COMMON SHAREHOLDERS as Shareholders. and. PREFERRED SHAREHOLDERS as Shareholders. and. SERIES II PREFERRED SHAREHOLDERS as Shareholders.

Transcription

1 COMMON SHAREHOLDERS as Shareholders and PREFERRED SHAREHOLDERS as Shareholders and SERIES II PREFERRED SHAREHOLDERS as Shareholders and SERIES III PREFERRED SHAREHOLDERS as Shareholders and TREE GLOBAL INC. as Corporation ADDENDUM TO UNANIMOUS SHAREHOLDERS AGREEMENT June 23,

2 This Addendum to the Unanimous Shareholders Agreement is made as of June 23, Final closing of this Addendum will occur by September 30, Among: Common Shareholders, Those Common Shareholders as listed in the Unanimous Shareholders Agreement (herein "Common Shareholders") -and- Preferred Shareholders, Those Preferred Shareholders as listed in the Unanimous Shareholders Agreement and Shareholder Addendum dated April 24, 2013 (herein Preferred Shareholders ) -and- Those Persons Who Executed The Series III Preferred Share Purchase Agreement for Preferred Shares, which Preferred Shares are Issued by the Corporation and Who Agree to be Bound by this Addendum and the Unanimous Shareholders Agreement (herein Series III Preferred Shareholders ) - and - Tree Global Inc., an International Business Company, duly incorporated as Company Number under the International Business Companies Act, of the laws of Barbados (herein the "Corporation") Collectively referred to as the Parties 2

3 UNANIMOUS SHAREHOLDERS AGREEMENT This addendum is to the Tree Global Unanimous Shareholders Agreement dated February 15, 2011 ( USA ). Unless explicitly stated in this addendum to the USA ( Addendum ) all terms and conditions stated in the USA will bind all Parties of the Addendum. This Addendum supersedes the Addendum to the USA dated June 24, For the purposes of the USA Preferred Shares, Series II Preferred Shares and Series III Preferred Shares will be collectively referred to as Preferred Shares. All rights and obligations for Preferred Shares as outlined in the USA will be extended to the Series III Preferred Shares with the exception of the conversion price structure. All defined terms in the USA will extend to this Addendum. SHARE OWNERSHIP Tree Global Inc. is raising up to an additional US$1,500,000 through the issue of Series III Preferred Shares. This Addendum will allow the Board of Directors of Tree Global Inc. to issue a minimum of US$300,000 ( Minimum Offering ) and up to a maximum of $1,500,000 of Preferred III Shares on the terms outlined below ( Maximum Offering ). Upon reaching the Maximum Offering the Board of Directors will provide all Shareholders a complete list of the ownership of the Corporation. The offering of Series III Preferred Shares will remain in place until the earlier of the Maximum Offering is reached or September 30, All new investors of the Corporation will be become party to this Agreement. The Parties acknowledge and agree that the following shares represent the ownership of Tree Global Inc., assuming the Maximum Offering is complete: Tree Global Inc. Pro Forma Share Ownership Minimum Offering Maximum Offering Minimum Offering Maximum Offering (# of Shares) (# of Shares) (% Ownership) (% Ownership) Common Shares 266, , % 58.5% Series I Preferres Shares 67,000 67, % 14.7% Series II Preferred Shares 43,000 43, % 9.4% Series III Preferred Shares 12,000 60, % 13.2% Royalty Convertible Debentures (1) 0 18, % 4.1% Total Pro Forma Shares Outstanding 388, , % 100% 1. Convertible Royalty Debenture Tree Global Inc. (TGI) raised $425,000 through the sale of $500 convertible royalty debentures. Investors have a right to convert to equity at the next round of equity financing. Under the Minimum Offering it illustrates no conversion of the debenture and under the Maximum offering it illustrates 100% of conversion. TGI has the right to pre pay the royalty payments at a payment equal to the original investment plus an annualized return of 30%. Should neither party choose to exercise their rights, TGI will pay royalty payments equal to 0.005% per convertible debenture of gross revenue that TGI receives from the sale of seedlings related to TGI projects until a total of US$2,000 per convertible debenture has been paid to the investors. There is no fixed interest rate or obligation to repay principal. 3

4 SERIES III PREFERRED SHARES 1. Series III Preferred Shares will be issued at a price of USD25.00 per Preferred Share. 2. Series III Preferred Shares will be convertible into Common Shares on a one for one basis at anytime, at the option of the holder. 3. Series III Preferred Shares will automatically convert, upon the closing of the next round of financing ( Series C Financing ) into the same class of Shares issued pursuant to the Series C Financing at a conversion price per Share equal to: a. the lesser of USD25 and 95% of the subscription price per Share pursuant to the Series C financing; b. Series C Financing shall be for gross proceeds of not less than USD1,000, Series III Preferred Shares shall be retractable, at the option of the holder, and redeemable, at the option of the issuer, on or after June 15, 2018 at a price of USD30.00 per Series III Preferred Share. 5. In the event of any liquidation or winding up of the Company, Series III Preferred Shareholders shall, in priority to Common Shareholders, be entitled to receive USD30.00 per Series III Preferred Share. For greater clarification the Series III Preferred Shares will rank pari passu in all legal respects to the Preferred Shares, including liquidation rights. 6. Series III Preferred Shareholders will be entitled to one vote per Series III Preferred Share on all issues to be voted on by Common Shareholders. 7. For each Series III Preferred Share purchased investors will receive 1 warrant that will enable the investor to purchase a Common Share of Tree Global Inc. at a price of $30 per Common Share ( Warrant ). Warrant will expire December 31, All Series III Preferred Shareholders will receive the same terms and conditions and will be treated equally. If revealed at a later date that there was preference provided to certain Series III Preferred Shareholders all Series III Preferred Shareholders will be given the right to participate on those terms. 4

5 PREFERRED SHAREHOLDERS ACKNOWLEDGEMENT As per Article 3 of the USA the Preferred Shareholders acknowledge notice of a Follow-on Offering and have been given the option to participate based on their rights as described in the USA. Preferred Shareholders have participated as per the schedule of share ownership outlined above or have chosen to forego their right to participate in the Follow-on Offering. Series III Preferred Shareholders acknowledge receipt of and agree to the terms of the USA. In Witness Whereof the parties hereto have duly executed this Agreement as of the date first above mentioned. TREE GLOBAL INC. Gregory M. Hess CEO & President Tree Global Inc. Acknowledged and Agreed to by: Investor Name: Date: 5

6 APPENDIX 1 RISK FACTORS The Series III Preferred Shares are speculative investments. There is no assurance that a Series III Preferred Shareholder will receive the anticipated investment returns. There is no market through which the Series III Preferred Shares are offered hereunder may be sold and none is expected to develop as a consequence of this Offering. Accordingly, purchasers may not be able to resell their Series III Preferred Shares. Ownership and transfer of the Series III Preferred Shares are restricted. An investment in Series III Preferred Shares should only be made by prospective investors who are able to make a long term investment and who can afford to sustain a total loss of their investment. There is no assurance that the Series III Preferred Shareholder s investment in the Corporation will result in a positive return for the Series III Preferred Shareholders. Prospective investors should consider the merits of the investment in addition to their respective anticipated income tax treatment. There is no discussion in this Addendum or the USA nor are there any representations made regarding the income tax consequences of an investment in the Corporation. Investors are urged to consult and rely on their own professional advisers to assess legal, income tax and other aspects of an investment in Series III Preferred Shares. Risks Factors The Corporation has a limited operating history, which may make it difficult to evaluate our current business and predict our future performance. Our limited history as an operating company may make it difficult for you to evaluate our current business, our future performance or the viability of our business model or products. Any assessments you make about our future success or viability may not be as accurate as they might be if we had a longer operating history. The Corporation may not achieve or sustain positive cash flow in the future. We anticipate that we will have negative cash flow for the next few years as we continue to incur substantial research and development and selling, general and administrative expenses. Our business will also require significant amounts of working capital to support our growth and our fluctuating capital requirements across the planting and harvesting cycles of our trees. The Corporation may not achieve or sustain profitability in the future. We intend to incur significant research and product development expenses and selling, general and administrative expenses to grow our business. Our efforts to grow our business may be more costly than we expect, and we may not be able to increase our revenue enough to offset our operating expense. The Corporation s growth depends on customer acceptance of our process enhanced products To be successful, we will need to convince our customers that the cost of our services are justified by the greater returns on investment that these trees provide to our customers. We cannot guarantee that our efforts to educate our customers about the benefits of our enhanced products will be effective. Additionally, there can be no assurance that any of our process will achieve their targeted performance levels. Lower than expected product prices may adversely affect our financial results If our customers attribute a lower value to our products and services than we do, they may not be willing to pay the prices we charge. Pricing levels may be negatively affected if our products do not achieve their targeted performance levels. In addition, if our competitors are able to develop competitive products and sell them at lower prices, we may be forced to lower our prices. Lower than expected prices would adversely impact our financial condition and results of operations. 6

7 The Corporation s business is impacted by changes in general economic conditions in the countries and end-markets in which we sell our services, and a prolonged downturn could affect the demand for our products and our financial performance. The purchasing decisions of our customers are impacted by their economic health, the availability of credit and the conditions in the end-markets that they currently serve. Weather conditions, natural disasters or other catastrophes could result in a disruption of our operations and negatively impact our results of operations. Weather conditions, natural disasters or other catastrophes can affect the timing of planting and harvesting of our trees, as well as the quality, cost and volumes of trees that we are able to produce and sell, which will affect our results of operations. The Corporation expects to experience significant growth in multiple geographies, and if we were unable to manage this growth and breadth it could have a material adverse effect on our business, the quality of our products and services, and on our ability to retain key personnel. We may not be able to maintain or accelerate our anticipated growth rate, manage our expanding operations effectively or achieve planned growth on a timely or profitable basis. If the Corporation infringes, or are alleged to infringe, the intellectual property rights of third parties, it may adversely affect our business, financial condition and results of operations. Third parties could claim that the making, using, selling, offering for sale or importation of our products, processes or technologies infringe on their proprietary rights. It is possible that infringement claims may be asserted as the number of products and competitors in our market increases. In addition, to the extent that we gain greater visibility, we face a greater risk of being the target of intellectual property infringement claims. We cannot be certain that the conduct of our business does not and will not infringe intellectual property or other proprietary rights of others in any jurisdiction. Our future success depends on our ability to retain key personnel Our future success will depend to a significant extent on the continued service and performance of our senior management team. The loss or unavailability of key members of our senior management team could impact the execution of our business plan and harm our ability to maintain important business relationships. Our international operations expose us to additional business risks, and failure to manage these risks may adversely affect our overall operating results Our international operations are subject to risks related to the differing legal, political, social and regulatory requirements and economic conditions of many countries. Foreign currency exchange rate fluctuations could adversely affect our results Changes in the rate of exchange of foreign currencies in relation to the U.S. dollar and other currencies may adversely impact our U.S. dollar denominated results. Competitors and potential competitors may gain market share at our expense or may develop products and services that are superior to ours We can provide no assurance that other companies will not enter our markets or start developing products or providing services that compete with ours. Our business could be harmed by systems failures or other unanticipated business interruptions Telecommunications failures or other unanticipated catastrophes, such as computer viruses or other cyber-attacks or terrorist attacks, at any of the locations in which we do business, could cause interruptions in our operations. 7

8 The Corporation may be unable to obtain additional financing to grow our business, develop or enhance our products or respond to competitive pressures We may need to raise additional funds in the future in order to grow our business. Any required additional financing may not be available on terms acceptable to us, or at all. Lack of liquidity There is no public or other trading market for any of the securities of the Corporation and there can be no assurance that any market will develop or be sustained in the future. 8