Item
1.01 Entry into a Material Definitive Agreement.
On
July 22, 2021, C-Bond closed the Exchange Agreement and acquired 80% of the Mobile Shares. The Mobile Shares will be exchanged for restricted
shares of C-Bond’s common stock, par value $0.001 (“Common Stock”), in an amount equal to $800,000, divided by the
average of the closing prices of C-Bond’s Common Stock during the 30-day period immediately prior to the closing as defined in
the Exchange Agreement. Two years after closing, C-Bond has the option to acquire the remaining 20% of Mobile’s issued and outstanding
membership interests in exchange for a number of shares of C-Bond’s Common Stock equal to 300% of Mobile’s average EBIT value,
divided by the price of C-Bond’s Common Stock as defined in the Exchange Agreement (the “Additional Closing”).
The
Company also entered into an Amendment to the Exchange Agreement, dated July 21, 2021, which, among other things, stipulates that for
U.S. federal income tax purposes the Exchange and the Additional Closing (if exercised) are intended to qualify as a “reorganization”
within the meaning of Section 368(a) of the Code and the Treasury Regulations, and the definition of “Total EBIT Value” shall
mean Mobile’s net income, before income tax expense and interest expense have been deducted, for the period beginning on July 1,
2021 and ending on June 30, 2023, plus fifty percent (50%) of the Mobile Shareholder’s Base Salary, as defined in the Executive
Employment Agreement dated July 21, 2021, between the Mobile Shareholder and the Company (the “Employment Agreement”), as
described below.
The
Exchange Agreement transaction documents include the Operating Agreement of Mobile (the “Operating Agreement”) which, among
other things, appoints Mr. Wanke, Scott R. Silverman, and Allison Tomek as the Managers of Mobile, and governs the operations of Mobile
as outlined therein. Under the terms of the Operating Agreement, the Managers shall not have the authority to perform or approve the
following actions, among other things, unless such action is also approved by a unanimous vote: to terminate the existing lease between
Company and MDW Management, LLC; to borrow money for the Company from banks, other lending institutions, the Manager, Members, or affiliates
of the Manager or Members; to establish lines of credit in the name of the Company with financial institutions such as banks or other
lending institutions; to determine and declare distributions to Members of Mobile.
In
connection with the Exchange Agreement, the Company entered into a Piggy-Back Registration Rights Agreement dated July 20, 2021 (the
“Registration Rights Agreement”) with Mobile, the Mobile Shareholder, and Mr. Wanke, pursuant to which if at any time on
or after the date of the closing, the Company proposes to file any Registration Statement (a “Registration Statement”) with
respect to any offering of equity securities by the Company for its own account or for shareholders of the Company, other than a Form
S-8 Registration Statement, a dividend reinvestment plan, or in connection with a merger or acquisition, then the Company shall (x) give
written notice of such proposed filing to the holders of registrable securities no less than ten (10) days before the anticipated filing
date of the Registration Statement, and (y) offer to the holders of registrable securities the opportunity to register the sale of either
(i) an amount of registrable securities equal to the total number of shares of the Company’s common stock being registered in such
Registration Statement that are being offered solely for the Company’s account excluding the registrable securities; or (ii) an
amount of registrable securities equal to the total number of shares of the Company’s common stock being registered for resale
by shareholders of the Company excluding the registrable securities.
On
July 21, 2021, the Company entered into the Employment Agreement with Mr. Wanke, the President of Mobile, to serve as the President of
C-Bond’s Safety Solutions Group. Under the three-year Employment Agreement, Mr. Wanke will receive a base salary of $240,000 per
year, which may be increased from time to time with the approval of the board of directors. In addition, Mr. Wanke may receive an annual
bonus as determined by the board of directors. It is understood that although Mr. Wanke’s base salary will be paid by Mobile, 50%
of the base salary will be allocated to the expenses of Mobile, and the other 50% of the base salary will be allocated to the expenses
of the Company.
In
connection with the Exchange Agreement, the Company was named as guarantor (“Guarantor”) of a Commercial Lease Agreement
dated July 21, 2021, by and between landlord MDW Management, LLC, and tenant Mobile Tint, LLC d/b/a A-1 Glass (the “Lease”).
The term of the Lease is 60 months, at a minimum monthly rent of $5,600 (not including tax), with two five-year options for the tenant
to renew. The Company’s obligation as Guarantor of the Lease will terminate upon the occurrence of earlier of the following: (i)
the date of Guarantor’s acquisition of 100% of the ownership interests of Mobile; (ii) the date that Guarantor beneficially owns
less than an eighty percent (80%) ownership interest in Mobile; or (iii) two (2) years from and after the effective date of the guaranty.
The
foregoing description of the Exchange Agreement is a summary only and is qualified in its entirety by reference to the full text of such
document, filed as Exhibit 10.1 to the Current Report on Form 8-K filed on July 7, 2021. The foregoing description of the Amendment to
the Exchange Agreement, Operating Agreement, Piggy-Back Registration Rights Agreement, Employment Agreement, and Lease are summaries
only and are qualified in their entirety by reference to the full text of such documents, filed as Exhibit 10.2, 10.3, 10.4, 10.5, and
10.6, respectively,
