Document:

ex_264042.htm

Exhibit 10.5

 

SETTLEMENT, TERMINATION, RELEASE AND EQUITY PURCHASE AND LOAN AGREEMENT

 

THIS SETTLEMENT, TERMINATION, RELEASE AND EQUITY PURCHASE AND LOAN AGREEMENT (this “Agreement”) is made effective as of July 23, 2020 (the “Effective Date”), and is entered into by and among MULLEN TECHNOLOGIES, INC., a California corporation (“Mullen”), DRAWBRIDGE INVESTMENTS, LLC, a New Jersey limited liability company (“Drawbridge”) and DBI Lease Buyback Servicing LLC, a Delaware limited liability company (“DBI”). For purposes of this Agreement, Drawbridge, Mullen and DBI may be referred to individually as a “Party,” and collectively as the “Parties”.

 

RECITALS

 

A.    As of the Effective Date, Mullen owes Drawbridge and Drawbridge’s affiliates and/or related parties, including but not limited to those entities set forth on Schedule A attached hereto and incorporated herein by reference (the “Drawbridge Affiliates”), an aggregate outstanding balance of $23,831,553.98 (the “Outstanding Balance”) consisting of unpaid principal balance in the amount of $18,397,825.00 and accrued and unpaid interest in the amount of $5,433,728.98, pursuant to certain financing arrangements and related documentation (hereinafter, together the “Loans”) made by Drawbridge and/or the Drawbridge Affiliates to or for the benefit of Mullen;

 

B.    Pursuant to those certain Airsign Aerial Advertisement Flight Order & Agreement dated June 3, 2019 and Redrock Outdoor Advertising Display Agreement dated May 16, 2019, Mullen either has or had monetary obligations to Drawbridge and/or Drawbridge Affiliates (the “Advertising Agreements”);

 

C.    Pursuant to that certain Amended and Restated Asset Purchase Agreement dated September 24, 2019 by and between DBI, an affiliate of Drawbridge, and Mullen, attached hereto as Exhibit A (the “Purchase Agreement”), Mullen sold certain assets to DBI and licensed certain intellectual property related to said purchased assets to DBI (collectively, the “Assets”), as further described in the Purchase Agreement. The Purchase Agreement, the Loans and any and all amendments thereto and all other documents evidencing or securing the above shall be referred to collectively as the “Loan Documents”;

 

D.    Pursuant to that certain Amended and Restated Equipment Lease and Option Agreement dated September 24, 2019 by and between DBI and Mullen, attached hereto as Exhibit B (the “Option Agreement”), DBI leased back the Assets to Mullen and provided Mullen with the right to repurchase the Assets, provided that Mullen was not in default under the Option Agreement. Mullen is currently in default under the Option Agreement;

 

E.    As of the Effective Date, (i) Schedule B attached hereto and incorporated herein by this reference sets forth an aggregate of 29,152,500 shares of common stock of Mullen (“Common Stock”) currently owned by Drawbridge and certain of its affiliates (the “Existing Shares”); and (ii) Schedule C attached hereto and incorporated herein by this reference sets forth an aggregate of 23,566,000 shares of Common Stock previously issued by Mullen to persons or entities that are not parties to this Agreement (the “Retained Shares”) and are not being forfeited, modified, altered, or canceled by the terms of this Agreement;

 

F.    Pursuant to that certain Lease Agreement with Option to Purchase (the “Lease Agreement”) dated September 4, 2019, by and between 3685 N Clovis Real Estate LLC, an affiliate of Drawbridge (“Clovis”), and Mullen, Clovis has leased certain real property located in Fresno, CA to Mullen, as more specifically set forth therein;

 

- 1 -

 

 

G.    Drawbridge, or an affiliate of Drawbridge, has provided a loan to Mullen, or an affiliate of Mullen, to finance Mullen’s inventory of automobiles held for sale to the public (the “Auto Financing”) and a portion of such loan remains outstanding as of the Effective Date. Pursuant to the terms of the Auto Financing, upon any sale of an automobile, Mullen is obligated to repay Drawbridge the amount of the Auto Financing allocated to such automobile plus a 50% share of any profit recognized on such sale. As of the Effective Date, Mullen has not timely made all such payments to Drawbridge and such amounts remain due and owing to Drawbridge, which is in addition to the portion of the Auto Financing allocated to automobiles that have not yet been sold by Mullen;

 

H.    Drawbridge and Mullen each represent and warrant that they have all respective appropriate and necessary corporate and legal power to bind and obligate each of, as applicable, Drawbridge, the Drawbridge Affiliates, and Mullen and its affiliates, to the terms and conditions of this Agreement and that each has the power of attorney and/or signatory authority to sign on behalf of its respective affiliates;

 

I.    The Parties wish to advance and reorganize their respective interests by, among other things, (i) terminating and converting all outstanding obligations pursuant to the Advertising Agreements, the Loan Documents and the Option Agreement, (ii) selling the Assets to Mullen, (iii) executing a secured convertible promissory seller carry-back note (the “New Note”) in the form attached hereto as Exhibit C to finance the purchase of the Assets by Mullen from DBI, (iv) forfeiting the Existing Shares, and (v) issuing an aggregate of 69,800,000 shares of Series B Convertible Preferred Stock to Drawbridge (the “Preferred Shares”), which Preferred Shares shall be initially convertible into 69,800,000 shares of Common Stock (the “Conversion Shares” and together with the Preferred Shares, the “New Shares”) pursuant to the terms set forth in the Amended and Restated Articles of Incorporation of Mullen (the “Amended and Restated Articles”) in the form attached hereto as Exhibit D, on the terms and subject to the conditions set forth in this Agreement and in the documents attached hereto as exhibits and schedules. The New Note will be secured by a first priority lien on certain of Mullen’s assets, as more particularly described therein. Further, the New Note shall have a twenty-four (24) month term and bear interest at the rate of 28% per annum and will provide that 50% of the net proceeds (which shall be deemed gross proceeds minus direct selling costs, expenses and commissions) received, directly or indirectly by Mullen and/or its subsidiaries from the issuance of any equity or equity-linked financing (including convertible debt), less any selling commissions, will be applied towards the outstanding amounts owed under the New Note, except for the approximately up to $10 million of capital to be contributed by NetElement, Inc. in connection with a proposed reverse merger transaction. Also, the New Note will be convertible, at the option of the holder, into shares of the common stock of Mullen or Reporting Co. (as that term is defined herein), as the case may be, as more particularly described therein;

 

J.    The Parties expressly do not wish to (i) modify any terms of the Lease Agreement or the Auto Financing, (ii) otherwise reduce any related amounts due and owing to Clovis or Drawbridge as of the Effective Date, (iii) limit the ability of Clovis and Drawbridge to exercise all rights and remedies they may have therein; or (iv) modify any terms of the Retained Shares; and

 

K.    The Parties are entering into this Agreement in order to, among other things, (i) memorialize the terms of the Parties’ agreements regarding the termination and conversion of the Loan Documents and the Option Agreement, termination of all obligations owed or owing by Mullen to Drawbridge and/or the Drawbridge Affiliates under the Advertising Agreements, and amend and restate the agreement among the Parties under the terms of the New Note; (ii) provide for the forfeiture of the Existing Shares, confirming the existence and unmodified continuance of the Retained Shares, and the issuance of the New Shares; and (iii) provide for mutual releases of all claims which the Parties may have against one another in respect of the foregoing arrangements, except for those relating to or arising under the Lease Agreement or the Auto Financing, all on the terms and subject to the conditions set forth in this Agreement.

 

- 2 -

 

 

Now, therefore, for good and valuable consideration, the adequacy and sufficiency of which are hereby acknowledged, the Parties hereby agree as follows:

 

AGREEMENT

 

1.            CLOSING TRANSACTIONS. Simultaneously with the execution of this Agreement, the Parties hereto shall consummate the following transactions, all of which shall be deemed to occur as of the Effective Date:

 

1.1    Termination of Purchase Agreement, Termination of Option Agreement, and Sale of Assets. In exchange for entering into the New Note, receiving the New Shares, and Mullen fulfilling all other obligations under this Agreement, all Purchased Assets (as defined in the Purchase Agreement) purchased by DBI from Mullen pursuant to the Purchase Agreement, and all Technology (as defined in the Purchase Agreement) licensed, assigned or otherwise transferred to DBI by Mullen pursuant to the Purchase Agreement, shall be sold back to Mullen and each of the Purchase Agreement and Option Agreement shall be deemed terminated. DBI shall take any and all actions required to return the Purchased Assets and Technology to Mullen, and DBI shall bear all expenses, fees, taxes and costs of transferring back to Mullen all such assets, including intellectual property (including, without limitation, the Technology) that was licensed, assigned or otherwise transferred to DBI and/or its affiliates (including, but not limited to, Drawbridge) or registered in the name of DBI and/or its affiliates (including, but not limited to, Drawbridge), including all filing fees with the United States Patent and Trademark Office.

 

1.2    Reorganization of Loans and Loan Documents and Obligations under the Advertising Agreements.

 

1.2.1    Effective as of the Effective Date, Drawbridge, on behalf of itself and the Drawbridge Affiliates, hereby agrees to convert, reorganize, amend, and terminate the Loans, the Loan Documents and any and all outstanding obligations thereunder in their entirety in connection with entering into the New Note. In connection therewith, from and after the Effective Date, (i) Drawbridge, the Drawbridge Affiliates and/or their respective affiliates (as applicable) shall no longer be entitled to enjoy any rights, privileges, benefits and powers under, or incident to ownership of, the Loans and the Loan Documents or further to the Advertising Agreements, (ii) neither Mullen nor any of its affiliates, officers or directors shall no longer owe any further duty or obligation under, or incident to, the Loans or the Loan Documents under, or incident to, the Loans or the Loan Documents or any further duty or obligation to Drawbridge and/or the Drawbridge Affiliates under, or incident to, the Advertising Agreements, in any case, whether arising under the Loans, the Loan Documents, the Advertising Agreements or any other documents evidencing or securing the Loans or the Advertising Agreements, applicable law or otherwise.

 

1.2.2    Concurrently with the execution of this Agreement, Mullen shall execute the New Note attached hereto as Exhibit C and issue the Preferred Shares to finance the purchase of the Assets by Mullen from DBI.

 

1.3    Forfeiture of Existing Shares; Confirmation of Retained Shares. Effective as of the Effective Date, Drawbridge, on behalf of itself and the Drawbridge Affiliates, hereby agrees to irrevocably forfeit the Existing Shares, which Existing Shares shall be voided on the books and records of Mullen. In connection with the foregoing forfeiture, Drawbridge, on behalf of itself and the Drawbridge Affiliates, shall execute and deliver to Mullen the duly executed Assignment Separate from Certificate in the form of Exhibit E. Mullen hereby confirms that the Retained Shares were issued for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and such Retained Shares are validly issued, fully paid and non-assessable, shall remain issued to and registered in the name of the applicable individuals or entities set forth on Schedule C and are not being forfeited or modified under this Agreement.

 

1.4    Forfeiture of any Convertible Securities, Warrants or Options. Effective as of the Effective Date, Drawbridge, on behalf of itself and the Drawbridge Affiliates, hereby agrees to forfeit and void any and all convertible securities (excluding any Series A Preferred Shares held by Drawbridge and/or Drawbridge Affiliates as of the Effective Date), warrants and/or options issued to or promised to be issued to Drawbridge and/or the Drawbridge Affiliates by Mullen. Upon forfeiture, all rights and claims in respect of the convertible securities, warrants and/or options and any other agreements or instruments evidencing or promising, contractually or otherwise, the issuance of the same shall automatically terminate and be null and void in all respects.

 

- 3 -

 

 

1.5    Lease Agreement; Auto Financing. Notwithstanding anything to the contrary contained herein, the Parties acknowledge and agree that the Lease Agreement and the Auto Financing shall remain in effect following the Effective Date and shall not be terminated or, except as expressly provided herein, otherwise be modified by this Agreement. Mullen shall execute and deliver such further instruments, documents and papers, and shall perform any and all acts (including preparing an accounting of Mullen’s inventory of automobiles and proceeds received from the sale of such inventory prior to the Effective Date), as reasonably requested by Drawbridge, in an effort to cure any unsatisfied obligations or other conditions under the Lease Agreement or Auto Financing which do, or could, constitute a default by Mullen thereunder.

 

2.           CONSIDERATION.

 

2.1    In consideration for the Parties’ agreement to consummate the transactions set forth in Section 1 above, in addition to the issuance of the New Note, the Parties agree that, effective as of the Effective Date, Drawbridge will be issued an aggregate of 69,800,000 Preferred Shares, which shall be initially convertible into 69,800,000 shares of Common Stock, which the Parties hereto acknowledge shall represent twenty five percent (25%) of the outstanding shares of Common Stock of Mullen on a fully diluted and converted basis, after forfeiture of the Existing Shares described herein.

 

2.2    In the event that Mullen concludes a reverse merger transaction with NetElement, Inc. or any other public reporting entity (each a “Reporting Co.”), Mullen shall provide in the reverse merger transaction for the Preferred Shares to be exchanged for an equal number of preferred shares of Reporting Co. (the “Reporting Co. Preferred Shares”), such that Drawbridge will own that percentage of the outstanding shares of Reporting Co. post reverse merger on a fully diluted and fully converted basis that it owns of Mullen as of the effective date of such reverse merger, pursuant to a certificate of designation of Reporting Co. with the same preferences, rights and privileges as those set forth in the Amended and Restated Articles;

 

(a)    Reporting Co. and any subsidiaries shall guarantee the New Note as primary obligor and not merely as a surety; and

 

(b)    50% of the net proceeds (which shall be deemed gross proceeds minus direct selling costs, expenses and commissions) received, directly or indirectly by Reporting Co. and/or its subsidiaries from the issuance of any equity or equity-linked financing (including convertible debt), will be applied towards the outstanding amounts owed under the New Note.

 

2.3    For avoidance of doubt, Drawbridge and/or the Drawbridge Affiliates shall retain 30,000 shares of Series A Preferred Stock of Mullen held by Drawbridge and/or the Drawbridge Affiliates as of the Effective Date and such shares shall not be included within any calculations relating to ownership percentages of Mullen or Reporting Co. pursuant to the Preferred Shares or Reporting Co. Preferred Shares.

 

3.           REPRESENTATIONS AND WARRANTIES; COVENANTS.

 

3.1    Representations and Warranties of Drawbridge. Drawbridge, on behalf of itself and the Drawbridge Affiliates, represents and warrants to Mullen that:

 

(a) Drawbridge has all requisite power and authority to execute and deliver, and to perform all of its obligations under this Agreement, and all instruments and other documents executed and delivered by Drawbridge in connection herewith, and has all appropriate and necessary corporate and legal power to bind and obligate each of the Drawbridge Affiliates to the terms and conditions of this Agreement and that it has the power of attorney and/or signatory authority to sign on behalf of each of them;

 

- 4 -

 

 

(b) the execution, delivery and performance of this Agreement have been duly authorized by all necessary action on the part of Drawbridge and the Drawbridge Affiliates and does not and will not require any consent or approval of any other person or entity;

 

(c) this Agreement, when executed by the Parties, shall constitute the legal, valid and binding obligation of Drawbridge and the Drawbridge Affiliates, enforceable against each of them in accordance with its terms;

 

(d) Drawbridge (either directly or through the Drawbridge Affiliates) is the sole legal and beneficial holder and owner of the Loans and has not assigned or pledged any interest therein to any party;

 

(e) Drawbridge (either directly or through the Drawbridge Affiliates) is the sole legal and beneficial holder and owner of the Existing Shares;

 

(f) Drawbridge (either directly or through the Drawbridge Affiliates) is the sole legal and beneficial holder and owner of any convertible securities, warrants or options referenced in Section 1.5 herein, has never exercised nor assigned or pledged any interest in any of them;

 

(g) the conversion of the Loans and the Loan Documents and obligations owed or owing by Mullen to Drawbridge and/or the Drawbridge Affiliates under the Advertising Agreements pursuant to Section 1.2 and the termination of the Option Agreement pursuant to Section 1.1, no further amounts will be owed by Mullen or any of its affiliates, officers or directors, other than the amounts due under the New Note, the New Shares, the Lease Agreement, and the Auto Financing;

 

(h) the execution, delivery, and performance of this Agreement will not and does not violate in any material respect the provisions of any agreement to which Drawbridge and/or any of the Drawbridge Affiliates is a party or to which it is subject (including, without limitation, Drawbridge and the Drawbridge Affiliates’ respective governing documents);

 

(i) there are no actions, suits or proceedings, pending or threatened, before any judicial, administrative or other governmental authority that would prohibit the performance by Drawbridge or any of the Drawbridge Affiliates of this Agreement and/or the transactions contemplated hereby;

 

(j) Drawbridge understands that the New Shares are “restricted securities” and have not been registered under the Securities Act of 1933, as amended (the “Securities Act”) or any applicable state securities law and is acquiring the New Shares as principal for its own account and not with a view to or for distributing or reselling such New Shares or any part thereof in violation of the Securities Act or any applicable state securities law, has no present intention of distributing any of such New Shares in violation of the Securities Act or any applicable state securities law and has no direct or indirect arrangement or understandings with any other persons to distribute or regarding the distribution of the New Shares in violation of the Securities Act or any applicable state securities law;

 

(k) Drawbridge is an “accredited investor” as defined in Rule 501(a)(1), (a)(2), (a)(3), (a)(7) or (a)(8) under the Securities Act; and

 

(l) Drawbridge has such knowledge, sophistication and experience in business and financial matters so as to be capable of evaluating the merits and risks of the prospective investment in the New Shares, has so evaluated the merits and risks of such investment, is able to bear the economic risk of an investment in the New Shares and is able to afford a complete loss of such investment.

 

- 5 -

 

 

3.2    Representations of DBI. DBI represents and warrants to Mullen that:

 

(a) DBI has all requisite power and authority to execute and deliver, and to perform all of its obligations under this Agreement, and all instruments and other documents executed and delivered by DBI in connection herewith;

 

(b) the execution, delivery and performance of this Agreement have been duly authorized by all necessary action on the part of DBI and do not and will not require any consent or approval of any other person or entity;

 

(c) this Agreement, when executed by the Parties, shall constitute the legal, valid and binding obligation of DBI, enforceable in accordance with its terms;

 

(d) the execution, delivery, and performance of this Agreement will not and does not violate in any material respect the provisions of any agreement to which DBI is a party or to which it is subject (including, without limitation, DBI’s governing documents);

 

(e) none of the Purchased Assets to be returned to Mullen upon the termination of the Purchase Agreement are subject to any pledge, lien, security interest, claim or other encumbrance;

 

(f) upon sale of the Purchased Assets back to Mullen and the consummation of the transactions contemplated hereby, Mullen will have acquired good and marketable title in and to each of the Purchased Assets, free and clear of all liens; and

 

(g) there are no actions, suits or proceedings, pending or threatened, before any judicial, administrative or other governmental authority that would prohibit the performance by DBI of this Agreement and/or the transactions contemplated hereby.

 

3.3    Representations and Warranties of Mullen. Mullen represents and warrants to the other Parties that:

 

(a) Mullen is duly organized, validly existing and has all requisite power and authority to execute and deliver, and to perform all of its obligations under this Agreement, and all instruments and other documents executed and delivered by Mullen in connection herewith;

 

(b) the execution, delivery and performance of this Agreement and the consummation by Mullen of the transactions contemplated hereby and thereby (including, without limitation, the issuance of the New Note and Preferred Shares and the reservation for issuance and issuance of the Conversion Shares issuable upon conversion of the Preferred Shares) have been duly authorized by all necessary action on the part of the shareholders and board of directors of Mullen and no further filing, consent or authorization is required by Mullen, its board of directors or shareholders or other governing body;

 

(c) this Agreement has been, and all other documents referenced under this Agreement, to which it is a party will be prior to the closing, duly executed and delivered by Mullen, and each constitutes the legal, valid and binding obligations of Mullen, enforceable against Mullen in accordance with its respective terms;

 

(d) the issuance of the New Note and the Preferred Shares are duly authorized and upon issuance in accordance with the terms of this Agreement has been, and all other documents referenced under this Agreement, shall be validly issued, fully paid and non-assessable and free from all preemptive or similar rights, taxes, liens, charges and other encumbrances with respect to the issue thereof;

 

(e) upon conversion in accordance with the Amended and Restated Articles, the Conversion Shares, when issued, will be validly issued, fully paid and nonassessable and free from all preemptive or similar rights, taxes, liens, charges and other encumbrances with respect to the issue thereof, with the holder being entitled to all rights accorded to a holder of Common Stock;

 

- 6 -

 

 

(f) subject to the accuracy of the representations and warranties of Drawbridge in this Agreement, the offer and issuance by Mullen of the New Shares is exempt from registration under the Securities Act and state securities laws;

 

(g) the execution, delivery and performance of this Agreement has been, and all other documents referenced under this Agreement, by Mullen and the consummation by Mullen of the transactions contemplated hereby and thereby (including, without limitation, the issuance of the New Note, the Preferred Shares, the Conversion Shares and the reservation for issuance of the Conversion Shares) will not (i) result in a violation of the articles of incorporation or other organizational or charter documents of Mullen, any capital stock of Mullen or bylaws of Mullen, (ii) conflict with, or constitute a default (or an event which with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation of, any agreement, indenture or instrument to which Mullen is a party, or (iii) result in a violation of any law, rule, regulation, order, judgment or decree (including foreign, federal and state securities laws, rules and regulations) applicable to Mullen;

 

(h) Mullen is not required to obtain any consent from, authorization or order of, or make any filing or registration with any governmental entity or any regulatory or self-regulatory agency or any other Person in order for it to execute, deliver or perform any of its obligations under or contemplated by this Agreement has been, and all other documents referenced under this Agreement, in accordance with the terms hereof or thereof;

 

(i) upon the filing of the Amended and Restated Articles and after giving effect to the transactions contemplated hereunder, the authorized capital stock of Mullen will consist of (1) 600,000,000 shares of Common Stock, of which 59,299,101 will be issued and outstanding, 150,025,000 will be reserved for issuance upon conversion of Series A Preferred Stock and 69,800,000 will be reserved for issuance upon conversion of Series B Preferred Stock, and (2) 71,300,250 shares of preferred stock, of which, 1,500,250 will be designated as Series A Preferred Stock and 69,800,000 will be designated as Series B Preferred Stock, of which 1,500,250 and 69,800,000 will be issued and outstanding, respectively. Except for the Series A Preferred Stock, Series B Preferred Stock and the New Note, there are no outstanding options, warrants, scrip, rights to subscribe to, calls or commitments of any character whatsoever relating to, or securities or rights convertible into, or exercisable or exchangeable for, any capital stock of Mullen, or contracts, commitments, understandings or arrangements by which Mullen is or may become bound to issue additional capital stock of Mullen or options, warrants, scrip, rights to subscribe to, calls or commitments of any character whatsoever relating to, or securities or rights convertible into, or exercisable or exchangeable for, any capital stock of Mullen;

 

(j) none of Mullen’s capital stock is subject to preemptive rights or any other similar rights or any liens or encumbrances suffered or permitted by Mullen and there are no shareholders, buy-sell, voting, or other agreements among holders of capital stock of Mullen;

 

(k) except for the New Note, there are no (i) outstanding options, warrants, scrip, rights to subscribe to, calls or commitments of any character whatsoever relating to, or securities or rights convertible into, or exercisable or exchangeable for, any capital stock of Mullen, (ii) contracts, commitments, understandings or arrangements by which Mullen is or may become bound to issue additional capital stock of Mullen or options, warrants, scrip, rights to subscribe to, calls or commitments of any character whatsoever relating to, or securities or rights convertible into, or exercisable or exchangeable for, any capital stock of Mullen, or (iii) securities or instruments containing anti-dilution or similar provisions that will be triggered by the issuance of the New Shares;

 

- 7 -

 

 

(l) there are no actions, suits or proceedings, pending or to the knowledge of Mullen, threatened, before any judicial, administrative or other governmental authority that would prohibit the performance by Mullen of this Agreement and/or the transactions contemplated hereby; and

 

(m) all disclosure provided to Drawbridge regarding Mullen, its business and the transactions contemplated hereby, including the schedules to this Agreement, furnished by or on behalf of Mullen is true and correct in all material respects and does not contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements made therein, in the light of the circumstances under which they were made, not misleading.

 

All of the representations and warranties contained herein shall survive the closing of the transactions contemplated hereby.

 

3.4    Covenants of Mullen.

 

3.4.1    Right to Inspect. Prior to entering into this Agreement, Mullen has provided access to, and Drawbridge has had an opportunity to inspect, Mullen’s books and records, and to make copies thereof. So long as Mullen is a privately held company or has not consummated a reverse merger with a Reporting Co., and Drawbridge holds any equity of Mullen, (i) Drawbridge shall have the right, upon reasonable prior notice, from time to time during Mullen’s usual business hours, to inspect Mullen’s books and records and to make copies thereof and (ii) Mullen shall provide Drawbridge with drafts of all merger/acquisition agreements and financing arrangements prior to execution (whether term sheets, letters of intent, or definitive agreements).

 

3.4.2    Financial Statements. So long as Mullen is a privately held company or has not consummated a reverse merger with a Reporting Co., and Drawbridge holds any equity of Mullen, Mullen shall provide Drawbridge with a consolidated, unaudited balance sheet, statement of operations (profit/loss), statement of cash flows and statement of shareholder equity (deficit), which financial statements shall be provided quarterly and annually, within 45 days of the end of each such quarter and 90 days of the end of each such calendar year. All annual financial statements shall be audited.

 

3.4.3    Reservation of Shares. So long as any Preferred Shares remain outstanding, Mullen shall take all action necessary to at all times have authorized, and reserved for the purpose of issuance, no less than 100% of the maximum number of Conversion Shares initially issuable upon conversion of the Preferred Shares (assuming for purposes hereof that the Preferred Shares are convertible at the initial Conversion Price (as defined in the Amended and Restated Articles).

 

3.4.4    Board Appointment. So long as Mullen is a privately held company or has not consummated a reverse merger with a Reporting Co., and Drawbridge holds any Preferred Shares, the Amended and Restated Articles shall provide Drawbridge with the right to appoint one member to the board of directors of Mullen. As of the Effective Date, Mullen has 5 current directors.

 

3.4.5    Secretary’s Certificate. At the closing, Mullen shall provide a certificate, in the form reasonably acceptable to Drawbridge, executed by the Secretary of Mullen and dated as of the closing date, as to (i) the resolutions consistent with Section 3.3 as adopted by Mullen’s board of directors in a form reasonably acceptable to Drawbridge, (ii) the Amended and Restated Articles, and (iii) the Bylaws of Mullen, each as in effect at the closing.

 

- 8 -

 

 

4.           RELEASE OF CLAIMS.

 

4.1    General Release/Drawbridge, DBI and the Drawbridge Affiliates. Drawbridge, DBI and the Drawbridge Affiliates, on their own behalf and on behalf of their respective affiliated entities and/or related persons, and each of their respective shareholders, members, directors, officers, managers, heirs, trustees, beneficiaries, administrators, executors, partners, joint venturers, employees, attorneys, insurers, advisors, agents, representatives, successors and assigns, and any person or entity acting by, through, or under any of them (collectively with Drawbridge, DBI and the Drawbridge Affiliates, the “Drawbridge Releasing Parties”), hereby forever release and discharge Mullen and its affiliated entities and/or related persons, and each of their respective shareholders, members, directors, officers, managers, heirs, trustees, beneficiaries, administrators, executors, partners, joint venturers, employees, attorneys, insurers, advisors, agents, representatives, successors and assigns, and any person or entity acting by, through, under or in concert with any of them (collectively with Mullen, the “Mullen Released Parties”), and each of them, from and against, and forever waive, forfeit and relinquish, each and every claim, action, demand, right, lien, covenant, agreement, contract, representation, warranty, indemnity, obligation, debt, cause of action, liability, lawsuit, litigation, loss, damage (including consequential damages and penalties), fee, cost and expense (including fees, costs and expenses of counsel), indebtedness, order and cause of action, of every and whatever type, kind, nature, description or character, whether sounding in law, equity, contract, tort, statute or otherwise, and whether or not presently or later known, unknown, existing, asserted, suspected, unsuspected, liquidated, unliquidated, fixed, contingent, matured, unmatured, anticipated or unanticipated (each, a “Claim,” and collectively, “Claims”) of every kind and nature, including any Claim which is based on, relates to or otherwise in any way arises out of or in connection with: (i) the Loan Documents and the Advertising Agreements (including, without limitation, the Loans and the Purchase Agreement); (ii) any other prior dealings between or among the Drawbridge Releasing Parties, or any of them, on the one hand, and the Mullen Released Parties, or any of them, on the other hand; and (iii) the ownership, termination and/or forfeiture of the Existing Shares and any convertible securities, warrants or options referenced in Section 1.5 herein; provided, that the foregoing release shall not apply to any Claims relating to or arising out of the Lease Agreement or Auto Financing.

 

4.2    General Release/Mullen. Mullen, on its own behalf and on behalf of its respective affiliated entities and/or related persons, and each of their respective shareholders, members, directors, officers, managers, heirs, trustees, beneficiaries, administrators, executors, partners, joint venturers, employees, attorneys, insurers, advisors, agents, representatives, successors and assigns, and any person or entity acting by, through, under or in concert with any of them (collectively with Mullen, the “Mullen Releasing Parties” and together with the Drawbridge Releasing Parties, the “Releasing Parties”), hereby forever releases and discharges Drawbridge, the Drawbridge Affiliates, DBI and their respective affiliated entities and/or related persons, and each of their respective shareholders, members, directors, officers, managers, heirs, trustees, beneficiaries, administrators, executors, partners, joint venturers, employees, attorneys, insurers, advisors, agents, representatives, successors and assigns, and any person or entity acting by, through, under or in concert with any of them (collectively with Drawbridge, DBI and the Drawbridge Affiliates, the “Drawbridge Released Parties”, and together with the Mullen Released Parties, the “Released Parties”), and each of them, from and against, and forever waive, forfeit and relinquish, each and every claim, action, demand, right, lien, covenant, agreement, contract, representation, warranty, indemnity, obligation, debt, cause of action, liability, lawsuit, litigation, loss, damage (including consequential damages and penalties), fee, cost and expense (including fees, costs and expenses of counsel), indebtedness, order and cause of action, of every and whatever type, kind, nature, description or character, whether sounding in law, equity, contract, tort, statute or otherwise, and whether or not presently or later known, unknown, existing, asserted, suspected, unsuspected, liquidated, unliquidated, fixed, contingent, matured, unmatured, anticipated or unanticipated (each, a “Claim,” and collectively, “Claims”) of every kind and nature, including any Claim which is based on, relates to or otherwise in any way arises out of or in connection with: (i) the Loan Documents and the Advertising Agreements (including, without limitation, the Loans and the Purchase Agreement); and (ii) any other prior dealings between or among the Mullen Releasing Parties, or any of them, on the one hand, and the Drawbridge Released Parties, or any of them, on the other hand; provided, that the foregoing release shall not apply to any Claims relating to or arising out of the Lease Agreement or Auto Financing.

 

- 9 -

 

 

4.3    Civil Code Section 1542. The Releasing Parties intend for this Section 4 to serve as a general release, and recognize that such Releasing Parties may have Claims of which such Releasing Parties are unaware and unsuspecting, but that which such Releasing Parties are nevertheless releasing and giving up by executing this Agreement and providing the general release set forth above. In furtherance of such understanding and intention, each Releasing Party acknowledges that such Releasing Party is familiar with the provisions of California Civil Code Section 1542, and the corresponding provisions of any code, statute or law of any other state having jurisdiction over such Releasing Party, and such Releasing Party waives all such provisions and applications, including those of California Civil Code Section 1542, which provides as follows:

 

	Section 1542. (Extent of General Release.) A general release does not extend to claims that the creditor or releasing party does not know or suspect to exist in his or her favor at the time of executing the release and that, if known by him or her, would have materially affected his or her settlement with the debtor or released party.

 

4.4    Assumption of Risk. EACH PARTY HAS BEEN ADVISED, OR HAS HAD THE OPPORTUNITY TO BE ADVISED, BY SUCH PARTY’S LEGAL COUNSEL AS TO THE EFFECT OF THE RELEASE BEING PROVIDED HEREUNDER, AND EACH PARTY UNDERSTANDS THAT THE FACTS WITH RESPECT TO WHICH SUCH RELEASE IS GIVEN MAY BE DIFFERENT FROM THE FACTS NOW KNOWN OR BELIEVED BY SUCH PARTY TO BE TRUE. EACH PARTY ACCEPTS AND ASSUMES THE RISK THAT SUCH FACTS MAY TURN OUT TO BE DIFFERENT. NEVERTHELESS, EACH PARTY AGREES THAT THE RELEASE SUCH PARTY HAS PROVIDED UNDER THIS SECTION 4 SHALL REMAIN IN ALL RESPECTS EFFECTIVE AND SHALL NOT BE SUBJECT TO TERMINATION OR RESCISSION IN THE EVENT SUCH FACTS TURN OUT TO BE DIFFERENT.

 

4.5    Forbearance from Litigation. Each Party represents and warrants to the Released Parties that such Party does not presently have on file any complaints, charges, or claims (civil, administrative, criminal, or otherwise) with respect to any Claim that is released or purported to be released under this Agreement against any of the Released Parties in any court or forum, or before any governmental or administrative agency or entity. To the fullest extent allowed by law, with respect to any Claim that is released or purported to be released under this Agreement, each Party promises never to (i) file or prosecute a lawsuit, charge or complaint based on any such Claim, or (ii) seek any damages, remedies, or other relief by filing or prosecuting a charge with any administrative agency with respect to any such Claim. Each Party further promises to request any government agency or other body assuming jurisdiction of any such lawsuit, complaint or charge to withdraw from the matter or dismiss the matter with prejudice.

 

4.6    No Assignment of Claims. Each Party represents and warrants to the Released Parties that such Party has not assigned any Claim released or discharged under this Agreement, and each Party shall indemnify, defend, protect and hold harmless the Released Parties from and against any and all Claims that the Released Parties, or any of them, shall suffer or incur as a result of or arising in connection with any breach of the foregoing representation and warranty.

 

4.7    Survival of Obligations. Each Party acknowledges and agrees that nothing contained in this Section 4 shall release, excuse or discharge such Party from such Party’s representations, warranties, covenants, agreements, duties and obligations set forth in this Agreement (and specifically including those agreements, duties and obligations set forth in Section 1 above).

 

5.           ARM’S LENGTH. This Agreement has been negotiated at arm’s length between persons knowledgeable in the matters dealt with herein. In addition, each Party has been represented, or has had an opportunity to be represented, by independent legal counsel of such Party’s own choice. Accordingly, any rule of law or any other statute, legal decision or common law principle of similar effect that would require interpretation of any ambiguity in this Agreement against the Party which drafted it is of no application and is hereby expressly waived. The provisions of this Agreement shall be interpreted in a reasonable manner to effect the intentions of the Parties and of this Agreement.

 

- 10 -

 

 

6.            VOLUNTARY. Each Party represents, warrants and agrees that (i) in executing this Agreement, such Party does so with knowledge of any and all rights that such Party may have with respect to the provisions of this Agreement, (ii) such Party has carefully read and considered this Agreement and fully understands its contents and the significance of its contents, (iii) such Party is entering into this Agreement of such Party’s own informed and free will, based upon its own judgment and without any coercion or fear of retaliation, and (iv) such Party has obtained, or has had an opportunity to obtain, independent legal advice with respect to this Agreement.

 

7.           CONFIDENTIALITY; NON-DISPARAGEMENT; NON-CIRCUMVENTION.

 

7.1    Confidentiality. The Parties agree to keep strictly confidential and to refrain from directly or indirectly disclosing, publicizing or disseminating to any person or entity, whether orally or in writing, (i) the scope, nature or substance of the negotiations among the Parties regarding this Agreement, or (ii) the existence, nature, scope, substance or terms of this Agreement. Notwithstanding the foregoing restrictions, a Party may disclose this Agreement or its terms (a) to such Party’s legal, tax or financial advisors on an as-needed basis, or (b) in response to a subpoena or court order issued in a court of competent jurisdiction or as otherwise required by law or legal process, in which event written notice shall be given to all other Parties sufficiently reasonably in advance of such production.

 

7.2    Non-Disparagement. Mullen, on behalf of the Mullen Releasing Parties, and Drawbridge and DBI, on behalf of the Drawbridge Releasing Parties, hereby agrees not to make, publish or cause to be made or published, any statement in writing or orally (which shall include all electronic communications including, without limitation, texting and communications on social media sites such as Facebook and Twitter), which reasonably could be construed as injurious to or disparaging of the business, reputation or standing of the Mullen Released Parties and Drawbridge Released Parties, respectively, or their respective Affiliates or each of their successors and assigns, each of their current and former employees, owners, officers, directors, members, agents and attorneys, in any manner likely to be injurious, disparaging or harmful to them, their business or their business or personal reputations. Nothing in this Section 7.2 shall prohibit any of the parties from testifying truthfully in any court proceeding or under any order issued by a court of law, or from rebutting false or misleading statements.

 

7.3    Enforceability. If any restriction set forth in this Section 7 is found by any court of competent jurisdiction to be unenforceable due to length of time, scope of restricted activities or breadth of geographic area, it shall, as to such jurisdiction only, be interpreted to extend only over the maximum period of time, scope of activities or geographic area as to which it may be enforceable.

 

7.4    Non-Circumvention. Mullen hereby covenants and agrees that Mullen and the Mullen Releasing Parties will not, by amendment of Mullen’s charter documents or through any reorganization, transfer of assets, consolidation, merger, scheme of arrangement, dissolution, issue or sale of securities, or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Agreement, and will at all times in good faith carry out all of the provision of this Agreement and take all action as may be required to protect the rights of Drawbridge to receive payment in full of the New Note.

 

- 11 -

 

 

8.           NOTICES. All notices or elections required or permitted under this Agreement will be in writing and will be delivered in person, by facsimile, electronic mail or equivalent form of written telecommunication (with confirmation of delivery), or sent by certified or registered mail via the U.S. Postal service, return receipt requested, postage prepaid or by Federal Express, DHL or UPS, to the address for each Party set forth on the signature page to this Agreement or such other address as a Party may designate in a written notice served upon the other Parties in the manner provided for herein. All notices required or permitted hereunder will be deemed duly given and received (i) on the date received, if personally delivered or sent by facsimile or electronic mail, (ii) two (2) business days after being sent by Federal Express, DHL or UPS, and (iii) five (5) business days after deposit with the U.S. Postal Service, if sent by registered or certified mail.

 

9.           MISCELLANEOUS.

 

9.1    Entire Agreement. This Agreement, including its recitals, schedules, exhibits, and items referenced in this Agreement, constitutes the entire agreement among the Parties and supersedes and terminates any prior agreements, representations, warranties, or communications, whether oral or written, between and among the Parties relating to the subject matter herein.

 

9.2    Governing Law. New York law, without regard to conflict or choice of law principles, shall govern the construction, application and enforcement of this Agreement.

 

9.3    Mandatory Binding Arbitration; Consent to Jurisdiction. Except as set forth in this Section 9.3, the sole remedy for any claim, controversy or other dispute between or among the Parties, or any of them, regarding any matter relating to this Agreement any breach or interpretation of this Agreement (each a “Dispute”), shall be settled and resolved by binding arbitration in New York, New York, before a panel of three arbitrators at Judicial Arbitration and Mediation Services, Inc. (“JAMS”). Each Party shall select one arbitrator and those two arbitrators together shall select the third arbitrator. The arbitration shall be conducted in accordance with JAMS’ rules and procedures, including JAMS’s Comprehensive Arbitration Rules and Procedures, except as expressly modified by this paragraph. In reaching a decision on any Dispute, the arbitrators shall be bound by the provisions of this Agreement and by the law that the Parties have selected to govern the enforcement and interpretation of this Agreement. The arbitrators shall be required to render their decision in writing. The arbitrators‘ decision on the Dispute shall be a final and binding determination, and such decision may be confirmed and shall be fully enforceable as an arbitration award in any court having jurisdiction and venue over the Parties. The arbitrators shall have exclusive jurisdiction to determine any questions of arbitrability and any such question shall be governed by the New York civil practice laws and rules. The arbitrators shall also award the prevailing Party or Parties such Party’s or Parties’ reasonable attorneys’ fees and litigation expenses in accordance with Section 9.4 below, and shall order the non-prevailing Party or Parties to pay the prevailing Party’s or Parties’ arbitrator’s fees and expenses as part of the arbitration award. For such purpose, the arbitrators shall determine the prevailing Party or Parties. Each Party agrees to accept service of process for all arbitration proceedings in accordance with JAMS’ rules. Nothing in this paragraph shall prevent any Party from (i) seeking and obtaining injunctive or other equitable relief through an action in court; (ii) joining any Party as a defendant in any action brought by or against a third party; (iii) bringing an action in court to effect any attachment or garnishment; or (iv) bringing an action in court to compel arbitration as required by this paragraph. The Parties agree that in the event the arbitrators decide that a Dispute is not subject to arbitration, all actions or proceedings arising directly or indirectly from this Agreement shall be litigated in courts having a situs within New York County, New York, and hereby consent to the jurisdiction of any federal court in which such an action is commenced that is located in New York County, New York and agree not to disturb such choice of forum.

 

9.4    Attorneys’ Fees. If an action (including arbitration) is brought to interpret, apply or enforce any of the terms of this Agreement, or because of a Party’s breach of any provision of this Agreement, the losing Party shall pay the prevailing Party’s or Parties’ attorneys’ fees, costs and expenses, court costs and other costs of action incurred in connection with the prosecution or defense of such action, whether or not the action is prosecuted to a final judgment. In addition to the foregoing award of attorneys’ fees, the prevailing Party or Parties shall be entitled to such Party’s or Parties’ attorneys’ fees incurred in any post-judgment proceeding to enforce any award or judgment arising out of an action in connection with this Agreement.

 

- 12 -

 

 

9.5    Amendment, Modification and Waiver. This Agreement may not be amended, modified or supplemented except pursuant to an instrument in writing signed by each Party, except that any Party may waive any obligation owed to such Party by any other Party under this Agreement, provided such waiver is in writing. The waiver by a Party of a breach of any provisions of this Agreement shall not operate or be construed as a waiver of any subsequent breach.

 

9.6    Severability. If any provision of this Agreement as applied to a Party or to any circumstance shall be found by a court of competent jurisdiction to be void, invalid or unenforceable, the same shall in no way affect any other provision hereof, the application of any such provision in any other circumstance, or the validity or enforceability of this Agreement, and any provision that is found to be void, invalid or unenforceable shall be curtailed and limited only to the extent necessary to bring such provision within the requirements of the law.

 

9.7    Binding Effect. All the terms and provisions of this Agreement shall be binding upon and inure to the benefit of the Parties and their respective successors and assigns. Anything contained herein to the contrary notwithstanding, this Agreement shall not be assignable by a Party without the advance written consent of the other Parties.

 

9.8    Further Acts. Time is of the essence. Each Party shall execute and deliver all such further instruments, documents and papers, and shall perform any and all acts, as reasonably requested by any other Party in order to consummate and give effect to the transactions contemplated by this Agreement.

 

9.9    Counterparts. This Agreement may be executed electronically and in one or more counterparts, and by the Parties in separate counterparts, each of which when executed shall be deemed to be an original but all of which taken together shall constitute one and the same agreement. Delivery of an executed counterpart of a signature page to this Agreement by facsimile or electronic mail shall be effective as delivery of a manually executed counterpart to this Agreement.

 

9.10    Construction. In all instances when appearing in this Agreement, the terms “including,” “include” and “includes” shall be deemed to be followed by “without limitation.”

 

THE PARTIES EXPRESSLY ACKNOWLEDGE THAT THEY HAVE CAREFULLY READ THE FOREGOING AGREEMENT AND KNOW THE CONTENTS THEREOF AND AGREE THAT THEY HAVE ENTERED INTO THIS AGREEMENT FREELY AND WITH THE ADVICE OF LEGAL COUNSEL.

 

[Signature Pages Follow]

 

- 13 -

 

 

IN WITNESS WHEREOF, all Parties have executed this Settlement, Termination, Release and Equity Purchase and Loan Agreement, and upon full execution and delivery by all signatories, this Agreement shall be deemed effective as of the Effective Date.

 

	 	MULLEN:	 
	 	 	 	 
	 	Mullen Technologies, Inc.	 
	 	 	 	 
	 	By:	/s/ David Michery	 
	 	Name:	David Michery	 
	 	Its:	Chief Executive Officer	 
	 	 	 	 
	 	 	 	 
	 	Address:	1405 Pioneer Street	 
	 	 	Brea, CA 928216	 
	 	 	 	 
	 	Email:	 	 

 

- 14 -

 

 

IN WITNESS WHEREOF, all Parties have executed this Settlement, Termination, Release and Equity Purchase and Loan Agreement, and upon full execution and delivery by all signatories, this Agreement shall be deemed effective as of the Effective Date.

 

	 	DRAWBRIDGE:	 
	 	 	 	 
	 	Drawbridge Investments, LLC	 
	 	 	 	 
	 	By:	/s/ Tsvi Davis	 
	 	Name:	Tsvi Davis	 
	 	Its:	Member	 
	 	 	 	 
	 	 	 	 
	 	Address:	211 Boulevard of the Americas, Suite 205	 
	 	 	Lakewood, NJ 08701	 
	 	 	 	 
	 	Email:	 	 

 

 

 

 

IN WITNESS WHEREOF, all Parties have executed this Settlement, Termination, Release and Equity Purchase and Loan Agreement, and upon full execution and delivery by all signatories, this Agreement shall be deemed effective as of the Effective Date.

 

	 	DBI:	 
	 	 	 	 
	 	DBI Lease Buyback Servicing, LLC	 
	 	 	 	 
	 	By:	/s/ Moshe Minz	 
	 	Name:	Moshe Minz	 
	 	Its:	Managing Member	 
	 	 	 	 
	 	 	 	 
	 	Address:	211 Boulevard of the Americas, Suite 206	 
	 	 	Lakewood, NJ 08701	 
	 	 	 	 
	 	Email:	 	 

 

 

 

 

EXHIBIT A

 

Purchase Agreement

 

 

[see attached]

 

 

 

 

EXHIBIT B

 

Option Agreement 

 

 

[see attached]

 

 

 

 

EXHIBIT C

 

New Note

 

 

[see attached]

 

 

 

 

EXHIBIT D

 

Amended and Restated Articles

 

 

[see attached]

 

 

 

 

EXHIBIT E

 

Assignment Separate From Certificate

 

 

FOR VALUE RECEIVED, the undersigned, Drawbridge Investments, LLC, a New Jersey limited liability company (the “Transferor”), does hereby sell, assign and transfer to Mullen Technologies, Inc., a California corporation (the “Company”), an aggregate of 29,152,500 shares of common stock of the Company (the “Shares”), standing in the Transferor’s name on the books of the Company, [represented by Stock Certificate Nos. [__]1, and does hereby irrevocably constitute and appoint ________________________________, as its true and lawful attorney-in-fact to transfer the Shares on the Company’s books and records, with full power of substitution in the premises.

 

Dated:    ________________

 

 

	 	Drawbridge Investments, LLC	 
	 	 	 	 
	 	By:	 	 
	 	 	 	 
	 	Name:	 	 
	 	 	 	 
	 	Its:	 	 

 

1 NTD: TBD whether Existing Shares are certificated.ex_264041.htm

Exhibit 10.6

 

SECURITIES PURCHASE AGREEMENT 

 

This SECURITIES PURCHASE AGREEMENT (this “Agreement”), dated as of May 7, 2021 (the “Execution Date”), between Mullen Technologies, Inc., a California corporation (the “Company”), and the investors listed on the Buyer Schedule attached hereto (collectively, “Buyer”).

 

RECITALS

 

A.         The Company and Buyer are executing and delivering this Agreement in reliance upon the exemption from securities registration afforded by Section 4(a)(2) of the Securities Act of 1933, as amended (the “Securities Act”), and Rule 506 of Regulation D (“Regulation D”) as promulgated by the United States Securities and Exchange Commission (the “SEC”) under the Securities Act.

 

B.          Buyer wishes to purchase, and the Company wishes to sell, upon the terms and conditions stated in this Agreement, (i) shares of the Company’s Series C Preferred Stock, par value $0.001 per share (the “Preferred Stock”), in an aggregate amount as set forth on the Buyer Schedule; and (ii) warrants, in the form attached hereto as Exhibit A (with any Additional Warrants (as defined below), collectively, the “Warrants”), to acquire up to the aggregate number of shares of Common Stock set forth on the Buyer Schedule. “Purchase Shares” means all or a portion of the total number of shares of Preferred Stock to be sold and purchased hereunder, including Additional Purchase Shares (as defined below), if any. “Conversion Shares” means all or a portion of the total number of shares of Common Stock issuable upon full conversion of the Purchase Shares. “Warrant Shares” means all or a portion of the total number of shares of Common Stock issuable upon full exercise of the Warrants.

 

AGREEMENT

 

NOW, THEREFORE, in consideration of the premises and the mutual covenants contained herein and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Company and Buyer hereby agree as follows:

 

	
			1.

				
			PURCHASE AND SALE OF PREFERRED STOCK AND WARRANTS.

			

 

(a)         Purchase Shares and Warrants. Subject to the satisfaction (or waiver) of the conditions set forth in Sections 6 and 7 below, the Company shall issue and sell to Buyer, and Buyer shall purchase from the Company on the Closing Date (as defined below), Purchase Shares in amounts as is set forth on the Buyer Schedule, along with Warrants to initially acquire up to the aggregate number of Warrant Shares as is set forth on the Buyer Schedule.

 

(b)        Closing. The closing of the transactions contemplated by this Agreement (the “Closing”) shall take place as soon as practicable, but no later than the fifth (5th) Business Day following the satisfaction or waiver of all of the closing conditions set forth in Sections 6 and 7, as applicable (other than those to be satisfied at the Closing), or as otherwise mutually agreed by the Parties. The date on which the Closing actually occurs is referred to herein as the “Closing Date.” 

 

 

 

 

(c)          Purchase Price. The aggregate purchase price for the Purchase Shares and the Warrants to be purchased by Buyer (the “Purchase Price”) shall be paid at the Closing and in the amount as set forth on the Buyer Schedule. 

 

(d)         Payment of Purchase Price; Delivery of Securities. On the Closing Date, (i) Buyer shall pay the Purchase Price to the Company for the respective Securities to be issued and sold to Buyer at the Closing, by wire transfer of immediately available funds in accordance with the Company’s written wire instructions and (ii) the Company shall issue to Buyer the Purchase Shares (pursuant to which Buyer initially shall have the right to acquire up to the aggregate number of Conversion Shares as is set forth on the Buyer Schedule in respect of such Purchase Shares) and the Warrants (pursuant to which Buyer initially shall have the right to acquire up to the aggregate number of Warrant Shares as is set forth on the Buyer Schedule in respect of such Warrants) as set forth on the Buyer Schedule, in all cases, duly executed on behalf of the Company and registered in the name of Buyer or its designee, all as set forth on the Buyer Schedule. 

 

(e)         Beneficial Ownership Limitation. The Company shall not issue and Buyer shall not accept any Common Stock under the Transaction Documents, and Buyer shall not otherwise purchase Common Stock or securities exercisable or exchangeable for or convertible into Common Stock from any party, in the public market or otherwise, if such shares proposed to be sold or otherwise issued, or the Common Stock proposed to be purchased or issuable upon exercise, exchange or conversion of the securities proposed to be purchased (after giving effect to any limitation on exercise, exchange or conversion therein), when aggregated with all other shares of Common Stock then owned beneficially (as calculated pursuant to Section 13(d) of the Exchange Act and Rule 13d-3 promulgated thereunder) by Buyer and its affiliates, constitute more than the Maximum Percentage of the then issued and outstanding shares of Common Stock. The number of shares of Common Stock constituting the Maximum Percentage determination shall be appropriately adjusted for any stock dividend, stock split, reverse stock split or similar transaction. For the avoidance of doubt, any such shares of Common Stock that are determined at any time to cause Buyer’s beneficial ownership of Common Stock to exceed the Maximum Percentage upon issuance shall be issued to Buyer at such later time to the extent such issuance would not cause Buyer’s beneficial ownership of Common Stock to exceed the Maximum Percentage.

 

(f)         Weighted Average Anti-Dilution. To the extent that the Company makes a Subsequent Financing (as defined below) during the Restricted Period (as defined below) for consideration per share of Common Stock less than the consideration per share of Common Stock paid by Buyer (as adjusted for stock splits, stock dividends, reclassifications, reorganizations or other similar transactions) for any Conversion Shares, then the Company shall issue to Buyer, concurrently with such dilutive Subsequent Financing, the number of shares of Common Stock to ensure that Buyer has the number of shares of Common Stock that it would have had if it had converted the Convertible Note into Conversion Shares at the price per share as determined in accordance with the following formula (the “Post-Dilution Conversion Price”):

 

CP2 = CP1 x (A + B) / (A + C)

 

2

 

 

For purposes of the foregoing formula:

 

A=          The total number of Conversion Shares with respect to which the Preferred Stock was exercised.

 

B=          The total number of Common Stock that would be issued or issuable under the Subsequent Financing if issued at a per share equal to CP1.

 

C=          The total number of Common Stock actually issued or issuable under the Subsequent Financing.

 

CP1=         The Conversion Price (as defined in the Convertible Note and as adjusted thereunder).

 

CP2=         The Post-Dilution Conversion Price; provided, however, that such Post-Dilution Conversion Price shall in no event be less than $0.01 per share of Common Stock (as adjusted for stock splits, stock dividends, reclassifications, reorganizations or other similar transactions).

 

(g)          Taxes. The Company shall pay any and all transfer, stamp or similar taxes that may be payable with respect to the issuance and delivery of any Securities to the Buyer made under this Agreement or the other Transaction Documents (as defined below).

 

(h)          Expense Reimbursement. On the Closing Date, the Company shall pay to Buyer in cash an unallocated expense reimbursement of up to Eighty Thousand Dollars ($80,000); provided that, in lieu of such payment, Buyer shall be entitled to deduct such amount from the Purchase Price paid on such applicable Closing Date.

 

	
			2.

				
			BUYER’S REPRESENTATIONS AND WARRANTIES.

			

 

Buyer represents and warrants to the Company, on behalf of itself, that:

 

(a)          Organization; Authority. Buyer is an entity duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization with the requisite power and authority to enter into and to consummate the transactions contemplated by the Transaction Documents to which it is a party and otherwise to carry out its obligations hereunder and thereunder.

 

(b)          No Public Sale or Distribution. Buyer (i) is acquiring, or will acquire, the Purchase Shares and Warrants, (ii) upon conversion of its Purchase Shares, will acquire the Conversion Shares issuable upon conversion thereof, and (iii) upon exercise of its Warrants, will acquire the Warrant Shares issuable upon exercise thereof, in each case, for its own account and not with a view towards, or for resale in connection with, the public sale or distribution thereof in violation of applicable securities laws, except pursuant to sales registered or exempted under the Securities Act; provided, however, by making the representations herein, Buyer does not agree, or make any representation or warranty, to hold any of the Securities for any minimum or other specific term and reserves the right to dispose of the Securities at any time in accordance with or pursuant to a registration statement or an exemption under the Securities Act. Buyer does not presently have any agreement or understanding, directly or indirectly, with any Person (as defined below) to distribute any of the Securities in violation of applicable securities laws.

 

3

 

 

(c)          Accredited Investor Status. Buyer is an “accredited investor” as that term is defined in Rule 501(a) of Regulation D.

 

(d)          Reliance on Exemptions. Buyer understands that the Securities are being offered and sold to it in reliance on specific exemptions from the registration requirements of United States federal and state securities laws and that the Company is relying in part upon the truth and accuracy of, and Buyer’s compliance with, the representations, warranties, agreements, acknowledgments and understandings of Buyer set forth herein in order to determine the availability of such exemptions and the eligibility of Buyer to acquire the Securities.

 

(e)          No Governmental Review. Buyer understands that no United States federal or state agency or any other government or governmental agency has passed on or made any recommendation or endorsement of the Securities or the fairness or suitability of the investment in the Securities nor have such authorities passed upon or endorsed the merits of the offering of the Securities.

 

(f)          Transfer or Resale. Buyer understands that: (i) the Securities have not been and are not being registered under the Securities Act or any state securities laws, and may not be offered for sale, sold, assigned or transferred unless (A) subsequently registered thereunder, (B) Buyer shall have delivered to the Company (if requested by the Company) an opinion of counsel to Buyer, in a form reasonably acceptable to the Company, to the effect that such Securities to be sold, assigned or transferred may be sold, assigned or transferred pursuant to an exemption from such registration, or (C) Buyer provides the Company with reasonable assurance that such Securities can be sold, assigned or transferred pursuant to Rule 144 or Rule 144A promulgated under the Securities Act (or a successor rule thereto) (collectively, “Rule 144”); (ii) any sale of the Securities made in reliance on Rule 144 may be made only in accordance with the terms of Rule 144, and further, if Rule 144 is not applicable, any resale of the Securities under circumstances in which the seller (or the Person (as defined below) through whom the sale is made) may be deemed to be an underwriter (as that term is defined in the Securities Act) may require compliance with some other exemption under the Securities Act or the rules and regulations of the SEC promulgated thereunder; and (iii) except as provided in Section 5(h) hereof, neither the Company nor any other Person is under any obligation to register the Securities under the Securities Act or any state securities laws or to comply with the terms and conditions of any exemption thereunder.

 

(g)          Validity; Enforcement. The execution and delivery of the Transaction Documents and the consummation by Buyer of the transactions contemplated hereby and thereby have been duly and validly authorized by all necessary action on the part of Buyer and no further consent or authorization of Buyer or its members is required. Each Transaction Document has been duly executed by Buyer and when delivered in accordance with terms hereof and thereof, constitutes the legal, valid and binding obligations of Buyer enforceable against Buyer in accordance with its terms, except as such enforceability may be limited by general principles of equity or applicable bankruptcy, insolvency, reorganization, moratorium, liquidation and other similar laws relating to, or affecting generally, the enforcement of applicable creditors’ rights and remedies.

 

4

 

 

(h)          No Conflicts. The execution, delivery and performance by Buyer of this Agreement and the consummation by Buyer of the transactions contemplated hereby will not (i) result in a violation of the organizational documents of Buyer, (ii) conflict with, or constitute a default (or an event which with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation of, any agreement, indenture or instrument to which Buyer is a party or (iii) result in a violation of any law, rule, regulation, order, judgment or decree (including federal and state securities laws) applicable to Buyer, except in the case of clauses (ii) and (iii) above, for such conflicts, defaults, rights or violations which would not, individually or in the aggregate, reasonably be expected to have a material adverse effect on the ability of Buyer to perform its obligations hereunder.

 

(i)           Experience of Buyer. Buyer has such knowledge, sophistication and experience in business and financial matter so as to be capable of evaluating the merits and risks of the prospective investment in the Securities, and has so evaluated the merits and risks of such investment. Buyer is able to bear the economic risk of an investment in the Securities and, at the present time, is able to afford a complete loss of such investment.

 

(j)           Foreign Corrupt Practices. Neither Buyer, nor any of its subsidiaries or affiliates, nor to the knowledge of Buyer, any of its directors, officers, agents, employees, members or other Persons acting on behalf of Buyer or any its subsidiaries or affiliates has, in the course of its actions for, or on behalf of, Buyer or any of its subsidiaries or affiliates (i) used any corporate funds for any unlawful contribution, gift, entertainment or other unlawful expenses relating to political activity; (ii) made any direct or indirect unlawful payment to any foreign or domestic government official or employee from corporate funds; (iii) violated or is in violation of any provision of the U.S. Foreign Corrupt Practices Act of 1977, as amended; or (iv) made any unlawful bribe, rebate, payoff, influence payment, kickback or other unlawful payment of any foreign or domestic government official or employee.

 

(k)          General Solicitation. Buyer is not purchasing the Securities as a result of any advertisement, article, notice or other communication regarding the Securities published in any newspaper, magazine or similar media or broadcast over television or radio or presented at any seminar or any other general solicitation or advertisement.

 

(l)           Patriot Act Representations.

 

(i)    Buyer represents that all evidence of identity provided is genuine and all related information furnished is accurate.

 

(ii)    Buyer hereby acknowledges that the Company seeks to comply with all applicable anti-money laundering laws and regulations. In furtherance of such efforts, Buyer hereby represents and agrees that: (1) no part of the funds used by Buyer to acquire the Securities have been, or shall be, directly or indirectly derived from, or related to, any activity that may contravene federal, state, or international laws and regulations, including anti-money laundering laws and regulations; and (ii) no payment to the Company by Buyer shall cause the Company to be in violation of any applicable anti-money laundering laws and regulations including without limitation, the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism (USA PATRIOT ACT) Act of 2001, Executive Order 13224 (2001) (the “Patriot Act”) issued by the President of the United States and the U.S. Department of the Treasury Office of Foreign Assets Control (“OFAC”) regulations.

 

5

 

 

(iii)    Buyer represents and warrants that the amounts to be paid by Buyer to the Company will not be directly or indirectly derived from activities that may contravene federal, state or international laws and regulations, including anti-money laundering laws and regulations. Buyer represents and warrants that, to the best of its knowledge, none of: (a) Buyer; (b) any person controlling or controlled by Buyer; or (c) any person having a beneficial interest in Buyer is (i) a country, territory, individual or entity named on a list maintained by OFAC, (ii) a person prohibited under the OFAC Programs, (iii) a senior foreign political figure, or any immediate family member or close associate of a senior foreign political figure as such terms are defined in the footnotes below or (iv) a “foreign shell bank” within the meaning of the U.S. Bank Secrecy Act (31 U.S.C. §5311 et seq.), as amended (the “Bank Secrecy Act”) and the regulations promulgated thereunder by the U.S. Department of the Treasury.

 

(iv)    Buyer further represents and warrants that Buyer: (i) has conducted thorough due diligence with respect to all of its beneficial owners, (ii) has established the identities of all beneficial owners and the source of each of the beneficial owner’s funds and (iii) will retain evidence of any such identities, any such source of funds and any such due diligence.

 

(v)    Neither Buyer nor any person directly or indirectly controlling, controlled by or under common control with Buyer is a person identified as a terrorist organization on any relevant lists maintained by governmental authorities.

 

(vi)    Buyer agrees to provide the Company all information that may be reasonably requested to comply with applicable laws and regulations of any applicable jurisdiction, or to respond to requests for information concerning the identity of Buyer from any governmental authority, self-regulatory organization or financial institution in connection with its anti-money laundering compliance procedures, or to update such information. Buyer agrees to notify the Company promptly if there is any change with respect to the representations and warranties provided herein. Buyer consents to the disclosure to regulators and law enforcement authorities by the Company and its affiliates and agents of any information about Buyer or its constituents as the Company reasonably deems necessary or appropriate to comply with applicable anti-money laundering, anti-terrorist and asset control laws, regulations, rules and orders.

 

1           A “senior foreign political figure” is defined as a senior official in the executive, legislative, administrative, military or judicial branches of a foreign government (whether elected or not), a senior official of a major foreign political party, or a senior executive of a foreign government-owned corporation. In addition, a “senior foreign political figure” includes any corporation, business or other entity that has been formed by, or for the benefit of, a senior foreign political figure.

2            “Immediate family” of a senior foreign political figure typically includes the figure’s parents, siblings, spouse, children and in-laws.

3           A “close associate” of a senior foreign political figure is a person who is widely and publicly known to maintain an unusually close relationship with the senior foreign political figure, and includes a person who is in a position to conduct substantial domestic and international financial transactions on behalf of the senior foreign political figure.

 

 

6

 

 

	
			3.

				
			REPRESENTATIONS AND WARRANTIES OF THE COMPANY.

			

 

The Company represents and warrants to the Buyer the matters set forth in this Section 3, as may be qualified by the corresponding section of the Company Disclosure Schedule. These representations and warranties, and the information set forth in the Company Disclosure Schedule, are current as of the date of this Agreement, except to the extent that a representation, warranty or section of the Company Disclosure Schedule expressly states that such representation or warranty, or information in such section of the Company Disclosure Schedule, is current only as of an earlier date. If any information is so reflected as of an earlier date, there have been no material changes since such date to the date hereof.

 

(a)        Organization and Qualification. Each of the Company and each of its subsidiaries are entities duly organized and validly existing and, except as provided on Section 3(a) of the Disclosure Schedule, in good standing under the laws of the jurisdiction in which they are formed, and have the requisite power and authorization to own their properties and to carry on their business as now being conducted and as presently proposed to be conducted. Each of the Company and each of its subsidiaries is duly qualified as a foreign entity to do business and is in good standing in every jurisdiction in which its ownership of property or the nature of the business conducted by it makes such qualification necessary, except to the extent that the failure to be so qualified or be in good standing would not have a Material Adverse Effect. Except as provided on Section 3(a) of the Disclosure Schedule, the Company has no material subsidiaries. 

 

(b)         Authorization; Enforcement; Validity. The Company has the requisite power and authority to enter into and perform its obligations under this Agreement and the other Transaction Documents and to issue the Securities in accordance with the terms hereof and thereof. The execution and delivery of this Agreement and the other Transaction Documents by the Company and the consummation by the Company of the transactions contemplated hereby and thereby (including, without limitation, the issuance of the Purchase Shares and the issuance of the Warrants and the reservation for issuance and issuance of the Conversion Shares upon conversion of the Purchase Shares and issuance of the Warrant Shares issuable upon exercise of the Warrants) have been (i) duly authorized by the Company’s board of directors and (ii) no further filing, consent or authorization is required by the Company, its board of directors or its stockholders or other governing body of the Company (other than the filing of one or more Registration Statements and a Form D with the SEC and any other filings as may be required by any state securities agencies). This Agreement has been, and the other Transaction Documents will be prior to the Closing, duly executed and delivered by the Company, and each constitutes the legal, valid and binding obligations of the Company, enforceable against the Company in accordance with its respective terms, except as such enforceability may be limited by general principles of equity or applicable bankruptcy, insolvency, reorganization, moratorium, liquidation or similar laws relating to, or affecting generally, the enforcement of applicable creditors’ rights and remedies and except as rights to indemnification and to contribution may be limited by federal or state securities law.

 

7

 

 

(c)          Issuance of Securities. The issuance of the Purchase Shares is duly authorized, and upon issuance in accordance with the terms of this Agreement, the Purchase Shares will be validly issued, fully paid and non-assessable and free from all preemptive or similar rights, taxes, Liens, charges and other encumbrances with respect to the issue thereof (other than pursuant to the securities laws), with the holders being entitled to all rights accorded to a holder of shares of Preferred Stock. The issuance of the Warrants pursuant to the Transaction Documents is duly authorized, and upon the due execution, issuance and delivery thereof against payment in full therefor in accordance with the terms of this Agreement, the Warrants will be valid and binding obligations of the Company enforceable against the Company in accordance with their terms. The issuance of the Conversion Shares is duly authorized, and upon issuance in accordance with the Purchase Shares, the Conversion Shares will be validly issued, fully paid and non-assessable and free from all preemptive or similar rights, taxes, Liens, charges and other encumbrances with respect to the issue thereof (other than pursuant to the securities laws), with the holders being entitled to all rights accorded to a holder of shares of Common Stock. The issuance of the Warrant Shares is duly authorized, and upon issuance in accordance with the Warrants, the Warrant Shares will be validly issued, fully paid and non-assessable and free from all preemptive or similar rights, taxes, Liens, charges and other encumbrances with respect to the issue thereof (other than pursuant to the securities laws), with the holders being entitled to all rights accorded to a holder of shares of Common Stock. As of the Closing, the Company shall have reserved from its duly authorized capital stock not less than the sum of (i) 300% of the maximum number of Conversion Shares issuable upon conversion of the Purchase Shares (without taking into account any limitations on the conversion of the Purchase Shares set forth in the Amended and Restated Articles of Incorporation) and (ii) 300% of the maximum number of Warrant Shares issuable upon exercise of the Warrants (without taking into account any limitations on the exercise of the Warrants set forth therein). Subject to the accuracy of the representations and warranties of the Buyer in this Agreement, the offer and issuance by the Company of the Securities is exempt from registration under the Securities Act. Upon issuance in accordance with the terms of this Agreement, Buyer will have good and marketable title to the Securities. 

 

(d)         No Conflicts. The execution, delivery and performance of the Transaction Documents by the Company and the consummation by the Company of the transactions contemplated hereby and thereby (including, without limitation, the issuance of the Purchase Shares, the Conversion Shares, the Warrants and the Warrant Shares and the reservation for issuance of the Conversion Shares and the Warrant Shares) will not (i) result in a violation of the articles of incorporation of the Company (including, without limitation, any certificate of designation contained therein) or other organizational documents of the Company or any of its subsidiaries, any capital stock of the Company or any of its subsidiaries or bylaws or operating agreements of the Company or any of its subsidiaries, (ii) conflict with, or constitute a default (or an event which with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation of, any agreement, indenture or instrument to which the Company or any of its subsidiaries is a party or (iii) result in a violation of any law, rule, regulation, order, judgment or decree (including, without limitation, foreign, federal and state securities laws and regulations and the rules and regulations by which the Common Stock or any property or asset of the Company is bound or affected except, in the case of clause (ii) or (iii) above, to the extent such violations that could not reasonably be expected to have a Material Adverse Effect. 

 

8

 

 

(e)         Consents. Neither the Company nor any subsidiary is required to obtain any consent from, authorization or order of, or make any filing or registration with any court, governmental agency or any regulatory or self-regulatory agency or any other Person (other than the filing of one or more Registration Statements and a Form D with the SEC and any other filings as may be required by any state securities agencies), in order for it to execute, deliver or perform any of its respective obligations under, or contemplated by, the Transaction Documents, in each case, in accordance with the terms hereof or thereof. All consents, authorizations, orders, filings and registrations which the Company is required to obtain at or prior to the Closing have been obtained or effected on or prior to the Closing Date, and the Company is not aware of any facts or circumstances which might prevent the Company from obtaining or effecting any of the registration, application or filings contemplated by the Transaction Documents.

 

(f)          Acknowledgment Regarding Buyer’s Purchase of Securities. Buyer is not (i) an officer or director of the Company, (ii) an affiliate (as defined in Rule 405 of the Securities Act) of the Company (an “Affiliate”) or (iii) to the Company’s knowledge, a “beneficial owner” (as defined for purposes of Rule 13d-3 of the Exchange Act) of more than 10% of the shares of Common Stock. The Company’s decision to enter into the Transaction Documents has been based on its and its representative’s independent evaluation of the transactions contemplated hereby and the Company has neither been induced by, nor has it relied upon, any representation, warranty, covenant or statement (written or oral), whether express or implied, made by Buyer except those that are expressly set forth in this Agreement.

 

(g)           No General Solicitation; Placement Agent’s Fees. None of the Company, any of its Affiliates, or any Person acting on the behalf of the Company or any of its Affiliates, has engaged in any form of general solicitation or general advertising (within the meaning of Regulation D) in connection with the offer or sale of the Securities. The Company shall be responsible for the payment of any of its placement agent’s fees, financial advisory fees, or brokers’ commissions, relating to or arising out of the transactions contemplated hereby. 

 

(h)           No Integrated Offering. None of the Company, any of its Affiliates, or, to the knowledge of the Company, any Person acting on the behalf of the Company or any of its Affiliates has, directly or indirectly, made any offers or sales of any security or solicited any offers to buy any security, under circumstances that would require registration of the issuance of any of the Securities under the Securities Act, whether through integration with prior offerings or otherwise, or cause this offering of the Securities to require approval of stockholders of the Company under any applicable stockholder approval provisions, including, without limitation, under the rules and regulations of any exchange or automated quotation system on which any of the securities of the Company are listed or designated for quotation. None of the Company, any of its Affiliates, or, to the knowledge of the Company, any Person acting on the behalf of the Company or any of its Affiliates will take any action or steps that would require registration of the issuance of any of the Securities under the Securities Act or cause the offering of any of the Securities to be integrated with other offerings of securities of the Company. 

 

(i)         Dilutive Effect. The Company understands and acknowledges that the number of Conversion Shares and Warrant Shares may increase in certain circumstances. The Company further acknowledges that, except to the extent an issuance would exceed the beneficial ownership limitation in Section 1(e) of this Agreement, its obligation to issue the Conversion Shares upon conversion of the Purchase Shares and the Warrant Shares upon exercise of the Warrants in accordance therewith and with this Agreement is absolute and unconditional, regardless of the dilutive effect that such issuance may have on the ownership interests of other stockholders of the Company.

 

9

 

 

(j)          Application of Takeover Protections; Rights Agreement. The Company and its board of directors have taken all necessary action, if any, in order to render inapplicable any control share acquisition, interested stockholder, business combination, poison pill (including, without limitation, any distribution under a rights agreement), shareholder rights plan or other similar anti-takeover provision under the certificate of incorporation, bylaws or other organizational documents of the Company or any of its Affiliates or the laws of the jurisdiction of its incorporation or otherwise which is or could become applicable to Buyer as a result of the transactions contemplated by this Agreement, including, without limitation, the Company’s issuance of the Securities and Buyer’s ownership of the Securities. The Company and its board of directors have taken all necessary action, if any, in order to render inapplicable any shareholder rights plan or similar arrangement relating to accumulations of beneficial ownership of shares of Common Stock or a change in control of the Company or any of its Affiliates.

 

(k)        Absence of Certain Changes. Except as provided on Section 3(k) of the Disclosure Schedule, since January 1, 2021, there has been no material adverse change and no material adverse development in the business, assets, liabilities, properties, operations (including results thereof), or condition (financial or otherwise) of the Company and its subsidiaries. Except as provided on Section 3(k) of the Disclosure Schedule, since January 1, 2021, neither the Company nor any of its subsidiaries has (i) declared or paid any dividends, (ii) sold any material assets outside of the ordinary course of business or (iii) made any material capital expenditures, individually or in the aggregate, outside of the ordinary course of business. Neither the Company nor any of its subsidiaries has taken any steps to seek protection pursuant to any law or statute relating to bankruptcy, insolvency, reorganization, receivership, liquidation or winding up. Neither the Company nor any of its subsidiaries has any knowledge or reason to believe that any of their respective creditors intend to initiate involuntary bankruptcy proceedings or any actual knowledge of any fact which would reasonably lead a creditor to do so. The Company is not, and after giving effect to the transactions contemplated hereby to occur at the Closing will not be, Insolvent (as defined below). The Company has not engaged in any business or in any transaction, and is not about to engage in any business or in any transaction, for which the Company’s remaining assets constitute unreasonably small capital.

 

(l)           No Undisclosed Events, Liabilities, Developments or Circumstances. Except as provided on Section 3(l) of the Disclosure Schedule, since January 1, 2021, no event, liability, development or circumstance has occurred or exists, or is reasonably expected to occur or exist with respect to the Company or any of its subsidiaries or any of their respective businesses, properties, liabilities, prospects, operations (including results thereof) or condition (financial or otherwise) that would have a Material Adverse Effect on the Company.

 

10

 

 

(m)       Conduct of Business; Regulatory Permits. Neither the Company nor any of its subsidiaries is in violation of any term of or in default under its organizational documents including its certificate of incorporation, bylaws, certificate of formation, any other organizational charter, any certificate of designation, preferences or rights of any outstanding series of preferred stock of the Company or any of its subsidiaries, respectively. Neither the Company nor any of its subsidiaries is in violation of any judgment, decree or order or any statute, ordinance, rule or regulation applicable to the Company or any of its subsidiaries, and the Company will not conduct its business in violation of any of the foregoing, except in all cases for possible violations which could not, individually or in the aggregate, have a Material Adverse Effect. The Company and each of its subsidiaries possess all certificates, authorizations and permits issued by the appropriate regulatory authorities necessary to conduct their businesses, except where the failure to possess such certificates, authorizations or permits would not have, individually or in the aggregate, a Material Adverse Effect, and neither the Company nor any such subsidiary has received any notice of proceedings relating to the revocation or modification of any such certificate, authorization or permit.

 

(n)         Foreign Corrupt Practices. Neither the Company nor any of its subsidiaries nor to the knowledge of the Company, any director, officer, agent, employee or other Person acting on behalf of the Company or any of its subsidiaries (as applicable) has, in the course of its actions for, or on behalf of, the Company or any of its subsidiaries (i) used any corporate funds for any unlawful contribution, gift, entertainment or other unlawful expenses relating to political activity; (ii) made any direct or indirect unlawful payment to any foreign or domestic government official or employee from corporate funds; (iii) violated or is in violation of any provision of the U.S. Foreign Corrupt Practices Act of 1977, as amended; or (iv) made any unlawful bribe, rebate, payoff, influence payment, kickback or other unlawful payment to any foreign or domestic government official or employee.

 

(o)         Transactions With Affiliates. Except as provided on Section 3(o) of the Disclosure Schedule, none of the officers, directors, employees or Affiliates of the Company is presently a party to any transaction with the Company (other than for ordinary course services as employees, officers or directors and immaterial transactions), including any contract, agreement or other arrangement providing for the furnishing of services to or by, providing for rental of real or personal property to or from, or otherwise requiring payments to or from any such officer, director, employee or Affiliate or, to the knowledge of the Company, any corporation, partnership, trust or other Person in which any such officer, director, employee or Affiliate has a substantial interest or is an employee, officer, director, trustee or partner.

 

11

 

 

(p)        Equity Capitalization. As of the date hereof, the authorized capital stock of the Company consists solely of (i) 600,000,000 shares of Common Stock, of which 67,704,046 are issued and outstanding and 23,391,845 are reserved for issuance pursuant to Convertible Securities (as defined below) (other than the Preferred Stock) (150,025,000 are reserved for issuance upon conversion of Series A Preferred Stock and 71,516,534 are reserved for issuance upon conversion of Series B Preferred Stock), and (ii) 73,800,250 shares of preferred stock, of which, 1,500,250 are designated as Series A Preferred Stock, 72,300,000 are designated as Series B Preferred Stock and 0 are designated as Series C Preferred Stock, of which 1,500,250, 71,516,534 and 0 are issued and outstanding, respectively. No shares of Common Stock are held in treasury. All of such outstanding shares are duly authorized and have been, or upon issuance will be, validly issued and are fully paid and non-assessable. Except as provided on Section 3(p) of the Disclosure Schedule, (i) to the Company’s knowledge, no Person owns 10% or more of the Company’s issued and outstanding shares of Common Stock (calculated based on the assumption that all Convertible Securities, whether or not presently exercisable or convertible, have been fully exercised or converted (as the case may be) taking account of any limitations on exercise or conversion (including “blockers”) contained therein or in the Amended and Restated Articles of Incorporation without conceding that such identified Person is a 10% stockholder for purposes of federal securities laws); (ii) the Company’s capital stock and the capital stock of its subsidiaries are not subject to preemptive rights or any other similar rights or any Liens; (iii) there are no outstanding options, warrants, scrip, rights to subscribe to, calls or commitments of any character whatsoever relating to, or securities or rights convertible into, or exercisable or exchangeable for, any capital stock of the Company or any of its subsidiaries, or contracts, commitments, understandings or arrangements by which the Company or any of its subsidiaries is or may become bound to issue additional capital stock or options, warrants, scrip, rights to subscribe to, calls or commitments of any character whatsoever relating to, or securities or rights convertible into, or exercisable or exchangeable for, any capital stock of the Company or any of its subsidiaries, respectively (other than as may be issued from time to time under any equity incentive plan maintained); (iv) there are no outstanding debt securities, convertible notes, credit agreements, credit facilities or other agreements, documents or instruments evidencing Indebtedness of the Company or any of its subsidiaries or by which the Company or any of its subsidiaries is or may become bound; (v) there are no financing statements securing obligations in any amounts filed in connection with the Company or any of its subsidiaries; (vi) there are no agreements or arrangements under which the Company or any of its subsidiaries is obligated to register the sale of any of their securities under the Securities Act (except as provided in Section 5(h) hereof); (vii) there are no outstanding securities or instruments of the Company or any of its subsidiaries which contain any redemption or similar provisions, and there are no contracts, commitments, understandings or arrangements by which the Company or any of its subsidiaries is or may become bound to redeem a security of the Company or any of its subsidiaries; (viii) there are no securities or instruments containing anti-dilution or similar provisions that will be triggered by the issuance of the Securities; and (ix) neither the Company nor any of its subsidiaries has stock appreciation rights or “phantom stock” plans or agreements or any similar plan or agreement. The Company has provided to Buyer a true, correct and complete copy of the Company’s charter as in effect on the date hereof, and the terms of all securities convertible into, or exercisable or exchangeable for, shares of Common Stock and the material rights of the holders thereof.

 

(q)         Indebtedness and Other Contracts. Except as provided on Section 3(q) of the Disclosure Schedule, each of the Company and its subsidiaries (i) does not have any material outstanding Indebtedness, Indebtedness secured by any Lien on any assets of the Company or any of its Subsidiaries or other material debt obligations, (ii) is not a party to any contract, agreement or instrument, the violation of which, or default under which, by the other party(ies) to such contract, agreement or instrument could reasonably be expected to result in a Material Adverse Effect, (iii) is not in violation of any term of, or in default under, any contract, agreement or instrument relating to any Indebtedness, except where such violations and defaults would not result, individually or in the aggregate, in a Material Adverse Effect, and (iv) is not a party to any contract, agreement or instrument relating to any Indebtedness, the performance of which, in the judgment of the Company’s officers, has or is expected to have a Material Adverse Effect. The Company has no current intention or expectation to file for reorganization or liquidation under the bankruptcy or reorganization laws of any jurisdiction

 

12

 

 

(r)         Absence of Litigation. There is no action, suit, proceeding, inquiry or investigation before or by any court, public board, government agency, self-regulatory organization or body pending or, to the knowledge of the Company, threatened against or affecting the Company or any of its subsidiaries, the shares of Common Stock or any of the Company’s or its subsidiaries’ executive officers or directors which would be reasonably likely to adversely affect the transactions contemplated by this Agreement. There has not been, and to the knowledge of the Company, there is not pending or contemplated, any investigation by the SEC involving the Company, any of its subsidiaries or any current or former director or officer of the Company or any of its subsidiaries.

 

(s)         Insurance. The Company and each of its subsidiaries are insured by insurers of recognized financial responsibility against such losses and risks and in such amounts as management of the Company believes to be prudent and customary in the businesses in which the Company and its subsidiaries are engaged. The Company has no reason to believe that it will be unable to renew its existing insurance coverage as and when such coverage expires or to obtain similar coverage from similar insurers as may be necessary to continue its business at a cost that would not have a Material Adverse Effect.

 

(t)         Employee Relations. Neither the Company nor any of its subsidiaries is a party to any collective bargaining agreement nor does it employ any member of a union. No executive officer or other key employee of the Company or any of its subsidiaries has notified the Company or any such subsidiary that such officer intends to leave the Company or any such subsidiary or otherwise terminate such officer’s employment with the Company or any such subsidiary. To the knowledge of the Company, no executive officer or other key employee of the Company or any of its subsidiaries is, or is now expected to be, in violation of any material term of any employment contract, confidentiality, disclosure or proprietary information agreement, non-competition agreement, or any other contract or agreement or any restrictive covenant, and the continued employment of each such executive officer or other key employee (as the case may be) does not subject the Company or any of its subsidiaries to any liability with respect to any of the foregoing matters. The Company and its subsidiaries are in compliance with all federal, state, local and foreign laws and regulations respecting labor, employment and employment practices and benefits, terms and conditions of employment and wages and hours, except where failure to be in compliance would not, either individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect.

 

(u)         Title. The Company and its subsidiaries have good and marketable title to (i) all real property owned by it and (ii) all personal property, owned by them which is material to the business of the Company and its subsidiaries, in each case, free and clear of all Liens, encumbrances and defects except such as do not materially affect the value of such property and do not interfere with the use made and proposed to be made of such property by the Company and any of its subsidiaries. Any real property and facilities held under lease by the Company and any of its subsidiaries are held by them under valid, subsisting and enforceable leases with such exceptions as are not material and do not interfere with the use made and proposed to be made of such property and buildings by the Company or any of its subsidiaries.

 

13

 

 

(v)       Intellectual Property Rights. The Company and its subsidiaries own or possess adequate rights or licenses to use all material trademarks, trade names, service marks, service mark registrations, service names, patents, patent rights, copyrights, original works, inventions, licenses, approvals, governmental authorizations, trade secrets and other intellectual property rights and all applications and registrations therefor (“Intellectual Property Rights”) necessary to conduct their respective businesses as now conducted and as presently proposed to be conducted. None of the Company’s or its subsidiaries’ Intellectual Property Rights have expired, terminated or been abandoned, or are expected to expire, terminate or be abandoned, within three years from the date of this Agreement, which could reasonably be expected to result in a Material Adverse Effect. The Company has no knowledge of any material infringement by the Company or any of its subsidiaries of Intellectual Property Rights of others. There is no claim, action or proceeding being made or brought, or to the knowledge of the Company or any of its subsidiaries, being threatened, against the Company or any of its subsidiaries regarding their Intellectual Property Rights and which would reasonably be expected to have a Material Adverse Effect. The Company is not aware of any facts or circumstances which might give rise to any of the foregoing infringements or claims, actions or proceedings. The Company and each of its subsidiaries have taken reasonable security measures to protect the secrecy, confidentiality and value of all of their Intellectual Property Rights, except where failure to take such measures would not, either individually or in the aggregate, reasonably be expected to materially affect the value of their respective Intellectual Property Rights. 

 

(w)        Environmental Laws. The Company and its subsidiaries (i) are in compliance with all Environmental Laws (as defined below), (ii) have received all permits, licenses or other approvals required of them under applicable Environmental Laws to conduct their respective businesses and (iii) are in compliance with all terms and conditions of any such permit, license or approval where, in each of the foregoing clauses (i), (ii) and (iii), the failure to so comply could be reasonably expected to have, individually or in the aggregate, a Material Adverse Effect.

 

(x)          Subsidiary Rights. The Company or one of its subsidiaries has unrestricted right to vote, and (subject to limitations imposed by applicable law) to receive dividends and distributions on, all capital securities of its subsidiaries as owned by the Company or such subsidiary.

 

(y)         Tax Status. Except as set forth on Section 3(y) of the Disclosure Schedule, each of the Company and its subsidiaries (i) has timely made or filed all foreign, federal and state income and all other tax returns, reports and declarations required by any jurisdiction to which it is subject, (ii) has timely paid all taxes and other governmental assessments and charges that are material in amount, shown or determined to be due on such returns, reports and declarations, except those being contested in good faith and (iii) has set aside on its books provision reasonably adequate for the payment of all taxes for periods subsequent to the periods to which such returns, reports or declarations apply, except in each case where the failure to file, pay or set aside could not be reasonably expected to have a Material Adverse Effect. Except as set forth on Section 3(y) of the Disclosure Schedule, there are no unpaid taxes in any material amount claimed to be due by the taxing authority of any jurisdiction, and the officers of the Company and it subsidiaries know of no basis for any such claim. The Company is not operated in such a manner as to qualify as a passive foreign investment company, as defined in Section 1297 of the U.S. Internal Revenue Code of 1986, as amended.

 

(z)          Investment Company Status. The Company is not, and upon consummation of the sale of the Securities will not be, an “investment company,” an affiliate of an “investment company,” a company controlled by an “investment company” or an “affiliated person” of, or “promoter” or “principal underwriter” for, an “investment company” as such terms are defined in the Investment Company Act of 1940, as amended. 

 

14

 

 

(aa)        No Disqualification Events. None of the Company, any of its predecessors, any affiliated issuer, any director, executive officer, other officer of the Company participating in the offering contemplated hereby, any beneficial owner of 20% or more of the Company’s outstanding voting equity securities, calculated on the basis of voting power, nor any promoter (as that term is defined in Rule 405 under the Securities Act) connected with the Company in any capacity at the time of sale (each, an “Issuer Covered Person”) is subject to any of the “Bad Actor” disqualifications described in Rule 506(d)(1)(i) to (viii) under the Securities Act (a “Disqualification Event”), except for a Disqualification Event covered by Rule 506(d)(2) or (d)(3). The Company has exercised reasonable care to determine whether any Issuer Covered Person is subject to a Disqualification Event.

 

(bb)       Transfer Taxes. On the Closing Date, all stock transfer or other taxes (other than income or similar taxes) which are required to be paid in connection with the issuance, sale and transfer of the Securities to be sold to Buyer hereunder will be, or will have been, fully paid or provided for by the Company, and all laws imposing such taxes will be or will have been complied with.

 

(cc)        Shell Company Status. The Company is not, and has never been, an issuer identified in, or subject to, Rule 144(i).

 

(dd)       Fixtures and Equipment. Each of the Company and its subsidiaries (as applicable) has good title to, or a valid leasehold interest in, the tangible personal property, equipment, improvements, fixtures, and other personal property and appurtenances that are used by the Company or its subsidiary in connection with the conduct of its business (the “Fixtures and Equipment”). The Fixtures and Equipment are structurally sound, are in good operating condition and repair, are adequate for the uses to which they are being put, are not in need of maintenance or repairs except for ordinary, routine maintenance and repairs and are sufficient for the conduct of the Company’s and/or its subsidiaries’ businesses (as applicable) in the manner as conducted prior to the Closing. Each of the Company and its Subsidiaries owns all of its Fixtures and Equipment free and clear of all Encumbrances except for (a) Liens for current taxes not yet due and (b) zoning laws and other land use restrictions that do not impair the present or anticipated use of the property subject thereto.

 

(ee)        Illegal or Unauthorized Payments; Political Contributions. Neither the Company nor any of its subsidiaries nor, to the best of the Company’s knowledge (after reasonable inquiry of its executive officers and directors), any of the officers, directors, employees, agents or other representatives of the Company or any of its subsidiaries or any other business entity or enterprise with which the Company or any of its subsidiaries is or has been affiliated or associated, has, directly or indirectly, made or authorized any payment, contribution or gift of money, property, or services, whether or not in contravention of applicable law, (a) as a kickback or bribe to any Person or (b) to any political organization, or the holder of or any aspirant to any elective or appointive public office except for personal political contributions not involving the direct or indirect use of funds of the Company or any of its subsidiaries.

 

(ff)        Money Laundering. The Company and its subsidiaries are in compliance with, and have not previously violated, the USA Patriot Act of 2001 and all other applicable U.S. and non-U.S. anti-money laundering laws and regulations, including, without limitation, the laws, regulations and Executive Orders and sanctions programs administered by the U.S. Office of Foreign Assets Control, including, without limitation, (i) Executive Order 13224 of September 23, 2001 entitled, “Blocking Property and Prohibiting Transactions With Persons Who Commit, Threaten to Commit, or Support Terrorism” (66 Fed. Reg. 49079 (2001)); and (ii) any regulations contained in 31 CFR, Subtitle B, Chapter V.

 

15

 

 

(gg)       Registration Rights. Except as provided in the Registration Rights Agreement, no holder of securities of the Company has rights to the registration of any securities of the Company because of the issuance of the Securities hereunder that could expose the Company to material liability or Buyer to any liability or that could impair the Company’s ability to consummate the issuance and sale of the Securities in the manner, and at the times, contemplated hereby, which rights have not been waived by the holder thereof as of the date hereof.

 

(hh)       Disclosure. Each representation and warranty of the Company made herein is true and correct in all material respects and does not contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements made therein, in the light of the circumstances under which they were made, not misleading. The Company confirms that neither it nor any other Person acting on its behalf has provided Buyer or their agents or counsel with any information that constitutes or could reasonably be expected to constitute material, non-public information concerning the Company or any of its subsidiaries, other than the existence of the transactions contemplated by this Agreement and the other Transaction Documents; provided, however, that to the extent any such material non-public information was provided to Buyer, then the Company hereby covenants to include in that Form S-4 (the “S-4”) to be publicly filed with respect to the proposed reverse merger (the “Merger”) between the Company and Net Element, Inc., a Delaware corporation (the “Net Element”), any such information. The Company further covenants to include in the S-4 any event or circumstance occurring or information arising after the date hereof with respect to the Company or any of its subsidiaries or their respective businesses, properties, liabilities, prospects, operations (including results thereof) or conditions (financial or otherwise), which, under applicable law, rule or regulation, requires public disclosure at or before the date hereof or announcement by the Company but which has not been so publicly disclosed. The Company understands and confirms that Buyer will rely on the foregoing representations in effecting transactions in securities of the Company. The Company acknowledges and agrees that Buyer makes no and has not made any representations or warranties with respect to the transactions contemplated hereby other than those specifically set forth in Section 2.

 

	
			4.

				
			COVENANTS.

			

 

(a)          Form D and Blue Sky. The Company shall file a Form D with respect to the Securities as required under Regulation D and provide a copy thereof to Buyer promptly after filing. The Company shall, on or before the Closing Date, take such action as the Company shall reasonably determine is necessary in order to obtain an exemption for, or to, qualify the Securities for sale to Buyer at the Closing pursuant to this Agreement under applicable securities or “Blue Sky” laws of the states of the United States (or to obtain an exemption from such qualification), and shall provide confirmation of any such action, if applicable, so taken to Buyer on or prior to such Closing Date. Without limiting any other obligation of the Company under this Agreement, the Company shall timely make all filings and reports relating to the offer and sale of the Securities required under all applicable securities laws (including, without limitation, all applicable federal securities laws and all applicable “Blue Sky” laws), and the Company shall comply with all applicable federal, foreign, state and local laws, statutes, rules, regulations and the like relating to the offering and sale of the Securities to Buyer.

 

16

 

 

(b)         [Reserved].

 

(c)        Fees. The Company shall be responsible for the payment of any transfer agent fees, DTC fees or broker’s commissions, relating to or arising out of the issuance and sale of the Securities by the Company as contemplated hereby. The Company shall pay, and hold Buyer harmless against, any liability, loss or expense (including, without limitation, reasonable attorneys’ fees and out-of-pocket expenses) arising in connection with any claim relating to any such payment. Except as otherwise set forth in the Transaction Documents, each party to this Agreement shall bear its own expenses in connection with the sale of the Securities to Buyer.

 

(d)         Pledge of Securities. Notwithstanding anything to the contrary contained in this Agreement, the Company acknowledges and agrees that the Securities may be pledged by Buyer in connection with a bona fide margin agreement or other loan or financing arrangement that is secured by the Securities. The pledge of Securities shall not be deemed to be a transfer, sale or assignment of the Securities hereunder, and Buyer effecting a pledge of Securities shall not be required to provide the Company with any notice thereof or otherwise make any delivery to the Company pursuant to this Agreement or any other Transaction Document. At Buyer’s expense, the Company hereby agrees to execute and deliver such documentation as a pledgee of the Securities may reasonably request in connection with a pledge of the Securities to such pledgee by Buyer provided that the Company shall be under no obligation to deliver any legal opinion required in connection therewith unless required by the Company’s transfer agent to be issued by the Company’s legal counsel.

 

(e)         Disclosure of Transactions and Other Material Information. The Company shall not, and the Company shall cause each of its officers, directors, employees and agents not to, provide Buyer with any material, non-public information regarding the Company from and after the Execution Date without the express prior written consent of Buyer. Subject to the foregoing, neither the Company nor Buyer shall issue any press releases or any other public statements with respect to the transactions contemplated hereby; provided, however, the Company shall be entitled, without the prior approval of Buyer, to make any press release or other public disclosure with respect to such transactions as is required by applicable law and regulations (provided that Buyer shall be consulted by the Company in connection with any such press release or other public disclosure prior to its release). Without the prior written consent of Buyer, the Company shall not (and shall cause each of its affiliates to not) disclose the name of Buyer in any filing (other than as required by applicable law or rules and regulations), announcement, release or otherwise. Notwithstanding anything contained in this Agreement to the contrary and without implication that the contrary would otherwise be true, the Company expressly acknowledges and agrees that, from and after the Execution Date, and except as set forth in Section 4(l), Buyer shall not have (unless expressly agreed to by Buyer after the date hereof in a written definitive and binding agreement executed by the Company and Buyer), any duty of confidentiality with respect to, or a duty not to trade on the basis of, any information regarding the Company or any of its subsidiaries (as applicable) that Buyer receives from the Company, any of its subsidiaries or any of its or its officers, directors, employees, stockholders or agents.

 

17

 

 

(f)          Right to Additional Purchases. From the Execution Date until that date which twelve (12) months from the date on which the Merger has closed, Buyer shall have the right, but not the obligation, at any time from time to time, in its sole and absolute discretion to purchase from the Company additional shares of Preferred Stock (the “Additional Purchase Shares”) in an amount equal to no less than 100% and up to 200% of the Purchase Price on the same terms and conditions as applicable to the purchase and sale of the Purchase Shares (each an “Additional Purchase” and collectively “Additional Purchases”). Buyer may exercise such right by the delivery of written notice to the Company, which notice shall include a statement that the Buyer is exercising its right to an Additional Purchase, the amount of Additional Purchase Shares to be purchased by such Buyer, and the date on which such purchase and sale shall occur (“Additional Purchase Closing”), which Additional Purchase Closing shall occur within five (5) days following such notice by such Buyer, or such other date mutually agreed upon by the Buyer and Company. The terms and conditions of any Additional Purchase shall be identical to the terms and conditions set forth in this Agreement applicable to the sale of the Purchase Shares. Further, upon each Additional Purchase, Buyer shall receive a proportional amount of warrants identical to the terms and conditions set forth in this Agreement (the “Additional Warrants”) including, without limitation, that each Additional Warrant will be in the form attached hereto as Exhibit A, provided that the Expiration Date (as defined in the Warrants) of the Additional Warrants shall be the fifth (5th) anniversary from the issuance date of such Additional Warrants. On or prior to any Additional Purchase Closing(s), the Company and the Buyer shall, upon Buyer’s request, execute and deliver a new securities purchase agreement with respect to the Additional Purchase(s) in the same form and substance as this Agreement. 

 

(g)          Participation in Subsequent Financings.

 

(i)    From the Execution Date for as long as the Purchase Shares remain outstanding, the Company will not, directly or indirectly, effect an offering of any equity security or any equity-linked or related security (including, without limitation, any “equity security” (as that term is defined under Rule 405 promulgated under the Securities Act), any Convertible Securities, debt (with or related to equity), any preferred stock or any purchase rights) (a “Subsequent Financing”), unless in each case the Company shall have first offered to sell to the Buyer and the Holder (as defined in the Exchange Agreement) on a pro rata basis based on the Purchaser Price and the Debt Amount exchanged by the Holder pursuant to that certain Exchange Agreement, dated as of the date hereof, between Company, Buyer and the other parties thereto (the “Exchange Agreement”), in the aggregate, an amount of securities equal to twenty-five percent (25%) of the securities offered in such Subsequent Financing (the “Participation Maximum”) on the same terms, conditions and price provided to other investors in the Subsequent Financing.

 

(ii)    At least five (5) Trading Days prior to the closing of such Subsequent Financing, the Company shall deliver to the Buyer a written notice of the Company’s intention to effect a Subsequent Financing (a “Subsequent Financing Notice”), which notice shall describe in reasonable detail the proposed terms of such Subsequent Financing, the amount of proceeds intended to be raised thereunder and the Person or Persons through or with whom such Subsequent Financing is proposed to be effected and shall include a term sheet and transaction documents relating thereto as an attachment.

 

18

 

 

(iii)    Should the Buyer desire to participate in such Subsequent Financing, it must provide written notice to the Company by 6:30 pm (New York City time) on the third (3rd) Trading Day following the date on which the Subsequent Financing Notice is delivered to the Buyer (the “Notice Termination Time”) that the Buyer is willing to participate in the Subsequent Financing, the amount of the Buyer’s participation (which shall be up to the Participation Maximum), and representing and warranting that the Buyer is ready and willing to deliver payment to the Company to pay the purchase price of the offered securities and agree to the other terms set forth in the Subsequent Financing Notice. If the Company receives no such notice from a Buyer as of such Notice Termination Time, the Buyer shall be deemed to have notified the Company that it does not elect to participate in such Subsequent Financing.

 

(iv)    Notwithstanding anything to the contrary in this Section 4(h) and unless otherwise agreed to by the Buyer, the Company shall either confirm in writing to the Buyer that the transaction with respect to the Subsequent Financing has been abandoned or shall publicly disclose its intention to issue the securities in the Subsequent Financing, in either case in such a manner such that the Buyer will not be in possession of any material, non-public information, by 9:30 am (New York City time) on the second (2nd) Trading Day following date of delivery of the Subsequent Financing Notice. If by 9:30 am (New York City time) on such second (2nd) Trading Day, no public disclosure regarding a transaction with respect to the Subsequent Financing has been made, and no notice regarding the abandonment of such transaction has been received by the Buyer, such transaction shall be deemed to have been abandoned and the Buyer shall not be deemed to be in possession of any material, non-public information with respect to the Company or any of its Subsidiaries.

 

(v)    Notwithstanding the foregoing, to the extent that the issuance of any security meets one or more of the following criteria, such issuance shall be deemed to not be a “Subsequent Financing” for any purpose of this Agreement: (A) an issuance of shares of Common Stock or standard options to purchase shares of Common Stock to directors (who are also employees of the Company), officers, employees or consultants of the Company, in each case, in their capacity as such, pursuant to an Approved Share Plan (as defined below); (B) an issuance of shares of Common Stock upon the conversion or exercise of Convertible Securities issued prior to the date hereof, provided that the conversion or exercise (as the case may be) of any such Convertible Security is made solely pursuant to the conversion or exercise (as the case may be) provisions of such Convertible Security that were in effect on the date immediately prior to the date of this Agreement, the conversion or exercise price of any such Convertible Securities is not lowered, none of such Convertible Securities are (nor is any provision of any such Convertible Securities) amended or waived in any manner (whether by the Company or the holder thereof) to increase the number of securities issuable thereunder and none of the terms or conditions of any such Convertible Securities are otherwise materially changed or waived (whether by the Company or the holder thereof) in any manner that adversely affects Buyer; (C) the issuance of the Purchase Shares; (D) the issuance of the Conversion Shares (E) the issuance of the Warrants; (F) the issuance of Warrant Shares; and (G) an issuance of securities further to any equity line of credit offered by Esousa Holdings or any of its affiliates or related parties.

 

19

 

 

(vi)    The rights set forth in this Section 4(g) supersede any rights of the Buyer to participate in future financings set forth in any prior securities purchase agreement by and between the Company and the Buyer.

 

(h)         Reservation of Shares. As long as any of the Purchase Shares and Warrants remain outstanding, the Company shall take all action necessary to at all times have authorized and reserved for the purpose of issuance, no less than 300% of the shares of Common Stock issuable upon conversion of the Purchase Shares (assuming the Purchase Shares are convertible in full and without regard to any limitations on the exercise of the Purchase Shares set forth in the Amended and Restated Articles of Incorporation) or exercise of the Warrants (assuming the Warrants are exercisable in full and without regard to any limitations on the exercise of the Warrants set forth therein).

 

(i)           Conduct of Business. The business of the Company shall not be conducted in violation of any law, ordinance or regulation of any governmental entity, except where such violations would not result, either individually or in the aggregate, in a Material Adverse Effect.

 

(j)           Passive Foreign Investment Company. The Company shall conduct its business in such a manner as will ensure that the Company will not be deemed to constitute a passive foreign investment company within the meaning of Section 1297 of the U.S. Internal Revenue Code of 1986, as amended.

 

(k)        Corporate Existence. So long as Buyer owns any Warrants, the Company shall not be party to any Fundamental Transaction (as defined in the Warrants) unless the Company is in compliance with the applicable provisions governing Fundamental Transactions set forth in the Warrants.

 

(l)         Due Diligence. In connection with any reasonable request by Buyer made in connection with the filing of a Registration Statement, or any amendment or supplement thereto, Buyer shall have the right, from time to time as Buyer may reasonably deem appropriate, to perform reasonable due diligence on the Company during normal business hours and subject to reasonable prior notice to the Company. The Company and its officers and employees shall provide information (“Confidential Information”) and reasonably cooperate with Buyer in connection with Buyer’s due diligence; provided, however, that at no time is the Company required or permitted to disclose material nonpublic information to Buyer or breach any obligation of confidentiality or non-disclosure to a third party or make any disclosure that could cause a waiver of attorney-client privilege. Except as may be required by law, court order or governmental authority, each party hereto agrees not to disclose any Confidential Information of the other party to any third party and shall not use the Confidential Information of such other party for any purpose other than in connection with, or in furtherance of, the transactions contemplated hereby. In the event a party is required by law, court order or governmental authority to disclose the Confidential Information of the other party, such party shall give the other party written notice of the information to be disclosed as far in advance of its disclosure as practicable and use its commercially reasonable efforts, and shall reasonably cooperate with the other party’s efforts, to obtain assurances that confidential treatment will be accorded such information. Each party hereto acknowledges that the Confidential Information shall remain the property of the disclosing party and agrees that it shall take all reasonable measures to protect the secrecy of any Confidential Information disclosed by the other party.

 

20

 

 

	
			5.

				
			REGISTER; TRANSFER AGENT INSTRUCTIONS; LEGEND.

			

 

(a)         Register. The Company shall maintain at its principal executive offices (or such other office or agency of the Company as it may designate by notice to each holder of Securities), a register for the Warrants in which the Company shall record the name and address of the Person in whose name the Warrants have been issued (including the name and address of each transferee) reflecting the amount of the Warrants held by such Person. The Company shall keep the register open and available at all times during business hours for inspection by Buyer or its legal representatives.

 

(b)        Transfer Agent Instructions. The Company shall issue irrevocable instructions to its transfer agent and any subsequent transfer agent in a form acceptable to Buyer to credit shares to the applicable balance accounts at The Depository Trust Company (“DTC”), registered in the name of Buyer or its respective nominee(s), for the Conversion Shares and the Warrant Shares in such amounts as specified from time to time by Buyer to the Company, and confirmed by the Company, upon the conversion of the Purchase Shares or the exercise of the Warrants (as the case may be). The Company represents and warrants that no instruction other than such irrevocable transfer agent instructions referred to in this Section 5(b), and stop transfer instructions to give effect to Section 2(f) hereof, will be given by the Company to its transfer agent with respect to the Securities, and that the Securities shall otherwise be freely transferable on the books and records of the Company, as applicable, to the extent provided in this Agreement and the other Transaction Documents. If Buyer effects a sale, assignment or transfer of the Securities in accordance with Section 2(f), the Company shall permit the transfer and shall promptly instruct its transfer agent to credit shares to the applicable balance accounts at DTC in such name and in such denominations as specified by Buyer to effect such sale, transfer or assignment. In the event that such sale, assignment or transfer involves Conversion Shares or Warrant Shares sold, assigned or transferred pursuant to an effective Registration Statement or in compliance with Rule 144 or another exemption from registration, the transfer agent shall issue such shares to Buyer, assignee or transferee (as the case may be) without any restrictive legend in accordance with Section 5(d) below. The Company acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to Buyer. Accordingly, the Company acknowledges that the remedy at law for a breach of its obligations under this Section 5(b) will be inadequate and agrees, in the event of a breach or threatened breach by the Company of the provisions of this Section 5(b), that Buyer shall be entitled, in addition to all other available remedies, to an order and/or injunction restraining any breach and requiring immediate issuance and transfer, without the necessity of showing economic loss and without any bond or other security being required. The Company shall cause its counsel to issue the legal opinion referred to in the irrevocable transfer agent instructions to the Company’s transfer agent on the Closing Date. Any fees (with respect to the transfer agent, counsel to the Company or otherwise) associated with the issuance of such opinion or the removal of any legends on any of the Securities shall be borne by the Company.

 

21

 

 

(c)         Legends. Buyer understands that the Securities have been issued (or will be issued in the case of the Conversion Shares and Warrant Shares) pursuant to an exemption from registration or qualification under the Securities Act and applicable state securities laws, and except as set forth below, the Securities shall bear any legend as required by the “blue sky” laws of any state and a restrictive legend in substantially the following form (and a stop-transfer order may be placed against transfer of such stock certificates):

 

	[NEITHER THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE EXERCISABLE HAVE BEEN][THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN] REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL TO THE HOLDER (IF REQUESTED BY THE COMPANY), IN A FORM REASONABLY ACCEPTABLE TO THE COMPANY, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD OR ELIGIBLE TO BE SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID ACT. NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES.

 

(d)        Removal of Legends. Certificates evidencing Securities shall not be required to contain the legend set forth in Section 5(c) above or any other legend (i) while a registration statement (including a Registration Statement) covering the resale of such Securities is effective under the Securities Act (provided that Buyer provides the Company with any certificates from Buyer or its broker reasonably required by the Company’s transfer agent), (ii) following any sale of such Securities pursuant to Rule 144 (assuming the transferor is not an affiliate of the Company) or a registration statement, (iii) if such Securities are eligible to be sold, assigned or transferred under Rule 144 without current public information being available and without volume and manner of sale limitations (provided that Buyer provides the Company with reasonable assurances that such Securities are eligible for sale, assignment or transfer under Rule 144, which shall not include an opinion of counsel, but which may include any certificates from Buyer or its broker reasonably required by the Company’s transfer agent), (iv) in connection with a sale, assignment or other transfer (other than under Rule 144), provided that Buyer provides the Company with an opinion of counsel to Buyer from reputable counsel to the effect that such sale, assignment or transfer of the Securities may be made without registration under the applicable requirements of the Securities Act or (v) if such legend is not required under applicable requirements of the Securities Act (including, without limitation, controlling judicial interpretations and pronouncements issued by the SEC). If a legend is not required pursuant to the foregoing, the Company shall no later than five (5) Trading Days following either (x) the delivery by Buyer to the Company or the transfer agent (with notice to the Company) of a legended certificate representing such Securities (endorsed or with stock powers attached, signatures guaranteed, and otherwise in form necessary to affect the reissuance and/or transfer, if applicable), or (y) the delivery by Buyer to the Company of a notice of exercise or conversion, in each case, together with any other deliveries from Buyer as may be required above in this Section 5(d), credit the aggregate number of shares of Common Stock to which Buyer shall be entitled to Buyer’s or its designee’s balance account with DTC through its Deposit/Withdrawal at Custodian system (the date by which such credit is so required to be made to the balance account of Buyer’s or Buyer’s nominee with DTC pursuant to the foregoing is referred to herein as the “Required Delivery Date”). 

 

22

 

 

(e)         Failure to Timely Deliver; Buy-In. If the Company fails to issue and credit (or cause to be credited) by the Required Delivery Date the balance account of Buyer’s or Buyer’s nominee with DTC for such number of Securities so delivered to the Company, then, in addition to all other remedies available to Buyer, at the sole discretion of Buyer, the Company shall:

 

(i)       pay in cash to Buyer on each Trading Day after the Required Delivery Date that the issuance or credit of such shares is not timely effected an amount equal to 1% of the product of (A) the number of shares of Common Stock not so delivered or credited (as the case may be) to Buyer or Buyer’s nominee multiplied by (B) the Closing Sale Price of the Common Stock on the Trading Day immediately preceding the Required Delivery Date; or

 

(ii)      if on or after the Required Delivery Date, Buyer (or any other Person in respect, or on behalf, of Buyer) purchases (in an open market transaction or otherwise) shares of Common Stock (“Replacement Shares”) to deliver in satisfaction of a sale by Buyer of all or any portion of the number of shares of Common Stock, or a sale of a number of shares of Common Stock equal to all or any portion of the number of shares of Common Stock, that Buyer so anticipated receiving from the Company without any restrictive legend, then, within five (5) Trading Days after Buyer’s request and in Buyer’s sole discretion, either (x) pay cash to Buyer in an amount equal to Buyer’s total purchase price (including brokerage commissions and other out-of-pocket expenses, if any) for the Replacement Shares (the “Buy-In Price”), at which point the Company’s obligation to so credit Buyer’s balance account shall terminate and such shares shall be cancelled or (B) promptly honor its obligation to so credit Buyer’s DTC account representing such number of shares of Common Stock that would have been so delivered if the Company timely complied with its obligations hereunder and pay cash to Buyer in an amount equal to the excess (if any) of the Buy-In Price over the product of (1) such number of shares of Common Stock that the Company was required to deliver to Buyer by the Required Delivery Date multiplied by (2) the lowest Closing Sale Price of the Common Stock on any Trading Day during the period commencing on the date Buyer purchased Replacement Shares and ending on the date of such delivery and payment under this clause (ii).

 

(f)        Manner of Sale. Buyer agrees with the Company that Buyer will sell any Securities pursuant to either the registration requirements of the Securities Act, including any applicable prospectus delivery requirements, or an exemption therefrom, and acknowledges that the removal of the restrictive legend from certificates representing Securities as set forth in this Section 5 is predicated upon the Company’s reliance upon this understanding.

 

23

 

 

	
			6.

				
			CONDITIONS TO THE COMPANY’S OBLIGATION TO SELL.

			

 

The obligation of the Company hereunder to issue and sell the Purchase Shares and the related Warrants to Buyer at the Closing is subject to the satisfaction, at or before the Closing Date, of each of the following conditions, provided that these conditions are for the Company’s sole benefit and may be waived by the Company at any time in its sole discretion by providing Buyer with prior written notice thereof:

 

(a)          Buyer shall have executed each of the other Transaction Documents to which it is a party and delivered the same to the Company.

 

(b)        Buyer shall have delivered to the Company the Purchase Price for the Purchase Shares and Warrants being purchased by Buyer at the Closing (less Eighty Thousand Dollars ($80,000) for unallocated expense reimbursement) by wire transfer of immediately available funds pursuant to the wire instructions provided by the Company.

 

(c)         The representations and warranties of Buyer shall be true and correct in all material respects as of the date when made and as of the Closing Date as though originally made at that time (except for representations and warranties that speak as of a specific date, which shall be true and correct as of such date), and Buyer shall have performed, satisfied and complied in all material respects with the covenants, agreements and conditions required by this Agreement to be performed, satisfied or complied with by Buyer at or prior to the Closing Date.

 

	
			7.

				
			CONDITIONS TO BUYER’S OBLIGATION TO PURCHASE. 

			

 

The obligation of Buyer hereunder to purchase its Purchase Shares and related Warrants at the Closing is subject to the satisfaction, at or before the Closing Date and in respect of each such Closing Date, of each of the following conditions, provided that these conditions are for Buyer’s sole benefit and may be waived by Buyer at any time in its sole discretion by providing the Company with prior written notice thereof:

 

(a)         The Company shall have duly executed and delivered to Buyer each of the Transaction Documents to which it is a party and the Company shall have duly executed and delivered to Buyer the Warrants as is set forth on the applicable Buyer Schedule and the Company shall have complied in all respects with all obligations under this Agreement and the other Transaction Documents, including, without limitation, the Warrants.

 

(b)          The Company shall have filed the Amended and Restated Articles of Incorporation with the Secretary of State of the State of California and such Amended and Restated Articles of Incorporation shall be in full force and effect.

 

(c)        The Company shall have delivered irrevocable transfer agent instructions to the Company’s transfer agent (including any other documentation required by the transfer agent, such as a legal opinion) to credit Purchase Shares to the applicable balance accounts at DTC registered in the name of Buyer or its respective nominee(s). Notwithstanding the foregoing, the Company and its transfer agent shall be entitled to credit Purchase Shares to the applicable balance accounts at DTC, registered in the name of Buyer or its respective nominee(s) within five (5) business days after the Closing.

 

24

 

 

(d)         Each and every representation and warranty of the Company shall be true and correct in all material respects as of the date when made and as of the Closing Date as though originally made at that time (except for representations and warranties that speak as of a specific date, which shall be true and correct in all material respects as of such date) and the Company shall have performed, satisfied and complied in all material respects with the covenants, agreements and conditions required to be performed, satisfied or complied with by the Company at or prior to the Closing Date. Buyer shall have received a certificate, executed by the Chief Executive Officer of the Company, dated as of the Closing Date, (i) to the foregoing effect, (ii) verifying the accuracy of Section 7(g) herein, and (iii) as to such other matters as may be reasonably requested by Buyer in the form reasonably acceptable to Buyer.

 

(e)          The Company shall have obtained all governmental, regulatory or third party consents and approvals, if any, necessary for the sale of the Securities.

 

(f)         No statute, rule, regulation, executive order, decree, ruling or injunction shall have been enacted, entered, promulgated or endorsed by any court or governmental authority of competent jurisdiction that prohibits the consummation of any of the transactions contemplated by the Transaction Documents, and no actions, suits or proceedings shall be in progress or pending by any Person that seeks to enjoin, prohibit or otherwise adversely affect any of the transactions contemplated by the Transaction Documents.

 

(g)         Since the date of execution of this Agreement, no event or series of events shall have occurred that reasonably would have or result in a Material Adverse Effect and the Company has not filed for nor is it subject to any bankruptcy, insolvency, reorganization or liquidation proceedings or other proceedings for relief under any bankruptcy law or any law for the relief of debtors instituted by or against the Company.

 

(h)          The Company shall have entered into a definitive agreement to merge with Net Element (the “Merger Agreement”) and the Merger Agreement shall not have expired, terminated or been abandoned.

 

(i)          Net Element shall have filed the S-4 with the SEC, the S-4 covers the sale of the Registrable Securities and such Registration Statement shall have been declared effective and shall continue to be in full force and effect and shall not have expired, terminated or been abandoned; provided, however, that for the ten (10) Trading Days prior to effectiveness of the Form S-4, the average Daily Trading Volume of Net Element’s common stock, par value $0.0001 per share, (the “Net Element Shares”) is greater than Two Million Dollars ($2,000,000).

 

(j)           The Closing Sale Price of the Net Element Shares on the immediately preceding Trading Day is at least $3.00.

 

(k)          Net Element and the Company shall have received conditional approval for listing the combined company on the Nasdaq Capital Market.

 

(l)           The Company shall have delivered to Buyer such other documents, instruments or certificates relating to the transactions contemplated by this Agreement reasonably required to consummate the transactions contemplated hereby.

 

25

 

 

	
			8.

				
			TERMINATION. 

			

 

In the event that the Closing shall not have occurred prior to December 31, 2021 or if the Merger Agreement has expired, terminated or been abandoned, then Buyer shall have the right to terminate its obligations under this Agreement at any time on or after the close of business on such date without liability of Buyer to any other party; provided, however, the right to terminate this Agreement under this Section 8 shall not be available to Buyer if the failure of the transactions contemplated by this Agreement to have been consummated by such date is the result of Buyer’s breach of this Agreement. Notwithstanding anything to the contrary above, nothing contained in this Section 8 shall be deemed to release any party from any liability for any breach by such party of the terms and provisions of this Agreement or the other Transaction Documents or to impair the right of any party to compel specific performance by any other party of its obligations under this Agreement or the other Transaction Documents.

 

	
			9.

				
			CERTAIN DEFINITIONS

			

 

(a)          Amended and Restated Articles of Incorporation. “Amended and Restated Articles of Incorporation” means the Amended and Restated Articles of Incorporation in the form attached hereto as Exhibit B. 

 

(b)        Approved Share Plan. “Approved Share Plan” means any employee benefit plan or other compensatory contract, agreement or other arrangement (including an arrangement with a single officer or director) which has been approved by the board of directors of the Company prior to or subsequent to the date hereof pursuant to which Common Stock and standard options to purchase Common Stock may be issued to any employee, officer, director or consultant for services provided or to be provided to the Company in their capacity as such. 

 

(c)          Business Day. “Business Day” means any day other than a Saturday, Sunday or other day on which commercial banks in New York, New York are authorized or required by law to remain closed. 

 

(d)        Closing Sale Price. “Closing Sale Price” shall mean for any security as of any date, the last closing trade price for such security on the principal securities exchange or trading market where such security is listed or traded, as reported by Bloomberg, L.P. (“Bloomberg”), or if the foregoing do not apply, the average of the bid prices of all of the market makers for such security as reported in the “pink sheets” by OTC Markets Group Inc. (formerly Pink Sheets LLC). All such determinations shall be appropriately adjusted for any stock dividend, stock split, stock combination or other similar transaction during such period.

 

(e)          Common Stock. “Common Stock” means the common stock, par value $0.001 per share, of the Company and any other shares of stock issued or issuable with respect thereto (whether by way of a stock dividend or stock split or in exchange for or upon conversion of such shares or otherwise in connection with a combination of shares, distribution, recapitalization, merger, consolidation, other corporate reorganization or other similar event with respect to the Common Stock).

 

26

 

 

(f)         Contingent Obligation. “Contingent Obligation” means, as to any Person, any direct or indirect liability, contingent or otherwise, of that Person with respect to any Indebtedness, lease, dividend or other obligation of another Person if the primary purpose or intent of the Person incurring such liability, or the primary effect thereof, is to provide assurance to the obligee of such liability that such liability will be paid or discharged, or that any agreements relating thereto will be complied with, or that the holders of such liability will be protected (in whole or in part) against loss with respect thereto.

 

(g)         Convertible Securities. “Convertible Securities” means any capital stock or other security of the Company that is at any time and under any circumstances directly or indirectly convertible into, exercisable or exchangeable for, or which otherwise entitles the holder thereof to acquire, any capital stock or other security of the Company (including, without limitation, Common Stock). 

 

(h)          Daily Trading Volume. “Daily Trading Volume” shall mean for any security the aggregate dollar value of all trades in such security on the principal securities exchange or trading market where such security is listed or traded for the entirety of a Trading Day as reported by Bloomberg (without regard to (i) pre-open or after-hours trading outside of any regular trading session for such Trading Day or (ii) block trades.

 

(i)           Environmental Laws. “Environmental Laws” means all federal, state, local or foreign laws relating to pollution or protection of human health or the environment (including, without limitation, ambient air, surface water, groundwater, land surface or subsurface strata), including, without limitation, laws relating to emissions, discharges, releases or threatened releases of chemicals, pollutants, contaminants, or toxic or hazardous substances or wastes (collectively, “Hazardous Materials”) into the environment, or otherwise relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of Hazardous Materials, as well as all authorizations, codes, decrees, demands or demand letters, injunctions, judgments, licenses, notices or notice letters, orders, permits, plans or regulations issued, entered, promulgated or approved thereunder.

 

(j)           Exchange Act. The “Exchange Act” means the Securities Exchange Act of 1934, as amended.

 

(k)        Indebtedness. “Indebtedness” of any Person means, without duplication (A) all indebtedness for borrowed money, (B) all obligations issued, undertaken or assumed as the purchase price of property or assets, including indebtedness created or arising under any conditional sale or other title retention agreement, or incurred as financing, in either case with respect to any property or assets acquired with the proceeds of such indebtedness (even though the rights and remedies of the seller or bank under such agreement in the event of default are limited to repossession or sale of such property), other than trade payables entered into in the ordinary course of business, (C) all reimbursement or payment obligations with respect to letters of credit, surety bonds and other similar instruments, (D) all obligations evidenced by notes, bonds, debentures or similar instruments, (E) all monetary obligations under any leasing or similar arrangement which, in connection with generally accepted accounting principles, consistently applied for the periods covered thereby, is classified as a capital lease, (F) all indebtedness referred to in clauses (A) through (E) above secured by (or for which the holder of such Indebtedness has an existing right, contingent or otherwise, to be secured by) any mortgage, lien, pledge, charge, security interest or other encumbrance upon or in any material property or assets (including accounts and contract rights) owned by such Person, even though the Person has not assumed or become liable for the payment of such indebtedness, and (G) all Contingent Obligations in respect of indebtedness or obligations of others of the kinds referred to in clauses (A) through (F) above. 

 

27

 

 

(l)           Insolvent. “Insolvent” means the present fair saleable value of the Company’s assets is less than the amount required to pay the Company’s total Indebtedness (as defined below).

 

(m)       Lien. “Lien” means any lien, mortgage, pledge, encumbrance, charge, security interest, adverse claim, liability, interest, charge, preference, priority, proxy, transfer restriction (other than restrictions under the Securities Act and state securities laws), encroachment, tax, order, community property interest, equitable interest, option, warrant, right of first refusal, easement, profit, license, servitude, right of way, covenant or zoning restriction.

 

(n)         Material Adverse Effect. “Material Adverse Effect” means any material adverse effect on (i) the business, properties, assets, liabilities, operations (including results thereof), condition (financial or otherwise) or prospects of the Company and its subsidiaries, taken as a whole, (ii) the transactions contemplated hereby or in any of the other Transaction Documents or (iii) the authority or ability of the Company or any of its subsidiaries to perform any of its respective obligations under any of the Transaction Documents (as defined below).

 

(o)          Maximum Percentage. “Maximum Percentage” means 9.9%.

 

(p)          Person. “Person” means an individual, a limited liability company, a partnership, a joint venture, a corporation, a trust, an unincorporated organization, any other entity and a government or any department or agency thereof. 

 

(q)         Registrable Securities. “Registrable Securities” means (i) the Conversion Shares, (ii) the Warrant Shares and (iii) any capital stock of the Company issued or issuable with respect to such Conversion Shares, the Warrant Shares, the Purchase Shares or the Warrants, including, without limitation, (1) as a result of any stock split, stock dividend, recapitalization, exchange or similar event or otherwise and (2) shares of capital stock of the Company into which the Common Stock is converted or exchanged and shares of capital stock of a Successor Entity (as defined in the Warrants) into which the Common Stock is converted or exchanged, in each case, without regard to any limitations on exercise or exchange of the Purchase Shares or the Warrants. As to any Registrable Securities, such securities shall cease to be Registrable Securities when: (a) a registration statement with respect to the sale of such securities shall have become effective under the Securities Act and such securities shall have been sold, transferred, disposed of or exchanged in accordance with such registration statement; (b) such securities shall have been otherwise transferred, new certificates for them not bearing a legend restricting further transfer shall have been delivered by the Company, and subsequent public distribution of them shall not require registration under the Securities Act; or (c) such securities are freely saleable under Rule 144 under the Securities Act without the requirement for current public information and without volume or manner of sale limitations.

 

28

 

 

(r)          Registration Rights Agreement. “Registration Rights Agreement” means that certain Registration Rights Agreement, between the Company and the Purchaser, dated as of the date hereof, in the form attached hereto as Exhibit C.

 

(s)          Registration Statement. “Registration Statement” has the meaning set forth in the Registration Rights Agreement.

 

(t)          Restricted Period. “Restricted Period” means the period commencing on the Execution Date and ending on the earlier of (i) the date immediately following the 90th day after the a Registration Statement registering for resale the Registrable Securities has been declared effective by the SEC and (ii) provided that the Common Stock is listed on the Nasdaq Capital Market, the 90th day after the Securities purchased hereunder are saleable under Rule 144 without the requirement for current public information and without volume or manner of sale limitations.

 

(u)         Securities. “Securities” means the Purchase Shares, the Conversion Shares, the Warrants and the Warrant Shares.

 

(v)         Trading Day. “Trading Day” means, as applicable, (x) with respect to all price determinations relating to the Common Stock, any day on which the Common Stock is traded on the principal securities exchange or securities market on which the Common Stock is then traded, provided that “Trading Day” shall not include any day on which the Common Stock is scheduled to trade on such exchange or market for less than 4.5 hours or any day that the Common Stock is suspended from trading during the final hour of trading on such exchange or market (or if such exchange or market does not designate in advance the closing time of trading on such exchange or market, then during the hour ending at 4:00:00 p.m., New York time) unless such day is otherwise designated as a Trading Day in writing by the Holder or (y) with respect to all determinations other than price determinations relating to the Common Stock, any day on which The New York Stock Exchange (or any successor thereto) is open for trading of securities.

 

(w)        Transaction Documents. “Transaction Documents” means, collectively, this Agreement, the Amended and Restated Articles of Incorporation, the Warrants, the Registration Rights Agreement and each of the other agreements and instruments entered into or delivered by any of the parties hereto in connection with the transactions contemplated hereby and thereby, as may be amended from time to time.

 

	
			10.

				
			MISCELLANEOUS.

			

 

(a)          Governing Law; Jurisdiction; Jury Trial.

 

All questions concerning the construction, validity, enforcement and interpretation of this Agreement and the other Transaction Documents shall be governed by the internal laws of the State of New York, without giving effect to any choice of law or conflict of law provision or rule (whether of the State of New York or any other jurisdictions) that would cause the application of the laws of any jurisdictions other than the State of New York. Each party hereby irrevocably submits to the exclusive jurisdiction of the state and federal courts sitting in The City of New York, Borough of Manhattan, for the adjudication of any dispute hereunder or under any of the other Transaction Documents or in connection herewith or therewith or with any transaction contemplated hereby or thereby or discussed herein or therein, and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of any such court, that such suit, action or proceeding is brought in an inconvenient forum or that the venue of such suit, action or proceeding is improper. Each party hereby irrevocably waives personal service of process and consents to process being served in any such suit, action or proceeding by mailing a copy thereof to such party at the address for such notices to it under this Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any manner permitted by law. Nothing contained herein shall be deemed or operate to preclude Buyer from bringing suit or taking other legal action against the Company in any other jurisdiction to collect on the Company’s obligations to Buyer or to enforce a judgment or other court ruling in favor of Buyer. EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE TO, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION WITH OR ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY. 

 

29

 

 

(b)        Counterparts. This Agreement may be executed in two or more identical counterparts, all of which shall be considered one and the same agreement and shall become effective when counterparts have been signed by each party and delivered to the other party. In the event that any signature is delivered by facsimile transmission or by an e-mail which contains a portable document format (.pdf) file of an executed signature page, such signature page shall create a valid and binding obligation of the party executing (or on whose behalf such signature is executed) with the same force and effect as if such signature page were an original thereof.

 

(c)         Headings; Gender. The headings of this Agreement are for convenience of reference and shall not form part of, or affect the interpretation of, this Agreement. Unless the context clearly indicates otherwise, each pronoun herein shall be deemed to include the masculine, feminine, neuter, singular and plural forms thereof. The terms “including,” “includes,” “include” and words of like import shall be construed broadly as if followed by the words “without limitation.” The terms “herein,” “hereunder,” “hereof” and words of like import refer to this entire Agreement instead of just the provision in which they are found.

 

(d)         Severability. If any provision of this Agreement is prohibited by law or otherwise determined to be invalid or unenforceable by a court of competent jurisdiction, the provision that would otherwise be prohibited, invalid or unenforceable shall be deemed amended to apply to the broadest extent that it would be valid and enforceable, and the invalidity or unenforceability of such provision shall not affect the validity of the remaining provisions of this Agreement so long as this Agreement as so modified continues to express, without material change, the original intentions of the parties as to the subject matter hereof and the prohibited nature, invalidity or unenforceability of the provision(s) in question does not substantially impair the respective expectations or reciprocal obligations of the parties or the practical realization of the benefits that would otherwise be conferred upon the parties. The parties will endeavor in good faith negotiations to replace the prohibited, invalid or unenforceable provision(s) with a valid provision(s), the effect of which comes as close as possible to that of the prohibited, invalid or unenforceable provision(s).

 

30

 

 

(e)         Entire Agreement; Amendments. This Agreement, the other Transaction Documents and the schedules and exhibits attached hereto and thereto and the instruments referenced herein and therein supersede all other prior oral or written agreements between the Buyer, the Company, its affiliates and Persons acting on its behalf solely with respect to the matters contained herein and therein, and this Agreement, the other Transaction Documents, the schedules and exhibits attached hereto and thereto and the instruments referenced herein and therein contain the entire understanding of the parties solely with respect to the matters covered herein and therein. Except as specifically set forth herein or therein, neither the Company nor Buyer makes any representation, warranty, covenant or undertaking with respect to such matters. For clarification purposes, the Recitals are part of this Agreement. No provision of this Agreement may be amended other than by an instrument in writing signed by the Company and Buyer. No waiver shall be effective unless it is in writing and signed by an authorized representative of the waiving party. No consideration shall be offered or paid to any Person to amend or consent to a waiver or modification of any provision of any of the Transaction Documents unless the same consideration also is offered to all of the parties to the Transaction Documents or all holders of the Warrants (as the case may be). The Company has not, directly or indirectly, made any agreements with Buyer relating to the terms or conditions of the transactions contemplated by the Transaction Documents except as set forth in the Transaction Documents. Without limiting the foregoing, the Company confirms that, except as set forth in this Agreement, no Buyer has made any commitment or promise or has any other obligation to provide any financing to the Company or otherwise. As a material inducement for Buyer to enter into this Agreement, the Company expressly acknowledges and agrees that no due diligence or other investigation or inquiry conducted by Buyer, any of its advisors or any of its representatives shall affect Buyer’s right to rely on, or shall modify or qualify in any manner or be an exception to any of, the Company’s representations and warranties contained in this Agreement or any other Transaction Document.

 

(f)         Notices. Any notices, consents, waivers or other communications required or permitted to be given under the terms of this Agreement must be in writing and will be deemed to have been delivered when sent, if sent by e-mail (provided that such sent e-mail is kept on file (whether electronically or otherwise) by the sending party and the sending party does not receive an automatically generated message from the recipient’s e-mail server that such e-mail could not be delivered to such recipient). The e-mail addresses for such communications shall be:

 

If to the Company:

 

Mullen Technologies, Inc.

1405 Pioneer Street

Brea, California 92821

Attention: David Michery, CEO

Email: david@mullenusa.com

 

With a copy (for informational purposes only) to:

 

Manatt, Phelps & Phillips, LLP

695 Town Center Drive, 14th Floor

Costa Mesa, California 92626

Attn: Thomas J. Poletti

Email: tpoletti@manatt.com

 

31

 

 

 

If to the Transfer Agent:

 

[      ]

 

If to Buyer:

 

See the Buyer Schedule

 

or to such other e-mail address and/or to the attention of such other Person as the recipient party has specified by written notice given to each other party five (5) days prior to the effectiveness of such change. A copy of the e-mail transmission containing the time, date and recipient e-mail address shall be rebuttable evidence of receipt by e-mail.

 

(g)        Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the parties and its successors and assigns, including, as contemplated below, any assignee of any of the Securities. The Company shall not assign this Agreement or any rights or obligations hereunder without the prior written consent of the Buyer, including, without limitation, by way of a Fundamental Transaction (as defined in the Warrants) (unless the Company is in compliance with the applicable provisions governing Fundamental Transactions set forth in the Warrants). 

 

(h)          No Third Party Beneficiaries. This Agreement is intended for the benefit of the parties hereto and its permitted successors and assigns, and is not for the benefit of, nor may any provision hereof be enforced by, any other Person, other than the Indemnitees referred to in Section 10(k).

 

(i)          Survival. The representations, warranties, agreements and covenants shall survive the Closing. Buyer shall be responsible only for its representations, warranties, agreements and covenants hereunder.

 

(j)          Further Assurances. Each party shall do and perform, or cause to be done and performed, all such further acts and things, and shall execute and deliver all such other agreements, certificates, instruments and documents, as any other party may reasonably request in order to carry out the intent and accomplish the purposes of this Agreement and the consummation of the transactions contemplated hereby.

 

32

 

 

(k)          Indemnification.

 

(i)    In consideration of Buyer’s execution and delivery of the Transaction Documents and acquiring the Securities thereunder and in addition to all of the Company’s other obligations under the Transaction Documents, the Company shall defend, protect, indemnify and hold harmless Buyer and each holder of any Securities and all of their stockholders, partners, members, officers, directors, employees and direct or indirect investors and any of the foregoing Persons’ agents or other representatives (including, without limitation, those retained in connection with the transactions contemplated by this Agreement) (collectively, the “Indemnitees”) from and against any and all actions, causes of action, suits, claims, losses, costs, penalties, fees, liabilities and damages, and reasonable and documented expenses in connection therewith (irrespective of whether any such Indemnitee is a party to the action for which indemnification hereunder is sought), and including reasonable attorneys’ fees and disbursements (the “Indemnified Liabilities”), incurred by any Indemnitee as a result of, or arising out of, or relating to (a) any misrepresentation or breach of any representation or warranty made by the Company in any of the Transaction Documents, (b) any breach of any covenant, agreement or obligation of the Company contained in any of the Transaction Documents or (c) any cause of action, suit, proceeding or claim brought or made against such Indemnitee by a third party (including for these purposes a derivative action brought on behalf of the Company, but other than by an affiliate of Buyer) or which otherwise involves such Indemnitee that arises out of or results from (i) the execution, delivery, performance or enforcement of any of the Transaction Documents, (ii) any transaction financed or to be financed in whole or in part, directly or indirectly, with the proceeds of the issuance of the Securities, (iii) any disclosure properly made by Buyer pursuant to Section 4(e), or (iv) the status of Buyer or holder of the Securities either as an investor in the Company pursuant to the transactions contemplated by the Transaction Documents or as a party to this Agreement (including, without limitation, as a party in interest or otherwise in any action or proceeding for injunctive or other equitable relief), unless such action is based primarily upon a breach of Buyer’s representations, warranties, or covenants under the Transaction Documents, or any agreements or understandings Buyer may have with any such third party, or any violations by Buyer of state or federal securities laws or any conduct by Buyer which constitutes fraud, gross negligence or willful misconduct. To the extent that the foregoing undertaking by the Company may be unenforceable for any reason, the Company shall make the maximum contribution to the payment and satisfaction of each of the Indemnified Liabilities which is permissible under applicable law.

 

(ii)    Promptly after receipt by an Indemnitee under this Section 10(k) of notice of the commencement of any action or proceeding (including any governmental action or proceeding) involving an Indemnified Liability, such Indemnitee shall, if a claim in respect thereof is to be made against the Company under this Section 10(k), deliver to the Company a written notice of the commencement thereof, and the Company shall have the right to participate in, and, to the extent the Company so desires, to assume control of the defense thereof with counsel mutually satisfactory to the Company and the Indemnitee; provided, however, that an Indemnitee shall have the right to retain its own counsel with the fees and expenses of such counsel to be paid by the Company if: (i) the Company has agreed in writing to pay such fees and expenses; (ii) the Company shall have failed promptly to assume the defense of such Indemnified Liability and to employ counsel reasonably satisfactory to such Indemnitee in any such Indemnified Liability; or (iii) the named parties to any such Indemnified Liability (including any impleaded parties) include both such Indemnitee and the Company, and such Indemnitee shall have been advised by counsel that a conflict of interest is likely to exist if the same counsel were to represent such Indemnitee and the Company (in which case, if such Indemnitee notifies the Company in writing that it elects to employ separate counsel at the expense of the Company, then the Company shall not have the right to assume the defense thereof and such counsel shall be at the expense of the Company), provided further, that in the case of clause (iii) above the Company shall not be responsible for the reasonable fees and expenses of more than one (1) separate legal counsel for such Indemnitee. The Indemnitee shall reasonably cooperate with the Company in connection with any negotiation or defense of any such action or Indemnified Liability by the Company and shall furnish to the Company all information reasonably available to the Indemnitee which relates to such action or Indemnified Liability. The Company shall keep the Indemnitee reasonably apprised at all times as to the status of the defense or any settlement negotiations with respect thereto. The Company shall not be liable for any settlement of any action, claim or proceeding effected without its prior written consent, provided, however, that the Company shall not unreasonably withhold, delay or condition its consent. The Company shall not, without the prior written consent of the Indemnitee, consent to entry of any judgment or enter into any settlement or other compromise which does not include as an unconditional term thereof the giving by the claimant or plaintiff to such Indemnitee of a release from all liability in respect to such Indemnified Liability or litigation, and such settlement shall not include any admission as to fault on the part of the Indemnitee. Following indemnification as provided for hereunder, the Company shall be subrogated to all rights of the Indemnitee with respect to all third parties, firms or corporations relating to the matter for which indemnification has been made. The failure to deliver written notice to the Company within a reasonable time of the commencement of any such action shall not relieve the Company of any liability to the Indemnitee under this Section 10(k), except to the extent that the Company is materially and adversely prejudiced in its ability to defend such action.

 

33

 

 

(iii)    The indemnification required by this Section 10(k) shall be made by periodic payments of the amount thereof during the course of the investigation or defense, as and when bills are received or Indemnified Liabilities are incurred.

 

(iv)    Notwithstanding any provision in this Agreement or any other Transaction Documents, the aggregate indemnification obligations of the Company pursuant to this Section 10(k) shall not exceed 100% of the aggregate Purchase Price actually paid by the Buyer.

 

(v)    The sole and exclusive remedies for any breach of any representation, warranty, covenant or agreement hereunder shall be the indemnification provided by this Section 10(k), and Buyer expressly waives any other rights or remedies it may have; provided however, that equitable relief, including remedies of specific performance and injunction, shall be available with respect to any matter where money damages would not be sufficient to compensate Buyer or to preserve the rights of Buyer pending resolution of a dispute, and this Section 10(k) shall not relieve the Company from liability for willful misconduct, gross negligence, bad faith, fraud or willful breach of any of its representations, warranties, covenants or agreements set forth in this Agreement.

 

(l)        Construction. The language used in this Agreement will be deemed to be the language chosen by the parties to express their mutual intent, and no rules of strict construction will be applied against any party. No specific representation or warranty shall limit the generality or applicability of a more general representation or warranty. Each and every reference to share prices, Common Stock and any other numbers in this Agreement that relate to the Common Stock shall be automatically adjusted for stock dividends, stock splits, stock combinations and other similar transactions that occur with respect to the Common Stock after the date of this Agreement.

 

(m)       Remedies. Buyer and each holder of any Securities shall have all rights and remedies set forth in the Transaction Documents and all rights and remedies which such holders have been granted at any time under any other agreement or contract and all of the rights which such holders have under any law. Any Person having any rights under any provision of this Agreement shall be entitled to enforce such rights specifically (without posting a bond or other security, to the extent permitted by law), to recover damages by reason of any breach of any provision of this Agreement and to exercise all other rights granted by law. Furthermore, the Company recognizes that in the event that it fails to perform, observe, or discharge any or all of its obligations under the Transaction Documents, any remedy at law may prove to be inadequate relief to Buyer. The Company therefore agrees that Buyer shall be entitled to seek specific performance and/or temporary, preliminary and permanent injunctive or other equitable relief from any court of competent jurisdiction in any such case without the necessity of proving actual damages and without posting a bond or other security.

 

34

 

 

(n)        Exercise of Right. Notwithstanding anything to the contrary contained in (and without limiting any similar provisions of) the Transaction Documents, whenever Buyer exercises a right, election, demand or option under a Transaction Document and the Company does not timely perform its related obligations within the periods therein provided, then Buyer may continue to exercise it other rights, elections, demands and options hereunder and under any other Transaction Document from time to time as if such original right, election, demand or option had not been exercised without prejudice to its future actions and rights and remedies.

 

(o)        Payment Set Aside; Currency. To the extent that the Company makes a payment or payments to Buyer hereunder or pursuant to any of the other Transaction Documents or Buyer enforces or exercises its rights hereunder or thereunder, and such payment or payments or the proceeds of such enforcement or exercise or any part thereof are subsequently invalidated, declared to be fraudulent or preferential, set aside, recovered from, disgorged by or are required to be refunded, repaid or otherwise restored to the Company, a trustee, receiver or any other Person under any law (including, without limitation, any bankruptcy law, foreign, state or federal law, common law or equitable cause of action), then to the extent of any such restoration the obligation or part thereof originally intended to be satisfied shall be revived and continued in full force and effect as if such payment had not been made or such enforcement or setoff had not occurred. Unless otherwise expressly indicated, all dollar amounts referred to in this Agreement and the other Transaction Documents are in United States Dollars (“U.S. Dollars”), and all amounts owing under this Agreement and all other Transaction Documents shall be paid in U.S. Dollars. All amounts denominated in other currencies (if any) shall be converted into the U.S. Dollar equivalent amount in accordance with the Exchange Rate on the date of calculation. “Exchange Rate” means, in relation to any amount of currency to be converted into U.S. Dollars pursuant to this Agreement, the U.S. Dollar exchange rate as published in the Wall Street Journal on the relevant date of calculation.

 

[signature pages follow]

 

35

 

 

IN WITNESS WHEREOF, Buyer and the Company has caused its signature page to this Agreement to be duly executed as of the date first written above.

 

	 	COMPANY:	 
	 	 	 	 
	 	MULLEN TECHNOLOGIES, INC.	 
	 	 	 	 
	 	 	 	 
	 	 	 	 
	 	By:	/s/ David Michery	 
	 	Name:	David Michery	 
	 	Title:	CEO	 

 

 

[Signature page to Securities Purchase Agreement]

 

 

 

 

IN WITNESS WHEREOF, Buyer and the Company has caused its signature page to this Agreement to be duly executed as of the date first written above.

 

	 	BUYER:	 
	 	 	 	 
	 	ACUITAS CAPITAL, LLC	 
	 	 	 	 
	 	 	 	 
	 	 	 	 
	 	By:	/s/ Terren Peizer	 
	 	Name:	Terren Peizer	 
	 	Title:	Managing Member	 

 

 

[Signature page to Securities Purchase Agreement]

 

 

 

 

BUYER SCHEDULE #1

 

Name of Buyer: Acuitas Capital, LLC

 

Shares of Preferred Stock to be purchased and sold at Closing: Shares of the Series C Preferred Stock for $20,000,000 in the aggregate at a price per share of $0.6877 (the “Purchase Price”). The terms of the Series C Preferred Stock are set forth in the Amended and Restated Articles of Incorporation.

 

Warrants to be issued to Buyer at Closing: For no additional consideration, five-year Warrants to acquire three (3) shares of Common Stock for every Purchase Share initially issuable to Buyer under the terms of the Purchase Shares. Each Warrant shall have an exercise price (the “Exercise Price”) equal to $0.6877 per share of Common Stock, subject to weighted average anti-dilution protection for Subsequent Financings during the Restricted Period at an effective price per share less than the then-current Exercise Price (as may be adjusted for stock dividends, subdivisions, or combinations in the manner described in the Warrants).

 

The Warrants may be exercised, in whole or in part and, in lieu of making the cash payment otherwise contemplated to be made to the Company upon such exercise, the Holder may elect to redeem the Warrants pursuant to the following formula:

 

Net Number = (A x B)/C

 

For purposes of the foregoing formula:

A= the total number of shares with respect to which the applicable Warrant is then being exercised.

B= Black Scholes Value (as defined in the applicable Warrant).

C= the Closing Bid Price of the Common Stock as of two (2) Trading Days prior to the time of such exercise (as such Closing Bid Price is defined in the applicable Warrant), but in any event not less than $0.01 (as may be adjusted for stock dividends, subdivisions, or combinations in the manner described in the Warrant).

 

Notice Contact Information

 

Acuitas Capital, LLC

2120 Colorado Avenue, Suite 230

Santa Monica, California 90404

Attn: Terren Peizer, Managing Member

Email: terren@AcuitasGH.com

 

with a copy (for informational purposes only) to:

McDermott Will & Emery LLP

340 Madison Ave.

New York, NY 10173

Telephone: (212) 547-5885

E-mail: Rcohen@mwe.com

dwoodard@mwe.com

Attention: Robert Cohen, Esq.

 

 

[Signature page to Securities Purchase Agreement]

 

 

 

 

EXHIBIT A

 

Warrant

 

39

 

 

 

EXHIBIT B

 

Amended and Restated Articles of Incorporation

 

40

 

 

Exhibit C

 

REGISTRATION RIGHTS AGREEMENT

 

This Registration Rights Agreement (this “Agreement”) is made and entered into as of April __, 2021, between Mullen Technologies, Inc., a California corporation (the “Company”) and the investors signatory hereto (collectively, the “Buyer”).

 

This Agreement is made pursuant to the Securities Purchase Agreement, dated as of the date hereof, between the Company and the Buyer (the “Purchase Agreement”).

 

The Company and the Buyer hereby agrees as follows:

 

1.           Definitions. Capitalized terms used and not otherwise defined herein that are defined in the Purchase Agreement shall have the meanings given such terms in the Purchase Agreement. As used in this Agreement, the following terms shall have the following meanings:

 

“Advice” shall have the meaning set forth in Section 4(d).

 

“Commission” means the Securities and Exchange Commission.

 

“Effectiveness Deadline” means, with respect to the Initial Registration Statement required to be filed hereunder, the 60th calendar day following the Filing Deadline (or, in the event of a “full review” by the Commission, the 120th calendar day following the Filing Deadline) and with respect to any additional Registration Statements which may be required pursuant to Section 2(c), the 60th calendar day following the date on which an additional Registration Statement is required to be filed hereunder (or, in the event of a “full review” by the Commission, the 120th calendar day following the date such additional Registration Statement is required to be filed hereunder); provided, however, that in the event the Company is notified by the Commission that one or more of the above Registration Statements will not be reviewed or is no longer subject to further review and comments, the Effectiveness Deadline as to such Registration Statement shall be the fifth Trading Day following the date on which the Company is so notified if such date precedes the dates otherwise required above, provided, further, if such Effectiveness Deadline falls on a day that is not a Trading Day, then the Effectiveness Deadline shall be the next succeeding Trading Day.

 

“Effectiveness Period” shall have the meaning set forth in Section 2(a).

 

“Event” shall have the meaning set forth in Section 2(d).

 

“Event Date” shall have the meaning set forth in Section 2(d).

 

“Exchange Act” means the Securities Exchange Act of 1934, as amended.

 

“Filing Deadline” means, (i) with respect to the Initial Registration Statement, the 15th calendar day following the Closing, and (ii) with respect to any additional Registration Statements which may be required pursuant to Section 2(c), the earliest practical date on which the Company is permitted by SEC Guidance to file such additional Registration Statement related to the Registrable Securities.

 

41

 

 

“Holder” or “Holders” means the holder or holders, as the case may be, from time to time of Registrable Securities.

 

“Indemnified Party” shall have the meaning set forth in Section 6(c).

 

“Indemnifying Party” shall have the meaning set forth in Section 6(c).

 

“Initial Registration Statement” means the initial Registration Statement filed pursuant to Section 2(a) of this Agreement.

 

“Losses” shall have the meaning set forth in Section 6(a).

 

“Plan of Distribution” shall have the meaning set forth in Section 2(a).

 

“Prospectus” means the prospectus included in a Registration Statement (including, without limitation, a prospectus that includes any information previously omitted from a prospectus filed as part of an effective registration statement in reliance upon Rule 430A promulgated by the Commission pursuant to the Securities Act), as amended or supplemented by any prospectus supplement, with respect to the terms of the offering of any portion of the Registrable Securities covered by a Registration Statement, and all other amendments and supplements to the Prospectus, including post-effective amendments, and all material incorporated by reference or deemed to be incorporated by reference in such Prospectus.

 

“Registrable Securities” means, as of any date of determination, (a) all of the Conversion Shares then issued and issuable upon conversion in full of the Purchase Shares (assuming on such date the Purchase Shares are converted in full without regard to any conversion limitations therein), (b) all Warrant Shares then issued and issuable upon exercise of the Warrants (assuming on such date the Warrants are exercised in full without regard to any exercise limitations therein), (c) any additional shares of Common Stock issued and issuable in connection with any anti-dilution provisions relating to the Purchase Shares or the Warrants (in each case, without giving effect to any limitations on conversion set forth in the Purchase Shares or limitations on exercise set forth in the Warrants), and (d) any securities issued or then issuable upon any stock split, dividend or other distribution, recapitalization or similar event with respect to the foregoing; provided, however, that any such securities shall cease to be Registrable Securities (and the Company shall not be required to maintain the effectiveness of any, or file another, Registration Statement hereunder with respect thereto) for so long as (i) a Registration Statement with respect to the sale of such Registrable Securities is declared effective by the Commission under the Securities Act and such Registrable Securities have been disposed of by the Holder in accordance with such effective Registration Statement, (ii) such Registrable Securities have been sold in accordance with Rule 144 and the Company has delivered certificates representing such securities that no longer bear a legend and/or for which the Transfer Agent has not instituted a stop order restricting further transfer, or (iii) such securities become eligible for resale without volume or manner-of-sale restrictions and without current public information pursuant to Rule 144 as set forth in a written opinion letter to such effect, addressed, delivered and acceptable to the Transfer Agent and the affected Holders (assuming that such securities and any securities issuable upon exercise or conversion of which, or as a dividend upon which, such securities were issued or are issuable, were at no time held by any Affiliate of the Company, as reasonably determined by the Company, upon the advice of counsel to the Company).

 

42

 

 

“Registration Statement” means any registration statement required to be filed hereunder pursuant to Section 2(a) and any additional registration statements contemplated by Section 2(c), including (in each case) the Prospectus, amendments and supplements to any such registration statement or Prospectus, including pre- and post-effective amendments, all exhibits thereto, and all material incorporated by reference or deemed to be incorporated by reference in any such registration statement.

 

“Rule 144” means Rule 144 promulgated by the Commission under the 1933 Act, as such rule may be amended from time to time, or any other similar or successor rule or regulation of the Commission that may at any time permit the Holders to sell securities of the Company to the public without registration.

 

“Rule 415” means Rule 415 promulgated by the Commission pursuant to the Securities Act, as such Rule may be amended or interpreted from time to time, or any similar rule or regulation hereafter adopted by the Commission providing for offering securities on a continuous or delayed basis.

 

“Rule 424” means Rule 424 promulgated by the Commission pursuant to the Securities Act, as such Rule may be amended or interpreted from time to time, or any similar rule or regulation hereafter adopted by the Commission having substantially the same purpose and effect as such Rule.

 

“Selling Stockholder Questionnaire” shall have the meaning set forth in Section 4(a).

 

“SEC Guidance” means (i) any publicly-available written or oral guidance of the Commission staff, or any comments, requirements or requests of the Commission staff and (ii) the Securities Act.

 

“Securities Act” means the Securities Act of 1933, as amended.

 

2.           Required Registration.

 

(a)         The Company shall prepare and, as soon as practicable, but in no event later than the Filing Deadline, file with the Commission a Registration Statement covering the resale of all of the Registrable Securities (the “Initial Registration Statement”); provided that the Initial Registration Statement shall register for resale at least the number of shares of Common Stock equal to 125% of the sum of (i) the maximum number of shares of Common Stock issuable upon conversion of the Purchase Shares at the initial conversion price thereof and (ii) the maximum number of shares of Common Stock issuable upon exercise of the Warrant (the “Initial Required Registration Amount”). Each Registration Statement filed hereunder shall be on Form S-3 (except if the Company is not then eligible to register for resale the Registrable Securities on Form S-3, in which case such registration shall be on another appropriate form in accordance herewith, subject to the provisions of Section 2(e)) and shall contain (unless otherwise directed by at least a Majority in Interest of the Holders) substantially the “Plan of Distribution” attached hereto as Annex A. Subject to the terms of this Agreement, the Company shall cause each Registration Statement filed under this Agreement to be declared effective under the Securities Act as promptly as possible after the filing thereof, but in any event no later than the applicable Effectiveness Deadline, and shall keep such Registration Statement continuously effective under the Securities Act until the earlier of (i) the date that all Registrable Securities covered by such Registration Statement no longer constitute Registrable Securities or (ii) the two year anniversary of the date of this Agreement (the “Effectiveness Period”). The Company shall telephonically request effectiveness of a Registration Statement as of 5:00 p.m. Eastern Time on a Trading Day. The Company shall promptly notify the Holders via facsimile or by e-mail of the effectiveness of a Registration Statement on the same Trading Day that the Company telephonically confirms effectiveness with the Commission, which shall be the date requested for effectiveness of such Registration Statement. The Company shall, by 9:30 a.m. Eastern Time on the Trading Day after the effective date of such Registration Statement, file a final Prospectus with the Commission as required by Rule 424. Failure to so notify the Holders within one (1) Trading Day of such notification of effectiveness or failure to file a final Prospectus as foresaid shall be deemed an Event under Section 2(d).

 

43

 

 

(b)         Notwithstanding the registration obligations set forth in Section 2(a), if the Commission informs the Company that all of the Registrable Securities cannot, as a result of the application of Rule 415, be registered for resale as a secondary offering on a single registration statement, the Company agrees to promptly inform each of the Holders thereof and use its reasonable best efforts to file amendments to the Initial Registration Statement as required by the Commission, covering the maximum number of Registrable Securities permitted to be registered by the Commission, on Form S-3 or such other form available to register for resale the Registrable Securities as a secondary offering, subject to the provisions of Section 2(e); with respect to filing on Form S-3 or other appropriate form; provided, however, that prior to filing such amendment, the Company shall be obligated to use diligent efforts to advocate with the Commission for the registration of all of the Registrable Securities in accordance with the SEC Guidance, including without limitation, Compliance and Disclosure Interpretation 612.09. Notwithstanding the obligations of the Company under this Section 2(b), the provisions of Section 2(d) shall apply with respect to the payment of the Liquidated Damages.

 

(c)         Notwithstanding any other provision of this Agreement, if the Commission or any SEC Guidance sets forth a limitation on the number of Registrable Securities permitted to be registered on a particular Registration Statement as a secondary offering (and notwithstanding that the Company used diligent efforts to advocate with the Commission for the registration of all or a greater portion of Registrable Securities), unless otherwise (i) directed in writing by a Holder as to its Registrable Securities, or (ii) directed by the Commission as to the limitations or restrictions that it would require, the number of Registrable Securities to be registered on such Registration Statement will be reduced as follows:

 

	 	
			a.

				
			First, the Company shall reduce or eliminate any securities to be included by any Person other than a Holder;

			

 

	 	
			b.

				
			Second, the Company shall reduce or eliminate Registrable Securities contemplated by clause (c) of the definition of Registrable Securities (applied, in the case that only some such Registrable Securities may be registered, to the Holders on a pro rata basis based on the total number of such unregistered Registrable Securities held by such Holders); and

			

 

	 	
			c.

				
			Third, the Company shall reduce Registrable Securities represented by Warrant Shares (applied, in the case that only some such Registrable Securities may be registered, to the Holders on a pro rata basis based on the total number of such unregistered Registrable Securities held by such Holders); and

			

 

44

 

 

	 	
			d.

				
			Fourth, the Company shall reduce Registrable Securities represented by Conversion Shares (applied, in the case that some Conversion Shares may be registered, to the Holders on a pro rata basis based on the total number of unregistered Conversion Shares held by such Holders).

			

 

In the event of a cutback hereunder, the Company shall give the Holder at least five (5) Trading Days prior written notice along with the calculations as to such Holder’s allotment. In the event the Company amends the Initial Registration Statement in accordance with the foregoing, or determines to file an additional Registration Statement, the Company will use its reasonable best efforts to file with the Commission, as promptly as allowed by Commission or SEC Guidance provided to the Company or to registrants of securities in general, one or more Registration Statements on Form S-3 or such other form available to register for resale those Registrable Securities that were not registered for resale on the Initial Registration Statement, as amended, as a result of any cutback of Registrable Securities of the Holders or any Registrable Securities not included in the Initial Registration Statement. In any additional Registration Statement filed because of a cutback in the number of Registrable Securities included in the Initial Registration Statement, all holders of shares of Common Stock included in such additional Registration Statement shall be subject to any additional cutbacks that may be required by the Commission on a pro rata basis.

 

(d)         If: (i) the Initial Registration Statement is not filed on or prior to its Filing Deadline, or (ii) the Company fails to file with the Commission a request for acceleration of a Registration Statement in accordance with Rule 461 promulgated by the Commission pursuant to the Securities Act, within five (5) Trading Days of the date that the Company is notified (orally or in writing, whichever is earlier) by the Commission that such Registration Statement will not be “reviewed” or will not be subject to further review, or (iii) a Registration Statement registering for resale all of the Initial Required Registration Amount is not declared effective by the Commission by the Effectiveness Deadline of the Initial Registration Statement, or (iv) after the effective date of a Registration Statement, such Registration Statement ceases for any reason to remain continuously effective as to all Registrable Securities included in such Registration Statement, or the Holders are otherwise not permitted to utilize the Prospectus therein to resell such Registrable Securities, for more than ten (10) consecutive calendar days or more than an aggregate of fifteen (15) calendar days (which need not be consecutive calendar days) during any 12-month period (any such failure or breach being referred to as an “Event”, and for purposes of clauses (i) and (iii), the date on which such Event occurs, and for purpose of clause (ii) the date on which such five (5) Trading Day period is exceeded, and for purpose of clause (iv) the date on which such ten (10) or fifteen (15) calendar day period, as applicable, is exceeded being referred to as “Event Date”), then, in addition to any other rights the Holders may have hereunder or under applicable law, on each such Event Date and on each monthly anniversary of each such Event Date (if the applicable Event shall not have been cured by such date) until the applicable Event is cured, the Company shall pay to each Holder an amount in cash, as partial liquidated damages and not as a penalty, equal to the product of (1)  0.50% multiplied by (2) the aggregate purchase price paid by such Holder pursuant to the Purchase Agreement for all Registrable Securities that are then not covered by a Registration Statement that is then effective and available for use by such Holder (the “Liquidated Damages”).

 

45

 

 

The parties agree that the maximum aggregate Liquidated Damages payable to a Holder under this Agreement shall be 6% of the aggregate amount paid by such Holder pursuant to the Purchase Agreement with respect to any Registrable Securities. The Liquidated Damages shall accrue pursuant to the terms hereof on a daily pro rata basis for any portion of a month prior to the cure of an Event. Further, amounts payable as Liquidated Damages to each Holder hereunder with respect to each share of Registrable Securities shall cease when the Buyer no longer holds such shares of Registrable Securities. No Event shall be deemed to occur or continue if such Registration Event is caused by delays which are solely attributable to (i) the failure of a Holder to timely advise the Company of any information regarding such Holder for inclusion in the Registration Statement, but any such failure shall apply only to that particular Holder, or (ii) the resolution of comments from the Commission pertaining to the Holders.

 

For the purposes of clarity, it is hereby agreed that Liquidated Damages shall not accrue during, and none shall be due as a result of, any period not to exceed (i) ten (10) consecutive days or (ii) fifteen (15) days in total during any twelve month period (such periods, an “Allowed Delay”) during which the Prospectus included in any Registration Statement contemplated by this Registration Rights Agreement is suspended or otherwise unavailable.

 

(e)          If Form S-3 is not available for the registration of the resale of Registrable Securities hereunder, the Company shall (i) register the resale of the Registrable Securities on another appropriate form and (ii) undertake to register the Registrable Securities on Form S-3 as soon as such form is available, if at all, during the Effectiveness Period; provided that the Company shall only be required to maintain the effectiveness of the Registration Statement then in effect until the earlier of (A) such time as a Registration Statement on Form S-3 covering the Registrable Securities has been declared effective by the Commission or (B) the expiration of the Effectiveness Period.

 

3.           Company Obligations. In connection with the Company’s registration obligations hereunder, the Company shall:

 

(a)        Not less than five (5) Trading Days prior to the filing of each Registration Statement and not less than two (2) Trading Days prior to the filing of any related Prospectus or any amendment or supplement thereto (including any document that would be incorporated or deemed to be incorporated therein by reference), the Company shall (i) furnish to each Holder copies of all such documents proposed to be filed, which documents (other than those incorporated or deemed to be incorporated by reference) will be subject to the review of such Holders, and (ii) cause its officers and directors, counsel and independent registered public accountants to respond to such inquiries as shall be necessary, in the reasonable opinion of respective counsel to each Holder, to conduct a reasonable investigation within the meaning of the Securities Act. Notwithstanding the above, the Company shall not be obligated to provide the Holders advance copies of any universal shelf registration statement registering securities in addition to those required hereunder, or any Prospectus prepared thereto.

 

(b)       (i) Prepare and file with the Commission such amendments, including post-effective amendments, to a Registration Statement and the Prospectus used in connection therewith as may be necessary to keep a Registration Statement continuously effective as to the applicable Registrable Securities for the Effectiveness Period and prepare and file with the Commission such additional Registration Statements in order to register for resale under the Securities Act all of the Registrable Securities, (ii) cause the related Prospectus to be amended or supplemented by any required Prospectus supplement (subject to the terms of this Agreement), and, as so supplemented or amended, to be filed pursuant to Rule 424, (iii) respond as promptly as reasonably possible to any comments received from the Commission with respect to a Registration Statement or any amendment thereto, and (iv) comply in all material respects with the applicable provisions of the Securities Act and the Exchange Act with respect to the disposition of all Registrable Securities covered by a Registration Statement during the applicable period in accordance (subject to the terms of this Agreement) with the intended methods of disposition by the Holders thereof set forth in such Registration Statement as so amended or in such Prospectus as so supplemented.

 

46

 

 

(c)         If during the Effectiveness Period, the number of Registrable Securities at any time exceeds 100% of the number of shares of Common Stock then registered in a Registration Statement, then the Company shall file as soon as reasonably practicable, but in any case prior to the applicable Filing Deadline, an additional Registration Statement covering the resale by the Holders of not less than the number of such Registrable Securities.

 

(d)        Notify the Holders of Registrable Securities to be sold (which notice shall, pursuant to clauses (iii) through (vi) hereof, be accompanied by an instruction to suspend the use of the Prospectus until the requisite changes have been made) as promptly as reasonably possible (i)(A) when a Prospectus or any Prospectus supplement or post-effective amendment to a Registration Statement has been filed, (B) when the Commission notifies the Company whether there will be a “review” of such Registration Statement, and (C) with respect to a Registration Statement or any post-effective amendment, when the same has become effective, (ii) of any request by the Commission or any other federal or state governmental authority for amendments or supplements to a Registration Statement or Prospectus or for additional information, in each case, after the such Registration Statement has been declared effective, (iii) of the issuance by the Commission or any other federal or state governmental authority of any stop order suspending the effectiveness of a Registration Statement covering any or all of the Registrable Securities or the initiation of any Proceedings for that purpose, (iv) of the receipt by the Company of any notification with respect to the suspension of the qualification or exemption from qualification of any of the Registrable Securities for sale in any jurisdiction, or the initiation or threatening of any Proceeding for such purpose, (v) of the occurrence of any event or passage of time that makes the financial statements included in a Registration Statement ineligible for inclusion therein or any statement made in a Registration Statement or Prospectus or any document incorporated or deemed to be incorporated therein by reference untrue in any material respect or that requires any revisions to a Registration Statement, Prospectus or other documents so that, in the case of a Registration Statement or the Prospectus, as the case may be, it will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading, and (vi) of the occurrence or existence of any pending corporate development with respect to the Company that the Company believes may be material and that, in the determination of the Company, makes it not in the best interest of the Company to allow continued availability of a Registration Statement or Prospectus, provided, however, in no event shall any such notice contain any information which would constitute material, non-public information regarding the Company or any of its Subsidiaries.

 

(e)        Use its reasonable best efforts to avoid the issuance of, or, if issued, obtain the withdrawal of (i) any order stopping or suspending the effectiveness of a Registration Statement, or (ii) any suspension of the qualification (or exemption from qualification) of any of the Registrable Securities for sale in any jurisdiction, at the earliest practicable moment.

 

47

 

 

(f)         Furnish to each Holder, without charge, at least one conformed copy of each such Registration Statement and each amendment thereto, including financial statements and schedules, all documents incorporated or deemed to be incorporated therein by reference to the extent requested by such Person, and all exhibits to the extent requested by such Person (including those previously furnished or incorporated by reference) promptly after the filing of such documents with the Commission; provided, that any such item which is available on the EDGAR system (or successor thereto) need not be furnished. Subject to the terms of this Agreement, the Company hereby consents to the use of such Prospectus and each amendment or supplement thereto by each of the selling Holders in connection with the offering and sale of the Registrable Securities covered by such Prospectus and any amendment or supplement thereto, except after the Company has given notice pursuant to Section 3(d).

 

(g)          The Company shall cooperate with any broker-dealer through which a Holder proposes to resell its Registrable Securities in effecting a filing with the FINRA Corporate Financing Department pursuant to FINRA Rule 5110, as requested by any such Holder.

 

(h)         Prior to any resale of Registrable Securities by a Holder, use its reasonable best efforts to register or qualify or cooperate with the selling Holders in connection with the registration or qualification (or exemption from the Registration or qualification) of such Registrable Securities for the resale by the Holder under the securities or Blue Sky laws of such jurisdictions within the United States as any Holder reasonably requests in writing, to keep each registration or qualification (or exemption therefrom) effective during the Effectiveness Period and to do any and all other acts or things reasonably necessary to enable the disposition in such jurisdictions of the Registrable Securities covered by each Registration Statement; provided, that, the Company shall not be required to qualify generally to do business in any jurisdiction where it is not then so qualified, subject the Company to any material tax in any such jurisdiction where it is not then so subject or file a general consent to service of process in any such jurisdiction.

 

(i)         If requested by a Holder, cooperate with such Holder to facilitate the timely preparation and delivery of certificates representing Registrable Securities to be delivered to a transferee pursuant to a Registration Statement, which certificates shall be free, to the extent permitted by the Purchase Agreement, of all restrictive legends, and to enable such Registrable Securities to be in such denominations and registered in such names as any such Holder may request.

 

(j)          Upon the occurrence of any event contemplated by clause (v) or (vi) of Section 3(d), as promptly as reasonably possible under the circumstances taking into account the Company’s good faith assessment of any adverse consequences to the Company and its stockholders of the premature disclosure of such event, prepare a supplement or amendment, including a post-effective amendment, to a Registration Statement or a supplement to the related Prospectus or any document incorporated or deemed to be incorporated therein by reference, and file any other required document so that, as thereafter delivered, neither a Registration Statement nor such Prospectus will contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. If the Company notifies the Holders in accordance with clauses (iii) through (vi) of Section 3(d) above to suspend the use of any Prospectus until the requisite changes to such Prospectus have been made, then the Holders shall suspend use of such Prospectus. The Company will use its reasonable best efforts to ensure that the use of the Prospectus may be resumed as promptly as is practicable.

 

48

 

 

(k)          Comply with all applicable rules and regulations of the Commission.

 

(l)         The Company may require each selling Holder to furnish to the Company a certified statement as to the number of shares of Common Stock beneficially owned by such Holder and, if required by the Commission, the natural persons thereof that have voting and dispositive control over the shares. During any periods that the Company is unable to meet its obligations hereunder with respect to the registration of the Registrable Securities solely because any Holder fails to furnish such information within three Trading Days of the Company’s request, any liquidated damages that are accruing at such time shall be tolled and any Event that may otherwise occur solely because of such delay shall be suspended until such information is delivered to the Company.

 

4.         Obligations of the Holders.

 

(a)    Each Holder agrees to furnish to the Company a completed questionnaire in the form attached to this Agreement as Annex B (a “Selling Stockholder Questionnaire”) on a date that is not less than ten (10) days prior to the Filing Deadline or by the end of the fourth (4th) Trading Day following the date on which such Holder receives draft materials in accordance with Section 3(a). Each Holder shall furnish in writing to the Company such additional information regarding itself, the Registrable Securities held by it and the intended method of disposition of the Registrable Securities held by it, and shall execute such documents in connection with such registration, as shall be reasonably required to effect the registration of such Registrable Securities. A Holder shall provide such information to the Company at least two (2) Business Days prior to the first anticipated filing date of such Registration Statement if such Holder elects to have any of the Registrable Securities included in the Registration Statement. The Company shall not be required to include the Registrable Securities of a Holder in a Registration Statement, and no Event shall be deemed to occur and or continue solely as a result of the failure to include the Registrable Securities of such Holder in the Registration Statement, if such Holder fails to furnish to the Company a fully completed Selling Stockholder Questionnaire at least two (2) Business Days prior to the Filing Deadline.

 

(b)    Each Holder agrees to cooperate with the Company as reasonably requested by the Company in connection with the preparation and filing of a Registration Statement hereunder, unless such Holder has notified the Company in writing of its election to exclude all of its Registrable Securities from such Registration Statement.

 

(c)          Each Holder covenants and agrees that it will comply with the prospectus delivery requirements of the Securities Act as applicable to it (unless an exemption therefrom is available) in connection with sales of Registrable Securities pursuant to a Registration Statement.

 

(d)         Each Holder agrees that, upon receipt of any notice from the Company of either (i) the commencement of an Allowed Delay or (ii) the happening of an event pursuant to Section 3(d)(iii) – (vi) hereof, such Holder will immediately discontinue disposition of Registrable Securities pursuant to the Registration Statement covering such Registrable Securities, until it is advised in writing (the “Advice”) by the Company that the use of the applicable Prospectus (as it may have been supplemented or amended) may be resumed. The Company will use its reasonable best efforts to ensure that the use of the Prospectus may be resumed as promptly as is practicable.

 

49

 

 

5.         Registration Expenses. All fees and expenses incident to the performance of or compliance with, this Agreement by the Company shall be borne by the Company whether or not any Registrable Securities are sold pursuant to a Registration Statement. The fees and expenses referred to in the foregoing sentence shall include, without limitation, (i) all registration and filing fees (including, without limitation, fees and expenses of the Company’s counsel and independent registered public accountants) (A) with respect to filings made with the Commission, (B) with respect to filings required to be made with any Trading Market on which the Common Stock is then listed for trading, and (C) in compliance with applicable state securities or Blue Sky laws reasonably agreed to by the Company in writing (including, without limitation, fees and disbursements of counsel for the Company in connection with Blue Sky qualifications or exemptions of the Registrable Securities), (ii) printing expenses (including, without limitation, expenses of printing certificates for Registrable Securities), (iii) messenger, telephone and delivery expenses of the Company, (iv) fees and disbursements of counsel for the Company, (v) Securities Act liability insurance, if the Company so desires such insurance, and (vi) fees and expenses of all other Persons retained by the Company in connection with the consummation of the transactions contemplated by this Agreement. In addition, the Company shall be responsible for all of its internal expenses incurred in connection with the consummation of the transactions contemplated by this Agreement (including, without limitation, all salaries and expenses of its officers and employees performing legal or accounting duties), the expense of any annual audit and the fees and expenses incurred in connection with the listing of the Registrable Securities on any securities exchange as required hereunder. In no event shall the Company be responsible for any broker or similar commissions of any Holder or, except to the extent provided for in the Transaction Documents, any legal fees or other costs of the Holders.

 

6.         Indemnification.

 

(a)         Indemnification by the Company. The Company shall, notwithstanding any termination of this Agreement, indemnify and hold harmless each Holder, the officers, directors, members, partners, agents, brokers (including brokers who offer and sell Registrable Securities as principal as a result of a pledge or any failure to perform under a margin call of Common Stock), investment advisors and employees of the Company, each Person who controls any such Holder (within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act) and the officers, directors, members, stockholders, partners, agents, investment advisors and employees of each such controlling Person, to the fullest extent permitted by applicable law, from and against any and all losses, claims, damages, liabilities, costs (including, without limitation, reasonable attorneys’ fees) and expenses (collectively, “Losses”), as incurred, arising out of or relating to (i) any untrue or alleged untrue statement of a material fact contained in a Registration Statement, any Prospectus or any form of prospectus or in any amendment or supplement thereto or in any preliminary prospectus, or arising out of or relating to any omission or alleged omission of a material fact required to be stated therein or necessary to make the statements therein (in the case of any Prospectus or supplement thereto, in light of the circumstances under which they were made) not misleading or (ii) any violation or alleged violation by the Company of the Securities Act, the Exchange Act or any state securities law, or any rule or regulation thereunder, in connection with the performance of its obligations under this Agreement, except to the extent, but only to the extent, that (A) such untrue statements or omissions are based solely upon information regarding such Holder furnished in writing to the Company by such Holder expressly for use therein (it being understood that such information shall only consist of the name of the Holder, the number of offered shares (excluding percentages), the address and other information with respect to the Holder and the information included on Annex A hereto, each only to the extent which such information appears in an effective Registration Statement or any Prospectus) or (B) in the case of an occurrence of an event of the type specified in Section 3(d)(iii)-(vi), the use by such Holder of an outdated, defective or otherwise unavailable Prospectus after the Company has notified such Holder in writing that the Prospectus is outdated, defective or otherwise unavailable for use by such Holder and prior to the receipt by such Holder of the Advice contemplated in Section 4(d). The Company shall notify the Holders promptly of the institution, threat or assertion of any Proceeding arising from or in connection with the transactions contemplated by this Agreement of which the Company is aware. Such indemnity shall remain in full force and effect regardless of any investigation made by or on behalf of such indemnified person and shall survive the transfer of any Registrable Securities by any of the Holders in accordance with Section 7(e).

 

50

 

 

(b)         Indemnification by Holders. Each Holder shall, severally and not jointly, indemnify and hold harmless the Company, its directors, officers, agents and employees, each Person who controls the Company (within the meaning of Section 15 of the Securities Act and Section 20 of the Exchange Act), and the directors, officers, agents or employees of such controlling Persons, to the fullest extent permitted by applicable law, from and against all Losses, as incurred, to the extent arising out of or based solely upon: (i) such Holder’s failure to comply with any applicable prospectus delivery requirements of the Securities Act through no fault of the Company or (ii) any untrue or alleged untrue statement of a material fact contained in any Registration Statement, any Prospectus, or in any amendment or supplement thereto or in any preliminary prospectus, or arising out of or relating to any omission or alleged omission of a material fact required to be stated therein or necessary to make the statements therein (in the case of any Prospectus or supplement thereto, in light of the circumstances under which they were made) not misleading to the extent, but only to the extent, that such untrue statement or omission is contained in any information so furnished in writing by such Holder to the Company expressly for inclusion in such Registration Statement or such Prospectus (it being understood that such information shall only consist of the name of the Holder, the number of offered shares (excluding percentages), the address and other information with respect to the Holder and the information included on Annex A hereto, each only to the extent which such information appears in an effective Registration Statement or any Prospectus), such Prospectus or in any amendment or supplement thereto or (iii) in the case of an occurrence of an event of the type specified in Section 3(d)(iii)-(vi), to the extent, but only to the extent, related to the use by such Holder of an outdated, defective or otherwise unavailable Prospectus after the Company has notified such Holder in writing that the Prospectus is outdated, defective or otherwise unavailable for use by such Holder and prior to the receipt by such Holder of the Advice contemplated in Section 4(d). In no event shall the liability of any selling Holder under this Section 6(b) be greater in amount than the dollar amount of the net proceeds received by such Holder upon the sale of the Registrable Securities giving rise to such indemnification obligation, except in the case of fraud or willful misconduct by such Holder.

 

51

 

 

(c)         Conduct of Indemnification Proceedings. If any Proceeding shall be brought or asserted against any Person entitled to indemnity hereunder (an “Indemnified Party”), such Indemnified Party shall promptly notify the Person from whom indemnity is sought (the “Indemnifying Party”) in writing, and the Indemnifying Party shall have the right to assume the defense thereof, including the employment of counsel reasonably satisfactory to the Indemnified Party and the payment of all reasonable fees and expenses incurred in connection with defense thereof; provided, that, the failure of any Indemnified Party to give such notice shall not relieve the Indemnifying Party of its obligations or liabilities pursuant to this Agreement, except (and only) to the extent that it shall be finally determined by a court of competent jurisdiction (which determination is not subject to appeal or further review) that such failure shall have materially and adversely prejudiced the Indemnifying Party. An Indemnified Party shall have the right to employ separate counsel in any such Proceeding and to participate in the defense thereof, but the fees and expenses of such counsel shall be at the expense of such Indemnified Party or Parties unless: (1) the Indemnifying Party has agreed in writing to pay such fees and expenses, (2) the Indemnifying Party shall have failed promptly to assume the defense of such Proceeding and to employ counsel reasonably satisfactory to such Indemnified Party in any such Proceeding, or (3) the named parties to any such Proceeding (including any impleaded parties) include both such Indemnified Party and the Indemnifying Party, and counsel to the Indemnified Party shall reasonably believe that a material conflict of interest is likely to exist if the same counsel were to represent such Indemnified Party and the Indemnifying Party (in which case, if such Indemnified Party notifies the Indemnifying Party in writing that it elects to employ separate counsel at the expense of the Indemnifying Party, the Indemnifying Party shall not have the right to assume the defense thereof and the reasonable fees and expenses of no more than one separate counsel shall be at the expense of the Indemnifying Party). The Indemnifying Party shall not be liable for any settlement of any such Proceeding effected without its written consent. No Indemnifying Party shall, without the prior written consent of the Indemnified Party, effect any settlement of any pending Proceeding in respect of which any Indemnified Party is a party, unless such settlement includes an unconditional release of such Indemnified Party from all liability on claims that are the subject matter of such Proceeding. Subject to the terms of this Agreement, all reasonable fees and expenses of the Indemnified Party (including reasonable fees and expenses to the extent incurred in connection with investigating or preparing to defend such Proceeding in a manner not inconsistent with this Section) shall be paid to the Indemnified Party, as incurred, within thirty (30) calendar days of written notice thereof to the Indemnifying Party; provided, that, the Indemnified Party shall promptly reimburse the Indemnifying Party for that portion of such fees and expenses applicable to such actions for which such Indemnified Party is finally determined by a court of competent jurisdiction (which determination is not subject to appeal or further review) not to be entitled to indemnification hereunder.

 

(d)         Contribution. If the indemnification under Section 6(a) or 6(b) is unavailable to an Indemnified Party or insufficient to hold an Indemnified Party harmless for any Losses, then each Indemnifying Party shall contribute to the amount paid or payable by such Indemnified Party, in such proportion as is appropriate to reflect the relative fault of the Indemnifying Party and Indemnified Party in connection with the actions, statements or omissions that resulted in such Losses as well as any other relevant equitable considerations. The relative fault of such Indemnifying Party and Indemnified Party shall be determined by reference to, among other things, whether any action in question, including any untrue or alleged untrue statement of a material fact or omission or alleged omission of a material fact, has been taken or made by, or relates to information supplied by, such Indemnifying Party or Indemnified Party, and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such action, statement or omission. The amount paid or payable by a party as a result of any Losses shall be deemed to include, subject to the limitations set forth in this Agreement, any reasonable attorneys’ or other fees or expenses incurred by such party in connection with any Proceeding to the extent such party would have been indemnified for such fees or expenses if the indemnification provided for in this Section was available to such party in accordance with its terms. The parties hereto agree that it would not be just and equitable if contribution pursuant to this Section 6(d) were determined by pro rata allocation or by any other method of allocation that does not take into account the equitable considerations referred to in the immediately preceding paragraph. Notwithstanding the provisions of this Section 6(d), no Holder shall be required to contribute pursuant to this Section 6(d), in the aggregate, any amount in excess of the amount by which the net proceeds actually received by such Holder from the sale of the Registrable Securities subject to the Proceeding exceeds the amount of any damages that such Holder has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission.

 

52

 

 

(e)                  The indemnity and contribution agreements contained in this Section are in addition to any liability that the Indemnifying Parties may have to the Indemnified Parties.

 

7.           Miscellaneous.

 

(a)         Remedies. In the event of a breach by the Company or by a Holder of any of their respective obligations under this Agreement, each Holder or the Company, as the case may be, in addition to being entitled to exercise all rights granted by law and under this Agreement, including recovery of damages, shall be entitled to specific performance of its rights under this Agreement. Each of the Company and each Holder agrees that monetary damages would not provide adequate compensation for any losses incurred by reason of a breach by it of any of the provisions of this Agreement and hereby further agrees that, in the event of any action for specific performance in respect of such breach, it shall not assert or shall waive the defense that a remedy at law would be adequate.

 

(b)         Prohibition on Filing Other Registration Statements. The Company shall not, other than as provided in the Purchase Agreement, file any other registration statements until all Registrable Securities are registered pursuant to a Registration Statement that is declared effective by the Commission, provided that this Section 7(b) shall not prohibit the Company from filing amendments to registration statements filed prior to the date of this Agreement and shall not prohibit the Company from filing a registration statement on Form S-3 or other available form for a primary offering by the Company, provided that the Company makes no offering of securities pursuant to such registration statement prior to the effective date of the Registration Statement required hereunder that includes all of the Registrable Securities.

 

(c)         Amendments and Waivers. The provisions of this Agreement, including the provisions of this sentence, may not be amended, modified or supplemented, and waivers or consents to departures from the provisions hereof may not be given, unless the same shall be in writing and signed by the Company and the Holders of 51% or more of the then outstanding Registrable Securities (for purposes of clarification, this includes any Registrable Securities issuable upon exercise or conversion of any Security). If a Registration Statement does not register all of the Registrable Securities pursuant to a waiver or amendment done in compliance with the previous sentence, then the number of Registrable Securities to be registered for each Holder shall be reduced pro rata among all Holders and each Holder shall have the right to designate which of its Registrable Securities shall be omitted from such Registration Statement. Notwithstanding the foregoing, a waiver or consent to depart from the provisions hereof with respect to a matter that relates exclusively to the rights of a Holder or some Holders and that does not directly or indirectly affect the rights of other Holders may be given only by such Holder or Holders of all of the Registrable Securities to which such waiver or consent relates; provided, however, that the provisions of this sentence may not be amended, modified, or supplemented except in accordance with the provisions of the first sentence of this Section 7(c). No consideration shall be offered or paid to any Person to amend or consent to a waiver or modification of any provision of this Agreement unless the same consideration also is offered to all of the parties to this Agreement.

 

53

 

 

(d)         Notices. Any and all notices or other communications or deliveries required or permitted to be provided hereunder shall be delivered as set forth in the Purchase Agreement.

 

(e)         Successors and Assigns. This Agreement shall inure to the benefit of and be binding upon the successors and permitted assigns of each of the parties and shall inure to the benefit of each Holder. The Company may not assign (except by merger) its rights or obligations hereunder without the prior written consent of all of the Holders of the then outstanding Registrable Securities. Each Holder may assign their respective rights hereunder in the manner and to the Persons as permitted under the Purchase Agreement.

 

(f)         Prior Registration Rights. Each Holder of Registrable Securities hereby acknowledges that the Company has previously entered into agreements granting registration rights with respect to currently outstanding shares of convertible preferred stock and other common stock purchase warrants, which have not yet been satisfied and that the holders of such other securities may elect to include such shares of common stock issuable upon conversion or exercise of such securities in the Registration Statement(s) required to be filed hereunder. However, if, in the opinion of counsel for the Holder, the inclusion of such shares by other holders of the Company could reasonably be prohibited by the Commission pursuant to Rule 415 and/or related SEC Guidance, the Company will, upon the reasonable request by the Holder, request such holder to refrain from including such person’s registrable securities in the Registration Statement(s) filed pursuant to this Agreement.

 

(g)         Execution and Counterparts. This Agreement may be executed in two or more counterparts, all of which when taken together shall be considered one and the same agreement and shall become effective when counterparts have been signed by each party and delivered to the other party, it being understood that both parties need not sign the same counterpart. In the event that any signature is delivered by facsimile transmission or by e-mail delivery of a “.pdf” format data file, such signature shall create a valid and binding obligation of the party executing (or on whose behalf such signature is executed) with the same force and effect as if such facsimile or “.pdf” signature page were an original thereof.

 

(h)         Governing Law. All questions concerning the construction, validity, enforcement and interpretation of this Agreement shall be determined in accordance with the provisions of the Purchase Agreement.

 

(i)         Cumulative Remedies. The remedies provided herein are cumulative and not exclusive of any other remedies provided by law.

 

(j)         Severability. If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction to be invalid, illegal, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions set forth herein shall remain in full force and effect and shall in no way be affected, impaired or invalidated, and the parties hereto shall use their reasonable best efforts to find and employ an alternative means to achieve the same or substantially the same result as that contemplated by such term, provision, covenant or restriction. It is hereby stipulated and declared to be the intention of the parties that they would have executed the remaining terms, provisions, covenants and restrictions without including any of such that may be hereafter declared invalid, illegal, void or unenforceable.

 

(k)         Headings. The headings in this Agreement are for convenience only, do not constitute a part of the Agreement and shall not be deemed to limit or affect any of the provisions hereof.

 

54

 

 

(o)         Independent Nature of Holders’ Obligations and Rights. The obligations of each Holder hereunder are several and not joint with the obligations of any other Holder hereunder, and no Holder shall be responsible in any way for the performance of the obligations of any other Holder hereunder. Nothing contained herein or in any other agreement or document delivered at any closing, and no action taken by any Holder pursuant hereto or thereto, shall be deemed to constitute the Holders as a partnership, an association, a joint venture or any other kind of group or entity, or create a presumption that the Holders are in any way acting in concert or as a group or entity with respect to such obligations or the transactions contemplated by this Agreement or any other matters, and the Company acknowledges that the Holders are not acting in concert or as a group, and the Company shall not assert any such claim, with respect to such obligations or transactions. Each Holder shall be entitled to protect and enforce its rights, including without limitation the rights arising out of this Agreement, and it shall not be necessary for any other Holder to be joined as an additional party in any proceeding for such purpose. The use of a single agreement with respect to the obligations of the Company contained was solely in the control of the Company, not the action or decision of any Holder, and was done solely for the convenience of the Company and not because it was required or requested to do so by any Holder. It is expressly understood and agreed that each provision contained in this Agreement is between the Company and a Holder, solely, and not between the Company and the Holders collectively and not between and among Holders.

 

 

********************

(Signature Pages Follow)

 

55

 

 

IN WITNESS WHEREOF, the parties have executed this Registration Rights Agreement as of the date first written above.

 

	 	
			MULLEN TECHNOLOGIES, INC.

				 
	 	 	 	 
	 	
			By:

				
			 

				 
	 	 	
			Name:

				 
	 	 	
			Title:

				 

 

 

 

[SIGNATURE PAGE OF HOLDERS FOLLOWS]

 

56

 

 

[SIGNATURE PAGE OF HOLDERS]

 

 

	Name of Holder:	 

 

 

	Signature of Authorized Signatory of Holder:	 

 

 

	Name of Authorized Signatory:	 

 

 

	Title of Authorized Signatory:	 

 

 

 

[SIGNATURE PAGES CONTINUE]

 

57

 

 

Annex A

 

Plan of Distribution

 

Each Selling Stockholder (the “Selling Stockholders”) of the securities and any of their pledgees, assignees and successors-in-interest may, from time to time, sell any or all of their securities covered hereby on the principal Trading Market or any other stock exchange, market or trading facility on which the securities are traded or quoted or in private transactions. These sales may be at fixed or negotiated prices. A Selling Stockholder may use any one or more of the following methods when selling securities:

 

	 	
			•

				
			ordinary brokerage transactions and transactions in which the broker-dealer solicits purchasers;

			

 

	 	
			•

				
			block trades in which the broker-dealer will attempt to sell the securities as agent but may position and resell a portion of the block as principal to facilitate the transaction;

			

 

	 	
			•

				
			purchases by a broker-dealer as principal and resales by the broker-dealer for its account;

			

 

	 	
			•

				
			an exchange distribution in accordance with the rules of the applicable exchange;

			

 

	 	
			•

				
			privately negotiated transactions;

			

 

	 	
			•

				
			settlement of short sales;

			

 

	 	
			•

				
			in transactions through broker-dealers that agree with the Selling Stockholders to sell a specified number of such securities at a stipulated price per security;

			

 

	 	
			•

				
			through the writing or settlement of options or other hedging transactions, whether through an options exchange or otherwise;

			

 

	 	
			•

				
			a combination of any such methods of sale; or

			

 

	 	
			•

				
			any other method permitted pursuant to applicable law.

			

 

 

 

 

The Selling Stockholders may also sell securities under Rule 144 under the Securities Act of 1933, as amended (the “Securities Act”) or any other exemption from registration, if available, rather than under this prospectus.

 

Broker-dealers engaged by the Selling Stockholders may arrange for other broker-dealers to participate in sales. Broker-dealers may receive commissions or discounts from the Selling Stockholders (or, if any broker-dealer acts as agent for the purchaser of securities, from the purchaser) in amounts to be negotiated, but, except as set forth in a supplement to this Prospectus, in the case of an agency transaction not in excess of a customary brokerage commission in compliance with FINRA Rule 2121; and in the case of a principal transaction, a markup or markdown in compliance with FINRA Rule 2121.

 

In connection with the sale of the securities or interests therein, the Selling Stockholders may enter into hedging transactions with broker-dealers or other financial institutions, which may in turn engage in short sales of the securities in the course of hedging the positions they assume. The Selling Stockholders may also sell securities short and deliver these securities to close out their short positions, or loan or pledge the securities to broker-dealers that in turn may sell these securities. The Selling Stockholders may also enter into option or other transactions with broker-dealers or other financial institutions or create one or more derivative securities which require the delivery to such broker-dealer or other financial institution of securities offered by this prospectus, which securities such broker-dealer or other financial institution may resell pursuant to this prospectus (as supplemented or amended to reflect such transaction).

 

The Selling Stockholders and any broker-dealers or agents that are involved in selling the securities may be deemed to be “underwriters” within the meaning of the Securities Act in connection with such sales. In such event, any commissions received by such broker-dealers or agents and any profit on the resale of the securities purchased by them may be deemed to be underwriting commissions or discounts under the Securities Act. Each Selling Stockholder has informed the Company that it does not have any written or oral agreement or understanding, directly or indirectly, with any person to distribute the securities.

 

The Company is required to pay certain fees and expenses incurred by the Company incident to the registration of the securities. The Company has agreed to indemnify the Selling Stockholders against certain losses, claims, damages and liabilities, including liabilities under the Securities Act.

 

Because Selling Stockholders may be deemed to be “underwriters” within the meaning of the Securities Act, they will be subject to the prospectus delivery requirements of the Securities Act including Rule 172 thereunder. We will make copies of this prospectus available to the Selling Stockholders and have informed them of the need to deliver a copy of this prospectus to the Buyer at or prior to the time of the sale (including by compliance with Rule 172 under the Securities Act). In addition, any securities covered by this prospectus which qualify for sale pursuant to Rule 144 under the Securities Act may be sold under Rule 144 rather than under this prospectus. The Selling Stockholders have advised us that there is no underwriter or coordinating broker acting in connection with the proposed sale of the resale securities by the Selling Stockholders.

 

 

 

 

We agreed to keep this prospectus effective until the earlier of (i) the date on which the securities may be resold by the Selling Stockholders without registration and without regard to any volume or manner-of-sale limitations by reason of Rule 144, without the requirement for the Company to be in compliance with the current public information under Rule 144 under the Securities Act or any other rule of similar effect or (ii) all of the securities have been sold pursuant to this prospectus or Rule 144 under the Securities Act or any other rule of similar effect. The resale securities will be sold only through registered or licensed brokers or dealers if required under applicable state securities laws. In addition, in certain states, the resale securities covered hereby may not be sold unless they have been registered or qualified for sale in the applicable state or an exemption from the registration or qualification requirement is available and is complied with.

 

Under applicable rules and regulations under the Exchange Act, any person engaged in the distribution of the resale securities may not simultaneously engage in market making activities with respect to the Company’s common stock for the applicable restricted period, as defined in Regulation M, prior to the commencement of the distribution. In addition, the Selling Stockholders will be subject to applicable provisions of the Exchange Act and the rules and regulations thereunder, including Regulation M, which may limit the timing of purchases and sales of the Company’s common stock by the Selling Stockholders or any other person.

 

 

 

 

Annex B 

 

MULLEN TECHNOLOGIES, INC.

 

Selling Stockholder Notice and Questionnaire

 

The undersigned beneficial owner of common stock (the “Registrable Securities”) of Mullen Technologies, Inc., a California corporation (the “Company”), understands that the Company has filed or intends to file with the Securities and Exchange Commission (the “Commission”) a registration statement (the “Registration Statement”) for the registration and resale under Rule 415 of the Securities Act of 1933, as amended (the “Securities Act”), of the Registrable Securities, in accordance with the terms of the Registration Rights Agreement (the “Registration Rights Agreement”) to which this document is annexed. A copy of the Registration Rights Agreement is available from the Company upon request at the address set forth below. All capitalized terms not otherwise defined herein shall have the meanings ascribed thereto in the Registration Rights Agreement.

 

Certain legal consequences arise from being named as a selling stockholder in the Registration Statement and the related prospectus. Accordingly, holders and beneficial owners of Registrable Securities are advised to consult their own securities law counsel regarding the consequences of being named or not being named as a selling stockholder in the Registration Statement and the related prospectus.

 

NOTICE

 

The undersigned beneficial owner (the “Selling Stockholder”) of Registrable Securities hereby elects to include the Registrable Securities owned by it in the Registration Statement. The undersigned hereby provides the following information to the Company and represents and warrants that such information is accurate:

 

QUESTIONNAIRE 

 

	
			1.

				
			Name.

				 
	 	 	 
	 	
			(a)

				
			Full Legal Name of Selling Stockholder

			
	 	 	 
	 	 	 
	 	 	 
	 	
			(b)

				
			Full Legal Name of Registered Holder (if not the same as (a) above) through which Registrable Securities are held:

			
	 	 	 
	 	 	 
	 	 	 
	 	
			(c)

				
			Full Legal Name of Natural Control Person (which means a natural person who directly or indirectly alone or with others has power to vote or dispose of the securities covered by this Questionnaire):

			
	 	 	 
	 	 	 

 

 

 

 

2. Address for Notices to Selling Stockholder:

 

	 	 
	 	 
	 	 
	 	 
	 	 
	 	 
	Address:	 

 

	 	 
	 	 
	 	 
	 	 
	Telephone:	 

 

	Email:	 

 

	Fax:	 

 

	Contact Person:	 

 

3. Broker-Dealer Status: 

 

	 	
			(a)

				
			Are you a broker-dealer?

			

 

Yes    ☐              No    ☐

 

	 	
			(b)

				
			If “yes” to Section 3(a), did you receive your Registrable Securities as compensation for investment banking services to the Company?

			

 

Yes    ☐              No    ☐

 

	 	
			Note:    

				
			If “no” to Section 3(b), the Commission’s staff has indicated that you should be identified as an underwriter in the Registration Statement.

			

 

	 	
			(c)

				
			Are you an affiliate of a broker-dealer?

			

 

Yes    ☐             No    ☐

 

	 	
			(d)

				
			If you are an affiliate of a broker-dealer, do you certify that you purchased the Registrable Securities in the ordinary course of business, and at the time of the purchase of the Registrable Securities to be resold, you had no agreements or understandings, directly or indirectly, with any person to distribute the Registrable Securities?

			

 

Yes    ☐              No    ☐

 

	 	
			Note:    

				
			If “no” to Section 3(d), the Commission’s staff has indicated that you should be identified as an underwriter in the Registration Statement.

			

 

 

 

 

	
			4.

				
			Beneficial Ownership of Securities of the Company Owned by the Selling Stockholder.

			 

			Please state the number of securities of the Company beneficially owned by the Selling Stockholder, regardless of the time acquired or the source from which derived.

			
	 	 	 
	 	
			(a)

				
			Number of shares of Common Stock beneficially owned:

			
	 	 	 
	 	 	 
	 	 	 
	 	
			(b)

				
			Number of shares of Common Stock beneficially owned to be registered pursuant to the Registration Statement (if not the same as 4(a) above):

			
	 	 	 
	 	 	 

 

“Beneficial ownership” of a security means a person’s ability, directly or indirectly through any contract, arrangement, understanding, relationship or otherwise, to exercise alone or together with others:

 

	 	
			•

				
			voting power, which includes the power to vote, or to direct the voting of, a security; or

			

 

	 	
			•

				
			investment power, which includes the power to dispose, or to direct the disposition, of a security.

			

 

This term also includes having the right to acquire beneficial ownership of a security within 60 days, including any right to acquire the security through the exercise of any option, warrant or right, through the conversion of a security, pursuant to the power to revoke a trust, discretionary account or similar arrangement or pursuant to the automatic termination of a trust, discretionary account or similar arrangement.

 

The above definition of beneficial ownership is very broad and may include, for example, securities held in the name of another person, such as any relative living in your home, custodians, brokers, or pledgees for your account, or any partnership, trust estate or closely-held corporation in which you have an interest or are an officer or director. You are also the beneficial owner of securities if you, directly or indirectly, create or use a trust, proxy, power of attorney, pooling arrangement or any other contract, arrangement or device with the purpose or effect of divesting yourself of beneficial ownership of such securities or preventing the vesting of such beneficial ownership. 

 

 

 

 

5. Voting and Investment Power (to be completed only if the Selling Stockholder is not a natural person): 

 

	 	
			(a)

				
			Please name each person or persons who have voting or investment power over the Common Stock beneficially owned by the Selling Stockholder. As described in Question 4 above, please note that for purposes of answering this Question 5:

			

 

	 	
			(1)

				
			Voting power includes the power to vote, or to direct the voting of, such security; and

			

 

	 	
			(2)

				
			Investment power includes the power to dispose, or to direct the disposition, of such security.

			

	 
	 
	 
	 
	 

 

	 	
			(b)

				
			For each person named above in this Question 5, please state the number of shares of Common Stock beneficially owned by the Selling Stockholder in which that person has sole voting power, shared voting power, sole investment power and/or shared investment power.

			

 

	
			Beneficial Ownership

				 	
			Number of Shares

			
	 	 	 
	
			Total number of shares as to which the person has sole voting power

				 	 
	 	 	 
	
			Total number of shares as to which the person has shared voting power

				 	 
	 	 	 
	
			Total number of shares as to which the person has sole investment power

				 	 
	 	 	 
	
			Total number of shares as to which the person has shared investment power

				 	 

 

	 	 	
			If necessary, use the blank page attached hereto as Exhibit B.

			
	 	 	 
	 	
			(c)

				
			Do you have any reason to believe that the ownership of the Common Stock of the registered holder identified in response to Question 1 above should be aggregated with the ownership of any other registered holder of the Common Stock, for purposes of describing the beneficial ownership of those shares of Common Stock in the Registration Statement? Ownership could be aggregated where there is a relationship that, as a factual matter, confers on a person a significant ability to affect how voting power or investment power over the shares will be exercised.

			
	 	 	 
	 	 	
			☐ Yes ☐ No

			
	 	 	 
	 	 	
			If “yes,” please explain below:

			
	 	 	 
	 	 	 
	 	 	 
	 	 	 
	 	 	 

 

 

 

 

	 	
			5.

				
			Relationships with the Company:

			
	 	 	 
	 	 	
			Except as set forth below, neither the undersigned nor any of its affiliates, officers, directors or principal equity holders (owners of 5% of more of the equity securities of the undersigned) has held any position or office or has had any other material relationship with the Company (or its predecessors or affiliates) during the past three years. 

			
	 	 	 
	 	 	
			State any exceptions here:

			
	 	 	 
	 	 	 
	 	 	 
	 	 	 
	 	 	 

 

“Affiliate” means a person that directly, or indirectly through one or more intermediaries, controls or is controlled by, or is under common control with, a specified person.

 

“Control” means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of an entity, whether through the ownership of voting securities, by contract or otherwise.

 

The undersigned agrees to promptly notify the Company of any inaccuracies or changes in the information provided herein that may occur subsequent to the date hereof at any time while the Registration Statement remains effective.

 

By signing below, the undersigned consents to the disclosure of the information contained herein in its answers to Items 1 through 5 and the inclusion of such information in the Registration Statement and the related prospectus and any amendments or supplements thereto. The undersigned understands that such information will be relied upon by the Company in connection with the preparation or amendment of the Registration Statement and the related prospectus and any amendments or supplements thereto.

 

 

 

 

IN WITNESS WHEREOF the undersigned, by authority duly given, has caused this Notice and Questionnaire to be executed and delivered either in person or by its duly authorized agent.

 

 

	Date:	 	 	 	Beneficial Owner:	 
	 	 	 	 	 	 
	 	 	 	By:	 	 
	 	 	 	 	Name:	 
	 	 	 	 	Title:	 

 

PLEASE FAX A COPY (OR EMAIL A .PDF COPY) OF THE COMPLETED AND EXECUTED NOTICE AND QUESTIONNAIRE, AND RETURN THE ORIGINAL BY OVERNIGHT MAIL, TO: 

 

[             ]

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00331-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00331-of-00352.parquet"}]]