Exhibit 10.1

 

PROMISSORY NOTE CONVERSION AGREEMENT FOR US NOTEHOLDERS

 

THIS PROMISSORY NOTE CONVERSION AGREEMENT (this “Agreement”) is entered into as
of June 17, 2016 by and between Quest Solution, Inc., a Delaware corporation
(the “Company”), and _______________ (“Noteholder”).

 

W I T N E S S E T H:

 

WHEREAS, the Company has executed a Promissory Note in favor of Noteholder in
the original aggregate principal amount of $_________, dated ____________, a
copy of which is attached hereto as Exhibit A (the “Note”); and

 

WHEREAS, the current outstanding principal and interest amount due under the
Note (including principal and accrued but unpaid interest) is $_____________,
which the Company and Noteholder desire to convert $_______________ of this
amount into shares of Series C Preferred Stock, $0.001 par value, of the Company
(“Preferred Stock”).

 

NOW, THEREFORE, in consideration of the foregoing premises, the mutual covenants
and agreements contained herein, and other good and valuable consideration, the
receipt, sufficiency and adequacy of which is hereby acknowledged, the parties
hereby agree as follows:

 

  1. Conversion to Preferred Stock. Notwithstanding any term or provision of the
Note to the contrary, this Agreement shall be effective when it is accepted and
countersigned by the Company (the “Effective Date”) and the entire amount
outstanding under the Note (including principal and accrued but unpaid interest)
shall be converted into shares of Preferred Stock (each, a “Share” and
collectively, the “Shares”), at a conversion rate of one Share for each $1.00 of
principal and accrued but unpaid interest due under the Note through the
Effective Date, which, for purposes of this Agreement, Noteholder and the
Company agree shall be equal to an aggregate of ___________ Shares of Preferred
Stock. Upon the Effective Date and return of the original Note as described
below, the Company shall instruct its transfer agent to issue such shares of
Preferred Stock to Noteholder at the address on the signature page hereto.      
  2. Reserved.         3. Restricted Stock. The Preferred Stock to be issued
hereunder has not been registered with the Securities and Exchange Commission or
with the securities regulatory authority of any state. Preferred Stock is
subject to restrictions imposed by federal and state securities laws and
regulations on transferability and resale, and may not be transferred assigned
or resold except as permitted under the Securities Act of 1933, as amended (the
“1933 Act”), and the applicable state securities laws, pursuant to registration
thereunder or exemption therefrom.         4. Company Representations and
Warranties. As of the date hereof, the Company hereby represents and warrants to
Noteholder that:

 

  (a)  Organization. The Company is a corporation, duly organized, validly
existing and in good standing under the laws of the State of Delaware.        
(b)  Authority and Validity. The Company has all requisite corporate power and
authority to execute, deliver and perform its obligations under this Agreement
and to consummate the transactions contemplated hereby. The execution, delivery
and performance by the Company of this Agreement and the consummation of the
transactions contemplated hereby have been duly and validly authorized by all
necessary action required on the part of the Company, and no other proceedings
on the part of the Company are necessary to authorize this Agreement or for the
Company to perform its obligations under this Agreement. This Agreement
constitutes the lawful, valid and legally binding obligation of the Company,
enforceable in accordance with its terms, except as the same may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting the enforcement of creditors’ rights generally and general equitable
principles regardless of whether such enforceability is considered in a
proceeding at law or in equity.

 

 

 

 

  (c) Valid Issuance of Preferred Stock. The Shares, when issued and delivered
in accordance with the terms hereof, will be duly and validly authorized and
issued, fully paid and nonassessable.         (d) No Violation or Conflict. The
execution, delivery and performance of this Agreement and the transactions
contemplated hereby do not (i) violate, conflict with or result in the breach of
any provision of the Company’s Certificate of Incorporation or the Company’s
Amended and Restated Bylaws, adopted September 29, 2003 (the “Bylaws”), (ii)
conflict with or violate any law, rule, regulation, order, judgment or decree
applicable the Company or any of its assets, properties or businesses, or (iii)
conflict with, result in any breach of, constitute a default (or event that with
the giving of notice or lapse of time, or both, would become a default) under,
require any consent under, or give to others any rights of termination,
amendment, acceleration, suspension, revocation or cancellation of, or result in
the creation of any encumbrance on any of the assets or properties of the
Company, pursuant to any note, bond, mortgage or indenture, contract, agreement,
lease, sublease, license, permit, franchise or other instrument or arrangement
to which the Company is a party except, in the case of clauses (ii) and (iii),
to the extent that such conflicts, breaches, defaults or other matters would
not, individually or in the aggregate, reasonably be expected to have a material
adverse effect on the Company.         (e) Governmental/Regulatory Consents and
Approvals. Except for filings under federal securities laws and, if required,
FINRA rules and regulations, the execution, delivery and performance of this
Agreement by the Company does not, and the consummation of the transactions
contemplated hereby do not and will not, require any permits, consents,
approvals, orders, authorizations of, or declarations to or filings with any
federal, state, local or foreign government or regulatory authority, which has
not already been obtained, effected or provided.

 

  5. Noteholder Representations and Warranties. As of the date hereof,
Noteholder hereby represents and warrants to the Company that:

 

  (a) Noteholder is the beneficial owner of the Note free and clear of any
liens, security interests, encumbrances or other like items and is conveying
good title to the Note back to the Company. The Note is the only Promissory Note
that Noteholder holds in relation to Company and that there is no further
indebtedness owed by the Company to Noteholder.         (b) Noteholder, either
alone or with the assistance of the appropriate professional advisors, is a
sophisticated investor, is able to fend for himself/herself/itself in the
transactions contemplated by this Agreement and has sufficient knowledge and
experience in financial and business matters to be capable of evaluating the
merits and risks of this investment. Noteholder has the ability to accept the
high risk and lack of liquidity inherent in this type of investment.
Noteholder’s financial condition is such that Noteholder can afford to bear the
economic risk of holding Preferred Stock, and to suffer a complete loss of
Noteholder’s investment in the Company represented by Preferred Stock.

 

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  (c) Noteholder:

 

  (i) has had, and continues to have, access to detailed information with
respect to the business, financial condition, results of operations and
prospects of the Company;         (ii) has received or has been provided access
to all material information concerning an investment in the Company; and        
(iii) has been given the opportunity to obtain any additional information or
documents from, and to ask questions and receive answers of, the officers,
directors and representatives of the Company to the extent necessary to evaluate
the merits and risks related to an investment in the Company represented by
Preferred Stock.

 

  (d) As a result of Noteholder’s study of the aforementioned information and
Noteholder’s prior overall experience in financial matters, and Noteholder’s
familiarity with the nature of businesses such as the Company, Noteholder is
properly able to evaluate the capital structure of the Company, the business of
the Company and the risks inherent therein.         (e) Noteholder is an
“accredited investor” (as said term is defined in Rule 501(a) (17 C.F.R. §
230.501) promulgated under the 1933 Act. Noteholder has accurately completed the
Investor Questionnaire attached hereto as Exhibit B. The undersigned agrees to
provide any additional documents and information that the Board of Directors of
the Company shall reasonably request for purposes of determining whether the
undersigned is an accredited investor.         (f) Noteholder understands that
nothing in this Agreement or any materials presented to Noteholder in connection
with the issuance of the Shares constitutes legal, tax or investment advice.
Noteholder has consulted such legal, tax and investment advisors and made such
investigations as it, it its sole discretion, has deemed necessary or
appropriate in connection with its purchase of the Shares.         (g) No person
or entity acting on behalf of, or under the authority of, Noteholder is or will
be entitled to any broker’s, finder’s or similar fees or commission payable by
the Company.         (h) Noteholder has all necessary power and authority to
execute and deliver this Agreement and become an owner of the Shares. All action
on Noteholder’s part required for the lawful execution and delivery of this
Agreement has been taken. Upon its execution and delivery, this Agreement will
be a valid and binding obligation of Noteholder, enforceable in accordance with
its terms, except (a) as limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other laws of general application affecting
enforcement of creditors’ rights, and (b) as limited by general principles of
equity that restrict the availability of equitable remedies.         (i) The
Shares are being acquired for Noteholder’s own account without the participation
of any other person, with the intent of holding the Shares for investment and
without the intent of participating, directly or indirectly, in a distribution
of the Shares and not with a view to, or for resale in connection with, any
distribution of the Shares or any portion thereof, nor is Noteholder aware of
the existence of any distribution of the Company’s securities, and Noteholder
does not have any contract, undertaking, agreement or arrangement with any
person to sell, transfer or grant participations to such person or to any third
person with respect to any of the Shares.

 

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  (j) The Shares were not offered to Noteholder by means of any form of general
solicitation, general advertising or publicly disseminated advertisements or
sales literature, nor is Noteholder aware of any offers made to other persons by
such means.         (k) For purposes of the application of state securities
laws, if Noteholder is an individual, then Noteholder resides in the state or
province identified in the address of Noteholder set forth on the signature page
hereto; if Noteholder is a partnership, corporation, limited liability company
or other entity, then the office or offices of Noteholder in which its
investment decision was made is located at the address or addresses of
Noteholder set forth on the signature page hereto.         (l) Noteholder
acknowledges (a) that the undersigned’s purchase of the Shares will be a highly
speculative investment, (b) the tax implication of his/her/its purchase, and (c)
the undersigned must continue to bear the economic risk of the investment in the
Shares for an indefinite period and recognizes that the Shares will be:

 

  (i) issued without registration under any state or federal law relating to the
registration of securities for sale;         (ii) issued in reliance on the
exemption from registration under the Nevada Uniform Securities Act (the “Nevada
Act”), provided by Section 90.530(11) thereof (N.R.S. § 90.530(11));        
(iii) issued in reliance on the exemption from registration under the Delaware
Securities Act (the “Delaware Act”), provided by Section 73-207(b)(9) thereof
(Del. Code Ann, tit. 6, § 73-207(b)(9));         (iv) issued in reliance on the
exemption from registration under the Securities Act of Washington (the
“Washington Act”), provided by Section 21.20.320(1) thereof (Wash. Rev. Code §
21.20.320(1) and Rule WAC 460-44A-50(1)(d) promulgated thereunder); and        
(v) issued in reliance on one or more exemptions from registration under the
1933 Act, including, without limitation, those contained in Sections 3(b)(1),
4(a)(2) or 4(a)(5) thereof and Rules 505 and 506 under Regulation D.

 

  (m) Noteholder agrees:

 

  (i) The Shares will not be offered for sale, sold, or transferred other than
pursuant to (i) an effective registration under the Nevada Act, the Delaware Act
or the Washington Act, as applicable, or in a transaction which is otherwise in
compliance with the Nevada Act, the Delaware Act and the Washington Act, as
applicable; (ii) an effective registration under the 1933 Act or in a
transaction otherwise in compliance with the 1933 Act; and (iii) evidence
satisfactory to the Company of compliance with the applicable securities laws of
other jurisdictions. The Company shall be entitled to rely upon an opinion of
counsel satisfactory to it with respect to compliance with the above laws.

 

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  (ii) Noteholder realizes that (a) the Shares have not been registered under
the 1933 Act, each Share is characterized under the 1933 Act as a “restricted
security” and, therefore, the Shares cannot be sold or transferred unless the
Shares are subsequently registered under the 1933 Act or an exemption from
registration is available and (b) the Company will be under no obligation to
register the Shares or to comply with any exemption available for sale of the
Shares without registration, and the information or conditions necessary to
permit routine sales of securities of the Company under Rule 144 of the 1933 Act
are not now available, and no assurance has been given that they will become
available. The Company is under no obligation to act in any manner so as to make
Rule 144 available with respect to the Shares. The Company is not being
registered as an “investment company” as defined in Section 3(a) of the
Investment Company Act of 1940, as amended 15 U.S.C. § 80a-51, et. seq. There is
presently no public market for the Shares and Noteholder would most likely not
be able to liquidate Noteholder’s investment in the event of an emergency or to
pledge the Shares as collateral security for loans. Noteholder’s financial
condition is such that it is unlikely that Noteholder would need to dispose of
any of the Shares in the foreseeable future. Consistent with the foregoing,
Noteholder represents that Noteholder is familiar with Rule 144 and understands
the resale limitations imposed by Rule 144 and by the 1933 Act.

 

  (n) The Company may, if it so desires, refuse to permit the transfer of the
Shares unless the request for transfer is accompanied by an opinion of counsel
reasonably acceptable to the Company to the effect that neither the sale nor the
proposed transfer will result in any violation of the 1933 Act or the applicable
securities laws of any other jurisdiction.         (o) A legend substantially
stating the following and indicating that the Shares have not been registered
under such securities laws and referring to the restrictions on transferability
and sale of the Shares may be placed on any certificate(s) delivered to
Noteholder or any substitutes therefor and any transfer agent of the Company may
be instructed to require compliance therewith:

 

“THE SECURITIES ISSUED IN ACCORDANCE HEREWITH HAVE NOT BEEN REGISTERED UNDER THE
FEDERAL SECURITIES ACT OF 1933, AS AMENDED (THE “FEDERAL ACT”), AND WERE ISSUED
IN RELIANCE UPON ONE OR MORE OF THE EXEMPTIONS CONTAINED IN SECTIONS 3(b)(1),
4(a)(2) OR 4(a)(5) THEREOF. THESE SECURITIES CANNOT BE SOLD, ASSIGNED, PLEDGED
OR TRANSFERRED EXCEPT IN A TRANSACTION WHICH IS EXEMPT UNDER THE FEDERAL ACT, OR
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT, OR IN A TRANSACTION WHICH IS
OTHERWISE IN COMPLIANCE WITH THE FEDERAL ACT.”

 

  6. Miscellaneous.

 

  (a) This Agreement shall be construed and enforced in accordance with the laws
of the State of Delaware.         (b) This Agreement constitutes the entire
agreement between the parties and supersedes all prior oral or written
negotiations and agreements between the parties with respect to the subject
matter hereof. No modification, variation or amendment of this Agreement
(including any exhibit hereto) shall be effective unless made in writing and
signed by both parties. To the extent any terms of the Note are inconsistent
with the provisions of this Agreement, Noteholder waives the application of such
inconsistent provision and covenants and agrees that the terms of this Agreement
shall control.         (c) Each party to this Agreement hereby represents and
warrants to the other party that it has had an opportunity to seek the advice of
its own independent legal counsel with respect to the provisions of this
Agreement and that its decision to execute this Agreement is not based on any
reliance upon the advice of any other party or its legal counsel. Each party
represents and warrants to the other party that in executing this Agreement such
party has completely read this Agreement and that such party understands the
terms of this Agreement and its significance. This Agreement shall be construed
neutrally, without regard to the party responsible for its preparation.        
(d) Each party to this Agreement hereby represents and warrants to the other
party that

 

  (i) the representative executing this Agreement on behalf of such party has
been granted all necessary power and authority to act on behalf of such party
with respect to the execution, performance and delivery of this Agreement; and  
      (ii) the representative executing this Agreement on behalf of such party
is of legal age and capacity to enter into agreements which are fully binding
and enforceable against such party.

 

  (e) This Agreement may be executed in any number of counterparts, all of which
taken together shall constitute a single instrument.

 

[SIGNATURES CONTAINED ON FOLLOWING PAGE.]

 

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IN WITNESS WHEREOF, the parties have executed this Promissory Note Conversion
Agreement as of the date set forth above.

 

COMPANY:   NOTEHOLDER:            QUEST SOLUTION, INC.               By:     By:
            Name: Gilles Gaudreault   Name:             Title: Chief Executive
Officer   Title:             Address: 860 Conger Street   Address:
                                  Eugene, OR 97402                 Telephone:
(541) 284-1476   Telephone:             Facsimile: (____) ___________  
Facsimile:             E-Mail: ggaudreault@questsolution.com   E-Mail:  

 

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EXHIBIT A

 

COPY OF NOTE

 

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EXHIBIT B

 

INVESTOR QUESTIONNAIRE

 

  1. The exact name that your Shares are to be registered in. You may use a
nominee name if appropriate:

 

     

 

  2. The relationship between Noteholder and the registered holder listed in
response to item 1 above:

 

     

 

  3. The mailing address of the registered holder listed in response to item 1
above:

 

                                                                  Fax:    

 

  4. The Social Security Number or Tax Identification Number of the registered
holder listed in the response to item 1 above:

 

     

 

  5. Occupation/Business: _____________________________________________________

 

  6. Place and date of formation if an entity:

 

     

 

  7. If Noteholder is an individual subscriber, please CHECK whichever of the
following statements, (a) - (e) below, is applicable to you:

 

_______ (a) Noteholder has had an individual income in excess of $200,000 in
each of the two most recent calendar years and reasonably expects to have an
individual income in excess of $200,000 in the current calendar year;

 

_______ (b) Noteholder has had joint income with his or her spouse in excess of
$300,000 in each of the two most recent calendar years and reasonably expects to
have joint income with his or her spouse in excess of $300,000 in the current
calendar year;

 

_______ (c) Noteholder has an individual net worth, or joint net worth with his
or her spouse, in excess of $1,000,000, excluding the value of Noteholder’s
primary residence;

 

_______ (d) Noteholder is a director or executive officer of the Company;

 

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_______ (e) None of the above.

 

For purposes of this Questionnaire, the following definitions apply:

 

“Individual income” means “adjusted gross income” as reported for federal income
tax purposes, less any income attributable to a spouse or to property owned by a
spouse, increased by the following amounts (but not including any amounts
attributable to a spouse or to property owned by a spouse): (i) the amount of
any interest income received which is tax-exempt under Section 103 of the
Internal Revenue Code of 1986, as amended (the “Code”), (ii) the amount of any
losses claimed as a limited partner in a limited liability company (as reported
on Schedule E of Form 1040) and (iii) any deduction claimed for depletion under
Section 611 et seq. of the Code.

 

“Joint income” means “adjusted gross income” of you and your spouse as reported
for federal income tax purposes, increased by the following amounts: (i) the
amount of any interest income received which is tax-exempt under Section 103 of
the Code, (ii) the amount of losses claimed as a limited partner in a limited
liability company (as reported on Schedule E of Form 1040) and (iii) any
deduction claimed for depletion under Section 611 et seq. of the Code.

 

“Net worth” means the excess of total assets at fair market value, including
personal property but excluding the value of Noteholder’s primary residence,
over total liabilities, including mortgages and income taxes on unrealized
appreciation of assets.

 

8. If Noteholder is a corporation, partnership, employee benefit plan,
individual retirement account or trust, please CHECK whichever of the following
statements, (a) - (n) below, is applicable to it:

 

_______ (a) Noteholder is a self-directed individual retirement account or
401(k) Plan (if this statement is checked, the participant must also check
whichever of statements 7(a) - (e) above are applicable);

 

_______ (b) Noteholder is a bank as defined in Section 3(a)(2) of the 1933 Act,
or a savings and loan association or other institution as defined in Section
3(a)(5)(A) of the 1933 Act, whether acting in an individual or fiduciary
capacity;

 

_______ (c) Noteholder is a broker or dealer registered pursuant to Section 15
of the Securities Exchange Act of 1934, as amended;

 

_______ (d) Noteholder is an insurance company as defined in Section 2(13) of
the 1933 Act;

 

_______ (e) Noteholder is an investment company registered under the Investment
Company Act of 1940, as amended (the “Company Act”);

 

_______ (f) Noteholder is a business development company as defined in Section
2(a)(48) of the Company Act;

 

_______ (g) Noteholder is a Small Business Investment Company licensed by the
U.S. Small Business Administration under Section 301(c) or (d) of the Small
Business Investment Act of 1958, as amended ;

 

_______ (h) Noteholder is a plan established and maintained by a state, its
political subdivisions, or any agency or instrumentality of a state or its
political subdivisions, for the benefit of its employees if such plan has total
assets in excess of $5,000,000;

 

_______ (i) Noteholder is an employee benefit plan within the meaning of Title I
of the Employee Retirement Income Security Act of 1974, as amended, provided
that the investment decision is made by a plan fiduciary, as defined in Section
3(21) of such Act, and the plan fiduciary is either a bank, savings and loan
association, insurance company or registered investment adviser, or if the
employee benefit plan has total assets in excess of $5,000,000, or, if a
self-directed plan, the investment decisions are made solely by persons that are
accredited investors.

 

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_______ (j) Noteholder is a private business development company as defined in
Section 202(a)(22) of the Investment Advisers Act of 1940, as amended;

 

_______ (k) Noteholder is an organization described in Section 501(c)(3) of the
Code, a corporation, a Massachusetts or similar business trust, or partnership,
not formed for the specific purpose of acquiring the Shares, with total assets
in excess of $5,000,000;

 

_______ (l) Noteholder is a trust with total assets in excess of $5,000,000, not
formed for the specific purpose of acquiring the Shares, whose purchase is
directed by a sophisticated person as described in Rule 506(b)(2)(ii) under the
1933 Act;

 

_______ (m) Noteholder is an entity, each of whose stockholders, partners or
beneficiaries meets at least one of the conditions set forth under 7(a) - (d)
above with respect to individuals or 8(b)-(l) above with respect to
corporations, partnerships, trusts or other entities; or

 

_______ (n) None of the above.

 

IF YOU CHECK STATEMENT 8(m) ABOVE AND DO NOT CHECK ANY OTHER STATEMENT, A
COMPLETED QUESTIONNAIRE AND AGREEMENT FOR EACH STOCKHOLDER OF THE CORPORATION,
EACH PARTNER OF THE PARTNERSHIP OR EACH BENEFICIARY OF THE EMPLOYEE BENEFIT PLAN
MUST ACCOMPANY THIS QUESTIONNAIRE AND AGREEMENT.

 

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