UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 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) August 4, 2015
Net Element, Inc.
(Exact Name of Registrant as Specified
in Charter)
Delaware |
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001-34887 |
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90-1025599 |
(State or Other Jurisdiction
of Incorporation) |
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(Commission File
Number) |
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(IRS Employer
Identification No.)
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3363 NE 163rd Street, Suite
705, North Miami Beach, FL |
33160 |
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(Address of Principal Executive Offices) |
(Zip Code) |
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(305)
507-8808 |
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(Registrant’s telephone number, including area code) |
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Not Applicable |
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(Former Name or Former Address, if Changed Since Last Report) |
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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:
| o | Written communications pursuant to Rule
425 under the Securities Act (17 CFR 230.425) |
| x | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| o | Pre-commencement communications pursuant
to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| o | Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.13e-4(c)) |
| Item 1.01 | Entry into a Material Definitive Agreement. |
On August 4, 2015,
Net Element, Inc. (the “Company”) entered into two letter agreements with the certain qualified institutional investors
and certain institutional accredited investors listed in the Securities Purchase Agreement (Series A Convertible Preferred Stock
of the Company) (the “Preferred SPA”) and the Securities Purchase Agreement (Senior Convertible Notes and Warrants)
(the “Debt SPA”). The letter agreements waived certain terms of the Series A Convertible Preferred Stock of the Company,
and waived and amended certain terms of the Preferred SPA and the Debt SPA and of the Senior Convertible Notes and Warrants issued
pursuant to the Debt SPA, as follows:
| a. | No interest will accrue on the Senior Convertible Notes issued on April 30, 2015 by the Company
to the Investors (the “Notes”) from the date of issuance of the Notes until the Moratorium Date (as defined
below), unless otherwise mutually agreed to by the Company and the investors. |
| b. | All obligations of the parties with respect to the Notes, the Warrants (as defined in the Debt
SPA and all other Transaction Documents (as defined in the Debt SPA), including but not limited to the investors' obligations to
release the purchase price of the Notes to the Company and the Company’s obligations to the holders of the Notes set forth
in the Notes or the Investors’ rights to purchase and the Company obligations to issue any Additional Notes or any Additional
Warrants (each, as defined in the Debt SPA), were frozen and placed on hold until September 4, 2015 (such date, or such later date
agreed to in writing by all Parties, the “Moratorium Date”). |
| c. | On or before the Moratorium Date, the Company and the investors will mutually decide in writing
whether to reinstate the Notes and/or the Warrants and act in accordance with the terms thereof or otherwise mutually agreed modified
terms thereof. The Company and the investors agreed that prior to the Moratorium Date they will work in good faith on amending
the Warrants in a mutually acceptable manner |
| d. | Unless the Company and the investors have reached agreement in writing as contemplated in paragraph(c)
above by the Moratorium Date, (i) all Notes will be automatically (i.e., without any further action by Company or the investors)
null and void as of the Moratorium Date with no obligations or liabilities whatsoever of the Company relating thereto; (ii) the
investors' right to purchase, and the Company's obligation to issue, Additional Notes and Additional Warrants (each, as defined
in the Debt SPA) will be automatically (i.e., without any further action by the Company or the investors) null and void as of the
Moratorium Date with no obligations or liabilities whatsoever of the Company relating thereto; and (iii) within five (5) business
days from the Moratorium Date, the investors will return to the Company the originals of all Notes for cancellation by the Company. |
| e. | Notwithstanding anything to the contrary in the letter agreements or any other prior agreements,
the Company's may enter into a transaction in which it obligates itself to issue shares of its common stock without triggering
the Investors' participation rights, the anti-dilution provisions or other provisions set forth in any prior Agreements provided
that such transaction is entered into on or prior to the Moratorium Date. |
The terms of the Preferred
SPA and related documents (including but not limited to the Certificate of Designations, Preferences and Rights (the "Certificate
of Designations") of the Company's Series A Preferred Stock (the "Preferred Shares")) entered into on April 30,
2015 by and between the Parties with respect to the issuance of the Preferred Shares will be deemed waived to the extent necessary
so that the following terms apply to the remaining outstanding Preferred Shares:
| a. | From the effective date of the letter agreements, Section 4 (installment payment obligations) of
the Certificate of Designations will not apply to the remaining outstanding Preferred Shares. From the effective date of the letter
agreements until the Moratorium Date, the Equity Condition set forth in Section 24(v)(N) of the Certificate of Designations will
be suspended. |
| b. | Notwithstanding anything herein to the contrary, the investors may submit a conversion notice to
the Company pursuant to Section 2 of the Certificate of Designations and the Company shall deliver to the applicable Investor the
shares of the Company common stock issuable upon such voluntary conversion pursuant to Section 2 of the Certificate of Designations. |
In addition, each of the investors, together
with any of its affiliates, agree that it will not sell shares of the Company common stock during any trading day in an amount
exceeding in the aggregate 10% (ten percent) of the composite aggregate share trading volume of the Common Stock, measured at the
time of each sale of common stock during such trading day as reported on Bloomberg L.P.
Further, the investors
waived any and all actual, alleged or potential Equity Conditions Failures, Events of Default, any true-up obligations with respect
to any Installment Amounts (as defined in the Certificate of Designations), Triggering Events, any failure to pay Interest solely
under the Initial Notes (as defined in the Debt SPA) and any other claims with respect to any obligations of the Company prior
to and through the effective date of the letter agreements, and any Investors’ remedies with respect thereto. The Company
and the Investors exchanged mutual general releases through the date of the letter agreements.
The foregoing is only
a brief description of the terms of the letter agreements, does not purport to be a complete description of the rights and obligations
of the parties thereunder, and is qualified in its entirety by reference to the letter agreements which is filed as Exhibits 10.1
and 10.2 respectively to this Current Report on Form 8-K and incorporated by reference herein.
| Item 2.03 | Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement
or a Registrant. |
The disclosures of
Item 1.01 of this Current Report are incorporated herein by this reference.
| Item 3.03 | Material Modification to Rights of Security Holders |
The information set
forth in Item 1.01 of this Current Report is incorporated herein by reference.
| Item 9.01 | Financial Statements and Exhibits |
(d) Exhibits
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Exhibit No. |
Description |
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10.1 |
Letter Agreement by and among the Company and the investors listed on the signature pages attached thereto. |
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10.2 |
Letter Agreement by and among the Company and the investors listed on the signature pages attached thereto. |
SIGNATURES
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.
Dated: August 4, 2015
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NET ELEMENT, INC. |
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By: |
/s/ Jonathan New |
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Name: Jonathan New |
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Title: Chief Financial Officer |
EXHIBIT INDEX
| 10.1 | Letter Agreements among the Company and the investors listed on the signature pages attached thereto. |
| 10.2 | Letter Agreements among the Company and the investors listed on the signature pages attached thereto. |
Exhibit 10.1
[NETE LETTERHEAD]
August 4, 2015
Candlewood Special Situations Master Fund, Ltd.
CWD OC 522 Master Fund, Ltd.
Flagler Master Fund SPC Ltd., acting for and on behalf of the
Class A Segregated Portfolio (collectively, the "Investors")
c/o Candlewood Investment Group, LP
555 Theodore Fremd, Suite C-303
Rye, NY 10580
Attention: Matthew H. Spiro
Matt:
This will confirm our
recent phone conversation to discuss the proposed settlement of all matters arising from the Series A Preferred Stock and Debt
and Warrant transactions (“Prior Agreements”) entered into on April 30, 2015 by and among Net Element, Inc.
(the “Company”), the Investors and the various Tenor entities (the "Other Investors"). The
Company and the Investors are collectively referred to as the Parties.
Please
sign where indicated below to confirm that the provisions below reflect the agreement reached between all Parties. Once your
confirmation and the confirmation of the Other Investors in form and substance identical to your confirmation is received by the
Company and, in each case, acknowledged by the Company (the "Effective Date"), the terms of this letter agreement will
supersede any inconsistent terms and provisions of the Prior Agreements.
| a. | No interest shall accrue on the Senior Convertible Notes issued on April 30, 2015 by the Company
to the Investors (the “Notes”) from the date of issuance of the Notes until the Moratorium Date (as defined
below), unless otherwise mutually agreed to by all Parties. |
| b. | All obligations of the Parties with respect to the Notes, the Warrants (as defined in the Debt
SPA (as defined in Section 4 below) and all other Transaction Documents (as defined in the Debt SPA), including but not limited
to the Investors' obligations to release the purchase price of the Notes to the Company and the Company’s obligations to
the holders of the Notes set forth in the Notes or the Investors’ rights to purchase and the Company obligations to issue
any Additional Notes or any Additional Warrants (each, as defined in the Debt SPA), are hereby frozen and placed on hold until
September 4, 2015 (such date, or such later date agreed to in writing by all Parties, the “Moratorium Date”). |
| c. | On or before the Moratorium Date, the Parties shall mutually decide in writing whether to reinstate
the Notes and/or the Warrants and act in accordance with the terms thereof or otherwise mutually agreed modified terms thereof.
The Parties agree that prior to the Moratorium Date they will work in good faith on amending the Warrants in a mutually acceptable
manner. |
| d. | Unless the Parties have reached agreement in writing as contemplated in Section 1(c) above by the
Moratorium Date, (i) all Notes will be automatically (i.e., without any further action by the Parties) null and void as of the
Moratorium Date with no obligations or liabilities whatsoever of the Parties relating thereto; (ii) the Investors' right to purchase,
and the Company's obligation to issue, Additional Notes and Additional Warrants (each, as defined in the Debt SPA) will be automatically
(i.e., without any further action by the Parties) null and void as of the Moratorium Date with no obligations or liabilities whatsoever
of the Parties relating thereto and (iii) within five (5) business days from the Moratorium Date, the Investors shall return to
the Company by courier or Federal Express the originals of all Notes for cancellation by the Company. |
| e. | Notwithstanding anything to the contrary set forth herein or in the Prior Agreements, the Company's
may enter into a transaction in which it obligates itself to issue shares of its common stock, par value $0.0001 per share (the
"Common Stock") without triggering the Investors' participation rights, the anti-dilution provisions or other
provisions set forth in the Prior Agreements provided that such transaction is entered into on or prior to the Moratorium Date. |
The terms
of the Preferred SPA (as defined below) and related documents (including but not limited to the Certificate of Designations, Preferences
and Rights (the "Certificate of Designations") of the Company's Series A Preferred Stock (the "Preferred
Shares")) entered into on April 30, 2015 by and between the Parties with respect to the issuance of the Preferred Shares
will be deemed waived to the extent necessary so that the following terms apply to the remaining outstanding Preferred Shares:
| a. | From the Effective Date, Section 4 of the Certificate of Designations shall not apply to the remaining
outstanding Preferred Shares. From the Effective date until the Moratorium Date, the Equity Condition set forth in Section 24(v)(N)
of the Certificate of Designations shall be suspended. |
| b. | Notwithstanding anything herein to the contrary, the Investors may submit a conversion notice to
the Company pursuant to Section 2 of the Certificate of Designations and the Company shall deliver to the applicable Investor the
shares of Common Stock issuable upon such voluntary conversion pursuant to Section 2 of the Certificate of Designations. |
| c. | It is agreed that as of the date hereof the following Preferred Shares remain outstanding: |
| (i) | Candlewood Special Situations Master Fund, Ltd - 855 Preferred Shares; |
| (ii) | CWD OC 522 Master Fund, Ltd. – 538 Preferred Shares; and |
| (iii) | Flagler Master Fund SPC Ltd. – Class A Portfolio Candlewood – 105 Preferred Shares |
| 3. | AGREEMENTS; WAIVERS AND ACKNOWLEDGEMENTS |
Each of the Investors,
together with any of its affiliates, agree that it shall not sell shares of Common Stock during any trading day in an amount exceeding
in the aggregate 10% (ten percent) of the composite aggregate share trading volume of the Common Stock, measured at the time of
each sale of Common Stock during such trading day as reported on Bloomberg L.P.
The Investors hereby
waive any and all actual, alleged or potential Equity Conditions Failures, Events of Default, any true-up obligations with respect
to any Installment Amounts (as defined in the Certificate of Designations), Triggering Events, any failure to pay Interest solely
under the Initial Notes (as defined in the Debt SPA) and any other claims with respect to any obligations of the Company prior
to and through the Effective Date as defined in this letter agreement, any Investors’ remedies with respect thereto. The
Investors hereby acknowledge and agree that all Company obligations under the RRA (as defined in Section 4 below) with respect
to all Registrable Securities (as defined in the RRA) have been performed in full solely with respect to the Notes and Warrants
issued on the Initial Closing Date (as defined in the Debt SPA), but, provided that the Parties agree to reinstate the Investors’
rights to purchase, and the Company obligations to issue, any Additional Notes and/or any Additional Warrants after the Moratorium
Date, the Company shall remain obligated pursuant to the RRA to register the shares of Common Stock issuable pursuant to the Additional
Notes and Additional Warrants (each, as defined in the Debt SPA) (i) by filing an Initial Registration Statement (as defined in
the RRA) on or prior to the date that is thirty (30) days after the applicable Additional Closing Date (as defined in the Debt
SPA), (ii) by causing such Initial Registration Statement to be declared effective by the SEC on or prior to the earlier of (x)
ninety (90) after the applicable Additional Closing Date and (y) five (5) days after the Company is notified (orally or in writing,
whichever is earlier) by the SEC that such Initial Registration Statement will not be subject to further review and (iii) otherwise
pursuant to the terms and conditions set forth in the RRA.
As of the Effective Date, the
agreements set forth herein will be binding on all Parties. Notwithstanding the foregoing, except as expressly set forth herein,
this letter agreement shall not be deemed to be a waiver, amendment or modification of any provisions of the Prior Agreements,
or of any right, power or remedy of the Investors, or constitute a waiver, amendment or modification of any provision of the Prior
Agreements (except to the extent expressly set forth herein), or any other document, instrument and/or agreement executed or delivered
in connection therewith, in each case whether arising before or after the date hereof or as a result of performance hereunder or
thereunder, all of which (except as specified herein) remain in full force and effect. For the avoidance of doubt, the only agreements
in effect between the Company and the Investors are (i) this letter agreement, (ii) that certain Securities Purchase Agreement
dated as of April 30, 2015, by and among the Company and the investors listed on the signature pages attached thereto with respect
to the issuance of shares of the Preferred Shares, which Preferred Shares are convertible or redeemable into Common Stock in accordance
with the terms of the Certificate of Designations (the "Preferred SPA"), (iii) that certain Securities Purchase
Agreement dated as of April 30, 2015, by and among the Company and the investors listed on the signature pages attached thereto
with respect to the issuance of the Notes, which Notes are convertible or redeemable into Common Stock in accordance with the thereof
and warrants (the "Warrants") representing the right to acquire shares of Common Stock (the "Debt SPA")
and (iv) that certain Registration Rights Agreement dated as of April 30, 2015, by and among the Company and the investors listed
on the signature pages attached thereto entered into in connection with the Debt SPA (the "RRA"), and no other
communication, oral or written, electronic or physical, constitutes or can be deemed an agreement between the Parties.
5.1 In
consideration of the benefits provided to the Company under the terms and provisions hereof, the Company hereby agrees as follows
("General Release"):
(a) Each of the Company and
each of its subsidiaries, for itself and on behalf of all of its respective successors, assigns, predecessors in interest, past
and present officers, directors, attorneys, affiliates, consultants, employees and agents (collectively, the "Releasors")
does hereby fully, finally, unconditionally and irrevocably release, waive, acquit and forever discharge each of the Investors,
all of their respective successors, assigns, predecessors in interest, and all of their respective past and present officers, directors,
members, partners, attorneys, affiliates, consultants, employees and agents (collectively, the "Released Parties"),
of and from any and all claims, cause of action, allegations, formal or informal demands, suits, actions, informational requests
or formal or informal proceedings, obligations, liabilities, indebtedness, breaches of contract, breaches of duty or of any relationship,
acts, omissions, misfeasance, malfeasance, defenses, offsets, debts, sums of money, accounts, compensation, contracts, controversies,
promises, damages, costs, losses and expenses, of every type, kind, nature, description or character, whether known or unknown,
contingent or fixed, direct or indirect, suspected or unsuspected, liquidated or unliquidated, of whatever nature or description,
and whether in law or equity, under contract, tort, statute or otherwise, each as though fully set forth herein at length (each,
a "Released Claim" and collectively, the "Released Claims"), that the Company now has or may
acquire as of the date of this letter agreement (hereafter, the "Release Date") by reason of any act, omission
or thing whatsoever done or omitted to be done, in each case, prior to and through the Release Date, including, without limitation,
those Released Claims in any way arising out of, connected with or related to any and all of the transactions contemplated by (1)
the Prior Agreements, including without limitation (I) the Preferred SPA, (II) the Debt SPA and (III) the RRA; (3) any securities
of the Company, including without limitation, the Preferred Shares, the Notes, the Warrants and/or shares of Common Stock whether
or not issued pursuant to the aforementioned securities; (4) any transactions effected in the securities of the Company, including
without limitation, the Preferred Shares, the Notes, the Warrants and/or shares of Common Stock whether or not issued pursuant
to the aforementioned securities; and/ or (5) the transactions contemplated hereby.
(b) Each person signing below
on behalf of the Company acknowledges that he or she has read each of the provisions of this General Release. Each such person
fully understands that this General Release has important legal consequences and each such person realizes that they are releasing
any and all Released Claims that the Company may have as of the Release Date. The Company hereby acknowledges that it has had an
opportunity to obtain a lawyer's advice concerning the legal consequences of each of the provisions of this General Release.
(c) The Company hereby specifically
acknowledges and agrees that: (i) none of the provisions of this General Release shall be construed as or constitute an admission
of any liability on the part of any of the Released Parties; (ii) the provisions of this General Release shall constitute an absolute
bar to any Released Claim of any kind, whether any such Released Claim is based on contract, tort, warranty, mistake or any other
theory, whether legal, statutory or equitable; and (iii) any attempt to assert a Released Claim barred by the provisions of this
General Release shall subject the Company to the provisions of applicable law setting forth the remedies for the bringing of groundless,
frivolous or baseless claims or causes of action.
(d) The Company represents and
warrants that, as of the Release Date, it has no knowledge of any claim by any Releasor against any Released Party or of any facts
or acts or omissions of any Released Party which on the date hereof would be the basis of a claim by any Releasor against any Released
Party which would not be released hereby.
5.2 In
consideration of the benefits provided to the Investors under the terms and provisions hereof, each of the Investors hereby agrees
as follows ("Investors’ General Release"):
(a) Each Investor and each
of its subsidiaries, for itself and on behalf of all of its respective successors, assigns, predecessors in interest, past and
present officers, directors, attorneys, affiliates, consultants, employees and agents (collectively, the "Investor Releasors")
does hereby fully, finally, unconditionally and irrevocably release, waive, acquit and forever discharge the Company, all of their
respective successors, assigns, predecessors in interest, and all of their respective past and present officers, directors, members,
partners, attorneys, affiliates, consultants, employees and agents (collectively, the "Company Released Parties"),
of and from any and all claims, cause of action, allegations, formal or informal demands, suits, actions, informational requests
or formal or informal proceedings, obligations, liabilities, indebtedness, breaches of contract, breaches of duty or of any relationship,
acts, omissions, misfeasance, malfeasance, defenses, offsets, debts, sums of money, accounts, compensation, contracts, controversies,
promises, damages, costs, losses and expenses, of every type, kind, nature, description or character, whether known or unknown,
contingent or fixed, direct or indirect, suspected or unsuspected, liquidated or unliquidated, of whatever nature or description,
and whether in law or equity, under contract, tort, statute or otherwise, each as though fully set forth herein at length (each,
a "Investor Released Claim" and collectively, the "Investor Released Claims"), that such Investor
now has or may acquire as of the Release Date by reason of any act, omission or thing whatsoever done or omitted to be done, in
each case, prior to and through the Release Date, including, without limitation, those Investor Released Claims in any way arising
out of, connected with or related to any and all of the transactions contemplated by (1) the Prior Agreements, including without
limitation (I) the Preferred SPA, (II) the Debt SPA and (III) the RRA; (3) any securities of the Company, including without limitation,
the Preferred Shares, the Notes, the Warrants and/or shares of Common Stock whether or not issued pursuant to the aforementioned
securities; (4) any transactions effected in the securities of the Company, including without limitation, the Preferred Shares,
the Notes, the Warrants and/or shares of Common Stock whether or not issued pursuant to the aforementioned securities; and/ or
(5) the transactions contemplated hereby.
(b) Each person signing below
on behalf of each Investor acknowledges that he or she has read each of the provisions of this Investors’ General Release.
Each such person fully understands that this Investors’ General Release has important legal consequences and each such person
realizes that they are releasing any and all Investor Released Claims that such Investor may have as of the Release Date. Each
Investor hereby acknowledges that it has had an opportunity to obtain a lawyer's advice concerning the legal consequences of each
of the provisions of this Investors’ General Release.
(c) Each Investor hereby specifically
acknowledges and agrees that: (i) none of the provisions of this Investors’ General Release shall be construed as or constitute
an admission of any liability on the part of any of the Company Released Parties; (ii) the provisions of this Investors’
General Release shall constitute an absolute bar to any Investor Released Claim of any kind, whether any such Investor Released
Claim is based on contract, tort, warranty, mistake or any other theory, whether legal, statutory or equitable; and (iii) any attempt
to assert an Investor Released Claim barred by the provisions of this Investors’ General Release shall subject such Investor
to the provisions of applicable law setting forth the remedies for the bringing of groundless, frivolous or baseless claims or
causes of action.
(d) Each Investor represents
and warrants that, as of the Release Date, it has no knowledge of any claim by any Investor Releasor against any Company Released
Party or of any facts or acts or omissions of any Company Released Party which on the date hereof would be the basis of a claim
by any Investor Releasor against any Company Released Party which would not be released hereby.
(e) For the avoidance of doubt
and notwithstanding anything herein to the contrary, in no event shall the Investors' Release derogate from any of the Company's
obligations under any of the Prior Agreements to the extent such obligations are not superseded by this letter agreement.
The Company
shall by 12:30 p.m. (New York City time) or as soon as possible thereafter on August 4, 2015, file with the Securities and Exchange
Commission a Current Report on Form 8-K disclosing the material terms of the transactions contemplated by this letter agreement
and attaching this letter agreement as an exhibit to such filing(including all attachments, the "8-K Filing").
From and after the filing of the 8-K Filing, none of the Investors shall be in possession of any material, nonpublic information
received from the Company, any of its subsidiaries or any of their respective officers, directors, agents, employees or affiliates,
that is not disclosed in the 8-K Filing. In addition, effective upon the filing of the 8-K Filing, the Company acknowledges and
agrees that any and all confidentiality or similar obligations under any agreement, whether written or oral, between the Company,
any of its subsidiaries or any of their respective officers, directors, agents, employees or affiliates on the one hand, and any
of the Investors or any of their respective affiliates on the other hand, shall terminate and shall be of no further force or effect.
The Company understands and confirms that each Investor will rely on the foregoing representations in effecting transactions in
securities of the Company. The Company shall allow the Investors to review and comment upon the 8-K Filing and shall not file an
8-K Filing in a form to which any of the Investors reasonably objects. Without the prior written consent of all of the Investors,
the Company shall not disclose the name of any of the Investors in the 8-K Filing or in any other filing, announcement, release
or otherwise (except in the letter agreement filed as an exhibit to the 8-K Filing). The Company shall not, and shall cause
each of its subsidiaries and its and each of their respective officers, directors, agents employees and affiliates, not to, provide
any of the Investors with any material, nonpublic information regarding the Company or any of its subsidiaries from and after the
filing of the 8-K Filing without the express prior written consent of all of the Investors. To the extent the Company, any of its
subsidiaries or any of their respective officers, directors, agents, employees or affiliates delivers any material, non-public
information to any of the Investors without the prior written consent of each Investor, the Company hereby covenants and agrees
that none of the Investors shall not have any duty of confidentiality to the Company, any of its subsidiaries or any of their respective
officers, directors, agents, employees or affiliates with respect to, or a duty to the Company, any of its subsidiaries or any
of their respective officers, directors, agents, employees or affiliates not to trade on the basis of, such material, non-public
information.
This letter
agreement may be executed in any number of counterparts, which together shall constitute one and the same agreement. In the event
that any provision of this letter agreement is found to be void or invalid, then such provision shall be deemed to be severable
from the remaining provisions of this letter agreement, and it shall not affect the validity of the remaining provisions, which
provisions shall be given full effect as if the void or invalid provision had not been included herein. The terms and provisions
of this letter agreement shall inure to the benefit of and be binding upon the heirs, successors and assigns of the parties. This
letter agreement shall be governed by, and construed in accordance with, the laws of the State of New York (without giving effect
to the conflict of laws principles thereof). The federal and state courts located in the State of New York shall have exclusive
jurisdiction to resolve any and all disputes that may arise under this letter agreement. Any amendments or modifications hereto
must be executed in writing by all parties. Each party hereto shall do and perform, or cause to be done and performed, all such
further acts and things, and shall execute and deliver all such other agreements, certificates, instruments and documents, as any
other party may reasonably request in order to carry out the intent and accomplish the purposes of this letter agreement.
(Signature Pages Follow)
Very truly yours,
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NET ELEMENT, INC. |
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By: |
/s/ Oleg Firer |
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Name: Oleg Firer
Title: Chief Executive Officer |
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Acknowledged and Agreed as of this 4th day of August, 2015
CANDLEWOOD SPECIAL SITUATIONS MASTER FUND, LTD. |
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By: Candlewood Investment Group LP, its Investment Manager |
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By: |
/s/ Jonathan Weiss |
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Name: Jonathan Weiss
Title: Authorized Signatory |
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CWD OC 522 Master Fund, Ltd. |
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By: Candlewood Investment Group LP, its Investment Manager |
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By: |
/s/ Jonathan Weiss |
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Name: Jonathan Weiss
Title: Authorized Signatory |
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Flagler
Master Fund SPC Ltd.,
acting for and on behalf of the Class A Segregated Portfolio |
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By: Candlewood Investment Group LP, its Investment Manager |
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By: |
/s/ Jonathan Weiss |
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Name: Jonathan Weiss
Title: Authorized Signatory |
Exhibit 10.2
[NETE LETTERHEAD]
August 4, 2015
Tenor Opportunity Master Fund, Ltd
Tenor Special Situation Fund, LP.
(collectively, the "Investors")
c/o Tenor Capital Management Company, L.P
1180 Avenue of the Americas, Suite 1940
New York, NY 10036
Attention: Daniel Kochav
Daniel:
This will confirm our
recent phone conversation to discuss the proposed settlement of all matters arising from the Series A Preferred Stock and Debt
and Warrant transactions (“Prior Agreements”) entered into on April 30, 2015 by and among Net Element, Inc.
(the “Company”), the Investors and the various Candlewood entities (the "Other Investors").
The Company and the Investors are collectively referred to as the Parties.
Please
sign where indicated below to confirm that the provisions below reflect the agreement reached between all Parties. Once your
confirmation and the confirmation of the Other Investors in form and substance identical to your confirmation is received by the
Company and, in each case, acknowledged by the Company (the "Effective Date"), the terms of this letter agreement will
supersede any inconsistent terms and provisions of the Prior Agreements.
| a. | No interest shall accrue on the Senior Convertible Notes
issued on April 30, 2015 by the Company to the Investors (the “Notes”) from the date of issuance of the Notes
until the Moratorium Date (as defined below), unless otherwise mutually agreed to by all Parties. |
| b. | All obligations of the Parties with respect to the Notes,
the Warrants (as defined in the Debt SPA (as defined in Section 4 below) and all other Transaction Documents (as defined in the
Debt SPA), including but not limited to the Investors' obligations to release the purchase price of the Notes to the Company and
the Company’s obligations to the holders of the Notes set forth in the Notes or the Investors’ rights to purchase
and the Company obligations to issue any Additional Notes or any Additional Warrants (each, as defined in the Debt SPA), are hereby
frozen and placed on hold until September 4, 2015 (such date, or such later date agreed to in writing by all Parties, the “Moratorium
Date”). |
| c. | On or before the Moratorium Date, the Parties shall mutually
decide in writing whether to reinstate the Notes and/or the Warrants and act in accordance with the terms thereof or otherwise
mutually agreed modified terms thereof. The Parties agree that prior to the Moratorium Date they will work in good faith
on amending the Warrants in a mutually acceptable manner. |
| d. | Unless the Parties have reached agreement in writing
as contemplated in Section 1(c) above by the Moratorium Date, (i) all Notes will be automatically (i.e., without any further action
by the Parties) null and void as of the Moratorium Date with no obligations or liabilities whatsoever of the Parties relating
thereto; (ii) the Investors' right to purchase, and the Company's obligation to issue, Additional Notes and Additional Warrants
(each, as defined in the Debt SPA) will be automatically (i.e., without any further action by the Parties) null and void as of
the Moratorium Date with no obligations or liabilities whatsoever of the Parties relating thereto and (iii) within five (5) business
days from the Moratorium Date, the Investors shall return to the Company by courier or Federal Express the originals of all Notes
for cancellation by the Company. |
| e. | Notwithstanding anything to the contrary set forth herein
or in the Prior Agreements, the Company's may enter into a transaction in which it obligates itself to issue shares of its common
stock, par value $0.0001 per share (the "Common Stock") without triggering the Investors' participation rights,
the anti-dilution provisions or other provisions set forth in the Prior Agreements provided that such transaction is entered into
on or prior to the Moratorium Date. |
The terms
of the Preferred SPA (as defined below) and related documents (including but not limited to the Certificate of Designations, Preferences
and Rights (the "Certificate of Designations") of the Company's Series A Preferred Stock (the "Preferred
Shares")) entered into on April 30, 2015 by and between the Parties with respect to the issuance of the Preferred Shares
will be deemed waived to the extent necessary so that the following terms apply to the remaining outstanding Preferred Shares:
| a. | From the Effective Date, Section 4 of the Certificate of Designations shall not apply to the remaining
outstanding Preferred Shares. From the Effective date until the Moratorium Date, the Equity Condition set forth in Section 24(v)(N)
of the Certificate of Designations shall be suspended. |
| b. | Notwithstanding anything herein to the contrary, the Investors may submit a conversion notice to
the Company pursuant to Section 2 of the Certificate of Designations and the Company shall deliver to the applicable Investor the
shares of Common Stock issuable upon such voluntary conversion pursuant to Section 2 of the Certificate of Designations. |
| c. | It is agreed that as of the date hereof the following Preferred Shares remain outstanding: |
| (i) | Tenor Opportunity Master Fund, Ltd - 1285 Preferred Shares; and |
| (ii) | Tenor Special Situation Fund, L.P. – 121 Preferred Shares; and |
| 3. | AGREEMENTS; WAIVERS AND ACKNOWLEDGEMENTS |
Each of the Investors,
together with any of its affiliates, agree that it shall not sell shares of Common Stock during any trading day in an amount exceeding
in the aggregate 10% (ten percent) of the composite aggregate share trading volume of the Common Stock, measured at the time of
each sale of Common Stock during such trading day as reported on Bloomberg L.P.
The Investors hereby
waive any and all actual, alleged or potential Equity Conditions Failures, Events of Default, any true-up obligations with respect
to any Installment Amounts (as defined in the Certificate of Designations), Triggering Events, any failure to pay Interest solely
under the Initial Notes (as defined in the Debt SPA) and any other claims with respect to any obligations of the Company prior
to and through the Effective Date as defined in this letter agreement, any Investors’ remedies with respect thereto. The
Investors hereby acknowledge and agree that all Company obligations under the RRA (as defined in Section 4 below) with respect
to all Registrable Securities (as defined in the RRA) have been performed in full solely with respect to the Notes and Warrants
issued on the Initial Closing Date (as defined in the Debt SPA), but, provided that the Parties agree to reinstate the Investors’
rights to purchase, and the Company obligations to issue, any Additional Notes and/or any Additional Warrants after the Moratorium
Date, the Company shall remain obligated pursuant to the RRA to register the shares of Common Stock issuable pursuant to the Additional
Notes and Additional Warrants (each, as defined in the Debt SPA) (i) by filing an Initial Registration Statement (as defined in
the RRA) on or prior to the date that is thirty (30) days after the applicable Additional Closing Date (as defined in the Debt
SPA), (ii) by causing such Initial Registration Statement to be declared effective by the SEC on or prior to the earlier of (x)
ninety (90) after the applicable Additional Closing Date and (y) five (5) days after the Company is notified (orally or in writing,
whichever is earlier) by the SEC that such Initial Registration Statement will not be subject to further review and (iii) otherwise
pursuant to the terms and conditions set forth in the RRA.
As of the Effective Date, the
agreements set forth herein will be binding on all Parties. Notwithstanding the foregoing, except as expressly set forth herein,
this letter agreement shall not be deemed to be a waiver, amendment or modification of any provisions of the Prior Agreements,
or of any right, power or remedy of the Investors, or constitute a waiver, amendment or modification of any provision of the Prior
Agreements (except to the extent expressly set forth herein), or any other document, instrument and/or agreement executed or delivered
in connection therewith, in each case whether arising before or after the date hereof or as a result of performance hereunder or
thereunder, all of which (except as specified herein) remain in full force and effect. For the avoidance of doubt, the only agreements
in effect between the Company and the Investors are (i) this letter agreement, (ii) that certain Securities Purchase Agreement
dated as of April 30, 2015, by and among the Company and the investors listed on the signature pages attached thereto with respect
to the issuance of shares of the Preferred Shares, which Preferred Shares are convertible or redeemable into Common Stock in accordance
with the terms of the Certificate of Designations (the "Preferred SPA"), (iii) that certain Securities Purchase
Agreement dated as of April 30, 2015, by and among the Company and the investors listed on the signature pages attached thereto
with respect to the issuance of the Notes, which Notes are convertible or redeemable into Common Stock in accordance with the thereof
and warrants (the "Warrants") representing the right to acquire shares of Common Stock (the "Debt SPA")
and (iv) that certain Registration Rights Agreement dated as of April 30, 2015, by and among the Company and the investors listed
on the signature pages attached thereto entered into in connection with the Debt SPA (the "RRA"), and no other
communication, oral or written, electronic or physical, constitutes or can be deemed an agreement between the Parties.
5.1 In
consideration of the benefits provided to the Company under the terms and provisions hereof, the Company hereby agrees as follows
("General Release"):
(a) Each of the Company and
each of its subsidiaries, for itself and on behalf of all of its respective successors, assigns, predecessors in interest, past
and present officers, directors, attorneys, affiliates, consultants, employees and agents (collectively, the "Releasors")
does hereby fully, finally, unconditionally and irrevocably release, waive, acquit and forever discharge each of the Investors,
all of their respective successors, assigns, predecessors in interest, and all of their respective past and present officers, directors,
members, partners, attorneys, affiliates, consultants, employees and agents (collectively, the "Released Parties"),
of and from any and all claims, cause of action, allegations, formal or informal demands, suits, actions, informational requests
or formal or informal proceedings, obligations, liabilities, indebtedness, breaches of contract, breaches of duty or of any relationship,
acts, omissions, misfeasance, malfeasance, defenses, offsets, debts, sums of money, accounts, compensation, contracts, controversies,
promises, damages, costs, losses and expenses, of every type, kind, nature, description or character, whether known or unknown,
contingent or fixed, direct or indirect, suspected or unsuspected, liquidated or unliquidated, of whatever nature or description,
and whether in law or equity, under contract, tort, statute or otherwise, each as though fully set forth herein at length (each,
a "Released Claim" and collectively, the "Released Claims"), that the Company now has or may
acquire as of the date of this letter agreement (hereafter, the "Release Date") by reason of any act, omission
or thing whatsoever done or omitted to be done, in each case, prior to and through the Release Date, including, without limitation,
those Released Claims in any way arising out of, connected with or related to any and all of the transactions contemplated by (1)
the Prior Agreements, including without limitation (I) the Preferred SPA, (II) the Debt SPA and (III) the RRA; (3) any securities
of the Company, including without limitation, the Preferred Shares, the Notes, the Warrants and/or shares of Common Stock whether
or not issued pursuant to the aforementioned securities; (4) any transactions effected in the securities of the Company, including
without limitation, the Preferred Shares, the Notes, the Warrants and/or shares of Common Stock whether or not issued pursuant
to the aforementioned securities; and/ or (5) the transactions contemplated hereby.
(b) Each person signing below
on behalf of the Company acknowledges that he or she has read each of the provisions of this General Release. Each such person
fully understands that this General Release has important legal consequences and each such person realizes that they are releasing
any and all Released Claims that the Company may have as of the Release Date. The Company hereby acknowledges that it has had an
opportunity to obtain a lawyer's advice concerning the legal consequences of each of the provisions of this General Release.
(c) The Company hereby specifically
acknowledges and agrees that: (i) none of the provisions of this General Release shall be construed as or constitute an admission
of any liability on the part of any of the Released Parties; (ii) the provisions of this General Release shall constitute an absolute
bar to any Released Claim of any kind, whether any such Released Claim is based on contract, tort, warranty, mistake or any other
theory, whether legal, statutory or equitable; and (iii) any attempt to assert a Released Claim barred by the provisions of this
General Release shall subject the Company to the provisions of applicable law setting forth the remedies for the bringing of groundless,
frivolous or baseless claims or causes of action.
(d) The Company represents and
warrants that, as of the Release Date, it has no knowledge of any claim by any Releasor against any Released Party or of any facts
or acts or omissions of any Released Party which on the date hereof would be the basis of a claim by any Releasor against any Released
Party which would not be released hereby.
5.2 In
consideration of the benefits provided to the Investors under the terms and provisions hereof, each of the Investors hereby agrees
as follows ("Investors’ General Release"):
(a) Each Investor and each
of its subsidiaries, for itself and on behalf of all of its respective successors, assigns, predecessors in interest, past and
present officers, directors, attorneys, affiliates, consultants, employees and agents (collectively, the "Investor Releasors")
does hereby fully, finally, unconditionally and irrevocably release, waive, acquit and forever discharge the Company, all of their
respective successors, assigns, predecessors in interest, and all of their respective past and present officers, directors, members,
partners, attorneys, affiliates, consultants, employees and agents (collectively, the "Company Released Parties"),
of and from any and all claims, cause of action, allegations, formal or informal demands, suits, actions, informational requests
or formal or informal proceedings, obligations, liabilities, indebtedness, breaches of contract, breaches of duty or of any relationship,
acts, omissions, misfeasance, malfeasance, defenses, offsets, debts, sums of money, accounts, compensation, contracts, controversies,
promises, damages, costs, losses and expenses, of every type, kind, nature, description or character, whether known or unknown,
contingent or fixed, direct or indirect, suspected or unsuspected, liquidated or unliquidated, of whatever nature or description,
and whether in law or equity, under contract, tort, statute or otherwise, each as though fully set forth herein at length (each,
a "Investor Released Claim" and collectively, the "Investor Released Claims"), that such Investor
now has or may acquire as of the Release Date by reason of any act, omission or thing whatsoever done or omitted to be done, in
each case, prior to and through the Release Date, including, without limitation, those Investor Released Claims in any way arising
out of, connected with or related to any and all of the transactions contemplated by (1) the Prior Agreements, including without
limitation (I) the Preferred SPA, (II) the Debt SPA and (III) the RRA; (3) any securities of the Company, including without limitation,
the Preferred Shares, the Notes, the Warrants and/or shares of Common Stock whether or not issued pursuant to the aforementioned
securities; (4) any transactions effected in the securities of the Company, including without limitation, the Preferred Shares,
the Notes, the Warrants and/or shares of Common Stock whether or not issued pursuant to the aforementioned securities; and/ or
(5) the transactions contemplated hereby.
(b) Each person signing below
on behalf of each Investor acknowledges that he or she has read each of the provisions of this Investors’ General Release.
Each such person fully understands that this Investors’ General Release has important legal consequences and each such person
realizes that they are releasing any and all Investor Released Claims that such Investor may have as of the Release Date. Each
Investor hereby acknowledges that it has had an opportunity to obtain a lawyer's advice concerning the legal consequences of each
of the provisions of this Investors’ General Release.
(c) Each Investor hereby specifically
acknowledges and agrees that: (i) none of the provisions of this Investors’ General Release shall be construed as or constitute
an admission of any liability on the part of any of the Company Released Parties; (ii) the provisions of this Investors’
General Release shall constitute an absolute bar to any Investor Released Claim of any kind, whether any such Investor Released
Claim is based on contract, tort, warranty, mistake or any other theory, whether legal, statutory or equitable; and (iii) any attempt
to assert an Investor Released Claim barred by the provisions of this Investors’ General Release shall subject such Investor
to the provisions of applicable law setting forth the remedies for the bringing of groundless, frivolous or baseless claims or
causes of action.
(d) Each Investor represents
and warrants that, as of the Release Date, it has no knowledge of any claim by any Investor Releasor against any Company Released
Party or of any facts or acts or omissions of any Company Released Party which on the date hereof would be the basis of a claim
by any Investor Releasor against any Company Released Party which would not be released hereby.
(e) For the avoidance of doubt
and notwithstanding anything herein to the contrary, in no event shall the Investors' Release derogate from any of the Company's
obligations under any of the Prior Agreements to the extent such obligations are not superseded by this letter agreement.
The Company
shall by 12:30 p.m. (New York City time) or as soon as possible thereafter on August 4, 2015, file with the Securities and Exchange
Commission a Current Report on Form 8-K disclosing the material terms of the transactions contemplated by this letter agreement
and attaching this letter agreement as an exhibit to such filing(including all attachments, the "8-K Filing").
From and after the filing of the 8-K Filing, none of the Investors shall be in possession of any material, nonpublic information
received from the Company, any of its subsidiaries or any of their respective officers, directors, agents, employees or affiliates,
that is not disclosed in the 8-K Filing. In addition, effective upon the filing of the 8-K Filing, the Company acknowledges and
agrees that any and all confidentiality or similar obligations under any agreement, whether written or oral, between the Company,
any of its subsidiaries or any of their respective officers, directors, agents, employees or affiliates on the one hand, and any
of the Investors or any of their respective affiliates on the other hand, shall terminate and shall be of no further force or effect.
The Company understands and confirms that each Investor will rely on the foregoing representations in effecting transactions in
securities of the Company. The Company shall allow the Investors to review and comment upon the 8-K Filing and shall not file an
8-K Filing in a form to which any of the Investors reasonably objects. Without the prior written consent of all of the Investors,
the Company shall not disclose the name of any of the Investors in the 8-K Filing or in any other filing, announcement, release
or otherwise (except in the letter agreement filed as an exhibit to the 8-K Filing). The Company shall not, and shall cause
each of its subsidiaries and its and each of their respective officers, directors, agents employees and affiliates, not to, provide
any of the Investors with any material, nonpublic information regarding the Company or any of its subsidiaries from and after the
filing of the 8-K Filing without the express prior written consent of all of the Investors. To the extent the Company, any of its
subsidiaries or any of their respective officers, directors, agents, employees or affiliates delivers any material, non-public
information to any of the Investors without the prior written consent of each Investor, the Company hereby covenants and agrees
that none of the Investors shall not have any duty of confidentiality to the Company, any of its subsidiaries or any of their respective
officers, directors, agents, employees or affiliates with respect to, or a duty to the Company, any of its subsidiaries or any
of their respective officers, directors, agents, employees or affiliates not to trade on the basis of, such material, non-public
information.
This letter
agreement may be executed in any number of counterparts, which together shall constitute one and the same agreement. In the event
that any provision of this letter agreement is found to be void or invalid, then such provision shall be deemed to be severable
from the remaining provisions of this letter agreement, and it shall not affect the validity of the remaining provisions, which
provisions shall be given full effect as if the void or invalid provision had not been included herein. The terms and provisions
of this letter agreement shall inure to the benefit of and be binding upon the heirs, successors and assigns of the parties. This
letter agreement shall be governed by, and construed in accordance with, the laws of the State of New York (without giving effect
to the conflict of laws principles thereof). The federal and state courts located in the State of New York shall have exclusive
jurisdiction to resolve any and all disputes that may arise under this letter agreement. Any amendments or modifications hereto
must be executed in writing by all parties. Each party hereto shall do and perform, or cause to be done and performed, all such
further acts and things, and shall execute and deliver all such other agreements, certificates, instruments and documents, as any
other party may reasonably request in order to carry out the intent and accomplish the purposes of this letter agreement.
(Signature Pages Follow)
Very truly yours,
|
NET ELEMENT, INC. |
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By: |
/s/ Oleg Firer |
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Name: Oleg Firer
Title: Chief Executive Officer |
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Acknowledged and Agreed as of this 4th day of August, 2015
TENOR OPPORTUNITY MASTER FUND, LTD.
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By:
Tenor Capital Management Company, L.P, its investment advisor
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By: |
/s/ Daniel Kochav |
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Name: Daniel Kochav
Title: Partner |
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tenor
special situation fund, l.p
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By:
Tenor Capital Management Company, L.P, its investment advisor
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By: |
/s/ Daniel Kochav |
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Name: Daniel Kochav
Title: Partner |
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