Exhibit 10.1

 

mPhase Technologies, Inc.

688 New Dorp Lane,

Staten Island, New York 10306-4933

 

 

December 22, 2017

 

Scepter Commodities, LLC

9841 Washingtonian Blvd., Suite 390

Gaithersburg, MD 20878

 

Attention: Anshu Bhatnagar

 

Re:       Letter of Intent (“LOI”)

Dear Anshu:

 

The purpose of this letter is to set forth certain understandings and agreements among Scepter Commodities, LLC (the “Private Company”), Certain Shareholders of mPhase Technologies, Inc. (Management of the Company “Management ”) and mPhase Technologies, Inc. (“Public Company”) (both Public Company and Management described together as “Sellers”) and with any party individually referred to as a “Party” or collectively the “Parties”), with respect to the potential acquisition by Private Company of a majority interest in Public Company (the “Transaction”). The Parties acknowledge that all provisions of this LOI are non-binding. No contract or agreement providing for a Transaction shall be deemed to exist unless and until a definitive agreement has been negotiated and executed between the Parties hereto.

 

The proposed terms of the Transaction are as follows:

 

1. Transaction. Sellers will enter into the Transaction with Private Company, the form of which will be suitable to the Parties and will comply with applicable state and federal laws. Public Company is a publicly-traded company in the United States, subject to the reporting requirements of the Securities Exchange Act of 1934, and its common stock trades on the OTC Pink Open Market. Presently, Public Company is in the process of preparing and filing delinquent reports with the U.S. Securities and Exchange Commission (the “SEC”) and it plans to become current in its reporting obligations on or before February 15, 2018. Pursuant to a mutually satisfactory definitive agreement (the “Definitive Agreement”) among Private Company and the Sellers, the Public Company will agree to implement a reverse split of its issued and outstanding common stock (the “Common Shares”) and issue shares to Private Company such that upon closing of the Transaction, Private Company will own 80% of the fully-diluted Common Shares. At closing, Public Company will maintain limited operations with limited material assets or liabilities, with such liabilities estimated to be no more than $350,000.00 in accounts payable and unpaid, debt excluding proxy and other shareholder filings subsequent to the September 30, 2017 quarterly report, otherwise, will have no tax obligations, will not be subject to litigation and will have had no material changes to its business or financial condition from the date of this LOI until such date of closing.

 

 

2. Definitive Agreement. The Parties will use their best efforts to negotiate in good faith the Definitive Agreement, which will contain, among other standard terms and conditions, the following provisions:

 

	a.	Prior to the closing of the Transaction, the Public Company’s Board of Directors and the Management will approve a reverse split, the ratio of which is to be determined by the Private Company and Management.
	b.	At the closing, Private Company shall receive 80% of the fully diluted Common Shares of the Public Company.

 

c.

Public Company shall eliminate all liabilities except for up to $350,0000.00 discussed above from its balance sheet and have no ongoing operations as of the closing, or the business will be spun out at a later date.

 

d.

Public Company shall deliver to Private Company its financial statements, by an accounting firm accredited by the PCAOB and a member of the SEC practice section.

 

e.

Public Company shall deliver to Private Company, certified transfer sheets (or make same available through the transfer agent) as well as all corporate books and records and support documents for the audits as provided for in item 1(d) above.

 

f.

All officers and employees shall resign from the Public Company in all current capacities, with no further compensation due under their existing employment agreement other than mutually agreed to consulting agreements if any. For a period of 90 days, the Parties may agree to keep one (1) remaining Director on the Board from the Public Company in order to maintain operating company status.

 

g.

A condition precedent to the closing of the Transaction shall be an executed agreement by the Management of the Public Company, to vote in favor of the Transaction if need be and to have the Board of Directors and/or holders of the majority of shares of voting common stock execute any documents necessary to affect the sale of a majority interest in the Public Company and as documented in the Definitive Agreement, with all such approvals being obtained as required by relevant state and Federal securities laws.

 

h.

Public Company acknowledges that within the first sixty (60) days after the closing, the new Board will amend the Public Company’s Certificate of Incorporation to authorize 20,000,000 shares of blank check preferred stock, and of that preferred, the Board shall approve a super voting series of preferred stock in the form set forth in Exhibit A (“Series A Preferred Stock”). The Series A Preferred Stock will be issued to the new principals in exchange for certain contributions such principals will be making to the combined entity.

 

i.

Public Company agrees to leave one (1) of its existing subsidiaries intact as part of the Transaction, but that subsidiary need not have any assets or operations.

 

j.

All current known and unknown debts and payoffs and settlements made thereto, estimated at no more than $350,0000, including the disclosed convertible notes, will be the responsibility of the Management of mPhase, and will either be converted to equity (and included in the 20% hold back) or will be repaid, and shall not be the responsibility of the Private Company pre or post Transaction. In the event that any debts are presented over the course of the next 36 months that existed prior to this Transaction (even if that amount exceeds the estimated $350,000) such debts will remain the responsibility of Management of mPhase and will either be converted and deemed included in the 20% hold back or will be repaid by the Managment.

 

k.

During the twelve (12) months that follow the closing of the Transaction, any undisclosed liabilities that are uncovered by Private Company will be the responsibility of the Management to repay or shall be deducted from the 20% initial holdings.

 

 

3. Conduct of Business. On and after the date that this LOI is executed by the Parties hereto, Public Company will cause the operations of Public Company to be carried on in the normal course of business, diligently and lawfully, and in substantially the same manner as they previously were carried out. Public Company will not cause its business to suffer the existence or allow the creation of any liens or encumbrances of any nature on its business, property or assets, except in the ordinary course of business consistent with past practices. Public Company shall not engage in any activities or transactions which are outside the ordinary course as conducted prior to and on the date hereof, other than certain transactions which include raising capital via private placement memorandums to accredited investors pursuant to Section 4(2)a of the SEC in order to continue operations and to clean up of the balance sheet, thru either cash payments or debt to equity conversions. In addition, Public Company will not issue, or enter into any agreements for the future issuance of any capital stock or grant any options with respect to its capital stock other than for the purposes described above, nor will the Public Company make any distributions, dividends or other payments to any affiliate or shareholders of the Public Company.

 

4. Public Announcements. Neither Party will make any public disclosure concerning the matters set forth in this LOI or the negotiation of the proposed Transaction without the prior written consent of the other Party. When either Party desires to make such public disclosure, after receiving such prior written consent, the disclosing Party will give the other Party an opportunity to review and comment on any such disclosure in advance of public release. Notwithstanding the above, to the extent that either Party is advised by counsel that disclosure of the matters set forth in this letter of intent is required by applicable securities laws or to the extent that such disclosure is ordered by a court of competent jurisdiction or is otherwise required by law, then such disclosing Party will provide the other Party, if reasonably possible under the circumstances, prior notice of such disclosure as well as an opportunity to review and comment on such disclosure in advance of the public release.

 

5. Due Diligence. Each Party and its representatives, officers, employees and advisors, including accountants and legal advisors, will provide the other Party and its representatives, officers, employees and advisors, including accountants and legal advisors, with all information, books, records and property (collectively, “Transaction Information”) that such other Party reasonably considers necessary or appropriate in connection with its due diligence inquiry. Each Party agrees to make available to the other Party such officers, employees, consultants, advisors and others as reasonably requested by the other Party for meetings, visits, questions and discussions concerning each other and the Transaction. Each of the Parties will use its reasonable best efforts to maintain the confidentiality of the Transaction Information, unless all or part of the Transaction Information is required to be disclosed by applicable securities laws or to the extent that such disclosure is ordered by a court of competent jurisdiction.

 

 

6. Exclusivity. In consideration of the mutual covenants and agreements contained herein, until the earlier of the closing of the Transaction or termination of this LOI in accordance with its terms, the Public Company and its officers, directors, employees, shareholders and other representatives will not, and will not permit any of their respective affiliates to, directly or indirectly, solicit, discuss, accept, approve, respond to or encourage (including by way of furnishing information) any inquiries or proposals relating to, or engage in any negotiations with any third party with respect to any transaction similar to the Transaction or any transaction involving the transfer of a significant or controlling interest in the assets or capital stock of the Public Company, including, but not limited to, a merger, acquisition, strategic investment or similar transaction (“Acquisition Proposal”). Public Company and its officers or their respective affiliates will immediately notify Private Company of the receipt of any third-party inquiry or proposal relating to an Acquisition Proposal and will provide Private Company with copies of any such notice inquiry or proposal. Notwithstanding the foregoing, nothing in this Section 6 will be construed as prohibiting the Board of Directors of the Public Company from (a) making any disclosure required by applicable law to its shareholders; or (b) responding to any unsolicited proposal or inquiry to the Public Company (other than an Acquisition Proposal by a third party) by advising the person making such proposal or inquiry of the terms of this Section 6.

 

7. Termination. This LOI may be terminated (a) by mutual written consent of the Parties hereto, (b) by either Party if the Transaction (i) has not been consummated by March, 1, 2018, (placeholder) (ii) is enjoined by a court or a governmental body, (iii) cannot be consummated due to a material breach of any representation, warranty, covenant or agreement on the part of the other Party, which breach cannot be cured within thirty (30) days of written notice of such breach, or (iv) by either Party if a Party is not reasonably satisfied with the results of its due diligence investigation of the other Party; or (c) by Private Company if (i) the Public Company’s financial condition or capitalization changes to any material extent from that which shall be reported to Private Company in its most recently filed Annual Report on Form10-K.

 

8. Closing. The Transaction shall close upon the execution of Definitive Agreement and ancillary documents related thereto by the Parties.

 

9. Brokers. Each Party represents and warrants to the other that if they are represented by any brokers or finders entitled to any compensation with respect to the Transaction that Party shall be responsible for any compensation due to the broker or finder, and each Party agrees to indemnify and hold the other harmless from and against any expenses or damages incurred because of a breach of this representation and warranty.

 

10. Expenses. Except as provided in Section 11, each party will be solely responsible for any and all of its respective costs, fees and expenses, including, without limitation, expenses of legal counsel, consultants, accountants and other advisors, incurred at any time in connection with pursuing or consummating the Transaction.

 

11. Attorneys’ Fees. If any legal action is necessary to enforce or interpret the terms of this LOI which are binding on the Parties pursuant to Section 12, the prevailing Party shall be entitled to recover reasonable attorneys’ fees, costs and necessary disbursements in addition to any other relief to which such Party may be entitled.

 

12. Non-Binding Nature. This LOI expresses the intention of the Parties with respect to the Transaction. This LOI does not contain all matters upon which the parties must reach agreement. This LOI will not constitute an obligation binding in any respect on any party or create any rights in favor of any party or any person, except for the parties’ agreements and obligations under Sections 3, 4, 6, 9 ,10, 11 and 12 of this LOI, which sections will be binding obligations on each of the Parties hereto. Any other obligations (legal or otherwise) will be as set forth in the Definitive Agreement.

 

 

13. Compliance with the Securities Laws. Private Company acknowledges that it and the Private Company’s officers, directors, shareholders and employees and other representatives may, in connection with their consideration of the proposed Transaction, come into possession of material non-public information about Public Company. Accordingly, the Private Company will use its best efforts to ensure that none of its officers, directors, shareholders and employees or other representatives will trade (or cause or encourage any third party to trade) in any of the securities which they will receive as a result of the Transaction while in possession of any such material, non-public information.

 

14. Mutual Cooperation. The parties hereto shall cooperate with each other to achieve the purpose of this LOI, and shall execute such other and further documents and take such other and further actions as may be necessary or convenient to affect the transaction described herein.

 

15. Miscellaneous.

 

a. Governing Law; Venue. This LOI will be governed by and construed under the internal laws of the State of New York applicable to a contract made and performed in that state, without regard to choice of law or conflict of law principles. Each Party submits to the exclusive personal jurisdiction of the state and federal courts located in New York and agrees that all actions or disputes related to this LOI shall be brought in such courts.

 

b. Interpretation. No provision of this LOI shall be interpreted or construed against any Party hereto solely because such Party or its legal representative drafted such provision.

 

c. Entire Agreement; Amendment. This LOI constitutes the entire agreement between the Parties with respect to the matters covered herein and supersedes any prior negotiations, understandings or agreements with respect to the matters contemplated hereby. This LOI may only be modified or amended in a writing signed by the Parties hereto.

 

d. Counterparts. This LOI may be executed by facsimile or .PDF signature and in any number of counterparts, all of which taken together shall be deemed to constitute a single original document.

 

This LOI will terminate at 5:00 p.m. Eastern time on December 29, 2017 unless it has been duly executed by or on behalf of the Parties prior to such time.

 

THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK

SIGNATURE PAGE TO FOLLOW

 

 

Please indicate your acceptance of the terms outlined in this LOI regarding the Transaction as set forth herein.

 

Sincerely,

 

/s/ Martin Smiley

Martin Smiley

CFO and General Counsel of mPHASE Technologies, Inc.

on behalf of the Sellers.

 

/s/ Ronald Durando

Ronald Durando, President and CEO

 

Dated: December 28, 2017

 

Agreed and Accepted:

 

Scepter Commodities, LLC

 

By:	/s/ Anshu Bhatnagar
	Name:	Anshu Bhatnagar
	Title:	Chief Executive Officer
	Date:	12/29/2017