Exhibit 10.40 

 

SUBSIDIARY GUARANTY

 

This SUBSIDIARY GUARANTY (as amended, restated, supplemented, or otherwise
modified and in effect from time to time, this “Guaranty”) is made as of March
1, 2019, jointly and severally, by Helix TCS, LLC, (“LLC”), Security Consultants
Group, LLC (“SCG”), Boss Security Solutions, Inc. (“Boss”), Security Grade
Protective Services, Ltd. (“SG”), Bio-Tech Medical Software, Inc. (“THC”), and
Engeni LLC (“Engeni”, and together with LLC, SCG, Boss, SG, THC, and each other
Person who becomes a party to this Guaranty by execution of a joinder in the
form of Exhibit A attached hereto, which shall include all wholly-owned or
majority-owned subsidiaries of the Company acquired after the date hereof for so
long as this Guaranty remains in effect, shall each be referred to individually
as a “Guarantor” and collectively as the “Guarantors”), in favor of the
purchasers listed on the signature pages of the Purchase Agreement (as defined
below) (together with their respective successors and assigns and each other
purchaser of a Note (as defined below) after the date hereof and their
respective successors and assigns, each a “Purchaser” and collectively, the
“Purchasers”), and Rose Capital Fund I, LP, a Delaware limited partnership, as
collateral agent for the Purchasers (the “Collateral Agent”). All references to
a “Purchaser” or “Purchasers” hereunder shall include the Collateral Agent
acting in its capacity as a Purchaser.

 

WHEREAS, the purchasers as from time to time parties to the Rose Purchase
Agreement (as hereafter defined), together with their successors and assigns,
and each other purchaser of a Note (as defined) together with their respective
successors and assigns, (the “Rose Purchasers”), will purchase from the Company
certain senior secured notes each made by the Company and dated as of the date
hereof in an initial aggregate principal amount of $1,500,000 (all such notes,
together with any promissory notes or other securities issued in exchange or
substitution therefor or replacement thereof, and as any of the same may be
amended, supplemented, restated or modified and in effect from time to time, the
“Rose Notes”), and receive certain Common Stock Purchase Warrants (all such
Warrants, together with any promissory notes or other securities issued in
exchange or substitution therefor or replacement thereof, and as any of the same
may be amended, supplemented, restated or modified and in effect from time to
time, the “Rose Warrants”);

 

WHEREAS, the Company delivered a convertible promissory note (the “Existing
RedDiamond Note”) in the aggregate principal amount of $208,333.33 to RedDiamond
Partners, LLC (“RD”) and Common Stock Purchase Warrants (the “Existing
RedDiamond Warrants”), in each case pursuant to that certain Securities Purchase
Agreement by and between the Company and RD, dated as of February 13, 2017 (the
“Existing RedDiamond Purchase Agreement”);

 

WHEREAS, as of the date hereof the principal amount outstanding on the Existing
RedDiamond Note is $116,780;

 

WHEREAS, RD transferred the Existing RedDiamond Note to Rock;

 

WHEREAS, the Existing RedDiamond Note is secured pursuant to that certain
security agreement by and among the Company, all the subsidiaries of the Company
and RD, dated as of February 14, 2017 (the “RedDiamond Security Agreement”);

 

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WHEREAS, Rock desires to terminate the RedDiamond Security Agreement and to
become a party to this Agreement, and the Company desires to permit Rock to
terminate the RedDiamond Security Agreement and become a party to this
Agreement;

 

WHEREAS, Rock will purchase a secured convertible promissory note (the “New Rock
Note” and, with the Existing RedDiamond Note and the Rose Notes, collectively,
the “Notes”) in the aggregate principal amount of $450,000.00, and Common Stock
Purchase Warrants (the “New Rock Warrants” and, with the Existing RedDiamond
Warrants and the Rose Warrants, collectively, the “Warrants”), in each case
pursuant to that certain Securities Purchase Agreement by and between the
Company and Rock, dated as of the date hereof (the “New Rock Purchase
Agreement”);

 

WHEREAS, the Rose Notes are being acquired by the Secured Parties other than
Rock, and the Secured Parties other than Rock have made certain financial
accommodations to the Company pursuant to a Securities Purchase Agreement, dated
as of the date hereof, by and among the Company and the Secured Parties other
than Rock (as the same may be amended, restated, supplemented or otherwise
modified from time to time, the “Rose Purchase Agreement”, and together with the
Existing RedDiamond Purchase Agreement and the New Rock Purchase Agreement, the
“Purchase Agreements”). Capitalized terms used herein but not otherwise defined
shall have the meanings set forth in the Rose Purchase Agreement;

 

WHEREAS, each Debtor will derive substantial benefit and advantage from the
financial accommodations to the Company set forth in the Purchase Agreements and
the Notes, and it will be to each such Debtor’s direct interest and economic
benefit to assist the Company in procuring said financial accommodations from
the Secured Parties;

 

WHEREAS, pursuant to a Security Agreement dated as of the Closing Date (as the
same may be amended, restated, supplemented or otherwise modified and in effect
from time to time, the “Security Agreement”) by the Debtors (as defined in the
Security Agreement) in favor of the Collateral Agent, such Debtors have granted
the Collateral Agent, for its benefit and the benefit of the other Purchasers
(as defined therein), a first priority Lien on and security interest in all of
their respective rights in the Collateral (as defined in the Security
Agreement); and

 

WHEREAS, the Guarantors are subsidiaries of the Company and, as such, will
derive substantial benefit and advantage from the Purchase Agreements, the
Notes, the Pledge Agreement, the Security Agreement and the other related
agreements (collectively, the “Transaction Documents”).

 

NOW, THEREFORE, for and in consideration of the promises and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, each Guarantor hereby jointly and severally agrees as follows:

 

1.  Definitions: Capitalized terms used herein without definition and defined in
the Purchase Agreement are used herein as defined therein. In addition, as used
herein:

 

“Bankruptcy Code” shall mean the Federal Bankruptcy Reform Act of 1978
(11 U.S.C. §101, et seq.), as amended and in effect from time to time
thereunder.

 

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“Obligations” shall mean (i) all obligations, liabilities and indebtedness of
every nature of the Company and each Guarantor from time to time owed or owing
to the Purchasers and the Collateral Agent arising under, out of or in
connection with this Guaranty, the Pledge Agreement, the Security Agreement, the
Purchase Agreement, the Notes, the Warrants and the other Transaction Documents,
including, without limitation, the principal amount of all debts, claims and
indebtedness, accrued and unpaid interest and all fees, taxes, indemnities,
costs and expenses, whether primary, secondary, direct, contingent, fixed or
otherwise, heretofore, now and/or from time to time hereafter owing, due or
payable, whether before or after the filing of a bankruptcy, insolvency or
similar proceeding under applicable federal, state, foreign or other law and
whether or not an allowed claim in any such proceeding, and (ii) all
obligations, liabilities and indebtedness of every nature of any subsequent
Guarantor from time to time owed or owing to the Purchasers and/or the
Collateral Agent, under or in respect of this Guaranty, the Pledge Agreement,
the Security Agreement, the Purchase Agreement, the Notes, the Warrants and the
other Transaction Documents, as the case may be, including, without limitation,
the principal amount of all debts, claims and indebtedness, accrued and unpaid
interest and all fees, taxes, indemnities, costs and expenses, whether primary,
secondary, direct, contingent, fixed or otherwise, heretofore, now and/or from
time to time hereafter owing, due or payable, whether before or after the filing
of a bankruptcy, insolvency or similar proceeding under applicable federal,
state, foreign or other law and whether or not an allowed claim in any such
proceeding.

 

2. Guaranty of Payment.

 

(a)  Each Guarantor, jointly and severally, hereby unconditionally and
irrevocably guarantees the full and prompt payment and performance to the
Purchasers and the Collateral Agent, on behalf of itself and in its capacity as
agent for the benefit of Purchasers, when due, upon demand, at maturity or by
reason of acceleration or otherwise and at all times thereafter, of any and all
of the Obligations.

 

(b)  Each Guarantor acknowledges that valuable consideration supports this
Guaranty, including, without limitation, the consideration set forth in the
recitals above; any extension, renewal or replacement of any of the Obligations;
any forbearance with respect to any of the Obligations or otherwise; any
cancellation of an existing guaranty; any purchase of any of the Company’s
assets by any Purchaser or Collateral Agent; or any other valuable
consideration.

 

(c)  Each Guarantor agrees that all payments under this Guaranty shall be made
in United States currency and in the same manner as provided for the
Obligations.

 

(d)  Notwithstanding any provision of this Guaranty to the contrary, it is
intended that this Guaranty, and any interests, Liens and security interests
granted by Guarantors as security for this Guaranty, not constitute a
“Fraudulent Conveyance” (as defined below) in the event that this Guaranty or
such interest is subject to the Bankruptcy Code or any applicable fraudulent
conveyance or fraudulent transfer law or other applicable laws of any state.
Consequently, the Guarantors, the Collateral Agent and the Purchasers all agree
that if this Guaranty, or any such interests, Liens or security interests
securing this Guaranty, would, but for the application of this sentence,
constitute a Fraudulent Conveyance, this Guaranty and each such Lien and
security interest shall be valid and enforceable only to the maximum extent that
would not cause this Guaranty or such interest, Lien or security interest to
constitute a Fraudulent Conveyance, and this Guaranty shall automatically be
deemed to have been amended accordingly at all relevant times. For purposes
hereof, “Fraudulent Conveyance” means a fraudulent conveyance under Section 548
of the Bankruptcy Code or a fraudulent conveyance or fraudulent transfer under
the provisions of any applicable fraudulent conveyance or fraudulent transfer
law or other applicable laws of any state, as in effect from time to time.

 

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3.  Costs and Expenses. The Company and each Guarantor, jointly and severally,
agrees to pay on demand, all reasonable Costs and Expenses of every kind
incurred by any Purchaser or the Collateral Agent: (a) in enforcing this
Guaranty or any other Transaction Document, (b) in collecting any of the
Obligations from any Guarantor pursuant to this Guaranty or any other
Transaction Document, (c) in realizing upon or protecting or preserving any
Collateral (as defined in the Security Agreement), and (d) in connection with
any amendment of, modification to, waiver or forbearance granted under, or
enforcement or administration of this Guaranty or any other Transaction Document
or for any other purpose in connection with this Guaranty or any other
Transaction Document, in each case, to the extent a Purchaser or the Collateral
Agent may take such action pursuant to the terms and conditions of this
Guaranty. “Costs and Expenses” as used in the preceding sentence shall include,
without limitation, reasonable attorneys’ fees incurred by any Purchaser or the
Collateral Agent in retaining legal counsel for advice, suit, appeal, any
insolvency or other proceedings under the Bankruptcy Code or otherwise, or for
any purpose specified in the preceding sentence.

 

4.  Nature of Guaranty: Continuing, Absolute and Unconditional.

 

(a)  This Guaranty is and is intended to be a continuing guaranty of payment of
the Obligations, and not of collectability, and is intended to be independent of
and in addition to any other guaranty, endorsement, collateral or other
agreement held by a Purchaser or the Collateral Agent therefor or with respect
thereto, whether or not furnished by a Guarantor. None of Purchasers and Agent
shall be required to prosecute collection, enforcement or other remedies against
any Company, any other Guarantor or guarantor of the Obligations or any other
person or entity, or to enforce or resort to any of the Collateral or other
rights or remedies pertaining thereto, before calling on a Guarantor for
payment. The obligations of each Guarantor to repay the Obligations hereunder
shall be unconditional. Guarantor shall have no right to exercise any right of
subrogation, reimbursement, indemnity, exoneration, contribution or any other
claim which it may now or hereafter have against any Company in connection with
this Guaranty until the termination of this Guaranty in accordance with Section
8 below, and hereby waives any benefit of, and any right to participate in, any
security or collateral given to Purchasers to secure payment of the Obligations,
and each Guarantor agrees that it will not take any action to enforce any
obligations of any Company to such Guarantor prior to the Obligations being
finally and irrevocably paid in full in cash, provided that, in the event of the
bankruptcy or insolvency of any Company, to the extent the Obligations have not
been finally and irrevocably paid in full in cash, Agent, for the benefit of
itself and Purchasers, and Purchasers shall be entitled notwithstanding the
foregoing, to file in the name of any Guarantor or in its own name a claim for
any and all indebtedness owing to a Guarantor by such Company (exclusive of this
Guaranty), vote such claim and to apply the proceeds of any such claim to the
Obligations.

 

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(b)  For the further security of Purchasers and without in any way diminishing
the liability of the Guarantors, following the occurrence and during the
continuance of an Event of Default, all debts and liabilities, present or
future, of the Companies to the Guarantors, and all monies received from any
Company or for its account by the Guarantors in respect thereof shall be
received in trust for Purchasers and Agent and promptly following receipt shall
be paid over to Agent, for its benefit and in its capacity as Agent for the
benefit of Purchasers, until all of the Obligations have been paid in full in
cash. This assignment and postponement is independent of and severable from this
Guaranty and shall remain in full effect whether or not any Guarantor is liable
for any amount under this Guaranty.

 

(c)  This Guaranty is absolute and unconditional and shall not be changed or
affected by any representation, oral agreement, act or thing whatsoever, except
as herein provided. This Guaranty is intended by the Guarantors to be the final,
complete and exclusive expression of the guaranty agreement among the Company,
the Guarantors, the Purchasers and the Collateral Agent (except as expressly
limited by the express terms of this Guaranty). No modification or amendment of
any provision of this Guaranty shall be effective against any party hereto
unless in writing and signed by a duly authorized officer of such party. This
Guaranty, together with the other Transaction Documents, supersedes all other
prior oral or written agreements between the Purchasers, the Company, the
Guarantors and the Collateral Agent, their respective Affiliates and Persons
acting on their respective behalves with respect to the matters discussed
herein, and this Guaranty, together with the other Transaction Documents and the
other instruments referenced herein and therein, contain the entire
understanding of the parties with respect to the matters covered herein and
therein and, except as specifically set forth herein or therein, neither the
Company, any Guarantor, the Collateral Agent nor any Purchaser makes any
representation, warranty, covenant or undertaking with respect to such matters.
As of the date of this Guaranty, there are no unwritten agreements between the
parties with respect to the matters discussed herein. No provision of this
Guaranty may be amended, modified or supplemented other than by an instrument in
writing signed by the parties hereto.

 

(d)  Each Guarantor hereby releases each Purchaser and the Collateral Agent from
all, and agrees not to assert or enforce (whether by or in a legal or equitable
proceeding or otherwise) any, “claims” (as defined in Section 101(5) of the
Bankruptcy Code), whether arising under any law, ordinance, rule, regulation,
order, policy or other requirement of any domestic or foreign governmental
authority or any instrumentality or agency thereof, having jurisdiction over the
conduct of its business or assets or otherwise, to which the Guarantors are or
would at any time be entitled by virtue of its obligations hereunder, any
payment made pursuant hereto or the exercise by any Purchaser or the Collateral
Agent of its rights with respect to the Collateral (as defined in the Security
Agreement), including any such claims to which such Guarantor may be entitled as
a result of any right of subrogation, exoneration or reimbursement.

 

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5.  Certain Rights and Obligations.

 

(a)  Each Guarantor acknowledges and agrees that the Collateral Agent may,
without notice, demand or any reservation of rights against such Guarantor and
without affecting such Guarantor’s obligations hereunder, from time to time:

 

(i)  renew, extend, increase, accelerate or otherwise change the time for
payment of, the terms of or the interest on the Obligations or any part thereof
or grant other indulgences to any Guarantor or others;

 

(ii)  accept from any Person and hold Collateral (as defined in the Security
Agreement) for the payment of the Obligations or any part thereof, and modify,
exchange, enforce or refrain from enforcing, or release, compromise, settle,
waive, subordinate or surrender, with or without consideration, such Collateral
(as defined in the Security Agreement) or any part thereof;

 

(iii)  accept and hold any endorsement or guaranty of payment of the Obligations
or any part thereof, and discharge, release or substitute any such obligation of
any such endorser or guarantor, or discharge and release or compromise any
Guarantor, or any other Person who has given any security interest in any
Collateral (as defined in the Security Agreement) as security for the payment of
the Obligations or any part thereof, or any other Person in any way obligated to
pay the Obligations or any part thereof, and enforce or refrain from enforcing,
or compromise or modify, the terms of any obligation of any such endorser,
guarantor or Person;

 

(iv)  dispose of any and all Collateral (as defined in the Security Agreement)
securing the Obligations in its reasonable discretion, as it may deem
appropriate, and direct the order or manner of such disposition and the
enforcement of any and all endorsements and guaranties relating to the
Obligations or any part thereof as the Collateral Agent in its reasonable
discretion may determine;

 

(v)  subject to the terms of the Notes, determine the manner, amount and time of
application of payments and credits, if any, to be made on all or any part of
any component or components of the Obligations (whether principal, interest,
fees, costs, and expenses, or otherwise), including, without limitation, the
application of payments received from any source to the payment of Indebtedness
other than the Obligations even though one or more Purchasers might lawfully
have elected to apply such payments to the Obligations or to amounts which are
not covered by this Guaranty;

 

(vi)  take advantage or refrain from taking advantage of any security or accept
or make or refrain from accepting or making any compositions or arrangements
when and in such manner as Collateral Agent, in its sole discretion, may deem
appropriate; and

 

(vii)  generally do or refrain from doing any act or thing which might
otherwise, at law or in equity, release the liability of such Guarantor as a
guarantor or surety in whole or in part, and in no case shall any Purchaser or
Collateral Agent be responsible or shall any Guarantor be released either in
whole or in part for any act or omission in connection with a Purchaser or
Collateral Agent having sold any security at less than its fair market value.

 

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(b)  Following the occurrence and during the continuance of an Event of Default
(as defined in the Notes), and upon demand by the Collateral Agent, each
Guarantor, jointly and severally, hereby agrees to pay the Obligations to the
extent hereinafter provided and to the extent unpaid:

 

(i)  without deduction by reason of any setoff, defense (other than payment) or
counterclaim of the Company or any other Guarantor;

 

(ii)  without requiring presentment, protest or notice of nonpayment or notice
of default to the Company, any other Guarantor or any other Person;

 

(iii)  without demand for payment or proof of such demand or filing of claims
with a court in the event of receivership, bankruptcy or reorganization of the
Company or any other Guarantor;

 

(iv)  without requiring any Purchaser or the Collateral Agent to resort first to
the Company (this being a guaranty of payment and not of collection), to any
other Guarantor, or to any other guaranty or any collateral which a Purchaser or
the Collateral Agent may hold;

 

(v)  without requiring notice of acceptance hereof or assent hereto by any
Purchaser or the Collateral Agent; and

 

(vi)  without requiring notice that any of the Obligations has been incurred,
extended or continued or of the reliance by any Purchaser or the Collateral
Agent upon this Guaranty;

 

all of which each Guarantor hereby irrevocably waives.

 

(c)  Each Guarantor’s obligation hereunder shall not be affected by any of the
following, all of which such Guarantor hereby waives:

 

(i)  any failure to perfect or continue the perfection of any security interest
in or other Lien on any Collateral (as defined in the Security Agreement)
securing payment of any of the Obligations or any Guarantor’s obligation
hereunder;

 

(ii)  the invalidity, unenforceability, propriety of manner of enforcement of,
or loss or change in priority of any document or security interest or other Lien
or guaranty of the Obligations;

 

(iii)  any failure to protect, preserve or insure any Collateral (as defined in
the Security Agreement);

 

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(iv)  failure of a Guarantor to receive notice of any intended disposition of
any Collateral (as defined in the Security Agreement);

 

(v)  any defense arising by reason of the cessation from any cause whatsoever of
liability of any Guarantor including, without limitation, any failure,
negligence or omission by any Purchaser or the Collateral Agent in enforcing its
claims against the Company;

 

(vi)  any release, settlement or compromise of any Obligation of the Company,
any other Guarantor or any other Person guaranteeing the Obligations;

 

(vii)  the invalidity or unenforceability of any of the Obligations;

 

(viii)  any change of ownership of the Company, any other Guarantor or any other
Person guaranteeing the Obligations or the insolvency, bankruptcy or any other
change in the legal status of the Company, any Guarantor or any other Person
guaranteeing the Obligations;

 

(ix)  any change in, or the imposition of, any law, decree, regulation or other
governmental act which does or might impair, delay or in any way affect the
validity, enforceability or the payment when due of the Obligations;

 

(x)  the existence of any claim, setoff or other rights which the Company, the
Guarantor, any other Guarantor or guarantor of the Obligations or any other
Person may have at any time against any Purchaser or the Collateral Agent in
connection herewith or any unrelated transaction;

 

(xi)  any Purchaser’s or the Collateral Agent’s election in any case instituted
under chapter 11 of the Bankruptcy Code, of the application of section
1111(b)(2) of the Bankruptcy Code;

 

(xii)  any use of cash Collateral (as defined in the Security Agreement), or
grant of a security interest by any Company, as debtor in possession, under
sections 363 or 364 of the Bankruptcy Code;

 

(xiii)  the disallowance of all or any portion of any of any Purchaser’s or the
Collateral Agent’s claims for repayment of the Obligations under sections 502 or
506 of the Bankruptcy Code;

 

(xiv)  any stay or extension of time for payment by the Company or any Guarantor
resulting from any proceeding under the Bankruptcy Code or any other applicable
law; or

 

(xv)  any other fact or circumstance which might otherwise constitute grounds at
law or equity for the discharge or release of a Guarantor from its obligations
hereunder, all whether or not such Guarantor shall have had notice or knowledge
of any act or omission referred to in the foregoing clauses (i) through (xiv) of
this Section 5(c).

 

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6.  Representations and Warranties. Each Guarantor further represents and
warrants to each Purchaser and the Collateral Agent that: (a) such Guarantor is
a corporation or other entity duly incorporated or organized, as applicable,
validly existing and in good standing under the laws of the jurisdiction of its
incorporation or formation, as applicable, and has full power, authority and
legal right to own its property and assets and to transact the business in which
it is presently engaged; (b) such Guarantor has full power, authority and legal
right to execute and deliver, and to perform its obligations under, this
Guaranty, and has taken all necessary action to authorize the guarantee
hereunder on the terms and conditions of this Guaranty and to authorize the
execution, delivery and performance of this Guaranty; (c) this Guaranty has been
duly executed and delivered by such Guarantor and constitutes a legal, valid and
binding obligation of such Guarantor enforceable against such Guarantor in
accordance with its terms, except to the extent that such enforceability is
subject to applicable bankruptcy, insolvency, reorganization, fraudulent
conveyance and moratorium laws and other laws of general application affecting
enforcement of creditors’ rights generally, or the availability of equitable
remedies, which are subject to the discretion of the court before which an
action may be brought; and (d) the execution, delivery and performance by each
Guarantor of this Guaranty does not require any action by or in respect of, or
filing with, any governmental body, agency or official and do not violate,
conflict with or cause a breach or a default under any provision of (i)
applicable law or regulation, (ii) the organizational documents of such
Guarantor, (iii) any judgment, injunction, order, decree or other instrument
binding upon it, or (iv) any agreement binding upon it.

 

7.  Covenants. Each Guarantor covenants with each Purchaser and the Collateral
Agent that such Guarantor shall not grant any security interest in or permit any
Lien upon any of its assets in favor of any Person other than Permitted Liens
(as defined in the Notes) and security interests in favor of the Purchasers and
the Collateral Agent. Each Guarantor agrees that it shall not take any action or
engage in any transaction that such Guarantor is prohibited from taking or
engaging in pursuant to the terms of the Transaction Documents. In addition,
each Guarantor agrees to comply with the terms of the Transaction Documents to
the same extent that the Company is required to cause the Guarantors to comply
with such terms of the Transaction Documents. Each Guarantor, by its signature
hereto, hereby acknowledges and agrees that a breach by such Guarantor of this
Agreement constitutes an “Event of Default” under the Note and the other
Transaction Documents.

 

8. Termination. This Guaranty shall not terminate until the full and complete
performance and indefeasible satisfaction of all of the Obligations (including,
without limitation, the indefeasible payment in full in cash of all such
Obligations) (i) in respect of the Transaction Documents, and (ii) with respect
to which claims have been asserted by Collateral Agent and/or a Purchaser
arising out of or relating to the Transaction Documents. Thereafter, but subject
to the following, the Collateral Agent, on behalf of itself and as agent for the
Purchasers, shall take such actions and execute such documents as the Guarantors
may reasonably request (and at the Guarantors’ cost and expense) in order to
evidence the termination of this Guaranty. Payment of all of the Obligations
owing from time to time shall not operate as a discontinuance of this Guaranty.
Each Guarantor further agrees that, to the extent that the Company or a
Guarantor makes a payment to the Purchasers or the Collateral Agent on the
Obligations, or the Purchasers or the Collateral Agent receive any proceeds from
the Collateral (as defined in the Security Agreement) securing the Obligations
or any other payments with respect to the Obligations, which payment or receipt
of proceeds or any part thereof is subsequently invalidated, declared to be
fraudulent or preferential, set aside or required to be returned or repaid to
the Company, a Guarantor or any of their respective estates, trustees,
receivers, debtors in possession or any other Person under any insolvency or
bankruptcy law (including, but not limited to the Bankruptcy Code), state or
federal law, common law or equitable cause, then to the extent of such payment,
return or repayment, the obligation or part thereof which has been paid, reduced
or satisfied by such amount shall be reinstated and continued in full force and
effect as of the date when such initial payment, reduction or satisfaction
occurred, and this Guaranty shall continue in full force notwithstanding any
contrary action which may have been taken by any Purchaser or the Collateral
Agent in reliance upon such payment, and any such contrary action so taken shall
be without prejudice to any Purchaser’s or the Collateral Agent’s rights under
this Guaranty and shall be deemed to have been conditioned upon such payment
having become final and irrevocable. Upon satisfaction of the Obligations in
accordance with this Section 8, the Guarantors’ obligations under this Agreement
shall immediately terminate and the Guaranty shall be void.

 

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9.  Guaranty of Performance. Each Guarantor also, jointly and severally,
guarantees the full, prompt and unconditional performance of all Obligations and
agreements of every kind owed or hereafter to be owed by the Company or the
other Guarantors to the Purchasers or the Collateral Agent under this Guaranty
and the other Transaction Documents. Every provision for the benefit of the
Purchasers or the Collateral Agent contained in this Guaranty shall apply to the
guaranty of performance given in this Section 9.

 

10.  Assumption of Liens and Obligations. To the extent that a Guarantor has
received or shall hereafter receive distributions or transfers from the Company
of property or cash that are subject, at the time of such distribution or
transfer, to Liens and security interests in favor of Purchasers or the
Collateral Agent in accordance with the Transaction Documents, such Guarantor
hereby expressly agrees that (i) it shall hold such assets subject to such Liens
and security interests, and (ii) it shall be liable for the payment of the
Obligations secured thereby. Each Guarantor’s obligations under this Section 10
shall be in addition to its obligations as set forth in other sections of this
Guaranty and not in substitution therefor or in lieu thereof.

 

11.  Miscellaneous.

 

(a)  The terms “Company” and “Guarantor” as used in this Guaranty shall include:
(i) any successor individuals, associations, partnerships, limited liability
companies, corporations or other entities to which all or substantially all of
the business or assets of such Company or such Guarantor shall have been
transferred and (ii) any other associations, partnerships, limited liability
companies, corporations or entities into or with which such Company or such
Guarantor shall have been merged, consolidated, reorganized, or absorbed.

 

(b)  Without limiting any other right of any Purchaser or the Collateral Agent,
whenever any Purchaser or the Collateral Agent has the right to declare any of
the Obligations to be immediately due and payable (whether or not it has been so
declared), the Collateral Agent, on its behalf and in its capacity as agent for
the benefit of the Purchasers, at its sole election without notice to the
undersigned may appropriate and set off against the Obligations:

 

(i)  any and all indebtedness or other moneys due or to become due the Company
or to any Guarantor by any Purchaser or the Collateral Agent in any capacity and
whether arising out of or related to the Transaction Documents or otherwise; and

 

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(ii)  any credits or other property belonging to the Company or any Guarantor
(including all account balances, whether provisional or final and whether or not
collected or available) at any time held by or coming into the possession of any
Purchaser or the Collateral Agent, or any Affiliate of any Purchaser or the
Collateral Agent, whether for deposit or otherwise;

 

in each case, whether or not then due and owing, and the applicable Purchaser or
the Collateral Agent, as applicable, shall be deemed to have exercised such
right of set off immediately at the time of such election even though any charge
therefore is made or entered on such Purchaser’s or the Collateral Agent’s
records subsequent thereto. The Collateral Agent agrees to notify such Guarantor
in a reasonable time of any such set-off; however, failure of the Collateral
Agent to so notify such Guarantor shall not affect the validity of any set-off.

 

(c)  Each Guarantor’s obligation hereunder is to pay the Obligations in full in
cash when due according to this Guaranty, the Notes, the Warrants, the other
Transaction Documents, and any other agreements, documents and instruments
governing the Obligations to the extent provided herein, and shall not be
affected by any stay or extension of time for payment for the benefit of the
Company or any other Guarantor resulting from any proceeding under the
Bankruptcy Code or any other applicable law.

 

(d)  No course of dealing between the Company or any Guarantor, on the one hand,
and a Purchaser or the Collateral Agent, on the other hand, and no act, delay or
omission by a Purchasers or the Collateral Agent in exercising any right or
remedy hereunder or with respect to any of the Obligations shall operate as a
waiver thereof or of any other right or remedy, and no single or partial
exercise thereof shall preclude any other or further exercise thereof or the
exercise of any other right or remedy. The rights and remedies of each Purchaser
and the Collateral Agent hereunder are cumulative and may be exercised singly or
concurrently, and are not exclusive of any rights and remedies provided by law.

 

(e)  This Guaranty shall inure to the benefit of the parties hereto and their
respective successors and assigns.

 

(f)   Collateral Agent may assign its rights hereunder, in which event such
assignee shall be deemed to be the Collateral Agent hereunder with respect to
such assigned rights.

 

(g)  Captions of the sections of this Guaranty are solely for the convenience of
the parties hereto, and are not an aid in the interpretation of this Guaranty
and do not constitute part of the agreement of the parties set forth herein.

 

(h)  If any provision of this Guaranty is unenforceable in whole or in part for
any reason, the remaining provisions shall continue to be effective.

 

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(i)  All questions concerning the construction, validity, enforcement and
interpretation of this Guaranty shall be governed by the internal laws of the
State of New York, without giving effect to any choice of law or conflict of law
provision or rule (whether of the State of New York or any other jurisdiction)
that would cause the application of the laws of any jurisdiction other than the
State of New York. Each Guarantor hereby irrevocably submits to the exclusive
jurisdiction of the state and federal courts sitting in New York County, New
York, for the adjudication of any dispute hereunder or in connection herewith or
with any transaction contemplated hereby or discussed herein, and hereby
irrevocably waives, and agrees not to assert in any suit, action or proceeding,
any claim that it is not personally subject to the jurisdiction of any such
court, that such suit, action or proceeding is brought in an inconvenient forum
or that the venue of such suit, action or proceeding is improper. Each Guarantor
hereby irrevocably waives personal service of process and consents to process
being served in any such suit, action or proceeding by mailing by registered or
certified mail a copy thereof to such party at the address for such notices to
it under this Guaranty and agrees that such service shall constitute good and
sufficient service of process and notice thereof as of the date that is five (5)
business days after the mailing thereof. Nothing contained herein shall be
deemed to limit in any way any right to serve process in any manner permitted by
law.

 

12.  Notices. All notices, approvals, requests, demands and other communications
hereunder shall be delivered or made in the manner set forth in, and shall be
effective in accordance with the terms of, the Purchase Agreement; provided,
that any communication shall be effective as to any Guarantor if made or sent to
the Company in accordance with the foregoing.

 

13.  WAIVERS.

 

(a)  EACH GUARANTOR WAIVES THE BENEFIT OF ALL VALUATION, APPRAISAL AND EXEMPTION
LAWS.

 

(b)  UPON THE OCCURRENCE OF A DEFAULT OR EVENT OF DEFAULT (AS DEFINED IN THE
NOTES), EACH GUARANTOR HEREBY WAIVES ALL RIGHTS TO NOTICE AND HEARING OF ANY
KIND PRIOR TO THE EXERCISE BY ANY PURCHASER OR THE COLLATERAL AGENT, ON ITS
BEHALF AND IN ITS CAPACITY AS AGENT FOR THE BENEFIT OF PURCHASERS, OF ITS RIGHTS
TO REPOSSESS THE COLLATERAL WITHOUT JUDICIAL PROCESS OR TO REPLEVY, ATTACH OR
LEVY UPON THE COLLATERAL WITHOUT PRIOR NOTICE OR HEARING. EACH GUARANTOR
ACKNOWLEDGES THAT IT HAS BEEN ADVISED BY COUNSEL OF ITS CHOICE WITH RESPECT TO
THIS TRANSACTION AND THIS GUARANTY.

 

(c)  EACH GUARANTOR WAIVES ITS RIGHTS TO A TRIAL BY JURY OF ANY CLAIM OR CAUSE
OF ACTION BASED UPON OR ARISING OUT OF OR RELATED TO THIS GUARANTY, OR THE OTHER
TRANSACTION DOCUMENTS, IN ANY ACTION, PROCEEDING OR OTHER LITIGATION OF ANY TYPE
BROUGHT BY ANY PURCHASER OR THE COLLATERAL AGENT. EACH GUARANTOR AGREES THAT ANY
SUCH CLAIM OR CAUSE OF ACTION SHALL BE TRIED BY A COURT WITHOUT A JURY. WITHOUT
LIMITING THE FOREGOING, EACH GUARANTOR FURTHER AGREES THAT ITS RIGHT TO A TRIAL
BY JURY IS WAIVED BY OPERATION OF THIS SECTION AS TO ANY ACTION, COUNTERCLAIM OR
OTHER PROCEEDING WHICH SEEKS, IN WHOLE OR IN PART, TO CHALLENGE THE VALIDITY OR
ENFORCEABILITY OF THIS GUARANTY OR ANY PROVISION HEREOF. THIS WAIVER SHALL APPLY
TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS
GUARANTY.

 

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14.  Agent. The terms and provisions of the Purchase Agreement which set forth
the appointment of the Collateral Agent and the terms and provisions of the
Security Agreement and the Pledge Agreement which set for the indemnifications
to which the Collateral Agent is entitled are hereby incorporated by reference
herein as if fully set forth herein.

 

15.  Payments Free of Taxes.

 

(a)  Definitions. In this Section 15:

 

(i)  “Excluded Taxes” means, with respect to the Collateral Agent or the
Purchasers, or any other recipient of any payment to be made by or on account of
any obligations of any Guarantor under this Guaranty, or under any other
Transaction Document, income or franchise taxes imposed on (or measured by) its
net income by the United States of America or such other jurisdiction under the
laws of which such recipient is organized or in which its principal office is
located.

 

(ii)  “Governmental Authority” means the government of the United States of
America or any other nation, or any political subdivision thereof, whether state
or local, or any agency, authority, instrumentality, regulatory body, court,
central bank or other entity exercising executive, legislative, judicial,
taxing, regulatory or administrative powers or functions of or pertaining to
government over the company or any of the Guarantors, or any of their respective
properties, assets or undertakings.

 

(iii)  “Indemnified Taxes” means Taxes other than Excluded Taxes.

 

(iv)  “Taxes” means any and all present or future taxes, levies, imposts,
duties, deductions, charges or withholdings imposed by any Governmental
Authority.

 

(b)  Any and all payments by or on account of the Obligations of any of the
Guarantors under this Guaranty or any other Transaction Document shall be made
without any set-off, counterclaim or deduction and free and clear of and without
deduction for any Indemnified Taxes; provided that if any Guarantor shall be
required to deduct any Indemnified Taxes from such payments, then (i) the sum
payable shall be increased as necessary so that after making all required
deductions (including deductions applicable to additional sums payable under
this Section 15(b)), the Collateral Agent or the Purchasers, as applicable,
receives an amount equal to the sum it would have received had no such
deductions been made, (ii) such Guarantor shall make such deductions and (iii)
such Guarantor shall pay the full amount deducted to the relevant Governmental
Authority in accordance with applicable law.

 

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16.  Indemnification by the Guarantors. Each Guarantor shall indemnify the
Collateral Agent and the Purchasers, within ten (10) days after written demand
therefor, for the full amount of any Indemnified Taxes paid by the Collateral
Agent or Purchasers, as applicable, on or with respect to any payment by or on
account of any obligation of such Guarantor under this Guaranty and the other
Transaction Documents (including Indemnified Taxes or imposed or asserted on or
attributable to amounts payable under this Section 16) and any penalties,
interest and reasonable expenses including reasonable attorneys fees arising
therefrom or with respect thereto, whether or not such Indemnified Taxes were
correctly or legally imposed or asserted by the relevant Governmental Authority.
A certificate of the Collateral Agent or any Purchaser as to the amount of such
payment or liability under this Section 16 shall be delivered to such Guarantor
and shall be conclusive absent manifest error.

 

17.  Counterparts; Headings. This Guaranty may be executed in two or more
identical counterparts, all of which together shall be considered one and the
same agreement and shall become effective when counterparts have been signed by
each party and delivered to each other party; provided that a facsimile, .pdf or
similar electronically transmitted signature shall be considered due execution
and shall be binding upon the signatory thereto with the same force and effect
as if the signature were an original signature. The headings in this Guaranty
are for convenience of reference only and shall not alter or otherwise affect
the meaning hereof.

 

18.  Rights of Contribution. The Guarantors hereby agree as among themselves
that, if any Guarantor shall make an Excess Payment (as defined below), such
Guarantor shall have a right of contribution from each other Guarantor in an
amount equal to such other Guarantor’s Contribution Share (as defined below) of
such Excess Payment. The payment obligations of any Guarantor under this Section
18 shall be subordinate and subject in right of payment to the Obligations until
such time as the Obligations have been paid in full in cash, and none of the
Guarantors shall exercise any right or remedy under this Section 18 against any
other Guarantor until such Obligations have been paid in full in cash. For
purposes of this Section 18, (a) “Excess Payment” shall mean the amount paid by
any Guarantor in excess of its Ratable Share of any Obligations; (b) “Ratable
Share” shall mean, for any Guarantor in respect of any payment of Obligations,
the ratio (expressed as a percentage) as of the date of such payment of
Obligations of (i) the amount by which the aggregate present fair salable value
of all of its assets and properties exceeds the amount of all debts and
liabilities of such Guarantor (including contingent, subordinated, unmatured,
and unliquidated liabilities, but excluding the obligations of such Guarantor
hereunder) to (ii) the amount by which the aggregate present fair salable value
of all assets and other properties of the Company and the Guarantors exceeds the
amount of all of the debts and liabilities (including contingent, subordinated,
unmatured, and unliquidated liabilities, but excluding the obligations of the
Guarantors hereunder) of the Company and the Guarantors, provided, that, for
purposes of calculating the Ratable Shares of the Guarantors in respect of any
payment of Obligations, any Guarantor that became a Guarantor subsequent to the
date of any such payment shall be deemed to have been a Guarantor on the date of
such payment and the financial information for such Guarantor as of the date
such Guarantor became a Guarantor shall be utilized for such Guarantor in
connection with such payment; and (c) “Contribution Share” shall mean, for any
Guarantor in respect of any Excess Payment made by any other Guarantor, the
ratio (expressed as a percentage) as of the date of such Excess Payment of (i)
the amount by which the aggregate present fair salable value of all of its
assets and properties exceeds the amount of all debts and liabilities of such
Guarantor (including contingent, subordinated, unmatured, and unliquidated
liabilities, but excluding the Obligations) of the Company and the Guarantors
other than the maker of such Excess Payment; provided, however, that, for
purposes of calculating the Contribution Shares of the Guarantors in respect of
any Excess Payment, any Guarantor that became a Guarantor subsequent to the date
of any such Excess Payment shall be deemed to have been a Guarantor on the date
of such Excess Payment and the financial information for such Guarantor as of
the date such Guarantor became a Guarantor shall be utilized for such Guarantor
in connection with such Excess Payment. This Section 18 shall not be deemed to
affect any right of subrogation, indemnity, reimbursement or contribution that
any Guarantor may have under law against the Company in respect of any payment
of Obligations.

 

[Signature page follows]

 

14

 

 

IN WITNESS WHEREOF, each Company and the Guarantors have executed this Guaranty
as of the date first written above.

 

 

GUARANTORS:

        Helix TCS, LLC         By:

  Name:     Title:             

Security Consultants Group, LLC

        By:     Name:     Title:             

Boss Security Solutions, Inc.

        By:     Name:

  Title:              Security Grade Protective Services, Ltd.         By:    
Name:

  Title:             

Bio-Tech Medical Software, Inc.

        By:

  Name:     Title:             

Engeni LLC

   

  By:                                       Name:     Title:     

 

15

 

  

  COLLATERAL AGENT:         ROSE CAPITAL FUND I, LP       By: Rose Capital Fund
I GP, LLC   Its: General Partner         By: Rose Management Group LLC   Its:
Manager         By:     Name:   Jonathan Rosenthal   Title:     Member        
By:     Name:   Andrew Schweibold   Title:     Member

 

16

 

 

EXHIBIT A

 

Form of Joinder to

Subsidiary Guaranty

 

This Joinder Agreement is made between the undersigned, __________ a [·], (the
“New Subsidiary”) and Rose Capital Fund I, LP, a Delaware limited partnership,
as Collateral Agent under that certain Subsidiary Guaranty dated as of March 1,
2019 (as amended, restated, supplemented or otherwise modified from time to
time, the “Guaranty”) by and among the Company, the Guarantors and the
Collateral Agent; together with each other Person that becomes a Guarantor
thereunder after the date and pursuant to the terms thereof, to and in favor of
the Purchasers. Capitalized terms herein and not otherwise defined herein shall
have the meanings assigned to such terms in the Guaranty.

 

1.  The New Subsidiary hereby acknowledges, agrees and confirms that, by its
execution of this Agreement, the New Subsidiary will be deemed to be a party to
the Guaranty and a “Guarantor” for all purposes of the Guaranty, and shall have
all of the obligations of a Guarantor thereunder as if it had executed the
Guaranty. The New Subsidiary hereby ratifies, as of the date hereof, and agrees
to be bound by, all of the terms, provisions and conditions applicable to the
Guarantors contained in the Guaranty. Without limiting the generality of the
foregoing terms of this paragraph 1, the New Subsidiary hereby jointly and
severally together with the other Guarantors, guarantees to the Purchasers and
the Collateral Agent, as provided in the Guaranty, the prompt payment and
performance of the Obligations in full when due (whether at stated maturity, as
a mandatory prepayment, by acceleration or otherwise) strictly in accordance
with the terms thereof.

 

2.  The New Subsidiary represents and warrants that the representations and
warranties set forth in Section 6 of the Guaranty are, with respect to the
undersigned, true and correct as of the date hereof.

 

3.  From and after the date hereof, each reference to a Guarantor in the
Guaranty shall be deemed to include the undersigned.

 

4.  This Agreement may be executed in multiple counterparts, each of which shall
constitute an original but all of which when taken together shall constitute one
contract.

 

5.  THIS AGREEMENT SHALL BE GOVERNED BY THE INTERNAL LAWS OF THE STATE OF NEW
YORK, WITHOUT GIVING EFFECT TO ANY CHOICE OF LAW OR CONFLICT OF LAW PROVISION OR
RULE (WHETHER OF THE STATE OF NEW YORK OR ANY OTHER JURISDICTION) THAT WOULD
CAUSE THE APPLICATION OF THE LAWS OF ANY JURISDICTION OTHER THAN THE STATE OF
NEW YORK.

 

[Signature page follows]

 

17

 

 

IN WITNESS WHEREOF, the undersigned has executed this Joinder this ___ day of
___________, 201___.

 

 

[____________________________]

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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