Exhibit 10.1

 

SUBORDINATED SECURED PROMISSORY NOTE

 

$465,000.00 May 20, 2015   New York County, New York

 

1.PROMISE TO PAY. FOR VALUE RECEIVED, Creative Realities, Inc., a Minnesota
corporation (the “Maker”), hereby promises to pay to Slipstream Communications,
LLC, a Delaware limited liability company, or its assigns (the “Holder”), the
principal amount of Four Hundred Sixty-Five Thousand and No/100 Dollars
($465,000.00) (the “Principal Amount”). Except as set forth below, all payments
shall be made at the direction of Holder.

 

2.INTEREST. The Principal Amount of this Note will bear interest at the per
annum rate of twelve percent (12%), one-half of which accrued interest shall be
payable in cash and one-half of which accrued interest shall be added to the
Principal Amount of this Note. Accrued but unpaid interest under this Note will
be paid by Maker to Holder on a quarterly basis within ten business days of the
end of each calendar quarter. Notwithstanding the foregoing, from and after a
Default, as defined in Section 5 below, interest shall accrue on the Default
Principal at the per annum rate of fourteen percent (14%).

 

3.SECURITY. Maker hereby grants Holder, as collateral security for all
obligations under this Note, a second lien security interest in the accounts
receivable of Maker. This security interest shall be second in priority after
the grant made to Mill City Ventures III, Ltd.

 

4.CONVERSION OR PAYMENT AT MATURITY. The entire Principal Amount of this Note,
and all other sums owing hereunder (including accrued but unpaid interest), will
be due and payable on the one-year anniversary of the date of this Note;
provided, however, that the entire Principal Amount under this Note, together
with all other sums owing hereunder (including accrued but unpaid interest)
(collectively, the “Conversion Amount”), shall be convertible into other
securities of the Maker as specified below:

 

(i)At any time prior to maturity, at the election of the Holder (made through a
writing signed by the Holder and delivered to the Maker), the Conversion Amount
may be converted into Series A 6% Convertible Preferred Stock of the Maker,
together with common stock purchase warrants on the same economic basis as those
earlier sold on August 18, 2014 (the “Preferred Offering”) (with the
understanding that shares of common stock issuable upon any conversion of the
Series A 6% Convertible Preferred Stock of the Maker, and the shares of common
stock issuable upon any exercise of common stock purchase warrants, will
constitute “Registrable Securities” under, and as defined in, that certain
Securities Purchase Agreement of the Maker and the purchasers of preferred stock
dated as of August 18, 2014, the form of which was filed by the Maker on August
22, 2014, with the United States Securities and Exchange Commission as an
exhibit to a Current Report on Form 8-K (the “Series A Purchase Agreement”), and
the Holder will thereupon have the same registration rights with respect to such
Registrable Securities as set forth in the Series A Purchase Agreement). In the
event of a conversion of this Note into Series A 6% Convertible Preferred Stock,
the Maker and Holder shall execute and deliver such additional documentation as
may be reasonably requested by either party to fulfill the intents and purposes
of causing the common stock into which the Series A 6% Convertible Preferred
Stock is convertible and the common stock issuable upon exercise of the related
warrants to be treated as “Registrable Securities” in the manner described
above.

 

 

 

 

(ii)If the Maker obtains gross proceeds, in one or a series of related financing
transactions, aggregating to at least $3,000,000 of debt financing (a
“Qualifying Financing”), then Holder must, within five business days thereafter,
either—

 

a.convert the Conversion Amount, together with an additional conversion premium
equal to 25% of the then-outstanding Principal Amount, into those debt
securities offered and sold in the Qualifying Financing (in which case the
Holder must execute and deliver with the Maker the substantially identical
purchase documentation as involved in the Qualifying Financing and surrender
this Note to the Maker); or

 

b.convert the Conversion Amount, together with an additional conversion premium
equal to 25% of the then-outstanding Principal Amount, into debt securities of
the Maker that are subordinated to those debt securities offered and sold in the
Qualifying Financing (in which case the Holder must execute and deliver
customary purchase documentation with the Maker and surrender this Note to the
Maker); provided, however, that any such subordinated debt securities shall
include (i) an interest rate equal to the higher of the rate of interest
provided for in the Qualifying Financing or the rate of interest provided for
under this Note, and (ii) continued quarterly payments of accrued but unpaid
interest.

 

c.Any election by Holder under this paragraph (ii) shall be made pursuant to a
writing signed by Holder and delivered to the Maker.

 

5.DEFAULT. A default shall be deemed to have occurred under this Note if (each
a “Default”): (i) Maker fails to comply with any of the terms of this Note,
which failure continues uncured for more than ten days after written notice
thereof to Maker; (ii) Maker should dissolve; (iii) Maker commences 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 seeking the appointment of a trustee,
receiver, liquidator, custodian or other similar official of its or any part of
its property, or shall consent to any such relief or to the appointment of or
taking possession by any such official in an involuntary case or other
proceeding commenced against it, or shall make a general assignment for the
benefit of creditors, or shall fail generally to pay its debts as they become
due; (iv) an involuntary case or other proceeding shall be commenced against
Maker seeking liquidation, reorganization or other relief with respect to it or
its debts under any bankruptcy, insolvency or other similar law now or hereafter
in effect or seeking the appointment of a trustee, receiver, liquidator,
custodian or other similar official of it or any substantial part of its
property, and such involuntary case or other proceeding shall remain undismissed
and unstayed for a period of 45 days; or (v) an event of default occurs under
any of the agreements by and between Maker and Mill City Ventures III, Ltd. In
the event of Default, Holder shall have the remedies provided for in this Note
under Section 5.

 

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6.REMEDIES UPON DEFAULT. In the case of a Default, then 125% of the entire
Principal Amount (the “Default Principal”), together with all accrued but unpaid
interest on the Principal Amount, shall (upon demand made to Maker) become due
and payable on said date. In addition, as set forth in Section 2 above, the
Default Principal shall, from and after the date of acceleration as demanded by
Holder, accrue interest at the Default Rate. The remedies of Holder as provided
herein shall be cumulative and concurrent with all other remedies provided by
law or in equity, and such remedies may be pursued singly, successively or
together at the sole direction of Holder and may be exercised as often as
occasion therefor shall arise. Holder reserves all other rights and remedies
available to Holder under this Note and applicable law.

 

7.WAIVERS. Maker hereby waives demand, presentment, notice of non-payment,
dishonor, protest, and notice of protest. Holder’s failure to exercise its
option to accelerate this Note or any other remedy upon a Default shall not
constitute a waiver of Holder’s right to exercise such option thereafter.

 

8.COVENANTS.

 

(i)Without the express written consent of the Holder or unless as part of a
Qualifying Financing, the Maker will not issue any debt securities, either
senior in right of payment or in respect of the collateral security granted
hereunder, during such time as this Note remains outstanding.

 

(ii)During such time as any amounts remain owing under this Note, Maker shall
not declare or pay any cash dividends on common stock of Maker or redeem any
shares of capital stock of Maker.

 

9.INDEMNITY & RELEASE.

 

(i)As an inducement to make the loan evidenced by this Note, the Maker hereby
agrees to indemnify and hold harmless Holder and its affiliated entities,
including but not limited to Pegasus Capital, and each of their respective
directors, officers, managers, partners, employees, and agents (collectively,
the “Indemnified Parties”), from and against any legal claims brought against
them and relating in any way to their ownership or investment in the Maker
(including the investment evidenced by this Note) or to the merger agreement and
related transaction by and among the Maker, Creative Realities, LLC and WRT
Acquisition, LLC; provided, however, that the Maker shall not be obligated
hereunder to indemnify any Indemnified Parties for claims involving intentional
fraud or embezzlement relating to any of the above-identified matters, or for
any actions or omissions constituting bad faith, gross negligence or wilful
misconduct.

 

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(ii)In addition, the Maker hereby fully and finally releases and waives to the
maximum extent permitted by applicable law the following legal and equitable
claims against the Indemnified Parties up to the moment that the Maker signs and
delivers this Note (except as described in the proviso at the end of this
sentence): all claims the Maker has now, whether or not the Maker now knows
about or suspects the claims, relating in any way to the ownership or investment
in the Maker (including the investment evidenced by this Note) by the
Indemnified Parties or to the merger agreement and related transaction by and
among the Maker, Creative Realities, LLC and WRT Acquisition, LLC; provided,
however, that the Maker is not hereby releasing any Indemnified Parties from any
claims, or any rights to sue such parties, relating to conduct constituting
intentional fraud or embezzlement.

 

10.COLLECTION COSTS. Maker shall pay all reasonable costs and expenses of
collection, including without limitation all court costs and reasonable
attorneys’ fees incurred in collecting amounts due under this Note, or in
exercising or defending, or obtaining the right to exercise, the rights of
Holder under this Note, whether or not suit is brought, and in foreclosure, in
bankruptcy, insolvency, arrangement, reorganization and other debtor-relief
proceedings, in probate, in other court proceedings, or otherwise, whether or
not Holder prevails therein.

 

11.GENERAL PROVISIONS. This Note may not be modified, amended or terminated
unless in writing signed by Maker and Holder. This Note will be construed and
interpreted in accordance with the laws of the State of New York without regard
to its conflicts-of law-principles. This Note is binding upon and inures to the
benefit of Make and Holder and their respective heirs, executors,
administrators, successors and permitted assigns. Nevertheless, this Note is
non-negotiable and non-delegable and neither any rights nor any obligations
under this Note may be assigned by Holder or Maker without the prior written
consent of the other. The Maker hereby represents and warrants to the Holder
that the Maker has obtained any necessary consents or waivers of restrictive
covenants from third parties, including without limitation the holders of issued
and outstanding Series A 6% Convertible Preferred Stock. Any written notices or
elections hereunder shall be delivered to the Holder at
___________________________________________, and to the Maker at 55 Broadway,
9th Floor, New York, NY 10006 (copy to Maslon LLP, attention Paul D. Chestovich,
3300 Wells Fargo Center, 90 South Seventh Street, Minneapolis, MN 55402).

  

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ACCORDINGLY, this Subordinated Secured Promissory Note is effective as of the
date first written above.

 

MAKER:

 

CREATIVE REALITIES, INC.         By:   /s/ John Walpuck     John Walpuck    
Chief Financial Officer and     interim Chief Executive Officer  

 

 

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