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Item
7.01 Regulation FD Disclosure
On
September 5, 2017, Crexendo, Inc. (the "Company") accepted from
Steven G. Mihaylo, Chief Executive Officer of the Company, forms to
exercise $973,748.15 worth of options to purchase common shares of
the Company previously issued to Mr. Mihaylo under the current
Crexendo Long-Term Incentive Plan
(“Options”).
The
Options exercised consist of the following:
Option Price
Options Exercised
Proceeds to Company
$2.45
275,000
$673,750.00
$1.85
119,999
$221,998.15
$1.56
50,000
$78,000.00
444,999
$973,748.15
The
Option exercise was accepted in substantial satisfaction and
payment of a loan made under a Term Loan Agreement dated December30, 2015 (the "Loan Agreement"), with Steven G. Mihaylo, as Trustee
of The Steven G. Mihaylo Trust dated August 19, 1999 (the
"Lender"). After the payments discussed above there remains a
balance on the loan of $26,251.85.
Pursuant
to the Loan Agreement, the Lender agreed to make, and did make, an
unsecured loan to the Company in the initial principal amount of
$1,000,000.00 (the “Loan”). The Loan Agreement
contained a provision which required the Lender to increase the
amount of the Loan by up to an additional $1,000,000 on the same
terms and conditions as the initial advance if the independent
directors of the Company, in their reasonable discretion,
determined such an increase is necessary for the funding needs of
the Company and that the terms of the Loan are in the best
interests of the Company and its shareholders. The original term
for the Board to exercise the demand has expired; however it was
extended as discussed further herein.
The
term of the Loan was five years, with simple interest paid at 9%
per annum until a balloon payment is due December 30, 2020. The
Loan Agreement provides for interest to be paid in shares of common
stock of the Company (the “Common Stock”) at a stock
price of $1.20 (which was the average of the high and low adjusted
close price of the Common Stock of the Company for each business
day for the period which started December 23, 2015 and ended
December 29, 2015.). The first two years of the interest on the
principal balance of the Loan were paid in advance.
On
February 27, 2017, the Company entered a second amendment
(“Amendment”) to the Loan Agreement. The terms of the
Loan Agreement were not changed other than the provision which
required the Lender to increase the amount of the Loan by up to an
additional $1,000,000 on the same terms and conditions as the
initial advance if the independent directors of the Company, in
their reasonable discretion, determine such an increase is
necessary for the funding needs of the Company and that the terms
of the Loan are in the best interests of the Company and its
stockholders was extended to allow the Board of Directors to make
such a determination up to May 30, 2018. The Option for the Company
to require the funding will remain until May 30, 2018 due to the
balance of the loan of $26,251.85.
The
foregoing paragraphs provide a summary of selected provisions of
Loan Agreement and the Amendment. This summary is not complete and
is qualified in its entirety by reference to the copy of the Loan
Agreement filed as an Exhibit to the Current Report on Form 8-K
filed December 30, 2015 and the copy of the Amendment filed as an
Exhibit to the Current Report on Form 8-K filed March 1, 2017. The
Agreements contained representations and warranties and other
statements that are solely for the benefit of the parties to those
agreements and are designed to allocate business and other risks
among the parties. Such representations and warranties and other
statements (i) speak only as to the date on which they were made,
and may be modified or qualified by confidential schedules or other
disclosures, agreements or understandings among the parties, which
the parties believe are not required by the securities laws to be
publicly disclosed, and (ii) may be subject to a different
materiality standard than the standard that is applicable to
disclosures to investors. Moreover, you are advised that
information concerning the subject matter of the representations
and warranties and other statements made in the Loan Agreement has
changed the execution date of the Loan Agreement, and subsequent
information may or may not be fully reflected in the Company's
public disclosures. Accordingly, investors should not rely upon
representations and warranties and other statements in the Loan
Agreement as factual characterizations of the actual state of
affairs of the Company. Investors should instead look to
disclosures contained in the Company's reports under the Securities
Exchange Act of 1934, as amended.
2
Safe Harbor for Forward-Looking Statements
In
addition to historical information, this Report contains
forward-looking statements. The Company may, from time to time,
make written or oral forward-looking statements within the meaning
of the Private Securities Litigation Reform Act of 1995. Such
statements encompass the Company's beliefs, expectations, hopes or
intentions regarding future events. Words such as "expects,""intends,""believes,""anticipates,""should,""likely" and
similar expressions identify forward-looking statements. All
forward-looking statements included in this Report and the Exhibits
filed herewith are made as of the date hereof or as of the date of
the respective Exhibit. The Company assumes no obligation to update
any forward-looking statement. Readers should note that many
factors could affect the proposed transactions, as well as the
future operating and financial results of the Company, and could
cause actual results to vary materially from those expressed in
forward-looking statements set forth in this Report. These factors
include, but are not limited to, the timing of the actions
contemplated by the proposed transactions and other unanticipated
factors. Risk factors, cautionary statements and other conditions
which could cause the Company's actual results to differ from
management's current expectations are contained in the Company's
filings with the SEC, including the section of the Company's Annual
Report on Form 10-K for the year ended December 31, 2016, entitled
"Risk Factors." All subsequent forward-looking statements
attributable to the Company or persons acting on its behalf are
expressly qualified in their entirety by these cautionary
statements.
3
SIGNATURES
Pursuant to the
requirements of the Securities Exchange Act of 1934, the registrant
has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
