WAIVER AND EXCHANGE AGREEMENT
Exhibit 10.1
This WAIVER
AND EXCHANGE AGREEMENT (the
“Agreement”) is entered into as of May 25, 2021 (the
"Effective
Date"), by and between Charlies
Holdings, Inc., a Nevada corporation (the
“Company”),
and the parties set forth on the signature pages attached hereto
(collectively, the “Holders”).
RECITALS
WHEREAS, the Holders are the registered holders and the
beneficial owners of all of the issued and outstanding shares of
the Company’s Series A Convertible Preferred Stock, par value
$0.001 per share (the “Series A
Preferred”);
WHEREAS, Pursuant to the terms of the Certificate of
Designation Preferences and Rights of the Series A Convertible
Preferred Stock (the “Series A Certificate of
Designation”), the Series
A Preferred is currently entitled to a cash dividend in the amount
of eight percent (8%) of the Stated Value, for a total cash value
of $1,649,986 (the "Dividend
Payment");
WHEREAS, certain Holders have elected to receive their
portion of the Dividend Payment in shares of the Company's common
stock, par value $0.001 ("Common
Stock"), instead of cash, as
set forth on the respective signature pages attached
hereto;
WHEREAS, the Company desires to pay to the Holders the
Dividend Payment, in the form of cash or shares of Common Stock as
set forth on the signature pages hereto, and the Holders desire to
receive the Dividend Payment in the form of payment set forth on
the signature pages thereto, as full consideration for the Dividend
Payment.
AGREEMENT
NOW,
THEREFORE, in consideration of the foregoing and for other good and
valuable consideration, the receipt and sufficiency of which is
hereby acknowledged, the Company and the Holders hereby agree as
follows:
1. Payment
of Dividend; Closing. The
Company shall pay each Holder in cash or shares of the Company's
Common Stock, as set forth next on the signature page for each
respective Holder, pursuant to the terms set forth
hereinbelow.
1.1. Exchange
in Satisfaction of Dividend Payment. Subject to the terms and conditions hereinafter
set forth, each Holder (individually a "Stock Payee", and collectively the "Stock
Payees") requesting such Stock
Payee's respective amount of the Dividend Payment (each individual
Stock Payee's respective amount the "Stock Payee
Indebtedness") to be paid in
the form of shares of Common Stock (the "Stock
Payment") hereby agrees to
consummate an exchange of such Stock Payee's right to the Stock
Payee Indebtedness in cash for shares of Common Stock (the
"Exchange"), pursuant to which the entire Stock Payee
Indebtedness shall be exchanged for that number of shares of Common
Stock (the “Shares”) equal to the total Stock Payee
Indebtedness divided by $0.0044313. In connection therewith,
subject to the terms and conditions contained herein, each Stock
Payee hereby subscribes for, and agrees to accept from the Company,
the Stock Payment, in lieu of repayment of all amounts due under
the terms of the Series A Certificate, and the Company agrees to
issue the Shares to each Stock Payee.
1.2. Delivery
of Cash Payment in Satisfaction of Dividend
Payment. Subject to
the terms and conditions herein, the Company agrees to
deliver to each Holder not
electing to receive a Stock Payment (individually a
"Cash
Payee", and collectively, the
"Cash
Payees") a cash payment (the
"Cash
Payment", and collectively with
the Stock Payment, the "Settlement
Amount") equal to each Holder's
respective portion of the Dividend Payment in cash (the
"Cash Payee
Indebtedness", and collectively
with the Stock Payee Indebtedness, the "Indebtedness")
no later than two (2) business days after the Effective Date.
Payment of the Cash Payee Indebtedness shall be in the form of a
wire transfer in immediately available funds to an account
designated by each Cash Payee on the signature pages for each Cash
Payee attached hereto.
1.3. Closing.
Subject to the terms and conditions of this Agreement, the
consummation of the transactions contemplated by this Agreement
shall take place at a closing (the “Closing”) to be held two (2) business days after
the Effective Date (the “Closing
Date”), or such later
date as agreed to by the parties in writing.
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2. Release.
2.1. Satisfaction
of Indebtedness. Upon
delivery of the Settlement Amount by the Company in accordance with
this Agreement, each Holder
hereby agrees that the Indebtedness will have been fully and completely
satisfied.
2.2. Covenants
Not to Xxx. Effective upon the delivery of the
Settlement Amount by the
Company to the Holders in accordance with this Agreement, each
Holder agrees that it shall not file suit or initiate legal
proceedings against the Company, each of the Company’s past
or present shareholders, members, predecessors, successors, parents
and subsidiaries, partners, officers, directors, managers,
employees, agents, servants, attorneys, assigns, transferees,
beneficiaries, subrogees, insurers, or underwriters solely for the
Company’s failure to deliver the Dividend Payment to any
Holder when due pursuant to the terms of the Series A Certificate
of Designation.
3. Representations
of the Parties. Each party
hereby represents and warrants to the others
that:
(a) the
execution and delivery and performance by such party of this
Agreement: (i) is within such party’s power,
(ii) has been duly authorized by all necessary action of such
party, (iii) is not in contravention of such party’s
organizational documents (as applicable), (iv) does not
violate any law or regulation, or any order or decree of any
governmental authority applicable to such party, and (v) does
not conflict with, or result in the breach or termination,
constitute or default under or accelerate any performance required
by, any agreement to which such party is bound; and
(b) This
Agreement has been duly executed and delivered by or on behalf of
such party and constitutes a legal, valid and binding obligation of
such party, enforceable against such party in accordance with its
terms except as the enforceability may be limited by bankruptcy,
insolvency, organization, moratorium and other laws affecting
creditors’ rights and remedies in general.
4. Representations of the
Stock Payees. Each Stock Payee
represents and warrants to the Company as set forth
below.
4.1. Ownership.
Each Holder is the sole legal owner of the shares of Series A
Preferred held by such Holder. Each Holder has good, valid and
marketable title to the shares of Series A Preferred held by such
Holder, free and clear of any liens, pledges, charges, security
interests, encumbrances or other adverse claims. Each Holder has
not, in whole or in part, (i) assigned, transferred,
hypothecated, pledged, exchanged or otherwise disposed of any of
the shares of Series A Preferred, or (ii) given any person or
entity any transfer order, power of attorney or other authority of
any nature whatsoever with respect to the shares of Series A
Preferred.
4.2. Purchase
for Own Account, Etc. Such
Stock Payee is purchasing the Shares for such Stock Payee’s
own account for investment purposes only and not with a view
towards the public sale or distribution thereof, except pursuant to
sales that are exempt from the registration requirements of the
Securities Act of 1933, as amended (the "Securities
Act") and/or sales registered
under the Securities Act. Such Stock Payee has substantial
experience in evaluating and investing in private placement
transactions of securities in companies similar to the Company, and
is capable of evaluating the merits and risks of its investment in
the Company. Such Stock Payee understands that it must bear the
economic risk of this investment indefinitely, unless the Shares
are registered pursuant to the Securities Act and any applicable
state securities or blue sky laws or an exemption from such
registration is available, and that the Company has no present
intention of registering the resale of any such Shares.
Notwithstanding anything in this Section 4.2 to the contrary, by
making the representations herein, such Stock Payee does not agree
to hold the Shares for any minimum or other specific term and
reserves the right to dispose of the Shares at any time in
accordance with or pursuant to a registration statement or an
exemption from the registration requirements under the Securities
Act.
4.3. Accredited
Investor Status. Such Stock
Payee is an “Accredited Investor”, as that term is
defined in Rule 501(a) of Regulation D, promulgated under the
Securities Act.
4.4. Reliance
on Exemptions. Such Stock Payee
understands that the Shares are being offered and sold to such
Stock Payee in reliance upon specific exemptions from the
registration requirements of United States federal and state
securities laws, and that the Company is relying upon the truth and
accuracy of, and such Stock Payee’s compliance with, the
representations, warranties, agreements, acknowledgments and
understandings of such Stock Payee set forth herein in order to
determine the availability of such exemptions and the eligibility
of such Stock Payee to acquire the Shares.
4.5. Information.
All materials relating to the business, finances and operations of
the Company (including the Company’s most recent Annual
Report on Form 10-K and most recent Quarterly Report on Form 10-Q)
and materials relating to the offer and sale of the Shares which
have been specifically requested by such Stock Payee or its counsel
have been made available to such Stock Payee and its counsel, if
any. Neither such inquiries nor any other investigation conducted
by such Stock Payee or its counsel or any of such Stock
Payee’s representatives shall modify, amend or affect such
Stock Payee’s right to rely on the Company’s
representations and warranties contained in Section 5, below. Such
Stock Payee understands that its investment in the Shares involves
a high degree of risk, including the risk of loss of its entire
investment in the Shares.
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4.6. Governmental
Review. Such Stock Payee
understands that no United States federal or state agency or any
other government or governmental agency has passed upon or made any
recommendation or endorsement of the Shares.
4.7. Transfer
or Resale. Such Stock Payee
understands that (i) the sale or resale of the Shares have not been
and are not being registered under the Securities Act or any state
securities laws, and the Shares may not be transferred unless (A)
the transfer is made pursuant to and as set forth in an effective
registration statement under the Securities Act covering the
Shares; or (B) such Stock Payee shall have delivered to the Company
an opinion of counsel (which opinion shall be in form, substance
and scope customary for opinions of counsel in comparable
transactions) to the effect that the Shares to be sold or
transferred may be sold or transferred pursuant to an exemption
from such registration; or (C) sold under and in compliance with
Rule 144 promulgated under the Securities Act (including any
successor rule, “Rule 144”); or (D) sold or transferred to an
affiliate of such Stock Payee that agrees to sell or otherwise
transfer the Shares only in accordance with the provisions of this
Section 4.7, and that is an Accredited Investor; and (ii) neither
the Company nor any other person is under any obligation to
register the Shares under the Securities Act or any state
securities laws.
4.8. Residency.
Such Stock Payee is a resident of the jurisdiction set forth under
such Stock Payee’s name on the Signature Page hereto executed
by such Stock Payee.
4. Representations
and Warranties of the Cash Payees. Each Cash Payee hereby represents and warrants
to the Company that each Cash Payee is the sole legal of the shares
of Series A Preferred held by such Cash Payee. Each Cash Payee has
good, valid and marketable title to the shares of Series A
Preferred held by such Cash Payee, free and clear of any liens,
pledges, charges, security interests, encumbrances or other adverse
claims. Each Cash Payee has not, in whole or in part,
(i) assigned, transferred, hypothecated, pledged, exchanged or
otherwise disposed of any of the shares of Series A Preferred, or
(ii) given any person or entity any transfer order, power of
attorney or other authority of any nature whatsoever with respect
to the shares of Series A Preferred.
5. Representations
and Warranties of the Company.
The Company hereby represents and warrants to the Holders as set
forth below.
(a) Organization
and Qualification. The Company
has been duly incorporated and is validly existing and in good
standing under the laws of the state of Nevada, with full corporate
power and authority to own, lease and operate its properties and to
conduct its business as currently conducted, and is duly registered
and qualified to conduct its business and is in good standing in
each jurisdiction or place where the nature of its properties or
the conduct of its business requires such registration or
qualification, except where the failure to register or qualify
would not have a Material Adverse Effect. For purposes of this
Agreement, “Material Adverse
Effect” shall mean any
event, occurrence, fact, condition or change that, individually or
in the aggregate, results, or would reasonably be likely to result,
in a material adverse effect on (i) the Current Shares or the
Exchange Shares, (ii) the ability of the Company to perform its
obligations under this Agreement or (iii) the condition (financial
or otherwise) or in the earnings, prospects, business, properties,
surplus or results of operations of the
Company;
(b) The
Company has complied and will comply with all applicable federal
and state securities laws in connection with the offer, issuance
and delivery of the Shares hereunder. No registration under the
Securities Act is required for the offer and sale of the Shares by
the Company to the Holders as contemplated hereby.
(c) The
Shares shall not contain any legend (i) while a registration
statement covering the resale of such security is effective under
the Securities Act, (ii) following any sale of such Shares pursuant
to Rule 144 (iii) if such Shares are eligible for sale under Rule
144 without volume or manner-of-sale restrictions, or (iv) if such
legend is not required under applicable requirements of the
Securities Act (including judicial interpretations and
pronouncements issued by the staff of the Commission). The Company
shall cause its counsel to issue a legal opinion to the
Company’s transfer agent and/or the Holders if required by
the transfer agent to effect the removal of the legend hereunder,
or if requested by Holder.
6. Governing
Law; Jurisdiction; Prevailing Parties. This Agreement shall be governed by and
construed exclusively in accordance with the internal laws of the
state of California, without regard to the conflicts of laws
principles thereof. The parties hereby irrevocably agree that any
suit or proceeding arising directly and/or indirectly pursuant to
or under this Agreement shall be brought solely in a federal or
state court located in the County of Orange, State of California.
By execution hereof, the parties hereby covenant and irrevocably
submit to the jurisdiction of the federal and state courts located
in the County of Orange, State of California, and agree that any
process in any such action may be served upon any of them
personally, or by certified mail or registered mail addressed to
them or their agent, returned receipt requested, with the same
force and effect as personally served upon them in the state of
California. The parties hereto expressly and irrevocably waive any
claim that any such jurisdiction is not a convenient forum for any
such suit or proceeding and any defense or lack of jurisdiction
with respect thereto. In the event of any such action or
proceeding, the party prevailing therein shall be entitled to
payment from the other party to such action of its reasonably
attorney’s fees and disbursements.
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7. Further
Assurances. Each party agrees
that it shall do and preform or cause to be done and performed, all
such further acts and things, and shall execute and deliver all
such other agreements, certificate, instruments, waivers and
documents, as the other parties many reasonably request in order to
carry out the intent and accomplish the purposes of this
Agreement.
8. Successors
and Assigns. The terms and
conditions of this Agreement shall inure to the benefit of and be
binding upon their respective successors and assigns, including any
transferees of the Series A Preferred.
9. Notices.
Any notice required or permitted by
this Agreement shall be in writing and shall be deemed sufficient
upon delivery, when delivered personally or by overnight courier or
sent by facsimile (upon customary confirmation of receipt),
addressed to the party to be notified at such party’s address
as set forth on the signature page hereto, or as subsequently
modified by written notice from such
party.
10. Representation
by Counsel. Prior to executing
this Agreement, the Company and each of the Holders have had the
benefit of the advice and counsel of their own independent
attorneys in understanding and negotiating the terms of this
Agreement.
11. Entire
Agreement. This Agreement and
the documents referred to herein, constitute the entire agreement
between the parties pertaining to the subject matter
hereof.
12. Severability.
The holding of any provision of this Agreement to be invalid or
unenforceable by a court of competent jurisdiction shall not affect
any other provision of this Agreement, which shall remain in full
force and effect. If any provision of this Agreement shall be
declared by a court of competent jurisdiction to be invalid,
illegal or incapable of being enforced in whole or in part, such
provision shall be interpreted so as to remain enforceable to the
maximum extent permissible consistent with applicable law and the
remaining conditions and provisions or portions thereof shall
nevertheless remain in full force and effect and enforceable to the
extent they are valid, legal and enforceable, and no provisions
shall be deemed dependent upon any other covenant or provision
unless so expressed herein.
13. Counterparts;
Electronic Execution. This
Agreement may be executed in any number of counterparts and by
different parties on separate counterparts, each of which, when
executed and delivered, shall be deemed to be an original, and all
of which, when taken together, shall constitute but one and the
same Agreement. Delivery of an executed counterpart of this
Agreement by telefacsimile or other electronic method of
transmission (including without limitation a PDF attachment) shall
be equally as effective as delivery of an original executed
counterpart of this Amendment.
[Signature Pages Follow]
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IN
WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed and delivered as of the date in and set forth
above.
CHARLIES HOLDINGS, INC.
By:
Name:
Xxxxx Xxxxx
Title:
Chief Financial Officer
HOLDER:
(Print
or Type Name of Holder)
By:
Name:
Title:
ADDRESS:
Telephone:
Facsimile:
E-Mail:
Attention:
Jurisdiction:
_________________________
Number
of shares of Series A Preferred
Held:
Dividend
Payment
Amount:
Cash
Payment Election: Amount of Cash
Payment:
Stock
Payment Election: Number of Shares of Common
Stock:
Tax
Identification Number (for Stock
Payees):
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