The following table
sets forth as of November 13, 2020, the number of shares of OPES Common Stock beneficially owned by (i) each person who is known
by us to be the beneficial owner of more than five percent of our issued and outstanding ordinary shares, (ii) each of our officers
and directors; and (iii) all of our officers and directors as a group. As of November 13, 2020, we had 7,688,090 shares of Common
Stock issued and outstanding, reflecting 174,482 shares of Common Stock redeemed after the Record Date in connection with the
Seventh Extension
Unless otherwise indicated,
we believe that all persons named in the table have sole voting and investment power with respect to all shares of common stock
beneficially owned by them. The following table does not reflect record of beneficial ownership of any shares of common stock
issuable upon exercise of securities that are not exercisable or convertible within 60 days.
The following table
sets forth information regarding the beneficial ownership of the Post-Combination Company’s shares of commons stock immediately
after the consummation of the Business Combination by:
Unless otherwise indicated,
all persons named in the table will have, immediately after the consummation of the Business Combination, sole voting and investment
power with respect to all the Post-Combination Company securities beneficially owned by them.
Beneficial ownership
is determined in accordance with SEC rules and includes voting or investment power with respect to securities. Except as indicated
by the footnotes below, OPES believes, based on the information furnished to it, that the persons and entities named in the table
below will have, immediately after the consummation of the Business Combination, sole voting and investment power with respect
to all stock that they beneficially own, subject to applicable community property laws. All Post-Combination Company’s shares
of common stock subject to options or Warrants exercisable within 60 days of the consummation of the Business Combination are
deemed to be outstanding and beneficially owned by the persons holding those options or Warrants for the purpose of computing
the number of shares beneficially owned and the percentage ownership of that person. They are not, however, deemed to be outstanding
and beneficially owned for the purpose of computing the percentage ownership of any other person.
Subject to the paragraph
above, the percentage ownership of issued shares is based on [●] of the Post-Combination Company’s shares of Common
Stock issued and outstanding upon consummation of the Business Combination and assumes (i) no redemptions of our public shares
of Common Stock, (ii) the conversion of $1.123 million of Notes into 100,000 shares of Common Stock, (iii) the issuance of the
Closing Payment Shares, including the Stock Portion, in shares, (iv) the issuance of 3,000,000 shares of Common Stock in connection
with the Forward Purchase Contract, (v) the Earnout Shares are not earned and issued, and (vi) the Warrants and UPO are not exercised
for shares of Common Stock.
In connection with
our organization, we issued 2,875,000 Founders’ Shares for $25,000 in cash, at a purchase price of approximately $0.01 per
share, to Axis Public Ventures. After the IPO, certain of the pre-IPO Initial Stockholders transferred 2,847,596 Founders’
Shares to certain of their affiliates and designees, and on June 30, 2020, certain of the Initial Stockholders transferred in
the aggregate, 1,610,000 of the Founders’ Shares to the Sponsor.
At the time of the
IPO, all of the Founders’ Shares outstanding were placed in escrow with Continental, as escrow agent, until the earlier
of six months after the date of the consummation of our initial business combination and the date on which the closing price of
our common stock equals or exceeds $12.50 per share (as adjusted for share splits, share dividends, reorganizations and recapitalizations)
for any 20 trading days within any 30-trading day period commencing after our initial business combination, or earlier if, subsequent
to our initial business combination, we consummate a liquidation, merger, stock exchange or other similar transaction which results
in all of our stockholders having the right to exchange their shares of common stock for cash, securities or other property.
During the escrow
period, the holders of Founders’ Shares will not be able to sell or transfer their securities except for transfers, assignments
or sales (i) among our Initial Stockholders or to our Initial Stockholders’ members, officers, directors, consultants or
their affiliates, (ii) to a holder’s stockholders or members upon its liquidation, (iii) by bona fide gift to a member of
the holder’s immediate family or to a trust, the beneficiary of which is the holder or a member of the holder’s immediate
family, for estate planning purposes, (iv) by virtue of the laws of descent and distribution upon death, (v) pursuant to a qualified
domestic relations order, (vi) to us for no value for cancellation in connection with the consummation of our initial business
combination, or (vii) in connection with the consummation of a business combination at prices no greater than the price at which
the shares were originally purchased, in each case (except for clause (vi) or with our prior consent) where the transferee agrees
to the terms of the escrow agreement and to be bound by these transfer restrictions, but will retain all other rights as our stockholders,
including, without limitation, the right to vote their share of Founders’ Shares and the right to receive cash dividends,
if declared. If dividends are declared and payable in shares of Common Stock, such dividends will also be placed in escrow. If
we are unable to effect a business combination and liquidate, there will be no liquidation distribution with respect to the Founders’
Shares.
On June 30, 2020,
certain of the Initial Stockholders transferred an aggregate of 1,610,000 of the Founders’ Shares to Lionheart Equities,
which subsequently transferred the shares to our Sponsor. Mr. Sternberg, our Chairman and Chief Executive Officer, owns 100% of
Lionheart Equities, an entity which owns a majority of the interests in our Sponsor. Lionheart Equities has advanced working capital
loans to OPES.
Our Chief Financial
Officer, José Luis Córdova Vera, currently owns 16,715 of the Founders’ Shares. Mr. Córdova is Vice-President
of our Initial Sponsor, which is an affiliate of Axis Public Ventures that owns 83,437 Private Placement Units. Axis Public Ventures
has also advanced working capital loans to OPES.
An affiliate of Axis
Public Ventures advanced an aggregate amount of $67,013 and loaned us an aggregate amount of $122,839 pursuant to a promissory
note. The advances and notes were non-interest bearing. OPES fully repaid these amounts on March 16, 2018.
During the year ended
December 31, 2019, an affiliate of the Sponsor advanced to OPES an aggregate of $56,194 to fund working capital purposes. The
advances are non-interest bearing and due on demand.
Prior to the change
in management in April 2020, we maintained our executive offices at Park Plaza Torre I, Javier Barros Sierra 540, Of. 103, Col.
Santa Fe, 01210 México City, México. The cost for this space is included in the $10,000 per-month fee that an affiliate
of Axis Public Ventures charged us for general and administrative services pursuant to a letter agreement between us and our Initial
Sponsor. During the years ended December 31, 2019 and 2018, we incurred $120,000 and $95,000 in fees for these services, of which
such amount is included in accounts payable and accrued expenses at December 31, 2019 and 2018, respectively. Commencing in April
2020, we changed our executive offices to c/o Lionheart Equities, LLC, 4218 NE 2nd Avenue, Miami, FL 33137, and the $10,000 per-month
administrative fee was payable instead to our Sponsor. That payment has accrued, and that accrued amount shall be paid to our
Sponsor upon the consummation of the Business Combination in either cash or stock, at the Post-Business Combination Company’s
election.
Simultaneously with
the consummation of the IPO, we consummated the private placement of 400,000 Private Placement Units at a price of $10.00 per
Private Placement Unit, generating gross proceeds of $4,000,000. The Private Placement Units were purchased by Axis Public Ventures,
Lion Point, and certain of our other Initial Stockholders who held Founders’ Shares prior to the IPO. On March 20, 2018,
in connection with the underwriters’ exercise of their overallotment option in full, we consummated the sale of an additional
45,000 Private Placement Units to Axis Public Ventures, Lion Point, and our other Initial Stockholders who held Founders’
Shares prior to the IPO, each at a purchase price of $10.00 per unit, generating additional gross proceeds of $450,000.
In order to finance
transaction costs in connection with an intended initial business combination and working capital expenses, our Sponsor, the Initial
Stockholders, officers, directors or their affiliates may, but are not obligated to, loan us funds as may be required. In the
event that the initial business combination does not close, we may use a portion of the working capital held outside the trust
account to repay such loaned amounts, but no proceeds from our trust account would be used for such repayment. Such loans would
be evidenced by promissory notes. The notes would either be paid upon consummation of our initial business combination, without
interest, or, at the lender’s discretion, up to $1,500,000 of the notes may be converted upon consummation of our business
combination into additional Private Placement Units at a price of $10.00 per unit. We believe the purchase price of these units
will approximate the fair value of such units when issued. However, if it is determined, at the time of issuance, that the fair
value of such units exceeds the purchase price, we would record compensation expense for the excess of the fair value of the units
on the day of issuance over the purchase price in accordance with ASC 718 — Compensation — Stock Compensation.
On September 16,
2019, the Company’s stockholders agreed to extend the period of time the Company has to consummate a Business Combination
to November 15, 2019 and Lion Point agreed to loan the Company the funds necessary to obtain such extension.
On September 18,
2019 and October 18, 2019, the Company issued unsecured promissory notes in the aggregate principal amount of $613,870, to provide
the Company further funds necessary to obtain such extension. A portion of the promissory notes were issued to an affiliate of
the Sponsor ($214,855) and a portion of the promissory notes were issued to Lion Point ($399,015). The promissory notes are non-interest
bearing and due to be paid upon the consummation of a Business Combination. The loans will be forgiven if the Company is unable
to consummate a Business Combination except to the extent of any funds held outside of the trust account.
In October 2019,
OPES issued unsecured promissory notes to Lion Point in the aggregate principal amount of $16,925 to fund working capital requirements.
The promissory notes are non-interest bearing and due to be paid upon the consummation of a business combination. The loans will
be forgiven if OPES is unable to consummate a business combination except to the extent of any funds held outside of the trust
account.
On January 15,
2020, the OPES’s stockholders agreed to the Third Extension. An affiliate of Sponsor and EarlyBirdCapital agreed to loan
OPES a portion of the funds necessary to obtain the Third Extension. On March 3, 2020, OPES issued unsecured promissory notes
to an affiliate of Sponsor and EarlyBirdCapital in the aggregate principal amount of approximately $145,780 and $145,781, respectively.
The promissory notes are non-interest bearing and due to be paid upon the consummation of a business combination. The loans will
be forgiven if OPES is unable to consummate a business combination except to the extent of any funds held outside of the trust
account.
On January 30,
2020, OPES issued an unsecured promissory note to an affiliate of the Initial Sponsor in the aggregate principal amount of $26,169
to fund working capital requirements. The promissory note is non-interest bearing and due to be paid upon the consummation of
a business combination. The loan will be forgiven if OPES is unable to consummate a business combination except to the extent
of any funds held outside of the trust account.
On March 16, 2020,
the Company’s stockholders agreed to the Fourth Extension. On March 16, 2020, OPES issued an unsecured promissory note in
the aggregate principal amount of $136,292 to an affiliate of Sponsor for such extension. The promissory note is non-interest
bearing and due to be paid upon the consummation of a business combination. The loan will be forgiven if OPES is unable to consummate
a business combination except to the extent of any funds held outside of the trust account.
At the time of
the IPO, we also entered into the Forward Purchase Contract with Lion Point, wherein Lion Point agreed to purchase in a private
placement to occur concurrently with the consummation of our initial business combination the Forward Purchase Units, for aggregate
gross proceeds of $30,000,000. The Forward Purchase Contract is subject to conditions, including that Lion Point consents to our
initial business combination. Lion Point granting its consent to the purchase is entirely within its sole discretion. Accordingly,
if it does not consent to the business combination, it will not be obligated to purchase the units. In connection with the consummation
of the Business Combination, the Company will enter into an Amended and Restated Forward Purchase Contract with each of Lion Point
and Lionheart Equities for the purchase of Forward Purchase Units. In the written notice from Lion Point to OPES on June 29, 2020,
Lion Point confirmed that it will consent to the Business Combination and has agreed to purchase 2,000,000 Forward Purchase Units
under the terms of the Amended and Restated Forward Purchase Agreement it will enter into with us upon the consummation of the
Business Combination. An affiliate of the Sponsor has also agreed to purchase 1,000,000 Forward Purchase Units under the terms
of another Amended and Restated Forward Purchase Agreement it will enter into with us upon the consummation of the Business Combination.
In addition, OPES agreed to register a total of 5,029,376 shares of OPES Common Stock owned, or to be owned by Lion Point as of
the consummation of the Business Combination, which is comprised of (i) 862,500 of the Founders’ Shares, (ii) 83,438 shares
of OPES Common Stock underlying the Private Placement Units and 83,438 shares of OPES Common Stock underlying the Private Placement
Warrants, and (iii) 2,000,000 shares of OPES Common Stock underlying the Forward Purchase Units and 2,000,000 shares of OPES Common
Stock underlying the warrants that are part of the Forward Purchase Units, which shares would have priority registration rights
over all other shares of OPES Common Stock to be registered under the New Registration Rights Agreement. Lion Point is entitled
to make up to two demands that we register such shares. OPES and Lion Point have agreed to enter into definitive documentation
with respect to the terms of the written notice from Lion Point to OPES on June 29, 2020.
Pursuant to a registration
rights agreement, dated as of March 15, 2018 (the “Original Registration Rights Agreement”), those Initial Stockholders
who held the Founders’ Shares issued and outstanding prior to the IPO, as well as the holders of the Private Placement Units
and any units our Initial Sponsor, the Initial Stockholders, their affiliates, officers, directors or third parties may be issued
in payment of working capital loans made to us, are entitled to registration rights. The holders of a majority of these securities
are entitled to make up to two demands that we register such securities. The holders of the majority of the Founders’ Shares
can elect to exercise these registration rights at any time commencing three months prior to the date on which their shares of
Common Stock are to be released from escrow. The holders of a majority of the Private Placement Units and units issued to our
Initial Sponsor, officers, directors or their affiliates in payment of working capital loans made to us (or underlying securities)
can elect to exercise these registration rights at any time after we consummate a business combination. In addition, the holders
have certain “piggy-back” registration rights with respect to registration statements filed subsequent to our consummation
of a business combination. We bear the expenses incurred in connection with the filing of any such registration statements.
In connection with
the Business Combination, all of the parties to the Original Registration Rights Agreement (and those parties who as a result
of the transfer of Founders’ Shares became a party to the Original Registration Rights Agreement), the holders of Private
Placement Units, the holders of Warrants pursuant to the warrant agreement entered into at the time of the IPO, as well as the
Members, the PIPE Investors, and our Sponsor will enter into a new registration rights agreement covering the registration of
28,618,773 shares of Common Stock in the aggregate (the “New Registration Rights Agreement”). The Post-Combination
Company will be obligated to file a registration statement with the SEC within thirty (30) days after the Closing of the Business
Combination to register the shares for resale, which must be effective within 90 calendar days following the filing date, or in
the event the registration statement receives a “full review” by the SEC, the 120th calendar date following the filing
date. In the event the SEC requires a cutback in the number of shares being registered, the shares will be cut back on a pro rata
basis, except that the 5,029,376 shares of Lion Point that are being registered will not be reduced. In addition, Lion Point is
are entitled to make up to two demands that we register the shares and all holders have “piggy-back” registration
rights with respect to registration statements filed subsequent to the consummation of the Business Combination. The form of the
New Registration Rights Agreement is attached as Exhibit C to the Acquisition Agreement.
Our Code of Ethics,
which we adopted upon consummation of our IPO, requires us to avoid, wherever possible, all related party transactions that could
result in actual or potential conflicts of interests, except under guidelines approved by the board of directors (or the audit
committee). Related-party transactions are defined as transactions in which (1) the aggregate amount involved will or may be expected
to exceed $120,000 in any calendar year, (2) we or any of our subsidiaries is a participant, and (3) any (a) executive officer,
director or nominee for election as a director, (b) greater than 5% beneficial owner of our shares of common stock, or (c) immediate
family member, of the persons referred to in clauses (a) and (b), has or will have a direct or indirect material interest (other
than solely as a result of being a director or a less than 10% beneficial owner of another entity). A conflict of interest situation
can arise when a person takes actions or has interests that may make it difficult to perform his or her work objectively and effectively.
Conflicts of interest may also arise if a person, or a member of his or her family, receives improper personal benefits as a result
of his or her position.
We also require each
of our directors and executive officers to annually complete a directors’ and officers’ questionnaire that elicits
information about related party transactions.
Our audit committee,
pursuant to its written charter, is responsible for reviewing and approving related-party transactions to the extent we enter
into such transactions. All ongoing and future transactions between us and any of our officers and directors or their respective
affiliates will be on terms believed by us to be no less favorable to us than are available from unaffiliated third parties. Such
transactions will require prior approval by our audit committee and a majority of our uninterested “independent” directors,
or the members of our board who do not have an interest in the transaction, in either case who had access, at our expense, to
our attorneys or independent legal counsel. We will not enter into any such transaction unless our audit committee and a majority
of our disinterested “independent” directors determine that the terms of such transaction are no less favorable to
us than those that would be available to us with respect to such a transaction from unaffiliated third parties. Additionally,
we require each of our directors and executive officers to complete a directors’ and officers’ questionnaire that
elicits information about related party transactions.
These procedures are
intended to determine whether any such related party transaction impairs the independence of a director or presents a conflict
of interest on the part of a director, employee or officer.
BurgerFi leases building
space for its corporate office from an entity under common ownership with its majority member, John Rosatti, on a month-to-month
basis starting in 2012. Rent expense for each of the years ended December 31, 2019 and 2018 was approximately $160,000.
OPES is authorized
to issue 100,000,000 shares of Common Stock, par value $0.0001 and 10,000,000 shares of preferred stock, par value $0.0001. As
of the Record Date there were 7,862,572 shares of Common Stock issued and outstanding. There are no shares of preferred stock
currently outstanding. As of November 13, 2020, as a result of the Seventh Extension, 174,482 shares of Common Stock were redeemed
and there were 7,688,090 shares of Common Stock issued and outstanding.
As of the Record
Date there were 445,000 units issued and outstanding. Each unit consists of one share of Common Stock and one warrant to purchase
one share of Common Stock.
Our stockholders
of record are entitled to one vote for each share held on all matters to be voted on by stockholders. In connection with any vote
held to approve the Business Combination, our Sponsor, the Initial Stockholders and our officers and directors who own approximately
42.23% of OPES outstanding shares of Common Stock as of the Record Date have agreed to vote their respective shares of Common
Stock owned by them in favor of the Business Combination.
Our stockholders
have no preemptive or other subscription rights and there are no sinking fund provisions applicable to the shares of Common Stock.
Our public stockholders have the right to sell their shares to us in a tender offer or have their shares of common stock redeemed
for cash equal to their pro rata share of the trust account if they vote on the proposed Business Combination and elect to have
their shares redeemed, or if the Business Combination is not completed and we dissolve and liquidate the trust account. Public
stockholders who sell or redeem their stock into their share of the trust account still have the right to exercise the Public
Warrants that they received as part of the Units.
If we seek to amend
any provisions of our Certificate of Incorporation that would affect our public stockholders’ ability to redeem their shares
in connection with the Business Combination as described herein or affect the substance or timing of our obligation to redeem
100% of our public shares if we do not complete a business combination by January 31, 2021, we will provide public stockholders
with the opportunity to redeem their public shares in connection with any such vote.
Pursuant to our
Certificate of Incorporation, if we do not consummate the Business Combination by January 31, 2021, our corporate existence will cease
except for the purposes of winding up our affairs and liquidating. If we are forced to liquidate prior to a business combination,
our public stockholders are entitled to share ratably in the trust account, based on the amount then held in the trust account.
Our Sponsor and the Initial Stockholders, have agreed to waive their rights to participate in any liquidation distribution from
the trust account occurring upon our failure to consummate the Business Combination with respect to the Founder’s Shares
and shares of Common Stock that are part of the Private Units. They will, however, participate in any liquidation distribution
from the trust account with respect to any shares of Common Stock they acquired following our IPO.
Our Certificate
of Incorporation authorizes the issuance of 10,000,000 shares of preferred stock with such designation, rights and preferences
as may be determined from time to time by our Board of Directors. Our Board of Directors is empowered, without stockholder approval,
to issue preferred stock with dividend, liquidation, conversion, voting or other rights which could adversely affect the voting
power or other rights of the holders of Common Stock. However, our underwriting agreement with EarlyBirdCapital prohibits us,
prior to a business combination, from issuing preferred stock which participates in any manner in the proceeds of the trust account,
or which votes as a class with the Common Stock on a business combination. We may issue some or all of the preferred stock to
effect a business combination, although we are not issuing any preferred stock in connection with the Business Combination. In
addition, the preferred stock could be utilized as a method of discouraging, delaying, or preventing a change in control of us.
Each Warrant entitles
the registered holder to purchase one share of common stock at a price of $11.50 per share, subject to adjustment as discussed
below. However, no Public Warrant will be exercisable for cash unless we have an effective and current registration statement
covering the shares of Common Stock issuable upon exercise of the Public Warrants and a current prospectus relating to such shares
of Common Stock. Notwithstanding the foregoing, if a registration statement covering the shares of Common Stock issuable upon
exercise of the Public Warrants is not effective within a specified period following the consummation of the Business Combination,
warrant holders may, until such time as there is an effective registration statement and during any period when we shall have
failed to maintain an effective registration statement, exercise the Public Warrants on a cashless basis pursuant to the exemption
provided by Section 3(a)(9) of the Securities Act, provided that such exemption is available. If that exemption, or another exemption,
is not available, holders will not be able to exercise their Public Warrants on a cashless basis. In the event of such a cashless
exercise, each holder would pay the exercise price by surrendering the Public Warrants for that number of shares of Common Stock
equal to the quotient obtained by dividing (x) the product of the number of shares of Common Stock underlying the Public Warrants,
multiplied by the difference between the exercise price of the Public Warrants and the “fair market value” (defined
below) by (y) the fair market value. The “fair market value” for this purpose will mean the average reported last
sale price of the shares of Common Stock for the 5 trading days ending on the trading day prior to the date of exercise. The Public
Warrants will expire on the fifth anniversary of our completion of an initial business combination, at 5:00 p.m., New York City
time, or earlier upon redemption or liquidation.
The Private Placement
Warrants, as well as any warrants underlying additional units we issue in payment of working capital loans made to us, will be
identical to the Public Warrants except that the Private Placement Warrants will be exercisable for cash or on a cashless basis,
at the holder’s option, and will not be redeemable by us, in each case so long as they are still held by the initial holder
or its permitted transferees.
We may call the Public
Warrants for redemption, in whole and not in part, at a price of $0.01 per warrant, (i) at any time after the Public Warrants
become exercisable, (ii) upon not less than 30 days’ prior written notice of redemption to each holder after the Public
Warrants become exercisable, (iii) if, and only if, the reported last sale price of the shares of Common Stock equals or
exceeds $18.00 per share (as adjusted for stock splits, stock dividends, reorganizations and recapitalizations), for any 20 trading
days within a 30 trading day period commencing after the Public Warrants become exercisable and ending on the third business day
prior to the notice of redemption to holders of the Public Warrants, and (iv) if, and only if, there is a current registration
statement in effect with respect to the shares of Common Stock underlying the Public Warrants.
The right to exercise
will be forfeited unless the Warrants are exercised prior to the date specified in the notice of redemption. On and after the
redemption date, a record holder of a Public Warrant will have no further rights except to receive the redemption price for such
holder’s Public Warrant upon surrender of the Public Warrants.
If we call the Public
Warrants for redemption as described above, our management will have the option to require all holders that wish to exercise Public
Warrants to do so on a “cashless basis.” In such event, each holder would pay the exercise price by surrendering the
Public Warrants for that number of shares of Common Stock equal to the quotient obtained by dividing (x) the product of the number
of shares of Common Stock underlying the Public Warrants, multiplied by the difference between the exercise price of the Warrants
and the “fair market value” (defined below) by (y) the fair market value. The “fair market value” for
this purpose shall mean the average reported last sale price of the shares of Common Stock for the 5 trading days ending on the
third trading day prior to the date on which the notice of redemption is sent to the holders of Public Warrants.
The exercise price
and number of shares of Common Stock issuable on exercise of Warrants may be adjusted in certain circumstances including in the
event of a stock dividend, extraordinary dividend or our recapitalization, reorganization, merger, or consolidation. However,
the Warrants will not be adjusted for issuances of shares of Common Stock at a price below their respective exercise prices.
We have not paid any
cash dividends on our shares of Common Stock to date and do not intend to pay cash dividends prior to the completion of the Business
Combination. The payment of cash dividends in the future will be dependent upon our revenues and earnings, if any, capital requirements
and general financial condition subsequent to completion of the Business Combination. The payment of any dividends subsequent
to the Business Combination will be within the discretion of the Post-Closing Board of Directors.
Our Board of Directors
is, and the Post-Closing Board of Directors will be, divided into three classes, each of which will generally serve for a term
of three years with only one class of directors being elected in each year. As a result, in most circumstances, a person can gain
control of our board only by successfully engaging in a proxy contest at two or more annual meetings. There is no cumulative voting
with respect to the election of directors, with the result that the holders of more than 50% of the shares eligible to vote for
the election of directors can elect all of the directors.
Our Amended and Restated
Certificate of Incorporation and bylaws provide that special meetings of our stockholders may be called only by a majority vote
of our Board of Directors, by our president or by our chairman.
Our bylaws provide
that stockholders seeking to bring business before our annual meeting of stockholders, or to nominate candidates for election
as directors at our annual meeting of stockholders must provide timely notice of their intent in writing. To be timely, a stockholder’s
notice will need to be delivered to our principal executive offices not later than the close of business on the 60th day
nor earlier than the close of business on the 90th day prior to the scheduled date of the annual meeting of stockholders.
In the event that less than 70 days’ notice or prior public disclosure of the date of the annual meeting of stockholders
is given, a stockholder’s notice shall be timely if delivered to our principal executive offices not later than the 10th day
following the day on which public announcement of the date of our annual meeting of stockholders is first made or sent by us.
Our bylaws also specify certain requirements as to the form and content of a stockholders’ meeting. These provisions may
preclude our stockholders from bringing matters before our annual meeting of stockholders or from making nominations for directors
at our annual meeting of stockholders.
Our authorized but
unissued common stock and preferred stock are available for future issuances without stockholder approval (except for any such
issuances in a private offering in excess of 20% of our issued and outstanding Common Stock, that may need approval under Nasdaq
rules) and could be utilized for a variety of corporate purposes, including future offerings to raise additional capital, acquisitions
and employee benefit plans. The existence of authorized but unissued and unreserved common stock and preferred stock could render
more difficult or discourage an attempt to obtain control of us by means of a proxy contest, tender offer, merger or otherwise.
Our Certificate
of Incorporation and our Amended and Restated Certificate of Incorporation requires, to the fullest extent permitted by law, that
(i) derivative actions brought in our name, (ii) actions against directors, officers and employees for breach of fiduciary duty,
(iii) actions asserting a claim arising pursuant to any provision of the DGCL, our Certificate of Incorporation or our Bylaws,
or (iv) any action asserting a claim governed by the internal affairs doctrine, may be brought only in the Court of Chancery in
the State of Delaware, and, if an action is brought outside of Delaware, the stockholder bringing the suit will be deemed to have
consented to (i) personal jurisdiction of the state and federal courts located within the State of Delaware in connection with
any action brought in any such court, and (ii) having service of process made upon such stockholder by service upon such stockholder’s
counsel. If the Delaware Court of Chancery does not have jurisdiction, another state court located within the State of Delaware,
or if no state court located within the State of Delaware has jurisdiction, the federal district court for the District of Delaware.
Although we believe this provision benefits us by providing increased consistency in the application of Delaware law in the types
of lawsuits to which it applies, a court may determine that this provision is unenforceable, and to the extent it is enforceable,
the provision may have the effect of discouraging lawsuits against our directors and officers. Our Certificate of Incorporation provides that the exclusive forum provision will be applicable to the
fullest extent permitted by applicable law.
In addition to
the foregoing, our Amended and Restated Certificate of Incorporation provides that the exclusive forum provision will not apply
to suits brought to enforce any duty or liability created by the Exchange Act, the Securities Act, or any other claim for which
the federal courts have exclusive jurisdiction, and that stockholders cannot waive compliance with the federal securities laws
and the rules and regulations thereunder.
The consolidated
financial statements of BurgerFi as of December 31, 2019 and 2018 and for the years then ended appearing in this proxy statement
have been audited by BDO USA, LLP, an independent registered public accounting firm, as set forth in their report thereon appearing
elsewhere herein.
The financial statements
of OPES as of December 31, 2019 and 2018 and for the years then ended have been audited by Marcum, LLP, an independent registered
public accounting firm, as stated in their report appearing herein. Such financial statements are included in reliance upon the
report of such firm given upon their authority as experts in accounting and auditing.
Management of OPES
knows of no other matters which may be brought before the Meeting. If any matter other than the proposed Business Combination
or related matters should properly come before the Meeting, however, the persons named in the enclosed proxies will vote proxies
in accordance with their judgment on those matters.
Pursuant to the rules
of the SEC, OPES and its agents that deliver communications to its stockholders are permitted to deliver to two or more stockholders
sharing the same address a single copy of OPES’s proxy statement. Upon written or oral request, OPES will deliver a separate
copy of this proxy statement to any stockholder at a shared address who wishes to receive separate copies of such documents in
the future. Stockholders receiving multiple copies of such documents may likewise request that OPES deliver single copies of such
documents in the future. Stockholders may notify OPES of their requests by calling or writing OPES at its principal executive
offices at 4218 NE 2nd Avenue, Miami, FL 33137, Attn: Investor Relations.
OPES files reports,
proxy statements and other information with the SEC as required by the Exchange Act. You can read OPES’s SEC filings, including
this proxy statement, over the Internet at the SEC’s website at http://www.sec.gov. You may also read and copy any document
OPES files with the SEC at the SEC public reference room located at 100 F Street, N.E., Room 1580 Washington, D.C., 20549. You
may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. You may also obtain
copies of the materials described above at prescribed rates by writing to the SEC, Public Reference Section, 100 F Street, N.E.,
Washington, D.C. 20549.
Information and statements
contained in this proxy statement, or any annex to this proxy statement, are qualified in all respects by reference to the complete
copy of the relevant contract documents or other annex filed with this proxy statement.
If you would like
additional copies of this proxy statement, or if you have questions about the Business Combination, you should contact OPES’s
proxy solicitor, Advantage Proxy, at 877-870-8565.
All information contained
in this proxy statement relating to OPES has been supplied by OPES, and all information relating to BurgerFi has been supplied
by BurgerFi. Information provided by either of OPES or BurgerFi does not constitute any representation, estimate or projection
of the other party.
BurgerFi
International, LLC and Subsidiaries
Consolidated Balance Sheets
December 31,
|
|
2019
|
|
|
2018
|
|
|
|
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
CURRENT ASSETS
|
|
|
|
|
|
|
Cash, including Variable interest entities of $3,585 and $3,585, respectively
|
|
$
|
1,689,658
|
|
|
$
|
1,700,497
|
|
Cash - restricted - Note 2
|
|
|
727,005
|
|
|
|
551,246
|
|
Accounts receivable, net - Note 1
|
|
|
517,133
|
|
|
|
476,358
|
|
Inventory
|
|
|
249,228
|
|
|
|
121,866
|
|
Other current assets
|
|
|
415,960
|
|
|
|
220,940
|
|
TOTAL CURRENT ASSETS
|
|
|
3,598,984
|
|
|
|
3,070,907
|
|
|
|
|
|
|
|
|
|
|
PROPERTY & EQUIPMENT, net
- Note 3 – including variable interest entities of $853,343 and $1,014,435, respectively
|
|
|
6,300,618
|
|
|
|
4,658,441
|
|
|
|
|
|
|
|
|
|
|
DUE FROM RELATED COMPANIES - Note 4
|
|
|
3,611,536
|
|
|
|
5,991,050
|
|
|
|
|
|
|
|
|
|
|
GOODWILL – variable interest entities
|
|
|
397,621
|
|
|
|
397,621
|
|
|
|
|
|
|
|
|
|
|
OTHER ASSETS
|
|
|
472,694
|
|
|
|
506,940
|
|
|
|
|
|
|
|
|
|
|
TOTAL ASSETS
|
|
$
|
14,381,453
|
|
|
$
|
14,624,959
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND MEMBERS’ EQUITY
|
|
|
|
|
|
|
|
|
CURRENT LIABILITIES
|
|
|
|
|
|
|
|
|
Accounts payable - trade
|
|
$
|
1,264,852
|
|
|
$
|
1,644,603
|
|
Accrued expense
|
|
|
544,734
|
|
|
|
840,793
|
|
Gift card liability
|
|
|
585,827
|
|
|
|
445,213
|
|
Revolving line of credit
|
|
|
2,317,000
|
|
|
|
-
|
|
Notes payable - current – variable interest
entities – no recourse to general credit of the Company
|
|
|
1,207,072
|
|
|
|
180,026
|
|
Current portion deferred initial franchise fees - Note
1
|
|
|
438,085
|
|
|
|
787,500
|
|
|
|
|
|
|
|
|
|
|
TOTAL CURRENT LIABILITIES
|
|
|
6,357,570
|
|
|
|
3,898,135
|
|
|
|
|
|
|
|
|
|
|
NON-CURRENT LIABILITIES
|
|
|
|
|
|
|
|
|
Deferred initial franchise fees, net of current portion - Note 1
|
|
|
4,249,836
|
|
|
|
3,148,125
|
|
Due to related companies - Note 4
|
|
|
271,448
|
|
|
|
923,561
|
|
Deferred rent
|
|
|
995,615
|
|
|
|
735,275
|
|
Notes payable – variable
interest entities – no recourse to general credit of the Company
|
|
|
-
|
|
|
|
1,112,737
|
|
|
|
|
|
|
|
|
|
|
TOTAL LIABILITIES
|
|
|
11,874,469
|
|
|
|
9,817,833
|
|
|
|
|
|
|
|
|
|
|
COMMITMENTS AND CONTINGENCIES - Note 6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
MEMBERS’
EQUITY - Before non-controlling interest, including variable interest entities of $47,277 and $122,678, respectively
|
|
|
2,492,129
|
|
|
|
4,827,713
|
|
|
|
|
|
|
|
|
|
|
MEMBERS’ EQUITY (Deficit) - Non-controlling interest
|
|
|
14,855
|
|
|
|
(20,587
|
)
|
|
|
|
|
|
|
|
|
|
TOTAL LIABILITIES AND MEMBERS’
EQUITY
|
|
$
|
14,381,453
|
|
|
$
|
14,624,959
|
|
See accompanying
notes to consolidated financial statements.
BurgerFi International,
LLC and Subsidiaries
Consolidated Statements
of Income
For the Years Ended December 31,
|
|
2019
|
|
|
2018
|
|
|
|
|
|
|
|
|
REVENUES
|
|
|
|
|
|
|
Restaurant sales - Note 1
|
|
$
|
23,855,005
|
|
|
$
|
20,859,629
|
|
Royalty and other fees - Note 1
|
|
|
7,369,413
|
|
|
|
7,105,506
|
|
Terminated franchise fees - Note 1
|
|
|
824,938
|
|
|
|
300,000
|
|
Royalty - brand development and co-op - Note 1
|
|
|
1,720,087
|
|
|
|
-
|
|
Initial franchise fees - Note 1
|
|
|
457,937
|
|
|
|
493,125
|
|
TOTAL REVENUES
|
|
|
34,227,380
|
|
|
|
28,758,260
|
|
|
|
|
|
|
|
|
|
|
Restaurant level operating expenses:
|
|
|
|
|
|
|
|
|
Food, beverage and paper costs
|
|
|
6,315,828
|
|
|
|
5,370,090
|
|
Labor and related expenses
|
|
|
7,839,203
|
|
|
|
7,042,782
|
|
Other operating expenses
|
|
|
5,270,761
|
|
|
|
4,220,293
|
|
Occupancy and related expenses
|
|
|
2,148,955
|
|
|
|
1,876,490
|
|
General and administrative expenses
|
|
|
7,230,200
|
|
|
|
6,744,678
|
|
Depreciation and amortization expense
|
|
|
825,201
|
|
|
|
832,834
|
|
Brand development and co-op advertising expense
|
|
|
1,732,407
|
|
|
|
801,769
|
|
Gain on disposal of property and equipment
|
|
|
(184,386
|
)
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
TOTAL OPERATING EXPENSES
|
|
|
31,178,169
|
|
|
|
26,888,936
|
|
OPERATING INCOME
|
|
|
3,049,211
|
|
|
|
1,869,324
|
|
|
|
|
-
|
|
|
|
-
|
|
Interest expense
|
|
|
(78,987
|
)
|
|
|
(44,768
|
)
|
NET INCOME
|
|
|
2,970,224
|
|
|
|
1,824,556
|
|
|
|
|
|
|
|
|
|
|
Net Income (Loss) Attributable to Non-Controlling Interests
|
|
|
35,442
|
|
|
|
(21,868
|
)
|
Net Income Attributable to Controlling Interests
|
|
$
|
2,934,782
|
|
|
$
|
1,846,424
|
|
See accompanying
notes to consolidated financial statements.
BurgerFi
International, LLC and Subsidiaries
Consolidated Statements
of Members’ Equity
|
|
Controlling
Interest
|
|
|
NonControlling
Interest
|
|
|
Total Members’
Equity
|
|
Balance, December 31, 2017
|
|
$
|
3,309,366
|
|
|
$
|
-
|
|
|
$
|
3,309,366
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income
|
|
|
1,846,424
|
|
|
|
(21,868
|
)
|
|
|
1,824,556
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contributions
|
|
|
16,923
|
|
|
|
11,281
|
|
|
|
28,204
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Distributions
|
|
|
(345,000
|
)
|
|
|
(10,000
|
)
|
|
|
(355,000
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2018
|
|
$
|
4,827,713
|
|
|
$
|
(20,587
|
)
|
|
$
|
4,807,126
|
|
|
|
Controlling
Interest
|
|
|
NonControlling
Interest
|
|
|
Total Members’
Equity
|
|
Balance, December 31, 2018
|
|
$
|
4,827,713
|
|
|
$
|
(20,587
|
)
|
|
$
|
4,807,126
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjustment related to adoption of ASC 606
|
|
|
(1,201,546
|
)
|
|
|
-
|
|
|
|
(1,201,546
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, January 1, 2019 as adjusted
|
|
|
3,626,167
|
|
|
|
(20,587
|
)
|
|
|
3,605,580
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income
|
|
|
2,934,782
|
|
|
|
35,442
|
|
|
|
2,970,224
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contributions
|
|
|
594,000
|
|
|
|
-
|
|
|
|
594,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Distributions
|
|
|
(4,662,820
|
)
|
|
|
-
|
|
|
|
(4,662,820
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2019
|
|
$
|
2,492,129
|
|
|
$
|
14,855
|
|
|
$
|
2,506,984
|
|
BurgerFi International,
LLC and Subsidiaries
Consolidated Statements
of Cash Flows
For the Years Ended December 31,
|
|
2019
|
|
|
2018
|
|
|
|
|
|
|
|
|
CASH FLOWS PROVIDED BY OPERATING ACTIVITIES
|
|
|
|
|
|
|
Net income
|
|
$
|
2,970,224
|
|
|
$
|
1,824,556
|
|
Adjustments to reconcile net income to net cash provided by (used in) operating
activities
|
|
|
|
|
|
|
|
|
Provision for bad debts
|
|
|
86,888
|
|
|
|
50,000
|
|
Depreciation and amortization
|
|
|
825,201
|
|
|
|
832,834
|
|
Forfeited franchise deposits
|
|
|
(824,938
|
)
|
|
|
(300,000
|
)
|
Gain on sale of franchise/corporate-owned store
|
|
|
(184,386
|
)
|
|
|
-
|
|
Changes in operating assets and liabilities
|
|
|
|
|
|
|
|
|
Accounts receivable
|
|
|
(127,663
|
)
|
|
|
(262,197
|
)
|
Inventory
|
|
|
(127,362
|
)
|
|
|
(20,866
|
)
|
Other assets
|
|
|
(190,784
|
)
|
|
|
374,920
|
|
Accounts payable - trade
|
|
|
(379,752
|
)
|
|
|
570,427
|
|
Accrued expenses and gift card liability
|
|
|
(155,447
|
)
|
|
|
313,863
|
|
Deferred franchise fees
|
|
|
375,688
|
|
|
|
112,500
|
|
Other liabilities
|
|
|
260,340
|
|
|
|
212,460
|
|
|
|
|
|
|
|
|
|
|
NET CASH PROVIDED BY OPERATING
ACTIVITIES
|
|
|
2,528,009
|
|
|
|
3,708,497
|
|
|
|
|
|
|
|
|
|
|
NET CASH FLOWS FROM INVESTING ACTIVITIES
|
|
|
|
|
|
|
|
|
Net cash acquired in acquisition of stores
|
|
|
-
|
|
|
|
39,096
|
|
Proceeds from sale of franchise/corporate owned store
|
|
|
937,500
|
|
|
|
-
|
|
Purchase of property and equipment
|
|
|
(2,437,368
|
)
|
|
|
(1,191,606
|
)
|
Advances to related companies
|
|
|
(10,601,298
|
)
|
|
|
(7,979,549
|
)
|
Repayments from related companies
|
|
|
11,575,586
|
|
|
|
6,496,558
|
|
|
|
|
|
|
|
|
|
|
NET CASH USED IN INVESTING ACTIVITIES
|
|
|
(525,580
|
)
|
|
|
(2,635,501
|
)
|
|
|
|
|
|
|
|
|
|
NET CASH FLOWS FROM FINANCING ACTIVITIES
|
|
|
|
|
|
|
|
|
Proceeds on revolving line of credit
|
|
|
2,317,000
|
|
|
|
-
|
|
Payments on notes payable
|
|
|
(85,689
|
)
|
|
|
(69,462
|
)
|
Members’ distributions
|
|
|
(4,662,820
|
)
|
|
|
(355,000
|
)
|
Members’ contributions
|
|
|
594,000
|
|
|
|
87,754
|
|
|
|
|
|
|
|
|
|
|
NET CASH USED IN FINANCING ACTIVITIES
|
|
|
(1,837,509
|
)
|
|
|
(336,708
|
)
|
|
|
|
|
|
|
|
|
|
NET INCREASE IN CASH
|
|
|
164,920
|
|
|
|
736,288
|
|
|
|
|
|
|
|
|
|
|
CASH, beginning of year
|
|
|
2,251,743
|
|
|
|
1,515,455
|
|
|
|
|
|
|
|
|
|
|
CASH, end of year
|
|
$
|
2,416,663
|
|
|
$
|
2,251,743
|
|
BurgerFi
International, LLC and Subsidiaries
Notes to Consolidated Financial Statements
For the Years Ended December 31, 2019
and 2018
|
1.
|
Nature
of Operations and Summary of Significant Accounting Policies
|
Nature of operations
BurgerFi International, LLC, (a Delaware
limited liability company) and Subsidiaries (collectively, the “Company”) is the exclusive franchisor of the BurgerFi
concept. The BurgerFi concept is a quick service restaurant offering handcrafted natural Angus gourmet burgers, hot dogs, chicken,
fresh cut fries, craft beers, wine and freshly prepared custards in an urban environment. Franchises are sold in restricted geographical
territories. The Company has prepared its Franchise Disclosure Document as required by the United States Federal Trade Commission
and has registered or will register in those states where required in order to legally sell its franchises. It is currently the
Company’s plan to offer franchises for sale in those states where demographics of the population represent a demand for
the services. The Company grants franchises to independent operators who in turn pay an initial franchise fee, royalties and other
fees as stated in the franchise agreement. The Company is 90% owned by BurgerFi Holdings, LLC, a Delaware limited liability company,
and 10% by a trust.
Store activity for the years ended December
31, 2019 and 2018 is as follows:
|
|
2019
|
|
|
2018
|
|
Franchised stores, beginning of year
|
|
|
109
|
|
|
|
101
|
|
Stores opened during the year
|
|
|
15
|
|
|
|
11
|
|
Stores closed during the year
|
|
|
7
|
|
|
|
3
|
|
Franchised stores, end of year
|
|
|
117
|
|
|
|
109
|
|
|
|
2019
|
|
|
2018
|
|
Company-owned stores, beginning
of year
|
|
|
11
|
|
|
|
8
|
|
Stores opened during the year
|
|
|
3
|
|
|
|
3
|
|
Stores closed during the year
|
|
|
1
|
|
|
|
-
|
|
Company-owned stores, end of year
|
|
|
13
|
|
|
|
11
|
|
End of year store totals included five
international stores at December 31, 2019 and 2018.
In 2018, the Company’s members contributed
their interests in one additional restaurant to BF Restaurant Management, LLC, which is 40% owned by an unrelated party, resulting
in the presentation of a non-controlling interest beginning in the 2018 consolidated financial statements.
In 2019, the Company’s members did
not contribute any interests to BF Restaurant Management, LLC.
Liquidity and COVID-19
On January 30, 2020, the World Health
Organization (“WHO”) announced a global health emergency because of a new strain of coronavirus originating in Wuhan,
China (the “COVID-19 outbreak”) and the risks to the international community as the virus spreads globally beyond
its point of origin. In March 2020, the WHO classified the COVID-19 outbreak as a pandemic, based on the rapid increase in exposure
globally. On March 27, 2020, the “Coronavirus Aid, Relief and Economic Security (CARES)
Act” was signed into law. The CARES Act, among other things, includes provisions relating to refundable payroll tax credits,
and deferment of employer side social security payments. As a result of the COVID-19 outbreak, the Company is experiencing
temporary closures of certain restaurants and reduced revenues at those restaurants which remain open, which may have a significant
impact on the Company’s 2020 revenues and cash flows. However, the Company has taken steps to reduce operating costs through
reductions in payroll expenses to conserve cash. Management continues to actively manage and monitor its cash flows and has the
ability to further reduce certain expenses as necessary. From May 4, 2020 to May 11, 2020, the Company received approximately
$2.2 million from stimulus loans under the SBA Paycheck Protection Program of the CARES Act. As a result, management believes
that the Company has sufficient resources to fund its operations through at least twelve months from the date of this report.
Refer to Note 10 Subsequent Events for additional discussion about COVID-19 and the CARES Act. The stimulus loan bears interest
at a fixed rate of 1% per annum, with the first six months of interest deferred, has a term of two years, and is unsecured and
guaranteed by the SBA. The Company intends to apply to the lender for forgiveness of the stimulus loan, with the amount which
may be forgiven equal to the sum of payroll costs, covered rent and other obligations, and covered utility payments incurred by
the Company during the permitted period beginning on May 2020, calculated in accordance with the terms of the CARES Act. The Company’s
eligibility for the stimulus loan, expenditures that qualify toward forgiveness, and the final balance of the stimulus loan that
may be forgiven are subject to audit and final approval by the SBA. To the extent that all or part of the stimulus loan is not
forgiven, the Company will be required to pay interest at 1% and, commencing in November 2020, interest payments will be required
through the maturity date in May 2022. The terms of the stimulus loan provide for customary events of default including, among
other things, payment defaults, breach of representations and warranties, and insolvency events. The stimulus loan may be accelerated
upon the occurrence of an event of default, including if the SBA subsequently reaches an audit determination that the Company
does not meet the eligibility criteria.
BurgerFi International,
LLC and Subsidiaries
Notes to Consolidated
Financial Statements
For the Years
Ended December 31, 2019 and 2018
The stimulus loan is being accounted for under
ASC 470, Debt, whereby interest expense is being accrued at the contractual rate and future debt maturities are based on
the assumptions that none of the principal balance will be forgiven. Forgiveness, if any, will be recognized as a gain on extinguishment
if the lender legally releases the Company based on the criteria set forth in the debt agreement and the CARES Act.
Basis of Presentation
The accompanying consolidated financial
statements have been prepared in accordance with accounting principles generally accepted in the United States of America (U.S.
GAAP”) and pursuant to the reporting and disclosure rules and regulations of the Securities Exchange Commission (“SEC”)
for all periods presented.
On June 29, 2020 the Company entered into
a membership interest purchase agreement (the “MIP”) with OPES Acquisition Corp. (“OPES”) whereby the
Company is expected to become a publicly held company. Therefore, these consolidated financial statements include the application
of U.S. GAAP for public entities. Refer to Note 10 Subsequent Events for additional discussion on the MIP with OPES.
Principles of Consolidation
The consolidated financial statements
present the consolidated financial position, results from operations and cash flows of BurgerFi International, LLC, a Delaware
limited liability company, and its wholly owned subsidiaries, BF Restaurant Management LLC, a Florida limited liability company
and BF Commissary, LLC (“BF Commissary”), a Florida limited liability company. BF Restaurant Management LLC, (BFRM),
owns and/or operates fifteen restaurants across Florida, one in Philadelphia, and one in New York. BFRM is made up of the following
owned subsidiaries:
BurgerFi-Delray Beach, LLC, a
Delaware limited liability company
BF Coral Springs, LLC, a Florida
limited liability company
BF City Place-West Palm, LLC,
a Florida limited liability company
BF Commack, LLC, a Florida limited
liability company
BF Jupiter, LLC, a Florida limited
liability company
BF Philadelphia, LLC, a Florida
limited liability company
BF West Delray, LLC, a Florida
limited liability company
BF LBTS, LLC, a Florida limited
liability company
BGM Pembroke Pines, LLC, a Florida
limited liability company
BF Jacksonville Town Center,
LLC, a Florida limited liability company
BF Jacksonville Riverside, LLC,
a Florida limited liability company
BF Delray-Linton, LLC, a Florida
limited liability company
BF Pines City Center, LLC, a
Florida limited liability company
BF Boynton Beach, LLC, a Florida
limited liability company
BF Dania Beach, LLC, a Florida
limited liability company
BF Ft Myers-Daniels, LLC, a Florida
limited liability company
BF Boca Raton, LLC, a Florida
limited liability company
All material balances and transactions
between the entities have been eliminated in consolidation.
BurgerFi International,
LLC and Subsidiaries
Notes to Consolidated Financial Statements
For the Years Ended December 31, 2019
and 2018
Use of Estimates
The preparation of financial statements
in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets
and liabilities and disclosures of contingencies at the date of the consolidated financial statements and the reported amounts
of revenues and expenses during the reporting year. Actual results could differ from those estimates.
Segment Reporting
The Company owns and operates BurgerFi
restaurants in the United States, and also have domestic and international franchisees. The chief operating decision makers (the
“CODMs”) are the Company’s President, Chief Operating Officer and Chief Financial Officer. As the CODMs review
financial performance and allocate resources at a consolidated level on a recurring basis, the Company has one operating reporting
segment and one reportable segment.
Variable Interest Entities
For VIE(s), the Company assesses whether
the Company is the primary beneficiary as prescribed by the accounting guidance on the consolidation of VIE. The primary beneficiary
of a VIE is the party that has the power to direct the activities that most significantly impact the performance of the entity
and the obligation to absorb the losses or the right to receive the benefits that could potentially be significant to the entity.
The Company has evaluated its business
relationships with franchisees to identify potential VIEs. While the Company holds a variable interest in some of the franchised
restaurants owned by an affiliated entity, the Company is not the primary beneficiary since it does not have the power to direct
the activities of these franchised restaurants. As a result, the Company does not consolidate those VIEs. At December 31, 2019,
the Company is a guarantor for seven operating leases for those entities, BF Secaucus, LLC; BF Tallahassee, LLC; BF Fort Myers,
LLC; BF NY82, LLC; BF Naples Tamiami, LLC; and BF Naples Immokalee. Additionally, the Company is a guarantor for a lease for The
Burger Bunch, LLC, an unrelated party. The Company may become responsible for the payments under its guarantee. The Company has
determined that its maximum exposure to loss on the VIEs that it is not the primary beneficiary on results from the lease guarantees
amounts to approximately $7,200,000.
Additionally, on April 23, 2018 (the “Takeover
Date”), the Company entered into an asset purchase and management agreement (the “APM”) with a multiple unit
franchisee. The APM allowed the Company to acquire the assets of two of the franchisee’s restaurants for the consideration
of the Company making the monthly principal and interest payments on the franchisee’s three bank loans through 2027. The
closing on asset purchase would occur only when the debt was paid in full. The outstanding principal on the loans was approximately
$1,291,000 on the Takeover Date. The APM allowed the Company to take over the management and operation of the two restaurants
with full control over all operational decision making. Under the APM, the Company provides all capital for all of the restaurants’
expenditures it deems appropriate, and pays all costs and expenses associated with the operations. All cash flow and profits or
losses derived from the operations after the Takeover Date belong to the Company. The Company has evaluated the franchisee which
is a party to the APM for VIE accounting under ASC 810 “Consolidation” and has determined that the franchisee under
the APM is a VIE and that the Company is the primary beneficiary, effective on the Takeover Date. Therefore, the Company has consolidated
the franchisee that owned two restaurants as a business combination under ASC 805 Business Combinations.
BurgerFi International,
LLC and Subsidiaries
Notes to Consolidated Financial Statements
For the Years Ended December 31, 2019
and 2018
The acquisition is accounted for as a
business combination under the acquisition method as of the Takeover Date, and accordingly, the results of its operations are
included in the Company’s consolidated financial statements from that date. Net sales for the consolidated VIE were approximately
$2.4 million and net income was $93,364 from the Takeover Date through December 31, 2018. The Company is unable to disclose the
amount of sales and net income or loss from January 1, 2018 to the Takeover Date as they have been unable to obtain the information
from the prior operator and we do not believe the information is material for the period from January 1, 2018 to the Takeover
Date, April 23, 2018.
The consideration was the fair value of
the three loans at the Takeover Date and the assets are recorded based on the fair values of the assets acquired, net of current
liabilities as of the Takeover Date as follows:
Cash
|
|
$
|
39,097
|
|
Accounts Receivable
|
|
|
960
|
|
Inventory
|
|
|
28,387
|
|
Other current assets
|
|
|
24,070
|
|
Property & equipment
|
|
|
1,126,000
|
|
Other assets
|
|
|
4,390
|
|
Current liabilities
|
|
|
(330,006
|
)
|
|
|
|
|
|
Net tangible and identifiable intangible assets acquired
|
|
|
892,898
|
|
|
|
|
|
|
Goodwill
|
|
|
397,621
|
|
|
|
|
|
|
Net assets acquired
|
|
$
|
1,290,519
|
|
The Company incurred transaction costs
of approximately $10,000 which are included in general and administrative expenses in the accompanying consolidated statement
of income for the year ended December 31, 2018.
Included in the consolidated financial
statements are the following from variable interest entities for which the Company is the primary beneficiary:
|
|
December 31,
2019
|
|
|
December 31,
2018
|
|
Cash
|
|
$
|
3,385
|
|
|
$
|
3,385
|
|
Property and equipment
|
|
|
853,343
|
|
|
|
1,014,435
|
|
Goodwill
|
|
|
397,621
|
|
|
|
397,621
|
|
Total Assets
|
|
$
|
1,254,349
|
|
|
$
|
1,415,441
|
|
|
|
|
|
|
|
|
|
|
Current notes payable
|
|
$
|
1,207,072
|
|
|
$
|
180,026
|
|
Notes payable – net of current portion
|
|
|
-
|
|
|
|
1,112,737
|
|
Total liabilities
|
|
|
1,207,072
|
|
|
|
1,292,763
|
|
Total members’ equity
|
|
|
47,277
|
|
|
|
122,678
|
|
Total Liabilities and Members’ Equity
|
|
$
|
1,254,349
|
|
|
$
|
1,415,441
|
|
The
three loans are collateralized by the VIEs’ assets and the creditors of the loans do not have recourse to the general credit
of the Company. The carrying value of the VIEs assets which collateralize the loans are noted above.
BurgerFi International,
LLC and Subsidiaries
Notes to Consolidated Financial Statements
For the Years Ended December 31, 2019
and 2018
Cash and Cash Equivalents
The Company considers highly liquid investments
with maturities of three months or less as cash equivalents. Cash and cash equivalents also include approximately $339,000 and
$132,000 as of December 31, 2019 and 2018, respectively, of amounts due from commercial credit card companies, such as Visa, MasterCard,
Discover, and American Express, which are generally received within a few days of the related transactions. At times, the balances
in the cash and cash equivalents accounts may exceed federal insured limits.
Restricted Cash
Restricted cash consists of (i) cash collected
(net of redemptions) from gift cards, (ii) cash balances for the advertising co-op, (iii) Level-up loyalty program cash collections,
and (iii) initial franchise deposits in escrow. The Company is the custodian of these account balances, but these accounts are
in place for specific, restricted purposes, which typically are resolved within twelve months. The Company classifies the restricted
cash accounts as current assets.
Accounts receivable
Accounts receivable consist of amounts
due from franchisees for training and royalties and are stated at the amount invoiced. Accounts receivable are stated at the amount
management expects to collect from balances outstanding at year end. Management provides for probable uncollectible amounts through
a charge to earnings and a credit to allowance for uncollectible accounts based on its assessment of the current status of individual
accounts. Balances that are still outstanding after management has used reasonable collection efforts are written off through
a charge to the allowance for uncollectible accounts and a credit to accounts receivable. The allowance for uncollectible accounts
was approximately $65,000 at December 31, 2019 and $50,000 at December 31, 2018.
Inventories
Inventories primarily consist of food
and beverages. Inventories are accounted for at lower of cost or net realizable value using the first-in, first-out (FIFO) method.
Spoilage is expensed as incurred.
Property and Equipment
Property and equipment is carried at cost,
net of accumulated depreciation. Depreciation is provided by the straight-line method over an estimated useful life. Leasehold
improvements are amortized using the straight-line method over the lesser of the estimated useful life of the asset (generally
up to ten years) or the term of the related lease. The estimated lives for machinery and equipment, computer equipment, furniture
and fixtures, and vehicles range from five to seven years. Maintenance and repairs which are not considered to extend the
useful lives of the assets are charged to operations as incurred. Expenditures for additions and improvements are capitalized.
Expenditures for renewals and betterments, which materially extend the useful lives of assets or increase their productivity,
are capitalized. The Company capitalizes construction costs during construction of the restaurant and will begin to depreciate
them once the restaurant is placed in service. Wage costs directly related to and incurred during a restaurant’s construction
period are capitalized. Interest costs incurred during a restaurant’s construction period are capitalized. Upon sale or
retirement, the cost of assets and related accumulated depreciation and amortization are removed from the accounts and any resulting
gains or losses are included in operating expense.
BurgerFi International,
LLC and Subsidiaries
Notes to Consolidated Financial Statements
For the Years Ended December 31, 2019
and 2018
Impairment of Long-Lived Assets
The Company reviews long-lived assets
for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.
Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to future undiscounted
cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized
is measured by the amount by which the carrying amount of the assets exceeds the fair value. Assets to be disposed of are reported
at the lower of the carrying amount or fair value less costs to sell. There were no impairments recognized for the years ended
December 31, 2019 and 2018.
Goodwill
As of December 31, 2019 and 2018, in connection
with the APM described above, the Company has a balance of approximately $398,000 of goodwill on its consolidated balance sheet.
The Company accounts for goodwill in accordance with FASB ASC No. 350, Intangibles—Goodwill and Other (“ASC 350”).
ASC 350 requires goodwill to be reviewed for impairment annually, or more frequently if circumstances indicate a possible impairment.
The Company evaluates goodwill in the fourth quarter or more frequently if management believes indicators of impairment exist.
Such indicators could include but are not limited to (1) a significant adverse change in legal factors or in business climate,
(2) unanticipated competition, or (3) an adverse action or assessment by a regulator.
The Company first assesses qualitative
factors to determine whether it is more likely than not that the fair value of the reporting unit is less than its carrying amount,
including goodwill. If management concludes that it is more likely than not that the fair value of the reporting unit is less
than its carrying amount, management conducts a quantitative goodwill impairment test. This impairment test involves comparing
the fair value of the reporting unit with its carrying value (including goodwill). The Company estimates the fair values of its
reporting unit using a combination of the income, or discounted cash flows approach and the market approach, which utilizes comparable
companies’ data. If the estimated fair value of the reporting unit is less than its carrying value, a goodwill impairment
exists for the reporting unit and an impairment loss is recorded. There were no impairments of goodwill recognized for the years
ended December 31, 2019 and 2018.
Recently Adopted Accounting Pronouncements
In May 2014, the FASB issued ASU No. 2014-09,
Revenue from Contracts with Customers (Topic 606) (“ASC 606”) that updated and replaced existing revenue recognition
guidance. The guidance includes a five-step framework to determine the timing and amount of revenue to recognize related to contracts
with customers. Additionally, the guidance requires new and significantly enhanced disclosures about the nature, amount, timing
and uncertainty of revenue and cash flows from customer contracts as well as judgments made by a company when following the framework.
Revenue from Contracts with Customers
On January 1, 2019, the Company adopted
ASC 606, using the modified retrospective method applied to those contracts which were not completed as of January 1, 2019. The
Company elected a practical expedient to aggregate the effect of all contract modifications that occurred before the adoption
date, which did not have a material impact to the consolidated financial statements. Results for reporting periods beginning on
or after January 1, 2019 are presented under ASC 606. Prior period amounts were not revised and continue to be reported in accordance
with ASC 605, the accounting standard then in effect.
Upon transition, on January 1, 2019, we
recorded a decrease to opening members’ equity of $1,201,546, with a corresponding decrease of $348,730 in current
deferred initial franchise fees liability, and an increase of $1,550,276 in long-term deferred initial franchise fee
liabilities.
Revenue Recognition Under ASC 606
Revenue consists of restaurant sales and
franchise licensing revenue. Generally, revenue is recognized as performance obligations transfer to the customer in an amount
that reflects the consideration we expect to be entitled in exchange for those goods or services.
BurgerFi International,
LLC and Subsidiaries
Notes to Consolidated Financial Statements
For the Years Ended December 31, 2019
and 2018
Restaurant Revenues
Revenue from restaurant sales is presented
net of discounts and recognized when food, beverage and retail products are sold. Sales tax collected from customers is excluded
from restaurant sales and the obligation is included in sales tax payable until the taxes are remitted to the appropriate taxing
authorities. Sales from our gift cards are deferred and recognized upon redemption for goods or services. Revenues are reported
gross on the accompanying consolidated statements of income and members’ equity with employee complimentary meals recorded
as a component of labor expenses. Revenue from restaurant sales are generally paid at the time of sale. Credit cards and delivery
service partners sales are generally collected within 2-3 days.
The revenue from electronic gift cards
is deferred when purchased by the customer and revenue is recognized when the gift cards are redeemed. The Company is a Delaware
limited liability company and is subject to Delaware escheatment laws. Delaware escheatment laws state that gift cards are presumed
to be abandoned after five years and the balance remitted should represent the maximum cost to the issuer of merchandise. The
accounting for the restaurant revenues were not impacted by the adoption of ASC 606.
BFI contracts with delivery service partners
for delivery of goods and services to customers. The Company has determined that the delivery service partners are agents, and
the Company is the principal. Therefore, restaurant sales through delivery services are recognized at gross sales and delivery
service revenue is recorded as expense.
Revenues from BF Commissary
BF Commissary, which commenced operations
in 2019, produces and sells BurgerFi’s vegetable burgers to a distributer based on agreed-upon cost plus freight cost. The
Company recognizes revenue upon pick-up of orders at the designated pick up points or when the distributor obtains control of
the products. For the year ended December 31, 2019, the Company recognized revenue of $709,876 from BF Commissary and is presented
as part of restaurant sales in the consolidated statements of income.
Franchise Revenues
The franchise agreements require the franchisee
to pay an initial, non-refundable fee of $37,500 and continuing fees based upon a percentage of sales. Owners can make a deposit
equal to 50% of the total franchise fee to reserve the right to open additional locations. The remaining balance of the franchise
fee is due upon signing by the franchisee of the applicable location’s lease or mortgage. Franchise agreements and deposit
agreements outline a schedule for store openings. Failure to meet the schedule can result in forfeiture of deposits made.
Franchise revenue is comprised of certain
initial franchise fees and ongoing sales-based royalty fees from a franchised BurgerFi restaurant. Generally, the licenses granted
to develop, open and operate each BurgerFi franchise in a specified territory are the predominant performance obligations transferred
to the licensee in our contracts, and represent symbolic intellectual property. Ancillary promised services, such as training
and assistance during the initial opening of a BurgerFi restaurant are typically combined with the licenses and considered as
one performance obligation per BurgerFi franchise. Certain initial services such as site selection and lease review are considered
distinct services that are recognized at a point in time when the performance obligations have been provided, generally when the
BurgerFi has been opened. We determine the transaction price for each contract and allocate it to the distinct services based
on their standalone selling price based on the costs to provide the service and a profit margin. The remainder of the transaction
price is recognized over the remaining term of the franchise agreement once the BurgerFi restaurant has been opened. Because we
are transferring licenses to access our intellectual property during a contractual term, revenue is recognized on a straight-line
basis over the license term. Generally, payment for the initial franchise fee is received upon execution of the licensing agreement
These payments are initially deferred and recognized as revenue as the performance obligations are satisfied.
BurgerFi International,
LLC and Subsidiaries
Notes to Consolidated Financial Statements
For the Years Ended December 31, 2019
and 2018
Franchise deposits received in advance
for locations not expected to open within one year are classified as long-term liabilities. Forfeiture of deposits is recognized
as other revenue once contracts have been terminated for failure to comply. All terminations are communicated to the franchisee
in writing using formal termination letters.
Revenue from sales-based royalties (i.e.
royalty and other fees, brand development and advertising co-op royalties) is recognized as the related sales occur. The sales-based
royalties are invoiced and collected from the franchisees on a weekly basis. Rebates from vendors received on franchisee’s
sales are also recognized as revenue from sales-based royalties.
Prior to the adoption of ASC 606, initial
franchise fees were recorded as deferred revenue when received and proportionate amounts were recognized as revenue when a licensed
BurgerFi opened and all material services and conditions related to the fee were substantially performed. Sales-based royalty
fees were recorded as revenue when sales occurred.
Revenue recognized during the year ended
December 31, 2019 under ASC 606 and revenue that would have been recognized during the year ended December 31, 2019 had
ASC 605 been applied is as follows:
|
|
As reported
under ASC 606
|
|
|
If reported
under ASC 605
|
|
|
Increase
(decrease)
|
|
Restaurant sales
|
|
$
|
23,145,129
|
|
|
$
|
23,145,129
|
|
|
$
|
-
|
|
BF Commissary sales
|
|
|
709,876
|
|
|
|
709,876
|
|
|
|
-
|
|
Franchise revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales-based royalties
|
|
|
6,804,720
|
|
|
|
6,804,720
|
|
|
|
-
|
|
Brand development and advertising co-op royalties
|
|
|
1,720,087
|
|
|
|
-
|
|
|
|
1,720,087
|
|
Initial franchise fees
|
|
|
254,094
|
|
|
|
1,239,875
|
|
|
|
(985,781
|
)
|
Initial distinct services
|
|
|
203,843
|
|
|
|
-
|
|
|
|
203,843
|
|
Rebates from vendors
|
|
|
564,693
|
|
|
|
-
|
|
|
|
564,693
|
|
Other revenue - terminations of franchises
|
|
|
824,938
|
|
|
|
-
|
|
|
|
824,938
|
|
Total revenue
|
|
$
|
34,227,380
|
|
|
$
|
31,899,600
|
|
|
$
|
2,327,780
|
|
BurgerFi International,
LLC and Subsidiaries
Notes to Consolidated Financial Statements
For the Years Ended December 31, 2019
and 2018
Revenue recognized during the year ended
December 31, 2019 (under ASC 606) and the year ended December 31, 2018 (under ASC 605) disaggregated by type
is as follows:
|
|
December 31
2019
|
|
|
December 31
2018
|
|
Restaurant sales
|
|
$
|
23,145,129
|
|
|
$
|
20,859,629
|
|
BF Commissary sales
|
|
|
709,876
|
|
|
|
-
|
|
Franchising revenue:
|
|
|
|
|
|
|
|
|
Sales-based royalties
|
|
|
6,804,720
|
|
|
|
7,105,506
|
|
Rebate royalties
|
|
|
564,693
|
|
|
|
-
|
|
Brand development and advertising co-op royalties
|
|
|
1,720,087
|
|
|
|
-
|
|
Initial franchise fees
|
|
|
254,094
|
|
|
|
493,125
|
|
Initial distinct services
|
|
|
203,843
|
|
|
|
-
|
|
Other revenue - terminations of franchises
|
|
|
824,938
|
|
|
|
300,000
|
|
Total revenue
|
|
$
|
34,227,380
|
|
|
$
|
28,758,260
|
|
The following table shows the Company’s
revenues disaggregated according to the timing of transfer of goods or services:
Years ended December 31,
|
|
2019
|
|
Revenue recognized at a point in time
|
|
|
|
Restaurant revenue
|
|
$
|
23,145,129
|
|
BF Commissary sales
|
|
|
709,876
|
|
Royalty and other fees
|
|
|
7,369,413
|
|
Terminated franchise fees
|
|
|
824,938
|
|
Brand development and advertising co-op royalties
|
|
|
1,720,087
|
|
Franchising revenue – distinct initial services
|
|
|
203,843
|
|
Total revenue recognized at a point in time
|
|
$
|
33,973,286
|
|
|
|
|
|
|
Revenue recognized over time
|
|
|
|
|
Franchising fees
|
|
|
254,094
|
|
Total revenue recognized over time
|
|
|
254,094
|
|
Total Revenue
|
|
$
|
34,227,380
|
|
The aggregate amount of the transaction
price allocated to performance obligations that are unsatisfied (or partially unsatisfied) as of December 31, 2019 is $4,687,921.
The Company expects to recognize this amount as revenue over a long-term period, as the license term for each BurgerFi franchise
is 10 years. This amount excludes any variable consideration related to sales-based royalties.
BurgerFi International,
LLC and Subsidiaries
Notes to Consolidated Financial Statements
For the Years Ended December 31, 2019
and 2018
Contract Balances
Opening and closing balances of contract
liabilities and receivables from contracts with customers for the years ended December 31, 2019 and 2018 are as follows:
|
|
December 31
|
|
|
|
2019
|
|
|
2018
|
|
Franchising receivables
|
|
$
|
369,168
|
|
|
$
|
278,189
|
|
Advertising co-op funds
|
|
|
158,581
|
|
|
|
68,538
|
|
Gift card liability
|
|
|
585,827
|
|
|
|
445,213
|
|
Deferred revenue, current
|
|
|
438,085
|
|
|
|
787,500
|
|
Deferred revenue, long-term
|
|
|
4,249,836
|
|
|
|
3,148,125
|
|
Revenue recognized during the year ended
December 31, 2019, which was included in the balance of deferred franchise revenue at the beginning of the period is $1,282,959.
Revenue Recognition under ASC 605
Restaurant Revenues
The Company recognizes revenue from sales
of food and beverage when payment is tendered at the point of sale. Revenues are reported gross on the accompanying statements
of income with employee complimentary meals recorded as a component of labor expenses and customer complimentary meals and sales
incentives recorded as a component of operating expenses. The revenue from electronic gift cards is deferred when purchased by
the customer and revenue is recognized when the gift cards are redeemed or at the time redemption of the gift cards is considered
remote. The Company is a Delaware limited liability company and is subject to Delaware escheatment laws. Delaware escheatment
laws state that gift cards are presumed to be abandoned after five years and the balance remitted should represent the maximum
cost to the issuer of merchandise.
Franchise Revenues
The Company generates revenues from franchising
through individual franchise agreements. Franchise revenues are recognized in accordance with FASB Accounting Standards Codification
(ASC) 952, Franchisors, which requires deferral until substantial performance of franchisor obligations is complete. When an individual
franchise is sold, the Company agrees to provide certain services to the franchisee including assistance in site selection and
development, training personnel, opening assistance, and access to prototype plans and manuals.
The franchise agreements require the franchisee
to pay an initial, non-refundable fee of $37,500 and continuing fees based upon a percentage of sales. Owners can make a deposit
equal to 50% of the total franchise fee to reserve the right to open additional locations. The remaining balance of the franchise
fee is due upon signing by the franchisee of the applicable location’s lease or mortgage. Franchise agreements and deposit
agreements outline a schedule for store openings. Failure to meet the schedule can result in forfeiture of deposits made.
Revenues from initial franchise fees are
recognized as income when all services related to the initial fee have been performed and the related restaurant is opened for
business.
Franchise deposits received in advance
for locations not expected to open within one year are classified as long-term liabilities. Forfeiture of deposits is recognized
as revenue once contracts have been terminated for failure to comply. All terminations are communicated to the franchisee in writing
using formal termination letters.
Initial franchise fees and the related
direct costs are deferred until the franchisee begins operations. An analysis of deferred revenues is as follows:
Years ended December 31,
|
|
2018
|
|
Balance, beginning of period
|
|
$
|
4,123,125
|
|
Initial franchise fees received
|
|
|
521,250
|
|
Revenue recognized for stores opened during period
|
|
|
(408,750
|
)
|
Revenue recognized related to franchise agreement default
|
|
|
(300,000
|
)
|
Balance, end of period
|
|
$
|
3,935,625
|
|
Continuing royalty fees are generally
provided for in the franchise agreements as a percent of franchise gross sales. Royalty revenues are recognized as income in the
same period in which the franchisees’ sales occur.
BurgerFi International,
LLC and Subsidiaries
Notes to Consolidated Financial Statements
For the Years Ended December 31, 2019
and 2018
Presentation of Sales Taxes
The Company collects sales tax from customers
and remits the entire amount to the respective states. The Company’s accounting policy is to exclude the tax collected and
remitted from revenues and cost of sales. Sales tax payable amounted to approximately $142,000 and $131,000 at December 31, 2019,
2018, respectively, and is presented in accrued expenses and other current liabilities in the accompanying consolidated balance
sheets.
On June 21, 2018, the U.S. Supreme Court
issued a landmark decision in South Dakota v. Wayfair. The Company has assessed the current guidance surrounding the court case
and does not believe the Wayfair decision materially impacts its sales and use tax process. The Company continues to monitor changes
resulting from the Wayfair decision.
Concentration of Credit Risk
Financial instruments that potentially
subject the Company to concentrations of credit risk consist primarily of cash. The Company places its temporary cash investments
with financial institutions and during 2019 and 2018, there were amounts on deposit in excess of federal insurance limits.
Advertising Expenses
Advertising costs are expensed as incurred.
Advertising expenses for the years ended December 31, 2019 and 2018 were approximately $702,000 and $941,000, respectively, including
amounts paid to the brand development and advertising co-op fund, as described below.
Brand Development Fund
The Company’s franchise agreements
provide for franchisee contributions of a percentage of gross restaurant sales to a brand development fund administered by the
Company. Amounts collected are required to be segregated and used for advertising and related costs, including reasonable costs
of administering the fund. Contributed amounts are recognized as restricted cash. At December 31, 2019, the Company had revenue
of approximately $1,455,000 of contributions which are included in the brand development and advertising co-op royalties and approximately
$1,506,000 of expenses incurred which are included in the brand development and Co-op advertising expenses. At December 31, 2018,
the Company had approximately $521,000 of expenses incurred in excess of contributions received which is included as brand development
and co-op advertising expenses in the consolidated statements of income.
Advertising Co-Op Fund
During 2017, the Company established an
advertising Co-Op fund in which several of the South Florida franchises participate. The members of the Co-Op elect to contribute
a percentage of gross restaurant sales to a fund administered by the Company. Amounts collected are required to be segregated
and used for local advertising and related costs, including reasonable costs of administering the fund. Consequently, contributed
amounts, net of expended funds are recognized as restricted cash. At December 31, 2019, the Company had revenue of approximately
$265,000 of contributions and approximately $226,000 of expenses incurred which are included in the -brand development and co-op
royalties and brand development and co-op advertising expenses, respectively. At December 31, 2018, the Company had approximately
$281,000 of expenses incurred in excess of contributions received which is presented as brand development and Co-op advertising
expenses in the consolidated statements of income.
Pre-opening Costs
The Company follows ASC Topic 720-15,
“Start-up Costs”, which provides guidance on the financial reporting of start-up costs and organization costs. In
accordance with this ASC Topic, costs of pre-opening activities and organization costs are expensed as incurred. Pre-opening costs
expensed were approximately $425,000 and $24,000 for the years ended 2019 and 2018, respectively.
Deferred Rent
Rent expense on non-cancelable leases
containing known future scheduled rent increases or free rent periods is recorded on a straight-line basis over the respective
lease term. The lease term begins when the Company has the right to control the use of the leased property and includes the initial
non-cancelable lease term plus any periods covered by renewal options that the Company is reasonably assured of exercising. The
difference between rent expense and rent paid is accounted for as deferred rent and is amortized over the lease term.
BurgerFi International,
LLC and Subsidiaries
Notes to Consolidated Financial Statements
For the Years Ended December 31, 2019
and 2018
Operating Leases
The Company leases restaurant locations
that have terms expiring between December 2020 and March 2035. The initial obligation period is generally 10 years. The restaurant
facilities primarily have renewal clauses for two 5-year period or one 10-year period, exercisable at the option of the Company.
The Company includes one 5-year renewal option in its lease term.
Certain lease agreements contain one or
more of the following: tenant improvement allowances, rent holidays, rent escalation clauses and/or contingent rent provisions.
The Company includes scheduled rent escalation clauses for the purpose of recognizing straight-line rent. Certain of these leases
require the payment of contingent rentals based on a percentage of gross revenues, as defined, and certain other rent escalation
clauses are based on the change in the Consumer Price Index. The Company received cash incentives from certain landlords for specified
leasehold improvements which are deferred and accreted on a straight-line basis over the related lease term as a reduction of
rent expense.
Income Taxes
The Company, with the consent of its members,
has elected to be taxed as a partnership under the provisions of the Internal Revenue Code and similar state provisions. Partnerships
generally are not subject to Federal and state income taxes. In lieu of corporation income taxes, the partners reflect their respective
share of the Company’s taxable income or loss on their individual income tax returns. Accordingly, no provision for income
taxes has been included in the accompanying consolidated financial statements.
There were neither liabilities nor deferred
tax assets relating to uncertain income tax positions taken or expected to be taken on the tax returns.
The Company utilizes a two-step approach
for recognizing and measuring uncertain tax positions accounted for in accordance with the asset and liability method. The first
step is to evaluate the tax position for recognition by determining whether evidence indicates that it is more likely than not
that a position will be sustained if examined by a taxing authority.
The second step is to measure the tax
benefit as the largest amount that is 50% likely of being realized upon settlement with a taxing authority. There were no amounts
recorded at December 31, 2019 and 2018 related to uncertain tax positions, interest or penalties.
New Accounting Pronouncements
In February 2016, the FASB issued ASU
2016-02, which requires lessees to recognize lease assets and lease liabilities on the balance sheet for all leases with terms
longer than 12 months and disclose certain information about the leasing arrangements. Leases will be classified as either finance
or operating, with classification affecting the pattern of expense recognition in the income statement. This guidance became effective
for fiscal years beginning after December 15, 2018 for public entities, except for “emerging growth companies” (as
defined in Section 2(a) of the Securities Act and as modified by the Jumpstart Our Business Startups Act of 2012) and for fiscal
years beginning after December 15, 2019 for all other entities. However, in April 2020, the FASB voted to defer the effective
date of ASC 842 for private companies and certain not-for-profit entities for one year. As such, this will be effective for fiscal
years beginning after December 15, 2021. Since the Company will qualify as an “emerging growth company” after the
closing of the MIP with OPES, it is exempted from being required to comply with new or revised financial accounting standards
until private companies are required to comply with the new or revised financial accounting standards.
BurgerFi International,
LLC and Subsidiaries
Notes to Consolidated Financial Statements
For the Years Ended December 31, 2019
and 2018
The FASB issued ASU Update 2016-13, Financial
Instruments - Credit Losses (“Topic 326”) in June 2016, subsequently amended by various standard updates. This
guidance replaces the incurred loss impairment methodology in current GAAP with a methodology that reflects expected credit losses
and requires consideration of a broader range of reasonable and supportable information when determining credit loss estimates
and requires financial assets to be measured net of expected credit losses at the time of initial recognition. This guidance is
effective for annual and interim reporting periods beginning after December 15, 2019, for public entities and using a modified
retrospective adoption method. ASU 2019-10 deferred the effective date for smaller reporting companies and all other entities
until years beginning after December 15, 2022. Early adoption is permitted.
In December 2019, the FASB issued Update
2019-12, Income Taxes (“Topic 740”) as part of its Simplification Initiative. This guidance provides amendments to
simplify the accounting for income taxes by removing certain exceptions to the general principles in Topic 740. The amendments
also improve consistent application of and simplify GAAP for other areas of Topic 740 by clarifying and amending existing guidance.
This guidance is effective for annual and interim reporting periods beginning after December 15, 2020, and early adoption is permitted.
We are currently evaluating the full impact this guidance will have on our consolidated financial statements.
In March 2020, the FASB issued Topic 848
Reference Rate Reform to provide optional guidance for a limited period of time, from March 12, 2020 through December 31,
2022, to ease the burden of financial reporting due to reference rate reform. An entity can elect to utilize the guidance at any
time during the period.
The Company is evaluating the effect this
guidance will have on the consolidated financial statements and related disclosures.
Restricted cash consisted of the following
as of:
December 31,
|
|
2019
|
|
|
2018
|
|
Gift cards purchased
|
|
$
|
504,682
|
|
|
$
|
445,213
|
|
Advertising co-op funds
|
|
|
158,581
|
|
|
|
68,538
|
|
LevelUp loyalty program
|
|
|
63,742
|
|
|
|
-
|
|
Initial franchise deposits in escrow
|
|
|
-
|
|
|
|
37,495
|
|
|
|
|
|
|
|
|
|
|
Total Restricted Cash
|
|
$
|
727,005
|
|
|
$
|
551,246
|
|
BurgerFi International,
LLC and Subsidiaries
Notes to Consolidated Financial Statements
For the Years Ended December 31, 2019
and 2018
Property and equipment consisted of the
following:
December
31,
|
|
2019
|
|
|
2018
|
|
Leasehold improvements
|
|
$
|
5,723,684
|
|
|
$
|
4,293,900
|
|
Machinery & equipment
|
|
|
2,821,136
|
|
|
|
1,898,000
|
|
Computer equipment
|
|
|
560,085
|
|
|
|
472,457
|
|
Furniture & fixtures
|
|
|
1,277,775
|
|
|
|
1,280,300
|
|
Vehicles
|
|
|
50,000
|
|
|
|
50,000
|
|
|
|
|
10,432,680
|
|
|
|
7,994,657
|
|
Less: Accumulated depreciation and amortization
|
|
|
4,132,062
|
|
|
|
3,336,216
|
|
|
|
|
|
|
|
|
|
|
Property and equipment – net
|
|
$
|
6,300,618
|
|
|
$
|
4,658,441
|
|
|
4.
|
Related
Party Transactions
|
The Company is affiliated with various
entities through common control and ownership. The accompanying consolidated balance sheets reflect amounts related to periodic
advances between the Company and these entities for working capital and other needs as due from related companies or due to related
companies, as appropriate. The amounts due from related companies are not expected to be repaid within one year and accordingly,
are classified as non-current assets in the accompanying consolidated balance sheets. These advances are unsecured and non-interest
bearing.
There were approximately $3,612,000 and
$5,991,000 included as due from related companies, and $271,000 and $924,000 included as due to related companies in the consolidated
balance sheets, as of December 31, 2019 and 2018, respectively
During 2019 and 2018, the Company received
royalty revenues from franchisees related through common control and ownership totaling approximately $1,182,000 and $1,055,000,
respectively.
The Company pays certain payroll and administrative
fees on behalf of the entities under common ownership. A management fee is then billed to the respective entities to cover these
costs. Management fees are included as reductions to the related operating expenses. During 2019, the Company billed approximately
$60,000 of management fees. During 2018, the Company billed approximately $504,000 of management fees of which $504,000 are included
as due from related companies as of December 31, 2018.
The Company leases building space for
its corporate office from an entity under common ownership with its member on a month-to-month basis starting in 2012. Rent expense
for each of the years ended December 31, 2019 and 2018 was approximately $160,000.
BurgerFi International,
LLC and Subsidiaries
Notes to Consolidated Financial Statements
For the Years Ended December 31, 2019
and 2018
Other assets consisted of the following:
December 31,
|
|
2019
|
|
|
2018
|
|
Liquor license
|
|
$
|
210,000
|
|
|
$
|
210,000
|
|
Lease Acquisition Costs, net of accumulated amortization
|
|
|
47,518
|
|
|
|
77,528
|
|
Trademark
|
|
|
25,000
|
|
|
|
25,000
|
|
Deposits and other non-current assets
|
|
|
190,176
|
|
|
|
194,412
|
|
|
|
|
|
|
|
|
|
|
Other assets
|
|
$
|
472,694
|
|
|
$
|
506,940
|
|
Liquor license is considered to have an
indefinite life and is reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of
the asset may not be recoverable. No impairments were recognized for the years ended December 31, 2019 and 2018.
|
6.
|
Commitments
and Contingencies
|
Leases
The Company has entered into operating
leases for each of the nine restaurants owned and operated by BF Restaurant Management, LLC. Rent expense for the restaurants
during the years ended December 31, 2019 and 2018 was approximately $2,013,000 and $1,868,000, respectively. These lease agreements
expire on various dates through 2026 and have renewal options. Approximate future minimum payments on these operating leases for
the years ended December 31 are as follows:
2020
|
|
$
|
1,502,000
|
|
2021
|
|
|
1,960,000
|
|
2022
|
|
|
1,875,000
|
|
2023
|
|
|
1,897,000
|
|
2024
|
|
|
1,333,000
|
|
Thereafter
|
|
|
3,223,000
|
|
Contingencies
BurgerFi International, LLC filed a lawsuit
against a franchisee and its principals seeking declaratory judgments and damages in an amount to be proven at trial for various
breaches of the applicable franchise agreements resulting from the defendants’ closure of a restaurant, their failure to
open a second restaurant, and their operational defaults at the closed restaurant. In April 2016, the defendants filed a counterclaim,
asserting that they had no responsibility for their losses, and instead, alleged that the Company engaged in breach of contract,
fraud, misrepresentation, conversion in connection with the operation of the restaurant, and various other allegations, seeking
damages of over $5 million. The case is pending before the court. On December 30, 2016, the court stayed the case pending the
resolution of bankruptcy filings made by some of the defendants. No further action has occurred.
BurgerFi International,
LLC and Subsidiaries
Notes to Consolidated Financial Statements
For the Years Ended December 31, 2019
and 2018
A franchisee filed a suit against BurgerFi
International, LLC seeking unspecified damages in connection with plaintiff’s execution of franchise agreements for the
development of 11 BurgerFi restaurants in certain specified trade areas. The franchisee alleges that BurgerFi International, LLC
fraudulently induced the franchisee to enter into these agreements, and claimed fraud in the inducement, negligent misrepresentation,
breach of implied covenant of good faith and fair dealing, violation of FDUTPA and Florida’s Franchise Misrepresentation
Act by BurgerFi International, LLC. Management denies any wrongdoing and believes the claims to be baseless. The Company filed
a counterclaim for breach of contract and intends to pursue its claim against the plaintiff. The plaintiff has moved to dismiss
the Company’s counterclaim, which remains pending. While management intends to vigorously dispute the claims if continued
in the court system, the parties have reached a settlement in principal. No further action has occurred.
On December 1, 2019, a complaint was filed
by a former officer of the Company (“Plaintiff”) against BurgerFi International, LLC for certain alleged breaches
of an employment agreement. BurgerFi International, LLC filed a motion to dismiss the complaint on February 13, 2020. On May 20,
2020, the motion to dismiss was heard being granted in part and denied in part. The portion of the complaint not dismissed was
answered by BurgerFi International, LLC with affirmative defenses raised on July 7, 2020.The plaintiff served various discovery
requests (including notices of non-party subpoenas) on July 9, 2020 as well as a motion to strike BurgerFi International, LLC’s
affirmative defenses on July 16, 2020. BurgerFi International, LLC filed objections to the non-party subpoenas on July 20, 2020.
On July 8, 2020, the Company received
a letter from an attorney hired on behalf of a former employee of the Company. This former employee was terminated for cause on
May 5, 2020. This letter claims that the former employee was terminated wrongfully by the Company. The Company is of the opinion
that allegations in this letter lack merit. We have reported the claim to our insurance carrier and outside counsel has been retained.
Our counsel sent a letter to this former employee’s attorney lawyer denying all claims and the parties met for mediation
on September 4, 2020, but were unable to resolve this matter We feel that all claims are meritless, and we plan to vigorously
defend these allegations.
Management is unable to determine the
likelihood of a loss or range of loss, if any, which may result from the cases described above, therefore, no contingent liability
has been recorded as of December 31, 2019.
The Company is subject to other legal
proceedings and claims that arise during the normal course of business. Management believes that any liability, in excess of applicable
insurance coverages or accruals, which may result from these claims, would not be significant to the Company’s financial
position or results of operations.
BurgerFi International,
LLC and Subsidiaries
Notes to Consolidated Financial Statements
For the Years Ended December 31, 2019
and 2018
Line of Credit
Effective July 13, 2018, the Company entered
into a $2,000,000 revolving line of credit agreement (“LOC”) with a bank. The LOC’s original maturity date was
July 13, 2020 and has been extended to July 13, 2021. On October 31, 2019, the LOC was amended to increase the amount available
under the LOC from $2,000,000 to $5,000,000. The Company has an outstanding balance on the revolving line credit of $2,317,000
as of December 31, 2019. The majority member of the Company and his Family Trust are guarantors of, and the Family Trust is a
pledger of collateral, for the Company’s obligations to the bank under the line of credit agreement. The annual interest
on advances under the LOC is equal to the LIBOR Daily Floating rate plus 0.75%.
Notes Payable
|
|
December
31,
2019
|
|
|
December
31,
2018
|
|
|
|
|
|
|
|
|
Installment note payable to bank, monthly payments of $8,638, including interest
at 7.75%, principal and interest due at the earlier of, September 23, 2024 or the date of the Company’s termination
of the APM (see Note 1). This note is secured by equipment, and is guaranteed by the franchisee under the APM, its members
and their affiliates. As of December 31, 2019, this note is in default and classified as current. The Company elected not
to continue payment while negotiating with the banks to release the lien on the restaurant assets which the Company is managing
under the APM. No recourse to the general credit of the Company.
|
|
$
|
468,080
|
|
|
$
|
511,698
|
|
|
|
|
|
|
|
|
|
|
Installment note payable to bank, monthly payments of $3,564, including interest at 5.3%, principal
and interest due at the earlier of May 17, 2027 or the date of the Company’s termination of the APM (see Note 1). This
note is secured by equipment, guaranteed by the franchisee under the APM, its members and their affiliates. As of December
31, 2019, this note is in default and classified as current. The Company elected not to continue payment while negotiating
with the banks to release the lien on the restaurant assets which the Company is managing under the APM. No recourse to the
general credit of the Company.
|
|
|
258,109
|
|
|
|
286,304
|
|
|
|
|
|
|
|
|
|
|
Installment note payable to bank, monthly payments of $2,883, including interest at 5.0%, principal
and interest due the earlier of August 4, 2026 or the date of the Company’s termination of the APM (see Note 1). This
note is secured by equipment, guaranteed by the franchisee under the APM, its members and their affiliates. As of December
31, 2019, this note is in default and classified as current. No recourse to the general credit of the Company.
|
|
|
409,177
|
|
|
|
423,055
|
|
|
|
|
|
|
|
|
|
|
Other notes payable No recourse to the general credit of the Company.
|
|
|
71,706
|
|
|
|
71,706
|
|
|
|
|
|
|
|
|
|
|
Total notes payable
|
|
$
|
1,207,072
|
|
|
$
|
1,292,763
|
|
|
|
|
|
|
|
|
|
|
Less: current portion
|
|
|
(1,207,072
|
)
|
|
|
(180,026
|
)
|
|
|
|
|
|
|
|
|
|
Total notes payable - long-term portion
|
|
$
|
-
|
|
|
$
|
1,112,737
|
|
BurgerFi International,
LLC and Subsidiaries
Notes to Consolidated Financial Statements
For the Years Ended December 31, 2019
and 2018
|
9.
|
Supplemental
Disclosure of Noncash Activities
|
During 2018, one of the members contributed
their interest in a franchise location to the Company. The total non-cash component of the transaction consisted of the following:
Fixed assets
|
|
$
|
152,141
|
|
Inventory and other assets
|
|
|
145,349
|
|
Amounts due to related companies
|
|
|
(277,301
|
)
|
Accounts payable and other liabilities
|
|
|
(79,739
|
)
|
Members equity
|
|
|
(28,204
|
)
|
|
|
|
|
|
Total cash contributed
|
|
$
|
87,754
|
|
As described in Note 1, on the Takeover
Date, the Company entered into the APM resulting in the consolidation of the franchisee for debt totaling approximately $1,291,000,
non-cash tangible assets of approximately $1,183,000, intangible assets of approximately $398,000, and other liabilities of approximately
$330,000.
The Company has evaluated events and transactions
that occurred between December 31, 2019 and September 25, 2020, which is the date that the consolidated financial statements were
available to be issued for possible recognition or disclosure in the consolidated financial statements.
As
discussed in Note 1, the WHO classified the COVID-19 outbreak as a pandemic in March 2020, based on the rapid increase in exposure
globally.
The
full impact of the COVID-19 outbreak continues to evolve as of the date of this report. The Company has experienced a significant
decrease in revenue in March and April of 2020 as compared to the prior year due to temporary closures of certain restaurants
and reduced revenues at those restaurants which remain open. Management is actively monitoring the situation and the potential
impact on its financial condition, liquidity, operations, suppliers, industry, and workforce. Given the daily evolution of the
COVID-19 outbreak and the global responses to curb its spread, the Company is not able to estimate the future effects of the COVID-19
outbreak on its results of operations, financial condition or liquidity, however, if the pandemic continues, it may have a significant
adverse effect on the Company’s results of future operations, financial position, and liquidity in fiscal year 2020.
BurgerFi International,
LLC and Subsidiaries
Notes to Consolidated Financial Statements
For the Years Ended December 31, 2019
and 2018
On
March 27, 2020, the CARES Act was signed into law. The CARES Act, among other things, includes provisions relating to refundable
payroll tax credits, deferment of employer side social security payments, net operating loss carryback periods, alternative minimum
tax credit refunds, modifications to the net interest deduction limitations, increased limitations on qualified charitable contributions
and technical corrections to tax depreciation methods for qualified improvement property.
It
also appropriated funds for the SBA Paycheck Protection Program loans that are forgivable in certain situations to promote continued
employment, as well as Economic Injury Disaster Loans to provide liquidity to small businesses harmed by COVID-19. From May 4,
2020 to May 11, 2020, the Company received funding of approximately $2.2 million from loans under the SBA Paycheck Protection
Program. The application for these funds requires the Company to, in good faith, certify that the current economic uncertainty
made the loan request necessary to support the ongoing operations of the Company. This certification further requires the Company
to take into account our current business activity and our ability to access other sources of liquidity sufficient to support
ongoing operations in a manner that is not significantly detrimental to the business. The receipt of these funds, and the forgiveness
of the loan attendant to these funds, is dependent on the Company having initially qualified for the loan and qualifying for the
forgiveness of such loan based on our future adherence to the forgiveness criteria.
In
February 2020, the Company entered into an asset purchase agreement with an unrelated third party for the sale of substantially
all of the assets used in connection with the operation of BF Dania Beach, LLC for an aggregate purchase price of $1,299,000.
During January to March 2020, the Company received three cash deposits totaling $906,500 in connection with this transaction.
The closing of this transaction has been delayed due to the uncertainty of the COVID-19 outbreak. In the event the transaction
is terminated, the Company will keep operating the restaurant, and return the $906,500 to the unrelated third-party purchaser.
In
April 2020, the Company entered into an asset purchase agreement with a franchisee to purchase substantially all of the assets
of a franchised store for an aggregate purchase price of $1,250,000. This purchase price consisted of: (a) $650,000 cash paid
at closing and (b) a $600,000 promissory note to the franchisee.
On June 29, 2020, OPES entered into the
MIP with the Company, members of the Company and BurgerFi Holdings, LLC wherein OPES will purchase 100% of the membership interests
of the Company resulting in the Company becoming a wholly owned subsidiary of OPES with total acquisition consideration of $100,000,000
payable as follows:
|
(i)
|
a cash
payment in the aggregate amount of $30,000,000 payable to the Members;
|
|
(ii)
|
$20,000,000
payable either in cash or in shares of OPES common stock valued at $10.60 per share,
in the sole and absolute discretion of the OPES Board of Directors; and
|
|
(iii)
|
the
issuance in the aggregate of 4,716,981 shares of OPES common stock to the Company’s
members.
|
The members of the Company will be entitled
to receive additional acquisition consideration in the form of shares of OPES common stock on a pro-rata basis based on their
ownership percentages in the Company, subject to OPES achieving certain share price targets post-closing.
The Company entered into a membership
purchase agreement on August 17, 2020 to acquire the 40% non-controlling interest in BF Pembroke Pines, LLC. for a purchase price
of $175,000. The closing occurred on August 31, 2020.
Effective August 14, 2020, the Company
extended the maturity date on its revolving line of credit until July 13, 2021.
BurgerFi International,
LLC and Subsidiaries
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
|
|
September 30,
|
|
|
December 31,
|
|
|
|
2020
|
|
|
2019
|
|
|
|
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
CURRENT ASSETS
|
|
|
|
|
|
|
Cash -, including variable interest entities of $3,385 and
$3,385, respectively
|
|
$
|
2,768,169
|
|
|
$
|
1,689,658
|
|
Cash - restricted - Note 2
|
|
|
474,886
|
|
|
|
727,005
|
|
Accounts receivable, net - Note 1
|
|
|
495,990
|
|
|
|
517,133
|
|
Inventory
|
|
|
266,834
|
|
|
|
249,228
|
|
Asset held for sale
|
|
|
755,252
|
|
|
|
-
|
|
Other current assets
|
|
|
174,014
|
|
|
|
415,960
|
|
TOTAL CURRENT ASSETS
|
|
|
4,935,145
|
|
|
|
3,598,984
|
|
|
|
|
|
|
|
|
|
|
PROPERTY & EQUIPMENT, net - Note
3 – including variable interest entities of $727,933 and $853,343, respectively
|
|
|
6,935,589
|
|
|
|
6,300,618
|
|
|
|
|
|
|
|
|
|
|
DUE FROM RELATED COMPANIES - Note 4
|
|
|
5,166,938
|
|
|
|
3,611,536
|
|
|
|
|
|
|
|
|
|
|
GOODWILL – including variable
interest entities of $397,621 and $397,621, respectively
|
|
|
1,382,621
|
|
|
|
397,621
|
|
|
|
|
|
|
|
|
|
|
OTHER ASSETS
|
|
|
454,987
|
|
|
|
472,694
|
|
|
|
|
|
|
|
|
|
|
TOTAL ASSETS
|
|
$
|
18,875,280
|
|
|
$
|
14,381,453
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND MEMBERS’ EQUITY
|
|
|
|
|
|
|
|
|
CURRENT LIABILITIES
|
|
|
|
|
|
|
|
|
Accounts payable - trade
|
|
$
|
1,959,552
|
|
|
$
|
1,264,852
|
|
Accrued expenses
|
|
|
767,519
|
|
|
|
544,734
|
|
Gift card liability
|
|
|
406,619
|
|
|
|
585,827
|
|
Revolving line of credit
|
|
|
2,664,159
|
|
|
|
2,317,000
|
|
Note payable - current including variable interest
entities of $1,207,072 and $1,207,072, respectively which are non-recourse to the general credit of the Company
|
|
|
1,277,542
|
|
|
|
1,207,072
|
|
Current portion deferred initial franchise fees - Note 1
|
|
|
443,174
|
|
|
|
438,085
|
|
Other deposit
|
|
|
906,500
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
TOTAL CURRENT LIABILITIES
|
|
|
8,425,065
|
|
|
|
6,357,570
|
|
|
|
|
|
|
|
|
|
|
NON-CURRENT LIABILITIES
|
|
|
|
|
|
|
|
|
Deferred initial franchise fees, net of current portion
- Note 1
|
|
|
4,340,243
|
|
|
|
4,249,836
|
|
Due to related companies - Note 4
|
|
|
26,000
|
|
|
|
271,448
|
|
Notes payable
|
|
|
2,913,606
|
|
|
|
-
|
|
Deferred rent
|
|
|
1,366,887
|
|
|
|
995,615
|
|
|
|
|
|
|
|
|
|
|
TOTAL LIABILITIES
|
|
|
17,071,801
|
|
|
|
11,874,469
|
|
|
|
|
|
|
|
|
|
|
COMMITMENTS AND CONTINGENCIES - Note 6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
MEMBERS’
EQUITY - Before non-controlling interest – including variable interest entities of $(78,133) and $47,277
|
|
|
1,803,479
|
|
|
|
2,492,129
|
|
|
|
|
|
|
|
|
|
|
MEMBERS’ EQUITY - Non-controlling interest
|
|
|
-
|
|
|
|
14,855
|
|
|
|
|
|
|
|
|
|
|
TOTAL LIABILITIES AND MEMBERS’
EQUITY
|
|
|
18,875,280
|
|
|
$
|
14,381,453
|
|
See accompanying notes to consolidated
financial statements.
BurgerFi International,
LLC and Subsidiaries
CONDENSED CONSOLIDATED STATEMENTS OF
INCOME
Unaudited
|
|
Nine Months Ended
September 30,
|
|
|
|
2020
|
|
|
2019
|
|
|
|
|
|
|
|
|
REVENUES
|
|
|
|
|
|
|
|
|
Restaurant Sales - Note 1
|
|
$
|
18,892,131
|
|
|
$
|
17,641,150
|
|
Royalty and other fees - Note 1
|
|
|
4,686,706
|
|
|
|
5,373,046
|
|
Terminated franchise fees - Note 1
|
|
|
42,620
|
|
|
|
693,158
|
|
Royalties - brand development and co-op - Note 1
|
|
|
1,053,537
|
|
|
|
1,286,232
|
|
Initial franchise fees - Note 1
|
|
|
264,393
|
|
|
|
342,248
|
|
TOTAL REVENUES
|
|
|
24,939,387
|
|
|
|
25,335,834
|
|
|
|
|
|
|
|
|
|
|
Restaurant level operating expenses:
|
|
|
|
|
|
|
|
|
Food, beverage and paper costs
|
|
|
5,046,925
|
|
|
|
4,669,474
|
|
Labor and related expenses
|
|
|
5,482,141
|
|
|
|
5,784,239
|
|
Other operating expenses
|
|
|
4,575,366
|
|
|
|
3,914,792
|
|
Occupancy and related expenses
|
|
|
2,107,795
|
|
|
|
1,573,992
|
|
General and administrative expenses
|
|
|
4,986,598
|
|
|
|
5,249,747
|
|
Depreciation and amortization expense
|
|
|
810,835
|
|
|
|
589,907
|
|
Brand development and co-op advertising expense
|
|
|
1,822,165
|
|
|
|
1,398,490
|
|
|
|
|
|
|
|
|
|
|
TOTAL OPERATING EXPENSES
|
|
|
24,831,825
|
|
|
|
23,180,641
|
|
OPERATING INCOME
|
|
|
107,562
|
|
|
|
2,155,193
|
|
Interest expense
|
|
|
(97,252
|
)
|
|
|
(62,019
|
)
|
NET INCOME
|
|
|
10,310
|
|
|
|
2,093,174
|
|
|
|
|
|
|
|
|
|
|
Net Income Attributable to Non-Controlling
Interests
|
|
|
20,692
|
|
|
|
37,345
|
|
Net Income (Loss) Attributable to Controlling Interests
|
|
$
|
(10,382
|
)
|
|
$
|
2,055,829
|
|
See accompanying notes to consolidated
financial statements.
BurgerFi
International, LLC and Subsidiaries
CONDENSED CONSOLIDATED
STATEMENTS OF CHANGES IN MEMBERS’ EQUITY
(Unaudited)
|
|
Controlling
Interest
|
|
|
NonControlling
Interest
|
|
|
Total
Members’ Equity
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2018
|
|
$
|
3,626,167
|
|
|
$
|
(20,587
|
)
|
|
$
|
3,605,580
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
2,055,829
|
|
|
|
37,345
|
|
|
|
2,093,174
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Distributions
|
|
|
(1,631,403
|
)
|
|
|
-
|
|
|
|
(1,631,403
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, September 30, 2019
|
|
$
|
4,050,593
|
|
|
$
|
16,758
|
|
|
$
|
4,067,351
|
|
|
|
Controlling
Interest
|
|
|
NonControlling
Interest
|
|
|
Total
Members’ Equity
|
|
Balance, December 31, 2019
|
|
$
|
2,492,129
|
|
|
$
|
14,855
|
|
|
$
|
2,506,984
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income (Loss)
|
|
|
(10,382
|
)
|
|
|
20,692
|
|
|
|
10,310
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Distributions
|
|
|
(678,268
|
)
|
|
|
(35,547
|
)
|
|
|
(713,815
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, September 30, 2020
|
|
$
|
1,803,479
|
|
|
$
|
-
|
|
|
$
|
1,803,479
|
|
See accompanying
notes to consolidated financial statements.
BurgerFi
International, LLC and Subsidiaries
CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS
(Unaudited)
|
|
September
30,
|
|
|
|
2020
|
|
|
2019
|
|
|
|
|
|
|
|
|
CASH FLOWS PROVIDED BY (USED IN)
OPERATING ACTIVITIES
|
|
|
|
|
|
|
Net
Income
|
|
$
|
10,310
|
|
|
$
|
2,093,174
|
|
Adjustments
to reconcile net income to net cash provided by operating activities
|
|
|
|
|
|
|
|
|
Depreciation and
amortization
|
|
|
810,835
|
|
|
|
589,907
|
|
Changes in operating
assets and liabilities
|
|
|
|
|
|
|
|
|
Accounts receivable
|
|
|
21,143
|
|
|
|
(127,410
|
)
|
Inventory
|
|
|
(2,606
|
)
|
|
|
(93,259
|
)
|
Other assets
|
|
|
237,144
|
|
|
|
(16,643
|
)
|
Accounts payable
- trade
|
|
|
694,700
|
|
|
|
(291,125
|
)
|
Accrued expenses
and gift card liability
|
|
|
43,579
|
|
|
|
(96,682
|
)
|
Deferred franchise
fees and deposits
|
|
|
95,496
|
|
|
|
(315,438
|
)
|
Other liabilities
|
|
|
371,272
|
|
|
|
104,918
|
|
|
|
|
|
|
|
|
|
|
NET CASH PROVIDED
BY OPERATING ACTIVITIES
|
|
|
2,281,873
|
|
|
|
1,847,442
|
|
|
|
|
|
|
|
|
|
|
NET CASH FLOWS PROVIDED BY (USED IN) INVESTING
ACTIVITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchase of store
|
|
|
(650,000
|
)
|
|
|
-
|
|
Deposit on sale
|
|
|
906,500
|
|
|
|
-
|
|
Purchase of property
and equipment
|
|
|
(1,928,549
|
)
|
|
|
(1,359,748
|
)
|
Advances to related
companies
|
|
|
(6,873,967
|
)
|
|
|
(8,543,033
|
)
|
Repayments from
related companies
|
|
|
5,073,117
|
|
|
|
7,507,410
|
|
|
|
|
|
|
|
|
|
|
NET CASH USED
IN INVESTING ACTIVITIES
|
|
|
(3,472,899
|
)
|
|
|
(2,395,371
|
)
|
|
|
|
|
|
|
|
|
|
NET CASH FLOWS PROVIDED BY (USED IN) FINANCING
ACTIVITIES
|
|
|
|
|
|
|
|
|
Proceeds from revolving
line of credit
|
|
|
1,648,000
|
|
|
|
1,879,000
|
|
Payments on revolving
line of credit
|
|
|
(1,300,841
|
)
|
|
|
-
|
|
Notes payable proceeds
|
|
|
2,406,492
|
|
|
|
-
|
|
Payments on notes
payable
|
|
|
(22,418
|
)
|
|
|
(80,613
|
)
|
Members’
distributions
|
|
|
(713,815
|
)
|
|
|
(1,631,403
|
)
|
|
|
|
|
|
|
|
|
|
NET CASH PROVIDED
BY FINANCING ACTIVITIES
|
|
|
2,017,418
|
|
|
|
166,984
|
|
|
|
|
|
|
|
|
|
|
NET INCREASE (DECREASE) IN CASH AND RESTRICTED
CASH
|
|
|
826,392
|
|
|
|
(380,945
|
)
|
|
|
|
|
|
|
|
|
|
CASH AND RESTRICTED CASH, beginning of
period
|
|
|
2,416,663
|
|
|
|
2,251,743
|
|
|
|
|
|
|
|
|
|
|
CASH AND RESTRICTED CASH, end of period
|
|
$
|
3,243,055
|
|
|
$
|
1,870,798
|
|
See accompanying notes to consolidated
financial statements.
BurgerFi
International, LLC and Subsidiaries
|
Notes
to Condensed Consolidated Financial Statements
|
For
the Nine Months Ended September 30, 2020 and 2019
|
(Unaudited)
|
1.
|
Nature of Operations and Summary of Significant Accounting Policies
|
Nature of operations
BurgerFi International, LLC, (a Delaware
limited liability company) and Subsidiaries (collectively, the “Company”) is the exclusive franchisor of the BurgerFi
concept. The BurgerFi concept is a quick service restaurant offering handcrafted natural Angus gourmet burgers, hot dogs, chicken,
fresh cut fries, craft beers, wine and freshly prepared custards in an urban environment. Franchises are sold in restricted geographical
territories. The Company has prepared its Franchise Disclosure Document as required by the United States Federal Trade Commission
and has registered or will register in those states where required in order to legally sell its franchises. It is currently the
Company’s plan to offer franchises for sale in those states where demographics of the population represent a demand for
the services. The Company grants franchises to independent operators who in turn pay an initial franchise fee, royalties and other
fees as stated in the franchise agreement. The Company is 90% owned by BurgerFi Holdings, LLC, a Delaware limited liability company,
and 10% by a trust.
Store activity for the nine months
ended September 30, 2020 and the year ended December 31, 2019 is as follows:
|
|
September
30,
2020
|
|
|
December
31,
2019
|
|
Franchised stores, beginning of period
|
|
|
117
|
|
|
|
109
|
|
Stores opened during the period
|
|
|
5
|
|
|
|
15
|
|
Stores closed during the period
|
|
|
19
|
|
|
|
7
|
|
Franchised stores, end of period
|
|
|
103
|
|
|
|
117
|
|
|
|
September 30,
2020
|
|
|
December 31,
2019
|
|
Company-owned stores, beginning of year
|
|
|
13
|
|
|
|
11
|
|
Stores opened during the year
|
|
|
3
|
|
|
|
3
|
|
Stores closed during the year
|
|
|
0
|
|
|
|
1
|
|
Company-owned stores, end of year
|
|
|
16
|
|
|
|
13
|
|
End of period franchised store totals included
five international stores at September 30, 2020 and at December 31, 2019.
In 2018, the Company’s members
contributed their interests in one additional restaurant to BF Restaurant Management, LLC, which is 40% owned by an unrelated
party, resulting in the presentation of a non-controlling interest in the consolidated financial statements. On August 17, 2020,
the Company purchased the membership interests of this 40% unrelated party in full for $175,000. Through the closing date, the
non controlling interest recognized net income of $20,692 for the nine months ended September 30, 2020.
During the nine months ended September
30, 2020 and 2019, the Company’s members did not contribute any interests to BF Restaurant Management, LLC.
Liquidity and COVID-19
On January 30, 2020, the World Health
Organization (“WHO”) announced a global health emergency because of a new strain of coronavirus originating in Wuhan,
China (the “COVID-19 outbreak”) and the risks to the international community as the virus spreads globally beyond
its point of origin. In March 2020, the WHO classified the COVID-19 outbreak as a pandemic, based on the rapid increase in exposure
globally. On March 27, 2020, the “Coronavirus Aid, Relief and Economic Security (CARES) Act” was signed into law.
The CARES Act, among other things, includes provisions relating to refundable payroll tax credits, and deferment of employer side
social security payments. As a result of the COVID-19 outbreak, the Company is experiencing temporary closures of certain restaurants
and reduced revenues at those restaurants which remain open, which may have a significant impact on the Company’s 2020 revenues
and cash flows. However, the Company has taken steps to reduce operating costs through reductions in payroll expenses to conserve
cash. Management continues to actively manage and monitor its cash flows and has the ability to further reduce certain expenses
as necessary. From May 4, 2020 to May 11, 2020, the Company received approximately $2.2 million from stimulus loans under the
SBA Paycheck Protection Program of the CARES Act. As a result, management believes that the Company has sufficient resources to
fund its operations through at least twelve months from the date of this report. The stimulus loan bears interest at a fixed rate
of 1% per annum, with the first six months of interest deferred, has a term of two years, and is unsecured and guaranteed by the
SBA. The Company intends to apply to the lender for forgiveness of the stimulus loan, with the amount which may be forgiven equal
to the sum of payroll costs, covered rent and other obligations, and covered utility payments incurred by the Company during the
permitted period beginning on May 2020, calculated in accordance with the terms of the CARES Act. The Company’s eligibility
for the stimulus loan, expenditures that qualify toward forgiveness, and the final balance of the stimulus loan that may be forgiven
are subject to audit and final approval by the SBA. To the extent that all or part of the stimulus loan is not forgiven, the Company
will be required to pay interest at 1% and, commencing in August 2021 (which is 10 months subsequent to the 24 month forgiveness
period). Interest payments will be required through the maturity date in May 2022. The terms of the stimulus loan provide for
customary events of default including, among other things, payment defaults, breach of representations and warranties, and insolvency
events. The stimulus loan may be accelerated upon the occurrence of an event of default, including if the SBA subsequently reaches
an audit determination that the Company does not meet the eligibility criteria.
The stimulus loan is being accounted for under
ASC 470, Debt, whereby interest expense is being accrued at the contractual rate and future debt maturities are based on
the assumptions that none of the principal balance will be forgiven. Forgiveness, if any, will be recognized as a gain on extinguishment
if the lender legally releases the Company based on the criteria set forth in the debt agreement and the CARES Act.
BurgerFi
International, LLC and Subsidiaries
|
Notes to Condensed
Consolidated Financial Statements
|
(Unaudited)
|
The full impact of the COVID-19 outbreak
continues to evolve as of the date of this report. The Company had experienced a significant decrease in revenue in March and
April of 2020 as compared to the prior year due to temporary closures of certain restaurants and reduced revenues at those restaurants
which remain open. Management is actively monitoring the situation and the potential impact on its financial condition, liquidity,
operations, suppliers, industry, and workforce. Given the daily evolution of the COVID-19 outbreak and the global responses to
curb its spread, the Company is not able to estimate the future effects of the COVID-19 outbreak on its results of operations,
financial condition or liquidity, however, if the pandemic continues, it may have a significant adverse effect on the Company’s
results of future operations, financial position, and liquidity in fiscal year 2020.
Basis of Presentation
The accompanying unaudited condensed
consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United
States of America (“U.S. GAAP”) and in accordance with the instructions to Form 10-Q and Article 8 of Regulation S-X. Accordingly,
they do not include all information and notes required by U.S. GAAP for complete financial statements. In the opinion of management,
all adjustments (consisting only of normal recurring adjustments) considered necessary for fair financial statement presentation
have been made. The condensed consolidated results of operations for the nine-month period ended September 30, 2020 are not necessarily
indicative of the results that may be expected for the year ending December 31, 2020, or any other future or annual period.
On June 29, 2020, the Company entered
into the MIP with OPES whereby the Company is expected to become a publicly held company. Therefore, these condensed consolidated
financial statements include the application of U.S. GAAP for public entities. As put forth in the MIP OPES will purchase 100%
of the membership interests of the Company resulting in the Company becoming a wholly owned subsidiary of OPES with total acquisition
consideration of approximately $100,000,000 payable as follows:
(i) a cash payment in the
aggregate amount of $30,000,000 payable to the Members;
(ii) $20,000,000 payable
either in cash or in shares of OPES common stock valued at $10.60 per share, in the sole and absolute discretion of the OPES Board
of Directors; and
(iii) the issuance in the
aggregate of 4,716,981 shares of OPES common stock to the Company’s members.
The members of the Company will be
entitled to receive additional acquisition consideration in the form of shares of OPES common stock on a pro-rata basis based
on their ownership percentages in the Company, subject to OPES achieving certain share price targets post-closing.
Principles of Consolidation
The consolidated financial statements
present the consolidated financial position, results from operations and cash flows of BurgerFi International, LLC, a Delaware
limited liability company, and its wholly owned subsidiaries, BF Restaurant Management LLC, a Florida limited liability company
and BF Commissary, LLC (“BF Commissary”), a Florida limited liability company. BF Restaurant Management LLC, (BFRM),
owns and/or operates fifteen restaurants across Florida, one in Philadelphia, and one in New York. BFRM is made up of the following
owned subsidiaries:
BurgerFi-Delray Beach, LLC, a
Delaware limited liability company
BF Coral Springs, LLC, a Florida
limited liability company
BF City Place-West Palm, LLC,
a Florida limited liability company
BF Commack, LLC, a Florida limited
liability company
BF Jupiter, LLC, a Florida limited
liability company
BF Philadelphia, LLC, a Florida
limited liability company
BF West Delray, LLC, a Florida
limited liability company
BF LBTS, LLC, a Florida limited
liability company
BGM Pembroke Pines, LLC, a Florida
limited liability company
BF Jacksonville Town Center,
LLC, a Florida limited liability company
BF Jacksonville Riverside, LLC,
a Florida limited liability company
BF Delray-Linton, LLC, a Florida
limited liability company
BF Pines City Center, LLC, a
Florida limited liability company
BF Dania Beach, LLC, a Florida
limited liability company
BF Ft Myers-Daniels, LLC, a Florida
limited liability company
BF Boca Raton, LLC, a Florida
limited liability company
BF Boca Raton – Boca Pointe,
LLC, a Florida limited liability company
All material balances and transactions
between the entities have been eliminated in consolidation.
Use of Estimates
The preparation of financial statements
in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets
and liabilities and disclosures of contingencies at the date of the condensed consolidated financial statements and the reported
amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Segment Reporting
The Company owns and operates BurgerFi
restaurants in the United States, and also have domestic and international franchisees. The CODMs are the Company’s President,
Chief Operating Officer and Chief Financial Officer. As the CODMs review financial performance and allocate resources at a consolidated
level on a recurring basis, the Company has one operating reporting segment and one reportable segment.
BurgerFi
International, LLC and Subsidiaries
|
Notes to Condensed
Consolidated Financial Statements
|
(Unaudited)
|
Variable Interest Entities
For VIE(s), the Company assesses whether
the Company is the primary beneficiary as prescribed by the accounting guidance on the consolidation of VIE. The primary beneficiary
of a VIE is the party that has the power to direct the activities that most significantly impact the performance of the entity
and the obligation to absorb the losses or the right to receive the benefits that could potentially be significant to the entity.
The Company has evaluated its business
relationships with franchisees and related parties to identify potential VIEs. While the Company holds a variable interest in
some of the franchised restaurants owned by an affiliated entity, the Company is not the primary beneficiary since it does not
have the power to direct the activities of these franchised restaurants. As a result, the Company does not consolidate these VIEs.
At September 30, 2020, the Company is a guarantor for seven operating leases for BF Secaucus, LLC; BF Tallahassee, LLC; BF Fort
Myers, LLC; BF NY82, LLC; BF Naples Tamiami, LLC; and BF Naples Immokalee. Additionally, the Company is a guarantor for a lease
for The Burger Bunch, LLC, an unrelated party. The Company may become responsible for the payments under its guarantee. The Company
has determined that its maximum exposure to loss results from these lease guarantees which amounts to approximately $6,452,000.
On April 23, 2018 (the “Takeover
Date”), the Company entered into an asset purchase and management agreement (the “APM”) with a multiple unit
franchisee. The APM allowed the Company to acquire the assets of two of the franchisee’s restaurants for the consideration
of the Company making the monthly principal and interest payments on the franchisee’s three bank loans through 2027. The
closing on asset purchase would occur only when the debt was paid in full. The outstanding principal on the loans was approximately
$1,291,000 on the Takeover Date. The APM allowed the Company to take over the management and operation of the two restaurants
with full control over all operational decision making. Under the management agreement, the Company provides all capital for all
of the restaurants’ expenditures it deems appropriate, and pays all costs and expenses associated with the operations. All
cash flow and profits or losses derived from the operations after the Takeover Date belong to the Company. The Company has evaluated
the franchisee which is a party to the APM for VIE accounting under ASC 810 “Consolidation” and has determined that
the franchisee under the APM is a VIE and that the Company is the primary beneficiary, effective on the Takeover Date. Therefore,
the Company has consolidated the franchisee that owned two restaurants as a business combination under ASC 805 Business Combinations.
Included in the consolidated financial statements are the following
from variable interest entities for which the Company is the primary beneficiary:
|
|
September
30,
2020
|
|
|
December 31,
2019
|
|
Cash
|
|
$
|
3,385
|
|
|
$
|
3,385
|
|
Property and equipment
|
|
|
727,933
|
|
|
|
853,343
|
|
Goodwill
|
|
|
397,621
|
|
|
|
397,621
|
|
Total Assets
|
|
$
|
1,128,939
|
|
|
$
|
1,254,349
|
|
|
|
|
|
|
|
|
|
|
Current notes payable
|
|
$
|
1,207,072
|
|
|
$
|
1,207,072
|
|
Total liabilities
|
|
|
1,207,072
|
|
|
|
1,207,072
|
|
Total members’ (deficit) equity
|
|
|
(78,133
|
)
|
|
|
47,277
|
|
Total Liabilities and Members’ Equity
|
|
$
|
1,128,939
|
|
|
$
|
1,254,349
|
|
BurgerFi
International, LLC and Subsidiaries
|
Notes
to Condensed Consolidated Financial Statements
|
(Unaudited)
|
The three loans are collateralized by
the VIEs’ assets and the creditors of the loans do not have recourse to the general credit of the Company. The carrying
value of the VIEs’ assets which collateralize the loans are noted above.
Acquisition
In April 2020, the Company entered into
an asset purchase agreement with a franchisee to purchase substantially all of the assets of a franchised restaurant for an aggregate
purchase price of $1,250,000. This purchase price consisted of $650,000 cash paid at closing and a $600,000 promissory note to
the franchisee. See Note 7 for the terms of the note. The acquisition of the franchise protects the Company’s brand and
expands the Company’s corporate locations and creates synergies in the management.
The acquisition of this franchise location
was accounted for as a business combination under ASC 805 Business Combinations. The purchase price of the acquired business
was allocated based on the estimated fair value of the assets acquired. Liabilities of $16,000 were assumed as part of the acquisition.
The Company incurred transaction costs of $45,000 which are included in general and administrative expenses in the accompanying
consolidated statement of income for the nine months ended September 30, 2020.
The acquisition was recorded based on
the fair values of the assets acquired as of April 30, 2020:
Inventory
|
|
$
|
15,000
|
|
Property & equipment
|
|
|
250,000
|
|
|
|
|
|
|
Net tangible and identifiable intangible assets acquired
|
|
|
265,000
|
|
|
|
|
|
|
Goodwill
|
|
|
985,000
|
|
|
|
|
|
|
Net assets acquired
|
|
$
|
1,250,000
|
|
The acquisition is accounted for as
a business combination under the acquisition method as of the date of acquisition, and accordingly, the results of its operations
are included in the Company’s consolidated financial statements from the acquisition date. Net sales were approximately
$720,000 and net income was approximately $22,000 for this restaurant from the date of the acquisition through September 30, 2020.
Cash and Cash Equivalents
The Company considers highly liquid
investments with maturities of three months or less as cash equivalents. Cash and cash equivalents also include approximately
$29,000 and $339,000 as of September 30, 2020 and December 31, 2019, respectively, of amounts due from commercial credit card
companies, such as Visa, MasterCard, Discover, and American Express, which are generally received within a few days of the related
transactions. At times, the balances in the cash and cash equivalents accounts may exceed federal insured limits.
Restricted Cash
Restricted cash consists of (i) cash collected
(net of redemptions) from gift cards, (ii) cash balances for the advertising co-op, (iii) Level-up loyalty program cash collections,
and (iii) initial franchise deposits in escrow. The Company is the custodian of these account balances, but these accounts are
in place for specific, restricted purposes, which typically are resolved within twelve months. The Company classifies the restricted
cash accounts as current assets.
Accounts receivable
Accounts receivable consist of amounts
due from franchisees for training and royalties and are stated at the amount invoiced. Accounts receivable are stated at the amount
management expects to collect from balances outstanding at year end. Management provides for probable uncollectible amounts through
a charge to earnings and a credit to allowance for uncollectible accounts based on its assessment of the current status of individual
accounts. Balances that are still outstanding after management has used reasonable collection efforts are written off through
a charge to the allowance for uncollectible accounts and a credit to accounts receivable. The allowance for uncollectible accounts
was approximately $73,000 and $65,000, at September 30, 2020 and December 31, 2019, respectively.
Inventories
Inventories primarily consist of food
and beverages. Inventories are accounted for at lower of cost or net realizable value using the first-in, first-out (FIFO) method.
Spoilage is expensed as incurred.
BurgerFi
International, LLC and Subsidiaries
|
Notes
to Condensed Consolidated Financial Statements
|
(Unaudited)
|
Property and Equipment
Property and equipment is carried at cost,
net of accumulated depreciation. Depreciation is provided by the straight-line method over an estimated useful life. Leasehold
improvements are amortized using the straight-line method over the lesser of the estimated useful life of the asset (generally
up to ten years) or the term of the related lease. The estimated lives for machinery and equipment, computer equipment, furniture
and fixtures, and vehicles range from five to seven years. Maintenance and repairs which are not considered to extend the
useful lives of the assets are charged to operations as incurred. Expenditures for additions and improvements are capitalized.
Expenditures for renewals and betterments, which materially extend the useful lives of assets or increase their productivity,
are capitalized. The Company capitalizes construction costs during construction of the restaurant and will begin to depreciate
them once the restaurant is placed in service. Wage costs directly related to and incurred during a restaurant’s construction
period are capitalized. Interest costs incurred during a restaurant’s construction period are capitalized. Upon sale or
retirement, the cost of assets and related accumulated depreciation and amortization are removed from the accounts and any resulting
gains or losses are included in operating expense.
Impairment of Long-Lived Assets
The Company reviews long-lived assets
for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.
Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to future undiscounted
cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized
is measured by the amount by which the carrying amount of the assets exceeds the fair value. Assets to be disposed of are reported
at the lower of the carrying amount or fair value less costs to sell. There were no impairments recognized for the nine-month
periods ended September 30, 2020 and 2019.
Goodwill
As of September 30, 2020, in connection
with the APM and April 2020 acquisition described above, the Company has a balance of approximately $1,383,000 of goodwill on
its condensed consolidated balance sheet. The Company accounts for goodwill in accordance with ASC 350. ASC 350 requires goodwill
to be reviewed for impairment annually, or more frequently if circumstances indicate a possible impairment. The Company evaluates
goodwill in the fourth quarter or more frequently if management believes indicators of impairment exist. Such indicators could
include but are not limited to (1) a significant adverse change in legal factors or in business climate, (2) unanticipated competition,
or (3) an adverse action or assessment by a regulator.
The Company first assesses qualitative
factors to determine whether it is more likely than not that the fair value of the reporting unit is less than its carrying amount,
including goodwill. If management concludes that it is more likely than not that the fair value of the reporting unit is less
than its carrying amount, management conducts a quantitative goodwill impairment test. This impairment test involves comparing
the fair value of the reporting unit with its carrying value (including goodwill). The Company estimates the fair values of its
reporting unit using a combination of the income, or discounted cash flows approach and the market approach, which utilizes comparable
companies’ data. If the estimated fair value of the reporting unit is less than its carrying value, a goodwill impairment
exists for the reporting unit and an impairment loss is recorded. There were no impairments of goodwill recognized for the nine-month
periods ended September 30, 2020 and 2019.
Revenue Recognition
On January 1, 2019, the Company adopted
ASU 2014-09, Revenue from Contracts with Customers (Topic 606), using the modified retrospective method applied to
those contracts which were not completed as of January 1, 2019. The Company elected a practical expedient to aggregate the effect
of all contract modifications that occurred before the adoption date, which did not have a material impact to the consolidated
financial statements. Results for reporting periods beginning on or after January 1, 2019 are presented under ASC 606. Prior period
amounts were not revised and continue to be reported in accordance with ASC 605, the accounting standard then in effect.
Upon transition, on January 1, 2019, we
recorded a decrease to opening members’ equity of $1,201,546, with a corresponding decrease of $348,730 in current
deferred initial franchise fees liability, and an increase of $1,550,276 in long-term deferred initial franchise fee
liabilities.
Revenue consists of restaurant sales and
franchise licensing revenue. Generally, revenue is recognized as performance obligations transfer to the customer in an amount
that reflects the consideration we expect to be entitled in exchange for those goods or services.
Restaurant Revenues
Revenue from restaurant sales is presented
net of discounts and recognized when food, beverage and retail products are sold. Sales tax collected from customers is excluded
from restaurant sales and the obligation is included in sales tax payable until the taxes are remitted to the appropriate taxing
authorities. Sales from our gift cards are deferred and recognized upon redemption for goods or services. Revenues are reported
gross on the accompanying consolidated statements of income and members’ equity with employee complimentary meals recorded
as a component of labor expenses. Revenue from restaurant sales are generally paid at the time of sale. Credit cards and delivery
service partners sales are generally collected within 2-3 days.
The revenue from electronic gift cards
is deferred when purchased by the customer and revenue is recognized when the gift cards are redeemed. The Company is a Delaware
limited liability company and is subject to Delaware escheatment laws. Delaware escheatment laws state that gift cards are presumed
to be abandoned after five years and the balance remitted should represent the maximum cost to the issuer of merchandise. The
accounting for the restaurant revenues were not impacted by the adoption of ASC 606.
BurgerFi
International, LLC and Subsidiaries
|
Notes
to Condensed Consolidated Financial Statements
|
(Unaudited)
|
BFI contracts with delivery service partners
for delivery of goods and services to customers. The Company has determined that the delivery service partners are agents, and
the Company is the principal. Therefore, restaurant sales through delivery services are recognized at gross sales and delivery
service revenue is recorded as expense.
Revenues from BF Commissary
BF Commissary, which commenced operations
in 2019, produces and sells BurgerFi’s vegetable burgers to a distributer based on agreed-upon cost plus freight cost. The
Company recognizes revenue upon pick-up of orders at the designated pick up points or when the distributor obtains control of
the products. For the nine months ended September 30, 2020 and 2019, the Company recognized revenue of $657,839 and $374,926,
respectively, from BF Commissary and is presented as part of restaurant sales in the consolidated statements of income.
Franchise Revenues
The franchise agreements require the franchisee
to pay an initial, non-refundable fee of $37,500 and continuing fees based upon a percentage of sales. Owners can make a deposit
equal to 50% of the total franchise fee to reserve the right to open additional locations. The remaining balance of the franchise
fee is due upon signing by the franchisee of the applicable location’s lease or mortgage. Franchise agreements and deposit
agreements outline a schedule for store openings. Failure to meet the schedule can result in forfeiture of deposits made.
Franchise revenue is comprised of certain
initial franchise fees and ongoing sales-based royalty fees from a franchised BurgerFi restaurant. Generally, the licenses granted
to develop, open and operate each BurgerFi franchise in a specified territory are the performance obligations transferred to the
licensee in our contracts, and represent symbolic intellectual property. Ancillary promised services, such as training and assistance
during the initial opening of a BurgerFi restaurant are typically combined with the licenses and considered as one performance
obligation per BurgerFi franchise. Certain initial services such as site selection and lease review are considered distinct services
that are recognized at a point in time when the performance obligations have been provided, generally when the BurgerFi has been
opened. We determine the transaction price for each contract and allocate it to the distinct services based on their standalone
selling price based on the costs to provide the service and a profit margin. The remainder of the transaction price is recognized
over the remaining term of the franchise agreement once the BurgerFi restaurant has been opened. Because we are transferring licenses
to access our intellectual property during a contractual term, revenue is recognized on a straight-line basis over the license
term. Generally, payment for the initial franchise fee is received upon execution of the licensing agreement These payments are
initially deferred and recognized as revenue as the performance obligations are satisfied.
Franchise deposits received in advance
for locations not expected to open within one year are classified as long-term liabilities. Forfeiture of deposits is recognized
as other revenue once contracts have been terminated for failure to comply. All terminations are communicated to the franchisee
in writing using formal termination letters.
Revenue from sales-based royalties (i.e.
royalty and other fees, brand development and advertising co-op royalties) is recognized as the related sales occur. The sales-based
royalties are invoiced and collected from the franchisees on a weekly basis. Rebates from vendors received on franchisee’s
sales are also recognized as revenue from sales-based royalties.
The Company’s contract liabilities
consist of initial franchise fees and the related direct costs, which we refer to as deferred initial franchise fees, are deferred
until the franchisee begins operations.
The aggregate amount of the transaction
price allocated to performance obligations that are unsatisfied (or partially unsatisfied) as of September 30, 2020 and December
31, 2019 was $4,783,417 and $4,687,921, respectively. The Company expects to recognize this amount as revenue over a long-term
period, as the license term for each BurgerFi franchise is 10 years. This amount excludes any variable consideration related to
sales-based royalties.
Contract Balances
Opening and closing balances of contract
liabilities and receivables from contracts with customers as of September 30, 2020 and December 31, 2019 are as follows:
|
|
September 30,
2020
|
|
|
December 31,
2019
|
|
Franchising receivables
|
|
$
|
319,391
|
|
|
$
|
369,168
|
|
Advertising co-op funds
|
|
|
68,267
|
|
|
|
158,581
|
|
Gift card liability
|
|
|
406,619
|
|
|
|
585,827
|
|
Deferred revenue, current
|
|
|
443,174
|
|
|
|
438,085
|
|
Deferred revenue, long-term
|
|
|
4,340,243
|
|
|
|
4,249,836
|
|
BurgerFi
International, LLC and Subsidiaries
|
Notes
to Condensed Consolidated Financial Statements
|
(Unaudited)
|
Revenue recognized during the nine-month
periods ended September 30, 2020 and 2019, which was included in the balance deferred revenue, current, at the beginning
of each period was $307,013 and $1,035,406, respectively.
Presentation of Sales Taxes
The Company collects sales tax from
customers and remits the entire amount to the respective states. The Company’s accounting policy is to exclude the tax collected
and remitted from revenues and cost of sales. Sales tax payable amounted to approximately $142,000 and $142,000 at September 30,
2020 and at December 31, 2019, respectively, and is presented in accrued expenses and other current liabilities in the accompanying
consolidated balance sheets.
On June 21, 2018, the U.S. Supreme Court
issued a landmark decision in South Dakota v. Wayfair. The Company has assessed the current guidance surrounding the court case
and does not believe the Wayfair decision materially impacts its sales and use tax process. The Company continues to monitor changes
resulting from the Wayfair decision.
Concentration of Credit Risk
Financial instruments that potentially
subject the Company to concentrations of credit risk consist primarily of cash. The Company places its temporary cash investments
with financial institutions and during 2020 and 2019 there were amounts on deposit in excess of federal insurance limits.
Advertising Expenses
Advertising costs are expensed as incurred.
Advertising expenses for the nine months ended September 30, 2020 and 2019 were approximately $353,000 and $478,000, respectively,
including amounts paid to the brand development fund and co-op advertising expenses, as described below.
Brand Development Fund
The Company’s franchise agreements
provide for franchisee contributions of a percentage of gross restaurant sales to a brand development fund administered by the
Company. Amounts collected are required to be segregated and used for advertising and related costs, including reasonable costs
of administering the fund. Contributed amounts are recognized as restricted cash. At September 30, 2020 and 2019, the Company
had revenue of approximately $838,000 and $1,085,000, respectively, of contributions which are included in the brand development
and advertising co-op royalties and approximately $1,403,000 and $1,239,000 of expenses incurred for the nine months ended September
30, 2020 and 2019, respectively, which are included in the royalty-brand development and Co-op revenues and brand development
and Co-op advertising expenses in the consolidated statements of income.
Advertising Co-Op Fund
During 2017, the Company established
an advertising Co-Op fund in which several of the South Florida franchises elected to participate. The members of the Co-Op
elected to contribute a percentage of gross restaurant sales to a fund administered by the Company. Amounts collected are required
to be segregated and used for local advertising and related costs, including reasonable costs of administering the fund. Consequently,
contributed amounts, net of expensed funds are recognized as restricted cash. At September 30, 2020 and 2019, the Company had
revenue of approximately $215,000 and $201,000, respectively, of contributions received, which are included in the brand development
and co-op royalties. In addition, the Company had incurred approximately $419,000 and $160,000 of expenses for the nine months
ended September 30, 2020 and 2019, respectively, which are included in the brand development and Co-op advertising expenses.
Pre-opening Costs
The Company follows ASC Topic 720-15,
“Start-up Costs”, which provides guidance on the financial reporting of start-up costs and organization costs. In
accordance with this ASC Topic, costs of pre-opening activities and organization costs are expensed as incurred. Pre-opening expenses for the nine months ended September 30, 2020 and 2019 were approximately $18,000 and $111,000, respectively.
Deferred Rent
Rent expense on non-cancelable leases
containing known future scheduled rent increases or free rent periods is recorded on a straight-line basis over the respective
lease term. The lease term begins when the Company has the right to control the use of the leased property and includes the initial
non-cancelable lease term plus any periods covered by renewal options that the Company is reasonably assured of exercising. The
difference between rent expense and rent paid is accounted for as deferred rent and is amortized over the lease term.
Operating Leases
The Company leases restaurant locations
that have terms expiring between December 2020 and March 2035. The initial obligation period is generally 10 years. The restaurant
facilities primarily have renewal clauses of two 5-year periods or one 10-year period, exercisable at the option of the Company.
The Company generally include one 5-year renewal option in its lease term.
BurgerFi
International, LLC and Subsidiaries
|
Notes
to Condensed Consolidated Financial Statements
|
(Unaudited)
|
Certain lease agreements contain one or
more of the following: tenant improvement allowances, rent holidays, rent escalation clauses and/or contingent rent provisions.
The Company includes scheduled rent escalation clauses for the purpose of recognizing straight-line rent. Certain of these leases
require the payment of contingent rentals based on a percentage of gross revenues, as defined, and certain other rent escalation
clauses are based on the change in the Consumer Price Index. The Company received cash incentives from certain landlords for specified
leasehold improvements which are deferred and accreted on a straight-line basis over the related lease term as a reduction of
rent expense.
Income Taxes
The Company, with the consent of its members,
has elected to be taxed as a partnership under the provisions of the Internal Revenue Code and similar state provisions. Partnerships
generally are not subject to Federal and state income taxes. In lieu of corporation income taxes, the partners reflect their respective
share of the Company’s taxable income or loss on their individual income tax returns. Accordingly, no provision for income
taxes has been included in the consolidated financial statements.
There were neither liabilities nor deferred
tax assets relating to uncertain income tax positions taken or expected to be taken on the tax returns.
The Company utilizes a two-step approach
for recognizing and measuring uncertain tax positions accounted for in accordance with the asset and liability method. The first
step is to evaluate the tax position for recognition by determining whether evidence indicates that it is more likely than not
that a position will be sustained if examined by a taxing authority.
The second step is to measure the tax
benefit as the largest amount that is 50% likely of being realized upon settlement with a taxing authority. There were no amounts
recorded at September 30, 2020 and December 31, 2019 related to uncertain tax positions, interest or penalties.
New Accounting Pronouncements
In February 2016, the FASB issued ASU
2016-02, which requires lessees to recognize lease assets and lease liabilities on the balance sheet for all leases with terms
longer than 12 months and disclose certain information about the leasing arrangements. Leases will be classified as either finance
or operating, with classification affecting the pattern of expense recognition in the income statement. This guidance became effective
for fiscal years beginning after December 15, 2018 for public entities, except for “emerging growth companies” (as
defined in Section 2(a) of the Securities Act and as modified by the Jumpstart Our Business Startups Act of 2012) and for fiscal
years beginning after December 15, 2019 for all other entities. However, in April 2020, the FASB voted to defer the effective
date of ASC 842 for private companies and certain not-for-profit entities for one year. As such, this will be effective for fiscal
years beginning after December 15, 2021. Since the Company will qualify as an “emerging growth company” after the
closing of the MIP with OPES, it is exempted from being required to comply with new or revised financial accounting standards
until private companies are required to comply with the new or revised financial accounting standards.
The FASB issued Topic 326 in June 2016,
subsequently amended by various standard updates. This guidance replaces the incurred loss impairment methodology in current GAAP
with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable
information when determining credit loss estimates and requires financial assets to be measured net of expected credit losses
at the time of initial recognition. This guidance was to be effective for annual and interim reporting periods beginning after
December 15, 2019, for public entities other than smaller reporting companies. ASU 2019-10 deferred the effective date for smaller
reporting companies and all other entities until years beginning after December 15, 2022. Early adoption is permitted.
In December 2019, the FASB issued Update
2019-12, Income Taxes (“Topic 740”) as part of its Simplification Initiative. This guidance provides amendments to
simplify the accounting for income taxes by removing certain exceptions to the general principles in Topic 740. The amendments
also improve consistent application of and simplify GAAP for other areas of Topic 740 by clarifying and amending existing guidance.
This guidance is effective for annual and interim reporting periods beginning after December 15, 2020, and early adoption is permitted.
We are currently evaluating the full impact this guidance will have on our consolidated financial statements.
In March 2020, the FASB issued Topic 848
Reference Rate Reform to provide optional guidance for a limited period of time, from March 12, 2020 through December 31,
2022, to ease the burden of financial reporting due to reference rate reform. An entity can elect to utilize the guidance at any
time during the period.
The Company is currently evaluating the
effect this guidance will have on the consolidated financial statements and related disclosures.
Sale of Dania Beach Restaurant to
Franchisee
In February 2020, the Company entered
into an asset purchase agreement with an unrelated third party (“Purchaser”) for the sale of substantially all of
the assets used in connection with the operation of BF Dania Beach, LLC for an aggregate purchase price of $1,299,000. The closing
of this transaction was delayed due to the COVID-19 outbreak, until at least the fourth quarter of 2020. The Company received
advances on this purchase totaling $906,500 from the Purchaser from January 2020 to March 2020, which is classified as “Other
Deposit”, and the property and equipment, net of accumulated depreciation for this location in the amount of $755,252 has
been classified as “Asset Held for Sale” on the condensed consolidated balance sheet as of September 30, 2020.
BurgerFi
International, LLC and Subsidiaries
|
Notes
to Condensed Consolidated Financial Statements
|
(Unaudited)
|
Restricted cash consisted of the following
as of:
|
|
September
30,
2020
|
|
|
December 31,
2019
|
|
Gift cards purchased
|
|
$
|
376,030
|
|
|
$
|
504,682
|
|
Advertising co-op funds
|
|
|
68,267
|
|
|
|
158,581
|
|
LevelUp loyalty program
|
|
|
30,589
|
|
|
|
63,742
|
|
|
|
|
|
|
|
|
|
|
Total Restricted Cash
|
|
$
|
474,886
|
|
|
$
|
727,005
|
|
Property and equipment consisted of the
following:
|
|
September 30,
2020
|
|
|
December
31,
2019
|
|
Leasehold improvements
|
|
$
|
6,055,411
|
|
|
$
|
5,723,684
|
|
Machinery & equipment
|
|
|
3,013,056
|
|
|
|
2,821,136
|
|
Computer equipment
|
|
|
667,069
|
|
|
|
560,085
|
|
Furniture & fixtures
|
|
|
1,891,325
|
|
|
|
1,277,775
|
|
Vehicles
|
|
|
50,000
|
|
|
|
50,000
|
|
|
|
|
11,676,861
|
|
|
|
10,432,680
|
|
Less: Accumulated depreciation and amortization
|
|
|
4,741,272
|
|
|
|
4,132,062
|
|
|
|
|
|
|
|
|
|
|
Property and equipment – net
|
|
$
|
6,935,589
|
|
|
$
|
6,300,618
|
|
4.
|
Related Party Transactions
|
The Company is affiliated with various
entities through common control and ownership. The accompanying consolidated balance sheets reflect amounts related to periodic
advances between the Company and these entities for working capital and other needs as due from related companies or due to related
companies, as appropriate. The amounts due from related companies are not expected to be repaid within one year and accordingly,
are classified as non-current assets in the accompanying consolidated balance sheets. These advances are unsecured and non-interest
bearing.
There were approximately $5,167,000
and $3,612,000 included as due from related companies, and approximately $26,000 and $271,000 included as due to related companies
in the condensed consolidated balance sheets as of September 30, 2020 and December 31, 2019, respectively.
For the nine months ended September
30, 2020 and 2019, the Company received royalty revenues from franchisees related through common control and ownership totaling
approximately $913,000 and $872,000, respectively.
The Company pays certain payroll and
administrative fees on behalf of the entities under common ownership. A management fee was billed to the respective entities to
cover these costs through the end of 2019. No amounts were billed in 2020. Management fees are included as reductions to the related
operating expenses. For the nine months ended September 30, 2019, the Company billed approximately $60,000 of management fees.
These amounts are included as due from related companies when billed.
The Company leases building space for
its corporate office from an entity under common ownership with its member on a month-to-month basis starting in 2012. Rent expense
for each of the nine months ended September 30, 2020 and 2019 was approximately $12,000.
BurgerFi
International, LLC and Subsidiaries
|
Notes
to Condensed Consolidated Financial Statements
|
(Unaudited)
|
Other assets consisted of the following:
|
|
September
30,
2020
|
|
|
December 31,
2019
|
|
Liquor license
|
|
$
|
210,000
|
|
|
$
|
210,000
|
|
Lease Acquisition Costs, net of accumulated amortization
|
|
|
32,514
|
|
|
|
47,518
|
|
Trademark
|
|
|
25,000
|
|
|
|
25,000
|
|
Deposits, trademark and other non-current assets
|
|
|
187,473
|
|
|
|
190,176
|
|
|
|
|
|
|
|
|
|
|
Other assets
|
|
$
|
454,987
|
|
|
$
|
472,694
|
|
Liquor license is considered to have
an indefinite life and is reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount
of the asset may not be recoverable. No impairments were recognized for the nine-month periods ended September 30, 2020 and 2019.
6.
|
Commitments and Contingencies
|
Leases
The Company has entered into operating
leases for each of the restaurants owned and operated by BF Restaurant Management, LLC. Rent expense for the restaurants during
the nine months ended September 30, 2020 and 2019 was approximately $1,953,000 and $1,300,000, respectively. These lease agreements
expire on various dates through 2026 and have renewal options. Approximate future minimum payments on these operating leases as
of September 30, 2020 are as follows:
2020
|
|
$
|
1,950,000
|
|
2021
|
|
|
1,898,000
|
|
2022
|
|
|
1,892,000
|
|
2023
|
|
|
1,508,000
|
|
2024
|
|
|
1,114,000
|
|
Thereafter
|
|
|
2,419,000
|
|
Contingencies
BurgerFi International, LLC filed a lawsuit
against a franchisee and its principals seeking declaratory judgments and damages in an amount to be proven at trial for various
breaches of the applicable franchise agreements resulting from the defendants’ closure of a restaurant, their failure to
open a second restaurant, and their operational defaults at the closed restaurant. In April 2016, the defendants filed a counterclaim,
asserting that they had no responsibility for their losses, and instead, alleged that the Company engaged in breach of contract,
fraud, misrepresentation, conversion in connection with the operation of the restaurant, and various other allegations, seeking
damages of over $5 million. The case is pending before the court. On December 30, 2016, the court stayed the case pending the
resolution of bankruptcy filings made by some of the defendants. No further action has occurred.
A franchisee filed a suit against BurgerFi
International, LLC seeking unspecified damages in connection with plaintiff’s execution of franchise agreements for the
development of 11 BurgerFi restaurants in certain specified trade areas. The franchisee alleged that BurgerFi International, LLC
fraudulently induced the franchisee to enter into these agreements, and claimed fraud in the inducement, negligent misrepresentation,
breach of implied covenant of good faith and fair dealing, violation of FDUTPA and Florida’s Franchise Misrepresentation
Act by BurgerFi International, LLC. Management denied any wrongdoing and believed the claims to be baseless. The Company filed
a counterclaim for breach of contract and pursued its claim against the plaintiff. The plaintiff moved to dismiss the Company’s
counterclaim. The parties reached a settlement on November 17, 2020. This settlement resulted in (i) the termination of the franchise
agreement and (ii) the Company will take ownership of the restaurant which this franchisee operated.
BurgerFi
International, LLC and Subsidiaries
|
Notes to Condensed
Consolidated Financial Statements
|
(Unaudited)
|
On December 1, 2019, a complaint was filed
by a former officer of the Company (“Plaintiff”) against BurgerFi International, LLC for certain alleged breaches
of an employment agreement. BurgerFi International, LLC filed a motion to dismiss the complaint on February 13, 2020. On May 20,
2020, the motion to dismiss was heard being granted in part and denied in part. The portion of the complaint not dismissed was
answered by BurgerFi International, LLC with affirmative defenses raised on July 7, 2020.The plaintiff served various discovery
requests (including notices of non-party subpoenas) on July 9, 2020 as well as a motion to strike BurgerFi International, LLC’s
affirmative defenses on July 16, 2020. BurgerFi International, LLC filed objections to the non-party subpoenas on July 20, 2020.
On July 8, 2020, the Company received
a letter from an attorney hired on behalf of a former employee of the Company. This former employee was terminated for cause on
May 5, 2020. This letter claims that the former employee was terminated wrongfully by the Company. The Company is of the opinion
that allegations in this letter lack merit. We have reported the claim to our insurance carrier and outside counsel has been retained.
Our counsel sent a letter to this former employee’s attorney lawyer denying all claims and the parties met for mediation
on September 4, 2020 but were unable to resolve this matter. We feel that all claims are meritless, and we plan to vigorously
defend these allegations.
Management is unable to determine the
likelihood of a loss or range of loss, if any, which may result from the cases described above, therefore, no contingent liability
has been recorded as of September 30, 2020 and December 31, 2019.
The Company is subject to other legal
proceedings and claims that arise during the normal course of business. Management believes that any liability, in excess of applicable
insurance coverages or accruals, which may result from these claims, would not be significant to the Company’s financial
position or results of operations.
Effective July 13, 2018, the Company
entered into a $2,000,000 revolving line of credit agreement (“LOC”) with a bank. The majority member of the Company
and his Family Trust are guarantors of, and the Family Trust is a pledger of collateral, for the Company’s obligations to
the bank under the line of credit agreement. The LOC initially had a maturity date of July 13, 2020 and has been extended to July
13, 2021. The annual interest on advances under the LOC is equal to the LIBOR Daily Floating rate plus 0.75%, which at September
30, 2020 was 0.89%. On October 31, 2019, the LOC was amended to increase the amount available under the LOC from $2,000,000 to
$5,000,000. Effective August 14, 2020, the Company extended the maturity date on its revolving line of credit until July 13, 2021.
The Company has an outstanding balance on the revolving line credit of $2,664,159 and $2,317,000 as of September 30, 2020 and
December 31, 2019, respectively.
BurgerFi
International, LLC and Subsidiaries
|
Notes to Condensed
Consolidated Financial Statements
|
(Unaudited)
|
Notes Payable
|
|
September
30,
2020
|
|
|
December
31,
2019
|
|
|
|
|
|
|
|
|
On May 11, 2020 the Company received
loan proceeds in the amount of $2,236,593 under the Paycheck Protection Program (“PPP”). The loans and accrued
interest are forgivable after eight weeks, as long as, the Company uses the loan proceeds for eligible purposes, including
payroll, benefits, rent and utilities, and maintain its payroll levels. The amount of loan forgiveness will be reduced if
the Company terminates employees or reduces salaries during the eight-week period. The unforgiven portion of the PPP loans
are payable over two years at an interest rate of 1%, with a deferral of payments for the first nine months.
|
|
$
|
2,236,593
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
Installment note payable to an individual, issued
in connection with the Company’s April 2020 acquisition, monthly payments of $9,056, over a seven-year amortization
including 7% interest, with a maturity date of June 1, 2024.
|
|
|
577,582
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Installment note payable to bank, monthly payments
of $8,638, including interest at 7.75%, principal and interest due at the earlier of, September 23, 2024 or the date of the
Company’s termination of the APM (see Note 1). This note is secured by equipment, guaranteed the franchisee under the
APM, its members and their affiliates. This note has been in default since December 2019 and classified as current. The Company
elected not to continue payment while negotiating with the banks to release the lien on the restaurant assets which the Company
is managing under the APM. No recourse to the general credit of the Company.
|
|
|
468,080
|
|
|
|
468,080
|
|
|
|
|
|
|
|
|
|
|
Installment note payable to bank, monthly payments
of $3,564, including interest at 5.3%, principal and interest due at the earlier of May 17, 2027 or the date of the Company’s
termination of the APM (see Note 1). This note is secured by equipment, guaranteed by the franchisee under the APM, its members
and their affiliates. This note has been in default since December 2019 and is classified as current. The Company elected
not to continue payment while negotiating with the banks to release the lien on the restaurant assets which the Company is
managing under the APM. No recourse to the general credit of the Company.
|
|
|
258,109
|
|
|
|
258,109
|
|
|
|
|
|
|
|
|
|
|
Installment note payable to bank, monthly payments
of $2,883, including interest at 5.0%, principal and interest due the earlier of August 4, 2026 or the date of the Company’s
termination of the APM (see Note 1). This note is secured by equipment, guaranteed by the franchisee under the APM, its members
and their affiliates. This note has been in default since December 2019 and classified as current. The Company elected not
to continue payment while negotiating with the banks to release the lien on the restaurant assets which the Company is managing
under the APM. No recourse to the general credit of the Company.
|
|
|
409,177
|
|
|
|
409,177
|
|
|
|
|
|
|
|
|
|
|
Other notes payable No recourse to the general credit of the Company.
|
|
|
241,607
|
|
|
|
71,706
|
|
|
|
|
|
|
|
|
|
|
Total notes payable
|
|
$
|
4,191,148
|
|
|
$
|
1,207,072
|
|
|
|
|
|
|
|
|
|
|
Less: current portion
|
|
|
(1,277,542
|
)
|
|
|
(1,207,072
|
)
|
|
|
|
|
|
|
|
|
|
Total notes payable - long-term portion
|
|
$
|
2,913,606
|
|
|
$
|
-
|
|
BurgerFi
International, LLC and Subsidiaries
|
Notes
to Condensed Consolidated Financial Statements
|
(Unaudited)
|
The Company has evaluated events and
transactions that occurred between September 30, 2020 and November 20, 2020, which is the date that the consolidated financial
statements were available to be issued for possible recognition or disclosure in the consolidated financial statements.
|
10.
|
Supplemental
Disclosure of Noncash Activities
|
Financing Activity
As described in Note 1, in April 2020,
the Company acquired a restaurant from a franchisee, with financing on a note payable for $600,000.
OPES
ACQUISITION CORP.
CONDENSED FINANCIAL STATEMENTS
CONTENTS
REPORT OF INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and Board of Directors of
OPES Acquisition Corp.
Opinion on the Financial Statements
We have audited the
accompanying balance sheets of OPES Acquisition Corp. (the “Company”) as of December 31, 2019 and 2018, the related
statements of operations, changes in stockholders’ equity and cash flows for each of the two years in the period ended December
31, 2019 and 2018, and the related notes (collectively referred to as the “financial statements”). In our opinion,
the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2019
and 2018, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2019
and 2018, in conformity with accounting principles generally accepted in the United States of America.
Explanatory Paragraph – Going
Concern
The accompanying
financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to
the financial statements, the Company’s business plan is dependent on the completion of a business combination and the Company’s
cash and working capital as of December 31, 2019 are not sufficient to complete its planned activities. These conditions raise
substantial doubt about the Company’s ability to continue as a going concern. Management’s plans in regard to these
matters are also described in Note 2. The financial statements do not include any adjustments that might result from the outcome
of this uncertainty.
Basis for Opinion
These financial statements
are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial
statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board
(United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S.
federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our
audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable
assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company
is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of
our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of
expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express
no such opinion.
Our audits included
performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud,
and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding
the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and
significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe
that our audits provide a reasonable basis for our opinion.
/
s/ Marcum LLP
|
|
|
|
We
have served as the Company’s auditor since 2017.
|
|
|
Marcum LLP
|
|
New York, NY
|
|
March 30, 2020
|
|
OPES ACQUISITION
CORP.
BALANCE SHEETS
|
|
December 31,
|
|
|
December 31,
|
|
|
|
2019
|
|
|
2018
|
|
ASSETS
|
|
|
|
|
|
|
Current Assets
|
|
|
|
|
|
|
Cash
|
|
$
|
17,862
|
|
|
$
|
205,638
|
|
Prepaid income
taxes
|
|
|
67,045
|
|
|
|
—
|
|
Prepaid
expenses
|
|
|
10,278
|
|
|
|
89,095
|
|
Total Current
Assets
|
|
|
95,185
|
|
|
|
294,733
|
|
|
|
|
|
|
|
|
|
|
Deferred tax
asset
|
|
|
52,268
|
|
|
|
—
|
|
Marketable
securities held in Trust Account
|
|
|
94,541,286
|
|
|
|
117,740,109
|
|
TOTAL
ASSETS
|
|
$
|
94,688,739
|
|
|
$
|
118,034,842
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES
AND STOCKHOLDERS’ EQUITY
|
|
|
|
|
|
|
|
|
Current liabilities
|
|
|
|
|
|
|
|
|
Account payable and accrued expenses
|
|
$
|
329,552
|
|
|
$
|
256,301
|
|
Income taxes
payable
|
|
|
—
|
|
|
|
14,852
|
|
Advance
from related party
|
|
|
56,194
|
|
|
|
—
|
|
Total Current
Liabilities
|
|
|
385,746
|
|
|
|
271,153
|
|
|
|
|
|
|
|
|
|
|
Promissory note
|
|
|
719,904
|
|
|
|
—
|
|
Promissory note – related
party
|
|
|
630,795
|
|
|
|
—
|
|
Total
Liabilities
|
|
|
1,736,445
|
|
|
|
271,153
|
|
|
|
|
|
|
|
|
|
|
Commitments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
stock subject to possible redemption, 8,363,100 and 11,030,442 shares at redemption value as of December 31, 2019 and 2018,
respectively
|
|
|
87,952,287
|
|
|
|
112,763,686
|
|
|
|
|
|
|
|
|
|
|
Stockholders’
Equity
|
|
|
|
|
|
|
|
|
Preferred
stock, $0.0001 par value; 10,000,000 authorized; none issued and outstanding
|
|
|
—
|
|
|
|
—
|
|
Common stock,
$0.0001 par value; 100,000,000 shares authorized; 3,946,146 and 3,789,558 issued and outstanding (excluding 8,363,100 and
11,030,442 shares subject to possible redemption) as of December 31, 2019 and 2018, respectively
|
|
|
395
|
|
|
|
379
|
|
Additional
paid-in capital
|
|
|
2,817,313
|
|
|
|
3,979,089
|
|
Retained
earnings
|
|
|
2,182,299
|
|
|
|
1,020,535
|
|
Total
Stockholders’ Equity
|
|
|
5,000,007
|
|
|
|
5,000,003
|
|
TOTAL
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
|
$
|
94,688,739
|
|
|
$
|
118,034,842
|
|
The accompanying notes are an integral
part of the financial statements.
OPES ACQUISITION
CORP.
STATEMENTS OF OPERATIONS
|
|
Year
Ended December 31,
|
|
|
|
2019
|
|
|
2018
|
|
|
|
|
|
|
|
|
Operating costs
|
|
$
|
840,321
|
|
|
$
|
553,546
|
|
Loss
from operations
|
|
|
(840,321
|
)
|
|
|
(553,546
|
)
|
|
|
|
|
|
|
|
|
|
Other income:
|
|
|
|
|
|
|
|
|
Interest income
|
|
|
2,409,408
|
|
|
|
1,871,405
|
|
Unrealized
gain (loss) on marketable securities held in Trust Account
|
|
|
8,776
|
|
|
|
(19,398
|
)
|
Other income,
net
|
|
|
2,418,184
|
|
|
|
1,852,007
|
|
|
|
|
|
|
|
|
|
|
Income before provision for income
taxes
|
|
|
1,577,863
|
|
|
|
1,298,461
|
|
Provision
for income taxes
|
|
|
(416,099
|
)
|
|
|
(276,750
|
)
|
Net income
|
|
$
|
1,161,764
|
|
|
$
|
1,021,711
|
|
|
|
|
|
|
|
|
|
|
Weighted
average shares outstanding, basic and diluted (1)
|
|
|
3,808,719
|
|
|
|
3,499,414
|
|
|
|
|
|
|
|
|
|
|
Basic
and diluted net loss per common share (2)
|
|
$
|
(0.13
|
)
|
|
$
|
(0.17
|
)
|
|
(1)
|
Excludes
an aggregate of up to 8,363,100 and 11,030,442 shares subject to possible redemption
at December 31, 2019 and 2018, respectively.
|
|
(2)
|
Net
loss per share – basic and diluted excludes income attributable to common stock
subject to possible redemption of $1,675,083 and $1,607,478 for the year ended December
31, 2019 and 2018, respectively.
|
The accompanying notes are an integral
part of the financial statements.
OPES ACQUISITION
CORP.
STATEMENTS OF CHANGES IN STOCKHOLDERS’
EQUITY
|
|
Common
Stock
|
|
|
Additional
Paid-in
|
|
|
Retained Earnings/ (Accumulated
|
|
|
Total Stockholders’
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Capital
|
|
|
Deficit)
|
|
|
Equity
|
|
Balance
– January 1, 2018
|
|
|
2,875,000
|
|
|
$
|
288
|
|
|
$
|
24,712
|
|
|
$
|
(1,176
|
)
|
|
$
|
23,824
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sale of 11,500,000
Units, net of underwriting discounts and offering expenses
|
|
|
11,500,000
|
|
|
|
1,150
|
|
|
|
112,266,904
|
|
|
|
—
|
|
|
|
112,268,054
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sale of 445,000
Private Placement Units
|
|
|
445,000
|
|
|
|
45
|
|
|
|
4,449,955
|
|
|
|
—
|
|
|
|
4,450,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from
the sale of unit purchase option
|
|
|
—
|
|
|
|
—
|
|
|
|
100
|
|
|
|
—
|
|
|
|
100
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock
subject to possible redemption
|
|
|
(11,030,442
|
)
|
|
|
(1,104
|
)
|
|
|
(112,762,582
|
)
|
|
|
—
|
|
|
|
(112,763,686
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1,021,711
|
|
|
|
1,021,711
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance – December
31, 2018
|
|
|
3,789,558
|
|
|
|
379
|
|
|
|
3,979,089
|
|
|
|
1,020,535
|
|
|
|
5,000,003
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in value
of common stock subject to possible redemption
|
|
|
156,588
|
|
|
|
16
|
|
|
|
(1,161,776
|
)
|
|
|
—
|
|
|
|
(1,161,760
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1,161,764
|
|
|
|
1,161,764
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance – December
31, 2019
|
|
|
3,946,146
|
|
|
$
|
395
|
|
|
$
|
2,817,313
|
|
|
$
|
2,182,299
|
|
|
$
|
5,000,007
|
|
The accompanying notes are an
integral part of the financial statements.
OPES ACQUISITION
CORP.
STATEMENTS OF CASH FLOWS
|
|
Year
Ended
December 31,
|
|
|
Year
Ended
December 31,
|
|
|
|
2019
|
|
|
2018
|
|
|
|
|
|
|
|
|
Cash Flows from Operating Activities:
|
|
|
|
|
|
|
Net income
|
|
$
|
1,161,764
|
|
|
$
|
1,021,711
|
|
Adjustments to reconcile net income to net cash used
in operating activities:
|
|
|
|
|
|
|
|
|
Interest earned on marketable securities
held in Trust Account
|
|
|
(2,409,408
|
)
|
|
|
(1,871,405
|
)
|
Unrealized (gain) loss on marketable
securities held in Trust Account
|
|
|
(8,776
|
)
|
|
|
19,398
|
|
Deferred tax benefit
|
|
|
(52,268
|
)
|
|
|
—
|
|
Changes in operating assets and
liabilities:
|
|
|
|
|
|
|
|
|
Prepaid expenses
|
|
|
78,817
|
|
|
|
(89,095
|
)
|
Prepaid income taxes
|
|
|
(67,045
|
)
|
|
|
—
|
|
Accounts payable and accrued
expenses
|
|
|
73,251
|
|
|
|
255,263
|
|
Income
taxes payable
|
|
|
(14,852
|
)
|
|
|
14,852
|
|
Net
cash used in operating activities
|
|
|
(1,238,517
|
)
|
|
|
(649,276
|
)
|
|
|
|
|
|
|
|
|
|
Cash Flows from Investing Activities:
|
|
|
|
|
|
|
|
|
Investment of cash in Trust Account
|
|
|
(1,198,171
|
)
|
|
|
(116,150,000
|
)
|
Cash withdrawn from Trust Account to pay franchise
and income taxes
|
|
|
842,019
|
|
|
|
261,898
|
|
Cash withdrawn from Trust Account
to redeeming stockholders
|
|
|
25,973,159
|
|
|
|
—
|
|
Net
cash provided by (used in) investing activities
|
|
|
25,617,007
|
|
|
|
(115,888,102
|
)
|
|
|
|
|
|
|
|
|
|
Cash Flows from Financing Activities:
|
|
|
|
|
|
|
|
|
Proceeds from sale of Units, net of underwriting discounts
paid
|
|
|
—
|
|
|
|
112,700,000
|
|
Proceeds from sale of Private Placement Units
|
|
|
—
|
|
|
|
4,450,000
|
|
Proceeds from Unit Purchase Option
|
|
|
—
|
|
|
|
100
|
|
Advances from related party
|
|
|
56,194
|
|
|
|
67,013
|
|
Repayment of advances from related party
|
|
|
—
|
|
|
|
(67,013
|
)
|
Proceeds from promissory note
|
|
|
719,904
|
|
|
|
—
|
|
Proceeds from promissory note – related party
|
|
|
630,795
|
|
|
|
—
|
|
Repayment of promissory note – related party
|
|
|
—
|
|
|
|
(122,839
|
)
|
Payment of offering costs
|
|
|
—
|
|
|
|
(306,247
|
)
|
Redemption of common stock
|
|
|
(25,973,159
|
)
|
|
|
—
|
|
Net
cash (used in) provided by financing activities
|
|
|
(24,566,266
|
)
|
|
|
116,721,014
|
|
|
|
|
|
|
|
|
|
|
Net Change in Cash
|
|
|
(187,776
|
)
|
|
|
183,636
|
|
Cash – Beginning
|
|
|
205,638
|
|
|
|
22,002
|
|
Cash – Ending
|
|
$
|
17,862
|
|
|
$
|
205,638
|
|
|
|
|
|
|
|
|
|
|
Supplemental cash flow information:
|
|
|
|
|
|
|
|
|
Cash paid for income taxes
|
|
$
|
550,264
|
|
|
$
|
261,898
|
|
|
|
|
|
|
|
|
|
|
Non-cash investing and financing activities:
|
|
|
|
|
|
|
|
|
Initial classification of common
stock subject to possible redemption
|
|
$
|
—
|
|
|
$
|
111,741,988
|
|
Change in value of common stock
subject to possible redemption
|
|
$
|
1,161,760
|
|
|
$
|
1,021,698
|
|
The accompanying notes are an integral
part of the financial statements.
OPES ACQUISITION
CORP.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2019
NOTE 1. DESCRIPTION OF ORGANIZATION AND BUSINESS OPERATIONS
OPES Acquisition
Corp. (the “Company”) is a blank check company incorporated in Delaware on July 24, 2017. The Company was formed for
the purpose of entering into a merger, share exchange, asset acquisition, stock purchase, recapitalization, reorganization or
other similar business transaction with one or more operating businesses or entities that the Company has not yet identified (a
“Business Combination”).
All activity through
December 31, 2019 relates to the Company’s formation, its initial public offering (“Initial Public Offering”),
which is described below, and identifying a target business for a Business Combination.
The registration
statement for the Company’s Initial Public Offering was declared effective on March 13, 2018. On March 16, 2018, the Company
consummated the Initial Public Offering of 10,000,000 units (“Units” and, with respect to the common stock included
in the Units sold, the “Public Shares”), generating gross proceeds of $100,000,000, which is described in Note 4.
Simultaneously with
the closing of the Initial Public Offering, the Company consummated the sale of 400,000 units (the “Private Placement Units”)
at a price of $10.00 per unit in a private placement to Axis Public Ventures S. de R.L. de C.V. (“Axis Public Ventures”),
an affiliate of Axis Capital Management (the “Initial Sponsor”), Lion Point Capital, LP (“Lion Point”)
and the other stockholders of the Company prior to the Initial Public Offering (“Initial Stockholders”), generating
gross proceeds of $4,000,000, which is described in Note 5.
Following the closing
of the Initial Public Offering on March 16, 2018, an amount of $101,000,000 ($10.10 per Unit) from the net proceeds of the sale
of the Units in the Initial Public Offering and the Private Placement Units was placed in a trust account (“Trust Account”)
which may be invested only in U.S. government securities, within the meaning set forth in Section 2(a)(16) of the Investment Company
Act of 1940, as amended (the “Investment Company Act”), with a maturity of 180 days or less or in any open-ended investment
company that holds itself out as a money market fund selected by the Company meeting the conditions of Rule 2a-7 of the Investment
Company Act, as determined by the Company, until the earlier of: (i) the consummation of a Business Combination or (ii) the distribution
of the Trust Account upon failure to consummate a Business Combination, as described below.
On March 20, 2018,
in connection with the underwriters’ exercise of their over-allotment option in full, the Company consummated the sale of
an additional 1,500,000 Units, and the sale of an additional 45,000 Private Placement Units each at $10.00 per unit, generating
total gross proceeds of $15,450,000. Following the closing, an additional $15,150,000 of the net proceeds ($10.10 per Unit) was
placed in the Trust Account, resulting in $116,150,000 ($10.10 per Unit) held in the Trust Account.
Transaction costs
amounted to $2,731,946, consisting of $2,300,000 of underwriting fees and $431,946 of other costs. As of December 31, 2019, cash
of $17,862 was held outside of the Trust Account and was available for working capital purposes.
The Company’s
management has broad discretion with respect to the specific application of the net proceeds of the Initial Public Offering and
private placement of Private Placement Units, although substantially all of the net proceeds are intended to be applied generally
toward consummating a Business Combination. The Company’s initial Business Combination must be with one or more target businesses
that together have a fair market value equal to at least 80% of the balance in the Trust Account (net of taxes payable) at the
time of the signing an agreement to enter into a Business Combination. The Company will only complete a Business Combination if
the post-Business Combination company owns or acquires 50% or more of the outstanding voting securities of the target or otherwise
acquires a controlling interest in the target sufficient for it not to be required to register as an investment company under
the Investment Company Act. There is no assurance that the Company will be able to successfully effect a Business Combination.
OPES ACQUISITION CORP.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2019
The Company will
provide its stockholders with the opportunity to redeem all or a portion of their Public Shares upon the completion of a Business
Combination either (i) in connection with a stockholder meeting called to approve the Business Combination or (ii) by means of
a tender offer. The decision as to whether the Company will seek stockholder approval of a Business Combination or conduct a tender
offer will be made by the Company, solely in its discretion. The stockholders will be entitled to redeem their shares for a pro
rata portion of the amount then on deposit in the Trust Account ($10.10 per share, plus any pro rata interest earned on the funds
held in the Trust Account and not previously released to the Company to pay its franchise and income tax obligations). There will
be no redemption rights upon the completion of a Business Combination with respect to the Company’s warrants.
The Company will
proceed with a Business Combination only if the Company has net tangible assets of at least $5,000,001 upon consummation of such
Business Combination and, solely if the Company seeks stockholder approval, a majority of the outstanding shares voted are voted
in favor of the Business Combination. If a stockholder vote is not required by law and the Company does not decide to hold a stockholder
vote for business or other legal reasons, the Company will, pursuant to its Amended and Restated Certificate of Incorporation,
conduct the redemptions pursuant to the tender offer rules of the Securities and Exchange Commission (“SEC”), and
file tender offer documents with the SEC prior to completing a Business Combination. If, however, stockholder approval of the
transaction is required by law, or the Company decides to obtain stockholder approval for business or other legal reasons, the
Company will offer to redeem shares in conjunction with a proxy solicitation pursuant to the proxy rules and not pursuant to the
tender offer rules. If the Company seeks stockholder approval in connection with a Business Combination, the Company’s Initial
Stockholders have agreed to (a) vote their Founder’s Shares (as defined in Note 6), Placement Shares (as defined in Note
5) and any Public Shares held by them in favor of approving a Business Combination and (b) not to convert any shares in connection
with a stockholder vote to approve a Business Combination (or to sell any shares in any tender offer in connection with a Business
Combination). Additionally, each public stockholder may elect to redeem their Public Shares irrespective of whether they vote
for or against the proposed Business Combination.
The Company has until
June 18, 2020 (or such later date as may be approved by stockholders, which has since occurred) to consummate a Business Combination
(the “Combination Period”). If the Company is unable to complete a Business Combination within the Combination Period,
the Company will (i) cease all operations except for the purpose of winding up, (ii) as promptly as reasonably possible but no
more than ten business days thereafter, redeem 100% of the outstanding Public Shares, at a per share price, payable in cash, equal
to the aggregate amount then on deposit in the Trust Account, including interest earned (net of taxes payable), divided by the
number of then outstanding Public Shares, which redemption will completely extinguish public stockholders’ rights as stockholders
(including the right to receive further liquidation distributions, if any), subject to applicable law, and (iii) as promptly as
reasonably possible following such redemption, subject to the approval of the remaining stockholders and the Company’s board
of directors, proceed to commence a voluntary liquidation and thereby a formal dissolution of the Company, subject in each case
to its obligations to provide for claims of creditors and the requirements of applicable law. The proceeds deposited in the Trust
Account could, however, become subject to claims of creditors. Therefore, the actual per-share redemption amount could be less
than $10.10.
The Initial Stockholders
have (i) waived their redemption rights with respect to Founder’s Shares, Placement Shares and any Public Shares they may
acquire, (ii) waived their rights to liquidating distributions from the Trust Account with respect to their Founder’s Shares
and Placement Shares if the Company fails to consummate a Business Combination within the Combination Period and (iii) agreed
that they will not propose any amendment to the Company’s Amended and Restated Certificate of Incorporation that would affect
Public Stockholders’ ability to convert or sell their shares to the Company in connection with a Business Combination or
affect the substance or timing of the Company’s obligation to redeem 100% of the Public Shares if the Company does not complete
a Business Combination within the Combination Period unless the Company provides the Public Stockholders with the opportunity
to redeem their shares in conjunction with any such amendment. However, the Initial Stockholders will be entitled to liquidating
distributions with respect to any Public Shares acquired if the Company fails to consummate a Business Combination or liquidates
within the Combination Period.
OPES ACQUISITION CORP.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2019
In order to protect
the amounts held in the Trust Account, the Sponsor has agreed to be liable to the Company if and to the extent any claims by a
vendor for services rendered or products sold to the Company, or a prospective target business with which the Company has discussed
entering into a Business Combination agreement, reduce the amount of funds in the Trust Account below $10.10 per share. This liability
will not apply with respect to any claims by a third party who executed a waiver of any right, title, interest or claim of any
kind in or to any monies held in the Trust Account or to any claims under the Company’s indemnity of the underwriters of
the Proposed Offering against certain liabilities, including liabilities under the Securities Act of 1933, as amended (the “Securities
Act”). Moreover, in the event that an executed waiver is deemed to be unenforceable against a third party, the Sponsor will
not be responsible to the extent of any liability for such third-party claims. The Company will seek to reduce the possibility
that the Sponsor will have to indemnify the Trust Account due to claims of creditors by endeavoring to have all vendors, service
providers, prospective target businesses or other entities with which the Company does business, execute agreements with the Company
waiving any right, title, interest or claim of any kind in or to monies held in the Trust Account.
On September 16,
2019, the Company’s stockholders approved an amendment to its Amended and Restated Certificate of Incorporation (the “charter”)
to extend the period of time for which the Company is required to consummate a Business Combination from September 16, 2019 to
November 15, 2019 (the “Extension”). In connection with the approval of the extension, stockholders elected to redeem
an aggregate of 2,282,753 shares of common stock, of which the Company paid cash in the aggregate amount of $23,594,187, or approximately
$10.34 per share, to redeeming stockholders. In connection with the Extension, the Company deposited into the Trust Account $0.0333
for each public share that was not redeemed in connection with the Extension, or an aggregate of approximately $613,870, for such
extension. A portion of the promissory notes were issued to an affiliate of the Sponsor ($214,855) and a portion of the promissory
notes were issued to Lion Point ($399,015). The loans are non-interest bearing, and due to be paid upon the consummation of a
Business Combination. The loans will be forgiven if the Company is unable to consummate a Business Combination except to the extent
of any funds held outside of the Trust Account.
On November 15, 2019,
the Company’s stockholders approved an amendment to its Amended and Restated Certificate of Incorporation to extend the
period of time for which the Company is required to consummate a Business Combination from November 15, 2019 to January 15, 2020
(the “Second Extension”). In connection with the approval of the Second Extension, stockholders elected to redeem
an aggregate of 228,001 shares of common stock, of which the Company paid cash in the aggregate amount of $2,378,972, or approximately
$10.43 per share, to redeeming stockholders. In connection with the Second extension, the Company deposited into the Trust Account
$0.0325 for each public share that was not redeemed in connection with the Second Extension, or an aggregate of approximately
$584,301, for such extension. The amount deposited into the Trust Account was loaned to the Company by an unrelated third party.
The loan is non-interest bearing, and due to be paid upon the consummation of a Business Combination. The loan will be forgiven
if the Company is unable to consummate a Business Combination except to the extent of any funds held outside of the Trust Account.
On January 15, 2020,
the Company’s stockholders approved an amendment to its Amended and Restated Certificate of Incorporation to extend the
period of time for which the Company is required to consummate a Business Combination from January 15, 2020 to March 16, 2020
(the “Third Extension”). In connection with the approval of the Third Extension, stockholders elected to redeem an
aggregate of 18,133 shares of common stock, of which the Company paid cash in the aggregate amount of $190,800, or approximately
$10.52 per share, to redeeming stockholders. In connection with the Third Extension, the Company deposited into the Trust Account
$0.0325 for each public share that was not redeemed in connection with the Third Extension, or an aggregate of approximately $583,122,
for such extension. A portion of the amount deposited into the Trust Account was loaned to the Company by an unrelated third party
($291,561), a portion was loaned by EarlyBirdCapital ($145,781) and a portion was loaned by an affiliate of Sponsor ($145,780)
The loans are non-interest bearing, and due to be paid upon the consummation of a Business Combination. The loans will be forgiven
if the Company is unable to consummate a Business Combination except to the extent of any funds held outside of the Trust Account.
OPES ACQUISITION CORP.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2019
On March 16, 2020,
the Company’s stockholders approved an amendment to its Amended and Restated Certificate of Incorporation to extend the
period of time for which the Company is required to consummate a Business Combination from March 16, 2020 to June 18, 2020 (the
“Fourth Extension”). In connection with the approval of the Fourth Extension, stockholders elected to redeem an aggregate
of 4,428,044 shares of common stock, of which the Company paid cash in the aggregate amount of $46.97 million, or approximately
$10.61 per share, to redeeming stockholders. In connection with the Fourth Extension, the Company deposited into the Trust Account
$0.03 for each public share that was not redeemed in connection with the Fourth Extension, or an aggregate of approximately $136,292,
for such extension. The amount deposited into the Trust Account was loaned to the Company by an affiliate of Sponsor. The loan
is non-interest bearing, and due to be paid upon the consummation of a Business Combination. The loan will be forgiven if the
Company is unable to consummate a Business Combination except to the extent of any funds held outside of the Trust Account.
Nasdaq Notification
On January 2, 2020,
the Company received a written notice (the “Notice”) from the Listing Qualifications Department of The Nasdaq Stock
Market (“Nasdaq”) indicating that the Company was not in compliance with Listing Rule 5620(a), due to the Company’s
failure to hold an annual meeting of stockholders within twelve months of the end of the Company’s fiscal year end. The
Notice is only a notification of deficiency, not of imminent delisting, and has no current effect on the listing or trading of
the Company’s securities on the Nasdaq Capital Market. The Company submitted a plan of compliance with Nasdaq and Nasdaq
granted the Company an extension until June 29, 2020 to regain compliance with the rule by holding an annual meeting of stockholders.
NOTE 2. LIQUIDITY AND GOING CONCERN
As of December 31,
2019, the Company had $17,862 in its operating bank accounts, $94,541,286 in securities held in the Trust Account to be used for
a Business Combination or to repurchase or redeem its common stock in connection therewith and working capital deficit of $286,557,
which excludes prepaid income taxes and franchise and income taxes payable as the net amounts can be paid from the interest earned
in the Trust Account. As of December 31, 2019, approximately $2,578,000 of the amount on deposit in the Trust Account represented
interest income, which is available to pay the Company’s tax obligations.
Until the consummation
of a Business Combination, the Company will be using the funds not held in the Trust Account for identifying and evaluating prospective
acquisition candidates, performing due diligence on prospective target businesses, paying for travel expenditures, selecting the
target business to acquire, and structuring, negotiating and consummating the Business Combination.
The Company will
need to raise additional capital through loans or additional investments from its Sponsor, stockholders, officers, directors,
or third parties. The Company’s officers, directors and Sponsor may, but are not obligated to, loan the Company funds, from
time to time or at any time, in whatever amount they deem reasonable in their sole discretion, to meet the Company’s working
capital needs. Accordingly, the Company may not be able to obtain additional financing. If the Company is unable to raise additional
capital, it may be required to take additional measures to conserve liquidity, which could include, but not necessarily be limited
to, curtailing operations, suspending the pursuit of a potential transaction, and reducing overhead expenses. The Company cannot
provide any assurance that new financing will be available to it on commercially acceptable terms, if at all. These conditions
raise substantial doubt about the Company’s ability to continue as a going concern through January 31, 2021, the date that
the Company will be required to cease all operations, except for the purpose of winding up, if a Business Combination is not consummated
(unless further extended). These financial statements do not include any adjustments relating to the recovery of the recorded
assets or the classification of the liabilities that might be necessary should the Company be unable to continue as a going concern.
OPES ACQUISITION CORP.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2019
NOTE 3. SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
Basis of presentation
The accompanying
financial statements are presented in conformity with accounting principles generally accepted in the United States of America
(“GAAP”) and pursuant to the rules and regulations of the SEC.
Emerging growth company
The Company is an
“emerging growth company,” as defined in Section 2(a) of the Securities Act, as modified by the Jumpstart Our Business
Startups Act of 2012 (the “JOBS Act”), and it may take advantage of certain exemptions from various reporting requirements
that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being
required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations
regarding executive compensation in its periodic reports and proxy statements, and exemptions from the requirements of holding
a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously
approved.
Further, Section
102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting
standards until private companies (that is, those that have not had a Securities Act registration statement declared effective
or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial
accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with
the requirements that apply to non-emerging growth companies but any such election to opt out is irrevocable. The Company has
elected not to opt out of such extended transition period which means that when a standard is issued or revised and it has different
application dates for public or private companies, the Company, as an emerging growth company, can adopt the new or revised standard
at the time private companies adopt the new or revised standard. This may make comparison of the Company’s balance sheet
with another public company which is neither an emerging growth company nor an emerging growth company which has opted out of
using the extended transition period difficult or impossible because of the potential differences in accounting standards used.
Use of estimates
The preparation of
financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting period.
Making estimates
requires management to exercise significant judgment. It is at least reasonably possible that the estimate of the effect of a
condition, situation or set of circumstances that existed at the date of the financial statements, which management considered
in formulating its estimate, could change in the near term due to one or more future confirming events. Accordingly, the actual
results could differ significantly from those estimates.
Cash and cash equivalents
The Company considers
all short-term investments with an original maturity of three months or less when purchased to be cash equivalents. The Company
did not have any cash equivalents as of December 31, 2019 and 2018.
Marketable securities held in Trust Account
At December 31, 2019
and 2018, the assets held in the Trust Account were substantially held in U.S. Treasury Bills. During the year ended December
31, 2019 and 2018, the Company withdrew $842,019 and $261,898, respectively, of interest earned on the Trust Account to pay its
franchise and income tax obligations.
OPES ACQUISITION CORP.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2019
Common stock subject to possible redemption
The Company accounts
for its common stock subject to possible redemption in accordance with the guidance in Accounting Standards Codification (“ASC”)
Topic 480 “Distinguishing Liabilities from Equity.” Common stock subject to mandatory redemption is classified as
a liability instrument and is measured at fair value. Conditionally redeemable common stock (including common stock that features
redemption rights that are either within the control of the holder or subject to redemption upon the occurrence of uncertain events
not solely within the Company’s control) is classified as temporary equity. At all other times, common stock is classified
as stockholders’ equity. The Company’s common stock features certain redemption rights that are considered to be outside
of the Company’s control and subject to occurrence of uncertain future events. Accordingly, common stock subject to possible
redemption is presented at redemption value as temporary equity, outside of the stockholders’ equity section of the Company’s
balance sheets.
Income taxes
The Company complies
with the accounting and reporting requirements of ASC Topic 740 “Income Taxes,” which requires an asset and liability
approach to financial accounting and reporting for income taxes. Deferred income tax assets and liabilities are computed for differences
between the financial statement and tax bases of assets and liabilities that will result in future taxable or deductible amounts,
based on enacted tax laws and rates applicable to the periods in which the differences are expected to affect taxable income.
Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized.
ASC Topic 740 prescribes
a recognition threshold and a measurement attribute for the financial statement recognition and measurement of tax positions taken
or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more-likely-than-not to be
sustained upon examination by taxing authorities. The Company recognizes accrued interest and penalties related to unrecognized
tax benefits as income tax expense. As of December 31, 2019 and 2018, there were no unrecognized tax benefits and no amounts accrued
for interest and penalties. The Company is currently not aware of any issues under review that could result in significant payments,
accruals or material deviation from its position.
The Company may be
subject to potential examination by federal, state, city and foreign taxing authorities in the areas of income taxes. These potential
examinations may include questioning the timing and amount of deductions, the nexus of income among various tax jurisdictions
and compliance with federal, state, city and foreign tax laws. The Company’s management does not expect that the total amount
of unrecognized tax benefits will materially change over the next twelve months.
Net loss per common share
Net loss per common
share is computed by dividing net loss by the weighted average number of common shares outstanding for the period. The Company
applies the two-class method in calculating earnings per share. Shares of common stock subject to possible redemption at December
31, 2019 and 2018, which are not currently redeemable and are not redeemable at fair value, have been excluded from the calculation
of basic loss per common share since such shares, if redeemed, only participate in their pro rata share of the Trust Account earnings.
The Company has not considered the effect of (1) warrants sold in the Initial Public Offering and private placement to purchase
11,945,000 shares of common stock and (2) 750,000 shares of common stock and warrants to purchase 750,000 shares of common stock
in the unit purchase option sold to the underwriters and their designees, in the calculation of diluted loss per share, since
the exercise of the warrants and the exercise of the unit purchase option is contingent upon the occurrence of future events.
As a result, diluted loss per common share is the same as basic loss per common share for the periods.
OPES ACQUISITION CORP.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2019
Reconciliation of net loss per common
share
The Company’s
net income is adjusted for the portion of income that is attributable to common stock subject to possible redemption, as these
shares only participate in the earnings of the Trust Account and not the income or losses of the Company. Accordingly, basic and
diluted loss per common share is calculated as follows:
|
|
Year
Ended
|
|
|
Year
Ended
|
|
|
|
December
31,
2019
|
|
|
December
31,
2018
|
|
Net income
|
|
$
|
1,161,764
|
|
|
$
|
1,021,711
|
|
Less: Income attributable to shares subject
to possible redemption
|
|
|
(1,675,083
|
)
|
|
|
(1,607,478
|
)
|
Adjusted net loss
|
|
$
|
(513,319
|
)
|
|
$
|
(585,767
|
)
|
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding,
basic and diluted
|
|
|
3,808,719
|
|
|
|
3,499,414
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted net loss per common share
|
|
$
|
(0.13
|
)
|
|
$
|
(0.17
|
)
|
Concentration of credit risk
Financial instruments
that potentially subject the Company to concentration of credit risk consist of cash accounts in a financial institution, which,
at times may exceed the Federal depository insurance coverage of $250,000. The Company had not experienced losses on these accounts
and management believes the Company is not exposed to significant risks on such accounts.
Fair value of financial instruments
The fair value of
the Company’s assets and liabilities, which qualify as financial instruments under ASC Topic 820, “Fair Value Measurements
and Disclosures,” approximates the carrying amounts represented in the accompanying balance sheets, primarily due to their
short-term nature.
Recently issued accounting standards
Management does not
believe that any recently issued, but not yet effective, accounting pronouncements, if currently adopted, would have a material
effect on the Company’s financial statements.
NOTE 4. INITIAL PUBLIC OFFERING
Pursuant to the Initial
Public Offering, the Company sold 11,500,000 units at a purchase price of $10.00 per Unit, inclusive of 1,500,000 units sold to
the underwriters on March 20, 2018 upon the underwriters’ election to exercise their over-allotment option in full. Each
Unit consists of one share of common stock and one warrant (“Public Warrant”). Each Public Warrant entitles the holder
to purchase one share of common stock at an exercise price of $11.50 per share (see Note 9).
OPES ACQUISITION CORP.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2019
NOTE 5. PRIVATE PLACEMENT
Simultaneously with
the Initial Public Offering, the Initial Stockholders purchased an aggregate of 400,000 Private Placement Units, at a purchase
price of $10.00 per Private Placement Unit for an aggregate purchase price of $4,000,000. On March 20, 2018, the Company consummated
the sale of an additional 45,000 Private Placement Units at a price of $10.00 per Private Placement Unit, which were purchased
by the Initial Sponsor, generating gross proceeds of $450,000. Each Private Placement Unit consists of one share of common stock
(“Placement Share”) and one warrant (“Placement Warrant”) to purchase one share of common stock at an
exercise price of $11.50. The proceeds from the sale of the Private Placement Units were added to the proceeds from the Initial
Public Offering held in the Trust Account. If the Company does not complete a Business Combination within the Combination Period,
the proceeds from the sale of the Private Placement Units will be used to fund the redemption of the Public Shares (subject to
the requirements of applicable law) and the Placement Warrants will expire worthless.
NOTE 6. RELATED PARTY TRANSACTIONS
Founder’s Shares
In November 2017,
the Company issued an aggregate of 2,875,000 shares of common stock (“Founder’s Shares”) to Axis Public Ventures
for an aggregate purchase price of $25,000. On March 9, 2018, Axis Public Ventures transferred 2,012,500 Founder’s Shares
to the other Initial Stockholders for the same price originally paid for such shares. The Founder’s Shares included an aggregate
of up to 375,000 shares subject to forfeiture by the Initial Stockholders to the extent that the underwriters’ over-allotment
was not exercised in full or in part, so that the Initial Stockholders would own 20% of the Company’s issued and outstanding
shares after the Initial Public Offering (assuming the Initial Stockholders did not purchase any Public Shares in the Proposed
Offering and excluding the Placement Shares). On March 20, 2018, as a result of the underwriters’ election to exercise their
over-allotment option in full, 375,000 Founder’s Shares are no longer subject to forfeiture.
The Initial Stockholders
have agreed that, subject to certain limited exceptions, the Founder’s Shares will not be transferred, assigned or sold
until the earlier of six months after the date of the consummation of a Business Combination, or earlier if, subsequent to a Business
Combination, the Company consummates a liquidation, merger, stock exchange or other similar transaction which results in all of
the Company’s stockholders having the right to exchange their shares of common stock for cash, securities or other property.
Administrative Services Agreement
The Company entered
into an agreement whereby, commencing on March 13, 2018 through the earlier of the consummation of a Business Combination or the
Company’s liquidation, the Company will pay an affiliate of the Initial Sponsor (and later, an affiliate of Sponsor) a monthly
fee of $10,000 for office space, utilities and administrative support. During the years ended December 31, 2019 and 2018, the
Company incurred $120,000 and $95,000 in fees for these services, respectively. At December 31, 2019 and 2018, $215,000 and $95,000,
respectively, are included in accounts payable and accrued expenses in the accompanying balance sheets.
Advances — Related Party
During the year ended
December 31, 2018, the Company received an aggregate of $67,013 in advances from an affiliate of the Initial Sponsor for costs
associated with the Initial Public Offering. The advances were non-interest bearing, unsecured and due on demand. The Company
repaid the advances in full, and accordingly, as of December 31, 2018, there were no advances outstanding.
OPES ACQUISITION CORP.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2019
During the year ended
December 31, 2019, an affiliate of the Sponsor advanced the Company an aggregate of $56,194 to fund working capital purposes.
The advances are non-interest bearing and due on demand. At December 31, 2019, advances of $56,194 were outstanding.
Promissory Note – Related Party
On August 1, 2017,
the Company issued to an affiliate of the Initial Sponsor an unsecured promissory note, pursuant to which the Company borrowed
an aggregate principal amount of $122,839 (the “Promissory Note”). The Promissory Note was non-interest bearing and
payable on the earlier to occur of (i) December 31, 2018, (ii) the consummation of the Initial Public Offering or (iii) the date
on which the Company determined not to proceed with the Initial Public Offering. The Promissory Note was repaid at the closing
of the Initial Public Offering.
Related Party Loans
In order to finance
transaction costs in connection with a Business Combination, the Sponsor, an affiliate of the Sponsor, or the Company’s
officers, directors and other Initial Stockholders may, but are not obligated to, loan the Company funds from time to time or
at any time, as may be required (“Working Capital Loans”). Each Working Capital Loan would be evidenced by a promissory
note. The Working Capital Loans would either be paid upon consummation of a Business Combination, without interest, or, at the
holder’s discretion, up to $1,500,000 of the Working Capital Loans may be converted into units at a price of $10.00 per
unit. The units would be identical to the Private Placement Units. In the event that a Business Combination does not close, the
Company may use a portion of the proceeds held outside the Trust Account to repay the Working Capital Loans, but no proceeds held
in the Trust Account would be used to repay the Working Capital Loans.
On September 16,
2019, the Company’s stockholders agreed to extend the period of time the Company has to consummate a Business Combination
to November 15, 2019 and Lion Point agreed to loan the Company the funds necessary to obtain the Extension. On September 18, 2019
and October 18, 2019, the Company issued unsecured promissory notes in the aggregate principal amount of $613,870 for such extension,
to provide the Company the funds necessary to obtain the Extension. The promissory notes are non-interest bearing and due to be
paid upon the consummation of a Business Combination. The loans will be forgiven if the Company is unable to consummate a Business
Combination except to the extent of any funds held outside of the Trust Account.
In October 2019,
the Company issued unsecured promissory notes to Lion Point in the aggregate principal amount of $16,925 to fund working capital
requirements. The promissory notes are non-interest bearing and due to be paid upon the consummation of a Business Combination.
The loans will be forgiven if the Company is unable to consummate a Business Combination except to the extent of any funds held
outside of the Trust Account.
As of December 31,
2019, the outstanding balance under the promissory notes amounted to an aggregate of $630,975.
On January 30, 2020,
the Company issued unsecured promissory note to an affiliate of the Initial Sponsor in the aggregate principal amount of $26,169
to fund working capital requirements. The promissory note is non-interest bearing and due to be paid upon the consummation of
a Business Combination. The loans will be forgiven if the Company is unable to consummate a Business Combination except to the
extent of any funds held outside of the Trust Account.
NOTE 7. PROMISSORY NOTES
On November 15, 2019,
the Company’s stockholders agreed to extend the period of time the Company has to consummate a Business Combination to January
15, 2020 and an unrelated third party agreed to loan the Company the funds necessary to obtain the Second Extension. On November
15, 2019 and December 17, 2019, the Company issued unsecured promissory notes in the aggregate principal amount of approximately
$584,301 for such extension, to provide the Company the funds necessary to obtain the Second Extension. The promissory notes are
non-interest bearing and due to be paid upon the consummation of a Business Combination. The loans will be forgiven if the Company
is unable to consummate a Business Combination except to the extent of any funds held outside of the Trust Account.
OPES ACQUISITION CORP.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2019
In November and December
2019, the Company issued unsecured promissory notes in the aggregate principal amount of $135,603 to fund working capital requirements.
The promissory notes are non-interest bearing and due to be paid upon the consummation of a Business Combination. The loans will
be forgiven if the Company is unable to consummate a Business Combination except to the extent of any funds held outside of the
Trust Account.
As of December 31,
2019, the outstanding balance under the promissory notes amounted to $719,904.
On January 15, 2020,
the Company’s stockholders agreed to extend the period of time the Company has to consummate a Business Combination to March
15, 2020 and an unrelated third party agreed to loan the Company the funds necessary to obtain the Third Extension. On January
15, 2020 and March 3, 2020, the Company issued unsecured promissory notes in the aggregate principal amount of approximately $583,122
for such extension, to provide the Company the funds necessary to obtain the Third Extension. The promissory notes are non-interest
bearing and due to be paid upon the consummation of a Business Combination. The loans will be forgiven if the Company is unable
to consummate a Business Combination except to the extent of any funds held outside of the Trust Account.
On January 15, 2020,
the Company issued an unsecured promissory note in the aggregate principal amount of $111,666 to fund working capital requirements.
The promissory note is non-interest bearing and due to be paid upon the consummation of a Business Combination. The loans will
be forgiven if the Company is unable to consummate a Business Combination except to the extent of any funds held outside of the
Trust Account.
On March 16, 2020,
the Company’s stockholders agreed to extend the period of time the Company has to consummate a Business Combination to June
18, 2020 and an affiliate of Sponsor agreed to loan the Company the funds necessary to obtain the Fourth Extension. On March 16,
2020, the Company issued an unsecured promissory note in the aggregate principal amount of $136,292 for such extension, to provide
the Company the funds necessary to obtain the Fourth Extension. The promissory note is non-interest bearing and due to be paid
upon the consummation of a Business Combination. The loan will be forgiven if the Company is unable to consummate a Business Combination
except to the extent of any funds held outside of the Trust Account.
NOTE 8. COMMITMENTS
Registration Rights
Pursuant to a registration
rights agreement entered into on March 13, 2018, the holders of the Founder’s Shares, Private Placement Units (and their
underlying securities) and any Units that may be issued upon conversion of the Working Capital Loans (and their underlying securities)
are entitled to registration rights. The holders of a majority of these securities are entitled to make up to two demands that
the Company register such securities. The holders of the majority of the Founder’s Shares can elect to exercise these registration
rights at any time commencing three months prior to the date on which these shares of common stock are to be released from escrow.
The holders of a majority of the Private Placement Units or Units issued to the Sponsor, officers, directors or their affiliates
in payment of Working Capital Loans made to the Company (in each case, including the underlying securities) can elect to exercise
these registration rights at any time after the Company consummates a Business Combination. In addition, the holders will have
certain “piggy-back” registration rights with respect to registration statements filed subsequent to the completion
of a Business Combination. The Company will bear the expenses incurred in connection with the filing of any such registration
statements.
OPES ACQUISITION CORP.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2019
Business Combination Marketing Agreement
The Company has engaged
EarlyBirdCapital, Inc., the representative of the underwriters in the Initial Public Offering (“EarlyBirdCapital”),
as an advisor in connection with a Business Combination to assist the Company in holding meetings with its stockholders to discuss
a potential Business Combination and the target business’ attributes, introduce the Company to potential investors that
are interested in purchasing securities in connection with the Business Combination, assist the Company in obtaining stockholder
approval for the Business Combination and assist the Company with its press releases and public filings in connection with a Business
Combination. The Company will pay EarlyBirdCapital a cash fee of $4,025,000 for such services upon the consummation of a Business
Combination (exclusive of any applicable finders’ fees which might become payable).
Forward Purchase Agreement
Lion Point has entered
into a contingent forward purchase agreement with the Company to purchase, in a private placement for aggregate gross proceeds
of $30,000,000, to occur concurrently with the consummation of the Company’s initial Business Combination, 3,000,000 units
at $10.00 per unit, on substantially the same terms as the sale of Units in the Initial Public Offering. The funds from the sale
of these units may be used as part of the consideration to the sellers in the initial Business Combination; any excess funds may
be used for the working capital needs of the post-transaction company. This agreement is independent of the percentage of stockholders
electing to redeem their Public Shares and may provide the Company with an increased minimum funding level for the initial Business
Combination. The contingent forward purchase agreement is subject to conditions, including Lion Point giving the Company its irrevocable
written consent to purchase the units no later than five days after the Company notifies Lion Point of the Company’s intention
to meet to consider entering into a definitive agreement for a proposed Business Combination. Lion Point granting its consent
to the purchase is entirely within its sole discretion. Accordingly, if it does not consent to the purchase, it will not be obligated
to purchase the units.
NOTE 9. STOCKHOLDERS’ EQUITY
Preferred Stock
On March 13, 2018,
the Company filed an Amended and Restated Certificate of Incorporation such that the Company is authorized to issue 10,000,000
shares of preferred stock with a par value of $0.0001 per share with such designation, rights and preferences as may be determined
from time to time by the Company’s Board of Directors. At December 31, 2019 and 2018, there were no shares of preferred
stock issued or outstanding.
Common Stock
On March 13, 2018,
the Company filed an Amended and Restated Certificate of Incorporation such that the Company is authorized to issue 100,000,000
shares of common stock with a par value of $0.0001 per share. Holders of the Company’s common stock are entitled to one
vote for each share. At December 31, 2019 and 2018, there were 3,946,146 and 3,789,558 shares of common stock issued and outstanding,
excluding 8,363,100 and 11,030,442 shares of common stock subject to possible redemption, respectively.
OPES ACQUISITION CORP.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2019
Warrants
The Public Warrants
will become exercisable 30 days after the completion of a Business Combination; provided that the Company has an effective registration
statement under the Securities Act covering the shares of common stock issuable upon exercise of the Public Warrants and a current
prospectus relating to them is available. The Company has agreed that as soon as practicable, the Company will use its best efforts
to file with the SEC a registration statement for the registration, under the Securities Act, of the shares of common stock issuable
upon exercise of the Public Warrants. The Company will use its best efforts to cause the same to become effective and to maintain
the effectiveness of such registration statement, and a current prospectus relating thereto, until the expiration of the Public
Warrants in accordance with the provisions of the warrant agreement. Notwithstanding the foregoing, if a registration statement
covering the shares of common stock issuable upon exercise of the Public Warrants is not effective within a specified period following
the consummation of Business Combination, warrant holders may, until such time as there is an effective registration statement
and during any period when the Company shall have failed to maintain an effective registration statement, exercise warrants on
a cashless basis pursuant to the exemption provided by Section 3(a)(9) of the Securities Act, provided that such exemption is
available. If that exemption, or another exemption, is not available, holders will not be able to exercise their warrants on a
cashless basis. The Public Warrants will expire five years after the completion of a Business Combination or earlier upon redemption
or liquidation.
The Company may redeem the Public Warrants:
|
●
|
in
whole and not in part;
|
|
●
|
at
a price of $0.01 per warrant;
|
|
●
|
at
any time during the exercise period;
|
|
●
|
upon
a minimum of 30 days’ prior written notice of redemption; and
|
|
●
|
if,
and only if, the last sale price of the Company’s common stock equals or exceeds $18.00 per share for any 20 trading
days within a 30-trading day period ending on the third business day prior to the date on which the Company sends the notice
of redemption to the warrant holders.
|
|
●
|
if,
and only if, there is a current registration statement in effect with respect to the shares of common stock underlying such
warrants.
|
If the Company calls
the Public Warrants for redemption, management will have the option to require all holders that wish to exercise the Public Warrants
to do so on a “cashless basis,” as described in the warrant agreement. The exercise price and number of shares of
common stock issuable upon exercise of the warrants may be adjusted in certain circumstances including in the event of a stock
dividend, or recapitalization, reorganization, merger or consolidation. However, the warrants will not be adjusted for issuance
of common stock at a price below its exercise price. Additionally, in no event will the Company be required to net cash settle
the warrants. If the Company is unable to complete a Business Combination within the Combination Period and the Company liquidates
the funds held in the Trust Account, holders of warrants will not receive any of such funds with respect to their warrants, nor
will they receive any distribution from the Company’s assets held outside of the Trust Account with the respect to such
warrants. Accordingly, the warrants may expire worthless.
The Placement Warrants
will be identical to the Public Warrants underlying the Units sold in the Initial Public Offering, except that the Placement Warrants
and the common stock issuable upon the exercise of the Placement Warrants will not be transferable, assignable or salable until
after the completion of a Business Combination, subject to certain limited exceptions. Additionally, the Placement Warrants will
be exercisable on a cashless basis and be non-redeemable so long as they are held by the initial purchasers or their permitted
transferees. If the Placement Warrants are held by someone other than the initial purchasers or their permitted transferees, the
Placement Warrants will be redeemable by the Company and exercisable by such holders on the same basis as the Public Warrants.
OPES ACQUISITION CORP.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2019
Unit Purchase Option
On March 13, 2018,
the Company sold EarlyBirdCapital (and its designees), for $100, an option to purchase up to 750,000 Units exercisable at $10.00
per Unit (or an aggregate exercise price of $7,500,000) commencing on the later of March 13, 2019 and the consummation of a Business
Combination. The unit purchase option may be exercised for cash or on a cashless basis, at the holder’s option, and expires
on March 17, 2023. The Units issuable upon exercise of this option are identical to those offered in the Initial Public Offering.
The Company accounted for the unit purchase option, inclusive of the receipt of $100 cash payment, as an expense of the Initial
Public Offering resulting in a charge directly to stockholders’ equity. The fair value of the unit purchase option was estimated
to be approximately $2,633,621 (or $3.51 per Unit) using the Black-Scholes option-pricing model. The fair value of the unit purchase
option granted to the underwriters was estimated as of the date of grant using the following assumptions: (1) expected volatility
of 35%, (2) risk-free interest rate of 2.65% and (3) expected life of five years. The option grants to its holder demand and “piggyback”
rights for periods of five and seven years, respectively, from March 13, 2018 with respect to the registration under the Securities
Act of the securities directly and indirectly issuable upon exercise of the option. The Company will bear all fees and expenses
attendant to registering the securities, other than underwriting commissions which will be paid for by the holders themselves.
The exercise price and number of units issuable upon exercise of the option may be adjusted in certain circumstances including
in the event of a stock dividend, or the Company’s recapitalization, reorganization, merger or consolidation. However, the
option will not be adjusted for issuances of common stock at a price below its exercise price.
NOTE 10. INCOME TAX
The Company’s net deferred tax assets
are as follows:
|
|
December 31,
2019
|
|
|
December 31,
2018
|
|
Deferred tax asset
|
|
|
|
|
|
|
Accrued expenses
|
|
$
|
54,492
|
|
|
$
|
—
|
|
Unrealized
loss on securities
|
|
|
—
|
|
|
|
4,074
|
|
Total deferred tax assets
|
|
|
54,492
|
|
|
|
4,074
|
|
Deferred tax liability
|
|
|
|
|
|
|
|
|
Unrealized
gain on securities
|
|
|
(2,224
|
)
|
|
|
—
|
|
Total deferred tax liabilities
|
|
|
(2,224
|
)
|
|
|
—
|
|
Valuation allowance
|
|
|
—
|
|
|
|
(4,074
|
)
|
Deferred tax asset, net of allowance
|
|
$
|
52,268
|
|
|
$
|
—
|
|
The income tax provision for the years
ended December 31, 2019 and 2018 consists of the following:
|
|
December 31,
|
|
|
December 31,
|
|
|
|
2019
|
|
|
2018
|
|
Federal
|
|
|
|
|
|
|
Current
|
|
$
|
319,339
|
|
|
$
|
276,750
|
|
Deferred
|
|
|
(39,233
|
)
|
|
|
(4,074
|
)
|
|
|
|
|
|
|
|
|
|
State
|
|
|
|
|
|
|
|
|
Current
|
|
$
|
149,028
|
|
|
$
|
—
|
|
Deferred
|
|
|
(8,961
|
)
|
|
|
—
|
|
Change in valuation allowance
|
|
|
(4,074
|
)
|
|
|
4,074
|
|
Income tax provision
|
|
$
|
416,099
|
|
|
$
|
276,750
|
|
As of December 31,
2019 and 2018, the Company did not have any U.S. federal and state net operating loss carryovers (“NOLs”) available
to offset future taxable income.
OPES ACQUISITION CORP.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2019
In assessing the
realization of the deferred tax assets, management considers whether it is more likely than not that some portion of all of the
deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of
future taxable income during the periods in which temporary differences representing net future deductible amounts become deductible.
Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies
in making this assessment. For the years ended December 31, 2019 and 2018, the change in the valuation allowance was $(4,074)
and $4,074, respectively.
A reconciliation
of the federal income tax rate to the Company’s effective tax rate at December 31, 2019 and 2018 is as follows:
|
|
December 31,
|
|
|
December 31,
|
|
|
|
2019
|
|
|
2018
|
|
|
|
|
|
|
|
|
Statutory federal income tax rate
|
|
|
21.0
|
%
|
|
|
21.0
|
%
|
State taxes, net of federal tax benefit
|
|
|
7.2
|
%
|
|
|
0.0
|
%
|
Deferred tax rate change
|
|
|
(0.3
|
)%
|
|
|
0.0
|
%
|
True-ups
|
|
|
(1.3
|
)%
|
|
|
0.0
|
%
|
Valuation allowance
|
|
|
(0.3
|
)%
|
|
|
0.3
|
%
|
|
|
|
|
|
|
|
|
|
Income tax provision
|
|
|
26.3
|
%
|
|
|
21.3
|
%
|
The Company files
income tax returns in the U.S. federal jurisdiction in various state and local jurisdictions and is subject to examination by
the various taxing authorities. The Company’s tax returns since inception remain open and subject to examination.
NOTE 11. FAIR VALUE MEASUREMENTS
The Company follows
the guidance in ASC 820 for its financial assets and liabilities that are re-measured and reported at fair value at each reporting
period, and non-financial assets and liabilities that are re-measured and reported at fair value at least annually.
The fair value of
the Company’s financial assets and liabilities reflects management’s estimate of amounts that the Company would have
received in connection with the sale of the assets or paid in connection with the transfer of the liabilities in an orderly transaction
between market participants at the measurement date. In connection with measuring the fair value of its assets and liabilities,
the Company seeks to maximize the use of observable inputs (market data obtained from independent sources) and to minimize the
use of unobservable inputs (internal assumptions about how market participants would price assets and liabilities). The following
fair value hierarchy is used to classify assets and liabilities based on the observable inputs and unobservable inputs used in
order to value the assets and liabilities:
|
Level
1:
|
Quoted
prices in active markets for identical assets or liabilities. An active market for an asset or liability is a market in which
transactions for the asset or liability occur with sufficient frequency and volume to provide pricing information on an ongoing
basis.
|
|
Level
2:
|
Observable
inputs other than Level 1 inputs. Examples of Level 2 inputs include quoted prices in active markets for similar assets or
liabilities and quoted prices for identical assets or liabilities in markets that are not active.
|
|
Level
3:
|
Unobservable
inputs based on our assessment of the assumptions that market participants would use in pricing the asset or liability.
|
OPES ACQUISITION CORP.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2019
The following table
presents information about the Company’s assets that are measured at fair value on a recurring basis at December 31, 2019
and 2018, and indicates the fair value hierarchy of the valuation inputs the Company utilized to determine such fair value:
Description
|
|
Level
|
|
December 31,
2019
|
|
|
December 31,
2018
|
|
Assets:
|
|
|
|
|
|
|
|
|
Marketable securities held
in Trust Account
|
|
1
|
|
$
|
94,541,286
|
|
|
$
|
117,740,109
|
|
NOTE 12. SUBSEQUENT EVENTS
The Company evaluated
subsequent events and transactions that occurred after the balance sheet date up to the date that the financial statements were
issued. Other than as described in these financial statements, the Company did not identify any subsequent events that would have
required adjustment or disclosure in the financial statements.
OPES ACQUISITION
CORP.
CONDENSED BALANCE SHEETS
|
|
September 30,
|
|
|
December 31,
|
|
|
|
2020
|
|
|
2019
|
|
|
|
(unaudited)
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
Current Assets
|
|
|
|
|
|
|
Cash
|
|
$
|
10,962
|
|
|
$
|
17,862
|
|
Prepaid income taxes
|
|
|
215,073
|
|
|
|
67,045
|
|
Prepaid expenses
|
|
|
19,125
|
|
|
|
10,278
|
|
Total Current Assets
|
|
|
245,160
|
|
|
|
95,185
|
|
|
|
|
|
|
|
|
|
|
Deferred tax asset
|
|
|
77,423
|
|
|
|
52,268
|
|
Marketable securities held in Trust Account
|
|
|
48,401,503
|
|
|
|
94,541,286
|
|
TOTAL ASSETS
|
|
$
|
48,724,086
|
|
|
$
|
94,688,739
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
|
|
|
|
|
|
|
|
Current liabilities
|
|
|
|
|
|
|
|
|
Account payable and accrued expenses
|
|
$
|
725,718
|
|
|
$
|
329,552
|
|
Advance from related party
|
|
|
—
|
|
|
|
56,194
|
|
Total Current Liabilities
|
|
|
725,718
|
|
|
|
385,746
|
|
|
|
|
|
|
|
|
|
|
Convertible promissory notes
|
|
|
1,123,131
|
|
|
|
719,904
|
|
Promissory notes – related parties
|
|
|
1,642,599
|
|
|
|
630,795
|
|
Total Liabilities
|
|
|
3,491,448
|
|
|
|
1,736,445
|
|
|
|
|
|
|
|
|
|
|
Commitments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock subject to possible
redemption, 3,764,625 and 8,363,100 shares at redemption value as of September 30, 2020 and December 31, 2019, respectively
|
|
|
40,232,637
|
|
|
|
87,952,287
|
|
|
|
|
|
|
|
|
|
|
Stockholders’ Equity
|
|
|
|
|
|
|
|
|
Preferred stock, $0.0001 par value; 10,000,000 authorized;
none issued and outstanding
|
|
|
—
|
|
|
|
—
|
|
Common stock, $0.0001 par value; 100,000,000 shares
authorized; 4,097,947 and 3,946,146 issued and outstanding (excluding 3,764,625 and 8,363,100 shares subject to possible redemption)
as of September 30, 2020 and December 31, 2019, respectively
|
|
|
410
|
|
|
|
395
|
|
Additional paid-in capital
|
|
|
3,368,432
|
|
|
|
2,817,313
|
|
Retained earnings
|
|
|
1,631,159
|
|
|
|
2,182,299
|
|
Total Stockholders’ Equity
|
|
|
5,000,001
|
|
|
|
5,000,007
|
|
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY
|
|
$
|
48,724,086
|
|
|
$
|
94,688,739
|
|
The accompanying notes are an integral
part of these condensed financial statements.
OPES ACQUISITION
CORP.
CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
|
|
Three
Month Ended
September
30,
|
|
|
Nine
Month Ended
September
30,
|
|
|
|
2020
|
|
|
2019
|
|
|
2020
|
|
|
2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating costs
|
|
$
|
361,978
|
|
|
$
|
157,429
|
|
|
$
|
922,544
|
|
|
$
|
571,946
|
|
Loss from operations
|
|
|
(361,978
|
)
|
|
|
(157,429
|
)
|
|
|
(922,544
|
)
|
|
|
(571,946
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income
|
|
|
11,160
|
|
|
|
621,666
|
|
|
|
346,727
|
|
|
|
2,010,319
|
|
Unrealized (loss) gain on marketable securities
held in Trust Account
|
|
|
(289
|
)
|
|
|
(13,259
|
)
|
|
|
(478
|
)
|
|
|
5,704
|
|
Other income, net
|
|
|
10,871
|
|
|
|
608,407
|
|
|
|
346,249
|
|
|
|
2,016,023
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) income before income taxes
|
|
|
(351,107
|
)
|
|
|
450,978
|
|
|
|
(576,295
|
)
|
|
|
1,444,077
|
|
Benefit (provision) for income taxes
|
|
|
7,676
|
|
|
|
(114,278
|
)
|
|
|
25,155
|
|
|
|
(442,827
|
)
|
Net (loss) income
|
|
$
|
(343,431
|
)
|
|
$
|
336,700
|
|
|
$
|
(551,140
|
)
|
|
$
|
1,001,250
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average
shares outstanding, basic and diluted (1)
|
|
|
4,069,685
|
|
|
|
3,800,351
|
|
|
|
4,016,420
|
|
|
|
3,796,787
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
and diluted net loss per common share (2)
|
|
$
|
(0.08
|
)
|
|
$
|
(0.02
|
)
|
|
$
|
(0.18
|
)
|
|
$
|
(0.09
|
)
|
|
(1)
|
Excludes
an aggregate of up to 3,764,625 and 8,693,122 shares subject to possible redemption at
September 30, 2020 and 2019, respectively.
|
|
(2)
|
Net
loss per share – basic and diluted excludes income attributable to common stock
subject to possible redemption of $0 and $418,858 for the three ended September 30, 2020
and 2019, respectively and $183,478 and $1,342,216 for the nine ended September 30, 2020
and 2019, respectively.
|
The accompanying notes are an integral
part of these condensed financial statements.
OPES ACQUISITION
CORP.
CONDENSED STATEMENTS OF CHANGES IN
STOCKHOLDERS’ EQUITY
(Unaudited)
THREE AND NINE MONTHS ENDED SEPTEMBER
30, 2020
|
|
Common Stock
|
|
|
Additional
Paid-in
|
|
|
Retained
|
|
|
Total Stockholders’
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Capital
|
|
|
Earnings
|
|
|
Equity
|
|
Balance – January
1, 2020
|
|
|
3,946,146
|
|
|
$
|
395
|
|
|
$
|
2,817,313
|
|
|
$
|
2,182,299
|
|
|
$
|
5,000,007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in value of common stock subject to possible
redemption
|
|
|
86,697
|
|
|
|
8
|
|
|
|
15,845
|
|
|
|
—
|
|
|
|
15,853
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(15,852
|
)
|
|
|
(15,852
|
)
|
Balance – March 31, 2020
|
|
|
4,032,843
|
|
|
|
403
|
|
|
|
2,833,158
|
|
|
|
2,166,447
|
|
|
|
5,000,008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in value of common stock subject to possible
redemption
|
|
|
36,842
|
|
|
|
4
|
|
|
|
191,849
|
|
|
|
—
|
|
|
|
191,853
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(191,857
|
)
|
|
|
(191,857
|
)
|
Balance – June 30, 2020
|
|
|
4,069,685
|
|
|
|
407
|
|
|
|
3,025,007
|
|
|
|
1,974,590
|
|
|
|
5,000,004
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in value of common stock subject to possible
redemption
|
|
|
28,262
|
|
|
|
3
|
|
|
|
343,425
|
|
|
|
—
|
|
|
|
343,428
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(343,431
|
)
|
|
|
(343,431
|
)
|
Balance – September 30,
2020
|
|
|
4,097,947
|
|
|
$
|
410
|
|
|
$
|
3,368,432
|
|
|
$
|
1,631,159
|
|
|
$
|
5,000,001
|
|
THREE AND NINE MONTHS ENDED SEPTEMBER
30, 2019
|
|
Common Stock
|
|
|
Additional
Paid-in
|
|
|
Retained
|
|
|
Total
Stockholders’
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Capital
|
|
|
Earnings
|
|
|
Equity
|
|
Balance – January 1, 2019
|
|
|
3,789,558
|
|
|
$
|
379
|
|
|
$
|
3,979,089
|
|
|
$
|
1,020,535
|
|
|
$
|
5,000,003
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in value of common stock subject to possible
redemption
|
|
|
10,775
|
|
|
|
1
|
|
|
|
(380,236
|
)
|
|
|
—
|
|
|
|
(380,235
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
380,241
|
|
|
|
380,241
|
|
Balance – March 31, 2019
|
|
|
3,800,333
|
|
|
|
380
|
|
|
|
3,598,853
|
|
|
|
1,400,776
|
|
|
|
5,000,009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in value of common stock subject to possible
redemption
|
|
|
18
|
|
|
|
—
|
|
|
|
(284,317
|
)
|
|
|
—
|
|
|
|
(284,317
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
284,309
|
|
|
|
284,309
|
|
Balance – June 30, 2019
|
|
|
3,800,351
|
|
|
|
380
|
|
|
|
3,314,536
|
|
|
|
1,685,085
|
|
|
|
5,000,001
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in value of common stock subject to possible
redemption
|
|
|
43,774
|
|
|
|
4
|
|
|
|
(336,700
|
)
|
|
|
—
|
|
|
|
(336,696
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
336,700
|
|
|
|
336,700
|
|
Balance – September 30,
2019
|
|
|
3,844,124
|
|
|
$
|
384
|
|
|
$
|
2,977,836
|
|
|
$
|
2,021,785
|
|
|
$
|
5,000,005
|
|
The accompanying notes are an integral
part of these condensed financial statements.
OPES ACQUISITION
CORP.
CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
|
|
Nine
Months Ended
September
30,
|
|
|
|
2020
|
|
|
2019
|
|
|
|
|
|
|
|
|
Cash Flows from Operating Activities:
|
|
|
|
|
|
|
Net (loss) income
|
|
$
|
(551,140
|
)
|
|
$
|
1,001,250
|
|
Adjustments to reconcile net (loss) income to net cash used in operating activities:
|
|
|
|
|
|
|
|
|
Interest earned on marketable securities held in Trust Account
|
|
|
(346,727
|
)
|
|
|
(2,010,319
|
)
|
Unrealized loss (gain) on marketable securities held in Trust Account
|
|
|
478
|
|
|
|
(5,704
|
)
|
Deferred tax benefit
|
|
|
(25,155
|
)
|
|
|
(21,361
|
)
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
Prepaid expenses
|
|
|
(8,847
|
)
|
|
|
62,845
|
|
Prepaid income taxes
|
|
|
(148,028
|
)
|
|
|
(71,224
|
)
|
Accounts payable and accrued expenses
|
|
|
396,166
|
|
|
|
58,621
|
|
Income taxes payable
|
|
|
—
|
|
|
|
(14,852
|
)
|
Net cash used in operating activities
|
|
|
(683,253
|
)
|
|
|
(1,000,744
|
)
|
|
|
|
|
|
|
|
|
|
Cash Flows from Investing Activities:
|
|
|
|
|
|
|
|
|
Investment of cash in Trust Account
|
|
|
(991,999
|
)
|
|
|
(306,935
|
)
|
Cash withdrawn from Trust Account to pay franchise taxes and income taxes
|
|
|
309,515
|
|
|
|
809,284
|
|
Cash withdrawn from Trust Account to pay redeeming stockholders
|
|
|
47,168,516
|
|
|
|
23,594,187
|
|
Net cash provided by investing
activities
|
|
|
46,486,032
|
|
|
|
24,096,536
|
|
|
|
|
|
|
|
|
|
|
Cash Flows from Financing Activities:
|
|
|
|
|
|
|
|
|
Proceeds from convertible promissory notes
|
|
|
403,227
|
|
|
|
—
|
|
Proceeds from promissory notes – related parties
|
|
|
955,610
|
|
|
|
306,935
|
|
Redemption of common stock
|
|
|
(47,168,516
|
)
|
|
|
(23,594,187
|
)
|
Net cash used in financing activities
|
|
|
(45,809,679
|
)
|
|
|
(23,287,252
|
)
|
|
|
|
|
|
|
|
|
|
Net Change in Cash
|
|
|
(6,900
|
)
|
|
|
(191,460
|
)
|
Cash – Beginning
|
|
|
17,862
|
|
|
|
205,638
|
|
Cash – Ending
|
|
$
|
10,962
|
|
|
$
|
14,178
|
|
|
|
|
|
|
|
|
|
|
Supplemental cash flow information:
|
|
|
|
|
|
|
|
|
Cash paid for income taxes
|
|
$
|
148,027
|
|
|
$
|
550,264
|
|
|
|
|
|
|
|
|
|
|
Non-cash investing and financing activities:
|
|
|
|
|
|
|
|
|
Change in value of common stock subject to possible redemption
|
|
$
|
(551,134
|
)
|
|
$
|
1,001,248
|
|
Conversion of advances to promissory notes – related parties
|
|
$
|
56,194
|
|
|
$
|
—
|
|
The accompanying notes are an integral
part of these condensed financial statements.
OPES
ACQUISITION CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2020
(Unaudited)
NOTE 1. DESCRIPTION OF ORGANIZATION AND BUSINESS OPERATIONS
Opes Acquisition
Corp. (the “Company”) is a blank check company incorporated in Delaware on July 24, 2017. The Company was formed for
the purpose of entering into a merger, share exchange, asset acquisition, stock purchase, recapitalization, reorganization or
other similar business transaction with one or more operating businesses or entities (a “Business Combination”).
All activity through
September 30, 2020 relates to the Company’s formation, its initial public offering (“Initial Public Offering”),
which is described below, and, since the closing of the Initial Public Offering, the search for a prospective initial Business
Combination target and the proposed acquisition of BurgerFi International LLC (“BurgerFi”), as discussed in Note 8.
The registration
statement for the Company’s Initial Public Offering was declared effective on March 13, 2018. On March 16, 2018, the Company
consummated the Initial Public Offering of 10,000,000 units (“Units” and, with respect to the common stock included
in the Units sold, the “Public Shares”), generating gross proceeds of $100,000,000, which is described in Note 4.
Simultaneously
with the closing of the Initial Public Offering, the Company consummated the sale of 400,000 units (the “Private Placement
Units”) at a price of $10.00 per unit in a private placement to Axis Public Ventures S. de R.L. de C.V. (“Axis Public
Ventures”), an affiliate of Axis Capital Management (the “Sponsor”), Lion Point Capital (“Lion Point”)
and the other stockholders of the Company prior to the Initial Public Offering (“Initial Stockholders”), generating
gross proceeds of $4,000,000, which is described in Note 5.
Following the
closing of the Initial Public Offering on March 16, 2018, an amount of $101,000,000 ($10.10 per Unit) from the net proceeds of
the sale of the Units in the Initial Public Offering and the Private Placement Units was placed in a trust account (“Trust
Account”) which may be invested only in U.S. government securities, within the meaning set forth in Section 2(a)(16) of
the Investment Company Act of 1940, as amended (the “Investment Company Act”), with a maturity of 180 days or less
or in any open-ended investment company that holds itself out as a money market fund selected by the Company meeting the conditions
of Rule 2a-7 of the Investment Company Act, as determined by the Company, until the earlier of: (i) the consummation of a Business
Combination or (ii) the distribution of the Trust Account upon failure to consummate a Business Combination, as described below.
On March 20, 2018,
in connection with the underwriters’ exercise of their over-allotment option in full, the Company consummated the sale of
an additional 1,500,000 Units, and the sale of an additional 45,000 Private Placement Units each at $10.00 per unit, generating
total gross proceeds of $15,450,000. Following the closing, an additional $15,150,000 of the net proceeds ($10.10 per Unit) was
placed in the Trust Account, resulting in $116,150,000 ($10.10 per Unit) held in the Trust Account.
Transaction costs
amounted to $2,731,946, consisting of $2,300,000 of underwriting fees and $431,946 of other costs. As of September 30, 2020, cash
of $10,962 was held outside of the Trust Account and is available for working capital purposes.
The Company’s
management has broad discretion with respect to the specific application of the net proceeds of the Initial Public Offering and
private placement of Private Placement Units, although substantially all of the net proceeds are intended to be applied generally
toward consummating a Business Combination. The Company’s initial Business Combination must be with one or more target businesses
that together have a fair market value equal to at least 80% of the balance in the Trust Account (net of taxes payable) at the
time of the signing an agreement to enter into a Business Combination. The Company will only complete a Business Combination if
the post-Business Combination company owns or acquires 50% or more of the outstanding voting securities of the target or otherwise
acquires a controlling interest in the target sufficient for it not to be required to register as an investment company under
the Investment Company Act. There is no assurance that the Company will be able to successfully effect a Business Combination.
The Company will
provide its stockholders with the opportunity to redeem all or a portion of their Public Shares upon the completion of a Business
Combination either (i) in connection with a stockholder meeting called to approve the Business Combination or (ii) by means of
a tender offer. The decision as to whether the Company will seek stockholder approval of a Business Combination or conduct a tender
offer will be made by the Company, solely in its discretion. The stockholders will be entitled to redeem their shares for a pro
rata portion of the amount then on deposit in the Trust Account ($10.10 per share, plus any pro rata interest earned on the funds
held in the Trust Account and not previously released to the Company to pay its franchise and income tax obligations). There will
be no redemption rights upon the completion of a Business Combination with respect to the Company’s warrants.
OPES ACQUISITION
CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2020
(Unaudited)
The Company will
proceed with a Business Combination only if the Company has net tangible assets of at least $5,000,001 upon consummation of such
Business Combination and, solely if the Company seeks stockholder approval, a majority of the outstanding shares voted are voted
in favor of the Business Combination. If a stockholder vote is not required by law and the Company does not decide to hold a stockholder
vote for business or other legal reasons, the Company will, pursuant to its Amended and Restated Certificate of Incorporation,
conduct the redemptions pursuant to the tender offer rules of the Securities and Exchange Commission (“SEC”), and
file tender offer documents with the SEC prior to completing a Business Combination. If, however, stockholder approval of the
transaction is required by law, or the Company decides to obtain stockholder approval for business or other legal reasons, the
Company will offer to redeem shares in conjunction with a proxy solicitation pursuant to the proxy rules and not pursuant to the
tender offer rules. If the Company seeks stockholder approval in connection with a Business Combination, the Company’s Initial
Stockholders, and transferees of the shares held by the Initial Stockholders, have agreed to (a) vote their Founder Shares (as
defined in Note 6), Placement Shares (as defined in Note 5) and any Public Shares held by them in favor of approving a Business
Combination and (b) not to convert any shares in connection with a stockholder vote to approve a Business Combination (or to sell
any shares in any tender offer in connection with a Business Combination). Additionally, each public stockholder may elect to
redeem their Public Shares irrespective of whether they vote for or against the proposed Business Combination.
The Company has
until January 31, 2021 to consummate a Business Combination (the “Combination
Period”). If the Company is unable to complete a Business Combination within the Combination Period, the Company will (i)
cease all operations except for the purpose of winding up, (ii) as promptly as reasonably possible but no more than ten business
days thereafter, redeem 100% of the outstanding Public Shares, at a per share price, payable in cash, equal to the aggregate amount
then on deposit in the Trust Account, including interest earned (net of taxes payable), divided by the number of then outstanding
Public Shares, which redemption will completely extinguish public stockholders’ rights as stockholders (including the right
to receive further liquidation distributions, if any), subject to applicable law, and (iii) as promptly as reasonably possible
following such redemption, subject to the approval of the remaining stockholders and the Company’s board of directors, proceed
to commence a voluntary liquidation and thereby a formal dissolution of the Company, subject in each case to its obligations to
provide for claims of creditors and the requirements of applicable law. The proceeds deposited in the Trust Account could, however,
become subject to claims of creditors. Therefore, the actual per-share redemption amount could be less than $10.10.
The Initial Stockholders,
and transferees of the shares held by the Initial Stockholders, have (i) waived their redemption rights with respect to Founder
Shares, Placement Shares and any Public Shares they may acquire, (ii) waived their rights to liquidating distributions from the
Trust Account with respect to their Founder Shares and Placement Shares if the Company fails to consummate a Business Combination
within the Combination Period and (iii) agreed that they will not propose any amendment to the Company’s Amended and Restated
Certificate of Incorporation that would affect Public Stockholders’ ability to convert or sell their shares to the Company
in connection with a Business Combination or affect the substance or timing of the Company’s obligation to redeem 100% of
the Public Shares if the Company does not complete a Business Combination within the Combination Period unless the Company provides
the Public Stockholders with the opportunity to redeem their shares in conjunction with any such amendment. However, the Initial
Stockholders will be entitled to liquidating distributions with respect to any Public Shares acquired if the Company fails to
consummate a Business Combination or liquidates within the Combination Period.
In order to protect
the amounts held in the Trust Account, the Sponsor has agreed to be liable to the Company if and to the extent any claims by a
vendor for services rendered or products sold to the Company, or a prospective target business with which the Company has discussed
entering into a Business Combination agreement, reduce the amount of funds in the Trust Account below $10.10 per share. This liability
will not apply with respect to any claims by a third party who executed a waiver of any right, title, interest or claim of any
kind in or to any monies held in the Trust Account or to any claims under the Company’s indemnity of the underwriters of
the Proposed Offering against certain liabilities, including liabilities under the Securities Act of 1933, as amended (the “Securities
Act”). Moreover, in the event that an executed waiver is deemed to be unenforceable against a third party, the Sponsor will
not be responsible to the extent of any liability for such third-party claims. The Company will seek to reduce the possibility
that the Sponsor will have to indemnify the Trust Account due to claims of creditors by endeavoring to have all vendors, service
providers (except for the Company's independent registered accounting firm), prospective target businesses or other entities with
which the Company does business, execute agreements with the Company waiving any right, title, interest or claim of any kind in
or to monies held in the Trust Account.
On September 16,
2019, the Company’s stockholders approved an amendment to its Amended and Restated Certificate of Incorporation (the “charter”)
to extend the period of time for which the Company is required to consummate a Business Combination from September 16, 2019 to
November 15, 2019 (the “Extension”). In connection with the approval of the extension, certain stockholders elected
to redeem an aggregate of 2,282,753 shares of common stock, of which the Company paid cash in the aggregate amount of $23,594,187,
or approximately $10.34 per share, to redeeming stockholders. In connection with the Extension, the Company deposited into the
Trust Account $0.0333 for each public share that was not redeemed in connection with the Extension, or an aggregate of approximately
$613,870, for such extension. The amounts deposited into the Trust Account was loaned to the Company by Lion Point. The loans
are non-interest bearing, and due to be paid upon the consummation of a Business Combination. The loans will be forgiven if the
Company is unable to consummate a Business Combination except to the extent of any funds held outside of the Trust Account.
OPES ACQUISITION
CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2020
(Unaudited)
On November 15,
2019, the Company’s stockholders approved an amendment to its Amended and Restated Certificate of Incorporation to extend
the period of time for which the Company is required to consummate a Business Combination from November 15, 2019 to January 15,
2020 (the “Second Extension”). In connection with the approval of the Second Extension, certain stockholders elected
to redeem an aggregate of 228,001 shares of common stock, of which the Company paid cash in the aggregate amount of $2,378,972,
or approximately $10.43 per share, to redeeming stockholders. In connection with the Second extension, the Company deposited into
the Trust Account $0.0325 for each public share that was not redeemed in connection with the Second Extension, or an aggregate
of $584,301, for such extension. The amount deposited into the Trust Account was loaned to the Company by an unrelated third party.
The loan is non-interest bearing, and due to be paid upon the consummation of a Business Combination. The loan will be forgiven
if the Company is unable to consummate a Business Combination except to the extent of any funds held outside of the Trust Account.
On January 15,
2020, the Company’s stockholders approved an amendment to its Amended and Restated Certificate of Incorporation to extend
the period of time for which the Company is required to consummate a Business Combination from January 15, 2020 to March 16, 2020
(the “Third Extension”). In connection with the approval of the Third Extension, certain stockholders elected to redeem
an aggregate of 18,133 shares of common stock, of which the Company paid cash in the aggregate amount of $190,800, or approximately
$10.52 per share, to redeeming stockholders. In connection with the Third Extension, the Company deposited into the Trust Account
$0.0325 for each public share that was not redeemed in connection with the Third Extension, or an aggregate of $583,122, for such
extension. A portion of the amount deposited into the Trust Account was loaned to the Company by an unrelated third party ($291,561),
a portion was loaned by EarlyBirdCapital, Inc. (“EarlyBirdCapital”) ($145,781) and a portion was loaned by Lionheart
Management, LLC (“Lionheart”), an affiliate of Ophir Sternberg, the Chairman and CEO of the Company ($145,780). The
loans are non-interest bearing, and due to be paid upon the consummation of a Business Combination. The loans will be forgiven
if the Company is unable to consummate a Business Combination except to the extent of any funds held outside of the Trust Account.
On March 16, 2020,
the Company’s stockholders approved an amendment to its Amended and Restated Certificate of Incorporation to extend the
period of time for which the Company is required to consummate a Business Combination from March 16, 2020 to June 18, 2020 (the
“Fourth Extension”). In connection with the approval of the Fourth Extension, certain stockholders elected to redeem
an aggregate of 4,428,044 shares of common stock, of which the Company paid cash in the aggregate amount of $46.97 million, or
approximately $10.61 per share, to redeeming stockholders. In connection with the Fourth Extension, the Company deposited into
the Trust Account $0.03 for each public share that was not redeemed in connection with the Fourth Extension, or an aggregate of
$408,876, for such extensions. The amounts deposited into the Trust Account were loaned to the Company by Lionheart. The loans
are non-interest bearing, and due to be paid upon the consummation of a Business Combination. The loans will be forgiven if the
Company is unable to consummate a Business Combination except to the extent of any funds held outside of the Trust Account.
On June 18, 2020,
the Company’s stockholders approved an amendment to its Amended and Restated Certificate of Incorporation to extend the
period of time for which the Company is required to consummate a Business Combination from June 18, 2020 to September 16, 2020
(the “Fifth Extension”). In connection with the approval of the Fifth Extension, none of the Company’s stockholders
elected to redeem any of their shares of common stock.
On September
15, 2020, the Company’s stockholders approved an amendment to its Amended and Restated Certificate of Incorporation to extend
the period of time for which the Company is required to consummate a Business Combination from September 16, 2020 to November
15, 2020 (the “Sixth Extension”). In connection with the approval of the Sixth Extension, certain stockholders elected
to redeem an aggregate of 497 shares of common stock, of which the Company paid cash in the aggregate amount of $5,297, or approximately
$10.66 per share, to redeeming stockholders.
Nasdaq Notification
On January 2,
2020, the Company received a written notice (the “Notice”) from the Listing Qualifications Department of The Nasdaq
Stock Market (“Nasdaq”) indicating that the Company is not in compliance with Listing Rule 5620(a), due to the Company’s
failure to hold an annual meeting of stockholders within twelve months of the end of the Company’s fiscal year end. The
Notice is only a notification of deficiency, not of imminent delisting, and has no current effect on the listing or trading of
the Company’s securities on the Nasdaq Capital Market. The Company submitted a plan of compliance with Nasdaq and Nasdaq
granted the Company an extension until June 29, 2020 to regain compliance with the rule by holding an annual meeting of stockholders.
On July 6, 2020,
the new management of the Company received a notice from Nasdaq that it did not hold the Annual Meeting by June 29, 2020 and,
therefore, did not satisfy the requirements to regain compliance with Nasdaq Listing Rule 5620(a). The Company immediately took
measures to schedule its Annual Meeting by filing a definitive proxy statement on Schedule 14A on July 2, 2020. The Annual Meeting
was held on August 7, 2020. As set forth in the notice, Nasdaq has determined that it will initiate procedures to delist the Company’s
securities, unless the Company timely requests a hearing to appeal the decision to delist, which the Company has done. While the
appeals process is pending, the Company’s securities will continue to trade on Nasdaq. The Company expects that following
the Annual Meeting it will have regained full compliance with the listing rules.
OPES ACQUISITION
CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2020
(Unaudited)
NOTE 2. LIQUIDITY AND GOING CONCERN
As of September
30, 2020, the Company had $10,962 in its operating bank accounts, $48,401,503 in securities held in the Trust Account to be used
for a Business Combination or to repurchase or redeem its common stock in connection therewith and working capital deficit of
$625,631, which excludes prepaid income taxes and franchise and income taxes payable as the net amounts can be paid from the interest
earned in the Trust Account. As of September 30, 2020, approximately $1,231,000 of the amount on deposit in the Trust Account
represented interest income, which is available to pay the Company’s tax obligations.
The Company
will need to raise additional capital through loans or additional investments from its Sponsor, stockholders, officers,
directors, or third parties. The Company’s officers, directors and Sponsor may, but are not obligated to, loan the
Company funds, from time to time or at any time, in whatever amount they deem reasonable in their sole discretion, to meet
the Company’s working capital needs. Accordingly, the Company may not be able to obtain additional financing. If the
Company is unable to raise additional capital, it may be required to take additional measures to conserve liquidity, which
could include, but not necessarily be limited to, curtailing operations, suspending the pursuit of a potential transaction,
and reducing overhead expenses. The Company cannot provide any assurance that new financing will be available to it on
commercially acceptable terms, if at all. These conditions raise substantial doubt about the Company’s ability to
continue as a going concern through January 31, 2021, the date that the Company will be required to cease all operations,
except for the purpose of winding up, if a Business Combination is not consummated. These financial statements do not include
any adjustments relating to the recovery of the recorded assets or the classification of the liabilities that might be
necessary should the Company be unable to continue as a going concern.
NOTE 3. SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
Basis of Presentation
The accompanying
unaudited condensed financial statements have been prepared in accordance with accounting principles generally accepted in the
United States of America (“GAAP”) for interim financial information and in accordance with the instructions to Form
10-Q and Article 8 of Regulation S-X of the SEC. Certain information or footnote disclosures normally included in financial statements
prepared in accordance with GAAP have been condensed or omitted, pursuant to the rules and regulations of the SEC for interim
financial reporting. Accordingly, they do not include all the information and footnotes necessary for a complete presentation
of financial position, results of operations, or cash flows. In the opinion of management, the accompanying unaudited condensed
financial statements include all adjustments, consisting of a normal recurring nature, which are necessary for a fair presentation
of the financial position, operating results and cash flows for the periods presented.
The accompanying
unaudited condensed financial statements should be read in conjunction with the Company’s Annual Report on Form 10-K for
the year ended December 31, 2019 as filed with the SEC on March 30, 2020, which contains the audited financial statements and
notes thereto. The financial information as of December 31, 2019 is derived from the audited financial statements presented in
the Company’s Annual Report on Form 10-K for the year ended December 31, 2019. The interim results for the three and nine
months ended September 30, 2020 are not necessarily indicative of the results to be expected for the year ending December 31,
2020 or for any future interim periods.
Emerging Growth Company
The Company is
an “emerging growth company,” as defined in Section 2(a) of the Securities Act, as modified by the Jumpstart Our Business
Startups Act of 2012 (the “JOBS Act”), and it may take advantage of certain exemptions from various reporting requirements
that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being
required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations
regarding executive compensation in its periodic reports and proxy statements, and exemptions from the requirements of holding
a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously
approved.
Further, Section
102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting
standards until private companies (that is, those that have not had a Securities Act registration statement declared effective
or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial
accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with
the requirements that apply to non-emerging growth companies but any such election to opt out is irrevocable. The Company has
elected not to opt out of such extended transition period which means that when a standard is issued or revised and it has different
application dates for public or private companies, the Company, as an emerging growth company, can adopt the new or revised standard
at the time private companies adopt the new or revised standard. This may make comparison of the Company’s balance sheet
with another public company which is neither an emerging growth company nor an emerging growth company which has opted out of
using the extended transition period difficult or impossible because of the potential differences in accounting standards used.
OPES ACQUISITION
CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2020
(Unaudited)
Use of Estimates
The preparation
of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements
and the reported amounts of revenues and expenses during the reporting period.
Making estimates
requires management to exercise significant judgment. It is at least reasonably possible that the estimate of the effect of a
condition, situation or set of circumstances that existed at the date of the financial statements, which management considered
in formulating its estimate, could change in the near term due to one or more future confirming events. Accordingly, the actual
results could differ significantly from those estimates.
Cash and Cash Equivalents
The Company considers
all short-term investments with an original maturity of three months or less when purchased to be cash equivalents. The Company
did not have any cash equivalents as of September 30, 2020 and December 31, 2019.
Marketable Securities Held in Trust Account
At September 30,
2020 and December 31, 2019, the assets held in the Trust Account were substantially held in U.S. Treasury Bills. Through September
30, 2020, the Company has withdrawn $1,413,429 of interest earned on the Trust Account to pay for its franchise and income taxes,
of which $309,515 was withdrawn during the nine months ended September 30, 2020.
Common Stock Subject to Possible Redemption
The Company accounts
for its common stock subject to possible redemption in accordance with the guidance in Accounting Standards Codification (“ASC”)
Topic 480 “Distinguishing Liabilities from Equity.” Common stock subject to mandatory redemption is classified as
a liability instrument and is measured at fair value. Conditionally redeemable common stock (including common stock that features
redemption rights that are either within the control of the holder or subject to redemption upon the occurrence of uncertain events
not solely within the Company’s control) is classified as temporary equity. At all other times, common stock is classified
as stockholders’ equity. The Company’s common stock features certain redemption rights that are considered to be outside
of the Company’s control and subject to occurrence of uncertain future events. Accordingly, common stock subject to possible
redemption is presented at redemption value as temporary equity, outside of the stockholders’ equity section of the Company’s
condensed balance sheets.
Income Taxes
The Company complies
with the accounting and reporting requirements of ASC Topic 740 “Income Taxes,” which requires an asset and liability
approach to financial accounting and reporting for income taxes. Deferred income tax assets and liabilities are computed for differences
between the financial statement and tax bases of assets and liabilities that will result in future taxable or deductible amounts,
based on enacted tax laws and rates applicable to the periods in which the differences are expected to affect taxable income.
Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized.
ASC Topic 740
prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement of tax
positions taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more-likely-than-not
to be sustained upon examination by taxing authorities. The Company recognizes accrued interest and penalties related to unrecognized
tax benefits as income tax expense. As of September 30, 2020 and December 31, 2019, there were no unrecognized tax benefits and
no amounts accrued for interest and penalties. The Company is currently not aware of any issues under review that could result
in significant payments, accruals or material deviation from its position.
The Company may
be subject to potential examination by federal, state, city and foreign taxing authorities in the areas of income taxes. These
potential examinations may include questioning the timing and amount of deductions, the nexus of income among various tax jurisdictions
and compliance with federal, state, city and foreign tax laws. The Company’s management does not expect that the total amount
of unrecognized tax benefits will materially change over the next twelve months. The effective tax rate differs from the statutory
tax rate of 21% for the three and nine months ended September 30, 2020 due to the valuation allowance recorded against the Company’s
net operating losses.
On March 27, 2020,
President Trump signed the Coronavirus Aid, Relief, and Economic Security “CARES” Act into law. The CARES Act includes
several significant business tax provisions that, among other things, would eliminate the taxable income limit for certain net
operating losses (“NOL) and allow businesses to carry back NOLs arising in 2018, 2019 and 2020 to the five prior years,
suspend the excess business loss rules, accelerate refunds of previously generated corporate alternative minimum tax credits,
generally loosen the business interest limitation under IRC section 163(j) from 30 percent to 50 percent among other technical
corrections included in the Tax Cuts and Jobs Act tax provisions. The Company does not believe that the CARES Act will have a
significant impact on Company’s financial position or statement of operations.
OPES ACQUISITION
CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2020
(Unaudited)
Net Loss per Common Share
Net loss per common
share is computed by dividing net loss by the weighted average number of common shares outstanding for the period. The Company
applies the two-class method in calculating earnings per share. Shares of common stock subject to possible redemption at September
30, 2020 and 2019, which are not currently redeemable and are not redeemable at fair value, have been excluded from the calculation
of basic loss per common share since such shares, if redeemed, only participate in their pro rata share of the Trust Account earnings.
The Company has not considered the effect of (1) warrants sold in the Initial Public Offering and private placement to purchase
11,945,000 shares of common stock and (2) 750,000 shares of common stock and warrants to purchase 750,000 shares of common stock
in the unit purchase option sold to the underwriters and their designees, in the calculation of diluted loss per share, since
the exercise of the warrants and the exercise of the unit purchase option is contingent upon the occurrence of future events.
As a result, diluted loss per common share is the same as basic loss per common share for the periods.
Reconciliation of Net Loss per Common
Share
The Company’s
net (loss) income is adjusted for the portion of income that is attributable to common stock subject to possible redemption, as
these shares only participate in the earnings of the Trust Account and not the income or losses of the Company. Accordingly, basic
and diluted loss per common share is calculated as follows:
|
|
Three
Months Ended
September
30,
|
|
|
Nine
Months Ended
September
30,
|
|
|
|
2020
|
|
|
2019
|
|
|
2020
|
|
|
2019
|
|
Net (loss) income
|
|
$
|
(343,431
|
)
|
|
$
|
336,700
|
|
|
$
|
(551,140
|
)
|
|
$
|
1,001,250
|
|
Less: Income attributable to
shares subject to possible redemption
|
|
|
—
|
|
|
|
(418,858
|
)
|
|
|
(183,478
|
)
|
|
|
(1,342,216
|
)
|
Adjusted net loss
|
|
$
|
(343,431
|
)
|
|
$
|
(82,158
|
)
|
|
$
|
(734,618
|
)
|
|
$
|
(340,966
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares
outstanding, basic and diluted
|
|
|
4,069,685
|
|
|
|
3,800,351
|
|
|
|
4,016,420
|
|
|
|
3,796,787
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted net loss per
common share
|
|
$
|
(0.08
|
)
|
|
$
|
(0.02
|
)
|
|
$
|
(0.18
|
)
|
|
$
|
(0.09
|
)
|
Concentration of Credit Risk
Financial instruments
that potentially subject the Company to concentration of credit risk consist of cash accounts in a financial institution, which,
at times may exceed the Federal depository insurance coverage of $250,000. The Company has not experienced losses on these accounts
and management believes the Company is not exposed to significant risks on such accounts.
Fair Value of Financial Instruments
The fair value
of the Company’s assets and liabilities, which qualify as financial instruments under ASC Topic 820, “Fair Value Measurement,”
approximates the carrying amounts represented in the accompanying condensed balance sheets, primarily due to their short-term
nature.
Recently Issued Accounting Standards
Management does
not believe that any recently issued, but not yet effective, accounting standards, if currently adopted, would have a material
effect on the Company’s condensed financial statements.
Risks and Uncertainties
The coronavirus
(COVID-19) pandemic has resulted in a widespread health crisis that has adversely affected the economies and financial markets
worldwide. While the Company believes we may have experienced delays communicating with and conducting due diligence with regard
to certain potential target companies because of reduced availability of personnel of such companies, the Company does not believe
the COVID-19 has had a significant impact on its ability to identify and conduct due diligence with respect to prospective target
companies. The extent to which the COVID-19 pandemic may impact the Company's ability to consummate a Business Combination, including
the BurgerFi Business Combination, will depend on future developments which are highly uncertain and cannot be predicted, including
new information which may emerge concerning the severity of COVID-19 and the actions to contain COVID-19 or treat its impact,
among others.
Various governmental
bodies and private enterprises have implemented preventative or protective measures to contain the COVID-19 pandemic, such as
travel bans and restrictions, quarantines, shelter-in-place orders and shutdowns, and these actions may continue to expand in
scope, type and impact. These measures, in addition to the disruption of economies and financial markets worldwide caused by the
COVID-19 pandemic, could result in direct and indirect adverse effects on the industries in which BurgerFi operates. The extent
to which the COVID-19 pandemic may impact BurgerFi’ operations and the Company’s ability to consummate the BurgerFi Business Combination
is uncertain.
OPES ACQUISITION
CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2020
(Unaudited)
NOTE 4. INITIAL PUBLIC OFFERING
Pursuant to the
Initial Public Offering, the Company sold 11,500,000 units at a purchase price of $10.00 per Unit, inclusive of 1,500,000 units
sold to the underwriters on March 20, 2018 upon the underwriters’ election to exercise their over-allotment option in full.
Each Unit consists of one share of common stock and one warrant (“Public Warrant”). Each Public Warrant entitles the
holder to purchase one share of common stock at an exercise price of $11.50 per share (see Note 9).
NOTE 5. PRIVATE PLACEMENT
Simultaneously
with the Initial Public Offering, the Initial Stockholders purchased an aggregate of 400,000 Private Placement Units, at a purchase
price of $10.00 per Private Placement Unit for an aggregate purchase price of $4,000,000. On March 20, 2018, the Company consummated
the sale of an additional 45,000 Private Placement Units at a price of $10.00 per Private Placement Unit, which were purchased
by the Sponsor, generating gross proceeds of $450,000. Each Private Placement Unit consists of one share of common stock (“Placement
Share”) and one warrant (“Placement Warrant”) to purchase one share of common stock at an exercise price of
$11.50. The proceeds from the sale of the Private Placement Units were added to the proceeds from the Initial Public Offering
held in the Trust Account. If the Company does not complete a Business Combination within the Combination Period, the proceeds
from the sale of the Private Placement Units will be used to fund the redemption of the Public Shares (subject to the requirements
of applicable law) and the Placement Warrants will expire worthless.
NOTE 6. RELATED PARTY TRANSACTIONS
Founder Shares
In November 2017,
the Company issued an aggregate of 2,875,000 shares of common stock (“Founder Shares”) to Axis Public Ventures for
an aggregate purchase price of $25,000. On March 9, 2018, Axis Public Ventures transferred 2,012,500 Founder Shares to the other
Initial Stockholders for the same price originally paid for such shares. The Founder Shares included an aggregate of up to 375,000
shares subject to forfeiture by the Initial Stockholders to the extent that the underwriters’ over-allotment was not exercised
in full or in part, so that the Initial Stockholders would own 20% of the Company’s issued and outstanding shares after
the Initial Public Offering (assuming the Initial Stockholders did not purchase any Public Shares in the Proposed Offering and
excluding the Placement Shares). On March 20, 2018, as a result of the underwriters’ election to exercise their over-allotment
option in full, 375,000 Founder’s Shares are no longer subject to forfeiture.
The Initial Stockholders
have agreed that, subject to certain limited exceptions, the Founder Shares will not be transferred, assigned or sold until the
earlier of six months after the date of the consummation of a Business Combination and the date on which the closing price of
the Company’s common stock equals or exceeds $12.50 per share (as adjusted for share splits, share dividends, reorganizations
and recapitalizations) for any 20 trading days within any 30-trading day period commencing after the Business Combination, or
earlier if, subsequent to a Business Combination, the Company consummates a liquidation, merger, stock exchange or other similar
transaction which results in all of the Company’s stockholders having the right to exchange their shares of common stock
for cash, securities or other property.
Administrative Services Agreement
The Company entered
into an agreement whereby, commencing on March 13, 2018 through the earlier of the consummation of a Business Combination or the
Company’s liquidation, the Company will pay an affiliate of the Sponsor a monthly fee of $10,000 for office space, utilities
and administrative support. During the each of the three months ended September 30, 2020 and 2019, the Company incurred $30,000
in fees for these services. During the each of the nine months ended September 30, 2020 and 2019, the Company incurred $90,000
in fees for these services. At September 30, 2020 and December 31, 2019, there was $305,000 and $215,000 of such fees, respectively,
included in accounts payable and accrued expenses in the accompanying condensed balance sheets.
Advances — Related Party
During the year
ended December 31, 2018, the Company received an aggregate of $67,013 in advances from an affiliate of the Sponsor for costs associated
with the Initial Public Offering. The advances were non-interest bearing, unsecured and due on demand. The Company repaid the
advances in full, and accordingly, as of December 31, 2018, there were no advances outstanding.
During the year
ended December 31, 2019, an affiliate of the Sponsor advanced the Company an aggregate of $56,194 to fund working capital purposes.
The advances were non-interest bearing and due on demand. During the period ended September 30, 2020, advances in the aggregate
amount of $56,194 were converted into promissory notes (see below). At September 30, 2020 and December 31, 2019, advances of $0
and $56,194, respectively, were outstanding.
OPES ACQUISITION
CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2020
(Unaudited)
Related Party Loans
In order to finance
transaction costs in connection with a Business Combination, the Sponsor, an affiliate of the Sponsor, or the Company’s
officers, directors and other Initial Stockholders may, but are not obligated to, loan the Company funds from time to time or
at any time, as may be required (“Working Capital Loans”). Each Working Capital Loan would be evidenced by a promissory
note. The Working Capital Loans would either be paid upon consummation of a Business Combination, without interest, or, at the
holder’s discretion, up to $1,500,000 of the Working Capital Loans may be converted into units at a price of $10.00 per
unit. The units would be identical to the Private Placement Units. In the event that a Business Combination does not close, the
Company may use a portion of the proceeds held outside the Trust Account to repay the Working Capital Loans, but no proceeds held
in the Trust Account would be used to repay the Working Capital Loans.
Promissory Notes – Related
Party
On September 16,
2019, the Company’s stockholders agreed to extend the period of time the Company has to consummate a Business Combination
to November 15, 2019 and Lion Point agreed to loan the Company the funds necessary to obtain the Extension. On September 18, 2019
and October 18, 2019, the Company issued unsecured promissory notes in the aggregate principal amount of $613,870 for such extension,
to provide the Company the funds necessary to obtain the Extension. The promissory notes are non-interest bearing and due to be
paid upon the consummation of a Business Combination. The loans will be forgiven if the Company is unable to consummate a Business
Combination except to the extent of any funds held outside of the Trust Account.
In October 2019,
the Company issued unsecured promissory notes to Lion Point in the aggregate principal amount of $16,925 to fund working capital
requirements. The promissory notes are non-interest bearing and due to be paid upon the consummation of a Business Combination.
The loans will be forgiven if the Company is unable to consummate a Business Combination except to the extent of any funds held
outside of the Trust Account.
On January 30,
2020, the Company issued unsecured promissory note to an affiliate of the Sponsor in the aggregate principal amount of $26,169
to fund working capital requirements. The promissory note is non-interest bearing and due to be paid upon the consummation of
a Business Combination. The loans will be forgiven if the Company is unable to consummate a Business Combination except to the
extent of any funds held outside of the Trust Account.
On January 15,
2020, the Company’s stockholders agreed to extend the period of time the Company has to consummate a Business Combination
to March 15, 2020 and Lionheart and EarlyBirdCapital agreed to loan the Company a portion of the funds necessary to obtain the
Third Extension. On March 3, 2020, the Company issued unsecured promissory notes to Lionheart and EarlyBirdCapital in the aggregate
principal amount of approximately $145,780 and $145,781, respectively, for such extension, to provide the Company the funds necessary
to obtain the Third Extension. The promissory notes are non-interest bearing and due to be paid upon the consummation of a Business
Combination. The loans will be forgiven if the Company is unable to consummate a Business Combination except to the extent of
any funds held outside of the Trust Account.
On March 16, 2020,
the Company’s stockholders agreed to extend the period of time the Company has to consummate a Business Combination to June
18, 2020 and Lionheart agreed to loan the Company the funds necessary to obtain the Fourth Extension. As of September 30, 2020,
the Company issued unsecured promissory notes in the aggregate principal amount of $408,876 for such extensions, to provide the
Company the funds necessary to obtain the Fourth Extension. The promissory notes are non-interest bearing and due to be paid upon
the consummation of a Business Combination. The loans will be forgiven if the Company is unable to consummate a Business Combination
except to the extent of any funds held outside of the Trust Account.
In May, June,
and September 2020, the Company issued unsecured promissory notes to Lionheart in the aggregate principal amount of $229,004 to
fund working capital requirements. The promissory notes are non-interest bearing and due to be paid upon the consummation of a
Business Combination. The loans will be forgiven if the Company is unable to consummate a Business Combination except to the extent
of any funds held outside of the Trust Account.
During the nine
months ended September 30, 2020, the Company issued an unsecured promissory note to Lionheart, pursuant to which outstanding advances
in the amount of $56,194 were converted into a promissory note. The promissory note is non-interest bearing and due to be paid
upon the consummation of a Business Combination. The loan will be forgiven if the Company is unable to consummate a Business Combination
except to the extent of any funds held outside of the Trust Account.
As of September
30, 2020, the outstanding balance under the promissory notes amounted to an aggregate of $1,642,599.
OPES ACQUISITION
CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2020
(Unaudited)
NOTE 7. CONVERTIBLE PROMISSORY NOTES
On November 15,
2019, the Company’s stockholders agreed to extend the period of time the Company has to consummate a Business Combination
to January 15, 2020 and an unrelated third party agreed to loan the Company the funds necessary to obtain the Second Extension.
On November 15, 2019 and December 17, 2019, the Company issued unsecured promissory notes in the aggregate principal amount of
approximately $584,301 for such extension, to provide the Company the funds necessary to obtain the Second Extension. The promissory
notes are non-interest bearing and due to be paid upon the consummation of a Business Combination. The loans will be forgiven
if the Company is unable to consummate a Business Combination except to the extent of any funds held outside of the Trust Account.
In November and
December 2019, the Company issued unsecured promissory notes in the aggregate principal amount of $135,603 to fund working capital
requirements. The promissory notes are non-interest bearing and due to be paid upon the consummation of a Business Combination.
The loans will be forgiven if the Company is unable to consummate a Business Combination except to the extent of any funds held
outside of the Trust Account.
On January 15,
2020, the Company’s stockholders agreed to extend the period of time the Company has to consummate a Business Combination
to March 15, 2020 and an unrelated third party agreed to loan the Company a portion of the funds necessary to obtain the Third
Extension. On January 15, 2020, the Company issued an unsecured promissory note in the aggregate principal amount of approximately
$291,561 for such extension, to provide the Company the funds necessary to obtain the Third Extension. The promissory notes are
non-interest bearing and due to be paid upon the consummation of a Business Combination. The loans will be forgiven if the Company
is unable to consummate a Business Combination except to the extent of any funds held outside of the Trust Account.
On January 15,
2020, the Company issued an unsecured promissory note in the aggregate principal amount of $111,666 to fund working capital requirements.
The promissory note is non-interest bearing and due to be paid upon the consummation of a Business Combination. The loans will
be forgiven if the Company is unable to consummate a Business Combination except to the extent of any funds held outside of the
Trust Account.
On February 27,
2020, the notes were amended such that the aggregate principal balance due of $1,123,131 will be converted into 100,000 shares
of the Company’s common stock upon the consummation of a Business Combination. The loans will be forgiven if the Company
is unable to consummate a Business Combination. The Company did not record any additional interest expense as a result of the
modification of the debt since the carrying amount of the promissory note was equivalent to the fair value of the consideration
transferred, which was determined from the closing price of the Company’s common stock on the date of modification.
As of September
30, 2020, the outstanding balance under the convertible promissory notes amounted to $1,123,131.
NOTE 8. COMMITMENTS
Registration Rights
Pursuant to a
registration rights agreement entered into on March 13, 2018, the holders of the Founder Shares, Private Placement Units (and
their underlying securities) and any Units that may be issued upon conversion of the Working Capital Loans (and their underlying
securities) are entitled to registration rights. The holders of a majority of these securities are entitled to make up to two
demands that the Company register such securities. The holders of the majority of the Founder Shares can elect to exercise these
registration rights at any time commencing three months prior to the date on which these shares of common stock are to be released
from escrow. The holders of a majority of the Private Placement Units or Units issued to the Sponsor, officers, directors or their
affiliates in payment of Working Capital Loans made to the Company (in each case, including the underlying securities) can elect
to exercise these registration rights at any time after the Company consummates a Business Combination. In addition, the holders
will have certain “piggy-back” registration rights with respect to registration statements filed subsequent to the
completion of a Business Combination. The Company will bear the expenses incurred in connection with the filing of any such registration
statements.
Business Combination Marketing Agreement
The Company has
engaged EarlyBirdCapital, the representative of the underwriters in the Initial Public Offering, as an advisor in connection with
a Business Combination to assist the Company in holding meetings with its stockholders to discuss a potential Business Combination
and the target business’ attributes, introduce the Company to potential investors that are interested in purchasing securities
in connection with the Business Combination, assist the Company in obtaining stockholder approval for the Business Combination
and assist the Company with its press releases and public filings in connection with a Business Combination. The Company will
pay EarlyBirdCapital a cash fee of $4,025,000 for such services upon the consummation of a Business Combination (exclusive of
any applicable finders’ fees which might become payable).
OPES ACQUISITION
CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2020
(Unaudited)
Forward Purchase Agreement
Lion Point has
entered into a contingent forward purchase agreement with the Company to purchase, in a private placement for aggregate gross
proceeds of $30,000,000, to occur concurrently with the consummation of the Company’s initial Business Combination, 3,000,000
units at $10.00 per unit, on substantially the same terms as the sale of Units in the Initial Public Offering. The funds from
the sale of these units may be used as part of the consideration to the sellers in the initial Business Combination; any excess
funds may be used for the working capital needs of the post-transaction company. This agreement is independent of the percentage
of stockholders electing to redeem their Public Shares and may provide the Company with an increased minimum funding level for
the initial Business Combination. The contingent forward purchase agreement is subject to conditions, including Lion Point giving
the Company its irrevocable written consent to purchase the units no later than five days after the Company notifies Lion Point
of the Company’s intention to meet to consider entering into a definitive agreement for a proposed Business Combination.
Lion Point granting its consent to the purchase is entirely within its sole discretion. Accordingly, if it does not consent to
the purchase, it will not be obligated to purchase the units.
Acquisition Agreement
On June 29, 2020,
the Company entered into a membership interest purchase agreement (the “Agreement”), with BurgerFi, members of BurgerFi
(the “Members”), and BurgerFi Holdings, LLC, a Delaware limited liability company (the “Members’ Representative”).
Upon the closing of the transactions contemplated in the Agreement (the “Closing”), the Company will purchase 100%
of the membership interests of BurgerFi from the Members resulting in BurgerFi becoming a wholly owned subsidiary of the Company
(the “BurgerFi Business Combination”).
The closing consideration
for the BurgerFi Business Combination (the “Acquisition Consideration”) shall be payable as follows (subject to reduction
for indemnification claims and potential changes due to a working capital adjustment as described below):
|
(i)
|
a
cash payment in the aggregate amount of $30,000,000 payable to the Members;
|
|
(ii)
|
$20,000,000
payable either in cash or in shares of the Company’s common stock valued at $10.60
per share, in the sole and absolute discretion of the Company’s Board of Directors;
and
|
|
(iii)
|
the
issuance in the aggregate of 4,716,981 shares of the Company’s common stock to
the Members (the “Closing Payment Shares”)
|
Of the Closing
Payment Shares, 943,396 shares shall be deposited into an escrow account, to satisfy any potential indemnification claims brought
pursuant to the Agreement.
The closing consideration
payable to the stockholders of BurgerFi is also subject to adjustment based on BurgerFi’s working capital as of the closing
date as contemplated in the Agreement.
The BurgerFi Business
Combination will be consummated subject to the deliverables and provisions as further described in the Agreement.
NOTE 9. STOCKHOLDERS’ EQUITY
Preferred Stock
The Company is
authorized to issue 10,000,000 shares of preferred stock with a par value of $0.0001 per share with such designation, rights and
preferences as may be determined from time to time by the Company’s Board of Directors. At September 30, 2020 and December
31, 2019, there were no shares of preferred stock issued or outstanding.
Common Stock
The Company is
authorized to issue 100,000,000 shares of common stock with a par value of $0.0001 per share. Holders of the Company’s common
stock are entitled to one vote for each share. At September 30, 2020 and December 31, 2019, there were 4,097,947 and 3,946,146
shares of common stock issued and outstanding, excluding 3,764,625 and 8,363,100 shares of common stock subject to possible redemption,
respectively.
OPES ACQUISITION
CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2020
(Unaudited)
Warrants
The Public Warrants
will become exercisable 30 days after the completion of a Business Combination; provided that the Company has an effective registration
statement under the Securities Act covering the shares of common stock issuable upon exercise of the Public Warrants and a current
prospectus relating to them is available. The Company has agreed that as soon as practicable, the Company will use its best efforts
to file with the SEC a registration statement for the registration, under the Securities Act, of the shares of common stock issuable
upon exercise of the Public Warrants. The Company will use its best efforts to cause the same to become effective and to maintain
the effectiveness of such registration statement, and a current prospectus relating thereto, until the expiration of the Public
Warrants in accordance with the provisions of the warrant agreement. Notwithstanding the foregoing, if a registration statement
covering the shares of common stock issuable upon exercise of the Public Warrants is not effective within a specified period following
the consummation of Business Combination, warrant holders may, until such time as there is an effective registration statement
and during any period when the Company shall have failed to maintain an effective registration statement, exercise warrants on
a cashless basis pursuant to the exemption provided by Section 3(a)(9) of the Securities Act, provided that such exemption is
available. If that exemption, or another exemption, is not available, holders will not be able to exercise their warrants on a
cashless basis. The Public Warrants will expire five years after the completion of a Business Combination or earlier upon redemption
or liquidation.
The Company may redeem the Public Warrants:
|
●
|
in
whole and not in part;
|
|
|
|
|
●
|
at
a price of $0.01 per warrant;
|
|
|
|
|
●
|
at
any time during the exercise period;
|
|
|
|
|
●
|
upon
a minimum of 30 days’ prior written notice of redemption; and
|
|
|
|
|
●
|
if,
and only if, the last sale price of the Company’s common stock equals or exceeds $18.00 per share for any 20 trading
days within a 30-trading day period ending on the third business day prior to the date on which the Company sends the notice
of redemption to the warrant holders.
|
|
|
|
|
●
|
if,
and only if, there is a current registration statement in effect with respect to the shares of common stock underlying such
warrants.
|
If the Company
calls the Public Warrants for redemption, management will have the option to require all holders that wish to exercise the Public
Warrants to do so on a “cashless basis,” as described in the warrant agreement. The exercise price and number of shares
of common stock issuable upon exercise of the warrants may be adjusted in certain circumstances including in the event of a stock
dividend, or recapitalization, reorganization, merger or consolidation. However, the warrants will not be adjusted for issuance
of common stock at a price below its exercise price. Additionally, in no event will the Company be required to net cash settle
the warrants. If the Company is unable to complete a Business Combination within the Combination Period and the Company liquidates
the funds held in the Trust Account, holders of warrants will not receive any of such funds with respect to their warrants, nor
will they receive any distribution from the Company’s assets held outside of the Trust Account with the respect to such
warrants. Accordingly, the warrants may expire worthless.
The Placement
Warrants will be identical to the Public Warrants underlying the Units sold in the Initial Public Offering, except that the Placement
Warrants and the common stock issuable upon the exercise of the Placement Warrants will not be transferable, assignable or saleable
until after the completion of a Business Combination, subject to certain limited exceptions. Additionally, the Placement Warrants
will be exercisable on a cashless basis and be non-redeemable so long as they are held by the initial purchasers or their permitted
transferees. If the Placement Warrants are held by someone other than the initial purchasers or their permitted transferees, the
Placement Warrants will be redeemable by the Company and exercisable by such holders on the same basis as the Public Warrants.
Unit Purchase Option
On March 13, 2018,
the Company sold EarlyBirdCapital (and its designees), for $100, an option to purchase up to 750,000 Units exercisable at $10.00
per Unit (or an aggregate exercise price of $7,500,000) commencing on the later of March 13, 2019 and the consummation of a Business
Combination. The unit purchase option may be exercised for cash or on a cashless basis, at the holder’s option, and expires
on March 17, 2023. The Units issuable upon exercise of this option are identical to those offered in the Initial Public Offering.
The Company accounted for the unit purchase option, inclusive of the receipt of $100 cash payment, as an expense of the Initial
Public Offering resulting in a charge directly to stockholders’ equity. The fair value of the unit purchase option was estimated
to be approximately $2,633,621 (or $3.51 per Unit) using the Black-Scholes option-pricing model. The fair value of the unit purchase
option granted to the underwriters was estimated as of the date of grant using the following assumptions: (1) expected volatility
of 35%, (2) risk-free interest rate of 2.65% and (3) expected life of five years. The option grants to holders demand and “piggyback”
rights for periods of five and seven years, respectively, from March 13, 2018 with respect to the registration under the Securities
Act of the securities directly and indirectly issuable upon exercise of the option. The Company will bear all fees and expenses
attendant to registering the securities, other than underwriting commissions which will be paid for by the holders themselves.
The exercise price and number of units issuable upon exercise of the option may be adjusted in certain circumstances including
in the event of a stock dividend, or the Company’s recapitalization, reorganization, merger or consolidation. However, the
option will not be adjusted for issuances of common stock at a price below its exercise price.
OPES ACQUISITION
CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2020
(Unaudited)
NOTE 10. FAIR VALUE MEASUREMENTS
The Company follows
the guidance in ASC 820 for its financial assets and liabilities that are re-measured and reported at fair value at each reporting
period, and non-financial assets and liabilities that are re-measured and reported at fair value at least annually.
The fair value
of the Company’s financial assets and liabilities reflects management’s estimate of amounts that the Company would
have received in connection with the sale of the assets or paid in connection with the transfer of the liabilities in an orderly
transaction between market participants at the measurement date. In connection with measuring the fair value of its assets and
liabilities, the Company seeks to maximize the use of observable inputs (market data obtained from independent sources) and to
minimize the use of unobservable inputs (internal assumptions about how market participants would price assets and liabilities).
The following fair value hierarchy is used to classify assets and liabilities based on the observable inputs and unobservable
inputs used in order to value the assets and liabilities:
|
Level
1:
|
Quoted
prices in active markets for identical assets or liabilities. An active market for an asset or liability is a market in which
transactions for the asset or liability occur with sufficient frequency and volume to provide pricing information on an ongoing
basis.
|
|
Level
2:
|
Observable
inputs other than Level 1 inputs. Examples of Level 2 inputs include quoted prices in active markets for similar assets or
liabilities and quoted prices for identical assets or liabilities in markets that are not active.
|
|
Level
3:
|
Unobservable
inputs based on our assessment of the assumptions that market participants would use in pricing the asset or liability.
|
The following
table presents information about the Company’s assets that are measured at fair value on a recurring basis at September
30, 2020 and December 31, 2019, and indicates the fair value hierarchy of the valuation inputs the Company utilized to determine
such fair value:
Description
|
|
Level
|
|
September 30,
2020
|
|
|
December 31,
2019
|
|
Assets:
|
|
|
|
|
|
|
|
|
Marketable securities held in Trust Account
|
|
1
|
|
$
|
48,401,503
|
|
|
$
|
94,541,286
|
|
NOTE 11. SUBSEQUENT EVENTS
The Company evaluates
subsequent events and transactions that occur after the balance sheet date up to the date that the financial statements were issued.
Other than as discussed below, the Company did not identify any subsequent events that would have required adjustment or disclosure
in the condensed financial statements.
The Company issued
the following persons unsecured promissory notes on the dates and in the amounts set forth below: (i) $16,080.00 to an affiliate
of Axis Public Ventures on October 16, 2020; (ii) $43,000.00 to Gonzalo Gil and $30,000.00 to Lionheart Equities on October 27,
2020 (iii) $52,428.68 to an affiliate of Axis Public Ventures on October 28, 2020; and (iv) $113,129.58 to LB&B Capital on
October 29, 2020. All of the promissory notes are non-interest bearing and due to be paid upon the consummation of a Business
Combination. The loans will be forgiven if the Company is unable to consummate a Business Combination except to the extent of
any funds held outside of the Trust Account.
ANNEX
A
Execution Version
MEMBERSHIP
INTEREST PURCHASE AGREEMENT
dated
June
29, 2020
by
and among
Opes
Acquisition Corp., a Delaware corporation
as
the Purchaser,
Burger
Fi International LLC, a Delaware limited liability company,
as
the Company,
Members
of the Company, as the Members
and
BurgerFi Holdings, LLC,
as
the Members’ Representative
TABLE
OF CONTENTS
ARTICLE
I DEFINITIONS
|
2
|
|
|
ARTICLE
II ACQUISITION
|
10
|
|
|
2.1
Acquisition
|
10
|
2.2
Closing; Effective Time
|
10
|
2.3
Closing Deliveries
|
10
|
2.4
Post-Closing Board of Directors
|
12
|
2.5
Withholding Rights
|
12
|
2.6
Rights Not Transferable
|
12
|
2.7
Taking of Necessary Action; Further Action
|
12
|
2.8
Taxes
|
12
|
|
|
ARTICLE
III PURCHASE PRICE
|
13
|
|
|
3.1
Payment of Purchase Price
|
13
|
|
|
ARTICLE
IV REPRESENTATIONS AND WARRANTIES OF THE COMPANY
|
17
|
|
|
4.1
Corporate Existence and Power
|
17
|
4.2
Authorization
|
17
|
4.3
Governmental Authorization
|
18
|
4.4
Non-Contravention
|
18
|
4.5
Capitalization
|
18
|
4.6
Certificate of Formation; Operating Agreement
|
18
|
4.7
Corporate Records
|
18
|
4.8
Third Parties
|
19
|
4.9
Assumed Names
|
19
|
4.10
Subsidiaries
|
19
|
4.11
Consents
|
20
|
4.12
Financial Statements
|
20
|
4.13
Books and Records
|
21
|
4.14
Absence of Certain Changes
|
21
|
4.15
Properties; Title to the Company’s Assets
|
23
|
4.16
Litigation
|
24
|
4.17
Contracts
|
24
|
4.18
Insurance
|
26
|
4.19
Licenses and Permits
|
27
|
4.20
Compliance with Laws
|
27
|
4.21
Intellectual Property
|
27
|
4.22
Customers, Suppliers and Franchisees
|
28
|
4.23
Accounts Receivable and Payable; Loans
|
29
|
4.24
Pre-payments
|
29
|
4.25
Employees
|
29
|
4.26
Employment Matters
|
30
|
4.27
Withholding
|
31
|
4.28
Employee Benefits and Compensation
|
31
|
4.29
Real Property
|
33
|
4.30
Accounts
|
33
|
4.31
Tax Matters
|
34
|
4.32
Environmental Laws
|
35
|
4.33
Finders’ Fees
|
35
|
4.34
Powers of Attorney and Suretyships
|
35
|
4.35
Managers
|
35
|
4.36
JR Trust Entities
|
35
|
4.37
Certain Business Practices
|
35
|
4.38
Money Laundering Laws
|
36
|
4.39
OFAC
|
36
|
4.40
Not an Investment Company
|
36
|
4.41
Information Supplied
|
36
|
|
|
ARTICLE
V REPRESENTATIONS AND WARRANTIES OF MEMBERS
|
37
|
|
|
5.1
Ownership of Interests; Authority
|
37
|
5.2
Approvals
|
37
|
5.3
Non-Contravention
|
37
|
5.4
Litigation and Claims
|
37
|
5.5
Investment Representations
|
38
|
|
|
ARTICLE
VI REPRESENTATIONS AND WARRANTIES OF PURCHASER
|
39
|
|
|
6.1
Corporate Existence and Power
|
39
|
6.2
Corporate Authorization
|
39
|
6.3
Governmental Authorization
|
39
|
6.4
Non-Contravention
|
39
|
6.5
Finders’ Fees
|
40
|
6.6
Issuance of Shares
|
40
|
6.7
Capitalization
|
40
|
6.8
Information Supplied
|
40
|
6.9
Trust Fund
|
41
|
6.10
Listing
|
41
|
6.11
Reporting Company
|
41
|
6.12
Undisclosed Liabilities
|
41
|
6.13
Interested Party Transactions
|
42
|
6.14
Board Approval
|
42
|
6.15
Purchaser SEC Documents and Purchaser Financial Statements
|
42
|
6.16
Absence of Certain Changes
|
43
|
6.17
Certain Business Practices
|
44
|
6.18
Money Laundering Laws
|
44
|
6.19
Business Activities
|
44
|
6.20
Purchaser Contracts
|
44
|
6.21
Intellectual Property
|
44
|
6.22
Employees
|
45
|
6.23
Employee Benefits
|
45
|
6.24
Assets
|
45
|
6.25
Real Property
|
45
|
6.26
Tax Matters
|
45
|
6.27
Legal Requirements and Permits
|
46
|
6.28
Insurance
|
46
|
6.29
Vote Required
|
46
|
6.30
Investment Company
|
46
|
6.31
Minute Books
|
46
|
6.32
Application of Takeover Provisions
|
46
|
6.33
Purchaser Investigations
|
46
|
6.34
Lockup
|
47
|
6.35
No Other Representations and Warranties
|
47
|
|
|
ARTICLE
VII COVENANTS OF THE COMPANY PENDING CLOSING
|
47
|
|
|
7.1
Conduct of the Business
|
47
|
7.2
Access to Information
|
49
|
7.3
Notices of Certain Events
|
50
|
7.4
Annual and Interim Financial Statements; Additional Financial Information
|
50
|
7.5
Employees of the Company and the Manager
|
51
|
7.6
Tax Matters
|
51
|
7.7
Best Efforts to Obtain Consents
|
54
|
7.8
Guaranteed Debt
|
54
|
7.9
Transfer and Assignment of Interests in the JR Trust Entities
|
54
|
7.10
Notification
|
54
|
|
|
ARTICLE
VIII COVENANTS OF PURCHASER
|
54
|
|
|
8.1
Notification
|
54
|
8.2
Contact with Customers and Suppliers
|
54
|
|
|
ARTICLE
IX ACTIONS PRIOR TO THE CLOSING
|
55
|
|
|
9.1
Best Efforts; Further Assurances
|
55
|
9.2
Trust Account
|
55
|
9.3
Cooperation with Proxy Statement and Other Filings
|
55
|
9.4
Shareholder Vote; Recommendation of the Purchaser’s Board of Directors
|
58
|
9.5
Purchaser Stockholders’ Meeting
|
58
|
9.6
Operations of Purchaser Prior to the Closing
|
58
|
9.7
Confidentiality
|
60
|
9.8
Form 8-K; Press Releases
|
60
|
9.9
Listing
|
61
|
9.10
D&O Insurance; Indemnification of Officers and Directors
|
61
|
9.11
Exclusivity
|
62
|
9.12
Appointment of Post-Closing Board of Directors and Officers
|
62
|
9.13
Adoption of Equity Incentive Plan
|
62
|
|
|
ARTICLE
X CONDITIONS TO CLOSING
|
62
|
|
|
10.1
Condition to the Obligations of the Parties
|
62
|
10.2
Conditions to Obligations of Purchaser
|
63
|
10.3
Conditions to Obligations of the Company
|
64
|
|
|
ARTICLE
XI INDEMNIFICATION
|
65
|
|
|
11.1
Indemnification of Purchaser
|
65
|
11.2
Procedure
|
66
|
11.3
Escrow of Escrow Shares by Members
|
68
|
11.4
Periodic Payments
|
69
|
11.5
Insurance
|
69
|
11.6
Survival of Indemnification Rights
|
69
|
11.7
Tax Treatment of Indemnification Payments
|
70
|
11.8
Indemnification for Current Litigation
|
70
|
11.9
Exclusive Remedies
|
70
|
11.10
NO ADDITIONAL REPRESENTATIONS; NO RELIANCE
|
70
|
|
|
ARTICLE
XII DISPUTE RESOLUTION
|
71
|
|
|
12.1
Mediation
|
71
|
12.2
Jurisdiction; Waiver of Jury Trial; Exemplary Damages
|
71
|
|
|
ARTICLE
XIII TERMINATION
|
72
|
|
|
13.1
Termination Without Default
|
72
|
13.2
Termination Upon Default
|
73
|
13.3
No Other Termination
|
73
|
13.4
Effect of Termination
|
73
|
|
|
ARTICLE
XIV MISCELLANEOUS
|
74
|
|
|
14.1
Notices
|
74
|
14.2
Amendments; No Waivers; Remedies
|
75
|
14.3
Arm’s length bargaining; no presumption against drafter
|
75
|
14.4
Publicity
|
76
|
14.5
Expenses
|
76
|
14.6
No Assignment or Delegation
|
76
|
14.7
Governing Law
|
76
|
14.8
Counterparts; facsimile signatures
|
76
|
14.9
Entire Agreement
|
76
|
14.10
Severability
|
76
|
14.11
Construction of certain terms and references; captions
|
76
|
14.12
Further Assurances
|
77
|
14.13
Third Party Beneficiaries
|
77
|
14.14
Waiver
|
77
|
14.15
Members’ Representative
|
78
|
14.16
Specific Performance
|
79
|
14.17
Legal Representation by Shumaker
|
79
|
Exhibit
Exhibit A – Escrow Agreement
Exhibit B – Lock Up Agreement
Exhibit C – Registration Rights Agreement
Exhibit D – Amended and Restated Certification of Incorporation
MEMBERSHIP
INTEREST PURCHASE AGREEMENT
This
MEMBERSHIP INTEREST PURCHASE AGREEMENT (the “Agreement”), dated as of June 29, 2020, by and among Opes Acquisition
Corp., a Delaware corporation (the “Purchaser”), BurgerFi International LLC, a Delaware limited liability company
(the “Company”), the members of the Company (each, a “Member” and collectively the “Members”),
and BurgerFi Holdings, LLC, a Delaware limited liability company, as the representative of the Members (the “Members’
Representative”).
W
I T N E S E T H :
A. The
Company is in the business of operating gourmet fast food and quick service casual restaurants focused on all-natural hamburgers,
vegetarian burgers, hormone-free chicken and other complementary food offerings (the “Business”);
B. Purchaser
is a blank check company formed for the sole purpose of entering into a share exchange, asset acquisition, share purchase, recapitalization,
reorganization or other similar business combination with one or more businesses or entities;
C. The
Members of the Company are listed on Schedule 1.10 hereto and own 100% of the membership interests of the Company (the “Interests”).
D. The
Board of Directors of the Purchaser, having determined that the Acquisition is fair and advisable to, and in the best interests
of Purchaser and its stockholders, and the Members of the Company have each approved the terms of the Acquisition;
E. The
Board of Directors of the Purchaser has determined to recommend that the stockholders of the Purchaser adopt, authorize and approve
this Agreement and the Acquisition; and
F. In
conjunction with, inter alia, obtaining approval from the stockholders of Purchaser for the Acquisition (collectively with
the other transactions, authorization and approvals set forth in the Proxy Statement, the “Offer”), and in
accordance with the terms hereof, Purchaser shall provide an opportunity to its Public Stockholders to have their Offering Shares
redeemed for the consideration, on the terms and subject to the conditions and limitations, set forth in the Prospectus and the
Certificate of Incorporation of Purchaser.
NOW,
THEREFORE, in consideration of the mutual covenants contained herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Parties agree as follows:
ARTICLE
I
DEFINITIONS
The
following terms, as used herein, have the following meanings:
1.1. “Action”
means any legal action, suit, claim, investigation, hearing or proceeding, including any audit, claim or assessment for Taxes
or otherwise.
1.2. “Acquisition”
means the purchase of the Members’ Interest by the Purchaser in accordance with the terms of this Agreement.
1.3. “Additional
Agreements” means the Voting Agreement, the Registration Rights Agreement, the Escrow Agreement, the Employment Agreements,
Consulting Agreement and the Lock-Up Agreements.
1.4. “Affiliate”
means, with respect to any Person, any other Person directly or indirectly Controlling, Controlled by, or under common Control
with such Person.
1.5. “Authority”
means any governmental, regulatory or administrative body, agency or authority, any court or judicial authority, any arbitrator,
or any public, private or industry regulatory authority, whether international, national, Federal, state, or local.
1.6. “Board
of Directors” means the board of directors of the Purchaser prior to the consummation of the Acquisition.
1.7. “Books
and Records” means all books and records, ledgers, employee records, customer lists, files, correspondence, and other
records of every kind (whether written, electronic, or otherwise embodied) owned or used by a Person or in which a Person’s
assets, the business or its transactions are otherwise reflected, other than stock books and minute books.
1.8. “Business
Combination Fees” means the fees and expenses held in the Trust Account payable to Early Bird Capital, Inc., the underwriter
in the IPO, that they are entitled to receive upon the Closing in accordance with the Business Combination Marketing Agreement,
between the Purchaser and the underwriter and the Trust Agreement.
1.9. “Business
Day” means any day other than a Saturday, Sunday or a legal holiday on which commercial banking institutions in New
York are authorized to close for business.
1.10.
“Cash Consideration” means consideration in the aggregate amount of $50,000,000, which shall consist of (i)
a cash payment in the aggregate amount of at least $30,000,000 payable to the Members and allocated in such amounts set forth
opposite such Member’s name on Schedule 1.10, and (ii) $20,000,000 payable, in the sole and absolute discretion of the Board
of Directors, either in cash or in 1,886,792 shares of Purchaser Common Stock valued at $10.60 per share and allocated in such
amounts set forth opposite such Member’s name on Schedule 1.10.
1.11. “Certificate
of Incorporation” means the Purchaser’s Amended and Restated Certificate of Incorporation dated, as amended.
1.12. “Closing”
has the meaning set forth in Section 2.2.
1.13. [Intentionally
Omitted]
1.14. “Closing
Payment Shares” means stock certificates representing, in the aggregate, 4,716,981 shares of Purchaser Common Stock
payable to the Members and in such amounts set forth opposite each Member’s name on Schedule 1.10 with a deemed price
per share of $10.60 (with a value of $50,000,000 in the aggregate).
1.15. “Closing
Working Capital” means the Company’s cash minus its Bank of America Revolving Line of Credit.
1.16. “COBRA”
means collectively, the requirements of Sections 601 through 606 of ERISA and Section 4980B of the Code.
1.17. “Code”
means the Internal Revenue Code of 1986, as amended.
1.18. “Confidential
Information” means any information that one party discloses, directly or indirectly, to the other party, whether embodied
in tangible form or disclosed visually or orally and whether or not designated as “confidential” or “proprietary”
or by some similar designation, relating to the prior, current or prospective business of the disclosing party, including, without
limitation, business models, business opportunities, business plans, financial information, market research, marketing plans,
pricing and cost data, customers, suppliers, employees, contractors, ideas, improvements, products and product plans, technologies,
research activities and results, and any other information that should be reasonably understood by the receiving party to be the
confidential or proprietary information of the disclosing party. Confidential Information shall not include information (i) that
has entered the public domain through no fault of the receiving party, (ii) rightfully known by the receiving party without obligation
of confidentiality to any third party prior to receipt of same from the disclosing party, (iii) independently developed by the
receiving party without using any Confidential Information of the disclosing party, and (iv) generally made available by the disclosing
party without obligation of confidentiality.
1.19. “Consulting
Agreement” means that certain consulting agreement dated as of the Closing Date between John Rosatti and Purchaser to
be in the form to be mutually agreed upon by the Purchaser and Mr. Rosatti.
1.20. “Contracts”
means the Leases and all contracts, agreements, leases (including equipment leases, car leases and capital leases), licenses,
commitments, client contracts, franchise agreements, sales and purchase orders and similar instruments, oral or written, to which
the Company is a party or by which any of its respective assets are bound, including any entered into by the Company in compliance
with Section 7.1 after the date hereof and prior to the Closing, and all rights and benefits thereunder, including all rights
and benefits thereunder with respect to all cash and other property of third parties under the Company’s dominion or control.
1.21. “Control”
of a Person means the possession, directly or indirectly, of the power to direct or cause the direction of the management and
policies of such Person, whether through the ownership of voting securities, by contract, or otherwise. “Controlled”,
“Controlling” and “under common Control with” have correlative meanings. Without limiting the foregoing,
a Person (the “Controlled Person”) shall be deemed Controlled by (a) any other Person (the “10% Owner”)
(i) owning beneficially, as meant in Rule 13d-3 under the Exchange Act, securities entitling such Person to cast 10% or more of
the votes for election of directors or equivalent governing authority of the Controlled Person or (ii) entitled to be allocated
or receive 10% or more of the profits, losses, or distributions of the Controlled Person; (b) an officer, director, general partner,
partner (other than a limited partner), manager, or member (other than a member having no management authority that is not a 10%
Owner) of the Controlled Person; or (c) a spouse, parent, lineal descendant, sibling, aunt, uncle, niece, nephew, mother-in-law,
father-in-law, sister-in-law, or brother-in-law of an Affiliate of the Controlled Person or a trust for the benefit of an Affiliate
of the Controlled Person or of which an Affiliate of the Controlled Person is a trustee.
1.22. “DGCL”
means the Delaware General Corporation Law.
1.23. “DLLCA”
means the Delaware Limited Liability Company Act.
1.24. [Intentionally
Omitted]
1.25. “Earnout”
has the meaning set forth in Section 3.1(g).
1.26. “Earnout
Share Consideration” means all of the Purchaser Common Stock issued in accordance with Section 3.1(g).
1.27. “Effective
Time” has the meaning set forth in Section 2.2.
1.28. “Employment
Agreements” means the separate employment agreements between Purchaser and each of the Key Employees, in the forms to
be mutually agreed to by the Purchaser and the Company.
1.29. “Environmental
Laws” shall mean all Laws that prohibit, regulate or control any Hazardous Material or any Hazardous Material Activity,
including, without limitation, the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, the Resource
Recovery and Conservation Act of 1976, the Federal Water Pollution Control Act, the Clean Air Act, the Hazardous Materials Transportation
Act and the Clean Water Act.
1.30. “ERISA”
means the Employee Retirement Income Security Act of 1974, as amended, and the regulations thereunder.
1.31. “Escrow
Agent” means Continental Stock Transfer & Trust Company.
1.32. “Escrow
Agreement” means the agreement in the form attached hereto as Exhibit A between the Members’ Representative,
Escrow Agent and the Purchaser with respect to the Escrow Shares.
1.33.
“Escrow Shares” means 943,396 of Closing Payment Shares (valued at $10.60 per share).
1.34. “Exchange
Act” means the Securities Exchange Act of 1934, as amended.
1.35. “Executive
Chairman Employment Agreement” means the employment agreement between Purchaser and Ophir Sternberg to serve as Executive
Chairman for a five-year term, in the form to be mutually agreed to by the Purchaser, the Company and Mr. Sternberg.
1.36. “Hazardous
Material” shall mean any material, emission, chemical, substance or waste that has been designated by any Governmental
Authority to be radioactive, toxic, hazardous, a pollutant or a contaminant.
1.37. “Hazardous
Materials Activity” shall mean the transportation, transfer, recycling, storage, use, treatment, manufacture, removal,
remediation, release, exposure of others to, sale, labeling, or distribution of any Hazardous Material or any product or waste
containing a Hazardous Material, or product manufactured with ozone depleting substances, including, without limitation, any required
labeling, payment of waste fees or charges (including so-called e-waste fees) and compliance with any recycling, product take-back
or product content requirements.
1.38.
“Indebtedness” means with respect to any Person, (a) all obligations of such Person for borrowed money, or
with respect to deposits or advances of any kind (including amounts by reason of overdrafts and amounts owed by reason of letter
of credit reimbursement agreements) including with respect thereto, all interests, fees and costs, (b) all obligations of such
Person evidenced by bonds, debentures, notes or similar instruments, (c) all obligations of such Person under conditional sale
or other title retention agreements relating to property purchased by such Person, (d) all obligations of such Person issued or
assumed as the deferred purchase price of property or services (other than accounts payable to creditors for goods and services
incurred in the ordinary course of business), (e) all Indebtedness of others secured by (or for which the holder of such Indebtedness
has an existing right, contingent or otherwise, to be secured by) any lien or security interest on property owned or acquired
by such Person, whether or not the obligations secured thereby have been assumed, (f) all obligations of such Person under leases
required to be accounted for as capital leases under U.S. GAAP, (g) all guarantees by such Person and (h) any agreement to incur
any of the same.
1.39. “Intellectual
Property Right” means any trademark, service mark, registration thereof or application for registration therefor, trade
name, license, invention, patent, patent application, trade secret, trade dress, know-how, copyright, copyrightable materials,
copyright registration, application for copyright registration, software programs, data bases, u.r.l.s., and any other type of
proprietary intellectual property right, and all embodiments and fixations thereof and related documentation, registrations and
franchises and all additions, improvements and accessions thereto, and with respect to each of the forgoing items in this definition,
which is owned or licensed or filed by the Company, or used or held for use in the Business, whether registered or unregistered
or domestic or foreign.
1.40. “Interests”
has the meaning set forth in the recitals to this Agreement.
1.41. “Inventory”
is defined in the UCC.
1.42. “IPO”
means the initial public offering of the Purchaser pursuant to a prospectus dated March 13, 2018 (the “Prospectus”).
1.43. “JR
Trust Entities” means the entities set forth on Schedule 1.43, including without limitation, the entities that own the
Intellectual Property of the Business, including without limitation the trademarks, and other brand attributes.
1.44. “knowledge
of the Company” or any other similar knowledge qualification, means the actual knowledge of John Rosatti, Bryan
McGuire, Ross Goldstein Charlie Guzzetta, and Nick Raucci.
1.45. “Law”
means any domestic or foreign, federal, state, municipality or local law, statute, ordinance, code, rule, or regulation.
1.46. “Leases”
means the leases with respect to the stores, warehouses and parking lots leased by the Company at the locations as set forth on
Schedule 1.43 attached hereto, together with all fixtures and improvements erected on the premises leased thereby.
1.47. “Legal
Requirement” means, with respect to any Party, all applicable laws, statutes, rules, regulations, codes, ordinances,
bylaws, variances, judgments, injunctions, orders, conditions and licenses of a Governmental Entity having jurisdiction over the
assets or the properties of such Party or its Subsidiaries and the operations thereof.
1.48. “Lien”
means, with respect to any asset, any mortgage, lien, pledge, charge, security interest or encumbrance of any kind in respect
of such asset, and any conditional sale or voting agreement or proxy, including any agreement to give any of the foregoing.
1.49.
“Lock-Up Agreements” means the Lock-Up Agreements in the form attached hereto as Exhibit B between Purchaser
and each of the Members, pursuant to which 4,716,981 Closing Payment Shares issuable in the aggregate to the Members will be locked
up until the earlier of (i) six months after the Closing Date, or (ii) if subsequent to the Closing Date, Purchaser consummates
a liquidation, merger, stock exchange or other similar transaction which results in all of Purchaser’s stockholders having
the right to exchange their shares of common stock for cash, securities or other property. For the avoidance of doubt, in the
event the Cash Consideration in the amount of $20,000,000 is paid in shares of the Purchaser Common Stock, such shares shall not
be subject to the Lock-Up.
1.50. “Material
Adverse Effect” or “Material Adverse Change” means a material adverse change or a material adverse
effect, individually or in the aggregate, upon the assets, liabilities, financial condition, prospects, net worth, management,
earnings, cash flows, business, operations or properties of the Company and the Business, taken as a whole, whether or not arising
from transactions in the ordinary course of business; provided, however, that Material Adverse Effect or Material Adverse
Change shall not include any event, occurrence, fact, condition or change, directly or indirectly, arising out of or attributable
to: (i) any change, effect or circumstance resulting from an action required or permitted by this Agreement; (ii) any change,
effect or circumstance resulting from the announcement of this Agreement; or (iii) conditions caused by acts of terrorism or war
(whether or not declared) or any natural or man-made disaster or acts of God (including any pandemic and any governmental response
thereto).
1.51. “Nasdaq”
means the Nasdaq Capital Market.
1.52. “Operating
Agreement” means the Limited Liability Company Operating Agreement of the Company dated May 20, 2015.
1.53.
“Order” means any decree, order, judgment, writ, award, injunction, rule or consent of or by an Authority.
1.54. “Parties”
means the parties to this Agreement.
1.55. “Permitted
Liens” means (i) all defects, exceptions, restrictions, easements, rights of way and encumbrances disclosed in policies
of title insurance which have been made available to Purchaser; and (ii) mechanics’, carriers’, workers’, repairers’
and similar statutory Liens arising or incurred in the ordinary course of business for amounts (A) that are not delinquent, (B)
that are not material to the business, operations and financial condition of the Company so encumbered, either individually or
in the aggregate, (C) not resulting from a breach, default or violation by the Company of any Contract or Law, and (D) the Liens
set forth on Schedule 1.52.
1.56. “Permitted
Transfer” means the transfer by a Member of Interests as a bona fide gift, by will or intestacy or to a family member
or trust for the benefit of a family member; provided that in the case of any transfer or distribution each donee or distributee
shall sign and deliver a Lock-Up Agreement.
1.57. “Person”
means an individual, corporation, partnership (including a general partnership, limited partnership or limited liability partnership),
limited liability company, association, trust or other entity or organization, including a government, domestic or foreign, or
political subdivision thereof, or an agency or instrumentality thereof.
1.58. “Promissory
Notes” means the promissory notes that have been and will be included as related party liabilities on the balance sheet
set forth in the Purchaser Financial Statements.
1.59. “Proxy
Statement” has the meaning set forth in Section 9.3(a).
1.60. “Public
Stockholders” means the shareholders of Purchaser Public Shares.
1.61. “Purchase
Price” has the meaning set forth in Section 3.1.
1.62. “Purchaser
Common Stock” means the common stock, par value $0.0001 per share of Purchaser.
1.63.
“Purchaser Financial Statements” means the audited consolidated financial statements of the Purchaser as of
and for the fiscal years ended December 31, 2018 and 2019, consisting of the audited consolidated balance sheets as of such dates,
the audited consolidated income statements for the twelve (12) month periods ended on such dates, and the audited consolidated
cash flow statements for the twelve (12) month periods ended on such dates, and (ii) reviewed financial statements for the three
month periods ended March 31, 2020 and 2019, consisting of the reviewed consolidated balance sheets as of such dates, the reviewed
consolidated income statements for the three (3) month periods ended on such dates, and the reviewed consolidated cash flow statements
for the three (3) month periods ended on such dates.
1.64. “Purchaser
Private Warrants” means each warrant issued in private placements at the time of the consummation of the IPO, entitling
the holder thereof to purchase one share of Purchaser Common Stock at an exercise price of $11.50 per share.
1.65. “Purchaser
Public Shares” means the Purchaser Common Stock issued in the Purchaser’s IPO and any securities into which
such Purchaser Common Stock are converted or for which such Purchaser Common Stock are exchanged.
1.66. “Purchaser
Public Warrants” means one warrant that was included as part of each Purchaser Unit, entitling the holder thereof to
purchase one share of Purchaser Common Stock at an exercise price of $11.50 per share.
1.67. “Purchaser
Redemption Price” means the price per share payable to those holders of Purchaser Public Shares who elect to redeem
their Purchaser Common Stock pursuant to Purchaser’s Certificate of Incorporation.
1.68. “Purchaser
Unit” means a unit of the Purchaser comprised of (a) one share of Purchaser Common Stock, and (b) one Purchaser Public
Warrant.
1.69. “Purchaser
UPO” means the option issued to Early Bird Capital, Inc. (and/or its designee) to purchase up to an aggregate of 750,000
Purchaser Units at a price of $10.00 per Purchaser Unit.
1.70. “Purchaser
Warrant” shall mean each Purchaser Private Warrant and Purchaser Public Warrant.
1.71. “Real
Property” means, collectively, all real properties and interests therein (including the right to use), together with
all buildings, fixtures, trade fixtures, plant and other improvements located thereon or attached thereto; all rights arising
out of use thereof (including air, water, oil and mineral rights); and all subleases, franchises, licenses, permits, easements
and rights-of-way which are appurtenant thereto.
1.72. “Registration
Rights Agreement” means the agreement in the form attached hereto as Exhibit C governing the resale of the Closing
Payment Shares, and the other securities included in the Registration Rights Agreement.
1.73. “Sarbanes-Oxley
Act” means the Sarbanes-Oxley Act of 2002, as amended.
1.74. “SEC”
means the Securities and Exchange Commission.
1.75. “Securities
Act” means the Securities Act of 1933, as amended.
1.76. “Standstill
Letter” means the letter agreement in the form to be mutually agreed upon between the Purchaser and the Members, and
the Purchaser and Mr. Ophir Sternberg whereby the Members as a group, and Mr. Sternberg individually, each agree to beneficially
own no more than forty-nine percent (49%) of the Purchaser Common Stock, at any time before or after the Closing.
1.77. “Subsidiary”
means each entity of which at least fifty percent (50%) of the capital stock or other equity or voting securities are Controlled
or owned, directly or indirectly, by the Company.
1.78. “Tangible
Personal Property” means all tangible personal property and interests therein, including machinery, computers and accessories,
furniture, office equipment, communications equipment, automobiles, trucks, forklifts and other vehicles owned or leased by the
Company and other tangible property.
1.79. “Target
Working Capital” means $1,000,000.
1.80. “Tax(es)”
means any federal, state, local or foreign tax, charge, fee, levy, custom, duty, deficiency, or other assessment of any kind or
nature imposed by any Taxing Authority (including any income (net or gross), gross receipts, profits, windfall profit, sales,
use, goods and services, ad valorem, franchise, license, withholding, employment, social security, workers compensation, unemployment
compensation, employment, payroll, transfer, excise, import, real property, personal property, intangible property, occupancy,
recording, minimum, alternative minimum, environmental or estimated tax), including any liability therefor as a transferee (including
under Section 6901 of the Code or similar provision of applicable Law) or successor, as a result of Treasury Regulation Section
1.1502-6 or similar provision of applicable Law or as a result of any Tax sharing, indemnification or similar agreement, together
with any interest, penalty, additions to tax or additional amount imposed with respect thereto.
1.81.
“Taxing Authority” means the Internal Revenue Service and any other Authority responsible for the collection,
assessment or imposition of any Tax or the administration of any Law relating to any Tax.
1.82. “Tax
Return” means any return, information return, declaration, claim for refund or credit, report or any similar statement,
and any amendment thereto, including any attached schedule and supporting information, whether on a separate, consolidated, combined,
unitary or other basis, that is filed or required to be filed with any Taxing Authority in connection with the determination,
assessment, collection or payment of a Tax or the administration of any Law relating to any Tax.
1.83.
“Trading Day” means a day on which the principal Trading Market is open for trading.
1.84. “Trading
Market” means any of the following markets or exchanges on which the Purchaser Common Stock is listed or quoted for
trading on the date in question: the NYSE American, the Nasdaq Capital Market, the Nasdaq Global Market, the Nasdaq Global Select
Market, the New York Stock Exchange, OTCQB or OTCQX (or any successors to any of the foregoing).
1.85. “UCC”
means the Uniform Commercial Code of the State of New York, or any corresponding or succeeding provisions of Laws of the State
of New York, or any corresponding or succeeding provisions of Laws, in each case as the same may have been and hereafter may be
adopted, supplemented, modified, amended, restated or replaced from time to time.
1.86. “U.S.
GAAP” means U.S. generally accepted accounting principles, consistently applied.
ARTICLE
II
ACQUISITION
2.1 Acquisition.
Subject to the terms and conditions of this Agreement, at the Closing, Members shall, in consideration of the Purchase Price,
sell, assign, transfer and convey to Purchaser, and Purchaser shall purchase, acquire and accept from Members, all rights, title
and interest in and to the Interests, free and clear of all Liens.
2.2 Closing;
Effective Time. Unless this Agreement is earlier terminated in accordance with Article XII, the closing of the Acquisition
(the “Closing”) shall take place electronically or at the offices of Loeb & Loeb LLP, 345 Park Avenue,
New York, New York, at 10:00 a.m. local time but shall be deemed to have occurred for all purposes as of 12:01 a.m. local time
(the “Effective Time”), no later than two Business Days after the last of the conditions to Closing set forth
in Article XI have been satisfied or waived (other than conditions which, by their nature, are to be satisfied on the Closing
Date) but no later than November 1, 2020, or at such other time, date and location as the Purchaser and the Company agree to in
writing. The parties may participate in the Closing via electronic means. The date on which the Closing actually occurs is hereinafter
referred to as the “Closing Date.”
2.3 Closing
Deliveries. At or prior to the Closing:
(a) Purchaser
shall:
(i) pay
the Escrow Shares to the Escrow Agent to be held pursuant to the Escrow Agreement;
(ii) pay
the Cash Consideration and the Closing Payment Shares (less the Escrow Shares) in accordance with the provisions set forth in
Section 3.1;
(iii) deliver
to the Members’ Representative the Escrow Agreement, duly executed by Purchaser and the Escrow Agent;
(iv) deliver
to the Key Employees the Employment Agreements, duly executed by Purchaser;
(v) deliver
to Ophir Sternberg the Executive Chairman Employment Agreement, duly executed by Purchaser;
(vi) deliver
to John Rosatti the Consulting Agreement, duly executed by Purchaser;
(vii) deliver
to Global Capital USA a commission agreement in form and substance mutually acceptable to Purchaser and Members’ Representative,
(viii) deliver
to the Members the Voting Agreement, the Registration Rights Agreement and the Lock-Up Agreements, duly executed by Purchaser
and the other parties thereto;
(ix) deliver
resignations effective as of the Closing Date of all of Purchaser’s officers and directors who are not appointed in accordance
with Section 9.12;
(x) a
certificate of good standing, dated not more than five (5) days prior to the Closing Date, with respect to the Purchaser, issued
by the appropriate government official of the Company’s jurisdiction of organization;
(xi) evidence
of the termination of agreements between the Purchaser and any of its directors or officers, except for agreements that provide
for continuing obligations of the Purchaser to its directors or officers after the Closing, reasonably satisfactory to the Members’
Representative; and
(xii) evidence
reasonably satisfactory to the Company showing an aggregate amount of at least $15,000,000 in cash held by the Purchaser immediately
prior to Closing in accordance with Section 10.3(e).
(b) The
Company or Members, as applicable, shall deliver to Purchaser each of the following (each in a form reasonably satisfactory to
Purchaser):
(i) membership
interest powers or other instruments of transfer duly executed in blank with respect to the Interests, duly executed in blank;
(ii) a
certificate of good standing, dated not more than five (5) days prior to the Closing Date, with respect to the Company, issued
by the appropriate government official of the Company’s jurisdiction of organization;
(iii) an
IRS Form W-9 and a certificate pursuant to Treasury Regulations Section 1.1445-2(b), executed by each Member, certifying
that such Member is not a foreign person within the meaning of Section 1445 of the Code;
(iv) the
Escrow Agreement, duly executed by the Members’ Representative;
(v) the
Voting Agreement, the Registration Rights Agreement and the Lock-Up Agreements, duly executed by the Members;
(vi) the
Assignment and Assumption Agreements of the JR Trust Entities to the Purchaser, duly executed by Mr. Rosatti and such other members,
if any, of the entities; and
(vii) the
Standstill Letter, duly executed and delivered to Members.
2.4
Post-Closing Board of Directors. Immediately after the Closing, the Purchaser’s board of directors will consist of
five directors, including Ophir Sternberg, as Executive Chairman, and A.J. Acker as a director, and three other directors selected
by Mr. Sternberg, in his reasonable discretion, and approved by Members’ Representative, such approval not to be unreasonably
withheld, in accordance with Section 9.12 (the “Post-Closing Board of Directors”), who will be appointed prior
to the earlier of (i) August 15, 2020, or (ii) the date on which Purchaser responds to the first round of SEC comments to the
Proxy Statement. At least a majority of the Post-Closing Board of Directors shall qualify as independent directors under the Securities
Act and the rules of any applicable Trading Market, and. The parties to this Agreement shall enter into a two (2) year voting
agreement (the “Voting Agreement”) in form agreed to by the parties hereto relating to election of directors
of the Purchaser.
2.5 Withholding
Rights. Notwithstanding anything to the contrary contained in this Agreement, Purchaser, the Company or the Members’
Representative shall be entitled to deduct and withhold from the cash otherwise deliverable under this Agreement, and from any
other payments otherwise required pursuant to this Agreement or any Additional Agreement, such amounts as Purchaser, the Company
or the Members’ Representative, as the case may be, are required to withhold and pay over to the applicable Authority with
respect to any such deliveries and payments under the Code or any provision of state, local, provincial or foreign Tax Law. To
the extent that amounts are so withheld and paid over, such withheld amounts shall be treated for all purposes of this Agreement
as having been delivered and paid to such Person in respect of which such deduction and withholding was made.
2.6 Rights
Not Transferable. The rights of the Members holding Interests as of immediately prior to the Effective Time with regard to
such Interests are personal to each such Member and shall not be assignable or otherwise transferable for any reason (except for
Permitted Transfers). Any attempted transfer of such right by any holder thereof (otherwise than as permitted by the immediately
preceding sentence) shall be null and void.
2.7 Taking
of Necessary Action; Further Action. If, at any time after the Effective Time, any further action is necessary or desirable
to carry out the purposes of this Agreement and to vest the Purchaser with full right, title and interest in, to and under, and/or
possession of, all assets, property, rights, privileges, powers and franchises of the Company, the officers and directors of the
Company are fully authorized in the name and on behalf of the Company, to take all lawful action necessary or desirable to accomplish
such purpose or acts, so long as such action is not inconsistent with this Agreement.
2.8 Taxes.
Each of the parties acknowledge and agree that each such party and each of the Members of the Company (i) has had the opportunity
to obtain independent legal and tax advice with respect to the transactions contemplated by this Agreement, and (ii) is responsible
for paying its own Taxes.
ARTICLE
III
PURCHASE PRICE
3.1 Payment
of Purchase Price. The “Purchase Price” shall consist of the sum of (i) the Cash Consideration, (ii) the
Closing Payment Shares (less the Escrow Shares), (iii) the Escrow Shares, (iv) any Post-Closing Adjustment (which may be a positive
or negative number), and (v) the Earnout, payable as follows:
(a) Cash
Consideration. Purchaser shall pay the Cash Consideration to each Member on the Closing Date in accordance with Schedule 1.10.
Notwithstanding anything to the contrary, notwithstanding the definition of Cash Consideration, although Purchaser may $20,000,000
of the Cash Consideration in Purchaser Common Stock, it shall, in good faith, use reasonable best efforts, in light of market
conditions, to maximize the amount of cash payable as part of the Cash Consideration to the Members.
(b) Closing
Payment Shares. Subject to and upon the terms and conditions set forth in this Agreement, in addition to the Cash Consideration,
the Purchaser shall issue to the Members the Closing Payment Shares (less the Escrow Shares), which shall be fully paid and free
and clear of all Liens other than applicable securities Law restrictions and the Lock-Up Agreements. Each Member shall receive
the number of Closing Payment Shares (less the Escrow Shares) opposite such Member’s name on Schedule 1.10.
(c) Escrow
Shares. The Company and the Members hereby authorize Purchaser to deliver the Escrow Shares into escrow (the “Escrow
Fund”) pursuant to the Escrow Agreement. The number of Escrow Shares to be allocated among the Members and held by the
Escrow Agent pursuant to the Escrow Agreement is set forth opposite each Member’s name on Schedule 1.10.
(d) No
Issuance of Fractional Shares. No certificates or scrip representing fractional shares of Purchaser Common Stock will be issued
pursuant to the Acquisition, and instead any such fractional share that would otherwise be issued will be rounded to the nearest
whole share.
(e) Legend.
Each certificate issued pursuant to the Acquisition to any Member shall bear the legend set forth below, or legend substantially
equivalent thereto, together with any other legends that may be required by any securities laws at the time of the issuance of
the Purchaser Common Stock:
THE
SHARES OF COMMON STOCK REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933,
AS AMENDED (THE “ACT”), AND MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHECATED UNLESS AND
UNTIL (I) SUCH OFFER, SALE, TRANSFER, PLEDGE OR HYPOTHECATION HAS BEEN REGISTERED UNDER THE ACT OR (II) THE ISSUER OF THE SHARES
HAS RECEIVED AN OPINION OF COUNSEL IN FORM AND SUBSTANCE SATISFACTORY TO THE ISSUER THAT SUCH OFFER, SALE OR TRANSFER, PLEDGE
OR HYPOTHECATION IS IN COMPLIANCE WITH THE ACT.
(f) Working
Capital Adjustments.
(i) Within
60 calendar days after the Closing Date, Purchaser shall prepare and deliver to Members’ Representative a statement setting
forth its good faith calculation of the Closing Working Capital (the “Closing Working Capital Statement”),
which statement shall contain a balance sheet of the Company as of the Closing Date (without giving effect to the transactions
contemplated herein), with significant detail substantially similar to the financial statements provided to Purchaser, including
a calculation of the Closing Working Capital (the “Closing Working Capital Statement”).
(ii) Subject
to the provisions of this Section 3.1(f), the post-closing adjustment shall be an amount equal to the Closing Working Capital
minus the Target Working Capital (the “Post-Closing Adjustment”). If the Post-Closing Adjustment is a positive
number, Purchaser shall pay to Members an amount equal to the Post-Closing Adjustment at its option in cash or shares of Purchaser
Common Stock, valued at $10.60 per share. If the Post-Closing Adjustment is a negative number, Members shall pay to Purchaser
an amount equal to the Post-Closing Adjustment by surrendering to Purchaser shares of Purchaser Common Stock with a value of the
Post-Closing Adjustment amount, value at $10.60 per share, rounded down to the nearest whole-number.
(iii) After
receipt of the Closing Working Capital Statement, Members’ Representative shall have 30 calendar days (the “Review
Period”) to review the Closing Working Capital Statement. During the Review Period, Members’ Representative and
its advisors shall have full access to the books and records of Purchaser and the Company, the personnel of, and work papers prepared
by, Purchaser and/or Purchaser’s accountants to the extent that they relate to the Closing Working Capital Statement and
to such historical financial information (to the extent in Purchaser’s possession) relating to the Closing Working Capital
Statement as Members’ Representative may reasonably request for the purpose of reviewing the Closing Working Capital Statement
and to prepare a Statement of Objections (defined below), provided, that such access shall be in a manner that does not unreasonably
interfere with the normal business operations of Purchaser or the Company.
(iv) On
or prior to the last day of the Review Period, Members’ Representative may object to the Closing Working Capital Statement
by delivering to Purchaser a written statement setting forth Members’ Representative’s objections in reasonable detail,
indicating each disputed item or amount and the basis for Members’ Representative’s disagreement therewith (the “Statement
of Objections”). If Members’ Representative fails to deliver the Statement of Objections before the expiration
of the Review Period, the Closing Working Capital Statement and the Post-Closing Adjustment, as the case may be, reflected in
the Closing Working Capital Statement shall be deemed to have been accepted by Members. If Members’ Representative delivers
the Statement of Objections before the expiration of the Review Period, Purchaser and Members’ Representative, on behalf
of the Members, shall negotiate in good faith to resolve such objections within 30 calendar days after the delivery of the Statement
of Objections (the “Resolution Period”), and, if the same are so resolved within the Resolution Period, the
Post-Closing Adjustment and the Closing Working Capital Statement with such changes as may have been previously agreed in writing
by Purchaser and Members’ Representative, shall be final and binding.
(v) If
Members’ Representative and Purchaser fail to reach an agreement with respect to all of the matters set forth in the Statement
of Objections before expiration of the Resolution Period, then any amounts remaining in dispute (“Disputed Amounts”
and any amounts not so disputed, the “Undisputed Amounts”) shall be submitted for resolution to Berkowitz Pollack
Brant or if Berkowitz Pollack Brant is unable to serve, Purchaser and Members’ Representative shall appoint by mutual agreement
the office of an impartial nationally recognized firm of independent certified public accountants other than Members’ Accountants
or Purchaser’s Accountants (the “Independent Accountants”) who, acting as experts and not arbitrators,
shall resolve the Disputed Amounts only and make any adjustments to the Post-Closing Adjustment, as the case may be, and the Closing
Working Capital Statement. The parties hereto agree that all adjustments shall be made without regard to materiality. The Independent
Accountants shall only decide the specific items under dispute by the parties and their decision for each Disputed Amount must
be within the range of values assigned to each such item in the Closing Working Capital Statement and the Statement of Objections,
respectively.
(vi) Members
and Purchaser shall each pay one-half of the fees and expenses of the Independent Accountants.
(vii) The
Independent Accountants shall make a determination as soon as practicable within 30 calendar days (or such other time as the parties
hereto shall agree in writing) after their engagement, and their resolution of the Disputed Amounts and their adjustments to the
Closing Working Capital Statement and/or the Post-Closing Adjustment shall be conclusive and binding upon the parties hereto.
(viii) Except
as otherwise provided herein, any payment of the Post-Closing Adjustment shall (A) be due (x) within five Business Days of acceptance
of the applicable Closing Working Capital Statement or (y) if there are Disputed Amounts, then within five Business Days of the
resolution described in Section 3.1(f)(v) above; and (B) be paid by wire transfer of immediately available funds to such accounts
as is directed by Purchaser or Members’ Representative, as the case may be.
(A) Any
payments made pursuant to Section 3.1(f) shall be treated as an adjustment to the Purchase Price by the parties for Tax purposes,
unless otherwise required by Law.
(g) Earnout
Payment. The Members shall be entitled to receive additional consideration (the “Earnout Share Consideration”)
on a pro-rata basis based on their ownership percentages in the Company as set forth on Schedule 1.10 as follows (each an “Earnout
Tranche”):
(A) If,
prior to the second anniversary of the Closing Date, the last reported closing price of Purchaser Common Stock on the Trading
Market in any 20 Trading Days within any consecutive 30 Trading Day period is greater than or equal to $19.00 per share, then
Purchaser shall promptly (and in any event within five (5) Business Days) issue to Members 3,947,368 shares of Purchaser Common
Stock, based on a deemed price of $19.00 per share.
(B) If,
prior to the third anniversary of the Closing Date, the last reported closing price of Purchaser Common Stock on the Tradition
Market in any 20 Trading Days within any consecutive 30 Trading Day period is greater than or equal to $22.00 per share, then
Purchaser shall promptly (and in any event within five (5) Business Days) issue to Members 3,409,091 additional shares of Purchaser
Common Stock, based on a deemed price of $22.00 per share.
(C) If,
prior to the third anniversary of the Closing Date (the period between the Closing Date and the third anniversary of the Closing
Date is hereinafter referred to as the “Earnout Period”), the last reported closing price of Purchaser Common
Stock on the Trading Market in any 20 Trading Days within any consecutive 30 Trading Day prior is greater than or equal to $25.00
per share, then Purchaser shall promptly (and in any event within five (5 Business Days) issue to Members 2,000,000 additional
shares of Purchaser Common Stock, based on a deemed price of $25.00 per share.
(D) The
Earnout Share Consideration payable with respect to each Earnout Tranche, if issued, shall be subject to a lockup for a period
of six months from the date of such Earnout Tranche is earned (provided that the Members shall be permitted to undertake block
trades during each such lockup period) and (ii) undertake other transfers during the lock up period permitted by Section 2 of
the Lockup Agreements. The terms and conditions of the lock-up for the Earnout Share Consideration shall be set forth in the Lock-Up
Agreement.
(E) Notwithstanding
the foregoing, the Members shall only be entitled to receive the Earnout Share Consideration from one Earnout Tranche in any twelve-month
period. If the Purchaser Common Stock trades at prices that satisfy the requirements of more than one of the Earnout Tranches
provided for in subsections (A), (B) or (C) of this subsection 3.1(g) during a twelve month period, the Members shall, instead,
receive a single Earnout Tranche for such twelve-month period, which Earnout Tranche shall be selected by the Members’ Representative,
in its sole discretion. During the remainder of the Earnout Period, the Members will be eligible to receive the remaining Earnout
Tranches, provided the Purchaser Common Stock trades at prices that meet the requirements of the remaining Earnout Tranches set
forth in subsections (A), (B) and (C). By way of example, if the stock price exceeds $25.00 within the first year after the Closing,
the Members would not be entitled to receive all of the Earnout Share Consideration for all of the Earnout Tranches, and, instead,
the Members’ Representative could select, on behalf of the Members, to receive any one of the Earnout Tranches provided
for in any one of subsections (A), (B) or (C) of this subsection 3.1(g), and, if the Members’ Representative, for example,
selects Earnout Tranche (C), the Members would remain eligible to receive the Earnout Tranches provided for in subsections (A)
and (B) if the Purchaser Common Stock trades at levels required by such subsections during the remaining Earnout Period. Any if
in the next twelve month period the stock prices exceeds $22.00, the Members’ Representative could select, on behalf of
the Members, to receive either Earnout Tranche provided for in either subsections (A) or (B), and, if Chooses Earnout Tranche
(A), the Members will remain eligible to receive Earnout Tranche (B) of the stock trades at prices that satisfy the requirements
of subsection (B).
(h) Purchaser
shall use its commercially reasonable efforts to list any Purchaser Common Stock issued pursuant to Section 3.1(g) on the Nasdaq.
(i) All
share and per share amounts shall be proportionally adjusted for splits, dividends, and similar events.
ARTICLE
IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except
as set forth in the corresponding sections or subsections of the Disclosure Schedules attached hereto (collectively, the “Disclosure
Schedules”) (each of which shall qualify the specifically identified Sections or subsections hereof to which such Disclosure
Schedule relates and those other Sections and subsections for which the relevance or applicability of such disclosure is reasonably
apparent on the face of such disclosure), the Company and each of the Members hereby represents and warrants to Purchaser as follows:
4.1 Corporate
Existence and Power. The Company is a limited liability company duly formed, validly existing and in good standing under the
Laws of the State of Delaware. The Company has all power and authority, corporate and otherwise, and all governmental licenses,
franchises, Permits, authorizations, consents and approvals required to own and operate its properties and assets and to carry
on the Business as presently conducted and as proposed to be conducted. The Company is not qualified to do business as a foreign
entity in any jurisdiction, except as set forth on Schedule 4.1, and there is no other jurisdiction in which the character of
the property owned or leased by the Company or the nature of its activities make qualification of the Company in any such jurisdiction
necessary, except where the failure to be so qualified would not have a Material Adverse Effect. The Company has offices located
only at the addresses set forth on Schedule 4.1. The Company has not taken any action, adopted any plan, or made any agreement
or commitment in respect of any merger, consolidation, sale of all or substantially all of its assets, reorganization, recapitalization,
dissolution or liquidation.
4.2 Authorization.
The execution, delivery and performance by the Company of this Agreement and the Additional Agreements and the consummation by
the Company of the transactions contemplated hereby and thereby are within the powers of the Company, and have been duly authorized
by all necessary action on the part of the Company, including the unanimous approval of the Members. This Agreement constitutes,
and, upon their execution and delivery, each of the Additional Agreements to which the Company is a party will constitute, a valid
and legally binding agreement of the Company enforceable against the Company in accordance with their respective terms.
4.3 Governmental
Authorization. Neither the execution, delivery nor performance by the Company of this Agreement or any Additional Agreements
requires any consent, approval, license or other action by or in respect of, or registration, declaration or filing with, any
Authority requiring a consent, approval, authorization, order or other action of or filing with any Authority as a result of the
execution, delivery and performance of this Agreement or any of the Additional Agreements or the consummation of the transactions
contemplated hereby or thereby (each of the foregoing, a “Governmental Approval”).
4.4 Non-Contravention.
None of the execution, delivery or performance by the Company of this Agreement or any Additional Agreements does or will (a)
contravene or conflict with the organizational or constitutive documents of the Company, (b) contravene or conflict with or constitute
a violation of any provision of any Law or Order binding upon or applicable to the Company, (c) except for the Contracts listed
on Schedule 4.11 requiring Company Consents (but only as to the need to obtain such Company Consents), constitute a default under
or breach of (with or without the giving of notice or the passage of time or both) or violate or give rise to any right of termination,
cancellation, amendment or acceleration of any right or obligation of the Company or require any payment or reimbursement or to
a loss of any material benefit relating to the Business to which the Company is entitled under any provision of any Permit, Contract
or other instrument or obligations binding upon the Company or by which any of the Interest or any of the Company’s assets
is or may be bound or any Permit, (d) result in the creation or imposition of any Lien on any of the Interest or any of the Company’s
assets, (e) cause a loss of any material benefit relating to the Business to which the Company is entitled under any provision
of any Permit or Contract binding upon the Company, or (f) result in the creation or imposition of any Lien (except for Permitted
Liens) on any of the Company’s assets.
4.5 Capitalization.
The Company was formed in the State of Delaware on January 27, 2011. All of the membership interests of the Company have been
issued to the Members and other than the Interests, no other equity securities of the Company have been issued and other than
as contemplated hereby, there are no agreements by the Company to issue any of its equity securities. The Interests issued to
the Members have been validly issued, are fully paid and nonassessable and are owned by the Members free and clear of any Lien.
For the avoidance of doubt, the Company does not have any stock options or any securities convertible into membership interest
of the Company.
4.6 Certificate
of Formation; Operating Agreement. Copies of (a) the certificate of formation of the Company, as certified by the Secretary
of State of the State of Delaware, and (b) the Operating Agreement of the Company, as certified by the secretary of the Company,
have heretofore been made available to Purchaser, and such copies are each true and complete copies of such instruments in effect
on the date hereof. The Company has not taken any action in violation or derogation of its Certificate of Formation or Operating
Agreement.
4.7 Corporate
Records. All proceedings occurring since January 1, 2018 of the Members and all consents to actions taken thereby, are accurately
reflected in the minutes and records contained in the corporate minute books of the Company. The membership list and transfer
books of the Company are complete and accurate. The membership list, transfer books and minute book records of the Company relating
to all issuances and transfers of Interests by the Company, and all proceedings of the Members of Company since January 1, 2018
have been made available to Purchaser, and are the original membership lists and transfer books and minute book records of the
Company or true, correct and complete copies thereof.
4.8 Third
Parties. Other than the Persons listed on Schedule 4.8, the Company is not Controlled by any Person and, other than the Persons
listed on Schedule 4.8, the Company is not in Control of any other Person. Except as set forth on Schedule 4.8, to the Company’s
knowledge, no Key Employees (a) engage in any business, except through the Company, or are employees of or provide any service
for compensation to, any other business concern or (b) own any equity security of any business concern, except for publicly traded
securities not in excess of 5% of the issued and outstanding securities with respect to such publicly traded securities. Schedule
4.8 lists each Contract to which the Company, on the one hand, and any Member beneficially owning more than 10% of the Interests
of the Company, or any affiliate of such a Member (collectively, a “10% Member”), on the other hand, is a party.
No Member or any Affiliate of a Member (i) owns, directly or indirectly, in whole or in part, any tangible or intangible property
(including Intellectual Property Rights) that the Company uses or the use of which is necessary for the conduct of the Business
or the ownership or operation of the Company’s assets, or (ii) have engaged in any transactions with the Company. Schedule
4.8 sets forth a complete and accurate list of the Affiliates of the Company and the ownership interests in the Affiliate of the
Company and each Member.
4.9 Assumed
Names. Schedule 4.9 is a complete and correct list of all assumed or “doing business as” names currently or, within
five (5) years of the date of this Agreement, used by the Company, including names on any websites. Since January 1, 2018, the
Company has not used any name other than the names listed on Schedule 4.9 to conduct the Business. The Company has filed appropriate
“doing business as” certificates in all applicable jurisdictions with respect to itself.
4.10 Subsidiaries.
(a) Except
as set forth on Schedule 4.10, the Company does not currently own and within the past five (5) years has not owned directly or
indirectly, securities or other ownership interests in any other entity. The Company owns 100% of the issued and outstanding capital
stock and securities of each Person listed on Schedule 5.10. None of the Company or any of its Subsidiaries is a party to any
agreement relating to the formation of any joint venture, association or other entity.
(b) Each
Subsidiary is either a corporation or limited liability company duly organized, validly existing and in good standing under and
by virtue of the Laws of the jurisdiction of its formation set forth by its name on Schedule 4.10. Each Subsidiary has all power
and authority, corporate and otherwise, and all material governmental licenses, franchises, Permits, authorizations, consents
and approvals required to own and operate its properties and assets and to carry on the Business as presently conducted and as
proposed to be conducted. No Subsidiary is qualified to do business as a foreign entity in any jurisdiction, except as set forth
by its name on Schedule 4.10, and there is no other jurisdiction in which the character of the property owned or leased by any
Subsidiary or the nature of its activities make qualification of such Subsidiary in any such jurisdiction necessary, except where
the failure to be so qualified would not have a Material Adverse Effect. Each Subsidiary has offices located only at the addresses
set forth by its name on Schedule 4.10. No Subsidiary has taken any action, adopted any plan, or made any agreement or commitment
in respect of any merger, consolidation, sale of all or substantially all of its assets, reorganization, recapitalization, dissolution
or liquidation.
4.11 Consents.
The Contracts listed on Schedule 4.11 are the only Contracts binding upon the Company or by which any of the Interest or any of
the Company’s assets are bound, requiring a consent, approval, authorization, order or other action of or filing with any
Person as a result of the execution, delivery and performance of this Agreement or any of the Additional Agreements or the consummation
of the transactions contemplated hereby or thereby (each of the foregoing, a “Company Consent”).
4.12 Financial
Statements.
(a) Schedule
4.12 includes (i) the audited consolidated financial statements of the Company as of and for the fiscal years ended December 31,
2018 and 2019, consisting of the audited consolidated balance sheets as of such dates, the audited consolidated income statements
for the twelve (12) month periods ended on such dates, the audited consolidated cash flow statements for the twelve (12) month
periods ended on such dates, and the corresponding notes to such consolidated financial statements (collectively, the “Company
Financial Statements” and the balance sheet as of December 31, 2019 included therein, the “Balance Sheet”)).
(b) The
Company Financial Statements have been prepared on an accrual basis in conformity with U.S. GAAP applied on a consistent basis
but have not been prepared in accordance with the requirements of the Public Company Accounting Oversight Board for public companies.
The Company Financial Statements are complete and accurate in all material respects and fairly present, in all material respects,
the financial position of the Company as of the dates thereof and the results of operations of the Company for the periods reflected
therein. The Company Financial Statements (i) were prepared from the Books and Records of the Company; (ii) contain and reflect
all necessary adjustments and accruals for a fair presentation of the Company’s financial condition as of their dates including
for all warranty, maintenance, service and indemnification obligations; (and (iii) contain and reflect adequate provisions for
all liabilities for all material Taxes applicable to the Company with respect to the periods then ended. The Company has delivered
to Purchaser complete and accurate copies of all “management letters” received by it from its accountants and all
responses during the last five (5) years by lawyers engaged by the Company to inquiries from its accountant or any predecessor
accountants.
(c) Except
as specifically disclosed, reflected or fully reserved against on the Balance Sheet, and for liabilities and obligations of a
similar nature and in similar amounts incurred in the ordinary course of business since the date of the Balance Sheet, there are
no material liabilities, debts or obligations of any nature (whether accrued, fixed or contingent, liquidated or unliquidated,
asserted or unasserted or otherwise) relating to the Company.
(d) The
Balance Sheet included in the Company Financial Statements accurately reflects the outstanding Indebtedness of the Company as
of the date thereof. Except as set forth in the Company Financial Statements or on Schedule 4.12, the Company does not have any
Indebtedness.
4.13 Books
and Records. The Company shall make all Books and Records of the Company available to Purchaser for its inspection and shall
deliver to Purchaser complete and accurate copies of all documents referred to in the Schedules to this Agreement or that Purchaser
otherwise has requested within ten (10) days from the date hereof. All Contracts, documents, and other papers or copies thereof
delivered to Purchaser by or on behalf of the Company are accurate, complete, and authentic in all material respects.
(a) The
Books and Records accurately and fairly, in reasonable detail, reflect the transactions and dispositions of assets of and the
providing of services by the Company. The Company maintains a system of internal accounting controls sufficient to provide reasonable
assurance that:
(i) transactions
are executed only in accordance with the respective management’s authorization;
(ii) all
income and expense items are promptly and properly recorded for the relevant periods in accordance with the revenue recognition
and expense policies maintained by the Company;
(iii) access
to assets is permitted only in accordance with the respective management’s authorization; and
(iv) recorded
assets are compared with existing assets at reasonable intervals, and appropriate action is taken with respect to any differences.
(b) All
accounts, books and ledgers of the Company have been properly and accurately kept and completed in all material respects, and
there are no material inaccuracies or discrepancies of any kind contained or reflected therein. The Company does not have any
records, systems controls, data or information recorded, stored, maintained, operated or otherwise wholly or partly dependent
on or held by any means (including any mechanical, electronic or photographic process, whether computerized or not) which (including
all means of access thereto and therefrom) are not under the exclusive ownership (excluding licensed software programs) and direct
control of the Company and which is not located at the relevant office.
4.14 Absence
of Certain Changes. Since the date of the Balance Sheet (the “Balance Sheet Date”), the Company has conducted
the Business in the ordinary course consistent with past practices. Without limiting the generality of the foregoing, since the
Balance Sheet Date, there has not been:
(a) any
Material Adverse Effect with regard to the Company;
(b) any
material transaction or Contract entered into, or commitment made, by the Company relating to the Business, or any of the Company’s
assets (including the acquisition or disposition of any assets) or any relinquishment by the Company of any Contract or other
right, in any case other than transactions, Contracts, commitments and relinquishments (X) in the ordinary course of business
consistent with past practices or (Y) contemplated by this Agreement;
(c) (i)
any redemption of, declaration, setting aside or payment of any dividend or other distribution with respect to any membership
interests in the Company; (ii) any issuance by the Company of membership interests in the Company, or (iii) any repurchase, redemption
or other acquisition, or any amendment of any term, by the Company of any outstanding Interests or other membership interests;
(d) (i)
any creation or other incurrence of any Lien other than Permitted Liens on the Interests or any of the Company’s assets,
and (ii) any making of any loan, advance or capital contributions to or investment in any Person by the Company other than in
the ordinary course of business consistent with past practices;
(e) any
material personal property damage, destruction or casualty loss or personal injury loss (whether or not covered by insurance)
affecting the business or assets of the Company;
(f) material
increase in benefits payable by the Company under any existing severance or termination pay policies or employment agreements;
any material employment, deferred compensation or other similar agreement (or materially amended any such existing agreement)
entered into by the Company with any director, officer, manager or employee of the Company; any material bonus, profit-sharing,
thrift, pension, retirement, deferred compensation, compensation, stock option, restricted stock or other benefit plan or arrangement
covering any director, officer, manager or employee of the Company established, adopted or amended (except as required by law)
by the Company; or any material increase in any compensation, bonus or other benefits payable to any director, officer, manager
or employee of the Company, other than increases to non-officer employees in the ordinary course of business consistent with past
practices;
(g) any
material labor dispute, other than routine individual grievances, or any activity or proceeding by a labor union or representative
thereof to organize any employees of the Company, which employees were not subject to a collective bargaining agreement at the
Balance Sheet Date, or any lockouts, strikes, slowdowns, work stoppages or threats thereof by or with respect to any employees
of the Company;
(h) any
material sale, transfer, lease to others or otherwise disposition of any of its assets by the Company except for inventory sold
in the ordinary course of business consistent with past practices or immaterial amounts of other Tangible Personal Property not
required by its business;
(i) (i)
any amendment to or termination of any Material Contract, (ii) any material amendment to any material license or material permit
from any Authority held by the Company, (iii) any receipt of any notice of termination of any of the items referenced in (i) and
(ii) of this subsection (i); and (iv) a material default by the Company under any Material Contract, or any material license or
material permit from any Authority held by the Company;
(j) any
capital expenditure by the Company in excess in any fiscal month of an aggregate of $100,000 or entering into any lease of capital
equipment or property by the Company under which the annual lease charges exceed $100,000 in the aggregate by the Company;
(k) any
institution of litigation, settlement or agreement to settle any litigation, action, proceeding or investigation before any court
or governmental body relating to the Company or its property or suffering of any actual or threatened litigation, action, proceeding
or investigation before any court or governmental body relating to the Company or its property;
(l) any
material loan of any monies to any Person or guarantee of any obligations of any Person by the Company;
(m) any
material change in the accounting methods or practices (including, without limitation, any material change in depreciation or
amortization policies or rates) of the Company or any material revaluation of any of the assets of the Company;
(n) any
amendment to the Company’s organizational documents, or any engagement by the Company in any merger, consolidation, reorganization,
reclassification, liquidation, dissolution or similar transaction;
(o) any
acquisition of assets (other than acquisitions of inventory in the ordinary course of business consistent with past practice)
or business of any Person;
(p) any
material Tax election made by the Company outside of the ordinary course of business consistent with past practice, or any material
Tax election changed or revoked by the Company; any material claim, notice, audit report or assessment in respect of Taxes settled
or compromised by the Company; any annual Tax accounting period changed by the Company; any Tax allocation agreement, Tax sharing
agreement, Tax indemnity agreement or closing agreement relating to any Tax entered into by the Company; or any right to claim
a material Tax refund surrendered by the Company; or
(q) any
commitment or agreement to do any of the foregoing.
Since
the Balance Sheet Date through and including the date hereof, the Company has not taken any action nor has any event occurred
which would have violated the covenants of the Company set forth in Article IX herein if such action had been taken or such event
had occurred between the date hereof and the Closing Date.
4.15 Properties;
Title to the Company’s Assets.
(a) The
items of Tangible Personal Property have no known defects, are in good operating condition and repair and function in accordance
with their intended uses (ordinary wear and tear excepted) and have been properly maintained, and are suitable for their present
uses and meet all specifications and warranty requirements with respect thereto. Schedule 5.15(a) sets forth a description and
location of each item of the Tangible Personal Property.
(b) The
Company has good, valid and marketable title in and to, or in the case of the Leases and the assets which are leased or licensed
pursuant to Contracts, a valid leasehold interest or license in or a right to use, all of their assets reflected on the Balance
Sheet or acquired after March 31, 2020. No such asset is subject to any Liens other than Permitted Liens. The Company’s
assets constitute all of the assets of any kind or description whatsoever, including goodwill, reasonably necessary for the Company
to operate the Business immediately after the Closing in the same manner as the Business is currently being conducted.
4.16 Litigation.
There is no Action (or any basis therefore) pending against, or to the knowledge of the Company, threatened against or affecting,
the Company, any of its officers or directors, the Business, or any Interests, or any of the Company’s assets or any Contract
before any court, Authority or official or which in any manner challenges or seeks to prevent, enjoin, alter or delay the transactions
contemplated hereby or by the Additional Agreements. There are no outstanding judgments against the Company. The Company is not,
and has not been in the past five (5) years, subject to any proceeding with any Authority
4.17 Contracts.
(a) Schedule
4.17(a) lists all material executory Contracts, oral or written (collectively, “Material Contracts”), to which
the Company is a party and which are currently in effect and constitute the following:
(i) all
Contracts that require annual payments or expenses by, or annual payments or income to, the Company of $100,000 or more (other
than standard purchase and sale orders entered into in the ordinary course of business consistent with past practice);
(ii) all
sales, advertising, agency, lobbying, broker, sales promotion, market research, marketing or similar contracts and agreements,
in each case requiring the payment of any commissions by the Company in excess of $150,000 annually;
(iii) all
employment Contracts, employee leasing Contracts, and consultant and sales representatives Contracts with any current or former
officer, director, employee or consultant of the Company or other Person, under which the Company (A) has continuing obligations
for payment of annual compensation of at least $150,000 (other than oral arrangements for at-will employment), (B) has severance
or post termination obligations to such Person (other than COBRA obligations), or (C) has an obligation to make a payment upon
consummation of the transactions contemplated hereby or as a result of a change of control of the Company;
(iv) all
Contracts creating a joint venture, strategic alliance, franchise agreements, limited liability company and partnership agreements
to which the Company is a party;
(v) all
Contracts relating to any acquisitions or dispositions of assets by the Company other than the purchase of inventory in the ordinary
course;
(vi) all
Contracts for material licensing agreements, including Contracts licensing Intellectual Property Rights, other than “shrink
wrap” licenses;
(vii) all
Contracts relating to secrecy, confidentiality and nondisclosure agreements restricting the conduct of the Company or substantially
limiting the freedom of the Company to compete in any line of business or with any Person or in any geographic area;
(viii) all
Contracts relating to material patents, trademarks, service marks, trade names, brands, copyrights, trade secrets and other material
Intellectual Property Rights of the Company;
(ix) all
Contracts providing for material guarantees, indemnification arrangements and other hold harmless arrangements made or provided
by the Company, including all ongoing agreements for repair, warranty, maintenance, service, indemnification or similar obligations;
(x) all
Contracts with or pertaining to the Company to which any 10% Member is a party;
(xi) all
Contracts relating to property or assets (whether real or personal, tangible or intangible) in which the Company holds a leasehold
interest (including the Leases) and which involve payments to the lessor thereunder in excess of $10,000 per month;
(xii) all
Contracts relating to outstanding Indebtedness of the Company, including financial instruments of indenture or security instruments
(typically interest-bearing) such as notes, mortgages, loans and lines of credit;
(xiii) any
Contract relating to the voting or control of the equity interests of the Company or the election of managers of the Company (other
than the Organizational Documents of the Company);
(xiv) any
Contract not cancellable by the Company with no more than 60 days’ notice if the effect of such cancellation would result
in monetary penalty to the Company in excess of $50,000 per the terms of such contract;
(xv) any
Contract that can be terminated, or the provisions of which are altered (other than the Organizational Documents of the Company),
as a result of the consummation of the transactions contemplated by this Agreement or any of the Additional Agreements to which
the Company is a party; and
(xvi) any
Contract for which any of the benefits, compensation or payments (or the vesting thereof) will be increased or accelerated by
the consummation of the transactions contemplated hereby or the amount or value thereof will be calculated on the basis of any
of the transactions contemplated by this Agreement.
(b) Each
Material Contract is a valid and binding agreement, and is in full force and effect, and neither the Company nor, to the Company’s
knowledge, any other party thereto, is in breach or default (whether with or without the passage of time or the giving of notice
or both) under the terms of any such Material Contract. The Company has not assigned, delegated, or otherwise transferred any
of its rights or obligations with respect to any Material Contracts, or granted any power of attorney with respect thereto or
to any of the Company’s assets. No Contract (i) requires the Company to post a bond or deliver any other form of security
or payment to secure its obligations thereunder or (ii) imposes any non-competition covenants that may be binding on, or restrict
the Business or require any payments by or with respect to Purchaser or any of its Affiliates. The Company shall, within 30 days
of the date hereof, provide to Purchaser true and correct (A) fully executed copies of each written Material Contract and (B)
written summaries of each oral Material Contract.
(c) None
of the execution, delivery or performance by the Company of this Agreement or Additional Agreements to which the Company is a
party or the consummation by the Company of the transactions contemplated hereby or thereby constitutes a default under or gives
rise to any right of termination, cancellation or acceleration of any obligation of the Company or to a loss of any material benefit
to which the Company is entitled under any provision of any Material Contract.
(d) The
Company is in material compliance with all covenants, including all financial covenants, in all notes, indentures, bonds and other
instruments or agreements evidencing any Indebtedness.
4.18 Insurance.
Schedule 4.18 contains a true, complete and correct list (including the names and addresses of the insurers, the names of the
Persons if other than the Company to whom such insurance policies have been issued, the expiration dates thereof, the annual premiums
and payment terms thereof, whether it is a “claims made” or an “occurrence” policy and a brief identification
of the nature of the policy) of all liability, property, workers’ compensation and other insurance policies currently in
effect that insure the property, assets or business of the Company or its employees (other than self-obtained insurance policies
by such employees). Each such insurance policy is valid and binding and in full force and effect, all premiums due thereunder
have been paid and the Company has not received any notice of cancellation or termination in respect of any such policy or default
thereunder. The Company believes such insurance policies, in light of the nature of the Company’s business, assets and properties,
are in amounts and have coverage that are reasonable and customary for Persons engaged in such business and having such assets
and properties. Neither the Company, nor, to the knowledge of the Company, the Person to whom such policy has been issued, has
received notice that any insurer under any policy referred to in this Section 4.18 is denying liability with respect to a claim
thereunder or defending under a reservation of rights clause. Within the last two (2) years the Company has not filed for any
claims exceeding $100,000 against any of its insurance policies, exclusive of automobile and health insurance policies. The Company
has not received written notice from any of its insurance carriers or brokers that any premiums will be materially increased in
the future, and does not have any reason to believe that any insurance coverage listed on Schedule 4.18 will not be available
in the future on substantially the same terms as now in effect.
4.19 Licenses
and Permits. Schedule 4.19 correctly lists each material license, franchise, permit, order or approval or other similar authorization
affecting, or relating in any way to, the Business, together with the name of the Authority issuing the same (the “Permits”).
Except as indicated on Schedule 4.19, such Permits are valid and in full force and effect, and none of the Permits will, assuming
the related third party consents have been obtained or waived prior to the Closing Date, be terminated or impaired or become terminable
as a result of the transactions contemplated hereby. The Company has all Permits reasonably necessary to operate the Business.
4.20 Compliance
with Laws. The Company is not in violation of, has not violated, and to the Company’s knowledge, is neither under investigation
with respect to nor has been threatened to be charged with or given notice of any violation or alleged violation of, any Law,
or judgment, order or decree entered by any court, arbitrator or Authority, domestic or foreign, nor, to the Company’s knowledge,
is there any basis for any such charge and within the last 24 months the Company has not received any subpoenas by any Authority.
(a) Without
limiting the foregoing paragraph, the Company is not in violation of, has not violated, and to the Company’s knowledge is
not under investigation with respect to nor, to the Company’s knowledge, has it been threatened or charged with or given
notice of any violation of any provisions of:
(i) any
Law applicable due to the specific nature of the Business;
(ii) the
Foreign Corrupt Practices Act of 1977 (§§ 78dd-1 et seq.), as amended (the “Foreign Corrupt Practices Act”);
(iii) any
comparable or similar Law of any jurisdiction; or
(iv) any
Law regulating or covering conduct in, or the nature of, the workplace, including regarding sexual harassment or, on any impermissible
basis, a hostile work environment.
4.21 Intellectual
Property.
(a) Schedule
4.21 sets forth a true, correct and complete list of all Intellectual Property Rights, specifying as to each, as applicable: (i)
the nature of such Intellectual Property Right; (ii) the owner of such Intellectual Property Right; (iii) the jurisdictions by
or in which such Intellectual Property Right has been issued or registered or in which an application for such issuance or registration
has been filed; and (iv) all licenses, sublicenses and other agreements pursuant to which any Person is authorized to use such
Intellectual Property Right.
(b) Within
the past five (5) years (or prior thereto if the same is still pending or subject to appeal or reinstatement) the Company has
not been sued or charged in writing with or been a defendant in any Action that involves a claim of infringement of any Intellectual
Property Rights, and the Company has no knowledge of any other claim of infringement by the Company, and no knowledge of any continuing
infringement by any other Person of any Intellectual Property Rights of the Company.
(c) The
current use by the Company of the Intellectual Property Rights does not infringe, and the use by the Company of the Intellectual
Property Rights after the closing will not infringe, the rights of any other Person. Any Intellectual Property Rights used by
the Company in the performance of any services under any Contract is, and upon the performance of such Contract remains, owned
by the Company and no client, customer or other third-party has any claim of ownership on the Intellectual Property Rights.
(d) All
employees, agents, consultants or contractors who have contributed to or participated in the creation or development of any copyrightable,
patentable or trade secret material on behalf of the Company or any predecessor in interest thereto either: (i) is a party to
a “work-for-hire” agreement under which the Company is deemed to be the original owner/author of all property rights
therein; or (ii) has executed an assignment or an agreement to assign in favor of the Company (or such predecessor in interest,
as applicable) all right, title and interest in such material.
(e) None
of the execution, delivery or performance by the Company of this Agreement or any of the Additional Agreements to which the Company
is a party or the consummation by the Company of the transactions contemplated hereby or thereby will cause any material item
of Intellectual Property Rights owned, licensed, used or held for use by the Company immediately prior to the Closing to not be
owned, licensed or available for use by the Company on substantially the same terms and conditions immediately following the Closing.
(f) The
Company has taken reasonable measures to safeguard and maintain the confidentiality and value of all material trade secrets and
other items of material Company Intellectual Property that are confidential and all other material confidential information, data
and materials licensed by the Company or otherwise used in the operation of the Business.
4.22 Customers,
Suppliers and Franchisees.
(a) Schedule
4.22(a) sets forth a list of the Company’s ten (10) largest customers, suppliers as measured by the dollar amount of purchases
therefrom or thereby, for the Company’s December 31, 2018 and 2019 fiscal years, and franchisees measured by annual revenues,
showing the approximate total sales by the Company to each such customer and the approximate total purchases by the Company from
each such supplier, and annual revenues of each such franchisee during each such period.
(b) No
supplier, customer or franchisee listed on Schedule 4.22(a) has (i) terminated its relationship with the Company, (ii) materially
reduced its business with the Company or materially and adversely modified its relationship with the Company, (iii) notified the
Company in writing of its intention to take any such action, or (iv) to the knowledge of the Company, become insolvent or subject
to bankruptcy proceedings.
4.23 Accounts
Receivable and Payable; Loans.
(a) All
accounts receivable and notes of the Company reflected on the Company Financial Statements, and all accounts receivable and notes
arising subsequent to the date thereof, represent valid obligations arising from services actually performed or goods actually
sold by the Company in the ordinary course of business consistent with past practice. The accounts payable of the Company reflected
on the Company Financial Statements, and all accounts payable arising subsequent to the date thereof, arose from bona fide transactions
in the ordinary course consistent with past practice.
(b) To
the Company’s knowledge, there is no contest, claim, or right of setoff in any agreement with any maker of an account receivable
or note relating to the amount or validity of such account, receivables or note that could reasonably result in a Material Adverse
Effect. To the Company’s knowledge, all accounts, receivables or notes are (subject to any applicable reserve set forth
in the Company Financial Statements) good and collectible in the ordinary course of business.
(c) The
information set forth on Schedule 4.23(c) separately identifies any and all accounts, receivables or notes of the Company which
are owed by any Affiliate of the Company. Except as set forth on Schedule 4.23(c) or the Company Financial Statements, the Company
is not indebted to any of its Affiliates and no Affiliates are indebted to the Company.
4.24 Pre-payments.
The Company has not received any payments with respect to any services to be rendered or goods to be provided after the Closing
except in the ordinary course of business or except as set forth in the Company Financial Statements.
4.25 Employees.
(a) Schedule
4.25(a) sets forth a true, correct and complete list of the ten (10) highest paid employees and independent contractors of the
Company as of December 31, 2019, including the name, department, title, employment or engagement commencement date, current salary
or compensation rate for each such person and total compensation (including bonuses) paid to each such person for the fiscal year
ended December 31, 2019. Unless indicated in such list, no salaried employee or independent contractor included in such list (i)
is currently on leave, (ii) has given written notice of his or her intent to terminate his or her relationship with the Company,
or (iii) has received written notice of such termination from the Company. To the knowledge of the Company, no Key Employee intends
to terminate his or her relationship with the Company within six (6) months following the Closing Date. Schedule 4.25(a) sets
forth all proceedings, governmental investigations or administrative proceedings of any kind against the Company of which the
Company has been notified regarding its employees or employment practices, or operations as they pertain to conditions of employment
within two (2) years preceding the date of this Agreement.
(b) The
Company is not a party to or subject to any employment contract, consulting agreement, collective bargaining agreement, confidentiality
agreement restricting the activities of the Company, non-competition agreement restricting the activities of the Company, or any
similar agreement, and there has been no activity or proceeding by a labor union or representative thereof to organize any employees
of the Company.
(c) Except
as set forth in Schedule 4.25(c), there are no material pending or, to the knowledge of the Company, threatened claims or proceedings
against the Company under any worker’s compensation policy or long-term disability policy.
(d) Except
as would not have a Material Adverse Effect, the Company has properly classified all of its employees as exempt or non-exempt.
4.26 Employment
Matters.
(a) Schedule
4.26(a) sets forth a true and complete list of every employment agreement, commission agreement, employee group or executive medical,
life, or disability insurance plan, and each incentive, bonus, profit sharing, retirement, deferred compensation, equity, phantom
stock, stock option, stock purchase, stock appreciation right or severance plan of the Company now in effect or under which the
Company has or might have any obligation, or any understanding between the Company and any employee concerning the terms of such
employee’s employment that does not apply to the Company’s employees generally (collectively, “Labor Agreements”).
The Company has previously delivered to Purchaser true and complete copies of each such Labor Agreement, any employee handbook
or policy statement of the Company, and complete and correct information concerning the Company’s employees, including with
respect to the (i) name, residence address, and social security number; (ii) position; (iii) compensation; (iv) vacation and other
fringe benefits; (v) claims under any benefit plan; and (vii) resident alien status (if applicable). Schedule 4.26(a) sets forth
a true and complete list of the names, addresses and titles of the directors, officers and managers of the Company.
(b) Except
as disclosed on Schedule 4.26(b):
(i) all
employees of the Company are employees at will, and the employment of each employee by the Company may be terminated immediately
by the Company, as applicable, without any cost or liability except severance in accordance with the Company’s standard
severance practice as disclosed on Schedule 4.26(b);
(ii) to
the best knowledge of the Company, no employee of the Company has any plan to terminate his or her employment now or in the near
future, whether as a result of the transactions contemplated hereby or otherwise;
(iii) to
the best knowledge of the Company, no employee of the Company, in the ordinary course of his or her duties, has breached or will
breach any obligation to a former employer in respect of any covenant against competition or soliciting clients or employees or
servicing clients or confidentiality or any proprietary right of such former employer; and
(iv) the
Company is not a party to any collective bargaining agreement, does not have any material labor relations problems, and there
is no pending representation question or union organizing activity respecting employees of the Company.
(c) The
Company has complied in all material respects with all Labor Agreements and all applicable laws relating to employment or labor.
There is no legal prohibition with respect to the permanent residence of any employee of the Company in the United States or his
or her permanent employment by the Company. No present or former employee, officer, director or manager of the Company has, or
will have at the Closing Date, any claim against the Company for any matter including for wages, salary, or vacation or sick pay,
or otherwise under any Labor Agreement. All accrued obligations of the Company applicable to its employees, whether arising by
operation of Law, by Contract, by past custom or otherwise, for payments by the Company to any trust or other fund or to any Authority,
with respect to unemployment or disability compensation benefits, social security benefits, under ERISA or otherwise, have been
paid or adequate accruals therefor have been made.
4.27 Withholding.
All obligations of the Company applicable to its employees, whether arising by operation of Law, by contract, by past custom or
otherwise, or attributable to payments by the Company to trusts or other funds or to any governmental agency, with respect to
unemployment compensation benefits, social security benefits or any other benefits for its employees with respect to the employment
of said employees through the date hereof have been paid or adequate accruals therefor have been made on the Company Financial
Statements. All reasonably anticipated obligations of the Company with respect to such employees (except for those related to
wages during the pay period immediately prior to the Closing Date and arising in the ordinary course of business), whether arising
by operation of Law, by contract, by past custom, or otherwise, for salaries and holiday pay, bonuses and other forms of compensation
payable to such employees in respect of the services rendered by any of them prior to the date hereof have been or will be paid
by the Company as they become due in the ordinary course.
4.28 Employee
Benefits and Compensation.
(a) Schedule
4.28 sets forth a true and complete list of each “employee benefit plan” (as defined in Section 3(3) of ERISA), bonus,
deferred compensation, equity-based or non-equity-based incentive, severance or other plan or written agreement relating to employee
or director benefits or employee or director compensation or fringe benefits, maintained or contributed to by the Company at any
time during the 7-calendar year period immediately preceding the date hereof and/or with respect to which the Company could incur
or could have incurred any direct or indirect, fixed or contingent liability (each a “Plan” and collectively,
the “Plans”). Each Plan is and has been maintained in substantial compliance with all applicable laws, including
but not limited to ERISA, and has been administered and operated in all material respects in accordance with its terms.
(b) Each
Plan which is intended to be “qualified” within the meaning of Section 401(a) of the Code, has received a favorable
determination letter from the Internal Revenue Service and, to the knowledge of the Company, no event has occurred and no condition
exists which could reasonably be expected to result in the revocation of any such determination. No event which constitutes a
“reportable event” (as defined in Section 4043(c) of ERISA) for which the 30-day notice requirement has not been waived
by the Pension Benefit Guaranty Corporation (the “PBGC”) has occurred with respect to any Plan. No Plan subject
to Title IV of ERISA has been terminated or is or has been the subject of termination proceedings pursuant to Title IV of ERISA.
Full payment has been made of all amounts which the Company was required under the terms of the Plans to have paid as contributions
to such Plans on or prior to the date hereof (excluding any amounts not yet due) and no Plan which is subject to Part 3 of Subtitle
B of Title I of ERISA has incurred an “accumulated funding deficiency” (within the meaning of Section 302 of ERISA
or Section 412 of the Code), whether or not waived.
(c) Neither
the Company nor to the knowledge of the Company, any other “disqualified person” or “party in interest”
(as defined in Section 4975(e)(2) of the Code and Section 3(14) of ERISA, respectively), has engaged in any transaction in connection
with any Plan that could reasonably be expected to result in the imposition of a penalty pursuant to Section 502(i) of ERISA,
damages pursuant to Section 409 of ERISA or a tax pursuant to Section 4975(a) of the Code. The Company has not maintained any
Plan (other than a Plan which is intended to be “qualified” within the meaning of Section 401(a) of the Code) which
provides benefits with respect to current or former employees or directors following their termination of service with the Company
(other than as required pursuant to COBRA). Each Plan subject to the requirements of COBRA has been operated in substantial compliance
therewith.
(d) No
individual will accrue or receive additional benefits, service or accelerated rights to payment of benefits as a direct result
of the transactions contemplated hereby. No material liability, claim, investigation, audit, action or litigation has been incurred,
made, commenced or, to the knowledge of the Company, threatened, by or against any Plan or the Company with respect to any Plan
(other than for benefits payable in the ordinary course and PBGC insurance premiums). No Plan or related trust owns any securities
in violation of Section 407 of ERISA. With respect to each Plan which is an “employee pension benefit plan” (as defined
in Section 3(2) of ERISA) as of the most recent actuarial valuation report prepared for each such Plan, the aggregate present
value of the accrued liabilities thereof (determined in accordance with Statement of Financial Accounting Standards No. 35) did
not exceed the aggregate fair market value of the assets allocable thereto.
(e) No
Plan is a “multiemployer plan” (as defined in Section 4001(a)(3) of ERISA) and the Company has not been obligated
to contribute to any multiemployer plan. No material liability has been, or could reasonably be expected to be, incurred under
Title IV of ERISA (other than for PBGC insurance premiums payable in the ordinary course) or Section 412(f) or (n) of the Code,
by the Company or any entity required to be aggregated with the Company pursuant to Section 4001(b) of ERISA and/or Section 414
(b), (c), (m) or (o) of the Code with respect to any “employee pension benefit plan” (as defined in Section 3(2) of
ERISA).
(f) There
is no unfunded non-tax-qualified Plan which provides a pension or retirement benefit.
(g) The
Company has not made any commitment to create or cause to exist any employee benefit plan which is not listed on Schedule 4.28,
or to modify, change or terminate any Plan (other than as may be necessary for compliance with applicable law).
(h) The
Company does not have any plan, arrangement or agreement providing for “deferred compensation” that is subject to
Section 409A(a) of the Code, or any plan, arrangement or agreement that is subject to Section 409A(b) of the Code.
(i) With
respect to each Plan, the Company has delivered or caused to be delivered to Purchaser and its counsel true and complete copies
of the following documents, as applicable, for each respective Plan: (i) all Plan documents, with all amendments thereto; (ii)
the current summary plan description with any applicable summaries of material modifications thereto as well as any other material
employee or government communications; (iii) all current trust agreements and/or other documents establishing Plan funding arrangements;
(iv) the most recent IRS determination letter and, if a request for such a letter has been filed and is currently pending with
the IRS, a copy of such filing; (v) the three most recently prepared IRS Forms 5500; (vi) the three most recently prepared financial
statements; and (vii) all material related contracts, including without limitation, insurance contracts, service provider agreements
and investment management and investment advisory agreements.
4.29 Real
Property.
(a) Except
as set forth on Schedule 4.29, the Company does not own, or otherwise have an interest in, any Real Property, including under
any Real Property lease, sublease, space sharing, license or other occupancy agreement. The Company has good, valid and subsisting
title to its respective leasehold estates in the offices described on Schedule 4.29, free and clear of all Liens. To the Company’s
knowledge, the Company has not breached or violated any local zoning ordinance, and no notice from any Person has been received
by the Company or served upon the Company claiming any violation of any local zoning ordinance.
(b) With
respect to the Leases: (i) they are valid, binding and in full force and effect; (ii) all rents and additional rents and other
sums, expenses and charges due thereunder have been paid; (iii) the lessees have been in peaceable possession since the commencement
of the original term thereof; (iv) no waiver, indulgence or postponement of the lessees’ obligations thereunder have been
granted by the lessors; (v) there exists no default or event of default thereunder by the Company or, to the Company’s knowledge,
by any other party thereto; (vi) there exists no occurrence, condition or act which, with the giving of notice, the lapse of time
or the happening of any further event or condition, would become a default or event of default by the Company thereunder; and
(vii) there are no outstanding claims of breach or indemnification or notice of default or termination thereunder. The Company
holds the leasehold estate on the Leases free and clear of all Liens, except for Permitted Liens and Liens of mortgagees of the
Real Property in which such leasehold estate is located. The Real Property leased by the Company is in a state of maintenance
and repair in all material respects adequate and suitable for the purposes for which it is presently being used, and there are
no material repair or restoration works likely to be required in connection with any of the leased Real Property. The Company
is in physical possession and actual and exclusive occupation of the whole of the leased properties, none of which are subleased
or assigned to another Person. The Leases lease all useable square footage of the premises located at the leased Real Property
locations. The Company does not owe any brokerage commission with respect to any Real Property.
4.30 Accounts.
Schedule 4.30 sets forth a true, complete and correct list of the checking accounts, deposit accounts, safe deposit boxes, and
brokerage, commodity and similar accounts of the Company, including the account number and name, the name of each depositary or
financial institution and the address where such account is located and the authorized signatories thereto.
4.31 Tax
Matters. Except as set forth in Schedule 4.31:
(i)
The Company has duly and timely filed all Tax Returns (taking into account all available extensions) in all jurisdictions in which
Tax Returns are required to be filed by or with respect to it, and has paid all Taxes (whether or not shown on any Tax Returns)
which have become due; (ii) all such Tax Returns are true, correct and complete and accurate in all material respects and disclose
all material Taxes required to be paid; (iii) there is no Action, pending or proposed or, to the best knowledge of the Company,
threatened, with respect to Taxes of the Company or for which a Lien may be imposed upon any of the Company’s assets (other
than liens for Taxes not yet due and payable) and, to the Company’s knowledge, no basis exists therefor; (iv) no statute
of limitations in respect of the assessment or collection of any Taxes of the Company for which a Lien may be imposed on any of
the Company’s assets has been waived or extended, which waiver or extension is in effect; (v) the Company has complied in
all material respects with all applicable Laws relating to the reporting, payment, collection and withholding of Taxes, including
sales and use Taxes and amounts required to be withheld for Taxes of employees, independent contractors, creditors, equityholders
(including the Members) or other third parties, and has duly and timely withheld or collected, paid over to the applicable Taxing
Authority and reported all material Taxes (including income, social, security and other payroll Taxes) required to be withheld
or collected by the Company; (vi) none of the assets of the Company is required to be treated as owned by another Person for income
Tax purposes pursuant to Section 168(f)(8) of the Code (as in effect prior to its amendment by the Tax Reform Act of 1986) or
otherwise; (vii) none of the assets of the Company is “tax-exempt use property” within the meaning of Section 168(h)
of the Code, “tax-exempt bond financed property” within the meaning of Section 168(g)(5) of the Code, or subject to
a “TRAC lease” under Section 7701(h) of the Code (or any predecessor provision) (viii) there is no Lien for Taxes
upon any of the assets of the Company (other than liens for taxes not yet due and payable); (ix) there is no outstanding request
for a ruling from any Taxing Authority, request for a consent by a Taxing Authority for a change in a method of accounting, subpoena
or request for information by any Taxing Authority, or closing agreement (within the meaning of Section 7121 of the Code or any
analogous provision of applicable Law), with respect to the Company; (x) no claim has ever been made by a Taxing Authority in
a jurisdiction where the Company has not paid any Tax or filed Tax Returns, asserting that the Company is or may be subject to
Tax in such jurisdiction; (xi) the Company has provided to Purchaser true, complete and correct copies of all income Tax Returns
relating to, and all audit reports and correspondence relating to each proposed adjustment, if any, made by any Taxing Authority
with respect to, any taxable period ending after March 31, 2015; (xii) the Company is not, and has ever been, a party to any Tax
sharing, Tax allocation or Tax indemnity Contract; (xiii) the Company will not be required to include any item of income in, or
exclude any item of deduction from, taxable income for any taxable period (or portion thereof) ending after the Closing Date as
a result of any: (a) change in method of accounting for a taxable period ending on or prior to the Closing Date; (b) “closing
agreement” as described in Code Section 7121 (or any corresponding or similar provision of state, local or foreign income
Tax law) executed on or prior to the Closing Date; (c) installment sale or open transaction disposition made on or prior to the
Closing Date; or (d) prepaid amount received for a Tax period ending on or prior to the Closing Date; (xiv) the Company is and
has never been included in any consolidated, combined or unitary Tax Return; (xv) there are no pending or threatened in writing
disputes, claims, audits, examinations or other proceedings regarding any material Taxes of the Company or the assets of the Company,
no deficiency with respect to a material amount of Taxes has been proposed, asserted or assessed against the Company; and to the
knowledge of the Company, no issue has been raised by a Taxing Authority in any prior Action relating to the Company with respect
to any Tax for any period which, by application of the same or similar principles, could reasonably be expected to result in a
proposed Tax deficiency of the Company for any other period; (xvi) the Company is not a party to any Contract for services that
would result, individually or in the aggregate, in the payment of any amount that would not be deductible by the Company by reason
of Section 162 or 404 of the Code; and (xvii) during the last two years, the Company has not engaged in any exchange under which
gain realized on the exchange was not recognized under Section 1031 of the Code; (xviii) except with respect to the taxation of
the Company as a partnership for federal income Tax purposes, there are no joint ventures, partnerships, limited liability companies,
or other arrangements or contracts to which the Company is a party and that is reasonably likely to be treated as a partnership
for federal income Tax purposes; (xix) the Company is and has been at all times since its formation treated as a partnership for
federal income Tax purposes and for all similar or corresponding state and local income Tax purposes; (xx) the Company is not
currently, and will not for any period for which a Tax Return has not been filed be, required to include any adjustment in Taxable
income for any Tax period (or portion thereof) pursuant to Section 263A of the Code (or any corresponding provisions of state,
local or foreign Law) as a result of transactions, events or accounting methods employed prior to the transactions contemplated
by this Agreement; (xxi) the Company has disclosed on its Tax Returns any Tax reporting position taken which could result in the
imposition of penalties under Section 6662 of the Code (or any comparable provisions of state, local or foreign Law); (xxii) the
Company has not consummated, entered into or participated in, and is not currently participating in, any transaction which was
or is a “tax shelter” transaction as defined in Sections 6662 or 6111 of the Code or the Treasury Regulations promulgated
thereunder; (xxiii) the Company has not participated in, and is not currently participating in (a) a “Listed Transaction”
or a “reportable transaction” (within the meaning of Section 6707A of the Code or Treasury Regulations §1.6011-4
or any predecessor thereof) or any transaction requiring disclosure under a corresponding provision of state, local, or foreign
Law and (b) any “nondisclosed noneconomic substance transaction” within the meaning of Section 6662(i)(2) of the Code;
(xxiv) the Company has not been a party to a transaction that does not have economic substance within the meaning of Section 7701(a)
of the Code or that fails to meet the requirements of any similar rule of law as used in Section 6662(b)(6) of the Code; and (xxv)
the unpaid Taxes of the Company (i) did not, as of the most recent fiscal month end, exceed the reserve for Tax liability (rather
than any reserve for deferred Taxes established to reflect timing differences between book and Tax income) set forth on the Balance
Sheet and (ii) will not exceed that reserve as adjusted for the passage of time through the Closing Date in accordance with the
past custom and practice of the Company in filing its Tax Returns.
The
unpaid Taxes of the Company (i) did not, as of the most recent fiscal month end, exceed the reserve for Tax liability (rather
than any reserve for deferred Taxes established to reflect timing differences between book and Tax income) set forth on the Balance
Sheet and (ii) will not exceed that reserve as adjusted for the passage of time through the Closing Date in accordance with the
past custom and practice of the Company in filing its Tax Returns.
4.32 Environmental
Laws.
(a) The
Company has not (i) received any written notice of any alleged claim, violation of or liability under any Environmental Law which
has not heretofore been cured or for which there is any remaining liability; (ii) disposed of, emitted, discharged, handled, stored,
transported, used or released any Hazardous Materials, arranged for the disposal, discharge, storage or release of any Hazardous
Materials, or exposed any employee or other individual to any Hazardous Materials so as to give rise to any liability or corrective
or remedial obligation under any Environmental Laws; or (iii) entered into any agreement that may require it to guarantee, reimburse,
pledge, defend, hold harmless or indemnify any other Person with respect to liabilities arising out of Environmental Laws or the
Hazardous Materials Activities of the Company, except in each case as would not, individually or in the aggregate, have a Material
Adverse Effect.
(b) The
Company has delivered to Purchaser all material records in its possession concerning the Hazardous Materials Activities of the
Company and all environmental audits and environmental assessments in the possession or control of the Company of any facility
currently owned, leased or used by the Company which identifies the potential for any violations of Environmental Law or the presence
of Hazardous Materials on any property currently owned, leased or used by the Company.
(c) There
are no Hazardous Materials in, on, or under any properties owned, leased or used at any time by the Company such as could give
rise to any material liability or corrective or remedial obligation of the Company under any Environmental Laws.
4.33 Finders’
Fees. Other than as set forth on Schedule 4.33, there is no investment banker, broker, finder or other intermediary which
has been retained by or is authorized to act on behalf of the Company or any of Affiliates who might be entitled to any fee or
commission from Purchaser or any of its Affiliates (including the Company following the Closing) upon consummation of the transactions
contemplated by this Agreement.
4.34 Powers
of Attorney and Suretyships. The Company does not have any general or special powers of attorney outstanding (whether as grantor
or grantee thereof) or any obligation or liability (whether actual, accrued, accruing, contingent, or otherwise) as guarantor,
surety, co-signer, endorser, co-maker, indemnitor or otherwise in respect of the obligation of any Person.
4.35 Managers.
Schedule 4.35 sets forth a true, correct and complete list of all managers of the Company.
4.36 JR
Trust Entities. The entities included on Schedule 1.43 reflect all of the entities owned directly, indirectly or as a joint
venture partner, by John Rosatti that are engaged in the Business and/or that own Intellectual Property of the Company.
4.37 Certain
Business Practices. Neither the Company, nor any director, officer, agent or employee of the Company (in their capacities
as such) has (i) used any funds for unlawful contributions, gifts, entertainment or other unlawful expenses relating to political
activity, (ii) made any unlawful payment to foreign or domestic government officials or employees, to foreign or domestic political
parties or campaigns or violated any provision of the Foreign Corrupt Practices Act of 1977 or (iii) made any other unlawful payment.
Neither the Company, nor any director, officer, agent or employee of the Company (nor any Person acting on behalf of any of the
foregoing, but solely in his or her capacity as a director, officer, employee or agent of the Company) has, directly or indirectly,
given or agreed to give any gift or similar benefit in any material amount to any customer, supplier, governmental employee or
other Person who is or may be in a position to help or hinder the Company or assist the Company in connection with any actual
or proposed transaction, which, if not given could reasonably be expected to have had a Material Adverse Effect on the Company,
or which, if not continued in the future, could reasonably be expected to adversely affect the business or prospects of the Company
or that could reasonably be expected to subject the Company to suit or penalty in any private or governmental litigation or proceeding.
4.38 Money
Laundering Laws. The operations of the Company are and have been conducted at all times in compliance with laundering statutes
in all applicable jurisdictions, the rules and regulations thereunder and any related or similar rules, regulations or guidelines,
issued, administered or enforced by any governmental authority (collectively, the “Money Laundering Laws”), and no
Action involving the Company with respect to the Money Laundering Laws is pending or, to the knowledge of the Company, threatened.
4.39 OFAC.
Neither the Company, nor any director or officer of the Company (nor, to the knowledge of the Company, any agent, employee, affiliate
or Person acting on behalf of the Company) is currently identified on the specially designated nationals or other blocked person
list or otherwise currently subject to any U.S. sanctions administered by the Office of Foreign Assets Control of the U.S. Treasury
Department (“OFAC”); and the Company has not, directly or indirectly, used any funds, or loaned, contributed or otherwise
made available such funds to any subsidiary, joint venture partner or other Person, in connection with any sales or operations
in Cuba, Iran, Syria, Sudan, Myanmar or any other country sanctioned by OFAC or for the purpose of financing the activities of
any Person currently subject to, or otherwise in violation of, any U.S. sanctions administered by OFAC in the last five (5) fiscal
years.
4.40 Not
an Investment Company. The Company is not an “investment company” within the meaning of the Investment Company
Act of 1940, as amended, and the rules and regulations promulgated thereunder.
4.41 Information
Supplied. None of the information supplied or to be supplied by the Company and/or the Members expressly for inclusion or
incorporation by reference in the filings with the SEC and mailings to Purchaser’s stockholders with respect to the solicitation
of proxies to approve the transactions contemplated by this Agreement will, at the date of filing and/or mailing, as the case
may be, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary
in order to make the statements therein, in light of the circumstances under which they are made, not misleading (subject to the
qualifications and limitations set forth in the materials provided by Company and/or the Members).
ARTICLE
V
REPRESENTATIONS AND WARRANTIES OF MEMBERS
Except
as set forth in the corresponding sections or subsections of the Disclosure Schedules, each Member, severally and not jointly,
as to itself only, represents to the Purchaser as follows:
5.1 Ownership
of Interests; Authority.
(a) Such
Member has good and marketable title to such Member’s Interests free and clear of any and all Liens other than restrictions
arising from federal and state securities laws and those contained in the Operating Agreement.
(b) Such
Member has full legal capacity, power and authority to execute and deliver this Agreement and the Additional Agreements to which
such Member is a party, to perform such Member’s obligations hereunder and thereunder and to consummate the transactions
contemplated hereby and thereby. If such Member is a trust, such Member is a trust validly existing and in good standing under
the laws of the State of its formation. This Agreement and the Additional Agreements to which such Member is a party have been,
or at Closing will be, duly executed and delivered by such Member and are, or upon their execution and delivery will be, valid
and legally binding obligations of such Member, enforceable against such Member in accordance with their respective terms, subject
to (i) laws of general application relating to bankruptcy, insolvency and the relief of debtors, or (ii) rules of law governing
specific performance, injunctive relief or other equitable remedies.
(c) Neither
the execution and delivery by such Member of this Agreement and the Additional Agreements to which such Member is a party, nor
the consummation by such Member of the transactions contemplated hereby and thereby, will (i) conflict with, result in a breach
of, constitute (with or without due notice or lapse of time or both) a default under, or require any notice, consent or waiver
under, any instrument, contract, agreement or arrangement to which such Member is a party or by which such Member is bound, or
(ii) result in the imposition of any Lien upon the Member’s Interests.
(d) Such
Member is not a “foreign person” within the meaning of Section 1445 and 1446(f) of the Code.
5.2 Approvals.
Except as contemplated by this Agreement, no consent, approval, waiver, authorization or novation is required to be obtained by
such Member from, and no notice or filing is required to be given by such Member to or made by any Member with, any Authority
or other Person in connection with the execution, delivery and performance by such Member of this Agreement and each of the Additional
Agreements to which he, she or it is a party.
5.3 Non-Contravention.
The execution, delivery and performance by such Member of this Agreement and each of the Additional Agreements, and the consummation
of the transaction, do not and will not (a) violate any provision of the articles of incorporation, bylaws or other organizational
documents of such Member if it is not a natural person, or (b) violate or result in a breach of or constitute a default under
any Law, judgment, injunction, Order, decree or other restriction of any Authority to which such Member, or the Member’s
Interests owned by such Member, is subject.
5.4 Litigation
and Claims. There is no civil, criminal or administrative action, suit, demand, claim, hearing, proceeding or disclosed investigation
pending or, to the knowledge of such Member, threatened, against such Member and such Member is not subject to any Order, writ,
judgment, award, injunction or decree of any Authority of competent jurisdiction or any arbitrator in any such case that would
prevent consummation of the transaction or materially impair the ability of such Member to perform its obligations hereunder.
5.5 Investment
Representations.
(a) Such
Member is an “accredited investor” as such term is defined in Rule 501 of Regulation D (“Reg. D”)
promulgated under the Act. Such Member acknowledges that Purchaser has the right to require evidence of such Member’s status
as an accredited investor, if necessary.
(b) Such
Member acknowledges that it has prior investment experience, including investments in non-listed and non-registered securities,
or has employed the services of an investment advisory, attorney or accountant to evaluate the merits and risks of such an investment
on its behalf, and such Member represents that it, he or she, as the case may be, understands the highly speculative nature of
an investment in Purchaser Common Stock which may result in the loss of the total amount of such investment.
(c) Such
Member has adequate means of providing for such Member’s current needs and possible personal contingencies, and such Member
has no need, and anticipates no need in the foreseeable future, for liquidity in such Member’s investment in the Purchaser
Common Stock. Such Member is able to bear the economic risks of this investment and, consequently, without limiting the generality
of the foregoing, such Member is able to hold the Purchaser Common Stock for an indefinite period of time and has a sufficient
net worth to sustain a loss of the entire investment in the event such loss should occur.
(d) Except
as otherwise set forth in Article VIII, Purchaser has not and is not making any representations or warranties to the Members or
providing any advice or information to the Members. Such Member acknowledges that it has retained its own professional advisors
to evaluate the tax and other consequences of an investment in the Purchaser Common Stock.
(e) Such
Member understands and consents to the placement of a legend on any certificate or other document evidencing Purchaser Common
Stock delivered to such Member pursuant to the terms of this Agreement stating that such Purchaser Common Stock has not been registered
under the Act and setting forth or referring to the restrictions on transferability and sale thereof. Each certificate evidencing
the shares shall bear the legends set forth below, or legends substantially equivalent thereto, together with any other legends
that may be required by federal or state securities laws at the time of the issuance of the Purchaser Common Stock pursuant to
this Agreement:
THE
SHARES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”),
AND MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHECATED UNLESS SUCH TRANSFER OR OTHER TRANSACTION (I) IS
REGISTERED UNDER THE ACT OR (II) EXEMPT FROM SUCH REGISTRATION; PROVIDED, THAT IN CONNECTION WITH SUCH AN EXEMPT TRANSACTION (OTHER
THAN IN CONNECTION WITH A TRANSFER PURSUANT TO RULE 144 UNDER THE ACT) THE ISSUER OF THE SHARES (THE “ISSUER”)
MAY REQUEST AN OPINION OF COUNSEL IN FORM AND SUBSTANCE SATISFACTORY TO THE ISSUER THAT SUCH OFFER, SALE OR TRANSFER, PLEDGE OR
HYPOTHECATION IS IN COMPLIANCE WITH THE ACT.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser hereby represents
and warrants to the Company and the Members that, except as disclosed in the Purchaser SEC Documents:
6.1 Corporate
Existence and Power. Purchaser is a corporation duly organized, validly existing and in good standing under the laws of the
State of Delaware. Purchaser has all power and authority, corporate and otherwise, and all governmental licenses, franchises,
Permits, authorizations, consents and approvals required to own and operate its properties and assets and to carry on its business
as presently conducted and as proposed to be conducted. Purchaser has not entered into any definitive agreements with respect
to any merger, consolidation, sale of all or substantially all of its assets, reorganization, recapitalization, dissolution or
liquidation.
6.2 Corporate
Authorization. The execution, delivery and performance by the Purchaser of this Agreement and the Additional Agreements and
the consummation by the Purchaser of the transactions contemplated hereby and thereby are within the corporate powers of the Purchaser
and have been duly authorized by all necessary corporate action on the part of the Purchaser, including the Purchaser’s
Board of Directors and shareholders to the extent required by the their organizational documents, the DGCL, any other applicable
Law or any contract to which the Purchaser or any of its Affiliates is a party or by which or its securities are bound. This Agreement
has been duly executed and delivered by each Purchaser Party and it constitutes, and upon their execution and delivery, the Additional
Agreements will constitute, a valid and legally binding agreement of each Purchaser Party, enforceable against them in accordance
with its terms.
6.3 Governmental
Authorization. Other than as required under Delaware Law, or as otherwise set forth on Schedule 6.3, neither the execution,
delivery nor performance of this Agreement requires any consent, approval, license or other action by or in respect of, or registration,
declaration or filing with any Authority.
6.4 Non-Contravention.
The execution, delivery and performance by the Purchaser of this Agreement and the Additional Agreements to which they are a party
do not and will not, (i) provided that holders of fewer than the number of Purchaser Common Stock specified in the Purchaser’s
organizational documents exercise their conversion rights with respect to the Acquisition, contravene or conflict with the organizational
or constitutive documents of Purchaser, or (ii) contravene or conflict with or constitute a violation of any provision of any
Law, judgment, injunction, order, writ, or decree binding upon the Purchaser.
6.5 Finders’
Fees. Except for the Business Combination Fees, there is no investment banker, broker, finder or other intermediary which
has been retained by or is authorized to act on behalf of any Purchaser Party or its Affiliates who might be entitled to any fee
or commission from the Company or any of its Affiliates upon consummation of the transactions contemplated by this Agreement or
any of the Additional Agreements.
6.6 Issuance
of Shares. The Closing Payment Shares (including the Escrow Shares) and the Earnout Share Consideration, when issued in accordance
with this Agreement, will be duly authorized and validly issued, and will be fully paid and nonassessable.
6.7 Capitalization.
(a) The authorized
share capital of Purchaser consists of 100,000,000 shares of Purchaser Common Stock, and 10,000,000 preferred shares, par value
$0.0001 per share, of which 7,863,069 shares of Purchaser Common Stock are issued and outstanding as of the date hereof and 0
preferred shares are issued and outstanding. 750,000 shares of Purchaser Common Stock are reserved for issuance upon the exercise
of the Purchaser Units underlying the Purchaser UPO. In addition, 11,945,000 Purchaser Warrants are issued and outstanding as
of the date hereof. All outstanding Purchaser Common Stock are duly authorized, validly issued, fully paid and nonassessable and
not subject to or issued in violation of any purchase option, right of first refusal, preemptive right, subscription right or
any similar right under any provision of Delaware Law, the Purchaser’s organizational documents or any contract to which
Purchaser is a party or by which Purchaser is bound. Except as set forth in the Purchaser’s organizational documents, the
Purchaser SEC Documents and Schedule 6.7, there are no outstanding contractual obligations of Purchaser to repurchase, redeem
or otherwise acquire any Purchaser Common Stock or any capital equity of the Purchaser. Other than as set forth in this Section
6.7(a) there are no outstanding or authorized options, warrants, convertible securities or other rights, agreements, arrangements
or commitments of any character relating to the capital stock of the Purchaser or obligating Purchaser to issue or sell any shares
of capital stock of, or any other interest in, the Purchaser. The Purchaser does not have outstanding or authorized any stock
appreciation, phantom stock, profit participation or similar rights. Except as set forth in the Purchaser SEC Documents, there
are no voting trusts, stockholder agreements, proxies or other agreements or understandings in effect with respect to the voting
or transfer of any of the Shares. There are no outstanding contractual obligations of the Purchaser to provide funds to, or make
any investment (in the form of a loan, capital contribution or otherwise) in, any other Person.
(b) Purchaser has
no Subsidiaries.
6.8 Information
Supplied. None of the information supplied or to be supplied by any Purchaser Party expressly for inclusion or incorporation
by reference in the filings with the SEC and mailings to Purchaser’s stockholders with respect to the solicitation of proxies
to approve the transactions contemplated by this Agreement will, at the date of filing and/or mailing, as the case may be, contain
any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order
to make the statements therein, in light of the circumstances under which they are made, not misleading (subject to the qualifications
and limitations set forth in the materials provided by Purchaser or that is included in the Purchaser SEC Documents).
6.9 Trust
Fund. As of the date of this Agreement, Purchaser has $48,406,524.17 in the trust fund established by Purchaser for the benefit
of its Public Stockholders (the “Trust Fund”) in a trust account at J.P. Morgan Chase Bank, N.A (the “Trust
Account”), and such monies are invested in “government securities” (as such term is defined in the Investment
Company Act of 1940, as amended) and held in trust by Continental Stock Transfer & Trust Company (the “Trustee”)
pursuant to the Investment Management Trust Agreement, dated as of March 13, 2018, between the Purchaser and the Trustee (the
“Trust Agreement”). The Trust Agreement is valid and in full force and effect and enforceable in accordance
with its terms and has not been amended or modified. There are no separate agreements, side letters or other agreements or understandings
(whether written or unwritten, express or implied) that would cause the description of the Trust Agreement in the Purchaser SEC
Documents to be inaccurate in any material respect and/or that would entitle any Person (other than the payment of the Business
Combination Fees payable to Early Bird Capital, Inc. for deferred underwriting commissions as described in the Purchaser SEC Documents
and holders of Purchaser Public Shares who shall have elected to redeem their Purchaser Common Stock pursuant to Purchaser’s
Certificate of Incorporation), to any portion of the proceeds in the Trust Fund. Prior to the Closing, none of the funds held
in the Trust Account may be released except (x) to pay income and other tax obligations from any interest income earned in
the Trust Account or (y) to redeem Purchaser Common stock in accordance with the provisions of the Purchaser’s Certificate
of Incorporation.
6.10 Listing.
The Purchaser Units, Purchaser Common Stock and Purchaser Public Warrants are listed on Nasdaq, with trading tickers OPESU, OPES
and OPESW. There is no action or proceeding pending or, to the knowledge of the Purchaser, threatened against the Purchaser by
Nasdaq with respect to any intention by such entity to prohibit or terminate the listing of the Purchaser Units, Purchaser Common
Stock and Purchaser Warrants on Nasdaq.
6.11 Reporting
Company. The Purchaser is a publicly held company subject to reporting obligations pursuant to Section 13 of the Exchange
Act, and the shares of Purchaser Common Stock are registered pursuant to Section 12(b) of the Exchange Act. There is no legal
proceeding pending or, to Purchaser’s knowledge, threatened in writing against Purchaser by the SEC with respect to the
deregistration of the Purchaser Common Stock under the Exchange Act. Purchaser has taken no action that is designed to terminate
the registration of the Purchaser Common Stock under the Exchange Act.
6.12 Undisclosed
Liabilities. The Purchaser has no liabilities (absolute, accrued, contingent or otherwise) of a nature required to be disclosed
on a balance sheet or in the related notes to Purchaser Financial Statements that are, individually or in the aggregate, material
to the business, results of operations or financial condition of the Purchaser, except: (i) liabilities provided for in or otherwise
disclosed in the balance sheet included in the most recent Purchaser Financial Statements or in the notes to the most recent Purchaser
Financial Statements, and (ii) such liabilities arising in the ordinary course of the Company’s business since the date
of the most recent Purchaser Financial Statement, none of which, individually or in the aggregate, would have a Purchaser Material
Adverse Effect taken as a whole.
6.13 Interested
Party Transactions. No officer, director, employee, shareholder or holder of derivative securities (each an “Insider”)
of the Purchaser or a member of his or her immediate family is indebted to the Purchaser, nor is the Purchaser indebted (or committed
to make loans or extend or guarantee credit) to any of such Persons, other than (i) for payment of salary or fees for services
rendered, (ii) reimbursement for reasonable expenses incurred on behalf of the Purchaser, (iii) for amounts owed under the Promissory
Notes, and (iv) for other employee benefits made generally available to all employees, if any. No Insider of the Purchaser or
a member of his or her immediate family is directly or indirectly a party to or has a material interest in any contract of the
Purchaser (other than such contracts as relate to any such Person’s ownership of capital stock or other securities of the
Purchaser or such Person’s employment with, or other services rendered to the Purchaser).
6.14 Board
Approval. The Purchaser’s Board of Directors (including any required committee or subgroup of such boards) has, as of
the date of this Agreement, unanimously (i) declared the advisability of the transactions contemplated by this Agreement, (ii)
determined that the transactions contemplated hereby are in the best interests of the stockholders of Purchaser and (iii) determined
that the transactions contemplated hereby constitutes a “Business Combination” as such term is defined in Purchaser’s
amended and restated articles of incorporation and bylaws.
6.15 Purchaser
SEC Documents and Purchaser Financial Statements. Purchaser has timely filed all forms, reports, schedules, statements and
other documents, including any exhibits thereto, required to be filed or furnished by Purchaser with the SEC since Purchaser’s
formation under the Exchange Act or the Securities Act, together with any amendments, restatements or supplements thereto (the
“Purchaser SEC Documents”), and will file all such forms, reports, schedules, statements and other documents
required to be filed subsequent to the date of this Agreement (the “Additional Purchaser SEC Documents”). Purchaser
has made available to the Company copies in the form filed with the SEC of all of the following, except to the extent available
in full without redaction on the SEC’s website through EDGAR for at least two (2) days prior to the date of this Agreement:
(i) Purchaser’s Annual Reports on Form 10-K for each fiscal year of Purchaser beginning with the first year Purchaser was
required to file such a form, (ii) all proxy statements relating to Purchaser’s meetings of stockholders (whether annual
or special) held, and all information statements relating to stockholder consents, since the beginning of the first fiscal year
referred to in clause (i) above, (iii) its Quarterly Reports on Form 10-Q filed since the beginning of the first fiscal year referred
to in clause (i) above, (iv) its Current Reports on Form 8-K filed since the beginning of the first fiscal year referred to in
clause (i) above, and (v) all other forms, reports, registration statements and other documents (other than preliminary materials
if the corresponding definitive materials have been provided to the Company pursuant to this Section 6.15) filed by Purchaser
with the SEC since Purchaser’s formation. The Purchaser SEC Documents were, and the Additional Purchaser SEC Documents will
be, prepared in all material respects in accordance with the requirements of the Securities Act, the Exchange Act, and the Sarbanes-Oxley
Act, as the case may be, and the rules and regulations thereunder. The Purchaser SEC Documents did not, and the Additional Purchaser
SEC Documents will not, at the time they were or are filed, as the case may be, with the SEC (except to the extent that information
contained in any Purchaser SEC Document or Additional Purchaser SEC Document has been or is revised or superseded by a later filed
Purchaser SEC Document or Additional Purchaser SEC Document, then on the date of such filing) contain any untrue statement of
a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements made
therein, in the light of the circumstances under which they were made, not misleading. As used in this Section 6.15, the term
“file” shall be broadly construed to include any manner in which a document or information is furnished, supplied
or otherwise made available to the SEC.
(a) Each of the
financial statements (including, in each case, any notes thereto) contained in the Purchaser SEC Documents was prepared in accordance
with GAAP applied on a consistent basis throughout the periods indicated (except as may be indicated in the notes thereto or,
in the case of unaudited statements, as permitted by Form 10-Q of the SEC) and each fairly presents, in all material respects,
the financial position, results of operations and cash flows of Purchaser as at the respective dates thereof and for the respective
periods indicated therein.
(b) Purchaser has
timely filed all certifications and statements required by (x) Rule 13a-14 or Rule 15d-14 under the Exchange Act or (y) 18
U.S.C. Section 1350 (Section 906 of the Sarbanes-Oxley Act of 2002) with respect to any Purchaser SEC Report (the “Purchaser
Certifications”). Each of the Purchaser Certifications is true and correct.
(c) Purchaser maintains
disclosure controls and procedures required by Rule 13a-15 or Rule 15d-15 under the Exchange Act; such controls and procedures
are reasonably designed to ensure that all material information concerning Purchaser is made known on a timely basis to the individuals
responsible for the preparation of Purchaser’s SEC filings and other public disclosure documents.
(d) Purchaser maintains
a standard system of accounting established and administered in accordance with GAAP. Purchaser has designed and maintains a system
of internal controls over financial reporting, as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act, sufficient
to provide reasonable assurances regarding the reliability of financial reporting and the preparation of financial statements
for external purposes in accordance with GAAP. Purchaser maintains a system of internal accounting controls sufficient to provide
reasonable assurance that (i) transactions are executed in accordance with management’s general or specific authorizations,
(ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with GAAP and to
maintain asset accountability, (iii) access to assets is permitted only in accordance with management’s general or
specific authorization, and (iv) the recorded accountability for assets is compared with the existing assets at reasonable
intervals and appropriate action is taken with respect to any differences.
(e) Purchaser has
no off-balance sheet arrangements.
(f) Neither Purchaser
nor, to the knowledge of Purchaser, any manager, director, officer, employee, auditor, accountant or representative of Purchaser
has received or otherwise had or obtained knowledge of any complaint, allegation, assertion or claim, whether written or oral,
regarding the accounting or auditing practices, procedures, methodologies or methods of Purchaser or their respective internal
accounting controls, including any complaint, allegation, assertion or claim that Purchaser has engaged in questionable accounting
or auditing practices. No attorney representing Purchaser, whether or not employed by Purchaser, has reported evidence of a material
violation of securities laws, breach of fiduciary duty or similar violation by Purchaser or any of its officers, directors, employees
or agents to the Purchaser Board of Directors (or any committee thereof) or to any director or officer of Purchaser. Since Purchaser’s
inception, there have been no internal investigations regarding accounting or revenue recognition discussed with, reviewed by
or initiated at the direction of the chief executive officer, chief financial officer, general counsel, the Purchaser Board or
any committee thereof.
6.16 Absence
of Certain Changes. Since March 31, 2020, Purchaser has conducted its business in the ordinary course of business consistent
with past practice and:
(a) there has not
been a Purchaser Material Adverse Effect, except that the incurring Indebtedness shall not constitute a Material Adverse Effect;
(b) except for
Public Stockholders redeeming Purchaser Public Shares as described in the Purchaser’s Certificate of Incorporation, Purchaser
has not declared, set aside or paid any dividend or other distribution or payment in respect of its securities other than intercompany
distributions;
(c) Purchaser has
not sold, assigned, transferred, conveyed, leased or otherwise disposed of any material portion of its assets, except in the ordinary
course of business;
(d) Purchaser has
not made any loans, advances, or capital contributions to, or investments in, any Person other than Purchaser;
(e) Purchaser has
not (i) increased the base salary or base wages payable to any of its officers or employees other than increases made in
the ordinary course of business, (ii) increased severance obligations payable to any of its officers or employees or (iii) made
or committed to make any bonus payment to any of its employees or agents other than payments or arrangements in the ordinary course
of business;
(f) Purchaser has
not acquired by merger, consolidation or otherwise any business of any Person or division thereof;
(g) there has not
been any casualty event that has resulted in or is reasonably likely to result in a loss in excess of $100,000, whether or not
covered by insurance;
(h) there has not
been any material change by Purchaser in accounting or Tax reporting principles, methods or policies;
(i) Purchaser has
not made or rescinded any material election relating to Taxes, settled or compromised any material Claim relating to Taxes, or
amended any material Tax Return;
(j) Purchaser has
not settled any material legal proceedings; and
(k) Purchaser has
not agreed or committed, whether orally or in writing, to do any of the foregoing.
6.17 Certain
Business Practices. Neither the Purchaser, nor any director, officer, agent or employee of the Purchaser (in their capacities
as such) has (i) used any Purchaser group funds for unlawful contributions, gifts, entertainment or other unlawful expenses relating
to political activity, (ii) made any unlawful payment to foreign or domestic government officials or employees, to foreign or
domestic political parties or campaigns or violated any provision of the Foreign Corrupt Practices Act of 1977 or (iii) made any
other unlawful payment. Neither the Purchaser, nor, to the knowledge of the Purchaser, any director, officer, agent or employee
of the Purchaser (nor any Person acting on behalf of any of the foregoing, but solely in his or her capacity as a director, officer,
employee or agent of the Purchaser) has, since June 1, 2017, directly or indirectly, in connection with the business of the Purchaser
group, given or agreed to give any gift or similar benefit in any amount to any customer, supplier, governmental employee or other
Person who is or may be in a position to help or hinder the Purchaser or assist the Purchaser in connection with any actual or
proposed transaction, which, if not given or continued in the future, would reasonably be expected to adversely affect the business
or prospects of the Purchaser and would reasonably be expected to subject the Purchaser to suit or penalty in any private or governmental
litigation or proceeding.
6.18 Money
Laundering Laws. The operations of the Purchaser are and have been conducted at all times in compliance with the Money Laundering
Laws, and no Action involving the Purchaser with respect to the Money Laundering Laws is pending or, to the knowledge of the Purchaser,
threatened.
6.19 Business
Activities. Since its incorporation, the Purchaser has not conducted any business activities other than activities directed
toward completing a Business Combination. Except as set forth in the Purchaser’s organizational documents, there is no agreement,
commitment, or Order binding upon the Purchaser or to which the Purchaser is a party that has or would reasonably be expected
to have the effect of prohibiting or impairing any business practice of the Purchaser, any acquisition of property by the Purchaser
or the conduct of business by the Purchaser as currently conducted or as contemplated to be conducted as of the Closing, other
than such effects, individually or in the aggregate, which have not had and would not reasonably be expected to have a material
adverse effect on the ability of the Purchaser to enter into and perform their obligations under this Agreement. The Purchaser
does not own directly or indirectly any interest or investment (whether equity or debt) in any corporation, partnership, joint
venture, business, trust or other entity.
6.20 Purchaser
Contracts. Except as disclosed in the Purchaser SEC Documents, as of the date hereof, Purchaser is not party to any contract
(other than nondisclosure agreements (containing customary terms) to which Purchaser is a party that were entered into in the
ordinary course of its business).
6.21 Intellectual
Property. Purchaser does not own or license the right to use any patents, copyrights, trademarks, know-how or software,
and none are or ever have been necessary for the operation of its business.
6.22 Employees.
(a) As of the date
hereof, other than the officers of Purchaser, Purchaser has no employees.
(b) Except as would
not reasonably be expected to have a Purchaser Material Adverse Effect, (i) Purchaser is in compliance with all applicable Laws
respecting labor, employment, fair employment practices (including equal employment opportunity laws), terms and conditions of
employment, classification of employees, workers’ compensation, occupational safety and health, immigration, affirmative
action, employee and data privacy, plant closings, and wages and hours, and (ii) all payments due from Purchaser on account of
wages have been paid or properly accrued as a liability on the books of Purchaser.
6.23 Employee
Benefits. Neither the Purchaser nor any of its Subsidiaries maintains, sponsors or contributes to or in the past has
maintained, sponsored or contributed to any Plan. Neither the execution of this Agreement nor the consummation of the transactions
contemplated by this Agreement shall, individually, in the aggregate or in connection with any other event, (a) result in any
payment becoming due to any officer, employee, consultant or director of Purchaser, (b) increase or modify any benefits otherwise
payable by Purchaser to any employee, consultant or director of Purchaser, or (c) result in the acceleration of time of payment
or vesting of any such benefits.
6.24 Assets. Purchaser
does not own or lease any tangible assets.
6.25 Real
Property. Purchaser does not own, lease or use any real property.
6.26 Tax Matters. Except
as would not reasonably be expected to have a Purchaser Material Adverse Effect:
(a) the Purchaser
has timely filed (taking into account all applicable extensions) all Tax Returns in all jurisdictions in which Tax Returns are
required to be filed by it and all such Tax Returns are true, correct, and complete in all respects;
(b) all Taxes of
Purchaser (whether or not shown on any Tax Returns) that are due have been fully and timely paid;
(c) the Purchaser
has withheld and paid all material Taxes required to have been withheld and paid in connection with amounts paid or owing to any
employee, creditor, shareholder, independent contractor or other third party;
(d) there are no
Liens for Taxes (except Taxes not yet due and payable) on any of the assets of Purchaser;
(e) there are no
pending or threatened in writing disputes, claims, audits, examinations or other proceedings regarding any material Taxes of Purchaser
or the assets of Purchaser; and
(f) no deficiency
with respect to a material amount of Taxes has been proposed, asserted or assessed against Purchaser.
6.27 Legal
Requirements and Permits. Purchaser is in compliance in all material respects with all applicable legal requirements. To the
knowledge of Purchaser, as of the date hereof, Purchaser is not under investigation by any governmental entity with respect to
any alleged material violation of any applicable legal requirements. Purchaser has been granted all Permits necessary for and
material to the conduct of the business as conducted as of the date hereof, taken as a whole. Such Permits are valid and in full
force and effect.
6.28 Insurance.
Purchaser does not own or maintain any insurance policies, nor is any insurance necessary for the operation of its business.
6.29 Vote
Required. The affirmative vote of the holders of a majority of the Purchaser Common Stock entitled to vote thereon and
present in person or by proxy at a meeting in which a majority in voting power of the Purchaser Common Stock (the “Purchaser
Required Vote”) is the only vote of the holders of any class or series of Purchaser’s share capital necessary to obtain
the Purchaser Shareholder Approval.
6.30 Investment
Company. Purchaser is not as of the date of this Agreement, nor upon the Closing will be, an “investment company,”
a company controlled by an “investment company,” or an “affiliated person” of, or “promoter”
or “principal underwriter” for, an “investment company,” as such terms are defined in the Investment Company
Act of 1940, as amended.
6.31 Minute
Books. The minute books and other similar records of Purchaser contain, in all material respects, complete and accurate
records of all actions taken at any meetings of directors (or committees thereof) and shareholders or actions by written consent
in lieu of the holding of any such meetings since the time of organization of each such corporation through the date of this Agreement.
Purchaser has provided true and complete copies of all such minute books and other similar records to the Company’s representatives.
6.32 Application
of Takeover Provisions. Purchaser and the Purchaser Board of Directors have taken all necessary action, if any, in order
to render inapplicable any control share acquisition, business combination, or other similar takeover, anti-takeover, moratorium,
fair price, interested shareholder or similar provision under the Purchaser Certificate of Incorporation to the transactions contemplated
hereby, including the Acquisition and Purchaser’s issuance of Purchaser Common Stock to the Members of the Company. Purchaser
has never adopted any shareholder rights plan or similar arrangement relating to accumulations of beneficial ownership of Purchaser
Common Stock or a change in control of Purchaser.
6.33 Purchaser
Investigations. Purchaser acknowledges that it and its representatives have received access to such books and records,
facilities, equipment, contracts and other assets of the Company and its Subsidiaries which they and their representatives have
desired or requested to review, and that they and their representatives have had full opportunity to meet with the management
of the Company and to discuss the business and assets of the Company and its Subsidiaries. Purchaser acknowledges and agrees that
it has made its own inquiry and investigation into, and, based thereon, has formed an independent judgment concerning, the Company
and its Subsidiaries and their respective businesses and operations.
6.34 Lockup.
All existing lock up agreements between Purchaser and any of its stockholders or holders of any other securities of Purchaser,
as amended through the date hereof, provide for lock up periods that are no shorter than six months after (i) the Closing Date,
or (ii) if subsequent to the Closing Date, the date Purchaser consummates a liquidation, merger, stock exchange or other similar
transaction which results in all of Purchaser’s stockholders having the right to exchange their shares of common stock for
cash, securities or other property.
6.35 No Other
Representations and Warranties. Except as provided in this Article VI, neither the Purchaser or any of its Affiliates nor
any of their respective directors, managers, officers, employees, equity holders, partners, members or representatives has made,
or is making, any representation or warranty whatsoever to the Company or its Affiliates and no such party shall be liable in
respect of the accuracy or completeness of any information provided to the Company.
ARTICLE VII
COVENANTS OF THE COMPANY PENDING CLOSING
The Company and the
Members covenant and agree that:
7.1 Conduct
of the Business.
(a) From the date
hereof through the Closing Date, the Company shall conduct the Business only in the ordinary course (including the payment of
accounts payable and the collection of accounts receivable), consistent with past practices, and shall not enter into any material
transactions without the prior written consent of Purchaser, and shall use its commercially reasonable efforts to preserve intact
its business relationships with employees, clients, suppliers and other third parties. Without limiting the generality of the
foregoing, from the date hereof until and including the Closing Date, without Purchaser’s prior written consent (which shall
not be unreasonably withheld), the Company shall not undertake the following, except in the ordinary course consistent with past
practices (it being agreed that entering into new franchise agreements, forming new Subsidiaries to open new restaurants, signing
and guaranteeing new leases in connection therewith are ordinary course actions):
(i) amend,
modify or supplement its certificate of formation, Operating Agreement or other organizational or governing documents;
(ii) amend,
waive any provision of, terminate prior to its scheduled expiration date, or otherwise compromise in any way, any Contract (including
Contracts described in Section 7.1(a)(iii)) below), or any other right or asset of the Company,;
(iii) modify,
amend or enter into any contract, agreement, lease, license or commitment, which (A) is with respect to Real Property, (B) extends
for a term of one year or more (other than franchise agreements entered into the ordinary course of business) or (C) obligates
the Company to payments of more than $100,000 (individually or in the aggregate);
(iv) make
any capital expenditures in excess of $100,000 (individually or in the aggregate);
(v) sell,
lease, license or otherwise dispose of any of the Company’s assets or assets covered by any Contract except (i) pursuant
to existing contracts or commitments disclosed herein and (ii) sales of Inventory in the ordinary course consistent with past
practice;
(vi) accept
returns of products sold from Inventory except in the ordinary course, consistent with past practice;
(vii) pay,
declare or promise to pay any distributions with respect to the Interests, or pay, declare or promise to pay any other payments
to any Member of the Company or any Affiliate of the Company;
(viii) authorize
any salary increase of more than 10% for any employee of the Company making an annual salary equal to or greater than $100,000
or in excess of $100,000 in the aggregate on an annual basis or change the bonus or profit sharing policies of the Company;
(ix) obtain
or incur any loan or other Indebtedness, including drawings under the Company’s existing lines of credit;
(x) suffer
or incur any Lien, except for Permitted Liens, on the Company’s assets;
(xi) suffer
any damage, destruction or loss of property related to any of the Company’s assets, whether or not covered by insurance;
(xii) delay,
accelerate or cancel any receivables or Indebtedness owed to the Company or write off or make further reserves against the same;
(xiii) merge
or consolidate with or acquire any other Person or be acquired by any other Person;
(xiv) suffer
any material insurance policy protecting any of the Company’s assets to lapse;
(xv) amend
any of its plans set forth in Section 4.28(a) or fail to continue to make timely contributions thereto in accordance with the
terms thereof;
(xvi) make
any change in its accounting principles or methods or write down the value of any Inventory or assets;
(xvii) change
the place of business or jurisdiction of organization of the Company;
(xviii) extend
any loans other than travel or other expense advances to employees in the ordinary course of business not to exceed $10,000 individually
or $100,000 in the aggregate;
(xix) issue,
redeem or repurchase any capital stock, membership interests or other securities, or issue any securities exchangeable for or
convertible into any of its membership interests;
(xx) effect
or agree to any material change in any practices or terms, including payment terms, with respect to customers or suppliers;
(xxi) make
or change any material Tax election, change any annual Tax accounting periods, amend any Tax Return, prepare or file any Tax Return
materially inconsistent with past practice or, on any such Tax Return, take any position, make any election, or adopt any method
that is materially inconsistent with positions taken, elections made or methods used in preparing or filing similar Tax Returns
in prior periods (including materially inconsistent positions, elections or methods that would have the effect of deferring income
to periods ending after the Closing Date or accelerating deductions to periods ending on or before the Closing Date);settle or
otherwise compromise any material Claim relating to Taxes, enter into any closing agreement or similar agreement relating to Taxes,
otherwise settle any material dispute relating to Taxes, or request any ruling or similar guidance with respect to Taxes;; or
(xxii) agree
to do any of the foregoing.
(b) From the date
hereof through the Closing Date, the Company shall not (i) take or agree to take any action that might make any representation
or warranty of the Company inaccurate or misleading in any material respect at, or as of any time prior to, the Closing Date or
(ii) omit to take, or agree to omit to take, any action necessary to prevent any such representation or warranty from being materially
inaccurate or misleading in any respect at any such time.
7.2 Access
to Information.
(a) From the date
hereof until and including the Closing Date, the Company shall, to the best of its ability, (a) continue to give the Purchaser,
its legal counsel and other representatives full access to the offices, properties and Books and Records, (b) furnish to the Purchaser,
its legal counsel and other representatives such information relating to the Business as such Persons may request and (c) cause
the employees, legal counsel, accountants and representatives of the Company to reasonably cooperate with the Purchaser in its
investigation of the Business; provided that no investigation pursuant to this Section (or any investigation prior to the date
hereof) shall affect any representation or warranty given by the Company and, provided further, that any investigation pursuant
to this Section shall be conducted in such manner as not to interfere unreasonably with the conduct of the Business of the Company.
(b) If requested
by the Purchaser, the Company shall arrange for representatives of Purchaser to meet with or speak to the representatives of the
ten (10) largest suppliers, customers and franchisees of the Company.
7.3 Notices
of Certain Events. The Company shall promptly notify Purchaser of:
(a) any notice
or other communication from any Person alleging or raising the possibility that the consent of such Person is or may be required
in connection with the transactions contemplated by this Agreement or that the transactions contemplated by this Agreement might
give rise to any Action or other rights by or on behalf of such Person or result in the loss of any rights or privileges of the
Company (or Purchaser, post-Closing) to any such Person or create any Lien on any Interest or any of the Company’s assets;
(b) any notice
or other communication from any Authority in connection with the transactions contemplated by this Agreement or the Additional
Agreements;
(c) any Actions
commenced or threatened against, relating to or involving or otherwise affecting the Company, any Member of the Company, Interests
held by Members, or the Company’s assets or the Business or that relate to the consummation of the transactions contemplated
by this Agreement or the Additional Agreements;
(d) the occurrence
of any fact or circumstance which constitutes or results, or might reasonably be expected to constitute or result, in a Material
Adverse Change; and
(e) the occurrence
of any fact or circumstance which results, or might reasonably be expected to result, in any representation made hereunder by
the Company to be false or misleading in any respect or to omit or fail to state a material fact.
7.4 Annual
and Interim Financial Statements; Additional Financial Information. The Company shall deliver to the Purchaser, as soon as
practicable, but in no event later than July 18, 2020, (i) annual audited financial statements for the twelve month periods ended
December 31, 2018 and 2019, consisting of the audited consolidated balance sheets as of such dates, the audited consolidated income
statements for the twelve (12) month periods ended on such dates, the audited consolidated cash flow statements for the twelve
(12) month periods ended on such dates, and the corresponding notes to such audited consolidated financial statements (collectively,
the “Annual Financial Statements,” and the balance sheet as of December 31, 2019 included therein, the “December
Balance Sheet Date”), and (ii) interim reviewed financial statements for the three month periods ended March 31,
2020 and 2019, consisting of the reviewed consolidated balance sheets as of such dates, the reviewed consolidated income statements
for the three (3) month periods ended on such dates, and the reviewed consolidated cash flow statements for the three (3) month
periods ended on such dates (collectively, the “March Interim Financial Statements,” and the balance sheet
as of March 31, 2020 included therein, the “March Balance Sheet Date”). The Annual Financial Statements and
the March Interim Financial Statements shall be prepared under U.S. GAAP and in accordance with requirements of the Public Company
Accounting Oversight Board for public companies. After the date hereof and prior to the Closing, the Company shall provide the
Purchaser with consolidated interim financial information of the Company and each of its Subsidiaries no later than forty (40
calendar days following the end of each three-month quarterly, and consolidated annual financial information for the Company and
each of its Subsidiaries no later than seventy-five (75) calendar days following the end of each fiscal year, as applicable, all
prepared under U.S. GAAP in accordance with requirements of the Public Company Accounting Oversight Board for public companies
(the “Required Financial Statements”). If the Company does not deliver the Annual Financial Statements, the
March Interim Financial Statements and the Company Required Financial Statements as required by this Section 7.4, the Purchaser
shall have the right to terminate this Agreement in accordance with Section 13.2(a) hereof. The Annual Financial Statements, the
March Interim Financial Statements and the Required Financial Statements shall be accompanied by a certificate of the Chief Financial
Officer of the Company to the effect that all such financial statements fairly present the financial position and results of operations
of the Company as of the date or for the periods indicated, prepared under U.S. GAAP in accordance with requirements of the Public
Company Accounting Oversight Board, except as otherwise indicated in such statements and subject to year-end audit adjustments.
Such certificate shall also state that except as noted, from the December Balance Sheet Date through the March Balance Sheet,
and from the March Balance Sheet Date to the date of such CFO certificate there has been no Material Adverse Effect. The Company
will promptly provide additional financial information requested by the Purchaser for inclusion in the Proxy Statement and any
other filings to be made by the Purchaser with the SEC. If requested by the Purchaser, such information must be reviewed or audited
by the Company’s auditors.
7.5 Employees
of the Company and the Manager. Schedule 7.5 lists those employees designated by the Company as Key Employees of the Company
(the “Key Employees”). The Key Employees shall, as a condition to their continued employment with the Company,
execute and deliver to the Company non-solicitation, non-service and confidentiality agreements covering a period of at least
three years post-Closing, in form and substance satisfactory to Purchaser (the “Confidentiality and Non-Solicitation
Agreements”). The Company shall use its commercially reasonable efforts to enter into employment agreements with each
of its Key Employees prior to the Closing Date, and to satisfy all accrued obligations of the Company applicable to its employees,
whether arising by operation of Law, by Contract, by past custom or otherwise, for payments by the Company to any trust or other
fund or to any Authority, with respect to, social security insurance benefits, unemployment or disability compensation benefits
or otherwise.
7.6 Tax Matters.
(a) The
parties hereto do hereby acknowledge and agree that, under the principles set forth in Revenue Ruling 99-6 (Situation2),
the purchase and sale of the Interests shall be treated for federal and applicable state and local income Tax purposes as follows:
(i) from the Members’ perspective, such transaction shall be treated as a sale of each Member’s respective Interests
to the Purchaser, and (ii) from the Purchaser’s perspective, such transaction shall be treated as a purchase of a proportionate,
undivided interest in the assets of the Company from each Member. Each of the parties hereto shall act consistently with the provisions
of this Agreement at all times and for all purposes, including for purposes of reporting the transactions contemplated by this
Agreement to the IRS and any other state or local taxing authority having jurisdiction over the transactions contemplated by this
Agreement. The Purchaser and the Members further agree not to take any position on any Tax Return or in any administrative or
judicial proceeding with respect to any such Tax Return inconsistent with such treatment. The Members shall not cause or permit
the Members’ Representative to knowingly or voluntarily file any other income or informational Tax Return or statement inconsistent
with the provisions of this Agreement. In furtherance of the foregoing, at least 30 days prior to the Closing Date, the Purchaser
and the Members shall agree on the form of the Purchase Price Allocation Schedule (as defined below) and the principles on which
such allocations shall be made (the “Purchase Price Allocation Principles”). Furthermore, within 90 days after the
Closing Date, the Purchaser shall allocate the Purchase Price among the undivided interest in the assets of the Company (the “Purchase
Price Allocation Schedule”). The Purchase Price Allocation Schedule will be (i) subject to Members’ Representative’s
review and reasonable comment, (ii) prepared in accordance with the Purchase Price Allocation Principles and applicable provisions
of the Code. The Purchaser, the Company, and the Members will file all Tax Returns (and cause their respective Affiliates to file
all Tax Returns) consistently with the Purchase Price Allocation Schedule (as appropriately adjusted) and will not take any position
during the course of any audit or other legal proceeding that is inconsistent with such election, forms or schedule, unless required
by a determination of the applicable Taxing Authority that is final
(b) The Members
shall properly prepare or cause to be properly prepared and timely file or cause to be timely filed at the sole expense of the
Members all income Tax Returns and other material Tax Returns of the Company for any period (any such period, a “Pre-Closing
Tax Period”) ending at or prior to the Effective Time, including the final Form 1065 partnership return for the Company
for the tax period ending on the Closing Date (each, a “Pre-Closing Tax Return” and, collectively, the “Pre-Closing
Tax Returns”). The Members shall pay or cause to be paid all Taxes due with respect to the periods covered by such Pre-Closing
Tax Returns.
(c) The Purchaser
shall prepare and timely file, or cause to be prepared and timely filed, all Tax Returns of the Company other than Pre-Closing
Tax Returns, including all Tax Returns for any Tax period which begins before the Closing Date and which ends on (and including)
the Closing Date (any such period, a “Straddle Period,” and any such Tax Return, a “Straddle Return”).
For purposes of determining the amount of Taxes allocable to the portion of the Straddle Period ending on (and including) the
Closing Date (the “Pre-Closing Portion”), (i) in the case of any Taxes (other than Taxes based upon or related
to income or receipts) that are imposed on a periodic basis and are payable for a Tax period that includes (but does not end on)
the Closing Date, the portion of such Tax which relates to the portion of the Straddle Period ending on (and including) the Closing
Date shall be deemed to be the amount of such Tax for the entire taxable period multiplied by a fraction the numerator of which
is the number of days in the taxable period ending on the Closing Date and the denominator of which is the number of days in such
Straddle Period (the “Pre-Closing Portion”); and (ii) in the case of any Taxes based upon or related to income
or receipts, be deemed equal to the amount which would be payable if the relevant Tax period ended on the Closing Date.
(d) With respect
to any Tax Return to be filed by the Company for a Straddle Period, the Company shall deliver, at least 30 days prior to the due
date for the filing of such Tax Return (taking into account extensions), to Members’ Representative a statement setting
forth the amount of the Pre-Closing Portion of such Taxes and a copy of each such Tax Return. The Members’ Representative
shall have the right to review and make reasonable comments on such Tax Returns. The Members’ Representative and the Purchaser
agree to consult and resolve in good faith any issue arising as a result of the review of such Tax Returns and statements prior
to the date on which such Tax Returns are required to be filed.
(e) The Purchaser,
the Members, the Members’ Representative and the Company shall cooperate fully, as and to the extent reasonably requested
by the other party, in connection with the preparation and filing of Tax Returns pursuant to this Section 7.6. Such cooperation
shall include the retention and (upon the other party’s request) the provision of records and information which are reasonably
relevant to the preparation and filing of any such Tax Return. The Purchaser and the Members shall (i) retain all books and records
with respect to Tax matters pertinent to the Company relating to any taxable period beginning before the Closing Date until the
expiration of the applicable statute of limitations of the respective taxable periods, and abide by all record retention agreements
entered into with any taxing authority and (ii) give the other party reasonable written notice prior to transferring, destroying
or discarding any such books and records and, if the other party so requests, the Company, the Purchaser or the Members, as the
case may be, shall allow the other party to take possession of such books and records.
(f) Within fifteen
(15) business days after the Company’s or any Member’s receipt of a notice of audit, assessment or other proceeding
respecting an item or items set forth on a Pre-Closing Tax Return for which the Members are solely responsible pursuant to this
Section 7.6, the Members may elect, so long as the Members have an obligation to indemnify Purchaser or the Company hereunder
with respect to such audit, by written notice to Purchaser, to contest the audit or assessment in the name of the Company. If
the Members so elect, they shall be solely responsible for the defense of the item or items at issue, except that Purchaser agrees
to cooperate, and Purchaser will cause the Company to cooperate, in the contest of such audit or assessment by making relevant
documents and employees available to the Members, and to execute such documents (including powers of attorney) as may be reasonably
necessary to allow the Members to conduct the defense. The Members shall bear all costs relating to such defense. If the Members
elect to conduct a defense, (i) the Members shall make a “push-out” election under Section 6226 of the Code with respect
to any imputed underpayment, and (ii) all decisions with respect to the negotiation, settlement, or litigation of the item or
items at issue shall be made by the Members and shall be binding upon Purchaser, except that the Members shall be required to
obtain the prior written consent of Purchaser before agreeing to any adjustment, or making any Tax election, that will or may
create an increase in Taxes for the Company or Purchaser in respect of any period ending after the Closing Date and shall promptly
indemnify Purchaser and/or the Company or, and hold Purchaser and/or the Company harmless against, any such increase.
(g) Without the
prior written consent of the Members, neither Purchaser nor the Company shall file any amended Tax Return, enter into any closing
agreement, settle any claim with respect to Taxes, surrender any right to claim a refund of Taxes, or take any similar action
if such action would have the effect of increasing any Tax liability of the Members for any Pre-Closing Tax Period.
(h) All transfer,
documentary, sales, use, stamp, registration, conveyance or similar Taxes or charges arising out of the transactions contemplated
hereby and all charges for or in connection with the recording of any document, instrument or certificate contemplated hereby
shall be paid 50% by the Purchaser and 50% by the Members if and when due. The Members will file, or cause the Company to file,
all necessary Tax Returns and other documentation in connection with the Taxes and charges encompassed in this Section 7.6(h),
and the costs of preparing and making such filing shall be paid 50% by the Purchaser and 50% by the Members if and when due.
7.7 Best Efforts
to Obtain Consents. The Company shall use its commercially reasonable efforts to obtain each third party consent required
under this Agreement as promptly as practicable hereafter.
7.8 Guaranteed
Debt. Set forth on Schedule 7.8 is a list of Company Indebtedness for which Mr. John Rosatti is a guarantor, including, without
limitation the Bank of America line of credit (the “Guaranteed Debt”). In connection with the Business Combination,
the Company shall use its commercially reasonable efforts to transfer the Bank of America line of credit to the Purchaser and
remove Mr. Rosatti as a guarantor on the Guaranteed Debt. In the event the Company is unable to do the foregoing prior to the
Closing Date, notwithstanding anything to the contrary, the Company shall repay in full all amounts outstanding as of such date
and terminate the Guaranteed Debt.
7.9 Transfer
and Assignment of Interests in the JR Trust Entities. As of the Closing, Mr. Rosatti and such other members, if any, shall
irrevocably convey, assign and transfer, all of their rights, title and interests in the JR Trust Entities to the Purchaser, pursuant
to the terms and conditions of an assignment and transfer of membership interests agreement (the “Assignment Agreement”).
7.10 Notification. From
the date hereof until the earlier of the termination of this Agreement and the Closing Date, if the Company becomes aware of any
fact or condition that constitutes a breach of any representation or warranty made in Article V or Article VI or any covenant
that would cause the conditions set forth in Section 9.1, Section 9.2 or Section 9.3, as applicable, not to be
satisfied as of the Closing Date, Company will disclose in writing to the Purchaser such breach.
ARTICLE VIII
COVENANTS OF PURCHASER
8.1 Notification. From
the date hereof until the earlier of the termination of this Agreement and the Closing Date, if the Purchaser becomes aware of
any fact or condition that constitutes a breach of any representation or warranty made in Article VII or any covenant
that would cause the conditions set forth in Section 9.1, Section 9.2 or Section 9.3, as applicable, not to be
satisfied as of the Closing Date, Purchaser will disclose in writing to the Company such breach.
8.2 Contact
with Customers and Suppliers. Purchaser hereby agrees that from the date hereof until the Closing Date or the earlier
termination of this Agreement, it is not authorized to, and will not (and will not permit any of its Representatives or Affiliates
to) contact or communicate with the employees, customers, franchisees, providers, licensors, collaborators, service providers
or suppliers of the Company or its Subsidiaries without the prior consultation with and prior written approval (which approval
shall not be unreasonably withheld or delayed) of an executive officer of the Company or the Members’ Representative.
ARTICLE IX
ACTIONS PRIOR TO THE CLOSING
The respective parties
hereto covenant and agree to take the following actions:
9.1 Best Efforts;
Further Assurances. Subject to the terms and conditions of this Agreement, from the date hereof until the earlier of the termination
of this Agreement and the Closing Date, the parties hereto shall use their commercially reasonable efforts to take, or cause to
be taken, all actions and to do, or cause to be done, all things reasonably necessary, proper or advisable to consummate and make
effective as promptly as practicable the transactions contemplated by this Agreement (including the satisfaction, but not waiver,
of the Closing conditions set forth in Article XI), and in the case of the Company, all things as reasonably requested by
Purchaser. The parties hereto shall execute and deliver, or cause to be executed and delivered, such other documents, certificates,
agreements and other writings and take such other actions as may be reasonably necessary or desirable in order to consummate or
implement expeditiously each of the transactions contemplated by this Agreement.
9.2 Trust
Account. The Purchaser has established the Trust Account from the proceeds of its IPO and from certain private placements
occurring simultaneously with the IPO for the benefit of the Public Stockholders and certain parties (including the underwriters
of the IPO). Except for a portion of the interest earned on the amounts held in the Trust Account, Purchaser shall disburse monies
from the Trust Account only: (a) to the Public Stockholders in the event they elect to redeem Purchaser Public Shares in
connection with the consummation of Purchaser’s initial business combination (“Business Combination”),
(b) to the Public Stockholders if Purchaser fails to consummate a Business Combination by September 16, 2020, which date
may be extended for an additional 90 days upon approval of Purchaser’s stockholders to amend the Purchaser’s Certificate
of Incorporation, (c) any amounts necessary to pay any Taxes, (d) expenses owed by Purchaser to third parties to which they
are owed, (e) the Business Combination Fees to the underwriter in the IPO or (f) to, or on behalf of, Purchaser after or
concurrently with the consummation of a Business Combination.
9.3 Cooperation
with Proxy Statement and Other Filings.
(a) As promptly
as practicable after the date hereof, Purchaser shall file with the SEC a proxy statement relating to the Offer and the Acquisition
(as amended or supplemented from time to time, the “Proxy Statement”), all in accordance with and as required
by the Purchaser’s Certificate of Incorporation, applicable law, and any applicable rules and regulations of the SEC and
the NASDAQ.
(b) Without limitation,
in the Proxy Statement, Purchaser shall seek, in accordance with the Purchaser’s Certificate of Incorporation and applicable
securities laws, rules and regulations, including the DGCL and rules and regulations of NASDAQ, from the holders of the Purchaser
Common Stock: (A) approval of this Agreement and the transactions contemplated hereby, (B) approval of the change of
the name of Purchaser with effect from the Closing to “BurgerFi International, Inc.” (C) adoption and approval of
the Amended and Restated Certificate of Incorporation of the Purchaser in the form attached hereto as Exhibit D with effect
from the Closing, (D) election of five members of the Purchaser’s Board selected in accordance with Section 9.12 with effect
from and after the Effective Time, (E) adoption of the Equity Incentive Plan, and (F) approval to obtain any and all other approvals
necessary or advisable to effect the consummation of the Acquisition (the proposals set forth in the forgoing clauses (A) through
(F) are referred to as the “Purchaser Proposals”). The Proxy Statement and the documents included or referred
to therein pursuant to which the Offer will be made, together with any supplements, amendments and/or exhibits thereto, the “Offer
Documents.”
(c) As soon as
practicable after the Proxy Statement is “cleared” by the SEC, Purchaser shall cause the Proxy Statement to be disseminated
to holders of Purchaser Common Stock. Concurrently with such dissemination, Purchaser shall commence (within the meaning of Rule
14d-2 under the Exchange Act) the Offer by disseminating the other Offer Documents to the holders of Purchaser Common Stock. The
Offer shall provide the Purchaser Public Stockholders with the opportunity to redeem all or a portion of their Purchaser Public
Shares, up to that number of Purchaser Public Shares that would permit Purchaser to maintain net tangible assets of at least $5,000,001
(the “Offering Shares”), at a price per share equal to the Purchaser Redemption Price, all in accordance with
and as required by the Purchaser’s Certificate of Incorporation, applicable Law, and any applicable rules and regulations
of the SEC. In accordance with the Purchaser’s Certificate of Incorporation, the proceeds held in the Purchaser Trust will
be used for the redemption of the Purchaser Public Shares held by Purchaser Public Stockholders who have elected to redeem such
Purchaser Public Shares.
(d) Purchaser shall
not terminate or withdraw the Offer other than in connection with the valid termination of this Agreement in accordance with Article
XII. Purchaser shall extend the Offer for any minimum period required by any rule, regulation, interpretation or position
of the SEC, NASDAQ or the respective staff thereof that is applicable to the Offer, and pursuant to Purchaser’s Certificate
of Incorporation. Nothing in this Section 9.3(d) shall (i) impose any obligation on Purchaser to extend the Offer beyond
the Outside Closing Date or (ii) be deemed to impair, limit or otherwise restrict in any manner the right of Purchaser to
terminate this Agreement in accordance with Article XII. Except with respect to the information provided by the
Company for inclusion in the Proxy Statement and the other Offer Documents, Purchaser shall ensure that, when filed, the Proxy
Statement and the other Offer Documents will comply in all material respects with the requirements of United States federal securities
laws and the rules and regulations of the SEC promulgated thereunder or otherwise (the “Federal Securities Laws”),
the DGCL and the NASDAQ rules. The Company shall promptly provide to Purchaser such information concerning the Company, any of
its Subsidiaries and the Members as is either required by the Federal Securities Laws or reasonably requested by Purchaser for
inclusion in the Offer Documents, including, if applicable, the Company Financial Statements and the Required Financial Statements
(“Company Information”).Subject to the Company’s review and approval of the Proxy Statement, including
Company Information and the consent of the Company’s auditor to the inclusion of the Company Financial Statements and Required
Financial Statements in the Proxy Statement (in each case, such approval or consent not to be unreasonably withheld, conditioned
or delayed), the Company acknowledges and agrees that Company Information (including the Company Financial Statements and the
Required Financial Statements), or summaries thereof or extracts therefrom, may be included in the Proxy Statement and any other
filings required under the Exchange Act, Securities Act or any other United States federal, foreign or blue sky laws (“Other
Filings”). In connection therewith, the Company shall instruct the employees, counsel, financial advisors, auditors
and other authorized representatives of the Company to reasonably cooperate with Purchaser as relevant if required to achieve
the foregoing.
(e) Purchaser shall
provide copies of the proposed forms of the Offer Documents (including any amendments or supplements thereto) to the Company and
its representatives as soon as practicable such that the Company and its representatives are afforded a reasonable amount of time
prior to the dissemination or filing thereof to review such material and comment thereon, and Purchaser shall reasonably consider
in good faith any comments of such Persons. Purchaser and the Company shall promptly correct any information provided by it for
use in the Offer Documents if and to the extent that such information shall have become false or misleading in any material respect
or as otherwise required by the Federal Securities Laws. Purchaser shall provide the Company with copies of any written comments,
and shall inform the Company of any material oral comments, that Purchaser or any of its representatives receive from the SEC
or its staff with respect to the Offer Documents promptly after the receipt of such comments and shall give the Company and its
representatives a reasonable opportunity prior to responding thereto to review and comment on any proposed written or material
oral responses to such comments. Purchaser shall reasonably consider in good faith any such comments of such Persons. Purchaser
shall use commercially reasonable efforts to “clear” comments from the SEC and its staff with respect to the Offer
Documents and to permit the Company to participate with Purchaser or its representatives in any discussions or meetings with the
SEC and its staff regarding the Offer Documents. The Company shall, and shall cause each of its subsidiaries and franchisees to,
make their respective directors, officers and employees and use commercially reasonable efforts to make their accountants, in
each case upon reasonable advance notice, reasonably available to Purchaser and its representatives in connection with the drafting
of the public filings with respect to the Acquisition (including the Offer Documents) and responding in a timely manner to comments
thereon from the SEC or its staff.
(f) If at any time
prior to the Effective Time, any information relating to Purchaser, or the Company, or any of their respective Subsidiaries, Affiliates,
officers or directors, should be discovered by the Company or Purchaser, as applicable, that should be set forth in an amendment
or supplement to the Proxy Statement, so that such documents would not include any misstatement of a material fact or omit to
state any material fact necessary to make the statements therein, in light of the circumstances under which they were made, not
misleading, the Party which discovers such information shall promptly notify each other Party hereto and an appropriate amendment
or supplement describing such information shall be promptly filed with the SEC and, to the extent required by law, disseminated
to the Purchaser shareholders.
(g) Notwithstanding
anything else to the contrary in this Agreement or any Additional Agreements, Purchaser may make any public filing with respect
to the Acquisition to the extent required by applicable Law.
(h) The Company
acknowledges that:
(i) the
Purchaser’s stockholders must approve the transactions contemplated by this Agreement prior to the transactions contemplated
hereby being consummated and that, in connection with such approval, the Purchaser must call a special meeting of its stockholders
requiring Purchaser to prepare and file with the SEC the Proxy Statement;
(ii) the
Purchaser will be required to file Quarterly and Annual reports that may be required to contain information about the transactions
contemplated by this Agreement; and
(iii) the
Purchaser will be required to file Current Reports on Form 8-K to announce the transactions contemplated hereby and other significant
events that may occur in connection with such transactions.
9.4 Shareholder
Vote; Recommendation of the Purchaser’s Board of Directors. Purchaser, through the Purchaser’s Board of Directors,
shall recommend that Purchaser’s stockholders vote in favor of adopting and approving all Purchaser Proposals, and Purchaser
shall include such recommendation in the Proxy Statement.
9.5 Purchaser
Stockholders’ Meeting.
(a) Purchaser shall
take all action necessary under applicable Law to, in consultation with the Company, establish a record date for, call, give notice
of and hold a meeting of the holders of Purchaser Common Stock to consider and vote on the Purchaser Proposals (such meeting,
the “Purchaser Stockholders’ Meeting”). The Purchaser Stockholders’ Meeting shall be held as promptly
as practicable, in accordance with applicable Law and the Purchaser’s Certificate of Incorporation, after the Proxy Statement
is “cleared” by the SEC. Purchaser shall take reasonable measures to ensure that all proxies solicited in connection
with the Purchaser Stockholders’ Meeting are solicited in compliance with all applicable Law. Notwithstanding anything to
the contrary contained herein, if on the date of the Purchaser Stockholders’ Meeting, or a date preceding the date on which
the Purchaser Stockholders’ Meeting is scheduled, Purchaser reasonably believes that (i) it will not receive proxies sufficient
to obtain the Purchaser Required Vote, whether or not a quorum would be present or (ii) it will not have sufficient Purchaser
Common Stock represented (whether in person or by proxy) to constitute a quorum necessary to conduct the business of the Purchaser
Stockholders’ Meeting, Purchaser may postpone or adjourn, or make one or more successive postponements or adjournments of,
the Purchaser Stockholders’ Meeting in compliance with the DGCL and the Purchaser’s Certificate of Incorporation,
as long as the date of the Purchaser Stockholders’ Meeting is not postponed or adjourned more than an aggregate of 30 calendar
days in connection with any postponements or adjournments.
9.6 Operations
of Purchaser Prior to the Closing. Between the date hereof and the Closing, and except as contemplated by this Agreement
or with the prior written approval of the Company or in accordance with the Prospectus, Purchaser shall (i) conduct its businesses,
in all material respects, in the ordinary course of business, (ii) comply with all applicable Laws, (iii) use commercially reasonable
efforts to keep available the services of its officers and employees and (iv) not take any of the following actions:
(a) make any amendment
or modification to any of the Purchaser’s Certificate of Incorporation;
(b) take any action
in violation or contravention of any of the Purchaser’s Certificate of Incorporation, applicable Law or any applicable rules
and regulations of the SEC and NASDAQ;
(c) split, combine
or reclassify the Purchaser Common Stock;
(d) authorize for
issuance, issue, grant, sell, pledge, dispose of or propose to issue, grant, sell, pledge or dispose of any of its equity securities
or any options, warrants, commitments, subscriptions or rights of any kind to acquire or sell any of its equity securities, or
other security interests, including any securities convertible into or exchangeable for any of its equity securities or other
security interests of any class and any other equity-based awards, or engage in any hedging transaction with a third Person with
respect to such equity securities or other security interests;
(e) make any redemption
or purchase of its equity interests, except pursuant to the Offer;
(f) declare, set
aside or pay any dividends on, or make any other distributions in respect of, any of its equity securities;
(g) effect any
recapitalization, reclassification, equity split or like change in its capitalization;
(h) make any amendment
or modification to the Trust Agreement;
(i) make or allow
to be made any reduction or increase in the Trust Amount, other than as expressly permitted by the Purchaser’s Certificate
of Incorporation;
(j) incur any Indebtedness
(other than the issuance of additional Promissory Notes) or issue or sell any debt securities or warrants or rights to acquire
any debt securities of Purchaser or assume, guarantee, endorse or otherwise as an accommodation become responsible for the obligations
of any Person for indebtedness;
(k) contact (or
permit any of its employees, agents, representatives or Affiliates to contact) any customer, supplier, distributor, joint-venture
partner, lessor, lender or other material business relation of the Company or any of its Subsidiaries;
(l) establish any
Subsidiary or acquire any interest in any asset;
(m) prepare or
file any Tax Return materially inconsistent with past practice or, on any such Tax Return, take any position, make any election,
or adopt any method that is materially inconsistent with positions taken, elections made or methods used in preparing or filing
similar Tax Returns in prior periods (including materially inconsistent positions, elections or methods that would have the effect
of deferring income to periods ending after the Closing Date or accelerating deductions to periods ending on or before the Closing
Date);
(n) settle or otherwise
compromise any material Claim relating to Taxes, enter into any closing agreement or similar agreement relating to Taxes, otherwise
settle any material dispute relating to Taxes, or request any ruling or similar guidance with respect to Taxes;
(o) amend, waive
or terminate, in whole or in part, any material agreement to which Purchaser is a party;
(p) adopt a plan
of complete or partial liquidation, dissolution, merger, consolidation, restructuring, recapitalization or other reorganization;
(q) adopt any Plan;
or
(r) enter into
any agreement or commitment to do any of the foregoing, or any action or omission that would result in any of the foregoing.
9.7 Confidentiality.
Prior to Closing, except as necessary to complete the Proxy Statement or any Other Filings, the Company and the Members, on the
one hand, and the Purchaser, on the other hand, shall hold and shall cause their respective representatives to hold in strict
confidence, unless compelled to disclose by judicial or administrative process or by other requirements of Law, all Confidential
Information concerning the other party furnished to it by such other party or its representatives in connection with the transactions
contemplated by this Agreement (except to the extent that such information can be shown to have been (a) previously known by the
party to which it was furnished, (b) in the public domain through no fault of such party or (c) later lawfully acquired from other
sources, which source is not the agent of the other party, by the party to which it was furnished), and each party shall not release
or disclose such Confidential Information to any other person, except its representatives in connection with this Agreement. In
the event that any party believes that it is required to disclose any such Confidential Information pursuant to applicable Laws,
such party shall give timely written notice to the other parties so that such parties may have an opportunity to obtain a protective
order or other appropriate relief. Each party shall be deemed to have satisfied its obligations to hold Confidential Information
concerning or supplied by the other parties if it exercises the same care as it takes to preserve confidentiality for its own
similar information. The parties acknowledge that some previously confidential information will be required to be disclosed in
the Proxy Statement or any Other Filings.
9.8 Form 8-K;
Press Releases.
(a) As promptly
as practicable after execution of this Agreement, Purchaser will prepare and file a Current Report on Form 8-K pursuant to the
Exchange Act to report the execution of this Agreement, a copy of which will be provided to the Company at least one (1) Business
Day before its filing deadline and which the Company may review and comment upon prior to filing. Promptly after the execution
of this Agreement, Purchaser and the Company shall also issue a joint press release announcing the execution of this Agreement,
in form and substance mutually acceptable to Purchaser and the Members’ Representative.
(b) At least five
(5) days prior to the Closing, the Company shall begin preparing, in consultation with the Purchaser, a draft Current Report on
Form 8-K in connection with and announcing the Closing, together with, or incorporating by reference, such information that is
required to be disclosed with respect to the Acquisition pursuant to Form 8-K (the “Closing Form 8-K”). Prior
to the Closing, the Purchaser and the Company shall prepare a mutually agreeable press release announcing the consummation of
the Acquisition (the “Closing Press Release”). Concurrently with the Closing, the Purchaser shall distribute
the Closing Press Release and, as soon as practicable thereafter, file the Closing Form 8-K with the SEC.
9.9 Listing. From
the date of this Agreement through the Closing, Purchaser shall use all reasonable efforts that are necessary or desirable for
Purchaser to remain listed as a public company on, and for Purchaser Common Stock to be tradable over, the applicable NASDAQ market(s).
9.10 D&O
Insurance; Indemnification of Officers and Directors.
(a) If the Closing
occurs, Purchaser shall cause all rights to indemnification and advancement of expenses and all limitations on liability existing
in favor of any employee, officer or director of Purchaser prior to the Closing (collectively, the “Pre-Closing Purchaser
Indemnitees”), and the Purchaser and the Company after the Closing (collectively, the “Company Indemnitees”),
as provided in the organizational documents of the applicable company, to survive the consummation of the transactions contemplated
hereby and continue in full force and effect and be honored by the Purchaser after the Closing. After the Effective Time, Purchaser
shall maintain in effect the exculpation, indemnification and advancement of expenses provisions of (i) any certificate of incorporation,
by-laws or similar organizational documents of the Purchaser as in effect immediately prior to the Effective Time and (ii) any
indemnification agreements of Purchaser or the Company with any of their respective directors, officers or employees as in effect
immediately prior to the Effective Time, and in each case shall not amend, repeal or otherwise modify any such provisions in any
manner that would adversely affect the rights thereunder of any individuals who at the Effective Time were current or former directors,
officers or employees of any of such companies. The obligations of Purchaser under this Section 9.10 shall not be terminated
or modified in such a manner as to adversely affect any Pre-Closing Purchaser Indemnitees or Company Indemnitee to whom this Section
9.10 applies without the consent of such affected Pre-Closing Purchaser Indemnitees or Company Indemnitee, as the case may be,
(it being expressly agreed that the Pre-Closing Purchaser Indemnitees and Company Indemnitees to whom this Section 9.10 applies
shall be intended third party beneficiaries of this Section 9.10 ). If the Closing occurs, Purchaser shall pay all expenses
to any Pre-Closing Purchaser Indemnitees or Company Indemnitee incurred in successfully enforcing the indemnity or other obligations
provided for in this Section 9.10.
(b) Prior to the
Closing Date, the Purchaser, at its sole cost and expense, shall purchase a directors’ and officers’ liability insurance
policy for a period of six (6) years after the Closing Date, which policy shall cover the officers and directors of the Purchaser
after the Business Combination, as well as the current and former directors and officers of the Purchaser and the Company prior
to the Business Combination (the “D&O Policy”).
9.11 Exclusivity.
From the date hereof through the earlier of the Closing Date or the date that this Agreement is properly terminated in accordance
with Article XII, neither the Company, nor the Members, on the one hand, nor the Purchaser, on the other hand, shall, and such
Persons shall use reasonable commercially reasonable efforts to cause each of their respective members, officers, directors, Affiliates,
managers, consultants, employees, representatives and agents not to, directly or indirectly, (i) encourage, solicit, initiate,
engage, participate, enter into discussions or negotiations with any Person concerning any Alternative Transaction (as hereinafter
defined), (ii) take any other action intended or designed to facilitate the efforts of any Person relating to a possible Alternative
Transaction or (iii) approve, recommend or enter into any Alternative Transaction or any Contract related to any Alternative Transaction.
For purposes of this Agreement, the term “Alternative Transaction” shall mean any of the following transactions
involving the Company, the Members or the Purchaser (other than the transactions contemplated by this Agreement): (i) any merger,
acquisition consolidation, recapitalization, share exchange, business combination or other similar transaction, possible public
investment or public offering, or (ii) any sale, lease, exchange, transfer or other disposition of a material portion of the assets
of such Person (other than sales of inventory in the ordinary course of business) or any class or series of the capital stock,
membership interests or other equity interests of the Company or the Purchaser in a single transaction or series of transactions
(other than the Minimum Cash Amount (as hereinafter defined), which may be satisfied, through the issuance of Purchaser Common
Stock in a private placement or other equity financing by the Purchaser). In the event that there is an unsolicited proposal for,
or an indication of a serious interest in entering into, an Alternative Transaction, communicated in writing to the Company, the
Members or the Purchaser or any of their respective representatives or agents (each, an “Alternative Proposal”),
such party shall as promptly as practicable (and in any event within one (1) Business Day after receipt) advise the other parties
to this Agreement orally and in writing of any Alternative Proposal and the material terms and conditions of any such Alternative
Proposal (including any changes thereto) and the identity of the person making any such Alternative Proposal. The Company, the
Members and the Purchaser shall keep the other parties informed on a reasonably current basis of material developments with respect
to any such Alternative Proposal.
9.12 Appointment
of Post-Closing Board of Directors and Officers. The Post-Closing Board of Directors shall be selected, as set forth in Section
2.4. The executive officers of the Purchaser, immediately after the Closing, shall be the Key Employees.
9.13 Adoption
of Equity Incentive Plan. The Purchaser and the Company shall prepare a mutually agreeable long-term incentive plan for employees
of Purchaser and its Subsidiaries following the closing of the Business Combination (the “Equity Incentive Plan”).
The adoption of the Equity Incentive Plan shall be included as a Purchaser Proposal in the Proxy Statement for approval by the
Purchaser’s Stockholders at the Purchaser Stockholders’ Meeting.
ARTICLE X
CONDITIONS TO CLOSING
10.1 Condition
to the Obligations of the Parties. The obligations of all of the parties to consummate the Closing are subject to the satisfaction
of all the following conditions:
(a) No court, arbitrator
or other Authority shall have issued any judgment, injunction, decree or Order, or have pending before it a proceeding for the
issuance of any thereof, and there shall not be any provision of any applicable Law restraining or prohibiting the consummation
of the Closing, the ownership by Purchaser of any of the Interest or the effective operation of the Business by the Company after
the Closing Date.
(b) There shall
not be any Action brought by a third-party non-Affiliate to enjoin or otherwise restrict the consummation of the Closing;
(c) The requisite
majority of Purchaser’s stockholders shall have approved the Acquisition contemplated by this Agreement and the Purchaser
Proposals in accordance with the provisions of Purchaser’s organizational documents and Delaware Law (“Purchaser
Shareholder Approval”).
(d) The Closing
Payment Shares and the shares to be issued as part of the Cash Consideration shall have been approved for listing on Nasdaq.
(e) After giving
effect to any redemptions of Purchaser Common Stock in connection with the Acquisition (the “Purchaser Stock Redemptions”),
the Purchaser shall have net tangible assets of at least $5,000,001 upon the consummation of the Acquisition.
(f) The Purchaser
Stock Redemptions shall have been completed in accordance with the terms hereof and the Proxy Statement.
(g) The D&O
Policy shall be in force and full effect.
(h) There shall
have been no event, change or occurrence which individually or together with any other event, change or occurrence, could reasonably
be expected to have a Material Adverse Effect on either Purchaser or the Company, regardless of whether it involved a known risk.
10.2 Conditions
to Obligations of Purchaser. The obligation of the Purchaser to consummate the Closing is subject to the satisfaction, or
the waiver at Purchaser’s sole and absolute discretion, of all the following further conditions:
(a) The Company
shall have duly performed all of its obligations hereunder required to be performed by it at or prior to the Closing Date.
(b) The representations
and warranties of the Company contained in this Agreement, and in any certificate or other writing delivered by the Company pursuant
hereto, disregarding all qualifications and exceptions contained therein relating to materiality, shall be true, correct and complete
in all material respects at and as of the Closing Date, as if made at and as of such date (except to the extent expressly made
as of an earlier date, in which case only as of such date), except where the failure of such representations and warranties to
be so true and correct, has not had, and would not have, a Material Adverse Effect;
(c) The Company,
the Members and the Members’ Representative, as applicable, shall have executed and delivered to the Purchaser a copy of
each Additional Agreement to which it is a party.
(d) The Members
shall have executed and delivered to the Purchaser the Standstill Letter.
(e) Purchaser shall
have received a certificate signed by the Chief Financial Officer of the Company stating that the conditions specified in Section
10.2(a) and Section 10.2(b) have been satisfied.
(f) Counsel to
the Company shall have delivered an opinion in form and substance satisfactory to Purchaser’s counsel.
(g) There shall
have been no event, change or occurrence which individually or together with any other event, change or occurrence, could reasonably
be expected to have a Material Adverse Effect, regardless of whether it involved a known risk.
(h) Mr. Rosatti
shall have executed and delivered to the Purchaser an Assignment Agreement for all of the JR Trust Entities.
(i) Purchaser shall
have received copies of all required third party consents (including the consents of the landlords under the Leases), if any,
in form and substance reasonably satisfactory to Purchaser, and no such third party consents shall have been revoked.
(j) Purchaser shall
have received copies of all Governmental Approvals, if any, in form and substance reasonably satisfactory to Purchaser, and no
such Governmental Approval shall have been revoked.
(k) Purchaser
shall have received Schedules updated as of the Closing Date, which shall not be materially different from the Schedules provided
as of the date hereof.
(l) Company shall
have provided to Purchaser estoppel certificates from each of Company’s ten (10) largest franchisees for the Company’s
December 31, 2018 and 2019 fiscal years
If the Closing occurs, all Closing conditions set forth in
Section 10.1 and Section 10.2 that have not been fully satisfied as of the Closing will be deemed to have been waived by
Purchaser.
10.3 Conditions
to Obligations of the Company. The obligations of the Company and the Members to consummate the Closing is subject to the
satisfaction, or the waiver at Members’ Representative’s discretion, of all of the following further conditions:
(a) The Purchaser
shall have performed in all material respects all of its obligations hereunder required to be performed by it at or prior to the
Closing Date.
(b) The representations
and warranties of the Purchaser contained in this Agreement, and in any certificate or other writing delivered by the Purchaser
pursuant hereto, disregarding all qualifications and exceptions contained therein relating to materiality, shall be true and correct
in all material respects at and as of the Closing Date, as if made at and as of such date (except to the extent expressly made
as of an earlier date, in which case only as of such date), except where the failure of such representations and warranties to
be so true and correct, has not had, and would not have, a Material Adverse Effect.
(c) The Company
shall have received a certificate signed by an authorized officer of the Purchaser stating that the conditions specified in Section
10.3(a) and Section 10.3(b) have been satisfied.
(d) Purchaser shall
have delivered to the Company (i) certified copies of the resolutions duly adopted by Purchaser’s Board of Directors authorizing
the execution, delivery and performance of this Agreement; and (ii) written resignations, in forms satisfactory to the Company,
dated as of the Closing Date and effective as of the Closing, executed by (X) all officers of Purchaser and (Y) all persons serving
as directors of Purchaser immediately prior to the Closing who are not selected as directors in accordance with Section 9.12.
(e) Purchaser shall
have cash in the Trust Account at Closing, in addition to the cash portion of the Cash Consideration being paid to Members at
Closing, at least equal to $15,000,000, which minimum amount shall be measured net of and after (i) all fees and expenses incurred
in connection with any Financing (as defined below) and payment of all amounts to be disbursed from the Trust Account in accordance
with Section 9.2, and (ii) after the payment of all Purchaser Stock Redemptions and repayment of all Promissory Notes (the “Minimum
Cash Amount”). The Minimum Cash Amount may be satisfied, at the Purchaser’s election, through the issuance of
Purchaser Common Stock in a private placement or other equity financing by the Purchaser on terms acceptable to the Company (“Financing”),
which shall be at a price that is fair at the time for that type of Financing.
(f) Purchaser shall
have executed and delivered to the Company a copy of each Additional Agreement to which it is a party.
(g) The Post-Closing
Board of Directors shall have been appointed to the Board of Directors of the Purchaser.
(h) Mr. Sternberg
shall have executed and delivered to the Purchaser the Standstill Letter.
If the Closing occurs, all Closing conditions set forth in
Section 10.1 and Section 10.3 that have not been fully satisfied as of the Closing will be deemed to have been waived by
the Company and the Members.
ARTICLE XI
INDEMNIFICATION
11.1 Indemnification
of Purchaser. The Company (solely with respect to claims made under this Section 12.1 prior to the Closing), and the Members
hereby, severally but not jointly or jointly and severally, agree to indemnify and hold harmless Purchaser, each of its Affiliates
and each of its and their respective managers, directors, officers, employees, successors and permitted assignees (the “Purchaser
Indemnitees”), against and in respect of any and all actual out-of-pocket losses, damages, liabilities, costs or expenses,
including reasonable attorneys’ fees (including actual costs of investigation and reasonable attorneys’ fees) (all
of the foregoing collectively, “Losses”) incurred or sustained by any Purchaser Indemnitee as a result of or
in connection with (a) any breach or inaccuracy in of any of the representations or warranties of the Company or the Members contained
herein; or (b) any breach or non-fulfillment of any covenant, agreement or obligation to be performed by the Company or the Members
contained herein to be performed prior to or at the Closing. Notwithstanding anything to the contrary, the total payments made
by the Company and the Members to the Purchaser Indemnitees with respect to Losses shall not exceed the Escrow Shares in the Escrow
Fund (the “Indemnifiable Loss Limit”). Any liability incurred by the Members pursuant to the terms of this
Article XII shall be paid by the return for cancellation of the Escrow Shares in accordance with the terms of the Escrow Agreement,
pursuant to the procedures set forth in Section 11.2.
11.2 Procedure.
The following shall apply with respect to all claims by any Purchaser Indemnitee (an “Indemnified Party”) for
indemnification:
(a) An Indemnified
Party shall give the Members’ Representative prompt notice (an “Indemnification Notice”) of any third-party
action with respect to which such Indemnified Party seeks indemnification pursuant to Section 11.1 (a “Third-Party Claim”),
which shall describe in reasonable detail the Loss that has been or may be suffered by the Indemnified Party. The failure to give
the Indemnification Notice shall not impair any of the rights or benefits of such Indemnified Party under Section 11.1, except
to the extent such failure materially and adversely affects the ability of the Members or the Purchaser, as applicable (any of
such parties, “Indemnifying Parties”) to defend such claim or increases the amount of such liability.
(b) If any Indemnified
Party receives notice of the assertion or commencement of any action, suit, claim or other legal proceeding made or brought by
any Person who is not a party to this Agreement or an Affiliate of a party to this Agreement (a “Third-Party Claim”)
against such Indemnified Party with respect to which the Indemnifying Party is obligated to provide indemnification under this
Agreement, the Indemnified Party shall give the Indemnifying Party prompt written notice thereof. The failure to give such prompt
written notice shall not, however, relieve the Indemnifying Party of its indemnification obligations, except and only to the extent
that the Indemnifying Party forfeits rights or defenses by reason of such failure. Such notice by the Indemnified Party shall
describe the Third-Party Claim in reasonable detail, shall include copies of all material written evidence thereof and shall indicate
the estimated amount, if reasonably practicable, of the Loss that has been or may be sustained by the Indemnified Party. The Indemnifying
Party shall have the right to participate in, or by giving written notice to the Indemnified Party, to assume the defense of any
Third-Party Claim at the Indemnifying Party’s expense and by the Indemnifying Party’s own counsel, and the Indemnified
Party shall cooperate in good faith in such defense. In the event that the Indemnifying Party assumes the defense of any Third-Party
Claim, subject to Section 11.2(c), the Indemnifying Party shall have the right to take such action as it deems necessary to avoid,
dispute, defend, appeal or make counterclaims pertaining to any such Third-Party Claim in the name and on behalf of the Indemnified
Party. The Indemnified Party shall have the right, at its own cost and expense, to participate in the defense of any Third-Party
Claim with counsel selected by it subject to the Indemnifying Party’s right to control the defense thereof. If the Indemnifying
Party elects not to compromise or defend such Third-Party Claim or fails to promptly notify the Indemnified Party in writing of
its election to defend as provided in this Agreement, the Indemnified Party may, subject to Section 11.2(c), pay, compromise,
defend such Third-Party Claim and seek indemnification for any and all Losses based upon, arising from or relating to such Third-Party
Claim. Purchaser and the Company shall cooperate with each other in all reasonable respects in connection with the defense of
any Third-Party Claim, including making available records relating to such Third-Party Claim and furnishing, without expense (other
than reimbursement of actual out-of-pocket expenses) to the defending party, management employees of the non-defending party as
may be reasonably necessary for the preparation of the defense of such Third-Party Claim.
(c) Notwithstanding
any other provision of this Agreement, the Indemnifying Party shall not enter into settlement of any Third-Party Claim without
the prior written consent of the Indemnified Party (which consent shall not be unreasonably withheld or delayed), except as provided
in this Section 11.2(c). If a firm offer is made to settle a Third-Party Claim without leading to liability or the creation of
a financial or other obligation on the part of the Indemnified Party and provides, in customary form, for the unconditional release
of each Indemnified Party from all liabilities and obligations in connection with such Third-Party Claim and the Indemnifying
Party desires to accept and agree to such offer, the Indemnifying Party shall give written notice to that effect to the Indemnified
Party. If the Indemnified Party fails to consent to such firm offer within ten days after its receipt of such notice, the Indemnified
Party may continue to contest or defend such Third-Party Claim and in such event, the maximum liability of the Indemnifying Party
as to such Third-Party Claim shall not exceed the amount of such settlement offer. If the Indemnified Party fails to consent to
such firm offer and also fails to assume defense of such Third-Party Claim, the Indemnifying Party may settle the Third-Party
Claim upon the terms set forth in such firm offer to settle such Third-Party Claim. If the Indemnified Party has assumed the defense
pursuant to Section 11.2(b), it shall not agree to any settlement without the written consent of the Indemnifying Party (which
consent shall not be unreasonably withheld or delayed).
(d) Any claim by
an Indemnified Party on account of a Loss which does not result from a Third-Party Claim (a “Direct Claim”)
shall be asserted by the Indemnified Party giving the Indemnifying Party prompt written notice thereof, which notice shall also
be referred to as an “Indemnification Notice.” The failure to give such prompt written Indemnification Notice
shall not, however, relieve the Indemnifying Party of its indemnification obligations, except and only to the extent that the
Indemnifying Party forfeits rights or defenses by reason of such failure. Such Indemnification Notice by the Indemnified Party
shall describe the Direct Claim in reasonable detail, shall include copies of all material written evidence thereof and shall
indicate the estimated amount, if reasonably practicable, of the Loss that has been or may be sustained by the Indemnified Party.
The Indemnifying Party shall have 30 days after its receipt of such Indemnification Notice to respond in writing to such Direct
Claim. During such 30-day period, the Indemnified Party shall allow the Indemnifying Party and its professional advisors to investigate
the matter or circumstance alleged to give rise to the Direct Claim, and whether and to what extent any amount is payable in respect
of the Direct Claim and the Indemnified Party shall assist the Indemnifying Party’s investigation by giving such information
and assistance (including access to the Company’s premises and personnel and the right to examine and copy any accounts,
documents or records) as the Indemnifying Party or any of its professional advisors may reasonably request. If the Indemnifying
Party does not so respond within such 30-day period, the Indemnifying Party shall be deemed to have rejected such claim, in which
case the Indemnified Party shall be free to pursue such remedies as may be available to the Indemnified Party on the terms and
subject to the provisions of this Agreement.
(e) Notwithstanding
anything to the contrary, the Indemnifying Party shall not be liable to an Indemnified Party for indemnification under 12.1(a)
until the aggregate amount of all Losses in respect of indemnification under Section 11.1(a) exceeds 0.40% of the Purchase Price
(the “Deductible”), in which event the Indemnifying Party shall only be required to pay or be liable for Losses
in excess of the Deductible.
(f) Notwithstanding
anything to the contrary, the aggregate amount of all Losses for which an Indemnifying Party shall be liable pursuant to this
Article XII shall not exceed the Escrow Shares, and the parties hereto agree that the sole and exclusive recourse for any amount
finally determined to be owed in respect of any indemnity obligations pursuant to this Article XII shall be made only
by disbursement of Escrow Shares out of the Escrow Fund, no other assets shall in any respect be used to satisfy such indemnity
obligations, and once the Escrow Fund shall be depleted or released, such indemnity obligations shall terminate.
(g) In no event
shall any Indemnifying Party be liable to any Indemnified Party for any punitive, incidental, consequential, special or indirect
damages, including loss of future revenue or income, loss of business reputation or opportunity relating to the breach or alleged
breach of this Agreement, or diminution of value or any damages based on any type of multiple.
(h) Each Indemnified
Party shall take, and cause its Affiliates to take, all reasonable steps to mitigate any Loss upon becoming aware of any event
or circumstance that would be reasonably expected to, or does, give rise thereto, including incurring costs only to the minimum
extent necessary to remedy the breach that gives rise to such Loss.
(i) No Indemnifying
Party shall be liable under this Article XII for any Losses based upon or arising out of any inaccuracy in or breach of any of
the representations or warranties of the Company or Members contained in this Agreement if Purchaser had knowledge of such inaccuracy
or breach prior to the Closing.
11.3 Escrow
of Escrow Shares by Members. The Purchaser shall deliver the Escrow Shares into the Escrow Fund at the time of the Closing.
The holding and disbursement of the Escrow Shares shall be pursuant to the Escrow Agreement. For purposes of determining the number
of Escrow Shares to be placed into escrow, the shares were valued at $10.60 per share.
(a) Escrow Shares;
Payment of Dividends; Voting. Any dividends, interest payments, or other distributions of any kind made in respect of the
Escrow Shares will be delivered promptly to the Escrow Agent to be held in escrow in accordance with the Escrow Agreement. The
Members shall be entitled to vote the Escrow Shares on any matters to come before the stockholders of Purchaser.
(b) Distribution
of Escrow Shares. At the times provided for in Section 11.3(d), the Escrow Shares shall be released to the Members’
Representative for distribution to the Members. Purchaser will take such action as may be necessary to cause such certificates
to be issued in the names of the appropriate persons. Certificates representing Escrow Shares so issued that are subject to resale
restrictions under applicable securities laws will bear a legend to that effect. No fractional shares shall be released and delivered
from the Escrow Fund to the Members’ Representative and all fractional shares shall be rounded to the nearest whole share.
(c) Assignability.
No Escrow Shares or any beneficial interest therein may be pledged, sold, assigned or transferred, including by operation of law,
by the Members or be taken or reached by any legal or equitable process in satisfaction of any debt or other liability of the
Members, prior to the delivery to such Members by the Members’ Representative of the Escrow Shares by the Escrow Agent as
provided herein.
(d) Release
from Escrow Fund. Within five (5) business days following expiration of the Survival Period (the “Release Date”),
the remaining Escrow Shares will be released from escrow to the Members’ Representative less the number or amount of Escrow
Shares (at an assumed value of $10.60 per Escrow Share) equal to the amount of any potential Losses set forth in any Indemnification
Notice from Purchaser with respect to any pending but unresolved claim for indemnification. Prior to the Release Date, the Members’
Representative shall issue to the Escrow Agent a certificate executed by it instructing the Escrow Agent to release such number
of Escrow Shares determined in accordance with this Section 11.3(d). Any Escrow Shares retained in escrow as a result of the immediately
preceding sentence shall be released to the Members’ Representative promptly upon resolution of the related claim for indemnification
in accordance with the provisions of this Article XII.
11.4 Periodic
Payments. Any indemnification required by Section 11.1 for costs, disbursements or expenses of any Indemnified Party in connection
with investigating, preparing to defend or defending any Action shall be made by periodic payments by the Indemnifying Parties
to each Indemnified Party during the course of the investigation or defense, as and when bills are received or costs, disbursements
or expenses are incurred.
11.5 Insurance.
Any indemnification payments hereunder shall take into account any insurance proceeds or other third party reimbursement actually
received.
11.6 Survival
of Indemnification Rights. Except for the representations and warranties in Section 4.1 (Corporate Existence and Power), 4.2
(Authorization), 4.3. (Governmental Authorization), 4.4 (Capitalization), 4.6 (Certificate of Formation and Operating Agreement),
4.14 (Properties; Title to the Company’s Assets), 4.26 (Employment Matters), 4.28 (Employee Benefits and Compensation),
4.31 (Tax Matters), 4.33 (Finder’s Fees), which shall survive until sixty (60) days after the expiration of the statute
of limitations with respect thereto (including any extensions and waivers thereof), the representations and warranties of the
Company and the Members shall survive until eighteen months (the “Survival Period”) following the Closing.
The indemnification to which any Indemnified Party is entitled from the Indemnifying Parties pursuant to Section 11.1 for Losses
shall be effective so long as it is asserted prior to: (x) sixty (60) days after the expiration of the applicable statute of limitations
(including all extensions and waivers thereof), in the case of the representations and warranties referred to in the first part
of the sentence of this Section 11.6 and the breach or the alleged breach of any covenant or agreement of any Indemnifying Party;
and (y) eighteen months following the Closing, in the case of all other representations and warranties of the Company and the
Members hereunder. The obligations in Articles VIII and IX shall terminate upon the Closing.
11.7 Tax Treatment
of Indemnification Payments. All indemnification payments made under this Agreement shall be treated by the parties as an
adjustment to the Purchase Price for Tax purposes, unless otherwise required by Law.
11.8 Indemnification
for Current Litigation. The Company has advised Purchaser that it is currently a defendant in that certain Complaint filed
on December 1, 2019 by the Company’s prior Managing Director and CEO, pursuant to which the plaintiff is seeking compensatory
damages in excess of $1.88m for breach of contract claims (the “Complaint”). Members have agreed to indemnify
the Purchaser Indemnitees for any and all Losses payable to the prior Managing Director and CEO arising from the Complaint. The
Losses arising from the Complaint shall be paid, in the sole discretion of the Post-Closing Board of Directors, by (i) the return
for cancellation of Escrow Shares in accordance with the terms of the Escrow Agreement (valued at $10.60 per share), pursuant
to the procedures set forth in Section 11.2 or (ii) the payment in cash by the Members.
11.9 Exclusive
Remedies. The parties acknowledge and agree that the sole and exclusive remedy of any Purchaser Indemnitee with respect to
any and all claims (other than claims arising from intentional fraud on the part of a party hereto in connection with the transactions
contemplated by this Agreement) for any breach of any representation, warranty, covenant, agreement or obligation set forth herein
or otherwise relating to the subject matter of this Agreement, shall be pursuant to the indemnification provisions set forth in
this Article XII. In furtherance of the foregoing, the Purchaser on behalf of all Purchaser Indemnitee’s hereby waives,
to the fullest extent permitted under Law, any and all rights, claims and causes of action for any breach of any representation,
warranty, covenant, agreement or obligation set forth herein or otherwise relating to the subject matter of this Agreement it
may have against the other parties hereto and their Affiliates and each of their respective representatives arising under or based
upon any Law, except pursuant to the indemnification provisions set forth in this Article XII. Nothing in this Section 11.8 shall
limit any Person’s right to seek and obtain any equitable relief to which any Person shall be entitled pursuant to Section
14.16 or to seek any remedy on account of intentional fraud by any party hereto.
11.10 NO ADDITIONAL
REPRESENTATIONS; NO RELIANCE. PURCHASER ACKNOWLEDGES AND AGREES THAT: (A) NOTWITHSTANDING ANY PROVISION OF THIS
AGREEMENT TO THE CONTRARY, EXCEPT FOR THE REPRESENTATIONS AND WARRANTIES EXPRESSLY MADE BY THE COMPANY OR THE MEMBERS ARTICLES
V AND VI, NEITHER THE COMPANY OR THE MEMBERS OR AFFILIATE THEREOF NOR ANY OTHER PERSON HAS MADE ANY REPRESENTATION OR WARRANTY
WITH RESPECT TO THE COMPANY, THE SURVIVING COMPANY OR THE BUSINESS OR THE COMPANY’S OPERATIONS, ASSETS, LIABILITIES, CONDITION
(FINANCIAL OR OTHERWISE) OR PROSPECTS, NOTWITHSTANDING THE DELIVERY OR DISCLOSURE TO PURCHASER, OR ANY OF ITS RESPECTIVE AFFILIATES
OR REPRESENTATIVES OF ANY DOCUMENTATION, FORECASTS, PROJECTIONS OR OTHER INFORMATION WITH RESPECT TO ANY ONE OR MORE OF THE FOREGOING;
(B) PURCHASER HAS NOT RELIED ON ANY REPRESENTATION OR WARRANTY FROM THE COMPANY OR THE MEMBERS OR ANY OTHER PERSON IN DETERMINING
TO ENTER INTO THIS AGREEMENT, EXCEPT AS EXPRESSLY SET FORTH IN THIS AGREEMENT; AND (C) NONE OF THE MEMBERS, THE COMPANY OR
ANY OTHER PERSON WILL HAVE, OR BE SUBJECT TO, ANY LIABILITY TO PURCHASER OR ANY OTHER PERSON RESULTING FROM THE DISTRIBUTION TO
PURCHASER, OR ITS USE, OF ANY INFORMATION REGARDING THE COMPANY OR ITS BUSINESS OR MADE AVAILABLE TO PURCHASER AND ITS REPRESENTATIVES,
INCLUDING ANY INFORMATION, DOCUMENTS OR MATERIAL MADE AVAILABLE TO PURCHASER IN ANY DATA ROOM, MANAGEMENT PRESENTATIONS OR IN
ANY OTHER FORM IN EXPECTATION OF THE TRANSACTIONS CONTEMPLATED HEREBY. EXCEPT FOR THE REPRESENTATIONS AND WARRANTIES EXPRESSLY
MADE BY THE COMPANY AND THE MEMBERS IN ARTICLES V AND VI, ALL OTHER REPRESENTATIONS AND WARRANTIES, WHETHER EXPRESS OR IMPLIED,
ARE EXPRESSLY DISCLAIMED BY THE COMPANY.
ARTICLE XII
DISPUTE RESOLUTION
12.1 Mediation.
(a) Any dispute
under the terms of this Agreement or the Additional Agreements, including the alleged breach, termination, validity, interpretation
and performance thereof (“Dispute”), but specifically excluding any dispute regarding the Post-Closing Adjustment,
which shall be resolved in accordance with Section 3.1(f), shall be resolved with the following procedures: Upon written notice
of any Dispute, the parties shall attempt to resolve it promptly by negotiation between Mr. Sternberg and the Member’s Representative
who have authority to settle the Dispute and this process should be completed within thirty (30) days (the “Negotiation”).
If the dispute has not been resolved by negotiation, then the parties shall proceed to mediation unless the parties at the time
of the dispute agree to a different timeframe. A “Notice of Mediation” shall be served, signifying that the Negotiation
was not successful and to commence the mediation process. The parties shall retain legal counsel of their choosing and such legal
counsel shall agree on a mediator (the “Mediator”) who shall be a mediator in Florida from a list of mediators
provided by JAMS; however, if they cannot agree within fourteen (14) days, then the Purchaser and Members’ Representative,
through counsel, will convene a conference with a JAMS case administrator (or such other JAMS staff member as JAMS shall make
available) and the claimant and the respondent will alternate striking one mediator from the list, claimant striking first, until
one mediator is left, which such mediator will be appointed. If such mediator is unable or unwilling to serve, then the last
candidate stricken will be appointed. The Parties shall continue through the list in reverse order until a candidate who is willing
and able to serve is appointed. The mediation session shall be held in Fort Lauderdale, FL within forty-five (45) days of the
retention of the Mediator, and last for at least two full mediation days, before any party has the option to withdraw from the
process. The parties may agree to continue the mediation process beyond two days, until there is a settlement agreement, or one
party or the Mediator states that there is no reason to continue because of an impasse that cannot be overcome and sends a “notice
of termination of mediation.” All reasonable efforts will be made to complete the mediation within thirty (30) days of the
first mediation session. During the course of the mediation, no party can assert the failure to fully comply with the requirement
of Negotiation prior to mediation as a reason not to proceed or to delay the mediation. The service of the Notice of Mediation
shall stay the running of any applicable statute of limitations regarding the Dispute until 30 days after the parties agree that
the mediation is concluded or the mediator issues a notice of termination of mediation. Each side shall bear an equal share of
the mediation costs unless the parties agree otherwise. All communications, both written and oral, are confidential and shall
be treated as settlement negotiations for purposes of applicable rules of evidence; however, documents generated in the ordinary
course of business prior to the Dispute, that would otherwise be discoverable, do not become confidential simply because they
are used in the Negotiation and/or Mediation process. The process shall be confidential based on terms acceptable to the mediator
and/or mediation service.
(b) The laws of
the State of New York shall apply to any mediation hereunder, and the laws of the State of Florida shall apply to any mediation
under the Additional Agreements.
(c) This mediation
section shall survive the termination of this Agreement and any agreement contemplated hereby
12.2 Jurisdiction;
Waiver of Jury Trial; Exemplary Damages.
(a) ANY LEGAL SUIT,
ACTION OR PROCEEDING ARISING OUT OF OR BASED UPON THIS AGREEMENT, THE OTHER ADDITIONAL AGREEMENTS OR THE TRANSACTIONS CONTEMPLATED
HEREBY OR THEREBY MAY BE INSTITUTED IN THE FEDERAL COURTS OF THE UNITED STATES OF AMERICA OR THE COURTS OF THE STATE OF FLORIDA,
IN EACH CASE LOCATED IN CITY OF FORT LAUDERDALE AND BROWARD COUNTY, AND EACH PARTY IRREVOCABLY SUBMITS TO THE EXCLUSIVE JURISDICTION
OF SUCH COURTS IN ANY SUCH SUIT, ACTION OR PROCEEDING. THE PARTIES IRREVOCABLY AND UNCONDITIONALLY WAIVE ANY OBJECTION TO THE
LAYING OF VENUE OF ANY SUIT, ACTION OR ANY PROCEEDING IN SUCH COURTS AND IRREVOCABLY WAIVE AND AGREE NOT TO PLEAD OR CLAIM IN
ANY SUCH COURT THAT ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.
(b) THE PARTIES
TO THIS AGREEMENT HEREBY KNOWINGLY, VOLUNTARILY AND IRREVOCABLY WAIVE ANY RIGHT EACH SUCH PARTY MAY HAVE TO TRIAL BY JURY IN ANY
ACTION OF ANY KIND OR NATURE, IN ANY COURT IN WHICH AN ACTION MAY BE COMMENCED, ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT
OR ANY ADDITIONAL AGREEMENT, OR BY REASON OF ANY OTHER CAUSE OR DISPUTE WHATSOEVER BETWEEN OR AMONG ANY OF THE PARTIES TO THIS
AGREEMENT OF ANY KIND OR NATURE. NO PARTY SHALL BE AWARDED PUNITIVE OR OTHER EXEMPLARY DAMAGES RESPECTING ANY DISPUTE ARISING
UNDER THIS AGREEMENT OR ANY ADDITIONAL AGREEMENT.
(c) Each of the
parties to this Agreement acknowledge that each has been represented in connection with the signing of this waiver by independent
legal counsel selected by the respective party and that such party has discussed the legal consequences and import of this waiver
with legal counsel. Each of the parties to this Agreement further acknowledge that each has read and understands the meaning of
this waiver and grants this waiver knowingly, voluntarily, without duress and only after consideration of the consequences of
this waiver with legal counsel.
ARTICLE XIII
TERMINATION
13.1 Termination
Without Default.
(a) In the event
that the Closing of the transactions contemplated hereunder has not occurred by October 31, 2020 (the “Outside Closing
Date”) and no material breach of this Agreement by the party seeking to terminate this Agreement shall have occurred
or have been made, Purchaser or the Company shall have the right, at its sole option, to terminate this Agreement without liability
to the other side. Such right may be exercised by the Purchaser or the Company, as the case may be, giving written notice to the
other at any time after the Outside Closing Date; provided, however that, the right to terminate under this Section 13.1 shall
not be available to any party that through its inaction, or by its failure to promptly fulfill its covenants or complete its closing
conditions, has caused unreasonably delays in closing by the Outside Closing Date
(b) by the Company
by written notice to Purchaser if (i) the Board of Directors withdraws (or modifies in any manner adverse to the Company),
or proposes to withdraw (or modify in any manner adverse to the Company), the Board of Directors’ recommendation in favor
of the Purchaser Proposals, or fails to reaffirm such recommendation as promptly as practicable (and in any event within five
Business Days) after receipt of any written request to do so by the Company or (ii) if the Purchaser Shareholder Approval
shall not have been obtained at the meeting of Purchaser shareholders to be held in accordance with the Proxy Statement (or at
any adjournment or postponement thereof).
(c) If within twenty
business days after the date hereof, the Purchaser is not satisfied with its continuing legal due diligence review of the Company
and its Subsidiaries, and has identified facts or circumstances that could reasonably be believed to have a material adverse effect
on the Business, financial condition and results of operations of the Company and its Subsidiaries, taken as a whole, prior to
or after the Business Combination; the Purchaser shall have the right to terminate this Agreement by providing written notice
to the Company and the Members; provided, however, that the Purchaser shall not exercise the right of termination set forth in
this Section 13.1(c) unless the Purchaser shall have promptly notified the Company and the Members in writing of any of such identified
facts or circumstances and shall have allowed the Company and the Members an opportunity in good faith to resolve such issues.
If such issues are not resolved, or a plan to resolve such issues has not been agreed to by the Purchaser within five (5) business
days of such notice, the Purchaser has the right to immediately terminate this Agreement.
(d) If within twenty
business days after the date hereof, the Company or the Members’ Representative are not satisfied with their continuing
legal due diligence review of the Purchaser, and has identified facts or circumstances that could reasonably be believed to have
a material adverse effect on the Purchaser, financial condition and results of operations of the Purchaser prior to or after the
Business Combination, the Members’ Representative, on behalf of the Members and the Company, shall have the right to terminate
this Agreement by providing written notice to the Purchaser; provided, however, that the Members’ Representative shall not
exercise the right of termination set forth in this Section 13.1(d) unless the Members’ Representative shall have promptly
notified the Purchaser in writing of any of such identified facts or circumstances and shall have allowed the Purchaser an opportunity
in good faith to resolve such issues. If such issues are not resolved within five (5) business days of such notice, the Members’
Representative, on behalf of the Members, has the right to immediately terminate this Agreement.
13.2 Termination
Upon Default.
(a) Purchaser may
terminate this Agreement by giving notice to the Company on or prior to the Closing Date, without prejudice to any rights or obligations
Purchaser may have, if the Company or the Members shall have materially breached any representation, warranty, agreement or covenant
contained herein or in any Additional Agreement to be performed on or prior to the Closing Date and such breach shall not be cured
by the earlier of the Outside Closing Date and fifteen (15) days (the “Cure Period”) following receipt by the
Company or the Members’ Representative, as the case may be, of a notice describing in reasonable detail the nature of such
breach.
(b) The Company
may terminate this Agreement by giving notice to Purchaser on or prior to the Closing Date, without prejudice to any rights or
obligations the Company may have, if the Purchaser shall have materially breached any of its covenants, agreements, representations,
and warranties contained herein to be performed on or prior to the Closing Date and such breach shall not be cured by the earlier
of the Outside Closing Date and the expiration of the Cure Period following receipt by Purchaser of a notice describing in reasonable
detail the nature of such breach.
(c) In the event
of a breach of Section 9.11 by the Purchaser, the Company or the Members or their Affiliates, there shall be no Cure Period, and,
if the non-breaching party elects to terminate this Agreement in accordance with this Section 13.2, the non-breaching party shall
be entitled to a termination fee in the aggregate amount of $1,000,000.
13.3 No Other
Termination. Except as otherwise specified herein, neither the Purchaser nor the Company may terminate this Agreement without
the prior written consent of the other party.
13.4 Effect
of Termination. In the event of the termination of this Agreement pursuant to Articles XII, all obligations of the Parties
hereunder (other than this Section 14.4, Section 14.5, Section 10.2 and Article XII through Article XV, which will survive
the termination of this Agreement) will terminate without any liability of any Party to any other Party; provided, further,
that no termination will relieve a Party from any liability arising from or relating to any knowing and intentional breach of
a representation, a warranty or a covenant by such Party prior to termination.
ARTICLE XIV
MISCELLANEOUS
14.1 Notices.
Any notice hereunder shall be sent in writing, addressed as specified below, and shall be deemed given: (a) if by hand or recognized
courier service, by 5:00PM on a business day, addressee’s day and time, on the date of delivery, and otherwise on the first
business day after such delivery; (b) if by fax or email, on the date that transmission is confirmed electronically, if by 5:00PM
on a business day, addressee’s day and time, and otherwise on the first business day after the date of such confirmation;
or (c) five days after mailing by certified or registered mail, return receipt requested. Notices shall be addressed to the respective
parties as follows (excluding telephone numbers, which are for convenience only), or to such other address as a party shall specify
to the others in accordance with these notice provisions:
if to Purchaser or the
Company (following the Closing), to:
Opes Acquisition Corp.
4218 NE 2nd Avenue
2nd Floor
Miami, Florida 33137
Attention: Ophir Sternberg
Email: o@lheartcapital.com
with a copy to (which
shall not constitute notice):
Loeb & Loeb LLP
345 Park Avenue
New York, New York 10154
Attention: Giovanni Caruso, Esq.
Email: gcaruso@loeb.com
Fax: (212) 407-4866
if to the Company (prior
to the Closing):
BurgerFi International LLC
105 U.S. HIGHWAY ONE
NORTH PALM BEACH, FL 33408
Attn: General Counsel
Email: ross@burgerfi.com
Fax: (561) 844-5529
with a copy to (which
shall not constitute notice):
Shumaker, Loop & Kendrick, LLP
101 East Kennedy Boulevard, Suite 2800
Tampa, FL 33602
Attn: Julio C. Esquivel
Email: jesquivel@shumaker.com
Fax: (813) 229-1660
if to the Members’ Representative:
BurgerFi Holdings, LLC
105 U.S. HIGHWAY ONE
NORTH PALM BEACH, FL 33408
Attn: General Counsel
Email: ross@burgerfi.com
Fax: (561) 844-5529
14.2 Amendments;
No Waivers; Remedies.
(a) This Agreement
cannot be amended, except by a writing signed by each party, and cannot be terminated orally or by course of conduct. No provision
hereof can be waived, except by a writing signed by the party against whom such waiver is to be enforced, and any such waiver
shall apply only in the particular instance in which such waiver shall have been given.
(b) Neither any
failure or delay in exercising any right or remedy hereunder or in requiring satisfaction of any condition herein nor any course
of dealing shall constitute a waiver of or prevent any party from enforcing any right or remedy or from requiring satisfaction
of any condition. No notice to or demand on a party shall waive or otherwise affect any obligation of that party or impair any
right of the party giving such notice or making such demand, including any right to take any action without notice or demand not
otherwise required by this Agreement. No exercise of any right or remedy with respect to a breach of this Agreement shall preclude
exercise of any other right or remedy, as appropriate to make the aggrieved party whole with respect to such breach, or subsequent
exercise of any right or remedy with respect to any other breach.
(c) Except as otherwise
expressly provided herein, no statement herein of any right or remedy shall impair any other right or remedy stated herein or
that otherwise may be available.
(d) Notwithstanding
anything else contained herein, neither shall any party seek, nor shall any party be liable for, punitive or exemplary damages,
under any tort, contract, equity, or other legal theory, with respect to any breach (or alleged breach) of this Agreement or any
provision hereof or any matter otherwise relating hereto or arising in connection herewith.
14.3 Arm’s
length bargaining; no presumption against drafter. This Agreement has been negotiated at arm’s-length by parties of
equal bargaining strength, each represented by counsel or having had but declined the opportunity to be represented by counsel
and having participated in the drafting of this Agreement. This Agreement creates no fiduciary or other special relationship between
the parties, and no such relationship otherwise exists. No presumption in favor of or against any party in the construction or
interpretation of this Agreement or any provision hereof shall be made based upon which Person might have drafted this Agreement
or such provision.
14.4 Publicity.
Except as required by law and except with respect to the Purchaser SEC Documents, the parties agree that neither they nor their
agents shall issue any press release or make any other public disclosure concerning the transactions contemplated hereunder without
the prior approval of the other party hereto. If a party is required to make such a disclosure as required by law, the parties
will use their commercially reasonable efforts to cause a mutually agreeable release or public disclosure to be issued.
14.5 Expenses.
Each party shall bear its own costs and expenses in connection with this Agreement and the transactions contemplated hereby, unless
otherwise specified herein.
14.6 No Assignment
or Delegation. No party may assign any right or delegate any obligation hereunder, including by merger, consolidation, operation
of law, or otherwise, without the written consent of the other party. Any purported assignment or delegation without such consent
shall be void, in addition to constituting a material breach of this Agreement.
14.7 Governing
Law. This Agreement shall be construed in accordance with and governed by the laws of the State of New York, without giving
effect to the conflict of laws principles thereof.
14.8 Counterparts;
facsimile signatures. This Agreement may be executed in counterparts, each of which shall constitute an original, but all
of which shall constitute one agreement. This Agreement shall become effective upon delivery to each party of an executed counterpart
or the earlier delivery to each party of original, photocopied, or electronically transmitted signature pages that together (but
need not individually) bear the signatures of all other parties.
14.9 Entire
Agreement. This Agreement together with the Additional Agreements, sets forth the entire agreement of the parties with respect
to the subject matter hereof and thereof and supersedes all prior and contemporaneous understandings and agreements related thereto
(whether written or oral), all of which are merged herein. No provision of this Agreement or any Additional Agreement may be explained
or qualified by any agreement, negotiations, understanding, discussion, conduct or course of conduct or by any trade usage. Except
as otherwise expressly stated herein or any Additional Agreement, there is no condition precedent to the effectiveness of any
provision hereof or thereof. No party has relied on any representation from, or warranty or agreement of, any person in entering
into this Agreement, prior hereto or contemporaneous herewith or any Additional Agreement, except those expressly stated herein
or therein.
14.10 Severability.
A determination by a court or other legal authority that any provision that is not of the essence of this Agreement is legally
invalid shall not affect the validity or enforceability of any other provision hereof. The parties shall cooperate in good faith
to substitute (or cause such court or other legal authority to substitute) for any provision so held to be invalid a valid provision,
as alike in substance to such invalid provision as is lawful.
14.11 Construction
of certain terms and references; captions. In this Agreement:
(a) References
to particular sections and subsections, schedules, and exhibits not otherwise specified are cross-references to sections and subsections,
schedules, and exhibits of this Agreement.
(b) The words “herein,”
“hereof,” “hereunder,” and words of similar import refer to this Agreement as a whole and not to any particular
provision of this Agreement, and, unless the context requires otherwise, “party” means a party signatory hereto.
(c) Any use of
the singular or plural, or the masculine, feminine, or neuter gender, includes the others, unless the context otherwise requires;
“including” means “including without limitation;” “or” means “and/or;” “any”
means “any one, more than one, or all;” and, unless otherwise specified, any financial or accounting term has the
meaning of the term under United States generally accepted accounting principles as consistently applied heretofore by the Company.
(d) Unless otherwise
specified, any reference to any agreement (including this Agreement), instrument, or other document includes all schedules, exhibits,
or other attachments referred to therein, and any reference to a statute or other law includes any rule, regulation, ordinance,
or the like promulgated thereunder, in each case, as amended, restated, supplemented, or otherwise modified from time to time.
Any reference to a numbered schedule means the same-numbered section of the disclosure schedule.
(e) If any action
is required to be taken or notice is required to be given within a specified number of days following a specific date or event,
the day of such date or event is not counted in determining the last day for such action or notice. If any action is required
to be taken or notice is required to be given on or before a particular day which is not a Business Day, such action or notice
shall be considered timely if it is taken or given on or before the next Business Day.
(f) Captions are
not a part of this Agreement, but are included for convenience, only.
(g) For the avoidance
of any doubt, all references in this Agreement to “the knowledge or best knowledge of the Company” or similar terms
shall be deemed to include the actual or constructive (e.g., implied by Law) knowledge of the Key Employees.
14.12 Further
Assurances. Each party shall execute and deliver such documents and take such action, as may reasonably be considered within
the scope of such party’s obligations hereunder, necessary to effectuate the transactions contemplated by this Agreement.
14.13 Third
Party Beneficiaries. Neither this Agreement nor any provision hereof confers any benefit or right upon or may be enforced
by any Person not a signatory hereto.
14.14 Waiver.
Reference is made to the Prospectus. The Company, the Member Representative and the Members have read the Prospectus and understands
that the Purchaser has established the Trust Account for the benefit of the Public Stockholders of the Purchaser and the underwriters
of the IPO pursuant to the Trust Agreement and that, except for a portion of the interest earned on the amounts held in the Trust
Account, the Purchaser may disburse monies from the Trust Account only for the purposes set forth in the Trust Agreement. For
and in consideration of the Purchaser agreeing to enter into this Agreement, the Company and Members hereby agree that they do
not have any right, title, interest or claim of any kind in or to any monies in the Trust Account and hereby agree that they will
not seek recourse against the Trust Account for any claim they may have in the future as a result of, or arising out of, any negotiations,
contracts or agreements with the Purchaser.
14.15 Members’
Representative.
(a) BurgerFi Holdings,
LLC is hereby appointed as agent, proxy and attorney-in-fact (the “Members’ Representative”) for each
Member for all purposes of this Agreement and the Additional Agreements, including the full power and authority on each such Member’s
behalf to (i) to give and receive notices and communications to or by the Purchaser for any purpose under this Agreement and the
Additional Agreements, (ii) to agree to, negotiate, enter into settlements and compromises of and demand mediation and comply
with orders of courts and awards of arbitrators with respect to any indemnification claims (including Third-Party Claims) under
Article XII or other disputes arising under or related to this Agreement or the Additional Agreements, (iii) to enter into and
deliver the Escrow Agreement on behalf of each of the Members and to disburse any funds or Purchaser Common Stock received hereunder
or pursuant to the Escrow Agreement, (iv) to authorize or object to delivery to the Purchaser of the Escrow Fund, or any portion
thereof, in satisfaction of indemnification claims by the Purchaser in accordance with the provisions of the Escrow Agreement,
(v) to act on behalf of Members in accordance with the provisions of the Agreement and the Additional Agreements, the securities
described herein and any other document or instrument executed in connection with the Agreement and the Acquisition, (vi) to endorse
and deliver any certificates or instruments of assignment as Purchase shall reasonably request; (vii) to execute and deliver
on behalf of each such Member any amendment, waiver, ancillary agreement and documents on behalf of any Member that the Members’
Representative deems necessary or appropriate; and (viii) to take all actions necessary or appropriate in the judgment of the
Members’ Representative for the accomplishment of the foregoing and to do each and every act and exercise any and all rights
which the Members collectively are permitted or required to do or exercise under this Agreement.
(b) Such agency
may be changed by the Members from time to time upon no less than twenty (20) days prior written notice to the Purchaser, provided,
however, that the Members’ Representative may not be removed unless holders of at least 51% of all of the Interest on an
as-if converted basis outstanding immediately prior to the transaction contemplated by this Agreement agrees to such removal.
Any vacancy in the position of Members’ Representative may be filled by approval of the holders of at least 51% of all of
the Interest on an as-if converted basis outstanding immediately prior to the transaction contemplated by this Agreement. Any
removal or change of the Members’ Representative shall not be effective until written notice is delivered to Purchaser.
No bond shall be required of the Members’ Representative, and the Members’ Representative shall not receive any compensation
for his services. Notices or communications to or from the Members’ Representative shall constitute notice to or from the
Members.
(c) A decision,
act, consent or instruction of the Members’ Representative shall, for all purposes hereunder, constitute a decision, act,
consent or instruction of all of the Members of the Company and shall be final, binding and conclusive upon each of the Members.
In connection with this Agreement, the Escrow Agreement and any instrument, agreement or document relating hereto or thereto,
and in exercising or failing to exercise all or any of the powers conferred upon the Members’ Representative hereunder (i) the
Members’ Representative shall incur no responsibility whatsoever to any Members by reason of any error in judgment or other
act or omission performed or omitted hereunder or in connection with the Escrow Agreement or any such other agreement, instrument
or document, excepting only responsibility for any act or failure to act which represents willful misconduct, and (ii) the
Members’ Representative shall be entitled to rely on the advice of counsel, public accountants or other independent experts
experienced in the matter at issue, and any error in judgment or other act or omission of the Members’ Representative pursuant
to such advice shall in no event subject the Members’ Representative to liability to any Members. Each Member shall severally
(in accordance with their ownership percentages in the Company as set forth on Schedule 1.10), and not jointly, indemnify the
Members’ Representative, against all losses, damages, liabilities, claims, obligations, costs and expenses, including reasonable
attorneys’, accountants’ and other experts’ fees and the amount of any judgment against them, of any nature
whatsoever (including, but not limited to, any and all expense whatsoever reasonably incurred in investigating, preparing or defending
against any litigation, commenced or threatened or any claims whatsoever) (“Members’ Representative Losses”),
arising out of or in connection with any actions taken or omitted to be taken by the Members’ Representative pursuant to
the terms of this Agreement or the Escrow Agreement (including any claim, investigation, challenge, action or proceeding or in
connection with any appeal thereof, relating to the acts or omissions of the Members’ Representative hereunder, or under
the Escrow Agreement or otherwise), in each case as such Members’ Representative Loss is incurred or suffered. If not paid
directly to the Members’ Representative by the Members, any such Members’ Representative Loss may be recovered by
the Members’ Representative from the Escrow Fund otherwise distributable to the Members pursuant to the terms hereof and
the Escrow Agreement at the time of distribution in accordance with written instructions delivered by the Members’ Representative
to the Escrow Agent; provided that while this section allows the Members’ Representative to be paid from the Escrow Fund,
this does not relieve the Members from their obligation to promptly pay such Members’ Representative Losses as they are
suffered or incurred, nor does it prevent the Members’ Representative from seeking any remedies available to it at law or
otherwise. Notwithstanding anything in this Section 14.15 to the contrary, the Members’ Representative (in his capacity
as such) shall have no obligation or authority with respect to any indemnification claims against a Member made by a Purchaser
Indemnitee under Section 11.1.
14.16 Specific
Performance. The parties agree that irreparable damage would occur if any provision of this Agreement were not performed in
accordance with the terms hereof and that the parties shall be entitled to specific performance of the terms hereof, in addition
to any other remedy to which they are entitled at law or in equity.
14.17 Legal
Representation by Shumaker. Each party hereto acknowledges and agrees, on its own behalf and on behalf of its directors,
members, partners, officers, managers, employees and Affiliates, that at and prior to the Closing, Shumaker, Loop & Kendrick,
LLP (“Shumaker”) may act as counsel for the Company, the Members, the representatives of the Members and their respective
Affiliates (collectively, the “Seller Group”) in connection with the negotiation, preparation, execution and delivery
of this Agreement and the consummation of the transactions contemplated hereby, and agrees that subsequent to the Closing, any
member of the Seller Group, and any director, member, partner, officer, employee or Affiliate of the Seller Group, shall have
the right to retain Shumaker to represent its respective interests, including in any dispute relating in any manner to this Agreement
or the transactions contemplated herein or hereby. Purchaser irrevocably waives, consents to and covenants not to assert (and
agrees following Closing to cause its Affiliates to waive, and not to assert) any objection, based on conflict of interest or
otherwise, to any representation of any member of the Seller Group by Shumaker, including in connection with any such dispute.
Each of the parties further agrees to take the steps necessary to ensure any privilege attaching as a result of Shumaker’s
service as counsel to the Company or any of its Subsidiaries in connection with this Agreement and the consummation of the transactions
contemplated hereby will survive the Closing and will remain in effect, provided that such privilege from and after the Closing
will belong solely to the Members and will be controlled solely by the Members’ Representative on behalf of the Members.
As to any privileged attorney-client communications between Shumaker and the Company or Shumaker and any of the Company’s
Affiliates prior to the Closing Date (collectively, the “Privileged Communications”), Purchaser together with
any of its Affiliates, Subsidiaries, successors or assigns, agree that no such party may have access to, use or rely on any of
the Privileged Communications in connection with any action against or involving any of the Parties after the Closing. Notwithstanding
anything to the contrary in this Section 14.17, in the event that, after the Closing, any dispute arises between Purchaser
or its Subsidiaries, or any of their respective Affiliates, Subsidiaries, successors or assigns, on the one hand, and a third
party, on the other hand, the Company may assert the attorney-client privilege to prevent disclosure of any Privileged Communications
to such third party; provided, however, that the Company may not waive such privilege without the prior written consent
of the Members’ Representative.
[The remainder of this page intentionally
left blank; signature pages to follow]
IN WITNESS WHEREOF,
the parties hereto have caused this Agreement to be duly executed as of the day and year first above written.
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Purchaser:
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OPES ACQUISITION CORP., a Delaware corporation
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By:
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/s/ Ophir Sternberg
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Name: Ophir Sternberg
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Title: Chairman and Chief Executive Officer
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Company:
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BurgerFi International, LLC, a Delaware limited liability company
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By:
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/s/ Kevin Cooper
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Name: Kevin Cooper
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Title: Manager
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[Member signature
page begins on next page]
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Members:
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BurgerFi Holdings, LLC
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By:
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/s/ Kevin Cooper
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Name: Kevin Cooper
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Title: Manager
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Andrea Jane Acker Revocable Trust U/A dated April 25, 2008
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By:
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/s/ Andrea Acker
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Name: Andrea Acker
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Title: Trustee
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Members’ Representative:
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BurgerFi Holdings, LLC
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By:
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/s/ Kevin Cooper
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Name: Kevin Cooper
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Title: Manager
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Execution Version
EXHIBIT A
SHARE ESCROW AGREEMENT
THIS SHARE ESCROW
AGREEMENT (“Agreement”) is made and entered into as of ____________ ___, 2020, by and by and among Opes
Acquisition Corp., a Delaware corporation (the “Purchaser”), BurgerFi Holdings, LLC, a Delaware limited liability
company, as the representative of the Members (the “Members’ Representative”) and Continental Stock Transfer
& Trust Company, a New York corporation (“Escrow Agent”).
RECITALS
A. The Purchaser,
BurgerFi International LLC, a Delaware limited liability company (the “Company”), the members of the Company,
being BurgerFi Holdings, LLC and Andrea Jane Acker Revocable Trust U/A dated April 25, 2008 (each, a “Member”
and collectively the “Members”), and the Members’ Representative entered into a Membership Interest Purchase
Agreement dated as of June 29, 2020 (the “Underlying Agreement”), which requires that the Purchaser deliver
the Escrow Shares into the Escrow Fund to held and disbursed in accordance with this Agreement.
NOW THEREFORE, in
consideration of the foregoing and of the mutual covenants hereinafter set forth, the parties hereto agree as follows:
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a)
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Purchaser and Members’
Representative, on behalf of the Members, hereby appoint the Escrow Agent as their escrow
agent for the purposes set forth herein, and the Escrow Agent hereby accepts such appointment
under the terms and conditions set forth herein.
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b)
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All capitalized terms with
respect to the Escrow Agent shall be defined herein. The Escrow Agent shall act only
in accordance with the terms and conditions contained in this Agreement and shall have
no duties or obligations with respect to the Underlying Agreement.
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a)
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Purchaser agrees to deposit
with the Escrow Agent 943,396 shares of common stock, par value $0.0001 per share of
Purchaser (“Escrow Shares”) on the date hereof. The Escrow Agent shall
hold the Escrow Shares as a book-entry position registered in the name of “Continental
Stock Transfer & Trust as Escrow Agent for the benefit of BurgerFi Holdings, LLC
and Andrea Jane Acker Revocable Trust U/A dated April 25, 2008.
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b)
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During the term of this
Agreement, the Members shall be entitled to vote the Escrow Shares on any matters to
come before the stockholders of Purchaser.
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c)
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Any stock dividends paid
with respect to the Escrow Shares shall be deemed part of the Escrow Shares and be delivered
to the Escrow Agent to be held in a bank account and be deposited in a non-interest bearing
account to be maintained by the Escrow Agent in the name of “Continental Stock
Transfer & Trust as Escrow Agent for the benefit of BurgerFi Holdings, LLC and Andrea
Jane Acker Revocable Trust U/A dated April 25, 2008.
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d)
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In the event of any stock
split, reverse stock split, stock dividend, recapitalization, reorganization, merger,
consolidation, combination, exchange of shares, liquidation, spin-off or other similar
change in capitalization or event, or any distribution to holders of the common stock
of Purchaser, other than a regular cash dividend, the Escrow Shares shall be appropriately
adjusted on a pro rata basis and consistent with the terms of the Underlying Agreement.
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3)
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Disposition and
Termination
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a)
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At any time upon delivery
(i) to the Escrow Agent of joint written instructions from Purchaser and Members’
Representative for a release of all or a portion of the Escrow Shares or (ii) of a written
notification from Purchaser or Members’ Representative of a final non-appealable
decision, order, judgment or decree of a court of competition jurisdiction or an arbitrator,
which notification shall attach a copy of such final decision, order, judgment or decree
(a “Final Order”), the Escrow Agent shall deliver such Escrow Shares,
or the applicable portion thereof, in accordance with the directions set forth in such
joint written instructions or Final Order. The Escrow Agent shall make distributions
of the Escrow Shares only in accordance with such joint written instruction or Final
Order.
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b)
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Upon the release and delivery
of all the Escrow Shares by the Escrow Agent in accordance with the terms of this Agreement
and such written instructions, this Agreement shall terminate, subject to the provisions
of Section 6.
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a)
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The Escrow Agent shall
have only those duties as are specifically and expressly provided herein, which shall
be deemed purely ministerial in nature, and no other duties shall be implied. The Escrow
Agent shall neither be responsible for, nor chargeable with, knowledge of, nor have any
requirements to comply with, the terms and conditions of any other agreement (other than
this Agreement), instrument or document between Purchaser, Members and any other person
or entity, in connection herewith, if any, including without limitation the Underlying
Agreement nor shall the Escrow Agent be required to determine if any person or entity
has complied with any such agreements, nor shall any additional obligation of the Escrow
Agent be inferred from the terms of such agreements, even though reference thereto may
be made in this Agreement.
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b)
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In the event of any conflict
between the terms and provisions of this Agreement, those of the
Underlying Agreement, any schedule or exhibit attached to this Agreement, or any other
agreement between Purchaser and Members or any other person or entity, the terms and
conditions of this Agreement shall control.
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c)
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The Escrow Agent may rely
upon and shall not be liable for acting or refraining from acting upon any written notice,
document, instruction or request furnished to it hereunder and believed by it to be genuine
and to have been signed or presented by Purchaser and Members’ Representative without
inquiry and without requiring substantiating evidence of any kind. The Escrow Agent shall
not be liable to any beneficiary or other person for refraining from acting upon any
instruction setting forth, claiming, containing, objecting to, or related to the transfer
or distribution of the Escrow Shares, or any portion thereof, unless such instruction
shall have been delivered to the Escrow Agent in accordance with Section 9 below
and the Escrow Agent has been able to satisfy any applicable security procedures as may
be required hereunder and as set forth in Section 10. The Escrow Agent shall be
under no duty to inquire into or investigate the validity, accuracy or content of any
such document, notice, instruction or request. The Escrow Agent shall have no duty to
solicit any payments which may be due nor shall the Escrow Agent have any duty or obligation
to confirm or verify the accuracy or correctness of any amounts deposited with it hereunder.
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d)
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The Escrow Agent shall
not be liable for any action taken, suffered or omitted to be taken by it in good faith
except to the extent that a final adjudication of a court of competent jurisdiction determines
that the Escrow Agent’s gross negligence or willful misconduct was the primary
cause of any loss to either Purchaser or Members or their beneficiaries. The Escrow Agent
may execute any of its powers and perform any of its duties hereunder directly or through
affiliates or agents.
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e)
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The Escrow Agent may consult
with counsel, accountants and other skilled persons to be selected and retained by it.
The Escrow Agent shall not be liable for any action taken, suffered or omitted to be
taken by it in accordance with, or in reliance upon, the advice or opinion of any such
counsel, accountants or other skilled persons except to the extent that a final adjudication
of a court of competent jurisdiction determines that the Escrow Agent’s gross negligence
or willful misconduct was the primary cause of any loss to either Purchaser or Members
or their beneficiaries. In the event that the Escrow Agent shall be uncertain or believe
there is some ambiguity as to its duties or rights hereunder or shall receive instructions,
claims or demands which, in its opinion, conflict with any of the provisions of this
Agreement, it shall be entitled to refrain from taking any action and its sole obligation
shall be to keep safely all the property held in escrow until it shall be given a joint
written direction from Purchaser and Members’ Representative which eliminates such
ambiguity or uncertainty to the satisfaction of the Escrow Agent or by a final and non-appealable
order or judgement of a court of competent jurisdiction.
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a)
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The Escrow Agent may resign
and be discharged from its duties or obligations hereunder by giving thirty (30) days’
advance notice in writing of such resignation to Purchaser and Members’ Representative
specifying a date when such resignation shall take effect, provided that such
resignation shall not take effect until a successor Escrow Agent has been appointed in
accordance with this Section 5. If Purchaser and Members’ Representative
have failed to appoint a mutually acceptable successor Escrow Agent prior to the expiration
of thirty (30) days following receipt of the notice of resignation, the Escrow Agent
may petition any court of competent jurisdiction for the appointment of a successor Escrow
Agent or for other appropriate relief, and any such resulting appointment shall be binding
upon all of the parties hereto. The Escrow Agent’s sole responsibility after such
thirty (30) day notice period expires shall be to hold the Escrow Shares (without any
obligation to reinvest the same) and to deliver the same to a designated substitute Escrow
Agent, if any, or in accordance with the directions of a final order or judgement of
a court of competent jurisdiction, at which time of delivery the Escrow Agent’s
obligations hereunder shall ease and terminate, subject to the provisions of Section
7 below. In accordance with Section 7 below, the Escrow Agent shall have the right
to withhold, as security, an amount of shares equal to any dollar amount due and owing
to the Escrow Agent in connection with this Agreement, plus any costs and expenses the
Escrow Agent shall reasonably believe may be incurred by the Escrow Agent in connection
with the termination of this Agreement.
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b)
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Any entity into which the
Escrow Agent may be merged or converted or with which it may be consolidated, or any
entity to which all or substantially all the escrow business may be transferred, shall
be the Escrow Agent under this Agreement without further act.
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6)
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Compensation and
Reimbursement. The Escrow Agent shall be entitled to compensation for its services
under this Agreement as Escrow Agent and for reimbursement for its reasonable out-of-pocket
costs and expenses, in the amounts and payable by Purchaser as set forth on Schedule
2. The Escrow Agent shall also be entitled to payments of any amounts to which the
Escrow Agent is entitled under the indemnification provisions contained herein as set
forth in Section 7. The obligations of Purchaser set forth in this Section
6 shall survive the resignation, replacement or removal of the Escrow Agent or the
termination of this Agreement.
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a)
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The Escrow Agent shall
be indemnified and held harmless by Purchaser and Members from and against any expenses,
including counsel fees and disbursements, or loss suffered by the Escrow Agent in connection
with any action, suit or other proceeding involving any claim which in any way, directly
or indirectly, arises out of or relates to this Agreement, the services of the Escrow
Agent hereunder, other than expenses or losses arising from the gross negligence or willful
misconduct of the Escrow Agent. Promptly after the receipt by the Escrow Agent of notice
of any demand or claim or the commencement of any action, suit or proceeding, the Escrow
Agent shall notify the other parties hereto in writing. In the event of the receipt of
such notice, the Escrow Agent, in its sole discretion, may commence an action in the
Nature of Interpleader in any state of federal court located in New York County, State
of New York.
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b)
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The Escrow Agent shall
not be liable for any action taken or omitted by it in good faith and in the exercise
of its own best judgement, and may rely conclusively and shall be protected in acting
upon any order, notice, demand, certificate, opinion or advice of counsel (including
counsel chosen by the Escrow Agent), statement, instrument, report or other paper or
document (not only as to its due execution and the validity and effectiveness of its
provisions, but also as to the truth and acceptability of any information therein contained)
which is believed by the Escrow Agent to be genuine and to be signed or presented by
the proper person or persons. The Escrow Agent shall not be bound by any notice or demand,
or any waiver, modification, termination or rescission of this Agreement unless evidenced
by a writing delivered to the Escrow Agent.
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c)
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The Escrow Agent shall
not be liable for any action taken by it in good faith and believed by it to be authorized
or within the rights or powers conferred upon it by this Agreement, and may consult with
counsel of its own choice and shall have full and complete authorization and indemnification,
for any action taken or suffered by it hereunder in good faith and in accordance with
the opinion of such counsel.
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d)
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This Section 7 shall
survive termination of this Agreement or the resignation, replacement or removal of the
Escrow Agent for any reason.
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8)
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Patriot Act Disclosure/Taxpayer
Identification Numbers/Tax Reporting
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a)
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Patriot Act Disclosure.
Section 326 of the Uniting and Strengthening America by Providing Appropriate Tools Required
to Intercept and Obstruct Terrorism Act of 2001 (“USA PATRIOT Act”)
requires the Escrow Agent to implement reasonable procedures to verify the identity of
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any person that opens a new
account with it. Accordingly, Purchaser and Members’ Representative acknowledge that Section 326 of the USA PATRIOT Act
and the Escrow Agents’ identity verification procedures require the Escrow Agent to obtain information which may be used
to confirm the identity of Purchaser or Members’ Representative including without limitation name, address and organizational
documents (“identifying information”). Purchaser and Members’ Representative agrees to provide the Escrow Agent
with and consent to the Escrow Agent obtaining from third parties any such identifying information required as a condition of
opening an account with or using any service provided by the Escrow Agent.
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b)
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Such underlying transaction
does not constitute an installment sale requiring any tax reporting or withholding of
imputed interest or original issue discount to the IRS or other taxing authority.
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a)
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All communications hereunder
shall be in writing and, except for communications setting forth, claiming, containing,
objecting to, or in any way related to the full or partial transfer or distribution of
the Escrow Shares, including but not limited to transfer instructions (all of which shall
be specifically governed by Section 10 below), all notices and communications
hereunder shall be deemed to have been duly given and made if in writing and if (i) served
by personal delivery upon the party for whom it is intended, (ii) delivered by registered
or certified mail, return receipt requested, or by Federal Express or similar overnight
courier, or (iii) sent by facsimile or email, electronically or otherwise, to the party
at the address set forth below, or such other address as may be designated in writing
hereafter, in the same manner, by such party:
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If to
the Escrow Agent:
Continental
Stock Transfer and Trust
One State Street
— 30th Floor
New York, New York 10004
Facsimile No: (212) 616-7615
Attention:______________________
Email:_________________________
If to
Purchaser to:
Opes Acquisition
Corp.
4218 NE 2nd Avenue
2nd Floor
Miami, Florida 33137
Attention: Ophir Sternberg
Email: o@lheartcapital.com
if to
the Members or Members’ Representative:
BurgerFi International LLC
105 U.S. HIGHWAY ONE
NORTH PALM BEACH, FL 33408
Attn: General Counsel
Email: ross@burgerfi.com
Fax: (561) 844-5529
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b)
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Notwithstanding the above,
in the case of communications delivered to the Escrow Agent, such communications shall
be deemed to have been given on the date received by an officer of the Escrow Agent or
any employee of the Escrow Agent who reports directly to any such offer at the above-referenced
office. In the event that the Escrow Agent, in its sole discretion, shall determine that
an emergency exists, the Escrow Agent may use such other means of communication as the
Escrow Agent deems appropriate. For purposes of this Agreement, “Business Day”
shall mean any day other than a Saturday, Sunday or any other day on which the Escrow
Agent located at the notice address set forth above is authorized or required by law
or executive order to remain closed.
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a)
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Notwithstanding anything
to the contrary as set forth in Section 9, any instructions setting forth, claiming,
containing, objecting to, or in any way related to the transfer distribution, including
but not limited to any transfer instructions that may otherwise be set forth in a joint
written instruction permitted pursuant to Section 3 of this Agreement, may be
given to the Escrow Agent only by confirmed facsimile or other electronic transmission
(including e-mail) and no instruction for or related to the transfer or distribution
of the Escrow Shares, or any portion thereof, shall be deemed delivered and effective
unless the Escrow Agent actually shall have received such instruction by facsimile or
other electronic transmission (including e-mail) at the number or e-mail address for
the Escrow Agent set forth in Section 9 and as further evidenced by a confirmed
transmittal to that number.
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b)
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In the event transfer instructions
are so received by the Escrow Agent by facsimile or other electronic transmission (including
e-mail), the Escrow Agent is authorized to seek confirmation of such instructions by
telephone call-back to the person or persons designated on Schedule 1 hereto,
and the Escrow Agent may rely upon the confirmation of anyone purporting to be the person
or persons so designated. The persons and telephone numbers for call-backs may be changed
only in writing actually received and acknowledged by the Escrow Agent. If the Escrow
Agent is unable to contact any of the authorized representatives identified in Schedule
1, the Escrow Agent is hereby authorized both to receive written instructions from
and seek confirmation of such instructions by officers of Purchaser and Members’
Representative (collectively, the “Senior Officers”), as the case
may be, which shall include the titles of Chief Executive Officer, General Counsel, Chief
Financial Officer, President of Executive Vice President, as the Escrow Agent may select.
Such Senior Officer shall deliver to the Escrow Agent a fully executed incumbency certificate,
and the Escrow Agent may rely upon the confirmation of anyone purporting to be any such
officer.
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c)
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Purchaser and Members’
Representative acknowledge that the Escrow Agent is authorized to deliver the Escrow
Shares to the custodian account of recipient designated by Members’ Representative
in writing.
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11)
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Compliance with
Court Officers. In the event that any escrow property shall be attached, garnished
or levied upon by any court order, or the delivery thereof shall be stayed or enjoined
by an order of a court, or any order, judgement of decree shall be made or entered by
any court order affecting the property deposited under this Agreement, the Escrow Agent
is hereby expressly authorized, in its sole discretion, to obey and comply with all writs,
orders or decrees so entered or whether with or without jurisdiction, and in the event
that the Escrow Agent reasonably obeys or complies with any such writ, order or decree
it shall not be liable to any of the parties hereto or to any other person, entity, firm
or corporation, by reason of such compliance notwithstanding such writ, order or decree
by subsequently reversed, modified, annulled, set aside or vacated.
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a)
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Except for changes to transfer
instructions as provided in Section 10, the provisions of this Agreement may be
waived, altered, amended or supplemented, in whole or in part, only by a writing signed
by the Escrow Agent, Purchaser and Members’ Representative. Neither this Agreement
nor any right or interest hereunder may be assigned in whole or in part by the Escrow
Agent, Purchaser or Members’ Representative except as provided in Section 5,
without the prior consent of the Escrow Agent, Purchaser and Members’ Representative.
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b)
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This Agreement shall be
governed by and construed under the laws of the State of New York. Each of and the Escrow
Agent irrevocably waives any objection on the grounds of venue, forum non-convenience
or any similar grounds and irrevocably consents to service of process by mail or in any
other manner permitted by applicable law and consents to the jurisdiction of any court
of the State of New York or United States federal court, in each case, sitting in New
York County, New York. To the extent that in any jurisdiction any party may now or hereafter
be entitled to claim for itself or its assets, immunity from suit, execution attachment
(before or after judgement), or other legal process, such party shall not claim, and
it hereby irrevocably waives, such immunity. The parties further hereby waive any right
to a trial by jury with respect to any lawsuit or judicial proceedings arising or relating
to this Agreement.
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c)
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No party to this Agreement
is liable to any other party for losses due to, or if it is unable to perform its obligations
under the terms of this Agreement because of, acts of God, fire, war, terrorism, floods,
strikes, electrical outages, equipment or transmission failure, or other causes reasonably
beyond its control.
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d)
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This Agreement may be executed
in one or more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument. All signatures of the parties
to this Agreement may be transmitted by facsimile or other electronic transmission (including
e-mail), and such facsimile or other electronic transmission (including e-mail) will,
for all purposes, be deemed to be the original signature of such party whose signature
it reproduces, and will be binding upon such party.
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e)
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If any provision of this
Agreement is determined to be prohibited or unenforceable by reason of any applicable
law of a jurisdiction, then such provision shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the remaining
provisions thereof, and any such prohibition or unenforceability in such jurisdiction
shall not invalidate or render unenforceable such provisions in any other jurisdiction.
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f)
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A person who is not a party
to this Agreement, other than the Members, shall have no right to enforce any term of
this Agreement.
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g)
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The parties represent,
warrant and covenant that each document, notice, instruction or request provided by such
party to the other party shall comply with applicable laws and regulations. Where, however,
the conflicting provisions of any such applicable law may be waived, they are hereby
irrevocably waived by the parties hereto to the fullest extent permitted by law, to the
end that this Agreement shall be enforced as written.
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h)
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Except as expressly provided
in Section 7 above, nothing in this Agreement, whether express or implied, shall
be construed to give to any person or entity other than the Escrow Agent, Purchaser and
Members any legal or equitable right, remedy, interest or claim under or in respect of
this Agreement or the Escrow Shares escrowed hereunder.
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[REMAINDER OF THIS PAGE INTENTIONALLY LEFT
BLANK]
IN WITNESS WHEREOF,
the parties hereto have executed this Agreement as of the date set forth above.
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Escrow Agent:
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Continental Stock Transfer & Trust Company
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By:
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Name:
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Title:
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Purchaser:
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OPES Acquisition Corp.
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By:
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Name:
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Title:
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Members’ Representative:
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BurgerFi Holdings, LLC.
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By:
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Kevin Cooper, Manager
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Signature Page to Escrow Agreement
Schedule 1
Telephone Number(s) and authorized signature(s)
for
Person(s) Designated to give Escrow
Transfer Instructions
Party
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Representative
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Telephone No.
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Signature
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Purchaser
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Members’ Representative
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Kevin Cooper
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Schedule 2
Compensation and Reimbursement
None.
Execution Version
EXHIBIT B
Form of Lock-up Agreement
LOCK-UP
AGREEMENT
THIS
LOCK-UP AGREEMENT (this “Agreement”) is dated as of [●], 2020, by and between the undersigned (the “Holder”)
and BurgerFi International, Inc. (f/k/a Opes Acquisition Corp.), a Delaware corporation (“BurgerFi”).
Capitalized
terms used, but not otherwise defined herein, shall have the meanings ascribed to such terms in the Member Interest Purchase Agreement,
dated as of June 29, 2020 (the “Purchase Agreement”) by and among BurgerFi, Burger Fi International LLC, a
Delaware limited liability company (the “Company”), members of the Company (the “Members”),
and BurgerFi Holdings, LLC, a Delaware limited liability company (the “Members’ Representative”).
BACKGROUND
A. Pursuant
to the Purchase Agreement, the Members agreed to lock-up their Closing Payment Shares (the “Shares”), after
the consummation of the Acquisition.
NOW,
THEREFORE, for and in consideration of the mutual covenants and agreements set forth herein, and other good and valuable consideration,
the receipt and sufficiency of which is hereby acknowledged, the parties, intending to be legally bound, agree as follows:
AGREEMENT
1. Lock-Up.
(a) During
the Lock-up Period (as defined below), the Holder irrevocably agrees that it, he or she will not offer, sell, contract to sell,
pledge or otherwise dispose of, directly or indirectly, any of the Shares, enter into a transaction that would have the same effect,
or enter into any swap, hedge or other arrangement that transfers, in whole or in part, any of the economic consequences of ownership
of the Shares, whether any of these transactions are to be settled by delivery of any Shares, or otherwise, publicly disclose
the intention to make any offer, sale, pledge or disposition, or to enter into any transaction, swap, hedge or other arrangement,
or engage in any Short Sales (as defined below) with respect to any securities of BurgerFi.
(b) In
furtherance of the foregoing, during the Lock-up Period. BurgerFi will (i) place an irrevocable stop order on all the Shares,
including those which may be covered by a registration statement, and (ii) notify BurgerFi’s transfer agent in writing of
the stop order and the restrictions on the Shares under this Agreement and direct BurgerFi’s transfer agent not to process
any attempts by the Holder to resell or transfer any Shares, except in compliance with this Agreement.
(c) For
purposes hereof, “Short Sales” include, without limitation, all “short sales” as defined in Rule
200 promulgated under Regulation SHO under the Securities Exchange Act of 1934, as amended (the “Exchange Act”),
and all types of direct and indirect stock pledges, forward sale contracts, options, puts, calls, swaps and similar arrangements
(including on a total return basis), and sales and other transactions through non-US broker dealers or foreign regulated brokers.
(d) The
“Lock-up Period” means the earlier of (i) six months after the Closing Date and (ii) if, subsequent to the
Closing Date, BurgerFi consummates a liquidation, merger, stock exchange or other similar transaction which results in all of
BurgerFi’s stockholders having the right to exchange their shares of common stock, par value $0.001 per share of BurgerFi
(“BurgerFi Common Stock”) for cash, securities or other property.
2. Beneficial
Ownership. The Holder hereby represents and warrants that it does not beneficially own, directly or through its nominees (as
determined in accordance with Section 13(d) of the Exchange Act, and the rules and regulations promulgated thereunder), any shares
of BurgerFi Common Stock, or any economic interest in or derivative of such shares, other than the Shares specified on the signature
page hereto. For purposes of this Agreement, the Shares beneficially owned by the Holder as specified on the signature page hereto,
together with any other shares of BurgerFi Common Stock, and including any securities convertible into, or exchangeable for, or
representing the rights to receive BurgerFi Common Stock, if any, acquired during the Lock-up Period are collectively referred
to as the “Lock-up Shares.
Notwithstanding
the foregoing, and subject to the conditions below, the undersigned may transfer Lock-Up Shares in connection (a) transfers or
distributions to the Holder’s current or former general or limited partners, managers or members, stockholders, other equityholders
or direct or indirect affiliates (within the meaning of Rule 405 under the Securities Act of 1933, as amended) or to the estates
of any of the foregoing; (b) transfers by bona fide gift to a member of the Holder’s immediate family or to a trust, the
beneficiary of which is the Holder or a member of the Holder’s immediate family for estate planning purposes; (c) by virtue
of the laws of descent and distribution upon death of the Holder; or (d) pursuant to a qualified domestic relations order, in
each case where such transferee agrees to be bound by the terms of this Agreement. provided that in the case of any transfer pursuant
to the foregoing clauses it shall be a condition to any such transfer that (i) the transferee/donee agrees to be bound by the
terms of this Agreement (including, without limitation, the restrictions set forth in the preceding sentence) to the same extent
as if the transferee/donee were a party hereto; and (ii) each party (donor, donee, transferor or transferee) shall not be required
by law (including without limitation the disclosure requirements of the Securities Act of 1933, as amended (the “Securities
Act”), and the Exchange Act) to make, and shall agree to not voluntarily make, any filing or public announcement of the
transfer or disposition prior to the expiration of the Lock-Up Period.
3. Representations
and Warranties. Each of the parties hereto, by their respective execution and delivery of this Agreement, hereby represents
and warrants to the other that (a) such party has the full right, capacity and authority to enter into, deliver and perform its
respective obligations under this Agreement, (b) this Agreement has been duly executed and delivered by such party and is a binding
and enforceable obligation of such party and, enforceable against such party in accordance with the terms of this Agreement, and
(c) the execution, delivery and performance of such party’s obligations under this Agreement will not conflict with or breach
the terms of any other agreement, contract, commitment or understanding to which such party is a party or to which the assets
or securities of such party are bound. The Holder has independently evaluated the merits of its decision to enter into and deliver
this Agreement, and such Holder confirms that it has not relied on the advice of BurgerFi, BurgerFi’s legal counsel, or
any other person.
4. No
Additional Fees/Payment. Other than the consideration specifically referenced herein, the parties hereto agree that no fee,
payment or additional consideration in any form has been or will be paid to the Holder in connection with this Agreement.
5. Notices.
Any notices required or permitted to be sent hereunder shall be sent in writing, addressed as specified below, and shall be deemed
given: (a) if by hand or recognized courier service, by 4:00PM on a business day, addressee’s day and time, on the date
of delivery, and otherwise on the first business day after such delivery; (b) if by fax or email, on the date that transmission
is confirmed electronically, if by 4:00PM on a business day, addressee’s day and time, and otherwise on the first business
day after the date of such confirmation; or (c) five days after mailing by certified or registered mail, return receipt requested.
Notices shall be addressed to the respective parties as follows (excluding telephone numbers, which are for convenience only),
or to such other address as a party shall specify to the others in accordance with these notice provisions:
105
U.S. HIGHWAY ONE
NORTH PALM BEACH, FL 33408
Attn:
Email:
Fax:
with
a copy to (which shall not constitute notice):
LionHeart
Equities, LLC.
4218 NE 2nd Avenue
Miami, Florida 33137
Attention: General Counsel
Email: notices@lheartcapital.com
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(b)
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If
to the Holder, to the address set forth on the Holder’s signature page hereto,
with a copy, which shall not constitute notice, to:
|
[●]
[●]
[●]
Attention:
[●]
Phone:
[●]
Email:
[●]
or
to such other address as any party may have furnished to the others in writing in accordance herewith.
6. Enumeration
and Headings. The enumeration and headings contained in this Agreement are for convenience of reference only and shall not
control or affect the meaning or construction of any of the provisions of this Agreement.
7. Counterparts.
This Agreement may be executed in facsimile and in any number of counterparts, each of which when so executed and delivered shall
be deemed an original, but all of which shall together constitute one and the same agreement.
8. Successors
and Assigns. This Agreement and the terms, covenants, provisions and conditions hereof shall be binding upon, and shall inure
to the benefit of, the respective heirs, successors and assigns of the parties hereto. The Holder hereby acknowledges and agrees
that this Agreement is entered into for the benefit of and is enforceable by BurgerFi and its successors and assigns.
9. Severability.
If any provision of this Agreement is held to be invalid or unenforceable for any reason, such provision will be conformed to
prevailing law rather than voided, if possible, in order to achieve the intent of the parties and, in any event, the remaining
provisions of this Agreement shall remain in full force and effect and shall be binding upon the parties hereto.
10. Amendment.
This Agreement may be amended or modified by written agreement executed by each of the parties hereto.
11. Further
Assurances. Each party 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 Agreement and the consummation of the transactions contemplated
hereby.
12. No
Strict Construction. The language used in this Agreement will be deemed to be the language chosen by the parties to express
their mutual intent, and no rules of strict construction will be applied against any party.
13. Dispute
Resolution. Article XIII of the Purchase Agreement regarding arbitration of disputes is incorporated by reference herein to
apply with full force to any disputes arising under this Agreement.
14. Governing
Law; Jurisdiction. The terms and provisions of this Agreement shall be construed in accordance with the laws of the State
of Florida. Any legal suit, action or proceeding arising out of or based upon this agreement, the other additional agreements
or the transactions contemplated hereby or thereby may be instituted in the Federal courts of the United States of America or
the courts of the State of Florida, in each case located in the City of Fort Lauderdale and County of Broward, and each party
irrevocably submits to the exclusive jurisdiction of such courts in any such suit, action or proceeding. the parties irrevocably
and unconditionally waive any objection to the laying of venue of any suit, action or any proceeding in such courts and irrevocably
waive and agree not to plead or claim in any such court that any such suit, action or proceeding brought in any such court has
been brought in an inconvenient forum.
15. Controlling
Agreement. To the extent the terms of this Agreement (as amended, supplemented, restated or otherwise modified from time to
time) directly conflicts with a provisions in the Purchase Agreement, the terms of this Agreement shall control.
[Signature
Page Follows]
IN
WITNESS WHEREOF, the parties hereto have caused this Lock-up Agreement to be duly executed by their respective authorized signatories
as of the date first indicated above.
|
BURGERFI
INTERNATIONAL, INC.
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By:
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Name: [●]
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Title: [●]
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IN
WITNESS WHEREOF, the parties hereto have caused this Lock-up Agreement to be duly executed by their respective authorized signatories
as of the date first indicated above.
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HOLDER
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By:
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Name:
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Address:
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[●]
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|
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NUMBER
OF Lock-up Shares:
|
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|
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[●]
|
AMENDED AND RESTATED LOCK-UP AGREEMENT
THIS AMENDED AND RESTATED
LOCK-UP AGREEMENT (this “Agreement”) is dated as of July _____, 2020, by and between the undersigned (the “Holder”)
and Opes Acquisition Corp., a Delaware corporation (“Opes”).
BACKGROUND
A.
In connection with the initial public offering of Opes, which was consummated on March 16, 2018 (the “IPO”),
the Holder agreed to lock up all of the Holder’s shares of common stock of Opes (the “Shares”).
B.
On June 29, 2020, OPES entered into a Member Interest Purchase Agreement, (the “Purchase Agreement”)
with, Burger Fi International LLC, a Delaware limited liability company (the “Company”), members of the Company
(the “Members”), and BurgerFi Holdings, LLC, a Delaware limited liability company (the “Members’
Representative”).
C.
Capitalized terms used, but not otherwise defined herein, shall have the meanings ascribed to such terms in the Purchase
Agreement.
NOW, THEREFORE, for
and in consideration of the mutual covenants and agreements set forth herein, and other good and valuable consideration, the receipt
and sufficiency of which is hereby acknowledged, the parties, intending to be legally bound, agree as follows:
AGREEMENT
1.
Lock-Up.
(a)
During the Lock-up Period (as defined below), the Holder irrevocably agrees that it, he or she will not offer, sell, contract
to sell, pledge or otherwise dispose of, directly or indirectly, any of the Shares, enter into a transaction that would have the
same effect, or enter into any swap, hedge or other arrangement that transfers, in whole or in part, any of the economic consequences
of ownership of the Shares, whether any of these transactions are to be settled by delivery of any Shares, or otherwise, publicly
disclose the intention to make any offer, sale, pledge or disposition, or to enter into any transaction, swap, hedge or other
arrangement, or engage in any Short Sales (as defined below) with respect to any securities of Opes.
(b)
In furtherance of the foregoing, during the Lock-up Period. Opes will (i) place an irrevocable stop order on all the Shares,
including those which may be covered by a registration statement, and (ii) notify Opes’s transfer agent in writing of the
stop order and the restrictions on the Shares under this Agreement and direct Opes’s transfer agent not to process any attempts
by the Holder to resell or transfer any Shares, except in compliance with this Agreement.
(c)
For purposes hereof, “Short Sales” include, without limitation, all “short sales” as defined
in Rule 200 promulgated under Regulation SHO under the Securities Exchange Act of 1934, as amended (the “Exchange Act”),
and all types of direct and indirect stock pledges, forward sale contracts, options, puts, calls, swaps and similar arrangements
(including on a total return basis), and sales and other transactions through non-US broker dealers or foreign regulated brokers.
(d)
The “Lock-up Period” means the period ending on the earlier of (i) six months after the Closing Date
of the transactions contemplated by the Purchase Agreement, and (ii) if, subsequent to the Closing Date, OPES (post-closing) (the
“Post-Closing Entity”) consummates a liquidation, merger, stock exchange or other similar transaction which results
in all of the Post-Closing Entity’s stockholders having the right to exchange their shares of common stock, par value $0.001
per share of the Post-Closing Entity (“Common Stock”) for cash, securities or other property.
2.
Beneficial Ownership. The Holder hereby represents and warrants that it does not beneficially own, directly or through
its nominees (as determined in accordance with Section 13(d) of the Exchange Act, and the rules and regulations promulgated thereunder),
any shares of Common Stock, or any economic interest in or derivative of such shares, other than the Shares specified on the signature
page hereto. For purposes of this Agreement, the Shares beneficially owned by the Holder as specified on the signature page hereto,
together with any other shares of Common Stock, and including any securities convertible into, or exchangeable for, or representing
the rights to receive Common Stock, if any, acquired during the Lock-up Period are collectively referred to as the “Lock-up
Shares.
Notwithstanding
the foregoing, and subject to the conditions below, the undersigned may transfer Lock-Up Shares in connection with (a) transfers
or distributions to the Holder’s current or former general or limited partners, managers or members, stockholders, other
equityholders or direct or indirect affiliates (within the meaning of Rule 405 under the Securities Act of 1933, as amended) or
to the estates of any of the foregoing; (b) transfers by bona fide gift to a member of the Holder’s immediate family or
to a trust, the beneficiary of which is the Holder or a member of the Holder’s immediate family for estate planning purposes;
(c) by virtue of the laws of descent and distribution upon death of the Holder; or (d) pursuant to a qualified domestic relations
order, in each case where such transferee agrees to be bound by the terms of this Agreement. provided that in the case of any
transfer pursuant to the foregoing clauses it shall be a condition to any such transfer that (i) the transferee/donee agrees to
be bound by the terms of this Agreement (including, without limitation, the restrictions set forth in the preceding sentence)
to the same extent as if the transferee/donee were a party hereto; and (ii) each party (donor, donee, transferor or transferee)
shall not be required by law (including without limitation the disclosure requirements of the Securities Act of 1933, as amended
(the “Securities Act”), and the Exchange Act) to make, and shall agree to not voluntarily make, any filing or public
announcement of the transfer or disposition prior to the expiration of the Lock-Up Period.
3.
Representations and Warranties. Each of the parties hereto, by their respective execution and delivery of this Agreement,
hereby represents and warrants to the other that (a) such party has the full right, capacity and authority to enter into, deliver
and perform its respective obligations under this Agreement, (b) this Agreement has been duly executed and delivered by such party
and is a binding and enforceable obligation of such party and, enforceable against such party in accordance with the terms of
this Agreement, and (c) the execution, delivery and performance of such party’s obligations under this Agreement will not
conflict with or breach the terms of any other agreement, contract, commitment or understanding to which such party is a party
or to which the assets or securities of such party are bound. The Holder has independently evaluated the merits of its decision
to enter into and deliver this Agreement, and such Holder confirms that it has not relied on the advice of Opes, Opes’s
legal counsel, or any other person.
4.
No Additional Fees/Payment. Other than the consideration specifically referenced herein, the parties hereto agree
that no fee, payment or additional consideration in any form has been or will be paid to the Holder in connection with this Agreement.
5.
Notices. Any notices required or permitted to be sent hereunder shall be sent in writing, addressed as specified
below, and shall be deemed given: (a) if by hand or recognized courier service, by 4:00PM on a business day, addressee’s
day and time, on the date of delivery, and otherwise on the first business day after such delivery; (b) if by fax or email, on
the date that transmission is confirmed electronically, if by 4:00PM on a business day, addressee’s day and time, and otherwise
on the first business day after the date of such confirmation; or (c) five days after mailing by certified or registered mail,
return receipt requested. Notices shall be addressed to the respective parties as follows (excluding telephone numbers, which
are for convenience only), or to such other address as a party shall specify to the others in accordance with these notice provisions:
105 U.S. HIGHWAY
ONE
NORTH PALM BEACH, FL 33408
Attn:
Email:
Fax:
with a copy to (which
shall not constitute notice):
LionHeart Equities, LLC.
4218 NE 2nd Avenue
Miami, Florida 33137
Attention: General Counsel
Email: notices@lheartcapital.com
|
(b)
|
If to the Holder, to the
address set forth on the Holder’s signature page hereto, with a copy, which shall
not constitute notice, to:
|
[●]
[●]
[●]
Attention: [●]
Phone: [●]
Email: [●]
or to such other address as any party
may have furnished to the others in writing in accordance herewith.
6.
Enumeration and Headings. The enumeration and headings contained in this Agreement are for convenience of reference
only and shall not control or affect the meaning or construction of any of the provisions of this Agreement.
7.
Counterparts. This Agreement may be executed in facsimile and in any number of counterparts, each of which when
so executed and delivered shall be deemed an original, but all of which shall together constitute one and the same agreement.
8.
Successors and Assigns. This Agreement and the terms, covenants, provisions and conditions hereof shall be binding
upon, and shall inure to the benefit of, the respective heirs, successors and assigns of the parties hereto. The Holder hereby
acknowledges and agrees that this Agreement is entered into for the benefit of and is enforceable by Opes and its successors and
assigns.
9.
Severability. If any provision of this Agreement is held to be invalid or unenforceable for any reason, such provision
will be conformed to prevailing law rather than voided, if possible, in order to achieve the intent of the parties and, in any
event, the remaining provisions of this Agreement shall remain in full force and effect and shall be binding upon the parties
hereto.
10.
Amendment. This Agreement may be amended or modified by written agreement executed by each of the parties hereto.
11.
Entire Agreement. This Agreement supersedes and replaces all previous written or oral agreements between the parties
hereto relating to the subject matter hereof, including without limitation the lock-up agreement entered into in connection with
the IPO.
12.
Further Assurances. Each party 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 Agreement and the consummation of the
transactions contemplated hereby.
13.
No Strict Construction. The language used in this Agreement will be deemed to be the language chosen by the parties
to express their mutual intent, and no rules of strict construction will be applied against any party.
14.
Dispute Resolution. Any dispute under the terms of this Agreement, including the alleged breach, termination, validity,
interpretation and performance thereof (“Dispute”), shall be resolved with the following procedures: Upon written
notice of any Dispute, the parties shall attempt to resolve it promptly by negotiation between Opes and the Holder and this process
should be completed within thirty (30) days (the “Negotiation”). If the dispute has not been resolved by negotiation,
then the parties shall proceed to mediation unless the parties at the time of the dispute agree to a different timeframe. A “Notice
of Mediation” shall be served, signifying that the Negotiation was not successful and to commence the mediation process.
The parties shall retain legal counsel of their choosing and such legal counsel shall agree on a mediator (the “Mediator”)
who shall be a mediator in Florida from a list of mediators provided by JAMS; however, if they cannot agree within fourteen (14)
days, then Opes and Holder, through counsel, will convene a conference with a JAMS case administrator (or such other JAMS staff
member as JAMS shall make available) and the claimant and the respondent will alternate striking one mediator from the list, claimant
striking first, until one mediator is left, which such mediator will be appointed. If such mediator is unable or unwilling
to serve, then the last candidate stricken will be appointed. The Parties shall continue through the list in reverse order until
a candidate who is willing and able to serve is appointed. The mediation session shall be held in Fort Lauderdale, FL within forty-five
(45) days of the retention of the Mediator, and last for at least two full mediation days, before any party has the option to
withdraw from the process. The parties may agree to continue the mediation process beyond two days, until there is a settlement
agreement, or one party or the Mediator states that there is no reason to continue because of an impasse that cannot be overcome
and sends a “notice of termination of mediation.” All reasonable efforts will be made to complete the mediation within
thirty (30) days of the first mediation session. During the course of the mediation, no party can assert the failure to fully
comply with the requirement of Negotiation prior to mediation as a reason not to proceed or to delay the mediation. The service
of the Notice of Mediation shall stay the running of any applicable statute of limitations regarding the Dispute until 30 days
after the parties agree that the mediation is concluded or the mediator issues a notice of termination of mediation. Each side
shall bear an equal share of the mediation costs unless the parties agree otherwise. All communications, both written and oral,
are confidential and shall be treated as settlement negotiations for purposes of applicable rules of evidence; however, documents
generated in the ordinary course of business prior to the Dispute, that would otherwise be discoverable, do not become confidential
simply because they are used in the Negotiation and/or Mediation process. The process shall be confidential based on terms acceptable
to the mediator and/or mediation service.
15.
Governing Law; Jurisdiction. The terms and provisions of this Agreement shall be construed in accordance with the
laws of the State of Florida. Any legal suit, action or proceeding arising out of or based upon this agreement, the other additional
agreements or the transactions contemplated hereby or thereby may be instituted in the Federal courts of the United States of
America or the courts of the State of Florida, in each case located in the City of Fort Lauderdale and County of Broward, and
each party irrevocably submits to the exclusive jurisdiction of such courts in any such suit, action or proceeding. the parties
irrevocably and unconditionally waive any objection to the laying of venue of any suit, action or any proceeding in such courts
and irrevocably waive and agree not to plead or claim in any such court that any such suit, action or proceeding brought in any
such court has been brought in an inconvenient forum.
[Signature Page Follows]
IN WITNESS WHEREOF,
the parties hereto have caused this Lock-up Agreement to be duly executed by their respective authorized signatories as of the
date first indicated above.
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OPES ACQUISITION CORP.
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By:
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Name: [●]
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Title: [●]
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IN WITNESS WHEREOF,
the parties hereto have caused this Lock-up Agreement to be duly executed by their respective authorized signatories as of the
date first indicated above.
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HOLDER
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By:
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Name:
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Address:
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[●]
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NUMBER
OF Lock-up Shares:
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[●]
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Execution Version
EXHIBIT C
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION
RIGHTS AGREEMENT (this “Agreement”) is entered into as of the __ day of _______, 2020, by and among
the undersigned holders set forth on Exhibit A (each a “Holder,” collectively, the “Holders”)
and BurgerFi International, Inc., a Delaware corporation (f/k/a Opes Acquisition Corp.) (the “Company”).
Capitalized terms
used, but not otherwise defined herein, shall have the meanings ascribed to such terms in the Membership Interest Purchase Agreement,
dated as of June 29, 2020 (the “Purchase Agreement”), by and among the Company, Burger Fi International,
LLC, a Delaware limited liability company (“BurgerFi LLC”), the members of BurgerFi LLC (the “Members”),
and BurgerFi Holdings, LLC, a Delaware limited liability company (the “Members’ Representative”).
WHEREAS, the Holders
and the Company desire to enter into this Agreement to provide the Holders with certain rights relating to the registration of
the Registrable Securities (as defined below);
NOW, THEREFORE, in
consideration of the mutual covenants and agreements set forth herein, and for other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:
1. DEFINITIONS.
The following capitalized terms used herein have the following meanings:
“Agreement”
means this Agreement, as amended, restated, supplemented, or otherwise modified from time to time.
“Commission”
means the Securities and Exchange Commission, or any other Federal agency then administering the Securities Act or the Exchange
Act.
“Common
Stock” means common stock of the Company, par value $0.0001 per share.
“Demand
Registration” is defined in Section 2.2.1.
“Demand
Holder” is defined in Section 2.2.1.
“Effectiveness
Date” means, with respect to the Initial Registration Statement, the 90th calendar day following the Filing Date
(or in the event the Registration Statement receives a “full review” by the Commission, the 120th day following the
Filing Date) and with respect to any additional Registration Statements which may be required pursuant to Sections 2.2 and 2.3,
the 90th calendar day following the date on which an additional Registration Statement is required to be filed hereunder; provided,
however, that in the event the Company is notified by the Commission that one or more of the above Registration Statements will
not be reviewed or is no longer subject to further review and comments, or the Company is eligible to register the Registrable
Securities on Form S-3, the Effectiveness Date as to such Registration Statement shall be the earlier of (i) the fifth Business
Day following the date on which the Company is so notified if such date precedes the dates otherwise required above or (ii) the
filing date if the Registration Statement is automatically effective; provided, further, that, if the Effectiveness Date falls
on a Saturday, Sunday or any other day which shall be a legal holiday or a day on which the Commission is authorized or required
by law or other government actions to close, the Effectiveness Date shall be the following Business Day.
“Effectiveness
Period” is defined in Section 2.1.1.
“Exchange
Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations of the Commission promulgated
thereunder, all as the same shall be in effect at the time.
“Filing
Date” means, with respect to the Initial Registration Statement, the 30th calendar day following the Effectiveness
Date and, with respect to any additional Registration Statements which may be required pursuant to 2.1.2 the earliest practical
date on which the Company is permitted by Commission Guidance to file such additional Registration Statement related to the Registrable
Securities; provided, however, that, if the Filing Date falls on a Saturday, Sunday or any other day which shall be a legal holiday
or a day on which the Commission is authorized or required by law or other government actions to close, the Filing Date shall
be the following Business Day.
“Form
S-3” is defined in Section 2.4.
“Forward
Purchase Securities” are the 3,000,000 shares of Common Stock and 3,000,000 shares of Common Stock underlying warrants
that are part of the 3,000,000 units issued to Lion Point and Lionheart Equities, LLC, in the aggregate, under the forward purchase
contracts
“Holder”
is defined in the preamble to this Agreement.
“Holder
Indemnified Party” is defined in Section 4.1.
“Indemnified
Party” is defined in Section 4.3.
“Indemnifying
Party” is defined in Section 4.3.
“Initial
Registration Statement” means the Registration Statement required to be filed pursuant to Section 2.1.
“IPO”
is defined as the initial public offering of the Company pursuant to a prospectus dated March 13, 2018.
“IPO Registrable
Securities” is defined as shares identified as having registration rights in the Company’s registration statement
on Form S-1 (File No. 333-223106) including, (i) 2,875,000 founder’s shares issued and outstanding on the date of the IPO,
(ii) 445,000 shares of Common Stock and 445,000 shares of Common Stock underlying warrants that are part of the 445,000 units
issued in the private placement consummated at the time of the IPO, (iii)Forward Purchase Securities, (iv) 750,000 shares of
Common Stock and 750,000 shares of Common Stock underlying the Unit Purchase Option, and (vi) 11,500,000 shares of Common Stock
underlying the warrants issued in the IPO.
“Lion
Point” is defined as Lion Point Capital, LP.
“Lion
Point Securities” means (i) 862,500 founder’s shares held by Lion Point, (ii) 83,438 shares of Common Stock
and 83,438 shares of Common Stock underlying warrants that are part of the 83,438 units held by Lion Point, and (iii) 2,000,000
shares of Common Stock and 2,000,000 shares of Common Stock underlying warrants that are part of the Forward Purchase Units are
held by Lion Point.
“Maximum
Number of Shares” is defined in Section 2.2.4.
“Notices”
is defined in Section 6.3.
“Piggy-Back
Registration” is defined in Section 2.3.1.
“Plan
of Distribution” is defined in Section 2.1.1.
“Pro Rata”
is defined in Section 2.1.2.
“Register,”
“Registered” and “Registration” mean a registration effected by preparing
and filing a registration statement or similar document in compliance with the requirements of the Securities Act, and the applicable
rules and regulations promulgated thereunder, and such registration statement becoming effective.
“Registrable
Securities” means (i) 4,716,981 shares of Common Stock issued to the Members as the Closing Payment Shares, (ii)
1,886,792 shares of Common Stock issuable to the Members, as part of the Cash Merger Consideration, (iii) to the extent earned
in accordance with the Purchase Agreement, up to 9,356,459 shares of Common Stock issuable in connection with the Earnout, (iv)
the shares of Common Stock issuable to investors in the private placement offerings conducted by the Company prior to the closing
of the business combination pursuant to the Purchase Agreement, and (v) the IPO Registrable Securities. Registrable Securities
shall also include any securities of the Company issued as a dividend or other distribution with respect to, in exchange for or
in replacement of each of the shares of Common Stock held by the Holder as set forth on Exhibit A. As to any particular
Registrable Securities, such securities shall cease to be Registrable Securities when: (a) a Registration Statement with respect
to the sale of all of such securities shall have become effective under the Securities Act and such securities shall have been
sold, transferred, disposed of or exchanged in accordance with such Registration Statement; (b) such securities shall have been
otherwise transferred, new certificates for them not bearing a legend restricting further transfer shall have been delivered by
the Company and subsequent public distribution of them shall not require registration under the Securities Act; (c) such securities
shall have ceased to be outstanding, or (d) the Registrable Securities are freely saleable under Rule 144 without volume limitations.
“Registration
Statement” means a registration statement filed by the Company with the Commission in compliance with the Securities
Act and the rules and regulations promulgated thereunder, for a public offering and sale of equity securities, or securities or
other obligations exercisable or exchangeable for, or convertible into, equity securities (other than a registration statement
on Form S-4 or Form S-8, or their successors, or any registration statement covering only securities proposed to be issued in
exchange for securities or assets of another entity).
“Securities
Act” means the Securities Act of 1933, as amended, and the rules and regulations of the Commission promulgated thereunder,
all as the same shall be in effect at the time.
“Underwriter”
means, solely for the purposes of this Agreement, a securities dealer who purchases any Registrable Securities as principal in
an underwritten offering and not as part of such dealer’s market-making activities.
“Unit
Purchase Option” means the unit purchase option to purchase 750,000 units of the Company issued to EarlyBirdCapital,
Inc. and its designees in connection with the IPO.
2. REGISTRATION
RIGHTS.
2.1 Shelf Registration.
2.1.1 On or prior
to each Filing Date, the Company shall prepare and file with the Commission a Registration Statement covering the resale of all
or such maximum portion of the Registrable Securities as permitted by SEC Guidance (provided that, the Company shall use diligent
efforts to advocate with the Commission for the registration of all of the Registrable Securities in accordance with the SEC Guidance,
including without limitation, the Manual of Publicly Available Telephone Interpretations D.29) that are not then registered on
an effective Registration Statement for an offering to be made on a continuous basis pursuant to Rule 415. Each Registration Statement
filed hereunder shall be on Form S-1 (except if the Company is then eligible to register for resale the Registrable Securities
on Form S-3, such registration shall be on Form S-3 in accordance herewith (or any successor form to Form S-3, or any similar
short-form Registration Statement)) and shall contain the “Plan of Distribution” attached hereto as
Annex A. Subject to the terms of this Agreement, the Company shall use its commercially reasonable efforts to cause a Registration
Statement to be declared effective under the Securities Act as promptly as practicable after the filing thereof, but in any event
prior to the applicable Effectiveness Date, and shall use its commercially reasonable efforts to keep such Registration Statement
continuously effective under the Securities Act until all Registrable Securities covered by such Registration Statement have been
sold, or may be sold without volume or manner-of-sale restrictions pursuant to Rule 144, without the requirement for the Company
to be in compliance with the current public information requirement under Rule 144, as determined by the counsel to the Company
pursuant to a written opinion letter to such effect, addressed and acceptable to the Transfer Agent and the affected Holders (the
“Effectiveness Period”). The Company shall telephonically request effectiveness of a Registration Statement
as of 5:00 p.m. New York City time on a Business Day. The Company shall promptly notify the Holders by e-mail of the effectiveness
of a Registration Statement on the same Business Day that the Company telephonically confirms effectiveness with the Commission.
The Company shall, no later than the second Business Day after the effective date of such Registration Statement, file a final
Prospectus with the Commission as required by Rule 424.
2.1.2 Notwithstanding
any other provision of this Agreement, if any SEC Guidance sets forth a limitation on the number of Registrable Securities permitted
to be registered on a particular Registration Statement (and notwithstanding that the Company used diligent efforts to advocate
with the Commission for the registration of all or a greater portion of Registrable Securities), the number of Registrable Securities
to be registered shall include (i) first, all of the Lion Point Securities, and (ii) second, unless otherwise directed in writing
by the Holders (other than Lion Point) as to its Registrable Securities, the number of Registrable Securities to be registered
on such Registration Statement will be reduced on a on a pro rata basis based on the total number of Registrable Securities held
by such other Holders (such proportion is referred to herein as “Pro Rata”), except that with respect
to this subsection 2.1.2(ii), the reduction in the number of Registrable Securities to be registered on behalf of the Members
shall not be reduced below 1,886,792 shares of Common Stock unless SEC Guidance dictates or the Commission’s Staff requests
such reduction to facilitate declaring the Registration Statement effective. In the event of any further reductions, the Lion
Point Securities will have priority registration over the Registrable Securities held by the other Holders. In the event of a
reduction hereunder, the Company shall give the Holder at least five (5) Business Days prior written notice along with the calculations
as to such Holder’s allotment. Promptly after such SEC Guidance is no longer applicable with respect to some or all of the
remaining unregistered Registrable Securities, the Company shall file an additional Registration Statement in accordance with
this Section 2 with respect to such shares.
2.1.3 Each Holder
agrees to furnish to the Company a completed Selling Stockholder Questionnaire within ten (10) Business Days following the date
of this Agreement, a form of which will be provided by the Company together with this Agreement. Each Holder further acknowledges
and agrees that it shall not be entitled to be named as a selling security holder in the Registration Statement or use the Prospectus
for offers and resales of Registrable Securities at any time, unless such Holder has returned to the Company a completed and signed
Selling Stockholder Questionnaire. If a Holder of Registrable Securities returns a Selling Stockholder Questionnaire after the
deadline specified in the previous sentence, the Company shall use its commercially reasonable efforts to take such actions as
are required to name such Holder as a selling security holder in the Registration Statement or any pre-effective or post-effective
amendment thereto and to include (to the extent not theretofore included) in the Registration Statement the Registrable Securities
identified in such late Selling Stockholder Questionnaire; provided that the Company shall not be required to file an additional
Registration Statement solely for such shares. Each Holder acknowledges and agrees that the information in the Selling Stockholder
Questionnaire will be used by the Company in the preparation of the Registration Statement and hereby consents to the inclusion
of such information in the Registration Statement.
2.2 Demand Registration.
2.2.1 Request for
Registration. At any time and from time to time on or after the date of this Agreement, Lion Point may make a written demand
for registration under the Securities Act of all or part of the Lion Point Securities, as the case may be (a “Demand
Registration”). Any Demand Registration shall specify the number of shares of Lion Point Securities proposed to be sold
and the intended method(s) of distribution thereof. The Company will notify all holders of Lion Point Securities of the demand,
and each holder of Lion Point Securities who wishes to include all or a portion of such holder’s Lion Point Securities in
the Demand Registration (each such holder including shares of Lion Point Securities in such registration, a “Demanding
Holder”) shall so notify the Company within fifteen (15) days after the receipt by the holder of the notice from the
Company. Upon any such request, the Demanding Holders shall be entitled to have their Lion Point Securities included in the Demand
Registration, subject to Section 2.2.4. The Company shall not be obligated to effect more than two (2) Demand Registrations under
this Section 2.2.1 in respect of all Lion Point Securities.
2.2.2 Effective Registration.
A registration will not count as a Demand Registration until the Registration Statement filed with the Commission with respect
to such Demand Registration has been declared effective and the Company has complied with all of its obligations under this Agreement
with respect thereto; provided, however, that if, after such Registration Statement has been declared effective, the offering
of Lion Point Securities pursuant to a Demand Registration is interfered with by any stop order or injunction of the Commission
or any other governmental agency or court, the Registration Statement with respect to such Demand Registration will be deemed
not to have been declared effective, unless and until, (i) such stop order or injunction is removed, rescinded or otherwise terminated,
and (ii) a majority-in-interest of the Demanding Holders thereafter elect to continue the offering; provided, further, that the
Company shall not be obligated to file a second Registration Statement until a Registration Statement that has been filed is counted
as a Demand Registration or is terminated.
2.2.3 Underwritten
Offering. If a majority-in-interest of the Demanding Holders so elect and such holders so advise the Company as part of their
written demand for a Demand Registration, the offering of such Lion Point Securities pursuant to such Demand Registration shall
be in the form of an underwritten offering. In such event, the right of any holder to include its Lion Point Securities in such
registration shall be conditioned upon such holder’s participation in such underwriting and the inclusion of such holder’s
Lion Point Securities in the underwriting to the extent provided herein. All Demanding Holders proposing to distribute their Lion
Point Securities through such underwriting shall enter into an underwriting agreement in customary form with the Underwriter or
Underwriters selected for such underwriting by a majority-in-interest of the holders initiating the Demand Registration.
2.2.4 Reduction of
Offering. If the managing Underwriter or Underwriters for a Demand Registration that is to be an underwritten offering advises
the Company and the Demanding Holders in writing that the dollar amount or number of shares of Registrable Securities which the
Demanding Holders desire to sell, taken together with all other shares of Common Stock or other securities which the Company desires
to sell and the shares of Common Stock, if any, as to which registration has been requested pursuant to written contractual piggy-back
registration rights held by the other Holders who desire to sell, exceeds the maximum dollar amount or maximum number of shares
that can be sold in such offering without adversely affecting the proposed offering price, the timing, the distribution method,
or the probability of success of such offering (such maximum dollar amount or maximum number of shares, as applicable, the “Maximum
Number of Shares”), then the Company shall include in such registration: (i) first, the Lion Point Securities as
to which Demand Registration has been requested by the Demanding Holders (pro rata in accordance with the number of shares that
each such Person has requested be included in such registration, regardless of the number of shares held by each such Person that
can be sold without exceeding the Maximum Number of Shares); (ii) second, to the extent that the Maximum Number of Shares has
not been reached under the foregoing clause (i), the Registrable Securities as to which “piggy-back” registration
under Section 2.3.1 has been requested by the Holders, Pro Rata, that can be sold without exceeding the Maximum Number of Shares;
(iii) third, to the extent that the Maximum Number of Shares has not been reached under the foregoing clause (i) and (ii), the
shares of Common Stock or other securities that the Company desires to sell that can be sold without exceeding the Maximum Number
of Shares; and (iv) fourth, to the extent that the Maximum Number of Shares have not been reached under the foregoing clauses
(i), (ii) and (iii), the shares of Common Stock or other securities for the account of other persons that the Company is obligated
to register pursuant to written contractual arrangements with such persons and that can be sold without exceeding the Maximum
Number of Shares.
2.2.5 Withdrawal.
If a majority-in-interest of the Demanding Holders disapprove of the terms of any underwriting or are not entitled to include
all of their Lion Point Securities in any offering, such majority-in-interest of the Demanding Holders may elect to withdraw from
such offering by giving written notice to the Company and the Underwriter or Underwriters of their request to withdraw prior to
the effectiveness of the Registration Statement filed with the Commission with respect to such Demand Registration. If the majority-in-interest
of the Demanding Holders withdraws from a proposed offering relating to a Demand Registration, then such registration shall not
count as a Demand Registration provided for in Section 2.2.
2.3 Piggy-Back
Registration.
2.3.1 Piggy-Back
Rights. If at any time on or after the date hereof the Company proposes to file a Registration Statement under the Securities
Act with respect to an offering of equity securities, or securities or other obligations exercisable or exchangeable for, or convertible
into, equity securities, by the Company for its own account or for shareholders of the Company for their account (or by the Company
and by shareholders of the Company including, without limitation, pursuant to Section 2.2), other than a Registration Statement
(i) filed in connection with any employee stock option or other benefit plan, (ii) for an exchange offer or offering of securities
solely to the Company’s existing shareholders, (iii) for an offering of debt that is convertible into equity securities
of the Company, (iv) for a dividend reinvestment plan, or (v) securities proposed to be issued in exchange for securities or assets
of another entity, then the Company shall (x) give written notice of such proposed filing to the holders of Registrable Securities
as soon as practicable but in no event less than ten (10) days before the anticipated filing date, which notice shall describe
the amount and type of securities to be included in such offering, the intended method(s) of distribution, and the name of the
proposed managing Underwriter or Underwriters, if any, of the offering, and (y) offer to the holders of Registrable Securities
in such notice the opportunity to register the sale of such number of shares of Registrable Securities as such holders may request
in writing within five (5) days following receipt of such notice (a “Piggy-Back Registration”). The
Company shall cause such Registrable Securities to be included in such registration and shall use its best efforts to cause the
managing Underwriter or Underwriters of a proposed underwritten offering to permit the Registrable Securities requested to be
included in a Piggy-Back Registration on the same terms and conditions as any similar securities of the Company and to permit
the sale or other disposition of such Registrable Securities in accordance with the intended method(s) of distribution thereof.
All holders of Registrable Securities proposing to distribute their securities through a Piggy-Back Registration that involves
an Underwriter or Underwriters shall enter into an underwriting agreement in customary form with the Underwriter or Underwriters
selected for such Piggy-Back Registration. Notwithstanding the provisions set forth in the immediately preceding sentences, the
right to a Piggy-Back Registration set forth under this Section 2.3.1 with respect to the Registrable Securities shall terminate
on such date the Registrable Securities may be sold without volume or manner-of-sale restrictions pursuant to Rule 144, and without
the requirement for the Company to be in compliance with the current public information requirement under Rule 144, as determined
by the counsel to the Company pursuant to a written opinion letter to such effect.
2.3.2 Reduction
of Offering. If the managing Underwriter or Underwriters for a Piggy-Back Registration that is to be an underwritten offering
advises the Company and the holders of Registrable Securities in writing that the dollar amount or number of Common Stock which
the Company desires to sell, taken together with the Common Stock, if any, as to which registration has been demanded pursuant
to written contractual arrangements with persons other than the holders of Registrable Securities hereunder, the Registrable Securities
as to which registration has been requested under this Section 2.3, and the Common Stock, if any, as to which registration has
been requested pursuant to the written contractual piggy-back registration rights of other shareholders of the Company, exceeds
the Maximum Number of Shares then if the registration is undertaken for the Company’s account: (i) first, the Common Stock
or other securities that the Company desires to sell that can be sold without exceeding the Maximum Number of Shares; (ii) second,
to the extent that the Maximum Number of Shares has not been reached under the foregoing clause (i), all of the Lion Point Securities;
(iii) to the extent that the Maximum Number of Shares has not been reached under the foregoing clauses (i) and (ii), the Registrable
Securities held by Holders other than Lion Point, as to which registration has been requested pursuant to this Section 2.3, Pro
Rata, except that with respect to this subsection 2.3.2(iii), the reduction in the number of Registrable Securities to be registered
on behalf of the Members shall not be reduced below 1,886,792 shares of Common Stock; and (iv) fourth, to the extent that the
Maximum Number of Shares has not been reached under the foregoing clauses (i),(ii) and (iii), the Common Stock or other securities
for the account of other persons that the Company is obligated to register pursuant to written contractual piggy-back registration
rights with such persons..
2.3.3 Withdrawal.
Any holder of Registrable Securities may elect to withdraw such holder’s request for inclusion of Registrable Securities
in any Piggy-Back Registration by giving written notice to the Company of such request to withdraw prior to the effectiveness
of the Registration Statement. The Company (whether on its own determination or as the result of a withdrawal by persons making
a demand pursuant to written contractual obligations) may withdraw a Registration Statement at any time prior to the effectiveness
of such Registration Statement. Notwithstanding any such withdrawal, the Company shall pay all expenses incurred by the holders
of Registrable Securities in connection with such Piggy-Back Registration as provided in Section 3.3.
2.4 Registrations
on Form S-3. The holders of Registrable Securities may at any time and from time to time, request in writing that the Company
register the resale of any or all of such Registrable Securities on Form S-3 or any similar short-form registration which may
be available at such time (“Form S-3”); provided, however, that the Company shall not be obligated to
effect such request through an underwritten offering. Upon receipt of such written request, the Company will promptly give written
notice of the proposed registration to all other holders of Registrable Securities, and, as soon as practicable thereafter, effect
the registration of all or such portion of such holder’s or holders’ Registrable Securities as are specified in such
request, together with all or such portion of the Registrable Securities or other securities of the Company, if any, of any other
holder or holders joining in such request as are specified in a written request given within fifteen (15) days after receipt of
such written notice from the Company; provided, however, that the Company shall not be obligated to effect any such registration
pursuant to this Section 2.4: (i) if Form S-3 is not available for such offering; or (ii) if the holders of the Registrable Securities,
together with the holders of any other securities of the Company entitled to inclusion in such registration, propose to sell Registrable
Securities and such other securities (if any) at any aggregate price to the public of less than $500,000.
3. REGISTRATION
PROCEDURES.
3.1 Filings; Information.
Whenever the Company is required to effect the registration of any Registrable Securities pursuant to Section 2, the Company shall
use its best efforts to effect the registration and sale of such Registrable Securities in accordance with the intended method(s)
of distribution thereof as expeditiously as practicable, and in connection with any such request:
3.1.2 Copies.
The Company shall, prior to filing a Registration Statement or prospectus, or any amendment or supplement thereto, furnish without
charge to the holders of Registrable Securities included in such registration, and such holders’ legal counsel, copies of
such Registration Statement as proposed to be filed, each amendment and supplement to such Registration Statement (in each case
including all exhibits thereto and documents incorporated by reference therein), the prospectus included in such Registration
Statement (including each preliminary prospectus), and such other documents as the holders of Registrable Securities included
in such registration or legal counsel for any such holders may request in order to facilitate the disposition of the Registrable
Securities owned by such holders.
3.1.3 Amendments
and Supplements. The Company shall prepare and file with the Commission such amendments, including post-effective amendments,
and supplements to such Registration Statement and the prospectus used in connection therewith as may be necessary to keep such
Registration Statement effective and in compliance with the provisions of the Securities Act until all Registrable Securities
and other securities covered by such Registration Statement have been disposed of in accordance with the intended method(s) of
distribution set forth in such Registration Statement or such securities have been withdrawn.
3.1.4 Notification.
After the filing of a Registration Statement, the Company shall promptly, and in no event more than two (2) business days after
such filing, notify the holders of Registrable Securities included in such Registration Statement of such filing, and shall further
notify such holders promptly and confirm such advice in writing in all events within two (2) business days of the occurrence of
any of the following: (i) when such Registration Statement becomes effective; (ii) when any post-effective amendment to such Registration
Statement becomes effective; (iii) the issuance or threatened issuance by the Commission of any stop order (and the Company shall
take all actions required to prevent the entry of such stop order or to remove it if entered); and (iv) any request by the Commission
for any amendment or supplement to such Registration Statement or any prospectus relating thereto or for additional information
or of the occurrence of an event requiring the preparation of a supplement or amendment to such prospectus so that, as thereafter
delivered to the purchasers of the securities covered by such Registration Statement, such prospectus will not contain an untrue
statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements
therein not misleading, and promptly make available to the holders of Registrable Securities included in such Registration Statement
any such supplement or amendment; except that before filing with the Commission a Registration Statement or prospectus or any
amendment or supplement thereto, including documents incorporated by reference, the Company shall furnish to the holders of Registrable
Securities included in such Registration Statement and to the legal counsel for any such holders, copies of all such documents
proposed to be filed sufficiently in advance of filing to provide such holders and legal counsel with a reasonable opportunity
to review such documents and comment thereon, and the Company shall not file any Registration Statement or prospectus or amendment
or supplement thereto, including documents incorporated by reference, to which such holders or their legal counsel shall object.
3.1.5 State Securities
Laws Compliance. The Company shall use its best efforts to (i) register or qualify the Registrable Securities covered by the
Registration Statement under such securities or “blue sky” laws of such jurisdictions in the United States as the
holders of Registrable Securities included in such Registration Statement (in light of their intended Plan of Distribution) may
request and (ii) take such action necessary to cause such Registrable Securities covered by the Registration Statement to be registered
with or approved by such other governmental authorities as may be necessary by virtue of the business and operations of the Company
and do any and all other acts and things that may be necessary or advisable to enable the holders of Registrable Securities included
in such Registration Statement to consummate the disposition of such Registrable Securities in such jurisdictions; provided, however,
that the Company shall not be required to qualify generally to do business in any jurisdiction where it would not otherwise be
required to qualify but for this paragraph or subject itself to taxation in any such jurisdiction.
3.1.6 Agreements
for Disposition. The Company shall enter into customary agreements (including, if applicable, an underwriting agreement in
customary form) and take such other actions as are reasonably required in order to expedite or facilitate the registration of
such Registrable Securities. The representations, warranties and covenants of the Company in any underwriting agreement which
are made to or for the benefit of any Underwriters, to the extent applicable, shall also be made to and for the benefit of the
holders of Registrable Securities included in such registration statement. No holder of Registrable Securities included in such
registration statement shall be required to make any representations or warranties in the underwriting agreement except, if applicable,
with respect to such holder’s organization, good standing, authority, title to Registrable Securities, lack of conflict
of such sale with such holder’s material agreements and organizational documents, and with respect to written information
relating to such holder that such holder has furnished in writing expressly for inclusion in such Registration Statement.
3.1.7 Cooperation.
The principal executive officer of the Company, the principal financial officer of the Company and all other officers and members
of the management of the Company shall cooperate fully in any offering of Registrable Securities hereunder, which cooperation
shall include, without limitation, the preparation of the Registration Statement with respect to such offering and all other offering
materials and related documents, and participation in meetings with Underwriters, attorneys, accountants and potential investors.
3.1.8 Records.
The Company shall make available for inspection by the holders of Registrable Securities included in such Registration Statement,
any Underwriter participating in any disposition pursuant to such registration statement and any attorney, accountant or other
professional retained by any holder of Registrable Securities included in such Registration Statement or any Underwriter, all
financial and other records, pertinent corporate documents and properties of the Company, as shall be necessary to enable them
to exercise their due diligence responsibility, and cause the Company’s officers, directors and employees to supply all
information requested by any of them in connection with such Registration Statement.
3.1.9 Opinions
and Comfort Letters. If the registration involves the registration of Registrable Securities in an underwritten offering upon
request, the Company shall furnish to each holder of Registrable Securities included in any Registration Statement a signed counterpart,
addressed to such holder, of (i) any opinion of counsel to the Company delivered to any Underwriter and (ii) any comfort letter
from the Company’s independent public accountants delivered to any Underwriter. In the event no legal opinion is delivered
to any Underwriter, the Company shall furnish to each holder of Registrable Securities included in such Registration Statement,
at any time that such holder elects to use a prospectus, an opinion of counsel to the Company to the effect that the Registration
Statement containing such prospectus has been declared effective and that no stop order is in effect.
3.1.10 Earnings
Statement. The Company shall comply with all applicable rules and regulations of the Commission and the Securities Act, and
make available to its shareholders, as soon as practicable, an earnings statement covering a period of twelve (12) months, which
earnings statement shall satisfy the provisions of Section 11(a) of the Securities Act and Rule 158 thereunder.
3.1.11 Listing.
The Company shall use its best efforts to cause all Registrable Securities included in any registration to be listed on such exchanges
or otherwise designated for trading in the same manner as similar securities issued by the Company are then listed or designated
or, if no such similar securities are then listed or designated, in a manner satisfactory to the holders of a majority of the
Registrable Securities included in such registration.
3.1.12 Road Show.
If the registration involves the registration of Registrable Securities in an underwritten offering involving gross proceeds in
excess of $25,000,000, the Company shall use its commercially reasonable efforts to make available senior executives of the Company
to participate in customary road show presentations that may be reasonably requested by the Underwriter in any underwritten offering.
3.2 Obligation
to Suspend Use of the Prospectus. Upon receipt of any notice from the Company of the happening of any event of the kind described
in Section 3.1.4(iv), each holder of Registrable Securities included in any registration shall immediately discontinue disposition
of such Registrable Securities pursuant to the Registration Statement covering such Registrable Securities until such holder receives
the supplemented or amended prospectus contemplated by Section 3.1.4(iv), and, if so directed by the Company, each such holder
will deliver to the Company all copies, other than permanent file copies then in such holder’s possession, of the most recent
prospectus covering such Registrable Securities at the time of receipt of such notice.
3.3 Registration
Expenses. The Company shall bear all costs and expenses incurred in connection with the filing of the Registration Statement(s)
pursuant to Section 2.1 and Section 2.2, any Piggy-Back Registration pursuant to Section 2.3, and any registration on Form S-3
effected pursuant to Section 2.4, and all expenses incurred in performing or complying with its other obligations under this Agreement,
whether or not the Registration Statement becomes effective, including, without limitation: (i) all registration and filing fees;
(ii) fees and expenses of compliance with securities or “blue sky” laws (including fees and disbursements of counsel
in connection with blue sky qualifications of the Registrable Securities); (iii) printing expenses; (iv) the Company’s internal
expenses (including, without limitation, all salaries and expenses of its officers and employees); (v) the fees and expenses incurred
in connection with the listing of the Registrable Securities as required by Section 3.1.11; (vi) Financial Industry Regulatory
Authority fees; (vii) fees and disbursements of counsel for the Company and fees and expenses for independent certified public
accountants retained by the Company (including the expenses or costs associated with the delivery of any opinions or comfort letters
requested pursuant to Section 3.1.9); (viii) the reasonable fees and expenses of any special experts retained by the Company in
connection with such registration and (ix) the reasonable fees and expenses of one legal counsel selected by the holders of a
majority-in-interest of the Registrable Securities included in such registration. The Company shall have no obligation to pay
any underwriting discounts or selling commissions attributable to the Registrable Securities being sold by the holders thereof,
which underwriting discounts or selling commissions shall be borne by such holders. Additionally, in an underwritten offering,
all selling shareholders and the Company shall bear the expenses of the Underwriter pro rata in proportion to the respective amount
of shares each is selling in such offering.
3.4 Information.
The holders of Registrable Securities shall provide such information as may reasonably be requested by the Company, or the managing
Underwriter, if any, in connection with the preparation of any Registration Statement, including amendments and supplements thereto,
in order to effect the registration of any Registrable Securities under the Securities Act pursuant to Section 2 and in connection
with the Company’s obligation to comply with Federal and applicable state securities laws.
4. INDEMNIFICATION
AND CONTRIBUTION.
4.1 Indemnification
by the Company. The Company agrees to indemnify and hold harmless each Holder and each other holder of Registrable Securities,
and each of their respective officers, employees, affiliates, directors, partners, members, attorneys and agents, and each person,
if any, who controls a Holder and each other holder of Registrable Securities (within the meaning of Section 15 of the Securities
Act or Section 20 of the Exchange Act) (each, a “Holder Indemnified Party”), from and against any expenses,
losses, judgments, claims, damages or liabilities, whether joint or several, arising out of or based upon any untrue statement
(or allegedly untrue statement) of a material fact contained in any Registration Statement under which the sale of such Registrable
Securities was registered under the Securities Act, any preliminary prospectus, final prospectus or summary prospectus contained
in the Registration Statement, or any amendment or supplement to such Registration Statement, or arising out of or based upon
any omission (or alleged omission) to state a material fact required to be stated therein or necessary to make the statements
therein not misleading, or any violation by the Company of the Securities Act or any rule or regulation promulgated thereunder
applicable to the Company and relating to action or inaction required of the Company in connection with any such registration;
and the Company shall promptly reimburse the Holder Indemnified Party for any legal and any other expenses reasonably incurred
by such Holder Indemnified Party in connection with investigating and defending any such expense, loss, judgment, claim, damage,
liability or action whether or not any such person is a party to any such claim or action and including any and all legal and
other expenses incurred in giving testimony or furnishing documents in response to a subpoena or otherwise; provided, however,
that the Company will not be liable in any such case to the extent that any such expense, loss, claim, damage or liability arises
out of or is based upon any untrue statement or allegedly untrue statement or omission or alleged omission made in such Registration
Statement, preliminary prospectus, final prospectus, or summary prospectus, or any such amendment or supplement, in reliance upon
and in conformity with information furnished to the Company, in writing, by such selling holder expressly for use therein. The
Company also shall indemnify any Underwriter of the Registrable Securities, their officers, affiliates, directors, partners, members
and agents and each person who controls such Underwriter on substantially the same basis as that of the indemnification provided
above in this Section 4.1.
4.2 Indemnification
by Holders of Registrable Securities. Subject to the limitations set forth in Section 4.4.3 hereof, each selling holder of
Registrable Securities will, in the event that any registration is being effected under the Securities Act pursuant to this Agreement
of any Registrable Securities held by such selling holder, indemnify and hold harmless the Company, each of its directors and
officers and each Underwriter (if any), and each other selling holder and each other person, if any, who controls another selling
holder or such Underwriter within the meaning of the Securities Act, against any losses, claims, judgments, damages or liabilities,
whether joint or several, insofar as such losses, claims, judgments, damages or liabilities (or actions in respect thereof) arise
out of or are based upon any untrue statement or allegedly untrue statement of a material fact contained in any Registration Statement
under which the sale of such Registrable Securities was registered under the Securities Act, any preliminary prospectus, final
prospectus or summary prospectus contained in the Registration Statement, or any amendment or supplement to the Registration Statement,
or arise out of or are based upon any omission or the alleged omission to state a material fact required to be stated therein
or necessary to make the statement therein not misleading, if the statement or omission was made in reliance upon and in conformity
with information furnished in writing to the Company by such selling holder expressly for use therein, and shall reimburse the
Company, its directors and officers, and each other selling holder or controlling person for any legal or other expenses reasonably
incurred by any of them in connection with investigation or defending any such loss, claim, damage, liability or action. Each
selling holder’s indemnification obligations hereunder shall be several and not joint and shall be limited to the amount
of any net proceeds actually received by such selling holder.
4.3 Conduct of
Indemnification Proceedings. Promptly after receipt by any person of any notice of any loss, claim, damage or liability or
any action in respect of which indemnity may be sought pursuant to Section 4.1 or 4.2, such person (the “Indemnified
Party”) shall, if a claim in respect thereof is to be made against any other person for indemnification hereunder,
notify such other person (the “Indemnifying Party”) in writing of the loss, claim, judgment, damage,
liability or action; provided, however, that the failure by the Indemnified Party to notify the Indemnifying Party shall not relieve
the Indemnifying Party from any liability which the Indemnifying Party may have to such Indemnified Party hereunder, except and
solely to the extent the Indemnifying Party is actually prejudiced by such failure. If the Indemnified Party is seeking indemnification
with respect to any claim or action brought against the Indemnified Party, then the Indemnifying Party shall be entitled to participate
in such claim or action, and, to the extent that it wishes, jointly with all other Indemnifying Parties, to assume control of
the defense thereof with counsel satisfactory to the Indemnified Party. After notice from the Indemnifying Party to the Indemnified
Party of its election to assume control of the defense of such claim or action, the Indemnifying Party shall not be liable to
the Indemnified Party for any legal or other expenses subsequently incurred by the Indemnified Party in connection with the defense
thereof other than reasonable costs of investigation; provided, however, that in any action in which both the Indemnified Party
and the Indemnifying Party are named as defendants, the Indemnified Party shall have the right to employ separate counsel (but
no more than one such separate counsel) to represent the Indemnified Party and its controlling persons who may be subject to liability
arising out of any claim in respect of which indemnity may be sought by the Indemnified Party against the Indemnifying Party,
with the fees and expenses of such counsel to be paid by such Indemnifying Party if, based upon the written advice of counsel
of such Indemnified Party, representation of both parties by the same counsel would be inappropriate due to actual or potential
differing interests between them. No Indemnifying Party shall, without the prior written consent of the Indemnified Party, consent
to entry of judgment or effect any settlement of any claim or pending or threatened proceeding in respect of which the Indemnified
Party is or could have been a party and indemnity could have been sought hereunder by such Indemnified Party, unless such judgment
or settlement includes an unconditional release of such Indemnified Party from all liability arising out of such claim or proceeding.
4.4 Contribution.
4.4.1 If the indemnification
provided for in the foregoing Sections 4.1, 4.2 and 4.3 is unavailable to any Indemnified Party in respect of any loss, claim,
damage, liability or action referred to herein, then each such Indemnifying Party, in lieu of indemnifying such Indemnified Party,
shall contribute to the amount paid or payable by such Indemnified Party as a result of such loss, claim, damage, liability or
action in such proportion as is appropriate to reflect the relative fault of the Indemnified Parties and the Indemnifying Parties
in connection with the actions or omissions which resulted in such loss, claim, damage, liability or action, as well as any other
relevant equitable considerations. The relative fault of any Indemnified Party and any Indemnifying Party shall be determined
by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged
omission to state a material fact relates to information supplied by such Indemnified Party or such Indemnifying Party and the
parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission.
4.4.2 The parties
hereto agree that it would not be just and equitable if contribution pursuant to this Section 4.4 were determined by pro rata
allocation or by any other method of allocation which does not take account of the equitable considerations referred to in the
immediately preceding Section 4.4.1.
4.4.3 The amount paid
or payable by an Indemnified Party as a result of any loss, claim, damage, liability or action referred to in the immediately
preceding paragraph shall be deemed to include, subject to the limitations set forth above, any legal or other expenses incurred
by such Indemnified Party in connection with investigating or defending any such action or claim. Notwithstanding the provisions
of this Section 4.4, no holder of Registrable Securities shall be required to contribute any amount in excess of the dollar amount
of the net proceeds (after payment of any underwriting fees, discounts, commissions or taxes) actually received by such holder
from the sale of Registrable Securities which gave rise to such contribution obligation. No person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty
of such fraudulent misrepresentation.
5. RULE 144.
5.1 Rule 144.
The Company covenants that it shall file any reports required to be filed by it under the Securities Act and the Exchange Act
and shall take such further action as the holders of Registrable Securities may reasonably request, all to the extent required
from time to time to enable such holders to sell Registrable Securities without registration under the Securities Act within the
limitation of the exemptions provided by Rule 144 under the Securities Act, as such Rules may be amended from time to time, or
any similar rule or regulation hereafter adopted by the Commission.
6. MISCELLANEOUS.
6.1 Other Registration
Rights. The Company represents and warrants that (a), except for the IPO Registrable Securities disclosed in the Company’s
registration statement on Form S-1 (File No. 333-223106), no person, other than the holders of the Registrable Securities, has
any right to require the Company to register any of the Company’s equity securities, or securities exercisable for or exchangeable
into Company equity securities in any registration filed by the Company for the sale of equity securities for its own account
or for the account of any other person and (b) neither the execution, delivery or performance by the Company of this Agreement
does or will constitute a default under or breach of (with or without the giving of notice or the passage of time or both) or
violate or give rise to any breach of any contract or agreement to which the Company is a party. From and after the date hereof,
other than the existing rights provided to the holders of the Registrable Securities and the IPO Registrable Securities, the Company
shall not grant to any person or entity any right to require the Company to register any of the Company’s equity securities,
or securities exercisable for or exchangeable into Company equity securities in any registration filed by the Company for the
sale of equity securities for its own account or for the account of any other person without the consent, in writing, of the holders
of the majority Registrable Securities.
6.2 Assignment;
No Third Party Beneficiaries. This Agreement and the rights, duties and obligations of the Company hereunder may not be assigned
or delegated by the Company in whole or in part. This Agreement and the rights, duties and obligations of the holders of Registrable
Securities hereunder may be freely assigned or delegated by such holder of Registrable Securities in conjunction with and to the
extent of any transfer of Registrable Securities by any such holder. This Agreement and the provisions hereof shall be binding
upon and shall inure to the benefit of each of the parties, to the permitted assigns of the Holders or holder of Registrable Securities
or of any assignee of the Holders or holder of Registrable Securities. This Agreement is not intended to confer any rights or
benefits on any persons that are not party hereto other than as expressly set forth in Article 4 and this Section 6.2.
6.3 Notices.
All notices, demands, requests, consents, approvals or other communications (collectively, “Notices”)
required or permitted to be given hereunder or which are given with respect to this Agreement shall be in writing and shall be
personally served, delivered by reputable air courier service with charges prepaid, or transmitted by hand delivery, telegram,
telex or facsimile, addressed as set forth below, or to such other address as such party shall have specified most recently by
written notice. Notice shall be deemed given on the date of service or transmission if personally served or transmitted by telegram,
telex or facsimile; provided, that if such service or transmission is not on a business day or is after normal business hours,
then such notice shall be deemed given on the next business day. Notice otherwise sent as provided herein shall be deemed given
on the next business day following timely delivery of such notice to a reputable air courier service with an order for next-day
delivery.
To the Company:
105 U.S. HIGHWAY
ONE
NORTH PALM BEACH, FL 33408
Attn:
Email:
Fax:
with a copy to (which
shall not constitute notice):
Lionheart Equities, LLC
4218 NE 2nd Avenue
Miami, Florida 33137
Attention: General Counsel
Email: notices@lheartequities.com
To a Holder, to the address set forth below such
Holder’s name on Exhibit A hereto.
6.4 Severability.
This Agreement shall be deemed severable, and the invalidity or unenforceability of any term or provision hereof shall not affect
the validity or enforceability of this Agreement or of any other term or provision hereof. Furthermore, in lieu of any such invalid
or unenforceable term or provision, the parties hereto intend that there shall be added as a part of this Agreement a provision
as similar in terms to such invalid or unenforceable provision as may be possible that is valid and enforceable.
6.5 Counterparts.
This Agreement may be executed in multiple counterparts, each of which shall be deemed an original, and all of which taken together
shall constitute one and the same instrument. This Agreement shall become effective upon delivery to each party of an executed
counterpart or the earlier delivery to each party of original, photocopied, or electronically transmitted signature pages that
together (but need not individually) bear the signatures of all other parties.
6.6 Entire Agreement.
This Agreement (including all agreements entered into pursuant hereto and all certificates and instruments delivered pursuant
hereto and thereto) constitute the entire agreement of the parties with respect to the subject matter hereof and supersede all
prior and contemporaneous agreements, representations, understandings, negotiations and discussions between the parties, whether
oral or written. Furthermore, this Agreement supersedes any and all other registration rights agreements between the Company and
any other Holder.
6.7 Modifications
and Amendments. No amendment, modification or termination of this Agreement shall be binding upon the Company unless executed
in writing by the Company. No amendment, modification or termination of this Agreement shall be binding upon the holders of the
Registrable Securities unless executed in writing by the holders of the majority Registrable Securities.
6.8 Titles and
Headings. Titles and headings of sections of this Agreement are for convenience only and shall not affect the construction
of any provision of this Agreement.
6.9 Waivers and
Extensions. Any party to this Agreement may waive any right, breach or default which such party has the right to waive, provided
that such waiver will not be effective against the waiving party unless it is in writing, is signed by such party, and specifically
refers to this Agreement. Waivers may be made in advance or after the right waived has arisen or the breach or default waived
has occurred. Any waiver may be conditional. No waiver of any breach of any agreement or provision herein contained shall be deemed
a waiver of any preceding or succeeding breach thereof nor of any other agreement or provision herein contained. No waiver or
extension of time for performance of any obligations or acts shall be deemed a waiver or extension of the time for performance
of any other obligations or acts.
6.10 Remedies Cumulative.
In the event that the Company fails to observe or perform any covenant or agreement to be observed or performed under this Agreement,
the Holder or any other holder of Registrable Securities may proceed to protect and enforce its rights by suit in equity or action
at law, whether for specific performance of any term contained in this Agreement or for an injunction against the breach of any
such term or in aid of the exercise of any power granted in this Agreement or to enforce any other legal or equitable right, or
to take any one or more of such actions, without being required to post a bond. None of the rights, powers or remedies conferred
under this Agreement shall be mutually exclusive, and each such right, power or remedy shall be cumulative and in addition to
any other right, power or remedy, whether conferred by this Agreement or now or hereafter available at law, in equity, by statute
or otherwise.
6.11 Governing
Law/Venue. This Agreement shall be governed by, interpreted under, and construed in accordance with the internal laws of the
State of New York applicable to agreements made and to be performed within the State of New York a, without giving effect to any
choice-of-law provisions thereof that would compel the application of the substantive laws of any other jurisdiction. Any legal
suit, action or proceeding arising out of or based upon this agreement, the other additional agreements or the transactions contemplated
hereby or thereby may be instituted in the Federal courts of the United States of America or the courts of the State of New York, in each case located in the City of New York, New York County, and each party irrevocably submits to the exclusive jurisdiction
of such courts in any such suit, action or proceeding. the parties irrevocably and unconditionally waive any objection to the
laying of venue of any suit, action or any proceeding in such courts and irrevocably waive and agree not to plead or claim in
any such court that any such suit, action or proceeding brought in any such court has been brought in an inconvenient forum.
6.12 Waiver of
Trial by Jury. EACH PARTY HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES THE RIGHT TO A TRIAL BY JURY IN ANY ACTION, SUIT,
COUNTERCLAIM OR OTHER PROCEEDING (WHETHER BASED ON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF, CONNECTED WITH OR RELATING TO
THIS AGREEMENT, THE TRANSACTIONS CONTEMPLATED HEREBY, OR THE ACTIONS OF THE HOLDER IN THE NEGOTIATION, ADMINISTRATION, PERFORMANCE
OR ENFORCEMENT HEREOF.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
IN WITNESS WHEREOF,
the parties have caused this Registration Rights Agreement to be executed and delivered by their duly authorized representatives
as of the date first written above.
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COMPANY:
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BURGERFI
INTERNATIONAL, INC.
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By:
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Name:
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[*]
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Title:
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[*]
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HOLDER:
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LION
POINT CAPITAL, LP
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By:
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Name: [*]
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Title:
[*]
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EXHIBIT
A
Name
and Address of Holders
Holder
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Address
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Legal
Counsel
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Lion
Point Capital, LP
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250
West 55th Street, 33rd Floor
New
York, NY 10019
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Akin
Gump Strauss Hauer & Feld LLP
One Bryant Park
New York, NY 10036
Attention: Alice Hsu
Email: ahsu@akingump.com
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Execution Version
EXHIBIT D
Form of Amended and Restated Certificate
of Incorporation
AMENDED
AND RESTATED
CERTIFICATE
OF INCORPORATION
OF
BURGERFI
INTERNATIONAL, INC.
Pursuant
to Section 245 of the
Delaware General Corporation Law
OPES
ACQUISITION CORP., a corporation existing under the laws of the State of Delaware (the “Corporation”), by its
Chief Executive Officer, hereby certifies as follows:
First:
The name of the corporation is BurgerFi International,
Inc. (hereinafter sometimes referred to as the “Corporation”).
Second:
The registered office of the Corporation is to
be located at 1013 Centre Road, Suite 403-B, Wilmington, New Castle County, Delaware, 19805. The name of its registered agent
at that address is VCorp Services, LLC.
Third:
The purpose of the Corporation shall be to engage
in any lawful act or activity for which corporations may be organized under the GCL. In addition to the powers and privileges
conferred upon the Corporation by law and those incidental thereto, the Corporation shall possess and may exercise all the powers
and privileges that are necessary or convenient to the conduct, promotion or attainment of the business or purposes of the Corporation.
Fourth:
The total number of shares of all classes of
capital stock which the Corporation shall have authority to issue is 110,000,000, of which 100,000,000 shares shall be common
stock of the par value $.0001 per share (“Common Stock”) and 10,000,000 shares shall be preferred stock of
the par value of $.0001 per share (“Preferred Stock”).
A.
Preferred Stock. The Board of Directors is expressly granted authority to issue shares of the Preferred Stock, in one or
more series, and to fix for each such series such voting powers, full or limited, and such designations, preferences and relative,
participating, optional or other special rights and such qualifications, limitations or restrictions thereof as shall be stated
and expressed in the resolution or resolutions adopted by the Board of Directors providing for the issue of such series (a “Preferred
Stock Designation”) and as may be permitted by the GCL. The number of authorized shares of Preferred Stock may be increased
or decreased (but not below the number of shares thereof then outstanding) by the affirmative vote of the holders of a majority
of the voting power of all of the then outstanding shares of the capital stock of the Corporation entitled to vote generally in
the election of directors, voting together as a single class, without a separate vote of the holders of the Preferred Stock, or
any series thereof, unless a vote of any such holders is required pursuant to any Preferred Stock Designation.
B.
Common Stock. Except as otherwise required by law or as otherwise provided in any Preferred Stock Designation, the holders
of the Common Stock shall exclusively possess all voting power and each share of Common Stock shall have one vote. Subject to
the rights of holders of any series of outstanding Preferred Stock, holders of shares of Common Stock shall have equal rights
of participation in the dividends and other distributions in cash, stock, or property of the Corporation when, as and if declared
thereon by the Board of Directors from time to time out of assets or funds of the Corporation legally available therefor and shall
have equal rights to receive the assets and funds of the Corporation available for distribution to stockholders in the event of
any liquidation, dissolution, or winding up of the affairs of the Corporation, whether voluntary or involuntary.
Fifth:
The size of the Board as of the date hereof shall
be fixed at five (5); provided that such number may be increased or decreased from time to time in such manner as prescribed by
the By-laws of the Corporation. Directors need not be stockholders.
Sixth:
Classified Board. The Board of Directors
shall be divided into three classes: Class A, Class B, and Class C. The number of directors in each class shall be as nearly equal
as possible. At the first election of directors by the incorporator, the incorporator shall elect a Class C director for a term
expiring at the Corporation’s third Annual Meeting of Stockholders. The Class C director shall then appoint additional Class
A, Class B, and Class C directors, as necessary. The directors in Class A shall be elected for a term expiring at the first Annual
Meeting of Stockholders, the directors in Class B shall be elected for a term expiring at the second Annual Meeting of Stockholders
and the directors in Class C shall be elected for a term expiring at the third Annual Meeting of Stockholders. Commencing at the
first Annual Meeting of Stockholders, and at each annual meeting thereafter, directors elected to succeed those directors whose
terms expire shall be elected for a term of office to expire at the third succeeding annual meeting of stockholders after their
election. Except as the GCL may otherwise require, in the interim between annual meetings of stockholders or special meetings
of stockholders called for the election of directors and/or the removal of one or more directors and the filling of any vacancy
in that connection, newly created directorships and any vacancies in the Board of Directors, including unfilled vacancies resulting
from the removal of directors for cause, may be filled by the vote of a majority of the remaining directors then in office, although
less than a quorum (as defined in the Corporation’s Bylaws), or by the sole remaining director. All directors shall hold
office until the expiration of their respective terms of office and until their successors shall have been elected and qualified.
A director elected to fill a vacancy resulting from the death, resignation or removal of a director shall serve for the remainder
of the full term of the director whose death, resignation or removal shall have created such vacancy and until his successor shall
have been elected and qualified.
Seventh:
The following provisions are inserted for the
management of the business and for the conduct of the affairs of the Corporation, and for further definition, limitation and regulation
of the powers of the Corporation and of its directors and stockholders:
A.
The business and affairs of the Corporation shall be managed by or under the direction of the Board of Directors.
B.
Election of directors need not be by ballot unless the Bylaws of the Corporation so provide.
C.
The Board of Directors shall have the power, without the assent or vote of the stockholders, to make, alter, amend, change, add
to or repeal the Bylaws of the Corporation as provided in the Bylaws of the Corporation.
D.
The directors in their discretion may submit any contract or act for approval or ratification at any annual meeting of the stockholders
or at any meeting of the stockholders called for the purpose of considering any such act or contract, and any contract or act
that shall be approved or be ratified by the vote of the holders of a majority of the stock of the Corporation which is represented
in person or by proxy at such meeting and entitled to vote thereat (provided that a lawful quorum of stockholders be there represented
in person or by proxy) shall be as valid and binding upon the Corporation and upon all the stockholders as though it had been
approved or ratified by every stockholder of the Corporation, whether or not the contract or act would otherwise be open to legal
attack because of directors’ interests, or for any other reason.
E.
In addition to the powers and authorities hereinbefore or by statute expressly conferred upon them, the directors are hereby empowered
to exercise all such powers and do all such acts and things as may be exercised or done by the Corporation; subject, nevertheless,
to the provisions of the statutes of Delaware, of this Certificate of Incorporation, and to any Bylaws from time to time made
by the stockholders; provided, however, that no Bylaw so made shall invalidate any prior act of the directors which would have
been valid if such Bylaw had not been made.
Eighth:
LIMITATION OF LIABILITY AND INDEMNIFICATION
A.
Limitation of Personal Liability. A director of the Corporation shall not be personally liable to the Corporation or its
stockholders for monetary damages for breach of fiduciary duty as a director, except for liability (1) for any breach of the director’s
duty of loyalty to the Corporation or its stockholders, (2) for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law, (3) under Section 174 of the GCL, or (4) for any transaction from which the director
derived an improper personal benefit. If the GCL is amended to authorize corporate action further eliminating or limiting the
personal liability of directors, then the liability of a director of the Corporation shall be eliminated or limited to the fullest
extent permitted by the GCL, as so amended. Any repeal or modification of this paragraph A by the stockholders of the Corporation
shall not adversely affect any right or protection of a director of the Corporation with respect to events occurring prior to
the time of such repeal or modification.
B.
Indemnification. The Corporation shall indemnify, to the fullest extent authorized or permitted by the DGCL, as now or
hereafter in effect, any director or officer of the Corporation who was or is a party to, or is threatened to be made a party
to, any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative, investigative or
otherwise, by reason of the fact that such person is or was a director or officer of the Corporation, or is or was serving at
the request of the Corporation as a director, officer, partner, trustee or employee of another corporation, partnership, joint
venture, trust or other enterprise, and such right to indemnification shall continue as to a person who has ceased to be a director
or officer of the Corporation and shall inure to the benefit of such person’s heirs, executors and personal and legal representatives.
The right to indemnification conferred by this Paragraph B shall include the right to be paid by the Corporation the expenses
incurred in defending or otherwise participating in any proceeding in advance of its final disposition, provided that such director
or officer presents to the Corporation a written undertaking to repay such amount if it shall ultimately be determined that such
director or officer is not entitled to be indemnified by the Corporation under this Article EIGHTH or otherwise. Notwithstanding
the foregoing, except for proceedings to enforce any director’s or officer’s rights to indemnification or to advancement
of expenses, the Corporation shall not be obligated to indemnify or advance expenses to any director or officer (or such director’s
or officer’s heirs, executors or personal or legal representatives) in connection with any proceeding (or part thereof)
initiated by such person unless such proceeding (or part thereof) was authorized by the Board of Directors.
C.
Insurance. The Corporation shall have power to purchase and maintain insurance on behalf of any person who is or was a
director, officer, employee or agent of the Corporation, or is or was serving at the request of the Corporation as a director,
officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against any expense,
liability or loss incurred by such person in any such capacity or arising out of such person’s status as such, whether or
not the Corporation would have the power to indemnify such person against such liability under the DGCL.
D.
Non-Exclusivity of Rights. The rights and authority conferred in this Article EIGHTH shall neither be exclusive of, nor
be deemed in limitation of, any rights to which any person may otherwise be or become entitled or permitted under this Certificate
of Incorporation, the Bylaws, any statute, agreement, vote of stockholders or disinterested directors or otherwise.
E.
Persons Other Than Directors and Officers. This Article EIGHTH shall not limit the right of the Corporation, to the extent
and in the manner permitted by law, to indemnify and to advance expenses to, or to purchase and maintain insurance on behalf of,
persons other than those persons described in the first sentence of Paragraph B of Article EIGHTH or to advance expenses to persons
other than directors and officers of the Corporation.
F.
Effect of Modifications. Any amendment, repeal or modification of any provision contained in this Article EIGHTH shall,
unless otherwise required by law, be prospective only (except to the extent such amendment or change in law permits the Corporation
to further limit or eliminate the liability of directors or officers) and shall not adversely affect any right or protection of
any current or former director or officer of the Corporation existing at the time of such amendment, repeal or modification with
respect to any acts or omissions occurring prior to such amendment, repeal or modification.
Ninth:
STOCKHOLDERS
A.
Special Meetings. Except as otherwise expressly provided by the terms of any series of Preferred Stock permitting the holders
of such series of Preferred Stock to call a special meeting of the holders of such series, special meetings of the stockholders
of the Corporation may be called only by the Chairman of the Board of Directors, the Chief Executive Officer of the Corporation
or the Board of Directors. The ability of the stockholders to call a special meeting of the stockholders is hereby specifically
denied.
B.
Advance Notice. Advance notice of stockholder nominations for the election of directors and of business to be brought by
stockholders before any meeting of the stockholders of the Corporation shall be given in the manner and to the extent provided
in the Bylaws.
C.
Whenever a compromise or arrangement is proposed between this Corporation and its creditors or any class of them and/or between
this Corporation and its stockholders or any class of them, any court of equitable jurisdiction within the State of Delaware may,
on the application in a summary way of this Corporation or of any creditor or stockholder thereof or on the application of any
receiver or receivers appointed for this Corporation under Section 291 of Title 8 of the Delaware Code or on the application of
trustees in dissolution or of any receiver or receivers appointed for this Corporation under Section 279 of Title 8 of the Delaware
Code, order a meeting of the creditors or class of creditors, and/or of the stockholders or class of stockholders of this Corporation,
as the case may be, to be summoned in such manner as the said court directs. If a majority in number representing three fourths
in value of the creditors or class of creditors, and/or of the stockholders or class of stockholders of this Corporation, as the
case may be, agree to any compromise or arrangement and to any reorganization of this Corporation as a consequence of such compromise
or arrangement, the said compromise or arrangement and the said reorganization shall, if sanctioned by the court to which the
said application has been made, be binding on all the creditors or class of creditors, and/or on all the stockholders or class
of stockholders, of this Corporation, as the case may be, and also on this Corporation.
Tenth:
FORUM FOR CERTAIN ACTIONS
A.
Unless the Corporation consents in writing to the selection of an alternative forum, the sole and exclusive forum for any stockholder
(including a beneficial owner) to bring (i) any derivative action or proceeding brought on behalf of the Corporation, (ii) any
action asserting a claim of breach of a fiduciary duty owed by any director, officer or other employee of the Corporation to the
Corporation or the Corporation’s stockholders, (iii) any action asserting a claim arising pursuant to any provision of the
GCL, this Certificate of Incorporation or the Corporation’s Bylaws, or (iv) any action asserting a claim governed by the
internal affairs doctrine shall be the Court of Chancery of the State of Delaware (or if the Court of Chancery does not have jurisdiction,
another state court located within the State of Delaware, or if no state court located within the State of Delaware has jurisdiction,
the federal district court for the District of Delaware) in all cases subject to the court’s having personal jurisdiction
over the indispensable parties named as defendants.
B.
If any action the subject matter of which is within the scope of Section A immediately above is filed in a court other than a
court located within the State of Delaware (a “Foreign Action”) in the name of any stockholder, such stockholder shall
be deemed to have consented to (i) the personal jurisdiction of the state and federal courts located within the State of Delaware
in connection with any action brought in any such court to enforce paragraph A immediately above (an “FSC Enforcement Action”)
and (ii) having service of process made upon such stockholder in any such FSC Enforcement Action by service upon such stockholder’s
counsel in the Foreign Action as agent for such stockholder.
C. Notwithstanding
the foregoing, Section 27 of the Securities and Exchange Act of 1934, as amended (the “Exchange Act”) creates exclusive
federal jurisdiction over all suits brought to enforce any duty or liability created by the Exchange Act or the rules and regulations
thereunder. Section 22 of the Securities Act of 1933, as amended (the “Securities Act”) creates concurrent jurisdiction
for federal and state courts over all suits brought to enforce any duty or liability created by the Securities Act or the rules
and regulations thereunder. As a result, the exclusive forum provision set forth in this Article TENTH will not apply to suits
brought to enforce any duty or liability created by the Exchange Act, the Securities Act, or any other claim for which the federal
courts have exclusive jurisdiction. Stockholders cannot waive compliance with the federal securities laws and the rules and regulations
thereunder.
D.
If any provision or provisions of this Article TENTH shall be held to be invalid, illegal or unenforceable as applied to any person
or entity or circumstance for any reason whatsoever, then, to the fullest extent permitted by law, the validity, legality and
enforceability of such provisions in any other circumstance and of the remaining provisions of this Article TENTH (including,
without limitation, each portion of any sentence of this Article TENTH containing any such provision held to be invalid, illegal
or unenforceable that is not itself held to be invalid, illegal or unenforceable) and the application of such provision to other
persons or entities and circumstances shall not in any way be affected or impaired thereby. Any person or entity purchasing or
otherwise acquiring any interest in shares of capital stock of the Corporation shall be deemed to have notice of and consented
to the provisions of this Article TENTH.
ELEVENTH:
AMENDMENT
A.
Amendment of Certificate of Incorporation. The Corporation reserves the right to amend, alter or repeal any provision contained
in this Certificate of Incorporation, in the manner now or hereafter prescribed by this Certificate of Incorporation and the DGCL,
and all rights, preferences and privileges herein conferred upon stockholders of the Corporation by and pursuant to this Certificate
of Incorporation in its present form or as hereafter amended are granted subject to the right reserved in this Article ELEVENTH.
In addition to any other vote that may be required by law, applicable stock exchange rule or the terms of any series of Preferred
Stock, the affirmative vote of the holders of at least a majority of the voting power of all then outstanding shares of capital
stock of the Corporation entitled to vote generally in the election of directors, voting together as a single class, shall be
required to amend, alter, repeal or adopt any provision of this Certificate of Incorporation. Notwithstanding any other provision
of this Certificate of Incorporation, and in addition to any other vote that may be required by law, applicable stock exchange
rule or the terms of any series of Preferred Stock, the affirmative vote of the holders of at least 75% of the voting power of
all then outstanding shares of capital stock of the Corporation entitled to vote generally in the election of directors, voting
together as a single class, shall be required to amend, alter, repeal or adopt any provision of this Certificate of Incorporation
inconsistent with the purpose and intent of Article FIFTH, Article SIXTH, Article SEVENTH, Article EIGHTH, Article NINTH, Article
TENTH or this Article ELEVENTH (including, without limitation, any such Article as renumbered as a result of any amendment, alteration,
repeal or adoption of any other Article).
B.
Amendment of Bylaws. In furtherance and not in limitation of the powers conferred by the DGCL, the Board of Directors is
expressly authorized to adopt, amend, alter or repeal the Bylaws. The Bylaws may also be adopted, amended, altered or repealed
by the stockholders of the Corporation by the affirmative vote of the holders of at least 75% of the voting power of all then
outstanding shares of capital stock of the Corporation entitled to vote generally in the election of directors, voting together
as a single class.
TWELFTH:
Section 203. The Corporation will be governed by Section 203 of the DGCL.
IN
WITNESS WHEREOF, the Corporation has caused this Amended and Restated Certificate of Incorporation to be signed as of the _______
day of ________, 2020.
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Ophir
Sternberg, Chairman of the Board and
Chief Executive Officer
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Attested
to:
__________________
__________,
Secretary
Annex A-1
AMENDMENT
TO MEMBERSHIP INTEREST PURCHASE AGREEMENT
THIS AMENDMENT TO
MEMBERSHIP INTEREST PURCHASE AGREEMENT (this “Amendment”), dated as of September 22, 2020 by and among Opes
Acquisition Corp., a Delaware corporation (the “Purchaser”), BurgerFi International LLC, a Delaware limited
liability company (“Company”), the members of the Company (the “Members”), and BurgerFi
Holdings, LLC, a Delaware limited liability company, as the representative of the Members (the “Members’ Representative”),
hereby amends that certain Membership Interest Purchase Agreement (the “MIPA”) between Purchase, Company, the
Members and the Members’ Representative dated as of June 29, 2020 (the “Effective Date”), as follows:
1. Definitions. All capitalized
terms not defined herein shall have the meaning given to them in the Operating Agreement.
2. Definition of JR Trust Entities.
(a) Schedule 1.43
is hereby amended to delete all references to the following entities (the “Excluded Entities”):
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(iii)
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BF Tallahassee,
LLC
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(v)
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BF Naples
Tamiami, LLC
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(vi)
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BF Naples
Immokalee, LLC
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(vii)
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Restaurant
Development Group, LLC
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(b) Schedule 1.43
is hereby amended to add BurgerFi IP, LLC (“BFIP”) and any other entity that owns intellectual property of
the Company.
(c) The Excluded Entities
will not be considered JR Trust Entities and Mr. Rosatti shall not convey, assign, and transfer his rights, title, and interests
in the Excluded Entities to Purchaser. Furthermore, to the extent that BFIP is owned by the Company prior to Closing, it is understood
that Mr. Rosatti will not be required to further convey, assign, and transfer his rights, title, and interests to BFIP to Purchaser.
(d) Section 4.36 is
hereby amended and restated in its entirety as follows:
“The
entities included on Schedule 1.43, along with the Excluded Entities, reflect all of the entities owned directly, indirectly or
as a joint venture partner, by John Rosatti that are engaged in the Business and/or that own Intellectual Property of the Company
(other than any Intellectual Property already owned by the Company).”
3. Definition of Key Employees.
Schedule 7.5 is hereby amended and restated as follows:
“1. Chief Executive Officer – Julio Ramirez
2. President –
Charles Guzzetta
3. Chief Operations
Officer – Nick Raucci
4. Chief Financial
Officer – Bryan McGuire
5. Chief Legal Officer
– Ross Goldstein
6.
Executive Vice President of Culinary & Procurement – Chef Paul Griffin”
4. Intellectual Property Covenant.
(a)
Section 4.21(a) shall be amended and restated as follows:
“(a)
Schedule 4.21 sets forth, as of the Effective Date, a true, correct, and complete list of all Intellectual
Property Rights, specifying as to each, as applicable: (i) the nature of such Intellectual Property Right; (ii) the owner of such
Intellectual Property Right; (iii) the jurisdictions by or in which such Intellectual Property Right has been issued or registered
or in which an application for such issuance or registration has been filed; and (iv) all licenses, sublicenses and other agreements
pursuant to which any Person is authorized to use such Intellectual Property Right.”
(b)
The third paragraph of Schedule 4.21 shall be amended and restated as follows:
“The
trademarks reflected on the following pages, other than Service Mark Registration No.: 4,179,037 (7/24/12) which is owned by the
Company, are owned by Restaurant Development Group, LLC (“RDG”), as of the Effective Date, and have been or
will be licensed or assigned to BFIP, and (other than IP already owned by the Company) are all of the trademarks, service marks
and intellectual property (collectively, the “IP”) used by the Company and franchisees.”
(c)
Section 10.2 shall be amended by adding the following clause:
“(m) The
Company and RDG shall use commercially reasonable best efforts to transfer the IP to the new entity formed to hold the Company’s
IP, BFIP.”
(d)
A new Section 10.4 shall be added as follows:
“10.4 Post-Closing
Obligation of the Members and RDG. To the extent that the Company and RDG are unable, despite diligent efforts, to cause all
of the IP to be transferred to BFIP at or prior to Closing, the Members and RDG agree that they shall (i) execute and deliver
to Seller at Closing licenses (in form and substance acceptable to the Company) of any IP not yet transferred to BFIP (collectively,
the “Remaining IP”), permitting the Company to use the Remaining IP until such time as the transfer of such
Remaining IP is completed, and (ii) diligently pursue the transfer of the Remaining IP to the Company.”
(e) Sections 1.19
and 2.3(a)(vi) shall be deleted; and Section 1.3 shall be amended to delete the words Consulting Agreement from the definition
of Additional Agreements.
(f) Article XI shall
be amended to correct references to Article XII and Section 12 in such Article XI, making them refer, instead, to Article XI and
Section 11, respectively as the case may be.
5. Miscellaneous.
Except as hereby amended or as otherwise expressly set forth herein, the MIPA and all of the terms and provisions thereof shall
remain in full force and effect. As amended by this Amendment, the MIPA is hereby ratified and remains in full force and effect
in accordance with its terms. Wherever a conflict exists between this Amendment and the MIPA, the provisions of this Amendment
shall control. This Amendment may be executed and delivered in counterparts, including by facsimile or electronic signature included
in an Adobe PDF file, each of which shall be deemed an original and which together shall constitute one and the same instrument.
This Amendment shall be governed by, interpreted under, and construed and enforced in accordance with laws of the State of Florida,
without regard to conflict of laws principles.
[Remainder of this page intentionally
left blank; signatures to follow]
The parties, with
full power and authority, intending to be legally bound hereby, have executed this Amendment on the date first written above.
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Purchaser:
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OPES ACQUISITION CORP.
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By:
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/s/ Ophir Sternberg
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Ophir Sternberg, Chairman
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Company:
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BurgerFi International, LLC, a Delaware limited liability company
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By:
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/s/ Kevin Cooper
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Kevin Cooper, Manager
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Members:
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BurgerFi Holdings, LLC
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By:
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/s/ Kevin Cooper
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Kevin Cooper, Manager
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Andrea Jane Acker Revocable Trust U/A dated April 25, 2008
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By:
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/s/ Andrea Acker
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Andrea Acker, Trustee
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Members’ Representative:
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BurgerFi Holdings, LLC
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By:
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/s/ Kevin Cooper
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Kevin Cooper, Manager
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ANNEX
B
AMENDED
AND RESTATED
CERTIFICATE
OF INCORPORATION
OF
BURGERFI
INTERNATIONAL, INC.
The Form of Amended
and Restated Certificate of Incorporation is attached as Exhibit D to Annex A of this Proxy Statement.
ANNEX
C
OPES
ACQUISITION CORP.
2020
OMNIBUS EQUITY INCENTIVE PLAN
OPES
ACQUISITION CORP.
2020
OMNIBUS EQUITY INCENTIVE PLAN
Article
I
PURPOSE
The
purpose of this OPES Acquisition Corp. 2020 Omnibus Equity Incentive Plan (the “Plan”) is to benefit OPES Acquisition
Corp., a Delaware corporation (the “Company”) and its stockholders, by assisting the Company and its subsidiaries
to attract, retain and provide incentives to key management employees, directors, and consultants of the Company and its Affiliates,
and to align the interests of such service providers with those of the Company’s stockholders. Accordingly, the Plan provides
for the granting of Non-qualified Stock Options, Incentive Stock Options, Restricted Stock Awards, Restricted Stock Unit Awards,
Stock Appreciation Rights, Performance Stock Awards, Performance Unit Awards, Unrestricted Stock Awards, Distribution Equivalent
Rights or any combination of the foregoing.
Article
II
DEFINITIONS
The
following definitions shall be applicable throughout the Plan unless the context otherwise requires:
2.1
“Affiliate” shall mean any corporation which, with respect to the Company, is a “subsidiary corporation”
within the meaning of Section 424(f) of the Code or other entity in which the Company has a controlling interest in such entity
or another entity which is part of a chain of entities in which the Company or each entity has a controlling interest in another
entity in the unbroken chain of entities ending with the applicable entity.
2.2
“Award” shall mean, individually or collectively, any Option, Restricted Stock Award, Restricted Stock Unit
Award, Performance Stock Award, Performance Unit Award, Stock Appreciation Right, Distribution Equivalent Right or Unrestricted
Stock Award.
2.3
“Award Agreement” shall mean a written agreement between the Company and the Holder with respect to an Award,
setting forth the terms and conditions of the Award, as amended.
2.4
“Board” shall mean the Board of Directors of the Company.
2.5
“Base Value” shall have the meaning given to such term in Section 14.2.
Opes Acquisition Corp. 2020 Omnibus Equity Incentive Plan
2.6
“Cause” shall mean (i) if the Holder is a party to an employment or service agreement with the Company
or an Affiliate which agreement defines “Cause” (or a similar term), “Cause” shall have the same
meaning as provided for in such agreement, or (ii) for a Holder who is not a party to such an agreement, “Cause”
shall mean termination by the Company or an Affiliate of the employment (or other service relationship) of the Holder by reason
of the Holder’s (A) intentional failure to perform reasonably assigned duties, (B) dishonesty or willful misconduct in the
performance of the Holder’s duties, (C) involvement in a transaction which is materially adverse to the Company or an Affiliate,
(D) breach of fiduciary duty involving personal profit, (E) willful violation of any law, rule, regulation or court order (other
than misdemeanor traffic violations and misdemeanors not involving misuse or misappropriation of money or property), (F) commission
of an act of fraud or intentional misappropriation or conversion of any asset or opportunity of the Company or an Affiliate, or
(G) material breach of any provision of the Plan or the Holder’s Award Agreement or any other written agreement between
the Holder and the Company or an Affiliate, in each case as determined in good faith by the Board, the determination of which
shall be final, conclusive and binding on all parties.
2.7
“Change of Control” shall mean: (i) for a Holder who is a party to an employment or consulting agreement
with the Company or an Affiliate which agreement defines “Change of Control” (or a similar term), “Change
of Control” shall have the same meaning as provided for in such agreement, or (ii) for a Holder who is not a party to
such an agreement, “Change of Control” shall mean the satisfaction of any one or more of the following conditions
(and the “Change of Control” shall be deemed to have occurred as of the first day that any one or more of the following
conditions shall have been satisfied):
(a)
Any person (as such term is used in paragraphs 13(d) and 14(d)(2) of the Exchange Act, hereinafter in this definition, “Person”),
other than the Company or an Affiliate or an employee benefit plan of the Company or an Affiliate, becomes the beneficial owner
(as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing more than
fifty percent (50%) of the combined voting power of the Company’s then outstanding securities;
(b)
The closing of a merger, consolidation or other business combination (a “Business Combination”) other than
a Business Combination in which holders of the Shares immediately prior to the Business Combination have substantially the same
proportionate ownership of the common stock or ordinary shares, as applicable, of the surviving corporation immediately after
the Business Combination as immediately before;
(c)
The closing of an agreement for the sale or disposition of all or substantially all of the Company’s assets to any entity
that is not an Affiliate;
(d)
The approval by the holders of shares of Shares of a plan of complete liquidation of the Company, other than a merger of the Company
into any subsidiary or a liquidation as a result of which persons who were stockholders of the Company immediately prior to such
liquidation have substantially the same proportionate ownership of shares of common stock or ordinary shares, as applicable, of
the surviving corporation immediately after such liquidation as immediately before; or
Opes Acquisition Corp. 2020 Omnibus Equity Incentive Plan
(e)
Within any twenty-four (24) month period, the Incumbent Directors shall cease to constitute at least a majority of the Board or
the board of directors of any successor to the Company; provided, however, that any director elected to the Board,
or nominated for election, by a majority of the Incumbent Directors then still in office, shall be deemed to be an Incumbent Director
for purposes of this paragraph (e), but excluding, for this purpose, any such individual whose initial assumption of office occurs
as a result of either an actual or threatened election contest with respect to the election or removal of directors or other actual
or threatened solicitation of proxies or consents by or on behalf of an individual, entity or “group” other than the
Board (including, but not limited to, any such assumption that results from paragraphs (a), (b), (c), or (d) of this definition).
2.8
“Code” shall mean the United States of America Internal Revenue Code of 1986, as amended. Reference in the
Plan to any section of the Code shall be deemed to include any amendments or successor provisions to any section and any regulation
under such section.
2.9
“Committee” shall mean a committee comprised of two (2) or more members of the Board who are selected by the
Board as provided in Section 4.1.
2.10
“Company” shall have the meaning given to such term in the introductory paragraph, including any successor
thereto.
2.11
“Consultant” shall mean any non-Employee (individual or entity) advisor to the Company or an Affiliate who
or which has contracted directly with the Company or an Affiliate to render bona fide consulting or advisory services thereto.
2.12
“Director” shall mean a member of the Board or a member of the board of directors of an Affiliate, in either
case, who is not an Employee.
2.13
“Distribution Equivalent Right” shall mean an Award granted under Article XIII of the Plan which entitles the
Holder to receive bookkeeping credits, cash payments and/or Share distributions equal in amount to the distributions that would
have been made to the Holder had the Holder held a specified number of Shares during the period the Holder held the Distribution
Equivalent Right.
2.14
“Distribution Equivalent Right Award Agreement” shall mean a written agreement between the Company and a Holder
with respect to a Distribution Equivalent Right Award.
2.15
“Effective Date” shall mean [________], 2020.
2.16
“Employee” shall mean any employee, including any officer, of the Company or an Affiliate.
2.17
“Exchange Act” shall mean the United States of America Securities Exchange Act of 1934, as amended.
Opes Acquisition Corp. 2020 Omnibus Equity Incentive Plan
2.18
“Fair Market Value” shall mean, as of any specified date, the closing sales price of the Shares for such date
(or, in the event that the Shares are not traded on such date, on the immediately preceding trading date) on the NASDAQ Stock
Market (“NASDAQ”), as reported by NASDAQ, or such other domestic or foreign national securities exchange on which
the Shares may be listed. If the Shares are not listed on NASDAQ or on a national securities exchange, but are quoted on the OTC
Bulletin Board or by the National Quotation Bureau, the Fair Market Value of the Shares shall be the mean of the highest bid and
lowest asked prices per Share for such date. If the Shares are not quoted or listed as set forth above, Fair Market Value shall
be determined by the Board in good faith by any fair and reasonable means (which means may be set forth with greater specificity
in the applicable Award Agreement). The Fair Market Value of property other than Shares shall be determined by the Board in good
faith by any fair and reasonable means consistent with the requirements of applicable law.
2.19
“Family Member” of an individual shall mean any child, stepchild, grandchild, parent, stepparent, spouse, former
spouse, sibling, niece, nephew, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law or sister-in-law, including
adoptive relationships, any person sharing the Holder’s household (other than a tenant or employee of the Holder), a trust
in which such persons have more than fifty percent (50%) of the beneficial interest, a foundation in which such persons (or the
Holder) control the management of assets, and any other entity in which such persons (or the Holder) own more than fifty percent
(50%) of the voting interests.
2.20
“Holder” shall mean an Employee, Director or Consultant who has been granted an Award or any such individual’s
beneficiary, estate or representative, who has acquired such Award in accordance with the terms of the Plan, as applicable.
2.21
“Incentive Stock Option” shall mean an Option which is intended by the Committee to constitute an “incentive
stock option” and conforms to the applicable provisions of Section 422 of the Code.
2.22
“Incumbent Director” shall mean, with respect to any period of time specified under the Plan for purposes of
determining whether or not a Change of Control has occurred, the individuals who were members of the Board at the beginning of
such period.
2.23
“Non-qualified Stock Option” shall mean an Option which is not an Incentive Stock Option or which is designated
as an Incentive Stock Option but does not meet the applicable requirements of Section 422 of the Code.
2.24
“Option” shall mean an Award granted under Article VII of the Plan of an option to purchase Shares and shall
include both Incentive Stock Options and Non-qualified Stock Options.
2.25
“Option Agreement” shall mean a written agreement between the Company and a Holder with respect to an Option.
Opes Acquisition Corp. 2020 Omnibus Equity Incentive Plan
2.26
“Performance Criteria” shall mean the criteria selected by the Committee for purposes of establishing the Performance
Goal(s) for a Holder for a Performance Period.
2.27
“Performance Goals” shall mean, for a Performance Period, the written goal or goals established by the Committee
for the Performance Period based upon the Performance Criteria, which may be related to the performance of the Holder, the Company
or an Affiliate.
2.28
“Performance Period” shall mean one or more periods of time, which may be of varying and overlapping durations,
selected by the Committee, over which the attainment of the Performance Goals shall be measured for purposes of determining a
Holder’s right to, and the payment of, a Performance Stock Award or a Performance Unit Award.
2.29
“Performance Stock Award” or “Performance Stock” shall mean an Award granted under Article
XII of the Plan under which, upon the satisfaction of predetermined Performance Goals, Shares are paid to the Holder.
2.30
“Performance Stock Agreement” shall mean a written agreement between the Company and a Holder with respect
to a Performance Stock Award.
2.31
“Performance Unit” shall mean a Unit awarded to a Holder pursuant to a Performance Unit Award.
2.32
“Performance Unit Award” shall mean an Award granted under Article XI of the Plan under which, upon the satisfaction
of predetermined Performance Goals, a cash payment shall be made to the Holder, based on the number of Units awarded to the Holder.
2.33
“Performance Unit Agreement” shall mean a written agreement between the Company and a Holder with respect to
a Performance Unit Award.
2.34
“Plan” shall mean this Opes Acquisition Corp. 2020 Omnibus Equity Incentive Plan, as amended from time to time,
together with each of the Award Agreements utilized hereunder.
2.35
“Restricted Stock Award” and “Restricted Stock” shall mean an Award granted under Article
VIII of the Plan of Shares, the transferability of which by the Holder is subject to Restrictions.
2.36
“Restricted Stock Agreement” shall mean a written agreement between the Company and a Holder with respect to
a Restricted Stock Award.
2.37
“Restricted Stock Unit Award” and “RSUs” shall refer to an Award granted under Article X
of the Plan under which, upon the satisfaction of predetermined individual service-related vesting requirements, a cash payment
shall be made to the Holder, based on the number of Units awarded to the Holder.
Opes Acquisition Corp. 2020 Omnibus Equity Incentive Plan
2.38
“Restricted Stock Unit Agreement” shall mean a written agreement between the Company and a Holder with respect
to a Restricted Stock Unit Award.
2.39
“Restriction Period” shall mean the period of time for which Shares subject to a Restricted Stock Award shall
be subject to Restrictions, as set forth in the applicable Restricted Stock Agreement.
2.40
“Restrictions” shall mean the forfeiture, transfer and/or other restrictions applicable to Shares awarded to
an Employee, Director or Consultant under the Plan pursuant to a Restricted Stock Award and set forth in a Restricted Stock Agreement.
2.41
“Rule 16b-3” shall mean Rule 16b-3 promulgated by the Securities and Exchange Commission under the Exchange
Act, as such may be amended from time to time, and any successor rule, regulation or statute fulfilling the same or a substantially
similar function.
2.42
“Shares” or “Stock” shall mean the common stock of the Company, par value $0.0001 per share.
2.43
“Stock Appreciation Right” or “SAR” shall mean an Award granted under Article XIV of the
Plan of a right, granted alone or in connection with a related Option, to receive a payment equal to the increase in value of
a specified number of Shares between the date of Award and the date of exercise.
2.44
“Stock Appreciation Right Agreement” shall mean a written agreement between the Company and a Holder with respect
to a Stock Appreciation Right.
2.45
“Tandem Stock Appreciation Right” shall mean a Stock Appreciation Right granted in connection with a related
Option, the exercise of some or all of which results in termination of the entitlement to purchase some or all of the Shares under
the related Option, all as set forth in Article XIV.
2.46
“Ten Percent Stockholder” shall mean an Employee who, at the time an Option is granted to him or her, owns
shares possessing more than ten percent (10%) of the total combined voting power of all classes of shares of the Company or of
any parent corporation or subsidiary corporation thereof (both as defined in Section 424 of the Code), within the meaning of Section
422(b)(6) of the Code.
2.47
“Termination of Service” shall mean a termination of a Holder’s employment with, or status as a Director
or Consultant of, the Company or an Affiliate, as applicable, for any reason, including, without limitation, Total and Permanent
Disability or death, except as provided in Section 6.4. In the event Termination of Service shall constitute a payment event with
respect to any Award subject to Code Section 409A, Termination of Service shall only be deemed to occur upon a “separation
from service” as such term is defined under Code Section 409A and applicable authorities.
Opes Acquisition Corp. 2020 Omnibus Equity Incentive Plan
2.48
“Total and Permanent Disability” of an individual shall mean the inability of such individual to engage in
any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to
result in death or which has lasted or can be expected to last for a continuous period of not less than twelve (12) months, within
the meaning of Section 22(e)(3) of the Code.
2.49
“Unit” shall mean a bookkeeping unit, which represents such monetary amount as shall be designated by the Committee
in each Performance Unit Agreement, or represents one Share for purposes of each Restricted Stock Unit Award.
2.50
“Unrestricted Stock Award” shall mean an Award granted under Article IX of the Plan of Shares which are not
subject to Restrictions.
2.51
“Unrestricted Stock Agreement” shall mean a written agreement between the Company and a Holder with respect
to an Unrestricted Stock Award.
Article
III
EFFECTIVE DATE OF PLAN
The
Plan shall be effective as of the Effective Date.
Article
IV
ADMINISTRATION
4.1
Composition of Committee. The Plan shall be administered by the Committee, which shall be appointed by the Board. If necessary,
in the Board’s discretion, to comply with Rule 16b-3 under the Exchange Act or relevant securities exchange or inter-dealer
quotation service, the Committee shall consist solely of two (2) or more Directors who are each (i) “non-employee directors”
within the meaning of Rule 16b-3 and (ii) “independent” for purposes of any applicable listing requirements;. If a
member of the Committee shall be eligible to receive an Award under the Plan, such Committee member shall have no authority hereunder
with respect to his or her own Award.
4.2
Powers. Subject to the other provisions of the Plan, the Committee shall have the sole authority, in its discretion, to
make all determinations under the Plan, including but not limited to (i) determining which Employees, Directors or Consultants
shall receive an Award, (ii) the time or times when an Award shall be made (the date of grant of an Award shall be the date on
which the Award is awarded by the Committee), (iii) what type of Award shall be granted, (iv) the term of an Award, (v) the date
or dates on which an Award vests, (vi) the form of any payment to be made pursuant to an Award, (vii) the terms and conditions
of an Award (including the forfeiture of the Award, and/or any financial gain, if the Holder of the Award violates any applicable
restrictive covenant thereof), (viii) the Restrictions under a Restricted Stock Award, (ix) the number of Shares which may be
issued under an Award, (x) Performance Goals applicable to any Award and certification of the achievement of such goals, and (xi)
the waiver of any Restrictions or Performance Goals, subject in all cases to compliance with applicable laws. In making such determinations
the Committee may take into account the nature of the services rendered by the respective Employees, Directors and Consultants,
their present and potential contribution to the Company’s (or the Affiliate’s) success and such other factors as the
Committee in its discretion may deem relevant.
Opes Acquisition Corp. 2020 Omnibus Equity Incentive Plan
4.3
Additional Powers. The Committee shall have such additional powers as are delegated to it under the other provisions of
the Plan. Subject to the express provisions of the Plan, the Committee is authorized to construe the Plan and the respective Award
Agreements executed hereunder, to prescribe such rules and regulations relating to the Plan as it may deem advisable to carry
out the intent of the Plan, to determine the terms, restrictions and provisions of each Award and to make all other determinations
necessary or advisable for administering the Plan. The Committee may correct any defect or supply any omission or reconcile any
inconsistency in any Award Agreement in the manner and to the extent the Committee shall deem necessary, appropriate or expedient
to carry it into effect. The determinations of the Committee on the matters referred to in this Article IV shall be conclusive
and binding on the Company and all Holders.
4.4
Committee Action. Subject to compliance with all applicable laws, action by the Committee shall require the consent of
a majority of the members of the Committee, expressed either orally at a meeting of the Committee or in writing in the absence
of a meeting. No member of the Committee shall have any liability for any good faith action, inaction or determination in connection
with the Plan.
Article
V
SHARES SUBJECT TO PLAN AND LIMITATIONS THEREON
5.1
Authorized Shares and Award Limits. The Committee may from time to time grant Awards to one or more Employees, Directors
and/or Consultants determined by it to be eligible for participation in the Plan in accordance with the provisions of Article VI.
Subject to Article XV, the aggregate number of Shares that may be issued under the Plan shall not exceed Two Million (2,000,000)
Shares. Shares shall be deemed to have been issued under the Plan solely to the extent actually issued and delivered pursuant
to an Award. To the extent that an Award lapses, expires, is canceled, is terminated unexercised or ceases to be exercisable for
any reason, or the rights of its Holder terminate, any Shares subject to such Award shall again be available for the grant of
a new Award. Notwithstanding any provision in the Plan to the contrary, the maximum number of Shares that may be subject to Awards
of Options under Article VII and/or Stock Appreciation Rights under Article XIV, in either or both cases granted to any one person
during any calendar year, shall be Two Hundred Thousand (200,000) Shares (subject to adjustment in the same manner as provided
in Article XV with respect to Shares subject to Awards then outstanding). The aggregate number of Shares reserved for Awards
under the Plan (other than Incentive Stock Options) shall automatically increase on January 1 of each year, for a period of not
more than ten (10) years, commencing on January 1 of the year following the year after the Effective Date, in an amount equal
to five percent (5%) of the total number of shares of Common Stock outstanding on December 31 of the preceding calendar year,
provided that the Committee may determine prior to the first day of the applicable fiscal year to lower the amount of such annual
increase. Notwithstanding the foregoing, the Board may act prior to January 1 of a given year to provide that there will be no
January 1 increase for such year or that the increase for such year will be a lesser number of Shares than provided herein. The
aggregate number of Shares reserved for Incentive Stock Option Awards shall remain the same for the term of the Plan.
5.2
Types of Shares. The Shares to be issued pursuant to the grant or exercise of an Award may consist of authorized but unissued
Shares, Shares purchased on the open market or Shares previously issued and outstanding and reacquired by the Company.
Opes Acquisition Corp. 2020 Omnibus Equity Incentive Plan
Article
VI
ELIGIBILITY AND TERMINATION OF SERVICE
6.1
Eligibility. Awards made under the Plan may be granted solely to individuals or entities who, at the time of grant, are
Employees, Directors or Consultants. An Award may be granted on more than one occasion to the same Employee, Director or Consultant,
and, subject to the limitations set forth in the Plan, such Award may include, a Non-qualified Stock Option, a Restricted Stock
Award, a Restricted Stock Unit Award, an Unrestricted Stock Award, a Distribution Equivalent Right Award, a Performance Stock
Award, a Performance Unit Award, a Stock Appreciation Right, a Tandem Stock Appreciation Right, or any combination thereof, and
solely for Employees, an Incentive Stock Option.
6.2
Termination of Service. Except to the extent inconsistent with the terms of the applicable Award Agreement and/or the provisions
of Section 6.3 or 6.4, the following terms and conditions shall apply with respect to a Holder’s Termination of Service
with the Company or an Affiliate, as applicable:
(a)
The Holder’s rights, if any, to exercise any then exercisable Options and/or Stock Appreciation Rights shall terminate:
(i)
If such termination is for a reason other than the Holder’s Total and Permanent Disability or death, ninety (90) days after
the date of such Termination of Service;
(ii)
If such termination is on account of the Holder’s Total and Permanent Disability, one (1) year after the date of such Termination
of Service; or
(iii)
If such termination is on account of the Holder’s death, one (1) year after the date of the Holder’s death.
Upon
such applicable date the Holder (and such Holder’s estate, designated beneficiary or other legal representative) shall forfeit
any rights or interests in or with respect to any such Options and Stock Appreciation Rights. Notwithstanding the foregoing, the
Committee, in its sole discretion, may provide for a different time period in the Award Agreement, or may extend the time period,
following a Termination of Service, during which the Holder has the right to exercise any vested Non-qualified Stock Option or
Stock Appreciation Right, which time period may not extend beyond the expiration date of the Award term.
(b)
In the event of a Holder’s Termination of Service for any reason prior to the actual or deemed satisfaction and/or lapse
of the Restrictions, vesting requirements, terms and conditions applicable to a Restricted Stock Award and/or Restricted Stock
Unit Award, such Restricted Stock and/or RSUs shall immediately be canceled, and the Holder (and such Holder’s estate, designated
beneficiary or other legal representative) shall forfeit any rights or interests in and with respect to any such Restricted Stock
and/or RSUs. Notwithstanding the immediately preceding sentence, the Committee, in its sole discretion, may determine, prior to
or within thirty (30) days after the date of such Termination of Service that all or a portion of any such Holder’s Restricted
Stock and/or RSUs shall not be so canceled and forfeited.
Opes Acquisition Corp. 2020 Omnibus Equity Incentive Plan
6.3
Special Termination Rule. Except to the extent inconsistent with the terms of the applicable Award Agreement, and notwithstanding
anything to the contrary contained in this Article VI, if a Holder’s employment with, or status as a Director of, the Company
or an Affiliate shall terminate, and if, within ninety (90) days of such termination, such Holder shall become a Consultant, such
Holder’s rights with respect to any Award or portion thereof granted thereto prior to the date of such termination may be
preserved, if and to the extent determined by the Committee in its sole discretion, as if such Holder had been a Consultant for
the entire period during which such Award or portion thereof had been outstanding. Should the Committee effect such determination
with respect to such Holder, for all purposes of the Plan, such Holder shall not be treated as if his or her employment or Director
status had terminated until such time as his or her Consultant status shall terminate, in which case his or her Award, as it may
have been reduced in connection with the Holder’s becoming a Consultant, shall be treated pursuant to the provisions of
Section 6.2, provided, however, that any such Award which is intended to be an Incentive Stock Option shall, upon the Holder’s
no longer being an Employee, automatically convert to a Non-qualified Stock Option. Should a Holder’s status as a Consultant
terminate, and if, within ninety (90) days of such termination, such Holder shall become an Employee or a Director, such Holder’s
rights with respect to any Award or portion thereof granted thereto prior to the date of such termination may be preserved, if
and to the extent determined by the Committee in its sole discretion, as if such Holder had been an Employee or a Director, as
applicable, for the entire period during which such Award or portion thereof had been outstanding, and, should the Committee effect
such determination with respect to such Holder, for all purposes of the Plan, such Holder shall not be treated as if his or her
Consultant status had terminated until such time as his or her employment with the Company or an Affiliate, or his or her Director
status, as applicable, shall terminate, in which case his or her Award shall be treated pursuant to the provisions of Section
6.2.
6.4
Termination of Service for Cause. Notwithstanding anything in this Article VI or elsewhere in the Plan to the contrary,
and unless a Holder’s Award Agreement specifically provides otherwise, in the event of a Holder’s Termination of Service
for Cause, all of such Holder’s then outstanding Awards shall expire immediately and be forfeited in their entirety upon
such Termination of Service.
Article
VII
OPTIONS
7.1
Option Period. The term of each Option shall be as specified in the Option Agreement; provided, however,
that except as set forth in Section 7.3, no Option shall be exercisable after the expiration of ten (10) years from the date of
its grant.
7.2
Limitations on Exercise of Option. An Option shall be exercisable in whole or in such installments and at such times as
specified in the Option Agreement.
Opes Acquisition Corp. 2020 Omnibus Equity Incentive Plan
7.3
Special Limitations on Incentive Stock Options. To the extent that the aggregate Fair Market Value (determined at the time
the respective Incentive Stock Option is granted) of Shares with respect to which Incentive Stock Options are exercisable for
the first time by an individual during any calendar year under all plans of the Company and any parent corporation or subsidiary
corporation thereof (both as defined in Section 424 of the Code) which provide for the grant of Incentive Stock Options exceeds
One Hundred Thousand Dollars ($100,000) (or such other individual limit as may be in effect under the Code on the date of grant),
the portion of such Incentive Stock Options that exceeds such threshold shall be treated as Non-qualified Stock Options. The Committee
shall determine, in accordance with applicable provisions of the Code, Treasury Regulations and other administrative pronouncements,
which of a Holder’s Options, which were intended by the Committee to be Incentive Stock Options when granted to the Holder,
will not constitute Incentive Stock Options because of such limitation, and shall notify the Holder of such determination as soon
as practicable after such determination. No Incentive Stock Option shall be granted to an Employee if, at the time the Incentive
Stock Option is granted, such Employee is a Ten Percent Stockholder, unless (i) at the time such Incentive Stock Option is granted
the Option price is at least one hundred ten percent (110%) of the Fair Market Value of the Shares subject to the Incentive Stock
Option, and (ii) such Incentive Stock Option by its terms is not exercisable after the expiration of five (5) years from the date
of grant. No Incentive Stock Option shall be granted more than ten (10) years from the earlier of the Effective Date or date on
which the Plan is approved by the Company’s stockholders. The designation by the Committee of an Option as an Incentive
Stock Option shall not guarantee the Holder that the Option will satisfy the applicable requirements for “incentive stock
option” status under Section 422 of the Code.
7.4
Option Agreement. Each Option shall be evidenced by an Option Agreement in such form and containing such provisions not
inconsistent with the other provisions of the Plan as the Committee from time to time shall approve, including, but not limited
to, provisions intended to qualify an Option as an Incentive Stock Option. An Option Agreement may provide for the payment of
the Option price, in whole or in part, by the delivery of a number of Shares (plus cash if necessary) that have been owned by
the Holder for at least six (6) months and having a Fair Market Value equal to such Option price, or such other forms or methods
as the Committee may determine from time to time, in each case, subject to such rules and regulations as may be adopted by the
Committee. Each Option Agreement shall, solely to the extent inconsistent with the provisions of Sections 6.2, 6.3, and 6.4, as
applicable, specify the effect of Termination of Service on the exercisability of the Option. Moreover, without limiting the generality
of the foregoing, a Non-qualified Stock Option Agreement may provide for a “cashless exercise” of the Option, in whole
or in part, by (a) establishing procedures whereby the Holder, by a properly-executed written notice, directs (i) an
immediate market sale or margin loan as to all or a part of Shares to which he is entitled to receive upon exercise of the Option,
pursuant to an extension of credit by the Company to the Holder of the Option price, (ii) the delivery of the Shares from
the Company directly to a brokerage firm and (iii) the delivery of the Option price from sale or margin loan proceeds from
the brokerage firm directly to the Company, or (b) reducing the number of Shares to be issued upon exercise of the Option
by the number of such Shares having an aggregate Fair Market Value equal to the Option price (or portion thereof to be so paid)
as of the date of the Option’s exercise. An Option Agreement may also include provisions relating to: (i) subject to
the provisions hereof, accelerated vesting of Options, including but not limited to, upon the occurrence of a Change of Control,
(ii) tax matters (including provisions covering any applicable Employee wage withholding requirements and requiring additional
“gross-up” payments to Holders to meet any excise taxes or other additional income tax liability imposed as a result
of a payment made upon a Change of Control resulting from the operation of the Plan or of such Option Agreement) and (iii) any
other matters not inconsistent with the terms and provisions of the Plan that the Committee shall in its sole discretion determine.
The terms and conditions of the respective Option Agreements need not be identical.
Opes Acquisition Corp. 2020 Omnibus Equity Incentive Plan
7.5
Option Price and Payment. The price at which an Share may be purchased upon exercise of an Option shall be determined by
the Committee; provided, however, that such Option price (i) shall not be less than the Fair Market Value of
an Share on the date such Option is granted (or 110% of Fair Market Value for an Incentive Stock Option held by Ten Percent Stockholder,
as provided in Section 7.3), and (ii) shall be subject to adjustment as provided in Article XV. The Option or portion thereof
may be exercised by delivery of an irrevocable notice of exercise to the Company. The Option price for the Option or portion thereof
shall be paid in full in the manner prescribed by the Committee as set forth in the Plan and the applicable Option Agreement,
which manner, with the consent of the Committee, may include the withholding of Shares otherwise issuable in connection with the
exercise of the Option. Separate share certificates shall be issued by the Company for those Shares acquired pursuant to the exercise
of an Incentive Stock Option and for those Shares acquired pursuant to the exercise of a Non-qualified Stock Option.
7.6
Stockholder Rights and Privileges. The Holder of an Option shall be entitled to all the privileges and rights of a stockholder
of the Company solely with respect to such Shares as have been purchased under the Option and for which share certificates have
been registered in the Holder’s name.
7.7
Options and Rights in Substitution for Stock or Options Granted by Other Corporations. Options may be granted under the
Plan from time to time in substitution for stock options held by individuals employed by entities who become Employees, Directors
or Consultants as a result of a merger or consolidation of the employing entity with the Company or any Affiliate, or the acquisition
by the Company or an Affiliate of the assets of the employing entity, or the acquisition by the Company or an Affiliate of stock
or shares of the employing entity with the result that such employing entity becomes an Affiliate.
7.8
Prohibition Against Re-Pricing. Except to the extent (i) approved in advance by holders of a majority of the shares
of the Company entitled to vote generally in the election of directors, or (ii) as a result of any Change of Control or any
adjustment as provided in Article XV, the Committee shall not have the power or authority to reduce, whether through amendment
or otherwise, the exercise price under any outstanding Option or Stock Appreciation Right, or to grant any new Award or make any
payment of cash in substitution for or upon the cancellation of Options and/or Stock Appreciation Rights previously granted.
Opes Acquisition Corp. 2020 Omnibus Equity Incentive Plan
Article
VIII
RESTRICTED STOCK AWARDS
8.1
Award. A Restricted Stock Award shall constitute an Award of Shares to the Holder as of the date of the Award which are
subject to a “substantial risk of forfeiture” as defined under Section 83 of the Code during the specified Restriction
Period. At the time a Restricted Stock Award is made, the Committee shall establish the Restriction Period applicable to such
Award. Each Restricted Stock Award may have a different Restriction Period, in the discretion of the Committee. The Restriction
Period applicable to a particular Restricted Stock Award shall not be changed except as permitted by Section 8.2.
8.2
Terms and Conditions. At the time any Award is made under this Article VIII, the Company and the Holder shall enter into
a Restricted Stock Agreement setting forth each of the matters contemplated thereby and such other matters as the Committee may
determine to be appropriate. The Company shall cause the Shares to be issued in the name of Holder, either by book-entry registration
or issuance of one or more stock certificates evidencing the Shares, which Shares or certificates shall be held by the Company
or the stock transfer agent or brokerage service selected by the Company to provide services for the Plan. The Shares shall be
restricted from transfer and shall be subject to an appropriate stop-transfer order, and if any certificate is issued, such certificate
shall bear an appropriate legend referring to the restrictions applicable to the Shares. After any Shares vest, the Company shall
deliver the vested Shares, in book-entry or certificated form in the Company’s sole discretion, registered in the name of
Holder or his or her legal representatives, beneficiaries or heirs, as the case may be, less any Shares withheld to pay withholding
taxes. If provided for under the Restricted Stock Agreement, the Holder shall have the right to vote Shares subject thereto and
to enjoy all other stockholder rights, including the entitlement to receive dividends on the Shares during the Restriction Period.
At the time of such Award, the Committee may, in its sole discretion, prescribe additional terms and conditions or restrictions
relating to Restricted Stock Awards, including, but not limited to, rules pertaining to the effect of Termination of Service prior
to expiration of the Restriction Period. Such additional terms, conditions or restrictions shall, to the extent inconsistent with
the provisions of Sections 6.2, 6.3 and 6.4, as applicable, be set forth in a Restricted Stock Agreement made in conjunction with
the Award. Such Restricted Stock Agreement may also include provisions relating to: (i) subject to the provisions hereof,
accelerated vesting of Awards, including but not limited to accelerated vesting upon the occurrence of a Change of Control, (ii) tax
matters (including provisions covering any applicable Employee wage withholding requirements and requiring additional “gross-up”
payments to Holders to meet any excise taxes or other additional income tax liability imposed as a result of a payment made in
connection with a Change of Control resulting from the operation of the Plan or of such Restricted Stock Agreement) and (iii) any
other matters not inconsistent with the terms and provisions of the Plan that the Committee shall in its sole discretion determine.
The terms and conditions of the respective Restricted Stock Agreements need not be identical. All Shares delivered to a Holder
as part of a Restricted Stock Award shall be delivered and reported by the Company or the Affiliate, as applicable, to the Holder
at the time of vesting.
Opes Acquisition Corp. 2020 Omnibus Equity Incentive Plan
8.3
Payment for Restricted Stock. The Committee shall determine the amount and form of any payment from a Holder for Shares
received pursuant to a Restricted Stock Award, if any, provided that in the absence of such a determination, a Holder shall not
be required to make any payment for Shares received pursuant to a Restricted Stock Award, except to the extent otherwise required
by law.
Article
IX
UNRESTRICTED STOCK AWARDS
9.1
Award. Shares may be awarded (or sold) to Employees, Directors or Consultants under the Plan which are not subject to Restrictions
of any kind, in consideration for past services rendered thereby to the Company or an Affiliate or for other valid consideration.
9.2
Terms and Conditions. At the time any Award is made under this Article IX, the Company and the Holder shall enter into
an Unrestricted Stock Agreement setting forth each of the matters contemplated hereby and such other matters as the Committee
may determine to be appropriate.
9.3
Payment for Unrestricted Stock. The Committee shall determine the amount and form of any payment from a Holder for Shares
received pursuant to an Unrestricted Stock Award, if any, provided that in the absence of such a determination, a Holder shall
not be required to make any payment for Shares received pursuant to an Unrestricted Stock Award, except to the extent otherwise
required by law.
Article
X
RESTRICTED STOCK UNIT AWARDS
10.1
Award. A Restricted Stock Unit Award shall constitute a promise to grant Shares (or cash equal to the Fair Market Value
of Shares) to the Holder at the end of a specified Restriction Period. At the time a Restricted Stock Unit Award is made, the
Committee shall establish the Restriction Period applicable to such Award. Each Restricted Stock Unit Award may have a different
Restriction Period, in the discretion of the Committee. A Restricted Stock Unit shall not constitute an equity interest in the
Company and shall not entitle the Holder to voting rights, dividends or any other rights associated with ownership of Shares prior
to the time the Holder shall receive a distribution of Shares pursuant to Section 10.3.
Opes Acquisition Corp. 2020 Omnibus Equity Incentive Plan
10.2
Terms and Conditions. At the time any Award is made under this Article X, the Company and the Holder shall enter into a
Restricted Stock Unit Agreement setting forth each of the matters contemplated thereby and such other matters as the Committee
may determine to be appropriate. The Restricted Stock Unit Agreement shall set forth the individual service-based vesting requirement
which the Holder would be required to satisfy before the Holder would become entitled to distribution pursuant to Section 10.3
and the number of Units awarded to the Holder. Such conditions shall be sufficient to constitute a “substantial risk of
forfeiture” as such term is defined under Section 409A of the Code. At the time of such Award, the Committee may, in its
sole discretion, prescribe additional terms and conditions or restrictions relating to Restricted Stock Unit Awards in the Restricted
Stock Unit Agreement, including, but not limited to, rules pertaining to the effect of Termination of Service prior to expiration
of the applicable vesting period. The terms and conditions of the respective Restricted Stock Unit Agreements need not be identical.
10.3
Distributions of Shares. The Holder of a Restricted Stock Unit shall be entitled to receive a cash payment equal to the
Fair Market Value of an Share, or one Share, as determined in the sole discretion of the Committee and as set forth in the Restricted
Stock Unit Agreement, for each Restricted Stock Unit subject to such Restricted Stock Unit Award, if the Holder satisfies the
applicable vesting requirement. Such distribution shall be made no later than by the fifteenth (15th) day of the third
(3rd) calendar month next following the end of the calendar year in which the Restricted Stock Unit first becomes vested
(i.e., no longer subject to a “substantial risk of forfeiture”).
Article
XI
PERFORMANCE UNIT AWARDS
11.1
Award. A Performance Unit Award shall constitute an Award under which, upon the satisfaction of predetermined individual
and/or Company (and/or Affiliate) Performance Goals based on selected Performance Criteria, a cash payment shall be made to the
Holder, based on the number of Units awarded to the Holder. At the time a Performance Unit Award is made, the Committee shall
establish the Performance Period and applicable Performance Goals. Each Performance Unit Award may have different Performance
Goals, in the discretion of the Committee. A Performance Unit Award shall not constitute an equity interest in the Company and
shall not entitle the Holder to voting rights, dividends or any other rights associated with ownership of Shares.
11.2
Terms and Conditions. At the time any Award is made under this Article XI, the Company and the Holder shall enter into
a Performance Unit Agreement setting forth each of the matters contemplated thereby and such other matters as the Committee may
determine to be appropriate. The Committee shall set forth in the applicable Performance Unit Agreement the Performance Period,
Performance Criteria and Performance Goals which the Holder and/or the Company would be required to satisfy before the Holder
would become entitled to payment pursuant to Section 11.3, the number of Units awarded to the Holder and the dollar value or formula
assigned to each such Unit. Such payment shall be subject to a “substantial risk of forfeiture” under Section 409A
of the Code. At the time of such Award, the Committee may, in its sole discretion, prescribe additional terms and conditions or
restrictions relating to Performance Unit Awards, including, but not limited to, rules pertaining to the effect of Termination
of Service prior to expiration of the applicable performance period. The terms and conditions of the respective Performance Unit
Agreements need not be identical.
Opes Acquisition Corp. 2020 Omnibus Equity Incentive Plan
11.3
Payments. The Holder of a Performance Unit shall be entitled to receive a cash payment equal to the dollar value assigned
to such Unit under the applicable Performance Unit Agreement if the Holder and/or the Company satisfy (or partially satisfy, if
applicable under the applicable Performance Unit Agreement) the Performance Goals set forth in such Performance Unit Agreement.
All payments shall be made no later than by the fifteenth (15th) day of the third (3rd) calendar month next
following the end of the Company’s fiscal year to which such performance goals and objectives relate.
Article
XII
PERFORMANCE STOCK AWARDS
12.1
Award. A Performance Stock Award shall constitute a promise to grant Shares (or cash equal to the Fair Market Value of
Shares) to the Holder at the end of a specified Performance Period subject to achievement of specified Performance Goals. At the
time a Performance Stock Award is made, the Committee shall establish the Performance Period and applicable Performance Goals
based on selected Performance Criteria. Each Performance Stock Award may have different Performance Goals, in the discretion of
the Committee. A Performance Stock Award shall not constitute an equity interest in the Company and shall not entitle the Holder
to voting rights, dividends or any other rights associated with ownership of Shares unless and until the Holder shall receive
a distribution of Shares pursuant to Section 11.3.
12.2
Terms and Conditions. At the time any Award is made under this Article XII, the Company and the Holder shall enter into
a Performance Stock Agreement setting forth each of the matters contemplated thereby and such other matters as the Committee may
determine to be appropriate. The Committee shall set forth in the applicable Performance Stock Agreement the Performance Period,
selected Performance Criteria and Performance Goals which the Holder and/or the Company would be required to satisfy before the
Holder would become entitled to the receipt of Shares pursuant to such Holder’s Performance Stock Award and the number of
Shares subject to such Performance Stock Award. Such distribution shall be subject to a “substantial risk of forfeiture”
under Section 409A of the Code. If such Performance Goals are achieved, the distribution of Shares (or the payment of cash, as
determined in the sole discretion of the Committee), shall be made no later than by the fifteenth (15th) day of the
third (3rd) calendar month next following the end of the Company’s fiscal year to which such goals and objectives
relate. At the time of such Award, the Committee may, in its sole discretion, prescribe additional terms and conditions or restrictions
relating to Performance Stock Awards, including, but not limited to, rules pertaining to the effect of the Holder’s Termination
of Service prior to the expiration of the applicable performance period. The terms and conditions of the respective Performance
Stock Agreements need not be identical.
12.3
Distributions of Shares. The Holder of a Performance Stock Award shall be entitled to receive a cash payment equal to the
Fair Market Value of a Share, or one Share, as determined in the sole discretion of the Committee, for each Performance Stock
Award subject to such Performance Stock Agreement, if the Holder satisfies the applicable vesting requirement. Such distribution
shall be made no later than by the fifteenth (15th) day of the third (3rd) calendar month next following
the end of the Company’s fiscal year to which such performance goals and objectives relate.
Opes Acquisition Corp. 2020 Omnibus Equity Incentive Plan
Article
XIII
DISTRIBUTION EQUIVALENT RIGHTS
13.1
Award. A Distribution Equivalent Right shall entitle the Holder to receive bookkeeping credits, cash payments and/or Share
distributions equal in amount to the distributions that would have been made to the Holder had the Holder held a specified number
of Shares during the specified period of the Award.
13.2
Terms and Conditions. At the time any Award is made under this Article XIII, the Company and the Holder shall enter into
a Distribution Equivalent Rights Award Agreement setting forth each of the matters contemplated thereby and such other matters
as the Committee may determine to be appropriate. The Committee shall set forth in the applicable Distribution Equivalent Rights
Award Agreement the terms and conditions, if any, including whether the Holder is to receive credits currently in cash, is to
have such credits reinvested (at Fair Market Value determined as of the date of reinvestment) in additional Shares or is to be
entitled to choose among such alternatives. Such receipt shall be subject to a “substantial risk of forfeiture” under
Section 409A of the Code and, if such Award becomes vested, the distribution of such cash or Shares shall be made no later than
by the fifteenth (15th) day of the third (3rd) calendar month next following the end of the Company’s
fiscal year in which the Holder’s interest in the Award vests. Distribution Equivalent Rights Awards may be settled in cash
or in Shares, as set forth in the applicable Distribution Equivalent Rights Award Agreement. A Distribution Equivalent Rights
Award may, but need not be, awarded in tandem with another Award (other than an Option or a SAR), whereby, if so awarded, such
Distribution Equivalent Rights Award shall expire, terminate or be forfeited by the Holder, as applicable, under the same conditions
as under such other Award.
13.3
Interest Equivalents. The Distribution Equivalent Rights Award Agreement for a Distribution Equivalent Rights Award may
provide for the crediting of interest on a Distribution Rights Award to be settled in cash at a future date (but in no event later
than by the fifteenth (15th) day of the third (3rd) calendar month next following the end of the Company’s
fiscal year in which such interest is credited and vested), at a rate set forth in the applicable Distribution Equivalent Rights
Award Agreement, on the amount of cash payable thereunder.
Article
XIV
STOCK APPRECIATION RIGHTS
14.1
Award. A Stock Appreciation Right shall constitute a right, granted alone or in connection with a related Option, to receive
a payment equal to the increase in value of a specified number of Shares between the date of Award and the date of exercise.
Opes Acquisition Corp. 2020 Omnibus Equity Incentive Plan
14.2
Terms and Conditions. At the time any Award is made under this Article XIV, the Company and the Holder shall enter into
a Stock Appreciation Right Agreement setting forth each of the matters contemplated thereby and such other matters as the Committee
may determine to be appropriate. The Committee shall set forth in the applicable Stock Appreciation Right Agreement the terms
and conditions of the Stock Appreciation Right, including (i) the base value (the “Base Value”) for the Stock
Appreciation Right, which shall be not less than the Fair Market Value of an Share on the date of grant of the Stock Appreciation
Right, (ii) the number of Shares subject to the Stock Appreciation Right, (iii) the period during which the Stock Appreciation
Right may be exercised; provided, however, that no Stock Appreciation Right shall be exercisable after the expiration
of ten (10) years from the date of its grant, and (iv) any other special rules and/or requirements which the Committee imposes
upon the Stock Appreciation Right. Upon the exercise of some or all of the portion of a Stock Appreciation Right, the Holder shall
receive a payment from the Company, in cash or in the form of Shares having an equivalent Fair Market Value or in a combination
of both, as determined in the sole discretion of the Committee, equal to the product of:
(a)
The excess of (i) the Fair Market Value of an Share on the date of exercise, over (ii) the Base Value, multiplied by,
(b)
The number of Shares with respect to which the Stock Appreciation Right is exercised.
14.3
Tandem Stock Appreciation Rights. If the Committee grants a Stock Appreciation Right which is intended to be a Tandem Stock
Appreciation Right, the Tandem Stock Appreciation Right shall be granted at the same time as the related Option, and the following
special rules shall apply:
(a)
The Base Value shall be equal to or greater than the per Share exercise price under the related Option;
(b)
The Tandem Stock Appreciation Right may be exercised for all or part of the Shares which are subject to the related Option, but
solely upon the surrender by the Holder of the Holder’s right to exercise the equivalent portion of the related Option (and
when a Share is purchased under the related Option, an equivalent portion of the related Tandem Stock Appreciation Right shall
be canceled);
(c)
The Tandem Stock Appreciation Right shall expire no later than the date of the expiration of the related Option;
(d)
The value of the payment with respect to the Tandem Stock Appreciation Right may be no more than one hundred percent (100%) of
the difference between the per Share exercise price under the related Option and the Fair Market Value of the Shares subject to
the related Option at the time the Tandem Stock Appreciation Right is exercised, multiplied by the number of the Shares with respect
to which the Tandem Stock Appreciation Right is exercised; and
(e)
The Tandem Stock Appreciation Right may be exercised solely when the Fair Market Value of the Shares subject to the related Option
exceeds the per Share exercise price under the related Option.
Opes Acquisition Corp. 2020 Omnibus Equity Incentive Plan
Article
XV
RECAPITALIZATION OR REORGANIZATION
15.1
Adjustments to Shares. The shares with respect to which Awards may be granted under the Plan are Shares as presently constituted;
provided, however, that if, and whenever, prior to the expiration or distribution to the Holder of Shares underlying
an Award theretofore granted, the Company shall effect a subdivision or consolidation of the Shares or the payment of an Share
dividend on Shares without receipt of consideration by the Company, the number of Shares with respect to which such Award may
thereafter be exercised or satisfied, as applicable, (i) in the event of an increase in the number of outstanding Shares,
shall be proportionately increased, and the purchase price per Share shall be proportionately reduced, and (ii) in the event
of a reduction in the number of outstanding Shares, shall be proportionately reduced, and the purchase price per Share shall be
proportionately increased. Notwithstanding the foregoing or any other provision of this Article XV, any adjustment made with respect
to an Award (x) which is an Incentive Stock Option, shall comply with the requirements of Section 424(a) of the Code, and in no
event shall any adjustment be made which would render any Incentive Stock Option granted under the Plan to be other than an “incentive
stock option” for purposes of Section 422 of the Code, and (y) which is a Non-qualified Stock Option, shall comply with
the requirements of Section 409A of the Code, and in no event shall any adjustment be made which would render any Non-qualified
Stock Option granted under the Plan to become subject to Section 409A of the Code.
15.2
Recapitalization. If the Company recapitalizes or otherwise changes its capital structure, thereafter upon any exercise
or satisfaction, as applicable, of a previously granted Award, the Holder shall be entitled to receive (or entitled to purchase,
if applicable) under such Award, in lieu of the number of Shares then covered by such Award, the number and class of shares and
securities to which the Holder would have been entitled pursuant to the terms of the recapitalization if, immediately prior to
such recapitalization, the Holder had been the holder of record of the number of Shares then covered by such Award.
15.3
Other Events. In the event of changes to the outstanding Shares by reason of an extraordinary cash dividend, reorganization,
merger, consolidation, combination, split-up, spin-off, exchange or other relevant change in capitalization occurring after the
date of the grant of any Award and not otherwise provided for under this Article XV, any outstanding Awards and any Award Agreements
evidencing such Awards shall be adjusted by the Board in its discretion in such manner as the Board shall deem equitable or appropriate
taking into consideration the applicable accounting and tax consequences, as to the number and price of Shares or other consideration
subject to such Awards. In the event of any adjustment pursuant to Sections 15.1, 15.2 or this Section 15.3, the aggregate number
of Shares available under the Plan pursuant to Section 5.1 may be appropriately adjusted by the Board, the determination of which
shall be conclusive. In addition, the Committee may make provision for a cash payment to a Holder or a person who has an outstanding
Award. In addition, the Committee may make provision for a cash payment to a Holder or a person who has an outstanding Award.
Opes Acquisition Corp. 2020 Omnibus Equity Incentive Plan
15.5
Change of Control. The Committee may, in its sole discretion, at the time an Award is made or at any time prior to, coincident
with or after the time of a Change of Control, cause any Award either (i) to be canceled in consideration of a payment in cash
or other consideration in amount per share equal to the excess, if any, of the price or implied price per Share in the Change
of Control over the per Share exercise, base or purchase price of such Award, which may be paid immediately or over the vesting
schedule of the Award; (ii) to be assumed, or new rights substituted therefore, by the surviving corporation or a parent or subsidiary
of such surviving corporation following such Change of Control; (iii) accelerate any time periods, or waive any other conditions,
relating to the vesting, exercise, payment or distribution of an Award so that any Award to a Holder whose employment has been
terminated as a result of a Change of Control may be vested, exercised, paid or distributed in full on or before a date fixed
by the Committee; (iv) to be purchased from a Holder whose employment has been terminated as a result of a Change of Control,
upon the Holder’s request, for an amount of cash equal to the amount that could have been obtained upon the exercise, payment
or distribution of such rights had such Award been currently exercisable or payable; or (v) terminate any then outstanding Award
or make any other adjustment to the Awards then outstanding as the Committee deems necessary or appropriate to reflect such transaction
or change. The number of Shares subject to any Award shall be rounded to the nearest whole number.
15.6
Powers Not Affected. The existence of the Plan and the Awards granted hereunder shall not affect in any way the right or
power of the Board or of the stockholders of the Company to make or authorize any adjustment, recapitalization, reorganization
or other change of the Company’s capital structure or business, any merger or consolidation of the Company, any issue of
debt or equity securities ahead of or affecting Shares or the rights thereof, the dissolution or liquidation of the Company or
any sale, lease, exchange or other disposition of all or any part of its assets or business or any other corporate act or proceeding.
15.7
No Adjustment for Certain Awards. Except as hereinabove expressly provided, the issuance by the Company of shares of any
class or securities convertible into shares of any class, for cash, property, labor or services, upon direct sale, upon the exercise
of rights or warrants to subscribe therefor or upon conversion of shares or obligations of the Company convertible into such shares
or other securities, and in any case whether or not for fair value, shall not affect previously granted Awards, and no adjustment
by reason thereof shall be made with respect to the number of Shares subject to Awards theretofore granted or the purchase price
per Share, if applicable.
Opes Acquisition Corp. 2020 Omnibus Equity Incentive Plan
Article
XVI
AMENDMENT AND TERMINATION OF PLAN
The
Plan shall continue in effect, unless sooner terminated pursuant to this Article XVI, until the tenth (10th) anniversary
of the date on which it is adopted by the Board (except as to Awards outstanding on that date). The Board in its discretion may
terminate the Plan at any time with respect to any shares for which Awards have not theretofore been granted; provided,
however, that the Plan’s termination shall not materially and adversely impair the rights of a Holder with respect
to any Award theretofore granted without the consent of the Holder. The Board shall have the right to alter or amend the Plan
or any part hereof from time to time; provided, however, that without the approval by a majority of the votes cast
at a meeting of stockholders at which a quorum representing a majority of the shares of the Company entitled to vote generally
in the election of directors is present in person or by proxy, no amendment or modification of the Plan may (i) materially
increase the benefits accruing to Holders, (ii) except as otherwise expressly provided in Article XV, materially increase
the number of Shares subject to the Plan or the individual Award Agreements specified in Article V, (iii) materially modify
the requirements for participation in the Plan, or (iv) amend, modify or suspend Section 7.7 (re-pricing prohibitions) or
this Article XVI. In addition, no change in any Award theretofore granted may be made which would materially and adversely impair
the rights of a Holder with respect to such Award without the consent of the Holder (unless such change is required in order to
exempt the Plan or any Award from Section 409A of the Code).
Article
XVII
MISCELLANEOUS
17.1
No Right to Award. Neither the adoption of the Plan by the Company nor any action of the Board or the Committee shall be
deemed to give an Employee, Director or Consultant any right to an Award except as may be evidenced by an Award Agreement duly
executed on behalf of the Company, and then solely to the extent and on the terms and conditions expressly set forth therein.
17.2
No Rights Conferred. Nothing contained in the Plan shall (i) confer upon any Employee any right with respect to continuation
of employment with the Company or any Affiliate, (ii) interfere in any way with any right of the Company or any Affiliate
to terminate the employment of an Employee at any time, (iii) confer upon any Director any right with respect to continuation
of such Director’s membership on the Board, (iv) interfere in any way with any right of the Company or an Affiliate
to terminate a Director’s membership on the Board at any time, (v) confer upon any Consultant any right with respect
to continuation of his or her consulting engagement with the Company or any Affiliate, or (vi) interfere in any way with
any right of the Company or an Affiliate to terminate a Consultant’s consulting engagement with the Company or an Affiliate
at any time.
17.3
Other Laws; No Fractional Shares; Withholding. The Company shall not be obligated by virtue of any provision of the Plan
to recognize the exercise of any Award or to otherwise sell or issue Shares in violation of any laws, rules or regulations, and
any postponement of the exercise or settlement of any Award under this provision shall not extend the term of such Award. Neither
the Company nor its directors or officers shall have any obligation or liability to a Holder with respect to any Award (or Shares
issuable thereunder) (i) that shall lapse because of such postponement, or (ii) for any failure to comply with the requirements
of any applicable law, rules or regulations, including but not limited to any failure to comply with the requirements of Section
409A of this Code. No fractional Shares shall be delivered, nor shall any cash in lieu of fractional Shares be paid. The Company
shall have the right to deduct in cash (whether under this Plan or otherwise) in connection with all Awards any taxes required
by law to be withheld and to require any payments required to enable it to satisfy its withholding obligations. In the case of
any Award satisfied in the form of Shares, no Shares shall be issued unless and until arrangements satisfactory to the Company
shall have been made to satisfy any tax withholding obligations applicable with respect to such Award. Subject to such terms and
conditions as the Committee may impose, the Company shall have the right to retain, or the Committee may, subject to such terms
and conditions as it may establish from time to time, permit Holders to elect to tender, Shares (including Shares issuable in
respect of an Award) to satisfy, in whole or in part, the amount required to be withheld.
Opes Acquisition Corp. 2020 Omnibus Equity Incentive Plan
17.4
No Restriction on Corporate Action. Nothing contained in the Plan shall be construed to prevent the Company or any Affiliate
from taking any corporate action which is deemed by the Company or such Affiliate to be appropriate or in its best interest, whether
or not such action would have an adverse effect on the Plan or any Award made under the Plan. No Employee, Director, Consultant,
beneficiary or other person shall have any claim against the Company or any Affiliate as a result of any such action.
17.5
Restrictions on Transfer. No Award under the Plan or any Award Agreement and no rights or interests herein or therein,
shall or may be assigned, transferred, sold, exchanged, encumbered, pledged or otherwise hypothecated or disposed of by a Holder
except (i) by will or by the laws of descent and distribution, or (ii) where permitted under applicable tax rules, by
gift to any Family Member of the Holder, subject to compliance with applicable laws. An Award may be exercisable during the lifetime
of the Holder only by such Holder or by the Holder’s guardian or legal representative unless it has been transferred by
gift to a Family Member of the Holder, in which case it shall be exercisable solely by such transferee. Notwithstanding any such
transfer, the Holder shall continue to be subject to the withholding requirements provided for under Section 17.3 hereof.
17.6
Beneficiary Designations. Each Holder may, from time to time, name a beneficiary or beneficiaries (who may be contingent
or successive beneficiaries) for purposes of receiving any amount which is payable in connection with an Award under the Plan
upon or subsequent to the Holder’s death. Each such beneficiary designation shall serve to revoke all prior beneficiary
designations, be in a form prescribed by the Company and be effective solely when filed by the Holder in writing with the Company
during the Holder’s lifetime. In the absence of any such written beneficiary designation, for purposes of the Plan, a Holder’s
beneficiary shall be the Holder’s estate.
17.7
Rule 16b-3. It is intended that the Plan and any Award made to a person subject to Section 16 of the Exchange Act shall
meet all of the requirements of Rule 16b-3. If any provision of the Plan or of any such Award would disqualify the Plan or
such Award under, or would otherwise not comply with the requirements of, Rule 16b-3, such provision or Award shall be construed
or deemed to have been amended as necessary to conform to the requirements of Rule 16b-3.
Opes Acquisition Corp. 2020 Omnibus Equity Incentive Plan
17.8
Clawback Policy. Notwithstanding any contained herein or in any incentive “performance based” Awards under
the Plan shall be subject to reduction, forfeiture or repayment by reason of a correction or restatement of the Company’s
financial information if and to the extent such reduction or repayment is required by any applicable law.
17.9
Section 409A. Notwithstanding any other provision of the Plan, the Committee shall have no authority to issue an Award
under the Plan with terms and/or conditions which would cause such Award to constitute non-qualified “deferred compensation”
under Section 409A of the Code unless such Award shall be structured to be exempt from or comply with all requirements of
Code Section 409A. The Plan and all Award Agreements are intended to comply with the requirements of Section 409A of the
Code (or to be exempt therefrom) and shall be so interpreted and construed and no amount shall be paid or distributed from the
Plan unless and until such payment complies with all requirements of Code Section 409A. It is the intent of the Company that the
provisions of this Agreement and all other plans and programs sponsored by the Company be interpreted to comply in all respects
with Code Section 409A, however, the Company shall have no liability to the Holder, or any successor or beneficiary thereof, in
the event taxes, penalties or excise taxes may ultimately be determined to be applicable to any payment or benefit received by
the Holder or any successor or beneficiary thereof.
17.10
Indemnification. Each person who is or shall have been a member of the Committee or of the Board shall be indemnified and
held harmless by the Company against and from any loss, cost, liability, or expense that may be imposed upon or reasonably incurred
thereby in connection with or resulting from any claim, action, suit, or proceeding to which such person may be made a party or
may be involved by reason of any action taken or failure to act under the Plan and against and from any and all amounts paid thereby
in settlement thereof, with the Company’s approval, or paid thereby in satisfaction of any judgment in any such action,
suit, or proceeding against such person; provided, however, that such person shall give the Company an opportunity,
at its own expense, to handle and defend the same before he or she undertakes to handle and defend it on his or her own behalf.
The foregoing right of indemnification shall not be exclusive and shall be independent of any other rights of indemnification
to which such persons may be entitled under the Company’s Articles of Incorporation or By-laws, by contract, as a matter
of law, or otherwise.
17.11
Other Benefit Plans. No Award, payment or amount received hereunder shall be taken into account in computing an Employee’s
salary or compensation for the purposes of determining any benefits under any pension, retirement, life insurance or other benefit
plan of the Company or any Affiliate, unless such other plan specifically provides for the inclusion of such Award, payment or
amount received. Nothing in the Plan shall be construed to limit the right of the Company to establish other plans or to pay compensation
to its employees, in cash or property, in a manner which is not expressly authorized under the Plan.
17.12
Limits of Liability. Any liability of the Company with respect to an Award shall be based solely upon the contractual obligations
created under the Plan and the Award Agreement. None of the Company, any member of the Board nor any member of the Committee shall
have any liability to any party for any action taken or not taken, in good faith, in connection with or under the Plan.
Opes Acquisition Corp. 2020 Omnibus Equity Incentive Plan
17.13
Governing Law. Except as otherwise provided herein, the Plan shall be construed in accordance with the laws of the State
of Florida, without regard to principles of conflicts of law.
17.14
Severability of Provisions. If any provision of the Plan is held invalid or unenforceable, such invalidity or unenforceability
shall not affect any other provision of the Plan, and the Plan shall be construed and enforced as if such invalid or unenforceable
provision had not been included in the Plan.
17.15
No Funding. The Plan shall be unfunded. The Company shall not be required to establish any special or separate fund or
to make any other segregation of funds or assets to ensure the payment of any Award. Prior to receipt of Shares or a cash distribution
pursuant to the terms of an Award, such Award shall represent an unfunded unsecured contractual obligation of the Company and
the Holder shall have no greater claim to the Shares underlying such Award or any other assets of the Company or Affiliate than
any other unsecured general creditor.
17.16
Headings. Headings used throughout the Plan are for convenience only and shall not be given legal significance.
ANNEX
D
VOTING AGREEMENT
This Voting Agreement
(this “Agreement”) is made as of , 2020, by and among BurgerFi International, Inc. (f/k/a OPES Acquisition
Corp.), a Delaware corporation (the “Company”), and each of the individuals and entities set forth on the signature
page hereto (each a “Voting Party” and collectively, the “Voting Parties”). For purposes
of this Agreement, capitalized terms used and not defined herein shall have the respective meanings ascribed to them in the Member
Interest Purchase Agreement (as defined below).
RECITALS
WHEREAS,
the Company, BurgerFi International LLC, a Delaware limited liability company (“BurgerFi
LLC”), the members of BurgerFi LLC(the “Members”), and BurgerFi Holdings, LLC, a Delaware limited
liability company (the “Members’ Representative”) entered into a membership interest purchase agreement,
dated June 29, 2020 (the “Member Interest Purchase Agreement”); and
WHEREAS, each
of the Voting Parties, currently owns, or on closing of the transactions contemplated by the Member Interest Purchase Agreement,
will own, shares of the Company’s common stock, and wishes to provide for orderly elections of the Company’s board
of directors as described herein.
NOW THEREFORE,
in consideration of the foregoing and of the promises and covenants contained herein, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto agree as follows:
AGREEMENT
1. Agreement to
Vote. During the term of this Agreement, each Voting Party agrees to vote all securities of the Company that such Voting Party
owns from time to time and may vote in the election of the Company’s directors (hereinafter referred to as the “Voting
Shares”), in accordance with the provisions of this Agreement, whether at a regular or special meeting of stockholders
or by written consent.
2. Election of Boards of Directors.
2.1. Voting; Initial
Designees. During the term of this Agreement, each Voting Party agrees to vote all Voting Shares in such manner as may be
necessary to elect (and maintain in office) the following five members of the Company’s Post-Closing Board of Directors,
consisting of: Ophir Sternberg, as Chairman of the Board, A.J. Acker and __________________.
2.2. Size of the
Board. During the term of this Agreement, the parties hereto agree that they shall, and shall cause their respective successors
to, maintain the size of the Company’s Post-Closing Board of Directors at five (5) persons for a period of two (2) years
from the Closing Date.
2.3. Obligations;
Removal of Directors; Vacancies. The obligations of the Voting Parties pursuant to this Section 2 shall include any stockholder
vote to amend the Company’s Amended and Restated Certificate of Incorporation as required to effect the intent of this Agreement.
Each of the Voting Parties and the Company agree not to take any actions that would contravene or materially and adversely affect
the provisions of this Agreement and the intention of the parties with respect to the composition of the Company’s Post-Closing
Board of Directors as herein stated. The parties acknowledge that the fiduciary duties of each member of the Company’s Post-Closing
Board of Directors are to the Company’s stockholders as a whole. In the event any director elected pursuant to the terms
hereof ceases to serve as a member of the Company’s Post-Closing Board of Directors, the Company and the Voting Parties
agree to take all such action as is reasonable and necessary, including the voting of shares of capital stock of the Company by
the Voting Parties as to which they have beneficial ownership, to cause the election or appointment of such other person designated
by the Chairman, in consultation with the Members’ Representative (after Closing), or, as the case may be, to the Post-Closing
Board of Directors as may be designated on the terms provided herein.
2.4. Power of Attorney.
During the term of this Agreement, in the event a Voting Party is unable to attend in person a meeting of BurgerFi’s
stockholders at which directors shall be elected to the Board, and the Voting Party also fails to timely submit a proxy card indicating
how such Voting Party intends to vote for the directors who are standing for election, the Voting Party hereby appoints the Chairman
of the Board of Directors as its true and lawful attorney and proxy with full power of substitution for and its name to act on
behalf of the Voting Party, for the limited purpose of voting in favor of the election of all of the directors set forth in Section
2. 1 hereof. The Voting Party understands and agrees that this limited proxy is irrevocable and coupled with an interest
and, except as otherwise provided herein, shall terminate upon the termination of this Agreement.
3. Successors in
Interest of the Voting Parties and the Company. The provisions of this Agreement shall be binding upon the successors in interest
of any Voting Party with respect to any of such Voting Party’s Voting Shares or any voting rights therein, unless the Voting
Shares are sold into the Trading Market. Each Voting Party shall not, and the Company shall not, permit the transfer of any Voting
Party’s Voting Shares (except for sales of Voting Shares, including block trades, into the Trading Market), unless and until
the person to whom such securities are to be transferred shall have executed a written agreement pursuant to which such person
agrees to become a party to this Agreement and agrees to be bound by all the provisions hereof as if such person was a Voting
Party hereunder.
4. Covenants. The
Company and each Voting Party agrees to take all actions required to ensure that the rights given to each Voting Party hereunder
are effective and that each Voting Party enjoys the benefits thereof. Such actions include, without limitation, the use of best
efforts to cause the nomination of the designees, as provided herein, for election as directors of the Company. Neither the Company
nor any Voting Party will, by any voluntary action, avoid or seek to avoid the observance or performance of any of the terms to
be performed hereunder by the Company or any such Voting Party, as applicable, but will at all times in good faith assist in the
carrying out of all of the provisions of this Agreement and in the taking of all such actions as may be necessary or appropriate
in order to protect the rights of each Voting Party hereunder against impairment.
5. Grant of Proxy.
The parties agree that this Agreement does not constitute the granting of a proxy to any party or any other person; provided,
however, that should the provisions of this Agreement be construed to constitute the granting of proxies, such proxies shall be
deemed coupled with an interest and are irrevocable for the term of this Agreement.
6. Specific Enforcement.
It is agreed and understood that monetary damages would not adequately compensate an injured party for the breach of this
Agreement by any party hereto, that this Agreement shall be specifically enforceable, and that any breach of this Agreement shall
be the proper subject of a temporary or permanent injunction or restraining order. Further, each party hereto waives any claim
or defense that there is an adequate remedy at law for such breach or threatened breach and agrees that a party’s rights
would be materially and adversely affected if the obligations of the other parties under this Agreement were not carried out in
accordance with the terms and conditions hereof.
7. Manner of Voting.
The voting of the Voting Shares pursuant to this Agreement may be effected in person, by proxy, by written consent or in any
other manner permitted by applicable law.
8. Termination.
This Agreement shall terminate upon the first to occur of the following:
8.1 The date that is two (2) years
from the Closing Date; or
8.2 immediately
prior to a transaction pursuant to which a person or group other than current stockholders of the Company or the Voting Parties,
or their respective affiliates, will control greater than 50% of the Company’s voting power with respect to the election
of directors of the Company.
9. Amendments and
Waivers. Except as otherwise provided herein, any provision of this Agreement may be amended or the observance thereof may
be waived (either generally or in a particular instance and either retroactively or prospectively) only with the unanimous written
consent of (a) the Company, and (b) the holders of a majority of Voting Shares then held by the Voting Parties, the Chairman,
and the Members’ Representative; provided, however, that the right of the Chairman, with the consent of the Member’s
Representative, to nominate members to the Post-Closing Board of Directors shall not be amended without the written consent of
the Chairman.
10. Stock Splits,
Stock Dividends, etc. In the event of any stock split, stock dividend, recapitalization, reorganization or the like, any securities
issued with respect to Voting Shares held by Voting Parties shall become Voting Shares for purposes of this Agreement.
11. Severability.
In the event that any provision of the Agreement shall be invalid, illegal or unenforceable, the validity, legality and enforceability
of the remaining provisions shall not in any way be affected or impaired thereby.
12. Governing Law.
This Agreement and the legal relations between the parties arising hereunder shall be governed by and interpreted in accordance
with the laws of the State of Florida without reference to its conflicts of laws provisions, except that all matters relating
to the fiduciary duties of the Company’s Post-Closing Board of Directors shall be subject to the laws of Delaware. Any legal
suit, action or proceeding arising out of or based upon this agreement, the other additional agreements or the transactions contemplated
hereby or thereby may be instituted in the Federal courts of the United States of America or the courts of the State of Florida,
in each case located in the City of Fort Lauderdale and County of Broward, and each party irrevocably submits to the exclusive
jurisdiction of such courts in any such suit, action or proceeding. the parties irrevocably and unconditionally waive any objection
to the laying of venue of any suit, action or any proceeding in such courts and irrevocably waive and agree not to plead or claim
in any such court that any such suit, action or proceeding brought in any such court has been brought in an inconvenient forum.
13. Counterparts.
This Agreement may be executed in two or more counterparts, each of which shall be deemed an original and all of which together
shall constitute one instrument.
14. Successors and
Assigns. Except as otherwise expressly provided in this Agreement, the provisions hereof shall inure to the benefit of, and
be binding upon, the successors and assigns of the parties hereto.
15. Entire Agreement.
This Agreement constitutes the full and entire understanding and agreement among the parties, and supersedes any prior agreement
or understanding among the parties, with regard to the subjects hereof and thereof, and no party shall be liable or bound to any
other party in any manner by any warranties, representations or covenants except as specifically set forth herein or therein.
[Remainder of page intentionally left
blank; signature page follows]
This Voting Agreement
is hereby executed effective as of the date first set forth above.
OPES ACQUISITION CORP.,
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a Delaware corporation
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By:
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Name:
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Title:
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VOTING PARTIES:
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BurgerFi Holdings, LLC
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a Delaware limited liability company
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By:
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Name:
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Title:
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Andrea Jane Acker Revocable Trust
U/A
dated April 25, 2008
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By:
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Name:
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Title:
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[The Sponsor and others now holding
Sponsor shares must be listed on the signature block]
ANNEX
E
Amendment
to
STOCK
ESCROW AGREEMENT
This
AMENDMENT TO THE STOCK ESCROW AGREEMENT (the “Amendment”), dated as of __________, 2020, by and among OPES ACQUISITION
CORP., a Delaware corporation (“Company”), each stockholder identified on the signature pages hereto and CONTINENTAL
STOCK TRANSFER & TRUST COMPANY, a New York corporation (“Escrow Agent”). Capitalized terms used herein and not
otherwise defined herein shall have the meaning ascribed to them in the Stock Escrow Agreement, dated as of March 13, 2018 (the
“Stock Escrow Agreement”), by and among the Company, the Initial Stockholders and the Escrow Agent.
W
I T N E S S E T H :
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A.
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The
Company and the Initial Stockholders entered into the Stock Escrow Agreement.
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B.
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Subsequent
to the date of the Stock Escrow Agreement, certain of the Initial Stockholders transferred
their Escrow Shares to other Initial Stockholders and certain of such Initial Stockholders’
members, officers, directors, consultants or affiliates (the “Initial Transferees”),
and thereafter certain of the Initial Stockholders and/or Initial Transferees transferred
their Escrow Shares to certain third parties (the “Subsequent Transferees,”
and together with the Initial Transferees, the “Transferees”).
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C.
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The
Transferees agreed to be bound by the terms and conditions of the Stock Escrow Agreement,
this Amendment and the Insider Letter signed by the Initial Stockholders transferring
the shares.
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D.
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The
Company, the Initial Stockholders and the Transferees desire to make an amendment to
the Stock Escrow Agreement as set forth in this Amendment.
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The
parties hereto accordingly agree as follows:
1.
Amendment.
a.
Section 3 Disbursement of the Escrow Shares.
Section
3.2 of the Stock Escrow Agreement is hereby deleted and the following is inserted in its place:
“Except
as otherwise set forth herein, the Escrow Agent shall hold the shares remaining after any cancellation required pursuant to Section
3.1 above (such remaining shares to be referred to herein as the “Escrow Shares”) until the earlier of (x) six months
after the date of the consummation of the Company’s initial merger, share exchange, asset acquisition, stock purchase, recapitalization,
reorganization, or other similar business combination with one or more businesses or entities (“Business Combination”),
and (ii) if, subsequent to the closing date of the Business Combination, the post-closing Company (the “Post-Closing Entity”)
consummates a liquidation, merger, stock exchange or other similar transaction which results in all of the Post-Closing Entity’s
stockholders having the right to exchange their shares of Common Stock for cash, securities or other property (collectively, the
“Escrow Period”). The Company shall promptly provide notice of the consummation of a Business Combination to the Escrow
Agent. Upon completion of the Escrow Period, the Escrow Agent shall disburse such amount of each Initial Stockholder’s Escrow
Shares (and any applicable stock power) to such Initial Stockholder; provided, however, that if the Escrow Agent is notified by
the Company pursuant to Section 6.7 hereof that the Company is being liquidated because it failed to consummate a Business Combination
within the time period specified in the Company’s amended and restated certificate of incorporation, as the same may be
further amended from time to time, then the Escrow Agent shall promptly deliver the Escrow Shares to the Initial Stockholders
and/or Transferees, as appropriate (i.e. the holder of such shares at that time); provided further, that if, within six months
after the Company consummates a Business Combination, the Company (or the surviving entity) consummates a liquidation, merger,
stock exchange, or other similar transaction which results in all of the stockholders of such entity having the right to exchange
their shares of Common Stock for cash, securities, or other property, then upon receipt of a notice executed by the Chairman of
the Board, in form reasonably acceptable to the Escrow Agent, certifying that such transaction is then being consummated or such
conditions have been achieved, as applicable, the Escrow Agent will release the Escrow Shares to the Initial Stockholders and/or
Transferees, as appropriate (i.e. the holder of such shares at that time). The Escrow Agent shall have no further duties hereunder
after the disbursement of the Escrow Shares in accordance with this Section 3.”
2.
No Other Amendments. Except for the amendments expressly set forth in this Amendment, the Stock Escrow Agreement shall
remain unchanged and in full force and effect.
3.
Entire Agreement. The Stock Escrow Agreement (as amended by this Amendment), sets forth the entire agreement of the parties
hereto with respect to the subject matter hereof and thereof, and there are no restrictions, promises, representations, warranties,
covenants or undertakings with respect to the subject matter hereof or thereof, other than those expressly set forth in the Stock
Escrow Agreement (as amended by this Amendment). The Stock Escrow Agreement (as amended by this Amendment) supersedes all prior
and contemporaneous understandings and agreements related thereto (whether written or oral), all of which are merged herein.
4.
Governing Law. This Amendment shall for all purposes be deemed to be made under and shall be construed in accordance with
the laws of the State of New York, without giving effect to conflicts of law principles that would result in the application of
the substantive laws of another jurisdiction. Each of the parties hereby agrees that any action, proceeding, or claim against
it arising out of or relating in any way to this Agreement shall be brought and enforced in the courts of the State of New York
or the United States District Court for the Southern District of New York, and irrevocably submits to such personal jurisdiction,
which jurisdiction shall be exclusive. Each of the parties hereby waives any objection to such exclusive jurisdiction and that
such courts represent an inconvenient forum.
5.
Severability. A determination by a court or other legal authority of competent jurisdiction that any provision of this
Amendment is legally invalid shall not affect the validity or enforceability of any other provision hereof. The parties hereto
shall cooperate in good faith to substitute (or cause such court or other legal authority to substitute) for any provision so
held to be invalid a valid provision, as alike in substance to such invalid provision as is lawful.
6.
Counterparts; Facsimile Signatures. This Amendment may be executed in counterparts, each of which shall constitute an original,
but all of which shall constitute one agreement. This Amendment shall become effective upon delivery to each party hereto an executed
counterpart or the earlier delivery to each party hereto an original, photocopied, or electronically transmitted signature pages
that together (but need not individually) bear the signatures of all other parties.
7.
Captions. Captions are not a part of this Amendment, but are included for convenience, only.
8.
Further Assurances. Each party hereto shall execute and deliver such documents and take such action, as may reasonably
be considered within the scope of such party’s obligations hereunder, necessary to effectuate the transactions contemplated
by this Amendment.
[Signature
page follows.]
IN
WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed by their respective authorized signatories
as of the date first indicated above.
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Company:
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OPES
Acquisition Corp.
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By:
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Name:
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Ophir Sternberg
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Title:
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Chairman and
Chief Executive Officer
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INITIAL
STOCKHOLDERS AND TRANSFEREES:
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LH
Equities, LLC.
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By:
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Name:
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Ophir Sternberg
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Title:
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Manager
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AXIS
PUBLIC VENTURES S. DE R.L. DE C.V.
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By:
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Name:
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Gonzalo Gil White
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Title:
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CEO
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LION
POINT CAPITAL, LP
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By:
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Name:
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Irshad Karim
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Title:
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General Counsel
and CCO
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LB&B
S.A. DE C.V.
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By:
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Name:
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Rodrigo Lebois
Mateos
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Title:
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CEO
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Name:
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Gonzalo Gil White
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Name:
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Carlos E. Williamson
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Name:
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Jose Antonio
Canedo White
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Name:
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Gustavo A. Mondrago
Marquez
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Name:
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Jose Luis Cordova
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Name:
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Miguel Angel
Villegas Vargas
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CONTINENTAL
STOCK TRANSFER & TRUST COMPANY
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By:
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Name:
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Title:
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ANNEX
F
AMENDED
AND RESTATED BY LAWS
OF
BURGERFI
INTERNATIONAL, INC. F/K/A OPES ACQUISITION CORP.
ARTICLE
I
OFFICES
1.1
Registered Office. The registered office of BurgerFi International, Inc. fka Opes Acquisition Corp. (the “Corporation”)
in the State of Delaware shall be established and maintained at 1013 Centre Road, Suite 403-B, Wilmington, Delaware 19805, County
of New Castle and Vcorp Services, LLC shall be the registered agent of the corporation in charge thereof.
1.2
Other Offices. The Corporation may also have offices at such other places both within and without the State of Delaware
as the board of directors of the Corporation (the “Board of Directors”) may from time to time determine or the business
of the Corporation may require.
ARTICLE
II
MEETINGS OF STOCKHOLDERS
2.1
Place of Meetings. All meetings of the stockholders shall be held at such time and place, either within or without the
State of Delaware, as shall be designated from time to time by the Board of Directors and stated in the notice of the meeting
or in a duly executed waiver of notice thereof.
2.2
Annual Meetings. The annual meeting of stockholders shall be held on such date and at such time as may be fixed by the
Board of Directors and stated in the notice of the meeting, for the purpose of electing directors and for the transaction of only
such other business as is properly brought before the meeting in accordance with these Bylaws (the “Bylaws”).
Written
notice of an annual meeting stating the place, date and hour of the meeting, shall be given to each stockholder entitled to vote
at such meeting not less than ten (10) nor more than sixty (60) days before the date of the annual meeting.
To
be properly brought before the annual meeting, business must be either (i) specified in the notice of annual meeting (or any supplement
or amendment thereto) given by or at the direction of the Board of Directors, (ii) otherwise brought before the annual meeting
by or at the direction of the Board of Directors, or (iii) otherwise properly brought before the annual meeting by a stockholder.
In addition to any other applicable requirements, for business to be properly brought before an annual meeting by a stockholder,
the stockholder must have given timely notice thereof in writing to the Secretary of the Corporation. To be timely, a stockholder’s
notice must be delivered to or mailed and received at the principal executive offices of the Corporation not less than sixty (60)
days nor more than ninety (90) days prior to the meeting; provided, however, that in the event that less than seventy (70) days’
notice or prior public disclosure of the date of the annual meeting is given or made to stockholders, notice by a stockholder,
to be timely, must be received no later than the close of business on the tenth (10th) day following the day on which such notice
of the date of the annual meeting was mailed or such public disclosure was made, whichever first occurs. A stockholder’s
notice to the Secretary shall set forth (a) as to each matter the stockholder proposes to bring before the annual meeting (i)
a brief description of the business desired to be brought before the annual meeting and the reasons for conducting such business
at the annual meeting, and (ii) any material interest of the stockholder in such business, and (b) as to the stockholder giving
the notice (i) the name and record address of the stockholder and (ii) the class, series and number of shares of capital stock
of the Corporation which are beneficially owned by the stockholder. Notwithstanding anything in these Bylaws to the contrary,
no business shall be conducted at the annual meeting except in accordance with the procedures set forth in this Article II, Section
2. The officer of the Corporation presiding at an annual meeting shall, if the facts warrant, determine and declare to the annual
meeting that business was not properly brought before the annual meeting in accordance with the provisions of this Article II,
Section 2, and if such officer should so determine, such officer shall so declare to the annual meeting and any such business
not properly brought before the meeting shall not be transacted.
2.3
Special Meetings. Special meetings of the stockholders, for any purpose or purposes, unless otherwise prescribed by statute
or by the Amended and Restated Certificate of Incorporation of the Corporation (the “Certificate of Incorporation”),
may only be called by a majority of the entire Board of Directors, or the President or the Chairman, and shall be called by the
Secretary at the request in writing of stockholders owning a majority in amount of the entire capital stock of the corporation
issued and outstanding and entitled to vote. Such request shall state the purpose or purposes of the proposed meeting.
Unless
otherwise provided by law, written notice of a special meeting of stockholders, stating the time, place and purpose or purposes
thereof, shall be given to each stockholder entitled to vote at such meeting, not less than ten (10) or more than sixty (60) days
before the date fixed for the meeting. Business transacted at any special meeting of stockholders shall be limited to the purposes
stated in the notice.
2.4
Quorum. The holders of a majority of the capital stock issued and outstanding and entitled to vote thereat, present in
person or represented by proxy, shall constitute a quorum at all meetings of the stockholders for the transaction of business
except as otherwise provided by statute or by the Certificate of Incorporation. If, however, such quorum shall not be present
or represented at any meeting of the stockholders, the holders of a majority of the votes entitled to be cast by the stockholders
entitled to vote thereat, present in person or represented by proxy, shall have power to adjourn the meeting from time to time,
without notice other than announcement at the meeting, until a quorum shall be present or represented. At such adjourned meeting
at which a quorum shall be present or represented, any business may be transacted which might have been transacted at the meeting
as originally noticed. If the adjournment is for more than thirty (30) days, or if after the adjournment a new record date is
fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each stockholder entitled to vote at the
meeting.
2.5
Organization. The Chairman of the Board of Directors shall act as chairman of meetings of the stockholders. The Board of
Directors may designate any other officer or director of the Corporation to act as chairman of any meeting in the absence of the
Chairman of the Board of Directors, and the Board of Directors may further provide for determining who shall act as chairman of
any stockholders meeting in the absence of the Chairman of the Board of Directors and such designee.
The
Secretary of the Corporation shall act as secretary of all meetings of the stockholders, but in the absence of the Secretary the
presiding officer may appoint any other person to act as secretary of any meeting.
2.6
Voting. Unless otherwise required by law, the Certificate of Incorporation or these Bylaws, any question (other than the
election of directors) brought before any meeting of stockholders shall be decided by the vote of the holders of a majority of
the stock represented and entitled to vote thereat. At all meetings of stockholders for the election of directors, a plurality
of the votes cast shall be sufficient to elect. Each stockholder represented at a meeting of stockholders shall be entitled to
cast one vote for each share of the capital stock entitled to vote thereat held by such stockholder, unless otherwise provided
by the Certificate of Incorporation. Each stockholder entitled to vote at a meeting of stockholders or to express consent or dissent
to corporate action in writing without a meeting may authorize any person or persons to act for him by proxy. All proxies shall
be executed in writing and shall be filed with the Secretary of the Corporation not later than the day on which exercised. No
proxy shall be voted or acted upon after three (3) years from its date, unless the proxy provides for a longer period. The Board
of Directors, in its discretion, or the officer of the Corporation presiding at a meeting of stockholders, in his or her discretion,
may require that any votes cast at such meeting shall be cast by written ballot.
2.7
No Stockholder Action by Written Consent. No action that is required or permitted to be taken by the stockholders of the
Corporation at any annual or special meeting of stockholders may be effected by written consent of stockholders in lieu of a meeting.
2.8
Voting List. The officer who has charge of the stock ledger of the corporation shall prepare and make, at least ten (10)
days before every meeting of stockholders, a complete list of the stockholders entitled to vote at the meeting, arranged in alphabetical
order, showing the address of each stockholder and the number of shares registered in the name of each stockholder. Such list
shall be open to the examination of any stockholder, for any purpose germane to the meeting, during ordinary business hours, for
a period of at least ten (10) days prior to the election, either at a place within the city, town or village where the election
is to be held, which place shall be specified in the notice of the meeting, or, if not specified, at the place where said meeting
is to be held. The list shall be produced and kept at the time and place of election during the whole time thereof, and may be
inspected by any stockholder of the Corporation who is present.
2.9
Stock Ledger. The stock ledger of the Corporation shall be the only evidence as to who are the stockholders entitled to
examine the stock ledger, the list required by Section 8 of this Article II or the books of the Corporation, or to vote in person
or by proxy at any meeting of stockholders.
2.10
Adjournment. Any meeting of the stockholders, including one at which directors are to be elected, may be adjourned for
such periods as the presiding officer of the meeting or the stockholders present in person or by proxy and entitled to vote shall
direct.
2.11
Ratification. Any transaction questioned in any stockholders’ derivative suit, or any other suit to enforce alleged
rights of the Corporation or any of its stockholders, on the ground of lack of authority, defective or irregular execution, adverse
interest of any director, officer or stockholder, nondisclosure, miscomputation or the application of improper principles or practices
of accounting may be approved, ratified and confirmed before or after judgment by the Board of Directors or by the holders of
Common Stock and, if so approved, ratified or confirmed, shall have the same force and effect as if the questioned transaction
had been originally duly authorized, and said approval, ratification or confirmation shall be binding upon the Corporation and
all of its stockholders and shall constitute a bar to any claim or execution of any judgment in respect of such questioned transaction.
2.12
Remote Communication. If authorized by the Board of Directors in its sole discretion, and subject to such guidelines and
procedures as the Board of Directors may adopt, stockholders and proxy holders not physically present at a meeting of stockholders
may, by means of remote communication:
(a)
participate in a meeting of stockholders; and
(b)
be deemed present in person and vote at a meeting of stockholders whether such meeting is to be held at a designated place or
solely by means of remote communication,
provided
that
(i)
the Corporation shall implement reasonable measures to verify that each person deemed present and permitted to vote at the meeting
by means of remote communication is a stockholder or proxyholder;
(ii)
the Corporation shall implement reasonable measures to provide such stockholders and proxyholders a reasonable opportunity to
participate in the meeting and to vote on matters submitted to the stockholders, including an opportunity to read or hear the
proceedings of the meeting substantially concurrently with such proceedings; and
(iii)
if any stockholder or proxyholder votes or takes other action at the meeting by means of remote communication, a record of such
vote or other action shall be maintained by the Corporation.
2.13
Inspectors. The Corporation may, and shall if required by law, in advance of any meeting of stockholders, appoint one or
more inspectors of election, who may be employees of the Corporation, to act at the meeting or any adjournment thereof and to
make a written report thereof. The Corporation may designate one or more persons as alternate inspectors to replace any inspector
who fails to act. In the event that no inspector so appointed or designated is able to act at a meeting of stockholders, the chairman
of the meeting shall appoint one or more inspectors to act at the meeting. Each inspector, before entering upon the discharge
of his or her duties, shall take and sign an oath to execute faithfully the duties of inspector with strict impartiality and according
to the best of his or her ability. The inspector or inspectors so appointed or designated shall (a) ascertain the number of shares
of capital stock of the Corporation outstanding and the voting power of each such share, (b) determine the shares of capital stock
of the Corporation represented at the meeting and the validity of proxies and ballots, (c) count all votes and ballots, (d) determine
and retain for a reasonable period a record of the disposition of any challenges made to any determination by the inspectors and
(e) certify their determination of the number of shares of capital stock of the Corporation represented at the meeting and such
inspectors’ count of all votes and ballots. Such certification and report shall specify such other information as may be
required by law. In determining the validity and counting of proxies and ballots cast at any meeting of stockholders of the Corporation,
the inspectors may consider such information as is permitted by applicable law. No person who is a candidate for an office at
an election may serve as an inspector at such election.
ARTICLE
III
DIRECTORS
3.1
Powers; Number; Qualifications. The business and affairs of the Corporation shall be managed by or under the direction
of the Board of Directors. The Board of Directors may exercise all such authority and powers of the Corporation and do all such
lawful acts and things as are not by the DGCL or the Certificate of Incorporation directed or required to be exercised or done
by the stockholders. The number of directors which shall constitute the Board of Directors shall be not less than one (1) nor
more than nine (9). The exact number of directors shall be fixed from time to time, within the limits specified in this Article
III Section 1 or in the Certificate of Incorporation, by resolution of the Board of Directors. Directors need not be stockholders
of the Corporation. The Board may be divided into Classes as more fully described in the Certificate of Incorporation.
3.2
Election; Term of Office; Resignation; Removal; Vacancies. Each director shall hold office until the next annual meeting
of stockholders at which his or her Class stands for election or until such director’s earlier resignation, removal from
office, death or incapacity. Unless otherwise provided in the Certificate of Incorporation, vacancies and newly created directorships
resulting from any increase in the authorized number of directors or from any other cause may be filled by a majority of the directors
then in office, although less than a quorum, or by a sole remaining director and each director so chosen shall hold office until
the next election of the class for which such director shall have been chosen, and until his or her successor shall be elected
and qualified, or until such director’s earlier resignation, removal from office, death or incapacity.
3.3
Nominations. Nominations of persons for election to the Board of Directors of the Corporation at a meeting of stockholders
of the Corporation may be made at such meeting by or at the direction of the Board of Directors, by any committee or persons appointed
by the Board of Directors or by any stockholder of the Corporation entitled to vote for the election of directors at the meeting
who complies with the notice procedures set forth in this Article III, Section 3. Such nominations by any stockholder shall be
made pursuant to timely notice in writing to the Secretary of the Corporation. To be timely, a stockholder’s notice shall
be delivered to or mailed and received at the principal executive offices of the Corporation not less than sixty (60) days nor
more than ninety (90) days prior to the meeting; provided however, that in the event that less than seventy (70) days’ notice
or prior public disclosure of the date of the meeting is given or made to stockholders, notice by the stockholder, to be timely,
must be received no later than the close of business on the tenth (10th) day following the day on which such notice of the date
of the meeting was mailed or such public disclosure was made, whichever first occurs. Such stockholder’s notice to the Secretary
shall set forth (i) as to each person whom the stockholder proposes to nominate for election or reelection as a director, (a)
the name, age, business address and residence address of the person, (b) the principal occupation or employment of the person,
(c) the class and number of shares of capital stock of the Corporation which are beneficially owned by the person, and (d) any
other information relating to the person that is required to be disclosed in solicitations for proxies for election of directors
pursuant to the Rules and Regulations of the Securities and Exchange Commission under Section 14 of the Securities Exchange Act
of 1934, as amended, and (ii) as to the stockholder giving the notice (a) the name and record address of the stockholder and (b)
the class and number of shares of capital stock of the Corporation which are beneficially owned by the stockholder. The Corporation
may require any proposed nominee to furnish such other information as may reasonably be required by the Corporation to determine
the eligibility of such proposed nominee to serve as a director of the Corporation. No person shall be eligible for election as
a director of the Corporation unless nominated in accordance with the procedures set forth herein. The officer of the Corporation
presiding at an annual meeting shall, if the facts warrant, determine and declare to the meeting that a nomination was not made
in accordance with the foregoing procedure, and if he should so determine, he shall so declare to the meeting and the defective
nomination shall be disregarded.
3.4
Meetings. The Board of Directors of the Corporation may hold meetings, both regular and special, either within or without
the State of Delaware. The first meeting of each newly elected Board of Directors shall be held immediately after and at the same
place as the meeting of the stockholders at which it is elected and no notice of such meeting shall be necessary to the newly
elected directors in order to legally constitute the meeting, provided a quorum shall be present. Regular meetings of the Board
of Directors may be held without notice at such time and place as shall from time to time be determined by the Board of Directors.
Special meetings of the Board of Directors may be called by the President or a majority of the entire Board of Directors. Notice
thereof stating the place, date and hour of the meeting shall be given to each director either by mail not less than forty-eight
(48) hours before the date of the meeting, by telephone, facsimile, telegram or e-mail on twenty-four (24) hours’ notice,
or on such shorter notice as the person or persons calling such meeting may deem necessary or appropriate in the circumstances.
3.5
Quorum. Except as may be otherwise specifically provided by law, the Certificate of Incorporation or these Bylaws, at all
meetings of the Board of Directors or any committee thereof, a majority of the entire Board of Directors or such committee, as
the case may be, shall constitute a quorum for the transaction of business and the act of a majority of the directors present
at any meeting at which there is a quorum shall be the act of the Board of Directors. If a quorum shall not be present at any
meeting of the Board of Directors or of any committee thereof, a majority of the directors present thereat may adjourn the meeting
from time to time, without notice other than announcement at the meeting, until a quorum shall be present.
3.6
Organization of Meetings. The Board of Directors shall elect one of its members to be Chairman of the Board of Directors.
The Chairman of the Board of Directors shall lead the Board of Directors in fulfilling its responsibilities as set forth in these
By-Laws, including its responsibility to oversee the performance of the Corporation, and shall determine the agenda and perform
all other duties and exercise all other powers which are or from time to time may be delegated to him or her by the Board of Directors.
Meetings
of the Board of Directors shall be presided over by the Chairman of the Board of Directors, or in his or her absence, by the President,
or in the absence of the Chairman of the Board of Directors and the President by such other person as the Board of Directors may
designate or the members present may select.
3.7
Actions of Board of Directors Without Meeting. Unless otherwise restricted by the Certificate of Incorporation or these
Bylaws, any action required or permitted to be taken at any meeting of the Board of Directors or of any committee thereof may
be taken without a meeting, if all members of the Board of Directors or of such committee, as the case may be, consent thereto
in writing or by electronic transmission, and the writing or writings or electronic transmission or transmissions are filed with
the minutes of the proceedings of the Board of Directors or such committee.
3.8
Removal of Directors by Stockholders. The entire Board of Directors or any individual Director may be removed from office
with or without cause by a majority vote of the holders of the outstanding shares then entitled to vote at an election of directors.
Notwithstanding the foregoing, if the Corporation’s board is classified, stockholders may effect such removal only for cause.
In case the Board of Directors or any one or more Directors be so removed, new Directors may be elected at the same time for the
unexpired portion of the full term of the Director or Directors so removed.
3.9
Resignations. Any Director may resign at any time by submitting his or her written resignation to the Board of Directors
or Secretary of the Corporation. Such resignation shall take effect at the time of its receipt by the Corporation unless another
time be fixed in the resignation, in which case it shall become effective at the time so fixed. The acceptance of a resignation
shall not be required to make it effective.
3.10
Committees. The Board of Directors may designate one or more committees, each committee to consist of one or more of the
directors of the Corporation. In the absence or disqualification of a member of a committee, the member or members thereof present
at any meeting and not disqualified from voting, whether or not he or they constitute a quorum, may unanimously appoint another
member of the Board of Directors to act at the meeting in the place of any such absent or disqualified member. Any such committee,
to the extent provided by law and in the resolution of the Board of Directors establishing such committee, shall have and may
exercise all the powers and authority of the Board of Directors in the management of the business and affairs of the Corporation,
and may authorize the seal of the Corporation to be affixed to all papers which may require it; but no such committee shall have
the power or authority in reference to amending the Certificate of Incorporation, adopting an agreement of merger or consolidation,
recommending to the stockholders the sale, lease or exchange of all or substantially all of the Corporation’s property and
assets, recommending to the stockholders a dissolution of the Corporation or a revocation of a dissolution or amending the Bylaws
of the Corporation; and, unless the resolution expressly so provides, no such committee shall have the power or authority to declare
a dividend or to authorize the issuance of stock or to adopt a certificate of ownership and merger. Each committee shall keep
regular minutes of its meetings and report the same to the Board of Directors when required.
3.11
Compensation. The directors may be paid their expenses, if any, of attendance at each meeting of the Board of Directors
and may be paid a fixed amount (in cash or other form of consideration) for attendance at each meeting of the Board of Directors
or a stated salary as director. No such payment shall preclude any director from serving the Corporation in any other capacity
and receiving compensation therefor. Members of special or standing committees may be allowed like compensation for attending
committee meetings.
3.12
Interested Directors. No contract or transaction between the Corporation and one or more of its directors or officers,
or between the Corporation and any other corporation, partnership, association, or other organization in which one or more of
its directors or officers are directors or officers, or have a financial interest, shall be void or voidable solely for this reason,
or solely because the director or officer is present at or participates in the meeting of the Board of Directors or committee
thereof which authorizes the contract or transaction, or solely because his, her or their votes are counted for such purpose,
if (i) the material facts as to his, her or their relationship or interest and as to the contract or transaction are disclosed
or are known to the Board of Directors or the committee, and the Board of Directors or committee in good faith authorizes the
contract or transaction by the affirmative votes of a majority of the disinterested directors, even though the disinterested directors
be less than a quorum; or (ii) the material facts as to his, her or their relationship or interest and as to the contract or transaction
are disclosed or are known to the stockholders entitled to vote thereon, and the contract or transaction is specifically approved
in good faith by vote of the stockholders; or (iii) the contract or transaction is fair as to the Corporation as of the time it
is authorized, approved or ratified, by the Board of Directors, a committee thereof or the stockholders. Common or interested
directors may be counted in determining the presence of a quorum at a meeting of the Board of Directors or of a committee which
authorizes the contract or transaction.
3.13
Meetings by Means of Conference Telephone. Members of the Board of Directors or any committee designed by the Board of
Directors may participate in a meeting of the Board of Directors or of a committee of the Board of Directors by means of conference
telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other,
and participation in a meeting pursuant to this subsection shall constitute presence in person at such meeting.
ARTICLE
IV
OFFICERS
4.1
General. The officers of the Corporation shall be elected by the Board of Directors and may consist of: a Chairman of the
Board, including an Executive Chairman of the Board when so designated, Vice Chairman of the Board, Chief Executive Officer, President,
Chief Financial Officer, Chief Legal Officer or General Counsel, Secretary and Treasurer. The Board of Directors, in its discretion,
may also elect one or more Vice Presidents (including Executive Vice Presidents and Senior Vice Presidents), Assistant Secretaries,
Assistant Treasurers, a Controller and such other officers as in the judgment of the Board of Directors may be necessary or desirable.
Any number of offices may be held by the same person and more than one person may hold the same office, unless otherwise prohibited
by law, the Certificate of Incorporation or these Bylaws. The officers of the Corporation need not be stockholders of the Corporation,
nor need such officers be directors of the Corporation.
4.2
Election. The Board of Directors at its first meeting held after each annual meeting of stockholders shall elect the officers
of the Corporation who shall hold their offices for such terms and shall exercise such powers and perform such duties as shall
be determined from time to time by the Board of Directors; and all officers of the Corporation shall hold office until their successors
are chosen and qualified, or until their earlier resignation or removal. Except as otherwise provided in this Article IV, any
officer elected by the Board of Directors may be removed at any time by the affirmative vote of a majority of the Board of Directors.
Any vacancy occurring in any office of the Corporation shall be filled by the Board of Directors. The salaries of all officers
who are directors of the Corporation shall be fixed by the Board of Directors.
4.3
Voting Securities Owned by the Corporation. Powers of attorney, proxies, waivers of notice of meeting, consents and other
instruments relating to securities owned by the Corporation may be executed in the name of and on behalf of the Corporation by
the President or any Vice President, and any such officer may, in the name and on behalf of the Corporation, take all such action
as any such officer may deem advisable to vote in person or by proxy at any meeting of security holders of any corporation in
which the Corporation may own securities and at any such meeting shall possess and may exercise any and all rights and powers
incident to the ownership of such securities and which, as the owner thereof, the Corporation might have exercised and possessed
if present. The Board of Directors may, by resolution, from time to time confer like powers upon any other person or persons.
4.4
Executive Chairman of the Board. The Executive Chairman is appointed by the Board of Directors. The primary functions of
the Executive Chairman are to provide leadership and direction to the Board, facilitate the operations and deliberations of the
Board and the satisfaction of the Board’s functions and responsibilities under its mandate, and assume responsibility for
the strategic initiatives outlined below. In addition to the responsibilities applicable to all other directors, and subject to
the authority and oversight of the Board, the Executive Chairman’s responsibilities shall include:
(a)
Strategic Initiatives, including (1) Working with the Board and the Corporation’s Chief Executive Officer (“CEO”)
to develop the strategy for the Corporation’s future growth; (2) Working with the CEO to identify opportunities for value-enhancing
strategic initiatives including acquisitions, joint ventures, and strategically important relationships, as well as the disposition
from time to time of non-core assets, and communicating regularly with the CEO regarding the pursuit of such strategic initiatives;
(3) Developing and maintaining the Corporation’s relationships with future strategic partners whose capital, influence and
knowledge could add significantly to the Corporation’s value and its share price; (4) Working with members of the Corporation’s
Advisory Board and the Corporation's CEO to expand and deepen the Corporation’s relationships with political leaders, industry
leaders, private equity funds, investors and analysts, and other senior officials and stakeholders in entities of critical importance
to the Corporation; and (5) Working with the CEO on critical issues related to government relationships and strategic alliances.
(b)
Meetings, including (1) Scheduling Board meetings and setting the agenda for Board meetings; (2) Presiding over meetings of the
Board and assuming principal responsibility for the Board’s operation and functioning; (3) Ensuring that sufficient time
is allotted during Board meetings for effective discussion of agenda items and key issues and concerns and fostering an environment
in which directors ask questions and express their viewpoints; and (4) Providing opportunities for independent directors to meet
at each Board meeting in the absence of non-independent directors.
(c)
Leadership, including (1) Ensuring that Board functions are effectively carried out and, where functions have been delegated to
Board Committees, that the results are reported to the Board; (2) Ensuring that the interests of various stakeholders are considered
by the Board; and (3) Taking all reasonable steps to ensure that Board decisions are implemented.
(d)
Communication, including (1) Debriefing Board on decisions reached and suggestions made at meetings or in camera sessions of independent
directors; and (2) Facilitating communication between management and the independent directors.
(e)
Relationship with Management, including (1) Acting as principal liaison between the directors and the CEO and taking all reasonable
steps to ensure that the expectations of the Board towards management are clearly expressed, understood and respected; (2) Working
with the CEO to ensure the Corporation’s operations are conducted in a best-in-class manner and that the Corporation has
strong, productive relationships with shareholders, analysts, and other stakeholders; (3) Working with the CEO to ensure management
strategies, plans and performance are appropriately represented to the Board; and (4) Conducting an annual performance evaluation
of the CEO with input from the Board.
4.4
Chief Executive Officer. Subject to the provisions of these Bylaws and to the direction of the Executive Chairman and the
Board of Directors, the Chief Executive Officer shall have ultimate authority for decisions relating to the general management
and control of the affairs and business of the Corporation and shall perform such other duties and exercise such other powers
which are or from time to time may be delegated to him or her by the Executive Chairman or the Board of Directors or these Bylaws,
all in accordance with basic policies as established by and subject to the oversight of the Board of Directors.
4.5
President. At the request of the Executive Chairman, or in the absence of the Executive Chairman, the Chief Executive Officer,
or in the absence of the Chief Executive Officer, or in the event of his or her inability or refusal to act, the President shall
perform the duties of the Chief Executive Officer, and when so acting, shall have all the powers of and be subject to all the
restrictions upon such office. The President shall perform such other duties and have such other powers as the Executive Chairman
or the Board of Directors from time to time may prescribe.
4.6
Chief Financial Officer. The Chief Financial Officer shall have general supervision, direction and control of the financial
affairs of the Corporation and shall perform such other duties and exercise such other powers which are or from time to time may
be delegated to him or her by the Executive Chairman or the Board of Directors or these Bylaws, all in accordance with basic policies
as established by and subject to the oversight of the Board of Directors. In the absence of a named Treasurer, the Chief Financial
Officer shall also have the powers and duties of the Treasurer as hereinafter set forth and shall be authorized and empowered
to sign as Treasurer in any case where such officer’s signature is required.
4.7
Chief Legal Officer/General Counsel. The Chief Legal Officer or General Counsel shall have such powers and shall perform
such duties as shall be assigned to him or her by the Executive Chairman, the Chief Executive Officer, or the Board of Directors.
4.8
Vice Presidents. At the request of the President or in the absence of the President, or in the event of his or her inability
or refusal to act, the Vice President or the Vice Presidents if there is more than one (in the order designated by the Executive
Chairman or the Board of Directors) shall perform the duties of the President, and when so acting, shall have all the powers of
and be subject to all the restrictions upon such office. Each Vice President shall perform such other duties and have such other
powers as the Executive Chairman or the Board of Directors from time to time may prescribe. If there be no Vice President, the
Board of Directors shall designate the officer of the Corporation who, in the absence of the President or in the event of the
inability or refusal of such officer to act, shall perform the duties of such office, and when so acting, shall have all the powers
of and be subject to all the restrictions upon such office.
4.9
Secretary. The Secretary shall attend all meetings of the Board of Directors and all meetings of stockholders and record
all the proceedings thereat in a book or books to be kept for that purpose; the Secretary shall also perform like duties for the
standing committees when required. The Secretary shall give, or cause to be given, notice of all meetings of the stockholders
and special meetings of the Board of Directors, and shall perform such other duties as may be prescribed by the Executive Chairman
or the Board of Directors or the President, under whose supervision the Secretary shall be. If the Secretary shall be unable or
shall refuse to cause to be given notice of all meetings of the stockholders and special meetings of the Board of Directors, then
any Assistant Secretary shall perform such actions. If there be no Assistant Secretary, then the Board of Directors or the President
may choose another officer to cause such notice to be given. The Secretary shall have custody of the seal of the Corporation and
the Secretary or any Assistant Secretary, if there be one, shall have authority to affix the same to any instrument requiring
it and when so affixed, it may be attested by the signature of the Secretary or by the signature of any such Assistant Secretary.
The Executive Chairman or the Board of Directors may give general authority to any other officer to affix the seal of the Corporation
and to attest the affixing by his or her signature. The Secretary shall see that all books, reports, statements, certificates
and other documents and records required by law to be kept or filed are properly kept or filed, as the case may be.
4.10
Treasurer. The Treasurer shall have the custody of the corporate funds and securities and shall keep full and accurate
accounts of receipts and disbursements in books belonging to the Corporation and shall deposit all moneys and other valuable effects
in the name and to the credit of the Corporation in such depositories as may be designated by the Executive Chairman or the Board
of Directors. The Treasurer shall disburse the funds of the Corporation as may be ordered by the Board of Directors, taking proper
vouchers for such disbursements, and shall render to the Executive Chairman or the President and the Board of Directors, at its
regular meetings, or when the Board of Directors so requires, an account of all his or her transactions as Treasurer and of the
financial condition of the Corporation. If required by the Executive Chairman or the Board of Directors, the Treasurer shall give
the Corporation a bond in such sum and with such surety or sureties as shall be satisfactory to the Executive Chairman or the
Board of Directors for the faithful performance of the duties of his or her office and for the restoration to the Corporation,
in case of his or her death, resignation, retirement or removal from office, of all books, papers, vouchers, money and other property
of whatever kind in his or her possession or under his or her control belonging to the Corporation.
4.11
Assistant Secretaries. Except as may be otherwise provided in these Bylaws, Assistant Secretaries, if there be any, shall
perform such duties and have such powers as from time to time may be assigned to them by the Executive Chairman or the Board of
Directors, the President, any Vice President, if there be one, or the Secretary, and in the absence of the Secretary or in the
event of his or her disability or refusal to act, shall perform the duties of the Secretary, and when so acting, shall have all
the powers of and be subject to all the restrictions upon the Secretary.
4.12
Assistant Treasurers. Assistant Treasurers, if there be any, shall perform such duties and have such powers as from time
to time may be assigned to them by the Executive Chairman or the Board of Directors, the President, any Vice President, if there
be one, or the Treasurer, and in the absence of the Treasurer or in the event of his or her disability or refusal to act, shall
perform the duties of the Treasurer, and when so acting, shall have all the powers of and be subject to all the restrictions upon
the Treasurer. If required by the Board of Directors, an Assistant Treasurer shall give the Corporation a bond in such sum and
with such surety or sureties as shall be satisfactory to the Executive Chairman or the Board of Directors for the faithful performance
of the duties of his or her office and for the restoration to the Corporation, in case of his or her death, resignation, retirement
or removal from office, of all books, papers, vouchers, money and other property of whatever kind in his or her possession or
under his or her control belonging to the Corporation.
4.13
Controller. The Controller shall establish and maintain the accounting records of the Corporation in accordance with generally
accepted accounting principles applied on a consistent basis, maintain proper internal control of the assets of the Corporation
and shall perform such other duties as the Executive Chairman or the Board of Directors, the President or any Vice President of
the Corporation may prescribe.
4.14
Other Officers. Such other officers as the Board of Directors may choose shall perform such duties and have such powers
as from time to time may be assigned to them by the Executive Chairman or the Board of Directors. The Executive Chairman or the
Board of Directors may delegate to any other officer of the Corporation the power to choose such other officers and to prescribe
their respective duties and powers.
4.15
Vacancies. The Board of Directors shall have the power to fill any vacancies in any office occurring from whatever reason.
4.16
Resignations. Any officer may resign at any time by submitting his or her written resignation to the Corporation. Such
resignation shall take effect at the time of its receipt by the Corporation, unless another time be fixed in the resignation,
in which case it shall become effective at the time so fixed. The acceptance of a resignation shall not be required to make it
effective.
4.17
Removal. Subject to the provisions of any employment agreement approved by the Board of Directors, any officer of the Corporation
may be removed at any time, with or without cause, by the Board of Directors.
ARTICLE
V
CAPITAL STOCK
5.1
Form of Certificates. The shares of stock in the Corporation shall be represented by certificates, provided that the Board
of Directors may provide by resolution or resolutions that some or all of any or all classes or series of the Corporation’s
stock shall be in uncertificated form. Stock certificates shall be in such forms as the Board of Directors may prescribe and signed
by the Chairman of the Board, President or a Vice President and by the Treasurer or an Assistant Treasurer, or the Secretary or
an Assistant Secretary of the Corporation.
5.2
Signatures. Any or all of the signatures on a stock certificate may be a facsimile, including, but not limited to, signatures
of officers of the Corporation and countersignatures of a transfer agent or registrar. In case an officer, transfer agent or registrar
who has signed or whose facsimile signature has been placed upon a certificate shall have ceased to be such officer, transfer
agent or registrar before such certificate is issued, it may be issued by the Corporation with the same effect as if such person
were such officer, transfer agent or registrar at the date of issue.
5.3
Lost Certificates. The Board of Directors may direct a new stock certificate or certificates to be issued in place of any
stock certificate or certificates theretofore issued by the Corporation alleged to have been lost, stolen or destroyed, upon the
making of an affidavit of that fact by the person claiming the certificate of stock to be lost, stolen or destroyed. When authorizing
such issue of a new stock certificate, the Board of Directors may, in its discretion and as a condition precedent to the issuance
thereof, require the owner of such lost, stolen or destroyed certificate, or his or her legal representative, to advertise the
same in such manner as the Board of Directors shall require and/or to give the Corporation a bond in such sum as it may direct
as indemnity against any claim that may be made against the Corporation with respect to the certificate alleged to have been lost,
stolen or destroyed.
5.4
Transfers. Stock of the Corporation shall be transferable in the manner prescribed by law and in these Bylaws. Transfers
of certificated stock shall be made on the books of the Corporation only by the person named in the certificate or by such person’s
attorney lawfully constituted in writing and upon the surrender of the certificate therefor, which shall be canceled before a
new certificate shall be issued. Transfers of uncertificated stock shall be made on the books of the Corporation only by the person
then registered on the books of the Corporation as the owner of such shares or by such person's attorney lawfully constituted
in writing and written instruction to the Corporation containing such information as the Corporation or its agents may prescribe.
No transfer of uncertificated stock shall be valid as against the Corporation for any purpose until it shall have been entered
in the stock records of the Corporation by an entry showing from and to whom transferred. The Corporation shall have no duty to
inquire into adverse claims with respect to any stock transfer unless (a) the Corporation has received a written notification
of an adverse claim at a time and in a manner which affords the Corporation a reasonable opportunity to act on it prior to the
issuance of a new, reissued or re-registered share certificate, in the case of certificated stock, or entry in the stock record
books of the Corporation, in the case of uncertificated stock, and the notification identifies the claimant, the registered owner
and the issue of which the share or shares is a part and provides an address for communications directed to the claimant; or (b)
the Corporation has required and obtained, with respect to a fiduciary, a copy of a will, trust, indenture, articles of co-partnership,
Bylaws or other controlling instruments, for a purpose other than to obtain appropriate evidence of the appointment or incumbency
of the fiduciary, and such documents indicate, upon reasonable inspection, the existence of an adverse claim. The Corporation
may discharge any duty of inquiry by any reasonable means, including notifying an adverse claimant by registered or certified
mail at the address furnished by him or, if there be no such address, at his or her residence or regular place of business that
the security has been presented for registration of transfer by a named person, and that the transfer will be registered unless
within thirty days from the date of mailing the notification, either (a) an appropriate restraining order, injunction or other
process issues from a court of competent jurisdiction; or (b) an indemnity bond, sufficient in the Corporation’s judgment
to protect the Corporation and any transfer agent, registrar or other agent of the Corporation involved from any loss which it
or they may suffer by complying with the adverse claim, is filed with the Corporation.
5.5
Fixing Record Date. In order that the Corporation may determine the stockholders entitled to notice or to vote at any meeting
of stockholders or any adjournment thereof, or to express consent to corporate action in writing without a meeting, or entitled
to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect
of any change, conversion or exchange of stock or for the purpose of any other lawful action, the Board of Directors may fix a
record date, which record date shall not precede the date upon which the resolution fixing the record is adopted by the Board
of Directors, and which record date shall not be more than sixty (60) nor less than ten (10) days before the date of such meeting,
nor more than ten (10) days after the date upon which the resolution fixing the record date of action with a meeting is adopted
by the Board of Directors, nor more than sixty (60) days prior to any other action. If no record date is fixed:
(a)
The record date for determining stockholders entitled to notice of or to vote at a meeting of stockholders shall be at the
close of business on the day next preceding the day on which notice is given, or, if notice is waived, at the close of business
on the day next preceding the day on which the meeting is held.
(b)
The record date for determining stockholders entitled to express consent to corporate action in writing without a meeting,
when no prior action by the Board of Directors is necessary, shall be the first date on which a signed written consent is delivered
to the Corporation.
(c)
The record date for determining stockholders for any other purpose shall be at the close of business on the day on which
the Board of Directors adopts the resolution relating thereto.
A
determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment
of the meeting; provided, however, that the Board of Directors may fix a new record date for the adjourned meeting.
5.6
Registered Stockholders. Prior to due presentment for transfer of any share or shares, the Corporation shall treat the
registered owner thereof as the person exclusively entitled to vote, to receive notifications and to all other benefits of ownership
with respect to such share or shares, and shall not be bound to recognize any equitable or other claim to or interest in such
share or shares on the part of any other person, whether or not it shall have express or other notice thereof, except as otherwise
provided by the laws of the State Delaware.
5.7
List of Stockholders Entitled To Vote. The officer who has charge of the stock ledger shall prepare and make, at least
ten (10) days before every meeting of stockholders, a complete list of the stockholders entitled to vote at the meeting (provided,
however, that if the record date for determining the stockholders entitled to vote is less than ten (10) days before the date
of the meeting, the list shall reflect the stockholders entitled to vote as of the tenth (10th) day before the meeting date),
arranged in alphabetical order and showing the address of each stockholder and the number of shares registered in the name of
each stockholder. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting at least
ten (10) days prior to the meeting (a) on a reasonably accessible electronic network, provided that the information required to
gain access to such list is provided with the notice of meeting, or (b) during ordinary business hours at the principal place
of business of the Corporation. In the event that the Corporation determines to make the list available on an electronic network,
the Corporation may take reasonable steps to ensure that such information is available only to stockholders of the Corporation.
If the meeting is to be held at a place, then a list of stockholders entitled to vote at the meeting shall be produced and kept
at the time and place of the meeting during the whole time thereof and may be examined by any stockholder who is present. If the
meeting is to be held solely by means of remote communication, then the list shall also be open to the examination of any stockholder
during the whole time of the meeting on a reasonably accessible electronic network, and the information required to access such
list shall be provided with the notice of the meeting. Except as otherwise provided by law, the stock ledger shall be the only
evidence as to who are the stockholders entitled to examine the list of stockholders required by this Section 5.7 or to vote in
person or by proxy at any meeting of stockholders.
ARTICLE
VI
NOTICES
6.1
Form of Notice. Notices to directors and stockholders other than notices to directors of special meetings of the board
of Directors which may be given by any means stated in Article III, Section 4, shall be in writing and delivered personally or
mailed to the directors or stockholders at their addresses appearing on the books of the Corporation. Notice by mail shall be
deemed to be given when deposited in the mail, postage prepaid, directed to the stockholder at such stockholder’s address
as it appears on the records of the Corporation. Without limiting the manner by which notice otherwise may be given effectively
to stockholders, any notice to stockholders may be given by electronic transmission in the manner provided in Section 232 of the
DGCL.. Notice to directors may also be given by telegram or electronic transmission.
6.2
Waiver of Notice. Whenever any notice is required to be given under the provisions of law or the Certificate of Incorporation
or by these Bylaws of the Corporation, a written waiver, signed by the person or persons entitled to notice, or waiver by electronic
transmission by such person, whether before or after the time stated therein, shall be deemed equivalent to notice. Attendance
of a person at a meeting shall constitute a waiver of notice of such meeting, except when the person attends a meeting for the
express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully
called or convened. Neither the business to be transacted at, nor the purpose of, any regular, or special meeting of the stockholders,
Directors, or members of a committee of Directors need be specified in any written waiver of notice unless so required by the
Certificate of Incorporation.
ARTICLE
VII
INDEMNIFICATION OF DIRECTORS AND OFFICERS
7.1
The Corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending
or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or
in the right of the Corporation) by reason of the fact that he is or was a director, officer, employee or agent of the Corporation,
or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise, against expenses (including attorneys’ fees), judgments, fines and amounts paid
in settlement actually and reasonably incurred by him in connection with such action, suit or proceeding if he acted in good faith
and in a manner he reasonably believed to be in or not opposed to the best interests of the Corporation, and, with respect to
any criminal action or proceeding, had no reasonable cause to believe his or her conduct was unlawful. The termination of any
action, suit or proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent, shall
not, of itself, create a presumption that the person did not act in good faith and in a manner which he reasonably believed to
be in or not opposed to the best interests of the Corporation, and, with respect to any criminal action or proceeding, had reasonable
cause to believe that his or her conduct was unlawful.
7.2
The Corporation shall indemnify any person who was or is a party, or is threatened to be made a party to any threatened, pending
or completed action or suit by or in the right of the Corporation to procure a judgment in its favor by reason of the fact that
he is or was a director, officer, employee or agent of the Corporation, or is or was serving at the request of the Corporation
as a director, officer, employee or agent of another Corporation, partnership, joint venture, trust or other enterprise against
expenses (including attorneys’ fees) actually and reasonably incurred by him in connection with the defense or settlement
of such action or suit if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests
of the Corporation and except that no indemnification shall be made in respect of any claim, issue or matter as to which such
person shall have been adjudged to be liable to the Corporation unless and only to the extent that the Court of Chancery or the
court in which such action or suit was brought shall determine upon application that, despite the adjudication of liability but
in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which
the Court of Chancery or such other court shall deem proper.
7.3
To the extent that a director, officer, employee or agent of the Corporation has been successful on the merits or otherwise in
defense of any action, suit or proceeding referred to in Sections 1 or 2 of this Article, or in defense of any claim, issue or
matter therein, he shall be indemnified against expenses (including attorneys’ fees) actually and reasonably incurred by
him or her in connection therewith.
7.4
Any indemnification under sections 1 or 2 of this Article (unless ordered by a court) shall be made by the Corporation only as
authorized in the specific case upon a determination that indemnification of the director, officer, employee or agent is proper
in the circumstances because he has met the applicable standard of conduct set forth in such section. Such determination shall
be made:
(a)
By the Board of Directors by a majority vote of a quorum consisting of directors who were not parties to such action, suit
or proceeding, or
(b)
If such a quorum is not obtainable, or, even if obtainable a quorum of disinterested directors so directs, by independent
legal counsel in a written opinion, or
(c)
By the stockholders.
7.5
Expenses (including attorneys’ fees) incurred by an officer or director in defending any civil, criminal, administrative
or investigative action, suit or proceeding may be paid by the Corporation in advance of the final disposition of such action,
suit or proceeding upon receipt of an undertaking by or on behalf of such director or officer to repay such amount if it shall
ultimately be determined that he is not entitled to be indemnified by the Corporation as authorized in this Section. Such expenses
(including attorneys’ fees) incurred by other employees and agents may be so paid upon such terms and conditions, if any,
as the Board of Directors deems appropriate.
7.6
Indemnification Not Exclusive.
(a)
The provisions for indemnification to or the advancement of expenses and costs to any indemnitee under this Article VII, or the
entitlement of any indemnitee to indemnification or advancement of expenses and costs under this Article VII, shall not limit
or restrict in any way the power of the Corporation to indemnify or advance expenses and costs to such indemnitee in any other
way permitted by law or be deemed exclusive of, or invalidate, any right to which any indemnitee seeking indemnification or advancement
of expenses and costs may be entitled under any law, the Corporation’s certificate of incorporation, other agreements or
arrangements, vote of stockholders or disinterested directors or otherwise, both as to action in such indemnitee’s capacity
as an officer, director, employee or agent of the Corporation and as to action in any other capacity.
(b)
Given that certain jointly indemnifiable claims (as defined below) may arise due to the service of the indemnitee as a director
and/or officer of the Corporation at the request of the indemnitee-related entities (as defined below), the Corporation shall
be fully and primarily responsible for payments to the indemnitee in respect of indemnification or advancement of expenses in
connection with any such jointly indemnifiable claims, pursuant to and in accordance with the terms of this Article VII, irrespective
of any right of recovery the indemnitee may have from the indemnitee-related entities. Under no circumstance shall the Corporation
be entitled to any right of subrogation or contribution by the indemnitee-related entities, and no right of advancement or recovery
the indemnitee may have from the indemnitee-related entities shall reduce or otherwise alter the rights of the indemnitee or the
obligations of the Corporation hereunder. In the event that any of the indemnitee-related entities shall make any payment to the
indemnitee in respect of indemnification or advancement of expenses with respect to any jointly indemnifiable claim, the indemnitee-related
entity making such payment shall be subrogated to the extent of such payment to all of the rights of recovery of the indemnitee
against the Corporation, and the indemnitee shall execute all papers reasonably required and shall do all things that may be reasonably
necessary to secure such rights, including the execution of such documents as may be necessary to enable the indemnitee-related
entities effectively to bring suit to enforce such rights. Each of the indemnitee-related entities shall be third-party beneficiaries
with respect to this Section 7.6(b) and entitled to enforce this Section 7.6(b).
For
purposes of this Section 7.6(b), the following terms shall have the following meanings:
(1)
The term “indemnitee-related entities” means any corporation, limited liability company, partnership, joint venture,
trust, employee benefit plan or other enterprise (other than the Corporation or any other corporation, limited liability company,
partnership, joint venture, trust, employee benefit plan or other enterprise for which the indemnitee has agreed, on behalf of
the Corporation or at the Corporation’s request, to serve as a director, officer, employee or agent and which service is
covered by the indemnity described herein) from whom an indemnitee may be entitled to indemnification or advancement of expenses
with respect to which, in whole or in part, the Corporation may also have an indemnification or advancement obligation (other
than as a result of obligations under an insurance policy).
(2)
The term “jointly indemnifiable claims” shall be broadly construed and shall include, without limitation, any action,
suit or proceeding for which the indemnitee shall be entitled to indemnification or advancement of expenses from both the Corporation
and any indemnity-related entity pursuant to the DGCL, any agreement and any certificate of incorporation, bylaws, partnership
agreement, operating agreement, certificate of formation, certificate of limited partnership or comparable organizational documents
of the Corporation or the indemnitee-related entities, as applicable.
7.7
The Corporation shall have power to purchase and maintain insurance on behalf of any person who is or was a director, officer,
employee or agent of the Corporation, or is or was serving at the request of the Corporation as a director, officer, employee
or agent of another Corporation, partnership, joint venture, trust or other enterprise against any liability asserted against
him and incurred by him in any such capacity, or arising out of his or her status as such, whether or not the Corporation would
have the power to indemnify him against such liability under the provisions of this Article.
7.8
For purposes of this Article, references to “the Corporation” shall include, in addition to the resulting Corporation,
any constituent Corporation (including any constituent of a constituent) absorbed in a consolidation or merger which, if its separate
existence had continued, would have had power and authority to indemnify its directors, officers, and employees or agents, so
that any person who is or was a director, officer employee or agent of such constituent Corporation, or is or was serving at the
request of such constituent Corporation as a director, officer, employee or agent of another Corporation, partnership, joint venture,
trust or other enterprise, shall stand in the same position under this Article with respect to the resulting or surviving Corporation
as he would have with respect to such constituent Corporation of its separate existence had continued.
7.9
For purposes of this Article, references to “other enterprises” shall include employee benefit plans; references to
“fines” shall include any excise taxes assessed on a person with respect to any employee benefit plan; and references
to “serving at the request of the Corporation” shall include any service as a director, officer, employee or agent
of the Corporation which imposes duties on, or involves services by, such director, officer, employee, or agent with respect to
an employee benefit plan, its participants or beneficiaries; and a person who acted in good faith and in a manner he reasonably
believed to be in the interest of the participants and beneficiaries of an employee benefit plan shall be deemed to have acted
in a manner “not opposed to the best interests of the Corporation” as referred to in this Article.
7.10
The indemnification and advancement of expenses provided by, or granted pursuant to, this Article shall, unless otherwise provided
when authorized or ratified, continue as to a person who has ceased to be a director, officer, employee or agent and shall inure
to the benefit of the heirs, executors and administrators of such a person.
7.11
No director or officer of the Corporation shall be personally liable to the Corporation or to any stockholder of the Corporation
for monetary damages for breach of fiduciary duty as a director or officer, provided that this provision shall not limit the liability
of a director or officer (i) for any breach of the director’s or the officer’s duty of loyalty to the Corporation
or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation
of law, (iii) under Section 174 of the General Corporation Law of Delaware, or (iv) for any transaction from which the director
or officer derived an improper personal benefit.
7.12
Right of Indemnitee to Bring Suit. If a claim for indemnification or advancement of expenses is not paid in full within
ninety (90) days after receipt by the Corporation of a request therefor, the indemnitee shall be entitled to an adjudication in
any court of competent jurisdiction of his or her entitlement to such indemnification or advancement of expenses, as applicable.
To the fullest extent permitted by law, if successful in whole or in part in any such suit, or in a suit brought by the Corporation
to recover an advancement of expenses pursuant to the terms of an undertaking, the indemnitee shall be entitled to be paid also
the expense (including attorneys’ fees, costs and expenses) of prosecuting or defending such suit. Neither the failure of
the Corporation (including its directors who are not parties to such action, a committee of such directors, independent legal
counsel or the Corporation’s stockholders) to have made a determination prior to the commencement of such suit that indemnification
of the indemnitee is proper in the circumstances because the indemnitee has met the applicable standard of conduct set forth in
the DGCL, nor an actual determination by the Corporation (including its directors who are not parties to such action, a committee
of such directors, independent legal counsel or the Corporation’s stockholders) that the indemnitee has not met such applicable
standard of conduct, shall create a presumption that the indemnitee has not met the applicable standard of conduct or, in the
case of such a suit brought by the indemnitee, be a defense to such suit. In any suit brought by the indemnitee to enforce a right
to indemnification hereunder (but not in a suit brought by the indemnitee to enforce a right to an advancement of expenses) it
shall be a defense that the indemnitee has not met any applicable standard for indemnification set forth in the DGCL. Further,
the Corporation shall be entitled to recover advanced expenses upon a final adjudication that the indemnitee has not met any applicable
standard for indemnification set forth in the DGCL. In any suit brought by the indemnitee to enforce a right to indemnification
or to an advancement of expenses hereunder, or brought by the Corporation to recover an advancement of expenses pursuant to the
terms of an undertaking, the burden of proving that the indemnitee is not entitled to be indemnified, or to such advancement of
expenses, under this Article VII or otherwise shall be on the Corporation.
7.13
Nature of Rights. The rights conferred upon indemnitees in this Article VII shall be contract rights and such rights shall
continue as to an indemnitee who has ceased to be a director or officer and shall inure to the benefit of the indemnitee’s
heirs, executors and administrators. Any amendment, alteration or repeal of this Article VII that adversely affects any right
of an indemnitee or its successors shall be prospective only and shall not limit, eliminate or impair any such right with respect
to any proceeding involving any occurrence or alleged occurrence of any action or omission to act that took place prior to such
amendment or repeal. In addition, the rights conferred upon indemnitees in this Article VII shall extend to any broader indemnification
rights permitted by any amendment to the DGCL.
ARTICLE
VIII
GENERAL PROVISIONS
8.1
Reliance on Books and Records. Each Director, each member of any committee designated by the Board of Directors, and each
officer of the Corporation, shall, in the performance of his or her duties, be fully protected in relying in good faith upon the
books of account or other records of the Corporation and upon such information, opinions, reports or statements presented to the
Corporation by any of the Corporation’s officers or employees, or committees of the Board of Directors, or by any other
person as to matters the member reasonably believes are within such other person’s professional or expert competence and
who has been selected with reasonable care by or on behalf of the Corporation, including reports made to the Corporation by an
independent certified public accountant, or by an appraiser selected with reasonable care.
8.2
Maintenance and Inspection of Records. The Corporation shall, either at its principal executive office or at such place
or places as designated by the Board of Directors, keep a record of its stockholders listing their names and addresses and the
number and class of shares held by each stockholder, a copy of these by-laws, as may be amended to date, minute books, accounting
books and other records.
Any
such records maintained by the Corporation may be kept on, or by means of, or be in the form of, any information storage device
or method, provided that the records so kept can be converted into clearly legible paper form within a reasonable time. The Corporation
shall so convert any records so kept upon the request of any person entitled to inspect such records pursuant to the provisions
of the Delaware General Corporation Law. When records are kept in such manner, a clearly legible paper form produced from or by
means of the information storage device or method shall be admissible in evidence, and accepted for all other purposes, to the
same extent as an original paper form accurately portrays the record.
Any
stockholder of record, in person or by attorney or other agent, shall, upon written demand under oath stating the purpose thereof,
have the right during the usual hours for business to inspect for any proper purpose the Corporation’s stock ledger, a list
of its stockholders, and its other books and records and to make copies or extracts therefrom. A proper purpose shall mean a purpose
reasonably related to such person’s interest as a stockholder. In every instance where an attorney or other agent is the
person who seeks the right to inspection, the demand under oath shall be accompanied by a power of attorney or such other writing
that authorizes the attorney or other agent to so act on behalf of the stockholder. The demand under oath shall be directed to
the Corporation at its registered office in Delaware or at its principal executive office.
8.3
Inspection by Directors. Any director shall have the right to examine the Corporation’s stock ledger, a list of its
stockholders, and its other books and records for a purpose reasonably related to his or her position as a director.
8.4
Dividends. Subject to the provisions of the Certificate of Incorporation, if any, dividends upon the capital stock of the
Corporation may be declared by the Board of Directors at any regular or special meeting, pursuant to law. Dividends may be paid
in cash, in property, or in shares of the capital stock, subject to the provisions of the Certificate of Incorporation. Before
payment of any dividend, there may be set aside out of any funds of the Corporation available for dividends such sum or sums as
the Directors from time to time, in their absolute discretion, think proper as a reserve or reserves to meet contingencies, or
for equalizing dividends, or for repairing or maintaining any property of the Corporation, or for such other purpose as the Directors
shall think conducive to the interest of the Corporation, and the Directors may modify or abolish any such reserve in the manner
in which it was created.
8.5
Checks. All checks or demands for money and notes of the Corporation shall be signed by such officer or officers or such
other persons as the Board of Directors may from time to time designate.
8.6
Fiscal Year. The fiscal year of the Corporation shall be as determined by the Board of Directors. If the Board of Directors
shall fail to do so, the President shall fix the fiscal year.
8.7
Seal. The corporate seal shall have inscribed thereon the name of the Corporation, the year of its organization and the
words “Corporate Seal, Delaware”. The seal may be used by causing it or a facsimile thereof to be impressed or affixed
or in any manner reproduced.
8.8
Amendments. The original or other Bylaws may be adopted, amended or repealed by the stockholders entitled to vote thereon
at any regular or special meeting or, if the Certificate of Incorporation so provides, by the Board of Directors. The fact that
such power has been so conferred upon the Board of Directors shall not divest the stockholders of the power nor limit their power
to adopt, amend or repeal Bylaws. The Board of Directors is authorized to make, alter, amend, repeal and rescind, in whole or
in part, these Bylaws without the assent or vote of the stockholders in any manner not inconsistent with the laws of the State
of Delaware or the Certificate of Incorporation. Notwithstanding any other provisions of these Bylaws or any provision of law
that might otherwise permit a lesser vote of the stockholders, in addition to any vote of the holders of any class or series of
capital stock of the Corporation required by the Certificate of Incorporation (including any certificate of designation relating
to any series of Preferred Stock (as defined in the Certificate of Incorporation), these Bylaws or applicable law, the affirmative
vote of the holders of at least seventy-five percent (75%) in voting power of all the then outstanding shares of stock of the
Corporation entitled to vote thereon, voting together as a single class, shall be required in order for the stockholders of the
Corporation to make, alter, amend, repeal or rescind, in whole or in part, any provision of these Bylaws (including this Section
8.8) or to adopt any provision inconsistent herewith.
8.9
Interpretation of Bylaws. All words, terms and provisions of these Bylaws shall be interpreted and defined by and in accordance
with the General Corporation Law of the State of Delaware, as amended, and as amended from time to time hereafter. For purposes
of these Bylaws, unless the context otherwise requires, (i) references to “Articles” and “Sections” refer
to articles and sections of these Bylaws and (ii) the term “include” or “includes” means includes, without
limitation, and “including” means including, without limitation. Section headings in these Bylaws are for convenience
of reference only and shall not be given any substantive effect in limiting or otherwise construing any provision herein.
8.10
Inconsistent Provisions. In the event that any provision of these Bylaws is or becomes inconsistent with any provision
of the Amended and Restated Certificate of Incorporation, the DGCL or any other applicable law, such provision of these Bylaws
shall not be given any effect to the extent of such inconsistency but shall otherwise be given full force and effect.
8.11
Electronic Transmission. For purposes of these Bylaws, “electronic transmission” means any form of communication,
not directly involving the physical transmission of paper, that creates a record that may be retained, retrieved, and reviewed
by a recipient thereof, and that may be directly reproduced in paper form by such a recipient through an automated process.