EXCHANGE AGREEMENT
Exhibit 4.1
EXCHANGE AGREEMENT (this
“Agreement”),
dated as of February 24, 2020, by and between PAID, INC., a
Delaware corporation (the “Company”) and the shareholder that
is a signatory to this Agreement (the “Shareholder”).
WHEREAS:
A. On January 17,
2017, the Company recorded the rights to Series A Preferred Stock
to certain former owners of EmergeIT Inc., including the
Shareholder, which Preferred Stock accrues interest at a rate of
1.5% per annum and are held in book entry form. On
December 31, 2018 and December 31, 2019, the Company
accrued a coupon payment of $.04545 per year per share of Series A
Preferred Stock, which coupon is not yet paid. Effective
February 24, 2020, the Company determined to convert all
2018 and 2019 cash dividends that have been accrued but unpaid into
shares of Preferred Stock in accordance with the terms of the
Certificate of Designations of Preferred Stock of the Company filed
on December 22, 2016 with the Delaware Secretary of
State.
B. The
Shareholder currently holds such number of shares of Preferred
Stock (including upon the conversion of interest in Preferred Stock) set forth below
the Shareholder’s name on its signature page attached hereto
(the “Preferred
Stock”).
C. The
Company and the Shareholder desire to enter into this Agreement,
pursuant to which the Shareholder shall exchange all the Preferred
Stock on a one-for-one basis into shares of Common Stock (the
“Exchange
Shares”) in reliance upon
the exemption from registration provided by Section 3(a)(9) of
the Securities Act.
NOW,
THEREFORE, in consideration of the foregoing recitals and the
mutual promises hereinafter set forth, the Company and the
Shareholder hereby agree as follows:
1. EXCHANGE
OF PREFERRED STOCK.
On the
date hereof, the Shareholder shall, and the Company shall, pursuant
to Section 3(a)(9) of the Securities Act, exchange the
Preferred Stock for the Exchange Shares, without the payment of any
additional consideration or use of a broker or payment of any
commission or other remuneration (the “Exchange”), as
follows:
(a) Delivery. In exchange for the
Preferred Stock, on the date hereof the Company shall cause the
Transfer Agent to deliver one or more certificates of Common Stock
to the Shareholder.
(b) Other Documents. The Company
and the Shareholder shall execute and/or deliver such other
documents and agreements as are customary and reasonably necessary
to effectuate the Exchange.
2. REPRESENTATIONS
AND WARRANTIES
(a) Shareholder
Representations and Warranties. The Shareholder hereby
represents and warrants to the Company that, as of the date hereof,
the Shareholder is the sole record and beneficial owner of the
Preferred Stock and will transfer and deliver to the Company at the
closing of the transactions contemplated hereunder valid title to
the Preferred Stock, free from preemptive or similar rights, taxes,
liens, charges and other encumbrances.
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(b) Company Representations and
Warranties. The Company hereby represents and warrants to
the Shareholder that, as of the date hereof, the Exchange and the
issuance of the Exchange Shares is duly authorized and upon
issuance in accordance with the terms of this Agreement, the
Exchange Shares will be validly issued, fully paid and
non-assessable and free from all preemptive or similar rights,
taxes, liens, charges and other encumbrances with respect to the
issue thereof. The Exchange Shares shall be issued without any
restrictive legend and may be freely resold by the Shareholder
without any restrictions.
3. COVENANTS.
(a) Disclosure
of Transactions and Other Material Information. The Company
shall file a Current Report on Form 8-K describing all the material
terms of the transactions contemplated by this Agreement in the
form required by the Exchange Act and attaching the form of this
Agreement (including all attachments, the “8-K Filing”).
(b) Section 3(a)(9). The
Company represents that the exchange of the Preferred Stock for the
Exchange Shares is being made in reliance upon the exemption from
registration provided by Section 3(a)(9) of the Securities Act
and agrees not to take any position contrary to this
Section 3(b). For the purposes of Rule 144 of the Securities
Act, the Company acknowledges that the holding period of the
Exchange Shares may be tacked onto the holding period of the
Preferred Stock and the Company agrees not to take a position
contrary to this Section 3(b). The Company shall issue the
Exchange Shares representing the originally Preferred Stock without
any restrictions on transfer and without any restrictive legend.
The Company shall issue the Exchange Shares representing the
interest on the originally Preferred Stock only with a restrictive
legend.
4. MISCELLANEOUS.
(a) Survival;
Successors and Assigns. All warranties and representations
(as of the date such warranties and representations were made) made
herein or in any certificate or other instrument delivered by it or
on its behalf under this Agreement shall be considered to have been
relied upon by the parties hereto and shall survive the issuance of
the Common Stock. This Agreement shall inure to the benefit of and
be binding upon the successors and permitted assigns of each of the
parties; provided however that no party may assign this Agreement
or the obligations and rights of such party hereunder without the
prior written consent of the other parties hereto.
(b) Counterparts. This Agreement
may be executed in two or more counterparts, all of which when
taken together shall be considered one and the same agreement and
shall become effective when counterparts have been signed by each
party and delivered to the other party, it being understood that
both parties need not sign the same counterpart. In the event that
any signature is delivered by facsimile transmission, such
signature shall create a valid and binding obligation of the party
executing (or on whose behalf such signature is executed) with the
same force and effect as if such facsimile signature page were an
original thereof.
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(c) Severability. If any provision
of this Agreement is prohibited by law or otherwise determined to
be invalid or unenforceable by a court of competent jurisdiction,
the provision that would otherwise be prohibited, invalid or
unenforceable shall be deemed amended to apply to the broadest
extent that it would be valid and enforceable, and the invalidity
or unenforceability of such provision shall not affect the validity
of the remaining provisions of this Agreement so long as this
Agreement as so modified continues to express, without material
change, the original intentions of the parties as to the subject
matter hereof and the prohibited nature, invalidity or
unenforceability of the provision(s) in question does not
substantially impair the respective expectations or reciprocal
obligations of the parties or the practical realization of the
benefits that would otherwise be conferred upon the parties. The
parties will endeavor in good faith negotiations to replace the
prohibited, invalid or unenforceable provision(s) with a valid
provision(s), the effect of which comes as close as possible to
that of the prohibited, invalid or unenforceable
provision(s).
(d) Governing Law. All questions
concerning the construction, validity, enforcement and
interpretation of this Agreement shall be determine under the laws
of the Commonwealth of Massachusetts.
(e) Entire Agreement. The
Agreement, together with the exhibits and schedules thereto,
contain the entire understanding of the parties with respect to the
subject matter hereof and supersede all prior agreements and
understandings, oral or written, with respect to such matters,
which the parties acknowledge have been merged into such documents,
exhibits and schedules.
(f) Construction. The headings
herein are for convenience only, do not constitute a part of this
Agreement and shall not be deemed to limit or affect any of the
provisions hereof. The language used in this Agreement will be
deemed to be the language chosen by the parties to express their
mutual intent, and no rules of strict construction will be applied
against any party.
(g) Amendment. This Agreement may
not be changed, amended, terminated, augmented, rescinded or
discharged (other than in accordance with its terms), in whole or
in part, except by a writing executed by the parties
hereto.
[Signature Page Follows]
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IN WITNESS WHEREOF, the Shareholder and
the Company have caused their respective signature pages to this
Exchange Agreement to be duly executed as of the date first written
above.
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COMPANY
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PAID, INC.
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By:
/s/
Xxxxx Xxxxx
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Name:
Xxxxx Xxxxx
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Title:
CEO
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IN WITNESS WHEREOF, the Shareholder and
the Company have caused their respective signature page to this
Exchange Agreement to be duly executed as of the date first written
above.
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SHAREHOLDER
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By:_______________________________
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Name:
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Title:
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Aggregate Number of Shares of Preferred Stock:
Original Issuance: xxx,xxx
Interest Preferred Shares for 2018 and 2019: xx,xxx
Total Number of Common Shares in Section 3(a)(9)
Exchange:
Original Issuance (no restrictive legend): xxx,xxx
Interest Shares (restrictive legend required): xx,xxx
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