TECHSHOP, INC. NOTICE OF LIQUIDATION EVENT

Transcription

1 TECHSHOP, INC. NOTICE OF LIQUIDATION EVENT T the Hlders f Series A Preferred Stck and Series B Preferred Stck f TechShp, Inc., a Califrnia crpratin ("TechShp"): As yu may have heard, TechShp ceased peratins n Wednesday, Nvember 15, Subsequently, TechShp was apprached by an unrelated third party interested in acquiring the assets f TechShp and assuming certain f its liabilities. Tech Shp is in the prcess f negtiating that transactin substantially n the terms identified n attached Exhibit A (the "Pending Transactin"). The purchaser desires t clse the Pending Transactin quickly s that it can re-pen as many TechShp lcatins as pssible. We are sending yu this ntice t start the 20-day ntice perid called fr by Article III, Sectin 2.B. f TechShp's Secnd Amended and Restated Articles f Incrpratin (the "Articles"). The sale f all r substantially all f TechShp's assets in the Pending Transactin wuld be cnsidered a "Liquidatin Event" under the Articles that requires us t prvide this ntice. Article III, Sectin 2.B als requires TechShp t prvide yu with prmpt ntice f any material changes t the terms f the Pending Transactin as described in this ntice, and t clse the Pending Transactin nt sner than 10 days after TechShp gives yu such ntice f any material change. A cpy f Article III, Sectin B.2. f the Articles is attached t this ntice as Exhibit B. The liabilities f TechShp vastly exceed the value f its assets. N sharehlder, including yu as a hlder f Series A Preferred Stck and/r Series B Preferred Stck, wuld receive anything if TechShp were liquidated tday. Only the secured creditrs wh have liens n TechShp's assets wuld recver anything in that liquidatin. The purchase price ffered in the Pending Transactin is nt high enugh t change this result. Because time is f the essence in the Pending Transactin, we are asking that yu reply "yes" t the t which this Ntice is attached t evidence yur apprval t waive entirely all prvisins under Article III, Sectin B.2 f the Articles that wuld therwise require TechShp t prvide yu with any ntices prir t the clsing f the Pending Transactin. This waiver wuld allw TechShp t clse the Pending Transactin at the earliest pssible time withut waiting fr the expiratin f either the 20-day ntice perid r any subsequently required 10-day ntice perid f material changes. This waiver will be effective nly if apprved by the hlders f a majrity f the shares f TechShp's Series A Preferred Stck and Series B Preferred Stck, vting tgether as a single vting grup. TechShp needs the requested apprval frm the hlders f at least 3,443,203 shares f Series A Preferred Stck and/r Series B Preferred Stck fr this waiver t be effective. Thank yu. San Francisc, Califrnia December 1, 2017 Daniel Wds, CEO

2 Exhibit A MATERIAL TERMS AND CONDITIONS OF PENDING TRANSACTION TechShp, Inc. is willing t sell all f its assets t a third-party buyer, TechShp 2.0, LLC (TechShp 2.0) n the fllwing terms by December 21, 2017 (with details t be finalized in definitive dcumentatin t be prepared by TechShp 2.0 and apprved by the Bard f Directrs f TechShp, Inc.): 1. TechShp 2.0 acquires all assets f TechShp, Inc. fr the fllwing cnsideratin: Up t a maximum f $200,000 in cash t be used as needed t pay creditrs and administrative expenses. Administrative plan t be apprved prir t clse. Distributin requires bth parties apprval and funds will be prvided as needed, including: Immediately prviding funds fr: Nvember Health Insurance; Ggle Suite, all effrts will be taken t minimize cst; TechShp Legal Cunsel- $15,000 available t use prir t cmpleting ntificatin f sharehlders (cmpletin f the 20 day sharehlder ntificatin perid r waiver f the ntificatin perid by hlders f the 51% f utstanding shares. Funds may nt be used fr anything nn transactin related with TechShp2.0 withut apprval f TechShp2.0. Prir t cmpleting ntificatin f sharehlders, funds may nly be used fr activity required t cmplete ntificatin.) Assumptin f all secured debt f apprximately $21 millin; Assumptin f all equipment leases; Assumptin f real prperty leases where mutually acceptable terms can be reached between TechShp2.0 and the landlrds; and Payment f apprved emplyee back pay, with apprval t be cmpleted by lcatin. 2. TechShp 2.0 als agrees t the fllwing: TechShp 2.0 will take the lead legal psitin in defending the sale f assets t TechShp 2.0 regarding the value paid by TechShp 2.0. TechShp 2.0 is nt liable fr any actins brught based n activity f TechShp prir t the transactin. Maintain all existing liability plicies fr TechShp, Inc. thrugh their scheduled expiratin dates (including emplyee actins, prperty and injury, D&O, etc.). Unless therwise agreed upn by bth parties, any insurance refunds will g twards TechShp cleanup and wind dwn.

3 TechShp 2.0 and TechShp will mutually set up a checklist f items required t nt buy a D&O tail. Parties will meet by March 1 t decide if the tail is required based n the checklist. TechShp 2.0 will pay fr the tail r agreeable replacement cverage in March if the checklist items are nt met. Offer emplyment t certain frmer emplyees f TechShp, Inc. t facilitate the immediate repening f TechShp lcatins. Hnr lifetime memberships given as part f any lan r investment in TechShp after a $275 transfer fee has been paid. Acceptance f new lifetime membership relinquishes any right the investr/lender has against TechShp. Member s investment/lan will be transferred t TechShp2.0 at a transfer rate f $1000 machine use credit per $5000 invested/laned and nt repaid. Hnr paid lifetime memberships after a $400 transfer fee has been paid t TechShp 2.0. Hnr prepaid individual memberships with a transfer fee f $40 per remaining mnth prepaid perid nt t exceed $250. Hnr prepaid strage fees with a transfer fee f 50% f the remaining strage space fee. Crprate Memberships will be evaluated n a ne n ne basis. Small business members with 10 r less members will be treated as an individual in regards t prepayments.

4 2. Liquidatin Preference. Exhibit B SECOND AMENDED AND RESTATED ARTICLES OF INCORPORATION ARTICLE III, SECTION B.2 (a) In the event f any Liquidatin Event (as defined belw), either vluntary r invluntary, the hlders f Series A Preferred Stck and Series B Preferred Stck, n a pr rata basis, shall be entitled t receive, prir and in preference t any distributin f the prceeds f such Liquidatin Event (the "Prceeds") t the hlders f Class A Cmmn Stck and Class B Cmmn Stck by reasn f their wnership theref, an amunt per share equal t the sum f the applicable Original Issue Price (as defined belw) fr such series f Preferred Stck, plus declared but unpaid dividends n such share. If, upn the ccurrence f such event, the Prceeds thus distributed amng the hlders f the Series A Preferred Stck and Series B Preferred Stck shall be insufficient t permit the payment t such hlders f the full afresaid preferential amunts, then, the entire Prceeds legally available fr distributin shall be distributed ratably amng the hlders f the Series A Preferred Stck and Series B Preferred Stck in prprtin t the full preferential amunt that each such hlder is therwise entitled t receive under this subsectin (a). Fr purpses f this Secnd Amended and Restated Articles f Incrpratin, "Original Issue Price" shall mean $1.00 per share fr each share f the Series A Preferred Stck (as adjusted fr any stck splits, stck dividends, cmbinatins, subdivisins, recapitalizatins r the like with respect t such series f Preferred Stck), and $2.54 per share fr each share f the Series B Preferred Stck (as adjusted fr any stck splits, stck dividends, cmbinatins, subdivisins, recapitalizatins r the like with respect t such series f Preferred Stck). (b) Upn cmpletin f the distributin required by subsectin (a) f this Sectin 2, all f the remaining Prceeds available fr distributin t sharehlders shall be distributed amng the hlders f Class A Cmmn Stck and Class B Cmmn Stck pr rata based n the number f shares held by each. (c) Ntwithstanding the abve, fr purpses f determining the amunt each hlder f shares f Preferred Stck is entitled t receive with respect t a Liquidatin Event, each such hlder f shares f a series f Preferred Stck shall be deemed t have cnverted (regardless f whether such hlder actually cnverted) such hlder's shares f such series int shares f Class A Cmmn Stck immediately prir t the Liquidatin Event if, as a result f an actual cnversin, such hlder wuld receive, in the aggregate, an amunt greater than the amunt that wuld be distributed t such hlder if such hlder did nt cnvert such series f Preferred Stck int shares f Class A Cmmn Stck. If any such hlder shall be deemed t have cnverted shares f Preferred Stck int Class A Cmmn Stck pursuant t this paragraph, then such hlder shall nt be entitled t receive any distributin that wuld therwise be made t hlders f Preferred Stck that have nt cnverted (r have nt been deemed t have cnverted) int shares f Class A Cmmn Stck. (d) (i) Fr purpses f this Sectin 2, a "Liquidatin Event" shall include (A) the clsing f the sale, transfer r ther dispsitin f all r substantially all f this crpratin's assets, (B) the cnsummatin f the merger r cnslidatin f this crpratin with r int anther entity (except a merger r cnslidatin in which the hlders f capital stck f this crpratin immediately prir t such merger r cnslidatin cntinue t hld at least 50% f the vting pwer f the capital stck f this crpratin r the surviving r acquiring entity), (C) the clsing f the transfer (whether by merger, cnslidatin r therwise), in ne transactin r a series f related transactins, t a persn r grup f affiliated persns (ther than an underwriter f this crpratin's securities), f this crpratin's

5 securities if, after such clsing, such persn r grup f affiliated persns wuld hld 50% r mre f the utstanding vting stck f this crpratin (r the surviving r acquiring entity) r (D) a liquidatin, disslutin r winding up f this crpratin; prvided, hwever, that a transactin shall nt cnstitute a Liquidatin Event if its sle purpse is t change the state f this crpratin's incrpratin r t create a hlding cmpany that will be wned in substantially the same prprtins by the persns wh held this crpratin's securities immediately prir t such transactin. Ntwithstanding the prir sentence, the sale f shares f Preferred Stck in a financing transactin shall nt be deemed a "Liquidatin Event." The treatment f any particular transactin r series f related transactins as a Liquidatin Event may be waived by the vte r written cnsent f the hlders f a majrity f the utstanding Preferred Stck (vting tgether as a single class and nt as separate series, n an as cnverted basis). (ii) In any Liquidatin Event, if Prceeds received by this crpratin r its sharehlders is ther than cash, its value will be deemed its fair market value. Any securities shall be valued as fllws: (A) Securities nt subject t investment letter r ther similar restrictins n free marketability cvered by (B) belw: (1) If traded n a securities exchange, the value shall be deemed t be the average f the clsing prices f the securities n such exchange ver the twenty (20) trading-day perid ending three (3) trading days prir t the clsing f the Liquidatin Event; (2) If actively traded ver-the-cunter, the value shall be deemed t be the average f the clsing bid r sale prices (whichever is applicable) ver the twenty (20) trading-day perid ending three (3) trading days prir t the clsing f the Liquidatin Event; and (3) If there is n active public market, the value shall be the fair market value theref, as mutually determined by this crpratin and the hlders f a majrity f the vting pwer f all then utstanding shares f Preferred Stck. (B) The methd f valuatin f securities subject t investment letter r ther restrictins n free marketability (ther than restrictins arising slely by virtue f a stckhlder's status as an affiliate r frmer affiliate) shall be t make an apprpriate discunt frm the market value determined as abve in (A) (1), (2) r (3) t reflect the apprximate fair market value theref, as mutually determined by this crpratin and the hlders f a majrity f the vting pwer f all then utstanding shares f such Preferred Stck. (C) The freging methds fr valuing nn-cash cnsideratin t be distributed in cnnectin with a Liquidatin Event shall, upn the apprpriate apprval by the sharehlders f the definitive agreements gverning a Liquidatin Event, be superseded by the determinatin f such value set frth in the definitive agreements gverning such Liquidatin Event. (iii) In the event the requirements f this Sectin 2 are nt cmplied with, this crpratin shall frthwith either: (A) cause the clsing f such Liquidatin Event t be pstpned until such time as the requirements f this Sectin 2 have been cmplied with; r (B) cancel such transactin, in which event the rights, preferences and privileges f the hlders f the Preferred Stck shall revert t and be the same as such rights, preferences and privileges existing immediately prir t the date f the first ntice referred t in subsectin 2(d)(iv) heref.

6 (iv) This crpratin shall give each hlder f recrd f Preferred Stck written ntice f such impending Liquidatin Event at least seven (7) days prir t the sharehlders' meeting called t apprve such transactin, r at least twenty (20) days prir t the clsing f such transactin, whichever is earlier, and shall als ntify such hlders in writing f the final apprval f such transactin. The first f such ntices shall describe the material terms and cnditins f the impending transactin and the prvisins f this Sectin 2, and this crpratin shall thereafter give such hlders prmpt ntice f any material changes. The transactin shall in n event take place sner than twenty (20) days after this crpratin has given the first ntice prvided fr herein r sner than ten (10) days after this crpratin has given ntice f any material changes prvided fr herein; prvided, hwever, that subject t cmpliance with the General Crpratin Law f Califrnia such perids may be shrtened r waived upn the written cnsent f the hlders f Preferred Stck that represent a majrity f the vting pwer f all then utstanding shares f such Preferred Stck (vting tgether as a single class and nt as separate series, and n an as-cnverted basis) /00001/ v2