BACKSTOP INVESTMENT AGREEMENT Dated as of January 31, 2020 by and among HOPTO, INC. and THE INVESTORS NAMED HEREIN BACKSTOP INVESTMENT AGREEMENT
Dated as of January 31, 2020
by and among
HOPTO, INC.
and
THE INVESTORS NAMED HEREIN
BACKSTOP INVESTMENT AGREEMENT, dated as of January 31, 2020 (this “Agreement”), by and among HopTo, Inc., a Delaware corporation (the “Company”), and the several Investors listed in Annex 1 (the “Investors”). Certain capitalized terms are defined in Section 8.16.
The Company proposes to commence an offering to each of the holders (the “Eligible Holders”) of its common stock, par value $0.0001 per share (the “Common Stock”), and warrants of record as of the close of business on a record date to be determined as provided herein (the “Record Date”), of non-transferable rights (the “Rights”) to subscribe for and purchase additional shares of Common Stock (the “New Shares”) at a subscription price per share equal to $0.30 (the “Subscription Price”) for an aggregate offering amount of $2.6 million (the “Aggregate Offering Amount”) (such offering, as further defined in Article 1 and by other transactions contemplated hereby, the “Rights Offering”).
As part of the Rights Offering, the Company will distribute to each of the Eligible Holders, at no charge, one Right for each share of Common Stock held by such Eligible Holder and for each share of Common Stock underlying each warrant, in each case, owned as of the Record Date, and each Right will entitle the holder thereof to purchase at the Subscription Price New Shares from the Company (with fractional shares rounded down to the nearest whole number of New Shares and the aggregate Subscription Price adjusted accordingly) (the “Basic Subscription Privilege”).
In order to facilitate the Rights Offering, the Company has requested each Investor to agree, and each Investor hereby agrees, severally and not jointly, on the terms of and subject to the conditions in this Agreement, to purchase New Shares that are not purchased by the Eligible Holders upon the exercise of Rights pursuant to the Basic Subscription Privilege (the “Unsubscribed Shares”), up to the amount set forth opposite such Investor’s name on Annex 1 (the “Investor Backstop Commitment”) from the Company at the Subscription Price and subject to proration of Unsubscribed Shares among all other Investors if the amount of Unsubscribed Shares is less than the total amount of all Investor Backstop Commitments.
In consideration of the foregoing and the mutual covenants in this Agreement, the parties, intending to be legally bound, agree as follows:
1. | The Rights Offering and Backstop Commitment |
1.1 | The Rights Offering. |
(a) | As promptly as practicable after the date of this Agreement, the Company shall use commercially reasonable efforts to prepare and file with the Securities and Exchange Commission (the “SEC”) a registration statement (including each amendment and supplement thereto, the “Registration Statement”) under the Securities Act of 1933 (the “Securities Act”) on Form S-1, covering the offer and sale of the Rights and the New Shares in the Rights Offering. The Company shall not permit any securities to be included in the Registration Statement other than the Rights and the New Shares to be issued in the Rights Offering. The Registration Statement shall be provided to the Investors and their counsel prior to its filing with the SEC, and the Investors and their counsel shall be given a reasonable opportunity to review and comment upon the Registration Statement (and any post-effective amendments). The Company shall use commercially reasonable efforts to, as promptly as practicable, (i) respond to comments to the Registration Statement raised by the staff of the SEC and (ii) cause the Registration Statement and any post-effective amendment to be declared effective by the SEC. |
1 |
(b) | The Investors shall provide to the Company such information and other assistance as it may reasonably require in connection with the preparation and filing of the Registration Statement and the final prospectus relating to the Rights Offering filed pursuant to Rule 424 of the Securities Act (as amended or supplemented, the “Prospectus”). At the time such information is provided and at the respective times the Registration Statement and any post-effective amendments thereto become effective and as of the date of the Prospectus, no such information provided by the Investors shall include 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 not misleading. |
(c) | At the respective times the Registration Statement and any post-effective amendments thereto become effective, the Registration Statement shall comply in all material respects with the requirements of Form S-1, and the Registration Statement and any documents incorporated by reference therein shall not include an untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in light of the circumstances in which they were made, not misleading; provided, that the Company shall make no such representation with respect to information provided to it by the Investors for inclusion therein. The Prospectus, as of its date, shall not include an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; provided, that the Company shall make no such representation with respect to information provided to it by the Investors for inclusion therein. The previous two sentences are referred to as the “10b-5 Representation.” |
(d) | Promptly following the date on which the Registration Statement is declared effective by the SEC (the “Registration Effective Date”), the Company shall print and file with the SEC the Prospectus, distribute the Prospectus to the Company’s stockholders of record as of the Record Date and thereafter promptly commence a rights offering on the following terms: (i) the Company shall distribute, at no charge, one Right to each holder of record of Common Stock for each share of Common Stock held by such holder as of the Record Date, (ii) each Right shall entitle the holder thereof to purchase, at the election of such holder, such number of shares of Common Stock at the Subscription Price thereby entitling such holders of Rights, in the aggregate, to subscribe for an aggregate number of shares (the “Aggregate Offered Shares”) of Common Stock equal to $2.6 million divided by the Subscription Price; provided that no fractional shares of Common Stock shall be issued pursuant to the exercise of any Rights, (iii) each such Right shall be non-transferable (provided that unexercised rights will be transferable only to the extent that the Aggregate Offered Shares to which they are attached are transferred from and after the Record Date), (iv) the rights offering shall remain open for at least sixteen days, but no more than thirty days or such longer period as required by Law (the “Subscription Period”), (v) no Person (other than the Investors and their Affiliates, who may acquire New Shares as contemplated by this Agreement) will be entitled to exercise the Rights to the extent the exercise thereof would cause such Person to acquire Beneficial Ownership, or ownership for purposes of section 382 of the Internal Revenue Code of 1986, as amended, in excess of 4.9% of the outstanding Common Stock after giving effect to the consummation of the Rights Offering and the Backstop Commitment, and (vi) any Person (other than the Investors and their Affiliates) who is, on the date of this Agreement, the Beneficial Owner of in excess of 4.9% of the outstanding Common Stock shall be entitled to exercise the Rights only to the extent necessary to maintain her, his or its proportionate interest in the Common Stock on the date hereof. |
2 |
(e) | Prior to the termination of this Agreement, the Company shall not amend any of the terms of the Rights Offering described in Section 1.1 (d), terminate the Rights Offering or waive any material conditions to the closing of the Rights Offering, without the prior written consent of Novelty Capital Partners LP on behalf of all of the Investors. Subject to the terms and conditions of the Rights Offering, the Company shall effect the closing of the Rights Offering as promptly as practicable following the end of the Subscription Period. The closing of the Rights Offering shall occur at the time, for the Subscription Price and in the manner and on the terms in Section 1.1 (d), as shall be set forth in the Prospectus. |
(f) | The Company shall pay all of its expenses associated with the Registration Statement, Prospectus, the Rights Offering and the other transactions contemplated hereby, including filing and printing fees, fees and expenses of any subscription and information agents, its counsel and accounting fees and expenses and costs associated with clearing the Common Stock offered thereby for sale under applicable state securities Laws. |
1.2 | Backstop Commitment. |
(a) | Subject to the consummation of the Rights Offering and the conditions in this Agreement, each Investor shall, severally and not jointly, purchase from the Company pursuant to the Rights Offering, and the Company shall issue to such Investor via the Rights Offering, at the Subscription Price, such Investor’s Pro Rata Portion of an aggregate number of New Shares (the “Backstop Commitment”) equal to (i) $2.41 million minus the aggregate proceeds of the Rights Offering which are in excess of $190,000, divided by (ii) the Subscription Price. At the closing of the Rights Offering, the Company shall issue to the Investors a notice (the “Subscription Notice”) setting forth the number of New Shares subscribed for in the Rights Offering other than pursuant to the Backstop Commitment and the aggregate proceeds of the Rights Offering other than pursuant to the Backstop Commitment and, accordingly, the number of shares of Common Stock to be acquired by the Investors pursuant to the Backstop Commitment at the Subscription Price at the Closing of the Rights Offering. New Shares acquired by the Investors pursuant to the Backstop Commitment are collectively referred to as the “Backstop Acquired Shares.” |
(b) | On the terms of and subject to the conditions in this Agreement, the settlement of the Backstop Commitment (the “Closing”) shall occur on the later of (i) the second Business Day following the expiration date of the Rights Offering and (ii) the date that all of the conditions to in Article 5 have been satisfied or waived (other than those conditions that by their nature are to be satisfied at the Closing), at 9:00 a.m. (Eastern time) by electronic settlement of shares and the electronic exchange of any applicable documents or at a place, time and date as shall be agreed between the Company and the Investors (the date on which the Closing occurs, the “Closing Date”). |
3 |
(c) | At the Closing (i) the Company shall issue to each Investor its Pro Rata Portion of the Backstop Acquired Shares against payment by or on behalf of such Investor of the aggregate Subscription Price for all such shares in accordance with the payment requirements of the Rights Offering, (ii) the Company shall deliver all other documents and certificates required to be delivered to the Investors pursuant to Section 5.3, and (iii) the Investors shall deliver all documents and certificates required to be delivered to the Company pursuant to Section 5.2. |
(d) | The Company shall promptly use proceeds from the Rights Offering, including amounts received from the Backstop Commitment, (i) first to pay costs of the Rights Offering and this Agreement and (ii) second, any remaining proceeds may be used for general corporate purposes (including acquisitions). |
2. | Representations and Warranties of the Company. Except as Previously Disclosed, the Company represents and warrants to the Investors that: |
2.1 | Organization. The Company and each of its Subsidiaries is duly incorporated or organized and validly existing as a corporation or other entity in good standing under the Laws of its jurisdiction of organization and has all corporate power and authority to own its property and assets and conduct its business as currently conducted, and, except as would not, individually or in the aggregate, have or reasonably be expected to have a Material Adverse Effect, is duly qualified as a foreign corporation for the transaction of business and is in good standing under the Laws of each other jurisdiction in which it owns or leases properties, or conducts any business so as to require such qualification. |
2.2 | Authorization. The Company has all corporate power and authority to execute and deliver this Agreement and to perform its obligations hereunder. The execution and delivery of each of this Agreement and performance by the Company of its obligations hereunder and the consummation of the transactions contemplated hereby have been duly authorized by all necessary corporate action on the part of the Company, and no further approval or authorization is required on the part of the Company. This Agreement constitutes the valid and binding obligation of the Company, enforceable against the Company in accordance with its terms, except as such may be limited by bankruptcy, insolvency, fraudulent conveyance, reorganization or other similar Laws affecting creditors’ rights generally and by general equitable principles and except as may be limited by applicable Law and public policy (collectively, the “Enforceability Exceptions”). No vote or consent of stockholders of the Company is required in connection with any of the transactions contemplated by this Agreement under the Company’s certificate of incorporation, the General Corporation Law of the State of Delaware (the “DGCL”), the rules and regulations of the OTC Markets or otherwise. |
2.3 | Capitalization. |
(a) | As of the date of this Agreement, (i) the Company is authorized to issue up 195,000,000 shares of Common Stock and has 9,954,866 shares of Common Stock issued and outstanding and (ii) the Company is authorized to issue up to 5,000,000 shares of preferred stock, par value $0.01 per share (the “Preferred Stock”) and no shares of Preferred Stock are issued or outstanding. As of the date of this Agreement, there are outstanding options to purchase an aggregate of 106,077 shares of Common Stock and warrants to purchase 481,335 shares of Common Stock. All of the outstanding shares of Common Stock and all of the outstanding warrants have been duly and validly authorized and issued and are fully paid and non-assessable and were not issued in violation of any preemptive rights, resale rights, rights of first refusal or similar rights. |
4 |
(b) | All of the outstanding shares of capital stock of each of the Company’s Subsidiaries has been duly and validly authorized and issued, are fully paid and non-assessable, were not issued in violation of any pre-emptive rights, resale rights, rights of first refusal or similar rights, and are owned directly or indirectly by the Company, free and clear of all liens, encumbrances, equities or claims (collectively, “Liens”), except for Liens in favor of the indenture trustee with respect to the Notes. As of the date of this Agreement, the Company does not Beneficially Own, directly or indirectly, any equity interests of any Person that is not a Subsidiary of the Company. |
2.4 | Valid Issuance of Shares. The Backstop Acquired Shares will be, as of the date of their issuance, duly authorized by all necessary corporate action on the part of the Company and, when issued and delivered by the Company against payment therefor as provided in this Agreement, (a) will be validly issued, fully paid and nonassessable, (b) will be free and clear of all Liens and (c) will not be subject to any statutory or contractual preemptive rights or other similar rights of stockholders. |
2.5 | Non-Contravention; Governmental Authorizations. |
(a) | The execution and delivery of this Agreement and the performance by the Company of its obligations under this Agreement and the consummation of the transactions contemplated hereby will not: (i) conflict with or violate any provision of the Company’s certificate of incorporation or by-laws, each as amended; (ii) conflict with or result in any breach of, or constitute a default (or an event which with notice or lapse of time or both would become a default) under, or give rise to any right to termination, acceleration or cancellation under any agreement, lease, mortgage, license, indenture or any other contract to which the Company or any of its Subsidiaries is a party or by which their respective properties may be bound or affected; or (iii) conflict with or violate any Law applicable to the Company or its Subsidiaries, except, in the case of clause (ii) or (iii), as would not, individually or in the aggregate, have or reasonably be expected to have a Material Adverse Effect. |
(b) | Each approval, consent, order, authorization, designation, declaration or filing by or with any Governmental Entity necessary in connection with the execution and delivery by the Company of this Agreement and the consummation of the transactions contemplated hereby (except for such additional steps as may be necessary to register or qualify the Rights and shares of Common Stock to be issued in connection with the Rights Offering and the Backstop Acquired Shares under federal securities, state securities or blue sky Laws) has been obtained or made and is in full force and effect. |
2.6 | Periodic Filings; Financial Statements; Undisclosed Liabilities. |
(a) | Since January 1, 2017, the Company has timely filed all reports, registrations, documents, filings, statements and submissions, together with any required amendments thereto (collectively the “Company SEC Documents”), that were required to be filed with the SEC under the Securities Act and the Securities Exchange Act of 1934 (the “Exchange Act”). As of their respective filing dates, the Company SEC Documents complied in all material respects with the requirements of the Securities Act and the Exchange Act, as applicable, and none of the Company SEC Documents contained, when filed with the SEC, and if amended, as of the date of such amendment, any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements made therein, in light of the circumstances in which they were made, not misleading. |
5 |
6 |
3. | Representations and Warranties of the Investors. Each Investor (solely with respect to itself) represents and warrants to the Company and each other Investor that: |
3.1 | Organization and Authority. If such Investor is not a natural person, such Investor is duly formed and validly existing in good standing as a limited liability company under the laws of the state of its organization and has all organizational power and authority to own its property and assets and conduct its business as currently conducted and, except where the failure to be qualified or in good standing would not or reasonably be expected to prevent, materially delay or materially impede the performance by such Investor of its obligations under this Agreement or the consummation of the transactions contemplated hereby. |
3.2 | Authorization. Such Investor has all power and authority to execute and deliver this Agreement and to perform its obligations under this Agreement. The execution, delivery and performance by such Investor of this Agreement and the consummation of the transactions contemplated hereby have been duly authorized by all necessary action of such Investor’s board, manager, trustee, members, stockholders, partners, beneficiaries or similar Persons, as the case may be, and no further approval or authorization by any of its members, partners, stockholders, beneficiaries or similar Persons is required. If such Investor is a natural person, such Investor has all necessary power and has received all necessary consents under community property and similar domestic relations laws. This Agreement constitutes the valid and binding obligation of such Investor, enforceable against such Investor in accordance with its terms, except as such may be limited by the Enforceability Exceptions. |
3.3 | Non-Contravention; Governmental Authorization. |
(a) | The execution and delivery by such Investor and performance by such Investor of its obligations under this Agreement and the consummation of the transactions contemplated hereby will not: (i) conflict with or violate any provision of its certificate of formation, limited liability company agreement or similar governing documents (where applicable) or community property or other domestic relations Law (where applicable); (ii) conflict with or result in any breach of, or constitute a default (or an event which with notice or lapse of time or both would become a default) under, or give rise to any right to termination, acceleration or cancellation under any agreement, lease, mortgage, license, indenture or any other contract to which such Investor is a party or by which its properties may be bound or affected; or (iii) conflict with or violate any Law applicable to such Investor, except in the case of clause (ii) or (iii), as would not, individually or in the aggregate, reasonably be expected to materially and adversely affect such Investor’s ability to perform its obligations under this Agreement or consummate the transactions contemplated hereby on a timely basis. |
(b) | Each approval, consent, order, authorization, designation, declaration or filing by or with any Governmental Entity necessary in connection with the execution and delivery by such Investor of this Agreement and the consummation of the transactions contemplated herein (except for such additional steps as may be necessary to register or qualify the Rights and shares of Common Stock to be issued in connection with the Rights Offering and the Backstop Acquired Shares under federal securities, state securities or blue sky Laws) has been obtained or made and is in full force and effect. |
7 |
8 |
9 |
10 |
(c) | the Registration Statement shall have been declared effective by the SEC and shall continue to be effective and no stop order shall have been entered by the SEC with respect thereto; |
(d) | OTC Markets shall have confirmed it has no objections or comments to the Rights Offering prior to the closing thereof; and |
(e) | the Rights Offering shall have been consummated in accordance with the terms of and subject to the conditions in Section 1.1(d). |
5.2 | Conditions to the Obligations of the Company. The obligations of the Company to effect the Closing shall be subject to the following conditions: |
(a) | The representations of the Investors in Section 1.1(b) shall be true and correct (i) in the case of the Registration Statement and any post-effective amendments thereto, at the respective times referred to in Section 1.1(c), and in the case of the Prospectus, as of its date, and (ii) as of the Closing Date, except that in the case of this clause (ii) all references to any time period or date referred to in Section 1.1(b) shall be deemed to be references to the Closing Date. All other representations and warranties of the Investors contained in this Agreement (A) that are qualified by materiality, material adverse effect or words of similar import, shall be true and correct as of the date hereof and as of the Closing (except to the extent that any such representation and warranty expressly speaks as of an earlier date, in which case such representation and warranty shall be true and correct as of such earlier date) and (B) that are not qualified by materiality, material adverse effect or words of similar import, shall be true and correct in all material respects as of the date hereof and as of the Closing (except to the extent that any such representation and warranty expressly speaks as of an earlier date, in which case such representation and warranty shall be true and correct in all material respects as of such earlier date). |
(b) | Each of the Investors shall have performed in all material respects all of its obligations hereunder required to be performed by it, and complied with the covenants hereunder applicable to it in all material respects, at or prior to the Closing. |
(c) | Since the date of this Agreement, there shall not have been any material adverse effect or any effect that would, individually or in the aggregate, reasonably be expected to materially and adversely affect the Investors’ ability to perform their obligations under this Agreement or consummate the transactions contemplated hereby on a timely basis. |
(d) | The Company shall have received a certificate, signed by an authorized person of each Investor, certifying as to the matters set forth in Sections 5.2(a), 5.2(b) and 5.2(c). |
11 |
5.3 | Conditions to the Obligations of the Investors. The obligations of the Investors to effect the Closing shall be subject to the following conditions: |
(a) | The 10b-5 Representation shall be true and correct in all respects (i) in the case of the Registration Statement and any post-effective amendments thereto, at the respective times referred to in Section 1.1(c), and in the case of the Prospectus, as of its date, and (ii) as of the Closing Date, except that in the case of this clause (ii) all references to any time period or date referred to in Section 1.1(c) shall be deemed to be references to the Closing Date. All other representations and warranties of the Company contained in this Agreement (A) that are qualified by materiality, Material Adverse Effect or words of similar import, shall be true and correct as of the date hereof and as of the Closing (except to the extent that any such representation and warranty expressly speaks as of an earlier date, in which case such representation and warranty shall be true and correct as of such earlier date) and (B) that are not qualified by materiality, Material Adverse Effect or words of similar import, shall be true and correct in all material respects as of the date hereof and as of the Closing(except to the extent that any such representation and warranty expressly speaks as of an earlier date, in which case such representation and warranty shall be true and correct in all material respects as of such earlier date). |
(b) | The Company shall have performed in all material respects all of its obligations hereunder required to be performed by it and complied with the covenants hereunder applicable to it in all material respects at or prior to the Closing. |
(c) | Since the date of this Agreement, there shall not have been any Material Adverse Effect or any Effect that would, individually or in the aggregate, have or reasonably be expected to have a Material Adverse Effect. |
(d) | The Investors shall have received a certificate, signed by an officer of the Company, certifying as to the matters set forth in Sections 5.3(a), 5.3(b) and 5.3(c). |
5.4 | Frustration of Closing Conditions. Neither the Company nor any Investor may rely on the failure of any condition in this Article 5 to be satisfied if such failure was caused by such party’s failure to act in good faith or use commercially reasonable efforts to consummate the transactions contemplated hereby. |
6. | Termination |
6.1 | Termination. This Agreement may be terminated at any time prior to the Closing, but the following termination rights may not be exercised by a party whose breach is a proximate cause of the arising of any of the following termination rights: |
(a) | by mutual written agreement of the Company and the Investors; |
(b) | by either the Company or the Investors, upon written notice to the other, in the event that the Closing does not occur on or before 2020 (the “Outside Date”); provided, that such date may be extended as of 2020 for a period of up to ninety days by either the Company or the Investors if the condition in Section 5.1(c) has not been satisfied by 2020; |
(c) | by either the Company or the Investors, upon written notice to the other party, if any Governmental Entity shall have issued any order, decree or injunction or taken any other action restraining, enjoining or prohibiting any of the transactions contemplated by this Agreement, and such order, decree, injunction or other action shall have become final and nonappealable; |
12 |
13 |
14 |
15 |
8.3 | Further Assurances. Each party hereto shall do and perform or cause to be done and performed all further acts and shall execute and deliver all other agreements, certificates, instruments and documents as any other party hereto reasonably may request in order to carry out the intent and accomplish the purposes of this Agreement and the consummation of the transactions contemplated hereby. |
8.4 | Fees and Expenses. |
(a) | Expenses. |
(i) | Regardless of whether the Closing occurs, the Company shall reimburse the Investors for all reasonable out-of-pocket fees and expenses (including attorneys’ fees and expenses) incurred by the Investors in connection with this Agreement and the transactions contemplated hereby; provided, however, that such fees and expenses shall not be reimbursed by the Company if this Agreement is terminated by the Company pursuant to Section 6.1(e). |
(ii) | Payment of the Investors’ fees and expenses by the Company pursuant to this Section 8.4 shall be made at the Closing or, if this Agreement is terminated other than by the Company pursuant to Section 6.1(e)), no later than three Business Days after delivery by the Investors to the Company of written notice of (A) demand for payment after the termination of this Agreement, and (B) reasonably detailed documentation of such fees and expenses. |
(b) | Termination Fee. |
(i) | If this Agreement is terminated per Section 6.1(f) or per Section 6.1(g), then the Company shall, simultaneously with such termination (in the case of a termination by the Company) or within one Business Day following such termination (in the case of a termination by the Investor), pay the Investors the Termination Fee. |
(ii) | Notwithstanding anything to the contrary in this Agreement, the parties hereby acknowledge that if the Termination Fee becomes payable and is paid per this Section 8.4(b), the Termination Fee (and reimbursement of expenses pursuant to Section 8.4(a) shall, absent fraud or willful breach of this Agreement, be the Investors’ sole and exclusive remedy under this Agreement. No officer or director of the Company shall be entitled to any fee hereunder and such amount otherwise payable to an officer or director of the Company shall be retained by the Company. |
(c) | Any amount that becomes payable by the Company in cash pursuant to this Section 8.4 shall be paid by wire transfer of immediately available funds to account(s) designated in writing by the Investors. |
8.5 | Choice of Law. This Agreement and the transactions contemplated hereby will be governed by the laws of the State of Delaware that are applicable to contracts made in and performed solely in Delaware. |
8.6 | Enforcement. |
(a) | Any dispute arising under, related to or otherwise involving this Agreement or the transactions contemplated hereby will be litigated in the Court of Chancery of the State of Delaware. The parties agree to submit to the jurisdiction of the Court of Chancery of the State of Delaware and waive trial by jury. The parties do not consent to mediate any disputes before the Court of Chancery. |
16 |
(b) | Notwithstanding the foregoing, if there is a determination that the Court of Chancery of the State of Delaware does not have subject matter jurisdiction over any dispute arising under this Agreement, the parties agree that: (i) such dispute will be adjudicated only by, and will be subject to the exclusive jurisdiction and venue of, the Superior Court of Delaware of and for the County of New Castle; (ii) if the Superior Court of Delaware does not have subject matter jurisdiction over such dispute, then such dispute will be adjudicated only by, and will be subject to the exclusive jurisdiction and venue of, the Complex Commercial Litigation Division of the Superior Court of the State of Delaware of and for the County of Newcastle; and (iii) if the Complex Commercial Litigation Division of the Superior Court of the State of Delaware does not have subject matter jurisdiction over such dispute, then such dispute will be adjudicated only by, and will be subject to the exclusive jurisdiction and venue of, the United States District Court for the State of Delaware. |
(c) | Each of the parties irrevocably (i) consents to submit itself to the personal jurisdiction of the Delaware courts in connection with any dispute arising under this Agreement, (ii) agrees that it will not attempt to deny or defeat such personal jurisdiction by motion or other request for relief from the Delaware courts or any other court or governmental body and (iii) agrees that it will not bring any action arising under this Agreement in any court other than the Delaware courts. EACH PARTY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT IT MAY HAVE TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER BASED ON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF THIS AGREEMENT, THE NEGOTIATION OR ENFORCEMENT HEREOF OR THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT. |
(d) | Process may be served in the manner specified in Section 8.7, such service will be deemed effective on the date of such notice, and each party irrevocably waives any defenses or objections it may have to service in such manner. |
(e) | The court shall award attorneys’ fees and expenses and costs to the substantially prevailing party in any action (including appeals) for the enforcement or interpretation of this Agreement. If there are cross claims in such action (including appeals), the court will determine which party is the substantially prevailing party as to the action as a whole and award fees, expenses and costs to such party. |
(f) | The transactions contemplated by this Agreement are unique. Accordingly, each of the Company and each Investor acknowledges and agrees that, in addition to all other remedies to which it may be entitled, each of the parties hereto is entitled to seek a decree of specific performance (except in the circumstances in which the Termination Fee is payable and paid under Section 8.4(b)); provided that the party seeking specific performance is not in material default hereunder. The Company and the Investors agree that, if for any reason a party shall have failed to perform its obligations under this Agreement, then the party seeking to enforce this Agreement against such nonperforming party shall be entitled to specific performance and injunctive and other equitable relief, and the parties further agree to waive any requirement for the securing or posting of any bond in connection with the obtaining of any such injunctive or other equitable relief. Except in the circumstances in which the Termination Fee is payable and paid under Section 8.4(b), this provision is without prejudice to any other rights that any party may have against another party for any failure to perform its obligations under this Agreement, including the right to seek damages for a breach of any provision of this Agreement, and all rights, powers and remedies available (at law or in equity) to a party in respect hereof by the other party shall be cumulative and not alternative or exclusive, and the exercise or beginning of the exercise of any thereof by a party shall not preclude the simultaneous or later exercise of any other rights, powers or remedies by such party. For the avoidance of doubt, in circumstances in which the Termination Fee is payable and paid, other than in the case of fraud or willful breach of this Agreement, such Termination Fee shall be the Investors’ sole and exclusive remedy and the Investor shall not be entitled to specific performance or any other form of equitable relief. |
17 |
(a) | If to the Company to: | HopTo, Inc. |
0 Xxxxxx Xxxx, Xxxxx 000 | ||
Xxxxxxx, XX 00000 | ||
Attention: General Counsel | ||
(b) | If to any of the Investors: | The applicable address set forth in Annex 1 |
18 |
19 |
8.16 | Definitions. As used in this Agreement, the terms have the following meanings: |
(a) | “Acquisition Transaction” means a (i) a merger, joint venture, partnership, consolidation, dissolution, liquidation, tender offer, recapitalization, reorganization, share exchange, business combination or similar transaction involving the Company or (ii) any other direct or indirect acquisition involving 50% or more of the total voting power of the Company, or all or substantially all of the consolidated total assets (including equity securities of its Subsidiaries) of the Company. |
(b) | “Affiliate” of any Person means any other Person directly or indirectly Controlling or Controlled by or under direct or indirect common Control with such Person; provided, for purposes of this Agreement, the Company and its subsidiaries shall not be deemed to be Affiliates of the Investors. |
(c) | “Alternative Financing Transaction” means a transaction or series of related transactions pursuant to which a Person provides to the Company debt or equity financing; provided that an Alternative Financing Transaction shall not include (i) a change of control transaction involving the Company or its stockholders, (ii) the liquidation, dissolution or reorganization of the Company, or (iii) an Acquisition Transaction. |
(d) | Any Person shall be deemed to “Beneficially Own”, to have “Beneficial Ownership” of, or to be “Beneficially Owning” any securities (which securities shall also be deemed “Beneficially Owned” by such Person) that such Person is deemed to (i) “beneficially own” within the meaning of Rules 13d-3 and 13d-5 under the Exchange Act as in effect on the date of this Agreement or (ii) own for purposes of determining such person’s ownership under Section 382 of the Internal Revenue Code of 1986, as amended, and the related Treasury Regulations. |
(e) | “Business Day” means any day other than a Saturday, Sunday or one on which banks are authorized to close in New York, New York. |
(f) | “Control” has the meaning specified in Rule 12b-2 under the Exchange Act. |
(g) | “DGCL” means the General Corporation Law of the State of Delaware. |
(h) | “Effect” shall have the meaning set forth in the definition of “Material Adverse Effect.” |
(i) | “Excluded Issuance” means any issuances of Common Stock, or options to acquire Common Stock, in bona fide employment or consulting relationships that are approved by the Board or a duly authorized committee of the Board. |
(j) | “Governmental Entity” means any domestic or foreign governmental or regulatory authority, agency, commission, body, court or other legislative, executive or judicial governmental entity. |
(k) | “Law” means any federal, state, local or foreign law (including the Foreign Corrupt Practices Act of 1977 and the laws implemented by the Office of Foreign Assets Control, United States Department of Treasury), statute or ordinance, common law, or any rule, regulation, judgment, order, writ, injunction, decree, arbitration award, license or permit of any Governmental Entity. |
20 |
(l) | “Material Adverse Effect” means any event, state of facts, circumstance, development, change, effect or occurrence (an “Effect”) that (i) is or could reasonably be expected to be materially adverse to the financial condition, business, properties, assets, liabilities or results of operations of the Company and its Subsidiaries taken as a whole, other than any Effect: (A) arising from changes or developments in the economy or financial markets generally, except to the extent such changes or developments have a materially disproportionate impact on the Company and its Subsidiaries, taken as a whole, relative to other participants in the industries in which the Company and its Subsidiaries conduct their businesses; (B) arising from general changes or developments in any industry in which the Company and its Subsidiaries operate, except to the extent such changes or developments have a materially disproportionate impact on the Company and its Subsidiaries, taken as a whole, relative to other participants in such industry; (C) arising from the announcement or pendency of the transactions contemplated by this Agreement; (D) arising from the taking of any action required by this Agreement; (E) arising from changes in any Law or GAAP or interpretation thereof; (F) arising from the failure by the Company to meet any public or other estimates, budgets or forecasts of revenues, earnings or other financial performance or results of operations (it being understood that the facts and circumstances giving rise to such failure may be deemed to constitute, and may be taken into account in determining whether there has been, a Material Adverse Effect); or (G) declines in the price or trading volume of shares of any capital stock of the Company or any change, or proposed change in the debt ratings of the Company or any of its Subsidiaries or any debt securities of the Company or any of its Subsidiaries (it being understood that the facts and circumstances giving rise to such declines or changes may be deemed to constitute, and may be taken into account in determining whether there has been, a Material Adverse Effect); or (ii) is materially adverse to the ability of the Company to consummate the transactions contemplated by this Agreement. |
(m) | “Person” means any individual, corporation, general or limited partnership, limited liability company, joint venture, estate, trust, association, organization, Governmental Entity or other entity of any kind or nature. |
(n) | “Previously Disclosed” means (i) information set forth in or incorporated in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2018 or its other reports and forms filed with the SEC under Section 13, 14 or 15 of the Exchange Act after January 1, 2017 (except for risks and forward looking information set forth or incorporated in the sections “Risk Factors” or in any forward looking statement disclaimers or similar statements that are similarly non-specific and are predictive or forward looking in nature) and (ii) the information set forth in a letter, dated the date of this Agreement, delivered by the Company to the Investors concurrent with the execution and delivery of this Agreement. |
(o) | “Pro Rata Portion” means, with respect to each Investor, a percentage equal to (i) the dollar amount set forth adjacent to such Investor’s name in Annex 1, divided by (ii) $2.6 million; provided that if Investors assume a defaulting Investors obligations as contemplated in Section 6.1(e), then any Pro Rata Portion calculation shall give effect to such assumed obligations. |
(p) | “Subsidiary” means any Person (whether or not incorporated) that the Company directly or indirectly owns or in respect of which the Company has the power to vote or Control 50% or more of any class or series of capital shares or other equity interests of such Person. |
(q) | “Superior Transaction” means a bona fide written Alternative Financing Transaction or Acquisition Transaction that the Board (or a committee thereof consisting only of disinterested directors) has determined in good faith, after receiving the advice of its financial advisors and outside legal counsel and in the exercise of its fiduciary duties, is in the best interests of the Company’s stockholders, including, in the case of an Alternative Financing Transaction, a determination that such Alternative Financing Transaction would (i) provide the Company with liquidity in an amount in excess of that expected to result from the Rights Offering and Backstop Commitment or (ii) result in more favorable economic terms (including in the case of an Alternative Financing Transaction that is an equity investment, the price per share to be paid for the Capital Stock of the Company) for the Company than the Rights Offering and Backstop Commitment. Without limiting the generality of the foregoing, in evaluating whether an Alternative Financing Transaction or Acquisition Transaction is in the best interests of the Company’s stockholders, the Board (or a committee thereof consisting only of disinterested directors) shall take into consideration, among other things, regulatory or other approvals that would be required for such transaction. |
(r) | “Termination Fee” means $75,000. |
21 |
The parties hereto have caused this Agreement to be duly executed as of date first written above.
HOPTO, INC.
By: | ||
Name: | ||
Title: |
22 |
Annex 1
THE INVESTORS
Investor Name and Address | Commitment Amount | Shares Beneficially Owned as of the Date of this Agreement | ||||||
Novelty Capital Partners LP Xxxxxxx Xxxxx, XX 00000 | $ | 2,346,153 | 1,397,150 | |||||
Xxxxxxx X. Xxxxxxxxxx | $ | 18,200 | 0 | |||||
Xxxxxx X. Xxxxxxx | $ | 28,200 | 120,000 | |||||
Xxxx-Xxxxx Xxxxxxxxx | $ | 18,200 | 3,333 |
Annex - 1 |