agreement has been duly executed and delivered by such Holder, and constitutes its valid and binding obligation enforceable in accordance with its terms (except to the extent that enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer or other similar laws relating to creditors’ rights generally or by general principles of equity and public policy).

 

(f)     No affiliate of such Holder other than the Holders party to this Agreement holds any securities of the Company; provided, however, that this clause (f) shall not apply to Blackwell.

 

(g)     Such Preferred Stockholder has had an opportunity to review with the Preferred Stockholder’s tax advisers the federal, state, local and foreign tax consequences of the transactions contemplated by this Agreement. Such Preferred Stockholder is relying solely on such advisers and not on any statements or representations of the Company or any of its agents. Such Preferred Stockholder understands that the Preferred Stockholder (and not the Company) shall be responsible for the Preferred Stockholder’s tax liability and any related interest and penalties imposed by a taxing authority on the Preferred Stockholders that may arise as a result of the transactions contemplated by this Agreement.

 

3

 

 

(h)     Such Holder is a sophisticated shareholder and has adequate information concerning the business and financial condition of the Company to make an informed decision regarding the transactions contemplated hereby and has independently and without reliance upon the Company and based on such information as such Holder has deemed appropriate, made its own analysis and decision to enter into this Agreement. Such Holder acknowledges that the Company has not made and does not make any representation or warranty, whether express or implied, of any kind or character except as expressly set forth in this Agreement.

 

4.     Representations and Warranties of the Company. The Company represents and warrants to the Holders as follows as of the date hereof and as of the Initial Closing Date:

 

(a)     The Company is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware.

 

(b)     All shares of Common Stock to be issued to the Preferred Stockholders pursuant to this Agreement shall be duly authorized, validly issued, fully paid, and non-assessable when issued.

 

(c)     The Company has the corporate power and authority to (i) enter into this Agreement and to perform its obligations hereunder and (ii) subject to receipt of the requisite stockholder approval, execute and file the COD Amendment (as defined below) and perform its obligations thereunder. This Agreement constitutes the valid and binding obligation of the Company enforceable in accordance with its terms (except to the extent that enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer or other similar laws relating to creditors’ rights generally or by general principles of equity and public policy).

 

(d)     The consummation by the Company of the transactions contemplated by this Agreement and subject to receipt of the requisite stockholder approval, the execution and filing of the COD Amendment do not (i) violate or conflict with any provision of the Certificate of Incorporation or Bylaws (each as defined below); or (ii) violate any applicable law binding on the Company, including, without limitation, Section 160 of the General Corporation Law of the State of Delaware.

 

(e)     The execution and delivery of this Agreement and the consummation of the transactions contemplated hereby have been duly authorized on the part of the Company. The Board of Directors of the Company (the “Board”) at a meeting duly called and held, has adopted resolutions: (i) approving and declaring advisable this Agreement and the transactions contemplated hereby; (ii) approving and declaring advisable the COD Amendment; (iii) determining that this Agreement and the COD Amendment are in the best interests of the Company and its stockholders; (iv) directing the COD Amendment be submitted to the stockholders of the Company for approval and adoption; and (v) recommending the approval and adoption of the COD Amendment to the stockholders of the Company, which resolutions have not been rescinded, modified, or withdrawn as of the date of this Agreement or as of the Initial Closing Date.

 

4

 

 

5.     Transfers. Each of the Holders shall not, until October 6, 2020 (the “Initial Lock-up Period”), directly or indirectly, sell, assign, pledge, encumber, convert, exchange, hypothecate or otherwise dispose of or transfer (by the operation of law or otherwise) (a “Transfer”) any of its shares of Common Stock. Upon the expiration of the Initial Lock-up Period, the Holders may, in the aggregate, Transfer up to 448,665 shares of Common Stock, (in each case subject to appropriate adjustment in the event of any share dividend, share split, combination or other similar recapitalization) during each of (a) the period between the end of the Initial Lock-Up Period and December 31, 2020, (b) the period between January 1, 2021 and March 31, 2021, plus the Excess Shares (if any), (c) the period between April 1, 2021 and June 30, 2021, plus the Excess Shares (if any), and (d) the period between July 1, 2021 and September 30, 2021, plus the Excess Shares (if any), in each case subject to applicable law. The term “Excess Shares” means a number of shares of Common Stock that could have been Transferred by the Holders, in the aggregate, in the periods beginning after the Initial Lock-up Period (determined on a cumulative basis) but were not Transferred by the Holders.

 

6.     Proxy Statement; COD Amendment. The Company shall, as promptly as reasonably practicable, in accordance with applicable law and the Company’s Second Amended and Restated Certificate of Incorporation (as amended, the “Certificate of Incorporation”) and the Company’s Amended and Restated Bylaws (the “Bylaws”), establish a record date for, duly call and give notice of, and use its reasonable best efforts to convene a meeting of holders of Common Stock and Series A Preferred Stock (the “Company Stockholders Meeting”) to consider and vote upon the approval of an amendment to the COD in the form attached hereto as Exhibit A (the “COD Amendment”), if required. If required, the Company shall, as promptly as reasonably practicable, and in any event, within forty-five (45) days after the date of this Agreement, prepare and file with the Securities and Exchange Commission a proxy statement on Schedule 14A (such proxy statement, including any amendment or supplement thereto, the “Proxy Statement”) in preliminary form relating to the Company Stockholders Meeting. No filing of, or amendment or supplement to, the Proxy Statement will be made by the Company without providing the Holders a reasonable opportunity to review and comment thereon, which comments the Company will consider for inclusion in good faith. Subject to the Board’s fiduciary duties, the Board shall (i) recommend at the Company Stockholders Meeting that the holders of shares of Common Stock and Series A Preferred Stock approve the COD Amendment and (ii) use its reasonable best efforts to obtain and solicit such approval. If the COD Amendment is approved at the Company Stockholders Meeting, then the Company shall file the Certificate of Amendment implementing the COD Amendment with the Secretary of State of the State of Delaware; provided, however, that the effective time of the COD Amendment shall be no earlier than the close of business on the fifth (5th) business day following public announcement that the COD Amendment has been approved by the stockholders.

 

5

 

 

7.     Voting Agreement. The Holders shall appear at the Company Stockholders Meeting (in person or by proxy) and cause the Remainder Preferred Shares and Post-Initial Conversion Common Shares to be counted as present thereat for purposes of calculating a quorum and shall vote (or cause to be voted) or deliver a written consent (or cause a written consent to be delivered) covering all of the Remainder Preferred Shares and Post-Initial Conversion Common Shares that such Holder shall be entitled to so vote: (i) in favor of the COD Amendment; (ii) in favor of any proposal to adjourn or postpone the meeting of the stockholders of the Company to a later date, if there are not sufficient votes for approval of the COD Amendment; and (iii) against any action, proposal, or agreement that would (or would reasonably be expected to) result in the termination of this Agreement ((i) through (iii), the “Covered Proposals”). No Holder shall take or commit or agree to take any action inconsistent with the foregoing.

 

8.     Irrevocable Proxy. By executing this Agreement, each Holder does hereby appoint Daniel E. Greenleaf and Kathryn Stalmack and each individually, with full power of substitution and resubstitution, as such Holder’s true and lawful attorney and irrevocable proxy, to the fullest extent of such Holder’s rights with respect to the Remainder Preferred Shares and Post-Initial Conversion Common Shares, to vote, and to execute written consents with respect to, each of such Remainder Preferred Shares and Post-Initial Conversion Common Shares solely with respect to the matters set forth in Section 7 and Section 9 hereof. Each Holder intends for this proxy to be irrevocable and coupled with an interest hereunder until (x) with respect to the Post-Initial Conversion Common Shares, the business day following the Company Stockholders Meeting (the “Expiration Time”) and (y) with respect to the Remainder Preferred Shares, until the date that no Series A Preferred Stock is outstanding. Each Holder affirms that the irrevocable proxy is given to the Company by such Holder to secure the performance of the duties of such Holder under this Agreement. Each Holder shall not to grant any subsequent proxies to, or enter into any agreement with, any person or entity to vote or give voting instructions with respect to the Post-Initial Conversion Common Shares and the Remainder Preferred Shares in any manner inconsistent with the terms of this irrevocable proxy until after the Expiration Time or the date that no Series A Preferred Stock is outstanding, as applicable. Notwithstanding anything contained herein to the contrary, this irrevocable proxy (1) with respect to the Post-Initial Conversion Common Shares shall automatically terminate upon the Expiration Time and (2) with respect to the Remainder Preferred Shares shall automatically terminate on the date that no Series A Preferred Stock is outstanding. Except for the proxy granted by each Holder in connection with the 2020 Annual Meeting of Stockholders of the Company to be held on June 16, 2020, each Holder hereby revokes any proxies or powers of attorney previously granted with respect to the Series A Preferred Stock and the Common Stock to the extent necessary to grant the proxy included in this Section 8 with respect to the Covered Proposals and matters related thereto and matters set out in Section 9 hereof, and represents that none of such previously granted proxies or powers of attorney is irrevocable; provided, however, that no proxy or power of attorney from Blackwell to Coliseum Capital Management, LLC (“CCM”), or any of its affiliates relating to the Series A Preferred Stock or the Common Stock shall be revoked. The Company may terminate this proxy with respect to a Holder at any time in its sole discretion by written notice provided to such Holder.

 

6

 

 

9.     Preferred Stockholder Approvals. If the COD Amendment is not approved at the Company Stockholders Meeting or any adjournment, continuation or postponement thereof, then, from the date of the Company Stockholders Meeting until the date that no Series A Preferred Stock is outstanding(the “Preferred Voting Period”), the Preferred Stockholders shall with respect to any action requiring a separate vote of the holders of the Series A Preferred Stock pursuant to Section 5(b)(i) (other than (i) any change, amendment, alteration, or repeal (including as a result of a merger, consolidation, or other extraordinary transaction) of any provision of the Certificate of Incorporation (including the COD) that adversely affects any of the economic rights, economic powers, and economic preferences of the Series A Preferred Stock, including, without limitation, dividend rights, rights upon liquidation, dissolution, or winding up of the Company (including the Liquidation Preference and rights upon any Deemed Liquidation Event (as defined in the COD)), conversion rights (including adjustment provisions relating to conversion), redemption rights, and voting rights under Section 5(a) of the COD), and (ii) any change, amendment, alteration, or repeal (including as a result of a merger, consolidation, or other similar extraordinary transaction) of Section 5(b) of the COD in a manner that would alter the right of the Preferred Stockholders to vote on any matter for which they have retained the ability to vote in their discretion (and not as directed by the Board) pursuant to this Section 9), (ii), (iii), (iv), or (vii) or Section 5(c) of the COD, vote (or cause to be voted) or deliver a written consent (or cause a written consent to be delivered) covering all of the Remainder Preferred Shares, as requested by the Board (acting through the members of the Board unaffiliated with any of the Preferred Stockholders).

 

10.     No Transfers, Conversions or Redemptions.

 

(a)     Other than pursuant to this Agreement, following the execution hereof and until the earliest of (a) the effectiveness of the COD Amendment, (b) the termination of this Agreement pursuant to Section 11 and (c) the date that no shares of Series A Preferred Stock held by anyone other than the Preferred Stockholders remain outstanding each of the Preferred Stockholders shall not and shall cause its affiliates not to (i) Transfer any of the Remainder Preferred Shares, (ii) exercise its right to convert the Remainder Preferred Shares into shares of Common Stock pursuant to Section 6 of the COD or (iii) exercise its right to redeem the Preferred Shares pursuant to Section 7 of the COD; provided, however, that (x) the Preferred Stockholders shall have the right to Transfer Remainder Preferred Shares to affiliates that, execute a written joinder and become subject to and bound by the terms of this Agreement as Preferred Stockholders with respect to such Remainder Preferred Shares, including all affiliates of CCM, the principals of CCM, and each other investment fund or managed account managed by CCM or any of its affiliates, and (y) the Preferred Stockholders shall at any time have the right to Transfer Remainder Preferred Shares (including through conversion pursuant to Section 6 of the COD); provided, that, after giving effect to each such Transfer or conversion, Remainder Preferred Shares owned by the Preferred Stockholders constitute not less than a majority of all outstanding Series A Preferred Stock of the Company.

 

(b)     If, following the date hereof and prior to the effectiveness of the COD Amendment, the Company exercises its optional conversion right pursuant to Section 6(b) of the COD, the Company shall, immediately prior to the Corporation Conversion (as defined in the COD), repurchase each of the Remainder Preferred Shares from the Preferred Stockholders for (i) a cash amount equal to $209.88 per Remainder Preferred Share plus (ii) a cash amount equal to accrued but unpaid dividends on the Remainder Preferred Shares through the day prior to the Corporation Conversion Date (as defined in the COD), subject to applicable law.

 

7

 

 

11.     Termination. This Agreement shall terminate automatically and shall have no further force and effect as of the later of (i) termination of the Preferred Voting Period and (ii) termination of the Transfer restrictions contained in Section 5 hereof, unless otherwise mutual agreed pursuant to a written agreement executed by the parties hereto; provided, however, that if the Initial Conversion Closing does not occur by June 15, 2020 (other than by reason of a breach by the Preferred Stockholders of this Agreement), the Holders shall have the option in their sole discretion to terminate this Agreement by written notice to the Company. Upon termination or expiration of this Agreement, no party shall have any further obligations or liabilities under this Agreement; provided, that (i) such termination or expiration shall not relieve any party from liability for any willful and material breach of this Agreement prior to termination or expiration thereof, and (ii) notwithstanding anything to the contrary in this Agreement, this Section 11 and Sections 13 through 23, shall survive the termination of this Agreement and remain in full force and effect.

 

12.     Organizational Documents Waiver. The execution and delivery of this Agreement by the Company and the Holders shall constitute the express waiver by the Holders of any right, notice, consent, entitlement or other procedural requirement under the Certificate of Incorporation, the Bylaws and the COD, in each case, that may be applicable to, and inconsistent with, the transactions contemplated by this Agreement.

 

13.     Blackwell. This Agreement and all provisions hereof, including without limitation any representation or warranty by Blackwell with respect to the Series A Preferred Stock or Common Stock, restrictions on transfer, and the obligation to vote (or cause to vote) shares of Series A Preferred Stock or Common Stock, shall apply to Blackwell only with respect to shares of Series A Preferred Stock and Common Stock shown as owned by Blackwell as set forth on Schedule 3 or Schedule 4, as applicable, which shares are subject to an investment management agreement between Blackwell and Coliseum Capital Management, LLC, and shall not apply in any respect to shares of Series A Preferred Stock or Common Stock or other equity securities of the Company otherwise held by Blackwell from time to time and which are not set forth on Schedule 3 or Schedule 4, as applicable.

 

14.     Notices. Any notice or other communication required or permitted to be delivered to any party under this Agreement shall be in writing and shall be deemed properly delivered, given and received: (a) if delivered by hand, when delivered; (b) if sent on a business day by electronic mail before 5:00 p.m. (recipient’s time) on the day sent by electronic mail, on the date on which receipt is confirmed; (c) if sent by electronic mail on a day other than a business day, or if sent by electronic mail after 5:00 p.m. (recipient’s time) on the day sent by electronic mail, on the business day following the date on which receipt is confirmed; (d) if sent by registered, certified or first class mail, the third business day after being sent; and (e) if sent by overnight delivery via a national courier service, two (2) business days after being delivered to such courier, in each case to the address set forth beneath the name of such party below (or to such other address as such party shall have specified in a written notice given to the other parties hereto):

 

8

 

 

If to the Holders, to:

 

Coliseum Capital Management, LLC

105 Rowayton Avenue

Rowayton, CT 06853

Attention: Adam Gray; Christopher Shackelton; and Chivonne Cassar

Email: agray@coliseumpartners.com; chris@coliseumpartners.com; ccassar@coliseumpartners.com

 

with a copy (which shall not constitute notice) to:

 

Paul Hastings LLP

200 Park Avenue

New York, NY 10166

Attention: Barry Brooks

Email: barrybrooks@paulhastings.com

 

If to the Company, to:

 

The Providence Service Corporation

1275 Peachtree Street, Sixth Floor

Atlanta, Georgia 30309

Attention: Kathryn Stalmack

Email: kathryn.stalmack@logisticare.com

 

with a copy (which shall not constitute notice) to:

 

Gibson, Dunn & Crutcher LLP

200 Park Avenue

New York, NY 10166

Attention: Sean P. Griffiths

Email: SGriffiths@gibsondunn.com

 

15.     Governing Law; Venue. All terms of and rights under this Agreement shall be governed by and construed in accordance with the laws of the State of Delaware, without giving effect to principles of conflicts of law. Any legal action or proceeding arising out of or relating to this Agreement brought by any party against any other party shall be brought and determined in the Court of Chancery of the State of Delaware; provided, however, that if subject matter jurisdiction is not then available in the Court of Chancery of the State of Delaware, then any such legal action or proceeding may be brought in any federal court located in the State of Delaware or any other Delaware state court. Each of the parties hereto hereby irrevocably submits to the jurisdiction of the aforesaid courts for itself and with respect to its property, generally and unconditionally, with regard to any such action or proceeding arising out of or relating to this Agreement and the transactions contemplated hereby. No party shall commence any action, suit or proceeding relating thereto except in the courts described above in Delaware, other than actions in any court of competent jurisdiction to enforce any judgment, decree or award rendered by any such court in Delaware as described herein. Notice as provided herein shall constitute sufficient service of process and the parties further waive any argument that such service is insufficient. Each of the parties hereto hereby irrevocably and unconditionally waives, and no party shall assert, by way of motion or as a defense, counterclaim or otherwise, in any action or proceeding arising out of or relating to this Agreement or the transactions contemplated hereby, (a) any claim that it is not personally subject to the jurisdiction of the courts in Delaware as described herein for any reason, (b) that it or its property is exempt or immune from jurisdiction of any such court or from any legal process commenced in such courts (whether through service of notice, attachment prior to judgment, attachment in aid of execution of judgment, execution of judgment or otherwise) and (c) that (i) the suit, action or proceeding in any such court is brought in an inconvenient forum, (ii) the venue of such suit, action or proceeding is improper or (iii) this Agreement, or the subject matter hereof, may not be enforced in or by such courts.

 

9

 

 

16.     Waiver of Jury Trial. EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY THAT MAY ARISE PURSUANT TO THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES, AND THEREFORE EACH PARTY HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT THAT SUCH PARTY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LEGAL PROCEEDING (WHETHER FOR BREACH OF CONTRACT, TORTIOUS CONDUCT OR OTHERWISE) DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY. EACH PARTY ACKNOWLEDGES AND AGREES THAT (i) NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER; (ii) IT UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF THIS WAIVER; (iii) IT MAKES THIS WAIVER VOLUNTARILY; AND (iv) IT HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 16.

 

17.     Entire Agreement. This Agreement sets forth the entire agreement and understanding between the parties as to the subject matter hereof and supersedes all prior oral and written and all contemporaneous oral discussions, agreements and understandings of any kind or nature.

 

18.     Severability. If any term of this Agreement is invalid, unlawful or incapable of being enforced by reason of any rule of law or public policy, all other terms (or parts thereof) set forth herein which can be given effect without the invalid, unlawful or unenforceable term will, nevertheless, remain in full force and effect, and no term herein (or parts thereof) set forth will be deemed dependent upon any other such term unless so expressed herein.

 

19.     Remedies. In the event of a breach by any party to this Agreement of its obligations under this Agreement, any other party, in addition to being entitled to exercise all rights granted by law, including recovery of damages, shall be entitled to specific performance of its rights under this Agreement (without requirement to post a bond therefor). The parties acknowledge and agree that irrevocable damage would occur in the event that any of the provisions of this Agreement were not performed in accordance with their specific terms or were otherwise breached, and that monetary damages, even if available, would not be an adequate remedy therefor and any defense in any action for specific performance that a remedy at law would be adequate is hereby waived.

 

10

 

 

20.     Further Assurances. Each party shall cooperate and take such action as may be reasonably requested by another party in order to carry out the provisions and purposes of this Agreement.

 

21.     Assignment; Binding Effect. This Agreement shall not be assigned by operation of law or otherwise by any party hereto without the prior written consent of the other parties hereto. This Agreement shall inure to the benefit of and be binding upon the parties hereto and their respective permitted successors and assigns.

 

22.     Amendment; Waiver. Any term of this Agreement may be amended and the observance of any such term may be waived (either generally or in a particular instance) only with the prior written consent of the Company (acting through the members of the Board unaffiliated with any of the Preferred Stockholders) and each of the Holders.

 

23.     Counterparts. This Agreement may be executed in two counterparts, each of which shall be deemed an original, but which together shall constitute one and the same instrument. Delivery of an executed counterpart of a signature page to this Agreement by facsimile shall be as effective as delivery of a manually executed counterpart to this Agreement.

 

[The remainder of this page has intentionally been left blank]

 

11

 

 

IN WITNESS WHEREOF, the parties have executed this Agreement with the intent that it be effective on the date first above written.

 

	 	THE PROVIDENCE SERVICE CORPORATION	 
	 	 	 	 
	 	 	 	 
	 	By:	/s/ Daniel E. Greenleaf	 
	 	 	Name: Daniel E. Greenleaf	 
	 	 	Title:   President & CEO	 
	 	 	 	 
	 	 	 	 
	 	COLISEUM CAPITAL PARTNERS, L.P.	 
	 	 	 	 
	 	By: Coliseum Capital, LLC, its general partner	 
	 	 	 	 
	 	 	 	 
	 	By:	/s/ Christopher Shackelton	 
	 	 	Name: Christopher Shackelton	 
	 	 	Title: Manager	 
	 	 	 	 
	 	 	 	 
	 	COLISEUM CAPITAL PARTNERS II, L.P.	 
	 	 	 	 
	 	By: Coliseum Capital, LLC, its general partner	 
	 	 	 	 
	 	 	 	 
	 	By:	/s/ Christopher Shackelton	 
	 	 	Name: Christopher Shackelton	 
	 	 	Title: Manager	 
	 	 	 	 
	 	 	 	 
	 	COLISEUM CAPITAL CO-INVEST, L.P.	 
	 	 	 	 
	 	By: Coliseum Capital, LLC, its general partner	 
	 	 	 	 
	 	 	 	 
	 	By:	/s/ Christopher Shackelton	 
	 	 	Name: Christopher Shackelton	 
	 	 	Title: Manager	 
	 	 	 	 
	 	 	 	 
	 	BLACKWELL PARTNERS LLC – SERIES A	 
	 	 	 	 
	 	By: Coliseum Capital Management, LLC – Attorney-in-Fact	 
	 	 	 	 
	 	 	 	 
	 	By:	/s/ Christopher Shackelton	 
	 	 	Name: Christopher Shackelton	 
	 	 	Title: Managing Partner	 

 

 

 

 

SCHEDULE 1

 

	
			Name of Holder

				
			Initial Cash Exchange Preferred Shares

			
	
			Coliseum Capital Partners, L.P.

				
			198,405.00

			
	
			Coliseum Capital Partners II, L.P.

				
			32,385.00

			
	
			Blackwell Partners LLC - Series A

				
			37,591.00

			
	
			Coliseum Capital Co-Invest, L.P.

				
			100,739.00

			
	
			Total:

				
			369,120.00

			

 

SCHEDULE 2

 

	
			Name of Holder

				
			Initial Share Conversion Preferred Shares

			
	
			Coliseum Capital Partners, L.P.

				
			198,406.00

			
	
			Coliseum Capital Partners II, L.P.

				
			32,385.00

			
	
			Blackwell Partners LLC - Series A

				
			37,590.00

			
	
			Coliseum Capital Co-Invest, L.P.

				
			100,739.00

			
	
			Total:

				
			369,120.00

			

 

SCHEDULE 3

 

	
			Name of Holder

				
			Number of shares of Series A Preferred Stock

				
			Number of shares of Common Stock

			
	
			Coliseum Capital Partners, L.P.

				
			411,688

				
			380,292

			
	
			Coliseum Capital Partners II, L.P.

				
			67,198

				
			180,095

			
	
			Blackwell Partners LLC - Series A

				
			77,999

				
			308,704

			
	
			Coliseum Capital Co-Invest, L.P.

				
			209,031

				
			0

			
	
			Total:

				
			765,916

				
			869,091

			

 

SCHEDULE 4

 

	
			Name of Holder

				
			Remainder Preferred Shares

				
			Post-Initial Conversion Common Shares

			
	
			Coliseum Capital Partners, L.P.

				
			14,877.00

				
			877,795.00 

			
	
			Coliseum Capital Partners II, L.P.

				
			2,428.00

				
			261,300.00

			
	
			Blackwell Partners LLC - Series A

				
			2,818.00

				
			402,960.00

			
	
			Coliseum Capital Co-Invest, L.P.

				
			7,553.00

				
			252,603.00

			
	
			Total:

				
			27,676.00

				
			1,794,658.00

			

 

 

 

 

EXHIBIT A

 

FORM OF 

 

CERTIFICATE OF AMENDMENT TO THE

CERTIFICATE OF DESIGNATIONS OF

SERIES A CONVERTIBLE PREFERRED STOCK,

PAR VALUE $0.001 PER SHARE,

OF

THE PROVIDENCE SERVICE CORPORATION

 

The Providence Service Corporation, a Delaware corporation (the “Corporation”), hereby certifies as follows:

 

FIRST: The Corporation’s Certificate of Designations of Series A Convertible Preferred Stock, par value $0.001 per share (the “Series A Certificate of Designations”), which was filed with the Secretary of State of the State of Delaware on February 6, 2015, is hereby amended to add the following new Section 18 thereto:

 

Section 18. Redemption.

 

(a) Redemption at the Option of the Corporation Following Approval. Notwithstanding anything to the contrary set forth herein, immediately following the effectiveness of the Certificate of Amendment containing this sentence (the “Redemption Date”), without any further action on the part of the Corporation or any stockholder thereof, each share of Series A Preferred Stock shall be redeemed, to the fullest extent permitted by law, for an amount in cash equal to $209.88 (plus any accrued but unpaid dividends as of the day prior to the Redemption Date on such share) (the “Redemption Price”), in each case in accordance with the terms and conditions set forth in this Section 18.

 

(b) Notice of Redemption. As promptly as practicable following the approval of the Amendment contained in the Certificate of Amendment containing this sentence, the Corporation shall give notice (or cause notice to be given) to each holder of Series A Preferred Stock of the redemption on the Redemption Date of such holder’s shares of Series A Preferred Stock, which notice may include a letter of transmittal in such form as the Corporation determines appropriate for the surrender of the certificate(s) representing the shares of Series A Preferred Stock redeemed pursuant to this Section 18. Such notice shall be given by first class mail, postage prepaid, addressed to the holders of record of the shares of Series A Preferred Stock at their respective last addresses appearing on the books of the Corporation. Any notice mailed as provided in this Section 18(b) shall be conclusively presumed to have been duly given, whether or not the holder receives such notice, but failure to duly give such notice by mail, or any defect in such notice or in the mailing thereof, to any holder of shares of Series A Preferred Stock subject to redemption as provided in Section 18(a) hereof shall not affect the validity or effectiveness of the redemption of such holder’s shares of Series A Preferred Stock or of any other shares of Series A Preferred Stock so redeemed. Each notice of redemption given to a holder shall state the place or places where certificates representing shares of Series A Preferred Stock redeemed pursuant to Section 18(a) hereof are to be surrendered in exchange for payment of cash in an amount equal to the sum of the aggregate Redemption Price for such shares of Series A Preferred Stock. If the certificate(s) representing any shares of Series A Preferred Stock are alleged to have been lost, stolen or destroyed, the holder thereof shall surrender, in lieu of such certificate(s), an affidavit that such certificate(s) have been lost, stolen or destroyed and an indemnity or bond in an amount the Corporation determines to be sufficient to indemnify it against any claim that may be made against it on account of the alleged loss, theft or destruction of any such certificate(s).

 

 

 

 

(c) Effectiveness of Redemption. Section 7(e) shall apply to all shares of Series A Preferred Stock redeemed pursuant to Section 18(a) hereof.

 

SECOND: The foregoing amendment was duly adopted by (i) the board of directors of the Corporation in accordance with the provisions of Section 242 of the General Corporation Law of the State of Delaware and (ii) the affirmative vote of holders representing not less than (a) a majority in voting power of the outstanding shares of capital stock of the Corporation entitled to vote thereon and (b) a majority of the outstanding shares of Series A Preferred Stock, in each case, in accordance with Section 242 of the General Corporation Law of the State of Delaware and the Series A Certificate of Designations.

 

IN WITNESS WHEREOF, the undersigned, a duly authorized officer of the Corporation, has executed this Certificate of Amendment this ___ day of _____________, 2020.

 

 

	 	THE PROVIDENCE SERVICE CORPORATION	 
	 	 	 	 
	 	 	 	 
	 	By:	 	 
	 	 	Name:	 
	 	 	Title:	 

 

 

 

2ex_189445.htm

Exhibit 10.1

 

 

 

 

 

 

 

 

 

 

 

SALES INCENTIVE AGREEMENT

 

 

 

 

 

 

By and Between

 

 

 

 

 

 

BIO-key International, Inc.

 

And

 

Technology Transfer Institute (“TTI”)

 

 

 

 

 

Dated March 25, 2020

 

 

 

 

SALES INCENTIVE AGREEMENT

 

This Sales Incentive Agreement (“Agreement”) is entered as of the date of the last signature hereon (the “Effective Date”) by and between BIO-key International, Inc. a Delaware corporation, having its principal place of business at 3349 Highway 138, Building A, Suite E, Wall, NJ 07719, on behalf of itself and its subsidiaries (“BIO- key”), and Technology Transfer Institute, a Florida corporation, having its principal place of business at 2719 Hollywood Blvd Suite A-1457, Hollywood, Florida 33020, (“TTI”). Certain capitalized terms used herein have the meaning set forth in Section 2 below.

 

	 	
			1.

				
			Recitals and Intent of the Parties

			

 

1.1     Intent to Facilitate Profitable BIO-key Revenue in Africa. The intent of this agreement is to establish and foster the growth of new market opportunities generating profitable revenue for BIO-key’s wholly-owned subsidiary in Africa, (“BIO- key Africa”), rewarding TTI with BIO-key common stock based on the attainment of TTI- obtained revenue goals.

 

	 	
			2.

				
			Definitions

			

 

2.1     “Territory” means the African continent.

 

2.2     “Confidential Information” means that information and know-how of either party (“Disclosing Party”) which is disclosed to the other party (“Receiving Party”) pursuant to this Agreement, in written form and marked “Confidential,” “Proprietary” or similar designation, or if disclosed orally, the Disclosing Party shall indicate that such information is confidential at the time of disclosure and send a written summary of such information marked as “Confidential,” “Property” or similar designation, to the Receiving Party within twenty (20) days of disclosure. Confidential Information shall include, but not be limited to, trade secrets, know-how, inventions, techniques, processes, algorithms, software programs, source code, schematics, designs, contracts, customer lists, financial information, sales and marketing plans and business information. References to a party as a Receiving Party or a Disclosing Party shall also include all present and future subsidiary and parent companies of such party. Confidential Information does not include information that: (i) now or hereafter, through no unauthorized act or failure to act on the Receiving Party’s part, in the public domain; (ii) known to the Receiving Party without an obligation of confidentiality at the time the Receiving Party receives the same from the Disclosing Party, as evidenced by written records; (iii) hereafter furnished to the Receiving Party by a third party as a matter of right and without restriction on disclosure;  (iv) furnished to others by the Disclosing Party without restriction on disclosure; or (v) independently developed by the Receiving Party without use of the Disclosing Party’s Confidential Information.

 

2.3     “GAAP” means generally accepted accounting principles for financial reporting in the United States, applied on a basis consistent.

 

2.4     “Hardware” means the fingerprint scanner products BIO-key manufactures or resells.

 

2.5     “Licensed Software” means BIO-key’s proprietary software products and any updates thereto.

 

2.6     “Maintenance” means contracted support and updates for Hardware or Licensed Software.

 

2.7     “Qualifying Entities” are government and enterprise entities located in the Territory, provided such entities are identified, introduced and assisted to closing by TTI.

 

Existing BIO-key partners and customers in the Territory are excluded from being Qualifying Entities for purposes of determining Stock Incentive Achievement Thresholds as defined in Exhibit A.

 

2.8     “Qualifying Sales” are sales revenue of BIO-key then-offered products (Licensed Software, Maintenance and Hardware) and BIO-key-delivered professional services to Qualified Entities in the Territory which sales generate a minimum of 20% Net Income under GAAP and are recognizable as revenue for BIO-key.

 

2

 

 

Specifically, Qualifying Sales must meet the criteria for revenue recognition of BIO-key’s independent auditors. If there is a dispute at any time as to whether a transaction is a Qualifying Sale, then the parties agree to assist and provide records to BIO-key’s independent auditors to make a determination on the nature of the revenue and costs affecting Net Income and what amount, if any, is a Qualifying Sale. TTI warrants all representations made as to the conditions of the sale, FCPA and other anti- corruption compliance pursuant to Section 5.2. Any Stock Incentives awarded which are determined to be prematurely awarded because of a recharacterization of Qualifying Sales to non-Qualifying Sales may at BIO-key’s option, be recalled, revoked or withheld until the achievement thresholds are again reached.

 

For clarity, it is the intent of the parties that a “20/20 hindsight” view of whether a sale is Qualifying Sale will be reflected in the Stock Incentives finally earned and retained by TTI.

 

(a)     Treatment of Combination Sales. Combination sales of products and services to related entities, even if transacted separately, will be assessed for profitability based on the aggregate Net Income of the total recognizable revenue under GAAP for each entity.

 

The intent of this provision is to ensure that overall sales to related entities are profitable.

 

2.9     “Net Income”. Net Income is determined using GAAP to deduct from the gross revenue, all costs of sale (including third party referral fees or other amounts reducing the amount received by BIO-key from the entity), all cost of goods sold, all overhead costs of BIO-key Africa, and an allocation of selling, general and administrative expenses incurred by BIO-key for the benefit if BIO-key Africa.

 

2.10     Stock Incentives. Stock Incentives are the shares and/or warrants issued in payment of amounts due to TTI hereunder associated with aggregate Qualifying Sales Achievement Thresholds, as detailed in Exhibit A.

 

	 	
			3.

				
			Obligations of TTI

			

 

3.1     TTI shall use its best efforts to establish and foster the growth of new market opportunities generating profitable revenue for BIO-key’s wholly-owned subsidiary in Africa.

 

3.2     Taxes. All taxes, transfer fees and other governmental charges of any kind related to the payment of Stock Incentives are the sole responsibility of TTI. TTI shall pay all such taxes, fees and other charges by either a direct payment to the taxing authority or by reimbursement to BIO- key if the amount was paid on TTI’s behalf by BIO-key.

 

3.3     Audit. TTI shall keep adequate records to verify all reports and representations made to BIO-key pursuant to this Agreement for a period of five (5) years following the date of such reports and payments, or as long as applicable laws referenced in Section 5 require. BIO-key shall have the right to select an independent certified public accountant mutually agreeable to the parties to inspect and if necessary, copy the records of TTI on reasonable notice and during regular business hours to verify the reports and payments required hereunder.

 

	 	
			4.

				
			Obligations of BIO-key

			

 

4.1     Payment of Commissions. In the event that (i) BIO-key Africa enters into binding contracts for Qualifying Sales in the Territory during the Initial Term with Qualifying Entities (a “Binding Contract”) and (ii) within eighteen (18) months after the date of the Binding Contract, BIO-key receives payment in full and recognizes revenue from such Qualifying Sales in aggregate that meets or exceeds an Incentive Stock threshold on Exhibit A, and provided there is no dispute by BIO-key or its auditors of the achievement, then BIO-key shall pay a commission to TTI in the amount set forth on Exhibit A which shall be paid by issuance of shares of common stock of BIO- key or warrants to purchase shares of common stock of BIO-key, in the form attached hereto as Exhibit C, as set forth on Exhibit A. For the avoidance of doubt, in no event shall BIO-key be obligated to issue more than 2,000,000 shares of common stock or warrants to purchase more than 500,000 shares of common stock. All such issuances shall be conditioned on the TTI executing an investment representation letter in the form attached hereto as Exhibit D.

 

3

 

 

4.2     Method of Delivery. Delivery of Stock Incentives in physical form is not necessary but notice of the Stock Incentive granted and their terms shall be provided to TTI.

 

	 	
			5. 

				
			Representations and Warranties Concerning the FCPA and Improper Payments

			

 

	 	
			5.1

				
			By BIO-key

			

 

(a)     FCPA. BIO-key and its principals are aware of the U.S. Foreign Corrupt Practices Act of 1977, as amended (“FCPA”), and all other applicable anti- corruption/anti-bribery laws in the territory and understands their relevance in all transactions by BIO-key involving TTI. BIO-key is committed to strict compliance with the FCPA and all other applicable anti-corruption/anti-bribery laws. BIO-key therefore makes the following representations and warranties:

 

(b)     Familiarity and compliance with Anti- Corruption Laws. BIO-key represents and warrants that it and its officers are familiar with the FCPA and other anticorruption and anti-bribery laws applicable to it, and that BIO-key is now and will remain in compliance with the FCPA and other such laws applicable to it.

 

(c)     No Improper Payments. In connection with the business of the Agreement, BIO-key represents that it, its principals, officers, employees, agents and subsidiaries will not, directly or indirectly, authorize, offer, promise, or make payments of anything of tangible or intangible value, including but not limited to cash, checks, wire transfers, gifts, favors, services, and entertainment and travel expenses that go beyond what is reasonable and customary and of modest value to: (i) an executive, official, employee, or agent of a governmental department, agency, or instrumentality, (ii) a director, officer, employee, or agent of a wholly or partially government-owned or -controlled company or business, (iii) a political party official, or candidate for public office, (iv) an executive, official, employee, or agent of a public international organization (e.g., the International Monetary Fund or the World Bank) (each such individual constituting a “Government Official”); while knowing or having a reasonable belief that all or some portion of the actual or promised provision of value will be used for the purpose of (a) obtaining, retaining, or directing business, (b) influencing any act, decision, or failure to act by a Government Official in his or her official capacity, (c) inducing a Government Official to use his or her influence with a government or instrumentality to affect any act or decision of such government or entity, or (d) securing an improper advantage. BIO-key further represents and warrants that no part of the payments received by it from TTI’s activities will be used for any purpose that could constitute a violation of any applicable laws, including the FCPA and other applicable anti- corruption laws.

 

(d)     BIO-key’s Ongoing Compliance with all Applicable Anti-Bribery Laws, Including the FCPA. BIO-key represents and warrants that, in performing under the terms of this Agreement, it, and its officers, employees, agents and subsidiaries will not, directly or indirectly, authorize, offer, or make payments of anything of tangible or intangible value to any Government Official while knowing or having a reasonable belief that all or some portion will be used for the purpose of: (a) influencing any act, decision, or failure to act by a Government Official in his or her official capacity, (b) inducing a Government Official to use his or her influence with a government or instrumentality to affect any act or decision of such government or entity, or (c) securing an improper advantage.

 

(e)     BIO-key represents and warrants that it and its principals have not engaged and will not engage in commercial bribery in the past or future. BIO-key represents that it has made reasonable inquiry into the backgrounds of its principals and any person or entity it engages to assist it in the performance of this agreement.

 

	 	
			5.2

				
			By TTI

			

 

(a)     FCPA. TTI and its principals are aware of the FCPA, and all other applicable anti- corruption/anti-bribery laws in the territory and understands their relevance in all transactions by BIO-key involving TTI. BIO-key is committed to strict compliance with the FCPA and all other applicable anti-corruption/anti-bribery laws. TTI therefore makes the following representations and warranties:

 

(b)     Familiarity and compliance with Anti- Corruption Laws. TTI and its undersigned principals represent and warrant that it and its principals are familiar with the FCPA and other Anticorruption and anti-bribery laws applicable to it, and that TTI is now and will remain in compliance with the FCPA and other such laws applicable to it.

 

4

 

 

(c)     No Improper Payments. In connection with the business of the Agreement, TTI represents that it, its principals officers, employees, agents and subsidiaries will not, directly or indirectly, authorize, offer, promise, or make payments of anything of tangible or intangible value, including but not limited to cash, checks, wire transfers, gifts, favors, services, and entertainment and travel expenses that go beyond what is reasonable and customary and of modest value to: (i) an executive, official, employee, or agent of a governmental department, agency, or instrumentality, (ii) a director, officer, employee, or agent of a wholly or partially government-owned or - controlled company or business, (iii) a political party official, or candidate for public office, (iv) a Government Official; while knowing or having a reasonable belief that all or some portion of the actual or promised provision of value will be used for the purpose of (a) obtaining, retaining, or directing business, (b) influencing any act, decision, or failure to act by a Government Official in his or her official capacity, (c) inducing a Government Official to use his or her influence with a government or instrumentality to affect any act or decision of such government or entity, or (d) securing an improper advantage. TTI further represents and warrants that no part of the payments received by it from BIO-key will be used for any purpose that could constitute a violation of any applicable laws, including the FCPA and other applicable anti-corruption laws.

 

(d)     TTI’s Ongoing Compliance with all Applicable Anti-Bribery Laws, Including the FCPA. TTI represents and warrants that, in performing under the terms of this Agreement, it, and its principals, officers, employees, agents and subsidiaries will not, directly or indirectly, authorize, offer, or make payments of anything of tangible or intangible value to any Government Official while knowing or having a reasonable belief that all or some portion will be used for the purpose of: (a) influencing any act, decision, or failure to act by a Government Official in his or her official capacity, (b) inducing a Government Official to use his or her influence with a government or instrumentality to affect any act or decision of such government or entity, or (c) securing an improper advantage.

 

(e)     TTI represents and warrants that it and its principals officers, employees, agents have not engaged and will not engage in commercial bribery in the past or future. TTI represents that it has made reasonable inquiry into the backgrounds of its principals and any person or entity it engages to assist it in the performance of this agreement.

 

	 	
			6. 

				
			Representations and Warranties Regarding Government Officials

			

 

6.1     No Government Officials. TTI represents that none of its officers, directors, senior managers, partners, owners, or principals are Government Officials, unless disclosed in writing to BIO- key. TTI agrees that if any of its officers, directors, senior managers, partners, owners, or principals becomes a Government Official, then TTI will promptly notify BIO-key in writing. On receipt of a written notice, the Parties will consult together to address concerns under the FCPA and determine whether those concerns can be satisfactorily resolved. If, after consultation, any such concerns cannot be resolved in the good faith and reasonable judgment of BIO-key, then BIO-key, on written notice to TTI, may withdraw from, suspend, or terminate this Agreement.

 

	 	
			7.

				
			Proprietary Rights

			

 

7.1     Ownership. TTI acknowledges and agrees that BIO-key is the sole owner of the Licensed Software and that TTI has no rights in and to such Licensed Software. All right, title and interest in and to the Licensed Software shall at all times remain with BIO-key.

 

	 	
			8.

				
			Indemnification

			

 

8.1     By BIO-key. BIO-key shall indemnify and hold TTI and its affiliates harmless from and against any and all claims, suits, losses, expenses and liabilities (including TTI’s reasonable attorneys’ fees) damages and costs, incurred by TTI or its affiliates in connection with any claims of (i) bodily injury, personal injury, death and tangible property damage made against TTI or its subsidiaries as a result of the gross negligence, intentional wrongful acts or omissions, or misrepresentations of BIO-key or any person for whose actions BIO-key is legally liable.

 

5

 

 

8.2     By TTI. TTI shall indemnify and hold BIO-key and its affiliates harmless from and against any and all claims, suits, losses, expenses and liabilities (including BIO-key’s reasonable attorneys’ fees) damages and costs, incurred by BIO-key or its affiliates in connection with any claims of (i) bodily injury, personal injury, death and tangible property damage made against BIO- key or its subsidiaries as a result of the gross negligence, intentional wrongful acts or omissions, or misrepresentations of TTI or any person for whose actions TTI is legally liable.

 

	 	
			9.

				
			Confidentiality

			

 

9.1     Confidential Information. Each party acknowledges that in the course of the performance of this Agreement, it may obtain the Confidential Information of the other party. The Receiving Party shall, at all times, both during the term of this Agreement and thereafter for a period of five (5) years, keep in confidence and trust all of the Disclosing Party’s Confidential Information received by it (except for source code, which shall be kept in confidence and trust in perpetuity). The Receiving Party shall not use the Confidential Information of the Disclosing Party other than as expressly permitted under the terms of this Agreement. The Receiving Party shall take reasonable steps to prevent unauthorized disclosure or use of the Disclosing Party’s Confidential Information and to prevent it from falling into the public domain or into the possession of unauthorized persons, but in no event will the Receiving Party use less care than it would in connection with its own Confidential Information of like kind. The Receiving Party shall not disclose Confidential Information of the Disclosing Party to any person or entity other than its officers, employees and consultants who need access to such Confidential Information in order to effect the intent of this Agreement and who have entered into confidentiality agreements which protect the Confidential Information of the Disclosing Party sufficient to enable the Receiving Party to comply with this Section 9.1. The Receiving Party shall immediately give notice to the Disclosing Party of any unauthorized use or disclosure of Disclosing Party’s Confidential Information. The Receiving Party agrees to assist the Disclosing Party to remedy such unauthorized use or disclosure of its Confidential Information.

 

9.2     Limited Disclosure. Nothing in this Agreement shall prevent the Receiving Party from disclosing Confidential Information to the extent the Receiving Party is legally compelled to do so by any governmental investigative or judicial agency pursuant to proceedings over which such agency has jurisdiction; provided, however, that prior to any such disclosure, the Receiving Party shall: (a) assert the confidential nature of the Confidential Information to the agency; (b) immediately notify the Disclosing Party in writing of the agency’s order or request to disclose; and (c) cooperate fully with the Disclosing Party in protecting against any such disclosure and/or obtaining a protective order narrowing the scope of the compelled disclosure and protecting its confidentiality.

 

	 	
			10.

				
			Term and Termination

			

 

10.1     Term. This Agreement is effective for a period of one (1) year from the Effective Date, unless earlier terminated as provided herein (the “Initial Term”). Thereafter, unless either party gives other party ninety (90) days notice of nonrenewal before the end of the then current term, this Agreement will be automatically extended for an additional one year term upon each successive expiration date unless earlier terminated as provided for herein (“Renewal Term,” together with the Initial Term, the “Term”).

 

10.2     Termination for Convenience. Either party may terminate this Agreement at any time after the end of the Initial Term without cause, by providing sixty (60) days advance written notice to the other party. In no event will either party be liable for any damages relating to termination of this Agreement for convenience.

 

10.3     Termination for Cause. Either party has the right to immediately terminate this Agreement for cause if the other party:

 

(a)     Fails to perform any material term or condition of this Agreement provided the defaulting party has received written notice of the failure from the non-defaulting party, and such failure is not corrected within (30) days after receipt of such notice; or

 

6

 

 

(b)     The parties agree that any violations of the FCPA or other anti-corruption laws constitute material breaches of this agreement, and are grounds for immediate termination for cause; or

 

(c)     Becomes insolvent, files or has filed against it a petition under applicable bankruptcy or insolvency laws which is not dismissed within ninety (90) days, proposes any dissolution, composition or financial reorganization with creditors, makes an assignment for the benefit of creditors, or if a receiver, trustee, custodian or similar agent is appointed or takes possession with respect to any property or business of the defaulting party.

 

10.4     Survival. Neither the termination nor expiration of this Agreement shall relieve either party from its obligations to pay the other any sums accrued hereunder. The parties agree that their respective rights, obligations and duties under 3.2,3.3,,7- 8.110.4 and 11 as well as any rights, obligations and duties which by their nature extend beyond the termination or expiration of this Agreement shall survive any termination or expiration of this Agreement.

 

	 	
			11.

				
			Miscellaneous

			

 

11.1     Notices. Any notice provided for or permitted under this Agreement will be treated as having been given when: (a) delivered personally; (b) sent by confirmed telex or fax; (c) sent by commercial overnight courier with written verification of receipt; or (d) mailed postage prepaid by certified or registered mail, return receipt requested, to the party to be notified, at the address set forth in Exhibit B, or at such other place of which the other party has been notified in accordance with the provisions of this Section 11.1. Such notice will be treated as having been received upon the earlier of actual receipt or two (2) days after posting.

 

11.2     Governing Law. This Agreement shall be governed by, and construed in accordance with the laws of the State of New Jersey, United States of America, without regard to its choice of law provisions or policies. The parties hereby irrevocably consent and submit to the personal jurisdiction and venue of the courts residing in New Jersey for any action and for all purposes in connection with this Agreement, and waive any defense based upon improper or inconvenient venue or lack of personal jurisdiction. The parties hereto specifically exclude the United Nations Convention on Contracts for the International Sale of Goods from this Agreement. The original of this Agreement has been written in English. The parties hereto waive any statute, law, or regulation that might provide an alternative law or forum or to have this Agreement written in any language other than English.

 

11.3     Injunctive Relief. The performance of TTI in a manner inconsistent with any provision of this Agreement will cause irreparable injury to BIO-key for which BIO-key will not have an adequate remedy at law. BIO-key shall be entitled to equitable relief in court, including but not limited to temporary restraining orders, preliminary injunctions and permanent injunctions.

 

11.4     Arbitration. Except for those situations where equitable relief is sought pursuant to Section 11.2, all disputes, claims, and controversies between the parties arising out of or related to this Agreement or the breach thereof (except for non-payment or late payment and breach of any obligation of confidentiality or infringement of any intellectual property right for which an injunction may be sought) will be settled by arbitration. The arbitration will be conducted by a single arbitrator under the then current Commercial Arbitration Rules of the American Arbitration Association. The decision and award of the arbitrator will be final and binding and judgment on the award so rendered may be entered in any court having jurisdiction thereof. The arbitration will be held in Monmouth County, New Jersey or a mutually convenient location agreed to by the parties, and the award will be deemed to be made in New Jersey.

 

11.5     Force Majeure. Except for the payment of normal License Fees and Support Fees specified herein, neither party will be liable for any failure or delay in performance under this Agreement due to fire, explosion, earthquake, storm, flood or other weather, unavailability of necessary utilities or raw materials, war, insurrection, riot, act of God or the public enemy, law, act, order, proclamation, decree, regulation, ordinance, or instructions of Government or other public authorities, or judgment or decree of a court of competent jurisdiction (not arising out of breach by such party of this Agreement) or any other event beyond the reasonable control of the party whose performance is to be excused.

 

7

 

 

11.6     Assignment. Assignment of this Agreement is prohibited without the express written consent of the other party; except that BIO-key may assign its interest in this Agreement in connection with a merger or other business combination in which BIO-key is not the surviving entity. Any attempted assignment in violation of this provision will be null and void.

 

11.7     Relationship of the Parties. The parties to this Agreement are independent contractors. There is no relationship of agency, partnership, joint venture, employment, or franchise between the parties as a result of this Agreement. Neither party has the authority to bind the other or to incur any obligation on its behalf.

 

11.8     Interpretation. This Agreement may be executed in two counterparts, each of which shall be deemed an original, but both of which together shall constitute one and the same instrument. If this Agreement is executed in counterparts, no signatory hereto shall be bound until both the parties named below have duly executed or caused to be duly executed a counterpart of this Agreement. The Parties agree that such counterparts may be delivered by facsimile and that such facsimile shall evidence a binding agreement. This Agreement, including all Exhibits and Schedules, constitutes the entire agreement between the parties relating to this subject matter and supersedes all prior or simultaneous representations, discussions, negotiations, and agreements, whether written or oral. If any provision of this Agreement is held invalid or unenforceable for any reason, the remainder of the provision shall be amended to achieve as closely as possible the economic effect of the original term and all other provision shall continue in full force and effect. This Agreement may be amended or supplemented only by a writing that is signed by duly authorized representatives of both parties. No term or provision hereof will be considered waived by either party, and no breach excused by either party, unless such waiver or consent is in writing signed on behalf of the party against whom the waiver is asserted. No consent by either party to, or waiver of, a breach by either party, whether express or implied, will constitute consent to, waiver of, or excuse of any other, different, or subsequent breach by either party.

 

 

[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK. THE SIGNATURE PAGE FOLLOWS]

 

8

 

 

IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the dates set forth below.

 

BIO-key International, Inc.

 

 

By:                                                                                 

 

Name: Michael DePasquale                                          

 

Title:   CEO                                                                  

 

Date    25 March 2020                                                  

 

 

TTI:

 

 

By:                                                                                

 

Name:                                                                           

 

Title:                                                                             

 

Date:                                                                              

 

9

 

 

List of Exhibits:

 

A – Stock Incentive Achievement Thresholds

B – Primary Contacts

C – Form of Warrant

D – Investment Representation Letter

 

10

 

 

EXHIBIT A

 

Commission and Stock Incentive Achievement Thresholds    

 

	“Qualified Sales” Aggregate Achievement  	Commissions and Shares Earned
	 	 
	USD 5,000,000 (>20% net income) 	USD $5,000,000 payable via issuance of 500,000 shares priced at $1/share)
	 	 
	
			USD 5,000,000

				
			USD $5,000,000 payable via issuance of 500,000 shares priced at $1/share)

			
	 	 
	
			USD 5,000,000

				
			USD $5,000,000 payable via issuance of 500,000 shares priced at $1/share)

			
	 	 
	
			USD 5,000,000

				
			USD $5,000,000 payable via issuance of 500,000 shares priced at $1/share)

			
	 	 
	
			TOTAL Sales

				
			TOTAL Shares

			
	 	 
	
			USD 20,000,000

				
			2,000,000 Shares

			
	 	 
	
			For all “Qualified Sales” in excess of USD 20,000,000

			
	 	 
	
			USD 21,000,000

				
			100,000 warrants

			
	 	 
	
			USD 22,000,000

				
			100,000 warrants

			
	 	 
	
			USD 23,000,000

				
			100,000 warrants

			
	 	 
	
			USD 24,000,000

				
			100,000 warrants

			
	 	 
	
			USD 25,000,000

				
			100,000 warrants

			
	 	 
	 	 
	
			TOTAL Sales

				
			TOTAL Warrants

			
	 	 
	
			USD 25,000,000

				
			500,000 Warrants

			

 

 

 

Note that share and warrant amounts and shares prices are subject to adjustment for reverse and forward stock splits, stock dividends, stock combinations and other similar transactions effecting BIO-key common stock that occur after the date of this Agreement. In no event shall BIO-key be obligated to issue more than 2,000,000 shares of common stock or warrants to purchase more than 500,000 shares of common stock.

 

11

 

 

Last Rev. 2013-09-01

 

 

EXHIBIT B

PRIMARY CONTACT(S) INFORMATION

 

 

	
			1.

				
			TTI Information:

			

 

	Technology Transfer Institute 	 	 
	2719 Hollywood Blvd Suite A-1457	 	 
	City:  Hollywood     State: Florida        Zip:    33020	 	 
	Country: United States of America	 	 
	Billing Address (if different from above):	 	 
	Shipping Address (if different from above):	 	 
	Main Telephone #: 1-786-260-5435 	Fax:	 
	(LIST ALL TTI PARTICPANTS)	 	 
	Primary Contact: Anthea Arnasalam 	Title:	Chairman and President	 
	email: anthea@exlpartner.com 	Phone:	1-868-703-1542 	 
	Primary Contact 2: Emmanuel Alia 	Title:	Chief Executive Officer	 
	email: manny@exlpartner.com  	Phone:	1-917-301-2091	 
	Primary Contact 3:  	Title: 	 
	email 	Phone:	 
	Primary Contact 4: 	Title: 	 
	email	Phone:	 

 

	
			2.

				
			BIO-key Information:

			

 

	BIO-key International 	Billing Address (if different): Same	 
	3349 Highway 138, Bldg. A, Suite E 	Shipping Address (if different): Same
	Wall, NJ 07719	 
	Main Telephone #:  732-359-1110 	Fax: 732-359-1101
	Primary Program Contact: Michael DePasquale	Title:	CEO
	email mike.depasquale@bio-key.com 	Phone:	732-359-1111
	Billing Report Contact: Cecilia Welch	Title: 	CFO
	Email : cecilia.welch@bio-key.com 	Phone:	732-359-1112

 

12

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00310-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00310-of-00352.parquet"}]]