Exhibit 10.14

 

 

SECURITIES PURCHASE AGREEMENT

This SECURITIES PURCHASE AGREEMENT (this “Agreement”), dated as
                                           , 2020, by and between Red Cat
Holdings, Inc., a Nevada corporation, with offices at 1607 Ponce De Leon Avenue,
Suite 407, San Juan, Puerto Rico 00909 (the “Company”), and
                            (the “Buyer”), with offices at 8220 Sullivan Hill
Rd. Atlanta GA 30350.

 

WHEREAS:

 

A. The Company and the Buyer are executing and delivering this Agreement in
reliance upon the exemption from securities registration afforded by the rules
and regulations as promulgated by the United States Securities and Exchange
Commission (the “SEC”) under the Securities Act of 1933, as amended (the
“Securities Act”); and

 

B. Buyer desires to purchase and the Company desires to issue and sell, upon the
terms and conditions set forth in this Agreement, (i) a 12% convertible note
(the “Note”) of the Company, in the form attached hereto as Exhibit A in the
principal amount of $                     , convertible into shares of common
stock, $0.001 par value per share, of the Company (the “Common Stock”), and (ii)
a Common Stock Purchase Warrant (the “Warrant”), in the form attached hereto as
Exhibit B, with an exercise price of $1.50 per share, upon the terms and subject
to the limitations and conditions set forth in such Note and Warrant; and

 

C. The Buyer wishes to purchase, upon the terms and conditions stated in this
Agreement, the Note and the Warrant as set forth immediately below its name on
the signature pages hereto.

 

NOW THEREFORE, in consideration of the mutual covenants and other agreements
contained in this Agreement, the Company and the Buyer hereby agree as follows:

1. Purchase and Sale of Note and Warrant.

 

a. Purchase of Note and Warrant. On the Closing Date (as defined below), the
Company shall issue and sell to the Buyer and the Buyer agrees to purchase from
the Company the Note and Warrant.

 

b. Form of Payment. On the Closing Date, (i) the Buyer shall fund the principal
amount for the Note and Warrant to be issued and sold to it at the Closing (as
defined below) by wire transfer of immediately available funds to the Company,
in accordance with the Company’s written wiring instructions, against delivery
of the Note and Warrant, and (ii) the Company shall deliver such duly executed
Note and Warrant on behalf of the Company, to the Buyer, against delivery of the
purchase price thereof.

 

c. Closing Date. The date and time of the issuance and sale of the Note and
Warrant pursuant to this Agreement (the “Closing Date”) shall be on or about
simultaneous with the execution and delivery of this Agreement, or such other
mutually agreed upon time. The closing of the transactions contemplated by this
Agreement (the “Closing”) shall occur on the Closing Date at such location as
may be agreed to by the parties.

 

d. Closing. On the Closing Date, upon the terms and subject to the conditions
set forth herein, the Company agrees to sell, and the Buyer agrees to purchase,
the Note and Warrant as set forth on each Buyer’s signature page hereto. At any
closing hereunder, the Company shall deliver to each Buyer its respective Note
and Warrant.

 

2. Buyer’s Representations and Warranties. The Buyer represents and warrants to
the Company that:

 

a. Investment Purpose. As of the date hereof, the Buyer is purchasing the Note
and the Warrant, and the shares of Common Stock issuable upon conversion of the
Note pursuant to the terms thereof and exercise of the Warrant pursuant to the
terms thereof (such shares of Common Stock being collectively referred to herein
as the “Conversion Shares” and, collectively with the Note and Warrant, the
“Securities”) for its own account and not with a present view towards the public
sale or distribution thereof, except pursuant to sales registered or exempted
from registration under the Securities Act.

 

b. Accredited Investor Status. The Buyer is, as of the date hereof, and on each
date on which it exercises the Warrants or converts the Note, an “accredited
investor” as defined in Rule 501(a)(1), (a)(2), (a)(3), (a)(7) or (a)(8) under
the Securities Act.

 

c. Reliance on Exemptions. The Buyer understands that the Securities are being
offered and sold to it in reliance upon specific exemptions from the
registration requirements of United States federal and state securities laws and
that the Company is relying upon the truth and accuracy of, and the Buyer’s
compliance with, the representations, warranties, agreements, acknowledgments
and understandings of the Buyer set forth herein in order to determine the
availability of such exemptions and the eligibility of the Buyer to acquire the
Securities.

 

d. Information. The Buyer and the Buyer’s attorney, accountant, purchaser
representative and/or tax advisor, if any (collectively, the “Advisors”), as the
case may be, if any, have been, and for so long as the Note remain outstanding
will continue to be, furnished with all materials relating to the business,
finances and operations of the Company and materials relating to the offer and
sale of the Securities which have been requested by the Buyer or its advisors.
The Buyer and its advisors, if any, have been, and for so long as the Note
remain outstanding will continue to be, afforded the opportunity to ask
questions of the Company. Notwithstanding the foregoing, the Company has not
disclosed to the Buyer any material nonpublic information and will not disclose
such information unless such information is disclosed to the public prior to or
promptly following such disclosure to the Buyer. Neither such inquiries nor any
other due diligence investigation conducted by Buyer or any of its advisors or
representatives shall modify, amend or affect Buyer’s right to rely on the
Company’s representations and warranties contained in Section 3 below. The Buyer
understands that its investment in the Securities involves a significant degree
of risk. The Buyer is not aware of any facts that may constitute a breach of any
of the Company's representations and warranties made herein.

 

e. Governmental Review. The Buyer understands that no United States federal or
state agency or any other government or governmental agency has passed upon or
made any recommendation or endorsement of the Securities.

 

f. Transfer or Re-sale. The Buyer understands that (i) the sale or re-sale of
the Securities has not been and is not being registered under the Securities Act
or any applicable state securities laws, and the Securities may not be
transferred unless (a) the Securities are sold pursuant to an effective
registration statement under the Securities Act, (b) the Buyer shall have
delivered to the Company, at the cost of the Buyer, an opinion of counsel that
shall be in form, substance and scope customary for opinions of counsel in
comparable transactions to the effect that the Securities to be sold or
transferred may be sold or transferred pursuant to an exemption from such
registration, which opinion shall be accepted by the Company, (c) the Securities
are sold or transferred to an “affiliate” (as defined in Rule 144 promulgated
under the Securities Act (or a successor rule) (“Rule 144”)) of the Buyer who
agrees to sell or otherwise transfer the Securities only in accordance with this
Section 2(f) and who is an Accredited Investor, (d) the Securities are sold
pursuant to Rule 144, or the Securities are sold pursuant to Regulation S under
the Securities Act (or a successor rule) (“Regulation S”), and the Buyer shall
have delivered to the Company, at the cost of the Buyer, an opinion of counsel
that shall be in form, substance and scope customary for opinions of counsel in
corporate transactions, which opinion shall be accepted by the Company; (ii) any
sale of such Securities made in reliance on Rule 144 may be made only in
accordance with the terms of said Rule and further, if said Rule is not
applicable, any re-sale of such Securities under circumstances in which the
seller (or the person through whom the sale is made) may be deemed to be an
underwriter (as that term is defined in the Securities Act) may require
compliance with some other exemption under the Securities Act or the rules and
regulations of the SEC thereunder; and (iii) neither the Company nor any other
person is under any obligation to register such Securities under the Securities
Act or any state securities laws or to comply with the terms and conditions of
any exemption thereunder (in each case). Notwithstanding the foregoing or
anything else contained herein to the contrary, the Securities may be pledged as
collateral in connection with a bona fide margin account or other lending
arrangement.

 

g. Legends. The Buyer understands that the Note and Warrant, and, until such
time as the Conversion Shares have been registered under the Securities Act or
may be sold pursuant to Rule 144 without any restriction as to the number of
securities as of a particular date that can then be immediately sold, the
Conversion Shares may bear a restrictive legend in substantially the following
form (and a stop-transfer order may be placed against transfer of the
certificates for such Securities):

 

“NEITHER THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE
NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE EXERCISABLE HAVE BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE
SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED
OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR
THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION
OF COUNSEL (WHICH COUNSEL SHALL BE SELECTED BY THE HOLDER), IN A GENERALLY
ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS
SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID ACT. NOTWITHSTANDING THE
FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN
ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES.”

 

The legend set forth above shall be removed and the Company shall issue a
certificate without such legend to the holder of any shares upon which it is
stamped, if, unless otherwise required by applicable state securities laws, (a)
such Security is registered for sale under an effective registration statement
filed under the Securities Act without any restriction as to the number of
securities as of a particular date that can then be immediately sold, or (b)
such holder provides the Company with an opinion of counsel, in form, substance
and scope customary for opinions of counsel in comparable transactions, to the
effect that a public sale or transfer of such Security may be made without
registration under the Securities Act, which opinion shall be accepted by the
Company so that the sale or transfer is effected. The Buyer agrees to sell all
Securities, including those represented by a certificate(s) from which the
legend has been removed, in compliance with applicable prospectus delivery
requirements, if any.

h. Residency. The Buyer is a resident of the jurisdiction set forth immediately
below the Buyer’s name on the signature pages hereto.

 

i. No Solicitation. The Buyer is unaware of, is in no way relying on, and did
not become aware of the offering of the Securities through or as a result of,
any form of general solicitation or general advertising including, without
limitation, any article, notice, advertisement or other communication published
in any newspaper, magazine or similar media or broadcast over television or
radio, in connection with the offering and sale of the Securities and is not
subscribing for the Securities and did not become aware of the offering of the
Securities through or as a result of any seminar or meeting to which the Buyer
was invited by, or any solicitation of a subscription by, a person not
previously known to the Buyer in connection with investments in securities
generally.

j. Brokerage Fees. The Buyer has taken no action that would give rise to any
claim by any person for brokerage commissions, finders’ fees or the like
relating to this Agreement or the transaction contemplated hereby.

k. Buyer’s Advisors. The Buyer and its Advisors, as the case may be, have such
knowledge and experience in financial, tax, and business matters, and, in
particular, investments in securities, so as to enable it to utilize the
information made available to it in connection with the Notes to evaluate the
merits and risks of an investment in the Notes and the Company and to make an
informed investment decision with respect thereto.

l. Buyer Liquidity. The Buyer has adequate means of providing for Buyer’s
current financial needs and foreseeable contingencies and has no need for
liquidity of its investment in the Securities for an indefinite period of time,
and after purchasing the Securities the Buyer will be able to provide for any
foreseeable current needs and possible personal contingencies. The Buyer must
bear and acknowledges the substantial economic risks of the investment in the
Securities including the risk of illiquidity and the risk of a complete loss of
this investment.

 

m. No Other Representations or Information. In evaluating the suitability of an
investment in the Securities, the Buyer has not relied upon any representation
or information (oral or written) with respect to the Company or its
subsidiaries, or otherwise, other than as stated in this Agreement. No oral or
written representations have been made, or oral or written information
furnished, to the Buyer or its Advisors, if any, in connection with the offering
of the Notes.

 

n. Authorization; Enforcement. The Buyer has the requisite power and authority
to enter into and perform this Agreement and to purchase the Securities. The
execution, delivery and performance of this Agreement and the Securities by the
Buyer and the consummation by it of the transactions contemplated hereby and
thereby have been duly authorized by all necessary corporate or partnership
action, and no further consent or authorization of the Buyer or its Board of
Directors, stockholders, partners, members, as the case may be, is required.
This Agreement has been duly authorized, executed and delivered by the Buyer and
upon execution of this Agreement by the Company, constitute, or shall constitute
when executed and delivered, a valid and binding obligation of the Buyer
enforceable against the Buyer in accordance with the terms hereof and thereof,
except as such enforceability may be limited by general principles of equity or
applicable bankruptcy, insolvency, reorganization, moratorium, liquidation and
other similar laws relating to, or affecting generally, the enforcement of
applicable creditors’ rights and remedies.

o. No Conflicts. The execution, delivery and performance of this Agreement and
the consummation by the Buyer of the transactions contemplated hereby and
thereby or relating hereto do not and will not (i) if the Buyer is not an
individual, result in a violation of the Buyer’s charter documents or bylaws or
other organizational documents or (ii) conflict with, or constitute a default
(or an event which with notice or lapse of time or both would become a default)
under, or give to others any rights of termination, amendment, acceleration or
cancellation of any agreement, indenture or instrument or obligation to which
the Buyer is a party or by which its properties or assets are bound, or result
in a violation of any law, rule, or regulation, or any order, judgment or decree
of any court or governmental agency applicable to the Buyer or its properties
(except for such conflicts, defaults and violations as would not, individually
or in the aggregate, have a material adverse effect on the Buyer). The Buyer is
not required to obtain any consent, authorization or order of, or make any
filing or registration with, any court or governmental agency in order for it to
execute, deliver or perform any of its obligations under this Agreement or to
purchase the Securities in accordance with the terms hereof.

p. SEC Filings. The Buyer has reviewed, or had an opportunity to review, all of
the SEC Filings and “Forward Looking Statements” disclaimers contained
therein.  In addition, the Buyer has reviewed and acknowledges it has such
knowledge, sophistication, and experience in securities matters, and understands
the risks related to the Company, including without limitation to, the “Risk
Factors’ in the 10K form filed on April 30, 2020, which the Company has made
available through the EDGAR system.

q. Restricted Securities.   Buyer understands that the Securities have not been
registered under the 1933 Act and such Buyer will not sell, offer to sell,
assign, pledge, hypothecate or otherwise transfer any of the Securities unless
pursuant to an effective registration statement under the 1933 Act, or unless an
exemption from registration is available.  Notwithstanding anything to the
contrary contained in this Agreement, such Buyer may transfer (with an opinion
of counsel satisfactory to the Company and its counsel) the Securities to its
Affiliates (as defined below), provided that each such Affiliate is an
“accredited investor” under Regulation D and such Affiliate agrees to be bound
by the terms and conditions of this Agreement. For the purposes of this
Agreement, an “Affiliate” of any person or entity means any other person or
entity directly or indirectly controlling, controlled by or under direct or
indirect common control with such person or entity.  Affiliate includes each
subsidiary of the Company.  For purposes of this definition, “control” means the
power to direct the management and policies of such person or firm, directly or
indirectly, whether through the ownership of voting securities, by contract or
otherwise.

3. Representations and Warranties of the Company. The Company represents and
warrants to the Buyer that, except as otherwise disclosed in the Company’s
public filings and reports with the SEC:

 

a. Organization and Qualification. The Company and each of its subsidiaries, if
any, is a corporation duly organized, validly existing and in good standing
under the laws of the jurisdiction in which it is incorporated, with full power
and authority (corporate and other) to own, lease, use and operate its
properties and to carry on its business, such that the failure to so qualify
would not have a material adverse effect on the assets or business of the
Company, its subsidiaries, or the ability of the Company to perform its
obligations hereunder.

 

b. Authorization; Enforcement. (i) The Company has all requisite corporate power
and authority to enter into and perform this Agreement, and to consummate the
transactions contemplated hereby and to issue the Securities, in accordance with
the terms hereof and thereof, (ii) the execution and delivery of this Agreement,
by the Company and the consummation by it of the transactions contemplated
hereby (including without limitation, the issuance of the Note and the Warrant
and the issuance and reservation for issuance of the Conversion Shares issuable
upon conversion or exercise thereof) have been duly authorized by the Company’s
Board of Directors and no further consent or authorization of the Company, its
Board of Directors, or its shareholders is required, (iii) this Agreement has
been duly executed and delivered by the Company by its authorized
representative, and such authorized representative is the true and official
representative with authority to sign this Agreement and the other documents
executed in connection herewith and bind the Company accordingly, and (iv) this
Agreement constitutes, and upon execution and delivery by the Buyer, will
constitute, a legal, valid and binding obligation of the Company enforceable
against the Company in accordance with its terms except as such enforceability
may be limited by general principles of equity or applicable bankruptcy,
insolvency, reorganization, moratorium, liquidation and other similar laws
relating to, or affecting generally, the enforcement of applicable creditors’
rights and remedies.

c. Issuance of Shares. The Conversion Shares are duly authorized and reserved
for issuance and, upon conversion of the Note and the Warrant in accordance with
its respective terms, will be validly issued, fully paid and non-assessable, and
free from all taxes, liens, claims and encumbrances with respect to the issue
thereof and shall not be subject to preemptive rights or other similar rights of
shareholders of the Company and will not impose personal liability upon the
holder thereof.

 

d. Acknowledgment of Dilution. The Company understands and acknowledges the
potentially dilutive effect to the Common Stock upon the issuance of the
Conversion Shares upon conversion of the Note and exercise of the Warrant. The
Company further acknowledges that its obligation to issue Conversion Shares upon
conversion of the Note and exercise of the Warrant in accordance with the
respective terms thereof, is absolute and unconditional regardless of the
dilutive effect that such issuance may have on the ownership interests of other
shareholders of the Company.

 

e. No Conflicts. The execution, delivery and performance of this Agreement, the
Note and the Warrant by the Company and the consummation by the Company of the
transactions contemplated hereby and thereby (including, without limitation, the
issuance and reservation for issuance of the Conversion Shares) will not (i)
conflict with or result in a violation of any provision of the Certificate of
Incorporation or By-laws, or (ii) violate or conflict with, or result in a
breach of any provision of, or constitute a default (or an event which with
notice or lapse of time or both could become a default) under, or give to others
any rights of termination, amendment, acceleration or cancellation of, any
agreement, indenture, patent, patent license or instrument to which the Company
or any of its subsidiaries is a party, or (iii) result in a violation of any
law, rule, regulation, order, judgment or decree (including federal and state
securities laws and regulations and regulations of any self-regulatory
organizations to which the Company or its securities are subject) applicable to
the Company or any of its subsidiaries or by which any property or asset of the
Company or any of its subsidiaries is bound or affected (except for such
conflicts, defaults, terminations, amendments, accelerations, cancellations and
violations as would not, individually or in the aggregate, have a material
adverse effect). All consents, authorizations, orders, filings and registrations
which the Company is required to obtain pursuant to the preceding sentence have
been obtained or effected on or prior to the date hereof.

 

f. Absence of Litigation. There is no action, suit, claim, proceeding, inquiry
or investigation before or by any court, public board, government agency,
self-regulatory organization or body pending or, to the knowledge of the Company
or any of its subsidiaries, threatened against or affecting the Company or any
of its subsidiaries, or their officers or directors in their capacity as such,
that could have a material adverse effect.

 

g. Acknowledgment Regarding Buyer’ Purchase of Securities. The Company
acknowledges and agrees that the Buyer is acting solely in the capacity of arm’s
length purchasers with respect to this Agreement and the transactions
contemplated hereby. The Company further acknowledges that the Buyer is not
acting as a financial advisor or fiduciary of the Company (or in any similar
capacity) with respect to this Agreement and the transactions contemplated
hereby and any statement made by the Buyer or any of its respective
representatives or agents in connection with this Agreement and the transactions
contemplated hereby is not advice or a recommendation and is merely incidental
to the Buyer’ purchase of the Securities. The Company further represents to the
Buyer that the Company’s decision to enter into this Agreement has been based
solely on the independent evaluation by the Company and its representatives.

 

h. No Integrated Offering. Neither the Company, nor any of its affiliates, nor
any person acting on its or their behalf, has directly or indirectly made any
offers or sales in any security or solicited any offers to buy any security
under circumstances that would require registration under the Securities Act of
the issuance of the Securities to the Buyer. The issuance of the Securities to
the Buyer will not be integrated with any other issuance of the Company’s
securities (past, current or future) for purposes of any shareholder approval
provisions applicable to the Company or its securities.

 

4. Expenses. Each of the parties hereto shall pay its own fees and expenses
(including the fees of any attorneys, accountants, appraises or others engaged
by such party) in connection with this Agreement and the transactions
contemplated hereby whether or not the transactions contemplated hereby are
consummated.

5. Miscellaneous.

 

a. Governing Law. This Agreement shall be governed by and interpreted in
accordance with the laws of the State of Nevada without regard to the principles
of conflict of laws. The parties further agree that any action between them
shall be heard exclusively in federal or state court sitting in Clark County,
Nevada, and expressly consent to the jurisdiction and venue of the Supreme Court
of Nevada, sitting in Douglas County and the United States District Court for
the District of Nevada for the adjudication of any civil action asserted
pursuant to this paragraph. The Company and Buyer waive trial by jury. The
prevailing party shall be entitled to recover from the other party its
reasonable attorney's fees and costs. Each party hereby irrevocably waives
personal service of process and consents to process being served in any suit,
action or proceeding in connection with this Agreement by mailing a copy thereof
via registered or certified mail or overnight delivery (with evidence of
delivery) to such party at the address in effect for notices to it under this
Agreement and agrees that such service shall constitute good and sufficient
service of process and notice thereof. Nothing contained herein shall be deemed
to limit in any way any right to serve process in any other manner permitted by
law.

b. Counterparts; Signatures by Facsimile. This Agreement may be executed in one
or more counterparts, each of which shall be deemed an original but all of which
shall constitute one and the same agreement and shall become effective when
counterparts have been signed by each party and delivered to the other party.
This Agreement, once executed by a party, may be delivered to the other party
hereto by facsimile or other electronic transmission of a copy of this Agreement
bearing the signature of the party so delivering this Agreement.

 

c. Headings. The headings of this Agreement are for convenience of reference
only and shall not form part of, or affect the interpretation of, this
Agreement.

 

d. Severability. In the event that any provision of this Agreement is invalid or
unenforceable under any applicable statute or rule of law, then such provision
shall be deemed inoperative to the extent that it may conflict therewith and
shall be deemed modified to conform with such statute or rule of law. Any
provision hereof which may prove invalid or unenforceable under any law shall
not affect the validity or enforceability of any other provision hereof.

 

e. Entire Agreement; Amendments. This Agreement and the instruments referenced
herein 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 nor the Buyer makes any representation,
warranty, covenant or undertaking with respect to such matters. No provision of
this Agreement may be waived or amended other than by an instrument in writing
signed by the majority in interest of the Buyer and by the Company.

 

f. Rescission and Withdrawal Right. Notwithstanding anything to the contrary
contained in this Agreement, whenever Buyer exercises a right, election, demand
or option under this Agreement and the Company does not timely perform its
related obligations within the periods therein provided, then Buyer may rescind
or withdraw, in its sole discretion from time to time upon written notice to the
Company, any relevant notice, demand or election in whole or in part without
prejudice to its future actions and rights; provided, however, that, in the case
of a rescission of a conversion of a Note or exercise of a Warrant, the
applicable Buyer shall be required to return any shares of Common Stock subject
to any such rescinded conversion or exercise notice concurrently with the return
to such Buyer of the aggregate exercise price paid to the Company for such
shares and the restoration of such Buyer’s right to acquire such shares pursuant
to such Buyer’s Warrant (including, issuance of a replacement warrant
certificate evidencing such restored right).

 

g. Notices. All notices, demands, requests, consents, approvals, and other
communications required or permitted hereunder shall be in writing and, unless
otherwise specified herein, shall be (i) personally served, (ii) deposited in
the mail, registered or certified, return receipt requested, postage prepaid,
(iii) delivered by reputable air courier service with charges prepaid, or (iv)
transmitted by hand delivery, telegram, or facsimile, addressed as set forth
below or to such other address as such party shall have specified most recently
by written notice. Any notice or other communication required or permitted to be
given hereunder shall be deemed effective (a) upon hand delivery or delivery by
facsimile, with accurate confirmation generated by the transmitting facsimile
machine, at the address or number designated below (if delivered on a business
day during normal business hours where such notice is to be received), or the
first business day following such delivery (if delivered other than on a
business day during normal business hours where such notice is to be received)
or (b) on the second business day following the date of mailing by express
courier service, fully prepaid, addressed to such address, or upon actual
receipt of such mailing, whichever shall first occur. The addresses for such
communications shall be:

 

If to the Company, to:

 

Red Cat Holdings, Inc.

1607 Ponce De Leon Avenue

Suite 407

San Juan, Puerto Rico 00909

Attn: Jeffrey M. Thompson, Chief Executive Officer 

 

With a copy to (which copy should not constitute a notice hereunder):

 

The Crone Law Group P.C.

500 Fifth Avenue

Suite 938

New York, NY 10110

Attn: Mark Crone  

 

If to the Buyer:

 

________________

________________

________________

 

 

Each party shall provide notice to the other party of any change in address.

 

h. Successors and Assigns. This Agreement shall be binding upon and inure to the
benefit of the parties and their successors and assigns. Neither the Company nor
the Buyer shall assign this Agreement or any rights or obligations hereunder
without the prior written consent of the other.

 

i. Third Party Beneficiaries. This Agreement is intended for the benefit of the
parties hereto and their respective permitted successors and assigns, and is not
for the benefit of, nor may any provision hereof be enforced by, any other
person.

 

j. Survival. The representations and warranties of the Company and the
agreements and covenants set forth in this Agreement shall survive the closing
hereunder notwithstanding any due diligence investigation conducted by or on
behalf of the Buyer. Each party agrees to indemnify and hold harmless the other
party and all their officers, directors, employees and agents for loss or damage
arising as a result of or related to any breach or alleged breach by such party
of any of its representations, warranties and covenants set forth in this
Agreement.

 

k. Further Assurances. Each party shall do and perform, or cause to be done and
performed, all such further acts and things, and shall execute and deliver all
such other agreements, certificates, instruments and documents, as the other
party may reasonably request in order to carry out the intent and accomplish the
purposes of this Agreement and the consummation of the transactions contemplated
hereby.

 

l. No Strict Construction. The language used in this Agreement will be deemed to
be the language chosen by the parties to express their mutual intent, and no
rules of strict construction will be applied against any party.

 

[Remainder of Page Intentionally Omitted; Signature Page to Follow]

 

 

 

 

IN WITNESS WHEREOF, the undersigned Buyer and the Company have caused this
Agreement to be duly executed as of the date first above written.

 

 

RED CAT HOLDINGS, INC.

 

 

 

By: _______________________________

Jeffrey M. Thompson

President and Chief Executive Officer 

 

 

 

 

By:_________________________________

Name:

Title:

 

SUBSCRIPTION AMOUNT:

 

Aggregate Principal Amount of Note: $

 

 

 

 

 

 

RED CAT HOLDINGS, INC.

 

ACCREDITED INVESTOR CERTIFICATION

 

For Individual Investors Only

(all Individual Investors must INITIAL where appropriate):

 

Initial _______  I have a net worth of at least US$1 million either individually
or through aggregating my individual holdings and those in which I have a joint,
community property or other similar shared ownership interest with my spouse.
(For purposes of calculating your net worth under this paragraph, (a) your
primary residence shall not be included as an asset; (b) indebtedness secured by
your primary residence, up to the estimated fair market value of your primary
residence at the time of your purchase of the securities, shall not be included
as a liability (except that if the amount of such indebtedness outstanding at
the time of your purchase of the securities exceeds the amount outstanding 60
days before such time, other than as a result of the acquisition of your primary
residence, the amount of such excess shall be included as a liability); and (c)
indebtedness that is secured by your primary residence in excess of the
estimated fair market value of your primary residence at the time of your
purchase of the securities shall be included as a liability.) Initial _______ I
have had an annual gross income for the past two years of at least US$200,000
(or US$300,000 jointly with my spouse) and expect my income (or joint income, as
appropriate) to reach the same level in the current year. Initial _______ I am a
director or executive officer of Red Cat Holdings, Inc.     For Non-Individual
Investors (all Non-Individual Investors must INITIAL where appropriate):    
Initial _______ The investor certifies that it is a partnership, corporation,
limited liability company or business trust that is 100% owned by persons who
meet at least one of the criteria for Individual Investors set forth above. 
Initial _______ The investor certifies that it is a partnership, corporation,
limited liability company or business trust that has total assets of at least
US$5 million and was not formed for the purpose of investing the Company.
Initial _______ The investor certifies that it is an employee benefit plan whose
investment decision is made by a plan fiduciary (as defined in ERISA §3(21))
that is a bank, savings and loan association, insurance company or registered
investment advisor. Initial _______ The investor certifies that it is an
employee benefit plan whose total assets exceed US$5,000,000 as of the date of
this Agreement. Initial _______ The undersigned certifies that it is a
self-directed employee benefit plan whose investment decisions are made solely
by persons who meet at least one of the criteria for Individual Investors.
Initial _______ The investor certifies that it is a U.S. bank, U.S. savings and
loan association or other similar U.S. institution acting in its individual or
fiduciary capacity. Initial _______ The undersigned certifies that it is a
broker-dealer registered pursuant to §15 of the Securities Exchange Act of 1934.
Initial _______ The investor certifies that it is an organization described in
§501(c)(3) of the Internal Revenue Code with total assets exceeding US$5,000,000
and not formed for the specific purpose of investing in the Company. Initial
_______ The investor certifies that it is a trust with total assets of at least
US$5,000,000, not formed for the specific purpose of investing in the Company,
and whose purchase is directed by a person with such knowledge and experience in
financial and business matters that such person is capable of evaluating the
merits and risks of the prospective investment. Initial _______ The investor
certifies that it is a plan established and maintained by a state or its
political subdivisions, or any agency or instrumentality thereof, for the
benefit of its employees, and which has total assets in excess of US$5,000,000.
Initial _______ The investor certifies that it is an insurance company as
defined in §2(13) of the Securities Act of 1933, or a registered investment
company.

 

 

RED CAT HOLDINGS, INC.

 

For Non-U.S. Person Investors

(all Investors who are not a U.S. Person must INITIAL this section): 

 

Initial _______ The investor is not a “U.S. Person” as defined in Regulation S;
and specifically, the investor is not: A. a natural person resident in the
United States of America, including its territories and possessions (“United
States”); B. a partnership or corporation organized or incorporated under the
laws of the United States; C. an estate of which any executor or administrator
is a U.S. Person; D. a trust of which any trustee is a U.S. Person; E. an agency
or branch of a foreign entity located in the United States; F. a
non-discretionary account or similar account (other than an estate or trust)
held by a dealer or other fiduciary for the benefit or account of a U.S. Person;
G. a discretionary account or similar account (other than an estate or trust)
held by a dealer or other fiduciary organized, incorporated, or (if an
individual) resident in the United States; or H. a partnership or corporation:
(i) organized or incorporated under the laws of any foreign jurisdiction; and
(ii) formed by a U.S. Person principally for the purpose of investing in
securities not registered under the Securities Act, unless it is organized or
incorporated, and owned, by accredited investors (as defined in Rule 501(a)
under the Securities Act) who are not natural persons, estates or trusts. And,
in addition: I. the investor was not offered the securities in the United
States; J. at the time the buy-order for the securities was originated, the
investor was outside the United States; and K. the investor is purchasing the
securities for its own account and not on behalf of any U.S. Person (as defined
in Regulation S) and a sale of the securities has not been pre-arranged with a
purchaser in the United States.

 

 

 

RED CAT HOLDINGS, INC.

 

Investor Profile
(Must be completed by Investor)

Section A - Personal Investor Information

Investor Name(s):
                                                                                                                                                                    

Individual executing Profile or Trustee:
                                                                                                                                   

Social Security Numbers / Federal I.D. Number:
                                                                                                                     

 

Date of Birth:                                         Marital Status:
                                                        Joint Party Date of
Birth:                                         Investment Experience (Years):
                              Annual Income:
                                        Liquid Net Worth:
                                                   Net Worth*:
                                         

Tax Bracket:                     _____ 15% or below                     _____
25% - 27.5%                     _____ Over 27.5%

Home Street Address:
                                                                                                                                                              

Home City, State & Zip Code:
                                                                                                                                               

Home Phone:                                                  Home Fax:
                                              Home Email:
                                   

Employer:
                                                                                                                                                                                 

Employer Street Address:
                                                                                                                                                        

Employer City, State & Zip Code:
                                                                                                                                        
  

Bus. Phone:                                                    Bus. Fax:
                                                 Bus. Email:
                                      

Type of Business:
                                                                                                                                                                    

Outside Broker/Dealer:
                                                                                                                                                             

 

Section B – Certificate Delivery Instructions

____ Please deliver Note to the Employer Address listed in Section A.

____ Please deliver Note to the Home Address listed in Section A.

____ Please deliver Note to the following address:
                                                                                                                   

 

 

Please check if you are a FINRA member or affiliate of a FINRA member firm: ____

  Investor Signature   Date 

 

 

*       For purposes of calculating your net worth in this form, (a) your
primary residence shall not be included as an asset; (b) indebtedness secured by
your primary residence, up to the estimated fair market value of your primary
residence at the time of your purchase of the securities, shall not be included
as a liability (except that if the amount of such indebtedness outstanding at
the time of your purchase of the securities exceeds the amount outstanding 60
days before such time, other than as a result of the acquisition of your primary
residence, the amount of such excess shall be included as a liability); and (c)
indebtedness that is secured by your primary residence in excess of the
estimated fair market value of your primary residence at the time of your
purchase of the securities shall be included as a liability

   

 

ANTI MONEY LAUNDERING REQUIREMENTS

The USA PATRIOT Act

The USA PATRIOT Act is designed to detect, deter, and punish terrorists in the
United States and abroad. The Act imposes new anti-money laundering requirements
on brokerage firms and financial institutions. Since April 24, 2002 all
brokerage firms have been required to have new, comprehensive anti-money
laundering programs.

To help you understand these efforts, we want to provide you with some
information about money laundering and our steps to implement the USA PATRIOT
Act.

What is money laundering?

Money laundering is the process of disguising illegally obtained money so that
the funds appear to come from legitimate sources or activities. Money laundering
occurs in connection with a wide variety of crimes, including illegal arms
sales, drug trafficking, robbery, fraud, racketeering, and terrorism.

How big is the problem and why is it important?

The use of the U.S. financial system by criminals to facilitate terrorism or
other crimes could well taint our financial markets. According to the U.S. State
Department, one recent estimate puts the amount of worldwide money laundering
activity at $1 trillion a year.

What are we required to do to eliminate money laundering?

Under rules required by the USA PATRIOT Act, our anti-money laundering program
must designate a special compliance officer, set up employee training, conduct
independent audits, and establish policies and procedures to detect and report
suspicious transaction and ensure compliance with such laws. As part of our
required program, we may ask you to provide various identification documents or
other information. We will ask you for your name, address, date of birth and
other information that will allow us to identify you. We will ask to see a
non-expired valid issued government identification, such as your driver’s
license or other identifying documents. Until you provide the information or
documents we need, we may not be able to effect any transactions for you.

 

 

ANTI-MONEY LAUNDERING INFORMATION FORM

The following is required in accordance with the AML provision of the USA
PATRIOT ACT.

(Please fill out and return with requested documentation.)

INVESTOR NAME: ______________________________________________

LEGAL ADDRESS: ______________________________________________

______________________________________________       

SSN# or TAX ID#

OF INVESTOR: _________________________________________________

FOR INVESTORS WHO ARE INDIVIDUALS:

YEARLY INCOME:  _________________________            AGE:  ________

NET WORTH (excluding value of primary
residence):  _____________________________________________________

OCCUPATION:   ________________________________________________

ADDRESS OF EMPLOYER: _______________________________________

 _______________________________________

INVESTMENT OBJECTIVE(S): ____________________________________

IDENTIFICATION & DOCUMENTATION AND SOURCE OF FUNDS:

1.Please submit a copy of non-expired identification for the authorized
signatory(ies) on the investment documents, showing name, date of birth, address
and signature. The address shown on the identification document MUST match the
Investor’s address shown on the Investor Signature Page.

Current Driver’s License or Valid Passport or Identity Card

(Circle one or more)

2.If the Investor is a corporation, limited liability company, trust or other
type of entity, please submit the following requisite documents: (i) Articles of
Incorporation, By-Laws, Certificate of Incorporation, Bylaws, Trust or other
similar documents for the type of entity; and (ii) Corporate Resolution or power
of attorney or other similar document granting authority to signatory(ies) and
designating that they are permitted to make the proposed investment.

3.Please advise where the funds were derived from to make the proposed
investment:

Investments Savings Proceeds of Sale Other ____________

(Circle one or more)

Signature:  ___________________________________

Print Name:  __________________________________

Title (if applicable):  ____________________________

Date:  _______________________________________