Item 1.01
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Entry into a Material Definitive Agreement.
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Acquisition of Locality Systems Inc.
Share Purchase Agreement
On May 21, 2019 (the
“Closing Date”), Inpixon, through its wholly owned subsidiary, Inpixon Canada Inc., as purchaser (the “Purchaser”),
completed its acquisition (the “Acquisition”) of Locality Systems Inc. (“Locality”), pursuant to the terms
of a Share Purchase Agreement (the “Purchase Agreement”), dated as of the Closing Date, by and among Inpixon, the Purchaser,
Locality, the owners (collectively, the “Sellers”) of all of the issued and outstanding capital stock of Locality (the
“Locality Shares”), Kirk Moir, in his capacity as the Sellers’ representative, and Garibaldi Capital Advisors
Ltd. (the “Advisor”). Locality is a British Columbia corporation that specializes in wireless device positioning and
radio frequency (RF) augmentation of video surveillance systems.
On the Closing Date,
the Sellers sold all of their Locality Shares to the Purchaser in exchange for consideration of (i) USD $1,500,000 (the “Aggregate
Cash Consideration”) (A) minus the amount by which the Estimated Working Capital is less than the Working Capital Target
(as defined in the Purchase Agreement), or (B) plus the amount by which the Estimated Working Capital is greater than the Working
Capital Target (as the case may be, the “Estimated Working Capital Adjustment”), and (ii) 650,000 shares of the common
stock of Inpixon (the “Parent Shares”).
The Aggregate Cash
Consideration, minus or plus (as the case may be) the Estimated Working Capital Adjustment to be applied against the Aggregate
Cash Consideration (which will be calculated within 90 days of the Closing Date), will be paid in installments as follows: (i)
the initial installment representing $250,000 minus or plus (as the case may be) the Estimated Working Capital Adjustment (the
“Initial Cash Consideration”) was paid on the Closing Date; (ii) three additional installments each equal to $250,000,
will be paid every six months following the Closing Date; and (iii) one final installment representing $500,000 will be paid on
the second anniversary of the Closing Date, in each case minus the cash fees payable to the Advisor in connection with the Acquisition
(collectively, (ii) and (iii) the “Installment Cash Consideration”) The Purchaser will have the right to offset any
Loss, as defined in the Purchase Agreement, first, against any installment of the Installment Cash Consideration that has not been
paid and second, against the Sellers and the Advisor on a several basis, in accordance with the indemnification provisions
of the Purchase Agreement.
Inpixon agreed to make
a capital contribution to the Purchaser in an amount equal to the fair market value of the Parent Shares at the time the Parent
Shares are issued (the “Capital Contribution”) and Inpixon will pay the Capital Contribution by issuing the Parent
Shares to the Sellers. In connection with the Capital Contribution, the Purchaser will add an amount equal to the Capital Contribution
to its capital in respect of the common shares in the authorized share structure of the Purchaser.
The Purchase Agreement
also includes representations, warranties, covenants and indemnifications made by the parties that are customary for agreements
of this type.
General Security
Agreement
In conjunction with
the Acquisition, Locality executed a general security agreement in favor of the Sellers (the “General Security Agreement”).
The General Security Agreement created a lien against Locality’s intellectual property, information technology systems and
software and all modifications, derivative works and goodwill arising from the use of the foregoing for the purpose of securing
payment of the Installment Cash Consideration to the Sellers.
Guaranty Agreement
In order to induce
the Sellers to enter into the Purchase Agreement, Inpixon entered into a guaranty agreement (the “Guaranty Agreement”),
pursuant to which it provided the Sellers with a full recourse guaranty for the full and punctual payment of any unpaid portion
of the Aggregate Cash Consideration.
The description of
the Purchase Agreement, the General Security Agreement and the Guaranty Agreement is qualified in its entirety by the full text
of such documents, copies of which are attached as Exhibits 2.1, 10.1 and 10.2 to this Current Report on Form 8-K, respectively,
and are incorporated herein by reference.
Third Amendment to Sysorex Loan Documents
On May 22, 2019, Inpixon
and Sysorex, Inc. (“Sysorex”) entered into a Third Amendment Agreement to that certain Note Purchase Agreement, dated
as of December 31, 2018 (as amended from time to time in accordance with its terms, the “NPA”), and that certain Secured
Promissory Note issued to the Company by Sysorex on December 31, 2018 (as amended from time to time in accordance with its terms,
the “Note,” together with the NPA, the “Sysorex Loan Documents”). Pursuant to the Third Amendment Agreement,
the Sysorex Loan Documents were amended to increase the maximum principal amount that may be outstanding at any time under the
Note from $8,000,000.00 to $10,000,000.00. Nadir Ali, Inpixon’s Chief Executive Officer and a member of its Board of Directors,
is also the Chairman of the Board of Directors of Sysorex. The transactions disclosed herein were unanimously approved by Inpixon’s
Board of Directors.
The description of
the Third Amendment Agreement is qualified in its entirety by the full text of the Third Amendment Agreement, a copy of which is
filed herewith as Exhibit 10.3, which is incorporated herein by reference.