EXCHANGE AGREEMENT
Exhibit
10.2
This
Exchange Agreement (this “Agreement”), dated effective as of
the purchase of the Exchanged Note (as defined below), is made by
and among Exactus, Inc., a Nevada corporation (the
“Company”), and
_______________ LLC as the to-be holder of the Exchanged Note (the
“Holder”).
WHEREAS, the Holder
is purchasing the convertible note as more specifically set forth
on Exhibit A
attached hereto (the “Exchanged Note”);
WHEREAS, subject to
the terms and conditions set forth in this Agreement and pursuant
to Section 3(a)(9) of the Securities Act of 1933 (the
“Securities
Act”), the Company desires to exchange with the
Holder, and the Holder desires to exchange with the Company, the
Exchanged Note for five hundred (500) shares of the Company’s
Preferred Shares Convertible Preferred Stock (the
“Preferred
Shares”), with such designations, rights, preferences,
limitations and restrictions as set forth in the Certificate of
Designation contained in Exhibit B attached
hereto.
NOW,
THEREFORE, in consideration of the mutual covenants contained in
this Agreement, and for other good and valuable consideration the
receipt and adequacy of which are hereby acknowledged, the Company
and the Holder agree as follows:
1. Terms of the Exchange. The
Company and the Holder agree that the Holder will exchange the
Exchanged Note held by the Holder and will relinquish any and all
other rights it may have under the Exchanged Note in exchange for
the Preferred Shares.
2. Closing. Upon of the conditions
set forth herein, a closing shall occur at the principal offices of
the Company, or such other location as the parties shall mutually
agree. At closing, the Company shall deliver to the Holder the
Preferred Shares. Upon closing, any and all obligations of the
Company to Holder under the Exchanged Note shall be fully
satisfied, the Holder will have no remaining rights, powers,
privileges, remedies or interests under the Exchanged Note. On the
closing date, the Company shall execute and cause its Transfer
Agent to execute the form of reserve letter attached as
Exhibit
C.
3. Further Assurances. Each party
shall do and perform, or cause to be done and performed, all such
further acts and things, and shall execute and deliver all such
other agreements, certificates, instruments and documents, as any
other party may reasonably request in order to carry out the intent
and accomplish the purposes of this Agreement and the consummation
of the transactions contemplated hereby.
4. Representations and Warranties of the
Holder. The Holder represents and warrants as of the date
hereof and as of the closing to the Company as
follows:
a. Authorization; Enforcement. The
Holder has the requisite power and authority to enter into and to
consummate the transactions contemplated by this Agreement and
otherwise to carry out its obligations hereunder and thereunder.
The execution and delivery of this Agreement by the Holder and the
consummation by it of the transactions contemplated hereby
have
been duly authorized by all necessary action on the part of the
Holder and no further action is required by the Holder. This
Agreement has been (or upon delivery will have been) duly executed
by the Holder and, when delivered in accordance with the terms
hereof, will constitute the valid and binding obligation of the
Holder enforceable against the Holder in accordance with its terms,
except: (i) as limited by general equitable principles and
applicable bankruptcy, insolvency, reorganization, moratorium and
other laws of general application affecting enforcement of
creditors’ rights generally, (ii) as limited by laws relating
to the availability of specific performance, injunctive relief or
other equitable remedies, and (iii) insofar as indemnification and
contribution provisions may be limited by applicable
law.
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b. Tax Advisors. The Holder has
reviewed with its own tax advisors the U.S. federal, state, local
and foreign tax consequences of this investment and the
transactions contemplated by this Agreement. With respect to such
matters, the Holder relied solely on such advisors and not on any
statements or representations of the Company or any of its agents,
written or oral. The Holder understands that it (and not the
Company) shall be responsible for its own tax liability that may
arise as a result of this investment or the transactions
contemplated by this Agreement.
c. Information Regarding Holder.
The Holder is an “accredited investor,” as such term is
defined in Rule 501 of Regulation D promulgated by the United
States Securities and Exchange Commission (the “Commission”) under the Securities
Act, is experienced in investments and business matters, has made
investments of a speculative nature and has purchased securities of
companies in private placements in the past and, with its
representatives, has such knowledge and experience in financial,
tax and other business matters as to enable the Holder to utilize
the information made available by the Company to evaluate the
merits and risks of and to make an informed investment decision
with respect to the proposed purchase, which represents a
speculative investment. The Holder has the authority and is duly
and legally qualified to purchase and hold the Preferred Shares.
The Holder is able to bear the risk of such investment for an
indefinite period and to afford a complete loss
thereof.
d. Legend. The Holder understands
that the Preferred Shares (including the shares of Common Stock
issuable upon the conversion of the Preferred Shares (the
“Underlying
Shares”)) will be issued pursuant to an exemption from
registration or qualification under the Securities Act and
applicable state securities laws, and except as set forth below,
the Preferred Shares shall bear any legend as required by the
“blue sky” laws of any state and a restrictive legend
in substantially the following form (and a stop-transfer order may
be placed against transfer of such stock
certificates):
THESE
SECURITIES AND THE SECURITIES ISSUABLE UPON THEIR EXERCISE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
“SECURITIES ACT”), AND MAY NOT BE TRANSFERRED UNLESS
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT, A “NO- ACTION” LETTER FROM THE UNITED
STATES SECURITIES AND EXCHANGE COMMISSION WITH RESPECT TO SUCH
TRANSFER, A TRANSFER MEETING THE REQUIREMENTS OF RULE 144 OF THE
COMMISSION, OR AN OPINION OF COUNSEL SATISFACTORY TO THE
ISSUER TO THE EFFECT THAT ANY SUCH TRANSFER IS EXEMPT FROM SUCH
REGISTRATION.
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e. Restricted Securities. The
Holder understands that: (i) the Preferred Shares (and the
Underlying Securities) have not been and may never be registered
under the Securities Act or any state securities laws, and may not
be offered for sale, sold, assigned or transferred
unless.
(A)
subsequently registered thereunder, (B) the Holder shall have
delivered to the Company (if requested by the Company) an opinion
of counsel to the Holder, in a form reasonably acceptable to the
Company, to the effect that such Preferred Shares to be sold,
assigned or transferred may be sold, assigned or transferred
pursuant to an exemption from such registration, or (C) the Holder
provides the Company with reasonable assurance that such Preferred
Shares (or Underlying Securities, as applicable) can be sold,
assigned or transferred pursuant to Rule 144 or Rule 144A
promulgated under the Securities Act (or a successor rule thereto)
(collectively, “Rule
144”); and
(ii) any
sale of the Preferred Shares (or Underlying Securities) made in
reliance on Rule 144 may be made only in accordance with the terms
of Rule 144, and further, if Rule 144 is not applicable, any resale
of the Preferred Shares (or Underlying Securities) under
circumstances in which the seller (or the Person through whom the
sale is made) may be deemed to be an underwriter (as that term is
defined in the Securities Act) may require compliance with some
other exemption under the Securities Act or the rules and
regulations of the Commission promulgated thereunder.
5. Representations and Warranties of the
Company. The Company hereby makes the following
representations and warranties to the Holder:
a. Authorization; Enforcement. The
Company has the requisite corporate power and authority to enter
into and to consummate the transactions contemplated by this
Agreement and each of the other agreements entered into by the
parties hereto in connection with the transactions contemplated by
this Agreement (collectively, the “Exchange Documents”) and otherwise
to carry out its obligations hereunder and thereunder. The
execution and delivery of this Agreement by the Company and the
consummation by it of the transactions contemplated hereby have
been duly authorized by all necessary action on the part of the
Company and no further action is required by the Company, the board
of directors of the Company or the Company’s stockholders in
connection therewith, including, without limitation, the issuance
of the Preferred Shares has been duly authorized by the
Company’s board of directors and no further filing, consent,
or authorization is required by the Company, its board of directors
or its stockholders. This Agreement has been (or upon delivery will
have been) duly executed by the Company and, when delivered in
accordance with the terms hereof, will constitute the valid and
binding obligation of the Company enforceable against the Company
in accordance with its terms, except: (i) as limited by general
equitable principles and applicable bankruptcy, insolvency,
reorganization, moratorium and other laws of general application
affecting enforcement of creditors’ rights generally, (ii) as
limited by laws relating to the availability of specific
performance, injunctive relief or other equitable remedies and
(iii) insofar as indemnification and contribution provisions may be
limited by applicable law.
b. Organization and Qualification.
Each of the Company and its subsidiaries (the “Subsidiaries”) are entities duly
organized and validly existing and in good standing under the laws
of the jurisdiction in which they are formed, and have the
requisite power and authorization to
own their properties and to carry on their business as now being
conducted and as presently proposed to be conducted. Each of the
Company and each of its Subsidiaries is duly qualified as a foreign
entity to do business and is in good standing in every jurisdiction
in which its ownership of property or the nature of the business
conducted by it makes such qualification necessary, except to the
extent that the failure to be so qualified or be in good standing
would not have a Material Adverse Effect. As used in this
Agreement, “Material Adverse
Effect” means any material adverse effect on (i) the
business, properties, assets, liabilities, operations (including
results thereof), condition (financial or otherwise) or prospects
of the Company or any Subsidiary, individually or taken as a whole,
(ii) the transactions contemplated hereby or in any of the other
Exchange Documents or (iii) the authority or ability of the Company
to perform any of its obligations under any of the Exchange
Documents. Other than its Subsidiaries, there is no Person (as
defined below) in which the Company, directly or indirectly, owns
capital stock or holds an equity or similar interest.
“Person” means
an individual, a limited liability company, a partnership, a joint
venture, a corporation, a trust, an unincorporated organization,
any other entity and any governmental entity or any department or
agency thereof.
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c. No Conflict. The execution,
delivery and performance of the Exchange Documents by the Company
and the consummation by the Company of the transactions
contemplated hereby and thereby (including, without limitation, the
issuance of the Preferred Shares will not (i) result in a violation
of the Certificate of Incorporation (as defined herein) or other
organizational documents of the Company or any of its Subsidiaries,
any capital stock of the Company or any of its Subsidiaries or
Bylaws (as defined herein) of the Company or any of its
Subsidiaries, (ii) except as set forth in the SEC Documents (as
defined herein), conflict with, or constitute a default (or an
event which with notice or lapse of time or both would become a
default) under, or give to others any rights of termination,
amendment, acceleration or cancellation of, any agreement,
indenture or instrument to which the Company or any of its
Subsidiaries is a party, or
(iii) result
in a violation of any law, rule, regulation, order, judgment or
decree (including foreign, federal and state securities laws and
regulations and the rules and regulations of The OTC Markets Group
(the “Principal
Market”) applicable to the Company or any of its
Subsidiaries or by which any property or asset of the Company or
any of its Subsidiaries is bound or affected except, in the case of
clause (ii) or (iii) above, to the extent such violations that
could not reasonably be expected to have a Material Adverse
Effect.
d. No Consents. Neither the
Company nor any Subsidiary is required to obtain any consent from,
authorization or order of, or make any filing or registration with,
any court, governmental agency or any regulatory or self-regulatory
agency or any other Person in order for it to execute, deliver or
perform any of its respective obligations under or contemplated by
the Exchange Documents, in each case, in accordance with the terms
hereof or thereof. All consents, authorizations, orders, filings
and registrations which the Company or any Subsidiary is required
to obtain pursuant to the preceding sentence have been obtained or
effected on or prior to the date of this Agreement, and neither the
Company nor any of its Subsidiaries is aware of any facts or
circumstances which might prevent the Company or any of its
Subsidiaries from obtaining or effecting any of the registration,
application or filings contemplated by the Exchange Documents. The
Company is not in violation of the requirements of the Principal
Market and has no knowledge of any facts or circumstances which
could reasonably lead to delisting or suspension of the Common
Stock in the foreseeable future.
e. Securities Law Exemptions.
Assuming the accuracy of the representations and warranties of the
Holder contained herein, the offer and issuance by the Company of
the Preferred Shares is exempt from registration under the
Securities Act. The offer and issuance of the Preferred Shares is
exempt from registration under the Securities Act pursuant to the
exemption provided by Section 3(a)(9) thereof. The Company
covenants and represents to the Holder that neither the Company nor
any of its Subsidiaries has received, anticipates receiving, has
any agreement to receive or has been given any promise to receive
any consideration from the Holder or any other Person in connection
with the transactions contemplated by the Exchange Documents. The
Company hereby acknowledges that the holding period of the
Preferred Shares (and Underlying Shares) shall tack back to the
date the Exchanged Securities were originally issued by the Company
to the Holder (or its assignor) and it covenants not to take any
position to the contrary.
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f. Issuance of the Preferred
Shares. The issuance of the Preferred Shares is duly
authorized by the Company. The issuance of shares of the Underlying
Shares upon conversion of the Preferred Shares is duly authorized
and, when issued in accordance with the Preferred Shares, will be
duly and validly issued, fully paid and non-assessable, free from
all taxes, liens, charges and other encumbrances imposed by the
Company other than restrictions on transfer provided for in such
documents.
g. Equity Capitalization. Except
as disclosed in the SEC Documents: (i) none of the Company’s
or any Subsidiary’s capital stock is subject to preemptive
rights or any other similar rights or any liens or encumbrances
suffered or permitted by the Company or any Subsidiary; (ii) there
are no outstanding options, warrants, scrip, rights to subscribe
to, calls or commitments of any character whatsoever relating to,
or securities or rights convertible into, or exercisable or
exchangeable for, any capital stock of the Company or any of its
Subsidiaries, or contracts, commitments, understandings or
arrangements by which the Company or any of its Subsidiaries is or
may become bound to issue additional capital stock of the Company
or any of its Subsidiaries or options, warrants, scrip, rights to
subscribe to, calls or commitments of any character whatsoever
relating to, or securities or rights convertible into, or
exercisable or exchangeable for, any capital stock of the Company
or any of its Subsidiaries; (iii) there are no outstanding debt
securities, notes, credit agreements, credit facilities or other
agreements, documents or instruments evidencing indebtedness of the
Company or any of its Subsidiaries or by which the Company or any
of its Subsidiaries is or may become bound; (iv) there are no
financing statements securing obligations in any amounts filed in
connection with the Company or any of its Subsidiaries; (v) there
are no agreements or arrangements under which the Company or any of
its Subsidiaries is obligated to register the sale of any of their
securities under the Securities Act; (vi) there are no outstanding
securities or instruments of the Company or any of its Subsidiaries
which contain any redemption or similar provisions, and there are
no contracts, commitments, understandings or arrangements by which
the Company or any of its Subsidiaries is or may become bound to
redeem a security of the Company or any of its Subsidiaries; (vii)
there are no securities or instruments containing anti-dilution or
similar provisions that will be triggered by the issuance of the
Preferred Shares; (viii) neither the Company nor any Subsidiary has
any stock appreciation rights or “phantom stock” plans
or agreements or any similar plan or agreement; and (ix) neither
the Company nor any of its Subsidiaries have any liabilities or
obligations required to be disclosed in
the Company’s filings with the Commission (the
“SEC Documents”)
which are not so disclosed in the SEC Documents, other than those
incurred in the ordinary course of the Company’s or its
Subsidiaries’ respective businesses and which, individually
or in the aggregate, do not or could not have a Material Adverse
Effect. The Company has furnished to the Holder true, correct and
complete copies of the Company’s Amended and Restated
Certificate of Incorporation, as amended and as in effect on the
date hereof (the “Certificate
of Incorporation”), and the Company’s Amended
and Restated Bylaws and as in effect on the date hereof (the
“Bylaws”), and
the terms of all securities convertible into, or exercisable or
exchangeable for, shares of Common Stock and the material rights of
the holders thereof in respect thereto that have not been disclosed
in the SEC Documents.
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h. Shell Company Status. The
Company is not, and has not been in the last three years, an issuer
identified in, or subject to, Rule 144(i) of the Securities
Act.
6.
Additional
Acknowledgments.
a.
The Holder and the
Company confirm that the Company has not received any consideration
for the transactions contemplated by this Agreement. Pursuant to
Rule 144 promulgated by the Commission pursuant to the Securities
Act and the rules and regulations promulgated thereunder as such
Rule 144 may be amended from time to time, or any similar rule or
regulation hereafter adopted by the Commission having substantially
the same effect as such Rule 144, the holding period of the
Preferred Shares (and Underlying Shares) tacks back to the issue
date of the Exchanged Note. The Company hereby confirms that the
Holder (who is exchanging the Exchanged Note) currently is not and
will not be upon closing of this Agreement (individually or
together as a group) deemed an “affiliate” as defined
in Rule 144. The Company agrees not to take a position contrary to
this paragraph.
b.
For so long as any
of the Series A Preferred Shares are held by Holder, Company shall
not issue any Series A Preferred Shares to any other entity or
investor (an “Other Investor”) without prior consent of
Holder. Any issuance to an Other Investor without Holder’s
consent shall be null and void.
7.
Miscellaneous.
a. Successors and Assigns. This
Agreement shall be binding upon and inure to the benefit of the
parties and their respective successors and assigns.
b. Governing Law; Jurisdiction; Waiver of
Jury Trial. This Agreement shall be governed by and
construed under the laws of the State of New York, without regard
to the choice of law principles thereof. Each party hereby
irrevocably submits to the exclusive jurisdiction of the state and
federal courts sitting in the State of New York, City of New York
for the adjudication of any dispute hereunder or in connection
herewith or with any transaction contemplated hereby, and hereby
irrevocably waives any objection that such suit, action or
proceeding is brought in an inconvenient forum or that the venue of
such suit, action or proceeding is improper. Nothing contained
herein shall be deemed to limit in any way any right to serve
process in any manner permitted by law. EACH PARTY HEREBY
IRREVOCABLY WAIVES ANY RIGHT IT MAY
HAVE, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION
OF ANY DISPUTE HEREUNDER OR IN CONNECTION WITH OR ARISING OUT OF
THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY.
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c. Severability. If any provision
of this Agreement shall be invalid or unenforceable in any
jurisdiction, such invalidity or unenforceability shall not affect
the validity or enforceability of the remainder of this Agreement
in that jurisdiction or the validity or enforceability of any
provision of this Agreement in any other jurisdiction.
d. Counterparts/Execution. This
Agreement may be executed in two or more identical counterparts,
all of which shall be considered one and the same agreement and
shall become effective when counterparts have been signed by each
party and delivered to the other party. In the event that any
signature is delivered by facsimile transmission or by an e-mail
which contains an electronic file of an executed signature page,
such signature page shall create a valid and binding obligation of
the party executing (or on whose behalf such signature is executed)
with the same force and effect as if such facsimile or electronic
file signature page (as the case may be) were an original
thereof.
e. Notices. Any notice or
communication permitted or required hereunder shall be in writing
and shall be deemed sufficiently given if hand-delivered or sent
(i) postage prepaid by registered mail, return receipt requested,
or (ii) by email, to the respective parties as set forth below, or
to such other address as either party may notify the other in
writing.
If to
the Company, to:
00 XX
0xx
Xxxxxx, Xxxxx 00 Xxxxxx Xxxxx, Xxxxxxx 00000
Attn:
Xxxxx Xxxx, Executive Chairman Email:
xxx@xxxxxxxxx.xxx
If to
the Holder, to:
000
Xxxxx Xxxxx Xxxxxx, Xxxxx 0000 Xxxx Xxxx Xxxx, Xxxx
00000
Attn:
Xxxxxxx Xxxxxxx Xxxxx
e-mail:
xxxxxx@xxxxxxxxxxxxx.xxx
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f. Expenses. The parties hereto
shall pay their own costs and expenses in connection
herewith.
g. Entire Agreement; Amendments.
This Agreement constitutes the entire agreement between the parties
with regard to the subject matter hereof and thereof, superseding
all prior agreements or understandings, whether written or oral,
between the parties. This Agreement may be amended, modified,
superseded, cancelled, renewed or extended, and the terms and
conditions hereof may be waived, only by a written instrument
signed by all parties, or, in the case of a waiver, by the party
waiving compliance. Except as expressly stated herein, no delay on
the part of any party in exercising any right, power or privilege
hereunder shall operate as a waiver thereof, nor shall any waiver
on the part of any party of any right, power or privilege hereunder
preclude any other or future exercise of any other right, power or
privilege hereunder.
h. Headings. The headings used in
this Agreement are used for convenience only and are not to be
considered in construing or interpreting this
Agreement.
i. Pledge of Preferred Shares. The
Company acknowledges and agrees that the Preferred Shares may be
pledged by the Holder in connection with a bona fide margin
agreement or other loan or financing arrangement that is secured by
the Preferred Shares. The pledge of the Preferred Shares shall not
be deemed to be a transfer, sale or assignment of the Preferred
Shares hereunder, and if the Holder effects a pledge of the
Preferred Shares it shall not be required to provide the Company
with any notice thereof or otherwise make any delivery to the
Company pursuant to this Agreement. The Company hereby agrees to
execute and deliver such documentation as a pledgee of the
Preferred Shares may reasonably request in connection with a pledge
of the Preferred Shares to such pledgee by the Holder.
[SIGNATURE PAGES
FOLLOW]
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IN WITNESS WHEREOF, the parties have
caused this Agreement to be duly executed as of the day and year
first above written.
HOLDER
By: \
LLC, Its Manager
By:
Name:
Title:
Manager
COMPANY
By:
Name: Xxxxx
Xxxx
Title:
Executive Chairman
|
[SIGNATURE PAGE TO EXCHANGE AGREEMENT]
|
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Exhibit A
(Exchanged
Note)
Exhibit B
(Certificate
of Designation)
Exhibit C
(TA
Letter)
