Item
1.01 Entry into a Material Definitive Agreement
Memorandum
of Sale
On
April 9, 2018, Securus365, Inc., a Delaware corporation (“
Securus
”), eVance Capital, Inc., a Delaware corporation
(“
eVance Capital
”), and eVance Inc., a Delaware corporation (“
eVance
”, and collectively
with Securus and eVance Capital, the “
Purchasers
”), each of which Purchaser is a newly formed wholly-owned
subsidiary of The OLB Group, Inc., a Delaware corporation (the “
Company
”), entered into a Memorandum of Sale
(the “
Memorandum of Sale
”) by and among the Purchasers and GACP Finance Co., LLC, a Delaware limited liability
company (“
GACP
”), acting solely in its capacity as administrative agent and collateral agent to certain secured
lenders of the Debtors (as defined below), pursuant to which the Purchasers acquired substantially all of the assets of the Debtors
(the “
Asset Acquisition
”) through a foreclosure sale conducted under the Uniform Commercial Code of the State
of New York (“
UCC
”) of the collateral of Excel Corporation (“
Excel
”) and its subsidiaries,
Payprotec Oregon, LLC, Excel Business Solutions, Inc. and eVance Processing, Inc. (Excel and such subsidiaries, collectively,
the “
Debtors
”) under the Loan and Security Agreement, dated as of November 2, 2016, by and among GACP, the
lenders thereunder and the Debtors, and related loan documents, as amended (the “
Excel Loan and Security Agreement
”).
GACP
exercised its post-default remedies and realized on the collateral securing the Debtors’ obligations under the Excel Loan
and Security Agreement by conducting a public auction of certain assets of the Debtors on April 9, 2018 in accordance with the
UCC. The Purchasers submitted the Memorandum of Sale at such auction, which constituted the Purchasers’ bid for substantially
all of the assets of the Debtors (“
Acquired Assets
”), which bid was accepted by GACP on April 9, 2018 in connection
with the simultaneous signing and closing (the “
Closing
”) of the transactions contemplated under the Memorandum
of Sale and the Credit Agreement (defined below).
In
consideration for the sale and transfer of the Acquired Assets at the Closing, the Purchasers assumed certain post-Closing obligations
under assigned contracts and paid to GACP the sum of $12,500,000, through the deemed simultaneous financing of such purchase price
to the Purchasers under the Credit Agreement. Pursuant to the Memorandum of Sale, the Purchasers purchased from GACP and accepted
all of the Debtors’ right, title and interest in and to the Acquired Assets “as is”, “where is”
and “with all faults” and without any representations or warranties, express or implied, of any nature whatsoever.
There are no indemnification rights provided for in the Memorandum of Sale.
Credit
Agreement
In
order to finance the Asset Acquisition, GACP, as administrative agent and collateral agent (“
Agent
”), and as
the initial sole lender thereunder, provided a term loan of $12,500,000 (the “
Term Loan
”) to the Purchasers,
Omnisoft, Inc., a Delaware corporation (“
Omnisoft
”), and CrowdPay.us, Inc., a New York corporation (“
CrowdPay
”
and, collectively with the Purchasers and Omnisoft, the “
Borrowers
”), each of Omnisoft and CrowdPay being affiliates
of the Company’s majority stockholder, which obligations are guaranteed by the Company (collectively with the Borrowers,
the “
Loan Parties
”), under the Loan and Security Agreement (the “
Credit Agreement
”), dated
as of April 9, 2018, by and among the Loan Parties, the lenders from time to time party thereto as lenders (the “
Lenders
”)
and the Agent.
The
Term Loan matures in full on April 9, 2021, the third anniversary of the Closing. $1,000,000 of the principal amount under the
Term Loan must be repaid on or prior to July 15, 2018, and an additional $2,000,000 in principal due on or prior to October 31,
2018 (in each case subject to earlier repayment under certain circumstances, including if a Loan Party consummates an equity financing),
with the remaining principal due upon maturity. The Term Loan can be prepaid without penalty in part by the Loan Parties with
ten days’ prior written notice to the Agent, and in full with thirty days’ prior written notice. The Term Loan is
subject to an interest rate of 9.0% per annum, payable monthly in arrears.
The
obligations of the Loan Parties under the Credit Agreement are secured by all of their respective assets and the Loan Parties
pledged all of their assets as collateral for their obligations under the Credit Agreement. Additionally, the Company pledged
its ownership interests in the Purchasers and any of its other subsidiaries that it may form or acquire from time to time.
The
Credit Agreement includes customary representations, warranties and financial and other covenants of the Loan Parties for the
benefit of the Lenders and the Agent. The obligations of the Loan Parties under the Credit Agreement are subject to customary
events of default for a secured term loan. Each Loan Party is jointly and severally liable for the obligations under the Credit
Agreement.
Warrants
Pursuant
to and as additional consideration for the Term Loan under the Credit Agreement, on April 9, 2018 (the “
Issuance Date
”)
the Company issued to GACP a Warrant (the “
Warrant
”) to purchase 1,200,000 shares of common stock of the Company
(“
Warrant Shares
”) at an exercise price of $0.25 per share, subject to adjustment as set forth in the Warrant.
The Warrant is exercisable by GACP at any time from the Issuance Date until the later of (i) the third anniversary of the Issuance
Date and (ii) the date on which all obligations under the Credit Agreement have been satisfied in full. The Warrant may be redeemed
for $0.0001 per Warrant Share, at the sole discretion of the Company, at any time after the six (6) month anniversary of the Issuance
Date if the closing sales price of the Company’s common stock equals or exceeds $5.00 per share on each of 20 trading days
within any 30 trading day period ending on the third trading day prior to the date on which the Company provides a notice of redemption.
GACP has certain piggy-back registration rights as set forth in the Warrant with respect to the Warrant Shares to be issued upon
exercise of the Warrant. After the six month anniversary of the Issuance Date, GACP can exercise the Warrant using a “cashless
exercise” feature to the extent that GACP exercises the Warrant for a number of Warrant Shares in excess of the number Warrant
Shares that have been registered for resale under the Securities Act of 1933, as amended, in accordance with the terms of the
Warrant.
As
additional consideration for the Term Loan under the Credit Agreement, on April 9, 2018 the Company also entered into an agreement
(the “
Additional Warrants Agreement
”) with GACP, pursuant to which the Company agreed that if the Company,
at any time after the Closing and prior to the satisfaction of all outstanding obligations under the Credit Agreement, requests
for GACP to provide debt financing for the acquisition of a company or operating business by the Company or its subsidiaries,
and GACP or its affiliates provide all of the debt financing for such acquisition, the Company will issue to GACP a warrant to
purchase 200,000 shares of the Company’s common stock (an “
Additional Warrant
”) upon the closing of such
debt-financing, with such Additional Warrant in substantially the same form as the Warrant. The Additional Warrants Agreement
requires the Company to issue an Additional Warrant for each such acquisition for which the debt is financed by GACP or its affiliates,
up to a maximum of four Additional Warrants. The exercise price of the Additional Warrants, if issued, will be $0.30 per share
for the first Additional Warrant, $0.35 per share for the second Additional Warrant, $0.40 per share for the third Additional
Warrant and $0.45 per share for the fourth Additional Warrant, with the number of shares and exercise price subject to adjustment
as set forth in the Additional Warrants Agreement and the Additional Warrant.
The
foregoing descriptions of the Memorandum of Sale, Credit Agreement, the Warrant and the Additional Warrants Agreement do not purport
to be complete and are qualified in their entirety by reference to complete text of the Memorandum of Sale, the Credit Agreement,
the Warrant and the Additional Warrants Agreement, copies of which are filed hereto as Exhibits 2.1, 10.1, 10.2 and 10.3, respectively.