Contract
Exhibit
10.5
This
STOCK PURCHASE AGREEMENT (the “Agreement”) is
made as of February 19, 2018, by and between Blockchain Industries,
Inc., a Nevada corporation with its principal place of business at
00 Xxxxx Xxxxxxxx, Xxxxx 000, Xxx Xxxx, XX 00000
(“BII”) and
LegatumX, Inc. (“LegatumX”), a
Delaware corporation (each a Party”, and collectively, the
“Parties”).
THE
PARTIES HEREBY AGREE AS FOLLOWS:
1. Purchase
and Sale of Stock. Subject to the terms and conditions
hereof (including Xxxxxxxx 0, 0 xxx 0 xxxxx), XxxxxxxX shall sell
to BII, and BII shall purchase from LegatumX [●] shares of
LegatumX’s common stock, par value $0.0001 per share, (the
“Initial
Shares”) at a price of [●] per share for an
aggregate purchase price of One Million Three Hundred Thousand (USD
$1,300,000) Dollars (the “Purchase
Price”). The Initial Shares shall equal, on a Fully-
Diluted Basis (as hereinafter defined), Thirty (30%) percent of the
outstanding capital stock of LegatumX immediately following the
Closing Date (as hereinafter defined). “Fully-Diluted
Basis” means the aggregate number of shares in
LegatumX calculated as if all outstanding stock options, warrants
and convertible securities have been exercised for or converted
into common stock and all options reserved for issuance in the
option pool have been issued and exercised for common stock.
**[NTD: The Purchase Price, and the
corresponding number of Initial Shares, presumably, will correspond
to a total ascribed value of LegatumX equal to
USD
$4,333,333.33].
2. Consideration
and Issuance of LegatumX Shares. The Purchase Price shall
consist of Cash Consideration and Stock Consideration,
respectively, each as hereinafter defined.
a. Cash
Consideration. The payments (“Cash
Consideration”) to be made by BII to Legatum, and the
corresponding number of Initial Shares allocable thereto, shall be
as follows:
Amount Payment
Date # of Initial Shares
Percentage of Total
Equity
(computed on a
Fully-Diluted Basis)
USD
$100,000
Closing
Date[●]20% USD $200,00090 Days
Following Closing[●]5%
b. Stock
Consideration. LegatumX shall receive One Hundred Thousand
(100,000) shares of common stock of BII (the “BII Stock”) in
exchange for such number of Initial Shares equal to Five (5%)
percent of the outstanding capital stock LegatumX on a Fully-
Diluted Basis.
c. Earnout
Adjustment. The Parties acknowledge that BII anticipates
filing with the Securities Exchange Commission (“SEC”) a Form
10 for the registration of the common stock of BII pursuant to
Section 12(b) of the Exchange Act (the “Registration
Statement”). BII shall use its commercially reasonable
efforts to have the Registration Statement declared effective by
the SEC on or before December 31, 2018 (the “Registration
Deadline”). During the one-year period beginning on
the date that the Registration Statement is declared effective by
the
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SEC and
ending on the one-year anniversary thereof (the “Earnout
Period”), BII and LegatumX shall cooperate with each
other, in good faith, in order to determine a mutually-agreeable
manner and timing for LegatumX to sell the BII Stock (the
“Earnout
Period Sales”). If LegatumX realizes gross proceeds on
the Earnout Period Sales equal to or exceeding Two Million Three
Hundred Thousand (USD $2,300,000) Dollars, BII shall receive
additional shares of LegatumX’s common stock equal to Five
(5%) percent of the outstanding capital stock LegatumX on a Fully-
Diluted Basis (the “Lower Threshold Earnout
Shares”). Alternatively, if LegatumX realizes gross
proceeds on the Earnout Period Sales equal to or exceeding Ten
Million One Hundred Thousand (USD $10,100,000) Dollars, BII shall
receive additional shares of LegatumX’s common stock equal to
Ten (10%) percent of the outstanding capital stock LegatumX on a
Fully- Diluted Basis (the “Higher Threshold Earnout
Shares”, and together with the Lower Threshold Earnout
Shares, the “Earnout
Shares”).
d. Mandatory
Loan. If, as of the Registration Deadline, BII does not have
an effective Registration Statement, reasonably promptly
thereafter, BII shall make a cash advance, or series of cash
advances, to LegatumX in the amount of One Million (USD $1,000,000)
Dollars (the “Mandatory
Loan”). The Mandatory Loan shall be secured by a first
lien priority security interest in all of the BII Stock and shall
bear no interest. The Mandatory Loan shall become immediately due
and payable upon the earlier to occur of (i) the date the
Registration Statement is declared effective by the SEC (the
“Registration Effective
Date”) or (ii) the sale or issuance by LegatumX of New
Securities (as defined in Section 8 below) for cash in a single
transaction or series of transaction resulting in gross proceeds
equal to or in excess of Five Million (USD $5,000,000) Dollars (a
“Qualified Capital
Raise”). In the event that a Qualified Capital Raise
shall precede and occur prior to the Registration Effective Date,
LegatumX repay the full amount of the Mandatory Loan from the
proceeds of the Qualified Capital Raise. Upon the Registration
Effective Date, LegatumX shall repay the Mandatory Loan if and in
such amount as the Mandatory Loan shall remain outstanding and
unpaid, and the provisions of Section 2.c. above automatically
shall apply with respect to the sale of BII Stock by LegatumX or an
affiliate.
3. Closing.
The consummation of the transactions contemplated by this Agreement
is herein referred to as the “Closing”, and
the date on which the Closing occurs is herein referred to as the
“Closing
Date.” The Closing shall take place via the electronic
exchange of documents and signatures at such other time and place
as the BII and LegatumX may mutually agree. At the Closing,
LegatumX shall deliver to BII a certificate representing the
Initial Shares against payment by BII of the Cash Consideration by
check or wire transfer and delivery by BII of a certificate
representing the BII Stock to LegatumX.
4. Optional
Loan Agreement. In consideration of LegatumX entering into
this Agreement (and not in consideration of any purchase of the
Initial Shares or with respect to the Earnout Shares), LegatumX
shall have the option to obtain a loan from BII in the principal
amount of up to Five Hundred Thousand (USD $500,000) Dollars (the
“Optional
Loan”) during the second calendar quarter of 2019. The
Optional Loan shall be evidenced by a promissory note, subject to a
commercially reasonable rate of interest, as mutually agreed upon
by the Parties, and secured by a pledge of the BII Stock. The
Optional Loan term and maturity schedule shall be determined in the
discretion of BII, and the Optional Loan shall be subject
to
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such
other terms and conditions as LegatumX and BII set forth in writing
(the “Loan
Agreement”). The Parties shall enter into an
“Optional
Loan Agreement”, and the full amount of the Optional
Loan shall be transferred to LegatumX, within a commercially
reasonable amount of time after written notice requesting the
Optional Loan is provided by LegatumX to BII. For the avoidance of
doubt, LegatumX shall have no obligation to accept the Optional
Loan.
5. Representations
and Warranties of LegatumX: LegatumX hereby represents and
warrants to BII as follows:
a. Organization,
Standing and Authority; Execution and Delivery;
Enforceability. LegatumX is a corporation duly organized,
validly existing and in good standing under the laws of the State
of Delaware. LegatumX has all requisite power and authority to
enter into this Agreement and the other documents in order to
effectuate the transactions contemplated by this Agreement. All
acts and other proceedings required to be taken by LegatumX to
authorize the execution, delivery and performance of this Agreement
and the other transaction documents contemplated hereby and thereby
have been duly and properly taken. This Agreement has been duly
executed and delivered by LegatumX and, prior to Closing, LegatumX
will have duly executed and delivered each other transaction
document. This Agreement constitutes a legal, valid and binding
obligation of LegatumX enforceable against such person in
accordance with its terms.
b. No
Conflicts; Consents; No Default. The execution, delivery and
performance by LegatumX of this Agreement, and the consummation of
the transactions contemplated hereby and thereby, do not and will
not: (i) conflict with or result in a violation or breach of any
provision of the organizational documents of LegatumX; (b) conflict
with or result in a violation or breach of any provision of any
material law or governmental order applicable to LegatumX; (c)
require the consent, notice or other action by any person under,
conflict with, result in a violation or breach of, constitute a
default or an event that, with or without notice or lapse of time
or both, would constitute a default under, result in the
acceleration of or create in any party the right to accelerate,
terminate, modify or cancel, any material contract; or (d) result
in the creation or imposition of any encumbrance on any properties
or assets of LegatumX. No consent, approval, permit, governmental
order, declaration or filing with, or notice to, any governmental
authority is required by or with respect to LegatumX in connection
with the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby.
c. Capitalization.
The authorized capital stock of the LegatumX, immediately prior to
the Closing, consists of [●] shares of Common Stock,
[●] shares of which are issued and outstanding.
d. Bonus
Plan. Under the LegatumX’s 20 Equity Incentive Plan
(the “Plan”), (i) no
shares have been issued pursuant to restricted stock purchase
agreements and/or the exercise of outstanding options, (ii) no
options have been granted and are currently outstanding and (iii)
[●] shares of Common Stock remain available for future
issuance to officers, directors, employees and consultants of the
Company. LegatumX has not made any
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representations
regarding equity incentives to any officer, employee, director or
consultant that are inconsistent with the share amounts and terms
set forth in the Company’s board minutes.
e. Outstanding
Stock. Other than the shares reserved for issuance under the
Plan and except as may be granted pursuant to this Agreement, there
are no outstanding options, warrants, rights (including conversion
or preemptive rights and rights of first refusal), proxy or
stockholder agreements or agreements of any kind for the purchase
or acquisition from LegatumX of any of its securities.
f. All
issued and outstanding shares of the LegatumX’s common stock
(i) have been duly authorized and validly issued and are fully paid
and nonassessable and (ii) were issued in compliance with all
applicable state and federal laws concerning the issuance of
securities.
g. All
outstanding shares of common stock, and all shares of common stock
issuable upon the exercise or conversion of outstanding options,
warrants or other exercisable or convertible securities are subject
to a market standoff or “lockup” agreement of not less
than 180 days following the LegatumX’s initial public
offering.
h. Liabilities.
LegatumX has no material liabilities and, to the best of its
knowledge no material contingent liabilities, except current
liabilities incurred in the ordinary course of business that have
not been, either in any individual case or in the aggregate,
materially adverse.
i. Intellectual
Property.
(i) LegatumX
is, and shall remain in perpetuity, the sole owner of any and all
work product created by any of its employees, officers, or
consultants, and of all rights it has in all creative and
copyrightable material created by it, trademarks, service marks and
other intellectual property as they may exist or may hereafter be
modified by LegatumX (collectively referred to as
“LegatumX
IP”). BII acknowledges that any use of LegatumX IP
inures to the benefit of LegatumX, including any goodwill, and that
BII will not acquire any ownership in LegatumX IP as a result of
this, or any future, Agreement. BII agrees, for itself and its
officers, directors, shareholders, employees, agents and
representatives, that all LegatumX IP shall remain and be kept in
strictest confidence and shall not be disclosed to or used by any
person or entity without the prior written consent of LegatumX. The
obligation to maintain confidentiality provided herein shall
survive any termination or expiration of the term of this Agreement
and may be enforced by injunctive relief or other equitable or
legal remedies without the necessity of proving inadequacy of legal
remedies and without proving that LegatumX or any of its respective
officers, directors, shareholders, employees, agents and
representatives would suffer irreparable harm as a result of a
violation of such confidentiality obligation.
(ii) LegatumX
owns or possesses sufficient legal rights to all patents,
trademarks, service marks, trade names, copyrights, trade secrets,
licenses, information and other proprietary rights and processes
necessary for its business as now conducted and as presently
proposed to be conducted, without any known infringement of the
rights of others. There are no
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outstanding
options, licenses or agreements of any kind relating to the
foregoing proprietary rights, nor is LegatumX bound by or a party
to any options, licenses or agreements of any kind with respect to
the patents, trademarks, service marks, trade names, copyrights,
trade secrets, licenses, information and other proprietary rights
and processes of any other person or entity other than such
licenses or agreements arising from the purchase of “off the
shelf” or standard products.
(iii) LegatumX
has not received any communications alleging that LegatumX has
violated or, by conducting its business as presently proposed to be
conducted, would violate any of the patents, trademarks, service
marks, trade names, copyrights or trade secrets or other
proprietary rights of any other person or entity.
(iv) LegatumX
is not aware that any of its employees are obligated under any
contract (including licenses, covenants or commitments of any
nature) or other agreement, or subject to any judgment, decree or
order of any court or administrative agency, that would interfere
with their duties to LegatumX or that would conflict with
LegatumX’s business as proposed to be conducted. Each former
and current employee, officer and consultant of LegatumX has
executed a proprietary information and inventions agreement. No
former or current employee, officer or consultant of LegatumX has
excluded works or inventions made prior to his or her employment
with LegatumX from his or her assignment of inventions pursuant to
such employee, officer or consultant’s proprietary
information and inventions agreement. LegatumX does not believe it
is or will be necessary to utilize any inventions, trade secrets or
proprietary information of any of its employees made prior to their
employment by LegatumX, except for inventions, trade secrets or
proprietary information that have been assigned to
LegatumX.
j. Full
Disclosure. LegatumX has provided BII with all information
requested by BII in connection with its decision to enter into this
Agreement. Neither this Agreement, the exhibits hereto nor any
related agreements contain any untrue statement of a material fact
nor, to the LegatumX’s knowledge, omit to state a material
fact necessary in order to make the statements contained herein or
therein not misleading.
k. Qualified
Small Business. LegatumX represents and warrants to BII
that, to the best of its knowledge, LegatumX is a “qualified
small business” within the meaning of Section 1202(d) of the
Internal Revenue Code, as amended (the “Code”), as of
the date hereof and the Initial Shares should qualify as
“qualified small business stock” as defined in Section
1202(c) of the Code as of the date hereof.
l. Shareholder
Lists. Schedule [●] contains true and complete copies
of the shareholder list of LegatumX including the following
information with respect to each shareholder of LegatumX
(“Shareholder”):
(i) the
name and the mailing address of such Shareholder as reflected on
the corporate records of the Company;
(ii)
the number of
shares of stock of LegatumX held by each such
Shareholder;
and
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(iii)
such
Shareholder’s proportionate share of the total equity capital
of
LegatumX.
6. Representations
and Warranties of BII: BII hereby represents and warrants to
LegatumX as follows:
a. Requisite
Power and Authority. BII has all necessary power and
authority to execute and deliver this Agreement. All action on
BII’s part required for the lawful execution and delivery of
this Agreement has been taken. Upon its execution and delivery,
this Agreement will be valid and binding obligations of BII,
enforceable in accordance with their terms, except as limited by
applicable bankruptcy, insolvency, reorganization, moratorium or
other laws of general application affecting enforcement of
creditors’ rights.
b. Investment
Representations. BII understands that the Initial Shares and
the Earnout Shares have been registered under the Securities Act.
BII also understands that the Initial Shares are being offered and
sold pursuant to an exemption from registration contained in the
Securities Act.
c. All
issued and outstanding shares of BII’s common stock (i) have
been duly authorized and validly issued and are fully paid and
nonassessable and (ii) were issued in compliance with all
applicable state and federal laws concerning the issuance of
securities.
d. Full
Disclosure. BII has provided LegatumX with all information
requested by LegatumX in connection with its decision to enter into
this Agreement. Neither this Agreement, the exhibits hereto nor any
related agreements contain any untrue statement of a material fact
nor, to the BII’s knowledge, omit to state a material fact
necessary in order to make the statements contained herein or
therein not misleading.
7. Board
Composition: Prior to the completion of a
“Qualified
Financing” (as hereinafter defined), the board of
directors of LegatumX shall be set and remain at Three (3)
directors. BII will have the right (the “Designation
Right”) to elect at any meeting of shareholders of
LegatumX at which directors are to be elected, designated and
appointed one (1) member of the board of directors. The parties
acknowledge and agree that One (1) member of the board of directors
(the “Independent
Director”) shall have no material relationship with
either LegatumX or BII. The Independent Director shall be
designated by the mutual agreement of BII and LegatumX. BII shall
have no Designation Right following the completion of a Qualified
Financing. A “Qualified
Financing” means the sale or issuance by LegatumX of
New Securities (as defined in Section 8 below) for cash in a single
transaction or series of transactions resulting in gross proceeds
equal to or in excess of $100 million.
8. Anti-Dilution
Protection. If BII shall, at any time or from time to time
after the Closing Date, but on or before the completion of a
Qualified Financing, issue or sell, agree to issue or sell, or be
deemed to have issued or sold, any New Securities (as hereinafter
defined), where the price per share paid upon purchase or exercise
is, or resultant upon conversion into common stock of Legatum
(taking into account any and all warrants or other securities and
other consideration issued in connection therewith when determining
the value of such price per share)
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would
be, less than the Purchase Price, then as a condition precedent to
any such issuance or sale (or deemed issuance or sale), LegatumX
shall be required to issue to BII additional shares of common stock
(the “Adjustment
Shares”) to maintain BII’s ownership
attributable to both (i) the Initial Shares at Thirty (30%) Percent
of LegatumX’s total capital stock on a Fully-Diluted Basis
and (ii) the Lower Threshold Earnout Shares, if applicable, at Five
(5%) Percent of LegatumX’s total capital stock on a
Fully-Diluted Basis, or alternatively the Higher Threshold Earnout
Shares, if applicable, at Ten (10%) Percent of LegatumX’s
total capital stock on a Fully-Diluted Basis. “New
Securities” means shares of the common stock of
LegatumX, any other securities, options, warrants or other rights
where upon exercise or conversion the purchaser or recipient
receives shares of common stock, or other securities with similar
rights to the common stock.
Within
thirty (30) days of the sale or issuance of any such New
Securities, LegatumX shall deliver to BII certificates evidencing
any Adjustment Shares BII is entitled to hereunder.
9. Most
Favored Nation. Prior to the issuance of any New Securities
in an offering (“New
Offering”), LegatumX shall provide BII with a notice
(the “MFN
Notice”) which shall include a copy of the offering
documentation provided by LegatumX to solicit investment in the New
Offering. The MFN Notice shall also describe in reasonable detail
the procedures affording BII the right (“Anti-Dilution
Right”) to participate in the New Offering on
substantially similar terms with respect to the average price per
share of common stock that an investor pays assuming the full
conversion or exercise of warrants or similar rights that are
issued in the New Offering. BII may exercise its Anti-Dilution
Right by providing a notice to such effect to LegatumX on or prior
to the date that is thirty (30) days after the date that BII
received the MFN Notice. For avoidance of doubt, the Anti-Dilution
Right shall terminate on the date that is the earlier of the date
that the BII does not duly and timely exercise its Anti-Dilution
Right as described in this Section 9 or upon the completion of a
Qualified Financing.
10. Conditions
to Closing.
a. Bringdown
Certificate of LegatumX. A certificate in the Form attached
hereto as Exhibit [●], duly executed by an authorized officer
of LegatumX as of the Closing Date, in each case to the effect that
the conditions set forth in Section 5 have been
satisfied.
b. Bringdown
Certificate of BII. A certificate in the Form attached
hereto as Exhibit [●], duly executed by an authorized officer
of BII as of the Closing Date, in each case to the effect that the
conditions set forth in Section 6 have been satisfied.
c. Legal
Investment. On the Closing Date, the sale and issuance of
the Common Stock shall be legally permitted by all laws and
regulations to which LegatumX is subject.
d. Secretary’s
Certificate. BII shall have received from the
LegatumX’s Secretary a certificate in the form attached
hereto as Exhibit [●] and having attached thereto (i) the
certificate of incorporation of LegatumX as in effect at the time
of the Closing, (ii) Leguatum’s by-laws as in effect at the
time of the Closing, (iii) resolutions approved by the board of
directors of LegatumX authorizing the transactions contemplated
hereby, (iv) resolutions approved by LegatumX’s stockholders
authorizing the filing of the restated
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certificate of
incorporaiton and (v) good standing certificates with respect to
LegatumX dated a recent date before the Closing.
e. Consents,
Permits, and Waivers. LegatumX shall have obtained any and
all consents, permits and waivers necessary or appropriate for
consummation of the transactions contemplated by the Agreement and
related agreements except for such as may be properly obtained
subsequent to the Closing.
f. Fiduciary
Duties. An agreement in the Form attached hereto as Exhibit
[●] shall be executed by each of the Shareholders and BII as
of the Closing Date, pursuant to which each of the Shareholders
shall agree to adhere to fiduciary duty standards, including the
duties of loyalty and care, with respect to BII and to avoid
conflicts of interest and engaging in any activity that is directly
competitive with the business of BII.
11. Survival.
The representations, warranties, covenants and agreements made
herein shall survive the closing of the transactions contemplated
hereby. The representations, warranties, covenants and obligations
of either Party, and the rights and remedies that may be exercised
by the other Party, shall not be limited or otherwise affected by
or as a result of any information furnished to, or any
investigation made by or knowledge of, either Party or any of its
representatives.
12. Notice.
Any notice required by the terms of this Agreement shall be given
in writing. It shall be deemed effective upon (i) personal
delivery, (ii) deposit with the United States Postal Service, by
registered or certified mail, with postage and fees prepaid or
(iii) deposit with Federal Express Corporation, with shipping
charges prepaid. All communications to BII shall be sent to BII at
its principal business address set forth above or at such other
address as BII may designate by 10 days’ advance written
notice to LegatumX. Notice shall be addressed to LegatumX at the
address provided in the signature page to this
Agreement.
13. Entire
Agreement. This Agreement constitutes the entire contract
between the parties hereto with regard to the subject matter
hereof. It supersedes any other agreements, representations or
understandings (whether oral or written and whether express or
implied) that relate to the subject matter hereof.
14. Choice
of Law. This Agreement shall be governed by, and construed
in accordance with, the laws of the State of Nevada, as such laws
are applied to contracts entered into and performed in such
State.
15. Specific
Enforcement. The parties hereto acknowledge that money
damages would not be an adequate remedy at law if any party fails
to perform in any material respect any of its obligations
hereunder, and accordingly agree that each party, in addition to
any other remedy to which it may be entitled at law or in equity,
shall be entitled to seek to compel specific performance of the
obligations of the other party under this Agreement, without the
posting of any bond, in accordance with the terms and conditions of
this Agreement in any court of the United States or any State
thereof having jurisdiction, and if any action should be brought in
equity to enforce any of the provisions of this Agreement, none of
the parties hereto shall raise
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the
defense that there is an adequate remedy at law. Notwithstanding
anything herein to the contrary, Legatum and BII acknowledge and
agree that no specific enforcement shall be available hereunder
with respect to any claim against BII arising under or related to
Section 4 hereof, the Loan and/or the Loan Agreement.
16. Counterparts
and Signatures. This Agreement may be executed in one or
more counterparts each of which shall be deemed to be an original
and all of which when taken together shall be deemed to be one and
the same instrument. Facsimile or electronic signatures shall have
the same meaning and legal effect as ribbon original
signatures.
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The
parties hereto have executed this STOCK PURCHASE AGREEMENT as of
the date set forth in the first paragraph hereof.
LEGATUMX,INC:
BLOCKCHAIN INDUSTRIES,
INC.:
By:/s/ Xxxxx
Xxxxxxx
Name:
Xxxxx Xxxxxxx
By:
/s/ Xxxxxxx
Xxxxxxxx _
Name:
Xxxxxxx Xxxxxxxx
Title:
CEO
Title:
CEO
Address:
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