Attached files
Exhibit 4.18
THE
SECURITIES REPRESENTED BY THIS NOTE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, AND HAVE BEEN ACQUIRED FOR
INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE
OR DISTRIBUTION THEREOF. NO SUCH SALE OR DISTRIBUTION MAY BE
EFFECTED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT RELATED
THERETO OR AN OPINION OF COUNSEL IN A FORM SATISFACTORY TO THE
COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED.
SECURED CONVERTIBLE PROMISSORY NOTE
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$__________
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_________,
2016
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New York , New
York
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For
value received, root9B Holdings, Inc. (f/k/a root9B Technologies,
Inc.), a Delaware corporation (the “Company”), promises to
pay to ____________ (the “Holder”), or its
registered assigns, in lawful money of the United States of America
the principal amount of [●] Dollars ($[●]). Interest
shall accrue from the date of this Secured Convertible Promissory
Note (this “Note”) on the unpaid
principal amount at a rate equal to 10.00% per annum simple
interest. Interest on this Note shall accrue and, unless otherwise
converted in accordance with Section 2 below, shall be payable upon
the Maturity Date (as defined below). This Note is one of a series
of Notes issued pursuant to that certain Securities Purchase
Agreement, dated as of September 9, 2016 (the “Purchase Agreement”), by
and among the Company and the investors (the “Holders”) referred to
therein, as amended from time to time. Capitalized terms used but
not defined herein shall have the meaning set forth in the Purchase
Agreement. This Note is subject to the following terms and
conditions:
1. Payments.
(a) Repayment.
(i) Repayment upon Maturity Date.
If this Note is not earlier converted pursuant to Section 2, the
entire then-outstanding and unpaid principal amount of this Note,
together with any accrued but unpaid interest thereon (the
“Outstanding
Amount”), shall be due and payable upon the earlier to
occur of (i) _________, 2019 (the “Maturity Date”), and (ii)
following the occurrence of an Event of Default (as defined below),
when such amounts are declared due and payable by the Holder in
accordance with the terms hereof. All payments shall be made, at
the Holder’s option, in either (i) lawful money of the United
States of America at such place as the Holder hereof may from time
to time designate in writing to the Company or (ii) shares of the
Company’s common stock, par value $0.001 (the
“Common
Stock”) pursuant to Section 2(b) below. Subject to
Section 2 below, interest shall accrue on this Note but shall not
be due and payable until the Maturity Date.
(ii) Optional
Repayment Upon a Minimum Threshold Sale. In the event that
the Company consummates a Minimum Threshold Sale (as defined
below), then Holder shall have the one-time right, exercisable by
delivering to the Company written notice (the “Optional Repayment
Notice”)at any time during the Option Period (as
defined below), to demand repayment of an amount equal to up to
twenty-five percent (25%) of the Outstanding Amount (which amount
shall be specified in the Optional Repayment Notice) (the
“Minimum Threshold
Repayment”), in cash at such place as the Holder
hereof may designate in writing to the Company, with such payment
to be made within three (3) business days of receipt of the
Optional Repayment Notice. Notwithstanding anything to the contrary
contained herein, including, but not limited to, Section 1(c)
below, any such Optional Repayment shall not be subject to any
prepayment penalty. For the avoidance of doubt, the right to demand
the Minimum Threshold Repayment shall expire upon the expiration of
the Option Period.
(iii) Optional
Repayment Upon a Maximum Threshold Sale. In the event that
the Company consummates a Maximum Threshold Sale (as defined
below), then Holder shall have the one-time right, exercisable by
delivering to the Company an Optional Repayment Notice during the
Option Period, to demand repayment of an amount equal to up to
fifty percent (50%) of the Outstanding Amount (which amount shall
be specified in the Optional Repayment Notice) (the
“Maximum Threshold
Repayment”), in cash at such place as the Holder
hereof may designate in writing to the Company, with such payment
to be made within three (3) business days of receipt of the
Optional Repayment Notice. Notwithstanding anything to the contrary
contained herein, including, but not limited to, Section 1(c)
below, any such Optional Repayment shall not be subject to any
prepayment penalty. For the avoidance of doubt, the right to demand
the Maximum Threshold Repayment shall expire upon the expiration of
the Option Period.
(b) Interest
Payment. The Interest Payment shall be paid by the Company
on each Payment Date. The Interest Payment shall be payable in, at
the option of the Holder, either (i) lawful money of the United
States of America at such place as the Holder hereof may from time
to time designate in writing to the Company or (ii) such number of
shares of Common Stock (the “Interest Shares”) equal
to the quotient obtained by dividing (i) the Interest Payment by
(ii) Interest Conversion Rate (the “Interest Payment Type”).
Notwithstanding the foregoing, Holder may not request the Interest
Payment to be paid in Interest Shares if such issuance shall result
in a Share Reserve Failure. Holder shall notify the Company in
writing no fewer than three (3) business days prior to the
applicable Payment Date the Interest Payment Type such
Holder’s Interest Payment shall be payable in on the
applicable Payment Date.
(c) Prepayment.
The Company shall have the right at any time prior to the twelve
month anniversary (the “Anniversary Date”) of the
date of issuance of this Note, with the prior written consent of
the Holder, to prepay all or some of the outstanding Principal
Amount of this Note together with accrued interest then due (the
"Prepayment
Amount") by paying to the Holder an amount equal to (1) the
unpaid principal to be repaid plus (2) any accrued but unpaid
interest plus (3) an amount
equal to the interest which has not accrued as of the Optional
Prepayment Date but would accrue on the principal to be repaid
during the period beginning on the Optional Prepayment Date and
ending on the Anniversary Date (the “Early Prepayment Price”).
Following the Anniversary Date, the Company shall have the right,
exercisable on not less than three (3) Trading Days prior written
notice to the Holder of the Note, to prepay all or some of the
outstanding Principal Amount of this Note together with accrued
interest then due by paying to the Holder an amount equal to (1)
the unpaid principal to be repaid plus (2) any accrued but unpaid
interest plus (3) an amount
equal to one-half of the interest which has not accrued as of the
Optional Prepayment Date (as defined below) but would accrue on the
principal to be repaid during the period beginning on the Optional
Prepayment Date and ending on the Maturity Date (the
“Subsequent
Prepayment Price” and, together with the Early
Prepayment Price, the "Prepayment Price"). Any notice
of prepayment hereunder (an “Optional Prepayment
Notice”) shall be delivered to the Holder at its
registered address and shall state: (1) that the Company is
exercising its right to prepay the Note, (2) the Prepayment Amount,
(3) the applicable Prepayment Price and (4) the date of prepayment
which shall be not more than three (3) Trading Days from the date
of the Optional Prepayment Notice. On the date fixed for prepayment
(the “Optional
Prepayment Date”), the Company shall make payment of
the applicable Prepayment Price to or upon the order of the Holder
as specified by the Holder in writing to the Company at least one
(1) business day prior to the Optional Prepayment Date. The Company
covenants and agrees that it will honor all Notices of Conversion
(as defined below) tendered from the time of delivery of the
Optional Prepayment Notice through the date all amounts owing
thereon are due and paid in full..
(d) Security.
The payment obligations arising under this Note are secured
pursuant to the terms of that certain Security Agreement made
effective as of the date of the Purchase Agreement by and between
the Company and the Holder (as amended from time to time, the
“Security
Agreement”). Reference hereby is made to the Security
Agreement for a description of the nature and extent of the
collateral serving as security for this Note and the rights of the
Holder with respect to such security.
(e) Ranking. The
Note shall rank senior in all respect to all indebtedness,
liabilities or obligations of the Company to other parties
outstanding as of the date of the Purchase Agreement.
(f) Definitions.
(i) “Interest Conversion Rate”
means a per share price equal to 85% of the quotient of the sum of
the VWAP of the Common Stock as of each Trading Day during the five
(5) consecutive Trading Day period ending and including the
Trading Day ended immediately prior to the Additional Closing Date,
divided by five (5), but in no event less than $0.80 per
share.
(ii) “Interest
Payment” means an amount equal to any accrued but
unpaid interest under this Note as of each Payment
Date.
(iii) “IPSA
Sale” means a sale of substantially all of the assets
of IPSA (as defined below).
(iv) “Maximum
Threshold Sale” means an IPSA Sale from which the
Company receives cash proceeds of not less than $10,000,000 at the
closing of such transaction (exclusive of any earn out amounts,
milestone payments or similar contingent payments).
(v) “Minimum Threshold Sale”
means an IPSA Sale from which the Company receives cash proceeds of
not less than $8,000,000 and not greater than $9,999,999 at the
closing of such transaction (exclusive of any earn out amounts,
milestone payments or similar contingent payments).
(vi) “Option
Period” means the 30 calendar day period following
either a Minimum Threshold Sale or Maximum Threshold Sale, as
applicable.
(vii) “Payment
Date” means each March 31, June 30, September 30 and
December 31, commencing December 31, 2016 or, in each case, if such
day is not a business day, the first business day immediately
thereafter until the earlier of (i) the Outstanding Amount is
repaid pursuant to Section
1(a) or (ii) the Outstanding Amount is converted pursuant to
Section
2.
(viii) “Trading
Day” means a day on which the principal Trading Market
is open for trading.
(ix) “Trading
Market” means any of the following markets or
exchanges on which the Common Stock is listed or quoted for trading
on the date in question: the NYSE MKT, the Nasdaq Capital Market,
the Nasdaq Global Market, the Nasdaq Global Select Market, the New
York Stock Exchange, the OTC Bulletin Board or the “Pink
Sheets” published by Pink OTC Markets, Inc. (or a similar
organization or agency succeeding to its functions of reporting
prices) (or any successors to any of the foregoing).
(x) “VWAP” means, for any
date, the price determined by the first of the following clauses
that applies: (a) if the Common Stock is then listed or quoted
on a Trading Market, the daily volume weighted average price of the
Common Stock for such date (or the nearest preceding date) on the
Trading Market on which the Common Stock is then listed or quoted
as reported by Bloomberg L.P. (based on a Trading Day from 9:30
a.m. (New York City time) to 4:02 p.m. (New York City time)),
(b) if the OTC Bulletin Board is not a Trading Market, the
volume weighted average price of the Common Stock for such date (or
the nearest preceding date) on the OTC Bulletin Board, (c) if
the Common Stock is not then listed or quoted for trading on the
OTC Bulletin Board and if prices for the Common Stock are then
reported in the “Pink Sheets” published by Pink OTC
Markets, Inc. (or a similar organization or agency succeeding to
its functions of reporting prices), the most recent bid price per
share of the Common Stock so reported, or (d) in all other
cases, the fair market value of a share of Common Stock as
determined by an independent appraiser selected in good faith by
the Holders of a majority in interest of the Securities then
outstanding and reasonably acceptable to the Company, the fees and
expenses of which shall be paid by the Company.
(a) Conversion.
Subject to the limitations set forth in Section 2(d) and Section 3 below, at any time on
or after February ___, 2017, unless the Outstanding Amount has
previously been repaid or converted as provided herein, the Holder
may elect to convert, in whole or in part, the Outstanding Amount
into fully paid and non-assessable shares of Common Stock. The
number of shares of Common Stock to be issued upon conversion of
this Note pursuant to this Section 2(a) shall be equal to
the quotient obtained by dividing (i) the Outstanding Amount
elected by the Holder to be converted, by (ii) $0.80 (subject to
appropriate adjustment in the event of any stock dividend, stock
split, combination or similar recapitalization affecting such
shares) (the "Conversion
Price"), rounded down to the nearest whole
share.
(b) Rights, Preferences
and Privileges of Common Stock. Upon conversion of this Note
pursuant to this Section
2, the Company shall issue shares of Common Stock (the
“Conversion
Shares”) which shall have the rights, preferences and
privileges set forth in the Company’s Certificate of
Incorporation, as amended from time to time and then in
effect.
(c) Mechanics and
Effect of Conversion.
This Note may be converted by the Holder in whole or in part
pursuant to Section
2(a), on any Trading Day, by submitting to the Company a
notice (by facsimile, e-mail or other reasonable means of
communication dispatched on the Conversion Date prior to 4:00 p.m.,
New York, New York time) specifying the Outstanding Amount to be so
converted (the “Notice of Conversion”).
Any Notice of Conversion submitted after 4:00 p.m., New York, New
York time, shall be deemed to have been delivered and received on
the next Trading Day.No fractional shares of the Common Stock will
be issued upon conversion of this Note. In lieu of any fractional
share to which the Holder would otherwise be entitled, the Company
will pay to the Holder in cash the amount of the unconverted
outstanding and unpaid principal amount of this Note that would
otherwise be converted into such fractional share. Upon conversion
of this Note pursuant to this Section 2, the Holder
shall surrender this Note, duly endorsed, at the principal offices
of the Company or any transfer agent of the Company. At its
expense, the Company will, as soon as practicable thereafter, issue
and deliver to such Holder, at such principal office, a certificate
or certificates for the number of shares to which such Holder is
entitled upon such conversion, together with any other securities
and property to which the Holder is entitled upon such conversion
under the terms of this Note, including a check payable to the
Holder for any cash amounts payable as described herein. Upon
conversion of this Note, the Company will be forever released from
all of its obligations and liabilities under this Note with regard
to that portion of the principal amount being converted including
without limitation the obligation to pay such portion of the
principal amount.
(d) Limitations on
Exercise. This Note shall not be converted by the Holder to
the extent (but only to the extent) that, following such
conversion, the Holder or any of its affiliates would beneficially
own in excess of 9.99% (the “Maximum Percentage”) of
the Outstanding Shares of Common Stock (as defined below). No prior
limitation on the number of shares of Common Stock subject to this
Note or the inability to convert this Note pursuant to this
Section 2 shall
have any effect on the applicability of the provisions of this
Section 2 with
respect to any subsequent determinations of the number of shares
subject to the Note or the conversion hereof. For the purpose of
this Section 2(e),
beneficial ownership and all determinations and calculations
(including, without limitation, with respect to calculations of
percentage ownership) shall be determined in accordance with
Section 13(d) of the Exchange Act. For clarification, the foregoing
calculation of beneficial ownership shall take into account all
securities which give rise to beneficial ownership by the Holder or
its Affiliates of such Common Stock under such rules and
regulations and not solely this Note. The provisions of this
Section 2(e) shall
be implemented in a manner otherwise than in strict conformity with
the terms of this Section
2(e) in order to correct this Section 2(e) or any portion
hereof which may be defective or inconsistent with the intended
Maximum Percentage beneficial ownership limitation herein contained
or to make changes or supplements necessary or desirable to
properly give effect to such Maximum Percentage limitation. The
limitations contained in this Section 2(e) shall apply to a
successor holder of this Note. “Affiliate” means, with
respect to any Person, any other Person that, directly or
indirectly through one or more intermediaries, Controls, is
controlled by or is under common control with such Person, as such
terms are used in and construed under Rule 405 under the Securities
Act. With respect to the Holder, any investment fund or managed
account that is managed on a discretionary basis by the same
investment manager Holder will be deemed to be an Affiliate of
Holder. “Person” means any
individual, firm, corporation, partnership, limited liability
company, joint venture, association, joint stock company, trust,
unincorporated organization or government or any agency or
political subdivision thereof, or other entity of any kind and
includes any successor (by merger or otherwise) of such entity.
“Outstanding Shares
of Common Stock” means, as of any particular
measurement time, the sum of (i) the total number of outstanding
shares of Common Stock of the Company as of such time, and (ii) the
total number of shares of Common Stock which Holder has the right
to acquire beneficial ownership of within sixty days of such
measurement time (to the extent not included in (i)), including but
not limited to any right to acquire shares of Common Stock through
the exercise of any option, warrant or right or through the
conversion of another security (including this Note).
“Exchange
Act” means the Securities Exchange Act of 1934, as
amended, and the rules and regulations of the Securities and
Exchange Commission thereunder.
(e) No Rights as
Stockholder. This Note does not by itself entitle the Holder
to any voting rights or other rights as a stockholder of the
Company. In the absence of conversion of this Note, no provisions
of this Note, and no enumeration herein of the rights or privileges
of the Holder shall cause the Holder to be a stockholder of the
Company for any purpose.
3. Share
Reserve.
(a) Notwithstanding
anything herein to the contrary, the Holder acknowledges and agrees
that this Note may not be converted nor any shares issued in
payment of accrued interest pursuant to Section 1(b), if, at the time
of such conversion or share payment, as applicable, the Company
does not have a sufficient number of authorized shares of Common
Stock pursuant to the Company’s Certificate of Incorporation
(the “Certificate of
Incorporation”), as in effect as of such date, to
cover such issuance. Notwithstanding anything herein to the
contrary, the Company shall hold a Special Meeting of Stockholders
prior to December 31, 2016 (the “Meeting”), in order to
seek stockholder approval (the “Approval”) to amend its
Certificate of Incorporation (the “Amendment”) in order to,
among other thing, to provide for a number of authorized shares of
Common Stock such that, following the effectiveness of the
Amendment, sufficient shares of Common Stock will be available to
provide for the conversion of the Notes in full without regard to
any limitation on conversion set forth in the Notes, as well as any
possible payment of interest on the Notes in shares of Common Stock
as provided in Section
1(b), and the exercise in full of the Warrants without
regard to any limitation on exercise set forth in the
Warrants.
(b) If the Company does
not receive the Approval on or prior to December 31, 2016, then the
Holder shall have the right at any time through January 31, 2017,
at its option, to require the Company to repurchase all or any
portion of its Notes, or any portion of the Outstanding Amount
thereunder at a price equal to the Outstanding Amount elected by
the Holder to be redeemed hereunder.
4. Events of
Default. Promptly following the Company becoming aware of an
occurrence of any Event of Default, the Company shall furnish to
the Holder written notice of the occurrence thereof. The occurrence
of any of the following shall constitute an “Event of Default” under
this Note:
(a) Failure to
Pay. The Company shall fail to pay (i) when due any
outstanding and unpaid principal amount on any due date hereunder
or (ii) any other payment required under the terms of this
Note on the date due, and in either such case of (i) and (ii), such
payment shall not have been made within five (5) business days
following the Company’s receipt of Holder’s written
notice to the Company of such failure to pay; or
(b) Voluntary
Bankruptcy or Insolvency Proceedings. The Company shall
(i) apply for or consent to the appointment of a receiver,
trustee, liquidator or custodian of itself or of all or a
substantial part of its property, (ii) make a general
assignment for the benefit of its or any of its creditors, or
(iii) commence a voluntary case or other proceeding seeking
liquidation, reorganization or other relief with respect to itself
or its debts under any bankruptcy, insolvency or other similar law
now or hereafter in effect or consent to any such relief or to the
appointment of or taking possession of its property by any official
in an involuntary case or other proceeding commenced against it;
or
(c) Involuntary
Bankruptcy or Insolvency Proceedings. Proceedings for the appointment of a
receiver, trustee, liquidator or custodian of the Company or of all
or a substantial part of the property thereof, or an involuntary
case or other proceedings seeking liquidation, reorganization or
other relief with respect to the Company or the debts thereof under
any bankruptcy, insolvency or other similar law now or hereafter in
effect shall be commenced and an order for relief entered or such
proceeding shall not be challenged, dismissed or discharged within
sixty (60) days of commencement;
(d) Dissolution.
The dissolution or winding up of the Company;
(e) Cessation or
Suspension of Trading. The Common Stock is (i) no longer
listed for trading or authorized for quotation (as the case may be)
on a Trading Market or (ii) suspended from trading on a Trading
Market for a period of five (5) consecutive Trading Days or for
more than an aggregate of ten (10) Trading Days in any 365-day
period;
(f) Failure to Deliver
Shares. The Company shall fail to timely deliver any shares
of Common Stock when so required pursuant to the terms of this
Note;
(g) Cross-Default.
There shall have occurred an “Event of Default” (or
other comparable event) under any currently or future existing
indebtedness of the Company and such “Event of Default”
(or other comparable event) shall be continuing and not subject to
forbearance; or
(h) Breach of
Representations, Warranties or Covenants. Any representation
or warranty of the Company in the Purchase Agreement, this Note or
any other document or agreement delivered by the Company to the
Holder shall not be true and complete, or the Company shall fail to
observe or perform any other covenant, obligation, condition or
agreement contained in this Note or any other Purchase Agreement or
any other document or agreement delivered by the Company to the
Holder, and such failure, to the extent curable, shall continue for
five (5) Trading Days.
5. Rights of Holder
upon Default. Upon the occurrence or existence of any Event
of Default (other than an Event of Default referred to in
Sections 4(b)
or 4(c)) and at any
time thereafter during the continuance of such Event of Default,
following the applicable cure or grace period, the Holder, may, by
written notice to the Company, declare all Outstanding Amounts
hereunder to be immediately due and payable without presentment,
demand, protest or any other notice of any kind, all of which are
hereby expressly waived, anything contained herein to the contrary
notwithstanding. Upon the occurrence or existence of any Event of
Default described in Sections 4(b) or
4(c), immediately
and without notice, all Outstanding Amounts payable by the Company
hereunder shall automatically become immediately due and payable,
without presentment, demand, protest or any other notice of any
kind, all of which are hereby expressly waived, anything contained
herein to the contrary notwithstanding. In addition to the
foregoing remedies, upon the occurrence or existence of any Event
of Default, and following the applicable cure or grace period,
Holder may exercise any other right power or remedy granted to it
by this Note or otherwise permitted to it by law, either by suit in
equity or by action at law, or both.
6. Rights Upon a
Fundamental Transaction. As a condition of the consummation
of any Fundamental Transaction occurring at any time prior to the
repayment or conversion in full of the Outstanding Amount, the
Company shall cause any Successor Entity in a Fundamental
Transaction to assume in writing all of the obligations of the
Company under this Note in accordance with the provisions of this
Section 6 pursuant to written agreements in form and
substance reasonably satisfactory to the Holder, including
agreements to deliver to the Holder in exchange for this Note a
security of the Successor Entity evidenced by a written instrument
substantially similar in form and substance to this Note,
including, without limitation, which is, at the time of
consummation of the Fundamental Transaction, convertible into a
corresponding number of shares of capital stock equivalent to the
shares of Common Stock acquirable and receivable upon conversion of
this Note (without regard to any limitations on the conversion of
this Note) prior to such Fundamental Transaction, and with a
conversion price equal to the Conversion Price (but taking into
account the relative value of the shares of Common Stock pursuant
to such Fundamental Transaction and the value of such shares of
capital stock, such adjustments to the number of shares of capital
stock and such exercise price being for the purpose of protecting
the economic value of this Note immediately prior to the
consummation of such Fundamental Transaction). Upon the
consummation of each Fundamental Transaction, the Successor Entity
shall succeed to, and be substituted for (so that from and after
the date of the applicable Fundamental Transaction, the provisions
of this Note referring to the “Company” shall refer
instead to the Successor Entity), and may exercise every right and
power of the Company and shall assume all of the obligations of the
Company under this Note with the same effect as if such Successor
Entity had been named as the Company herein. Notwithstanding
anything to the contrary, the Company or any Successor Entity
shall, at the Holder’s option, exercisable at any time
concurrently with, or within 30 days after, the consummation of the
Fundamental Transaction, purchase all or any portion of the
Outstanding Amount under this Note from the Holder by paying to the
Holder an amount of cash equal to the applicable Prepayment Amount
set forth is Section
1(c) above. The foregoing provisions of this Section 6 shall
similarly apply to successive Fundamental
Transactions.
(a) Definitions.
(i) “Fundamental Transaction" means
that the Company shall, directly or indirectly, in one or more
related transactions, (i) consolidate or merge with or into
(whether or not the Company is the surviving corporation) another
Person or Persons, if the holders of the Voting Stock (not
including any shares of Voting Stock held by the Person or Persons
making or party to, or associated or affiliated with the Persons
making or party to, such consolidation or merger) immediately prior
to such consolidation or merger shall hold or have the right to
direct the voting of less than 50% of the Voting Stock or such
voting securities of such other surviving Person immediately
following such transaction, or (ii) sell, assign, transfer, convey
or otherwise dispose of all or substantially all of the properties
or assets of the Company (other than the sale of IPSA
International, Inc., the Company’s wholly-owned subsidiary
(“IPSA”), or any assets
related to IPSA) to another Person, or (iii) allow another Person
to make a purchase, tender or exchange offer that is accepted by
the holders of more than the 50% of the outstanding shares of
Voting Stock of the Company (not including any shares of Voting
Stock held by the Person or Persons making or party to, or
associated or affiliated with the Persons making or party to, such
purchase, tender or exchange offer) (other than the acquisition of
the Voting Stock of IPSA), or (iv) consummate a stock purchase
agreement or other business combination (including, without
limitation, a reorganization, recapitalization, spin-off or scheme
of arrangement) with another Person whereby such other Person
acquires more than the 50% of the outstanding shares of Voting
Stock of the Company (not including any shares of Voting Stock held
by the other Person or other Persons making or party to, or
associated or affiliated with the other Persons making or party to,
such stock purchase agreement or other business combination) (other
than a sale of the Voting Stock of IPSA), (v) reorganize,
recapitalize or reclassify its Common Stock (other than pursuant to
the Amendment, if approved) or (vi) any "person" or "group" (as
these terms are used for purposes of Sections 13(d) and 14(d) of
the Securities Exchange Act of 1934, as amended) is or shall become
the "beneficial owner" (as defined in Rule 13d-3 under the
Securities Exchange Act of 1934, as amended), directly or
indirectly, of 50% of the aggregate ordinary voting power
represented by issued and outstanding Common Stock.
(ii) “Successor
Entity” means the Person formed by, resulting from or
surviving any Fundamental Transaction or the Person with which such
Fundamental Transaction shall have been entered into.
(iii) “Voting
Stock" of a Person means capital stock of such Person of the
class or classes pursuant to which the holders thereof have the
general voting power to elect, or the general power to appoint, at
least a majority of the board of directors, managers or trustees of
such Person (irrespective of whether or not at the time capital
stock of any other class or classes shall have or might have voting
power by reason of the happening of any contingency).
7. Negative
Covenants. Until the Note has been converted, redeemed or
otherwise satisfied in accordance with their terms, the Company
shall not and, the Company shall not permit any of its
subsidiaries, without the prior written consent of the Holder to,
directly or indirectly
(a) incur or guarantee,
assume or suffer to exist any indebtedness senior or pari passu to the Note;
(b) allow or suffer to
exist any mortgage, lien, pledge, charge, security interest or
other encumbrance upon or in any property or assets (including
accounts and contract rights) owned by the Company or any of its
subsidiaries (collectively, "Liens") other than (i) the
Liens contemplated by the Security Agreement (as defined in the
Purchase Agreement), (ii) any Lien for taxes not yet due or
delinquent or being contested in good faith by appropriate
proceedings for which adequate reserves have been established in
accordance with United States generally accepted accounting
principles, consistently applied during the periods involved, (iii)
any statutory Lien arising in the ordinary course of business by
operation of law with respect to a liability that is not yet due or
delinquent, (iv) any Liens created by that certain Factoring and
Security Agreement by and between IPSA and Advance Payroll Funding
Ltd., as amended, and any similar agreements and (v) any Lien
created by operation of law, such as materialmen's liens,
mechanics' liens and other similar liens, arising in the ordinary
course of business with respect to a liability that is not yet due
or delinquent or that are being contested in good faith by
appropriate proceedings, (v) Liens (A) upon or in any equipment
acquired or held by the Company or any of its subsidiaries to
secure the purchase price of such equipment or indebtedness
incurred solely for the purpose of financing the acquisition or
lease of such equipment, or (B) existing on such equipment at the
time of its acquisition, provided that the Lien is confined solely
to the property so acquired and improvements thereon, and the
proceeds of such equipment, (vi) Liens incurred in connection with
the extension, renewal or refinancing of the indebtedness secured
by Liens of the type described in clause (v) above, provided that
any extension, renewal or replacement Lien shall be limited to the
property encumbered by the existing Lien and the principal amount
of the Indebtedness being extended, renewed or refinanced does not
increase, (vii) leases or subleases and licenses and sublicenses
granted to others in the ordinary course of the Company's business,
not interfering in any material respect with the business of the
Company and its subsidiaries taken as a whole, (viii) Liens in
favor of customs and revenue authorities arising as a matter of law
to secure payments of custom duties in connection with the
importation of goods, and (ix) Liens arising from judgments,
decrees or attachments in circumstances;
(c) redeem, defease,
repurchase, repay or make any payments in respect of, by the
payment of cash or cash equivalents (in whole or in part, whether
by way of open market purchases, tender offers, private
transactions or otherwise), all or any portion of (i) any
indebtedness of the Company which is junior in priority to the Note
or (ii) any indebtedness if at the time such payment is due or is
otherwise made or, after giving effect to such payment, an event
constituting, or that with the passage of time and without being
cured would constitute, an Event of Default has occurred and is
continuing, in each case, whether by way of payment in respect of
principal of (or premium, if any) or interest on, such
indebtedness;
(d) redeem or
repurchase for cash the Common Stock;
(e) declare or pay any
cash dividend on the Common Stock; or
(f) enter into any
agreement that conflicts with any provision set forth in the
Purchase Agreement or this Note and/or restricts or prohibits the
Company's compliance with any provision of the Purchase Agreement
or this Note.
8. Transfer;
Successors and Assigns. The terms and conditions of this Note
shall inure to the benefit of and be binding upon the respective
successors and permitted assigns of the parties. Notwithstanding
the foregoing, neither the Company nor the Holder may assign or
transfer any of its obligations or rights under this Note without
the prior written approval of the other party hereto. Subject to
the preceding sentence, this Note may be transferred only upon
surrender of the original Note for registration of transfer, duly
endorsed, or accompanied by a duly executed written instrument of
transfer in form satisfactory to the Company. Thereupon, a new note
for the same principal amount and interest will be issued to, and
registered in the name of, the transferee. Interest and principal
are payable only to the Holder of this Note. The Company shall
maintain at its offices a register for the recordation of the names
and addresses of each Holder and assignee or transferee of such
Holder, and the principal amounts (and stated interest) under the
Note owing to, the Holder or any such assignee or transferee
pursuant to the terms hereof from time to time (the
“Register”). The entries
in the Register shall be conclusive absent manifest error, and the
Company, the Holder and any such assignee or transferee shall treat
each Person whose name is recorded in the Register pursuant to the
terms hereof as a Holder for all purposes hereunder.
9. Governing
Law. This Note and
all acts and transactions pursuant hereto and the rights and
obligations of the parties hereto shall be governed, construed and
interpreted in accordance with the laws of the State of Delaware,
without giving effect to principles of conflicts of
law.
10. Notices.
All notices and other communications given or made pursuant to this
Note shall be in writing and shall be deemed effectively given upon
the earlier of actual receipt or: (i) personal delivery to the
party to be notified, (ii) when sent, if sent by electronic mail or
facsimile during normal business hours of the recipient, and if not
sent during normal business hours, then on the recipient’s
next business day, provided that in either case it is followed
promptly by a confirming copy of the notice given via another
authorized means for that recipient, (iii) two (2) business days
after deposit with a nationally recognized overnight courier,
freight prepaid for delivery, specifying next business day
delivery, with written verification of receipt, addressed to the
party to be notified at such party’s address as set forth on
the signature page hereto, or as subsequently modified by written
notice, and if to the Company, with a copy to DLA Piper LLP (US),
4365 Executive Drive, Suite 1100, San Diego, CA, 92121, Attention:
Randy Socol.
11. Amendments and
Waivers. Any term of
this Note may be amended only with the written consent of the
Company and the Holder. Any amendment or waiver effected in
accordance with this Section 11 shall be binding
upon the Company, the Holder and each transferee of the Note. No
consideration shall be offered or paid to the Holder or any holder
of any Secured Convertible Promissory Note (other than this Note)
issued by the Company pursuant to the Purchase Agreement (the
"Other Notes") to
amend or consent to a waiver or modification of any provision of
this Note and/or the Other Notes unless the same consideration is
also offered to the Holder and all holders of Other
Notes.
12. Counterparts;
Electronic Delivery.
This Note may be executed in two (2) counterparts, each of which
shall be deemed an original, but both of which together shall
constitute one and the same instrument. Counterparts may be
executed electronically and delivered via facsimile, electronic
mail (including pdf or any electronic signature complying with the
U.S. federal ESIGN Act of 2000, e.g., www.docusign.com) or other
transmission method and any counterpart so delivered shall be
deemed to have been duly and validly delivered and be valid and
effective for all purposes.
13. Stockholders,
Officers and Directors Not Liable. In no event shall any stockholder,
officer or director of the Company be liable for any amounts due or
payable pursuant to this Note.
[Remainder
of Page Intentionally Left Blank]
The
Company has caused this Note to be issued as of the date first
written above.
COMPANY:
ROOT9B
TECHNOLOGIES, INC.
By:
__________________________
Name:
Title:
Address:
AGREED TO AND ACCEPTED:
______________________________
By:
Name:
Title:
Address: