UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): March 1, 2018
QUEST SOLUTION, INC.
(Exact name of registrant as specified in charter)
Delaware | 000-09047 | 20-3454263 | ||
(State or other jurisdiction | (Commission | (IRS Employer | ||
of incorporation) | File Number) | Identification No.) |
860 Conger Street, Eugene, OR 97402
(Address of Principal Executive Offices) (Zip Code)
(714) 899-4800
(Registrant’s Telephone Number, Including Area Code)
Not Applicable
(Former Name or Former Address, If Changed Since Last Report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
[ ] | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
[ ] | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
[ ] | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
[ ] | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§ 240.12b-2 of this chapter).
Emerging growth company [ ]
If an emerging growth company, indicate by check mart if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [ ]
Item 1.01 Entry into a Material Agreement.
On February 28, 2018, Quest Solution, Inc. (the “Company”) entered into two settlement agreements with David and Kathy Marin (the “Marin Settlement Agreements”). Pursuant to the first Marin Settlement Agreement (the “Marin Settlement Agreement I”), the Company and the Marins agreed to reduce the Company’s purchase price for all of the capital stock of Bar Code Specialties, Inc., which was acquired by the Company from the Marins in November 2014. In the 2014 acquisition, the Company had issued David Marin a promissory note for $11,000,000 of which an aggregate of $10,696,465.17 (the “Owed Amount”) was outstanding as of February 26, 2018which includes accrued interest earned but not paid. Pursuant to the Marin Settlement I Agreement, the amount of the indebtedness owed to Marin was reduced by $9,495,465.17 bringing the total amount owed to $1,201,000. Section 3.1 of the original note was amended to provide that the Company shall pay the Marins 60 monthly payments of $20,000 each commencing the earlier of (i) October 26, 2018 and (ii) the date that the Company’s obligation to Scansource, Inc., currently in the amount of $2,800,000 is satisfied and all amounts currently in default under the credit agreement with Scansource (currently approximately $ 6.0 Million) is reduced to $2.0 million. The Marins have agreed to release their security interest against the Company. In connection with the $9,495,465.17 reduction in the purchase price, the Company issued the Marins 3 year warrants to purchase an aggregate of 3,000,000 shares of Common Stock at an exercise price of $0.20 per-share.
On February 28, 2018, the Company entered into an additional settlement agreement with the Marins (the “Marin Settlement Agreement II”) whereby the Company settled a promissory note owed to the Marins in the original principal amount of $100,000 which currently had a balance of $111,064.69 in its entirety in exchange for an aggregate of 85,000 shares of the Company’s Series C Preferred Stock. The Series C Preferred Stock has a liquidation value and conversion price of $1.00 per share and automatically converts into Common Stock at $1.00 per share in the event that the Company’s common stock has a closing price of $1.50 per share for 20 consecutive trading days. The preferred stock pays a 6% dividend commencing two years from issuance. During the first two years, the Series C Preferred stock shall neither pay or accrue the dividend. The Company also agreed to transfer title to a vehicle that was being utilized by Mr. Marin to David Marin. In exchange therefor, the $100,000 Note and the accrued interest thereon was cancelled in its entirety.
On February 28, 2018, the Company entered into a settlement agreement with Kurt Thomet whereby the Company settled its indebtedness to Mr. Thomet in the current amount of $5,437,136.40 in full in exchange for 60 monthly payments of $12,500 each commencing the earlier of (i) October 26, 2018 or (ii) the date when the Company’s obligation under its promissory note with Scansource, Inc. currently in the amount of $2,800,000 is satisfied and all amounts currently due under the credit agreement with Scansource (currently approximately $6.0 million) is reduced to $2.0 million. In addition, the Company issued Mr. Thomet an aggregate of 500,000 shares of restricted common stock and 1,000,000 shares of Series C Preferred Stock with the same rights and restrictions as described above in the description of the Marin Settlement II Agreement.
On February 28, 2018, the Company entered into a settlement agreement with Goerge Zicman whereby the Company settled its indebtedness to Mr. Zicman in the current amount of $1,304,198.55 in full in exchange for 60 monthly payments of $3,000 each commencing the earlier of (i) October 26, 2018 or (ii) the date when the Company’s obligation under its promissory note with Scansource, Inc. currently in the amount of $2,800,000 is satisfied and all amounts currently due under the credit agreement with Scansource (currently approximately $6.0 million) is reduced to $2.0 million. In addition, the Company issued Mr. Zicman an aggregate of 100,000 shares of common stock and 600,000 shares of Series C Preferred Stock with the same rights and restrictions as described above in the description of the Marin Settlement II Agreement.
Each of the Marins, Thomet and Zicman entered into a voting agreement with the Company whereby they agreed to vote any shares of common stock beneficially owned by them and also agreed to a leakout restriction whereby they each agreed not to sell more than 10% of the common stock beneficially owned during any 30-day period.
On February 28, 2018, the Company entered into a 5 year employment agreement with David Marin to serve as a sales officer of the Company. Pursuant to the Employment Agreement, Mr. Marin shall receive a salary of $15,000 per month during the term of this employment. He is also entitled to a commission of 20% of the Company’s gross profit on the Company’s net revenues derived from sales to any customers that Marin is directly responsible for facilitating and/or closing. This commission structure is consistent with Mr. Marin’s previous commission structure. In addition, Mr. Marin may be entitled to a bonus at the discretion of the Company’s Board.
On February 26, 2018, the Company entered into a lease termination agreement with David and Kathy Marin whereby it cancelled the lease for the premises located at 12272 Monarch St., Garden Grove, California effective as of April 20, 2018.
Item 3.02 Unregistered Sales of Equity Securities
As described in Section 1.01 hereof, the Company issued an aggregate of 600,000 shares of Common Stock, 3,000,000 three-year warrants to purchase Common Stock at $0.20 per share and 1,685,000 shares of Series C Preferred Stock in connection with the February 28, 2018 settlement agreements.
Item 9.01 Financial statements and Exhibits
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
Date: March 1, 2018
QUEST SOLUTION, INC. | ||
By: | /s/ Shai S. Lustgarten | |
Shai S. Lustgarten | ||
Director, President and CEO |
SETTLEMENT AGREEMENT
($11 mil Note)
THIS SETTLEMENT AGREEMENT (the “Agreement”) is made this 28th day of February 2018 and effective as of December 30, 2017 (the “Effective Date”), by and between Quest Solution Inc., a Delaware corporation (the “Company”) and David Marin and Kathy Marin, individuals residing at 12272 Monarch Street, Garden Grove, CA 92841 and 20 Sklar Street, Ladera Ranch, CA 92694, respectively (collectively “the Marins”). The Company and the Marins collectively shall be referred to as the “Parties.”
WHEREAS, in connection with the Company’s purchase of all of the capital stock of Bar Code Specialties, Inc. from David Marin (the “Acquisition”), the Company entered into a promissory note on November 19, 2014 in the original principal amount of $11,000,000, as amended through the date hereof (the “Note”), of which the aggregate amount of approximately $10,696,465.17 (the “Owed Amount”) is currently owed to the Marins, which includes accrued interest earned but not paid;
WHEREAS; the Parties agree to reduce the purchase price of the capital stock purchased in the Acquisition and to reduce the Owed Amount under the Note accordingly on the terms set forth below.
WHEREAS, each of the Parties desires to resolve any and all claims in connection with the Owed Amount upon the fulfillment of the conditions set forth below.
NOW THEREFORE, in consideration of the mutual covenants and other good and valuable considerations hereinafter contained, the Parties agree as follows:
1. | Recitals. The above recitals are incorporated into this Agreement. | |
2. | Purchase Price Adjustment. The Parties agree that the Owed Amount shall be reduced by $9,495,465.17 of the Owed Amount (the “Cancelled Debt”) without consideration as a purchase price adjustment in the Acquisition, effective as of December 31, 2017. The Parties agree to treat such debt reduction for all purposes as a purchase price adjustment. Notwithstanding the foregoing, in the event the Company fails to deliver the Warrant in accordance with Section 3, fails to make any other payments due hereunder, or upon an Event of Default under the Note, $1,200,000 of the Cancelled Debt shall be reinstated and added back to the principal amount then outstanding under the Note, together with any accrued unpaid interest on the Reinstated Debt under the Note (the “Reinstated Debt”), and shall double the monthly payments under Section 2.1 of the Note to $40,000 per month. |
3. | Warrant; Payment on the Note. Within three (3) days of the execution of this Agreement, the Company agrees to issue and deliver to the Marins (or to an affiliated entity or affiliated person as designated in writing by both of the Marins) a Warrant to purchase an aggregate of 3,000,000 shares of the Company’s Common Stock (the “Warrant”) at an exercise price of $0.20 per share (which exercise price the Parties acknowledge is approximately 200% of the closing sales price per share of the Company’s Common Stock on the date hereof). The issuance of the Warrant shall reduce the outstanding balance of the Note by an additional $1,000. The Warrant shall be in a form reasonably acceptable to the Marins but shall have the following terms: (i) the term of the Warrant shall be for three years; (ii) the Warrant shall contain standard net exercise provisions to facilitate a cashless exercise of the Warrant; (iii) the shares of Common Stock issuable upon exercise of the Warrants shall be subject to restrictions in accordance with the Securities Act of 1933, as amended (the “1933 Act”) and will bear the standard 1933 Act restrictive legend until the requisite holding period shall be met under the 1933 Act. The Parties agree that the value of the Warrant for tax purposes as of the date of issuance is expected to be $1,000. In the event the Warrant’s value as of the date of issuance is in excess of the foregoing amount, the Parties agree that the Company shall reimburse the Marins for any resulting tax liability they owe in this regard up to $200,000, which reimbursement shall be due and payable upon notice to the Company of the amount of such taxes due (with reasonable documentation to support the same). This reimbursement obligation shall not be applicable to any potential gain on the exercise of the Warrant or sale of the underlying shares. Notwithstanding the foregoing, the Company agrees to make any reformations to this Agreement reasonable requested by the Marins to reduce any potential tax liability in this regard. In addition, the Marins hereby agree that they will not collectively sell more than 10% of the shares of Common Stock beneficially owned by them in any 30-day period (the “Trading Restriction”). The Trading Restriction shall be null and void 180 days after the Company’s Common Stock is listed on the NASDAQ Capital Market or another national stock exchange. In addition, the Marins agree to execute the voting proxy agreement in favor of the Company’s CEO, Shai Lustgarten, in substantially the form attached hereto as Exhibit B. | |
4. | Amendment of the Note. The Parties agree that the remaining principal balance of the Note, after giving effect to the debt cancellation and payment in kind for the Warrant set forth in in Sections 2 and 3 above, shall be $1,200,000 (the “Remaining Balance”) (subject to further increase upon a reinstatement of debt in accordance with Section 2 above). The Parties further agree that the Note shall be amended as follows: |
a. | Section 2.1 of the Note shall be amended in full to read as follows: “The principal balance of the Note (after giving effect to the debt cancellations and reductions pursuant to the Settlement Agreement between the Company and David and Kathy Marin dated February 2018), shall be paid in sixty (60) equal monthly installments of Twenty Thousand Dollars ($20,000), with the first payment due and payable on the earlier of (i) the eight month anniversary of the date of this Agreement; or (ii) the date when the Company’s obligation under its promissory note with Scansource, Inc. (“Scansource”), currently in the amount of approximately $2,800,000 is satisfied and all amounts currently in default due under the credit agreement (currently approximately $6.0 million) with Scansource is reduced to $2.0 million. Any interest accrued pursuant to the Note shall be paid with the 60th monthly payment. |
b. | Sections 2.3 and Section 4 of the Note shall be deleted in their entirety as the Company has ceased paying for the premiums on such life insurance, and the Company has executed and delivered an assignment of such life insurance policy to Mr. Marin. | |
c. | The Marins agree to release any security interest they may have against the Company’s assets related to this Note and to cancel the Security Agreement dated November 19, 2014 upon the termination of that certain Subordination Agreement by Scansource and the Company. Upon such cancellation of the Security Agreement, Section 6 of the Note shall be deleted in its entirety. The Company agrees to use its commercially reasonable best efforts to terminate such Subordination Agreement unless Scansource consents in writing to the payments to the Marins or their designees hereunder. | |
d. | Except as set forth in this Agreement, all of the terms and provisions of the Note not otherwise modified or eliminated by this Agreement, shall remain unchanged and in full force and effect. The Note, as amended through the date hereof, shall be read together and construed in accordance with the terms of this Agreement. | |
e. | The Company represents and warrants to the Marins that the Company has entered into settlement agreements with Kurt Thomet and George Zicman (collectively, the “Noteholders”), pursuant to which all of the promissory notes payable by the Company to the Noteholders have been cancelled in full, together with any security interest granted to the Noteholders. |
5. | The Marins hereby confirm that, upon receipt of this Agreement and the Warrant, the Company shall have no obligation to pay any other fees, expenses, accrued but unpaid interest or dividends or any other payment or reimbursements that comprise the Cancelled Debt, except for the Reinstated Debt (but only to the extent of any such reinstatement in accordance with this Agreement), and subsequent interest and other amounts that may be accrued thereon after such reinstatement. The Marins hereby agree to release any security interest that they may have against the Company’s assets upon the cancellation of that certain Subordination Agreement by the Company and Scansource. The Marins represent and warrant that no other person or entity has any interest in the Cancelled Debt and that they have not pledged, and that they have not assigned or transferred, or purported to assign or transfer, to any person or entity all or any portion of the Cancelled Debt. |
6. | Indemnification. The Marins agree that in the event either of the Marins assigned or transferred any interest in the Cancelled Debt, then the Marins shall be responsible for any damages arising against the Company relating to such assignment or transfer including reasonable expenses in defending a third party action related to such assignment or transfer. | |
7. | Mutual Non-Disparagement. All Parties agree not to disparage or otherwise make unfavorable remarks regarding any other party to this Agreement. Notwithstanding the foregoing, nothing in this Agreement shall prevent the Parties from making any truthful statement to the extent (a) necessary to rebut any untrue statements made about him; (b) necessary with respect to any litigation, arbitration or mediation involving this Agreement, including, but not limited to, the enforcement of this Agreement; (c) required by law or by any court, arbitrator, mediator or administrative or legislative body (including any committee thereof) with jurisdiction over such person; or (d) made as good faith competitive statements in the ordinary course of business. | |
8. | Merger and Amendment. This Agreement, its Exhibits and the Note, as amended, contain the entire agreement and understanding concerning the Owed Amounts and Cancelled Debt, and supersedes and replaces all prior negotiations, proposed agreement and agreements, written or oral. Each of the parties hereto acknowledges that none of the parties hereto, agents or counsel of any party, has made any promise, representation or warranty whatsoever, express or implied, not contained herein concerning the subject hereto, to induce it to execute this Agreement and acknowledges and warrants that it is not executing this Agreement in reliance on any promise, representation or warranty not contained herein. This Agreement may not be modified or amended in any manner except by an instrument in writing specifically stating that it is a supplement, modification or amendment to the Agreement and signed by each of the Parties hereto against whom such modification or amendment shall be claimed to be effective. | |
9. | Duplicate Originals; Counterparts. This Agreement may be executed in any number of duplicate originals and each duplicate original shall be deemed to be an original. This Agreement may be executed in several counterparts, each of which counterparts shall be deemed an original instrument and all of which together shall constitute a single agreement. | |
10. | Severability. Each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement is held to be prohibited or invalid under applicable law, such provision will be ineffective only to the extent of such prohibition or invalidity, without invalidating the remainder of this Agreement. | |
11. | Governing Law. This Agreement shall be interpreted and the rights and liabilities of the Parties determined in accordance with the laws of the State of California, excluding its conflict of laws rules. | |
12. | Representation by Counsel. Each party hereto represents and agrees with each other that it has been represented by or had the opportunity to be represented by, independent counsel of its own choosing, and that it has had the full right and opportunity to consult with its respective attorney(s), that to the extent, if any, that it desired, it availed itself of this right and opportunity, that it or its authorized officers (as the case may be) have carefully read and fully understand this Agreement in its entirety and have had it fully explained to them by such party’s respective counsel, that each is fully aware of the contents thereof and its meaning, intent and legal effect, and that it or its authorized officer (as the case may be) is competent to execute this Agreement and has executed this Agreement free from coercion, duress or undue influence. For the purposes of clarity, the Parties agree that Morgan, Lewis & Bockius LLP is only representing Mr. David Marin in connection with this Agreement. |
IN WITNESS WHEREOF, the Parties hereto have executed this Settlement Agreement as of the day and year first written above.
QUEST SOLUTION INC. | ||
By: | /s/ Shai Lustgarten | |
Name: | Shai Lustgarten | |
Title: | Chief Executive Officer | |
/s/ David Marin | ||
David Marin | ||
/s/ Kathy Marin | ||
Kathy Marin |
Execution Version
SETTLEMENT AGREEMENT
($100K Note)
THIS SETTLEMENT AGREEMENT (the “Agreement”) is made this 28th day of February 2018 and effective as of December 30, 2017 (the “Effective Date”), by and between Quest Solution Inc., a Delaware corporation (the “Company”) and David Marin and Kathy Marin, individuals residing at 12272 Monarch Street, Garden Grove, CA 92841 and 20 Sklar Street, Ladera Ranch, CA 92694, respectively (collectively “the Marins”). The Company and the Marins collectively shall be referred to as the “Parties.”
WHEREAS, the Company entered into a promissory note on June 24, 2015 in the original principal amount of $100,000 (the “Note”), of which the aggregate amount of approximately $111,064.69 (the “Owed Amount”) is owed to the Marins, which includes accrued interest earned but not paid;
WHEREAS, the Company is willing to settle the Owed Amount by paying certain consideration to the Marins as set forth in Section 2 below.
WHEREAS, each of the Parties desires to resolve any and all claims in connection with the Owed Amount upon the fulfillment of the conditions set forth in Section 2 below.
NOW THEREFORE, in consideration of the mutual covenants and other good and valuable considerations hereinafter contained, the Parties agree as follows:
1. | Recitals. The above recitals are incorporated into this Agreement. | |
2. | Settlement. On the date hereof, or as otherwise set forth below, the Marins agree to accept the following consideration (collectively, the “Consideration”) as payment in full of the Owed Amount: |
a. | The Company agrees, at its own expense and within five (5) business days after the date hereof, to issue to the Marins (or to an affiliated entity or affiliated person as directed in writing by both of the Marins) an aggregate of 85,000 shares of the Company’s Series C Preferred Stock (the “Preferred Shares”), which rights will be governed by the terms set forth in the Certificate of Designation of Rights and Preferences (the “COD”) attached as Exhibit A hereto, except that no dividends will be payable or will accrue on the Preferred Shares for the first two years from the date hereof, and the Preferred Shares will be convertible into shares of the Company’s Common Stock at the conversion rate $1.00 per share at the holder’s option and will be automatically convertible into common stock if the Company’s Common Stock has a closing sales price of $1.50 per share for 20 consecutive trading days on the primary stock exchange on which the Company’s securities are then listed or quoted. The Company represents and warrants to the Marins that (i) upon issuance, the Preferred Shares shall be duly and validly issued, non-assessable and fully paid shares of the Company’s Series C Preferred Stock; and (ii) that a sufficient number of shares of Common Stock shall have been reserved for issuance upon conversion in full of the Preferred Shares. |
b. | The Company shall, at the Company’s expense and within five business days after the date of this Agreement, transfer title to the Marins (or to such other affiliated person or entity as directed in writing by both of the Marins) of the Ford F250 Diesel Truck currently being utilized by the Marins. The Parties agree that the fair market value of such Truck shall be $15,000 and shall be applied to reduce the Owed Amount. |
3. | Cancellation of the Note. The Marins agree that upon the execution of this Agreement and the delivery to the Marins of the Consideration described above, the Owed Amount will be cancelled and forgiven in its entirety, and the Marins shall have no right to the Owed Amount as of the Effective Date. | |
4. | Confirmation. The Marins hereby confirm that, upon receipt of the Consideration set forth in Section 2 hereof, (a) the Company shall have no obligation to pay any other fees, expenses, accrued but unpaid interest or dividends or any other payment or reimbursements that comprise the Owed Amount, except for payments and rights set forth in the COD as modified in Section 2(b) hereof; and (b) the Marins hereby agree to release any security interest that they may have against the Company’s assets related to this Note. The Marins represent and warrant that no other person or entity has any interest in the Owed Amount and that they have not pledged, and that they have not assigned or transferred, or purported to assign or transfer, to any person or entity all or any portion of the Owed Amount. | |
5. | Indemnification. The Marins agree that in the event either of the Marins assigned or transferred any interest in the Owed Amounts, then the Marins shall be responsible for any damages arising against the Company relating to such assignment or transfer including reasonable expenses in defending a third party action related to alleged ownership as a result of such assignment or transfer. | |
6. | Mutual Non-Disparagement. All Parties agree not to disparage or otherwise make unfavorable remarks regarding any other party to this Agreement. Notwithstanding the foregoing, nothing in this Agreement shall prevent the Parties from making any truthful statement to the extent (a) necessary to rebut any untrue statements made about him; (b) necessary with respect to any litigation, arbitration or mediation involving this Agreement, including, but not limited to, the enforcement of this Agreement; (c) required by law or by any court, arbitrator, mediator or administrative or legislative body (including any committee thereof) with jurisdiction over such person; or (d) made as good faith competitive statements in the ordinary course of business. |
7. | Merger and Amendment. This Agreement and its Exhibits contain the entire agreement and understanding concerning the Owed Amounts and supersedes and replaces all prior negotiations, proposed agreement and agreements, written or oral. Each of the parties hereto acknowledges that none of the parties hereto, agents or counsel of any party, has made any promise, representation or warranty whatsoever, express or implied, not contained herein concerning the subject hereto, to induce it to execute this Agreement and acknowledges and warrants that it is not executing this Agreement in reliance on any promise, representation or warranty not contained herein. This Agreement may not be modified or amended in any manner except by an instrument in writing specifically stating that it is a supplement, modification or amendment to the Agreement and signed by each of the Parties hereto against whom such modification or amendment shall be claimed to be effective. | |
9. | Duplicate Originals; Counterparts. This Agreement may be executed in any number of duplicate originals and each duplicate original shall be deemed to be an original. This Agreement may be executed in several counterparts, each of which counterparts shall be deemed an original instrument and all of which together shall constitute a single agreement. | |
10. | Severability. Each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement is held to be prohibited or invalid under applicable law, such provision will be ineffective only to the extent of such prohibition or invalidity, without invalidating the remainder of this Agreement. | |
11. | Governing Law. This Agreement shall be interpreted and the rights and liabilities of the Parties determined in accordance with the laws of the State of California, excluding its conflict of laws rules. | |
12. | Representation by Counsel. Each party hereto represents and agrees with each other that it has been represented by or had the opportunity to be represented by, independent counsel of its own choosing, and that it has had the full right and opportunity to consult with its respective attorney(s), that to the extent, if any, that it desired, it availed itself of this right and opportunity, that it or its authorized officers (as the case may be) have carefully read and fully understand this Agreement in its entirety and have had it fully explained to them by such party’s respective counsel, that each is fully aware of the contents thereof and its meaning, intent and legal effect, and that it or its authorized officer (as the case may be) is competent to execute this Agreement and has executed this Agreement free from coercion, duress or undue influence. For the purposes of clarity, the Parties agree that Morgan, Lewis & Bockius LLP is only representing Mr. David Marin in connection with this Agreement. |
IN WITNESS WHEREOF, the Parties hereto have executed this Settlement Agreement as of the day and year first written above.
QUEST SOLUTION INC. | ||
By: | /s/ Shai Lustgarten | |
Name: | Shai Lustgarten | |
Title: | Chief Executive Officer | |
/s/ David Marin | ||
David Marin | ||
/s/ Kathy Marin | ||
Kathy Marin |
SETTLEMENT AGREEMENT
SETTLEMENT AGREEMENT, made this 28th day of February 2018 and effective as of December 30, 2017 (the “Effective Date”) (the “Agreement”), by and between Quest Solution Inc., a Delaware corporation (the “Company”) and Kurt Thomet, an individual residing at 706 Fairwinds Loop, Vancouver, WA 95661 (“Thomet”). The Company and Thomet collectively shall be referred to as the “Parties.”
WHEREAS, the Company is indebted to Thomet in the aggregate amount of $5,437,136.40 (the “Owed Amount”) which includes accrued interest earned but not paid;
WHEREAS, Thomet has instituted an action in the Circuit Court for the State of Oregon, for the County of Lane (the “Lawsuit”) seeking damages for breach of contract.
WHEREAS; the Company is willing to settle the Owed Amount by paying certain consideration to Thomet as set forth in Section 2 below.
WHEREAS, each of the Parties desires to release each of the other Parties from any and all claims in connection with the Owed Amount upon the fulfillment of the conditions set forth in Section 2 below.
NOW THEREFORE, in consideration of the mutual covenants and other good and valuable considerations hereinafter contained, the Parties agree as follows:
1. | Recitals. The above recitals are incorporated into this Agreement. | |
2. | Settlement. On the date hereof, or as otherwise set forth below, the Company shall satisfy the Owed Amount in the manner set forth below: |
a. | The Company will pay Thomet 60 monthly payments of $12,500 each (the “Settlement Payments”) commencing the earlier of (i) 8 months from the date hereof; or (ii) the date when the Company’s obligation under its promissory note with Scansource, Inc., currently in the amount of approximately $2,800,000 is satisfied and all amounts currently in default due under the credit agreement (currently approximately $6.0 million) with Scansource is reduced to $2.0 million, with subsequent payments due on or before the 25th day of each calendar month following such date. All Settlement Payments, if not paid when due, will bear interest at the rate of 12% per annum, or the maximum rate permitted by applicable law, whichever is less. If Company fails to timely pay 2 consecutive Settlement Payments when due, or is otherwise in breach of this Agreement, then Thomet may declare all remaining Settlement Payments (and all accrued but unpaid interest) due in its entirety, and such sum will thereafter bear interest at the rate of 18% per annum, or the maximum rate permitted by applicable law, whichever is less. |
b. | The Company hereby agrees to issue Thomet 500,000 shares of Common Stock within three (3) days of the execution of this Agreement (the “Common Shares”). The Common Shares will be subject to restriction in accordance with the Securities Act of 1933, as amended and the Securities Exchange Act of 1934, as amended (collectively “U.S. Securities Laws”) and will bear the standard 1933 Act restrictive legend. In addition, Thomet hereby agrees that he will not sell more than 10%of the shares of Common stock beneficially owned by him in any 30-day period (the “Trading Restriction”). The Trading Restriction shall be null and void 180 days after the Company’s common stock is listed on the NASDAQ Capital Market or another National Market. In addition, Thomet agrees to execute the voting proxy agreement in favor of the Company’s CEO, Shai Lustgarten, attached hereto as Exhibit B. | |
c. | The Company agrees to issue Thomet an aggregate of 1,000,000 shares of Series C Preferred Stock which rights will be governed by the terms set forth in the Certificate of Designation of Rights and Preferences (the “COD”)attached as Exhibit A hereto, except that no dividends will be payable or will accrue on the Preferred Shares until two years from the date of issuance; and the Preferred Shares will be convertible into Common Stock at $1.00 per share at the holder’s option and will be automatically convertible into common stock if the Company’s common stock has a closing price of $1.50 per share for 20 consecutive trading days. |
The Settlement Payments, the issuance of the Preferred Shares and the Common Shares shall constitute the total consideration for the Owed Amount (the “Consideration”).
3. | Forgiveness of the Obligation. Thomet agrees that upon the execution of this Agreement and the issuance of the Preferred Shares and Common Shares and payment of the attorneys’ fees as provided in Section 4, below, the Owed Amount will be forgiven in its entirety and Thomet shall have no right to the Owed Amount as of the Effective Date, although Thomet shall retain the right to the Consideration. Thomet agrees to sign any document deemed necessary by the Company’s auditors to reflect such forgiveness after review by his counsel; provided, that any such letter or agreement will not effect the economic terms of this Agreement. In addition, Thomet agrees to, not later than five business days after issuance of the Preferred Shares and Common Shares and payment of the attorneys’ fees as provided in Section 4, below, withdraw the Lawsuit with prejudice. | |
4. | Attorneys’ Fees. Contemporaneous with the execution of this Agreement the Company will pay the legal fees incurred by Thomet in connection with the negotiation of this Agreement in the amount of $5,000. |
5. | Release. In consideration of the foregoing and upon fulfillment of the conditions of this Agreement, Thomet hereby releases and discharges the Company, the Company’s officers, directors, principals, control persons, past and present employees, agents, insurers, successors, and assigns (“Company Parties”) from all actions, cause of action, suits, debts, dues, sums of money, accounts, reckonings, bonds, bills, specialties, covenants, contracts, controversies, agreements, promises, variances, trespasses, damages, judgments, extents, executions, claims, and demands whatsoever, in law, admiralty or equity, Thomet ever had, now has or hereafter can, shall or may, have for, upon, or by reason of any matter, cause or thing whatsoever, whether or not known or unknown, in connection with the Owed Amount, from the beginning of the world to the day of the date of this Release. Notwithstanding anything in this paragraph, Thomet does not waive any rights that he derives from this Agreement or any other agreement that he may enter into with the Company pursuant to Section 4 below. | |
Thomet hereby confirms that, upon receipt of the items set forth in Section 2 hereof, the Company shall have no obligation to pay any other fees, expenses, accrued but unpaid interest or dividends or any other payment or reimbursements that comprise the Owed Amount, except for payments and rights set forth in the COD as modified in Section 2(b) hereof. Thomet hereby agrees to release any security interest that he may have against the Company’s assets. Thomet represents and warrants that no other person or entity has any interest in the Owed Amount and that he has not pledged, and that it has not assigned or transferred, or purported to assign or transfer, to any person or entity all or any portion of the Owed Amount. | ||
6. | Indemnification. Thomet agrees that in the event that a third party brings a claim against the Company alleging that Thomet transferred or otherwise pledged a portion of the Owed Amount, and/or the promissory note(s) reflecting the Owed Amount, Thomet shall be responsible for any damages arising against the Company relating thereto including reasonable expenses in defending such third party action. | |
7. | Mutual Non-Disparagement. All Parties agree not to disparage or otherwise make unfavorable remarks regarding any other party to this Agreement. | |
8. | Merger and Amendment. This Agreement and its Exhibits contain the entire agreement and understanding concerning the Owed Amounts and supersedes and replaces all prior negotiations, proposed agreement and agreements, written or oral. Each of the parties hereto acknowledges that none of the parties hereto, agents or counsel of any party, has made any promise, representation or warranty whatsoever, express or implied, not contained herein concerning the subject hereto, to induce it to execute this Agreement and acknowledges and warrants that it is not executing this Agreement in reliance on any promise, representation or warranty not contained herein. This Agreement may not be modified or amended in any manner except by an instrument in writing specifically stating that it is a supplement, modification or amendment to the Agreement and signed by each of the Parties hereto against whom such modification or amendment shall be claimed to be effective. | |
9. | Duplicate Originals; Counterparts. This Agreement may be executed in any number of duplicate originals and each duplicate original shall be deemed to be an original. This Agreement may be executed in several counterparts, each of which counterparts shall be deemed an original instrument and all of which together shall constitute a single agreement. |
10. | Severability. Each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement is held to be prohibited or invalid under applicable law, such provision will be ineffective only to the extent of such prohibition or invalidity, without invalidating the remainder of this Agreement. | |
11. | Governing Law. This Agreement shall be interpreted and the rights and liabilities of the Parties determined in accordance with the laws of the State of Oregon, excluding its conflict of laws rules. Each party consents to the exclusive jurisdiction of any State Court or Federal Court in Lane County, Oregon with repsect to any claim or action arising out of or related to this Agreement. | |
12. | Representation by Counsel. Each party hereto represents and agrees with each other that it has been represented by or had the opportunity to be represented by, independent counsel of its own choosing, and that it has had the full right and opportunity to consult with its respective attorney(s), that to the extent, if any, that it desired, it availed itself of this right and opportunity, that it or its authorized officers (as the case may be) have carefully read and fully understand this Agreement in its entirety and have had it fully explained to them by such party’s respective counsel, that each is fully aware of the contents thereof and its meaning, intent and legal effect, and that it or its authorized officer (as the case may be) is competent to execute this Agreement and has executed this Agreement free from coercion, duress or undue influence. |
IN WITNESS WHEREOF, the Parties hereto have executed this Release Agreement as of the day and year first written above.
QUEST SOLUTION INC. | ||
By: |
/s/ Shai Lustgarten | |
Name: | Shai Lustgarten | |
Title: | Chief Executive Officer | |
/s/ Kurt Thomet | ||
Kurt Thomet |
EXHIBIT B
Voting Agreement
SETTLEMENT AGREEMENT
SETTLEMENT AGREEMENT, made this 28th day of February 2018 and effective as of December 30, 2017 (the “Effective Date”) (the “Agreement”), by and between Quest Solution Inc., a Delaware corporation (the “Company”) and George Zicman, an individual residing at 14820 Parisian Ct, Reno, NV (“Zicman”). The Company and Zicman collectively shall be referred to as the “Parties.”
WHEREAS, the Company is indebted to Zicman in the aggregate amount of $1,304,198.55 (the “Owed Amount”) which includes accrued interest earned but not paid;
WHEREAS; the Company is willing to settle the Owed Amount by paying certain consideration to Zicman as set forth in Section 2 below.
WHEREAS, each of the Parties desires to release each of the other Parties from any and all claims in connection with the Owed Amount upon the fulfillment of the conditions set forth in Section 2 below.
NOW THEREFORE, in consideration of the mutual covenants and other good and valuable considerations hereinafter contained, the Parties agree as follows:
1. | Recitals. The above recitals are incorporated into this Agreement. | |
2. | Settlement. On the date hereof, or as otherwise set forth below, the Company shall satisfy the Owed Amount in the manner set forth below: |
a. | The Company will pay Zicman 60 monthly payments of $3,000 each (the “Settlement Payments”) commencing the earlier of (i) 8 months from the date hereof; or (ii) the date when the Company’s obligation under its promissory note with Scansource, Inc., currently in the amount of approximately $2,800,000 is satisfied and all amounts currently in default due under the credit agreement (currently approximately $6.0 million) with Scansource is reduced to $2.0 million. | |
b. | The Company hereby agrees to issue Zicman 100,000 shares of Common Stock within three (3) days of the execution of this Agreement (the “Common Shares”). The Common Shares will be subject to restriction in accordance with the Securities Act of 1933, as amended and the Securities Exchange Act of 1934, as amended (collectively “U.S. Securities Laws”) and will bear the standard 1933 Act restrictive legend. In addition, Zicman hereby agrees that he will not sell more than 10%of the shares of Common stock beneficially owned by him in any 30-day period (the “Trading Restriction”). The Trading Restriction shall be null and void 180 days after the Company’s common stock is listed on the NASDAQ Capital Market or another National Market. In addition, Zicman agrees to execute the voting proxy agreement in favor of the Company’s CEO, Shai Lustgarten, attached hereto as Exhibit B. |
c. | The Company agrees to issue Zicman an aggregate of 600,000 shares of Series C Preferred Stock which rights will be governed by the terms set forth in the Certificate of Designation of Rights and Preferences (the “COD”)attached as Exhibit A hereto, except that no dividends will be payable or will accrue on the Preferred Shares until two years from the date of issuance; and the Preferred Shares will be convertible into Common Stock at $1.00 per share at the holder’s option and will be automatically convertible into common stock if the Company’s common stock has a closing price of $1.50 per share for 20 consecutive trading days. In addition, Zicman hereby agrees that he will not sell more than 10%of the shares of Common stock beneficially owned by him in any 30-day period (the “Trading Restriction”). The Trading Restriction shall be null and void 180 days after the Company’s common stock is listed on the NASDAQ Capital Market or another National Market. In addition, Zicman agrees to execute the voting proxy agreement in favor of the Company’s CEO, Shai Lustgarten, attached hereto as Exhibit B. |
The Settlement Payments and the issuance of the Preferred Shares shall constitute the total consideration for the Owed Amount (the “Consideration”).
3. | Forgiveness of the Obligation. Zicman agrees that upon the execution of this Agreement and the issuance of the Preferred Shares, Common Shares, the Owed Amount will be forgiven in its entirety and Zicman shall have no right to the Owed Amount as of the Effective Date although they retain the right to the Settlement Payments. Zicman agrees to sign any document deemed necessary by the Company’s auditors to reflect such forgiveness after review by his counsel; provided, that any such letter or agreement will not effect the economic terms of this Agreement. | |
4. | Continuing Services. The Company and Zicman agree that any continuing series performed on behalf of the Company will be subject to a mutually agreeable consulting agreement between the Company and Zicman. | |
5. | Release. In consideration of the foregoing and upon fulfillment of the conditions of this Agreement, Zicman hereby releases and discharges the Company, the Company’s officers, directors, principals, control persons, past and present employees, agents, insurers, successors, and assigns (“Company Parties”) from all actions, cause of action, suits, debts, dues, sums of money, accounts, reckonings, bonds, bills, specialties, covenants, contracts, controversies, agreements, promises, variances, trespasses, damages, judgments, extents, executions, claims, and demands whatsoever, in law, admiralty or equity, Zicman ever had, now has or hereafter can, shall or may, have for, upon, or by reason of any matter, cause or thing whatsoever, whether or not known or unknown, in connection with the Owed Amount, from the beginning of the world to the day of the date of this Release. Notwithstanding anything in this paragraph, Zicman does not waive any rights that he derives from this Agreement or any other agreement that he may enter into with the Company pursuant to Section 4 below. |
Zicman hereby confirms that, upon receipt of the items set forth in Section 2 hereof, the Company shall have no obligation to pay any other fees, expenses, accrued but unpaid interest or dividends or any other payment or reimbursements that comprise the Owed Amount, except for payments and rights set forth in the COD as modified in Section 2(b) hereof. Zicman hereby agrees to release any security interest that he may have against the Company’s assets. Zicman represents and warrants that no other person or entity has any interest in the Owed Amount and that he has not pledged, and that it has not assigned or transferred, or purported to assign or transfer, to any person or entity all or any portion of the Owed Amount. | ||
6. | Indemnification. Zicman agrees that in the event that a third party brings a claim against the Company alleging that Zicman transferred or otherwise pledged a portion of the Owed Amount, and/or the promissory note(s) reflecting the Owed Amount, Zicman shall be responsible for any damages arising against the Company relating thereto including reasonable expenses in defending such third party action. | |
7. | Mutual Non-Disparagement. All Parties agree not to disparage or otherwise make unfavorable remarks regarding any other party to this Agreement. | |
8. | Merger and Amendment. This Agreement and its Exhibits contain the entire agreement and understanding concerning the Owed Amounts and supersedes and replaces all prior negotiations, proposed agreement and agreements, written or oral. Each of the parties hereto acknowledges that none of the parties hereto, agents or counsel of any party, has made any promise, representation or warranty whatsoever, express or implied, not contained herein concerning the subject hereto, to induce it to execute this Agreement and acknowledges and warrants that it is not executing this Agreement in reliance on any promise, representation or warranty not contained herein. This Agreement may not be modified or amended in any manner except by an instrument in writing specifically stating that it is a supplement, modification or amendment to the Agreement and signed by each of the Parties hereto against whom such modification or amendment shall be claimed to be effective. | |
9. | Duplicate Originals; Counterparts. This Agreement may be executed in any number of duplicate originals and each duplicate original shall be deemed to be an original. This Agreement may be executed in several counterparts, each of which counterparts shall be deemed an original instrument and all of which together shall constitute a single agreement. | |
10. | Severability. Each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement is held to be prohibited or invalid under applicable law, such provision will be ineffective only to the extent of such prohibition or invalidity, without invalidating the remainder of this Agreement. | |
11. | Governing Law. This Agreement shall be interpreted and the rights and liabilities of the Parties determined in accordance with the laws of the State of New York, excluding its conflict of laws rules. | |
12. | Representation by Counsel. Each party hereto represents and agrees with each other that it has been represented by or had the opportunity to be represented by, independent counsel of its own choosing, and that it has had the full right and opportunity to consult with its respective attorney(s), that to the extent, if any, that it desired, it availed itself of this right and opportunity, that it or its authorized officers (as the case may be) have carefully read and fully understand this Agreement in its entirety and have had it fully explained to them by such party’s respective counsel, that each is fully aware of the contents thereof and its meaning, intent and legal effect, and that it or its authorized officer (as the case may be) is competent to execute this Agreement and has executed this Agreement free from coercion, duress or undue influence. |
IN WITNESS WHEREOF, the Parties hereto have executed this Release Agreement as of the day and year first written above.
QUEST SOLUTION INC. | ||
By: | /s/ Shai Lustgarten | |
Name: | Shai Lustgarten | |
Title: | Chief Executive Officer | |
/s/ George Zicman | ||
George Zicman |
EXHIBIT A
Certificate of Designation of Series C Preferred Stock
EXHIBIT B
Voting Agreement
voting agreement
THIS VOTING AGREEMENT (this “Agreement”) dated as February __, 2018, is made among Shai Lustgarten, David Marin, Kathy Marin, and Quest Solution, Inc., a Delaware corporation (the “Company”).
Recitals:
A. David Marin and Kathy Marin are the beneficial owners of certain shares of the common stock of the Company and shares of Preferred Stock as set forth on Schedule A (the “Shares”), and are the beneficial or record owners or are otherwise able to direct the voting of the Shares. For purposes of this Agreement, the Shares will include all securities issued or exchanged in respect to the Shares.
B. The Parties wish to agree to enter into this Agreement to restrict the voting of the Shares as set forth in this Agreement.
Agreement:
1. Term. The term (“Term”) of this Agreement shall commence on the date set forth above and shall terminate upon the earlier to occur of: (a) written consent of all parties to this Agreement, or (b) the departure of Shai Lustgarten as the CEO of Quest Solution, Inc. Upon the sale of Shares, the respective interest in this agreement will expire.
2. Representations and Warranties. David and Kathy Marin each represent and warrant to the other Parties that, as of the date of this Agreement: (a) Either David and Kathy Marin are the beneficial and record owners of all the Shares, have the sole right to vote the Shares free of any lien, and has not entered into any voting agreement or other similar agreement with or granted by any person or any proxy (whether revocable or irrevocable) in respect of the Shares (other than pursuant to this Agreement); (b) this Agreement is a valid and binding agreement enforceable against David and Kathy Marin in accordance with its terms; (c) David and Kathy Marin have the full and unrestricted legal power, authority, and right to enter into, execute, deliver, and perform this Agreement without the consent or approval of any other person; (d) the execution, delivery, and performance by David and Kathy Marin of this Agreement does not (i) violate or breach any provision of any law or order applicable to David and Kathy Marin or (ii) violate, breach, or cause a default under, or result in the creation of a lien pursuant to, any agreement or instrument to which either David and Kathy Marin is a party or to which it or any of its properties may be subject.
3. Irrevocable Proxy. David and Kathy Marin hereby constitute and appoint Shai Lustgarten with full power of substitution, to vote, in his sole discretion, all of the Shares of Quest Solution, Inc. which David and Kathy Marin beneficially own (including any shares of Common Stock issuable upon conversion of any securities beneficially held by David and Kathy Marin), at all meetings, annual or special, of shareholders, or any adjournment or adjournments of the same, and in all unanimous or non-unanimous written consents of shareholders, with respect to all matters submitted to the shareholders of the Company for approval. This proxy does not cover any matters involving the creation of a new or cancelation of an existing class of stock, a reverse split (except in connection with an uplisting of the Company’s common stock onto a National Securities Exchange), dividend of stock or any change of control to the Company. The proxy granted pursuant to the immediately preceding sentences is given in consideration of this Agreement, the agreements and covenants of the Company and the parties in connection with the transactions contemplated by this Agreement and, as such, is coupled with an interest and shall be irrevocable unless and until this Agreement terminates or expires pursuant to Section 1. David and Kathy Marin shall be made aware in writing each time the voting proxy, whether written consent or full shareholder vote, is utilized. David and Kathy Marin hereby revoke any and all previous proxies with respect to the Shares and shall not hereafter, unless and until this Agreement terminates or expires pursuant to Section 1, purport to grant any other proxy or power of attorney with respect to any of the Shares, deposit any of the Shares into a voting trust or enter into any agreement (other than this Agreement), arrangement or understanding with any person, directly or indirectly, to vote, grant any proxy or give instructions with respect to the voting of any of the Shares, in each case, with respect to any of the matters set forth in this Agreement.
4. Covenants. During the Term of this Agreement, Shai Lustgarten covenants and agrees that he shall use best efforts to: (a) vote the Shares of Quest Solution at every meeting of the shareholders of the Company, and where any vote, consent, or other approval (including by written consent) of the shareholders is sought; and (b) not enter into any voting agreement or grant a proxy or power of attorney in respect of the Shares in any manner inconsistent with his obligations under this Agreement or take any other action that is inconsistent with his obligations under this Agreement, including any action that would harm the underlying shareholder’s interest, prevent, or materially delay the consummation of any transaction.
5. Miscellaneous Provisions.
5.1 Amendment. This Agreement may not be amended except by a written instrument executed by each of the parties.
5.2 Assignment. No party shall assign or delegate its rights or obligations under this Agreement or any part of such rights or obligations without the prior written consent of the other parties, and any assignment made without written consent shall be void and of no force or effect.
5.3 Counterparts. This Agreement may be executed in two or more counterparts, all of which shall constitute one and the same instrument.
5.4 Entire Agreement. This Agreement constitutes the entire agreement among the parties in respect of the voting agreement governing the Shares and supersedes all prior agreements or understandings among regarding the same subject matter.
5.5 Further Assurances. Each party will, upon request of the Company, execute and deliver any additional documents deemed by the Company to be reasonably necessary or desirable to complete and effectuate the transactions contemplated by this Agreement.
5.6 Governing Law. This Agreement shall be governed by and construed, interpreted and enforced in accordance with the laws of the State of New York. Legal proceedings relating to this Agreement that are commenced against Company may be commenced only in the state or federal courts in New York County, New York. Any such legal proceedings that are commenced against the Company or against any party to this Agreement may be commenced only in the state or federal courts in New York County, New York. Each of the parties consents to the exclusive jurisdiction of such courts (and of the appropriate appellate courts) in any such action or proceeding and waives any objection to venue in New York, New York.
5.7 Parties in Interest. This Agreement shall be binding upon and inure solely to the benefit of the parties and their respective legal successors-in-interest and permitted assigns, and nothing in this Agreement, express or implied, is intended to confer upon any other person any rights or remedies of any nature whatsoever under or by reason of this Agreement.
5.8 Severability. If any provision of this Agreement, or the application of a provision to any person or circumstance, shall be held invalid under the applicable law of any jurisdiction, the remainder of this Agreement or the application of a provision to other persons or circumstances or in other jurisdictions shall not be affected thereby. Also, if any provision of this Agreement is invalid or unenforceable under any applicable law, then the provision shall be deemed inoperative to the extent that it may conflict therewith and shall be deemed modified to conform to such law. Any provision of this Agreement that may prove invalid or unenforceable under any law shall not affect the validity or enforceability of any other provision of this Agreement.
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed on the day and year first written above.
AGREED TO AND ACCEPTED BY:
Quest Solution, Inc. | |
By: Shai Lustgarten | |
Its: CEO | |
David Marin | |
Kathy Marin | |
Shai Lustgarten, Individually |
Schedule A
The following represents the shares of Common Stock, Preferred Stock and any other securities containing voting rights which are beneficially owned by David and Kathy Martin and which are covered by this Voting Agreement: [Ben – Fill in Schedule]
(i) _________shares of Common Stock $0.001 per value (the “Common Shares”)
(ii) _________ shares of Series C Preferred Stock $0.001 per value (the “Preferred Shares”)
This Voting Agreement also covers any Common Shares issuable upon exercise of any security beneficially held by David Martin or Kathy Marin.
voting agreement
THIS VOTING AGREEMENT (this “Agreement”) dated as February 28, 2018, is made among Shai Lustgarten, Kurt Thomet, and Quest Solution, Inc., a Delaware corporation (the “Company”).
Recitals:
A. Kurt Thomet is the beneficial owner of certain shares of the common stock of the Company and shares of Preferred Stock as set forth on Schedule A (the “Shares”), and is the beneficial or record owner or are otherwise able to direct the voting of the Shares. For purposes of this Agreement, the Shares will include all securities issued or exchanged in respect to the Shares.
B. The Parties wish to agree to enter into this Agreement to restrict the voting of the Shares as set forth in this Agreement.
Agreement:
1. Term. The term (“Term”) of this Agreement shall commence on the date set forth above and shall terminate upon the earlier to occur of: (a) written consent of all parties to this Agreement, or (b) the departure of Shai Lustgarten as the CEO of Quest Solution, Inc. Upon the sale of shares, the respective interest in this agreement will expire.
2. Representations and Warranties. Kurt Thomet represents and warrants to the other Parties that, as of the date of this Agreement: (a) Kurt Thomet is the beneficial and record owner of all the Shares, has the sole right to vote the Shares free of any lien, and has not entered into any voting agreement or other similar agreement with or granted by any person or any proxy (whether revocable or irrevocable) in respect of the Shares (other than pursuant to this Agreement); (b) this Agreement is a valid and binding agreement enforceable against Kurt Thomet in accordance with its terms; (c) Kurt Thomet has the full and unrestricted legal power, authority, and right to enter into, execute, deliver, and perform this Agreement without the consent or approval of any other person; (d) the execution, delivery, and performance by Kurt Thomet of this Agreement does not (i) violate or breach any provision of any law or order applicable to Kurt Thomet or (ii) violate, breach, or cause a default under, or result in the creation of a lien pursuant to, any agreement or instrument to which Kurt Thomet is a party or to which it or any of its properties may be subject.
3. Irrevocable Proxy. Kurt Thomet hereby constitutes and appoints Shai Lustgarten with full power of substitution, to vote, in his sole discretion, all of the Shares of Quest Solution, Inc. which Kurt Thomet beneficially owns (including any shares of Common Stock issuable upon conversion of any other securities beneficially held by Kurt Thomet, including the Series A Preferred Stock), at all meetings, annual or special, of shareholders, or any adjournment or adjournments of the same, and in all unanimous or non-unanimous written consents of shareholders, with respect to all matters submitted to the shareholders of the Company for approval. This proxy does not cover any matters involving the creation of a new or cancelation of an existing class of stock, a reverse split (except in connection with an uplisting of the Company’s common stock onto a National Securities Exchange), dividend of stock or any change of control to the Company. The proxy granted pursuant to the immediately preceding sentences is given in consideration of this Agreement, the agreements and covenants of the Company and the parties in connection with the transactions contemplated by this Agreement and, as such, is coupled with an interest and shall be irrevocable unless and until this Agreement terminates or expires pursuant to Section 1. Kurt Thomet to be made aware in writing each time the voting proxy, whether written consent or full shareholder vote, is utilized. Kurt Thomet hereby revokes any and all previous proxies with respect to the Shares and shall not hereafter, unless and until this Agreement terminates or expires pursuant to Section 1, purport to grant any other proxy or power of attorney with respect to any of the Shares, deposit any of the Shares into a voting trust or enter into any agreement (other than this Agreement), arrangement or understanding with any person, directly or indirectly, to vote, grant any proxy or give instructions with respect to the voting of any of the Shares, in each case, with respect to any of the matters set forth in this Agreement.
4. Covenants. During the Term of this Agreement, Shai Lustgarten covenants and agrees that he shall use best efforts to: (a) vote the Shares of Quest Solution at every meeting of the shareholders of the Company, and where any vote, consent, or other approval (including by written consent) of the shareholders is sought; and (b) not enter into any voting agreement or grant a proxy or power of attorney in respect of the Shares in any manner inconsistent with his obligations under this Agreement or take any other action that is inconsistent with his obligations under this Agreement, including any action that would harm the underlying shareholder’s interest, prevent, or materially delay the consummation of any transaction.
5. Miscellaneous Provisions.
5.1 Amendment. This Agreement may not be amended except by a written instrument executed by each of the parties.
5.2 Assignment. No party shall assign or delegate its rights or obligations under this Agreement or any part of such rights or obligations without the prior written consent of the other parties, and any assignment made without written consent shall be void and of no force or effect.
5.3 Counterparts. This Agreement may be executed in two or more counterparts, all of which shall constitute one and the same instrument.
5.4 Entire Agreement. This Agreement constitutes the entire agreement among the parties in respect of the voting agreement governing the Shares and supersedes all prior agreements or understandings among regarding the same subject matter.
5.5 Further Assurances. Each party will, upon request of the Company, execute and deliver any additional documents deemed by the Company to be reasonably necessary or desirable to complete and effectuate the transactions contemplated by this Agreement.
5.6 Governing Law. This Agreement shall be governed by and construed, interpreted and enforced in accordance with the laws of the State of New York. Legal proceedings relating to this Agreement that are commenced against Company may be commenced only in the state or federal courts in New York County, New York. Any such legal proceedings that are commenced against the Company or against any party to this Agreement may be commenced only in the state or federal courts in New York County, New York. Each of the parties consents to the exclusive jurisdiction of such courts (and of the appropriate appellate courts) in any such action or proceeding and waives any objection to venue in New York, New York.
5.7 Parties in Interest. This Agreement shall be binding upon and inure solely to the benefit of the parties and their respective legal successors-in-interest and permitted assigns, and nothing in this Agreement, express or implied, is intended to confer upon any other person any rights or remedies of any nature whatsoever under or by reason of this Agreement.
5.8 Severability. If any provision of this Agreement, or the application of a provision to any person or circumstance, shall be held invalid under the applicable law of any jurisdiction, the remainder of this Agreement or the application of a provision to other persons or circumstances or in other jurisdictions shall not be affected thereby. Also, if any provision of this Agreement is invalid or unenforceable under any applicable law, then the provision shall be deemed inoperative to the extent that it may conflict therewith and shall be deemed modified to conform to such law. Any provision of this Agreement that may prove invalid or unenforceable under any law shall not affect the validity or enforceability of any other provision of this Agreement.
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed on the day and year first written above.
AGREED TO AND ACCEPTED BY:
Quest Solution, Inc. | ||
By: | Shai Lustgarten | |
Its: | CEO | |
By: | Kurt Thomet |
Schedule A
The following represents the shares of Common Stock, Preferred Stock and any other securities containing voting rights which are beneficially owned by Thomet and which are covered by this Voting Agreement:
(i) | 500,000 shares of Common Stock $0.001 per value (the “Common Shares”) |
(ii) | 1,000,000 shares of Series C Preferred Stock $0.001 per value (the “Preferred Shares”) |
voting agreement
THIS VOTING AGREEMENT (this “Agreement”) dated as February 28, 2018, is made among Shai Lustgarten, George Zicman, and Quest Solution, Inc., a Delaware corporation (the “Company”).
Recitals:
A. George Zicman is the beneficial owner of certain shares of the common stock of the Company and shares of Preferred Stock as set forth on Schedule A (the “Shares”), and is the beneficial or record owner or are otherwise able to direct the voting of the Shares. For purposes of this Agreement, the Shares will include all securities issued or exchanged in respect to the Shares.
B. The Parties wish to agree to enter into this Agreement to restrict the voting of the Shares as set forth in this Agreement.
Agreement:
1. Term. The term (“Term”) of this Agreement shall commence on the date set forth above and shall terminate upon the earlier to occur of: (a) written consent of all parties to this Agreement, or (b) the departure of Shai Lustgarten as the CEO of Quest Solution, Inc. Upon the sale of shares, the respective interest in this agreement will expire.
2. Representations and Warranties. George Zicman represents and warrants to the other Parties that, as of the date of this Agreement: (a) George Zicman is the beneficial and record owner of all the Shares, has the sole right to vote the Shares free of any lien, and has not entered into any voting agreement or other similar agreement with or granted by any person or any proxy (whether revocable or irrevocable) in respect of the Shares (other than pursuant to this Agreement); (b) this Agreement is a valid and binding agreement enforceable against George Zicman in accordance with its terms; (c) George Zicman has the full and unrestricted legal power, authority, and right to enter into, execute, deliver, and perform this Agreement without the consent or approval of any other person; (d) the execution, delivery, and performance by George Zicman of this Agreement does not (i) violate or breach any provision of any law or order applicable to George Zicman or (ii) violate, breach, or cause a default under, or result in the creation of a lien pursuant to, any agreement or instrument to which George Zicman is a party or to which it or any of its properties may be subject.
3. Irrevocable Proxy. George Zicman hereby constitutes and appoints Shai Lustgarten with full power of substitution, to vote, in his sole discretion, all of the Shares of Quest Solution, Inc. which George Zicman beneficially owns (including any shares of Common Stock issuable upon conversion of any other securities beneficially held by George Zicman, including the Series A Preferred Stock), at all meetings, annual or special, of shareholders, or any adjournment or adjournments of the same, and in all unanimous or non-unanimous written consents of shareholders, with respect to all matters submitted to the shareholders of the Company for approval. This proxy does not cover any matters involving the creation of a new or cancelation of an existing class of stock, a reverse split (except in connection with an uplisting of the Company’s common stock onto a National Securities Exchange), dividend of stock or any change of control to the Company. The proxy granted pursuant to the immediately preceding sentences is given in consideration of this Agreement, the agreements and covenants of the Company and the parties in connection with the transactions contemplated by this Agreement and, as such, is coupled with an interest and shall be irrevocable unless and until this Agreement terminates or expires pursuant to Section 1. George Zicman to be made aware in writing each time the voting proxy, whether written consent or full shareholder vote, is utilized. George Zicman hereby revokes any and all previous proxies with respect to the Shares and shall not hereafter, unless and until this Agreement terminates or expires pursuant to Section 1, purport to grant any other proxy or power of attorney with respect to any of the Shares, deposit any of the Shares into a voting trust or enter into any agreement (other than this Agreement), arrangement or understanding with any person, directly or indirectly, to vote, grant any proxy or give instructions with respect to the voting of any of the Shares, in each case, with respect to any of the matters set forth in this Agreement.
4. Covenants. During the Term of this Agreement, Shai Lustgarten covenants and agrees that he shall use best efforts to: (a) vote the Shares of Quest Solution at every meeting of the shareholders of the Company, and where any vote, consent, or other approval (including by written consent) of the shareholders is sought; and (b) not enter into any voting agreement or grant a proxy or power of attorney in respect of the Shares in any manner inconsistent with his obligations under this Agreement or take any other action that is inconsistent with his obligations under this Agreement, including any action that would harm the underlying shareholder’s interest, prevent, or materially delay the consummation of any transaction.
5. Miscellaneous Provisions.
5.1 Amendment. This Agreement may not be amended except by a written instrument executed by each of the parties.
5.2 Assignment. No party shall assign or delegate its rights or obligations under this Agreement or any part of such rights or obligations without the prior written consent of the other parties, and any assignment made without written consent shall be void and of no force or effect.
5.3 Counterparts. This Agreement may be executed in two or more counterparts, all of which shall constitute one and the same instrument.
5.4 Entire Agreement. This Agreement constitutes the entire agreement among the parties in respect of the voting agreement governing the Shares and supersedes all prior agreements or understandings among regarding the same subject matter.
5.5 Further Assurances. Each party will, upon request of the Company, execute and deliver any additional documents deemed by the Company to be reasonably necessary or desirable to complete and effectuate the transactions contemplated by this Agreement.
5.6 Governing Law. This Agreement shall be governed by and construed, interpreted and enforced in accordance with the laws of the State of New York. Legal proceedings relating to this Agreement that are commenced against Company may be commenced only in the state or federal courts in New York County, New York. Any such legal proceedings that are commenced against the Company or against any party to this Agreement may be commenced only in the state or federal courts in New York County, New York. Each of the parties consents to the exclusive jurisdiction of such courts (and of the appropriate appellate courts) in any such action or proceeding and waives any objection to venue in New York, New York.
5.7 Parties in Interest. This Agreement shall be binding upon and inure solely to the benefit of the parties and their respective legal successors-in-interest and permitted assigns, and nothing in this Agreement, express or implied, is intended to confer upon any other person any rights or remedies of any nature whatsoever under or by reason of this Agreement.
5.8 Severability. If any provision of this Agreement, or the application of a provision to any person or circumstance, shall be held invalid under the applicable law of any jurisdiction, the remainder of this Agreement or the application of a provision to other persons or circumstances or in other jurisdictions shall not be affected thereby. Also, if any provision of this Agreement is invalid or unenforceable under any applicable law, then the provision shall be deemed inoperative to the extent that it may conflict therewith and shall be deemed modified to conform to such law. Any provision of this Agreement that may prove invalid or unenforceable under any law shall not affect the validity or enforceability of any other provision of this Agreement.
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed on the day and year first written above.
AGREED TO AND ACCEPTED BY:
Quest Solution, Inc. | ||
By: | Shai Lustgarten | |
Its: | CEO | |
By: | George Zicman |
Schedule A
The following represents the shares of Common Stock, Preferred Stock and any other securities containing voting rights which are beneficially owned by Zicman and which are covered by this Voting Agreement:
(i) 100,000 shares of Common Stock $0.001 per value (the “Common Shares”)
(ii) 1,641,000 shares of Series C Preferred Stock $0.001 per value (the “Preferred Shares”)
NEITHER THIS SECURITY NOR THE SECURITIES FOR WHICH THIS SECURITY IS EXERCISABLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS. THIS SECURITY AND THE SECURITIES ISSUABLE UPON EXERCISE OF THIS SECURITY MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN SECURED BY SUCH SECURITIES.
COMMON STOCK PURCHASE WARRANT
QUEST SOLUTION INC.
Warrant Shares: 3,000,000 | Initial Exercise Date: February 23, 2018 |
Issue Date: February 23, 2018 |
THIS COMMON STOCK PURCHASE WARRANT (the “Warrant”) certifies that, for value received, David and Kathy Marin or their assigns (collectively, the “Holder”) is entitled, upon the terms and subject to the limitations on exercise and the conditions hereinafter set forth, at any time on or the date hereof (the “Initial Exercise Date”) and on or prior to the close of business on the three (3) year anniversary of the Initial Exercise Date (the “Termination Date”) but not thereafter, to subscribe for and purchase from Quest Solution Inc., a Delaware corporation (the “Company”), up to 3,000,000 shares (as subject to adjustment hereunder, the “Warrant Shares”) of the Company’s Common Stock (the “Common Stock”). The purchase price of one share of Common Stock under this Warrant shall be equal to the Exercise Price, as defined in Section 1(b). The Company is issuing this Warrant to the Holder pursuant to that certain Settlement Agreement between the Company and the Holder dated February 23, 2018 (the “Settlement Agreement.”
Section 1. Exercise.
a) Exercise of Warrant. Exercise of the purchase rights represented by this Warrant may be made, in whole or in part, at any time or times on or after the Initial Exercise Date and on or before the Termination Date by delivery to the Company (or such other office or agency of the Company as it may designate by notice in writing to the registered Holder at the address of the Holder appearing on the books of the Company) of a duly executed facsimile copy (or e-mail attachment) of the Notice of Exercise in the form annexed hereto (the “Notice of Exercise”). Within the earlier of (i) two (2) Trading Days and (ii) the number of Trading Days comprising the Standard Settlement Period (as defined in Section 1(d)(i) herein) following the date of exercise as aforesaid, the Holder shall deliver the aggregate Exercise Price for the shares specified in the applicable Notice of Exercise by wire transfer or cashier’s check drawn on a United States bank unless the cashless exercise procedure specified in Section 1(c) below is specified in the applicable Notice of Exercise. No ink-original Notice of Exercise shall be required, nor shall any medallion guarantee (or other type of guarantee or notarization) of any Notice of Exercise be required. Notwithstanding anything herein to the contrary, the Holder shall not be required to physically surrender this Warrant to the Company until the Holder has purchased all of the Warrant Shares available hereunder and the Warrant has been exercised in full, in which case, the Holder shall surrender this Warrant to the Company for cancellation within two (2) Trading Days of the date the final Notice of Exercise is delivered to the Company. Partial exercises of this Warrant resulting in purchases of a portion of the total number of Warrant Shares available hereunder shall have the effect of lowering the outstanding number of Warrant Shares purchasable hereunder in an amount equal to the applicable number of Warrant Shares purchased. The Holder and the Company shall maintain records showing the number of Warrant Shares purchased and the date of such purchases. The Company shall deliver any objection to any Notice of Exercise within one (1) Business Day of receipt of such notice. The Holder and any assignee, by acceptance of this Warrant, acknowledge and agree that, by reason of the provisions of this paragraph, following the purchase of a portion of the Warrant Shares hereunder, the number of Warrant Shares available for purchase hereunder at any given time may be less than the amount stated on the face hereof.
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b) Exercise Price. The exercise price per share of the Common Stock under this Warrant shall be $0.20, subject to adjustment hereunder (the “Exercise Price”).
c) Cashless Exercise. This Warrant may also be exercised, in whole or in part, at such time by means of a “cashless exercise” in which the Holder shall be entitled to receive a number of Warrant Shares equal to the quotient obtained by dividing [(A-B)(X)] by(A), where:
(A) = | the average closing price per share of Common Stock for the five (5) days prior to the Notice of Exercise; | |
(B) = | the Exercise Price of this Warrant, as adjusted hereunder; and | |
(X) = | the number of Warrant Shares that would be issuable upon exercise of this Warrant in accordance with the terms of this Warrant if such exercise were by means of a cash exercise rather than a cashless exercise. |
If Warrant Shares are issued in such a cashless exercise, the parties acknowledge that the holding period of the Warrant Shares being issued may be tacked on to the holding period of this Warrant. The Company agrees not to take any position contrary to this Section 1(c).
Notwithstanding anything herein to the contrary, on the Termination Date, this Warrant shall be automatically exercised via cashless exercise pursuant to this Section 1(c).
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d) Mechanics of Exercise.
i. Delivery of Warrant Shares Upon Exercise. The Company shall cause the Warrant Shares purchased hereunder to be transmitted by the Transfer Agent to the Holder by crediting the account of the Holder’s or its designee’s balance account with The Depository Trust Company through its Deposit or Withdrawal at Custodian system (“DWAC”) if the Company is then a participant in such system and either (A) there is an effective registration statement permitting the issuance of the Warrant Shares to or resale of the Warrant Shares by Holder or (B) the Warrant Shares are eligible for resale by the Holder without volume or manner-of- sale limitations pursuant to Rule 144, and otherwise by physical delivery of a certificate, registered in the Company’s share register in the name of the Holder or its designee, for the number of Warrant Shares to which the Holder is entitled pursuant to such exercise to the address specified by the Holder in the Notice of Exercise by the date that is the earlier of (i) the earlier of (A) two (2) Trading Days after the delivery to the Company of the Notice of Exercise and (B) one (1) Trading Day after delivery of the aggregate Exercise Price to the Company and (ii) the number of Trading Days comprising the Standard Settlement Period after the delivery to the Company of the Notice of Exercise (such date, the “Warrant Share Delivery Date”). Upon delivery of the Notice of Exercise, the Holder shall be deemed for all corporate purposes to have become the holder of record of the Warrant Shares with respect to which this Warrant has been exercised, irrespective of the date of delivery of the Warrant Shares, provided that payment of the aggregate Exercise Price (other than in the case of a cashless exercise) is received within the earlier of (i) three Trading Days and (ii) the number of Trading Days comprising the Standard Settlement Period following delivery of the Notice of Exercise. If the Company fails for any reason to deliver to the Holder the Warrant Shares subject to a Notice of Exercise by the Warrant Share Delivery Date, the Company shall pay to the Holder, in cash, as liquidated damages and not as a penalty, for each $1,000 of Warrant Shares subject to such exercise (based on the VWAP of the Common Stock on the date of the applicable Notice of Exercise), $10 per Trading Day (increasing to $20 per Trading Day on the fifth Trading Day after such liquidated damages begin to accrue) for each Trading Day after such Warrant Share Delivery Date until such Warrant Shares are delivered or Holder rescinds such exercise. The Company agrees to maintain a transfer agent that is a participant in the FAST program so long as this Warrant remains outstanding and exercisable. As used herein, “Standard Settlement Period” means the standard settlement period, expressed in a number of Trading Days, on the Company’s primary Trading Market with respect to the Common Stock as in effect on the date of delivery of the Notice of Exercise.
ii. Delivery of New Warrants Upon Exercise. If this Warrant shall have been exercised in part, the Company shall, at the request of a Holder and upon surrender of this Warrant certificate, at the time of delivery of the Warrant Shares, deliver to the Holder a new Warrant evidencing the rights of the Holder to purchase the unpurchased Warrant Shares called for by this Warrant, which new Warrant shall in all other respects be identical with this Warrant.
iii. Rescission Rights. If the Company fails to cause the Transfer Agent to transmit to the Holder the Warrant Shares by the Warrant Share Delivery Date, then the Holder will have the right to rescind such exercise.
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iv. Compensation for Buy-In on Failure to Timely Deliver Warrant Shares Upon Exercise. In addition to any other rights available to the Holder, if the Company fails to cause the Transfer Agent to transmit to the Holder the Warrant Shares pursuant to an exercise on or before the Warrant Share Delivery Date, and if after such date the Holder is required by its broker to purchase (in an open market transaction or otherwise) or the Holder’s brokerage firm otherwise purchases, shares of Common Stock to deliver in satisfaction of a sale by the Holder of the Warrant Shares which the Holder anticipated receiving upon such exercise (a “Buy-In”), then the Company shall (A) pay in cash to the Holder the amount, if any, by which (x) the Holder’s total purchase price (including brokerage commissions, if any) for the shares of Common Stock so purchased exceeds (y) the amount obtained by multiplying (1) the number of Warrant Shares that the Company was required to deliver to the Holder in connection with the exercise at issue times (2) the price at which the sell order giving rise to such purchase obligation was executed, and (B) at the option of the Holder, either reinstate the portion of the Warrant and equivalent number of Warrant Shares for which such exercise was not honored (in which case such exercise shall be deemed rescinded) or deliver to the Holder the number of shares of Common Stock that would have been issued had the Company timely complied with its exercise and delivery obligations hereunder. For example, if the Holder purchases Common Stock having a total purchase price of $11,000 to cover a Buy-In with respect to an attempted exercise of shares of Common Stock with an aggregate sale price giving rise to such purchase obligation of $10,000, under clause (A) of the immediately preceding sentence the Company shall be required to pay the Holder $1,000. The Holder shall provide the Company written notice indicating the amounts payable to the Holder in respect of the Buy- In and, upon request of the Company, evidence of the amount of such loss. Nothing herein shall limit a Holder’s right to pursue any other remedies available to it hereunder, at law or in equity including, without limitation, a decree of specific performance and/or injunctive relief with respect to the Company’s failure to timely deliver shares of Common Stock upon exercise of the Warrant as required pursuant to the terms hereof.
v. No Fractional Shares or Scrip. No fractional shares or scrip representing fractional shares shall be issued upon the exercise of this Warrant. As to any fraction of a share which the Holder would otherwise be entitled to purchase upon such exercise, the Company shall, at its election, either pay a cash adjustment in respect of such final fraction in an amount equal to such fraction multiplied by the Exercise Price or round up to the next whole share.
vi. Charges, Taxes and Expenses. Issuance of Warrant Shares shall be made without charge to the Holder for any issue or transfer tax or other incidental expense in respect of the issuance of such Warrant Shares, all of which taxes and expenses shall be paid by the Company, and such Warrant Shares shall be issued in the name of the Holder or in such name or names as may be directed by the Holder; provided, however, that in the event that Warrant Shares are to be issued in a name other than the name of the Holder, this Warrant when surrendered for exercise shall be accompanied by the Assignment Form attached hereto duly executed by the Holder and the Company may require, as a condition thereto, the payment of a sum sufficient to reimburse it for any applicable transfer tax incidental thereto. The Company shall pay all Transfer Agent fees required for same-day processing of any Notice of Exercise and all fees to the Depository Trust Company (or another established clearing corporation performing similar functions) required for same-day electronic delivery of the Warrant Shares.
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vii. Closing of Books. The Company will not close its stockholder books or records in any manner which prevents the timely exercise of this Warrant, pursuant to the terms hereof.
Section 2. Certain Adjustments.
a) Stock Dividends and Splits. If the Company, at any time while this Warrant is outstanding: (i) pays a stock dividend or otherwise makes a distribution or distributions on shares of its Common Stock or any other equity or equity equivalent securities payable in shares of Common Stock (which, for avoidance of doubt, shall not include any shares of Common Stock issued by the Company upon exercise of this Warrant), (ii) subdivides outstanding shares of Common Stock into a larger number of shares, (iii) combines (including by way of reverse stock split) outstanding shares of Common Stock into a smaller number of shares, or (iv) issues by reclassification of shares of the Common Stock any shares of capital stock of the Company, then in each case the Exercise Price shall be multiplied by a fraction of which the numerator shall be the number of shares of Common Stock (excluding treasury shares, if any) outstanding immediately before such event and of which the denominator shall be the number of shares of Common Stock outstanding immediately after such event, and the number of shares issuable upon exercise of this Warrant shall be proportionately adjusted such that the aggregate Exercise Price of this Warrant shall remain unchanged. Any adjustment made pursuant to this Section 2(a) shall become effective immediately after the record date for the determination of stockholders entitled to receive such dividend or distribution and shall become effective immediately after the effective date in the case of a subdivision, combination or re-classification.
b) Pro Rata Distributions. During such time as this Warrant is outstanding, if the Company shall declare or make any dividend or other distribution of its assets (or rights to acquire its assets) to holders of shares of Common Stock, by way of return of capital or otherwise (including, without limitation, any distribution of cash, stock or other securities, property or options by way of a dividend, spin off, reclassification, corporate rearrangement, scheme of arrangement or other similar transaction) (a “Distribution”), at any time after the issuance of this Warrant, then, in each such case, the Holder shall be entitled to participate in such Distribution to the same extent that the Holder would have participated therein if the Holder had held the number of shares of Common Stock acquirable upon complete exercise of this Warrant immediately before the date of which a record is taken for such Distribution, or, if no such record is taken, the date as of which the record holders of shares of Common Stock are to be determined for the participation in such Distribution To the extent that this Warrant has not been partially or completely exercised at the time of such Distribution, such portion of the Distribution shall be held in abeyance for the benefit of the Holder until the Holder has exercised this Warrant.
c) Fundamental Transaction. If, at any time while this Warrant is outstanding, (i) the Company, directly or indirectly, in one or more related transactions effects any merger or consolidation of the Company with or into another Person, (ii) the Company, directly or indirectly, effects any sale, lease, license, assignment, transfer, conveyance or other disposition of all or substantially all of its assets in one or a series of related transactions, (iii) any, direct or indirect, purchase offer, tender offer or exchange offer (whether by the Company or another Person) is completed pursuant to which holders of Common Stock are permitted to sell, tender or exchange their shares for other securities, cash or property and has been accepted by the holders of 50% or more of the outstanding Common Stock, (iv) the Company, directly or indirectly, in one or more related transactions effects any reclassification, reorganization or recapitalization of the Common Stock or any compulsory share exchange pursuant to which the Common Stock is effectively converted into or exchanged for other securities, cash or property, or (v) the Company, directly or indirectly, in one or more related transactions consummates a stock or share purchase agreement or other business combination (including, without limitation, a reorganization, recapitalization, spin-off or scheme of arrangement) with another Person or group of Persons whereby such other Person or group acquires more than 50% of the outstanding shares of Common Stock (not including any shares of Common Stock held by the other Person or other Persons making or party to, or associated or affiliated with the other Persons making or party to, such stock or share purchase agreement or other business combination) (each a “Fundamental Transaction”), then, upon any subsequent exercise of this Warrant, the Holder shall have the right to receive, for each Warrant Share that would have been issuable upon such exercise immediately prior to the occurrence of such Fundamental Transaction, at the option of the Holder, the number of shares of Common Stock of the successor or acquiring corporation or of the Company, if it is the surviving corporation, and any additional consideration (the “Alternate Consideration”) receivable as a result of such Fundamental Transaction by a holder of the number of shares of Common Stock for which this Warrant is exercisable immediately prior to such Fundamental Transaction. For purposes of any such exercise, the determination of the Exercise Price shall be appropriately adjusted to apply to such Alternate Consideration based on the amount of Alternate Consideration issuable in respect of one share of Common Stock in such Fundamental Transaction, and the Company shall apportion the Exercise Price among the Alternate Consideration in a reasonable manner reflecting the relative value of any different components of the Alternate Consideration. If holders of Common Stock are given any choice as to the securities, cash or property to be received in a Fundamental Transaction, then the Holder shall be given the same choice as to the Alternate Consideration it receives upon any exercise of this Warrant following such Fundamental Transaction.
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d) Calculations. All calculations under this Section 2 shall be made to the nearest cent or the nearest 1/100th of a share, as the case may be. For purposes of this Section 2, the number of shares of Common Stock deemed to be issued and outstanding as of a given date shall be the sum of the number of shares of Common Stock (excluding treasury shares, if any) issued and outstanding.
e) Notice to Holder.
i. Adjustment to Exercise Price. Whenever the Exercise Price is adjusted pursuant to any provision of this Section 2, the Company shall promptly deliver to the Holder by facsimile or email a notice setting forth the Exercise Price after such adjustment and any resulting adjustment to the number of Warrant Shares and setting forth a brief statement of the facts requiring such adjustment.
ii. Notice to Allow Exercise by Holder. If (A) the Company shall declare a dividend (or any other distribution in whatever form) on the Common Stock, (B) the Company shall declare a special nonrecurring cash dividend on or a redemption of the Common Stock, (C) the Company shall authorize the granting to all holders of the Common Stock rights or warrants to subscribe for or purchase any shares of capital stock of any class or of any rights, (D) the approval of any stockholders of the Company shall be required in connection with any reclassification of the Common Stock, any consolidation or merger to which the Company is a party, any sale or transfer of all or substantially all of the assets of the Company, or any compulsory share exchange whereby the Common Stock is converted into other securities, cash or property, or (E) the Company shall authorize the voluntary or involuntary dissolution, liquidation or winding up of the affairs of the Company, then, in each case, the Company shall cause to be delivered by facsimile or email to the Holder at its last facsimile number or email address as it shall appear upon the Warrant Register of the Company, at least 20 calendar days prior to the applicable record or effective date hereinafter specified, a notice stating (x) the date on which a record is to be taken for the purpose of such dividend, distribution, redemption, rights or warrants, or if a record is not to be taken, the date as of which the holders of the Common Stock of record to be entitled to such dividend, distributions, redemption, rights or warrants are to be determined or (y) the date on which such reclassification, consolidation, merger, sale, transfer or share exchange is expected to become effective or close, and the date as of which it is expected that holders of the Common Stock of record shall be entitled to exchange their shares of the Common Stock for securities, cash or other property deliverable upon such reclassification, consolidation, merger, sale, transfer or share exchange; provided that the failure to deliver such notice or any defect therein or in the delivery thereof shall not affect the validity of the corporate action required to be specified in such notice. To the extent that any notice provided in this Warrant constitutes, or contains, material, non- public information regarding the Company or any of the Subsidiaries, the Company shall simultaneously file such notice with the Commission pursuant to a Current Report on Form 8-K. The Holder shall remain entitled to exercise this Warrant during the period commencing on the date of such notice to the effective date of the event triggering such notice except as may otherwise be expressly set forth herein.
Section 3. Transfer of Warrant.
a) Transferability. Subject to compliance with any applicable securities laws, this Warrant and all rights hereunder (including, without limitation, any registration rights) are transferable, in whole or in part, upon surrender of this Warrant at the principal office of the Company or its designated agent, together with a written assignment of this Warrant substantially in the form attached hereto duly executed by the Holder or its agent or attorney and funds sufficient to pay any transfer taxes payable upon the making of such transfer. Upon such surrender and, if required, such payment, the Company shall execute and deliver a new Warrant or Warrants in the name of the assignee or assignees, as applicable, and in the denomination or denominations specified in such instrument of assignment, and shall issue to the assignor a new Warrant evidencing the portion of this Warrant not so assigned, and this Warrant shall promptly be cancelled. Notwithstanding anything herein to the contrary, the Holder shall not be required to physically surrender this Warrant to the Company unless the Holder has assigned this Warrant in full, in which case, the Holder shall surrender this Warrant to the Company within three (3) Trading Days of the date the Holder delivers an assignment form to the Company assigning this Warrant in full. The Warrant, if properly assigned in accordance herewith, may be exercised by a new holder for the purchase of Warrant Shares without having a new Warrant issued. Any transferee of this Warrant shall agree to become a party to the Voting Agreement between the Company and the Holder.
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b) New Warrants. This Warrant may be divided or combined with other Warrants upon presentation hereof at the aforesaid office of the Company, together with a written notice specifying the names and denominations in which new Warrants are to be issued, signed by the Holder or its agent or attorney. Subject to compliance with Section 3(a), as to any transfer which may be involved in such division or combination, the Company shall execute and deliver a new Warrant or Warrants in exchange for the Warrant or Warrants to be divided or combined in accordance with such notice. All Warrants issued on transfers or exchanges shall be dated the Issue Date of this Warrant and shall be identical with this Warrant except as to the number of Warrant Shares issuable pursuant thereto.
c) Warrant Register. The Company shall register this Warrant, upon records to be maintained by the Company for that purpose (the “Warrant Register”), in the name of the record Holder hereof from time to time. The Company may deem and treat the registered Holder of this Warrant as the absolute owner hereof for the purpose of any exercise hereof or any distribution to the Holder, and for all other purposes, absent actual notice to the contrary.
d) Transfer Restrictions. If, at the time of the surrender of this Warrant in connection with any transfer of this Warrant, the transfer of this Warrant shall not be either (i) registered pursuant to an effective registration statement under the Securities Act and under applicable state securities or blue sky laws or (ii) eligible for resale without volume or manner-of-sale restrictions or current public information requirements pursuant to Rule 144, the Company may require, as a condition of allowing such transfer, that the Holder or transferee of this Warrant, as the case may be, comply with the Voting Agreement.
e) Representation by the Holder. The Holder, by the acceptance hereof, represents and warrants that it is acquiring this Warrant and, upon any exercise hereof, will acquire the Warrant Shares issuable upon such exercise, for its own account and not with a view to or for distributing or reselling such Warrant Shares or any part thereof in violation of the Securities Act or any applicable state securities law, except pursuant to sales registered or exempted under the Securities Act.
Section 4. Miscellaneous.
a) No Rights as Stockholder Until Exercise. This Warrant does not entitle the Holder to any voting rights, dividends or other rights as a stockholder of the Company prior to the exercise hereof as set forth in Section 1(d)(i), except as expressly set forth in Section 2.
b) Loss, Theft, Destruction or Mutilation of Warrant. The Company covenants that upon receipt by the Company of evidence reasonably satisfactory to it of the loss, theft, destruction or mutilation of this Warrant or any stock certificate relating to the Warrant Shares, and in case of loss, theft or destruction, of indemnity or security reasonably satisfactory to it (which, in the case of the Warrant, shall not include the posting of any bond), and upon surrender and cancellation of such Warrant or stock certificate, if mutilated, the Company will make and deliver a new Warrant or stock certificate of like tenor and dated as of such cancellation, in lieu of such Warrant or stock certificate.
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c) Saturdays, Sundays, Holidays, etc. If the last or appointed day for the taking of any action or the expiration of any right required or granted herein shall not be a Business Day, then, such action may be taken or such right may be exercised on the next succeeding Business Day.
d) Authorized Shares.
The Company covenants that, during the period the Warrant is outstanding, it will reserve from its authorized and unissued Common Stock a sufficient number of shares to provide for the issuance of the Warrant Shares upon the exercise of any purchase rights under this Warrant. The Company further covenants that its issuance of this Warrant shall constitute full authority to its officers who are charged with the duty of issuing the necessary Warrant Shares upon the exercise of the purchase rights under this Warrant. The Company will take all such reasonable action as may be necessary to assure that such Warrant Shares may be issued as provided herein without violation of any applicable law or regulation, or of any requirements of the Trading Market upon which the Common Stock may be listed. The Company covenants that all Warrant Shares which may be issued upon the exercise of the purchase rights represented by this Warrant will, upon exercise of the purchase rights represented by this Warrant and payment for such Warrant Shares in accordance herewith, be duly authorized, validly issued, fully paid and non-assessable and free from all taxes, liens and charges created by the Company in respect of the issue thereof (other than taxes in respect of any transfer occurring contemporaneously with such issue).
Except and to the extent as waived or consented to by the Holder, the Company shall not by any action, including, without limitation, amending its certificate of incorporation or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Warrant, but will at all times in good faith assist in the carrying out of all such terms and in the taking of all such actions as may be necessary or appropriate to protect the rights of Holder as set forth in this Warrant against impairment. Without limiting the generality of the foregoing, the Company will (i) not increase the par value of any Warrant Shares above the amount payable therefor upon such exercise immediately prior to such increase in par value, (ii) take all such action as may be necessary or appropriate in order that the Company may validly and legally issue fully paid and nonassessable Warrant Shares upon the exercise of this Warrant and (iii) use commercially reasonable efforts to obtain all such authorizations, exemptions or consents from any public regulatory body having jurisdiction thereof, as may be, necessary to enable the Company to perform its obligations under this Warrant.
Before taking any action which would result in an adjustment in the number of Warrant Shares for which this Warrant is exercisable or in the Exercise Price, the Company shall obtain all such authorizations or exemptions thereof, or consents thereto, as may be necessary from any public regulatory body or bodies having jurisdiction thereof.
e) Jurisdiction. All questions concerning the construction, validity, enforcement and interpretation of this Warrant shall be determined in accordance with the provisions of the Settlement Agreement.
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f) Restrictions. The Holder acknowledges that the Warrant Shares acquired upon the exercise of this Warrant, if not registered, and the Holder does not utilize cashless exercise, will have restrictions upon resale imposed by state and federal securities laws.
g) Nonwaiver and Expenses. No course of dealing or any delay or failure to exercise any right hereunder on the part of Holder shall operate as a waiver of such right or otherwise prejudice the Holder’s rights, powers or remedies. Without limiting any other provision of this Warrant or the Settlement Agreement, if the Company willfully and knowingly fails to comply with any provision of this Warrant, which results in any material damages to the Holder, the Company shall pay to the Holder such amounts as shall be sufficient to cover any costs and expenses including, but not limited to, reasonable attorneys’ fees, including those of appellate proceedings, incurred by the Holder in collecting any amounts due pursuant hereto or in otherwise enforcing any of its rights, powers or remedies hereunder.
h) Notices. Any notice, request or other document required or permitted to be given or delivered to the Holder by the Company shall be delivered in accordance with the notice provisions of the Settlement Agreement.
i) Limitation of Liability. No provision hereof, in the absence of any affirmative action by the Holder to exercise this Warrant to purchase Warrant Shares, and no enumeration herein of the rights or privileges of the Holder, shall give rise to any liability of the Holder for the purchase price of any Common Stock or as a stockholder of the Company, whether such liability is asserted by the Company or by creditors of the Company.
j) Remedies. The Holder, in addition to being entitled to exercise all rights granted by law, including recovery of damages, will be entitled to specific performance of its rights under this Warrant. The Company agrees that monetary damages would not be adequate compensation for any loss incurred by reason of a breach by it of the provisions of this Warrant and hereby agrees to waive and not to assert the defense in any action for specific performance that a remedy at law would be adequate.
k) Successors and Assigns. Subject to applicable securities laws, this Warrant and the rights and obligations evidenced hereby shall inure to the benefit of and be binding upon the successors and permitted assigns of the Company and the successors and permitted assigns of Holder. The provisions of this Warrant are intended to be for the benefit of any Holder from time to time of this Warrant and shall be enforceable by the Holder or holder of Warrant Shares.
l) Amendment. This Warrant may be modified or amended or the provisions hereof waived with the written consent of the Company and the Holder.
m) Severability. Wherever possible, each provision of this Warrant shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Warrant shall be prohibited by or invalid under applicable law, such provision shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provisions or the remaining provisions of this Warrant.
n) Headings. The headings used in this Warrant are for the convenience of reference only and shall not, for any purpose, be deemed a part of this Warrant.
(Signature Page Follows)
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IN WITNESS WHEREOF, the Company has caused this Warrant to be executed by its officer thereunto duly authorized as of the date first above indicated.
QUEST SOLUTION INC. | ||
By: | ||
Name: Title: |
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NOTICE OF EXERCISE
TO: QUEST SOLUTION INC.
(1) The undersigned hereby elects to purchase Warrant Shares of the Company pursuant to the terms of the attached Warrant (only if exercised in full), and tenders herewith payment of the exercise price in full, together with all applicable transfer taxes, if any.
(2) Payment shall take the form of (check applicable box):
[ ] in lawful money of the United States; or
[ ] if permitted the cancellation of such number of Warrant Shares as is necessary, in accordance with the formula set forth in subsection 2(c), to exercise this Warrant with respect to the maximum number of Warrant Shares purchasable pursuant to the cashless exercise procedure set forth in subsection 2(c).
(3) Please issue said Warrant Shares in the name of the undersigned or in such other name as is specified below:
___________________________________________
The Warrant Shares shall be delivered to the following DWAC Account Number:
___________________________________________
___________________________________________
___________________________________________
___________________________________________
(4) Accredited Investor. The undersigned is an “accredited investor” as defined in Regulation D promulgated under the Securities Act of 1933, as amended.
[SIGNATURE OF HOLDER]
Name of Investing Entity:________________________________________________________
Signature of Authorized Signatory of Investing Entity: __________________________________
Name of Authorized Signatory:____________________________________________________
Title of Authorized Signatory: _____________________________________________________
Date: _____________________________
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EXHIBIT B
ASSIGNMENT FORM
(To assign the foregoing Warrant, execute this form and supply required information. Do not use this form to purchase shares.)
FOR VALUE RECEIVED, the foregoing Warrant and all rights evidenced thereby are hereby assigned to
Name: | |
(Please Print) | |
Address: | |
(Please Print) | |
Phone Number: | |
(Please Print) | |
Email Address: | |
(Please Print) | |
Dated: _______________,________ | |
Holder’s Signature:_______________________ | |
Holder’s Address:________________________ |
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EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT dated February 28, 2018 (the “Effective Date”) is entered by and between Quest Solution, Inc., a company incorporated under the laws of Delaware (the “Company”), and David Marin, an individual (the “Employee”), with reference to the following facts:
WHEREAS, the Employee wishes to serve, and the Company wishes the Employee to serve, as a sales manager; and
WHEREAS, the parties hereto wish to enter into an employment agreement (the “Employment Agreement”) between the Employee and the Company, on the terms and conditions contained in this Employment Agreement.
NOW THEREFORE, in consideration of the foregoing facts and mutual agreements set forth below, the parties, intending to be legally bound, agree as follows:
1. Employment. The Company hereby agrees to employ the Employee, and the Employee hereby accepts such employment and agrees to perform the Employee’s duties and responsibilities in accordance with the terms and conditions hereinafter set forth.
1.1 Duties and Responsibilities. The Employee shall serve as a sales manager. During the Employment Term, the Employee shall perform all duties and accept all responsibilities that are customary for such position and other reasonable and appropriate duties as may be assigned to the Employee by the Chief Executive Officer of the Company or the board of directors of the Company (the “Board”) from time to time. The Employee shall report directly to the Chief Executive Officer. Employee shall be based in the Company’s Anaheim, California offices located at 1630 S. Sunkist, Suite L, in Anaheim, California (the “Anaheim Facility”) or at such future facility of the Company that is not more than thirty-five (35) miles from the existing Anaheim Facility.
1.2 Employment Term. The term of the Employee’s employment shall commence on the Effective Date and continue for sixty (60) months (the “Employment Term”).
1.3 Extent of Service. During the Employment Term, the Employee agrees to use the Employee’s commercially reasonable best efforts to carry out the duties and responsibilities under Section 1.1 hereof and to devote all requisite Employee’s business time, attention and energy thereto. Employee further agrees not to work either on a part-time or independent contracting basis for any other competing business or enterprise during the period that Employee remains employed by the Company on a full-time basis, without the prior written consent of the Company’s Chief Executive Officer. Notwithstanding the foregoing, the parties agree that Employee may manage his other personal investments so long as such activities do not materially interfere with the performance of his duties hereunder.
1.4 Base Salary. The Company shall pay the Employee a base salary (the “Base Salary”) at the monthly rate of $15,000 (U.S.), payable at such times as the Company customarily pays its other senior level Employees (but in any event no less often than monthly). The Base Salary shall be subject to all state, federal and local payroll tax withholding and any other withholdings required by law. The Employee’s Base Salary may be increased by the Chief Executive Officer, the Board or any party delegated by the Board. Once increased, such increased amount shall constitute the Employee’s Base Salary.
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1.5 Commissions. In this position, Employee also will be eligible for variable compensation in the form of sales commissions. The Company will pay Employee a commission of twenty percent (20%) of the gross profit on the Company’s net revenues derived from sales to any customers that Employee is directly and primarily responsible for facilitating and/or closing (“Qualifying Customers”). Employee’s current Qualifying Customers are set forth on Schedule A hereto but such commission will apply to new customers as well, provided that Employee is directly and primarily responsible for facilitating and/or closing such sales. Commissions are calculated and will be paid in accordance with the Company’s existing commission policies for its senior sales representatives and senior account managers (“Senior Personnel”). Commissions are earned when a Qualifying Customer pays its invoices based on the invoice amount paid. The foregoing sales commission structure will apply for the remainder of 2018 and continue until such time as the Company will establish and provide a replacement annual incentive commissions plan, provided that the terms shall be the same as provided to other Senior Personnel of the Company. For the purposes of clarity, such changes may not reduce the Employee’s Base Salary. The Employee shall be entitled to participate in all Employee benefit or incentive compensation plans now maintained or hereafter established by the Company for the purpose of providing compensation and/or benefits to Employees of the Company and any supplemental retirement, salary continuation, stock option, deferred compensation, supplemental medical or life insurance or other bonus or incentive compensation plans. The Employee’s participation in such plans shall be on the terms as determined by the Board provided that they are substantially the same as provided to any Senior Personnel. No additional compensation provided under any of such plans shall be deemed to modify or otherwise affect the terms of this Employment Agreement or any of the Employee’s entitlements hereunder.
1.6 Discretionary Bonus. Employee shall also be eligible to receive a discretionary bonus for each year (or portion thereof) during the Employment Term, with the actual amount of any such bonus to be determined in the sole discretion of the Board.
1.7 Other Benefits. During the Employment Term, the Employee shall be entitled to participate in all employee benefit plans and programs made available to the Company’s senior level Employees as a group or to its employees generally, as such plans or programs may be in effect from time to time (the “Benefit Coverages”), including, without limitation, medical, dental, hospitalization, short-term and long-term disability and life insurance plans, accidental death and dismemberment protection and travel accident insurance, in each case on substantially the same terms as provided to the Senior Personnel.
1.8 Reimbursement of Expenses; Vacation; Sick Days and Personal Days. The Employee shall be provided with reimbursement by the Company of expenses incurred by Employee in the performance of his duties hereunder in accordance with the Company’s reimbursement policies in effect from time to time for it Senior Personnel. Such reimbursement shall also cover reasonable expenses for travel within the scope of the Employee’s employment as long as such travel is pre-approved by the Chief Executive Officer. The Employee shall be entitled to vacation and holidays in accordance with the Company’s normal personnel policies for Senior Personnel, but not less than four (4) weeks of vacation per calendar year.
1.9 No Other Compensation. Except as expressly provided for in this Agreement or as awarded by the Company’s Chief Executive Officer, the Board or any person designated by the Board, the Employee shall not be entitled to any other compensation or benefits.
2. Representations and Warranties of the Employee. The Employee represents and warrants to the Company as follows:
2.1 No Conflicts. The execution and delivery by the Employee of this Employment Agreement, and the performance by the Employee of its obligations hereunder, do not and will not (i) violate or conflict with any law, ordinance, or regulation, or order, decree or judgment of any arbitrator, court or administrative or other governmental body which is applicable to, binding upon or enforceable against the Employee or any of his assets, (ii) constitute or result in any breach of any of the terms, provisions, conditions of, or constitute a default under, or an event which, with notice or lapse of time or both, would constitute a default under, any indenture, agreement, contract or other document to which the Employee is a party or by which the Employee may be bound or (iii) require the consent or approval of any court, governmental authority or other person. Neither the execution, delivery nor performance of this Employment Agreement, nor the consummation by the Employee of the obligations contemplated hereby requires the consent of, authorization by, exemption from, filing with or notice to any governmental entity or any other person.
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3. Representations of the Company. The Company represents and warrants to the Employee as follows:
3.1 Authorization and Binding Obligation. The Company has the requisite power and authority to enter into and perform its obligations under this Employment Agreement. The execution and delivery of this Employment Agreement by the Company and the implementation thereof by the Company have been duly authorized by the Company’s Board and no further filing, consent, or authorization is required by the Company, its Board or its stockholders. This Employment Agreement has been duly executed and delivered by the Company, and constitutes the legal, valid and binding obligations of the Company, enforceable against the Company in accordance with their respective terms, except as such enforceability may be limited by general principles of equity or applicable bankruptcy, insolvency, reorganization, moratorium, liquidation or similar laws relating to, or affecting generally, the enforcement of applicable creditors’ rights and remedies and except as rights to indemnification and to contribution may be limited by federal or state securities laws.
3.2 No Conflict. The execution, delivery and performance of this Employment Agreement by the Company will not (i) result in a violation of the Company’s Certificate of Incorporation, as amended, or other organizational document of the Company or any of its subsidiaries, any capital stock of the Company or any of its subsidiaries or bylaws of the Company or any of its subsidiaries, (ii) 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 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 adviser effect on the Company or its subsidiaries.
4. Confidential Information. The Employee recognizes and acknowledges that by reason of Employee’s employment by and service to the Company before, during and, if applicable, after the Employment Term, the Employee will have access to certain confidential and proprietary information relating to the Company’s business, which may include, but is not limited to, trade secrets, trade “know-how,” and plans, financing services, funding programs, costs, strategy and programs, computer programs and software and financial information (collectively referred to as “Confidential Information”). Employee acknowledges that such Confidential Information is a valuable and unique asset of the Company and Employee covenants that he will not, unless expressly authorized in writing by the Company, at any time during the course of Employee’s employment use any Confidential Information or divulge or disclose any Confidential Information to any person, firm or corporation except in connection with the performance of Employee’s duties for the Company and in a manner consistent with the Company’s policies regarding Confidential Information. The Employee also covenants that at any time after the termination of such employment, directly or indirectly, he will not use any Confidential Information or divulge or disclose any Confidential Information to any person, firm or corporation, unless such information is in the public domain through no fault of Employee or except when required to do so by a court of law, by any governmental agency having supervisory authority over the business of the Company or by any administrative or legislative body (including a committee thereof) with apparent jurisdiction to order Employee to divulge, disclose or make accessible such information. All written Confidential Information (including, without limitation, in any computer or other electronic format) which comes into Employee’s possession during the course of Employee’s employment shall remain the property of the Company. Except as required in the performance of Employee’s duties for the Company, or unless expressly authorized in writing by the Company, the Employee shall not remove any written Confidential Information from the Company’s premises, except in connection with the performance of Employee’s duties for the Company and in a manner consistent with the Company’s policies regarding Confidential Information. Upon termination of Employee’s Employment Agreement, the Employee agrees to return immediately to the Company all written Confidential Information (including, without limitation, in any computer or other electronic format) in Employee’s possession.
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5. Non-Solicitation.
5.1 Non-Solicitation. The Employee further agrees that during the period that he is employed by the Company and for a period of one (1) year after his termination of employment (other than his termination without Cause or resignation for Good Reason), the Employee will not, except in the furtherance of Employee’s duties hereunder, solicit or induce or attempt to solicit or induce, directly or indirectly, any person to leave his or her employment with the Company.
5.2 Remedies. The Employee acknowledges and agrees that his obligations provided herein are necessary and reasonable in order to protect the Company and its affiliates and their respective business and the Employee expressly agrees that monetary damages may be inadequate to compensate the Company and/or its affiliates for any breach by the Employee of his covenants and agreements set forth herein. Accordingly, the Employee agrees and acknowledges that any such violation or threatened violation of this Section 5 may cause irreparable injury to the Company and that, in addition to any other remedies that may be available in law or at equity or otherwise, the Company and its affiliates may be entitled to obtain injunctive relief against the threatened breach of this Section 5 or the continuation of any such breach by the Employee without the necessity of proving actual damages.
6. Termination.
6.1 Termination without Cause or for Good Reason.
(a) If this Employment Agreement is terminated by the Company other than for Cause (as defined in Section 6.2(f) hereof) or as a result of Employee’s death or Permanent Disability (as defined in Section 6.1(d) hereof), or if Employee terminates his employment for Good Reason (as defined in Section 6.1(b) hereof) prior to the expiration of the Employment Term, then:
(i) The Company shall pay to Employee a severance payment (the “Severance Payment”), which amount shall be paid in a cash lump sum within ten (10) days of the date of termination, in an amount equal to the aggregate amount of the Employee’s Base Salary for the then remaining Employment Term under this Employment Agreement;
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(ii) In the event that the Employee elects to continue health benefit coverage under the Consolidated Omnibus Budget Reconciliation Act (“COBRA”), and the Company receives from Employee a copy of such election and proof of payment of the same, the Company shall promptly and reimburse Employee for the amount of each such premium paid by Employee. Such COBRA premium reimbursements will be paid by the Company for coverage until the earlier of (i) the first twelve (12) months of COBRA continuation, or (ii), such time as Employee subsequently becomes covered by another group health plan (the “COBRA Benefits”). A
(iii) expense reimbursement which shall be paid in a lump sum payment within ten (10) days of the date of termination, in an amount equal Employee’s reimbursed expenses set forth in Section 1.8; and
(iv) any other compensation already earned by Employee or other payments required by law.
(b) For purposes of this Agreement, “Good Reason” shall mean any of the following (without Employee’s express prior written consent):
(i) Any breach by Company of any provision of this Agreement that results in a material negative change to Employee;
(ii) Any material reduction by the Company of Employee’s authorities, duties or responsibilities (except in connection with the termination of Employee’s employment for Cause, as a result of Permanent Disability, as a result of Employee’s death or by Employee other than for Good Reason);
(iii) A reduction by the Company in Employee’s Base Salary or any failure of the Company to reimburse Employee for his expenses required to be paid in Section 1.8;
(iv) The failure by the Company to obtain the specific assumption of this Employment Agreement by any successor or assign of Company as provided for in Section 7 hereof;
(v) Upon a Change in Control of Company (as such term is hereinafter defined); or
(vi) A relocation of Employee’s principal place of work to a location that is more than 35 miles from the Anaheim Facility,
Notwithstanding the foregoing, “Good Reason” shall only be found to exist if the Employee provides written notice (each a “Good Reason Notice”) to the Company identifying and describing the event resulting in Good Reason within ninety (90) days of the initial existence of such event, and the Company does not cure such event within thirty (30) days following the receipt of the Good Reason Notice from the Employee, and the Employee terminates his employment during the ninety (90) day period beginning after the Employee’s delivery of the Good Reason Notice.
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(c) The following provisions shall apply in the event the compensation provided in Section 6.1(a) becomes payable to the Employee:
(i) If the payment of the Total Payments (as defined below) will be subject to the tax (the “Excise Tax”) imposed by Section 409A of the Code, the Company shall pay the Employee on or before the tenth day following the Date of Termination, an additional amount (the “Gross-Up Payment”) such that the net amount retained by the Employee, after deduction of any Excise Tax on Total Payments and any federal and state and local income tax and Excise Tax upon the payment provided for by this paragraph, shall be equal to the Total Payments. For purposes of determining whether any of the payments will be subject to the Excise Tax and the amount of such Excise Tax, (A) any payments or benefits received or to be received by the Employee in connection with a Change in Control of the Company or the Employee’s termination of employment, whether payable pursuant to the terms of this Agreement or any other plan, arrangement or agreement with the Company, its successors, any person whose actions result in a Change in Control of the Company or any corporation affiliated or which, as a result of the completion of transaction causing such a Change in Control, will become affiliated with the Company within the meaning of Section 1504 of Code (the “Total Payments”) shall be treated as “parachute payments” within the meaning of Section 280G(b)(2) of the Code, and all “excess parachute payments” within the meaning of Section 280G(b)(1) shall be treated as subject to the Excise Tax, unless, in the opinion of tax counsel selected by the Company’s independent auditors and acceptable to the Employee, the Total Payments (in whole or in part) do not constitute parachute payments, or such excess parachute payments (in whole or in part) represent reasonable compensation for services actually rendered within the meaning of Section 280G(b)(4) of the Code either in their entirety or in excess of the base amount within the meaning of Section 280G(b)(3) of the Code, or are otherwise not subject to the Excise Tax, (B) the amount of the Total Payments that shall be treated as subject to the Excise Tax shall be equal to the lesser of (I) the total amount of the Total Payments or (II) the amount of excess parachute payments or benefit shall be determined by the Company’s independent auditors in accordance with the principles of Section 280G of the Code. For purposes of determining the amount of the Gross-Up Payment, the Employee shall be deemed to pay federal income taxes at the highest marginal rate of federal income taxation in the calendar year in which the Gross-Up Payment is to be made and state and local income taxes at the highest marginal rate of taxation in the state and locality of the Employee’s residence on the Date of Termination, net of the maximum reduction in federal income taxes which could be obtained from deduction of such state and local taxes. In the event the Excise Tax is subsequently determined to be less than the amount taken into account hereunder at the time of termination of the Employee’s employment, the Employee shall repay to the Company at the time the amount of such reduction in Excise Tax is finally determined the portion of the Gross-Up Payment that can be repaid such that the Employee remains whole on an after-tax basis following such repayment (taking into account any reduction in income or excise taxes to the Employee from such repayment) plus interest on the amount of such repayment at the Federal short-term rate provided in Section 1274(d)(1)(C)(i) of the Code. In the event the Excise Tax is determined to exceed the amount taken into account hereunder at the time of the termination of the Employee’s employment (including by reason of any payment the existence or amount of which cannot be determined at the time of the Gross-Up Payment), the Company shall make an additional gross-up payment in respect of such excess (plus any interest payable with respect to such excess) at the time that the amount of such excess is finally determined.
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(ii) This Employment Agreement is intended to comply with the requirements of Section 409A of the Internal Revenue Code (the “Code”) or an exemption or exclusion therefrom. For purposes of section 409A of the Code, all payments to be made upon a termination of employment under this Agreement may only be made upon a “separation from service” within the meaning of such term under section 409A of the Code, each payment made under this Agreement shall be treated as a separate payment and the right to a series of installment payments under this Agreement is to be treated as a right to a series of separate payments. Each payment under this Agreement shall be treated as a separate payment for purposes of Section 409A of the Code. In no event may Employee, directly or indirectly, designate the calendar year of any payment to be made under this Agreement. All reimbursements and in-kind benefits provided under this Agreement that constitute deferred compensation within the meaning of Section 409A of the Code shall be made or provided in accordance with the requirements of Section 409A of the Code, including, without limitation, that (i) in no event shall reimbursements by the Company under this Agreement be made later than the end of the calendar year next following the calendar year in which the applicable fees and expenses were incurred, provided that Employee shall have submitted an invoice for such fees and expenses at least 10 days before the end of the calendar year next following the calendar year in which such fees and expenses were incurred; (ii) the amount of in-kind benefits that the Company is obligated to pay or provide in any given calendar year (other than medical reimbursements described in Treas. Reg. § 1.409A-3(i)(1)(iv)(B)) shall not affect the in-kind benefits that the Company is obligated to pay or provide in any other calendar year; (iii) Employee’s right to have the Company pay or provide such reimbursements and in-kind benefits may not be liquidated or exchanged for any other benefit; and (iv) in no event shall the Company’s obligations to make such reimbursements or to provide such in-kind benefits apply later than Employee’s remaining lifetime or if longer, through the 20th anniversary of the Effective Date. To the extent Employee is a “specified employee,” as defined in Section 409A(a)(2)(B)(i) of the Code and the regulations and other guidance promulgated thereunder and any elections made by the Company in accordance therewith, notwithstanding the timing of payment provided in any other Section of this Agreement, no payment, distribution or benefit under this Agreement that constitutes a distribution of deferred compensation (within the meaning of Treasury Regulation Section 1.409A-1(b)) upon separation from service (within the meaning of Treasury Regulation Section 1.409A-1(h)), after taking into account all available exemptions, that would otherwise be payable, distributable or settled during the six-month period after separation from service, will be made during such six-month period, and any such payment, distribution or benefit will instead be paid, distributed or settled on the first business day after such six-month period; provided, however, that if Employee dies following the Date of Termination and prior to the payment, distribution, settlement or provision of the any payments, distributions or benefits delayed on account of Section 409A of the Code, such payments, distributions or benefits shall be paid or provided to the personal representative of Employee’s estate within 30 days after the date of Employee’s death
(d) Permanent Disability. Subject to the requirements of applicable law, on prior written notice to the Employee, the Company may terminate the Employee’s employment on account of the Permanent Disability (as defined below), and in such event, the Employee shall receive or commence receiving, as soon as practicable: :
(i) a compensation payment in an amount equal to the aggregate amount of the Employee’s Base Salary then in effect for twelve months (the “Compensation Payment”), which amount shall be paid in a cash lump sum within thirty (10) days of the date of the Permanent Disability;
(ii) the COBRA Benefits set forth in Section 6.1(a)(ii) above;
(iii) amounts payable pursuant to the terms of the disability insurance policy or similar arrangement which Company maintains for the Employee, if any, during the term hereof; and
(iv) any other compensation already earned by Employee or other payments required by law.
For purposes of this Agreement, “Permanent Disability” shall be deemed to have occurred if the Employee is unable, due to any physical or mental disease or condition, to perform his normal duties of employment for a period of thirty (30) consecutive days or sixty (60) days in any twelve (12) month period. The existence of the Employee’s Permanent Disability shall be determined by the Company on the advice of a physician chosen by the Employee, and the Company reserves the right to have the Employee examined by such physician at the Company’s expense.
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6.2 Death. In the event of the Employee’s death during an Employment Term hereunder, this Agreement will terminate, and the Employee’s estate or designated beneficiaries shall receive or commence receiving, as soon as practicable in accordance with the terms of this Agreement:
(a) any death benefits provided under the Employee benefit programs, plans and practices in which the Employee has an interest, in accordance with their respective terms;
(b) the Compensation Payment which shall be paid to Employee’s estate as a cash lump sum within 30 days of such termination;
(c) such other payments under applicable plans or programs to which Employee’s estate or designated beneficiaries are entitled pursuant to the terms of such plans or programs;
(d) expense reimbursement which shall be paid in a lump sum payment within ten (10) days of the date of termination, in an amount equal Employee’s reimbursed expenses set forth in Section 1.8; and
(e) any other compensation already earned by Employee or other payments required by law.
(f) Voluntary Termination by Employee: Discharge for Cause. The Company shall have the right to terminate this Employment Agreement for Cause (as hereinafter defined). In the event that the Employee’s employment is terminated by Company for Cause, as hereinafter defined, or by the Employee other than for Good Reason or other than as a result of the Employee’s Permanent Disability or death, prior to the Termination Date, the Employee shall be entitled only to receive, as a cash lump sum within 30 days of such termination, the Compensation Payment, together with any other any other compensation earned by Employee prior to the termination or other payments required by law.
6.3 As used herein, the term “Cause” shall be limited to (a) willful malfeasance or willful misconduct by the Employee after the date hereof in connection with the services to the Company in a matter of material importance to the conduct of the Company’s affairs which has a material adverse effect on the business of the Company, (b) the conviction of the Employee for commission of a felony, (c) the failure of the Employee after the date hereof to abide by the terms of the Company’s written Code of Conduct, insider trading policy or policy against sexual harassment; For purposes of this subsection, no act on the Employee’s part shall be considered “willful” unless (i) done by the Employee not in good faith and (ii) with reasonable belief that his action was not in the best interest of the Company. The Company shall provide written notice to the Employee of the conduct claimed to constitute Cause under this paragraph and shall provide at least 30 days for the Employee to cure the alleged conduct after receipt of such notice. Termination of this Employment Agreement for Cause pursuant to this Section 6.3 shall be made only by delivery to the Employee of a copy of a resolution duly adopted by the Board at a meeting duly called and held for such purpose (after 30 days prior written notice to the Employee and reasonable opportunity for the Employee to cure such conduct) finding that in the good faith business judgment of such Board, the Employee was guilty of conduct set forth in any of clauses (a) through (b) above, specifying the particulars thereof, and determining that Employee had been unable to cure the alleged conduct.
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6.4 Change In Control. For purposes of this Employment Agreement, a “Change in Control” shall be deemed to have occurred if (i) there shall be consummated (A) any consolidation or merger of the Company in which the Company is not the continuing or surviving corporation or pursuant to which shares of the Company’s Common Stock would be converted into cash, securities or other property, other than a merger of the Company in which the holders of the Company’s Common Stock immediately prior to the merger have substantially the same proportionate ownership of common stock of the surviving corporation immediately after the merger, or (B) any sale, lease, exchange or other transfer (in one transaction or a series of related transactions) of all or substantially all the assets of the Company, or (ii) the stockholders of the Company shall approve any plan or proposal for the liquidation or dissolution of the Company, or (iii) any person (as such term is used in Sections 13(d) and 14(d)(2) of the Securities Exchange Act of 1934 (the “Exchange Act”)), other than the Company, the Employee or any Employee benefit plan sponsored by the Company, or such person on the Effective Date hereof is a 50% or more beneficial owner, shall become the beneficial owner (within the meaning of Rule 13d-3 under the Exchange Act) of securities of the Company representing 50% or more of the combined voting power of the Company’s then outstanding securities ordinarily (and apart from rights accruing in special circumstances) having the right to vote in the election of directors, as a result of a tender or exchange offer, open market purchases, privately negotiated purchases or otherwise, or (iv) at any time during a period of two consecutive years, individuals who at the beginning of such period, constituted the Board of Directors of the Company shall cease for any reason to constitute at least a majority thereof, unless the election or the nomination for election by the Company’s stockholders of each new director during such two-year period was approved by a vote of at least two-thirds of the directors then still in office, who were directors at the beginning of such two-year period.
7. Assignment. This Employment Agreement shall be binding upon and inure to the benefit of the heirs and representatives of Employee and the assigns and successors of the Company, but neither this Employment Agreement nor any rights or obligations hereunder shall be assignable or otherwise subject to hypothecation by the Employee (except by will or by operation of the laws of intestate succession or by Employee notifying the Company that cash payment be made to an affiliated investment partnership in which Employee is a control person) or by the Company, except that Company may assign this Employment Agreement to any successor (whether by merger, purchase or otherwise) to all or substantially all of the stock, assets or businesses of Company, if such successor expressly agrees to assume the obligations of Company hereunder. The Employee may not assign this Employment Agreement without the prior written consent of the Company. The Company may assign its rights without the written consent of the Employee, so long as the Company or its assignee complies with the other material terms of this Employment Agreement. The rights and obligations of the Company under this Employment Agreement shall inure to the benefit of and be binding upon the successors and permitted assigns of the Company, and the Employee’s rights under this Agreement shall inure to the benefit of and be binding upon his heirs and executors.
8. Indemnification. The Employee shall be indemnified by the Company against all liability incurred by the Employee in connection with any proceeding, including, but not necessarily limited to, the amount of any judgment obtained against Employee, the amount of any settlement entered into by the Employee and any claimant with the approval of the Company, attorneys’ fees, actually and necessarily incurred by him in connection with the defense of any action, suit, investigation or proceeding or similar legal activity, regardless of whether criminal, civil, administrative or investigative in nature (“Claim”), to which he is made a party or is otherwise subject to, by reason of his being or having been a director, officer, agent or employee of the Company, to the full extent permitted by applicable law and the Certificate of Incorporation of the Company. Such right of indemnification will not be deemed exclusive of any other rights to which Employee may be entitled under Company’s Certificate of Incorporation or Bylaws, as in effect from time to time, any agreement or otherwise.
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9. General Provisions.
9.1 Modification, No Waiver. No modification, amendment or discharge of this Employment Agreement shall be valid unless the same is in writing and signed by all parties hereto. Failure of any party at any time to enforce any provisions of this Employment Agreement or any rights or to exercise any elections hall in no way be considered to be a waiver of such provisions, rights or elections and shall in no way affect the validity of this Employment Agreement. The exercise by any party of any of its rights or any of its elections under this Employment Agreement shall not preclude or prejudice such party from exercising the same or any other right it may have under this Employment Agreement irrespective of any previous action taken.
9.2 Notices. All notices and other communications required or permitted hereunder or necessary or convenient in connection herewith shall be in writing and shall be deemed to have been given when hand delivered, five (5) business days after being mailed by registered or certified mail (postage prepaid and return receipt requested), addressed as follows (provided that notice of change of address shall be deemed given only when received):
If to the Company, to:
Quest
Solution, Inc.
860 Conger Street
Eugene, OR 97402
Attn: Chief Executive Officer
If to Employee, to:
David Marin
12272
Monarch Street
Garden Grove, CA 92841
With a copy to, but which shall not constitute notice:
Morgan,
Lewis & Bockius, LLP
600 Anton Boulevard, Suite 1800
Costa Mesa, CA 92626
Attn: Ellen S. Bancroft, Esq.
Or to such other names or addresses as the Company or Employee, as the case may be, shall designate by notice to each other person entitled to receive notices in the manner specified in this Section.
9.3 Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of California.
9.4 Further Assurances. Each party to this Employment Agreement shall execute all instruments and documents and take all actions as may be reasonably required to effectuate this Employment Agreement.
9.5 Severability. Should any one or more of the provisions of this Employment Agreement or of any agreement entered into pursuant to this Employment Agreement be determined to be illegal or unenforceable, then such illegal or unenforceable provision shall be modified by the proper court or arbitrator to the extent necessary and possible to make such provision enforceable, and such modified provision and all other provisions of this Employment Agreement and of each other agreement entered into pursuant to this Employment Agreement shall be given effect separately from the provisions or portion thereof determined to be illegal or unenforceable and shall not be affected thereby.
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9.6 Entire Agreement. This Employment Agreement supersedes all prior agreements and understandings between the parties, oral or written. No modification, termination or attempted waiver shall be valid unless in writing, signed by the party against whom such modification, termination or waiver is sought to be enforced.
9.7 Counterparts; Facsimile. This Employment Agreement may be executed in one or more counterparts, each of which shall for all purposes be deemed to be an original, and all of which taken together shall constitute one and the same instrument. This Employment Agreement may be executed by facsimile with original signatures to follow.
[SIGNATURE PAGE TO FOLLOW
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IN WITNESS WHEREOF, the undersigned, intending to be legally bound, have executed this Employment Agreement as of the date first written above.
Employee | Quest Solution, Inc. | ||
/s/ David Marin | By: | /s/ Shai Lustgarten | |
David Marin | Name: | Shai Lustgarten | |
Title: | CEO |
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