Item 1.01 Entry into a Material Definitive Agreement
On September 30, 2019 (the “Closing Date”), Grow Capital, Inc. (the “Company”), a Nevada corporation, entered into a membership interest purchase agreement (the “Purchase Agreement”) with the Wayne A. Zallen Trust u/a/d/ 10/24/2014 (the “Purchaser”) pursuant to which the Company sold all of the Company’s membership interests in the Company’s wholly-owned subsidiary, WCS Enterprises, LLC, an Oregon limited liability company (“WCS”), for an aggregate purchase price (the “Purchase Price”) of $782,450.00 (the “Transaction”). The Purchaser paid the Purchase Price by transferring to the Company 8,693,888 shares (the “Payment Shares”) of the Company’s common stock, par value $0.001 (“Common Stock”), valued at $0.09 per share. Wayne Zallen, the trustee and a beneficiary of the Purchaser, is the former Chief Executive Officer of the Company and the former Chairman of the Company’s board of directors, and collectively the Purchaser and Mr. Zallen held more than 5% of the Company’s Common Stock prior to the completion of the Transaction. The Purchase Agreement also provided that the Purchaser would transfer to the Company an additional 400,000 shares of Common Stock (the “Rent Shares”) to pay the $36,000 in back rent owed by Purchaser to the Company. The Company will retire the Payment Shares and the Rent Shares after receiving them from Purchaser. After doing so, the Company will have 241,617,016 shares of Common Stock issued and outstanding.
Additionally, under the Purchase Agreement, the Purchaser and Mr. Zallen agreed to certain limitations on the sale of their remaining shares of the Company’s Common Stock for a period following the Closing Date (the “Lock-up”). Under the terms of the Lock-up, the Purchaser and Mr. Zallen will collectively have a certain number of shares released from the Lock-up every three months, as set forth in the following table. Additionally, under the Lock-up, the Purchaser and Mr. Zallen are prohibited from collectively selling more shares in a day than the number of shares equal to ten percent of the trailing average 60-day trading volume for the Common Stock.
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Release Date
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Number of Shares Released
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Closing Date
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500,000
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3 Month Anniversary of the Closing Date
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1,000,000
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6 Month Anniversary of the Closing Date
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1,500,000
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9 Month Anniversary of the Closing Date
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2,000,000
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12 Month Anniversary of the Closing Date
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2,500,000
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15 Month Anniversary of the Closing Date
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2,500,000
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18 Month Anniversary of the Closing Date
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2,500,000
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21 Month Anniversary of the Closing Date
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2,500,000
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The Purchase Agreement also contains customary representations, warranties and covenants from the parties (including certain limited indemnification, non-competition and non-solicitation provisions applicable to the Company and its affiliates).
In connection with the Transaction, the Company and Mr. Zallen also entered into a separation and release of claims agreement (the “Release”) pursuant to which the Company and Mr. Zallen provided a mutual release of claims against the other party and such party’s affiliates, including all claims related to Mr. Zallen’s service as an officer, employee, and director of the Company.
The foregoing descriptions of the Purchase Agreement and the Release are a summary and are qualified in their entirety by reference to the Purchase Agreement and the Release filed as Exhibit 10.1 and Exhibit 10.2, respectively, to this Current Report on Form 8-K and incorporated herein by reference.
The Company issued a press release announcing the Transaction on October 2, 2019, a copy of which is filed as Exhibit 99.1 to this Current Report on Form 8-K.